<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MANUFACTURERS' SERVICES LIMITED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3679 04-3258036
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
300 BAKER AVENUE, SUITE 106, CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
KEVIN C. MELIA
300 BAKER AVENUE, SUITE 106
CONCORD, MASSACHUSETTS 01742
(978) 287-5630
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
<TABLE>
<S> <C>
DAVID B. WALEK, ESQ. WINTHROP B. CONRAD, JR., ESQ.
Ropes & Gray Davis Polk & Wardwell
One International Place 450 Lexington Avenue
Boston, Massachusetts 02110 New York, New York 10017
(617) 951-7000 (212) 450-4000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Aggregate Offering Registration
Securities to be Registered Price(1) Fee(2)
<S> <C> <C>
Common Stock, par value $.001 per share..................... $150,000,000 $39,600
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the proposed
maximum aggregate offering price.
--------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities laws to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
<PAGE>
SUBJECT TO COMPLETION--FEBRUARY 4, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 2000
[LOGO]
MANUFACTURERS' SERVICES LIMITED
SHARES OF COMMON STOCK
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
MANUFACTURERS' SERVICES LIMITED: THE OFFERING:
- - We are a leading global provider of - We are offering shares of our common stock.
advanced electronics design, - The underwriters have an option to purchase an
manufacturing and related services. additional shares from us and shares
- - Manufacturers' Services Limited from the selling stockholders to cover
300 Baker Avenue, Suite 106 over-allotments.
Concord, Massachusetts 01742 - This is our initial public offering, and no
(978) 287-5630 public market currently exists for our shares.
- We anticipate that the initial public offering
PROPOSED SYMBOL & MARKET: price for our shares will be between $ and $
- - We have applied to have our common per share.
stock approved for listing on the - Closing: , 2000.
New York Stock Exchange under the
symbol "EMS."
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
<S> <C> <C>
Per Share Total
- ---------------------------------------------------------------------------------
Public offering price: $ $
Underwriting fees:
Proceeds to Manufacturers' Services Limited:
- ---------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
ROBERTSON STEPHENS
THOMAS WEISEL PARTNERS LLC
DLJDIRECT INC.
<PAGE>
Picture of circuit board, hard disk drive and keypad with the caption "The
products you use every day... designed and manufactured worldwide..." Picture
of doctor using a medical device and picture of person using a telephone.
Picture of hard disk drive, Palm computing device, floppy disk drive, pager,
stop watch and cellular telephone.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 5
Forward-Looking Statements......... 11
Use of Proceeds.................... 12
Dividend Policy.................... 12
Capitalization..................... 13
Dilution........................... 14
Selected Consolidated Financial
Data............................. 15
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 17
Business........................... 29
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Management......................... 45
Relationships and Transactions
with Related Parties............. 54
Principal and Selling
Stockholders..................... 57
Description of Indebtedness........ 60
Description of Capital Stock....... 63
Shares Eligible for Future Sale.... 68
Underwriting....................... 71
Legal Matters...................... 75
Experts............................ 75
Where You Can Find More
Information...................... 75
Index to Consolidated Financial
Statements....................... F-1
</TABLE>
------------------------
The industry data presented in this prospectus, except where otherwise
noted, has been compiled from an electronics manufacturing services industry
report--"Contract Manufacturing from a Global Perspective, 1999
Update"--prepared by Technology Forecasters, Inc., a California based management
consulting firm specializing in the electronics manufacturing services industry.
Technology Forecasters is commonly relied upon as an information source in the
electronics manufacturing services industry. Although we have not independently
verified any such data, we believe that the information provided by Technology
Forecasters in this prospectus is reliable. In addition, some Company data
presented in this prospectus has been compiled from internal Company surveys and
schedules, which, while believed by us to be reliable, have not been verified by
any independent sources.
In this prospectus, references to the "Company," "MSL," "we," "us" and "our"
refer to Manufacturers' Services Limited and its subsidiaries, except where
noted or the context clearly suggests otherwise. Total Cost of
Ownership-Registered Trademark-, the globe symbol and the globe with the name
"Manufacturers' Services" are registered trademarks of Manufacturers' Services
Limited. This prospectus contains trademarks, service marks and trade names of
companies and organizations other than Manufacturers' Services Limited.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission. You should read this prospectus together
with the additional information described under the heading "Where You Can Find
More Information."
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION REGARDING OUR BUSINESS AND
THIS OFFERING. BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL THE
INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS
CAREFULLY, ESPECIALLY "RISK FACTORS" BEGINNING ON PAGE 5 AND OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES, BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
MANUFACTURERS' SERVICES LIMITED
Our Company
We are a leading global provider of advanced electronics design,
manufacturing and related services, commonly referred to as EMS, to original
equipment manufacturers, or OEMs, primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. We provide OEMs with a
comprehensive range of services, including:
- product design and new product introduction services;
- materials procurement and management;
- assembly and manufacturing;
- testing services;
- order fulfillment and distribution; and
- after-market support.
By providing these services, we allow our customers to focus on their core
competencies and enhance their competitiveness by reducing the cost of their
products and shortening the time from product conception to product introduction
in the marketplace.
We have established a network of manufacturing facilities in the world's
major electronics markets--North America, Europe and Asia--to serve the
increasing outsourcing needs of both multinational and regional OEMs. We have
strategically located our manufacturing facilities near our customers and their
end-markets, which benefits our customers by reducing the time required to get
their products to market and by increasing their flexibility to respond to
changing market conditions. We believe that the combination of our services and
our global manufacturing network has enabled us to become integral to our
customers' product development and manufacturing strategies.
We target leading OEMs in rapidly growing industries. We seek to establish
long-term, integrated relationships with OEMs that have chosen outsourcing as a
core manufacturing strategy. Due to our focus on rapidly growing industries, our
prospects are influenced by recent trends, such as the buildout of the
communications and Internet infrastructure, the proliferation of personal
computing devices and other technological trends. Our customers include industry
leaders such as:
<TABLE>
<S> <C>
3Com Corporation LSI Logic Corporation
ADC Telecommunications, Inc. NEC Gunma Ltd.
Hewlett-Packard Company Palm, Inc.
International Business Machines
Corporation Philips NV
Rockwell International
Corporation
Iomega Corporation Siemens ICN
LM Ericsson AB
</TABLE>
We also serve selected emerging companies in order to establish an early
outsourcing relationship that will provide us with attractive growth
opportunities as the products of these emerging companies gain market
acceptance.
1
<PAGE>
OEMs, which once pursued fully integrated business strategies, have begun
outsourcing their new product design, materials procurement and management,
assembly and manufacturing, order fulfillment and distribution and after-market
support functions. As a result of this increasing trend by OEMs to outsource
these functions, the EMS industry has experienced significant growth over the
past several years. We have capitalized on this industry growth through a
combination of strategic acquisitions and internal expansion. Our total net
sales have increased from $183.2 million in 1995, our first full year of
operations, to $920.7 million in 1999, a compound annual growth rate of
approximately 50%. Technology Forecasters projects that EMS industry revenues
will grow annually at 20% from 1998 through 2003, reaching $149 billion in 2003.
Technology Forecasters also projects that the twelve EMS providers with revenues
of greater than $500 million in 1998 will have an annual growth rate of 30% over
the 1998 to 2003 period. We believe that we are well positioned to benefit from
this forecasted growth.
Our Business Strategy
Our objective is to be the premier provider of value-added electronics
design, manufacturing and related services to leading OEMs in rapidly growing
industries. Our strategy to achieve this objective includes the following key
elements:
- establish and maintain long-term relationships with leading OEMs in
rapidly growing industries;
- expand our global presence;
- expand our integrated design, manufacturing and related services;
- continually reduce our customers' overall product costs;
- reduce our customers' time-to-global market and time-to-global volume; and
- actively pursue strategic acquisitions.
An important element of our business strategy has been to acquire existing
OEM manufacturing facilities, retain their business and employees, integrate the
acquired operations and introduce new customers into the acquired facilities. As
an increasing number of OEMs are divesting their manufacturing operations, we
intend to selectively pursue acquisitions of OEM divestitures and other
strategic opportunities.
In 1995, we established a significant presence in North America, Europe and
Asia by acquiring facilities from AT&T, IBM and Omnitron, a spin-off of LM
Ericsson. We also acquired two Asian contract manufacturers, Connett
Technologies and Topas Electronics. More recently, in 1998 we assumed operation
of an IBM facility in Charlotte, North Carolina. In 1999, we acquired an
existing manufacturing facility in Salt Lake City, Utah, from 3Com. The Salt
Lake City facility manufactures handheld computing devices, known as Palm
computing devices, and modems and network interface cards. In connection with
this acquisition, we entered into a two-year supply agreement with Palm, a
subsidiary of 3Com, to produce Palm computing devices and a two-year supply
agreement with 3Com to produce modems and network interface cards. Additionally
in 1999, we considerably enhanced our North American product design services
with the acquisition of two electronics design firms, Electronic System
Packaging and Ronlin Design.
Our History
We are organized as a Delaware corporation. In January 1995, investment
entities affiliated with Donaldson, Lufkin & Jenrette, Inc. acquired
substantially all of our outstanding common stock, and after this offering they
will own approximately % of our common stock. Our principal executive office
is located at 300 Baker Avenue, Suite 106, Concord, Massachusetts 01742 and our
telephone number is (978) 287-5630. We maintain a website on the Internet at
WWW.MSL.COM. Information contained on our website is not incorporated by
reference into this prospectus, and you should not consider that information as
part of this prospectus.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us................ shares
Common stock outstanding after
this offering........................... shares
Use of proceeds........................... We plan to use the net proceeds from this offering
to retire all of our outstanding senior preferred
stock, to repay a portion of our indebtedness and
for general corporate purposes. See "Use of
Proceeds."
Proposed New York Stock Exchange symbol... EMS
</TABLE>
The number of shares of our common stock to be outstanding after this
offering is based on the number of shares outstanding as of December 31, 1999.
It excludes:
- shares of common stock to be sold by us if the underwriters'
over-allotment option is exercised in full;
- 7,896,872 shares of common stock reserved for issuance upon the exercise
of outstanding options granted under our stock option plans, of which
2,934,585 were exercisable at a weighted average exercise price equal to
$2.24 per share;
- 997,012 additional shares of common stock available for future grants
under our stock option plans; and
- 5,154,199 shares of common stock issuable upon the exercise of warrants at
a weighted average exercise price equal to $1.18 per share.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the consolidated financial data for our
business. You should read this information together with our "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales.......................... $183,164 $474,288 $562,666 $837,993 $920,722
Gross profit....................... 16,499 38,133 35,879 45,259 55,233
Operating income (loss)............ 5,210 3,880 (4,252) 8,695 16,411
Income (loss) applicable to common
stock before extraordinary
loss............................. 1,217 (9,726) (17,278) (4,039) 1,201
Income (loss) per share applicable
to common stock before
extraordinary loss:
Basic.......................... $ 0.05 $ (0.18) $ (0.27) $ (0.05) $ 0.02
Diluted........................ $ 0.05 $ (0.18) $ (0.27) $ (0.05) $ 0.02
Weighted average number of shares
outstanding:
Basic.......................... 25,720 52,635 64,687 74,983 77,537
Diluted........................ 25,720 52,635 64,687 74,983 78,334
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------------
Actual As Adjusted(a)
(In thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................................... $ 24,182 $
Working capital............................................. 98,273
Total assets................................................ 411,783
Total long-term debt and capital lease obligations.......... 127,343
Senior preferred stock...................................... 39,204
Total stockholders' equity.................................. 48,621
</TABLE>
- --------------------------
(a) As adjusted gives effect to this offering, assuming net proceeds of $
million.
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS. ANY OF THESE RISKS COULD
HAVE A MATERIAL AND NEGATIVE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE
TO ANY OF THESE RISKS, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Our performance depends on the business of our major customers.
We depend on a small number of customers for a large portion of our
business, and changes in our customers' orders have, in the past, had a
significant impact on our operating results. If a major customer significantly
reduces the amount of business it does with us, there would be an adverse impact
on our operating results. The following table sets forth the percentages of our
total net sales to customers who accounted for 10% or more of our total net
sales and the percentage of our total net sales to our ten largest customers in
each period presented:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1998 1999
<S> <C> <C> <C>
International Business Machines
Corporation................................ 51% 51% 49%
Iomega Corporation........................... 19% 20% 14%
Ten largest customers as a group............. 81% 89% 84%
</TABLE>
In addition, based on our recent acquisition of inventory, manufacturing
assets and other intangibles from 3Com and the related supply agreements, we
anticipate that 3Com and its subsidiary, Palm, will each become a major customer
in the year 2000.
We expect to continue to depend on sales to our major customers. Since it is
not always possible to replace lost business on a timely basis, it is likely
that our operating results would be adversely affected if one or more of our
major customers were to cancel, delay or reduce a large amount of business with
us in the future. In addition, we generate significant accounts receivable in
connection with providing services to our major customers. If one or more of our
customers were to become insolvent or otherwise be unable to pay for our
services, our operating results and financial condition could be adversely
affected.
Our acquisitions may present difficulties for us and may divert management time
and capital resources.
Since 1994, we have acquired several manufacturing facilities and
electronics design businesses. Successfully completing future acquisitions is an
important part of our overall business strategy. However, acquisitions involve
numerous risks, including some or all of the following:
- difficulty in integrating operations, technologies, systems, products and
services;
- difficulty in operating in foreign countries and over significant
geographical distances;
- diversion of management time;
5
<PAGE>
- increased expenses and working capital requirements;
- potential loss of key employees and customers of acquired facilities or
businesses; and
- financial risks, such as:
-- potential liabilities of the acquired facilities and businesses;
-- the incurrence of additional indebtedness; and
-- the dilutive effect of the issuance of additional equity
securities.
We cannot assure you that any of our recent or future acquisitions will be
successful. If any of our recent or future acquisitions are not successful, it
is likely that our financial performance will be adversely affected.
We may not be able to identify, finance and close future acquisitions.
We expect to actively pursue strategic acquisitions as part of our overall
business strategy. Competition for acquiring attractive facilities and
businesses in our industry is substantial. In executing this part of our
business strategy, we may experience difficulty in identifying suitable
acquisition candidates or in completing selected transactions. In addition, our
existing bank credit facility limits our ability to acquire the assets or
businesses of other companies. If we are able to identify acquisition
candidates, such acquisitions may be financed with substantial debt or with
potentially dilutive issuances of equity securities. Our ability to successfully
complete acquisitions in the future will depend upon several factors, including
the continued availability of financing. We cannot assure you that financing for
acquisitions will be available on terms acceptable to us, if at all.
The incurrence of indebtedness in connection with the consummation of future
acquisitions could harm our operating results and financial condition.
Our acquisition strategy could require us to incur substantial amounts of
indebtedness. As of December 31, 1999, our total debt was $127.3 million and our
interest expense for the year then ended was $8.1 million. After a portion of
the proceeds from this offering is used to repay existing indebtedness, we will
still owe approximately $ million in principal amount of indebtedness. Our
future level of indebtedness could have consequences for our business,
including:
- vulnerability to the effects of poor economic and industry conditions;
- dedication of a substantial portion of our cash flow from operations to
repayment of debt, limiting the availability of cash for other purposes;
- inability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes;
- reduced flexibility in planning for, or reacting to, changes in our
business and industry; and
- failure to comply with the covenants under our credit agreements resulting
in an event of default. If an event of default occurs and is not cured or
waived, substantially all of our indebtedness could become immediately due
and payable.
6
<PAGE>
We have financial instruments that are subject to interest rate risk,
principally debt obligations under our bank credit facility. An increase in the
base rates upon which our interest rates are determined could have an adverse
effect on our operating results and financial condition.
There can be no assurance that our leverage and accompanying restrictions
and fluctuations in interest rates will not adversely affect our ability to
finance our future operations, acquisitions or capital needs or to engage in
other business activities.
Contemporaneously with this offering, we intend to refinance our existing
indebtedness under our bank credit facility with a new bank credit facility. We
anticipate that the new bank credit facility will impose operating and financial
restrictions on us substantially similar to those contained in our existing bank
credit facility, including a limitation on our ability to pay cash dividends on
our common stock. See "Description of Indebtedness."
We face significant competition.
We operate in a highly competitive industry. We compete against many
domestic and foreign companies, some of which have substantially greater
manufacturing, financial, research and development and marketing resources than
we do. Some of our competitors have broader geographic breadth and range of
services than we do. In addition, some of our competitors may have more
developed relationships with our existing customers than we do. We also face
competition from the manufacturing operations of our current and potential
customers, who continually evaluate the benefits of internal manufacturing
versus outsourcing. As more OEMs dispose of their manufacturing assets and
increase the outsourcing of their products, we will face increasing competitive
pressures to grow our business in order to maintain our competitive position.
Price increases and shortages of raw materials or components used by electronics
manufacturing services companies could affect the volume of our sales.
We order raw materials and components to complete our customers' orders, and
some of these raw materials and components are ordered from sole-source
suppliers. Although we work with our customers and suppliers to minimize the
impact of shortages in raw materials and components, we sometimes experience
short-term adverse effects due to price fluctuations and delayed shipments. In
the past, there have been industry-wide shortages of electronic components,
particularly memory and logic devices. If a significant shortage of raw
materials or components were to occur, we may have to delay shipments, and our
operating results would be adversely affected. In some cases, supply shortages
of particular components will substantially curtail production of products using
these components. While most of our significant customer contracts permit
quarterly or other periodic reviews of pricing based on decreases and increases
in the prices of raw materials and components, we are not always able to pass on
price increases to our customers. Accordingly, some raw material and component
price increases could adversely affect our operating results. We also depend on
a small number of suppliers for many of the raw materials and components that we
use in our business. If we were unable to continue to purchase these raw
materials and components from our suppliers, our operating results would be
adversely affected.
7
<PAGE>
Long-term contracts are not typical in our industry, and reductions,
cancellations or delays in customer orders would adversely affect our operating
results.
As is typical in the EMS industry, we do not usually obtain long-term
purchase orders or commitments from our customers. Instead, we work closely with
our customers to develop non-binding forecasts of the future volume of orders.
Customers may cancel their orders, change production quantities from forecasted
volumes or delay production for a number of reasons beyond our control.
Significant or numerous cancellations, reductions or delays in orders by our
customers would reduce our net sales. In addition, because many of our costs are
fixed, a reduction in net sales could have an adverse effect on our operating
results. From time to time we make capital investments in anticipation of future
business opportunities. There can be no assurance that we will receive the
anticipated business. If we are unable to obtain the anticipated business, our
operating results and financial condition may be harmed.
We are subject to the demands and uncertainties of the electronics industry.
Our business depends on the electronics industry, which is subject to rapid
technological change, short product life-cycles and pricing and margin pressure.
In addition, the electronics industry has historically been cyclical and subject
to significant downturns characterized by diminished product demand, rapid
declines in average selling prices and production over-capacity. When these
factors adversely affect our customers, we may suffer similar effects. Our
customers' markets are also subject to economic cycles and are likely to
experience recessionary periods in the future. The economic conditions affecting
the electronics industry, in general, or any of our major customers, in
particular, may adversely affect our operating results.
Risks relating to our international operations could adversely affect our
operating results.
We have substantial international manufacturing operations in Europe and
Asia. Our international operations are subject to inherent risks, which may
adversely affect us, including:
- political and economic instability in countries where we have
manufacturing facilities, particularly in Asia;
- fluctuations in the value of currencies and high levels of inflation,
particularly in Asia;
- changes in labor conditions and difficulties in staffing and managing
foreign operations;
- greater difficulty in collecting accounts receivable and longer payment
cycles;
- burdens and costs of compliance with a variety of foreign laws;
- increases in duties and taxation;
- imposition of restrictions on currency conversion or the transfer of
funds;
- changes in export duties and limitations on imports or exports;
- expropriation of private enterprises; and
- unexpected changes in foreign regulations.
8
<PAGE>
We may experience variability in our annual and quarterly results.
Our annual and quarterly results may vary significantly depending on various
factors, many of which are beyond our control. These factors include:
- variations in the timing and volume of customer orders relative to our
manufacturing capacity;
- introduction and market acceptance of our customers' new products;
- changes in demand for our customers' existing products;
- the timing of our expenditures in anticipation of future orders;
- effectiveness in managing our manufacturing processes;
- changes in competitive and economic conditions generally or in our
customers' markets;
- the timing of, and the price we pay for, acquisitions and related
integration costs;
- changes in the cost or availability of components or skilled labor; and
- foreign currency exposure.
One or more of these factors has had in the past, and may have in the
future, an adverse effect on our operating results. Additionally, as is the case
with many technology companies, we typically ship a significant portion of our
products in the last few weeks of a quarter. Also, one of our significant
end-markets is the consumer electronics market. This market exhibits particular
strength towards the end of the year in connection with the holiday season. As a
result, we have experienced relative strength in net sales in our fourth
quarter.
Our business will suffer if we are unable to attract and retain key personnel
and skilled employees.
We depend on the services of our key senior executives and other technical
experts. The loss of the services of one or several of our key employees or an
inability to attract, train and retain skilled employees, specifically
engineering and sales personnel, could result in the loss of customers or
otherwise inhibit our ability to operate our business successfully. In addition,
our ability to successfully integrate acquired facilities or businesses depends,
in part, on our ability to retain and motivate key management and employees
hired by us in connection with the acquisition.
We are currently involved in litigation arising out of a proposed acquisition
that was not consummated.
We are currently involved in litigation instituted by Lockheed Martin
Corporation regarding a proposed acquisition of one of its subsidiaries.
Lockheed's complaint alleges, among other things, that we breached an
August 10, 1997 agreement to acquire the Lockheed subsidiary and that we also
breached an implied obligation of good faith and fair dealing in exercising our
contractual right to terminate the agreement. The complaint alleges that the
purchase price for the acquisition, inclusive of real estate, was $140 million,
subject to purchase price adjustments, and subsequent to the alleged breach,
Lockheed sold its subsidiary, exclusive of real estate, for $70 million. We
9
<PAGE>
contend that a material adverse change in the business of Lockheed's subsidiary
allowed us to terminate the agreement. We intend to vigorously defend our
position. There can be no assurances, however, that we will prevail in this
litigation. We believe that the outcome from the litigation, if determined
adversely to us, would harm our business, financial condition or results of
operations.
We must maintain our technological expertise in design and manufacturing
processes.
We believe that our future success will depend upon our ability to develop
and provide design and manufacturing services that meet the changing needs of
our customers. This requires that we successfully anticipate and respond to
technological changes in design and manufacturing processes in a cost-effective
and timely manner. As a result, we continually evaluate the advantages and
feasibility of new product design and manufacturing processes. We cannot,
however, assure you that our process development efforts will be successful.
Investment entities affiliated with Donaldson, Lufkin & Jenrette, Inc. have
substantial control over our business operations.
Prior to this offering, approximately 90% of our outstanding common stock is
held by investment entities affiliated with Donaldson, Lufkin & Jenrette, Inc.,
and after this offering these stockholders will beneficially own approximately
% of our outstanding common stock. If the underwriters exercise their
over-allotment option in full, investment entities affiliated with Donaldson,
Lufkin & Jenrette, Inc. will beneficially own approximately % of our
outstanding common stock. In addition, pursuant to a stockholders agreement, DLJ
Merchant Banking Partners, L.P. has the right to appoint a majority of the
members of our board of directors and, while shares of our senior preferred
stock remain outstanding, DLJ Investment Partners II, L.P. has the right to
elect one of our directors. As a result, Donaldson, Lufkin & Jenrette, Inc. and
its affiliates control us and have significant control over our business,
policies and affairs, including the power to appoint new management, prevent or
cause a change of control and approve any action requiring the approval of the
holders of our common stock, including adopting some amendments to our
certificate of incorporation and approving mergers or sales of all or
substantially all of our assets. The directors elected by affiliates of
Donaldson, Lufkin & Jenrette, Inc. also have the authority to make decisions
affecting our capital structure. The interests of these stockholders and
directors may differ from your interests or the interests of other stockholders.
Provisions in our charter documents and state law may make it harder for others
to obtain control of us even though some stockholders might consider such a
development favorable.
Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that some
stockholders might consider favorable or beneficial. If a change of control or
change in management is delayed or prevented, the market price of our common
stock could suffer.
We are subject to a variety of environmental laws that could adversely affect
our business operations.
We are subject to a variety of federal, state, local and foreign regulatory
requirements relating to environmental, waste management, health and safety
matters. We periodically generate and
10
<PAGE>
temporarily handle limited amounts of materials that are considered hazardous
waste under applicable law. If we fail to comply with any present or future
regulations, we could be subject to future liabilities or the suspension of
production, which could harm our financial condition and results of operations.
RISKS RELATED TO THIS OFFERING
There is currently no public market for our common stock.
Prior to this offering, there has been no public market for our common
stock. We cannot assure you that an active trading market for our common stock
will develop or be sustained after this offering. The initial public offering
price for our common stock will be determined by negotiations between the
underwriters and us. We cannot assure you that the initial public offering price
will correspond to the price at which our common stock will trade in the public
market subsequent to this offering or that the price of our common stock
available in the public market will reflect our actual financial performance.
Shares eligible for public sale after this offering could adversely affect our
stock price.
The market price of our common stock could decline after this offering as a
result of sales by our existing stockholders or the perception that these sales
could occur. These sales also might make it difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. See
"Shares Eligible For Future Sale." In addition, some existing stockholders have
the ability to require us to register their shares.
The initial public offering price is significantly higher than the book value of
our common stock, and you will experience immediate and substantial dilution in
the value of your investment.
The initial public offering price per share will significantly exceed our
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of $ per
share. See "Dilution."
We do not intend to pay dividends on our common stock.
We have never declared or paid any cash dividends on shares of our common
stock, and we do not intend to do so in the foreseeable future. We currently
intend to retain any future earnings to finance operations and expansion and to
reduce indebtedness. In addition, our existing bank credit facility limits, and
we expect that our new bank credit facility will limit, our ability to pay cash
dividends on our common stock.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Some of the
forward-looking statements can be identified by the use of forward-looking words
such as "believes," "expects," "may," "will," "should," "seeks,"
"approximately," "intends," "plans," "estimates" or "anticipates" or the
negative of those words or other comparable terminology. Forward-looking
statements involve risks and uncertainties. A number of important factors could
cause actual results to differ materially from those in the forward-looking
statements. These factors include systems failures, technological
11
<PAGE>
changes, volatility of securities markets, government regulations and economic
conditions and competition in the areas in which we conduct our operations. For
a discussion of factors that could cause actual results to differ, please see
the discussion under "Risk Factors" contained in this prospectus. The
forward-looking statements made in this prospectus relate only to events as of
the date on which the statements are made.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million from the sale of our common stock, offered at an assumed initial
public offering price per share of $ after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us. We
will receive approximately $ million if the underwriters' over-allotment
option is exercised in full. We will not receive any proceeds from the sale of
our common stock by the selling stockholders pursuant to any exercise of the
underwriters' over-allotment option.
We intend to use approximately $57.0 million of the net proceeds of this
offering to retire all of our outstanding senior preferred stock. The preferred
stock was issued in November 1999 to DLJ Investment Funding II, Inc., DLJ
Investment Partners II, L.P., DLJ ESC II L.P. and DLJ Investment Partners, L.P.
in connection with our acquisition from 3Com of selected inventory, fixed assets
and intangible assets in Salt Lake City, Utah. Holders of our senior preferred
stock are entitled to a quarterly cash dividend at the rate of 14% per annum
through November 26, 2000 and thereafter at a rate of 15% per annum payable in
cash at the mandatorily redeemable date or in additional shares of senior
preferred stock.
We intend to use approximately $ million of the net proceeds of this
offering to discharge a portion of our indebtedness under our bank credit
facility. We expect to repay approximately $ million under our term loan
facility and approximately $ million under our revolving credit facility. Our
term loan facility has a final maturity of July 31, 2004. Our revolving credit
facility has a final maturity of July 31, 2002. As of December 31, 1999, the
interest rate for our term loan facility was 9.94% and for our revolving credit
facility was between 9.19% and 10.50%. Following this offering and the
application of the net proceeds, we will have approximately $ million
outstanding under our bank credit facility.
After repayment of the indebtedness described above, we will have
$ million available under our bank credit facility to make future acquisitions
and for general corporate purposes. We currently have no agreements or
understandings about any specific acquisition, and we have not determined the
amount of net proceeds to be used for each of these specific purposes. In
connection with this offering, we expect to refinance the indebtedness under our
bank credit facility that remains outstanding after application of the net
proceeds of this offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Indebtedness--New Bank Credit Facility."
DIVIDEND POLICY
We have never declared or paid any cash dividends on shares of our common
stock, and we do not intend to do so in the foreseeable future. We currently
intend to retain any future earnings to finance operations and expansion and to
reduce indebtedness. In addition, our existing bank credit facility limits, and
we expect that our new bank credit facility will limit, our ability to pay cash
dividends on our common stock.
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999.
Our capitalization is presented:
- on an actual basis; and
- as adjusted to reflect the application of the estimated net proceeds from
this offering to retire all of our outstanding senior preferred stock and
to repay a portion of our outstanding indebtedness,
assuming an initial public offering price of $ per share.
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------
Actual As Adjusted
(In thousands, except per share data)
<S> <C> <C>
Cash and cash equivalents............................. $ 24,182 $
======== ========
Long-term debt and capital lease obligations:
Revolving facility.................................. $ 68,100 $
Term loans.......................................... 49,375
Other long-term debt and capital lease obligations
including current portion......................... 9,868
-------- --------
Total long-term debt and capital lease
obligations..................................... 127,343
Senior redeemable preferred stock due 2006, $.001 par
value, redemption value $25.00 per share; 2,000
shares authorized (actual and as adjusted); 2,000
shares issued and outstanding (actual); no shares
issued and outstanding (as adjusted)................ 39,204
Stockholders' equity:
Preferred stock, $.001 par value, 3,000 shares
authorized (actual and as adjusted); no shares
issued and outstanding (actual and as adjusted)... --
Common stock, $.001 par value, 150,000 shares
authorized (actual and as adjusted); 78,356 shares
issued and outstanding (actual);
shares issued and outstanding (as adjusted)....... 78
Additional paid-in capital.......................... 88,413
Accumulated deficit................................. (30,361)
Accumulated other comprehensive loss................ (9,509)
-------- --------
Total stockholders' equity........................ 48,621
-------- --------
Total capitalization.................................. $215,168 $
======== ========
</TABLE>
13
<PAGE>
DILUTION
The net tangible book value of our common stock as of December 31, 1999 was
approximately $ million, or approximately $ per share. Net tangible book
value per share represents the amount of our stockholders' equity less
intangible assets divided by the total number of shares of our common stock
outstanding.
Dilution per share to new investors represents the difference between the
amount per share paid by purchasers of our common stock in this offering and the
net tangible book value per share of our common stock immediately after the
completion of this offering.
Following:
- our sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share, and after deducting:
- the estimated underwriting discounts and commissions; and
- the estimated offering expenses; and
- the application of the estimated net proceeds from this offering,
our net tangible book value as of December 31, 1999 would have been
approximately $ million or approximately $ per share. This represents an
immediate increase in net tangible book value of approximately $ per share
to the existing stockholders and an immediate dilution in net tangible book
value of approximately $ per share to purchasers of our common stock in
this offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....... $
Net tangible book value per share as of
December 31, 1999................................. $
Increase per share attributable to new investors....
-------
Net tangible book value per share after this
offering............................................
-------
Dilution per share to new investors................... $
=======
</TABLE>
The following table illustrates as of December 31, 1999, the difference
between the number of shares of common stock purchased from us, the total
consideration paid to us and the average price paid by existing stockholders and
by the new investors purchasing shares of our common stock in this offering,
before deduction of estimated underwriting discounts and commissions and
offering expenses:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------- ---------------------- Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 78,355,587 % $82,483,418 % $1.05
New stockholders.....
---------- ----- ----------- ----- -----
Total.............. % $ % $
========== ===== =========== ===== =====
</TABLE>
The foregoing table assumes no exercise of any stock options and warrants
outstanding as of December 31, 1999. As of December 31, 1999, there were options
and warrants outstanding to purchase a total of 13,051,071 shares of our common
stock with exercise prices ranging from $1.00 to $5.00 per share. If all of
these options and warrants are exercised, you will experience further dilution
in the amount of approximately $ per share.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the dates
and periods indicated has been derived from our audited consolidated financial
statements. The selected consolidated financial data and notes should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales............................. $ 183,164 $ 474,288 $ 562,666 $ 837,993 $ 920,722
Cost of goods sold.................... 166,665 436,155 526,787 792,734 865,489
--------- --------- --------- --------- ---------
Gross profit.......................... 16,499 38,133 35,879 45,259 55,233
Selling, general and administrative... 11,289 31,718 28,037 29,835 38,042
Restructuring and other asset
writedowns.......................... -- 2,535 12,094 6,729 780
--------- --------- --------- --------- ---------
Operating income (loss)............... 5,210 3,880 (4,252) 8,695 16,411
Interest expense, net................. (1,476) (5,702) (7,723) (10,161) (8,081)
Minority interest..................... 416 -- -- -- --
Foreign exchange gain (loss).......... 931 (1,760) (931) 721 (2,510)
--------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes and extraordinary
loss................................ 5,081 (3,582) (12,906) (745) 5,820
Provision for income taxes............ 3,864 6,144 4,372 3,294 3,810
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
loss................................ 1,217 (9,726) (17,278) (4,039) 2,010
Extraordinary loss.................... -- -- -- (2,202) --
--------- --------- --------- --------- ---------
Net income (loss)..................... $ 1,217 $ (9,726) $ (17,278) $ (6,241) $ 2,010
========= ========= ========= ========= =========
Net income (loss) applicable to common
stock............................... $ 1,217 $ (9,726) $ (17,278) $ (6,241) $ 1,201
========= ========= ========= ========= =========
Basic income (loss) per share:
Income (loss) before extraordinary
loss............................ $ 0.05 $ (0.18) $ (0.27) $ (0.05) $ 0.02
Extraordinary loss................ $ -- $ -- $ -- $ (0.03) $ --
Net income (loss)................. $ 0.05 $ (0.18) $ (0.27) $ (0.08) $ 0.02
Weighted average shares
outstanding..................... 25,720 52,635 64,687 74,983 77,537
Diluted income (loss) per share:
Income (loss) before extraordinary
loss............................ $ 0.05 $ (0.18) $ (0.27) $ (0.05) $ 0.02
Extraordinary loss................ $ -- $ -- $ -- $ (0.03) $ --
Net income (loss)................. $ 0.05 $ (0.18) $ (0.27) $ (0.08) $ 0.02
Weighted average shares
outstanding..................... 25,720 52,635 64,687 74,983 78,334
Other Financial Data:
EBITDA(a)............................. $ 4,224 $ 10,734 $ 16,237 $ 26,357 $ 31,624
Depreciation and amortization......... (986) 4,319 8,395 10,933 14,433
Capital expenditures.................. 10,510 11,534 25,780 2,774 39,094
Net cash provided by (used in)
operating activities................ (1,060) 484 (17,396) 41,071 (25,121)
Net cash used in investing
activities.......................... (70,754) (11,534) (25,978) (4,483) (81,775)
Net cash provided by (used in)
financing activities................ 79,116 6,647 50,220 (23,505) 109,229
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. $ 8,292 $ 3,647 $ 9,513 $ 23,969 $ 24,182
Working capital....................... 64,603 47,857 43,009 54,340 98,273
Total assets.......................... 158,857 191,577 266,929 277,608 411,783
Total long-term debt and capital lease
obligations......................... 36,457 47,393 80,938 62,127 127,343
Preferred stock....................... 500 500 -- -- 39,204
Total stockholders' equity............ 50,728 39,332 42,097 39,174 48,621
</TABLE>
- --------------------------
(a) EBITDA is defined as earnings before net interest expense, income taxes,
depreciation and amortization as well as non-operating expenses including
foreign exchange gain (loss) and restructuring and other asset writedowns.
EBITDA is presented because we believe it is a widely accepted financial
indicator of a company's ability to incur and service debt. However, EBITDA
should not be considered as an alternative to a review of our consolidated
financial statements and notes, included elsewhere in this prospectus, in
relation to our operating performance or liquidity.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION CONTAINS FORWARD-LOOKING
STATEMENTS AND INVOLVES NUMEROUS RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT
LIMITED TO, THOSE DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS PROSPECTUS.
OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY
FORWARD-LOOKING STATEMENTS.
Overview
We are a leading global provider of advanced electronics design,
manufacturing and related services to OEMs primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. Our headquarters are in Concord,
Massachusetts, and we have manufacturing operations in the United States, Spain,
Ireland, Singapore and Malaysia. Since our founding in 1994, we have experienced
substantial growth driven primarily by recent acquisitions of existing OEM
manufacturing facilities and by the increasing number of OEMs who are
outsourcing their manufacturing requirements. We intend to continue to actively
pursue strategic acquisitions and to benefit from this increasing trend by OEMs
to outsource over the next several years.
We derive most of our net sales under purchase orders from our customers. We
recognize sales, net of product return and warranty costs, typically at the time
of product shipment or as services are rendered. Our cost of goods sold includes
the cost of electronic components and materials, labor costs and manufacturing
overhead. The procurement of raw materials and components requires us to commit
significant working capital to our operations and to manage the purchasing,
receiving, inspection and stocking of these items.
Our operating results are affected by the level of capacity utilization in
our manufacturing facilities, indirect labor costs and selling, general and
administrative expenses. Gross margins and operating income generally improve
during periods of high-volume and high-capacity utilization in our manufacturing
facilities and decline during periods of low-volume and low-capacity
utilization.
Our business strategy includes the continued expansion of our global
manufacturing network. Currently, approximately 75% of our net sales and cost of
materials worldwide are denominated in US dollars, while our labor and utility
costs in facilities outside of the United States are denominated in local
currencies. Foreign currency gains/losses are the result of transacting business
in a currency that is different from the functional currency of our operating
entity and the movements in those currencies between the time a transaction is
recorded for financial reporting purposes and the time payment is made or
received. We currently use derivative financial instruments, on a limited basis,
to hedge our foreign currency risk but not for trading purposes. Based upon the
growth of our operations outside of the United States and our corresponding
exposure to changes in foreign exchange rates, we have begun to evaluate
increasing the use of derivative financial instruments to hedge our exposure to
fluctuations in the value of foreign currencies.
17
<PAGE>
Recent Acquisitions
A significant portion of our growth has come from recent acquisitions, which
have strengthened existing customer relationships, added new customers and
increased our range of service offerings.
In November 1999, we acquired from 3Com selected inventory, fixed assets and
other intangibles located in Salt Lake City, Utah, for $79.5 million. The
acquisition was financed with the proceeds from the issuance of $50.0 million of
senior preferred stock and warrants and borrowings under our bank credit
facility. In connection with this acquisition, we entered into a two-year supply
agreement with Palm to produce Palm computing devices and a two-year supply
agreement with 3Com to produce modems and network interface cards. We also
retained the facility employees.
In the first half of 1999, we acquired two electronics design firms,
Electronic System Packaging and Ronlin Design, for an aggregate purchase price
of approximately $4.4 million.
In the first half of 1998, we acquired selected inventory and fixed assets
of IBM located in Charlotte, North Carolina, for $30.1 million in cash. The
acquisition of these assets was financed with borrowings under our bank credit
facility. In connection with this acquisition, we also entered into a three-year
supply agreement to provide systems assembly and integration, testing and order
fulfillment services for several divisions of IBM and retained the facility
employees.
Restructuring and Other Asset Writedowns
Generally, we enter into business acquisitions or asset acquisitions and
related supply agreements with the intention of improving the existing
manufacturing operations, reducing costs and improving operating margins. To
accomplish this, we typically assess the manufacturing processes and employee
base and restructure the operations.
During the fourth quarter of 1999, we approved a restructuring plan designed
to improve our manufacturing operations at our Charlotte facility. It is
comprised primarily of $0.8 million of severance costs related to a reduction of
33 manufacturing and managerial employees. We expect the restructuring plan to
be substantially implemented over the next twelve months, and the expected
savings from implementation of the plan are estimated to be $1.2 million.
In the fourth quarter of 1998, we approved a plan to restructure various
operations in the United States, Spain and Asia. The total restructuring charge
for this plan was $6.7 million, comprised primarily of the write-off of
capitalized assets, lease termination costs and severance costs related to a
reduction of 72 manufacturing and managerial employees. As of December 31, 1999,
this plan was substantially completed. We expect to realize substantially all of
the $3.4 million in savings contemplated as a result of implementing this plan.
In the fourth quarter of 1997, we approved a plan to restructure various
operations in the United States and Spain. Under this restructuring plan, we
closed a facility located in Fremont, California, during the first quarter of
1998. During the year ended December 31, 1997, the Fremont facility generated
net sales of $19.0 million and a net operating loss of $5.4 million, excluding
the restructuring charge. Restructuring costs totaling $7.2 million were
recorded for the closing of this facility. These costs consisted primarily of
the write-off of capitalized assets, lease termination costs and severance costs
related to a reduction of 103 manufacturing and managerial employees. This
restructuring plan also included charges of $4.9 million consisting of the
severance costs related to
18
<PAGE>
a reduction of 40 manufacturing and managerial employees located at our Valencia
facility. This restructuring plan was substantially completed by December 31,
1998. We are realizing substantially all of the $7.3 million in savings that
were contemplated in this plan.
The major components of our restructuring plans were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
(In thousands)
<S> <C> <C> <C>
Employee severance........................... $ 5,387 $3,673 $780
Asset writedowns............................. 4,932 1,135 --
Lease terminations........................... 1,000 1,921 --
Other........................................ 775 -- --
------- ------ ----
$12,094 $6,729 $780
======= ====== ====
</TABLE>
Asset writedowns relate primarily to the closing of facilities and the
losses resulting from equipment dispositions. Other charges include
miscellaneous costs and other commitments. Some severance charges are being paid
over periods greater than one year.
The following table details the activity in our restructuring reserve:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1998 1999 Total
(In thousands)
<S> <C> <C> <C> <C>
Restructuring provision............. $12,094 $ -- $ -- $12,094
Cash payments....................... -- -- -- --
Asset writedowns.................... 4,932 -- -- 4,932
------- ------ ---- -------
Balance at December 31, 1997........ 7,162 -- -- 7,162
Restructuring provision............. -- 6,729 -- 6,729
Cash payments....................... 6,958 1,127 -- 8,085
Asset writedowns.................... -- 1,135 -- 1,135
------- ------ ---- -------
Balance at December 31, 1998........ 204 4,467 -- 4,671
Restructuring provision............. -- -- 780 780
Cash payments....................... 204 3,819 266 4,289
Asset writedowns.................... -- 494 -- 494
------- ------ ---- -------
Balance at December 31, 1999........ $ -- $ 154 $514 $ 668
======= ====== ==== =======
</TABLE>
The restructuring reserve of $0.7 million at December 31, 1999 primarily
consists of liabilities for severance payments under our most recent
restructuring plan and will be utilized during the year 2000.
19
<PAGE>
Results of Operations
The following table sets forth specified operating data and percentages of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1997 1998 1999
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................... $562,666 100.0% $837,993 100.0% $920,722 100.0%
Cost of goods sold................. 526,787 93.6 792,734 94.6 865,489 94.0
-------- ----- -------- ----- -------- -----
Gross profit....................... 35,879 6.4 45,259 5.4 55,233 6.0
Selling, general and
administrative................... 28,037 5.0 29,835 3.6 38,042 4.1
Restructuring and other asset
writedowns....................... 12,094 2.1 6,729 0.8 780 0.1
-------- ----- -------- ----- -------- -----
Operating income (loss)............ (4,252) (0.8) 8,695 1.0 16,411 1.8
Interest expense, net.............. (7,723) (1.4) (10,161) (1.2) (8,081) (0.9)
Foreign exchange gain (loss)....... (931) (0.2) 721 0.1 (2,510) (0.3)
-------- ----- -------- ----- -------- -----
Income (loss) before provision for
income taxes and extraordinary
loss............................. (12,906) (2.3) (745) (0.1) 5,820 0.6
Provision for income taxes......... 4,372 0.8 3,294 0.4 3,810 0.4
-------- ----- -------- ----- -------- -----
Income (loss) before extraordinary
loss............................. (17,278) (3.1) (4,039) (0.5) 2,010 0.2
Extraordinary loss................. -- -- (2,202) (0.3) -- --
-------- ----- -------- ----- -------- -----
Net income (loss).................. $(17,278) (3.1)% $ (6,241) (0.7)% $ 2,010 0.2%
======== ===== ======== ===== ======== =====
</TABLE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
NET SALES
Net sales for the year ended December 31, 1999 increased $82.7 million, or
9.9%, to $920.7 million from $838.0 million for the year ended December 31,
1998. This increase in net sales was the net result of a $138.4 million increase
attributable to operating our Charlotte facility for the full year in 1999, as
compared to seven months in 1998, and the acquisition of our Salt Lake City
facility in November 1999 in addition to a $77.6 million increase attributable
to growth from three existing customers, partially offset by the effects of a
cancellation of a manufacturing program for a customer totaling $78.5 million as
a result of the sale of a business by that customer to a third-party and a
reduction in unit volumes for a different customer totaling $39.3 million
resulting from competitive pressures in that customer's industry.
GROSS PROFIT
Gross profit increased to 6.0% of net sales for the year ended December 31,
1999 from 5.4% of net sales for the year ended December 31, 1998. The increase
resulted from a change in our customer mix (0.2% of net sales) and improvement
in the utilization of our manufacturing capacity (0.2% of net sales). In
addition, the operations of our Fremont facility in 1998, prior to its closing,
negatively impacted margins in that year (0.2% of net sales).
20
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense for the year ended December 31,
1999 increased to $38.0 million, or 4.1% of net sales, from $29.8 million, or
3.6% of net sales, for the year ended December 31, 1998. This increase was
comprised of expenses of $2.7 million related to the impact of operating our
Charlotte facility for a full year, $1.3 million related to the modification of
an equipment leasing arrangement, $1.5 million related to the expansion of our
information systems to support our additional facilities and $0.9 million
related to our acquisition of two electronics design firms and our Salt Lake
City facility. This increase was partially offset by the reduction of expenses
totaling $0.7 million resulting from the closing of our Fremont facility in
1998.
FOREIGN EXCHANGE GAINS/LOSSES
Foreign exchange loss for the year ended December 31, 1999 was $2.5 million
compared with a foreign exchange gain of $0.7 million for the year ended
December 31, 1998. Most of our foreign exchange loss in 1999 is unrealized and
relates to the strengthening of the US dollar in relation to the Spanish peseta
in connection with a US dollar denominated loan for our Valencia facility.
INTEREST EXPENSE
Net interest expense decreased to $8.1 million for the year ended
December 31, 1999 from $10.2 million for the year ended December 31, 1998,
reflecting lower average borrowings during 1999, partially offset by the impact
of increasing interest rates.
PROVISION FOR INCOME TAXES
Provision for income taxes increased to $3.8 million for the year ended
December 31, 1999 compared with $3.3 million for the year ended December 31,
1998. Our tax provision in both years resulted from the mix of profits and
losses we experienced across the jurisdictions within which we operate. Losses
in the United States and Ireland provided us with no income tax benefit while
profits in Spain and Singapore required us to record tax provisions.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
NET SALES
Net sales for the year ended December 31, 1998 increased $275.3 million, or
48.9%, to $838.0 million from $562.7 million for the year ended December 31,
1997. This increase in net sales was the net result of a $175.0 million increase
attributable to our acquisition of the Charlotte facility in June 1998 and an
increase of $140.2 million attributable to growth from five existing customers,
partially offset by volume reduction in two customers' programs totaling $42.0
million resulting from competitive pressures in these customers' industries.
GROSS PROFIT
Gross profit decreased to 5.4% of net sales for the year ended December 31,
1998 from 6.4% of net sales for the year ended December 31, 1997. This decrease
primarily resulted from price reductions on two customer programs (1.2% of net
sales) and changes in product mix (0.8% of net sales). This decrease was
partially offset by increased capacity utilization due to higher production
volumes at several of our manufacturing facilities (1.0% of net sales).
21
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense for the year ended December 31,
1998 increased to $29.8 million, or 3.6% of net sales, from $28.0 million, or
5.0% of net sales, for the year ended December 31, 1997. This increase was
primarily comprised of additional expenses of $0.6 million related to
information systems and of $0.8 million related to the start-up of our logistics
operation.
FOREIGN EXCHANGE GAINS/LOSSES
Foreign exchange gain for the year ended December 31, 1998 was $0.7 million
compared with a foreign exchange loss of $0.9 million for the year ended
December 31, 1997. Our foreign exchange loss in 1998 and gain in 1997 primarily
resulted from various transactions in all of our foreign operating entities and
reflects the general fluctuation in the value of the US dollar in relation to
other currencies.
INTEREST EXPENSE
Net interest expense increased to $10.2 million for the year ended
December 31, 1998 from $7.7 million for the year ended December 31, 1997. This
increase was primarily due to increased borrowings to support working capital
requirements resulting from business expansion during 1998.
PROVISION FOR INCOME TAXES
Provision for income taxes decreased to $3.3 million for the year ended
December 31, 1998 compared with $4.4 million for the year ended December 31,
1997. Our tax provision in both years resulted from the mix of profits and
losses experienced by us across the jurisdictions within which we operate.
Losses in the United States and Ireland provided us with no income tax benefit
while profits in Europe and Asia required us to record tax provisions.
Quarterly Results of Operations
The following table sets forth our unaudited financial information for the
past eight quarterly periods. The information presented has been derived from
our unaudited consolidated financial statements that, in our opinion, reflect
all normal, recurring adjustments necessary for a fair
22
<PAGE>
presentation. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31, June 30, Sep. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $189,492 $177,659 $226,603 $244,239 $206,964 $221,043 $221,068 $271,647
Cost of goods sold....... 178,800 166,898 215,039 231,997 195,879 207,487 206,408 255,715
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit............. 10,692 10,761 11,564 12,242 11,085 13,556 14,660 15,932
Selling, general and
administrative......... 6,884 7,623 7,548 7,780 7,928 10,253 9,639 10,222
Restructuring and other
asset writedowns....... -- -- -- 6,729 -- -- -- 780
-------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................. 3,808 3,138 4,016 (2,267) 3,157 3,303 5,021 4,930
Interest expense, net.... 2,832 2,740 2,991 1,598 1,702 1,773 1,900 2,706
Foreign exchange gain
(loss)................. (154) 439 1,979 (1,543) (1,160) (1,215) 858 (993)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes and extraordinary
loss................... 822 837 3,004 (5,408) 295 315 3,979 1,231
Provision for income
taxes.................. 1,420 868 1,746 (740) 192 205 2,613 800
Income (loss) before
extraordinary loss..... (598) (31) 1,258 (4,668) 103 110 1,366 431
Extraordinary loss....... -- -- 2,202 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........ $ (598) $ (31) $ (944) $ (4,668) $ 103 $ 110 $ 1,366 $ 431
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss)
applicable to common
stock.................. $ 598 $ (31) $ (944) $ (4,668) $ 103 $ 110 $ 1,366 $ (378)
======== ======== ======== ======== ======== ======== ======== ========
Basic income (loss) per
share:
Income (loss) before
extraordinary loss... $ (0.01) $ -- $ 0.02 $ (0.06) $ -- $ -- $ 0.02 $ --
Extraordinary loss..... $ -- $ -- $ (0.03) $ -- $ -- $ -- $ -- $ --
Net income (loss)...... $ (0.01) $ -- $ (0.01) $ (0.06) $ -- $ -- $ 0.02 $ --
Weighted average shares
outstanding.......... 74,521 74,798 75,215 75,398 76,213 77,813 78,070 78,186
Diluted income (loss) per
share:
Income (loss) before
extraordinary loss... $ (0.01) $ -- $ 0.02 $ (0.06) $ -- $ -- $ 0.02 $ --
Extraordinary loss..... $ -- $ -- $ (0.03) $ -- $ -- $ -- $ -- $ --
Net income (loss)...... $ (0.01) $ -- $ (0.01) $ (0.06) $ -- $ -- $ 0.02 $ --
Weighted average shares
outstanding.......... 74,521 74,798 75,864 75,398 76,833 78,302 78,545 78,186
</TABLE>
23
<PAGE>
The following table sets forth our financial information stated as a
percentage of net sales for the past eight quarterly periods:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------------------
Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31, June 30, Sep. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...... 94.4 93.9 94.9 95.0 94.6 93.9 93.4 94.1
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............ 5.6 6.1 5.1 5.0 5.4 6.1 6.6 5.9
Selling, general and
administrative........ 3.6 4.3 3.3 3.2 3.8 4.6 4.4 3.8
Restructuring and other
asset writedowns...... -- -- -- 2.8 -- -- -- 0.3
----- ----- ----- ----- ----- ----- ----- -----
Operating income
(loss)................ 2.0 1.8 1.8 (0.9) 1.5 1.5 2.3 1.8
Interest expense, net... 1.5 1.5 1.3 0.7 0.8 0.8 0.9 1.0
Foreign exchange gain
(loss)................ (0.1) 0.2 0.9 (0.6) (0.6) (0.5) 0.4 (0.4)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision for income
taxes and
extraordinary loss.... 0.4 0.5 1.3 (2.2) 0.1 0.1 1.8 0.5
Provision for income
taxes................. 0.7 0.5 0.8 (0.3) 0.1 0.1 1.2 0.3
Income (loss) before
extraordinary loss.... (0.3) -- 0.6 (1.9) -- -- 0.6 0.2
Extraordinary loss...... -- -- 1.0 -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (0.3)% --% (0.4)% (1.9)% --% --% 0.6% 0.2%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Liquidity and Capital Resources
Net cash used in operating activities of $25.1 million for the year ended
December 31, 1999 resulted from an increase in working capital of
$47.6 million, net income of $2.0 million, depreciation and amortization of
$14.4 million and other non-cash items aggregating $6.1 million. Cash provided
by operating activities of $41.1 million for the year ended December 31, 1998
resulted from a decrease in working capital of $29.7 million, net loss of
$6.2 million, depreciation and amortization of $10.9 million and other non-cash
items aggregating $6.7 million. The increase in depreciation and amortization in
1999 compared to 1998 reflects increased capital expenditures in 1999
attributable to the implementation of a new enterprise resource planning system
in our Charlotte facility and the addition of manufacturing assets in several
facilities to support additional production volume. Increased depreciation and
amortization also resulted from our acquisition of the Salt Lake City facility
in November 1999. Cash used by operating activities of $17.4 million for the
year ended December 31, 1997 resulted from an increase in working capital of
$17.4 million, net loss of $17.3 million, depreciation and amortization of
$8.4 million and other non-cash items aggregating $8.9 million.
Net cash used in investing activities for the year ended December 31, 1999
was $81.8 million consisting primarily of capital expenditures of $45.0 million
and acquisitions of intangible assets of $35.3 million in connection with our
Salt Lake City facility. Net cash used in investing activities
24
<PAGE>
for the years ended December 31, 1998 and 1997 of $4.5 million and
$26.0 million, respectively, was all attributable to capital expenditures. We
expect capital expenditures in 2000, excluding the effects of any acquisitions,
to be approximately $28.0 million, primarily for the purchase of additional
manufacturing assets.
Net cash provided by financing activities for the year ended December 31,
1999 was $109.2 million, principally consisting of net borrowings of
$64.6 million under our bank credit facility and net proceeds of $49.1 million
from the issuance of senior preferred stock and warrants in connection with our
acquisition of the Salt Lake City facility. Net cash used in financing
activities for the year ended December 31, 1998 was $23.5 million, principally
consisting of net repayments under our bank credit facility. Net cash provided
by financing activities for the year ended December 31, 1997 was $50.2 million,
principally consisting of net borrowings of $25.9 million under our bank credit
facility and proceeds of $25.4 million from the issuance of our common stock.
At December 31, 1999, we had $49.4 million outstanding under our term loan
facility and $68.1 million outstanding under our revolving credit facility with
$6.9 million available for additional borrowings. We intend to increase our
available borrowings by $25.0 million during the first quarter of 2000. There is
no assurance, however, that such an increase will be permitted by our existing
lenders. Borrowings under our existing bank credit facility are limited by a
borrowing base calculation based on defined levels of accounts receivable and
inventory. At December 31, 1999, the total borrowing base was $149.8 million.
The interest rate on our revolving credit facility is, at our option, either
(i) 2.00% per annum plus the base rate, which is the higher of (a) the rate as
publicly announced from time to time by Bank of America as its "reference rate"
or (b) the federal funds effective rate plus 0.50% per annum, or (ii) the
reserve-adjusted London interbank offered rate, or Adjusted LIBOR, plus 3.00%
per annum. The applicable margins for our bank credit facility will be subject
to adjustment, +/-0.25%, based on the ratio of our consolidated total debt to
consolidated EBITDA (as defined in the bank credit facility). The interest rate
on our term loan facility is, at our option, either (i) the base rate plus 2.75%
per annum or (ii) the sum of Adjusted LIBOR plus 3.75%.
Based upon discussions with our principal lender under our bank credit
facility, we expect to refinance our existing indebtedness under our bank credit
facility upon consummation of this offering. We expect that the new bank credit
facility will provide for borrowings of up to $175.0 million and have a final
maturity in 2004. We anticipate that the new bank credit facility will be
secured by substantially all of our assets and will generally contain less
restrictive covenants and more favorable pricing terms than our existing bank
credit facility. To date, no definitive agreement has been executed, and no
assurance can be given that the new bank credit facility will be executed on
these terms or entered into at all.
On December 31, 1999, we had 2,000,000 shares of senior preferred stock
outstanding. The senior preferred stock was issued, along with warrants to
purchase 4,642,169 shares of our common stock at an exercise price of $1.20 per
share, in connection with the acquisition of our Salt Lake City facility. The
senior preferred stock and warrants were recorded at their estimated fair values
of $38.4 million and $10.7 million, respectively. This preferred stock has a
dividend rate of 14% per annum, payable quarterly in cash, through November 26,
2000 and thereafter, a rate of 15% per
25
<PAGE>
annum, payable in cash at the mandatorily redeemable date or in additional
shares of senior preferred stock. In the event that we fail to redeem the senior
preferred stock by November 26, 2006, the dividend rate will increase by 0.5%
per quarter, up to a maximum dividend rate of 25% per annum. So long as any
shares of senior preferred stock are outstanding, we are subject to restrictions
on the payment of dividends on our common stock and any other preferred stock in
addition to restrictions on the redemption or purchase of our common stock.
Until November 26, 2000, we may, at our option, redeem all of the senior
preferred stock at 114% of its liquidation value, or $57.0 million. Thereafter,
we may redeem the shares at 115% of its liquidation value. All redemptions of
senior preferred stock shall include accrued and unpaid dividends payable
thereon. We intend to retire all of the outstanding shares of senior preferred
stock with the proceeds from this offering. See "Use of Proceeds." Warrants to
purchase 890,921 shares of our common stock are immediately exercisable while
warrants to purchase 3,751,248 shares of our common stock are held in escrow and
will be released and become exercisable if the senior preferred stock remains
outstanding on the first anniversary date of its issuance.
We believe the proceeds of this offering, together with our current level of
working capital, cash generated from operations, leasing capabilities and
amounts available under our existing revolving credit facility will be adequate
to fund our anticipated capital expenditures for the next twelve months. We
intend to continue our acquisition strategy which could result in significant
future acquisitions. If available resources are not sufficient to finance these
acquisitions, we would be required to seek additional equity or debt financing.
There can be no assurance that funds from these sources, if required, will be
available on terms suitable to us, if at all.
Quantitative and Qualitative Disclosure Relating to Market Risks
INTEREST RATE RISK
Our exposure to interest rate risk arises from variable rate debt
arrangements entered into for other than trading purposes. The interest rate
risk on our fixed-rate debt is not material as the amounts outstanding under
these arrangements are not significant.
The cost of borrowings under our term loan facility is the applicable spread
plus the underlying cost of funds option (either the base rate or Adjusted
LIBOR). The applicable spread on the base rate loans is 2.75%, and the spread on
the Adjusted LIBOR loans is 3.75%. The cost of borrowing under our revolving
credit facility is the applicable spread plus the underlying cost of funds
option (either the base rate or Adjusted LIBOR). The applicable spread on the
base rate loans varies between 1.75% and 2.25% based on our consolidated
leverage ratio. The applicable spread on the Adjusted LIBOR loans varies between
2.75% and 3.25% based on our consolidated leverage ratio.
26
<PAGE>
The following table summarizes our market risks associated with our variable
rate debt in place at December 31, 1999 based on current maturities and interest
rates:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------
(Dollars in thousands)
2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C>
Term loans balance....... $49,375 $48,875 $48,375 $47,875 --
Effective interest
rate................... 9.938% 9.938% 9.938% 9.938% 9.938%
Principal payments....... $ 500 $ 500 $ 500 $ 500 $47,375
Interest expense......... $ 4,907 $ 4,857 $ 4,807 $ 4,758 $ 1,962
Revolving facility
balance................ $68,100 $68,100 -- -- --
Available credit......... $75,000 $75,000 -- -- --
Effective interest
rate................... 10.259% 10.259% 10.259% -- --
Fee on unused portion.... 0.47% 0.47% 0.47% -- --
Interest expense......... $ 7,018 $ 7,018 $ 4,075 -- --
</TABLE>
FOREIGN CURRENCY EXCHANGE RISK
We also have exposure to various foreign currency exchange-rate fluctuations
for cash flow received from our foreign subsidiaries. This risk is mitigated
because the functional currency of our subsidiaries in Ireland, Singapore and
Malaysia is the US dollar and most financial transactions are conducted with the
US dollar. The foreign currency exchange-rate risk for our subsidiary in Spain
is mitigated because substantially all of its financial transactions are
conducted in the Spanish peseta. Our primary exposure to foreign currency
exchange-rate fluctuations is related to debt at our subsidiary in Spain, which
is denominated in US dollars. We enter into a limited number of foreign exchange
contracts to hedge our foreign currency risk. These contracts were not
significant at December 31, 1999.
Year 2000
Computer systems used by us and our suppliers may not properly recognize a
date using "00" as the year 2000. This could result in system/program failure or
logic errors that could disrupt normal business activities. We established a
formal task force to address this issue and to achieve year 2000 readiness.
We systematically performed a global risk assessment, conducted testing and
remediation, developed contingency plans to mitigate unknown risks and
communicated with employees, suppliers and customers to raise awareness of the
year 2000 problem. In addition, we identified "worst case" scenarios and
developed appropriate contingency plans. We investigated most of our exposure in
this area and do not consider the foregoing a high risk. We cannot, however,
assure you that we have identified all of the potential risks. Failure by us to
identify and remediate all material year 2000 risks could adversely affect our
business, financial condition and results of operations.
Our customers or potential customers may be affected by year 2000 issues
that may, in part:
- cause a reduction, delay or cancellation of customer orders;
- cause a delay in payments for products shipped; or
- cause customers to expend significant resources on year 2000 compliance
matters, rather than employ us to design and manufacture their products.
27
<PAGE>
In addition, if computer systems used by us or our suppliers, products
provided to us by our suppliers, or the software applications or hardware used
in systems manufactured or sold by us, fail or experience significant
difficulties related to the year 2000 issue, our results of operations and
financial condition could be adversely affected. We could incur delays in
producing and delivering products to our customers, which could result in order
cancellations and lost net sales and profits. We cannot assure you that the
entities on whom we rely for some goods and services that are important for our
business were successful in addressing all of their software and systems
problems in order to operate without disruption in the year 2000 and beyond. We
believe, however, that the likelihood of losing net sales and profits from
difficulties resulting from year 2000 issues is low.
We are not currently aware of, and have not experienced, any significant
problems associated with the year 2000 readiness of our computers and other
systems or those of our customers or suppliers. We do not expect to bear any
significant incremental costs related to year 2000 problems. Through
December 31, 1999, we spent approximately $0.9 million to address the year 2000
issue. There can be no assurance, however, that there will not be a delay in, or
increased costs associated with, the programs described in this section.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Financial Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging, requiring recognition of all derivatives as either
assets or liabilities in the statement of financial position measured at fair
value, as well as identifying the conditions for which a derivative may be
specifically designed as a hedge. SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of Effective Date of SFAS
No. 133," deferred the effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000, which is fiscal year 2001 for us. The effects on our
financial condition, results of operations or cash flows of adopting SFAS
No. 133 are not expected to be significant.
28
<PAGE>
BUSINESS
Overview
We are a leading global provider of advanced electronics design,
manufacturing and related services to original equipment manufacturers primarily
in the voice and data communications, computer and related peripherals, medical
equipment and industrial and consumer electronics industries. We provide OEMs
with a comprehensive range of services, including:
- product design and new product introduction services;
- materials procurement and management;
- assembly and manufacturing;
- testing services;
- order fulfillment and distribution; and
- after-market support.
By providing these services, we allow our customers to focus on their core
competencies and enhance their competitiveness by reducing the cost of their
products and shortening the time from product conception to product introduction
in the marketplace.
We have established a network of manufacturing facilities in the world's
major electronics markets--North America, Europe and Asia--to serve the
increasing outsourcing needs of both multinational and regional OEMs. We have
strategically located our manufacturing facilities near our customers and their
end-markets, which benefits our customers by reducing the time required to get
their products to market and by increasing their flexibility to respond to
changing market conditions. We believe that the combination of our services and
our global manufacturing network has enabled us to become integral to our
customers' product development and manufacturing strategies.
We target leading OEMs in rapidly growing industries. We seek to establish
long-term, integrated relationships with OEMs that have chosen outsourcing as a
core manufacturing strategy. Due to our focus on rapidly growing industries, our
prospects are influenced by recent trends, such as the buildout of the
communications and Internet infrastructure, the proliferation of personal
computing devices and other technological trends. Our customers include industry
leaders such as:
<TABLE>
<S> <C>
3Com Corporation LSI Logic Corporation
ADC Telecommunications, Inc. NEC Gunma Ltd.
Hewlett-Packard Company Palm, Inc.
International Business Machinesp
Corporation Philips NV
Rockwell International
Corporation
Iomega Corporation Siemens ICN
LM Ericsson AB
</TABLE>
29
<PAGE>
We also serve selected emerging companies in order to establish an early
outsourcing relationship that will provide us with attractive growth
opportunities as the products of these emerging companies gain market
acceptance.
An important element of our business strategy has been to acquire existing
manufacturing facilities, retain their business and employees, integrate the
acquired operations and introduce new customers into the acquired facilities. As
an increasing number of OEMs are divesting their manufacturing operations, we
intend to selectively pursue acquisitions of OEM divestitures and other
strategic opportunities. We believe that acquisitions can strengthen our market
position by, among other things:
- expanding our geographic presence to serve our current and future
customers;
- enlarging our target customer base;
- enhancing our technical capabilities;
- broadening our service offerings; and
- adding experienced management.
Industry Background
Historically, OEMs have been fully integrated, performing the product
design, new product introduction, assembly and manufacturing, testing, order
fulfillment and distribution and after-market support functions for their
products. In recent years, OEMs throughout the world have increasingly accepted
and relied upon the outsourcing of these functions to EMS companies. By focusing
on these functions, EMS companies can provide OEMs with cost savings, superior
technological know-how and access to more advanced manufacturing processes. This
enables OEMs to concentrate on their core competencies, such as product
development, marketing and sales. As a result of this outsourcing strategy, OEMs
have begun to divest a significant portion of their manufacturing facilities and
newer OEMs are choosing to outsource rather than build an internal manufacturing
infrastructure. Today, the EMS industry is comprised of companies that provide a
broad range of services, including product design, manufacturing, order
fulfillment and after-market support services for OEMs in the electronics
industry.
As a result of this increasing trend by OEMs to outsource, the EMS industry
has experienced significant growth over the past several years. Technology
Forecasters projects that EMS industry revenues will grow annually at 20% from
1998 through 2003, reaching $149 billion by 2003. Technology Forecasters also
projects that the twelve EMS providers with annual revenues of greater than $500
million will have a growth rate of 30% over the 1998 to 2003 period. In
addition, they estimate that EMS industry revenues accounted for 9.5% of the
cost of goods sold in the electronics industry in 1998 and estimate this
percentage will increase to 17.1% by 2003.
The growth in the EMS industry is being fueled primarily by the growth in
the number of OEMs that have chosen an outsourcing strategy and secondarily by
the growth of the overall electronics industry. We believe that OEMs will
increasingly adopt an outsourcing strategy due to rapidly changing product
technologies, shortening product life-cycles and the increasing capability of
EMS companies to manufacture more complex products. We expect this trend will
favor larger
30
<PAGE>
EMS providers that have clear advantages of scale, geographic diversity and
technology and will contribute to a period of further consolidation in the EMS
industry. Factors driving OEMs to favor an outsourcing strategy include:
ACCELERATED TIME-TO-GLOBAL MARKET. Due to intense competitive pressures in
the electronics industry, OEMs are facing increasingly shorter product
life-cycles and therefore have a growing need to reduce the time required to
bring new products to market. OEMs can significantly improve product development
cycles and shorten time-to-global market by utilizing the expertise and
manufacturing infrastructure of EMS companies, including capabilities relating
to design and quick-turn prototype development.
ACCELERATED TIME-TO-GLOBAL VOLUME. OEMs are increasingly requiring EMS
companies to have global capabilities as they seek to expand sales and
simultaneously introduce new products in major global markets. Once products
have been developed, OEMs need to quickly reach commercial volume production and
distribute their products worldwide in order to achieve the greatest impact in a
competitive market. In addition, EMS companies with global capabilities are able
to offer their customers a variety of manufacturing locations to better address
OEMs' objectives, including compliance with local content regulations and the
elimination of expensive freight costs, tariffs and time-consuming customs
clearances.
REDUCED CAPITAL INVESTMENT AND SHIFT OF FIXED COSTS TO VARIABLE COSTS. As
electronics products have become more technologically advanced, the
manufacturing process is requiring greater levels of investment in capital
equipment. Outsourcing to EMS companies allows OEMs to lower their investment in
inventory and manufacturing assets and shift more of their fixed costs to
variable costs, thereby increasing their return on assets. As a result, OEMs can
react more quickly to changing market conditions and allocate capital to other
core activities such as sales and marketing and research and development.
REDUCED TOTAL PRODUCTION COST. OEMs need to continually reduce costs to
remain competitive. EMS providers are able to manufacture products at a reduced
total cost to OEMs because of higher utilization of manufacturing capacity,
access to leading-edge procurement and inventory management capabilities,
proficiency in purchasing materials and components and a continual focus on
improving the entire supply chain from product design to after-market support.
ACCESS TO LEADING TECHNOLOGIES. OEMs are continually seeking access to
engineering expertise and manufacturing technologies necessary to build their
increasingly complex products. OEMs are motivated to work with EMS companies to
gain access to their expertise in product design, assembly and manufacturing,
and testing technologies, as well as their expertise in materials procurement
and management and after-market support. In addition, EMS companies provide OEMs
with access to advanced information systems enabling OEMs to better monitor and
control the global production and distribution of their products.
Our Business Strategy
Our objective is to be the premier provider of value-added electronics
design, manufacturing and related services to leading OEMs in rapidly growing
industries. Our strategy to achieve this objective includes the following key
elements:
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ESTABLISH AND MAINTAIN LONG-TERM RELATIONSHIPS WITH LEADING OEMS IN RAPIDLY
GROWING INDUSTRIES. We seek to establish and maintain relationships with
leading OEMs beginning with early involvement in their product development and
new product introduction cycles and thereafter provide integrated design,
manufacturing, order-fulfillment and after-market support services. We target
leading OEMs in rapidly growing industries such as the voice and data
communications equipment, computer and related peripherals, medical equipment
and industrial and consumer electronics industries and seek to maintain a
balance of customers among these industries. We also serve emerging companies in
these industries in order to establish an early outsourcing relationship that
will provide us with attractive growth opportunities as the products of these
emerging companies gain market acceptance. We closely integrate our information
systems with those of our customers, and we are increasingly using the Internet
and other information technologies to share information with our customers on a
timely basis. We also believe that a critical factor in maintaining and growing
successful outsourcing relationships is superior customer service. Consistent
with this strategy, we track customer satisfaction on a continuing basis and
compensate our key employees, in significant part, based upon meeting specified
goals tied to customer service.
EXPAND OUR GLOBAL PRESENCE. We intend to expand our manufacturing presence
in the world's major electronics markets in order to serve the increasing
outsourcing needs of both multinational and regional OEMs. We currently maintain
manufacturing facilities in the United States, Spain, Ireland, Singapore and
Malaysia, which are in close proximity to the world's major electronics markets.
This strategically positioned network of product design and manufacturing
facilities reduces the time and cost required to bring our customers' products
to market and allows for the simultaneous introduction of our customers'
products in major global markets. To effectively serve the requirements of
current and potential customers, we believe we need to operate in low-cost
locations and have facilities capable of manufacturing products with varying
levels of technical complexity in low, moderate and high volumes. We intend to
seek and evaluate strategic opportunities to continue to expand our geographic
presence and the scope of our manufacturing capabilities, particularly near our
customers and their end-markets.
EXPAND OUR INTEGRATED DESIGN, MANUFACTURING AND RELATED SERVICES. We intend
to continue to expand our service offerings to meet the evolving needs of our
customers and to more effectively control and manage the supply chain. OEMs are
increasingly requiring a wider range of advanced services from EMS companies. We
offer our customers a comprehensive range of services, including product design
and new product introduction services, materials procurement and management,
assembly and manufacturing, testing services, order fulfillment and distribution
and after-market support services. We have increased our service offerings and
expanded our product design capabilities through recent acquisitions of two
electronics design firms, Electronic System Packaging and Ronlin Design. We
believe that our ability to support customers in these areas provides us insight
into our customers' future manufacturing requirements, which is critical to
further penetrating the EMS market and attracting new customers. We also assumed
the operation of an IBM facility in Charlotte, North Carolina, which expands our
systems assembly and order fulfillment capabilities, and acquired a facility in
Salt Lake City, Utah, from 3Com, which increases our North American high-volume,
low-cost production and radio frequency engineering capabilities.
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CONTINUALLY REDUCE OUR CUSTOMERS' OVERALL PRODUCT COSTS. We continually
seek to reduce our customers' overall product costs. We describe our
comprehensive approach to product cost reduction as "Total Cost of Ownership."
Our Total Cost of Ownership solution is based on the principal that the total
cost of a product is the sum of all economic costs related to designing,
producing and delivering final products to customers on a long-term basis. We
believe we are able to reduce our customers' overall product costs through our
integrated product design and manufacturing expertise and strength in global
procurement and supply chain management. Our product design capabilities enable
us to work closely with our customers and develop manufacturing strategies to
more efficiently procure materials and manufacture their products. We believe
the scale of our global materials purchases and our expertise in procurement and
supplier management enhances our ability to obtain advantageous materials
pricing. Our focus on the management of the global supply chain reduces costs by
optimizing the use of materials and components throughout the entire product
life-cycle from design and manufacturing to distribution and after-market
support. In addition, we continually review our operating performance and
implement specific cost reduction and process improvement initiatives, the
savings from which further reduce our customers' overall product costs. By
providing our customers with Total Cost of Ownership solutions, we believe we
enhance our customers' competitiveness in the marketplace.
REDUCE OUR CUSTOMERS' TIME-TO-GLOBAL MARKET AND TIME-TO-GLOBAL VOLUME. We
seek to reduce our customers' time-to-global market and time-to-global volume
production for their new products through our product design and new product
introduction services and our global manufacturing capabilities. We work closely
with our customers in the early stages of their product development efforts to
reduce product costs and improve the manufacturability and testability of their
products. Our information systems and materials management processes enable us
to rapidly ramp-up operations to meet our customers' needs, quickly respond to
changes in product demand and effectively distribute products directly to our
customers' end-users. By offering our customers a comprehensive range of
services in a variety of manufacturing locations, we are better able to assist
them in rapidly introducing new products into global markets.
ACTIVELY PURSUE STRATEGIC ACQUISITIONS. We intend to continue to pursue the
acquisition of selected OEM assets and EMS and related companies that offer us
relationships with key customers, strong and experienced management teams,
strategic capabilities and locations and expanded service offerings. Many OEMs
are divesting their internal manufacturing operations to EMS companies. By
purchasing facilities from OEMs, we are able to quickly develop customer
relationships and obtain established manufacturing capacity. Additionally, a
number of smaller EMS companies are seeking to strengthen their competitive
position by becoming part of a larger, global EMS provider. We believe that we
are favorably positioned to benefit from these trends. Furthermore, we believe
we have developed and successfully deployed a comprehensive post-acquisition
integration strategy which includes, among other things, establishing a common
corporate culture, providing a recognizable corporate appearance and consistent
functionality to our customers, implementing a common information technology
platform and sharing best practices among our operations. We have successfully
completed nine acquisitions since 1995. While we are currently in discussions
with several potential acquisition candidates, we do not have any agreement or
understanding with respect to any acquisition candidate.
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Recent Acquisitions
In November 1999, we acquired from 3Com selected inventory, fixed assets and
other intangibles located in Salt Lake City, Utah, for $79.5 million. The
acquisition was financed with the proceeds from the issuance of $50.0 million of
senior preferred stock and related warrants and borrowings under our bank credit
facility. In connection with this acquisition, we entered into a two-year supply
agreement with Palm to produce Palm computing devices and a two-year supply
agreement with 3Com to produce modems and network interface cards. We also
retained the facility employees. We expect our acquisition of the Salt Lake City
facility will provide us with many benefits, including:
- strong relationships with two leading OEMs in rapidly growing industries;
- a more diversified customer base, reducing our reliance on other major
customers;
- an expanded geographic presence into the western United States;
- a broadened range of service offerings through the addition of a
high-volume, low-cost manufacturing facility;
- access to advanced engineering capabilities, especially additional radio
frequency engineering capabilities; and
- expansion of our manufacturing capacity.
In the first half of 1999, we acquired two electronics design firms,
Electronic System Packaging and Ronlin Design, for an aggregate purchase price
of approximately $4.4 million. Electronic System Packaging and Ronlin Design
significantly enhance our product design services in North America. These
acquisitions allow us to establish relationships with OEMs in a broad range of
industries through involvement in earlier stages of their product development
cycles. We believe our enhanced offering of electronics design services will
strengthen existing customer relationships and help us win new business.
In the first half of 1998, we acquired selected inventory and fixed assets
of IBM located in Charlotte, North Carolina, for $30.1 million in cash. The
acquisition of these assets was financed with borrowings under our bank credit
facility. In connection with this acquisition, we also entered into a three-year
supply agreement to provide systems assembly and integration, testing and order
fulfillment services for several divisions of IBM and retained the facility
employees. The acquisition of these assets and the related supply agreement have
provided us with several benefits, including:
- a stronger relationship with a premier customer having a leadership
position in a growing market segment (retail point-of-sale systems);
- an enhanced range of service offerings including additional capabilities
in complex systems assembly, integration and testing services;
- a strengthening of our ability to provide order fulfillment services and
distribution of products to our customers' end-users on a global basis;
and
- an expanded geographic presence into the southeastern United States.
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Our Services
We offer a comprehensive range of integrated services, providing our
customers with a total solution to take their products from initial design
through volume production, test, distribution and after-market support. While we
currently derive substantially all of our net sales from printed circuit board
assembly, test, systems assembly and the fulfillment of completed products, we
believe that OEMs are increasingly demanding an integrated outsourcing solution
from EMS companies. Some of the services that we offer OEMs include:
PRODUCT DESIGN AND NEW PRODUCT INTRODUCTION SERVICES. We offer a wide range
of engineering, design, prototype, test development and related services that
shorten our customers' product introduction cycles and optimize a product's
design for commercial manufacturing. We support our customers' product design
efforts by offering them a wide range of design services including application
specific integrated circuit design and verification, electrical circuit design,
printed circuit board design and electro-mechanical design. To support and
manage new product introductions, we provide design for manufacturability,
design for testability and design for procurement services. The purpose of
design for manufacturability is to achieve defect-free and cost-effective
product designs, reduce product development cycle-times, create high initial
production yields and establish superior product quality. Design for testability
focuses on achieving the highest level of fault detection and isolation before
products are shipped. Design for procurement identifies areas in which the
overall cost of our customers' products can be reduced through a decrease in
material costs and effective inventory management. In addition, unlike many of
our customers, we have the infrastructure necessary to produce the low volumes
associated with prototype manufacturing, thereby enabling customers to avoid
substantial capital investment.
MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
involves planning, purchasing and expediting the delivery of materials and
components used in the manufacturing process. We are becoming increasingly
involved in selecting and qualifying suppliers to meet our customers' needs. Our
global information system for materials management optimization enables us to
achieve competitive component pricing and greater sourcing flexibility. We
employ various inventory management techniques such as just-in-time,
ship-to-stock, line-side stocking, in-house stores and demand-pull hubbing
programs, allowing product shipments to be closely coordinated with our
customers' requirements. We are also developing e-commerce solutions that will
further increase supply chain efficiency resulting in lower costs and increased
responsiveness to our customers.
ASSEMBLY AND MANUFACTURING. Our assembly and manufacturing operations
include printed circuit board assembly, assembly of subsystems and the final
assembly and integration of complete products that incorporate printed circuit
board assemblies, complex electromechanical subassemblies, enclosures, power
supplies and other components. We employ various manufacturing techniques such
as just-in-time and ship-to-stock programs, continuous flow manufacturing,
demand flow processes, total quality management and statistical process control.
As OEMs seek to provide greater functionality in smaller products, they
increasingly require more sophisticated manufacturing technologies and
processes. Our investment in advanced manufacturing equipment and technology and
our experience and expertise in miniaturization, packaging and interconnect
technologies enable our customers to have access to a wide variety of advanced
manufacturing solutions without having
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to make substantial capital investments. These technologies include chip scale
packaging, flip-chip, ball grid array, micro-ball grid array, ultra-fine pitch
surface mount and pin-through-hole. We also have extensive experience building a
wide range of final products and believe we are well positioned to take
advantage of the anticipated acceleration in outsourcing of final product
assembly and integration. We have industry leading capabilities in assembling
smaller consumer electronics products and build millions of these devices
annually. We also have extensive experience assembling and integrating larger,
more complex systems. In addition, our build-to-order and configuration-to-
order capabilities complement our expertise in final product assembly by
allowing us to postpone the final configuration of our customers' products until
actual end-user specifications are received, thus reducing inventory levels for
us and our customers.
TESTING SERVICES. We provide our customers with a comprehensive range of
testing services, including design verification testing, test program
development and fixture design, in-circuit and functional testing of printed
circuit board assemblies, system level functional testing, environmental and
stress testing and component reliability testing. We work with our customers to
develop product-specific test strategies, and in some cases we design and build
specific test platforms for our customers' products. Our test capabilities
include manufacturing defect analysis, flying probe testing,
closed-loop-in-circuit-test and diagnostics and x-ray inspection.
ORDER FULFILLMENT AND DISTRIBUTION. We offer a range of services related to
the configuration and shipment of our customers' products. We perform final
product packaging and distribution services for completed products, as well as
direct order fulfillment. We increasingly deliver final products directly into
our customers' distribution channels and to our customers' end-users. We believe
that these services complement our comprehensive manufacturing solution,
enabling our customers to be more responsive to changing market demands and to
get their products to market more quickly.
AFTER-MARKET SUPPORT. We provide a wide range of after-market support
services, including repair, refurbishment, remanufacturing, exchange, system
upgrades and spare part manufacturing. These services are supported by specific
information systems and testing technologies and can be tailored to meet the
specific requirements of each customer.
Customers
Our customers include leading OEMs primarily in the voice and data
communications equipment, computer and related peripherals, medical equipment
and industrial and consumer electronics industries. Within these industries, our
strategy is to establish long-term relationships with OEMs that seek to
outsource significant production volumes. In 1999, sales to IBM and Iomega
represented 49% and 14%, respectively, of our total net sales and net sales to
our ten largest customers accounted for 84% of our total net sales. In 1998, net
sales to IBM and Iomega represented 51% and 20%, respectively, of our total net
sales and net sales to our ten largest customers accounted for 89% of our total
net sales. As a result of our acquisition of 3Com's Salt Lake City facility, we
expect that 3Com and its subsidiary, Palm, will each become a top five customer
in 2000, significantly reducing the percentage of our total net sales
represented by IBM and Iomega.
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The following table lists alphabetically some of our significant customers
and the products for which we provide manufacturing services:
<TABLE>
<CAPTION>
Customer End Products
- -------- ------------
<S> <C>
3Com Corporation......................... Modems, network interface cards
ADC Telecommunications, Inc. ............ Broadband access and transmission
products
Hewlett-Packard Company.................. Printers
International Business Machines
Corporation............................ Point-of-sale systems, industrial PCs
Iomega Corporation....................... Storage devices
LM Ericsson AB........................... Mobile phones, PBX equipment and base
stations
LSI Logic Corporation.................... Mass storage equipment
NEC Gunma Ltd. .......................... Storage devices
Palm, Inc. .............................. Palm III, Palm V and Palm VII devices
Philips NV............................... PBX equipment and high-end ISDN phone
terminals
Rockwell International Corporation....... Industrial motion controls
Siemens ICN.............................. PBX equipment
</TABLE>
We customarily enter into supply arrangements in connection with our
acquisition of facilities from OEMs. These arrangements generally govern the
conduct of business between us and our new customers, including the manufacture
of products that were previously produced at that facility by the OEM. In some
instances these arrangements contain revenue, product volume or capacity
commitments and are generally for terms of one to three years.
Sales and Marketing
We are able to service all of the world's major electronics markets through
a direct sales force located in selected North American, European and Asian
cities. Our sales people have knowledge of local markets, which we believe is
critical to identifying new customers and developing new business opportunities.
Our direct sales force is complemented by several independent firms who serve as
our representatives in areas where we believe the most significant opportunities
exist, such as Silicon Valley, and in areas where we have no direct salespeople.
We intend to continue to expand our direct sales organization in response to
increased customer opportunities.
We seek to develop close, long-term relationships with our customers by
working with them throughout the entire product life-cycle, from product design
to after-market support. EMS companies generally face a long sales cycle and
must perform satisfactorily on a trial basis prior to obtaining significant
orders from a potential customer. Therefore, we work closely with our customers
during the initial product design and development stage. We support our existing
customer relationships with cross-functional customer focus teams that are led
by dedicated program managers. Each team is responsible for focusing on new
programs, products and/or part numbers and developing an in-depth understanding
of our customers' requirements and outsourcing needs. Customer focus teams for
major global accounts are complemented by seasoned account managers who
coordinate a broad range of services provided from multiple sites around the
world.
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We believe we differentiate ourselves from most of our competitors through
an active, focused marketing effort, designed to increase our brand awareness
and the likelihood of winning new business. We communicate important news about
our company to existing and potential customers through various news media. Our
technical personnel and functional managers often take industry leadership roles
by publishing technical papers, speaking on industry panels and maintaining
active roles in industry and technical associations. In addition, we have
established ongoing relationships with key industry analysts and trade
journalists, and we periodically host seminars on topics of interest to
potential customers in our manufacturing facilities. We also maintain a website
enabling potential customers to learn more about us, and on a more limited
basis, we run print advertisements in trade journals targeting potential
customers.
Customer Satisfaction Approach
High customer satisfaction is critical for success in the EMS industry, and
we believe that we differentiate ourselves from our competitors by adopting
policies and procedures and making investments that will result in consistently
high levels of customer satisfaction.
Customer satisfaction starts with a service attitude that we constantly
reinforce and reward. We continuously monitor customer-focused operational
metrics and formally review them on a weekly basis so that we can take specific
corrective actions, if necessary. Each customer has a dedicated program manager
who manages the day-to-day relationship with the customer. A significant portion
of a program manager's compensation is tied to improving customer satisfaction
scores, as measured by an independent consulting firm that conducts semi-annual
customer satisfaction surveys. These surveys also are reviewed at the highest
executive levels to ensure customer satisfaction issues are appropriately
addressed.
We have implemented processes, information systems and other tools that
enable our employees to provide high levels of customer service. One example is
our continuous process improvement program, in which we rigorously evaluate
operational processes relative to industry best practices and develop action
plans to improve our performance. This program ensures that best practices are
standardized across our global operations, leading to continuous improvement. In
addition, we will continue to invest in information systems that improve
customer satisfaction. We recently implemented a suite of software tools to help
us better control the quality of our manufacturing processes and provide timely
information to our customers. Our investments increasingly include e-business
solutions that reduce transaction costs and facilitate a more efficient flow of
information between us and our suppliers and customers.
Supply Chain Management
Supply chain management is critical for competing in the EMS industry as
OEMs are increasingly outsourcing their entire product supply chain to EMS
companies. Supply chain management involves the flow and management of
components and products throughout the product life-cycle, from initial product
design and component procurement through manufacturing and order fulfillment and
distribution. Our cross-functional supply chain management team ensures that
best practices, resources and tools are deployed throughout our organization,
improving our ability to
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reduce our customers' total costs and increasing our flexibility to respond to
changing customer demands.
We have strong relationships with a broad range of suppliers. We believe our
product design capabilities and scale of procurement enhance our ability to
obtain advantageous pricing on, and secure supply sources of, selected materials
and components. We believe we can reduce our customers' total costs by working
closely with them in their product development stages. For example, we help our
customers select components during a product's design to ensure advantageous
sourcing and pricing from preferred suppliers. We also utilize a rigorous
process for evaluating supplier performance based on our Total Cost of Ownership
solution. This approach realizes lower total costs for our customers by focusing
on improving our suppliers' quality, delivery, flexibility and service.
Asset management is a critical element of efficient supply chain management.
We seek to minimize our inventory risk by ordering materials and components only
to the extent necessary to satisfy existing customer orders. As a result, we are
increasingly implementing point-of-use replenishment and vendor managed
inventory strategies such as line-side stocking, component die banks, in-house
stores and just-in-time deliveries.
We focus on moving information rather than material, utilizing information
systems to improve the efficiency and flexibility of the supply chain. Our
enterprise resource planning system provides comprehensive and timely
information required for managing the logistical complexities in our business.
We also are implementing a component database and global information system to
optimize our materials management allowing us to consolidate data on historical
purchases and perform worldwide searches for component inventory and competitive
pricing. We will continue to implement e-commerce solutions that link us with
our customers and suppliers, providing them with timely information on specific
orders, product demand, inventory and component lead times in order to
facilitate planning and increase the efficiency of the entire supply chain.
We are increasingly using postponement, demand-pull and direct order
fulfillment processes. These processes allow us to delay the actual manufacture
of products as late as possible in the order-cycle. We are able to quickly
initiate global production based upon our customers' actual sales using our
build-to-order and configuration-to-order capabilities. We also utilize
demand-pull manufacturing processes, which initiate production of our customers'
products based upon their actual inventory usage. In addition, we have the
capability to provide direct order fulfillment, shipping products directly to
our customers' distribution channels and end users, which results in lower
inventory throughout the supply chain and faster delivery.
Information Systems
Information systems are a critical element for achieving our strategic
business objectives. We believe that our investment in information systems will
deliver competitive advantages for our customers by increasing supply chain
efficiency and improving product quality and operational flexibility. We have
implemented a common technological infrastructure that allows our customers and
suppliers to communicate and transact with us globally in an easy and consistent
manner. We believe this increases the efficiency of the supply chain.
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Our information systems strategy consists of selecting leading software
applications and establishing strong relationships with our software suppliers.
Our enterprise resource planning system manages the entire order cycle from
receiving customer orders and planning production schedules to billing customers
and tracking their payments. Having a standard enterprise resource planning
platform allows us to quickly respond to fluctuations in our customers' orders
in different parts of the world and also facilitates simultaneous product
introduction in multiple regions.
Our standard suite of engineering applications focuses on reducing our
customers' new product introduction set-up time and controlling our
manufacturing processes. These engineering applications allow us to collect
customer design data in any format and automatically convert this information
into commands that run our production lines. These tools also monitor our
manufacturing operations and alert our technicians and operators to process
deviations. Early error detection minimizes rework and reduces repair and
customer returns.
Our global information system for material management optimization is based
on two integrated applications. Our strategic sourcing application consolidates
purchasing history from suppliers and future demand from our manufacturing
sites. This allows us to realize significant materials cost savings by
concentrating our purchases with a smaller number of preferred suppliers. The
component supplier application provides standardized component information that
is integrated with an industry database that enables our customers' designers to
select components from our preferred suppliers. This optimizes the selection of
components used in our customers' products and provides them with advantages in
pricing and sourcing of components.
Our information solutions portfolio increasingly includes a broad range of
e-business tools. Both customers and suppliers can communicate with us via a
comprehensive suite of electronic data interchange applications. In addition,
customers can obtain order status and product quality information 24 hours a day
through our secure web-based applications. We plan to make significant further
investments in e-business tools that will leverage the speed and technology of
the Internet to facilitate the flow of information and increase the total
efficiency of the supply chain.
Competition
The EMS industry is highly competitive. We believe that the principal
competitive factors in our industry are:
- service offerings;
- technological capabilities;
- geographic location and coverage;
- pricing;
- product quality;
- reliability in meeting product delivery schedules; and
- flexibility and timeliness in responding to design and schedule changes.
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We compete against numerous domestic and foreign EMS providers, including:
<TABLE>
<S> <C>
Benchmark Electronics, Inc. Plexus Corporation
Celestica Inc. Sanmina Corporation
Flextronics International Ltd. SCI Systems, Inc.
Jabil Circuit, Inc. Solectron Corporation
Venture Manufacturing (Singapore)
NatSteel Electronics Limited Limited
</TABLE>
We believe that large publicly-traded OEMs prefer to enter into outsourcing
relationships with other public EMS companies that present them with the
opportunity to build a long-term relationship because of their greater access to
capital and resulting financial stability. Many of our competitors are
substantially larger and have greater financial, operating, manufacturing and
marketing resources than we do. Some of our competitors have broader geographic
breadth and range of services than we do. In addition, some of our competitors
may have more developed relationships with our existing customers than we do. We
also face competition from the manufacturing operations of our current and
potential customers, who continually evaluate the relative benefits of internal
manufacturing compared to outsourcing. As more OEMs dispose of their
manufacturing assets and increase their use of outsourcing, we face increasing
competitive pressures to grow our business in order to maintain our competitive
position.
International Operations
A key element in our business strategy is to expand our global presence to
provide product design, manufacturing and after-market support services in
locations that meet our customers' regional requirements. Consistent with this
strategy, we have established international manufacturing facilities in Spain,
Ireland, Singapore and Malaysia. We will continue to seek strategic
opportunities to acquire additional facilities throughout the world, especially
in low-cost regions, either through OEM divestitures or acquisitions of regional
EMS companies and other related companies.
Our European facilities serve European customers and North American and
Asian customers having significant sales in Europe. Our Athlone facility,
acquired by us in 1995, is a former LM Ericsson site that provides medium to
high-volume, capital intensive manufacturing and related support services. Our
Valencia facility, acquired from IBM in 1995, offers a comprehensive range of
integrated services including design, low, medium and high-volume production and
highly complex assembly and manufacturing, configuration-to-order and global
order fulfillment. In addition, our Valencia facility has a significant product
repair capability. Both the Athlone and Valencia facilities have strong
technical capabilities, including radio frequency engineering and test
capabilities.
Our Asian facilities, located in Johor Bahru, Malaysia, and in Singapore,
enable us to provide cost competitive manufacturing for global customers and a
range of regional manufacturing and support services. Both sites formerly
operated as independent contract manufacturers and were acquired by us in 1995.
The Singapore site was acquired from Connett Technologies and the Malaysian site
from Topas Electronics. Many OEMs recognize Southeast Asia as a competitive
region that offers both low-cost manufacturing and strong technical skills. Our
Southeast Asian sites specialize in high-volume assembly and manufacturing, and
we have a proven ability to provide globally competitive pricing for these types
of requirements. Our Singapore site is increasingly
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<PAGE>
offering a wider range of lower to medium-volume and more complex assembly and
manufacturing services and provides engineering and business support for the
Malaysian site. These sites have grown rapidly since their acquisition and have
undergone several major expansions to support increased customer demand. In
addition to our manufacturing sites, we have an international procurement office
in Singapore and a customer support office in Tokyo to meet the specific needs
of our Japanese customers.
We intend to further expand our international capabilities in product
design, new product introduction services, assembly and manufacturing and
after-market support services. We currently expect to establish operations in
Mexico, China and Central or Eastern Europe during the next several years. We
also intend to expand into other locations in Europe and Asia in order to
establish or enhance relationships with key customers, provide services to
important regional markets, expand our range of service offerings and improve
our ability to reduce our customers' time-to-global market and time-to-global
volume. See Note 16, "Business Segment Information," in our consolidated
financial statements for information relating to our international operations.
Research and Development
We engage in ongoing research and development activities to meet our
customers' increasingly sophisticated needs and maintain our leading-edge
capabilities. Changes in our customers' products drive our research and
development efforts. As our customers' products are both decreasing in size and
increasing in functionality, we must continually develop advanced technologies
such as chip scale packaging, flip-chip, ball grid array, micro-ball grid array
and ultra-fine pitch surface mount technology and the equipment to support them.
The evolution and extension of these technologies has placed additional demands
on process materials and chemistry, substrates for interconnecting devices and
the manufacturing environment.
We work with our customers, our suppliers and universities located near our
manufacturing facilities to develop and qualify advanced process capabilities
concurrent with, or prior to, our customers' needs. We are a member of an
industry consortium consisting of OEMs, equipment suppliers and other EMS
companies. This consortium supports process development and provides access to
manufacturing equipment, laboratory and research and development personnel that
complement our internal development work. The development and refinement of new
manufacturing processes are performed primarily at our advanced engineering
facility in Arden Hills, Minnesota. At Arden Hills and other facilities, new
processes and equipment are qualified through a rigorous process to ensure
production readiness.
In addition to our process development focus for printed circuit board
assembly and testing technologies, we have an ISO 9001 certified center for
research and development in Valencia, Spain, which globally supports specific
customer requirements. In Valencia, we have over 30 engineers who use
state-of-the-art tools that can interface with customer design teams during the
product design and development phase. We also work with selected universities
and design firms to complement our services and provide a vehicle to continually
upgrade our skills in this dynamic industry environment. As a result of these
relationships we have built a strong high frequency design and test development
capability that can support customers with wireless technology requirements.
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For the years ended December 31, 1997, 1998 and 1999, we spent
$1.6 million, $2.5 million and $3.2 million, respectively, on research and
development activities.
Governmental Regulation
Our operations are subject to federal, state and local regulatory
requirements relating to environmental, waste management and health and safety
matters, including measures relating to the release, use, storage, treatment,
transportation, discharge, disposal and remediation of contaminants, hazardous
substances and wastes, as well as practices and procedures applicable to the
construction and operation of our plants. There can be no assurance that
material costs and liabilities will not be incurred or that past or future
operations will not result in exposure to injury or claims of injury by
employees or the public. Although some risk of costs and liabilities related to
these matters is inherent in our business, as with many similar businesses, we
believe that our business is operated in substantial compliance with applicable
regulations. However, new, modified or more stringent requirements or
enforcement policies could be adopted, which could adversely affect us. We are
not presently aware of any facts or circumstances that would cause us to incur
significant costs or liabilities in the future related to environmental, health
and safety law compliance.
Legal Proceedings
In October 1998, Lockheed Martin Corporation commenced an action in the
Circuit Court for Montgomery County, Maryland, entitled LOCKHEED MARTIN
CORPORATION V. DLJ MERCHANT BANKING II, INC., DLJ MERCHANT BANKING PARTNERS, DLJ
MERCHANT BANKING, INC., DLJ MERCHANT BANKING PARTNERS, L.P., DLJ MERCHANT
BANKING PARTNERS II, L.P. AND MANUFACTURERS' SERVICES LIMITED, Case No. 193819.
The complaint alleges, among other things, that we breached an August 10, 1997
agreement to acquire a Lockheed subsidiary, Lockheed Martin Commercial
Electronics Company ("LMCE"), and that we also breached an implied obligation of
good faith and fair dealing in exercising our contractual right to terminate the
agreement. The complaint alleges that the purchase price for the acquisition,
inclusive of real estate, was $140 million, subject to purchase price
adjustments, and, subsequent to the alleged breach, Lockheed sold LMCE,
exclusive of real estate, for $70 million. Proceedings and discovery to date
have largely involved preliminary matters relating to jurisdiction and venue.
There has been no discovery to date on issues relating to the merits of the
complaint. We contend that a material adverse change in LMCE's business allowed
us to terminate the agreement. We intend to vigorously defend our position.
There can be no assurances, however, that we will prevail in this litigation. We
believe that the outcome from such litigation, if determined adversely to us,
could harm our business, financial condition or results of operations.
On July 22, 1999, we received written notice from legal counsel for the
Lemelson Medical, Education & Research Foundation, Limited Partnership alleging
that we are infringing specified patents held by the Lemelson Foundation
Partnership and offering to license such patents to us. Based on our
understanding of the terms that the Lemelson Foundation Partnership has made
available to current licensees, we believe, if necessary, that we can obtain a
license from them under the same or similar terms which would not have an
adverse effect on our financial condition. However, a license may not be
available on terms satisfactory to us.
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<PAGE>
We are party to other lawsuits in the ordinary course of business. We do not
believe that these other proceedings individually or in the aggregate will have
a material adverse effect on our financial position, results of operations and
cash flows.
Employees
As of December 31, 1999, we had approximately 3,113 full-time employees,
including 2,141 in production and quality, 369 in engineering, research and
development, 299 in procurement and materials management, 64 in information
systems, 49 in program management, 16 in sales and marketing and 175 in
executive and administrative functions. Given the variability in our business
and the quick response time required by our customers, it is critical that we be
able to quickly ramp-up and ramp-down our production to maximize efficiency.
Therefore, we use skilled temporary labor as required.
None of our employees is represented by a labor union or covered by a
collective bargaining agreement other than non-management employees in Spain and
Ireland. We consider our employee relations to be good.
Facilities
Our principal executive offices are located in Concord, Massachusetts. We
also have product design and manufacturing facilities in the United States,
Spain, Ireland, Singapore and Malaysia. Information about these facilities is
set forth below:
<TABLE>
<CAPTION>
Approximate
Location Principal Function Square Feet Leased/Owned
- -------- -------------------- ----------- ---------------
<S> <C> <C> <C>
Concord, Massachusetts............. Headquarters 16,765 Leased
Arden Hills, Minnesota............. Manufacturing 154,000 Leased
Charlotte, North Carolina.......... Manufacturing 273,500 Leased
Newark, California................. Administrative 2,760 Leased
Salt Lake City, Utah............... Manufacturing 150,000 Owned
Westford, Massachusetts............ Design 6,000 Leased
Athlone, Ireland................... Manufacturing 55,000 Leased
Valencia, Spain.................... Manufacturing/Design 518,000 Leased/Owned(a)
Johor Bahru, Malaysia.............. Manufacturing 46,000 Leased
Singapore.......................... Manufacturing 52,225 Leased
</TABLE>
- --------------------------
(a) We own approximately 418,000 square feet of manufacturing and logistics
space and lease approximately 100,000 square feet of warehouse space.
In addition we lease office space in Tokyo, Japan, to provide customer
support and administrative services. Leases for our facilities expire between
April 2000 and April 2017. We currently expect to be able to extend the terms of
expiring leases or to find suitable replacement facilities on reasonable terms.
We believe that our facilities are well-maintained and suitable for their
respective operations. We anticipate that as our business grows we will need to
obtain additional facilities through acquisitions, leases or new construction.
We may encounter unforseen difficulties, costs or delays in expanding our
facilities.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information with respect to our directors and
executive officers:
<TABLE>
<CAPTION>
Name Age Office
- ---- -------- -----------------------------------------------
<S> <C> <C>
Kevin C. Melia................. 51 Chairman, Chief Executive Officer and Director
Robert E. Donahue.............. 51 President
Eugene M. Bullis............... 54 Executive Vice President and Chief Financial
Officer
Rodolfo Archbold............... 46 Executive Vice President and Chief Technology
Officer
Dale R. Johnson................ 53 Executive Vice President, General Counsel and
Secretary
James N. Poor.................. 56 Executive Vice President, Human Resources
Thompson Dean.................. 41 Director
Stephen Ketchum................ 38 Director
Karl Wyss...................... 59 Director
John F. Fort, III.............. 58 Director
</TABLE>
We anticipate that two additional directors who are not affiliated with us
or our principal shareholders will be elected to the board of directors
following completion of this offering.
Kevin C. Melia, a founder of the Company, has been a director and our
Chairman and Chief Executive Officer since December 1994. From December 1994 to
February 1999, he also served as President. Prior to joining us, Mr. Melia was
acting President of Sun Microsystems Computer Corporation from 1992 to 1994.
Mr. Melia also served as Chief Financial Officer of Sun Microsystems Computer
Corporation from 1991 to 1994. Mr. Melia currently serves as a director of Iona
Technologies Plc and Horizon Technologies.
Robert E. Donahue has served as our President since February 1999.
Mr. Donahue joined us in August 1997 as Chief Financial Officer and served in
that capacity until his promotion to President. Prior to joining us,
Mr. Donahue served as Chief Financial Officer of Stratus Computer, Inc. from
1990 to August 1997. Along with his responsibilities as Chief Financial Officer,
Mr. Donahue also served as Chief Executive Officer of S2, a subsidiary of
Stratus Computer, Inc., from December 1995 to August 1997.
Eugene M. Bullis has been our Executive Vice President and Chief Financial
Officer since October 1999. Prior to assuming his current position with us,
Mr. Bullis served from March 1998 to October 1999 as the Chief Operating Officer
and Chief Executive Officer of Physicians Quality Care, Inc., a physician
practice management company. From October 1997 to February 1998, Mr. Bullis was
the Chief Financial Officer of Computervision Corporation, now a part of
Parametric Technology. Mr. Bullis served as the interim Chief Financial Officer
for Centennial Technologies from February 1997 to October 1997, as part of that
company's crisis management program. From May 1996 to February 1997, Mr. Bullis
served as Chief Financial Officer of Technology Management Partners. Prior to
that he was employed by Nynex Corporation, most recently as Vice President of
Electronic Services, from April 1993 to April 1996. Mr. Bullis is a director of
Centennial Technologies and Physicians Quality Care, Inc.
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<PAGE>
Rodolfo Archbold has served as our Executive Vice President and Chief
Technology Officer since July 1997. Prior to assuming his current position,
Mr. Archbold served as our Vice President of Technology from October 1995 to
July 1997. Before joining us, Mr. Archbold served as Group Manager of
Manufacturing for Digital Equipment Corporation from February 1992 to
September 1995.
Dale R. Johnson has served as our Executive Vice President and General
Counsel since February 1996 and as our Secretary since December 1994.
Mr. Johnson was formerly a shareholder of the Boston law firm of Sherburne,
Powers & Needham, P.C. from April 1993 to February 1996, where he was our
principal outside legal counsel.
James N. Poor has served as our Executive Vice President, Human Resources
since March 1998. Prior to that he was the Director of Human Resources,
Worldwide Sales and Manufacturing for Stratus Computer, Inc. beginning in 1985.
Thompson Dean has been a director since January 1995. Mr. Dean has been a
Managing Director of DLJ Merchant Banking, Inc. since 1991. He currently serves
as Chairman of the Board of Von Hoffmann Press, Inc., and as a director of
Arcade Holding Corp., CommVault Systems, Inc., DeCrane Aircraft Holdings, Inc.,
Formica Corp., Insilco Holding Co., Phase Metrics, Inc. and Charles River
Laboratories, Inc.
Stephen Ketchum has been a director since April 1995. Mr. Ketchum has been a
Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation since
January 2000. Previously Mr. Ketchum was a Senior Vice President at Donaldson,
Lufkin & Jenrette Securities Corporation since January 1997 and prior to that, a
Vice President. He currently serves as a director of Mail.com.
Karl Wyss has been a director since September 1997. Mr. Wyss has been a
Managing Director of DLJ Merchant Banking, Inc. since 1993. He is currently the
Chairman, Chief Executive Officer and a director of DecisionOne Corp. Mr. Wyss
is also a director of Brand Scaffold Services, Inc., CommVault Systems, Inc.,
Localiza Rent A Car S.A., Mallory S.A. and Von Hoffmann Press, Inc.
John F. Fort, III has been a director since November 1998. Mr. Fort retired
from his position as the Chairman of the Board of Tyco International Ltd. in
January 1993. He is currently a consultant to and a director of Tyco
International Ltd., Roper Industries, Thermadyne Holdings, and Dover
Corporation.
Each director is elected and serves until his successor is duly elected and
qualified or until the earlier of his death, disability, retirement, resignation
or removal. All members of the board of directors set forth herein were elected
pursuant to a stockholders agreement that was entered into in connection with an
investment in us by entities affiliated with Donaldson, Lufkin & Jenrette, Inc.
in January 1995, and later amended in connection with our sale of senior
preferred stock to similarly affiliated entities in November 1999. See
"Relationships and Transactions with Related Parties--Stockholders Agreement."
There are no family relationships between any of our directors or executive
officers. Our executive officers are elected by, and serve at the discretion of,
our board of directors.
The number of directors is fixed at seven and we currently have five
directors serving. Prior to the completion of this offering, our board will be
divided into three classes, as nearly equal in
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<PAGE>
number as possible, with each director serving a three-year term and one class
being elected at each year's annual meeting of our stockholders. Our board of
directors will consist of Class I directors, whose term of office will continue
until the 2000 annual meeting of our stockholders, Class II directors, whose
term of office will continue until the 2001 annual meeting of our stockholders
and Class III directors, whose term of office will continue until the 2002
annual meeting of our stockholders. At each annual meeting of our stockholders,
successors to the class of directors whose term expires at such meeting will be
elected to serve for three-year terms or until their respective successors are
elected and qualified.
Director Compensation
Our directors, other than Mr. Fort, are not paid fees for serving on our
board. Directors are reimbursed for their out-of-pocket expenses incurred in
connection with their services. Mr. Fort receives $5,000 for each board meeting
he attends. In December 1998, we granted Mr. Fort options to purchase 50,000
shares of our common stock at an exercise price of $1.20 per share. These
options vest over three years and would become fully vested upon a change of
control of MSL. Following this offering, directors who are not our employees or
who are not otherwise affiliated with us or our principal stockholders will
receive compensation that is commensurate with arrangements offered to directors
of companies that are similar to us. Compensation arrangements for independent
directors established by our board could be in the form of cash payments and/or
option grants.
Committees of the Board of Directors
Our board of directors has an audit committee and a compensation committee.
The board may also establish other committees to assist in the discharge of its
responsibilities.
The audit committee makes recommendations to the board of directors
regarding the independent auditor to be nominated for election by the
stockholders and reviews the independence of such auditor, approves the scope of
the annual audit activities of the independent auditor, approves the audit fee
payable to the independent auditor and reviews such audit results with the
independent auditor. The audit committee is currently comprised of two
directors, Messrs. Fort and Ketchum. We anticipate that, following this
offering, our audit committee will be comprised of three directors who are not
otherwise affiliated with us or any of our principal stockholders.
PricewaterhouseCoopers LLP presently serves as our independent auditor.
The duties of the compensation committee are to provide a general review of
our compensation and benefit plans to ensure that they meet corporate
objectives. In addition, the compensation committee reviews the chief executive
officer's recommendations on the compensation of all of our officers as well as
adoption of and changes to our major compensation policies and practices, and
reports its recommendations to the whole board of directors for approval and
authorization. The compensation committee also administers our stock plans. The
compensation committee is currently comprised of Messrs. Dean, Melia and Wyss
and, following this offering, is expected to be comprised solely of three or
more non-employee directors (as defined in Rule 16b-3 under the Securities
Exchange Act of 1934).
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<PAGE>
Compensation of Executive Officers
The following table sets forth information concerning the compensation for
the year ended December 31, 1999 for our Chief Executive Officer and our four
other most highly compensated executive officers at the end of our last fiscal
year. For ease of reference, we collectively refer to these executive officers
throughout this section as our "named executive officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ------------
-------------------------------------- Securities
Name and Principal Position Other Annual Underlying All Other
- --------------------------- Salary Bonus Compensation (1) Options (#) Compensation (2)
<S> <C> <C> <C> <C> <C>
Kevin C. Melia, Chairman and
Chief Executive Officer... $350,000 $302,944 $1,920 -- $ 9,929
Robert E. Donahue,
President................. 272,116 171,241 1,920 450,000 13,427
Rodolfo Archbold, Executive
Vice President and Chief
Technology Officer........ 169,327 83,801 1,908 25,000 4,107
Dale R. Johnson, Executive
Vice President, General
Counsel and Secretary..... 190,000 127,512 1,108 25,000 8,830
James N. Poor, Executive
Vice
President, Human
Resources................. 138,077 68,504 864 40,000 2,138
</TABLE>
- --------------------------
(1) Represents amount of matching contribution by us under our 401(k) plan.
(2) Represents insurance premiums that we paid for term life insurance and
long-term disability policies on behalf of the named executive officer.
48
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding stock options granted
by us to our named executive officers during our last fiscal year. Stock options
are generally granted at 100% of the fair market value of our common stock as
determined by our board of directors on the date of grant. In reaching the
determination of fair market value at the time of each grant, our board of
directors considers a range of factors, including our current financial
position, recent revenues, results of operations and cash flows, assessment of
our competitive position in our markets and prospects for the future, the status
of our manufacturing capabilities and marketing efforts, current valuations for
comparable companies and the illiquidity of any investment in our common stock.
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Percent of Potential Realizable
Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise Option Term (1)
Name Options in Fiscal Price Per Expiration -----------------------
- ---- Granted (#) 1999 Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Melia.................. -- -- -- -- -- --
Robert E. Donahue............... 450,000 18.6% $1.20 2/1/2009 $339,603 $860,621
Rodolfo Archbold................ 5,000 0.2 1.20 1/1/2009 3,773 9,562
20,000 0.8 1.20 8/1/2009 15,093 38,250
Dale R. Johnson................. 25,000 1.0 1.20 1/1/2009 18,867 47,812
James N. Poor................... 20,000 0.8 1.20 1/1/2009 15,093 38,250
20,000 0.8 1.20 10/1/2009 15,093 38,250
</TABLE>
- ------------------------
(1) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10% compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of our common stock, the optionholder's continued
employment through the option period and the date on which the options are
exercised.
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<PAGE>
Option Exercises During Fiscal Year 1999 and Fiscal Year-End Option Values
The following table sets forth information for the named executive officers
concerning stock option exercises during the year ended December 31, 1999 and
options outstanding at the end of our last fiscal year.
Aggregated Option Exercises in Fiscal 1999
and Fiscal Year-End Options Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired On Value Underlying Unexercised In-The-Money Options
Exercise Realized (1) Options At Fiscal Year-End At Fiscal Year-End
Name ----------- ------------ --------------------------- ---------------------------
- ---- Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Kevin C. Melia........... 854,835 $357,967 1,349,665 625,000 $465,057 $1,293,750
Robert E. Donahue........ 107,406 20,000 279,167 613,427 542,042 1,187,108
Rodolfo Archbold......... -- -- 99,923 55,077 57,466 109,344
Dale R. Johnson.......... -- -- 120,375 39,625 174,031 77,649
James N. Poor............ -- -- 26,124 78,876 53,451 155,899
</TABLE>
- ------------------------
(1) Value is based on the difference between the option exercise price and the
fair market value at the date of exercise.
Employment Agreements
On January 20, 1995, we entered into an employment agreement with Kevin C.
Melia for an initial term of three years, after which the term was and will
continue to be automatically extended until terminated by either party upon
three months' prior written notice. The agreement provides that Mr. Melia will
serve as our Chief Executive Officer and will also serve on our board of
directors as Chairman. Under the agreement, we will pay Mr. Melia a base salary
of up to $350,000 plus annual bonuses based upon financial performance. The
agreement specifies that if we terminate Mr. Melia for cause (as defined
therein), all of Mr. Melia's options will terminate and we will have the right
to purchase all of Mr. Melia's shares of our common stock at the lesser of fair
market value or the initial cost of those shares. If we terminate Mr. Melia
without cause or if Mr. Melia terminates the agreement for good reason
(including if Mr. Melia terminates the agreement due to a change in control of
MSL), Mr. Melia will receive the sum of one year's base salary calculated at the
level of his base salary at the time of termination and an amount equal to his
previous year's bonus. In addition, Mr. Melia would be entitled to sell his
shares of our common stock to us at fair market value. If Mr. Melia terminates
the agreement for any other reason (other than death or disability), we will
have the right to purchase his shares of our common stock at fair market value.
The agreement also provides that during any period that Mr. Melia is
entitled to receive any severance payments, Mr. Melia will not enter into
competitive endeavors and will not undertake any commercial activity that is
contrary to our best interest or that of our affiliates, including accepting
employment or acquiring an interest in any entity (other than up to 2% of any
publicly traded company) that derives more than 10% of its profits, revenues or
earnings from electronic contract
50
<PAGE>
manufacturing. In addition, the agreement requires Mr. Melia to refrain from
soliciting or hiring our employees for two years following his termination.
We have also entered into employment letter agreements with Robert E.
Donahue, Rodolfo Archbold, Dale R. Johnson and James N. Poor. These agreements
provide that in addition to their base salaries and initial option grants, these
individuals will receive annual bonuses based on their personal performance and
our financial performance. These individuals' employment is on an at-will basis.
However, Mr. Donahue's and Mr. Poor's employment letter agreements, and
Mr. Johnson's severance letter, provide that if we terminate such person for any
reason other than cause, death or disability, as defined therein, he will
receive the sum of one year's base salary, calculated at the level of his base
salary at the time of termination, and an amount equal to his previous year's
bonus, provided that the total amount payable shall not exceed two times his
base salary for the year of termination. In connection with their employment
letter agreements, Messrs. Donahue, Johnson and Poor also signed agreements
which prohibit them from competing with us or soliciting employees to compete
with us for one year following their termination.
2000 Cash Incentive Compensation Plan
We have established a Cash Incentive Compensation Plan for 2000 for
executives and key employees. Cash bonuses are paid under the plan based on the
achievement of corporate and site profitability objectives as well as personal
performance goals set at the beginning of the year. The target range of bonus is
between 5% and 100% of base compensation and payout is on a sliding scale based
on the level of achievement. Designated senior executives may achieve bonus
payments greater than their target if they exceed the specified profitability
and performance objectives.
Stock Plans
SECOND AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION PLAN
Our board of directors adopted a non-qualified stock option plan on
December 5, 1996, which was amended and restated on February 26, 1998 and on
January 1, 1999. The stock option plan authorizes the granting of stock options
to current and future employees, directors, consultants and contractors of MSL
and its subsidiaries. Under the stock option plan, the board is authorized to
sell or otherwise issue up to an aggregate of 12,000,000 shares of common stock,
in quantity, price and terms subject to the conditions established by the board.
These shares include shares of common stock with respect to which options may be
granted, subject to adjustment upon the occurrence of specified events to
prevent any dilution or expansion of the rights of participants that might
otherwise result from the occurrence of such events.
As of December 31, 1999, options to purchase an aggregate of 7,896,872
shares of common stock, portions of which are still subject to vesting, with
exercise prices ranging from $1.00 to $5.00 per share, were outstanding. Such
options will vest and become exercisable in accordance with their terms. In the
event that an employee is terminated without cause, unvested time vesting
options granted prior to January 1, 1997, will continue to vest and remain
exercisable for six months following the vesting of such options, and all other
unvested options will terminate immediately, and, in the case of options granted
on or after January 1, 1997, all unvested options will terminate immediately.
Vested but unexercised options will terminate immediately if the
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<PAGE>
optionee is terminated for cause or, after six months, if the optionee is
terminated without cause. All of the options granted have an exercise price
equal to the fair market value of our common stock on the date of grant as
determined by our board of directors.
2000 EQUITY INCENTIVE PLAN
The 2000 Equity Incentive Plan, or the 2000 Plan, is expected to be adopted
by our board of directors and approved by our stockholders prior to the
completion of this offering. As of the date of this prospectus, no awards have
been made under the 2000 Plan. No future grants will be made under the stock
option plan upon the effectiveness of the 2000 Plan.
The 2000 Plan provides for the grant of incentive stock options to our
employees (including officers and employee directors) and for the grant of
nonstatutory stock options to our employees, directors and consultants. A total
of (1) 10,675,000 shares of common stock, (2) any shares returned to the stock
option plan as a result of termination of options and (3) annual increases to be
added on the date of each annual meeting of our stockholders commencing in 2000
equal to 1.0% of the outstanding shares of our common stock, or such lesser
amount as may be determined by our board of directors, will be reserved for
issuance pursuant to the 2000 Plan.
The administrator of the 2000 Plan has the power to determine the terms of
each option granted, including the exercise price of the option, the number of
shares subject to each option, the exercisability thereof and the form of
consideration payable upon such exercise. In addition, our board of directors
has the authority to amend, suspend or terminate the 2000 Plan, provided that no
such action may affect any share of common stock previously issued and sold or
any option previously granted under the 2000 Plan.
Options granted under the 2000 Plan are generally not transferable by the
optionee, and each option is exercisable during the lifetime of the optionee.
Options granted under the 2000 Plan must generally be exercised within 3 months
after the end of an optionee's status as an employee, director or consultant of
MSL, or within 12 months after such optionee's death, but in no event later than
the expiration of the option term.
The exercise price of all incentive stock options granted under the 2000
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of nonstatutory stock options granted under
the 2000 Plan is determined by the administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the exercise price must be at least equal to the fair market value of our common
stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of any incentive stock option granted must be
at least equal to 110% of the fair market value on the grant date and the term
of such incentive stock option must not exceed five years. The term of all other
incentive stock options granted under the 2000 Plan may not exceed ten years.
The 2000 Plan provides that in the event of a merger of MSL with or into
another corporation or a sale of substantially all of our assets, each option
shall be assumed, or an equivalent option substituted for, by the successor
corporation. If the outstanding options are not assumed, or
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<PAGE>
substituted for, by the successor corporation, the administrator shall provide
for the optionee to have the right to exercise the option as to all of the
optioned stock, including shares as to which it would not otherwise be
exercisable, and the option will terminate upon the consummation of such merger
or sale of assets.
2000 EMPLOYEE STOCK PURCHASE PLAN
The 2000 Employee Stock Purchase Plan, or the stock purchase plan, is
expected to be adopted by our board of directors and approved by our
stockholders prior to the completion of this offering. The stock purchase plan
will be established to give employees desiring to do so a convenient means of
purchasing shares of our common stock through payroll deductions. The stock
purchase plan provides an incentive to participate by permitting purchases at a
discounted price. We believe that ownership of stock by our employees will
foster greater employee interest in our success, growth and development.
Subject to restrictions, each of our employees is eligible to participate in
the stock purchase plan if he or she has been employed by us for more than six
months and is employed for more than 20 hours per week. Participation is
discretionary with each eligible employee. An employee who owns or is deemed to
own shares of stock representing in excess of 5% of the combined voting power of
all classes of our stock will not be eligible to participate in the stock
purchase plan. We have reserved shares of common stock for issuance in
connection with the stock purchase plan. Elections to participate and purchases
of stock will be made on a semi-annual basis. Each participating employee
contributes to the stock purchase plan by choosing a payroll deduction in any
specified amount up to a maximum of 10% of his or her cash compensation. A
participating employee may increase or decrease the amount of such employee's
payroll deduction, including a change to a zero deduction semi-annually,
beginning July 1, 2000. Elected contributions will be credited to participants'
accounts semi-annually, beginning December 31, 2000. Each eligible employee will
be entitled to purchase a maximum of approximately $25,000 worth of our common
stock per year.
Set forth below is a summary of how the stock purchase plan will operate:
- Each participating employee's contributions will be used to purchase
shares for the employee's share account after the last day of each
semi-annual period and such participating employee will receive a
certificate evidencing such shares.
- The cost per share is 85% of the lower of the closing price of our common
stock on the New York Stock Exchange on the first or the last day of the
semi-annual period.
- The number of shares purchased on each employee's behalf and deposited in
his/her share account is based on the amount accumulated in that
participant's cash account and the purchase price for shares with respect
to any semi-annual period.
- Shares purchased under the stock purchase plan carry full rights to
receive dividends declared from time to time.
- Share distributions and share splits will be credited to the participating
employee's share account as of the record date and effective date,
respectively.
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<PAGE>
Subject to applicable federal securities and tax laws, our board of
directors has the right to amend or to terminate the stock purchase plan.
Amendments to the stock purchase plan will not affect a participating employee's
right to the benefit of the contributions made by such employee prior to the
date of any such amendment. In the event our stock purchase plan is terminated,
the committee is required to distribute all amounts held in each participating
employee's account.
Compensation Committee Interlocks and Insider Participation
The compensation committee is currently comprised of Messrs. Dean, Melia and
Wyss. Messrs. Dean and Wyss are each Managing Directors of DLJ Merchant
Banking, Inc. Mr. Melia is our Chairman of the Board and Chief Executive
Officer. Compensation for Mr. Melia for the year ended December 31, 1999 was
established pursuant to the terms of his employment agreement with us.
RELATIONSHIPS AND TRANSACTIONS WITH RELATED PARTIES
Stockholders Agreement
The stockholders agreement dated January 20, 1995, as amended, by and among
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ
Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ ESC II L.P.,
DLJ First ESC, L.L.C., DLJ First ESC, L.P., DLJ Investment Partners II, L.P.,
DLJ Investment Funding II, Inc. and DLJ Investment Partners, L.P. (collectively,
the "DLJ Entities"), specified trusts, Kevin C. Melia, Robert J. Graham, Julie
Kent, other specified stockholders of MSL and the Company, restricts transfers
of our common stock by non-DLJ Entities. Under the stockholders agreement, DLJ
Merchant Banking Partners, L.P. has the right to appoint a majority of the
members of our board of directors and, while shares of our senior preferred
stock are held by any of the DLJ Entities, DLJ Investment Partners, II, L.P. has
the right to elect one member of our board of directors. Under the terms of the
stockholders agreement, we have agreed to use our best efforts to retire the
outstanding senior preferred stock with the proceeds of this offering. The
stockholders agreement requires the non-DLJ Entities to sell their shares of our
common stock, in some circumstances, should the DLJ Entities choose to sell 100%
of their shares. In addition, subject to limitations, the stockholders agreement
provides all stockholders with demand and piggyback registration rights and
contains indemnification provisions relating to registration statements.
Under the stockholders agreement, the DLJ Entities, Kevin C. Melia and
Robert J. Graham have the exclusive right to invest additional equity in the
Company at a price per share equal to $1.00, should we require such investment
in order to acquire additional contract manufacturing facilities. We expect to
amend the stockholders agreement prior to this offering to remove this provision
from the agreement. Further, under the stockholders agreement, we were required
to pay Donaldson, Lufkin & Jenrette Securities Corporation an annual management
fee equal to $200,000 plus expenses. As of January 20, 2000, we were no longer
obligated to pay this fee or related expenses.
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<PAGE>
Interests of Donaldson, Lufkin & Jenrette, Inc. and its Affiliates
The DLJ Entities, Donaldson, Lufkin & Jenrette Securities Corporation and
DLJ Capital Funding, Inc. are affiliates of Donaldson, Lufkin & Jenrette, Inc.
In addition, Thompson Dean and Karl Wyss are Managing Directors of DLJ Merchant
Banking, Inc. and Stephen Ketchum is a Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation. Each of these individuals is a member of our
board of directors. DLJ Capital Funding, Inc. acted as syndication agent and
lender under our bank credit facility, for which it will receive its pro rata
share of any repayment of amounts outstanding under our bank credit facility
from the proceeds of this offering. In addition, Donaldson, Lufkin & Jenrette
Securities Corporation acted as arranger under our bank credit facility, for
which it received customary fees and expenses and is acting as lead underwriter
in this offering. Following this offering, the DLJ Entities will own
approximately % of our outstanding common stock. However, a provision in our
charter documents provides that some of these entities may not vote
approximately 26% of the shares held by the DLJ Entities until they and we
comply with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Since 1995, Donaldson, Lufkin & Jenrette, Inc. and its
affiliates have received fees in the aggregate amount of approximately $7.8
million under the stockholders agreement and our bank credit facility.
Additionally, affiliates of Donaldson, Lufkin & Jenrette, Inc. currently
hold approximately 75% of our outstanding senior preferred stock that we issued
in connection with the acquisition of selected inventory, manufacturing assets
and other intangibles in Salt Lake City, Utah, from 3Com. The senior preferred
stock was issued in November 1999 for cash consideration of $50.0 million.
Approximately $57.0 million of the proceeds from this offering will be used to
retire all of the outstanding senior preferred stock.
Indemnification Agreements
In connection with this offering, we expect to enter into agreements to
provide indemnification for our directors and executive officers in addition to
the indemnification provided for in our Restated Certificate of Incorporation
and By-laws.
Transactions with Executive Officers
In February 2000, our board of directors approved the grant of 800,000
shares of our common stock to Mr. Melia.
Issuance of Warrants
In connection with the issuance of our senior preferred stock, we issued
warrants to purchase 4,642,169 shares of our common stock to the DLJ Entities
purchasing our senior preferred stock, of which 890,921 were immediately
exercisable and 3,751,248 were placed into escrow. These warrants have an
exercise price of $1.20 per share and expire on November 26, 2006. If shares of
our senior preferred stock are still outstanding as of November 26, 2000, the
warrants that are in escrow will be released to the holders of the senior
preferred stock. Otherwise, the warrants will be returned to us and canceled.
The warrants permit cashless exercise and contain anti-dilution protection in
the case of a stock split, combination, reclassification or other changes to, or
sales or
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issuances of, our common stock, including future issuances of options, warrants
or convertible securities.
On August 31, 1995, we issued warrants to purchase an aggregate of 512,030
shares of our common stock, with an exercise price equal to $1.00 per share, to
Bank of America National Trust and Savings Association in connection with the
execution of our prior credit agreement. These warrants do not expire. The
warrants permit cashless exercise if a public market exists for our common stock
and contain various anti-dilution protections. In addition, the shares obtained
upon exercise of these warrants contain piggy-back registration rights and the
right to participate in certain transfers as if the holder were a party to our
stockholders agreement.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999 and as adjusted to reflect
the sale of the shares offered by us in this offering for:
- each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock;
- each director and named executive officer; and
- all directors and executive officers as a group.
As of December 31, 1999, there were 78,355,587 shares of our common stock
outstanding prior to giving effect to the shares to be sold in this offering.
The number of shares to be sold by each of the selling stockholders is stated on
the assumption that the underwriters exercise their over-allotment option in
full. Unless otherwise indicated below, each entity or person listed below
maintains a mailing address of c/o Manufacturers' Services Limited, 300 Baker
Avenue, Suite 106, Concord, Massachusetts 01742.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock issuable pursuant to
options or warrants, to the extent those options or warrants are currently
exercisable or convertible within 60 days of December 31, 1999, are treated as
outstanding for computing the percentage of the person holding those securities
but are not treated as outstanding for computing the percentage of any other
person. Unless otherwise noted, to our knowledge each person or group identified
possesses sole voting and investment power with respect to the shares, subject
to applicable community property laws. Beneficial ownership percentage is based
on 78,355,587 shares of our common stock outstanding as of December 31, 1999 and
shares of our common stock outstanding after completion of this offering
after giving effect to the issuance of shares of our common stock in this
offering.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to the Owned After the
Offering Offering
----------------------------------------------------- --------------------
Name of Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Principal and Selling Stockholders:
The DLJ Entities(1)........................... 71,724,255 90.5%
Directors and Executive Officers:
Kevin C. Melia(2)............................. 3,502,166 4.4
Robert E. Donahue(3).......................... 594,923 *
Rodolfo Archbold(4)........................... 120,548 *
Dale R. Johnson(5)............................ 129,750 *
James N. Poor(6).............................. 47,374 *
Thompson Dean(7).............................. 71,724,255 90.5
Stephen Ketchum............................... -- --
Karl Wyss(7).................................. 71,724,255 90.5
John F. Fort, III(8).......................... 16,667 *
All directors and executive officers
as a group (10 persons)(9)................... 76,207,333 93.9
</TABLE>
- --------------------------
* Indicates beneficial ownership of less than 1% of our issued and outstanding
common stock.
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(1) Includes 33,331,504, 13,367,971, 14,933,460, 865,837, 5,781,323, 2,511,572
and 41,667 shares of our common stock held by DLJ Merchant Banking Partners,
L.P., DLJ Merchant Banking Funding, Inc., DLJ International Partners, C.V.,
DLJ Offshore Partners, C.V., DLJ First ESC L.L.C., DLJ First ESC, L.P. and
DLJ ESC II, L.P., respectively, and warrants to purchase 506,290, 224,980,
95,791 and 63,860 shares of our common stock held by DLJ Investment Partners
II, L.P., DLJ Investment Partners, L.P., DLJ Investment Funding II, Inc. and
DLJ ESC II, L.P., respectively. The table does not include 1,136,552,
505,051, 215,038 and 143,359 shares of our senior preferred stock held by
such persons on December 31, 1999, respectively, which will be retired using
the proceeds of this offering. See "Use of Proceeds." Pursuant to the terms
of our restated certificate of incorporation, DLJ Merchant Banking Partners,
L.P., DLJ Merchant Banking Funding, Inc. and DLJ International Partners,
C.V. may not vote 9,803,384, 3,892,859 and 4,392,194 shares, respectively,
owned by such persons until they and we comply with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The address of each such person is c/o Donaldson Lufkin & Jenrette, Inc.,
277 Park Avenue, New York, New York 10172.
(2) The shares of common stock included in the table include 1,349,665 shares
that can be acquired upon the exercise of outstanding options. The table
excludes 800,000 shares issued to Mr. Melia in February 2000.
(3) The shares of common stock included in the table include 287,517 shares that
can be acquired upon the exercise of outstanding options.
(4) The shares of common stock included in the table include 101,798 shares that
can be acquired upon the exercise of outstanding options.
(5) The shares of common stock included in the table include 124,750 shares that
can be acquired upon the exercise of outstanding options.
(6) The shares of common stock included in the table include 28,624 shares that
can be acquired upon the exercise of outstanding options.
(7) Messrs. Dean and Wyss are each Managing Directors of DLJ Merchant
Banking, Inc., the general partner of DLJ Merchant Banking Partners, L.P.
and may be considered to have beneficial ownership of the DLJ Entities'
interests in us. Each such person disclaims beneficial ownership of any
shares in which he does not have a pecuniary interest. The address of each
such person is c/o DLJ Merchant Banking, Inc., 277 Park Avenue, New York,
New York 10172.
(8) The shares of common stock included in the table represent shares that can
be acquired upon the exercise of outstanding options.
(9) Excluding the shares owned by the DLJ Entities attributed to Messrs. Dean
and Wyss, our directors and executive officers as a group are deemed to own
4,483,078 shares of our common stock following this offering, assuming no
exercise of the underwriters' over-allotment option, representing
approximately % of our outstanding common stock.
Selling Stockholders
Pursuant to the underwriting agreement, the underwriters have been granted
an option to purchase up to an aggregate of shares of our common stock from
us and the selling stockholders for the purpose of covering over-allotments, if
any. The selling stockholders, DLJ Merchant Banking Partners, L.P., DLJ Merchant
Banking Funding, Inc., DLJ International Partners, C.V., DLJ Offshore Partners,
C.V., DLJ First ESC L.L.C., DLJ First ESC, L.P. and DLJ ESC II, L.P., have
granted an over-allotment option to the underwriters with respect to , ,
, , , and shares of our common stock, respectively, and will
own , , , , , and shares of our common stock,
respectively, if the over-allotment option is exercised in full with respect to
the selling stockholders' shares.
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<PAGE>
If the underwriters exercise their over-allotment option, the shares of our
common stock purchased thereunder will first be purchased from the selling
stockholders on a pro rata basis (based upon the aggregate number of shares that
may be purchased from the selling stockholders) until all such shares of our
common stock to be sold by the selling stockholders have been purchased, and the
remaining shares, if any, will be purchased from us.
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DESCRIPTION OF INDEBTEDNESS
Bank Credit Facility
On August 21, 1998, we entered into a bank credit facility, which agreement
was amended on February 26, 1999 and further amended on November 23, 1999 (the
"bank credit facility") with a syndicate of financial institutions led by
Donaldson, Lufkin & Jenrette Securities Corporation, as arranger and syndication
agent, and Bank of America, N.A. as administrative and collateral agent. Our
bank credit facility provides for both a term loan facility and a revolving
credit facility. Our term loan facility is for a total of $50.0 million and has
a final maturity on July 31, 2004. At December 31, 1999, we had $49.4 million
outstanding under our term loan facility. Our revolving credit facility is for a
total of $75.0 million and has a termination date of July 31, 2002. At
December 31, 1999, we had $68.1 million outstanding under our revolving credit
facility.
The interest rate on our revolving credit facility is, at our option, either
(i) 2.00% per annum plus the base rate, which is the higher of (a) the rate as
publicly announced from time to time by Bank of America as its "reference rate"
or (b) the Federal Funds Effective Rate plus 0.50% per annum, or (ii) the
reserve-adjusted London Interbank Offered Rate (Adjusted LIBOR) plus 3.00% per
annum. The applicable margins for our bank credit facility will be subject to
adjustment, +/-0.25%, based on the ratio of our consolidated total debt to
consolidated EBITDA (as defined in the bank credit facility). At December 31,
1999, the interest rate on our revolving loans was between 9.19% and 10.50%. The
interest rate on our term loan facility is, at our option, either (i) the base
rate plus 2.75% per annum or (ii) the sum of Adjusted LIBOR plus 3.75%. At
December 31, 1999, the interest rate on our term loan facility was 9.938%.
We are able to repay and reborrow on our revolving credit facility.
Availability under our revolving credit facility is subject to a commitment fee
which equals 0.50% per annum, subject to reduction to 0.45% per annum based upon
our ratio of consolidated total debt to consolidated EBITDA, of the unused
portion of our bank credit facility on the date of determination. Such fee is
payable quarterly in arrears until termination of our revolving credit facility.
We pay a letter of credit fee for the pro rata account of each lender in an
amount equal to the dollar equivalent of the daily amount available to be drawn
under letters of credit, if any are outstanding, at a per annum rate equal to
3.00%, +/- 0.25%, depending on the ratio of consolidated total debt to
consolidated EBITDA. In addition, we pay a fronting fee equal to 0.25% of the
daily amount available to be drawn down under any letters of credit.
The term loans under our bank credit facility are subject to quarterly
amortization payments over the life of our bank credit facility. In addition, if
we fail to comply with leverage covenants under our bank credit facility, we
would have to make partial repayments of our term loans and/or permanent
reduction in our revolving credit facility commitment, subject to exceptions,
with a portion of the:
- net proceeds from a sale of assets;
- net proceeds from an issuance of debt;
- net proceeds from an issuance of equity securities; and
- excess cash flow.
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Once the term loans have been repaid under our bank credit facility, the term
loans will not be permitted to be reborrowed. Issuance of new equity securities
may require, depending upon the ratio of consolidated total debt to consolidated
EBITDA, a prepayment of our outstanding debt obligations up to an amount equal
to 50% of the proceeds of the new equity security offering.
We and all of our present and future direct and indirect U.S. subsidiaries
unconditionally guarantee payment under our bank credit facility. These
guarantees are secured by a pledge of and a perfected security interest in all
of the assets of such entities, including 100% of the stock of our subsidiaries.
In addition, all of our foreign subsidiaries have guaranteed payment of the
obligations of MSL Overseas Finance B.V. under our bank credit facility.
Our bank credit facility contains customary covenants and restrictions on
our ability and the ability of our subsidiaries to engage in some activities,
including, but not limited to:
- issuing new indebtedness;
- creating liens;
- incurring capital expenditures;
- making investments;
- declaring dividends, repurchasing or redeeming capital stock and prepaying
subordinated debt;
- entering into any merger, consolidation, acquisition, sale of assets or
lease; and
- entering into hedging transactions.
Our bank credit facility permits us to pay cash dividends of up to $7.0 million
on or prior to December 1, 2000 on our senior preferred stock.
Our bank credit facility also requires us and our subsidiaries to observe
customary financial covenants, including, but not limited to:
- a minimum interest coverage ratio,
- a maximum leverage ratio;
- a minimum consolidated EBITDA ratio;
- a minimum consolidated net worth ratio;
- maximum capital expenditures; and
- maximum other indebtedness.
The availability of our revolving credit facility is further restricted based
upon a monthly "borrowing base" which is calculated by reference to eligible
receivables and inventory. Eligible receivables are generally limited to those
not in dispute and less than 90 days old. Our inventory is restricted to a
limited percentage of the total borrowing base.
Our bank credit facility contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults on other indebtedness, events of bankruptcy and insolvency, ERISA
defaults, judgment defaults, failure of any guaranty or
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security agreement supporting our bank credit facility to be in full force and
effect and change in our control.
New Bank Credit Facility
Based upon discussions with our principal lender under our existing bank
credit facility, we expect to refinance our existing indebtedness under our
existing bank credit facility upon consummation of this offering. We expect that
the new bank credit facility will provide for borrowings of up to $175.0 million
and have a final maturity in 2004. We anticipate that the new bank credit
facility will be secured by substantially all of our assets and will generally
contain less restrictive covenants and more favorable pricing terms than our
existing bank credit facility. To date, no definitive agreement has been
executed, and no assurance can be given that the new bank credit facility will
be executed on these terms or entered into at all.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General Matters
Upon completion of this offering, the total amount of our authorized capital
stock will consist of 150,000,000 shares of common stock, 2,000,000 shares of
senior preferred stock due 2006 and 3,000,000 shares of one or more additional
series of preferred stock. As of December 31, 1999, we had outstanding
78,355,587 shares of common stock and 2,000,000 shares of senior preferred
stock.
After giving effect to this offering, we will have shares of common
stock ( shares if the underwriters' over-allotment option is exercised in
full) and no other shares of any series of preferred stock outstanding. As of
December 31, 1999, we had 62 stockholders of record with respect to our common
stock and outstanding options to purchase 7,896,872 shares of our common stock,
of which 2,934,585 shares were exercisable. The following summarizes the
material provisions of our capital stock. This summary does not purport to be
complete and is qualified in its entirety by our restated certificate of
incorporation and our amended and restated by-laws, which are included as
exhibits to the registration statement of which this prospectus forms a part,
and by the provisions of applicable law.
The restated certificate and by-laws will contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and which may have the effect of delaying,
deferring or preventing a future takeover or change in control of MSL unless
such takeover or change in control is approved by our board of directors.
Common Stock
The issued and outstanding shares of common stock are, and the shares of
common stock to be issued by us in connection with the offering will be, validly
issued, fully paid and nonassessable. Subject to the prior rights of the holders
of any series of preferred stock, the holders of outstanding shares of our
common stock are entitled to receive dividends out of assets legally available
therefor at such time and in such amounts as our board of directors may from
time to time determine. See "Dividend Policy." Our shares of common stock are
not convertible and the holders thereof have no preemptive or subscription
rights to purchase any of our securities. Upon liquidation, dissolution or
winding up of MSL, the holders of our common stock are entitled to receive pro
rata our assets which are legally available for distribution, after payment of
all debts and other liabilities and subject to the prior rights of any holders
of any series of preferred stock then outstanding. Each outstanding share of our
common stock is entitled to one vote on all matters submitted to a vote of
stockholders. There is no cumulative voting. Except as otherwise required by law
or the restated certificate, the holders of our common stock vote together as a
single class on all matters submitted to a vote of stockholders.
We have applied to have our common stock approved for listing on the New
York Stock Exchange under the symbol "EMS."
Warrants
In connection with the issuance of our senior preferred stock, we issued
warrants to purchase 4,642,169 shares of our common stock to some of the DLJ
Entities, of which 890,921 were immediately exercisable and 3,751,248 were
placed into escrow. These warrants have an exercise
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<PAGE>
price of $1.20 per share and expire on November 26, 2006. If shares of senior
preferred stock are still outstanding as of November 26, 2000, the warrants that
are in escrow will be released to the holders of the senior preferred stock.
Otherwise, the warrants will be returned to us and canceled. The warrants permit
cashless exercise and contain anti-dilution protection in the case of a stock
split, combination, reclassification or other changes to, or sales or issuances
of, our common stock, including future issuances of options, warrants or
convertible securities.
On August 31, 1995 we issued warrants to purchase an aggregate of 512,030
shares of our common stock with an exercise price equal to $1.00 per share to
Bank of America National Trust and Savings Association in connection with the
execution of our prior credit agreement. These warrants do not expire. The
warrants permit cashless exercise if a public market exists for our common stock
and contain various anti-dilution protections. In addition, the shares obtained
upon exercise of these warrants contain piggy-back registration rights and the
right to participate in certain transfers as if the holder were a party to our
stockholders agreement.
Senior Preferred Stock Due 2006
On November 26, 1999, we issued 2,000,000 shares of senior preferred stock
due 2006 at $25.00 per share to some of the DLJ Entities. The holders of senior
preferred stock are entitled to cumulative dividends at a rate of 14% per annum,
payable quarterly in cash, through November 26, 2000 and, thereafter, at a rate
of 15% per annum payable in cash at the mandatorily redeemable date or in
additional shares of senior preferred stock. In the event that we fail to redeem
the senior preferred stock upon a change of control of MSL, or if we have not
redeemed the senior preferred stock by November 26, 2006, the dividend rate will
increase by 0.5% per quarter, up to a maximum dividend rate of 25% per annum.
So long as any shares of senior preferred stock are outstanding, we cannot
pay cash dividends on our common stock, nor may we redeem, purchase or otherwise
acquire common stock, except in connection with an employee incentive or benefit
plan. In addition, so long as any shares of our senior preferred stock are
outstanding, dividends on other shares of preferred stock must be paid ratably
in proportion to the respective amounts of dividends accumulated and unpaid.
If we fail to satisfy our obligations under the terms of our senior
preferred stock relating to payment of dividends and redemption obligations and
for so long as this failure continues, the holders of our senior preferred stock
will have the right to elect two additional directors to our board of directors.
In the event of any liquidation, dissolution or winding up of MSL, the
holders of our senior preferred stock shall be entitled to receive an amount
equal to $25.00 plus the value of all accrued and unpaid cash and in-kind
dividends. Until November 26, 2000, we may redeem all of our senior preferred
stock at 114% of its liquidation value, or $57.0 million. Thereafter, we may
redeem the shares at 115% of liquidation value. All redemptions of our senior
preferred stock shall include accrued and unpaid dividends payable thereon. We
intend to retire all of the outstanding shares of our senior preferred stock
with the proceeds from this offering. See "Use of Proceeds."
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Other Preferred Stock
Our board of directors may, without further action by our stockholders, from
time to time, direct the issuance of shares of preferred stock in series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series. Satisfaction of any dividend preferences of outstanding shares
of preferred stock would reduce the amount of funds available for the payment of
dividends on shares of our common stock. Holders of shares of preferred stock
may be entitled to receive a preference payment in the event of any liquidation,
dissolution or winding-up of MSL before any payment is made to the holders of
shares of our common stock. In some circumstances, the issuance of shares of
preferred stock may render more difficult or tend to discourage a merger, tender
offer or proxy contest, the assumption of control by a holder of a large block
of our securities or the removal of incumbent management. Upon the affirmative
vote of a majority of the total number of directors then in office, our board of
directors, without stockholder approval, may issue shares of preferred stock
with voting and conversion rights which could adversely affect the holders of
shares of our common stock. Following this offering and the application of the
net proceeds therefrom as described under "Use of Proceeds" there will be no
shares of preferred stock outstanding.
We have no current intention to issue any of our unissued, authorized shares
of preferred stock. However, the issuance of any shares of preferred stock in
the future could adversely affect the rights of the holders of our common stock.
Registration Rights
Pursuant to the stockholders agreement, in the event we propose to file a
registration statement under the Securities Act with respect to an offering by
us for our own account or the account of another person, or both, some of our
stockholders, including the DLJ Entities, will be entitled to include shares
held by them in a registration, subject to the right of the managing underwriter
of the offering to exclude some or all of the shares from the registration if
and to the extent the inclusion of the shares would adversely affect the
marketing of the shares to be sold by us. The agreement also provides that,
following the closing of our initial public offering of common stock, some of
our stockholders, including the DLJ Entities, may require us to register shares
having a fair market value of at least $5.0 million, except that we are not
required to effect such registration more than:
- four times on behalf of the DLJ Merchant Banking Partners, L.P., DLJ
International Partners, C.V., DLJ Offshore Partners, C.V. or DLJ Merchant
Banking Funding, Inc.;
- three times on behalf of DLJ Investment Partners II, L.P., DLJ Investment
Funding II, Inc., DLJ ESC II L.P. or DLJ Investment Partners, L.P., and we
may be required to register shares having a fair market value of less than
$5.0 million if such amount represents all of their shares; or
- once on behalf of the other stockholders party to the stockholders
agreement.
The agreement also provides that we will pay all expenses incurred in connection
with these registrations. We are not required, however, to effect any such
registration within six months after the effective date of a prior demand
registration. In addition, all holders of registerable securities
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are entitled to request the inclusion of any shares of our common stock subject
to the stockholders agreement in any registration statement at our expense
whenever we propose to register any of our securities under the Securities Act,
subject to some conditions. In connection with all such registrations, we have
agreed to indemnify all holders of registerable securities against specified
liabilities, including liabilities under the Securities Act. In addition, Bank
of America National Trust and Savings Association is entitled to request the
inclusion of shares of our common stock issuable upon exercise of its warrant in
any registration statement on terms substantially similar to those described
above.
Other Provisions of the Restated Certificate of Incorporation and By-laws
CLASSIFIED BOARD. The restated certificate will provide for our board to be
divided into three classes, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of our board will be elected each year.
Under the Delaware General Corporation Law, directors serving on a classified
board can only be removed for cause. The provision for a classified board could
prevent a party who acquires control of a majority of our outstanding voting
stock from obtaining control of the board until our second annual stockholders
meeting following the date the acquiror obtains the controlling stock interest.
The classified board provision could have the effect of discouraging a potential
acquiror from making a tender offer or otherwise attempting to obtain control of
MSL and could increase the likelihood that incumbent directors will retain their
positions.
ELIMINATION OF STOCKHOLDER ACTION THROUGH WRITTEN CONSENTS. The restated
certificate will provide that stockholder action can be taken only at an annual
or special meeting of stockholders and cannot be taken by written consent in
lieu of a meeting.
ELIMINATION OF THE ABILITY TO CALL SPECIAL MEETINGS. Our restated
certificate and by-laws will provide that, except as otherwise required by law,
special meetings of our stockholders can only be called pursuant to a resolution
adopted by a majority of our board of directors or by our Chief Executive
Officer. Stockholders are not permitted to call a special meeting or to require
our board to call a special meeting.
ADVANCED NOTICE PROCEDURES FOR STOCKHOLDER PROPOSALS. Our by-laws will
establish an advance notice procedure for stockholder proposals to be brought
before an annual meeting of our stockholders, including proposed nominations of
persons for election to our board. Stockholders at our annual meeting may only
consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of our board or by a stockholder who
was a stockholder of record on the record date for the meeting, who is entitled
to vote at the meeting and who has given to our secretary timely written notice,
in proper form, of the stockholder's intention to bring that business before the
meeting. Although our by-laws do not give our board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, our by-laws may have
the effect of precluding the conduct of some business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquiror from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of us.
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<PAGE>
AMENDMENTS TO THE RESTATED CERTIFICATE AND BY-LAWS. Our restated
certificate and by-laws will provide that the affirmative vote of holders of at
least 66 2/3% of the total votes eligible to be cast in the election of
directors is required to amend, alter, change or repeal some of their
provisions. This requirement of a super-majority vote to approve amendments to
the restated certificate and by-laws could enable a minority of our stockholders
to exercise veto power over any such amendments.
Provisions of Delaware Law Governing Business Combinations
Following the consummation of this offering, we will be subject to the
"business combination" provisions of the Delaware General Corporation Law. In
general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless:
- the transaction is approved by the board of directors prior to the date
the "interested stockholder" obtained such status;
- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."
A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, owns 15% or more of a corporation's voting stock or within three
years did own 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.
Limitations on Liability and Indemnification of Officers and Directors
Our restated certificate of incorporation limits the liability of our
directors to the fullest extent permitted by the Delaware General Corporation
Law and provides that we will indemnify them to the fullest extent permitted by
such law. We expect to enter into indemnification agreements with our current
directors and executive officers prior to the completion of this offering and
expect to enter into a similar agreement with any new directors or executive
officers. We expect to increase our director's and officer's liability insurance
coverage prior to the completion of this offering.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is BankBoston, N.A.
67
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial amount of our common stock in the public market
after this offering could adversely affect the prevailing market price of our
common stock. Furthermore, because no shares will be available for sale shortly
after this offering due to the contractual and legal restrictions on resale
described below, the sale of a substantial amount of our common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price of our common stock and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless the shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. Any shares purchased by an affiliate may not be resold except
pursuant to an effective registration statement or an applicable exemption from
registration, including an exemption under Rule 144 of the Securities Act. The
remaining shares of our common stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act. These restricted securities may be sold in the public market only if they
are registered or if they qualify for an exemption from registration under
Rule 144 or Rule 701 under the Securities Act. These rules are summarized below.
In connection with this offering, our existing officers and directors and
other persons who will own an aggregate of shares of our common stock
after this offering, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Donaldson, Lufkin & Jenrette Securities
Corporation may, in its sole discretion and at any time without notice, release
all or any portion of the shares subject to such restrictions. The shares of our
common stock outstanding upon closing of this offering will be available for
sale in the public market as follows:
<TABLE>
<CAPTION>
Approximate
Number of Shares Description
- ---------------- ------------------------------------------------------------
<S> <C>
After the date of this prospectus, freely tradeable shares
sold in this offering.
After 180 days from the date of this prospectus, the lock-up
period will expire, and these shares will be saleable under
Rule 144 (subject, in some cases, to volume limitations).
After one year from the date of this prospectus, these
shares will be saleable under Rule 144 (subject, in some
cases, to volume limitations).
After two years from the date of this prospectus, these
shares will be saleable under Rule 144 without limitations
as to volume.
</TABLE>
Lock-up Agreements
We, our executive officers, directors, substantially all of our existing
stockholders and many of our optionholders who are senior officers have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of our
common stock for a period of 180 days after the date of this
68
<PAGE>
prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. However, this restriction does not apply to the shares
of common stock to be issued by us in connection with this offering or pursuant
to employee benefit plans existing on the date of this prospectus, sales or
dispositions to us, permitted transfers to related parties that agree to be
bound by the foregoing restrictions or permitted sales of shares acquired in the
open market following the completion of this offering.
Rule 144
In general, under Rule 144 as currently in effect, beginning ninety (90)
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year from the later of the date
those shares of common stock were acquired from us or from an affiliate of ours
would be entitled to sell within any three-month period, a number of shares that
does not exceed the greater of:
- one percent of the number of shares of our common stock then outstanding,
which will equal approximately shares immediately after this
offering; or
- the average weekly trading volume of our common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common stock.
The sales of any shares of our common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us.
Rule 144(k)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years from the later of the date
such shares of our common stock were acquired from us or from an affiliate of
ours, including the holding period of any prior owner other than an affiliate,
is entitled to sell those shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the lock-up agreements or
otherwise, those shares may be sold immediately upon the completion of this
offering.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares ninety (90) days after the effective date of this
offering in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144. No precise
prediction can be made as to the effect, if any, that market sales of shares or
the availability of shares for sale will have on the market price of our common
stock prevailing from time to time. We are unable to estimate the number of our
shares that may be sold in the public market pursuant to Rule 144 or Rule 701
because this will depend on the market price of our common stock, the personal
circumstances of
69
<PAGE>
the sellers and other factors. Nevertheless, sales of significant amounts of our
common stock in the public market could adversely affect the market price of our
common stock.
Stock Plans
We intend to file a registration statement under the Securities Act covering
shares of common stock reserved for issuance under our stock option plan,
2000 Plan and stock purchase plan. This registration statement is expected to be
filed as soon as practicable after the effective date of this offering.
As of December 31, 1999, there were options to purchase 7,896,872 shares
outstanding under our stock option plan. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.
Registration Rights
Pursuant to the stockholders agreement, in the event we propose to file a
registration statement under the Securities Act with respect to an offering by
us for our own account or the account of another person, or both, some of our
stockholders, including the DLJ Entities, will be entitled to include shares
held by them in a registration, subject to the right of the managing underwriter
of the offering to exclude some or all of the shares from the registration if
and to the extent the inclusion of the shares would adversely affect the
marketing of the shares to be sold by us. In addition, Bank of America National
Trust and Savings Association has the right to require us to register the shares
of our common stock issuable upon exercise of its warrant on substantially
similar terms. See "Description of Capital Stock--Registration Rights."
Beginning 180 days after the date of the prospectus, the holders of an aggregate
of shares of our common stock will have demand registration rights
pursuant to the stockholders agreement.
70
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Banc of America Securities
LLC, FleetBoston Robertson Stephens Inc., Thomas Weisel Partners LLC and
DLJDIRECT Inc., have severally agreed to purchase from us the respective number
of shares of common stock set forth opposite their names below.
<TABLE>
<CAPTION>
Underwriters Number of Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation.......................................
Banc of America Securities LLC......................
FleetBoston Robertson Stephens Inc..................
Thomas Weisel Partners LLC..........................
DLJDIRECT Inc.......................................
-------------
Total...........................................
=============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of our common stock
included in this offering are subject to approval of legal matters by their
counsel and to customary conditions. The underwriters are obligated to purchase
and accept delivery of all the shares of our common stock offered in this
prospectus, other than those covered by the over-allotment option described
below, if they purchase any of the shares of our common stock.
The underwriters propose to initially offer some of the shares of our common
stock directly to the public at the initial public offering price set forth on
the cover page of this prospectus and some of the shares of our common stock to
dealers (including the underwriters) at the initial public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
those dealers may re-allow, a concession not in excess of $ per share on
sales to other dealers. After the initial public offering of our shares to the
public, the representatives of the underwriters may change the public offering
price and such concessions at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-managing
underwriter in 110 filed public offerings of equity securities, of which 79 have
been completed, and has acted as a syndicate member in an additional 54 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the underwriting agreement entered into in connection with this
offering.
DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in this offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJDIRECT for sale to its
brokerage account holders. An electronic prospectus is available on the Internet
site
71
<PAGE>
maintained by DLJDIRECT Inc. Other than the prospectus in electronic format, the
information on the Internet site relating to our offering is not a part of this
prospectus, has not been approved or endorsed by us or any underwriter and
should not be relied on by prospective purchasers.
The following table shows the underwriting discount we will pay to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of our common stock.
<TABLE>
<CAPTION>
Fees Paid by Fees Paid by
Manufacturers' the Selling
Services Limited Stockholders
------------------- ------------
No Full Full
Exercise Exercise Exercise
<S> <C> <C> <C>
Per share.............................. $ $ $
Total.................................. $ $ $
</TABLE>
We and the selling stockholders have granted to the underwriters an option,
exercisable for 30 days after the date of the underwriting agreement, to
purchase up to and additional shares of our common stock,
respectively, at the initial public offering price less the underwriting fees.
The underwriters may exercise their option solely to cover over-allotments, if
any, made in connection with this offering. To the extent that the underwriters
exercise their option, each underwriter will become obligated, subject to
conditions, to purchase a number of additional shares approximately
proportionate to their initial purchase commitment. We have agreed that if any
of the selling stockholders fail to deliver their shares upon the exercise of
the over-allotment option, we will sell to the underwriters that number of
shares of our common stock at the same price. We will pay all of the offering
expenses, estimated to be $ .
We and the selling stockholders have agreed to indemnify the underwriters
against specified civil liabilities, including liabilities under the Securities
Act, or to contribute to payments that the underwriters may be required to make
in respect of any of those liabilities.
We, our executive officers and directors and substantially all of our
stockholders have agreed, for a period of 180 days after the date of this
prospectus, not to, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities convertible
into or exercisable or exchangeable for our common stock; or
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, regardless of whether any of the transactions described in these
clauses are to be settled by the delivery of common stock, or such other
securities, in cash or otherwise.
However, we may:
- grant stock options or stock awards under our existing benefit or
compensation plans;
72
<PAGE>
- issue shares of our common stock upon the exercise of options, warrants or
rights or the conversion of currently outstanding securities; and
- issue, offer and sell shares of our common stock or securities convertible
into, or exercisable or exchangeable for, our common stock in transactions
not involving a public offering, or in connection with future
acquisitions, as long as each recipient of the securities agrees in
writing to be bound by the restrictions in this paragraph.
In addition, during this period, we have agreed not to file any registration
statement with respect to, and each of our executive officers and directors and
a significant majority of our stockholders have agreed not to make any demand
for, or exercise any right with respect to, the registration of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock (other than a registration statement registering options or
shares granted under a stock option plan) without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation.
Prior to this offering, there was no established trading market for our
common stock. The initial public offering price for our common stock will be
determined by negotiation among us and the representatives of the underwriters.
The factors to be considered in determining the initial public offering price
include:
- the history of and the prospects for the industry in which we compete;
- the ability of our management;
- our past and present operations;
- our prospects for future earnings;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of securities of generally comparable companies.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of our common
stock offered in this prospectus in any jurisdiction where action for that
purpose is required. The shares of our common stock offered in this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or
any other offering material or advertisements in connection with the offer and
sale of any shares of our common stock be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of the jurisdiction. Persons who receive this
prospectus are advised to inform themselves about and to observe any
restrictions relating to the offering of our common stock and the distribution
of this prospectus. This prospectus is not an offer to sell or a solicitation of
an offer to buy any shares of our common stock included in this offering in any
jurisdiction where that would not be permitted or legal.
In connection with this offering, some underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of our
common stock. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of our common stock in the open market to cover syndicate
short positions or to stabilize the price of our common stock. In addition, the
underwriting syndicate may reclaim
73
<PAGE>
selling concessions from syndicate members and selected dealers if they
repurchase previously distributed shares of our common stock in syndicate
covering transactions, stabilizing transactions or otherwise. These activities
may stabilize or maintain the market price of our common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.
At our request, the underwriters have reserved up to five percent of the
shares offered by this prospectus for sale at the initial public offering price
to our employees, officers, directors and other individuals associated with us
and members of their families. The number of shares of common stock available
for sale to the general public will be reduced to the extent any reserved shares
are purchased. Any reserved shares not so purchased will be offered by the
underwriters on the same basis as the other shares of our common stock. Any
employees, directors or other persons purchasing such reserved shares will be
prohibited from selling, transferring, assigning, pledging or hypothecating such
shares for a period of three months following the effective date of this
offering.
We have applied to have our common stock listed on the New York Stock
Exchange under the symbol "EMS."
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V., DLJ
First ESC L.L.C., DLJ ESC II, L.P., DLJ First ESC, L.P., DLJ Merchant Banking
Funding, Inc., DLJ Offshore Partners, C.V., DLJ Investment Partners II, L.P.,
DLJ Investment Partners, L.P. and DLJ Investment Funding II, L.P. each of which
are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation, are
stockholders of MSL. In addition, DLJ Merchant Banking Partners, L.P., has the
right to appoint a majority of the members of our board of directors. So long as
shares of our senior preferred stock are held by any of the DLJ Entities, DLJ
Investment Partners II, L.P. has the right to elect one member of our board of
directors pursuant to the terms of the stockholders agreement. DLJ Capital
Funding, Inc. acted as syndication agent and is a lender under our bank credit
facility and is expected to be the syndication agent and a lender under our new
bank credit facility. In addition, affiliates of some of the underwriters are
lenders under our bank credit facility and will receive proceeds from this
offering upon repayment of this indebtedness. Prior to this offering, Donaldson,
Lufkin & Jenrette Securities Corporation and its affiliates and employees own an
aggregate of approximately 90% percent of the issued and outstanding shares of
our common stock. See "Principal and Selling Stockholders."
The offering is being conducted in accordance with Rule 2720 of the Conduct
Rules of the NASD, which provides that, among other things, when an NASD member
participates in the underwriting of its parent's equity securities, the initial
public offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting specified standards. In accordance with this
requirement, Banc of America Securities LLC will serve in this role and will
recommend a price in compliance with the requirements of Rule 2720. In
connection with this offering, Banc of America Securities LLC, in its role as
qualified independent underwriter, has exercised its usual standards of "due
diligence" and has reviewed and participated in the preparation of this
prospectus and the registration statement of which this prospectus forms a part
and will recommend the maximum price at which our common stock may be offered
hereby. Banc of America Securities LLC will receive a separate fee of $5,000 for
its services as qualified
74
<PAGE>
independent underwriter. In addition, the underwriters may not confirm sales to
any discretionary account without the prior specific written approval of the
customer.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be passed
upon for us by Ropes & Gray, Boston, Massachusetts. Various legal matters
related to the sale of our common stock offered hereby will be passed upon for
the underwriters by Davis, Polk & Wardwell, New York, New York.
EXPERTS
The financial statements as of December 31, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus and the financial statement schedules included in the registration
statement have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For further
information about us and our common stock, you should refer to the registration
statement. Any statements made in this prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed as an exhibit to the
registration statement you should refer to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus shall
be deemed qualified in its entirety by this reference.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information in the files at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee by writing
to the Commission. You may call the Commission at 1-800-SEC-0330 for further
information on the operation of its public reference rooms. Our filings,
including the registration statement, will also be available to you on the
Internet site maintained by the Commission at http://www.sec.gov.
We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can request copies of these documents,
for a copying fee, by writing to the SEC. We intend to furnish our stockholders
with annual reports containing financial statements audited by our independent
auditors.
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<PAGE>
MANUFACTURERS' SERVICES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended
December 31, 1997, 1998 and 1999.......................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to the Consolidated Financial Statements.............. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Manufacturers' Services Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of
Manufacturers' Services Limited and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 2000
F-2
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-------------------
ASSETS 1998 1999
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 23,969 $ 24,182
Accounts receivable, less allowance for doubtful accounts
of $698 and $728
at December 31, 1998 and 1999, respectively............. 118,513 131,301
Inventories............................................... 87,487 125,164
Deferred tax asset........................................ 824 1,068
Prepaid expenses and other current assets................. 4,241 17,550
-------- --------
Total current assets.................................... 235,034 299,265
Property and equipment, net............................... 33,786 62,814
Goodwill and other intangibles............................ 676 37,949
Deferred tax asset........................................ 763 121
Other assets.............................................. 7,349 11,634
-------- --------
Total assets............................................ $277,608 $411,783
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations............................................. $ 4,939 $ 5,414
Accounts payable.......................................... 146,619 164,261
Accrued expenses and other current liabilities............ 21,953 26,177
Restructuring reserve..................................... 4,671 668
Income taxes payable...................................... 2,512 4,472
-------- --------
Total current liabilities............................... 180,694 200,992
Long-term debt and capital lease obligations................ 57,188 121,929
Other liabilities........................................... 552 1,037
-------- --------
Total liabilities....................................... 238,434 323,958
Commitments and contingencies (Note 10)
Senior redeemable preferred stock, 2,000,000 shares
authorized; 0 and
2,000,000 shares issued and outstanding at December 31,
1998 and 1999,
respectively; redemption value of $25 per share........... -- 39,204
Stockholders' equity:
Preferred stock, $0.001 par value, 3,000,000 shares
authorized; no shares
issued and outstanding.................................. -- --
Common stock, $0.001 par value; 150,000,000 shares
authorized;
75,397,920 and 78,355,587 shares issued and outstanding
at
December 31, 1998 and 1999, respectively................ 75 78
Additional paid in capital................................ 75,399 88,413
Accumulated deficit....................................... (32,371) (30,361)
Accumulated other comprehensive loss...................... (3,929) (9,509)
-------- --------
Total stockholders' equity.............................. 39,174 48,621
-------- --------
Total liabilities and stockholders' equity.............. $277,608 $411,783
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Net sales...................................... $ 562,666 $ 837,993 $ 920,722
Cost of goods sold............................. 526,787 792,734 865,489
----------- ----------- -----------
Gross profit................................... 35,879 45,259 55,233
Operating expenses:
Selling, general and administrative.......... 28,037 29,835 38,042
Restructuring and other asset writedowns..... 12,094 6,729 780
----------- ----------- -----------
40,131 36,564 38,822
----------- ----------- -----------
Operating income (loss)........................ (4,252) 8,695 16,411
Interest expense, net.......................... (7,723) (10,161) (8,081)
Foreign exchange gain (loss)................... (931) 721 (2,510)
----------- ----------- -----------
Income (loss) before provision for income taxes
and extraordinary loss....................... (12,906) (745) 5,820
Provision for income taxes..................... 4,372 3,294 3,810
----------- ----------- -----------
Income (loss) before extraordinary loss........ (17,278) (4,039) 2,010
Extraordinary loss............................. -- (2,202) --
----------- ----------- -----------
Net income (loss).............................. $ (17,278) $ (6,241) $ 2,010
=========== =========== ===========
Net income (loss) applicable to common stock... $ (17,278) $ (6,241) $ 1,201
=========== =========== ===========
Basic income (loss) per share:
Income (loss) before extraordinary loss...... $ (0.27) $ (0.05) $ 0.02
Extraordinary loss........................... $ -- $ (0.03) $ --
Net income (loss)............................ $ (0.27) $ (0.08) $ 0.02
Weighted average shares outstanding.......... 64,687,236 74,983,142 77,537,107
Diluted income (loss) per share:
Income (loss) before extraordinary loss...... $ (0.27) $ (0.05) $ 0.02
Extraordinary loss........................... $ -- $ (0.03) $ --
Net income (loss)............................ $ (0.27) $ (0.08) $ 0.02
Weighted average shares outstanding.......... 64,687,236 74,983,142 78,334,313
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Common stock Accumulated
-------------------- Additional other Total
Number paid in Accumulated comprehensive Comprehensive stockholders'
of shares Amount capital deficit income (loss) income (loss) equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. 53,011 $53 $49,202 $ (8,852) $(1,071) $ 39,332
Net loss................ (17,278) $(17,278) (17,278)
Issuance of stock....... 20,834 21 24,979 25,000
Fees associated with
stock issuance........ (300) (300)
Exercise of stock
options............... 651 651 651
Redemption of preferred
stock of subsidiary... (171) (171)
Translation
adjustment............ (5,137) (5,137) (5,137)
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $(22,415)
--------
Balance at December 31,
1997.................. 74,496 $74 $74,361 $(26,130) $(6,208) $ 42,097
Net loss................ (6,241) (6,241) (6,241)
Issuance of stock....... 284 341 341
Exercise of stock
options............... 217 217 217
Purchase of shares...... 400 1 480 481
Translation
adjustment............ 2,279 2,279 2,279
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $ (3,962)
--------
Balance at December 31,
1998.................. 75,397 $75 $75,399 $(32,371) $(3,929) $ 39,174
Net income.............. 2,010 2,010 2,010
Issuance of stock....... 358 430 430
Exercise of stock
options............... 2,237 3 2,234 2,237
Purchase of shares...... 364 436 436
Dividends declared on
preferred shares...... (671) (671)
Issuance of warrants.... 10,723 10,723
Accretion of preferred
stock................. (138) (138)
Translation
adjustment............ (5,580) (5,580) (5,580)
------ --- ------- -------- ------- -------- --------
Comprehensive income
(loss)................ $ (3,570)
--------
Balance at December 31,
1999.................. 78,356 $78 $88,413 $(30,361) $(9,509) $ 48,621
====== === ======= ======== ======= ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE>
MANUFACTURERS' SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Cash flows relating to operating activities:
Net income (loss)......................................... $(17,278) $ (6,241) $ 2,010
Adjustments to reconcile net income to net cash provided
by
(used in) operating activities:
Depreciation and amortization......................... 8,376 10,933 14,433
Amortization of capitalized finance fees.............. 1,419 1,800 777
Write off of capitalized bank fees.................... -- 2,202 --
Additions to allowance for doubtful accounts.......... 232 319 339
Issuance of shares to founders........................ -- 341 422
Non cash charge for option issuance................... -- -- 40
Foreign exchange (gain) loss.......................... 870 (485) 2,249
Deferred taxes........................................ 1,189 1,196 370
Writedowns and loss on disposal of fixed assets....... 5,184 1,302 1,854
Changes in operating assets and liabilities:
Accounts receivable..................................... (51,199) (3,282) (16,094)
Inventories............................................. (20,297) 5,284 (42,591)
Prepaid expenses and other assets....................... (2,577) (1,447) (13,910)
Accounts payable........................................ 44,545 26,700 20,122
Accrued expenses and other liabilities.................. 12,140 2,448 4,858
-------- -------- --------
Net cash provided by (used in) operating activities......... (17,396) 41,070 (25,121)
-------- -------- --------
Cash flows relating to investing activities:
Acquisition of businesses, net of cash acquired........... -- -- (1,844)
Intangible assets acquired................................ -- -- (35,287)
Proceeds from sale of fixed assets........................ -- 785 406
Purchases of property and equipment....................... (25,780) (2,774) (39,094)
Cost of internal use software............................. (198) (2,494) (5,956)
-------- -------- --------
Net cash used in investing activities....................... (25,978) (4,483) (81,775)
-------- -------- --------
Cash flows relating to financing activities:
Proceeds from long-term debt.............................. 37,195 50,000 --
Net proceeds from (payments on) new revolving line of
credit.................................................. (2,057) 3,500 64,600
Repayment of old revolving line of credit................. -- (22,000) --
Repayments of long-term debt and capital lease
obligations............................................. (9,233) (52,599) (6,268)
Debt issuance and amendment costs......................... (365) (3,104) (894)
Proceeds from exercise of stock options................... 651 217 2,237
Proceeds from issuance of common stock.................... 24,700 481 436
Proceeds from issuance of preferred stock and warrants.... -- -- 50,000
Issuance costs of preferred stock and warrants............ -- -- (882)
Redemption of preferred stock of subsidiary............... (671) -- --
-------- -------- --------
Net cash provided by (used in) financing activities......... 50,220 (23,505) 109,229
-------- -------- --------
Effect of foreign exchange rate changes on cash............. (980) 1,374 (2,120)
-------- -------- --------
Net increase in cash........................................ 5,866 14,456 213
Cash and cash equivalents at beginning of year.............. 3,647 9,513 23,969
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 9,513 $ 23,969 $ 24,182
======== ======== ========
Supplemental cash flow data:
Interest paid............................................. $ 5,782 $ 8,417 $ 8,140
======== ======== ========
Taxes paid................................................ $ 4,804 $ 1,826 $ 1,342
======== ======== ========
Assets acquired under capital leases...................... $ 6,021 $ 2,578 $ 2,861
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-6
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. Description of Operations
Manufacturers' Services Limited (the "Company" or "MSL") is a leading global
provider of advanced electronics design, manufacturing and related services to
original equipment manufacturers ("OEMs") primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. The Company provides OEMs with a
range of services including product design and new product introduction
services, material procurement and management, assembly and manufacturing,
testing services, order fulfillment and distribution, and after-market support.
The Company has established a network of manufacturing facilities in the world's
major electronics markets, including North America, Europe and Asia.
2. Summary of Significant Accounting Policies
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions.
CASH EQUIVALENTS
The Company considers all highly liquid financial instruments purchased with
a remaining maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
determined on the FIFO basis.
INCOME TAXES
Income taxes for financial reporting purposes are recorded in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of the Company's assets and liabilities. The measurement of deferred
tax assets is reduced, if necessary, by a valuation allowance.
U.S. income taxes have not been provided on a portion of undistributed
earnings of foreign subsidiaries as such earnings are expected to be permanently
reinvested. Such earnings would become taxable upon the sale or liquidation of
these foreign subsidiaries or upon the remittance of dividends. It is not
practicable to estimate the amount of the deferred tax liability on foreign
undistributed earnings that are intended to be permanently reinvested.
F-7
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed based
on the estimated useful lives of the respective assets, using the straight-line
method. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment............................... 1 to 10 years
Land improvements..................................... 5 to 15 years
Building improvements................................. 5 to 15 years
Buildings............................................. 45 years
</TABLE>
Repair and maintenance costs are expensed as incurred.
OTHER ASSETS
Debt issuance costs associated with the Company's credit agreements are
capitalized and amortized over the life of the agreement. Amortization of these
assets is included in interest expense.
The Company capitalizes the cost of software for internal use in accordance
with Statement of Position No. 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." These costs are amortized on a
straight line basis over three to five years.
OTHER INTANGIBLE ASSETS
In connection with a current year asset acquisition (see Note 9), the
Company acquired the following intangible assets:
<TABLE>
<S> <C>
Customer relationships..................................... $32,784
Workforce in place......................................... 1,155
Internal use software...................................... 1,348
-------
$35,287
=======
</TABLE>
These assets are being amortized over their estimated useful lives, ranging
from four to six years. The amortization expense recorded in 1999 relating to
these assets amounted to $497.
GOODWILL
The excess of cost over fair value of the net assets of businesses acquired
is amortized on a straight-line basis over periods ranging from five to ten
years. Goodwill amortization during the years ended 1997, 1998 and 1999 was
$1,415, $397 and $575, respectively. Accumulated amortization as of
December 31, 1997, 1998 and 1999 was $2,533, $2,930 and $3,505, respectively.
In a 1995 acquisition, the estimated fair values of assets acquired exceeded
the purchase price. The excess was applied ratably to reduce the carrying value
of the long-term assets and the residual
F-8
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
value was recorded as negative goodwill in other long-term liabilities and was
amortized over three years. Negative goodwill amortized during the years ended
December 31, 1997 and 1998 was $1,265 and $844, respectively. Net negative
goodwill was fully amortized as of December 31, 1998.
IMPAIRMENT OF ASSETS
The Company evaluates long-lived assets and intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposal are less than its carrying amount. In such instances, the
carrying value of long-lived assets is reduced to the estimated fair value as
determined using an appraisal or discounted cash flow, as appropriate. During
1997, the Company wrote-off the remaining value of goodwill relating to the
Company's subsidiary in Athlone, Ireland, of $838 as this subsidiary continued
to generate negative cash flows. This amount was recorded as amortization in
operating income in 1997.
FOREIGN CURRENCY CONTRACTS
The Company has from time to time entered into forward foreign exchange and
option contracts to hedge firm commitments and existing transactions. The
Company does not engage in currency speculation. These financial instruments are
designed to minimize exposure and reduce risk from exchange rate fluctuations in
the regular course of business. These contracts have maturities which do not
exceed six months. Gains and losses on these contracts are accounted for as part
of the underlying transaction being hedged.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This pronouncement will require the
Company to recognize derivatives on its balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company expects that this new standard
will not have a significant effect on its results of operations. Statement of
Financial Accounting Standards No. 137 "Accounting For Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS 133"
("SFAS 137") deferred the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000, which is fiscal year 2001 for the Company.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of product or as services are
rendered to customers.
F-9
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
FOREIGN CURRENCY
Monetary assets and liabilities of foreign subsidiaries with the US dollar
as the functional currency are remeasured at year-end exchange rates and
non-monetary assets and liabilities are remeasured at historical rates. Foreign
subsidiaries with functional currencies other than the US dollar translate
assets and liabilities at year-end exchange rates; income, expenses and cash
flows at average exchange rates; and stockholders' equity at historical rates.
The effects of these translation adjustments are reported as accumulated other
comprehensive income or loss in stockholders' equity. Foreign exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved are included in income.
EARNINGS (LOSS) PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128
"Earnings per Share," ("SFAS 128"), the Company presents basic and diluted
earnings (loss) per share ("EPS") amounts. Basic EPS is calculated based on net
earnings (loss) available to common stockholders and the weighted average number
of shares outstanding during the reported period. Diluted EPS gives effect to
all dilutive potential common shares that were outstanding during the period.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk include foreign exchange contracts and accounts receivable.
The exposure to credit risk from foreign exchange contracts is minimized
since they are held with major financial institutions and because the impact of
movements in currency exchange rates on such contracts offsets the related
impact of such movements on other transactions and balances.
Potential concentrations of credit risk in the Company's trade accounts
receivable are substantially mitigated by the Company's credit evaluation
process, reasonably short collection terms and geographical dispersion of sales
transactions. Collateral is generally not required by the Company. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of trade receivables, other current assets, accounts
payable, and accrued expenses and other current liabilities approximate their
fair value due to their current nature. As of December 31, 1999, the notional
amount of foreign exchange forward contracts outstanding is $12,000 which
approximates fair value.
F-10
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
SEGMENT REPORTING
The Company has adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information,"
which requires financial and descriptive information about an enterprise's
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Company operates in one business
segment, electronics design and manufacturing services.
RECLASSIFICATIONS
Certain amounts in prior year financial statements have been reclassified to
conform to the current year presentation.
3. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Raw materials and purchased inventory............ $65,595 $ 91,944
Work-in-process.................................. 17,997 29,623
Finished goods................................... 3,895 3,597
------- --------
$87,487 $125,164
======= ========
</TABLE>
F-11
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
4. Prepaid and Other Current Assets
Prepaids and other current assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Non-trade receivables.............................. $ -- $ 8,954
Value added tax receivables........................ -- 3,701
Other.............................................. 4,241 4,895
------ -------
$4,241 $17,550
====== =======
</TABLE>
5. Property and Equipment
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Land, buildings and leasehold improvements....... $ 4,560 $ 19,608
Machinery, equipment, computer equipment,
furniture and fixtures......................... 49,028 73,742
-------- --------
53,588 93,350
Less accumulated depreciation.................... (19,802) (30,536)
-------- --------
$ 33,786 $ 62,814
======== ========
</TABLE>
Depreciation expense totaled $7,575, $10,686 and $11,686 for the periods
ended December 31, 1997, 1998 and 1999, respectively. Gross value of equipment
under capital leases, primarily machinery and equipment was $13,092 and $8,673
and the related accumulated depreciation on those assets totaled $5,695 and
$5,252 at December 31, 1998 and 1999, respectively.
6. Other Assets
Other assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Debt issuance costs................................ $2,683 $ 2,800
Internal use software costs, net................... 4,001 8,332
Other.............................................. 665 502
------ -------
$7,349 $11,634
====== =======
</TABLE>
F-12
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Amortization of debt issuance costs for the periods ended December 31, 1997,
1998 and 1999 was $1,419, $1,800 and $777, respectively. In 1998, the Company
wrote off $2,202 of debt issuance costs related to the old credit facility (see
Note 8).
The gross cost of internal use software at December 31, 1998 and 1999 was
$5,267 and $11,223, respectively. Amortization of internal use software costs
for the periods ended December 31, 1997, 1998 and 1999 was $651, $694 and
$1,675, respectively.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Payroll and other employee costs.................. $ 9,383 $12,363
Value added tax and withholding tax payable....... 3,677 3,054
Other............................................. 8,893 10,760
------- -------
$21,953 $26,177
======= =======
</TABLE>
8. Long-Term Debt and Capital Lease Obligations
F-13
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Long-term debt and capital lease obligations are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Revolving Facility............................... $ 3,500 $ 68,100
Term Loans....................................... 49,875 49,375
Unsecured non-interest bearing obligation due to
former owner of an acquired subsidiary.
Payments are due in equal annual installments
of approximately $245, beginning January 1998
and continuing through January 2001............ 735 490
Unsecured interest bearing obligations due to
former owners of acquired businesses with an
interest rate of 5%. Payments are due in annual
installments of approximately $700, beginning
April 2000 and continuing through June 2002.... -- 1,916
Obligations under capital leases................. 8,017 7,462
------- --------
62,127 127,343
Less: Current portion............................ 4,939 5,414
------- --------
$57,188 $121,929
======= ========
</TABLE>
CREDIT AGREEMENT
On August 21, 1998, the Company and one of its Dutch finance subsidiaries
(MSL Overseas Finance B.V., herein "Overseas") entered into a six year credit
agreement (the "Credit Agreement") with a consortium of banks, including an
affiliate of a significant stockholder. The Credit Agreement contains two
facilities: a $50,000 bank term loan facility (the "Term Loans") and a $75,000
revolving credit facility (the "Revolving Facility").
On August 28, 1998, MSL borrowed $15,000 and Overseas borrowed $35,000 in
Term Loans. There are regular quarterly principal payments of $125, split $38 by
MSL and $87 by Overseas through the quarter ended May 31, 2004, with the
remaining balance of $47,125 split $14,137 by MSL and $32,988 by Overseas due on
July 31, 2004. At December 31, 1999, $14,810 of the Term Loans was owed by MSL
and $34,565 was owed by Overseas.
In November 1999, the Company entered into an amendment to the Credit
Agreement (the "Amendment"). The Amendment served to modify the Company's
borrowing base on the revolving
F-14
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
credit facility and to modify the spread used in calculating interest on the
outstanding borrowings. In 1999, the Company incurred $894 of debt issuance
costs in association with the closing of the Amendment.
The cost of borrowings under the Term Loans is the applicable spread plus
the underlying cost of funds option (base rate or Adjusted LIBOR). The spread on
the base rate loans is 2.75% and the spread on the Adjusted LIBOR loans is
3.75%. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Term Loans was 9.938%.
Borrowings under the Revolving Facility are limited to (i) between 80% and
90% of the Company's eligible accounts receivable (dependent on the customer)
plus 35% of the Company's eligible inventory, to the extent that inventory does
not represent more than 50% of the total borrowing base, less (ii) the total
amounts outstanding under the Term Loans. The Company must calculate these
restrictions separately for MSL and Overseas. The Revolving Facility expires on
July 31, 2002 and provides for a commitment fee of between 0.45% and 0.50% on
the unused portion of the Revolving Facility, payable in arrears quarterly. On
December 31, 1999, the Company had available credit of $6,900 under the
Revolving Facility.
The cost of borrowings under the Revolving Facility is the applicable spread
plus the underlying cost of funds option (either the base rate or Adjusted
LIBOR). The spread on the base rate loans varies between 1.75% and 2.25%, based
on the Company's consolidated leverage ratio. The spread on the Adjusted LIBOR
loans is between 2.75% and 3.25%, based on the Company's consolidated leverage
ratio. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Revolving Facility was between 9.188% and 10.50%.
Up to $10,000 of the Revolving Facility is available to MSL or Overseas in
the form of either financial or performance standby letters of credit.
Outstanding letters of credit are subject to a one-time issuance fee and to an
amount, payable quarterly, calculated on the available amount to be drawn. The
Company had no letters of credit outstanding at December 31, 1999.
Borrowings by either MSL or Overseas under the Credit Agreement are
collateralized by the assets of all domestic subsidiaries of the Company while
assets of all foreign subsidiaries secure only the borrowings by Overseas. The
borrowings are subject to certain restrictive covenants, including the
maintenance of key financial ratios, limitations on capital expenditures and a
limitation on paying dividends on Common Stock.
In 1998, the Company wrote off $2,202 of unamortized debt issuance costs in
conjunction with the cancellation of a prior facility that was replaced with the
Credit Agreement. This writeoff is classified as an extraordinary loss on the
statement of operations. A valuation allowance was provided on the tax benefit
associated with this writeoff.
F-15
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Principal due on long-term debt for each of the years following
December 31, 1999 is as follows:
<TABLE>
<S> <C>
2000..................................................... $ 1,449
2001..................................................... 1,384
2002..................................................... 69,171
2003..................................................... 503
2004..................................................... 47,374
--------
$119,881
========
</TABLE>
CAPITAL LEASES
The Company leases certain equipment under capital lease arrangements.
Future minimum lease payments under capitalized leases for each of the years
following December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000..................................................... $4,203
2001..................................................... 2,213
2002..................................................... 1,474
2003..................................................... 2
------
Future minimum payments.................................. 7,892
Less amounts representing interest....................... 430
------
Present value of future minimum lease payments
(including current portion of $3,965).................. $7,462
======
</TABLE>
9. Acquisitions
BUSINESS ACQUISITIONS
In April 1999, MSL acquired the assets of Electronic System Packaging, Inc.,
a privately held company located in Massachusetts, which provides electronics
design services, for a purchase price of $2,850. The purchase price consisted of
cash of $2,600 and 208,000 shares of the Company's Common Stock.
In June 1999, MSL acquired the assets of Ronlin Design Co., Inc., a
privately held company located in Massachusetts, which provides electronics
design services, for a total purchase price of $1,596. The purchase price
consisted of cash of $1,416 and 150,000 shares of the Company's Common Stock.
With respect to the cash component of these acquisitions, $2,100 was paid on
the dates of the transactions, with the remaining balances of $1,916 to be paid
in future installments (see Note 8).
F-16
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
These acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition.
ASSET ACQUISITIONS
In June 1998, the Company entered into a three-year outsourcing agreement to
perform and manage certain manufacturing, fulfillment, integration and other
services to IBM. As part of this agreement, MSL purchased certain machinery and
equipment at its estimated fair value of $125 and leased a manufacturing
facility from IBM. In addition, MSL purchased certain inventory at its estimated
fair value of $30,000.
In November 1999, the Company acquired certain assets from 3Com Corporation
("3Com") used in the production of Palm handheld computing devices and modems
and network interface cards for total consideration of $79,480, including
approximately $776 of assumed liabilities. These assets consisted primarily of a
manufacturing facility, other fixed assets, inventory and certain intangible
assets, consisting primarily of customer relationships, workforce in place and
internal use software. The transaction was accounted for as a purchase of
assets, and the purchase price was allocated to the assets acquired based on the
relative fair values of the tangible and intangible assets at the date of
acquisition, as follows:
<TABLE>
<CAPTION>
<S> <C>
Land and buildings......................................... $16,510
Other fixed assets......................................... 15,025
Inventory.................................................. 12,658
Intangible assets.......................................... 35,287
-------
$79,480
=======
</TABLE>
Under the terms of related supply agreements with 3Com and Palm, Inc, a
subsidiary of 3Com, the Company will provide a full range of manufacturing
services related to the production of Palm handheld computing devices and modems
and network interface cards for an initial term of two years.
F-17
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
10. Commitments and Contingencies
OPERATING LEASES
The Company leases certain facilities and equipment under operating leases
extending until the year 2017. Future minimum commitments under these leases for
each of the years following December 31, 1999 are summarized as follows:
<TABLE>
<S> <C>
2000....................................................... $ 8,146
2001....................................................... 3,952
2002....................................................... 1,830
2003....................................................... 1,248
2004....................................................... 1,209
Thereafter................................................. 2,556
-------
Future minimum payments.................................... $18,941
=======
</TABLE>
Total rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $3,516, $7,743 and $8,109, respectively.
LITIGATION
In 1998, Lockheed Martin Corporation ("LM") filed a complaint against the
Company and certain principal stockholders. The complaint alleges that the
Company failed to complete the acquisition of one of LM's subsidiaries under a
purchase agreement signed in 1997. The complaint alleges unspecified damages,
which may exceed $70 million based on the ultimate selling price of LM's
subsidiary to another unrelated party. It is the Company's position that a
material adverse change to the subsidiary's business relieved the Company of the
obligation to close the purchase agreement. Although no assurance can be given
as to the ultimate outcome with respect to this lawsuit, the Company believes
that it has meritorious defenses and, accordingly, that the outcome of this
action will not have a material adverse effect on the Company's financial
position or its results of operations.
In addition, the Company is from time to time subject to legal proceedings
and claims which arise in the normal course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on the Company's financial position or its
results of operations.
F-18
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
11. Income Taxes
Worldwide income (loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Domestic................................. $(15,824) $(2,478) $(5,368)
Foreign.................................. 2,918 1,733 11,188
-------- ------- -------
$(12,906) $ (745) $ 5,820
======== ======= =======
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Current:
Federal................................... $ -- $ -- $ --
State..................................... -- -- 150
Foreign................................... 3,197 1,960 3,487
------ ------ ------
3,197 1,960 3,637
Deferred:
Federal................................... -- -- --
State..................................... -- -- --
Foreign................................... 1,175 1,334 173
------ ------ ------
1,175 1,334 173
------ ------ ------
$4,372 $3,294 $3,810
====== ====== ======
</TABLE>
The overall effective income tax rate differs from the expected federal U.S.
income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Income tax (benefit) expense at expected
rate of 34%.............................. $(4,388) $ (253) $ 1,979
Change in valuation allowance.............. 8,904 978 1,482
Foreign tax credits........................ (1,998) (192) (1,668)
Deemed remittance of foreign earnings...... 81 -- 1,526
Income of foreign subsidiaries taxed
at different rates....................... 1,225 1,997 (97)
Other...................................... 548 764 588
------- ------ -------
Income tax expense......................... $ 4,372 $3,294 $ 3,810
======= ====== =======
</TABLE>
F-19
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Deferred tax assets:
Accruals, allowances and reserves.............. $ 8,016 $ 7,904
NOL carryforwards.............................. 10,028 10,894
Plant and equipment............................ 653 942
Foreign Tax Credits............................ 1,880 3,431
Other.......................................... 38 73
-------- --------
Total deferred tax assets........................ 20,615 23,244
-------- --------
Deferred tax liabilities:
Plant and equipment............................ (873) (1,977)
Other.......................................... (457) (93)
-------- --------
Total deferred tax liabilities................... (1,330) (2,070)
-------- --------
Deferred tax valuation allowance................. (17,698) (19,985)
-------- --------
Net deferred tax assets.......................... $ 1,587 $ 1,189
======== ========
</TABLE>
Management believes that it is more likely than not that it will generate
taxable income in certain jurisdictions sufficient to realize a portion of the
tax benefit associated with the future deductible temporary differences
identified above. This belief is based upon a review of all available evidence,
including historical operating results and projections of future taxable income.
The Company's provision for income taxes results from the mix of profits and
losses experienced across the jurisdictions in which it operates. Losses in the
United States and Ireland provide no income tax benefit while profits in Spain
and Singapore require tax provisions. At December 31, 1999, the Company had
gross operating loss carryforwards of $22,350 for federal and state income tax
purposes and $18,843 for foreign tax purposes. The federal and state
carryforwards expire between 2011 and 2018. The foreign carryforwards do not
expire. A change in ownership of the Company may reduce the amount of operating
loss carryforwards the Company is able to utilize. The Company also has foreign
tax credit carryovers of $3,431 which expire between 2002 and 2004.
The Company has not provided for U.S. federal and foreign withholding taxes
on approximately $30,700 of its foreign subsidiaries' undistributed earnings as
of December 31, 1999 because such earnings are intended to be permanently
reinvested.
12. Senior Redeemable Preferred Stock
In conjunction with the asset acquisition from 3Com (see Note 9), the
Company issued 2,000,000 shares of preferred stock with a par value of $0.001
per share and warrants to purchase
F-20
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Common Stock (see Note 12). The total consideration received of $49,118, net of
issuance costs incurred of $882, has been allocated to the preferred stock and
the warrants based on their fair values of $38,395 and $10,723, respectively.
The preferred stock is mandatorily redeemable on November 26, 2006 at its
liquidation value of $25 per share plus accumulated dividends. The securities
are callable by the Company at 114% of the liquidation value prior to
November 26, 2000 and at 115% from that date up through the date of mandatory
redemption.
Holders of the securities are entitled to cumulative cash dividends at an
annual rate of 14% through November 26, 2000. Subsequent to that date, dividends
will accrue at an annual rate of 15% and will be paid in cash on the redemption
date or paid in additional shares of preferred stock prior to that date. The
securities are convertible, at the option of the Company, to Subordinated
Exchange Debentures with an annual interest rate of 14% through November 26,
2000 and 15% thereafter. Such conversion is, however, subject to certain
restrictions including the Company's inability to convert the preferred stock as
long as the initial purchaser continues to hold it. The preferred stock (and
debentures, if converted) ranks senior to all other subordinated debt, preferred
stock and common equity of the Company.
The discount on the preferred stock of $13,509 is being accreted through the
mandatory redemption date and is recorded as a charge against additional paid in
capital. The amount of accretion recorded against additional paid in capital in
1999 was $138.
In the event that the Company elects to call the preferred stock in advance
of the mandatory redemption date, accretion of the remaining discount as well as
accretion of the call premium will occur. Such amounts would be deductible from
net income available to common stockholders, for purposes of earnings per share
calculations, in the period in which the call is exercised.
13. Common Stock
In 1998, the Company issued an aggregate of 284,000 shares of Common Stock
to three founders of the Company in connection with their shareholder
agreements. In 1999 the Company was obligated to issue an additional 137,364
shares of Common Stock to the three founders of the Company. These shares will
be issued in fiscal 2000. A non-cash charge of $341 and $422 was recorded in
selling, general and administrative expenses related to the above shares,
representing the fair value of $1.20 and $3.07 per share at the time of the
obligation to issue shares, in 1998 and 1999, respectively. At December 31,
1999, $422 has been included in accrued expenses related to the shares to be
issued in 2000.
In February 2000, the Board of Directors approved a grant of 800,000 shares
of Common Stock to the Company's Chief Executive Officer. In connection with
this grant, the Company will record a one time non-cash charge of approximately
$2,456 in the first quarter of 2000.
14. Warrants
The Company issued warrants to purchase 4,642,169 shares of Common Stock in
conjunction with the issuance of the senior redeemable preferred stock (see
Note 12). The warrants, which have
F-21
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
an exercise price of $1.20 per share, were issued in two tranches. The first
tranche is comprised of warrants, which are immediately exercisable to purchase
890,921 shares of Common Stock. The second tranche is comprised of warrants,
which are held in escrow, to purchase 3,751,248 shares of Common Stock. The
second tranche of warrants will be released from escrow on November 26, 2000 if
the preferred stock remains outstanding at that date.
In conjunction with a prior credit agreement, the Company issued a stock
purchase warrant to a lending bank entitling the holder to purchase shares of
the Company's Common Stock. The warrant is exercisable at any time, has no
expiration date and was determined to have an insignificant value at its time of
issuance. The number of shares that can be acquired at an exercise price of
$1.00 per share is 512,030.
15. Option Plan
Effective December 4, 1996, the Board of Directors adopted a non-qualified
stock option plan (the "Plan"). Under the terms of the Plan, the Board of
Directors, or its designee, shall have the ability to grant two types of options
("Share Value" and "Ordinary") to employees of the Company to purchase the
Company's Common Stock at an exercise price which will be determined by the
Board of Directors or its designee at the date of grant. The Company has
reserved 1.25 million common shares for issuance of Share Value options and
10.75 million common shares for issuance of Ordinary options. The Plan
terminates in November 2006.
For Ordinary options granted, one-half of the award will vest ratably over
four years following the date of grant. The remainder of the grant vests eight
years from the date of grant, with provisions for acceleration based on
pre-established financial performance goals. Ordinary options expire ten years
from the date of grant.
Share Value options have been issued by the Company at exercise prices of
$1.00 and $5.00. Under the original terms of the plan, these options vest based
on certain pre-established financial performance goals, which were measured
through January 2000. Prior to January 1, 1999, none of the pre-established
financial goals were met and, as such, none of the options vested and no
compensation was recognized. In January 1999, the Plan was amended to convert
the Share Value options with a $5.00 exercise price to Ordinary options, with
fifty percent vested as of January 1999 and the remaining vesting in January
2000. In addition, the vesting of the Share Value options with a $1.00 exercise
price was adjusted to provide for vesting four years from the modification date,
subject to acceleration based on pre-established Company share price goals.
Compensation expense of $40 was recognized in 1999 due to this modification.
F-22
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
A summary of stock option activity for the Company's option Plan is as
follows:
<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Option Price Exercise Price
<S> <C> <C> <C>
Outstanding at December 31, 1996................ 5,657,700 $ 1.00 $1.00
Granted....................................... 4,182,413 1.00-5.00 2.88
Exercised..................................... (651,110) 1.00 1.00
Forfeited..................................... (1,245,905) 1.00 1.00
----------
Outstanding at December 31, 1997................ 7,943,098 1.00-5.00 1.99
Granted....................................... 1,062,000 1.00-5.00 1.26
Exercised..................................... (217,837) 1.00 1.00
Forfeited..................................... (425,873) 1.00-5.00 2.54
----------
Outstanding at December 31, 1998................ 8,361,388 1.00-5.00 1.90
Granted....................................... 5,233,057 1.20-3.07 2.72
Exercised..................................... (2,237,169) 1.00-1.20 1.00
Forfeited..................................... (3,460,404) 1.00-5.00 3.21
----------
Outstanding at December 31, 1999................ 7,896,872 $ 1.00-$5.00 $2.12
==========
Exercisable at December 31, 1999................ 2,934,585 $ 1.00-$5.00 $2.24
==========
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ -----------------------------------
Number Weighted Number Weighted
outstanding at Weighted average average exercisable at average
Exercise price December 31, 1999 remaining years exercise price December 31, 1999 exercise price
<S> <C> <C> <C> <C> <C>
$1.00 3,199,659 7 $1.00 1,634,482 $1.00
$1.20 2,328,063 9 $1.20 407,653 $1.20
$3.07 584,250 10 $3.07 -- $3.07
$5.00 1,784,900 8 $5.00 892,450 $5.00
--------- ---------
7,896,872 2,934,585
========= =========
</TABLE>
As permitted, the Company applied Accounting Principles Board Opinion 25 and
related Interpretations in accounting for its stock-based compensation plan. If
compensation cost for the Company's stock-based compensation plan had been
determined based on the fair value of the options at the grant dates of the
awards consistent with the alternative method of Statement of
F-23
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," the Company's pro forma net income (loss) would have been as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Net income (loss) available to common stockholders:
As reported............................................... $(17,278) $(6,241) $1,201
Pro forma................................................. $(17,952) $(6,898) $ 389
Diluted net income (loss) per share:
As reported............................................... $ (0.27) $ (0.08) $ 0.02
Pro forma................................................. $ (0.28) $ (0.09) $ --
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for options granted in 1997: risk free interest rate of 6.49%;
expected life of 7 years; and no dividend declarations. The weighted average
assumptions for options granted in 1998 are as follows: risk free interest rate
of 5.74%; expected life of 7 years; and no dividend declarations. The weighted
average assumptions for options granted in 1999 are as follows: risk-free
interest rate of 5.78%; expected life of 7 years; and no dividend declarations.
16. Earnings Per Share
The following table illustrates the reconciliation of the numerator and
denominator of basic and diluted income (loss) per share before extraordinary
loss computations as required by SFAS 128:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Numerator--basic and diluted earnings per share:
Income (loss) before extraordinary loss................ $ (17,278) $ (4,039) $ 2,010
Dividends on senior redeemable preferred stock......... -- -- (671)
Accretion of senior redeemable preferred stock......... -- -- (138)
---------- ---------- ----------
Income (loss) available to common stockholders before
extraordinary loss................................... $ (17,278) $ (4,039) $ 1,201
========== ========== ==========
Denominator:
Basic income (loss) per share--weighted average shares
outstanding.......................................... 64,687,236 74,983,142 77,537,107
Effective of dilutive securities--stock options and
warrants............................................. -- -- 797,206
---------- ---------- ----------
Diluted income (loss) per share--weighted average
shares outstanding................................... 64,687,236 74,983,142 78,334,313
========== ========== ==========
Basic income (loss) per share.......................... $ (0.27) $ (0.05) $ 0.02
Diluted income (loss) per share........................ $ (0.27) $ (0.05) $ 0.02
</TABLE>
For the years ended December 31, 1997, December 31, 1998 and December 31,
1999 anti-dilutive options and warrants of 1,996,900, 8,885,495 and 6,456,506,
respectively, have been
F-24
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
excluded from the calculation of EPS as either the Company had a net loss for
the year or the options' exercise price was greater than the estimated fair
market price of the common shares. In addition, options and warrants to purchase
Common Stock of 6,705,698 were excluded for 1997 as the exercise price of the
options and warrants was equal to the estimated fair market price of the common
shares and therefore had no impact on the dilutive weighted shares outstanding.
17. Retirement and Benefit Programs
The Company sponsors a defined contribution plan covering its eligible U.S.
employees. The plan permits the Company to make non-discretionary contributions
on behalf of its employees. In 1997, 1998 and 1999, the Company made
contributions to the plan of $0, $282 and $636, respectively.
Employees of certain foreign operations participate in various local defined
benefit and defined contribution plans which, in the aggregate, are not
significant to the consolidated financial statements. Amounts charged to pension
expense for 1997, 1998 and 1999 under these plans were $223, $216 and $228,
respectively.
In 1997, the Company terminated a defined benefit plan in Athlone, Ireland,
which resulted in a gain of $1,378. In 1999, the Company curtailed its defined
benefit plan in Valencia, Spain. There was no significant gain or loss recorded
in relation to this curtailment.
18. Business Segment Information
The Company's operations comprise a single line of business, providing
electronics design and manufacturing services. Information about the Company's
operations in different geographic regions is presented in the table below:
<TABLE>
<CAPTION>
Operating Identifiable
Net sales income (loss) assets
<S> <C> <C> <C>
Year Ended December 31, 1997
United States -- Corporate................................ $ -- $(13,157) $ 12,683
-- Operations.................................. 97,765 (9,277) 43,005
Europe.................................................... 336,964 16,357 133,347
Asia...................................................... 127,937 1,825 77,894
-------- -------- --------
$562,666 $ (4,252) $266,929
======== ======== ========
Year Ended December 31, 1998
United States -- Corporate................................ $ -- $(14,639) $ 10,041
-- Operations.................................. 301,011 6,863 87,720
Europe.................................................... 349,229 9,292 122,615
Asia...................................................... 187,753 7,179 57,232
-------- -------- --------
$837,993 $ 8,695 $277,608
======== ======== ========
</TABLE>
F-25
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
<TABLE>
<CAPTION>
Operating Identifiable
Net sales income (loss) assets
<S> <C> <C> <C>
Year Ended December 31, 1999
United States -- Corporate................................ $ -- $(23,044) $ 14,167
-- Operations.................................. 457,390 15,432 236,705
Europe.................................................... 289,611 13,993 99,610
Asia...................................................... 173,721 10,030 61,301
-------- -------- --------
$920,722 $ 16,411 $411,783
======== ======== ========
</TABLE>
Identifiable assets are those assets used in the Company's operations in
each location.
19. Major Customers
The Company had sales to two customers aggregating 51% and 19% of total
sales for the year ended December 31, 1997. Accounts receivable from these two
customers represented 44% and 34%, respectively, of total accounts receivable at
December 31, 1997.
The Company had sales to two customers totaling 51% and 20%, respectively,
of total sales for the year ended December 31, 1998. Accounts receivable from
these customers represented 46% and 23%, respectively, of total accounts
receivable at December 31, 1998.
The Company had sales to two customers totaling 49% and 14%, respectively,
of total sales for the year ended December 31, 1999. Accounts receivable from
these customers represented 19% and 13%, respectively, of total accounts
receivable at December 31, 1999.
20. Restructuring and Other Asset Writedowns
The Company enters into business acquisitions or asset acquisitions and
related supply agreements with the intention of improving the existing
manufacturing operations to reduce costs and improve operating margins. In order
to do this, the Company typically assesses the manufacturing processes and
employee base and restructures the operations to achieve the expected operating
margins.
In the fourth quarter of 1997, management approved a plan to restructure
certain operations in the United States and Spain. Pursuant to the restructuring
plan, the Company's Fremont, California facility was closed during the first
quarter of 1998. During the year ended December 31, 1997, the facility generated
revenues of $19,009 and a net operating loss, excluding the restructuring
charge, of $5,446. Restructuring costs totaling $7,198 were recorded for the
closing of this facility. These costs related primarily to the writeoff of
capitalized assets, lease termination costs and severance costs for
approximately 103 manufacturing and managerial employees. Also included in the
1997 restructuring plan were charges of $4,896 related to the severance for
approximately 40 managerial and manufacturing employees located at the Company's
facility in Spain.
In the fourth quarter of 1998, management approved a plan to restructure
certain operations in the United States, Spain and Asia. The total charge
recorded for this plan was $6,729 which was comprised primarily of the write-off
of certain capitalized assets, lease termination costs, and the
F-26
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
severance related to personnel reductions of approximately 72 managerial and
manufacturing employees in both the U.S. and Spain.
During the fourth quarter of 1999, management approved a restructuring plan
designed to improve its manufacturing operations at its Charlotte facility. This
restructuring plan, which is expected to be substantially complete over the next
twelve months, is comprised primarily of severance costs of $780 related to
personnel reductions of approximately 33 manufacturing and managerial employees.
The major components of the restructuring plans are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
<S> <C> <C> <C>
Employee severance.................................. $ 5,387 $3,673 $780
Asset writedowns.................................... 4,932 1,135 --
Lease terminations.................................. 1,000 1,921 --
Other............................................... 775 -- --
------- ------ ----
$12,094 $6,729 $780
======= ====== ====
</TABLE>
Certain severance charges are being paid over periods that extend beyond one
year. Asset writedowns relate primarily to the closing of facilities and the
losses resulting from equipment dispositions. Other charges include
miscellaneous costs and other commitments.
The following table sets forth the activity in the restructuring reserves
through December 31, 1999:
<TABLE>
<CAPTION>
1997 1998 1999 Total
<S> <C> <C> <C> <C>
Restructuring provision..................... $12,094 $ -- $ -- $12,094
Cash payments............................... -- --
Asset writedowns............................ 4,932 -- -- 4,932
------- ------ ---- -------
Balance at December 31, 1997................ 7,162 -- -- 7,162
Restructuring provision..................... -- 6,729 -- 6,729
Cash payments............................... 6,958 1,127 -- 8,085
Asset writedowns............................ -- 1,135 -- 1,135
------- ------ ---- -------
Balance at December 31, 1998................ 204 4,467 -- 4,671
Restructuring provision..................... -- -- 780 780
Cash payments............................... 204 3,819 266 4,289
Asset writedowns............................ -- 494 -- 494
------- ------ ---- -------
Balance at December 31, 1999................ $ -- $ 154 $514 $ 668
======= ====== ==== =======
</TABLE>
Reserves remaining at December 31, 1999 primarily represent liabilities for
severance payments under the 1999 restructuring plan. The remaining balance of
$668 will be fully utilized during the year 2000.
F-27
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. Description of Operations
Manufacturers' Services Limited (the "Company" or "MSL") is a leading global
provider of advanced electronics design, manufacturing and related services to
original equipment manufacturers ("OEMs") primarily in the voice and data
communications, computer and related peripherals, medical equipment and
industrial and consumer electronics industries. The Company provides OEMs with a
range of services including product design and new product introduction
services, material procurement and management, assembly and manufacturing,
testing services, order fulfillment and distribution, and after-market support.
The Company has established a network of manufacturing facilities in the world's
major electronics markets, including North America, Europe and Asia.
2. Summary of Significant Accounting Policies
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany accounts and transactions.
CASH EQUIVALENTS
The Company considers all highly liquid financial instruments purchased with
a remaining maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
determined on the FIFO basis.
INCOME TAXES
Income taxes for financial reporting purposes are recorded in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of the Company's assets and liabilities. The measurement of deferred
tax assets is reduced, if necessary, by a valuation allowance.
U.S. income taxes have not been provided on a portion of undistributed
earnings of foreign subsidiaries as such earnings are expected to be permanently
reinvested. Such earnings would become taxable upon the sale or liquidation of
these foreign subsidiaries or upon the remittance of dividends. It is not
practicable to estimate the amount of the deferred tax liability on foreign
undistributed earnings that are intended to be permanently reinvested.
F-7
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed based
on the estimated useful lives of the respective assets, using the straight-line
method. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment............................... 1 to 10 years
Land improvements..................................... 5 to 15 years
Building improvements................................. 5 to 15 years
Buildings............................................. 45 years
</TABLE>
Repair and maintenance costs are expensed as incurred.
OTHER ASSETS
Debt issuance costs associated with the Company's credit agreements are
capitalized and amortized over the life of the agreement. Amortization of these
assets is included in interest expense.
The Company capitalizes the cost of software for internal use in accordance
with Statement of Position No. 98-1, "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." These costs are amortized on a
straight line basis over three to five years.
OTHER INTANGIBLE ASSETS
In connection with a current year asset acquisition (see Note 9), the
Company acquired the following intangible assets:
<TABLE>
<S> <C>
Customer relationships..................................... $32,784
Workforce in place......................................... 1,155
Internal use software...................................... 1,348
-------
$35,287
=======
</TABLE>
These assets are being amortized over their estimated useful lives, ranging
from four to six years. The amortization expense recorded in 1999 relating to
these assets amounted to $497.
GOODWILL
The excess of cost over fair value of the net assets of businesses acquired
is amortized on a straight-line basis over periods ranging from five to ten
years. Goodwill amortization during the years ended 1997, 1998 and 1999 was
$1,415, $397 and $575, respectively. Accumulated amortization as of
December 31, 1997, 1998 and 1999 was $2,533, $2,930 and $3,505, respectively.
In a 1995 acquisition, the estimated fair values of assets acquired exceeded
the purchase price. The excess was applied ratably to reduce the carrying value
of the long-term assets and the residual
F-8
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
value was recorded as negative goodwill in other long-term liabilities and was
amortized over three years. Negative goodwill amortized during the years ended
December 31, 1997 and 1998 was $1,265 and $844, respectively. Net negative
goodwill was fully amortized as of December 31, 1998.
IMPAIRMENT OF ASSETS
The Company evaluates long-lived assets and intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposal are less than its carrying amount. In such instances, the
carrying value of long-lived assets is reduced to the estimated fair value as
determined using an appraisal or discounted cash flow, as appropriate. During
1997, the Company wrote-off the remaining value of goodwill relating to the
Company's subsidiary in Athlone, Ireland, of $838 as this subsidiary continued
to generate negative cash flows. This amount was recorded as amortization in
operating income in 1997.
FOREIGN CURRENCY CONTRACTS
The Company has from time to time entered into forward foreign exchange and
option contracts to hedge firm commitments and existing transactions. The
Company does not engage in currency speculation. These financial instruments are
designed to minimize exposure and reduce risk from exchange rate fluctuations in
the regular course of business. These contracts have maturities which do not
exceed six months. Gains and losses on these contracts are accounted for as part
of the underlying transaction being hedged.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This pronouncement will require the
Company to recognize derivatives on its balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company expects that this new standard
will not have a significant effect on its results of operations. Statement of
Financial Accounting Standards No. 137 "Accounting For Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS 133"
("SFAS 137") deferred the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000, which is fiscal year 2001 for the Company.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of product or as services are
rendered to customers.
F-9
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
FOREIGN CURRENCY
Monetary assets and liabilities of foreign subsidiaries with the US dollar
as the functional currency are remeasured at year-end exchange rates and
non-monetary assets and liabilities are remeasured at historical rates. Foreign
subsidiaries with functional currencies other than the US dollar translate
assets and liabilities at year-end exchange rates; income, expenses and cash
flows at average exchange rates; and stockholders' equity at historical rates.
The effects of these translation adjustments are reported as accumulated other
comprehensive income or loss in stockholders' equity. Foreign exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved are included in income.
EARNINGS (LOSS) PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128
"Earnings per Share," ("SFAS 128"), the Company presents basic and diluted
earnings (loss) per share ("EPS") amounts. Basic EPS is calculated based on net
earnings (loss) available to common stockholders and the weighted average number
of shares outstanding during the reported period. Diluted EPS gives effect to
all dilutive potential common shares that were outstanding during the period.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk include foreign exchange contracts and accounts receivable.
The exposure to credit risk from foreign exchange contracts is minimized
since they are held with major financial institutions and because the impact of
movements in currency exchange rates on such contracts offsets the related
impact of such movements on other transactions and balances.
Potential concentrations of credit risk in the Company's trade accounts
receivable are substantially mitigated by the Company's credit evaluation
process, reasonably short collection terms and geographical dispersion of sales
transactions. Collateral is generally not required by the Company. The Company
maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of trade receivables, other current assets, accounts
payable, and accrued expenses and other current liabilities approximate their
fair value due to their current nature. As of December 31, 1999, the notional
amount of foreign exchange forward contracts outstanding is $12,000 which
approximates fair value.
F-10
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
SEGMENT REPORTING
The Company has adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information,"
which requires financial and descriptive information about an enterprise's
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The Company operates in one business
segment, electronics design and manufacturing services.
RECLASSIFICATIONS
Certain amounts in prior year financial statements have been reclassified to
conform to the current year presentation.
3. Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Raw materials and purchased inventory............ $65,595 $ 91,944
Work-in-process.................................. 17,997 29,623
Finished goods................................... 3,895 3,597
------- --------
$87,487 $125,164
======= ========
</TABLE>
F-11
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
4. Prepaid and Other Current Assets
Prepaids and other current assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Non-trade receivables.............................. $ -- $ 8,954
Value added tax receivables........................ -- 3,701
Other.............................................. 4,241 4,895
------ -------
$4,241 $17,550
====== =======
</TABLE>
5. Property and Equipment
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Land, buildings and leasehold improvements....... $ 4,560 $ 19,608
Machinery, equipment, computer equipment,
furniture and fixtures......................... 49,028 73,742
-------- --------
53,588 93,350
Less accumulated depreciation.................... (19,802) (30,536)
-------- --------
$ 33,786 $ 62,814
======== ========
</TABLE>
Depreciation expense totaled $7,575, $10,686 and $11,686 for the periods
ended December 31, 1997, 1998 and 1999, respectively. Gross value of equipment
under capital leases, primarily machinery and equipment was $13,092 and $8,673
and the related accumulated depreciation on those assets totaled $5,695 and
$5,252 at December 31, 1998 and 1999, respectively.
6. Other Assets
Other assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Debt issuance costs................................ $2,683 $ 2,800
Internal use software costs, net................... 4,001 8,332
Other.............................................. 665 502
------ -------
$7,349 $11,634
====== =======
</TABLE>
F-12
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Amortization of debt issuance costs for the periods ended December 31, 1997,
1998 and 1999 was $1,419, $1,800 and $777, respectively. In 1998, the Company
wrote off $2,202 of debt issuance costs related to the old credit facility (see
Note 8).
The gross cost of internal use software at December 31, 1998 and 1999 was
$5,267 and $11,223, respectively. Amortization of internal use software costs
for the periods ended December 31, 1997, 1998 and 1999 was $651, $694 and
$1,675, respectively.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Payroll and other employee costs.................. $ 9,383 $12,363
Value added tax and withholding tax payable....... 3,677 3,054
Other............................................. 8,893 10,760
------- -------
$21,953 $26,177
======= =======
</TABLE>
8. Long-Term Debt and Capital Lease Obligations
F-13
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Long-term debt and capital lease obligations are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
<S> <C> <C>
Revolving Facility............................... $ 3,500 $ 68,100
Term Loans....................................... 49,875 49,375
Unsecured non-interest bearing obligation due to
former owner of an acquired subsidiary.
Payments are due in equal annual installments
of approximately $245, beginning January 1998
and continuing through January 2001............ 735 490
Unsecured interest bearing obligations due to
former owners of acquired businesses with an
interest rate of 5%. Payments are due in annual
installments of approximately $700, beginning
April 2000 and continuing through June 2002.... -- 1,916
Obligations under capital leases................. 8,017 7,462
------- --------
62,127 127,343
Less: Current portion............................ 4,939 5,414
------- --------
$57,188 $121,929
======= ========
</TABLE>
CREDIT AGREEMENT
On August 21, 1998, the Company and one of its Dutch finance subsidiaries
(MSL Overseas Finance B.V., herein "Overseas") entered into a six year credit
agreement (the "Credit Agreement") with a consortium of banks, including an
affiliate of a significant stockholder. The Credit Agreement contains two
facilities: a $50,000 bank term loan facility (the "Term Loans") and a $75,000
revolving credit facility (the "Revolving Facility").
On August 28, 1998, MSL borrowed $15,000 and Overseas borrowed $35,000 in
Term Loans. There are regular quarterly principal payments of $125, split $38 by
MSL and $87 by Overseas through the quarter ended May 31, 2004, with the
remaining balance of $47,125 split $14,137 by MSL and $32,988 by Overseas due on
July 31, 2004. At December 31, 1999, $14,810 of the Term Loans was owed by MSL
and $34,565 was owed by Overseas.
In November 1999, the Company entered into an amendment to the Credit
Agreement (the "Amendment"). The Amendment served to modify the Company's
borrowing base on the revolving
F-14
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
credit facility and to modify the spread used in calculating interest on the
outstanding borrowings. In 1999, the Company incurred $894 of debt issuance
costs in association with the closing of the Amendment.
The cost of borrowings under the Term Loans is the applicable spread plus
the underlying cost of funds option (base rate or Adjusted LIBOR). The spread on
the base rate loans is 2.75% and the spread on the Adjusted LIBOR loans is
3.75%. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Term Loans was 9.938%.
Borrowings under the Revolving Facility are limited to (i) between 80% and
90% of the Company's eligible accounts receivable (dependent on the customer)
plus 35% of the Company's eligible inventory, to the extent that inventory does
not represent more than 50% of the total borrowing base, less (ii) the total
amounts outstanding under the Term Loans. The Company must calculate these
restrictions separately for MSL and Overseas. The Revolving Facility expires on
July 31, 2002 and provides for a commitment fee of between 0.45% and 0.50% on
the unused portion of the Revolving Facility, payable in arrears quarterly. On
December 31, 1999, the Company had available credit of $6,900 under the
Revolving Facility.
The cost of borrowings under the Revolving Facility is the applicable spread
plus the underlying cost of funds option (either the base rate or Adjusted
LIBOR). The spread on the base rate loans varies between 1.75% and 2.25%, based
on the Company's consolidated leverage ratio. The spread on the Adjusted LIBOR
loans is between 2.75% and 3.25%, based on the Company's consolidated leverage
ratio. All interest is payable in arrears quarterly. At December 31, 1999, the
interest rate on the Revolving Facility was between 9.188% and 10.50%.
Up to $10,000 of the Revolving Facility is available to MSL or Overseas in
the form of either financial or performance standby letters of credit.
Outstanding letters of credit are subject to a one-time issuance fee and to an
amount, payable quarterly, calculated on the available amount to be drawn. The
Company had no letters of credit outstanding at December 31, 1999.
Borrowings by either MSL or Overseas under the Credit Agreement are
collateralized by the assets of all domestic subsidiaries of the Company while
assets of all foreign subsidiaries secure only the borrowings by Overseas. The
borrowings are subject to certain restrictive covenants, including the
maintenance of key financial ratios, limitations on capital expenditures and a
limitation on paying dividends on Common Stock.
In 1998, the Company wrote off $2,202 of unamortized debt issuance costs in
conjunction with the cancellation of a prior facility that was replaced with the
Credit Agreement. This writeoff is classified as an extraordinary loss on the
statement of operations. A valuation allowance was provided on the tax benefit
associated with this writeoff.
F-15
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Principal due on long-term debt for each of the years following
December 31, 1999 is as follows:
<TABLE>
<S> <C>
2000..................................................... $ 1,449
2001..................................................... 1,384
2002..................................................... 69,171
2003..................................................... 503
2004..................................................... 47,374
--------
$119,881
========
</TABLE>
CAPITAL LEASES
The Company leases certain equipment under capital lease arrangements.
Future minimum lease payments under capitalized leases for each of the years
following December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000..................................................... $4,203
2001..................................................... 2,213
2002..................................................... 1,474
2003..................................................... 2
------
Future minimum payments.................................. 7,892
Less amounts representing interest....................... 430
------
Present value of future minimum lease payments
(including current portion of $3,965).................. $7,462
======
</TABLE>
9. Acquisitions
BUSINESS ACQUISITIONS
In April 1999, MSL acquired the assets of Electronic System Packaging, Inc.,
a privately held company located in Massachusetts, which provides electronics
design services, for a purchase price of $2,850. The purchase price consisted of
cash of $2,600 and 208,000 shares of the Company's Common Stock.
In June 1999, MSL acquired the assets of Ronlin Design Co., Inc., a
privately held company located in Massachusetts, which provides electronics
design services, for a total purchase price of $1,596. The purchase price
consisted of cash of $1,416 and 150,000 shares of the Company's Common Stock.
With respect to the cash component of these acquisitions, $2,100 was paid on
the dates of the transactions, with the remaining balances of $1,916 to be paid
in future installments (see Note 8).
F-16
<PAGE>
MANUFACTURERS' SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
These acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition.
ASSET ACQUISITIONS
In June 1998, the Company entered into a three-year outsourcing agreement to
perform and manage certain manufacturing, fulfillment, integration and other
services to IBM. As part of this agreement, MSL purchased certain machinery and
equipment at its estimated fair value of $125 and leased a manufacturing
facility from IBM. In addition, MSL purchased certain inventory at its estimated
fair value of $30,000.
In November 1999, the Company acquired certain assets from 3Com Corporation
("3Com") used in the production of Palm handheld computing devices and modems
and network interface cards for total consideration of $79,480, including
approximately $776 of assumed liabilities. These assets consisted primarily of a
manufacturing facility, other fixed assets, inventory and certain intangible
assets, consisting primarily of customer relationships, workforce in place and
internal use software. The transaction was accounted for as a purchase of
assets, and the purchase price was allocated to the assets acquired based on the
relative fair values of the tangible and intangible assets at the date of
acquisition, as follows:
<TABLE>
<CAPTION>
<S> <C>
Land and buildings......................................... $16,510
Other fixed assets......................................... 15,025
Inventory.................................................. 12,658
Intangible assets.......................................... 35,287
-------
$79,480
=======
</TABLE>
Under the terms of related supply agreements with 3Com and Palm, Inc, a
subsidiary of 3Com, the Company will provide a full range of manufacturing
services related to the production of Palm handheld computing devices and modems
and network interface cards for an initial term of two years.
F-17
<PAGE>
Report of Independent Accountants on Financial Statement Schedules
To the Board of Directors
of Manufacturers' Services Limited
Our audits of the consolidated financial statements referred to in our report
dated February 2, 2000 appearing in the Form S-1 Registration Statement of
Manufacturers' Services Limited also included an audit of the financial
statement schedule listed in Item 16 of this Form S-1. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 2000
S-1
<PAGE>
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1999.................................. $ 698 339 700 (1,009) $ 728
1998.................................. $ 1,942 319 -- (1,563) $ 698
1997.................................. $ 1,724 232 -- (14) $ 1,942
Deferred tax asset valutation allowance:
1999.................................. $17,698 1,482 805 -- $19,985
1998.................................. $13,960 978 2,760 -- $17,698
1997.................................. $ 6,936 8,904 -- (1,880) $13,960
</TABLE>
S-2
<PAGE>
Pictures of employees in their work environments below the caption"... with
technology, people and innovation," Address, telephone number and website
address for MSL with MSL's logo.
<PAGE>
- ---------------------------------------------------------
- ---------------------------------------------------------
, 2000
MANUFACTURERS' SERVICES LIMITED
Shares of Common Stock
----------------------
P R O S P E C T U S
----------------------
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
ROBERTSON STEPHENS
THOMAS WEISEL PARTNERS LLC
DLJDIRECT Inc.
- ---------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of
Manufacturers' Services Limited have not changed since the date hereof.
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter in this offering and when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........ $39,600
National Association of Securities Dealers, Inc. filing
fee...................................................... 15,500
New York Stock Exchange listing fee........................ *
Printing and engraving expenses............................ *
Legal fees and expenses.................................... *
Accounting fees and expenses............................... *
Blue sky fees and expenses................................. *
Transfer Agent and Registrar fees.......................... *
Miscellaneous.............................................. *
-------
Total.................................................... $ *
=======
</TABLE>
- --------------------------
* To be included by amendment.
Item 14. Indemnification of Directors and Officers.
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's Directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that the exculpation from liabilities is not permitted under the Delaware
General Corporation Law as in effect at the time such liability is determined.
The Amended and Restated By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.
Prior to the consummation of this offering, the Company will enter into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration Statement, the
Registrant has issued the following securities which were not registered under
the Securities Act of 1933, as amended:
(1) On June 11, 1997, MSL issued:
(a) an aggregate of 20,833,334 shares of common stock to the DLJ
Entities for an aggregate of $25 million; and
(b) 629,000 shares of common stock to Kevin C. Melia pursuant to the
exercise of outstanding options for an aggregate of $629,000.
II-1
<PAGE>
(2) Between April 4, 1998 and November 29, 1999, MSL sold an aggregate of
1,504,915 shares of common stock to employees and persons having business
relationships with MSL for an aggregate of $1,464,598.
(3) On November 26, 1999, MSL sold an aggregate of 2,000,000 shares of
senior exchangeable preferred stock due 2006 to investment entities affiliated
with Donaldson, Lufkin & Jenrette, Inc. for an aggregate of $50 million.
(4) Between November 4, 1997 and January 24, 2000, MSL sold an aggregate of
2,412,778 shares of common stock to employees of MSL pursuant to the exercise of
outstanding options for an aggregate of $2,414,259 and in consideration of
services rendered.
The sales and issuances listed above in paragraphs (1), (2) and (3) were
deemed exempt from registration under the Securities Act by virtue of Section
4(2) thereof, as transactions not involving a public offering. The issuances of
securities listed in paragraph (4) were deemed exempt from registration under
the Securities Act by virtue of Rule 701. Defined terms used herein not
otherwise defined have the meanings ascribed to them in the prospectus, which
forms a part of this Registration Statement.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1+ Securities Purchase Agreement dated as of January 20, 1995
by and among MSL and the parties listed therein.
2.2 Warrant Agreement dated as of August 31, 1995 by and among
MSL, Bank of America National Trust and Savings
Association and the parties listed therein.
2.3+ Preferred Stock and Warrant Subscription Agreement dated as
of November 26, 1999 by and among MSL and the parties
listed therein.
2.4 Escrow Agreement dated as of November 26, 1999 by and among
MSL and the parties listed therein.
2.5+ Asset Purchase Agreement dated as of November 19, 1999,
among 3Com Corporation, Manufacturers' Services Limited
and Manufacturers' Services Salt Lake City
Operations, Inc.
*3.1 Restated Certificate of Incorporation of MSL.
*3.2 Amended and Restated By-laws of MSL.
*3.3 Form of certificate representing shares of common stock,
$.001 par value per share.
4.1 Stockholders Agreement dated as of January 20, 1995 by and
among MSL and the stockholders named therein.
4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
*5.1 Opinion of Ropes & Gray.
10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
*10.8 Form of 2000 Equity Incentive Plan.
*10.9 Form of 2000 Employee Stock Purchase Plan.
*10.10 Form of Indemnification Agreement.
10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
*10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
*10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers Services Western US Operations, Inc.
*10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
*10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
*10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
*10.18 2000 Cash Incentive Compensation Plan.
21.1 Subsidiaries of MSL.
23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II hereof).
27.1 Financial Data Schedule.
</TABLE>
- --------------------------
* To be filed by amendment
+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.
II-3
<PAGE>
(b) Financial Statement Schedules.
The following financial statement schedule of the Company is included in
Part II of the Registration Statement:
<TABLE>
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules................................................. S-1
Schedule II - Valuation and Qualifying Accounts............. S-2
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such manner as requested by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Manufacturers' Services Limited has duly caused this Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Concord, Commonwealth of Massachusetts, on this 4th
day of February, 2000.
<TABLE>
<S> <C> <C>
MANUFACTURERS' SERVICES LIMITED
By: /s/ KEVIN C. MELIA
--------------------------------------
Name: Kevin C. Melia
Title: CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Kevin C.
Melia, Eugene M. Bullis, Dale R. Johnson, Thompson Dean and Stephen Ketchum and
each of them singly, his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement on Form S-1
to be filed by Manufacturers' Services Limited, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
* * * *
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
Chairman of the Board,
/s/ KEVIN C. MELIA Chief Executive
------------------------------------------- Officer February 4, 2000
KEVIN C. MELIA (Principal Executive
Officer) and Director
Executive Vice
President and
/s/ EUGENE M. BULLIS Chief Financial
------------------------------------------- Officer February 4, 2000
EUGENE M. BULLIS (Principal Financial
and
Accounting Officer)
/s/ THOMPSON DEAN
------------------------------------------- Director February 4, 2000
THOMPSON DEAN
/s/ STEPHEN KETCHUM
------------------------------------------- Director February 4, 2000
STEPHEN KETCHUM
/s/ KARL WYSS
------------------------------------------- Director February 4, 2000
KARL WYSS
------------------------------------------- Director
JOHN F. FORT, III
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1+ Securities Purchase Agreement dated as of January 20, 1995
by and among MSL and the parties listed therein.
2.2 Warrant Agreement dated as of August 31, 1995 by and among
MSL, Bank of America National Trust and Savings
Association and the parties listed therein.
2.3+ Preferred Stock and Warrant Subscription Agreement dated as
of November 26, 1999 by and among MSL and the parties
listed therein.
2.4 Escrow Agreement dated as of November 26, 1999 by and among
MSL and the parties listed therein.
2.5+ Asset Purchase Agreement dated as of November 19, 1999,
among 3Com Corporation, Manufacturers' Services Limited
and Manufacturers' Services Salt Lake City
Operations, Inc.
*3.1 Restated Certificate of Incorporation of MSL.
*3.2 Amended and Restated By-laws of MSL.
*3.3 Form of certificate representing shares of common stock,
$.001 par value per share.
4.1 Stockholders Agreement dated as of January 20, 1995 by and
among MSL and the stockholders named therein.
4.2 Stockholders Agreement Amendment dated as of November 26,
1999 by and among MSL and the stockholders names therein.
4.3+ Credit Agreement dated August 21, 1998 among MSL, MSL
Overseas Finance B.V. and the lenders named therein.
4.4 First Amendment to Credit Agreement and Limited Waiver dated
as of February 26, 1999 by and among MSL, MSL Overseas
Finance B.V. and the lenders named in the Credit
Agreement.
4.5 Second Amendment to Credit Agreement and Consent dated as of
November 23, 1999 by and among MSL, MSL Overseas Finance
B.V. and the lenders named in the Credit Agreement.
*5.1 Opinion of Ropes & Gray.
10.1 Employment Agreement dated as of January 20, 1995 by and
between MSL and Kevin C. Melia.
10.2 Employment Letter dated as of June 20, 1997 by and between
MSL and Robert E. Donahue.
10.3 Employment Letter dated as of September 27, 1995 by and
between MSL and Rodolfo Archbold.
10.4 Employment Letter dated as of January 4, 1996 by and between
MSL and Dale R. Johnson.
10.5 Severance Letter dated June 25, 1996 by and between MSL and
Dale R. Johnson.
10.6 Employment Letter dated as of January 23, 1998 by and
between MSL and James N. Poor.
10.7 Second Amended and Restated Non-Qualified Stock Option Plan.
*10.8 Form of 2000 Equity Incentive Plan.
*10.9 Form of 2000 Employee Stock Purchase Plan.
*10.10 Form of Indemnification Agreement.
10.11 Office/Warehouse Lease dated as of April 14, 1997 by and
between Amberjack, Ltd. and Manufacturers' Services
Limited - Roseville, Inc.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.12 Lease dated as of May 5, 1998 by and between International
Business Machines Corporation and Manufacturers' Services
Western U.S. Operations, Inc.
*10.13 Supply Agreement dated as of November 27, 1999 by and
between MSL and 3Com Corporation.
*10.14 Outsourcing Agreement dated as of June 1, 1998 by and
between International Business Machines Corporation and
Manufacturers Services Western US Operations, Inc.
*10.15 Manufacturing, Integration and Fulfillment Contract dated as
of June 26, 1998 by and between International Business
Machines S.A. and Global Manufacturers' Services -
Valencia.
*10.16 Global Requirements Agreement No. MSL 183G dated as of
July 30, 1997 by and between MSL and Iomega Corporation.
*10.17 Supply Agreement dated as of November 27, 1999 by and
between MSL and Palm Computing, Inc.
*10.18 2000 Cash Incentive Compensation Plan.
21.1 Subsidiaries of MSL.
23.1 Consent of PricewaterhouseCoopers LLP.
*23.2 Consent of Ropes & Gray (included in the opinion filed as
Exhibit 5.1).
24.1 Power of attorney pursuant to which amendments to this
registration statement may be filed (included on the
signature page in Part II hereof).
27.1 Financial Data Schedule.
</TABLE>
- --------------------------
* To be filed by amendment
+ MSL agrees to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to such agreement upon request by the Commission.
<PAGE>
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
dated as of
January 20, 1995
by and among
DLJ MERCHANT BANKING PARTNERS, L. P.,
DLJ INTERNATIONAL PARTNERS, C.V.,
DLJ OFFSHORE PARTNERS. C. V.,
DLJ MERCHANT BANKING FUNDING, INC.,
KEVIN C. MELIA,
ROBERT J. GRAHAM,
JULIE KENT,
THE KEVIN C. MELIA 1995 IRREVOCABLE TRUST,
THE ROBERT J. GRAHAM 1995 IRREVOCABLE TRUST,
THE JULIE KENT 1995 IRREVOCABLE TRUST
AND
MANUFACTURERS' SERVICES LIMITED
RELATING TO THE PURCHASE AND SALE
OF
SHARES OF COMMON STOCK
OF
MANUFACTURERS' SERVICES LIMITED
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
1.1 Definitions .......................................................... 1
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale .................................................... 6
2.2 Closing .............................................................. 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE ISSUER AND THE FOUNDERS
3.1 Corporate Existence and Power ........................................ 7
3.2 Corporate Authorization .............................................. 7
3.3 Governmental Authorization ........................................... 7
3.4 Non-Contravention .................................................... 7
3.5 Capitalization ....................................................... 8
3.6 Subsidiaries ......................................................... 9
3.7 Financial Statements ................................................. 9
3.8 Absence of Certain Changes ........................................... 10
3.9 No Undisclosed Material Liabilities .................................. 11
3.10 Certain Interests .................................................... 12
3.11 Material Contracts ................................................... 12
3.12 Litigation ........................................................... 14
3.13 Compliance with Laws and Court Orders; No Defaults ................... 14
3.14 Properties ........................................................... 15
3.15 Offering Documents ................................................... 16
3.16 Finders' Fees ........................................................ 16
3.17 Intellectual Property ................................................ 16
3.18 Insurance Coverage ................................................... 18
3.19 Licenses and Permits ................................................. 18
3.20 Employment, Compensation and Labor Matters ........................... 18
3.21 Inventories .......................................................... 19
3.22 Receivables .......................................................... 19
3.23 Environmental Matters ................................................ 19
i
<PAGE>
Page
----
3.24 Certain Assets ....................................................... 21
3.25 Meaning of Issuer .................................................... 21
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE DLJ BUYERS
4.1 Corporate Existence and Power ........................................ 21
4.2 Corporate Authorization .............................................. 21
4.3 Governmental Authorization ........................................... 22
4.4 Non-Contravention .................................................... 22
4.5 Purchase for Investment .............................................. 22
4.6 Private Placement .................................................... 22
4.7 Litigation ........................................................... 23
4.8 Finders' Fees ........................................................ 23
ARTICLE 5
COVENANTS OF THE ISSUER AND THE FOUNDERS
5.1 Conduct of the Issuer and the Founders ............................... 23
5.2 Access to Information ................................................ 24
5.3 Notices of Certain Events ............................................ 25
5.4 No Solicitations ..................................................... 26
ARTICLE 6
COVENANTS OF THE DLJ BUYERS AND THE ISSUER
6.1 Confidentiality ...................................................... 26
6.2 Access ............................................................... 27
6.3 Management Options ................................................... 27
ARTICLE 7
COVENANTS OF THE PARTIES
7.1 Best Efforts ......................................................... 27
7.2 Certain Filings ...................................................... 28
7.3 Public Announcements ................................................. 28
7.4 Intercompany Accounts ................................................ 28
ii
<PAGE>
Page
----
ARTICLE 8
TAX MATTERS
8.1 Tax Definitions ...................................................... 28
8.2 Tax Representations .................................................. 30
8.3 Covenants ............................................................ 31
8.4 Other Tax Matters .................................................... 32
8.5 Cooperation on Tax Matters ........................................... 32
ARTICLE 9
(INTENTIONALLY OMITTED]
ARTICLE 10
CONDITIONS TO CLOSING
10.1 Conditions to Obligations of each Party .............................. 33
10.2 Conditions to Obligation of the DLJ Buyers ........................... 34
10.3 Conditions to Obligation of the Founders and the Issuer .............. 36
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1 Survival ............................................................. 37
11.2 Indemnification ...................................................... 38
11.3 Procedures ........................................................... 39
ARTICLE 12
TERMINATION
12.1 Grounds for Termination .............................................. 39
12.2 Effect of Termination ................................................ 40
iii
<PAGE>
Page
----
ARTICLE 13
MISCELLANEOUS
13.1 Notices ............................................................. 40
13.2 Amendments and Waivers .............................................. 41
13.3 Expenses ............................................................ 42
13.4 Successors and Assigns .............................................. 42
13.5 Governing Law ....................................................... 42
13.6 Jurisdiction ........................................................ 42
13.7 Counterparts Third Party Beneficiaries .............................. 43
13.8 Appointment of Agent ................................................ 43
13.9 Entire Agreement .................................................... 43
EXHIBITS
Exhibit 1 - Amended and Restated Bylaws
Exhibit 2 - Amended and Restated Certificate of Incorporation
Exhibit 3A - Kevin C. Melia Employment Agreement Term Sheet
Exhibit 3B - Robert S. Graham Employment Agreement Term Sheet
Exhibit 4 - Non-Qualified Stock Option Plan Term Sheet
Exhibit 5 - Stockholders Agreement
iv
<PAGE>
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of January 20, 1995 by and among DLJ Merchant
Banking Partners, L.P., a Delaware limited partnership, DLJ International
Partners, C.V., a Netherlands Antilles limited partnership, DLJ Offshore
Partners, C.V., a Netherlands Antilles limited partnership, DLJ Merchant
Banking Funding, Inc., a Delaware corporation (each of the foregoing, a "DLJ
Buyer", and collectively, the "DLJ Buyers"), Kevin C. Melia, an individual
("Melia"), Robert J. Graham, an individual ("Graham"), Julie Kent, an
individual ("Kent"), The Kevin C. Melia 1995 Irrevocable Trust (the "Melia
Trust"), The Robert J. Graham 1995 Irrevocable Trust (the "Graham Trust"),
The Julie Kent 1995 Irrevocable Trust (the "Kent Trust") (each of the Melia
Trust, the Graham Trust and the Kent Trust, a "Trust", and collectively, the
"Trusts") (each of the Trusts, Melia, Graham and Kent, a "Founder", and
collectively, the "Founders") and Manufacturers' Services Limited, a Delaware
corporation (the "Issuer").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that no securityholder of the Issuer shall be deemed an
Affiliate of any other securityholder of the Issuer or any Subsidiary solely by
reason of any investment in the Issuer. For the purpose of this definition, the
term "control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" means this agreement, as the same may be amended from
time to time.
"AT&T-GIS" means AT&T Global Information Solutions Company, a
Maryland corporation.
<PAGE>
"Balance Sheet Date" means December 31, 1994.
"Bylaws" means the Amended and Restated Bylaws of the Issuer, in
substantially the form attached hereto as Exhibit 1.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any regulations
promulgated thereunder.
"Charter" means the Amended and Restated Certificate of
Incorporation of the Issuer, in substantially the form attached hereto as
Exhibit 2.
"Closing Date" means the date of the Closing.
"Common Stock" means the Common Stock, one tenth of $.01 par value
per share, of the Issuer.
"DLJMB Inc." means DLJ Merchant Banking, Inc., a Delaware
corporation.
"Employment Agreements" mean the Employment Agreements to be entered
into by and between the Issuer and each of Melia and Graham, having
substantially the terms set forth in Exhibits 3A and 3B, respectively.
"Environmental Liabilities" means any and all liabilities of or
relating to the Issuer or any Subsidiary (including any entity which is, in
whole or in part, a predecessor of the Issuer or any Subsidiary), whether vested
or unvested, contingent or fixed, actual or potential, known or unknown, and
whether arising from tort, contract, strict liability or otherwise, which arise
under or relate to matters covered by Environmental Laws, but only to the extent
such liabilities relate to actions occurring or conditions existing on or prior
to the Closing Date. Environmental Liabilities shall not include any
environmental liabilities relating primarily to the Roseville Assets.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including without limitation ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
2
<PAGE>
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"Final Determination" means (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to any other liabilities,
any final determination of liability in respect of a liability that, under
applicable law, is not subject to further appeal, review or modification through
proceedings or otherwise (including the expiration of a statute of limitations
or a period for the filing of claims for refunds, amended returns or appeals
from adverse determinations) or (ii) the payment of Tax by the DLJ Buyers, the
Founders, the Issuer or any of their Affiliates, whichever is responsible for
payment of such Tax under applicable law, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible party determines
that no action should be taken to recoup such payment and the other party
agrees.
"Group One Balance Sheet" means the unaudited and consolidated
balance sheet of the Issuer, MSL-Roseville and MSL-Corporate as of December 31,
1994.
"Group Two Balance Sheet" means the unaudited and consolidated
balance sheet of Omnitron as of December 31, 1994.
"Hazardous Substances" means any pollutant, contaminant or chemical,
any toxic, radioactive, corrosive or otherwise hazardous substance, waste or
material, or any substance having any constituent elements displaying any of the
foregoing characteristics, and shall include, without limitation, any petroleum,
its derivatives, by-products and other hydrocarbons, or any substance regulated
under any Environmental Law.
"Intellectual Property Right" means any trademark, service mark,
trade name, brand name, invention (whether conceived or reduced to practice),
patent, trade secret, copyright, know-how (including any registrations or
applications for any of the foregoing) or any other similar type of proprietary
intellectual property right.
"Issuer" means Manufacturers' Services Limited, a Delaware
corporation.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset
3
<PAGE>
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such property or asset.
"Management Stock Option Plan" means the Non-Qualified Stock Option
Plan to be adopted by the Board of Directors of the Issuer, having substantially
the terms set forth in Exhibit 4.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or
prospects of the Issuer and the Subsidiaries, taken as a whole.
"MSL-Corporate" means Manufacturers' Services Limited Corporate, a
Massachusetts corporation.
"MSL-Roseville" means Manufacturers' Services Limited-Roseville,
Inc., a Minnesota corporation.
"MSL-USA" means Manufacturers' Services Limited L.L.C. USA Group, a
Delaware limited liability company.
"1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Omnitron" means Omnitron Services Limited, an Irish limited
liability company.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Rathmullen Equity" means Rathmullen Equity Investments Limited, an
Irish limited liability company.
"Rathmullen Holdings" means Rathmullen Holdings Limited, an Irish
limited liability company.
"Regulated Environmental Activity" means any generation, treatment,
storage, recycling, transportation or disposal of any Hazardous Substance.
"Release" means any discharge, emission or release, including a
Release as defined in CERCLA at 42 U.S.C. ss.9601(22). The term "Released" has a
corresponding meaning.
4
<PAGE>
"Roseville Assets" means the assets acquired by MSL-Roseville
pursuant to the Roseville Documents.
"Roseville Documents" means the Asset Purchase Agreement by and
between MSL-Roseville and AT&T-GIS dated as of January 3, 1995, and each other
document relating to the acquisition by MSL-Roseville of certain assets, and the
assumption by MSL-Roseville of certain liabilities, of AT&T-GIS.
"Securities" means the shares of Common Stock to be acquired
pursuant to Article 2 of this Agreement.
"Stockholders Agreement" means the Stockholders Agreement,
substantially in the form attached hereto as Exhibit 5.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions (including, in the case
of a partnership, a general partner) are at the time directly or indirectly
owned by the Issuer. Notwithstanding the foregoing, Omnitron shall be deemed to
be a Subsidiary for purposes of this Agreement.
"Transaction Documents" means this Agreement, the Stockholders
Agreement, the Employment Agreements and any other ancillary agreements among
the parties executed in connection with the Transactions. Each such document is
sometimes referred to individually as a "Transaction Document."
"Transactions" means the transactions contemplated by the
Transaction Documents.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Closing 2.2
Code 8.1
Issuer Securities 3.5
Damages 11.2
DLJSC 3.16
Federal Taxes 8.1
Indemnified Party 11.2
Indemnifying Party 11.2
Post-Closing Tax Period 8.1
Pre-Closing Tax Period 8.1
Purchase Price 2.1
Returns 8.2
5
<PAGE>
Term Section
---- -------
Subsidiary Securities 3.6
Tax 8.1
Tax Asset 8.1
Tax Sharing Agreement 8.1
Taxing Authority 8.1
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions
of this Agreement, the Issuer agrees to issue and sell to each DLJ Buyer and
each DLJ Buyer agrees, severally and not jointly, to purchase from the Issuer
those Securities as are set forth opposite such DLJ Buyer's name on Schedule
2.1(a) at the Closing. The purchase price to be paid by each DLJ Buyer for the
Securities to be purchased by it (the "Purchase Price") is set forth opposite
such DLJ Buyer's name on Schedule 2.1(a). The Purchase Price shall be paid as
provided in Section 2.2.
2.2 Closing. The closing (the "Closing") of the purchase and sale of
the Securities hereunder shall take place at the offices of Davis Polk &
Wardwell, 450 Lexington Avenue, New York, New York as soon as possible, but in
no event later than 10 business days, after satisfaction of the conditions set
forth in Article 10, or at such other time or place as the parties hereto may
agree. At the Closing:
(a) Each DLJ Buyer shall deliver to the Issuer the amount indicated
opposite such DLJ Buyer's name on Schedule 2.1(a) in one or more cashiers
or certified checks.
(b) The Issuer shall deliver to each DLJ Buyer certificates for the
number of Securities indicated opposite such DLJ Buyer's name on Schedule
2.1(a), duly registered in the name of such DLJ Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE ISSUER AND THE FOUNDERS
The Issuer and the Founders represent and warrant to each DLJ Buyer
as of the date hereof that:
6
<PAGE>
3.1 Corporate Existence and Power. The Issuer is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. The Issuer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is materially necessary. The Issuer has heretofore delivered to
the DLJ Buyers true and complete copies of the certificate of incorporation and
bylaws of the Issuer in effect as of the date hereof and immediately prior to
the Closing.
3.2 Corporate Authorization. (a) The execution, delivery and
performance by the Issuer of the Transaction Documents to which the Issuer is a
party are within the Issuer's corporate powers and have been duly authorized by
all necessary corporate action on the part of the Issuer. This Agreement
constitutes (and, when executed and delivered, each other Transaction Document
to which the Issuer is a party will constitute) a valid and binding agreement of
the Issuer.
(b) The execution, delivery and performance by each Trust of the
Transaction Documents to which such Trust is a party are within such Trust's
powers and have been duly authorized by all necessary action under the governing
instrument of trust of such Trust.
(c) This Agreement constitutes a valid and binding agreement of the
Founders, and, when executed and delivered, each other Transaction Document to
which any Founder is a party will constitute a valid and binding agreement of
such Founder.
3.3 Governmental Authorization. The execution, delivery and
performance by each of the Issuer and the Founders of the Transaction Documents
to which the Issuer or any Founder is a party require no action by or in respect
of, or filing with, any governmental body, agency or official.
3.4 Non-Contravention. The execution, delivery and performance by
each of the Issuer and the Founders of the Transaction Documents to which the
Issuer or any Founder is a party and the consummation by each of the Issuer and
the Founders of the Transactions do not and will not (i) violate the certificate
of incorporation or bylaws of the Issuer or any subsidiary or the governing
instrument of trust applicable to any Trust, (ii) violate any applicable
material law, rule, regulation, judgment, injunction, order or decree, (iii)
require any consent or other action by any Person, constitute a default, give
rise to any right of termination, cancellation or
7
<PAGE>
acceleration of any right or obligation of the Issuer or any Subsidiary or
result in the loss of any benefit to which the Issuer or any Subsidiary is
entitled under any agreement or other instrument binding upon the Issuer or any
Subsidiary or result in the loss of any license, franchise, permit or other
similar authorization held by the Issuer or any Subsidiary or (iv) result in the
creation or imposition of any Lien on any asset of the Issuer or any Subsidiary.
3.5 Capitalization. (a) As of the date hereof and immediately prior
to the Closing, the authorized capital stock of the Issuer consists of
60,000,000 shares of Common Stock, 850,000 of which shares are, and will
immediately prior to the Closing be, outstanding, of which 290,700 shares will
be owned beneficially and of record by the Melia Trust, 290,700 shares will be
owned beneficially and of record by the Graham Trust and 268,600 shares will be
owned beneficially and of record by the Kent Trust.
(b) As of the Closing, 60,000,000 shares of Common Stock will be
authorized, of which 7,850,000 shares will be outstanding, 290,700 shares of
which will be owned by the Melia Trust, 290,700 shares of which will be owned by
the Graham Trust, 268,600 shares of which will be owned by the Kent Trust and
7,000,000 shares of which will be owned by the DLJ Buyers.
(c) All outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. Except as set forth in
this Section 3.5 and as contemplated by the Stockholders Agreement, as of the
date hereof and immediately prior to the Closing there are no outstanding (i)
shares of capital stock or voting securities of the Issuer, (ii) securities of
the Issuer convertible into or exchangeable for shares of capital stock or
voting securities of the Issuer or (iii) options or other rights to acquire from
the Issuer, or other obligations of the Issuer to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Issuer (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "Issuer Securities"). There are no
outstanding obligations of the Issuer or any Subsidiary to repurchase, redeem or
otherwise acquire any Issuer Securities.
(d) The Securities have been duly authorized by the Issuer and, when
issued and delivered in accordance with the terms of this Agreement, upon
payment therefor by the DLJ Buyers as contemplated hereunder, will be validly
issued, fully paid and non-assessable, and will be free and clear of any Lien or
other right or claim (except any created by or through the DLJ Buyers) and will
not be subject to any preemptive or other similar rights
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(except any created by or through the DLJ Buyers) except as contemplated by the
Stockholders Agreement.
3.6 Subsidiaries. (a) Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is materially necessary. All Subsidiaries and their respective
jurisdictions of incorporation are identified on Schedule 3.6.
(b) Except as disclosed in Schedule 3.6, all of the outstanding
capital stock of, or other voting securities or ownership interests in, each
Subsidiary, is owned by the Issuer, directly or indirectly, free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities or ownership interests). Except as disclosed in
Schedule 3.6, there are no outstanding (i) securities of the Issuer or any
Subsidiary convertible into or exchangeable for shares of capital stock or other
voting securities or ownership interests in any Subsidiary or (ii) options or
other rights to acquire from the Issuer or any Subsidiary, or other obligations
of the Issuer or any Subsidiary to issue, any capital stock or other voting
securities or ownership interests in, or any securities convertible into or
exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary (the items in clauses (i) and (ii) being referred
to collectively as the "Subsidiary Securities"). Except as disclosed in Schedule
3.6, there are no outstanding obligations of the Issuer or any Subsidiary to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
3.7 Financial Statements. (a) The Group One Balance Sheet and the
related statement of income and cash flows for the period ended December 31,
1994, present fairly, in all material respects, the financial position of the
Issuer, MSL-Roseville and MSL-Corporate as of such date and their results of
operations and changes in financial position for the period then ended in
conformity with generally accepted accounting principles applied on a consistent
basis.
(b) The Group Two Balance Sheet and the related consolidated
statement of income and cash flows for the twelve month period ended December
31, 1994, present fairly, in all material respects, the consolidated financial
position of
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Omnitron and its subsidiaries as of such date and their consolidated results of
operations and changes in their consolidated financial position for the period
then ended in accordance with standards under the Companies Acts, 1963 to 1990
and the European Communities Regulations, 1992, applied on a consistent basis.
3.8 Absence of Certain Changes. Since the relevant Balance Sheet
Date and except for the execution of the Roseville Documents, the business of
the Issuer and the Subsidiaries has been conducted in the ordinary course
consistent with past practices and there has not been:
(i) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Issuer, or any repurchase, redemption or other acquisition by the Issuer
or any Subsidiary of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Issuer or any
Subsidiary;
(iii) any amendment of any material term of any outstanding
security of the Issuer or any Subsidiary;
(iv) any incurrence, assumption or guarantee by the Issuer or
any Subsidiary of any indebtedness for borrowed money;
(v) any creation or assumption by the Issuer or any Subsidiary
of any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(vi) any making of any loan, advance or capital contributions
to or investment in any Person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the
Issuer or any Subsidiary which, individually or in the aggregate, has
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had or would reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or any contract or
agreement entered into, by the Issuer or any Subsidiary relating to its
assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Issuer or any Subsidiary of any
contract or other right, in either case, material to the Issuer and the
Subsidiaries, taken as a whole, other than transactions and commitments in
the ordinary course of business consistent with past practices and those
contemplated by the Transaction Documents;
(ix) any change in any method of accounting or accounting
practice by the Issuer or any Subsidiary;
(x) Except as disclosed in Schedule 3.8, any (A) employment,
deferred compensation, severance, retirement or other similar agreement
entered into with any director, officer or employee of the Issuer or any
Subsidiary (or any amendment to any such existing agreement), (B) grant of
any severance or termination pay to any director, officer or employee of
the Issuer or any Subsidiary or (C) change in compensation or other
benefits payable to any director, officer or employee of the Issuer or any
Subsidiary pursuant to any severance or retirement plans or policies
thereof; or
(xi) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Issuer or any
Subsidiary, which employees were not subject to a collective bargaining
agreement at the relevant Balance Sheet Date, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any
employees of the Issuer or any Subsidiary.
3.9 No Undisclosed Material Liabilities. There are no liabilities of
the Issuer or any Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise (including, without
limitation, any such liability with respect to Omnitron), and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
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(a) liabilities to be assumed pursuant to the Roseville Documents;
(b) liabilities provided for in the Group One Balance Sheet or the
Group Two Balance Sheet or disclosed in the notes thereto;
(c) liabilities disclosed on Schedule 3.9; and
(d) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Issuer and the Subsidiaries, taken as a
whole.
3.10 Certain Interests. (a) Except as set forth in Schedule 3.10,
neither the Founders nor any officer or director of the Issuer or any Subsidiary
(or any immediate family member or Affiliate of any such Founder, officer or
director) (i) has any interest in any property, real or personal, tangible or
intangible, including licenses, agencies or Intellectual Property Rights, used
in or pertaining to the business of the Issuer or any Subsidiary, (ii) has any
interest in any business, corporate or otherwise, that is in competition with
the business of the Issuer or any Subsidiary or (iii) has received any loan or
advance that remains unpaid as of the date hereof or is otherwise a debtor of,
or made any loan or advance to or is otherwise a creditor of, the Issuer or any
Subsidiary. Since the relevant Balance Sheet Date there has not been any asset
sold by the Issuer or any Subsidiary to, or to the Issuer or any Subsidiary by,
any Founder or any immediate family member or Affiliate of any Founder, other
than salaries and employee benefits accruing in the ordinary course of business.
Upon payment of the balances referred to in clause (iii) of this Section 3.10 as
contemplated by Section 7.4 no amounts will be owed to the Issuer or any
Subsidiary by, or owed by the Issuer or any Subsidiary to, any Founder or any
immediate family member or Affiliate of any Founder.
(b) Except as specifically provided pursuant to the Stockholders
Agreement, none of the Founders is a party to or bound by any voting agreement
or other similar arrangement with respect to the Issuer or the ownership of
shares of Common Stock.
3.11 Material Contracts. (a) Except as disclosed in Schedule 3.11,
neither the Issuer nor any Subsidiary is a party to or bound by:
(i) any lease (whether of real or personal property) providing for
annual rentals of $50,000 or more;
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(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments by the Issuer and the Subsidiaries of $50,000 or more or (B)
aggregate payments by the Issuer and the Subsidiaries of $100,000 or more;
(iii) any sales, distribution or other similar agreement providing
for the sale by the Issuer or any Subsidiary of materials, supplies,
goods, services, equipment or other assets that provides for either (A)
annual payments to the Issuer and the Subsidiaries of $50,000 or more or
(B) aggregate payments to the Issuer and the Subsidiaries of $50,000 or
more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise)
other than the Roseville Documents;
(vi) any agreement relating to indebtedness for borrowed money or
the deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset), except any such agreement
with an aggregate outstanding principal amount not exceeding $50,000 and
which may be prepaid on not more than 30 days' notice without the payment
of any penalty;
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any agreement that limits the freedom of the Issuer or any
Subsidiary to compete in any line of business or with any Person or in any
area or which would so limit the freedom of the Issuer or any Subsidiary
after the Closing Date;
(x) any agreement with (A) any Founder or its Affiliates, (B) any
Person directly or indirectly owning, controlling or holding with power to
vote, 5% or more of the outstanding voting securities of any Affiliates of
any Founder, (C) any Person 5% or more of
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whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by any Founder or its Affiliates or
(D) any director or officer of any Affiliate of any Founder or any
"associates" or members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of the 1934 Act) of any
such director or officer;
(xi) any agreement with any director or officer of the Issuer or any
Subsidiary or with any "associate" or any member of the "immediate family"
(as such terms are respectively defined in Rules 12b-2 and l6a-1 of the
1934 Act) of any such director or officer;
(xii) any contract, agreement or understanding guaranteeing any of
the foregoing; or
(xiii) any other agreement, commitment, arrangement or plan not made
in the ordinary course of business that is material to the Issuer and the
Subsidiaries, taken as a whole.
(b) Each agreement, commitment, arrangement or plan disclosed in
any Schedule to this Agreement or required to be disclosed pursuant to this
Section is a valid and binding agreement of the Issuer or a Subsidiary, as the
case may be, and is in full force and effect, and neither the Issuer nor any
Subsidiary is nor, to the knowledge of the Issuer or any Founder, is any other
party thereto, in default or breach in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment.
3.12 Litigation. There is no action, suit, investigation or.
proceeding pending against, or to the knowledge of the Issuer or any Founder
threatened against or affecting the Issuer or any Subsidiary or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Transactions.
3.13 Compliance with Laws and Court Orders; No Defaults. (a) Neither
the Issuer nor any Subsidiary is in violation of, and has not since January 1,
1992 violated, any applicable law, rule, regulation, judgement, injunction,
order or decree.
(b) Neither the Issuer nor any Subsidiary is in default under, and
no condition exists that with notice or lapse of time or both would constitute a
default under, any agreement
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or other instrument binding upon the Issuer or any Subsidiary or any license,
franchise, permit or similar authorization held by the Issuer or any Subsidiary.
3.14 Properties. (a) The Issuer and the Subsidiaries have good title
to all real and personal property and assets material to the operations of the
Issuer or the Subsidiaries (whether tangible or intangible), except for property
and assets sold since the relevant Balance Sheet Date in the ordinary course of
business, or in the case of leased property have valid leasehold interests in
(x) all real property under lease and (y) all personal property and assets under
lease material to the operations of the Issuer or the Subsidiaries. None of such
property or assets (whether real or personal) is subject to any Liens, except:
(i) Liens disclosed on the Group One Balance Sheet or the Group Two
Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Group One Balance Sheet or the Group Two Balance Sheet); or
(iii) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or
assets.
(b) There are no developments affecting any such property or assets
(whether real or personal) pending or, to the knowledge of the Issuer or any
Founder threatened, which might materially detract from the value of such
property or assets or materially interfere with any present or intended use of
such property or assets.
(c) All such leases of real property are valid, binding and
enforceable in accordance with their respective terms and there does not exist
under any such lease any material default by the Issuer or any Subsidiary or any
event which with notice or lapse of time or both would constitute such a
default.
(d) The plant and equipment owned by the Issuer and the Subsidiaries
are in good operating condition, and are reasonably adequate and suitable for
their present and intended uses and, in the case of plants, buildings and other
structures (including the roofs thereof), are structurally sound.
(e) All real property leased by the Issuer and the Subsidiaries
currently has access to (i) public roads or easements for such ingress to and
egress from all such real
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property and (ii) water supply, storm and sanitary sewer facilities, telephone,
gas and electrical connections, fire protection, drainage and other public
utilities, in each case, as is necessary for the conduct of the business of the
Issuer and the Subsidiaries as heretofore conducted.
(f) The property and assets (including Intellectual Property Rights)
owned, licensed or leased by the Issuer or any Subsidiary constitute all of the
property and assets reasonably necessary for the conduct of the businesses of
the Issuer and the Subsidiaries as currently conducted.
3.15 Offering Documents. None of the documents or information
delivered to the DLJ Buyers in connection with the Transactions contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein not misleading. The financial
projections relating to the Issuer and the Subsidiaries delivered to the DLJ
Buyers are made in good faith and are based upon reasonable assumptions, and
neither the Issuer nor any Founder is aware of any fact or set of circumstances
that would lead it to believe that such projections are incorrect or misleading
in any material respect.
3.16 Finders' Fees. Except for Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC"), whose fees in respect of services on behalf of
the Issuer, the Subsidiaries and the Founders will be paid by the Issuer, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Issuer, any Subsidiary or
any Founder who might be entitled to any fee or commission in connection with
the Transactions.
3.17 Intellectual Property. (a) Schedule 3.17(a) contains a list of
(i) all domestic and foreign patents and patent applications, trademarks,
service marks, trade names, brand names and copyrights (including any
registrations or applications for any of the foregoing) and (ii) all material
agreements with respect to Intellectual Property Rights, in the case of both (i)
and (ii), that are owned by or licensed to the Issuer or any Subsidiary or are
used or held for use by the Issuer or any Subsidiary, specifying as to each, as
applicable: (x) the nature of such Intellectual Property Right; (y) the owner of
such Intellectual Property Right; and (z) licenses, sublicenses and other
agreements as to which the Issuer or any Subsidiary is a party and pursuant to
which any Person is authorized to use such Intellectual Property Right,
including the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty and the term thereof. Except as
set forth on Schedule 3.17(a), all
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Intellectual Property Rights owned by the Issuer or any Subsidiary are owned
free and clear of any Liens and of any restrictions on the use or exploitation
thereof, and are not subject to any right (including as to royalties) or license
in favor of any other Person. To the extent required to perfect title, all prior
assignments of the Issuer's or any Subsidiary's Intellectual Property Rights
have been recorded in all appropriate patent, trademark and copyright offices
and there are no breaks in the chain of title with respect to any of such
Intellectual Property Rights. The Intellectual Property Rights listed in
Schedule 3.17(a) are valid and in full force and effect. The patent related
Intellectual Property Rights listed in Schedule 3.17(a) have been duly
registered or filed in or issued by the appropriate patent office or authority
in the countries identified in Schedule 3.17(a) to the extent any such
registration, filing or issuance is required by applicable law, and neither the
Issuer nor any Founder knows of any act or failure to act by the employees,
agents or counsel of the Issuer or any Subsidiary during the registration or
prosecution of, or other proceeding relating to, such patent related
Intellectual Property Rights in any patent office, or of any other fact, which
would make invalid or unenforceable, or negate the right to issuance of, any of
such patent related Intellectual Property Rights listed in such Schedule.
(b) (i) Since January 1, 1992, neither the Issuer nor any Subsidiary
has been a defendant in any action, suit, investigation or proceeding relating
to, or has otherwise been notified of, any alleged claim or infringement of any
Intellectual Property Rights and neither the Issuer nor any Founder has any
knowledge of any other such infringement by the Issuer or any Subsidiary and
(ii) neither the Issuer nor any Founder has any knowledge of any continuing
infringement by any other Person of any Intellectual Property Rights. No
Intellectual Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the Issuer or any
Subsidiary or restricting the licensing thereof by the Issuer or any Subsidiary
to any Person. Except as set forth on Schedule 3.17(b), neither the Issuer nor
any Subsidiary has entered into any agreement to indemnify any other Person
against any charge of infringement of any Intellectual Property Right.
(c) None of the processes and formulae, research and development
results and other know-how of the Issuer or any Subsidiary, including, without
limitation, trade secrets, the value of which to the Issuer or any Subsidiary is
contingent upon maintenance of the confidentiality thereof, has been disclosed
by the Issuer or any Subsidiary to any Person in a manner prejudicial to the
Issuer's or any Subsidiary's ownership
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interest therein, other than to employees, representatives and agents of the
Issuer or any Subsidiary.
3.18 Insurance Coverage. The Issuer has heretofore furnished to the
DLJ Buyers a list of, and true and complete copies or descriptions of, all
insurance policies and fidelity bonds relating to the assets, business,
operations, employees, officers or directors of the Issuer and the Subsidiaries.
There is no claim in excess of $50,000 by the Issuer or any Subsidiary pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds or in respect
of which such underwriters have reserved their rights. All premiums payable
under all such policies and bonds have been paid timely and the Issuer and the
Subsidiaries have otherwise complied in all material respects with the terms and
conditions of all such policies and bonds. Such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
are in full force and effect. To the best of the Issuer's or any Founder's
knowledge, such policies and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to those of the Issuer and the
Subsidiaries. Neither the Issuer nor any Founder knows of any threatened
termination of, material premium increase with respect to, or material
alteration of coverage under, any of such policies or bonds. The Issuer and the
Subsidiaries shall after the Closing continue to have coverage under such
policies and bonds (to the extent coverage is provided under such policies and
bonds) with respect to events occurring prior to the Closing, which policies and
bonds constitute the only insurance policies and fidelity bonds in effect
relating to the assets, businesses, operations, employees, officers and
directors of the Issuer and the Subsidiaries.
3.19 Licenses and Permits. Schedule 3.19 describes each material
license, franchise, permit or other similar authorization relating to the
ownership of the assets, or necessary for the operation of the business, of the
Issuer and the Subsidiaries (the "Permits"), together with the name of the
government agency or entity issuing such Permit. Except as set forth on Schedule
3.19, each such Permit is valid and in full force and effect and none of the
Permits will be terminated or impaired or become terminable, in whole or in
part, as a result of the Transactions.
3.20 Employment Compensation and Labor Matters. (a) Neither the
Issuer nor any of the Subsidiaries have at any time maintained, sponsored or
contributed to, or been members of a group of corporations or other entities
under common control, within the meaning of Section 414(b) or (c) of the-Code,
any other of the members of which maintained, sponsored or
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contributed to, any employee benefit plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(b) The Issuer and the Subsidiaries are in compliance with all
currently applicable material laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice, failure to comply with which or engagement
in which, as the case may be, could reasonably be expected to have a Material
Adverse Effect. There is no unfair labor practice complaint pending or, to the
best knowledge of the Issuer or any Founder, threatened against the Issuer or
any Subsidiary before the National Labor Relations Board or any foreign
equivalent thereof.
3.21 Inventories. The inventories set forth in the Group One Balance
Sheet and the Group Two Balance Sheet were properly stated therein at the lesser
of cost or fair market value pursuant to historical cost convention determined
in accordance with standards under the Companies Acts, 1963 to 1990 and the
European Communities Regulations, 1992, consistently maintained and applied by
the Issuer and the Subsidiaries. Since the relevant Balance Sheet Date, the
inventories of the Issuer and the Subsidiaries have been maintained in the
ordinary course of business. All such inventory is owned free and clear of all
Liens. All of the inventory recorded on the Group One Balance Sheet and the
Group Two Balance Sheet consists of, and all inventory of the Issuer and the
Subsidiaries on the Closing Date will consist of, items of a quality usable or
saleable in the normal course of business consistent with past practices and are
and will be in quantities sufficient for the normal operation of the business of
the Issuer and the Subsidiaries.
3.22 Receivables. (a) All accounts, notes receivable and other
receivables reflected on the Group One Balance Sheet and the Group Two Balance
Sheet are computed in accordance with generally accepted accounting principles
and are valid, genuine and collectible in the aggregate amount thereof, [subject
to normal and customary trade discounts,] less any reserves for doubtful
accounts recorded on the Group One Balance Sheet and the Group Two Balance
Sheet.
(b) All accounts, notes receivable and other receivables which arise
or are generated after the relevant Balance Sheet Date and on or prior to the
Closing Date are and will be valid, genuine and collectible, net of reserves for
doubtful accounts.
3.23 Environmental Matters. (a) (i) No notice, notification, demand,
request for information, citation, summons,
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complaint or order has been issued, no penalty has been assessed, no
investigation or review is pending or, to the Issuer's or any Founder's
knowledge, threatened and to the Issuer or any Founder's knowledge no complaint
has been filed by any governmental entity or other Person with respect to any
(A) alleged violation of any Environmental Law or liability thereunder, (B)
alleged failure to have any permit, certificate, license, approval, registration
or authorization required under any Environmental Law in connection with the
conduct of its business, (C) Regulated Environmental Activity or (D) Release of
Hazardous Substances;
(ii) no polychlorinated biphenyls, radioactive material, urea
formaldehyde, lead, asbestos, asbestos-containing material or underground
storage tank (active or abandoned) or solid or liquid waste disposal area
(whether a lagoon, impoundment or other area) is or has been present at
any property now or previously owned, leased or operated by the Issuer or
any Subsidiary;
(iii) no property now or previously owned, leased or operated by the
Issuer or any Subsidiary or any property to which the Issuer or any
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances is listed or, to Issuer's or
any Founder's knowledge, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA), or
on any similar federal, state or foreign list of sites requiring
investigation or clean-up; and
(iv) there are no Environmental Liabilities that have had or may
reasonably be expected to have a Material Adverse Effect.
(b) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which the Issuer or any Founder has
knowledge in relation to the current or prior business of the Issuer or any
Subsidiary or any property or facility now or previously owned, leased or used
by the Issuer or any Subsidiary which has not been delivered to the DLJ Buyers
at least five days prior to the date hereof.
(c) Neither the Issuer nor any Subsidiary owns or leases or has
owned or leased any property, or conducts or has conducted any operations, in
New Jersey or Connecticut.
(d) For purposes of this Section, the terms "Issuer" and
"Subsidiary" shall include any entity which is, in whole or in part, a
predecessor of the Issuer or any Subsidiary.
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3.24 Certain Assets. Except as disclosed in Schedule 3.24:
(a) None of the Trusts has any liabilities and, except for shares of
Common Stock or shares (or other interests therein) of MSL-USA, none of the
Trusts has any assets.
(b) MSL-USA has no liabilities, whether accrued, contingent,
absolute, determined, determinable or otherwise and, except for shares of
capital stock of Rathmullen Equity (or other interest therein), MSL-USA has no
assets.
(c) Rathmullen Equity has no liabilities, whether accrued,
contingent, absolute, determined, determinable or otherwise and, except for
shares of capital stock of Rathmullen Holdings (or other interest therein).
Rathmullen Equity has no assets.
(d) Rathmullen Holdings has no liabilities, whether accrued,
contingent, absolute, determined, determinable or otherwise and, except for
shares of capital stock of Omnitron (or other interest therein), Rathmullen
Holdings has no assets.
3.25 Meaning of Issuer. (a) The foregoing representations and
warranties of the Issuer and the Founders shall be construed to relate to the
Issuer, its business and assets immediately prior to the consummation of the
transactions contemplated by the Roseville Documents.
(b) The Issuer and the Founders have provided to the DLJ Buyers
copies of all material documents and other information the Issuer or any Founder
has received of a material nature concerning the Roseville Assets.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE DLJ BUYERS
Each DLJ Buyer, severally as to itself and not jointly, represents
and warrants to the Issuer and the Founders as follows:
4.1 Corporate Existence and Power. Such DLJ Buyer is a limited
partnership duly organized or a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of organization.
4.2 Corporate Authorization. The execution, delivery and performance
by such DLJ Buyer of each Transaction Document to
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which it is a party are within the powers (corporate, partnership or otherwise)
of such DLJ Buyer and have been duly authorized by all necessary action on the
part of such DLJ Buyer. This Agreement constitutes (and, when executed and
delivered by such DLJ Buyer, each other Transaction Document to which such DLJ
Buyer is a party will constitute) a valid and binding agreement of such DLJ
Buyer.
4.3 Governmental Authorization. The execution, delivery and
performance by such DLJ Buyer of each of the Transaction Documents to which it
is a party require no action by or in respect of, or filing with, any
governmental body, agency or official.
4.4 Non-Contravention. The execution, delivery and performance by
such DLJ Buyer of each of the Transaction Documents to which it is a party and
the consummation of the Transactions do not and will not (i) violate the
partnership agreement or articles of incorporation and bylaws, as the case may
be, of such DLJ Buyer, (ii) violate any material indenture, agreement or
mortgage to which such DLJ Buyer is a party or by which such DLJ Buyer is bound
or (iii) assuming the receipt of the consents described in Section 10.2(h),
violate any applicable material law, rule, regulation, judgment, injunction,
order or decree or require any material consent of any other Person.
4.5 Purchase for Investment. Such DLJ Buyer acknowledges that the
Securities have not been registered under the 1933 Act or any state securities
laws and that the purchase and sale of the Securities contemplated hereby is to
be effected pursuant to an exemption from the registration requirements imposed
by such laws. In this regard, such DLJ Buyer is purchasing the Securities to be
purchased by it hereunder for its own account and not with a view to, or for
sale in connection with, any distribution thereof in violation of the 1933 Act.
Such DLJ Buyer (either alone or together with its advisors) is an "accredited
investor" (as defined in Regulation D under the 1933 Act), has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in such Securities and is
capable of bearing the economic risks of such investment.
4.6 Private Placement. Such DLJ Buyer (i) was not formed for the
specific purpose of acquiring the Securities and (ii) understands that there is
no existing public or other market for the Securities and that there can be no
assurance that such DLJ Buyer will be able to sell or dispose of such DLJ
Buyer's Securities.
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4.7 Litiqation. There is no action, suit, investigation or
proceeding pending against or, to the knowledge of such DLJ Buyer, threatened
against or affecting such DLJ Buyer before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the Transactions.
4.8 Finders' Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of any DLJ Buyer who might be entitled to any fee or commission from such DLJ
Buyer or from the Issuer or any of its Affiliates in connection with the
Transactions.
ARTICLE 5
COVENANTS OF THE ISSUER AND THE FOUNDERS
The Issuer and the Founders hereby agree that:
5.1 Conduct of the Issuer and the Founders. Except as specifically
contemplated by the Transaction Documents, from the date hereof until the
Closing Date, the Founders shall cause the Issuer and the Subsidiaries to, and
Issuer and the Subsidiaries shall, conduct their business in the ordinary course
consistent with past practices and use their best efforts to preserve intact
their business organizations and material relationships with third parties and
to keep available the services of their present officers and employees. Without
limiting the generality of the foregoing (and except for consummation of the
Transactions), from the date hereof until the Closing Date, without the prior
written consent of the DLJ Buyers, the Founders will not:
(a) amend the governing instrument of trust of any Trust in any way;
(b) permit the Issuer or the Subsidiaries to, and Issuer and the
Subsidiaries will not, adopt or propose any change in their articles of
incorporation or bylaws;
(c) permit the Issuer or the Subsidiaries to, and the Issuer and the
Subsidiaries will not, merge or consolidate with any other Person or acquire a
material amount of assets of any other Person, except for (i) the transactions
contemplated by the Roseville Documents and (ii) acquisitions of inventory or
equipment in the ordinary course of business consistent with past practice;
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(d) permit the Issuer or the Subsidiaries to, and the Issuer and the
Subsidiaries will not, sell, lease, license or otherwise dispose of any material
assets or property except (i) pursuant to existing contracts or commitments
disclosed on Schedule 3.11 or (ii) in the ordinary course of business consistent
with past practice;
(e) permit the Issuer or the Subsidiaries to, and the Issuer and the
Subsidiaries will not, declare, set aside, or pay any dividend or make any other
distribution with respect to any of the securities of the Issuer or the
Subsidiaries;
(f) permit the Issuer or the Subsidiaries to, and the Issuer and
the Subsidiaries will not, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any of the securities of the Issuer or the
Subsidiaries or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any of the securities of the Issuer or
the Subsidiaries, other than the Securities to be issued pursuant to Section 2.1
hereof;
(g) permit the Issuer or the Subsidiaries to, and the Issuer and the
Subsidiaries will not, amend any agreement disclosed in Schedule 3.11, except in
the ordinary course of business, or amend any of the Roseville Documents;
(h) permit the Issuer or the Subsidiaries to, and the Issuer and the
Subsidiaries will not, incur any indebtedness to any Founder or any immediate
family member or Affiliates of any Founder or lend any amounts to any Founder or
any immediate family member or Affiliates of any Founder; or
(i) agree or commit, or, where applicable, permit the Issuer or the
Subsidiaries to agree or commit, to do any of the foregoing, and the Issuer and
the Subsidiaries will not, where applicable, agree or commit to do any of the
foregoing.
Except for any such action that is specifically permitted by the
Transaction Documents or is otherwise consented to in writing by DLJMB Inc. on
behalf of the DLJ Buyers, the Issuer and the Subsidiaries will not (i) take or
agree or commit to take any action that would make any representation and
warranty of the Issuer or the Founders hereunder inaccurate in any material
respect at, or as of any time prior to, the Closing Date or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
5.2 Access to Information. From the date hereof until the Closing
Date,
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(a) the Founders will, and will cause the Issuer and the
Subsidiaries to, give each DLJ Buyer. and their respective counsel, financial
advisors, auditors and other authorized representatives full access (upon
reasonable prior notice and during regular business hours) to the offices,
properties, books and records of the Issuer and the Subsidiaries and, in the
case of the Founders, to the books and records of the Founders relating to the
Issuer and the Subsidiaries.
(b) the Founders will, and will cause the Issuer and the
Subsidiaries to, furnish to each DLJ Buyer and their respective counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information (i) as relates to the Issuer and the
Subsidiaries and (ii) to the extent reasonably available to the Founders, the
Issuer and their respective counsel and advisors, as relates to the transactions
contemplated by the Roseville Documents, in each case as such Persons may
reasonably request.
(c) the Founders will instruct the employees, counsel and financial
advisors of the Issuer and the Subsidiaries to cooperate with each DLJ Buyer in
its investigation of the Issuer, the Subsidiaries and the Roseville Assets.
5.3 Notices of Certain Events. From the date hereof until the
Closing, the Issuer and the Founders shall promptly notify the DLJ Buyers of:
(a) any notice or other communication from any Person received by
any responsible officer of the Issuer or any Subsidiary alleging that the
consent of such Person is or may be required in connection with the Transactions
or the transactions contemplated by the Roseville Documents;
(b) any notice or other communication from any governmental or
regulatory agency or authority received by any responsible officer of the Issuer
or any Subsidiary in connection with the Transactions or the transactions
contemplated by the Roseville Documents;
(c) any actions, suits, claims, investigations or proceedings
pending or, to its knowledge threatened against or relating to any Founder, the
Issuer or any Subsidiary that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 3.12 or that
relate to the consummation of the Transactions or the transactions contemplated
by the Roseville Documents; and
(d) any other action, event or condition of any nature known to any
officer of the Issuer or any Subsidiary (i) where
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there is a significant possibility that such action, event or condition will
lead to or result in a Material Adverse Effect, (ii) that, with or without
notice or lapse of time or both, would constitute a material default under any
other material agreement, instrument or indenture to which the Issuer or any
Subsidiary is a party or to which the Issuer, any Subsidiary or their material
properties or material assets may be subject or (iii) where there is a
significant possibility that such action, event or condition will result in any
termination or material impairment of any material Permits.
5.4 No Solicitations. Until the earlier of the Closing and the
termination of this Agreement, the Founders will not, and will not permit the
officers or directors of the Issuer or any Subsidiary or any of their respective
Affiliates, agents or representatives to, (i) solicit, initiate, encourage,
conduct or engage in any discussion or enter into any agreement or
understanding, with any other Person regarding the transfer, directly or
indirectly, of any of the capital stock of the Issuer or any Subsidiary or any
material portion of the Issuer's or any Subsidiary's assets or (ii) disclose any
nonpublic information relating to the Issuer or any Subsidiary or afford access
to the properties, books or records of, or relating to, the Issuer or any
Subsidiary, to any other Person or entity that the Issuer or any Founder
believes to be considering acquiring an interest in the Issuer or any
Subsidiary. If the Issuer or any Founder becomes aware of any inquiry or request
by another Person with respect to any such transfer or disclosure, the Issuer or
the Founder, as the case may be, shall promptly notify the DLJ Buyers of such
inquiry, indicate the identity of the offeror and the terms and conditions of
any proposals or offers or the nature of any inquiries or contacts, and
thereafter keep the DLJ Buyers informed, on a current basis, of the status and
terms of any such proposals or offers. The Issuer and the Founders shall not
(and shall not permit any Subsidiary to) release any third party from, or waive
any provision of, any confidentiality or standstill agreement relating to the
Issuer or any Subsidiary to which the Issuer or any Subsidiary is a party.
ARTICLE 6
COVENANTS OF THE DLJ BUYERS AND THE ISSUER
The DLJ Buyers and the Issuer agree that:
6.1 Confidentiality. The DLJ Buyers and their Affiliates will hold,
and will use their best efforts to cause their respective officers, directors,
limited partners, employees, accountants, counsel, consultants, advisors and
agents
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to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning the Issuer or any Subsidiary furnished to
the DLJ Buyers or their Affiliates in connection with the Transactions, except
to the extent that such information can be shown to have been (i) previously
known on a nonconfidential basis by any DLJ Buyer or its Affiliates, (ii) in the
public domain through no fault of any DLJ Buyer or its Affiliates or (iii) later
lawfully acquired by any DLJ Buyer or its Affiliates from sources other than the
Issuer, any Subsidiary or the Founders; provided that the DLJ Buyers may
disclose such information to their officers, directors, limited partners,
employees, accountants, counsel, consultants, advisors and agents in connection
with the Transactions so long as such Persons are informed by the DLJ Buyers of
the confidential nature of such information and are directed by the DLJ Buyers
to treat such information confidentially.
6.2 Access. The Issuer will, on and after the Closing Date, afford
promptly to Founders and their agents reasonable access to its properties,
books, records, employees and auditors to the extent necessary to permit
Founders (x) to determine any matter relating to their rights and obligations
hereunder or relating to any period ending on or before the Closing Date and (y)
close the books and records of the Issuer for periods ending on or before the
Closing Date.
6.3 Management Options. Promptly following the Closing, the Board of
Directors of the Issuer shall adopt the Management Stock Option Plan.
ARTICLE 7
COVENANTS OF THE PARTIES
Each party hereto agrees that:
7.1 Best Efforts. Subject to the terms and conditions of this
Agreement, such party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the Transactions. Such party
agrees, and the Founders agree to cause the Issuer, to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the Transactions.
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7.2 Certain Filings. The parties hereto shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
Transactions and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
7.3 Public Announcements. Except as otherwise provided in this
Section 7.3, each party hereto agrees to consult with each other party before
issuing any press release or making any public statement with respect to any
Transaction Document or the Transactions. No party hereto will issue any such
press release or make any such public statement without the consent of the
consulted parties; provided that after such consultation the consent of the
consulted parties to the release of such press release or public statement shall
not be unreasonably withheld. The provisions of this Section 7.3 shall not apply
to any press release or public statement which any party is required to make by
any applicable law or any listing agreement with any national securities
exchange.
7.4 Intercompany Accounts. Except as disclosed in Schedule 3.10, all
loans and advances between the Founders and their Affiliates, on the one hand,
and the Issuer or any Subsidiary, on the other hand, as of the date hereof shall
be settled (irrespective of the terms of payment of such loans or advances) in
full in cash at least five business days prior to the Closing. At such time, the
Founders shall prepare and deliver to the DLJ Buyers a statement setting out in
reasonable detail the calculation of all balances in respect thereof and, to the
extent requested by the DLJ Buyers, provide the DLJ Buyers with supporting
documentation to verify the underlying charges and transactions.
ARTICLE 5
TAX MATTERS
8.3. Tax Definitions. The following terms, as used herein, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
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"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
ending after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, witholding on amounts paid to or by the Issuer or
any Subsidiary, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority (domestic or foreign) responsible for the
imposition of any such tax (a "Taxing Authority"), (ii) any liability of the
Issuer or any Subsidiary for the payment of any amounts of the type described in
(i) as a result of being a member of an affiliated, consolidated, combined or
unitary group, or being a party to any agreement or arrangement whereby
liability of the Issuer or any Subsidiary for payment of such amounts was
determined or taken into account with reference to the liability of any other
person for any period during the Tax Indemnification Period and (iii) liability
of the Issuer or any Subsidiary for the payment of any amounts as a result of
being party to any Tax Sharing Agreement or with respect to the payment of any
amounts of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other Person.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign Tax credit, charitable deduction or any other
credit or tax attribute of the Issuer or any Subsidiary which could reduce Taxes
(including, without limitation, deductions and credits related to alternative
minimum Taxes).
"Tax Sharing Agreements" means all existing Tax sharing agreements
or arrangements (whether or not written) binding the Issuer or any Subsidiary
and any agreements or arrangements which afford any other person the benefit of
any Tax Asset of the Issuer or any Subsidiary, afford the Issuer or any
Subsidiary the benefit of any Tax Asset of any other person or require or permit
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the transfer or assignment of income, revenues, receipts, or gains).
8.2 Tax Representations. (a) Except as set forth in the Group One
Balance Sheet or the Group Two Balance Sheet (including the notes thereto) or on
Schedule 8.2, (i) all Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
the Issuer or any Subsidiary (collectively, the "Returns") have, to the extent
required to be filed on or before the date hereof been or will be filed when due
in accordance with all applicable laws; (ii) as of the time of filing, the
Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Issuer and its Subsidiaries and
any other information required to be shown therein; (iii) all Taxes shown as due
and payable on the Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority; (iv) the charges,
accruals and reserves for Taxes with respect to the Issuer and its Subsidiaries
for any Pre-Closing Tax Period (including any Pre-Closing Tax Period for which
no Return has yet been filed) reflected on the books of the Issuer and its
Subsidiaries (excluding any provision for deferred income taxes) are adequate
to cover such Taxes; (v) neither the Issuer nor any of the Subsidiaries has been
required, as of the date hereof, to file any Return; (vi) neither the Issuer nor
any Subsidiary is delinquent in the payment of any Tax or has requested any
extension of time within which to file any Return and has not yet filed such
return; (vii) neither the Issuer nor any Subsidiary (or any member of any
affiliated, consolidated, combined or unitary group of which the Issuer or any
Subsidiary is or has been a member) has granted any extension or waiver of the
statute of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired; (viii) there is
no claim, audit, action, suit, proceeding, or investigation now pending or, to
the knowledge of the Issuer or any Founder, threatened against or with respect
to the Issuer or any Subsidiary in respect of any Tax or Tax Asset; (ix) there
are no requests for rulings or determinations in respect of any Tax or Tax Asset
pending between the Issuer or any Subsidiary and any Taxing Authority; (x)
neither the Issuer nor any Subsidiary owns any interest in real property in the
State of New York or in any other jurisdiction in which a Tax is imposed on the
transfer of a controlling interest in an entity that owns any interest in real
property; (xi) there are no liens for Taxes upon the assets of the Issuer or any
Subsidiary except liens for current Taxes not yet due; (xii) the Issuer is not,
and has not been within five years of the date hereof, a United States real
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property holding corporation as defined in Section 897 of the Code; (xiii)
neither the Issuer nor any Subsidiary will be required to include any adjustment
in taxable income for any Post-Closing Tax Period under Section 481(c) of the
Code (or any similar provision of the Tax laws of any jurisdiction) as a result
of a change in method of accounting for a Pre-Closing Tax Period or pursuant to
the provisions of any agreement entered into with any Taxing Authority with
regard to the Tax liability of the Issuer or any Subsidiary for any Pre-Closing
Tax Period; (xiv) neither the Issuer nor any Subsidiary is subject to
withholding under Section 1445 of the Code with respect to the Transactions or
any transaction contemplated by the Roseville Documents; (xv) neither the Issuer
nor any Subsidiary nor any predecessor of the foregoing is or has been subject
to any tax imposed under Section 531 or Section 541 of the Code; (xvi) neither
the Issuer nor any Subsidiary has been a member of an affiliated, consolidated,
combined or unitary group other than one of which any of the Founders or the
Issuer was the common parent or participated in any other arrangement whereby
any income, revenues, receipts, gain, loss or Tax Asset of the Issuer or any
Subsidiary was determined or taken into account for Tax purposes with reference
to or in conjunction with any income, revenues, receipts, gain, loss, asset,
liability or Tax Asset of any other person; (xvii) neither the Issuer nor any
Subsidiary is currently under any contractual obligation to pay any amounts of
the type described in clause (ii) or (iii) of the definition of "Tax"; and
(xviii) all information set forth in the notes to the Group One Balance Sheet
and the Group Two Balance Sheet relating to Tax matters is true and complete.
(b) Schedule 8.2 contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax is properly payable by the Issuer or any
Subsidiary in the ordinary course of business.
8.3 Covenants. (a) Without the prior written consent of DLJ Buyers,
none of the Founders, the Issuer, any Subsidiary or any Affiliate thereof shall,
to the extent it may affect or relate to the Issuer or any Subsidiary, make or
change any tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended Return, enter into any
closing agreement, settle any Tax claim or assessment, surrender any right to
claim a Tax refund, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment or take or omit to take any other
action, if any such action or omission would have the effect of increasing the
Tax liability or decreasing any Tax Asset of the Issuer, any Subsidiary, any DLJ
Buyer or any Affiliate of any DLJ Buyer.
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(b) All Returns not required to be filed on or before the date
hereof (i) will be filed when due in accordance with all applicable laws and
(ii) as of the time of filing, will correctly reflect the facts regarding the
income, business, assets, operations, activities and status of the Issuer and
the Subsidiaries and will include any other information required to be shown
therein.
(c) Neither the Issuer nor any Subsidiary shall reserve any amount
for or make any payment of Taxes to any person or any Taxing Authority except
for such Taxes as are due or payable or have been properly estimated in
accordance with applicable law as applied in a manner consistent with past
practice of the Founders.
(d) Prior to the Closing, the Founders shall deliver to the DLJ
Buyers a statement issued by the Issuer pursuant to and meeting the requirements
of Treas. Reg. ss. 1.897-2(h) (or any successor regulation) certifying that the
Issuer is not a "United States real property holding corporation" within the
meaning of Section 897(c) (2) of the Code.
8.4 Other Tax Matters. (a) All transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement (including
any New York State Real Property Transfer Gains Tax, New York Real Estate
Transfer Tax, New York City Real Property Transfer Tax and any similar Tax
imposed in other states or subdivisions) shall be borne and paid by the Issuer
when due, and the Issuer will file all necessary Tax returns and other
documentation with respect to all such Taxes and fees, and, if required by
applicable law, the DLJ Buyers will, and will cause their Affiliates to, join in
the execution of any such Tax returns and other documentation.
(b) The Founders shall promptly pay or shall cause prompt payment to
be made to the Issuer of the amount of any refund of Taxes with respect to the
Issuer or any Subsidiary upon receipt by the Founders or their Affiliates (or
any successor of any Founder or any successors of such Founder's Affiliates) of
such refund.
8.5. Cooperation on Tax Matters. (a) The DLJ Buyers and the Founders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the preparation and filing of any Tax return,
statement, report or form (including any report required pursuant to Section
6043 of the Code and all Treasury Regulations promulgated thereunder), any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other
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party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Issuer and the Founders
agree (i) to retain all books and records with respect to Tax matters pertinent
to the Issuer and the Subsidiaries relating to any Pre-Closing Tax Period, and
to abide by all record retention agreements entered into with any Taxing
Authority and (ii) to give the other party reasonable written notice prior to
destroying or discarding any such books and records and, if the other party so
requests, the Issuer or the Founders, as the case may be, shall allow the other
party to take possession of such books and records.
(b) The DLJ Buyers and the Founders further agree, upon request, to
use all reasonable efforts to obtain any certificate or other document from any
governmental authority or customer of the Issuer or any Subsidiary or any other
person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the Transactions).
ARTICLE 9
[INTENTIONALLY OMITTED]
ARTICLE 10
CONDITIONS TO CLOSING
10.1 Conditions to Obligations of each Party. The obligations of
each party to consummate the Closing are subject to the satisfaction of the
following conditions:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Closing.
(b) No proceeding challenging this Agreement or any of the
Transactions or seeking to prohibit, alter, prevent or materially delay the
Closing shall have been instituted by any Person before any court, arbitrator or
governmental body, agency or official and be pending, where, in the reasonable
judgment of the DLJ Buyers, on the one hand, or the Founders, on the other
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hand, there is a significant possibility of a determination in accordance with
the plaintiff's demand.
(c) All required third party consents and approvals set forth on
Schedule 10.1(c) shall have been obtained.
10.2 Conditions to Obligation of the DLJ Buyers. The obligation of
the DLJ Buyers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Issuer and the Founders shall have performed in all
material respects all of their obligations hereunder required to be performed by
them on or prior to the Closing Date, (ii) the representations and warranties of
the Issuer and the Founders contained in this Agreement and in any certificate
or other writing delivered by such parties pursuant hereto shall be true and
correct in all material respects at and as of the Closing Date, as if made at
and as of such date (it being understood that where any such representation and
warranty already includes a material adverse effect or materiality exception, no
further materiality exception is to be permitted by this Section 10.2(a) (ii))
and (iii) each DLJ Buyer shall have received certificates signed by the Issuer
and each of the Founders to the foregoing effect.
(b) There shall not be threatened, instituted or pending any action
or proceeding by any Person before any court or governmental authority or
agency, domestic or foreign, (i) seeking to restrain or prohibit the ownership
or operation by the Issuer of all or any material portion of the business or
assets of the Issuer or the Roseville Assets or to compel the Issuer to dispose
of all or any material portion of the business or assets of the Issuer or the
Roseville Assets, (ii) seeking to impose or confirm material limitations on the
ability of any DLJ Buyer or any of its Affiliates effectively to exercise full
rights of ownership of its Securities or (iii) seeking to require divestiture by
any DLJ Buyer or any of its Affiliates of any of its Securities.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed (where, in the reasonable
judgment of the DLJ Buyers, there is a significant possibility that such
proposal will be enacted), enacted, enforced, promulgated, issued or deemed
applicable to the purchase of their Securities, by any court, government or
governmental authority or agency, domestic or foreign, that, in the reasonable
judgment of any DLJ Buyer has a significant possibility of, directly or
indirectly, resulting in any of the consequences referred to in clauses (i)
through (iii) above of Section 10.2(b) above.
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(d) Each of the Transaction Documents to be executed as of the
Closing shall have been executed and delivered by the parties thereto other than
the DLJ Buyers, the conditions to Closing of each of the parties to such
Transaction Documents (other than the DLJ Buyers) as set forth in such
Transaction Documents shall have been satisfied or waived and, assuming due
execution and delivery by the DLJ Buyers, each such Transaction Document shall
be in full force and effect.
(e) The closing of the transactions contemplated by the Roseville
Documents shall have been consummated simultaneously herewith in accordance with
the terms of the Roseville Documents and without any waiver of any condition to
closing thereunder, except for such changes to the terms thereof or waivers of
conditions to closing as are acceptable to the DLJ Buyers, it being understood
that the Issuer will use a portion of the funds paid to it by the DLJ Buyers
pursuant to this Agreement to simultaneously fulfill its obligations pursuant to
the Roseville Documents.
(f) The Charter shall have been duly delivered for filing at the
office of the Secretary of State of the State of Delaware and the Bylaws shall
have been duly adopted by the Board of Directors of the Issuer.
(g) The fees payable to DLJSC referred to in Section 3.16 shall have
been paid.
(h) Each of the DLJ Buyers other than DLJ Merchant Banking Funding,
Inc. shall have received all consents of the limited partners of such DLJ Buyers
under Section 206(3) of the Investment Advisers Act of 1940.
(i) Each director of the Issuer other than Melia shall have
delivered to the DLJ Buyers a duly executed letter of resignation effective as
of the Closing Date.
(j) The DLJ Buyers shall have received an opinion or opinions of
Sherburne, Powers & Needham, P.C. (or other counsel reasonably satisfactory to
the DLJ Buyers), counsel to the Issuer and the Founders, dated the Closing Date,
in form and substance reasonably satisfactory to the DLJ Buyers. In rendering
such opinion or opinions, such counsel may rely upon certificates of public
officers and, as to matters of fact, upon certificates of the Founders or
officers of the Issuer.
(k) The DLJ Buyers shall have received all documents they may
reasonably request relating to the existence of the other parties hereto (other
than the DLJ Buyers) and the authority of such Persons for each of the
Transaction Documents,
35
<PAGE>
all in form and substance reasonably satisfactory to the DLJ Buyers.
(l) The DLJ Buyers shall have received a copy of a report addressed
to the DLJ Buyers and satisfactory to them in their sole discretion, identifying
and delineating, to the fullest extent possible, all environmental liabilities
pertaining to the Roseville Assets.
(m) The Founders shall have delivered a certification for the Issuer
and signed by the Issuer to the effect that the Issuer is not nor has it been
within 5 years of the date hereof a "United States real property holding
corporation" as defined in Section 897 of the Code.
10.3 Conditions to Obligation of the Founders and the Issuer. The
obligations of the Founders and the Issuer to consummate the Closing are subject
to the satisfaction of the following further conditions:
(a) (i) The DLJ Buyers shall have performed in all material respects
all of their obligations hereunder required to be performed by them at or prior
to the Closing Date, (ii) the representations and warranties of the DLJ Buyers
contained in this Agreement and in any certificate or other writing delivered by
the DLJ Buyers pursuant hereto shall be true in all material respects at and as
of the Closing Date, as if made at and as of such date (it being understood that
where any such representation and warranty already includes a material adverse
effect or materiality exception, no further materiality exception is to be
permitted by this Section 10.3(a) (ii)) and (iii) the Founders and the Issuer
shall have received a certificate signed by the general partner or an executive
officer of each DLJ Buyer to the foregoing effect.
(b) There shall not be threatened, instituted or pending any action
or proceeding by any Person before any court or governmental authority or
agency, domestic or foreign seeking to restrain or prohibit the ownership or
operation by the Issuer of all or any material portion of the business or assets
of the Issuer or the Roseville Assets or to compel the Issuer to dispose of all
or any material portion of the business or assets of the Issuer or the Roseville
Assets.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed (where, in the reasonable
judgment of the Founders or the Issuer, there is a significant possibility that
such proposal will be enacted), enacted, enforced, promulgated, issued or deemed
applicable to the sale of the Securities, by any court,
36
<PAGE>
government or governmental authority or agency, domestic or foreign that, in the
reasonable judgment of the Founders or the Issuer has a significant possibility
of, directly or indirectly, resulting in any of the consequences referred to in
Section 10.3(b) above.
(d) Each of the Transaction Documents to be executed as of the
Closing shall have been executed and delivered by the parties thereto other than
the Founders and the Issuer, the conditions to Closing of each of the parties to
such Transaction Documents (other than the Founders and the Issuer) as set forth
in such Transaction Documents shall have been satisfied or waived and, assuming
due execution and delivery by the Founders and the Issuer, each such Transaction
Document shall be in full force and effect.
(e) The closing of the transactions contemplated by the Roseville
Documents shall have been consummated simultaneously herewith in accordance with
the terms of the Roseville Documents.
(f) The Founders and the Issuer shall have received all documents
they may reasonably request relating to the existence of the other parties
hereto (other than the Founders and the Issuer) and the authority of such
Persons for each of the Transaction Documents, all in form and substance
reasonably satisfactory to the Founders and the Issuer.
(g) The Founders and the Issuer shall have received an opinion of
Davis Polk & Wardwell (or other counsel reasonably satisfactory to the Founders
and the Issuer), counsel to the DLJ Buyers, dated on the Closing Date, in form
and substance reasonably satisfactory to the Founders and the Issuer.
(h) Each of the DLJ Buyers shall be ready, willing and able to
perform its obligations under Article 2 of this Agreement.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
11.1. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until two years after the Closing Date; provided that (i) the representations
and warranties contained in Sections 3.5, 3.6(b) and 3.23 shall survive
indefinitely and (ii) the representations and warranties
37
<PAGE>
contained in Article 8 shall survive until expiration of the statute of
limitations applicable to the matters covered thereby (giving effect to any
waiver, mitigation or extension thereof), if later. Notwithstanding the
preceding sentence, any representation or warranty in respect of which indemnity
may be sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time.
11.2 Indemnification. (a) Each of the Founders hereby jointly and
severally indemnifies each DLJ Buyer against and agrees to hold each of them
harmless from (i) any and all damage, loss or liability (including, without
limitation, any diminution in the value of the Securities purchased by such DLJ
Buyer resulting from, or attributable to, such damage, loss or liability)
("Damages") and (ii) any and all expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding), in each case, arising out of
any misrepresentation or breach of warranty, covenant or agreement made or to be
performed by any Founder or the Issuer pursuant to this Agreement; provided that
the Founders shall not be liable under this Section 11.2 with respect to any
breach of representation or warranty unless the aggregate amount of Damages with
respect to all matters referred to in this Section 11.2 (determined without
regard to any materiality qualification contained in any representation or
warranty giving rise to the claim for indemnity hereunder) exceeds $50,000
(which $50,000 shall be deductible from total Damages in the event total Damages
exceed $50,000); and provided further that the Founders shall not be liable to
make any indemnification payments under this Section 11.2 with respect to any
breach of representation or warranty in an amount in excess of $500,000 in the
aggregate. Each of the Founders hereby waives any and all rights of
indemnification, contribution or subrogation against the Issuer with respect to
any indemnification payment made pursuant to this Section 11.2. The amount of
any Damages shall exclude insurance proceeds received by the Issuer or the DLJ
Buyers, as the case may be, in respect thereof.
(b) Each DLJ Buyer, severally but not jointly, hereby indemnifies
each Founder and the Issuer against and agrees to hold each of them harmless
from any and all Damages incurred or suffered by such Founder or the Issuer and
any and all expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding), in each case, arising out of any misrepresentation
or breach of warranty,
38
<PAGE>
covenant or agreement made or to be performed by such DLJ Buyer pursuant to this
Agreement.
(c) Any amount of Damages paid by the Founders, the Issuer or the
DLJ Buyers under this Section 11.2 will be treated as an adjustment to the
Purchase Price unless and to the extent that a Final Determination causes any
such amount not to constitute an adjustment to the Purchase Price for Federal
Tax purposes. In such event, the Founders, the Issuer or the DLJ Buyers, as the
case may be, shall pay an amount that reflects the hypothetical Tax consequences
of the receipt of such payment, using the maximum statutory rate (or rates, in
the case of an item that affects more than one Tax) applicable to the recipient
of such payment for the relevant year, reflecting, for example, the effect of
deductions available for interest paid or accrued and for Taxes such as state
and local income Taxes. Any payment required to be made by the Founders, the
Issuer or the DLJ Buyers under this Section 11.2 resulting from a breach of any
of the representations, warranties or covenants in Article 8 that is not made
when due shall bear interest at the rate per annum determined, from time to
time, under the provision of Section 6621(a) (2) of the Code for each day until
paid.
11.3 Procedures. The party seeking indemnification under Section
11.2 (the "Indemnified Party") agrees to give prompt notice to the party against
whom indemnity is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought under such Section. The Indemnifying Party may, and at
the request of the Indemnified Party shall, participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 11.2 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
ARTICLE 12
TERMINATION
12.1 Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing:
(i) by mutual written agreement of the Founders and the DLJ
Buyers;
39
<PAGE>
(ii) by either the Founders or the DLJ Buyers if the Closing
shall not have been consummated on or before January 31, 1995; or
(iii) by either the Founders or the DLJ Buyers if there shall
be any law or regulation that makes consummation of the Transactions
illegal or otherwise prohibited or if consummation of the Transactions
would violate any nonappealable final order, decree or judgment of any
court or governmental body having competent jurisdiction.
The party desiring to terminate this Agreement shall give notice of
such termination to the other party.
12.2 Effect of Termination. If this Agreement is terminated as
permitted by Section 12.1, termination shall be without liability of any party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement; provided
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of any other party,
failure to perform a covenant of this Agreement or breach by any party hereto of
any representation or warranty or agreement contained herein, such party shall
be fully liable for any and all Damages incurred or suffered by any other party
as a result of such failure or breach. The provisions of Section 13.3 shall
survive any termination hereof pursuant to Section 12.1.
ARTICLE 13
MISCELLANEOUS
13.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
if to the DLJ Buyers, to:
DLJ Merchant Banking Funding, Inc.
DLJ Merchant Banking Partners, L.P.
140 Broadway
New York, New York 10005-1285
Attention: David Wilson
Fax: (212) 504-4991
and to:
40
<PAGE>
DLJ International Partners, C.V.
DLJ Offshore Partners, C.V.
c/o DLJ Offshore Management N.V.
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
Attention: Germain Sprock
Pierson Trust (Curacao) N.V.
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
if to Founders or the Issuer, to:
Manufacturers' Services Limited
30 Rowes Wharf
Boston, MassachusettS 02110
Attention: Kevin C. Melia
Robert J. Graham
Julie Kent
The Kevin C. Melia 1995 Irrevocable Trust
The Robert J. Graham 1995 Irrevocable Trust
The Julie Kent 1995 Irrevocable Trust
Fax: (617) 330-7655
with a copy to:
Sherburne, Powers & Needham, P.C.
One Beacon Street
Boston, Massachusetts 02108
Attention: Dale R. Johnson
Fax: (617) 523-6850
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
13.2 Amendments and Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Closing Date if, but only if, such amendment
or waiver is in writing and is
41
<PAGE>
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
13.3 Expenses. All costs and expenses incurred in connection with
the Transaction Documents shall be paid by the party incurring such cost or
expense; provided that if the Closing occurs, any such reasonable costs and
expenses (including the reasonable fees and expenses of counsel) of each DLJ
Buyer and any reasonable fees and expenses of counsel to the Founders shall be
reimbursed by the Issuer at the Closing or promptly thereafter.
13.4 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
13.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
13.6 Jurisdiction. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, the Transaction
Documents or the Transactions shall only be brought in the United States
District Court for the Southern District of New York or any other New York State
court sitting in New York City, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient form. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that
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<PAGE>
service of process on such party as provided in Section 13.1 shall be deemed
effective service of process on such party.
13.7 Counterparts; Third Party Beneficiaries. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement shall confer upon any Person other
than the parties hereto any rights or remedies hereunder.
13.8 Appointment of Agent. Each of the DLJ Buyers hereby irrevocably
constitutes and appoints DLJMB Inc. as its agent and true and lawful attorney in
fact with full power and discretion, in the name of and for and on behalf of
each of the DLJ Buyers, in connection with all matters arising from,
contemplated by or relating to the Transaction Documents. The powers of DLJMB
Inc. include, without limitation, the power to represent each of the DLJ Buyers
with respect to all aspects of the Transaction Documents, which power shall
include, without limitation, the power to (i) waive any conditions of the
Transaction Documents, (ii) amend the Transaction Documents in any respect,
(iii) receive notices or other communications, (iv) deliver any notices,
certificates or other documents required and (v) take all such other action and
to do all such other things as DLJMB Inc. deems necessary or advisable with
respect to the Transaction Documents. The Issuer and the Founders shall have the
right to rely upon the acts taken or omitted to be taken by DLJMB Inc. on behalf
of the DLJ Buyers, and shall have no duty to inquire as to the acts and
omissions of DLJMB Inc.
13.9 Entire Agreement. The Transaction Documents constitute the
entire agreement between the parties with respect to the subject matter of the
Transaction Documents and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
the Transaction Documents. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by any party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By:/s/ David B. Wilson
----------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By:/s/ David B. Wilson
----------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ OFFSHORE PARTNERS, C.V.
BY DLJ MERCHANT BANKING, INC.
Advisory General Partner
By:/s/ David B. Wilson
----------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Thomas E. Siegler
---------------------------
Name: Thomas E. Siegler
Title: Secretary
44
<PAGE>
THE KEVIN C. MELIA 1995
IRREVOCABLE TRUST
By: _____________________________
Name:
Title: Trustee
THE ROBERT J. GRAHAM 1995
IRREVOCABLE TRUST
By: /s/ I. Christina B. Graham
-----------------------------
Name: I. Christina B. Graham
Title: Trustee
The Julie Kent 1995
IRREVOCABLE TRUST
By: ____________________________
Name: Julie Kent
Title: Trustee
________________________________
Kevin C. Melia
/s/ Robert J. Graham
--------------------------------
Robert J. Graham
________________________________
Julie Kent
45
<PAGE>
THE KEVIN C. MELIA 1995 IRREVOCABLE TRUST
By:______________________
Name:
Title: Trustee
THE ROBERT J. GRAHAM 1995 IRREVOCABLE TRUST
By:______________________
Name:
Title: Trustee
THE JULIE KENT 1995 IRREVOCABLE TRUST
By:______________________
Name: Julie Kent
Title: Trustee
/s/ Kevin C. Melia
- -------------------------
Kevin C. Melia
_________________________
Robert J. Graham
_________________________
Julie Kent
MANUFACTURERS' SERVICES LIMITED
By:/s/ Kevin C. Melia
----------------------
Name: Kevin C. Melia
Title: Chairman and
Chief Executive Officer
45
<PAGE>
THE KEVIN C. MELIA 1995 IRREVOCABLE TRUST
By: /s/ Ann Marie Melia
---------------------------
Name:
Title: Trustee
THE ROBERT J. GRAHAM 1995 IRREVOCABLE TRUST
By: ___________________________
Name:
Title: Trustee
THE JULIE KENT 1995 IRREVOCABLE TRUST
By: ___________________________
Name: Julie Kent
Title: Trustee
_______________________________
Kevin C. Melia
_______________________________
Robert J. Graham
_______________________________
Julie Kent
MANUFACTURERS' SERVICES LIMITED
By: ___________________________
Name: Kevin C. Melia
Title: Chairman and
Chief Executive Officer
<PAGE>
THE KEVIN C. MELIA 1995 IRREVOCABLE TRUST
By:____________________________
Name:
Title: Trustee
THE ROBERT J. GRAHAM 1995 IRREVOCABLE TRUST
By:____________________________
Name:
Title: Trustee
THE JULIE KENT 1995 IRREVOCABLE TRUST
By: /s/ Julie Kent, Trustee
---------------------------
Name: Julie Kent
Title: Trustee
_______________________________
Kevin C. Melia
_______________________________
Robert J. Graham
/s/ Julie Kent
- -------------------------------
Julie Kent
MANUFACTURERS' SERVICES LIMITED
By:____________________________
Name: Kevin C. Melia
Title: Chairman and
Chief Executive Officer
<PAGE>
SCHEDULE 2.1(a)
SECURITIES TO BE PURCHASED FROM THE ISSUER
Aggregate
Buyer Securities Purchase Price
----- ---------- --------------
DLJ Merchant Banking 3,290,688 $3,290,688.00
Partners, L.P.
DLJ International 1,477,071 $1,477,071.00
Partners, C.V.
DLJ Offshore Partners, 85,640 $ 85,640.00
C.V.
DLJ Merchant Banking 2,146,601 $2,146,601.00
Funding, Inc.
<PAGE>
Exhibit 2.2
EXECUTION COPY
WARRANT AGREEMENT
This WARRANT AGREEMENT (this "Agreement") is entered into as of August 31,
1995, by and among Manufacturers' Services Limited, a Delaware corporation (the
"Company"), DLJ Merchant Banking Partners, L.P., a Delaware limited partnership
("DLJMBP"), DLJ International Partners, C.V., a Netherlands Antilles limited
partnership ("DLJIP"), DLJ Offshore Partners, C.V., a Netherlands Antilles
limited partnership ("DLJOP"), DLJ Merchant Banking Funding, Inc., a Delaware
corporation ("DLJMBF" and, together with DLJMBP, DLJIP and DLJOP, the "DLJ
Entities") and Bank of America National Trust and Savings Association ("Bank of
America").
A. The Company has issued to Bank of America on the date hereof a Stock
Purchase Warrant, dated August 31, 1995, to purchase 512,030 shares of the
Company's Common Stock, $.0O1 par value, (the "Common Stock") in the form of
Exhibit A hereto. The Common Stock and all other classes of the Company's Common
Stock are referred to collectively as the "Common Stock".
B. The DLJ Entities, the Company and certain other Persons have entered
into a Stockholders Agreement dated as of January 20, 1995 (the "Stockholders
Agreement") relating to the Common Stock.
C. The Company, the DLJ Entities and the Holder believe it is in their
best interest to establish provisions for the future disposition of the Warrants
and Common Stock issued and issuable upon exercise of the Warrants (the "Warrant
Shares") now or hereafter legally or beneficially owned by a Warrantholder or a
permitted transferee, to permit the Holders to become the beneficiary of certain
provisions of the Stockholders Agreement and for certain other matters.
NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
Section 1. Restrictions on Transfer of the Warrants and Warrant Shares.
(a) Restrictions on Transfer; Registration on the Books of the Company. No
Warrantholder may transfer any Warrant or any Warrant Shares without the consent
of the Company except to (i) any of its affiliates; (ii) any Lender as defined
in that certain Multicurrency Credit Agreement among the Company and certain of
its subsidiaries, Bank of America and certain related entities and the financial
institutions parties thereto; or (ii) any party to the Stockholders Agreement.
No transfer of a Warrant shall be effective unless and until registered on the
books of the Company maintained for such purpose, and the Company may treat the
registered holder as the absolute owner of a Warrant for all purposes and the
Person entitled to exercise the rights represented thereby. The Company agrees
to register all requested transfers upon notice from the Holder pursuant to
Section 1(b), provided such transfer is made in compliance with all applicable
federal and state securities laws. Any transferee of a Warrant, by its
acceptance thereof, agrees to be bound by all of the terms and conditions of
such Warrant and the terms of this Agreement.
<PAGE>
(b) Notice of Proposed Transfer. Prior to any proposed transfer of any
Warrant or Warrant Shares, the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer, whereupon the holder of such
Warrant or Warrant Share may transfer such Warrant or Warrant Share in
accordance with the terms of its notice. Each certificate representing the
Warrant or Warrant Share transferred as above provided shall bear the legend set
forth in Section 2, unless (i) such transfer is to the public in accordance with
the provisions of Rule 144 (or any other rule permitting public sale without
registration under the Securities Act) or (ii) the Warrantholder delivers to the
Company an opinion of counsel to the effect that the transferee and any
subsequent transferee (other than an Affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act.
The foregoing restrictions on transferability of any Warrant or Warrant
Shares shall terminate as to any particular Warrant or Warrant Share when such
Warrant or Warrant Share (i) has been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition by the seller or sellers thereof set forth in the
registration statement concerning such shares or (ii) has been sold to the
public in accordance with Rule 144 (or any other rule permitting public sale
without registration under the Securities Act). Whenever a Holder is able to
demonstrate to the Company (and its counsel) that the provisions of Rule 144(k)
of the Securities Act are available to such Holder without limitation, such
Holder shall be entitled to receive from the Company, without expense, a new
certificate not bearing the restrictive legend set forth in Section 2.
Any shares of Common Stock represented by a certificate that does not bear
the legend set forth in Section 2 or any similar legend shall cease to be a
Warrant Share for all purposes of this Agreement.
Section 2. Investment Representation and Legend. A Holder, by acceptance
of a Warrant, represents and warrants to the Company that it is acquiring such
Warrant and the shares of Common Stock (or other securities) issuable upon the
exercise thereof for investment purposes only and not with a view towards the
resale or other distribution thereof and agrees that the Company may affix upon
such Warrant the following legend:
"Neither this Warrant nor the shares issuable upon the exercise of
this Warrant have been registered under the Securities Act of 1933,
as amended; nor under applicable state securities laws and may not
be sold, transferred or otherwise disposed of unless it has been
registered under such laws or an exemption from registration is
available. This Warrant and the shares issuable upon the exercise of
this Warrant are also subject to the additional restrictions on
transfer set forth in the Warrant Agreement dated as of August 31,
1995, copies of which may be obtained upon request from
Manufacturers' Services Limited and any successor thereto."
A Holder, by acceptance of a Warrant, further agrees that the Company may affix
the following legend to certificates for shares of Common Stock issued upon
exercise of such Warrant:
"These securities have not been registered under the Securities Act
of 1933, as amended, nor under applicable state securities laws and
may not be sold, transferred or otherwise disposed of unless they
have been registered under such laws or an exemption from
registration is available. These securities are also subject to the
additional restrictions on transfer set forth in the Warrant
Agreement dated as of August 31, 1995, copies of which may be
-2-
<PAGE>
obtained upon request from Manufacturers' Services Limited and any
successor thereto."
Notwithstanding the foregoing, the Company understands that Bank of America may
transfer a portion of the Warrant to other Lenders in connection with the
syndication of the credit facility pursuant to the Credit Agreement, subject to
applicable securities laws.
Section 3. Lost, Stolen, Mutilated or Destroyed Warrant. If a Warrant or
certificate representing Warrant Shares is lost, stolen, mutilated or destroyed,
the Company shall, on such terms as to indemnity or otherwise as it may in its
discretion reasonably impose (which shall, in the case of a mutilated Warrant or
certificate representing Warrant Shares, include the surrender thereof), issue a
new Warrant or certificate representing Warrant Shares of like denomination and
tenor as the Warrant or certificate so lost, stolen, mutilated or destroyed. Any
such new Warrant or certificate shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant or certificate shall be at any time enforceable by anyone.
Section 4. Representations and Warranties of the Company.
(a) The Company represents that the rights granted to Holders hereunder
and in the Warrants do not conflict with the Certificate of Incorporation or
By-laws of the Company or any agreement to which the Company is a party or by
which its assets are bound. The Company shall not, by amendment of its
Certificate of Incorporation or By-laws or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any voluntary action, avoid or seek to avoid the
observance or performance of the terms of this Agreement or any Warrant, but
shall in good faith assist in the carrying out of such terms and in the taking
of such action as may reasonably be necessary in order to implement same.
(b) The Company represents and warrants that attached as Exhibit B hereto
is a true, complete and accurate description of the capitalization of the
Company as of the date hereof.
Section 5. Registration Rights.
(a) Each Holder shall be entitled to incidental registration rights with
respect to the Warrant Shares as are set forth in Section 5.2 of the
Stockholders Agreement as though it were a DLJ Entity and the Warrant Shares of
such Holder requested to be included in such registration shall be treated as if
such Warrant Shares were Benchmark Shares (as defined in the Stockholders
Agreement); provided that no such rights shall be available in any Initial
Public Offering (as defined in the Stockholders' Agreement) unless any DLJ
Entity shall be exercising its rights to incidental registration in accordance
with such Section 5.2. To the extent any Warrant Shares are treated as if they
were Benchmark Shares, a corresponding number of shares held by DLJ Entities
shall be deemed not to be Benchmark Shares for purposes of the Stockholders'
Agreement.
(b) If a Holder elects to sell Warrant Shares pursuant to paragraph (a)
above, such Holder shall be considered to be a Stockholder and a DLJ Entity, as
the case may be, for all relevant purposes of Sections 5.2, 5.3, 5.4, 5.5, 5.6,
5.7, 5.8, 5.9 and 5.10 of the Stockholders Agreement, except that such Holder
shall not have the right (i) to select underwriters pursuant to Section 5.4(f)
and (ii) to select legal counsel pursuant to Section 5.7. The rights granted
under this Section 5(b) are subject to the terms and conditions contained in the
Stockholders Agreement and only apply to Warrant Shares which are Registrable
Stock at the time a Holder requests that such Warrant Shares be registered.
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<PAGE>
(c) Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of Majority Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are more favorable
than the registration rights granted to the Holders hereunder.
Section 6. Certain Transfer Rights.
(a) Right to Participate in Certain Transfers. If any of the DLJ Entities
(the "Selling DLJ Entity") proposes to sell (the "Proposed Sale") in one or more
series of related transactions shares of Common Stock to a Third Party (as
defined in the Stockholders Agreement), the Selling DLJ Entity shall provide
written notice (the "Sale Notice") of such proposed sale to the Holders;
provided that none of the rights described in this Section 6(a) shall apply (i)
to transfers to Permitted Transferees (as defined in the Stockholders Agreement)
of such DLJ Entity or Entities or (ii) to transfers pursuant to a Public
Offering (as defined in the Stockholders Agreement) or Rule 144. The Sale Notice
shall identify the number of shares of Common Stock subject to the Proposed
Sale, the proposed consideration per share for which the Proposed Sale (the
"Sale Price") is to be made and all other material terms and conditions thereof.
Each Holder, as to Warrant Shares held by it, shall have the option, exercisable
by irrevocable written notice to the Selling DLJ Entity within 15 days after
receipt of the Sale Notice (the "Sale Period"), to participate in the Proposed
Sale for a number of Warrant Shares held by such Holder equal to such Holder's
Pro Rata Portion (as defined below) (the "Participating Shares"); provided that
if the aggregate number of shares of Common Stock (including the Warrant Shares
to be sold by the Selling DLJ Entity and the Holders in such Proposed Sale
exceeds the number of shares that such Third Party is willing to purchase (the
"Purchase Shares"), then the number of shares of Common Stock to be sold by the
Selling DLJ Entity shall be an amount equal to the Purchase Shares reduced by
the number of Warrant Shares to be sold by the participating Holders. "Pro Rata
Portion" means, with respect to each Holder at the time of the Proposed Sale,
the number (rounded up to the nearest whole number) of Warrant Shares owned by
such Holder equal to (i) the number of shares of Common Stock subject to the
Proposed Sale identified in the Sale Notice divided by 25 multiplied by (ii) a
fraction the numerator of which is the number of Warrant Shares owned by such
Holder and the denominator of which is the aggregate number of Warrant Shares
outstanding. Each participating Holder shall deliver to the Selling DLJ Entity
the certificate or certificates representing the Participating Shares of such
Holder, together with a limited power-of-attorney authorizing the Selling DLJ
Entity to transfer such shares pursuant to the terms and conditions set forth in
the Sale Notice. Delivery of the certificate or certificates representing the
Participating Shares to be transferred and the limited power-of-attorney
authorizing the Selling DLJ Entity to transfer such shares shall constitute an
irrevocable acceptance of the Proposed Sale by the Holder.
(b) If a Holder elects to sell Warrant Shares pursuant to paragraph (a)
above, such Holder shall be considered to be an Other Stockholder for all
relevant purposes of Sections 4.1(b), (c), (d), (e) and (f) of the Stockholders
Agreement and, for purposes thereof, the Selling DLJ Entity shall be considered
to be the "Section 4.1 Seller", the Proposed Sale shall be considered to be the
"Section 4.1 Sale"), the Sale Notice shall be considered to be the "Section 4.1
Notice", the Sale Price shall be considered to be the "Section 4.1 Sale Price"
and the Sale Period shall be considered to be the "Section 4.1 Notice Period."
The rights granted under this Section 6(b) are subject to the terms and
conditions contained in the Stockholders Agreement.
(c) Notwithstanding anything herein or in the Stockholders Agreement to
the contrary, in connection with its participation in any sale by a Selling DLJ
Entity, each Holder shall comply with all of the terms and conditions with which
DLJ must comply in such transaction, including, but not limited to, any
representations and warranties as to title to the Warrants (or Warrant Shares)
being transferred and any indemnities granted to the prospective purchaser;
provided, however, that any such Holder shall not be required to make any
representation or warranty to any third party other than (a) a representation
and warranty to the effect that, at the closing of the purchase and sale, the
Holder will have title to the subject
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<PAGE>
Warrants (or Warrant Shares) free and clear of all liens, and (b) customary,
nonoperational representations and warranties not pertaining to the financial
condition or operations of MSL or its affiliates (such as those relating to the
Holder's authority to enter into the transaction) and that no Holder shall be
required to indemnify any purchaser other than for any breach of its own
representations and warranties.
(d) Right to Compel Participation in Certain Transfers. Each Holder hereby
agrees to be bound by the provisions of Section 4.2 of the Stockholders
Agreement as if it were an Other Stockholder.
Section 7. Certain Agreements. Each Holder agrees to be bound by this
Agreement and by Section 4.1 (other than Section 4.1(a)) and Article V (other
than Section 5.1) of the Stockholders Agreement (the "Applicable Provisions") as
if it were a Stockholder, Other Stockholder and a DLJ Entity, as the context so
requires (except as otherwise specifically provided for in this Agreement). The
rights and obligations of a Holder under Sections 5 and 6 hereof may be
transferred to any other Person in connection with a transfer of the Warrant
Shares by a Holder (other than a transfer which results in the Warrant Shares
ceasing to be Registrable Stock), provided that the Company is given written
notice at the time of or within a reasonable time after such transfer of the
name and address of the transferee. Each Holder shall cause any transferee
(other than a transferee in a transfer which results in the Warrant Shares
transferred ceasing to be Registrable Stock) of the Warrant Shares to execute an
Agreement, in form and substance satisfactory to the Company and DLJ Entities,
agreeing to be bound by this Agreement and the Applicable Provisions.
Section 8. Financial Statements, Reports, Etc.
(a) Until such time as the Company becomes subject to the periodic
reporting provisions of the Exchange Act, so long as any Holder shall hold
Warrants or Warrant Shares, as the case may be, the Company shall furnish to
such Holder:
(i) within 100 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its subsidiaries
as of the end of such fiscal year and the related consolidated statements
of income, changes in shareholders' equity and cash flows of the Company
and its subsidiaries for the fiscal year then ended, together with
supporting notes thereto, certified in accordance with generally accepted
accounting principles, without qualification as to scope of audit, by
Price Waterhouse or another firm of independent public accountants of
recognized national standing selected by the Company and reasonably
acceptable to the Holder,
(ii) within 45 days after the end of each fiscal quarter (other than
the last quarter in each fiscal year), a consolidated balance sheet of the
Company and its subsidiaries and the related consolidated statement of
income, unaudited but certified by the principal financial officer of the
Company, such balance sheets to be as of the end of such quarter and such
statements of income to be for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter, in each case
subject to normal year-end adjustments and without supporting notes;
(iii) prompt notice of (x) any event of default under any agreement
with respect to material indebtedness for borrowed money or a material
purchase money obligation, and any event which, upon notice or lapse of
time or both, would constitute such an event of default which would permit
the holder of such indebtedness or obligation to accelerate the maturity
thereof, and (y) any action, suit or proceeding at law or in equity or by
or before any governmental instrumentality or agency which, if adversely
determined, would materially impair the right of the Company or any of its
subsidiaries to carry on its business substantially as now or then
conducted, or materially affect the business, operations, properties,
assets or financial condition of the Company and its subsidiaries taken as
a whole; and
-5-
<PAGE>
(iv) promptly, from time to time, such other information regarding
the operations, business, affairs and financial condition of the Company
or any subsidiary as the Holder may reasonably request.
(b) At such time as the Company becomes subject to the periodic reporting
provisions of the Exchange Act, the Company shall provide each Holder promptly
upon filing, copies of all final or effective registration statements,
prospectuses, periodic reports and other documents filed by the Company or any
of its subsidiaries with the Commission.
Section 9. Notice of Certain Actions. In the event that at any time:
(a) the Company shall authorize the issuance to all holders of its
Common Stock of any shares of capital stock of the Company convertible
into Common Stock; or
(b) the Company shall authorize the distribution to all holders of
its Common Stock of evidences of its indebtedness or assets; or
(c) the Company shall authorize any capital reorganization or
reclassification of the Common Stock (other than a subdivision or
combination of the outstanding Common Stock and other than a change in par
value of the Common Stock) or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required (other than a consolidation of merger in which the
Company is the continuing corporation and that does not result in any
reclassification or change of the Common Stock outstanding), or of the
conveyance or transfer of the properties and assets of the Company
substantially as an entirety; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then the Company shall cause to be mailed by certified mail to each Holder, at
least 20 days prior to the applicable record or effective date hereinafter
specified, a notice describing such issuance, distribution, reorganization,
reclassification, consolidation, conveyance, transfer, dissolution, liquidation,
or winding-up and stating (i) the date as of which the holders of Common Stock
or record entitled to receive any such convertible securities or distributions
are to be determined or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.
Section 10. Notices. All notices, requests and other communications
required or permitted to be given or delivered hereunder shall be in writing,
and shall be transmitted by telex or telecopy, sent by national overnight
courier service or sent by certified or registered mail, postage prepaid and
addressed, if to a Holder, to such Holder's address shown on the records of the
Company or at such other address as shall have been furnished to the Company by
notice from such Holder and, if to the Company, addressed to the Company at its
principal executive offices, Attention: President; or at such other address as
shall have been furnished to the Holder by notice from the Company and otherwise
pursuant to the provisions of Section 12.02 of the Credit Agreement.
Section 11. Certain Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
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<PAGE>
"Affiliate" of any particular person or entity means any other
person or entity controlling, controlled by or under common control with
such particular person or entity.
"Credit Agreement" shall mean that certain Multi-currency Credit
Agreement dated as of August 31, 1995 among the Company, Manufacturers'
Services Limited - Roseville, Inc., a Minnesota corporation, MSL SPV
Spain, a special purpose Delaware corporation, MSL SPV Ireland, a special
purpose Delaware corporation, Bank of America (in its role as Agent,
Collateral Agent and Issuing Bank), Bank of America International Limited,
as Sub-Agent and the Lenders (as defined therein).
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" means a holder of a Warrant or Warrant Shares.
"Lenders" shall have the meaning given in the Credit Agreement.
"Majority Holders" means Bank of America for so long as it is the
largest Holder of Warrants based upon the number of shares of Common Stock
into which such Warrants are exercisable or have been exercised for) and
Warrant Shares or, if Bank of America is no longer the largest Holder of
Warrants (based upon the number of shares of Common Stock into which such
Warrants are exercisable or have been exercised for), and Warrant Shares
Holders holding a majority of the aggregate Warrants (based upon the
number of shares of Common Stock into which such Warrants are exercisable
or have been exercised for) and Warrant Shares.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time,
or any similar successor rule that may be promulgated by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Value" means, in respect of any share of Common Stock or Warrant on
any date herein specified:
(a) in case there is a public market for Common Stock, the average
closing price for any such shares on the largest exchange on which such
shares are traded (or if not traded on an exchange, then the average of
the closing bid and ask prices quoted over-the-counter) over the ten
trading days prior to the date of the determination; and
(b) in case there is no public market for the Common Stock, the fair
salable value of such shares as of the last day of the most recent fiscal
month prior to such date specified, as mutually agreed upon by the Company
and the Majority Holders. If no agreement is reached by such parties
described in the immediately preceding sentence within 10 business days,
the determination of Value shall be made by an independent firm of
investment bankers of recognized national standing mutually acceptable to
the Majority Holders and the Company. The Company shall pay all costs and
fees associated with any appraisal of Value.
If Value is being determined pursuant to clause (b) above, the Value
as of any date shall be determined on the basis of the value of the
Company as a going concern, based on such valuation criteria as the
investment bankers selected pursuant to clause (b)
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<PAGE>
above shall determine. The determination further shall be based on the
assumption that immediately prior to such determination all warrants,
rights and options to purchase Common Stock or Convertible Securities were
exercised and all convertible securities were converted into Common Stock.
Such determination shall be made without discounting for minority
interest.
"Warrants" means the Stock Purchase Warrant identified in Paragraph
A on the first page of this Agreement and all other Stock Purchase
Warrants of like tenor thereto (differing as to date, identity of holder,
number of shares purchasable thereunder and other matters resulting from
events subsequent to the date of issue of the original Stock Purchase
Warrant) issued upon one or more subdivisions, exercises in part,
surrenders in part, transfers or replacements of such Stock Purchase
Warrant.
Section 12. Amendment. No provision of this Agreement or the Warrant may
be amended or otherwise modified except by an instrument in writing executed by
the Company and the DLJ Entities and approved by the Majority Holders. The DLJ
Entities and the Company agree not to amend Article IV or Article V of the
Stockholders Agreement in a manner adverse to the Holders without the consent of
the Majority Holders which consent shall not be unreasonably withheld.
Section 13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
MANUFACTURERS' SERVICES LIMITED
By: /s/ [Illegible]
--------------------------------
Title: Asst Treasurer
-----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ [Illegible]
--------------------------------
Title: Managing Director
-----------------------------
DL MERCHANT BANKING PARNTERS, L.P.
By: DLJ Merchant Banking, Inc.
Managing General Partner
By: /s/ David B. Wilson
--------------------------------
Title: Sr. Vice President
-----------------------------
DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ Merchant Banking, Inc.
Advisory General Partner
By: /s/ David B. Wilson
--------------------------------
Title: Sr. Vice President
-----------------------------
DLJ OFFSHORE PARTNERS, C.V.
By: DLJ Merchant Banking, Inc.
Advisory General Partner
By: /s/ David B. Wilson
--------------------------------
Title: Sr. Vice President
-----------------------------
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<PAGE>
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ David B. Wilson
--------------------------------
Title: Atty in fact
-----------------------------
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<PAGE>
EXHIBIT A
[FORM OF WARRANT]
A-1
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NOR UNDER APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH LAWS OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE
OF THIS WARRANT ARE ALSO SUBJECT TO THE ADDITIONAL
RESTRICTIONS ON TRANSFER SET FORTH IN THE WARRANT
AGREEMENT DATED AS OF AUGUST 31, 1995 AMONG
MANUFACTURERS' SERVICES LIMITED AND THE OTHER PARTIES
LISTED ON THE SIGNATURE PAGES THEREOF, COPIES OF WHICH
MAY BE OBTAINED UPON REQUEST FROM MANUFACTURERS'
SERVICES LIMITED AND ANY SUCCESSOR THERETO.
August 31, 1995
STOCK PURCHASE WARRANT
To Purchase Common Stock of
MANUFACTURERS' SERVICES LIMITED
-------------------------------
THIS CERTIFIES that, for value received, BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION ("Bank of America"), or its registered assigns, is
entitled to subscribe for and purchase from Manufacturers' Services Limited, a
Delaware corporation, (the "Company"), at the price of $1.00 per share (such
price, as from time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time or from time to time on or
after the date hereof, up to (subject to adjustment as hereinafter provided)
512,030 fully paid and nonassessable shares of Common Stock, $.001 par value
("Common Stock"), of the Company (such shares of Common Stock issued or issuable
upon exercise of this Warrant being referred to herein as the "Warrant Shares"),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.
Section 1. Exercise of Warrant. This Warrant may be exercised by the
holder hereof (the "Warrantholder"), in whole or in part (but not as to a
fractional share of Common Stock), by the completion of the subscription form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
executive office of the Company (or at such other agency or office of the
Company in the United States as it may designate by notice in writing to the
holder hereof at the address of the holder hereof appearing on the books of the
Company), and by payment to the Company of the Warrant Price at the election of
such holder (i) in cash or by certified or official bank check payable to the
order of the Company, in the aggregate amount of the Warrant Price applicable to
the number of Warrant Shares for which this Warrant is being exercised or (ii)
if a public market exists for the Company's stock, by receiving from the Company
the number of Warrant Shares equal to the number of Warrant Shares otherwise
issuable upon such exercise less the number of Warrant Shares having a Value (as
hereafter defined) on the date of exercise equal to the Warrant Price applicable
to the number of Warrant Shares for which this Warrant is being exercised. In
the event or any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the holder, shall be delivered to the holder hereof
within a reasonable time, not exceeding ten business days, after the rights
represented by this Warrant shall have been so exercised; and, unless this
Warrant has been exercised in full, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then
<PAGE>
have been exercised shall also be issued to the holder hereof within such time.
With respect to any such exercise, the holder hereof shall, as between the
Company and the holder hereof, for all purposes be deemed to have become the
holder of record of the number of shares of Common Stock evidenced by such
certificate or certificates from the date on which this Warrant was surrendered
and payment of the Warrant Price was made irrespective of the date of delivery
of such certificate, except that, if the date of such surrender and payment is a
date on which the stock transfer books of the Company are closed, such person
shall, as between the Company and the holder hereof, be deemed to have become
the holder of such shares at the close of business on the next succeeding date
on which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant. If any fractional interest in a share of Common
Stock would, except for the provisions of this Section 1, be delivered upon any
such exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the holder hereof an amount in cash equal to the Value of such
fractional interest.
Section 2. Adjustment of Number of Shares. Upon each adjustment of the
Warrant Price as provided herein except any adjustment pursuant to Sections
3(a), (b), (c) or (f) hereof, the holder of this Warrant shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable pursuant hereto immediately prior to
such adjustment and dividing the product thereof by the Warrant price resulting
from such adjustment. If, in calculating the number of shares as aforesaid, any
fraction of a share is rounded off, the portion so rounded off shall be carried
over and applied to the next immediately following adjustment of the Warrant
Price, if any.
Section 3. Adjustment of Warrant Price.
(a) Subdivision or Combination of Stock. In case the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to such subdivision shall
be proportionately reduced, i.e., the holder shall be entitled to purchase after
such subdivision, for the same consideration as applicable prior to such
subdivision, the same percentage of outstanding Common Stock that such holder
was entitled to purchase prior to such subdivision, and conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Warrant Price in effect immediately prior to such combination shall
be proportionately increased.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization or reclassification of the capital stock of the
Company or any consolidation or merger of the Company with another corporation,
or the sale of all or substantially all its assets to another corporation; shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision will be made
whereby the holder of this Warrant shall thereafter have the right upon exercise
thereof to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
receivable upon the exercise of this Warrant such shares of stock, securities or
assets (including cash) as may be issued or payable with respect to or in
exchange for a number of outstanding shares of Common Stock equal to the number
of shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Warrant Price)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of this
Warrant. The Company will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor corporation (if other
than the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and mailed or
delivered to the Warrantholder at the last address of Warrantholder appearing on
the books of the Company, the obligation to deliver to
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<PAGE>
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive.
(c) Adjustment. If at any time the Company shall issue any shares of
Common Stock (other than Excluded Stock, as defined in paragraph (g) below) or
any shares of a class or series convertible into Common Stock (other than
Excluded Stock) or any Rights or Related Rights (as defined below) (collectively
with the Common Stock, "Securities") (other than a dividend or other
distribution payable in Common Stock or Convertible Securities (as defined
below), to which paragraph (e) below applies) for a consideration per share (the
consideration in each case to be determined in the manner provided in (v) and
(vi) of paragraph (d) below) less than the Warrant Price per share of the Common
Stock in effect immediately prior to the issuance of such Securities, the
Warrant Price in effect immediately prior to each such issuance shall forthwith
be adjusted to a Warrant Price (i) equal to such lesser amount per share if such
issuance occurs prior to March 1, 1996 or (ii) if the issuance occurs on or
after March 1, 1996, to a price determined by multiplying such Warrant Price in
effect immediately prior to the issuance of such Securities by a fraction, (A)
the numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Securities so issued would purchase at such Warrant Price; and
(B) the denominator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue plus (2) the number of such
Securities so issued.
(d) Adjustment Considerations. For the purpose of any adjustment of the
Warrant Price pursuant to paragraph (c) above, the following provisions shall be
applicable:
(i) In the case of the issuance of options or warrants to purchase,
or rights to subscribe for, Common Stock other than Excluded Stock
(collectively, the "Rights"), the aggregate maximum number of shares of
Common Stock deliverable upon exercise of the Rights shall be deemed to
have been issued at the time the Rights were issued, for a consideration
equal to the consideration (determined in the manner provided in (v) and
(vi) below), if any, received by the Company upon the issuance of the
Rights, plus the minimum purchase price provided in the Rights for the
Common Stock covered thereby; provided, that such shares of Common Stock
deliverable upon the exercise of the Rights shall not be deemed to have
been issued unless such consideration per share would be less than the
Warrant Price on the date of and immediately prior to such issuance.
(ii) In the case of the issuance of securities by their terms
convertible into or exchangeable for Common Stock other than Excluded
Stock (collectively, the "Convertible Securities"), or options or warrants
to purchase, or rights to subscribe for, securities by their terms
convertible into or exchangeable for Common Stock other than Excluded
Stock (collectively, the "Related Rights") the aggregate maximum number of
shares of Common Stock deliverable upon conversion, exchange or exercise
of any Convertible Securities or Related Rights shall be deemed to have
been issued at the time the Convertible Securities or the Related Rights
were issued and for a consideration equal to the consideration received by
the Company upon the issuance of the Convertible Securities or the Related
Rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion, exchange or exercise of the
Convertible Securities or Related Rights (the consideration in each case
to be determined in the manner provided in (v) and (vi) below); provided,
that such shares of Common Stock deliverable upon such conversion,
exchange or exercise of the Convertible Securities or Related Rights shall
not be deemed to have been issued unless such consideration per share
would be less than the Warrant Price on the date of and immediately prior
to such issuance.
(iii) On any change in the number of shares of Common Stock
deliverable upon the exercise of the Rights or Related Rights or upon the
conversion, exchange or exercise of the Convertible Securities or on any
change in the minimum purchase price of the Rights, Related Rights or
Convertible Securities other than a change resulting
-3-
<PAGE>
from the antidilution provisions of the Rights, Related Rights or
Convertible Securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have been obtained had the adjustment made
upon the issuance of such Rights, Related Rights or Convertible Securities
not converted, exchanged or exercised prior to such change, been made upon
the basis of such change.
(iv) On the expiration of any of the Rights, Related Rights or
Convertible securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have been obtained had the adjustment made
upon the issuance of such Rights or Related Rights or the issuance of any
such Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the conversion, exchange or
exercise of any such Convertible Securities.
(v) In the case of the issuance of Securities for cash, the
consideration shall be deemed to be the amount of cash paid therefor.
(vi) In the case of the issuance of Securities for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair value thereof as determined in good faith
by the Board of Directors of the Company.
(e) Dividend, Other Distribution, Subdivision or Combinations. If the
Company declares a dividend or other distribution payable in Common Stock or
Convertible Securities, then the Warrant Price in effect immediately prior to
such dividend or other distribution, shall forthwith be adjusted to that price
determined by multiplying the Warrant Price by a fraction (x) the numerator of
which shall be the total number of outstanding shares of Common Stock
immediately prior to such dividend, other distribution, subdivision or
combination and (y) the denominator of which shall be the total number of
outstanding shares of Common Stock (including the number of shares of Common
Stock into which such newly issued Convertible Securities may be convertible)
immediately after such dividend, other distribution, subdivision or combination.
(f) Effect of Distributions In Kind. If the Corporation shall distribute
to the holders of its Common Stock shares of its capital stock (other than
Securities), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options, warrants or rights (excluding Rights or Related Rights),
then, in each such case, immediately following the record date fixed for the
determination of the holders of Common Stock entitled to receive such
distribution, the Warrant Price in effect thereafter shall be determined by
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction (A) the numerator of which shall be an amount equal to the remainder
of (x) the Value immediately prior to such record date of one share of Common
Stock less (y) the Value (as determined in good faith by the Corporation's Board
of Directors) of the stock, securities, evidences of indebtedness, assets,
options, warrants or rights so distributed in respect of one share of common
Stock, as the case may be, and (B) the denominator of which shall be the Value
immediately prior to such record date of one share of Common Stock. Such
adjustment shall be made on the date such distribution is made, and shall become
effective at the opening of business on the business day following the record
date for the determination of stockholders entitled to such distribution.
(g) Excluded Stock. As used in this Section 3, "Excluded Stock" shall mean
shares of Common Stock issuable (i) upon the exercise of options issued by the
Company to its present or future employees, officers, directors or Consultants
(other than directors or Consultants affiliated with DLJ Merchant Banking
Partners, L.P. or an affiliate thereof) to purchase shares of Common Stock in
connection with or pursuant to any employee benefit or compensation plan or
employment arrangement approved by the Board of Directors, whether currently in
existence or created hereafter; or (ii) to any party to the Stockholders
Agreement (or any Permitted Transferee, as defined therein) as permitted or
contemplated by the terms of Section 2.7(a) of such Agreement as in effect on
January 20, 1995 or pursuant to those certain side letters executed on such date
by the Company and delivered to Bank of America on or prior to the
-4-
<PAGE>
date hereof; or (iii) in connection with any acquisition of stock or assets by
the Company; provided, however, that the number of shares of Common Stock set
forth in this Section 3(g) shall be adjusted for any stock dividends,
combinations or splits. For purposes of this Section 3(g), "Consultant" shall
mean a person providing bona fide services to the Company on a regular and
on-going basis.
(h) Notice of Adjustment. Upon any adjustment of the Warrant Price, then
and in each such case the Company shall give written notice thereof, within ten
(10) days of the event causing such adjustment, by first class mail, postage
prepaid, addressed to the Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon written
request of the Warrantholder said calculation shall be verified in writing by
the Company's independent auditors.
(i) Stock to Be Reserved. The Company will at all times reserve and keep
available out of its authorized Common Stock or its treasury shares, solely for
the purpose of issue upon the exercise of this Warrant as herein provided, such
number of shares of Common Stock as shall then be issuable upon the exercise of
this Warrant. The Company covenants that all shares of Common Stock which shall
be so issued shall be duly and validly issued and fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, the Company covenants
that it will from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all times equal to
or less than the effective Warrant Price. The Company will take all such action
as may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock of
the Company may be listed. The Company will not take any action that results in
any adjustment of the Warrant Price if the total number of shares of Common
Stock issued and issuable after such action upon exercise of this Warrant would
exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation (as amended from time to time). The
Company has not granted and will not grant any right of first refusal with
respect to the Warrant Shares, and there are no preemptive rights associated
with the issuance of Warrant Shares.
(j) Issue Tax. The issuance of certificates for Warrant Shares shall be
made without charge to the holder hereof for any issuance tax in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than that of the Warrantholder.
(k) Closing of Books. The Company will at no time close its transfer books
against the transfer of the shares of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant.
(l) Definition of Common Stock. As used herein, the term "Common Stock"
shall mean and include all classes of Common Stock, $.001 par Value; of the
Company as authorized on September 1, 1995 and also any capital stock of any
class of the Company hereinafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company; provided,
however, that the shares purchasable pursuant to this Warrant shall include only
shares designated as Common Stock, $.001 par value, of the Company on September
1, 1995, or shares of any class or classes resulting from any reclassification
or reclassifications thereof which are not limited to any such fixed sum or
percentage and are not subject to redemption by the Company and in case at any
time there shall be more than one such resulting class, the shares of each class
then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
-5-
<PAGE>
(m) Each holder of this Warrant acknowledges that this Warrant and the
Common Stock issuable hereunder (the "Warrant Shares") have not been registered
under the Securities Act of 1933, as amended (the "Act"), and agrees not to
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Shares issued upon its exercise in the absence of an
effective registration statement under the Act as to this Warrant or such
Warrant Shares and registration or qualification of this Warrant or such Warrant
Shares under any applicable Blue Sky or state securities law then in effect, or
an exemption therefrom. Each certificate or other instrument for Warrant Shares
issued upon the exercise of this Warrant shall bear a legend substantially as
set forth below.
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, NOR UNDER APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE. THESE SECURITIES ARE ALSO SUBJECT TO THE
ADDITIONAL RESTRICTIONS ON TRANSFER SET FORTH IN THE WARRANT
AGREEMENT DATED AS OF AUGUST 31, 1995, COPIES OF WHICH MAY BE
OBTAINED UPON REQUEST FROM MANUFACTURERS' SERVICES LIMITED AND ANY
SUCCESSOR THERETO."
Section 4. No Stockholder Rights or Liabilities. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof shall give rise to any
liability of such holder for the Warrant Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 5. Warrant Agreement. This Warrant is issued pursuant to, and is
subject to, the terms of the Warrant Agreement dated as of August 31, 1995
between the Company and Bank of America (the "Warrant Agreement").
Section 6. Definitions. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Warrant Agreement.
-6-
<PAGE>
Section 7. Notices. All notices, requests and other communications
required or permitted to be given or delivered hereunder shall be given in the
manner provided in the Warrant Agreement.
IN WITNESS WHEREOF, Manufacturers' Services Limited has executed this
Warrant on and as of the day and year first above written.
Manufacturers' Services Limited
By: __________________________________
Title: __________________________________
Attest:
______________________________
(Signature)
______________________________
(Print name)
______________________________
(Title)
-7-
<PAGE>
SUBSCRIPTION FORM TO BE EXECUTED
UPON EXERCISE OF THE WARRANT
Date: ____________________
Manufacturers' Services Limited:
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase _____________ shares of
Common Stock of Manufacturers' Services Limited covered by such Warrant, and
herewith tenders (i) $_____________ or (ii) ________________________ Warrant
Shares, in full payment of the purchase price for such shares.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By ______________________________________
Title ___________________________________
Address _____________________________
_____________________________
-8-
<PAGE>
EXHIBIT B
TOTAL SHARES OUTSTANDING AND RESERVED
Type of Stock No. of Shares
- ------------- -------------
Preferred Stock None
Common Stock 20,850,000(1)
Options(2) None
- --------------------
(1) Excludes 30,000,000 shares to be issued to DLJ Merchant Banking Partners,
L.P. and affiliates on September 1, 1995 and 353,000 shares to be issued to the
Trustee of Omnitron Limited shareholders.
(2) It is contemplated that MSL will adopt a management stock option plan that
will provide for options to purchase a total of 8,500,000 shares of common stock
to be granted to management of the Company at exercise prices ranging from $1.00
to $5.00 per share. 6,000,000 of such options will have vesting schedules based
on the Company's achieving certain financial performance thresholds.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that DLJ Merchant Banking Funding, Inc., a
Delaware Corporation, hereby constitutes and appoints DAVID WILSON as its true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for it and in its name, place and stead, in any and all
capacities, to sign any and all documents in connection with the closing of the
closing of the financing of MANUFACTURERS' SERVICES LIMITED, a Delaware
Corporation, to be held on September 1, 1995, or any adjournment thereof,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as it might or could do
in person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. This appointment shall expire thirty days from the date hereof.
Dated: August 30, 1995
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Ivy Dodes
--------------------------------
Ivy Dodes
Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that DLJ Merchant Banking Partners, L.P.,
a Delaware Partnership, hereby constitutes and appoints DAVID WILSON as its true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for it and in its name, place and stead, in any and all
capacities, to sign any and all documents in connection with the closing of the
closing of the financing of MANUFACTURERS' SERVICES LIMITED, a Delaware
Corporation, to be held on September 1, 1995, or any adjournment thereof,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as it might or could do
in person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. This appointment shall expire thirty days from the date hereof.
Dated: August 30, 1995
DLJ MERCHANT BANKING PARTNERS, L.P.
By: DLJ MERCHANT BANKING, INC.
By: /s/ Ivy Dodes
--------------------------------
Ivy Dodes
Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that DLJ International Partners, C.V., a
Netherlands Antilles Limited Partnership, hereby constitutes and appoints DAVID
WILSON as its true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for it and in its name, place and stead, in any
and all capacities, to sign any and all documents in connection with the closing
of the financing of MANUFACTURERS' SERVICES LIMITED, a Delaware Corporation, to
be held on September 1, 1995 or an adjournment thereof, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as it might or could do in
person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. This appointment shall expire thirty days from the date hereof.
Dated: August 30, 1995
DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.
By: /s/ Ivy Dodes
--------------------------------
Ivy Dodes
Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that DLJ Offshore Partners, CV., a
Netherlands Antilles Limited Partnership, hereby constitutes and appoints DAVID
WILSON as its true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for it and in its name, place and stead, in any
and all capacities, to sign any and all documents in connection with the closing
of the financing of MANUFACTURERS' SERVICES LIMITED, a Delaware Corporation, to
be held on September 1, 1995 or an adjournment thereof, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as it might or could do in
person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. This appointment shall expire thirty days from the date hereof.
Dated: August 30, 1995
DLJ OFFSHORE PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.
By: /s/ Ivy Dodes
--------------------------------
Ivy Dodes
Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that DLJ Merchant Banking Partners, LP., a
Delaware Partnership, hereby constitutes and appoints DAVID WILSON as its true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for it and in its name, place and stead, in any and all
capacities, to sign any and all documents relating to the current financing of
MANUFACTURERS' SERVICES LIMITED, a Delaware Corporation, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as it might or could do in
person, thereby ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Dated: August 30, 1995
DLJ MERCHANT BANKING PARTNERS, L.P.
By: DLJ MERCHANT BANKING, INC.
By: /s/ Ivy Dodes
--------------------------------
<PAGE>
PREFERRED STOCK AND WARRANT
SUBSCRIPTION AGREEMENT
dated as of
November 26, 1999
among
MANUFACTURERS' SERVICES LIMITED
and
THE BUYERS NAMED HEREIN
relating to the purchase and sale
of
Preferred Stock
and
Warrants
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ................................................... 1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale ............................................. 6
SECTION 2.02. Closing ....................................................... 6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.01. Corporate Existence and Power ................................. 7
SECTION 3.02. Corporate Authorization ....................................... 7
SECTION 3.03. Governmental Authorization .................................... 7
SECTION 3.04. Noncontravention .............................................. 7
SECTION 3.05. Capitalization and Voting Rights of the Seller ................ 8
SECTION 3.06. Valid Issuance of Securities .................................. 8
SECTION 3.07. Subsidiaries .................................................. 9
SECTION 3.08. Financial Statements .......................................... 9
SECTION 3.09. Absence of Certain Changes .................................... 10
SECTION 3.10. No Undisclosed Material Liabilities ........................... 11
SECTION 3.11. Material Contracts ............................................ 12
SECTION 3.12. Compliance with Laws and Court Orders; No Defaults ............ 13
SECTION 3.13. Litigation .................................................... 14
SECTION 3.14. Properties .................................................... 14
SECTION 3.15. Insurance Coverage ............................................ 15
SECTION 3.16. Licenses and Permits .......................................... 16
SECTION 3.17. Due Diligence Documents; Disclosure ........................... 16
SECTION 3.18. Finders' Fees ................................................. 16
SECTION 3.19. Labor Matters ................................................. 16
SECTION 3.20. Inventories ................................................... 17
SECTION 3.21. Receivables ................................................... 17
SECTION 3.22. Environmental Matters ......................................... 17
<PAGE>
PAGE
----
SECTION 3.23. Employee Benefit Plans ........................................ 18
SECTION 3.24. Seller's Taxes ................................................ 19
SECTION 3.25. Certain Interests ............................................. 20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYERS
SECTION 4.01. Existence and Power ........................................... 21
SECTION 4.02. Authorization ................................................. 21
SECTION 4.03. Governmental Authorization .................................... 21
SECTION 4.04. Purchase for Investment ....................................... 22
SECTION 4.05. Private Placement ............................................. 22
SECTION 4.06. Litigation .................................................... 22
SECTION 4.07. Brokers or Finders' Fees ...................................... 22
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to Obligations of Each Buyer and the Seller ........ 22
SECTION 5.02. Conditions to Obligation of Each Buyer ........................ 23
SECTION 5.03. Conditions to Obligation of the Seller ........................ 24
ARTICLE 6
SURVIVAL; INDEMNIFICATION
SECTION 6.01. Survival ...................................................... 25
SECTION 6.02. Indemnification ............................................... 25
SECTION 6.03. Exclusivity ................................................... 25
ARTICLE 7
TERMINATION
SECTION 7.01. Grounds for Termination ....................................... 26
SECTION 7.02. Effect of Termination ......................................... 26
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices ....................................................... 27
SECTION 8.02. Amendments and Waivers ........................................ 28
SECTION 8.03. Expenses; Other Payments ...................................... 28
iii
<PAGE>
SECTION 8 04. Successors and Assigns ........................................ 28
SECTION 8 05. Governing Law ................................................. 29
SECTION 8.06. Jurisdiction .................................................. 29
SECTION 8.07. Waiver Of Jury Trial .......................................... 29
SECTION 8.08. Counterparts; Third Party Beneficiaries ....................... 29
SECTION 8.09. Entire Agreement .............................................. 29
SECTION 8.10. Captions ...................................................... 30
SECTION 8.11. Severability .................................................. 30
SECTION 8.12. Interpretation ................................................ 30
Schedule A Schedule of Investors
Exhibit A Form of Certificate of Designation for the Preferred Stock
Exhibit B Form of Warrant
Exhibit C Form of Amendment to Stockholders Agreement
Schedule 3.07(a) Subsidiaries of Manufacturers' Services Limited
Schedule 3.07(b) Ownership of Subsidiaries
Schedule 3.09 Certain Changes
Schedule 3.10 Liabilities of Manufacturers' Services Limited
Schedule 3.11 Material Contracts
Schedule 3.13 Litigation
iv
<PAGE>
PREFERRED STOCK AND WARRANT
SUBSCRIPTION AGREEMENT
AGREEMENT dated as of November 26, 1999 among Manufacturers' Services
Limited, a Delaware corporation (the "Seller"), DLJ Investment Partners II,
L.P., a Delaware limited partnership, DLJ Investment Funding II, Inc., a
Delaware corporation, DLJ ESC II L.P., a Delaware limited partnership, and DLJ
Investment Partners, L.P., a Delaware limited partnership (each a "Buyer" and
collectively the "Buyers").
W I T N E S S E T H:
WHEREAS, Manufacturers' Services Salt Lake City Operations, Inc., a
wholly-owned subsidiary of Seller ("MSSLC"), has agreed to acquire (the "Asset
Purchase") certain assets from 3Com Corporation ("3Com") on the terms and
conditions set forth in the Asset Purchase Agreement, dated as of November 19,
1999 by and among 3Com, the Seller and MSSLC (the "Purchase Agreement");
WHEREAS, to finance in part the payment of the consideration payable by
the Seller in the Asset Purchase, the Seller intends to issue shares of
preferred stock, par value $.001 per share (the "Preferred Stock"), and to issue
warrants (the "Warrants" and, together with the Preferred Stock, the
"Securities") to purchase Common Stock, par value $.001 per share, of the
Seller (the "Common Stock").
WHEREAS, the Seller desires to issue and sell the relevant Securities to
each of the Buyers, and each of the Buyers desires to purchase the relevant
Securities from the Seller, upon the terms and subject to the conditions
hereinafter set forth;
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
<PAGE>
For purposes hereof, the term "control" (including the correlative terms
"controlling", "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contact, or otherwise.
"Benefit Arrangement" means any employment, severance or similar contract,
arrangement or policy, or any plan or arrangement (whether or not written)
providing for severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or benefits that (i) is not an Employee Plan, (ii) is entered into
or maintained, as the case may be, by the Seller or any of its Affiliates and
(iii) covers any current or former employee of the Seller or any of its
Subsidiaries.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any regulations promulgated thereunder.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Credit Agreement" means the Credit Agreement dated as of August 21, 1998
by and among the Seller, MSL Overseas Finance, B.V., the financial institutions
party thereto as Lenders, Bank of America, N.A., as Administrative Agent,
Collateral Agent and Issuing Lender, Bank of America International Limited, as
Sub-Agent, and DLJ Capital Funding, Inc., as Syndication Agent, as amended to
date and from time to time.
"Credit Agreement Amendment" means the Second Amendment to Credit
Agreement and Consent dated as of November 23, 1999 by and among the Seller and
the other parties to the Credit Agreement.
"Employee Plan" means, with respect to the Seller, any "employee benefit
plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision
of ERISA, (ii) is maintained, administered or contributed to by the Seller or
any of its Affiliates and (iii) covers any employee or any former employee of
the Seller or any of its Subsidiaries.
2
<PAGE>
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, treaties, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and governmental restrictions, whether
now or hereafter in effect, relating to human health, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Escrow Agent" means Snoga, Inc., a Delaware corporation.
"Escrow Agreement" means the Escrow Agreement of even date herewith among
the Seller, the Buyers and the Escrow Agent.
"Hazardous Substances" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, corrosive, reactive or otherwise hazardous substance,
waste or material, or any substance having any constituent elements displaying
any of the foregoing characteristics, including, without limitation, petroleum,
its derivatives, by-products and other hydrocarbons, and any substance regulated
under Environmental Laws.
"Intellectual Property Right" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance in respect of such property or
asset.
"Multiemployer Plan" means each Employee Plan that is a multiemployer Plan
as defined in Section 3(37) of ERISA.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
3
<PAGE>
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Seller Group" means (i) with respect to federal Taxes, the affiliated
group of corporations (as defined in Section 1504(a) of the Code) of which the
Seller or any Subsidiary is a member, and (ii) with respect to state and local
taxes, the consolidated, combined, unitary or similar group of which the Seller
or any Subsidiary is a member.
"Stockholders Agreement" means the Stockholders Agreement dated as of
January 20, 1995 by and among DLJ Merchant Banking Partners, L.P., DLJ
International Partners, CV., DLJ Offshore Partners, C.V., DLJ Merchant Banking
Funding, Inc., Kevin C. Melia, the Seller and the other parties thereto, as
amended from time to time.
"Stockholders Agreement Amendment" means the amendment to the Stockholders
Agreement in the form attached as Exhibit C.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are, after giving effect
to the Asset Purchase, directly or indirectly owned by the Seller.
"Tax" (and with correlative meaning, "Taxes") means (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition of
any such tax (domestic or foreign), (ii) liability of the Seller or any of its
Subsidiaries for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability of the
Seller or any of its Subsidiaries for payment of such amounts was determined or
taken into account with reference to the liability of any other person for any
Pre-Closing Tax Period and (iii) liability of the Seller or any of
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its Subsidiaries for the payments of any amounts as a result of being parry to
any tax sharing agreement (including, without limitation, the Tax Sharing
Agreement) or with respect to the payment of any amounts of the type described
in (i) or (ii) as a result of any express or implied obligation to indemnify any
other Person.
"Tax Asset" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including, without limitation, deductions
and credits related to alternative minimum Taxes).
"Title IV Plan" means an Employee Plan, other than any Multiemployer Plan,
subject to Title IV of ERISA.
"Transaction Documents" means this Agreement, the Purchase Agreement, the
Credit Agreement Amendment, the Stockholders Agreement Amendment, the Escrow
Agreement and the Warrants.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Asset Purchase Recitals
Balance Sheet Date 3.08(a)
Balance Sheet 3.10(a)
Closing 2.02
Common Stock Recitals
Damages 6.02
Environmental Matters 3.22
Interim Date 3.08(b)
Material Adverse Effect 3.09(a)(i)
Permits 3.16
Preferred Stock Recitals
Pre-Closing Tax Period 3.24(a)
Purchase Agreement . Recitals
Purchase Price 2.01
Returns 3.24(a)
Securities Recitals
Seller Securities 3.05(c)
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Term Section
Subsidiary Securities 3.07(b)
Transactions 3.17
USRPHC 3.24(a)
Warrants Recitals
3Com Recitals
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Seller agrees to issue and sell to each Buyer
and each Buyer agrees, severally and not jointly, to purchase from the Seller
the Securities set forth opposite such Buyer's name on Schedule A hereto at the
Closing. The purchase price for the Securities (the "Purchase Price") is the
amount in cash specified on Schedule A hereto. The Purchase Price shall be paid
as provided in Section 2.02.
SECTION 2.02. Closing. The closing (the "Closing") of the purchase and
sale of the Securities hereunder shall take place at the offices of Davis Polk &
Wardwell in New York, New York, concurrently with the execution of this
Agreement, or at such other time or place as Buyers and the Seller may agree. At
the Closing:
(a) Each Buyer shall deliver to the Seller, in immediately available
funds, Buyer's amount of the aggregate Purchase Price set forth opposite such
Buyer's name on Schedule A hereto, by wire transfer (or other means acceptable
to Seller) to an account of the Seller with a bank in New York City designated
by Seller, by notice to such Buyer.
(b) The Seller shall deliver, or cause to be delivered, (i) to each Buyer
certificates, or other appropriate documentation, for the shares of Preferred
Stock and for certain of the Warrants to be purchased by such Buyer, duly
registered in the name of such Buyer and (ii) to the Escrow Agent for release to
the applicable Buyer upon satisfaction of the conditions set forth in the Escrow
Agreement, certificates, or other appropriate documentation, for the remaining
Warrants, duly registered in the name of the applicable Buyer.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to each Buyer as of the date hereof and
as of the Closing Date that:
SECTION 3.01. Corporate Existence and Power. The Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted and as proposed to be conducted.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by the Seller of each of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby (including the
issuance and sale of the Securities by the Seller) are within its powers, and
have been duly authorized by all necessary corporate action. Each of the
relevant Transaction Documents constitutes, or when executed will constitute, a
valid and binding agreement of the Seller, enforceable against it in accordance
with its respective terms, except (i) as limited by the applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement or creditors' rights generally or (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Seller of each of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby require no
order, license, consent, authorization or approval of, or exemption by, or
action by or in respect of, or notice to, or filing or registration with, any
governmental body, agency or official except for (i) such as have been obtained,
(ii) the filing of an amendment to the Seller's certificate of incorporation to
authorize the issuance of preferred stock and (iii) the filing of the
Certificate of Designation by the Seller for the Preferred Stock with the office
of the Secretary of State for the State of Delaware.
SECTION 3.04. Noncontravention. The execution, delivery and performance by
the Seller of each of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) violate its
certificate of incorporation, bylaws or other organizational documents, (ii)
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, (iii) require any consent or other action by any Person under,
constitute a default under (with due notice or lapse of time or both), or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of
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such entity or to a loss of any benefit to which it is entitled under any
provision of any agreement or other instrument binding upon it or any of its
assets or properties or (iv) result in the creation or imposition of any
material Lien on any of its properties or assets.
SECTION 3.05. Capitalization and Voting Rights of the Seller. (a) The
authorized capital stock of the Seller consists of 150,000,000 shares of Common
Stock. Immediately prior to the Closing, (i) the authorized capital stock of the
Seller shall also consist of 5,000,000 shares of Preferred Stock and (ii) the
outstanding capital stock of the Seller will consist of 78,167,387 shares of
Common Stock and options, warrants and other similar rights to purchase
9,971,323 shares of Common Stock. The rights, privileges and preferences of the
Preferred Stock are set forth in the Certificate of Designation attached hereto
as Exhibit A.
(b) Immediately following the Closing, the outstanding capital stock of
the Seller will consist of 78,167,387 shares of Common Stock and 2,000,000
shares of Preferred Stock, and there will be outstanding Warrants to purchase
4,638,879 shares of Common Stock and options, other warrants and other similar
rights to purchase 9,971,323 shares of Common Stock. The form of Warrant is
attached hereto as Exhibit B.
(c) Except as set forth in this Section 3.05 there are, and immediately
after the Closing there will be, no outstanding (i) shares of capital stock or
voting securities of the Seller, (ii) securities of the Seller convertible into
or exchangeable for shares of capital stock or voting securities of the Seller,
(iii) options or other rights to acquire from the Seller, or other obligation of
the Seller to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Seller or (iv) obligation of the Seller to repurchase or otherwise acquire or
retire any shares of capital stock or any convertible securities, rights or
options of the type described in (i), (ii), or (iii) (collectively, the "Seller
Securities").
SECTION 3.06. Valid Issuance of Securities. The shares of Preferred Stock
which are being issued to the Buyers hereunder have been duly and validly
authorized and when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be fully paid and
nonassessable. The Warrants, when executed and delivered, will constitute valid
and binding obligations of the Seller enforceable in accordance with their
terms. The Seller will reserve and keep available for issuance upon exercise of
the Warrants the total number of Warrant Shares (as defined in such Warrant)
deliverable upon exercise of the Warrants issued by the Seller that are from
time to time outstanding. The issuance of the Warrant Shares has been duly and
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validly authorized and, when issued and sold in accordance with the Warrants,
the Warrant Shares will be duly and validly issued, fully paid and nonassessable
and free of preemptive rights.
SECTION 3.07. Subsidiaries. (a) Each Subsidiary is a corporation or a
limited liability company, as the case may be, duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation, has all powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary. All Subsidiaries and their respective jurisdictions
of incorporation or formation are identified on Schedule 3.07(a).
(b) Except as set forth on Schedule 3.07(b) and after giving effect to the
Asset Purchase, all of the outstanding capital stock or other voting securities
of each Subsidiary will be owned by the Seller, directly or indirectly, free and
clear of any Lien (other than Liens created under the Credit Agreement) and free
of any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other voting
securities). Except as contemplated by this Agreement, there will be no
outstanding (i) securities of the Seller or any Subsidiary convertible into or
exchangeable for shares of capital stock or voting securities of any Subsidiary
or (ii) options or other rights to acquire from the Seller or any Subsidiary, or
other obligation of the Seller or any Subsidiary to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of any Subsidiary (the items in clauses 3.07(b)(i)
and 3.07(b)(ii) being referred to collectively as the "Subsidiary Securities").
There are no outstanding obligations of the Seller or any Subsidiary to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 3.08. Financial Statements. (a) The audited consolidated financial
statements of the Seller and its Subsidiaries as of December 31, 1998 (the
"Balance Sheet Date") present fairly, in all material respects, the consolidated
financial position of the Seller and such Subsidiaries as of such date and their
consolidated results of operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles applied on a consistent
basis.
(b) The unaudited interim consolidated financial statements of the Seller
and its Subsidiaries as of September 30, 1999 (the "Interim Date") present
fairly, in all material respects, the consolidated financial position of the
Seller and such Subsidiaries as of such date and their consolidated results of
operations and cash
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flows for the period then ended in conformity with generally accepted accounting
principles applied on a consistent basis.
SECTION 3.09. Absence of Certain Changes. Since the Balance Sheet Date and
except as expressly contemplated by this Agreement or as set forth in Schedule
3.09, the business of the Seller and its Subsidiaries has been conducted in the
ordinary course consistent with past practices and there has not been:
(i) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), business, assets
or results of operations of the Seller and its Subsidiaries, taken as a
whole (a "Material Adverse Effect");
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Seller Securities, or any
repurchase, redemption or other acquisition by the Seller or any of its
Subsidiaries of any Seller Securities or Subsidiary Securities;
(iii) any amendment of any material term of any outstanding Seller
Security or Subsidiary Security by the Seller or any of its Subsidiaries;
(iv) other than pursuant to the Credit Agreement, any incurrence,
assumption or guarantee by the Seller or any of its Subsidiaries of any
indebtedness for borrowed money, other than in the ordinary course of
business consistent with past practices and other than capital leases and
in no event for an aggregate amount greater than $3,000,000;
(v) other than pursuant to the Credit Agreement, any creation or
assumption by the Seller or any of its Subsidiaries of any Lien on any
material asset other than in the ordinary course of business consistent
with past practices;
(vi) any making of any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of the Seller
made in the ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Seller or
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any of its Subsidiaries which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or any contract or
agreement entered into, by the Seller or any of its Subsidiaries relating
to its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by the Seller or any of its Subsidiaries of
any contract or other right, in either case, material to the Seller and
its Subsidiaries, taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement or the Purchase
Agreement;
(ix) any material change in any method of accounting or accounting
practice by the Seller or any of its Subsidiaries;
(x) any (A) employment, deferred compensation, change in control,
severance, retirement or other similar agreement entered into with any
current or former director, officer, employee or consultant of the Seller
or any of its Subsidiaries (or any amendment to any such existing
agreement) other than any such agreement entered into with a non-executive
employee in the ordinary course of business, (B) grant of any severance or
termination pay to any current or former director, officer, employee or
consultant of the Seller or any of its Subsidiaries or (C) change in
compensation or other benefits payable to any current or former director,
officer, employee or consultant of the Seller or any of its Subsidiaries
pursuant to any severance or retirement plans or policies thereof;
(xi) any labor dispute, other than routine individual grievances or
disputes involving an amount less than $50,000, or any activity or
proceeding by a labor union or representative thereof to organize any
employees of the Seller or any if its Subsidiaries, which employees were
not subject to a collective bargaining agreement at the Balance Sheet
Date, or any lockouts, strikes, slowdowns, work stoppages or, threats
thereof by or with respect to any employees of the Seller or any of its
Subsidiaries; or
(xii) any resignation, retirement or any termination of employment
of any executive officer or other key employee of the Seller or any of its
Subsidiaries nor has the Seller or any of its Subsidiaries received any
notice of any such resignation or retirement from any such officer or
employee.
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SECTION 3.10. No Undisclosed Material Liabilities. There are no
liabilities of the Seller or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(a) liabilities provided for in the audited, consolidated balance sheet of
the Seller and its Subsidiaries as of the Balance Sheet Date or disclosed in the
notes thereto (collectively, the "Balance Sheet");
(b) liabilities disclosed on Schedule 3.10; and
(c) liabilities incurred in the ordinary course of business which,
individually or in the aggregate, are not material to the Seller or any of its
Subsidiaries, taken as a whole.
SECTION 3.11. Material Contracts. (a) Except as set forth on Schedule
3.11, neither the Seller nor any of its Subsidiaries is a party to or bound by:
(i) any lease (whether of real or personal property) providing for
annual rentals of $1,000,000 or more;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (A) annual
payments by the Seller and its Subsidiaries of $1,000,000 or more or (B)
aggregate payments by the Seller and its Subsidiaries of $2,000,000 or
more;
(iii) any sales, distribution or other similar agreement with the
ten largest customers of the Seller or its Subsidiaries providing for the
sale by the Seller or any of its Subsidiaries of materials, supplies,
goods, services, equipment or other assets;
(iv) any partnership, joint venture or other similar agreement or
arrangement providing for expenditures in excess of $100,000 per annum;
(v) other than the Purchase Agreement, any agreement relating to the
acquisition or disposition of any business (whether by merger, sale of
stock, sale of assets or otherwise);
(vi) other than the Credit Agreement, any agreement relating to
indebtedness for borrowed money or the deferred purchase price of property
(in either case, whether incurred, assumed, guaranteed or secured
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by any asset), except any such agreement (A) with an aggregate outstanding
principal amount not exceeding $2,000,000 by itself (or not exceeding
$5,000,000 when combined with all other such agreements relating to
indebtedness for borrowed money or the deferred purchase price of
property) and which may be prepaid on not more than 30 days notice without
the payment of any penalty and (B) entered into subsequent to the date of
this Agreement as permitted by Section 3.09;
(vii) any option (other than stock options issued pursuant to a
compensation plan approved by the Company's Board of Directors), license,
franchise or similar agreement,
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any agreement that limits the freedom of the Seller or any of
its Subsidiaries to compete in any line of business or with any Person or
in any area or which would so limit the freedom of the Seller or any of
its Subsidiaries after the Closing Date;
(x) other than the Stockholders Agreement or any stock option issued
pursuant to a compensation plan approved by the Company's Board of
Directors or employment agreement entered into in the ordinary course of
business, any agreement with any director or officer of the Seller or any
of its Subsidiaries or with any "associate" or any member of the
"immediate family" (as such terms are respectively defined in Rules 12b-2
and 16a-1 of the 1934 Act) of any such director or officer; or
(xi) other than the Purchase Agreement and any documents delivered
pursuant thereto, any other agreement, commitment, arrangement or plan not
disclosed pursuant to clauses (i) through (x) of Section 3.11(a) not made
in the ordinary course of business that is material to the Seller and its
Subsidiaries, taken as a whole.
(b) Each agreement, commitment, arrangement or plan disclosed in any
Schedule to this Agreement or required to be disclosed pursuant to this Section
3.11 is a valid and binding agreement of the Seller or its Subsidiaries, as the
case may be, and is in full force and effect (except as such validity and
binding effect may be limited by bankruptcy, insolvency, moratorium or other
laws affecting creditors' rights generally and by equitable principles), and
neither the Seller nor any of its Subsidiaries is nor, to the knowledge of the
Seller, is any other party thereto in default or breach in any material respect
under the terms of any such agreement, contract, plan, lease, arrangement or
commitment except for defaults
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or breaches which, individually or in the aggregate, would not reasonably be
expected to have Material Adverse Effect.
SECTION 3.12. Compliance with Laws and Court Orders; No Defaults. (a)
Neither the Seller nor any of its Subsidiaries is in violation of, and has not
since January 1, 1997, violated, and to the knowledge of the Seller is not under
any investigation with respect to and has not been threatened to be charged with
or given notice of any violation of, any applicable law, rule, regulation,
judgment, injunction, order or decree, except for violations which are not
material.
(b) Neither the Seller nor any of its Subsidiaries is in material default
under, and no condition exists that with notice or lapse of time or both would
constitute a material default under, any agreement or other instrument binding
upon the Seller or any of its Subsidiaries or any license, franchise, permit or
similar authorization held by the Seller or any of its Subsidiaries.
SECTION 3.13. Litigation. Except as set forth on Schedule 3.13, there is
no action, suit, investigation or proceeding pending against, or to the
knowledge of the Seller, threatened against or affecting, the Seller or any of
its Subsidiaries or properties before any court or arbitrator or any
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or which could reasonably be expected to have a material adverse
effect on the business, financial condition, properties or operations of the
Seller or any of its Subsidiaries, nor is the Seller aware that there is any
basis for the foregoing.
SECTION 3.14. Properties. (a) The Seller and its Subsidiaries have good
and marketable, indefeasible, fee simple title to, or in the case of leased
property and assets have valid leasehold interests in, all property and assets
(whether real, or personal, tangible or intangible) reflected on the Balance
Sheet or material property and assets acquired after the Balance Sheet Date, and
none of such property or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Balance Sheet);
(iii) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or
assets; or
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(iv) Liens created pursuant to the Credit Agreement.
(b) There are no developments affecting any such property or assets
(whether real or personal) pending or, to the knowledge of the Seller
threatened, which might materially detract from the value of such property or
assets, materially interfere with any present or intended use of any such
property or assets or materially adversely affect the marketability of any such
property or assets.
(c) All such leases of real property and personal property are in good
standing and are valid, binding and enforceable in accordance with their
respective terms and there does not exist under any such lease any default or
any event which with notice or lapse of time or both would constitute a default.
(d) The plant, building, structure and equipment owned by the Seller
and/or its Subsidiaries have no material defects, are in good operating
condition and repair and have been reasonably maintained consistent with
standards generally followed in the industry (giving due account to the age and
length of use of same, ordinary wear and tear excepted), are adequate and
suitable for their present and intended uses and, in the case of plants,
buildings and other structures, are structurally sound.
(e) Such real property, and its continued use, occupancy and operation as
currently used, occupied and operated, does not constitute a nonconforming use
under all applicable building, zoning, subdivision and other land use and
similar laws, regulations and ordinances.
(f) The property and assets owned or leased by the Seller and/or any of
its Subsidiaries, or which they otherwise have the right to use, constitute all
of the property and assets used or held for use in connection with the
businesses of the Seller and/or any of its Subsidiaries and are adequate to
conduct such businesses as currently conducted
SECTION 3.15. Insurance Coverage. All insurance policies and fidelity
bonds relating to the assets, business, operations, employees, officers or
directors of the Seller or any of its Subsidiaries have been in effect since
October 1, 1999 and remain in full force and effect and similar policies and
bonds were in effect for the one-year periods beginning October 1, 1998, October
1, 1997 and October 1, 1996, and such policies and bonds are of the type and in
amounts customarily carried by Persons conducting businesses similar to those of
the Seller and each of its Subsidiaries. There is no material claim by the
Seller or any of its Subsidiaries pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the
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underwriters of such policies or bonds or in respect of which such underwriters
have reserved their rights. All premiums payable under all such policies and
bonds have been paid timely and the Seller and its Subsidiaries have otherwise
complied fully with the terms and conditions of all such policies and bonds. The
Seller does not know of any threatened termination of all premium increase with
respect to, or material alteration of coverage under, any of such policies or
bonds. The Seller and its Subsidiaries shall, after the Closing, continue to
have coverage under such policies and bonds with respect to events occurring
prior to the Closing.
SECTION 3.16. Licenses and Permits. Each license, franchise, permit or
other similar authorization affecting, or relating in any way to, the assets or
business of the Seller and its Subsidiaries (the "Permits") is valid and in
full force and effect, neither the Seller nor any of its Subsidiaries are in
default under and no condition exists that with notice or lapse of time or both
would constitute a default under, the Permits and none of the Permits will be
terminated or impaired or become terminable, in whole or in part, as a result of
the transactions contemplated hereby, except for such matters that, individually
or in the aggregate, are not material to the Seller and its Subsidiaries, taken
as a whole.
SECTION 3.17. Due Diligence Documents; Disclosure. The documents and
information delivered to the Buyers in connection with the transactions
contemplated by the Transaction Documents (the "Transactions"), taken as a
whole, contain no untrue statement of a material fact and do not omit to state
any material fact necessary in order to make the statements contained therein
not misleading, which untrue statements or omissions could reasonably be
expected to be material to the Buyers' evaluation of such information. The
financial projections relating to the Seller, any of its Subsidiaries and the
combination thereof delivered to the Buyers are made in good faith and are based
upon reasonable assumptions, and the Seller is not aware of any fact or set of
circumstances that would lead it to believe that such projections are incorrect
or misleading in any material respect.
SECTION 3.18. Finders' Fees. Except for Donaldson, Lufkin & Jenrette
Securities Corporation, whose fees and expenses will be paid by the Seller,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Seller or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
any of the Transactions.
SECTION 3.19. Labor Matters. The Seller and its Subsidiaries are in
compliance with all currently applicable laws respecting employment and
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employment practices, terms and conditions of employment and wages and hours,
and are not engaged in any unfair labor practice. There is no unfair labor
practice, wages and hours or other employment related investigation, claim,
charge or complaint pending or, to the knowledge of the Seller, threatened
against the Seller or any of its Subsidiaries before the National Labor
Relations Board.
SECTION 3.20. Inventories. The inventories set forth in the Balance Sheet
were properly stated therein at the lesser of cost or fair market value
determined in accordance with generally accepted accounting principles
consistently maintained and applied by the Seller and its Subsidiaries. Since
the Balance Sheet Date, the inventories of the Seller and its Subsidiaries have
been maintained in the ordinary course of business. All such inventories are
owned free and clear of all Liens other than Liens created under the Credit
Agreement. All of the inventories recorded on the Balance Sheet consisted of
(subject to the reserves set forth on the Balance Sheet), and all inventories of
the Seller and its Subsidiaries on the Closing Date will consist of (subject to
reserves proportional in relation to inventory as of the Closing Date as the
reserves set forth on the Balance Sheet were to inventory recorded on the
Balance Sheet), items of a quality usable or saleable in the normal course of
business consistent with past practices and are and will be in quantities
sufficient for the normal operation of the business of the Seller and its
Subsidiaries in accordance with past practice.
SECTION 3.21. Receivables. Subject to normal and customary trade
discounts, all accounts, notes receivable and other receivables (other than
receivables collected since the Balance Sheet Date) reflected on the Balance
Sheet are (less any reserves for doubtful accounts recorded on the Balance
Sheet), and all accounts and notes receivable arising from or otherwise relating
to the business of the Seller and its Subsidiaries as of the Closing Date will
be (less reserves for doubtful accounts proportional in relation to receivables
as of the Closing Date as the reserves for doubtful accounts set forth on the
Balance Sheet were to receivables reflected on the Balance Sheet), valid,
genuine and fully collectible in the aggregate. All accounts, notes receivable
and other receivables arising out of or relating to such business of the Seller
and its Subsidiaries as of the Balance Sheet Date have been included in the
Balance Sheet.
SECTION 3.22. Environmental Matters. Except for such matters that,
individually or in the aggregate, are not material to the Seller or any of its
Subsidiaries, taken as a whole:
(a) No notice, notification, demand, request for information, citation,
summons, complaint or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending, or to the
17
<PAGE>
Seller's knowledge. threatened by any governmental entity or other Person with
respect to any matters relating to the Seller or any of its Subsidiaries and
relating to or arising out of any Environmental Law;
(b) No polychlorinated biphenyls, radioactive material, lead, lead paint,
asbestos, asbestos-containing material, incinerator, sump, surface impoundment,
lagoon, landfill, septic, waste-water treatment or other disposal system or
underground storage tank (active or abandoned) is or has been present at, on or
under any property now or previously owned, leased or operated by the Seller or
any of its Subsidiaries;
(c) No Hazardous Substance has been discharged, disposed of, dumped,
injected, pumped, deposited, spilled, leaked, emitted or released at, on or
under any property now or previously owned, leased or operated by the Seller or
any of its Subsidiaries which would result in a violation of Environmental Law;
(d) There are no liabilities of or relating to the Seller or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, arising under or relating to any
Environmental Law; and, to the Seller's knowledge, there are no facts,
conditions, situations or set of circumstances which could result in or be the
basis for any such liability;
(e) The Seller and its Subsidiaries are in compliance with all
Environmental Laws and have obtained all permits, licenses and authorizations
necessary or proper for the business of the Seller and its Subsidiaries as
currently conducted relating to or required by Environmental Laws and are in
compliance with all such permits;
(f) No property now or previously owned, leased or operated by the Seller
or any of its Subsidiaries or, to the Seller's knowledge, any property to which
the Seller or any of its Subsidiaries has, directly or indirectly, transported
or arranged for the transportation of any Hazardous Substances is listed or, to
the knowledge of the Seller, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal, state or foreign list of sites requiring investigation or
clean-up; and
(g) Neither the Seller nor any of its Subsidiaries owns or leases or has
owned or leased any property in New Jersey constituting an "industrial
establishment" as defined in the Industrial Site Recovery Act, N.J. Stat ss.ss.
13:1K-6 et seq.
18
<PAGE>
(h) For purposes of this Section 3.22, the terms "Seller" and "Subsidiary"
shall include any entity which is, in whole or in part, a predecessor of the
Seller or any of its Subsidiaries.
SECTION 3.23. Employee Benefit Plans. (a) No Employee Plan and no employee
plan or arrangement maintained or contributed to by any ERISA Affiliate of the
Seller is (i) a Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in
connection with any trust described in Section 501(c)(9) of the Code. No
"prohibited transaction", as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred with respect to any Employee Plan or any other employee
benefit plan or arrangement maintained by the Seller, or any ERISA Affiliate of
the Seller which is covered by Title I of ERISA, excluding transactions effected
pursuant to a statutory or administrative exemption. Each Employee Plan is and
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the qualification and other provisions of
the Code, which are applicable to such plan, except where the failure to do so
would not have a Material Adverse Effect.
(b) Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, except where the failure to do so would
not have a Material Adverse Effect.
(c) Neither the Seller nor any of its ERISA Affiliates has any current or
projected liability in respect of post-employment or post-retirement health or
medical or life insurance benefits for retired or former employees of the Seller
or any of its Subsidiaries, except as required pursuant to the continuation
coverage requirements of Section 4980B of the Code and Section 601 et seq. of
ERISA or other applicable law.
(d) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Seller or any of its ERISA
Affiliates relating to, or change in employee participation or coverage under,
any Employee Plan or Benefit Arrangement that would increase materially the
expense of maintaining such Employee Plan or Benefit Arrangement above the level
of the expense incurred in respect thereof for the most recent fiscal year ended
prior to the date hereof.
(e) Neither the Seller nor any of its ERISA Affiliates has incurred, or
reasonably expects to incur prior to the Closing Date, any material unsatisfied
liability under Title I or any liability under Title IV of ERISA (or any
corresponding section of the Code) arising in connection with the funding or the
19
<PAGE>
termination of, or complete or partial withdrawal from, any plan covered or
previously covered by Title I or Title IV of ERISA, which liability could become
a liability of the Seller or any of its Subsidiaries after the Closing Date.
SECTION 3.24. Seller's Taxes. (a) The Seller and each of its Subsidiaries:
(i) has filed or will file, in accordance with all applicable laws, all Tax
returns, statements, reports and forms (collectively, the "Returns") required to
be filed by it with any Taxing Authority on or before the Closing Date (taking
into account any extension of a required filing date) with respect to any Tax
period ending on or before the Closing Date (a "Pre-Closing Tax Period"); (ii)
will file all other Returns required to be filed by it when due (taking into
account any extension of a required filing date); (iii) has timely paid all
material Taxes shown as due and payable on the Returns that have been filed by
it; (iv) has not been a member of an affiliated, consolidated, combined or
unitary group; (v) has provided the Buyers or their representatives with any tax
sharing agreements to which it is a party; and (vi) the Seller and each
Subsidiary is not a United States real property holding corporation (a "USRPHC")
within the meaning of section 897 of the Internal Revenue Code of 1986, as
amended, nor has it been a USRPHC within 5 years of the date hereof.
(b) The Seller represents further that (i) the charges, accruals and
reserves for Taxes reflected on the Balance Sheet (excluding any provision for
deferred income taxes) are adequate to cover the Tax liabilities of the Seller
and its Subsidiaries accruing through the date thereof; (ii) all state sales and
use Tax Returns, all state income or franchise Tax Returns, and all other
Returns filed with respect to Tax years of the Seller and its Subsidiaries
through the Tax year ended December 31, 1995, have been examined and closed or
are Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired; (iii)
none of the Seller or any of its Subsidiaries is delinquent in the payment of
any Tax or has requested any extension of time within which to file any Return
and, has not yet filed such Return; (iv) none of the Seller or any of its
Subsidiaries (or any member of any affiliated, consolidated, combined or unitary
group of which the Seller or any of its Subsidiaries is or has been members) has
been granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension or
waiver) has not yet expired; (v) there is no claim, audit, action, suit,
proceeding, or investigation now pending or threatened against or with respect
to the Seller or any of its Subsidiaries in respect of any Tax or Tax Asset; and
(vi) there are no requests for rulings or determinations in respect of any Tax
or Tax Asset pending between the Seller or any of its Subsidiaries and any
Taxing Authority.
20
<PAGE>
SECTION 3.25. Certain Interests. No stockholder, officer or director or
the Seller or any of its Subsidiaries or any relative or Affiliate of such
stockholder, officer or director (a) has any interest in any material property,
real or personal, tangible or intangible, including licenses, agencies or
Intellectual Property Rights, used in or pertaining to the business of the
Seller or any of its Subsidiaries, (b) has any material interest in any
business, corporate or otherwise, that is in competition with the business of
the Seller or any of its Subsidiaries or (c) has received any loan or advance,
other than for amounts (alone or in combination with all loans or advances to
other stockholders, officers or directors of Seller or any of its Subsidiaries
and all relatives or Affiliates of such stockholders, officers and directors)
not exceeding $1,000,000 in the aggregate, that remains unpaid as of the date
hereof or is otherwise a debtor of, or made any loan to or advance to or is
otherwise a creditor of, the Seller or any of its Subsidiaries. Since the
Balance Sheet Date, there has not been any asset sold by the Seller or any of
its Subsidiaries to, or to the Seller or any of its Subsidiaries by, any
stockholder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer represents and warrants to the Seller, severally as to itself
only and not jointly or as to any other Buyer, as of the date hereof and as of
the Closing Date that:
SECTION 4.01. Existence and Power. Such Buyer is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all powers (corporate, partnership or otherwise) and all material
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
SECTION 4.02. Authorization. The execution, delivery and performance by
such Buyer of each of this Agreement and, when executed, the Stockholders'
Agreement Amendment, and the consummation of the transactions contemplated
hereby and thereby are or, when executed, will be within the powers (corporate,
partnership or otherwise) of such Buyer and have been or will have been duly
authorized by all necessary action on the part of such Buyer. This Agreement
constitutes, and the Stockholders Agreement Amendment when executed will
constitute, a valid and binding agreement of such Buyer, each enforceable in
accordance with their respective terms, except (i) as limited by the applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
21
<PAGE>
application affecting enforcement or creditors' rights generally or (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by such Buyer of this Agreement and the Stockholders Agreement
Amendment and the consummation of the transactions contemplated hereby and
thereby require no order, license, consent, authorization or approval of, or
exemption by, or action by or in respect of, or notice to, or filing or
registration with, any governmental body, agency or official.
SECTION 4.04. Purchase for Investment. Such Buyer is purchasing the
relevant Securities for investment for its own account and not with a view to,
or for sale in connection with, any distribution thereof.
SECTION 4.05. Private Placement. (a) Such Buyer understands that (i) the
offering and sale of the Securities hereby is intended to be exempt from
registration under the 1933 Act and (ii) there is only a limited market for the
relevant Securities, and there can be no assurance that any Buyer will be able
to sell or dispose of the relevant Securities to be purchased by such Buyer.
(b) Such Buyer's financial situation is such that such Buyer can afford to
bear the economic risk of holding the relevant Securities acquired hereunder for
an indefinite period of time, and such Buyer can afford to suffer the complete
loss of the investment in the relevant Securities.
SECTION 4.06. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of such Buyer threatened against
or affecting, such Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Stockholders Agreement Amendment.
SECTION 4.07. Brokers or Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by, will be
retained by or is authorized to act on behalf of such Buyer who might be
entitled to any fee or commission from the Seller or such Buyer upon
consummation of the transactions contemplated by this Agreement.
22
<PAGE>
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to Obligations of Each Buyer and the Seller. The
obligations of each Buyer and the Seller to consummate the Closing are subject
to the satisfaction of the following conditions:
(a) No provision of any applicable law, rule or regulation and no
judgment, injunction, order or decree by any governmental entity of
competent jurisdiction shall prohibit the consummation of the Closing or
the Asset Purchase.
(b) All material actions by or in respect of, or filings with, any
governmental body, agency, official or authority required to permit the
consummation of the Closing and the Asset Purchase shall have been taken,
made or obtained.
(c) The conditions to the consummation of the Purchase Agreement
shall have been satisfied or waived (with any waiver of conditions and any
other changes having been consented to by each Buyer), and the parties to
the Purchase Agreement shall have irrevocably committed to consummating
the Asset Purchase as contemplated by the Purchase Agreement, subject only
to the passage of time.
(d) The conditions to the consummation of the Credit Agreement
Amendment shall have been satisfied or waived and the transactions
contemplated therein shall have been consummated as contemplated by the
Credit Agreement Amendment, with any waiver of conditions and any other
changes having been consented to by each Buyer.
(e) The Seller's certificate of incorporation shall have been
amended to authorize the issuance of preferred stock, and the Certificate
of Designation for the Preferred Stock shall have been duly filed at the
office of the Secretary of State of the State of Delaware.
(f) Each of the parties thereto shall have executed and delivered
the Escrow Agreement.
(g) Each other Buyer shall have purchased the Securities to be
purchased by it hereunder by paying the Purchase Price applicable thereto
in accordance with Section 2.02.
23
<PAGE>
SECTION 5.02. Conditions to Obligation of Each Buyer. The obligation of
each Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Seller shall have performed in all material respects all
of its obligations hereunder required to be performed by it on or prior to
the Closing Date, (ii) the representations and warranties of the Seller
contained in this Agreement and in any certificate or other writing
delivered by the Seller pursuant hereto shall be true in all material
respects when made and at and as of the Closing Date, as if made at and as
of such date (it being understood that where any such representation and
warranty already includes a material adverse effect or materiality
exception, no further materiality exception is to be permitted by this
Section 5.02(a)(ii)) and (iii) each Buyer shall have received a
certificate from the Seller signed by its executive officer to the
foregoing effect.
(b) Such Buyer shall have received all documents it may reasonably
request relating to the existence of the Seller and the authority of the
Seller for this Agreement, the Credit Agreement Amendment, the
Stockholders Agreement Amendment and the Warrants, all in form and
substance reasonably satisfactory to such Buyer.
(c) The Seller shall have paid in full all reasonable fees and
expenses, including any out-of-pocket expenses, of the Buyers then due and
required to be paid by the Seller in connection with the Transactions, in
accordance with Section 8.03(a) hereof.
(d) The Buyers shall have received an opinion of Ropes & Gray,
counsel for the Seller, in form and substance satisfactory to such Buyers.
(e) The Stockholders Agreement Amendment shall have been executed
and delivered by each Buyer, the Seller and the requisite number of
Stockholders (as defined in the Stockholders Agreement) necessary to
approve the amendments and other modifications to the Stockholders
Agreements provided for in the Stockholders Agreement Amendment.
(f) One designee of DLJ Investment Partners, L.P. shall have been
elected to the board of directors of the Seller pursuant to the
Stockholders Agreement Amendment.
24
<PAGE>
SECTION 5.03. Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the Closing with respect to any Buyer is subject to the
satisfaction of the following further conditions:
(a) (i) Such Buyer shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to
the Closing Date and (ii) the representations and warranties of such Buyer
contained in this Agreement and in any certificate or other writing
delivered by such Buyer pursuant hereto shall be true in all material
respects when made and at and as of the Closing Date, as if made at and as
of such date (it being understood that where any such representation and
warranty already includes a material adverse effect or materiality
exception, no further materially exception is to be permitted by this
Section 5.03(a)(ii)).
(b) The Seller shall have received all documents it may reasonably
request relating to the existence of such Buyer and the authority of such
Buyer for this Agreement and the Stockholders Agreement Amendment, all in
form and substance reasonably satisfactory to the Seller.
ARTICLE 6
SURVIVAL; INDEMNIFICATION
SECTION 6.01. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate delivered pursuant
hereto or in connection herewith shall survive the Closing until two years after
the Closing Date. Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time, but only as to such inaccuracy or
breach. A breach of any representation or warranty made in this Agreement shall
not affect in any manner whatsoever the relative rights and obligations of the
parties to and under the Stockholders Agreement, as amended.
SECTION 6.02. Indemnification. (a) The Seller hereby indemnifies,
severally and not jointly, each Buyer and its Affiliates, limited partners,
general partners, directors, officers and employees against and agrees to hold
each of them harmless from any and all damage, loss, liability and expense
(including, without
25
<PAGE>
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding) ("Damages")
incurred or suffered by any such party arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by the Seller
pursuant to this Agreement.
(b) Each Buyer hereby indemnifies, severally and not jointly, the Seller
and its Affiliates, limited partners, general partners, directors, officers and
employees against and agrees to hold each of them harmless from any and all
Damages incurred or suffered by any such party arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by such Buyer pursuant to this Agreement.
SECTION 6.03. Exclusivity. After the Closing, Section 6.02 will provide
the exclusive remedy for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the transactions
contemplated hereby.
ARTICLE 7
TERMINATION
SECTION 7.01. Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written agreement of the Seller and Buyers;
(b) by the Seller or any Buyer as to the Seller or Buyer if the
Closing shall not have been consummated by December 24, 1999; or
(c) by the Seller or any Buyer if consummation of the transactions
contemplated hereby would violate any non-appealable final order, decree
or judgment of any court or governmental body having competent
jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 7.01(b) or
(c) shall give notice of such termination to the other party.
SECTION 7.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 7.01, such termination shall be without liability of either
party (or any stockholder, general partner, limited partner, director, officer,
employee, agent, consultant or representative of such party) to the other party
to
26
<PAGE>
this Agreement; provided that if such termination shall result from the willful
(i) failure of either party to fulfill a condition to the performance of the
obligations of the other party, (ii) failure to perform a covenant of this
Agreement or (iii) breach by either party hereto of any representation or
warranty or agreement contained herein, such party shall be fully liable for any
and all Damages incurred or suffered by the other party as a result of such
failure or breach. The provisions of Sections 8.03, 8.05, 8.06 and 8.07 shall
survive any termination hereof pursuant to Section 7.01.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Buyers to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Director
Fax: (212)892-7552
with a copy to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2689
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John Knight
Fax: (212) 450-4800
if to the Seller to:
27
<PAGE>
Manufacturers' Services Limited
300 Baker Avenue
Concord, MA 01742
Attention: Dale Johnson, General Counsel
Fax: (978) 287-5635
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Michael J. Stick, Esq.
Fax: (617) 951-7050
or to such other address or telecopy number and with such other copies as such
party may hereafter specify for the purpose of notice.
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 8.02. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.03. Expenses; Other Payments. (a) All costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense; provided that the Seller shall pay all reasonable
out-of-pocket costs, expenses and other payments, including but not limited to
legal and accounting fees and disbursements, incurred or made by the Buyers in
connection with the transactions contemplated by this Agreement, whether or not
28
<PAGE>
consummated (unless such failure to consummate the transactions was by reason of
any breach by such Buyers of their obligations hereunder).
(b) At the Closing, the Seller shall pay to Donaldson, Lutkin & Jenrette
Securities Corporation a fee of $1,500.000.
SECTION 8.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto. Notwithstanding the foregoing,
in connection with a sale of Securities by any Buyer to any other Person within
one year of the date hereof, such Buyer may without the consent of Seller (or
any other party hereto) assign its rights under this Agreement, in whole or in
part, including the right of such Buyer to indemnification hereunder, and
thereafter such other Person shall have the benefit of the rights so assigned as
though it were a "Buyer" and a party to this Agreement.
SECTION 8.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 8.06. Jurisdiction. The parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 8.01 shall be deemed
effective service of process on such party.
SECTION 8.07. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
29
<PAGE>
SECTION 8.08. Counterparts: Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement shall confer upon any Person other than the parties
hereto any rights or remedies hereunder.
SECTION 8.09. Entire Agreement. This Agreement, the Stockholders Agreement
(as amended) and the Warrant Agreement constitute the entire agreement between
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter of this Agreement.
SECTION 8.10. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 8.11. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforced in
accordance with its terms to the maximum extent permitted by law.
SECTION 8.12. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MANUFACTURERS' SERVICES
LIMITED
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS II, L.P.
By DLJ INVESTMENT PARTNERS II,
INC., Managing General Partner
By:
------------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING II, NC.
By:
------------------------------------
Name:
Title:
DLJ ESC II L.P.
By DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By:
------------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS, L.P.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MANUFACTURERS' SERVICES
LIMITED
By:
------------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS II, L.P.
By DLJ INVESTMENT PARTNERS II,
INC., Managing General Partner
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING II, NC.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
DLJ ESC II L.P.
By DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
<PAGE>
DLJ INVESTMENT PARTNERS, L.P.
By DLJ INVESTMENT PARTNERS II,
INC., Managing General Partner
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
<PAGE>
Schedule A
<TABLE>
<CAPTION>
No. of No. of
Immediately Warrants to
No. of Preferred Exercisable be held in Aggregate
Investor Shares Warrants Escrow Purchase Price
- -------- ------ -------- ------ --------------
<S> <C> <C> <C> <C>
DLJ Investment Partners II, L.P. 1,136,552 505,931 2,130,235 $28,413,800.00
DLJ Investment Funding II, Inc. 215,038 95,723 403,044 5,375,950.00
DLJ ESC II L.P. 143,359 63,815 268,697 3,583,975.00
DLJ Investment Partners, L.P. 505,051 224,821 946,613 12,626,275.00
Total 2,000,000 890,290 3,748,589 $50,000,000.00
</TABLE>
33
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Exhibit A
Certificate of Designation for the Preferred Stock
1
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EXHIBIT A
Preferred Stock
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2006
of
MANUFACTURERS' SERVICES LIMITED
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Kevin C. Melia, President, and Dale Johnson,
Secretary, of Manufacturers' Services Limited, a Delaware corporation
(hereinafter called the "Corporation"), pursuant to the provisions of Sections
103 and 151 of the General Corporation Law of the State of Delaware, do hereby
make this Certificate of Designations and do hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation, the Board of Directors duly
adopted the following resolution:
RESOLVED, that, pursuant to Article Fourth of the Certificate of
Incorporation (which authorizes 5,000,000 shares of preferred stock, par value
$0.001 per share ("Preferred Stock"), of which no shares of Preferred Stock are
currently issued and outstanding), the Board of Directors hereby fixes the
powers, designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
(1) Number and Designation. Two million shares of the Preferred Stock of
the Corporation shall be designated as Senior Exchangeable Preferred Stock Due
2006 (the "Senior Preferred Stock").
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(2) Rank. The Senior Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank prior to all
classes of or series of common stock of the Corporation, including the
Corporation's common stock, par value $0.001 per share ("Common Stock"), and
each other class of capital stock of the Corporation, the terms of which provide
that such class shall rank junior to the Senior Preferred Stock or the terms of
which do not specify any rank relative to the Senior Preferred Stock. All equity
securities of the Corporation to which the Senior Preferred Stock ranks prior
(whether with respect to dividends or upon liquidation, dissolution, winding up
or otherwise), including the Common Stock, are collectively referred to herein
as the "Junior Securities." All equity securities of the Corporation with which
the Senior Preferred Stock ranks on a parity (whether with respect to dividends
or upon liquidation, dissolution or winding up) are collectively referred to
herein as the "Parity Securities." The respective definitions of Junior
Securities and Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Junior Securities and Parity
Securities, as the case may be. The Senior Preferred Stock shall be subject to
the creation of Junior Securities.
(3) Dividends. (a) (i) The holders of shares of Senior Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
dividends (subject to Sections 3(a)(ii) and (iii) hereof) at a rate equal to (A)
through the fourth Dividend Payment Date (as defined below), 14% per annum, and
(B) thereafter, 15% per annum (each of the preceding (A) and (B) shall be
computed on the basis of a 360 day year and shall be referred to herein as the
applicable "Dividend Rate"). In the event the Corporation is unable or shall
fail to discharge its obligation to redeem all outstanding shares of Senior
Preferred Stock pursuant to paragraph 5(b) or 5(c) hereof, the Dividend Rate as
provided above shall increase by .50% per quarter (each, a "Default Dividend")
for each quarter or portion thereof following the date on which such redemption
was required to be made until cured, provided that the aggregate increase shall
not exceed 10%. Such dividends shall be payable in the manner set forth below in
Sections 3(a)(ii) and (iii) quarterly on February 26, May 26, August 26, and
November 26 of each year (unless such day is not a business day, in which event
on the next succeeding business day) (each of such dates being a "Dividend
Payment Date" and each such quarterly period being a "Dividend Period"). Such
dividends shall be cumulative from the date of issue, whether or not in any
Dividend Period or Periods there shall be funds of the Corporation legally
available for the payment of such dividends.
(ii) Prior to and including the fourth Dividend Payment Date (the
"Accretion Date"), each such dividend shall be payable in cash on the
Liquidation Value per share of the Senior Preferred Stock, in equal quarterly
amounts (to which the Default Dividend, if any, shall be added), to the holders
of
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record of shares of the Senior Preferred Stock, as they appear on the stock
records of the Corporation at the close of business on such record dates, not
more than 60 days or less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors. Accrued and unpaid dividends for any
past Dividend Periods may be declared and paid at any time, without reference to
any Dividend Payment Date, to holders of record on such date, not more than 45
days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(iii) After the Accretion Date, dividends shall not be payable in cash to
holders of shares of Senior Preferred Stock but shall, subject to Section 3(b)
hereof, accrete to the Liquidation Value in accordance with Section 4(a) hereof.
(b) After the Accretion Date, upon the written request of the holders of a
majority of the shares of Senior Preferred Stock, the Corporation shall,
commencing on the first Dividend Payment Date after such request, be required to
pay all dividends on shares of Senior Preferred Stock by the issuance of
additional shares of Senior Preferred Stock ("Additional Shares"). The
Additional Shares shall be identical to all other shares of Senior Preferred
Stock, except as set forth in Section 4. Forte purposes of determining the
number of Additional Shares to be issued as dividends pursuant to this Paragraph
(b), such Additional Shares shall be valued at their Applicable Liquidation
Value as provided in Section 4(c).
(c) Holders of shares of Senior Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
cumulative dividends, as herein provided, on the Senior Preferred Stock. Except
as provided in this Section 3, no interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the Senior
Preferred Stock that may be in arrears.
(d) So long as any shares of the Senior Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment or other distribution declared or made
upon Parity Securities, nor shall any Parity Securities be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
by the Corporation, directly or indirectly, unless, in each case (to the extent
such dividends are payable in cash), full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Senior Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of the dividend
on, or the acquisition of, as applicable, such class or series of Parity
Securities. When (to the extent such dividends are payable in cash) dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all
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dividends declared upon shares of the Senior Preferred Stock and all dividends
declared upon any other class or series of Parity Securities shall (in each
case, to the extent payable in cash) be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the Senior Preferred
Stock and accumulated and unpaid on such Parity Securities.
(e) So long as any shares of the Senior Preferred Stock are outstanding,
no dividends (other than dividends or distributions paid in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Junior
Securities) shall be declared or paid or set apart for payment or other
distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) (all such dividends, distributions, redemptions or purchases being
hereinafter referred to as a "Junior Securities Distribution") for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities), unless
in each case (i) the full cumulative dividends on all outstanding shares of the
Senior Preferred Stock and any other Parity Securities shall (to the extent
payable in cash) have been paid or set apart for payment for all past Dividend
Periods with respect to the Senior Preferred Stock and all past dividend periods
with respect to such Parity Securities and (ii) (to the extent payable in cash)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Senior Preferred
Stock and the current dividend period with respect to such Parity Securities.
(4) Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Senior Preferred Stock shall be
entitled to receive an amount equal to the Liquidation Value of such share plus
any accrued and unpaid cash dividends to the date of distribution. "Liquidation
Value" on any date means, with respect to (x) any share of Senior Preferred
Stock other than any Additional Shares, the sum of (l) $25.00 per share and (2)
the aggregate of all dividends accreted on such share until the most recent
Dividend Payment Date upon which an accretion to Liquidation Value has occurred
(or if such date is a Dividend Payment Date upon which an accretion to
Liquidation Value has occurred, such date), provided that in the event of an
actual liquidation, dissolution or winding up of the Corporation or the
redemption of any shares of Senior Preferred Stock pursuant to Section 5
hereunder, the amount referred to in
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<PAGE>
(2) shall be calculated by including dividends accreting to the actual date of
such liquidation, dissolution or winding up or the redemption date, as the case
may be, rather than the Dividend Payment Date referred to above, and provided
further that in no event will dividends accrete beyond the most recent
Dividend Payment Date prior to the Dividend Payment Date on which dividends on
the Senior Preferred Stock are payable in Additional Shares, and (y) any
Additional Share, the Applicable Liquidation Value. All accretions to
Liquidation Value will be calculated using compounding on a quarterly basis.
Except as provided in the preceding sentences, holders of shares of Senior
Preferred Stock shall not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable among the holders of the
shares of Senior Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity Securities,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Senior Preferred Stock and any such other Parity Securities
ratably in accordance with the respective amounts that would be payable on such
shares of Senior Preferred Stock and any such other stock if all amounts payable
thereon were paid in full. For the purposes of this paragraph (4), (i) a
consolidation or merger of the Corporation with one or more corporations or (ii)
a sale or transfer of all or substantially all of the Corporation's assets,
shall not be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any Parity Securities, after
payment shall have been made in full to the holders of the Senior Preferred
Stock, as provided in this paragraph (4), any other series or class or classes
of Junior Securities shall, subject to the respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets remaining to be
paid or distributed, and the holders of the Senior Preferred Stock shall not be
entitled to share therein.
(c) The Applicable Liquidation Value of any Additional Shares shall be the
Liquidation Value of Senior Preferred Stock outstanding immediately prior to the
first Dividend Payment Date occurring after a request for payment in Additional
Shares has been made in accordance with Section 3(b).
(5) Redemption.
"Stockholders Agreement" means the Stockholders Agreement dated as of
January 20, 1995, among DLJ Merchant Banking Partners, L.P., DLJ International
Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc.,
The Kevin C. Melia 1995 Irrevocable Trust, The Robert J. Graham
5
<PAGE>
1995 Irrevocable Trust, The Julie Kent 1995 Irrevocable Trust, Kevin C. Melia,
Robert J. Graham, Julie Kent, the Company, and the other parties thereto, as
amended from time to time.
(a) Redemption At the Option of the Corporation. At any time, provided
that the Corporation has funds legally available for such payment, the
Corporation may, at its option, redeem all but not less than all shares of
Senior Preferred Stock at redemption prices per share in cash set forth in the
table below, together with accrued and unpaid cash dividends thereon to the date
fixed for redemption, without interest:
Year Beginning Percentage of Liquidation Value
-------------- -------------------------------
November 26, 1999 114.0%
November 26, 2000 115.0%
and thereafter
(b) Redemption In the Event of a Change of Control. In the event of a
Change of Control, to the extent that the Corporation shall have funds available
for such payment, the Corporation shall be required to offer to redeem all of
the shares of Senior Preferred Stock then outstanding and shall be required to
redeem the shares of Senior Preferred Stock of any holder of such shares that
shall consent to such redemption, upon a date no later than five days following
the Change in Control and at a redemption price per share equal to 107.50% of
the Liquidation Value, in cash, together with accrued and unpaid cash dividends
thereon to the date fixed for redemption, without interest.
"Change of Control" means such time as: (a) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended), other than any person or group comprised solely of the 1999
Investors, has become the beneficial owner, by way of merger, consolidation or
otherwise, of 30% or more of the voting power of all classes of voting
securities of the Corporation, and such person or group has become the
beneficial owner of a greater percentage of the voting power of all classes of
voting securities of the Corporation than that beneficially owned by the 1999
Investors; or (b) a sale or transfer of all or substantially all of the assets
of the Corporation to any person or group (other than any group consisting
solely of the 1999 Investors or their affiliates) has been consummated; or (c)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Corporation (together with
any new directors whose election was approved by a vote of a majority of the
directors then still in office,
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who either were directors at the beginning of such period or whose election or
nomination for the election was previously so approved) cease for any reason to
constitute a majority of the directors of the Corporation, then in office.
"1999 Investors" means the Stockholders (determined as of the date of
initial issuance of the Senior Preferred Stock) and their Permitted Transferees,
each as defined in the Stockholders Agreement.
(c) Mandatory Redemption. To the extent the Corporation shall have funds
legally available for such payment, on November 26, 2006, if any shares of the
Senior Preferred Stock shall be outstanding, the Corporation shall redeem all
outstanding shares of the Senior Preferred Stock, at a redemption price equal to
the aggregate Liquidation Value, in cash, together with any accrued and unpaid
cash dividends thereon to the date fixed for redemption, without interest.
(d) Status of Redeemed Shares. Shares of Senior Preferred Stock which have
been issued and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of authorized and unissued shares of the
class of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of the Preferred Stock, provided that no such
issued and reacquired shares of Senior Preferred Stock shall be reissued or sold
as Senior Preferred Stock.
(e) Failure to Redeem. If the Corporation is unable or shall fail to
discharge its obligation to redeem all outstanding shares of Senior Preferred
Stock pursuant to paragraph (5)(b) or 5(c) (each, a "Mandatory Redemption
Obligation"), such Mandatory Redemption Obligation shall be discharged as soon
as the Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as any Mandatory Redemption Obligation with respect to the Senior
Preferred Stock shall not be fully discharged, the Corporation shall not (i)
directly or indirectly, redeem, purchase, or otherwise acquire any Parity
Security or discharge any mandatory or optional redemption, sinking fund or
other similar obligation in respect of any Parity Securities (except in
connection with a redemption, sinking fund or other similar obligation to be
satisfied pro rata with the Senior Preferred Stock) or (ii) in accordance with
paragraph 3(e), declare or make any Junior Securities Distribution, or, directly
or indirectly, discharge any mandatory or optional redemption, sinking fund or
other similar obligation in respect of the Junior Securities.
(f) Failure to Pay Dividends. Notwithstanding the foregoing provisions of
this paragraph (5), unless full cumulative cash dividends (whether or not
declared) on all outstanding shares of Senior Preferred Stock shall have been
paid or
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contemporaneously are declared and paid or set apart for payment for all
dividend periods terminating on or prior to the applicable redemption date, none
of the shares of Senior Preferred Stock shall be redeemed, and no sum shall be
set aside for such redemption, unless shares of Senior Preferred Stock are
redeemed pro rata.
(6) Procedure for Redemption. (a) In the event the Corporation shall
redeem shares of Senior Preferred Stock pursuant to Section 5(a) or (c), notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 days nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed at such holder's address as
the same appears on the stock register of the Corporation, provided that neither
the failure to give such notice nor any defect therein shall affect the validity
of the giving of notice for the redemption of any share of Senior Preferred
Stock to be redeemed except as to the holder to whom the Corporation has failed
to give said notice or except as to the holder whose notice was defective. Each
such notice shall state: (i) the redemption date; (ii) the number of shares of
Senior Preferred Stock to be redeemed, (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
(b) In the case of any redemption pursuant to Section 5(a) or (c) hereof,
notice having been mailed as provided in Section 6(a) hereof, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares called for
redemption), dividends on the shares of Senior Preferred Stock so called for
redemption shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation shall so
require and the notice shall so state), such shares shall be redeemed by the
Corporation at the redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
(c) In the case of a redemption pursuant to Section 5(b) hereof, notice of
such redemption shall be given by first class mail, postage prepaid, mailed not
more than 20 days prior to the occurrence of the Change of Control and not less
than 5 days prior to the redemption date, to each holder of record of the shares
to be redeemed at such holder's address as the same appears on the stock
register of the Corporation, provided that neither the failure to give such
notice nor any
8
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defect therein shall affect the validity of the giving of notice for the
redemption of any share of Senior Preferred Stock to be redeemed except as to
the holder to whom the Corporation has failed to give said notice or except as
to the holder whose notice was defective. Each such notice shall state: (i) that
a Change of Control has occurred; (ii) the redemption date; (iii) the redemption
price; (iv) that such holder may elect to cause the Corporation to redeem all or
any of the shares of Senior Preferred Stock held by such holder; (v) the place
or places where certificates for such shares are to be surrendered for payment
of the redemption price; and (vi) that dividends on the shares the holder elects
to cause the Corporation to redeem will cease to accrue on such redemption date.
Upon receipt of such notice, the holder shall, within 20 days of receipt
thereof, return such notice to the Corporation indicating the number of shares
of Senior Preferred Stock such holder shall elect to cause the Corporation to
redeem, if any.
(d) In the case of a redemption pursuant to Section 5(b) hereof, notice
having been mailed as provided in Section 6(c) hereof, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares called for
redemption), dividends on such shares of Senior Preferred Stock as the holder
elects to cause the Corporation to redeem shall cease to accrue, and all rights
of the holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon surrender
in accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such share shall be
redeemed by the Corporation at the redemption price aforesaid.
(7) Exchange. (a) Subject to the provisions of this paragraph (7) the
Corporation may, at its option, at any time and from time to time on any
Dividend Payment Date exchange, to the extent it is legally permitted to do so,
all, but not less than all, outstanding shares (and fractional shares) of Senior
Preferred Stock, for Exchange Debentures, provided that (i) on or prior to the
date of exchange the Corporation shall have paid to or declared and set aside
for payment to the holders of outstanding shares of Senior Preferred Stock all
accrued and unpaid cash dividends on shares of Senior Preferred Stock through
the exchange date in accordance with the next succeeding paragraph; (ii) no
event of default under the indenture (as defined in such indenture) governing
the Exchange Debentures shall have occurred and be continuing; and (iii) no
shares of Senior Preferred Stock are held on such date by the Mezzanine Holders
(as defined in the Stockholders Agreement) or any of their Affiliates. The
principal amount of Exchange Debentures deliverable upon exchange of a share of
Senior Preferred Stock,
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<PAGE>
adjusted as hereinafter provided, shall be determined in accordance with the
Exchange Ratio (as defined below).
Cash dividends on any shares of Senior Preferred Stock exchanged for
Exchange Debentures which have accrued but have not been paid as of the date
of exchange shall be paid in cash. In no event shall the Corporation issue
Exchange Debentures in denominations other than $1,000 or in an integral
multiple thereof. Cash will be paid in lieu of any such fraction of an
Exchange Debenture which would otherwise have been issued (which shall be
determined with respect to the aggregate principal amount of Exchange
Debentures to be issued to a holder upon any such exchange). Interest will
accrue on the Exchange Debentures from the date of exchange.
Prior to effecting any exchange hereunder, the Corporation shall appoint a
trustee to serve in the capacity contemplated by an indenture between the
Corporation and such trustee, containing customary terms and conditions.
The Exchange Ratio shall be, as of any Dividend Payment Date, $1.00 (or
fraction thereof) of principal amount of Exchange Debenture for each $1.00 of
(i) Liquidation Value plus (ii) accrued and unpaid dividends, if any, per share
of Senior Preferred Stock held by a holder on the applicable exchange date.
"Affiliates" shall have the meaning ascribed to such term in the
Stockholders Agreement.
"Exchange Debentures" means the Subordinated Exchange Debentures due 2006
of the Corporation, to be issued pursuant to an indenture between the
Corporation and a trustee, containing customary terms and conditions, in
accordance with the Term Sheet attached as Annex A hereto.
(b) Procedure for Exchange. (i) In the event the Corporation shall
exchange shares of Senior Preferred Stock, notice of such exchange shall be
given by first class mail, postage prepaid, mailed not less than 30 days nor
more than 60 days prior to the exchange date, to each holder of record of the
shares to be exchanged at such holder's address as the same appears on the stock
register of the Corporation, provided that neither the failure to give such
notice nor any defect therein shall affect the validity of the giving of notice
for the exchange of any share of Senior Preferred Stock to be exchanged except
as to the holder to whom the Corporation has failed to give said notice or
except as to the holder whose notice was defective. Each such notice shall
state: (A) the exchange date; (B) the number of shares of Senior Preferred Stock
to be exchanged and, if fewer than all the shares held by such holder are to be
exchanged, the number of shares to be exchanged from such holder; (C) the
Exchange Ratio; (D) the place or
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<PAGE>
places where certificates for such shares are to be exchanged for notes
evidencing the Exchange Debentures to be received by the exchanging holder; and
(E) that dividends on the shares to be exchanged will cease to accrue on such
exchange date.
(ii) Prior to giving notice of intention to exchange, the
Corporation shall execute and deliver with a bank or trust company
selected by the Corporation an indenture containing customary terms and
conditions. The Corporation will cause the Exchange Debentures to be
authenticated on the Dividend Payment Date on which the exchange is
effective, and will pay interest on the Exchange Debentures at the rate
and on the dates specified in such indenture from the exchange date.
The Corporation will not give notice of its intention to exchange
under paragraph 6(b)(i) hereof unless it shall file at the place or places
(including a place in the Borough of Manhattan, The City of New York)
maintained for such purpose an opinion of counsel (who may be an employee
of the Corporation) to the effect that (i) the indenture has been duly
authorized, executed and delivered by the Corporation, has been duly
qualified under the Trust Indenture Act of 1939 (or that such
qualification is not necessary) and constitutes a valid and binding
instrument enforceable against the Corporation in accordance with its
terms (subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, and subject
to such other qualifications as are then customarily contained in opinions
of counsel experienced in such matters), (ii) the Exchange Debentures have
been duly authorized and, when executed and authenticated in accordance
with the provisions of the indenture and delivered in exchange for the
shares of Preferred Stock, will constitute valid and binding obligations
of the Corporation entitled to the benefits of the indenture (subject as
aforesaid), (iii) neither the execution nor delivery of the indenture or
the Exchange Debentures nor compliance with the terms, conditions or
provisions of such instruments will result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or agreement or instrument, known to
such counsel, to which the Corporation or any of its subsidiaries is a
party or by which it or any of them is bound, or any decree, judgment,
order, rule or regulation, known to such counsel, of any court or
governmental agency or body having jurisdiction over the Corporation and
such subsidiaries or any of their properties, (iv) the Exchange Debentures
have been duly registered for such exchange with the Securities and
Exchange Commission under a registration statement that has become
effective under the Securities Act of 1933 (the "Act") or
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<PAGE>
that the exchange of the Exchange Debentures for the shares of Senior
Preferred Stock is exempt from registration under the Act, and (v) the
Corporation has sufficient legally available funds for such exchange such
that such exchange is permitted under applicable law.
(iii) Notice having been mailed as aforesaid, from and after the
exchange date (unless default shall be made by the Corporation in issuing
Exchange Debentures in exchange for the shares called for exchange),
dividends on the shares of Senior Preferred Stock so called for exchange
shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the Exchange Debentures and any rights such holder, upon the
exchange, may have as a holder of the Exchange Debenture) shall cease.
Upon surrender in accordance with said notice of the certificates for any
shares so exchanged (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice
shall so state), such share shall be exchanged by the Corporation for the
Exchange Debentures at the Exchange Ratio. In case fewer than all the
shares represented by any such certificate are exchanged, a new
certificate shall be issued representing the unexchanged shares without
cost to the holder thereof.
(iv) Each exchange shall be deemed to have been effected immediately
after the close of business on the relevant Dividend Payment Date, and the
person in whose name or names any Exchange Debentures shall be issuable
upon such exchange shall be deemed to have become the holder of record of
the Exchange Debentures represented thereby at such time on such Dividend
Payment Date.
(v) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon exchange of the Senior Preferred Stock,
the Corporation shall comply with all applicable federal and state laws
and regulations which require action to be taken by the Corporation.
(c) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of notes
evidencing Exchange Debentures on exchange of the Senior Preferred Stock
pursuant hereto, provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of Exchange Debentures in a name other than that of the holder of the
Senior Preferred Stock to be exchanged and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the
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Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(8) Voting Rights. (a) The holders of record of shares of Senior Preferred
Stock shall not be entitled to any voting rights except as hereinafter provided
in this paragraph (8), as otherwise provided by law or as provided in the
Stockholders Agreement.
(b) If and whenever (i) four consecutive cash dividends payable on the
Senior Preferred Stock have not been paid in full, (ii) for any reason
(including the reason that funds are not legally available for a redemption),
the Corporation shall have failed to discharge any Mandatory Redemption
Obligation, (iii) the Corporation shall have failed to provide the notice
required by Section 6(c) hereof within the time period specified in such section
or (iv) the Corporation shall have failed to comply with Sections 3(d), 3(e) or
8(c) hereof, the number of directors then constituting the Board of Directors
shall be increased by two and the holders of a majority of the outstanding
shares of Senior Preferred Stock shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Senior Preferred Stock called as hereinafter provided.
(c) Whenever (i) all arrears in cash dividends on the Senior Preferred
Stock then outstanding shall have been paid and cash dividends thereon for the
current quarterly dividend period shall have been paid or declared and set apart
for payment, (ii) the Corporation shall have fulfilled its Mandatory Redemption
Obligation, (iii) the Corporation shall have fulfilled its obligation to provide
notice as specified in subsection (b)(iii) hereof, or (iv) the Corporation shall
have complied with Sections 3(d), 3(e) and 8(c) hereof, as the case may be, then
the right of the holders of the Senior Preferred Stock to elect such additional
directors shall cease (but subject always to the same provisions for the vesting
of such voting rights in the case of any similar future (i) arrearage in four
consecutive quarterly cash dividends, (ii) failure to fulfill any Mandatory
Redemption Obligation, (iii) failure to fulfill the obligation to provide the
notice required by Section 6(c) hereof within the time period specified in such
section or (iv) failure to comply with Sections 3(d), 3(e) or 8(c)), the terms
of office of the persons elected as directors by the holders of the Senior
Preferred Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of shares of Senior Preferred Stock,
the secretary of the Corporation may, and upon the written request of any holder
of Senior Preferred Stock (addressed to the secretary at the principal office of
the Corporation) shall, call a special meeting of the holders of the Senior
Preferred Stock for the election of the directors to be
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elected by them as herein provided, such call to be made by notice similar to
that provided in the Bylaws of the Corporation for a special meeting of the
stockholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the secretary within 20 days
after receipt of any such request, then any holder of shares of Senior Preferred
Stock may call such meeting, upon the notice above provided, and for that
purpose shall have access to the stock books of the Corporation. The directors
elected at any such special meeting shall hold office until the next annual
meeting of the stockholders or special meeting held in lieu thereof if such
office shall not have previously terminated as above provided. If any vacancy
shall occur with respect to the directors elected by the holders of the Senior
Preferred Stock, a successor shall be elected in accordance with the procedures
of Section 8(b) to serve until the next annual meeting of the stockholders or
special meeting held in place thereof, if such office shall not have previously
terminated as provided above.
(d) Without the written consent of 66 2/3% of the outstanding shares of
Senior Preferred Stock or the vote of holders of 66 2/3% of the outstanding
shares of Senior Preferred Stock at a meeting of the holders of Senior Preferred
Stock called for such purpose, the Corporation will not (i) amend, alter or
repeal any provision of the Certificate of Incorporation (by merger or
otherwise) so as to adversely affect the preferences, rights or powers of the
Senior Preferred Stock, provided that any such amendment that decreases the
dividend payable on or the Liquidation Value of the Senior Preferred Stock shall
require the affirmative vote of holders of each share of Senior Preferred Stock
at a meeting of holders of Senior Preferred Stock called for such purpose or
written consent of the holder of each share of Senior Preferred Stock; (ii)
create, authorize or issue any class or series of stock ranking prior to, or on
a parity with, the Senior Preferred Stock with respect to dividends or upon
liquidation, dissolution, winding up or otherwise, or increase the authorized
number of shares of any such class or series, or reclassify any authorized stock
of the Corporation into any such prior or parity shares or create, authorize or
issue any obligation or security convertible into or evidencing the right to
purchase any such prior or parity shares, except that the Corporation may,
without such approval, create, authorize and issue Parity Securities for the
purpose of utilizing the proceeds from the issuance of such Parity Securities
for the redemption or repurchase of all outstanding shares of Senior Preferred
Stock in accordance wit the terms hereof; (iii) merge or consolidate, or sell,
exchange or convey all or substantially all of the assets, property or business
of the Corporation unless, in the case of a merger or consolidation, (A) if the
Corporation is not the surviving corporation, the seniority, rights, powers and
preferences of the Senior Preferred Stock continue unimpaired and on identical
terms after such transaction or (B) the surviving corporation has a Consolidated
Net Worth (immediately following any such transaction) at least equal to that of
the Corporation immediately prior to such
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transaction or (iv) issue any additional shares of Senior Preferred Stock, other
than the issuance of Additional Shares in accordance with Section 3(b) hereof.
"Consolidated Net Worth" means at any date and with respect to any Person,
the consolidated stockholders' equity of such Person and its consolidated
subsidiaries less their consolidated Intangible Assets, all determined as of
such date. For purposes of this definition, "Intangible Assets" means the amount
(to the extent reflected in determining such consolidated stockholders' equity)
of (i) all write-ups (other than write-ups of assets of a going concern business
made within twelve months after the acquisition of such business) subsequent to
November 26, 1999 in the book value of any asset owned by such Person or a
consolidated subsidiary, (ii) all investments in unconsolidated subsidiaries and
all equity investments in Persons which are not subsidiaries and (iii) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental expenses and
other intangible assets.
(e) In exercising the voting rights set forth in this paragraph (8), each
share of Senior Preferred Stock shall have one vote per share, except that when
any other series of preferred stock shall have the right to vote with the Senior
Preferred Stock as a single class on any matter, then the Senior Preferred Stock
and such other series shall have with respect to such matters one vote per
$25.00 of Liquidation Value or other liquidation preference. Except as otherwise
required by applicable law or as set forth herein, the shares of Senior
Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action.
(9) Reports. So long as any of the Senior Preferred Stock is outstanding,
the Corporation will furnish the holders thereof with the quarterly and annual
financial reports that the Corporation is required to file with the Securities
and Exchange Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 or, in the event the Corporation is not required
to file such reports, reports containing the same information as would be
required in such reports.
(10) General Provisions. (a) The term "Person" as used herein means any
corporation, limited liability company, partnership, trust, organization,
association, other entity or individual.
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(b) The term "outstanding", when used with reference to shares of stock,
shall mean issued shares, excluding shares held by the Corporation or a
subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses and subclauses
used herein are for convenience of reference only and shall not define, limit or
affect any of the provisions hereof.
(d) Each holder of Senior Preferred Stock, by acceptance thereof,
acknowledges and agrees that payments of dividends, interest, premium and
principal on, and exchange, redemption and repurchase of, such securities by the
Corporation are subject to restrictions on the Corporation contained in certain
credit and financing agreements.
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IN WITNESS WHEREOF, Manufacturers' Services Limited has caused this
Certificate of Designations to be signed and attested by the undersigned this
____ day of November, 1999.
MANUFACTURERS' SERVICES
LIMITED
By: ______________________________
Name: Kevin C. Melia
Title: President
ATTEST:
_______________________________
Name: Dale Johnson
Title: Secretary
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ANNEX A
SUMMARY OF TERMS
OF INDENTURE FOR
SUBORDINATED EXCHANGE DEBENTURES
Parties: Manufacturers' Services Limited (the "Corporation") and
[ ], as trustee.
Issue: Subordinated Exchange Debentures (the "Exchange
Debentures") to be issued by the Corporation, at its
option, in exchange for any or all the outstanding
shares of Senior Exchangeable Preferred Stock due 2006
(the "Senior Preferred Stock") issued on or about
November 26, 1999.
Maturity: November 26, 2006.
Interest: Annual rate, payable quarterly, equal to 14% through
November 26, 2000 and 15% thereafter. After the
Accretion Date (as defined in the Certificate of
Designation of the Senior Preferred Stock of the
Corporation (the "Certificate of Designation")),
quarterly interest will be paid by the issuance of
additional Exchange Debentures; until then interest will
be payable in cash.
Ranking: The Exchange Debentures will rank senior to all other
subordinated debt, preferred stock and common equity of
the Corporation.
Optional Redemption: The Exchange Debentures will be redeemable at the option
of the Corporation, in whole but not in part, at the
same redemption prices set forth in the Certificate of
Designation.
Change of Control
Repurchase Right: In the event of a Change of Control, each holder of the
Exchange Debentures will have the right to require the
Corporation to repurchase all or any part of such
holder's Exchange Debentures, upon a date no later than
30 days following the Change
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of Control, at a repurchase price calculated in
accordance with the procedures set forth in Section 5(b)
of the Certificate of Designations for calculating the
redemption price of the Senior Preferred Stock in the
event of a Change of Control, except that, in so
calculating the repurchase price, the aggregate
principal amount of the Exchange Debentures shall be
substituted for "Liquidation Value", as such term is
used in such Section 5(b).
Covenants: The Debentures will contain covenants that are
substantially the same as the covenants contained in the
senior credit facility of the Corporation, as amended,
and will limit, among other things, the ability of the
Corporation and its subsidiaries (i) to incur additional
indebtedness, (ii) to pay dividends and make other
distributions on its capital stock, (iii) to repurchase
its capital stock or warrants, options or other rights
to acquire shares of its capital stock or any
Indebtedness subordinated to the Exchange Debentures,
(iv) to make certain other Restricted Payments, (v) to
make certain investments or asset sales, (vi) to engage
in transactions with affiliates, (vii) to create liens,
(viii) to permit "layering" of indebtedness and (ix) to
merge or consolidate or transfer all or substantially
all of its assets.
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EXHIBIT B
Form of Warrant
<PAGE>
EXHIBIT B
Form of Warrant
MANUFACTURERS' SERVICES LIMITED
Warrant for the Purchase of Shares of
Common Stock of Manufacturers Services Limited
No.____ Warrant to Purchase
______ Shares
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH
IN THE STOCKHOLDERS AGREEMENT (AS HEREIN DEFINED), COPIES OF WHICH MAY BE
OBTAINED UPON REQUEST FROM THE COMPANY OR ANY SUCCESSOR THERETO.
FOR VALUE RECEIVED, MANUFACTURERS' SERVICES LIMITED, a Delaware
corporation (the "Company"), hereby certifies that [HOLDER], its successor or
permitted assigns (the "Holder"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, _____
fully paid and non-assessable shares of common stock of the Company, par value
$0.001 per share (the "Warrant Shares"), at a purchase price per share equal to
the Exercise Price (as hereinafter defined). The number of Warrant Shares to be
received upon the exercise of this Warrant and the price to
<PAGE>
be paid for a Warrant Share are subject to adjustment from time to time as
hereinafter set forth.
(a) DEFINITIONS.
(1) The following terms, as used herein, have the following meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company or other capital stock of the Company that is not preferred as to
liquidation or dividends.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons in
whose name a stock certificate is registered or accompanied by a duly executed
stock assignment separate from the certificate with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Exercise Price" means $1.20 per Warrant Share, such Exercise Price to be
adjusted from time to time as provided herein.
"Expiration Date" means November 26, 2006 at 5:00 p.m. New York City time.
"Fair Market Value" means, with respect to one share of Common Stock on
any date, the Current Market Price Per Common Share for purposes of paragraph
(h)(6) hereof.
"Person" means an individual, partnership, corporation, limited liability
company, trust, joint stock company, association, joint venture, or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Principal Holders" means, on any date, the Holders of at least 25% of the
Warrants.
"Stockholders Agreement" means the Stockholders Agreement dated as of
January 20, 1995, among DLJ Merchant Banking Partners, L.P., DLJ
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International Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking
Funding, Inc., The Kevin C. Melia 1995 Irrevocable Trust, The Robert J. Graham
1995 Irrevocable Trust, The Julie Kent 1995 Irrevocable Trust, Kevin C. Melia,
Robert J. Graham, Julie Kent, the Company, and the other parties thereto, as
amended from time to time.
"transfer" shall have the meaning assigned to such term in the
Stockholders Agreement.
"Warrants" means the Warrants (including this Warrant) issued to the
subscribers under the Preferred Stock and Warrant Subscription Agreement dated
as of the date hereof among the Company and the subscribers listed on the
signature pages thereof.
(2) Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Stockholders Agreement.
(b) EXERCISE OF WARRANT.
(1) The Holder is entitled to exercise this Warrant in whole
or in part at any time, or from time to time, until the Expiration
Date or, if such day is not a Business Day, then on the next
succeeding day that shall be a Business Day. To exercise this
Warrant, the Holder shall execute and deliver to the Company a
Warrant Exercise Notice substantially in the form annexed hereto. No
earlier than ten days after delivery of the Warrant Exercise Notice,
the Holder shall deliver to the Company this Warrant Certificate,
including the Warrant Exercise Subscription Form forming a part
hereof duly executed by the Holder, together with payment of the
applicable Exercise Price, provided, that in connection with a
public offering of the Common Stock, a Holder may deliver the
Warrant Exercise Notice, the Warrant Exercise Subscription Form and
this Warrant Certificate to the Company simultaneously. Upon such
delivery and payment, the Holder shall be deemed to be the holder of
record of the Warrant Shares subject to such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Warrant Shares
shall not then be actually delivered to the Holder. Notwithstanding
anything herein to the contrary, in lieu of payment in cash of the
applicable Exercise Price, the Holder may elect (i) to receive upon
exercise of this Warrant, the number of Warrant Shares reduced by a
number of shares of Common Stock having the aggregate Fair Market
Value equal to the aggregate
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Exercise Price for the Warrant Shares, (ii) to deliver as payment,
in whole or in part of the aggregate Exercise Price, shares of
Common Stock having the aggregate Fair Market Value equal to the
applicable portion of the aggregate Exercise Price for the Warrant
Shares or (iii) to deliver as payment, in whole or in part of the
aggregate Exercise Price, such number of Warrants which, if
exercised, would result in a number of shares of Common Stock having
an aggregate Fair Market Value equal to the applicable portion of
the aggregate Exercise Price for the Warrant Shares. Notwithstanding
anything to the contrary in this paragraph (b)(1), if the aggregate
Fair Market Value of the Common Stock applied or delivered pursuant
to (i), (ii) or (iii) above exceeds the aggregate Exercise Price, in
no event shall the Holder be entitled to receive any amounts from
the Company.
(2) The Exercise Price may be paid in cash or by certified or
official bank check or bank cashier's check payable to the order of
the Company or by any combination of such cash or check. The Company
shall pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of the
Warrant Shares.
(3) If the Holder exercises this Warrant in part, this Warrant
Certificate shall be surrendered by the Holder to the Company and a
new Warrant Certificate of the same tenor and for the unexercised
number of Warrant Shares shall be executed by the Company. The
Company shall register the new Warrant Certificate in the name of
the Holder or in such name or names of its transferee pursuant to
paragraph (f) hereof as may be directed in writing by the Holder and
deliver the new Warrant Certificate to the Person or Persons
entitled to receive the same.
(4) Upon surrender of this Warrant Certificate in conformity
with the foregoing provisions, the Company shall transfer to the
Holder of this Warrant Certificate appropriate evidence of ownership
of the shares of Common Stock or other securities or property
(including any money) to which the Holder is entitled, registered or
otherwise placed in, or payable to the order of, the name or names
of the Holder or such transferee as may be directed in writing by
the Holder, and shall deliver such evidence of ownership and any
other securities or property (including any money) to the Person or
Persons entitled to receive the same,
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together with an amount in cash in lieu of any fraction of a share
as provided in paragraph (e) below.
(c) RESTRICTIVE LEGEND. Certificates representing shares of Common Stock
issued pursuant to this Warrant shall bear a legend substantially in the form of
the legend set forth on the first page of this Warrant Certificate to the extent
that and for so long as such legend is required pursuant to the Stockholders
Agreement.
(d) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of its authorized but unissued shares of Common Stock or other
securities of the Company from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encumbrances or restrictions on
sale and free and clear of all preemptive rights, except to the extent set forth
in the Stockholders Agreement.
(e) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the Current Market Price Per Common Share (as defined in paragraph (h)(6)) at
the date of such exercise.
The Company further agrees that it will not change the par value of the
Common Stock from par value $0.001 per share to any higher par value which
exceeds the Exercise Price then in effect, and will reduce the par value of the
Common Stock upon any event described in paragraph (h) that (i) provides for an
increase in the number of shares of Common Stock subject to purchase upon
exercise of this Warrant, in inverse proportion to and effective at the same
time as such number of shares is increased, but only to the extent that such
increase in the number of shares, together with all other such increases after
the date hereof, causes the aggregate Exercise Price of all Warrants (without
giving effect to any exercise thereof) to be greater than $___________ or (ii)
would, but for this provision, reduce the Exercise Price below the par value of
the Common Stock.
(f) EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT.
(1) This Warrant and the Warrant Shares are subject to the
provisions of the Stockholders Agreement, including the
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restrictions on transfer. Each taker and holder of this Warrant
Certificate by taking or holding the same, consents and agrees that
the registered holder hereof may be treated by the Company and all
other persons dealing with this Warrant Certificate as the absolute
owner hereof for any purpose and as the person entitled to exercise
the rights represented hereby. The Holder, by its acceptance of this
Warrant, will be subject to the provisions of, and will have the
benefits of, the Stockholders Agreement to the extent set forth
therein, including the transfer restrictions and the registration
rights included therein.
(2) Subject to compliance with the transfer restrictions set
forth in the Stockholders Agreement, upon surrender of this Warrant
to the Company, together with the attached Warrant Assignment Form
duly executed, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee or assignees named
in such instrument of assignment and, if the Holder's entire
interest is not being assigned, in the name of the Holder and this
Warrant shall promptly be canceled.
(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.
(h) ANTI-DILUTION PROVISIONS. The Exercise Price of this Warrant and the
number of shares of Common Stock for which this Warrant may be exercised shall
be subject to adjustment from time to time upon the occurrence of certain events
as provided in this paragraph (h); provided that, notwithstanding anything to
the contrary contained herein, the Exercise Price shall not be less than the par
value of the Common Stock, as such par value may be reduced from time to time in
accordance with paragraph (e).
(1) In case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on Common Stock
payable in Common Stock, (ii) subdivide or split the outstanding
Common Stock, (iii) combine or reclassify the outstanding Common
Stock into a smaller number of shares, or (iv) issue any shares of
its capital stock in a reclassification of Common Stock (including
any such reclassification in connection
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with a consolidation or merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of
the record date for such dividend or distribution or of the
effective date of such subdivision, split, combination or
reclassification shall be proportionately adjusted so that, giving
effect to paragraph (h)(9), the exercise of this Warrant after such
time shall entitle the holder to receive the aggregate number of
shares of Common Stock or other securities of the Company (or shares
of any security into which such shares of Common Stock have been
reclassified pursuant to clause (iii) or (iv) above) which, if this
Warrant had been exercised immediately prior to such time, such
holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, distribution, subdivision,
split, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.
(2) In case the Company shall issue or sell any Common Stock
(other than Common Stock issued (I) upon exercise of the Warrants)
or (II) upon exercise or conversion of any security the issuance of
which caused an adjustment under paragraphs (h)(3) or (h)(4)
hereof), the Exercise Price to be in effect after such issuance or
sale shall be determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the sum of (x) the number of shares of
Common Stock outstanding immediately prior to the time of such
issuance or sale multiplied by the Current Market Price Per Common
Share immediately prior to such issuance or sale and (y) the
aggregate consideration, if any, to be received by the Company upon
such issuance or sale, and the denominator of which shall be the
product of the aggregate number of shares of Common Stock
outstanding immediately after such issuance or sale and the Current
Market Price Per Common Share immediately prior to such issuance or
sale but in no event will such fraction exceed 1. In case any
portion of the consideration to be received by the Company shall be
in a form other than cash, the fair market value of such noncash
consideration shall be utilized in the foregoing computation. Such
fair market value shall be determined by the Board of Directors of
the Company; provided that if the Principal Holders shall object to
any such determination, the Board of Directors shall retain an
independent appraiser reasonably satisfactory to the Principal
Holders to determine such fair market value. The Holder shall be
notified promptly of any consideration other than cash to be
received by the Company and furnished with
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<PAGE>
a description of the consideration and the fair market value
thereof, as determined by the Board of Directors.
(3) In case the Company shall fix a record date for the
issuance of rights, options or warrants to the holders of its Common
Stock or other securities entitling such holders to subscribe for or
purchase for a period expiring within 60 days of such record date
shares of Common Stock (or securities convertible into shares of
Common Stock) at a price per share of Common Stock (or having a
conversion price per share of Common Stock, if a security
convertible into shares of Common Stock) less than the Current
Market Price Per Common Share on such record date, the maximum
number of shares of Common Stock issuable upon exercise of such
rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as
of such record date and the Exercise Price shall be adjusted
pursuant to paragraph (h)(2) hereof, as though such maximum number
of shares of Common Stock had been so issued for an aggregate
consideration payable by the holders of such rights, options,
warrants or convertible securities prior to their receipt of such
shares of Common Stock. In case any portion of such consideration
shall be in a form other than cash, the fair market value of such
noncash consideration shall be determined as set forth in paragraph
(h)(2) hereof. Such adjustment shall be made successively whenever
such record date is fixed; and in the event that such rights,
options or warrants are not so issued or expire unexercised, or in
the event of a change in the number of shares of Common Stock to
which the holders of such rights, options or warrants are entitled
(other than pursuant to adjustment provisions therein which are no
more favorable in their entirety than those contained in this
paragraph (h)), the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such record date had
not been fixed, in the former event, or the Exercise Price which
would then be in effect if such holder had initially been entitled
to such changed number of shares of Common Stock, in the latter
event.
(4) In case the Company shall sell or issue rights, options
(other than options issued pursuant to a plan described in clause II
of paragraph (h)(2)) or warrants entitling the holders thereof to
subscribe for or purchase Common Stock (or securities convertible
into shares of Common Stock) or shall issue convertible securities,
and the price per share of Common Stock of such rights, options,
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warrants or convertible securities (including, in the case of
rights, options or warrants, the price at which they may be
exercised) is less than the Current Market Price Per Common Share,
the maximum number of shares of Common Stock issuable upon exercise
of such rights, options or warrants or upon conversion of such
convertible securities shall be deemed to have been issued and
outstanding as of the date of such sale or issuance, and the
Exercise Price shall be adjusted pursuant to paragraph (h)(2) hereof
as though such maximum number of shares of Common Stock had been so
issued for an aggregate consideration equal to the aggregate
consideration paid for such rights, options, warrants or convertible
securities and the aggregate consideration payable by the holders of
such rights, options, warrants or convertible securities prior to
their receipt of such shares of Common Stock. In case any portion of
such consideration shall be in a form other than cash, the fair
market value of such noncash consideration shall be determined as
set forth in paragraph (h)(2) hereof. Such adjustment shall be made
successively whenever such rights, options, warrants or convertible
securities are issued; and in the event that such rights, options or
warrants expire unexercised, or in the event of a change in the
number of shares of Common Stock to which the holders of such
tights, options, warrants or convertible securities are entitled
(other than pursuant to adjustment provisions therein which are no
more favorable in their entirety than those contained in this
paragraph (h)), the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such rights,
options, warrants or convertible securities had not been issued, in
the former event, or the Exercise Price which would then be in
effect if such holders had initially been entitled to such changed
number of shares of Common Stock, in the latter event. No adjustment
of the Exercise Price shall be made pursuant to this paragraph
(h)(4) to the extent that the Exercise Price shall have been
adjusted pursuant to paragraph (h)(3) upon the setting of any record
date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of shares
of Common Stock to which the holders of such rights, options,
warrants or convertible securities are entitled and the price
payable therefor.
(5) In case the Company shall fix a record date for the making of a
distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of
9
<PAGE>
evidences of indebtedness, cash, assets or other property (other
than dividends payable in Common Stock or rights, options or
warrants referred to in, and for which an adjustment is made
pursuant to, paragraph (h)(3) hereof), the Exercise Price to be in
effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price
Per Common Share on such record date, less the fair market value
(determined as set forth in paragraph (h)(2) hereof) of the portion
of the assets, cash, other property or evidence of indebtedness so
to be distributed which is applicable to one share of Common Stock,
and the denominator of which shall be such Current Market Price Per
Common Share. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution
is not so made, the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such record date had
not been fixed.
(6) For the purpose of any computation under paragraph (e) or
paragraph (h)(2), (3), (4) or (5) hereof, on any determination date,
the Current Market Price Per Common Share shall be deemed to be the
average (weighted by daily trading volume) of the Daily Prices (as
defined below) per share of the Common Stock for the 20 consecutive
trading days ending three days prior to such date. "Daily Price"
means (1) if the shares of Common Stock then are listed and traded
on the New York Stock Exchange, Inc. ("NYSE"), the closing price on
such day as reported on the NYSE Composite Transactions Tape; (2) if
the shares of Common Stock then are not listed and traded on the
NYSE, the closing price on such day as reported by the principal
national securities exchange on which the shares are listed and
traded; (3) if the shares of Common Stock then are not listed and
traded on any such securities exchange, the last reported sale price
on such day on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); (4)
if the shares of Common Stock then are not listed and traded on any
such securities exchange and not traded on the NASDAQ National
Market, the average of the highest reported bid and lowest reported
asked price on such day as reported by NASDAQ; or (5) if such shares
are not listed and traded on any such securities exchange, not
traded on the NASDAQ National Market and bid and asked prices are
not reported by NASDAQ, then the average of the closing bid and
asked prices, as reported by The Wall Street
10
<PAGE>
Journal for the over-the-counter market. If on any determination
date the shares of Common Stock are not quoted by any such
organization, the Current Market Price Per Common Share shall be the
fair market value of such shares on such determination date as
determined by the Board of Directors, without regard to
considerations of the lack of liquidity, applicable regulatory
restrictions or any of the transfer restrictions or other
obligations imposed on such shares set forth in the Stockholders
Agreement. If the Principal Holders shall object to any
determination by the Board of Directors of the Current Market Price
Per Common Share, the Current Market Price Per Common Share shall be
the fair market value per share of the applicable class of Common
Stock as determined by an independent appraiser retained by the
Company at its expense and reasonably acceptable to the Principal
Holders. For purposes of any computation under this paragraph (h),
the number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the
Company.
s (7) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least one percent in such price; provided that any adjustments which
by reason of this paragraph (h)(7) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (h) shall be made
to the nearest one tenth of a cent or to the nearest hundredth of a
share, as the case may be.
(8) In the event that, at any time as a result of the
provisions of this paragraph (h), the holder of this Warrant upon
subsequent exercise shall become entitled to receive any shares of
capital stock or other securities of the Company other than Common
Stock, the number of such other shares so receivable upon exercise
of this Warrant shall thereafter be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained herein.
(9) Upon each adjustment of the Exercise Price as a result of
the calculations made in paragraphs (h)(l), (2), (3), (4) or (5)
hereof the number of shares for which this Warrant is exercisable
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that
number of shares of Common Stock obtained by (i) multiplying the
11
<PAGE>
number of shares covered by this Warrant immediately prior to this
adjustment of the number of shares by the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
(10) The Company shall notify all Holders of the fixing a
record date for the purpose of payment of a cash dividend to holders
of Common Stock as soon as reasonably practicable, but in no event
less than 20 days prior to any such record date.
(11) Not less than 10 nor more than 30 days prior to the
record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment
pursuant to this paragraph (h), the Company shall forthwith file in
the custody of this Secretary or an Assistant Secretary at its
principal executive office and with its stock transfer agent or its
warrant agent, if any, an officers' certificate showing the adjusted
Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment and the manner
of computing such adjustment. Each such officers' certificate shall
be signed by the chairman, president or chief financial officer of
the Company and by the secretary or any assistant secretary of the
Company. Each such officers' certificate shall be made available at
all reasonable times for inspection by the Holder or any holder of a
Warrant executed and delivered pursuant to paragraph (f) and the
Company shall, forthwith after each such adjustment, mail a copy, by
first-class mail, of such certificate to the Holder.
(12) The Holder shall, at its option, be entitled to receive,
in lieu of the adjustment pursuant to paragraph (h)(5) otherwise
required thereof, on the date of exercise of the Warrants, the
evidences of indebtedness, other securities, cash, property or other
assets which such Holder would have been entitled to receive if it
had exercised its Warrants for shares of Common Stock immediately
prior to the record date with respect to such distribution. The
Holder may exercise its option under this paragraph (h)(l2) by
delivering to the Company a written notice of such exercise within
seven days of its receipt of the certificate of adjustment required
pursuant to paragraph (h)(11) to be delivered by the Company in
connection with such distribution.
12
<PAGE>
(i) CONSOLIDATION, MERGER, OR SALE OF ASSETS. In case of any consolidation
of the Company with, or merger of the Company into, any other Person, any merger
of another Person into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock) or any sale or transfer of all or substantially all of the
assets of the Company or of the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be, the Holder
shall have the right thereafter to exercise this Warrant for the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of Common Stock for
which this Warrant may have been exercised immediately prior to such
consolidation, merger, sale or transfer, assuming (i) such holder of Common
Stock is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent Person"), or an Affiliate of
a constituent Person and (ii) in the case of a consolidation merger, sale or
transfer which includes an election as to the consideration to be received by
the holders, such holder of Common Stock failed to exercise its rights of
election, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock held immediately prior to such consolidation, merger, sale or transfer by
other than a constituent Person or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this paragraph (i) the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Adjustments for
events subsequent to the effective date of such a consolidation, merger and sale
of assets shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. In any such event, effective provisions shall be
made in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, conveyance, lease or transfer,
or otherwise so that the provisions set forth herein for the protection of the
rights of the Holder shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash and
property. The provisions of this paragraph (i) shall similarly apply to
successive consolidations, mergers, sales, leases or transfers.
(j) NOTICES. Any notice, demand or delivery authorized by this Warrant
Certificate shall be in writing and shall be given to the Holder or the Company
as the case may be, at its address (or telecopier number) set forth below, or
such
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<PAGE>
other address (or telecopier number) as shall have been furnished to the party
giving or making such notice, demand or delivery:
If to the Company: Manufacturers' Services Limited
300 Baker Avenue
Concord, MA 01742
Attention: Kevin C. Melia
Telephone: 978-287-5630
Facsimile: 978-287-5635
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Attention: Michael J. Stick, Esq.
Telephone: 617-951-7000
Facsimile: 617-951-7050
If to the Holder: DLJ Investment Partners II, L.P.
277 Park Avenue
New York, NY 10172
Attention: Director
Telephone: 212-892-3000
Facsimile: 212-892-7552
With a copy to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York New York 10172
Attention: Ivy Dodes
Telephone: 212-892-3000
Facsimile: 212-892-2689
And a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John Knight
Telephone: 212-450-4597
Facsimile: 212-450-4800
14
<PAGE>
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
(k) RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant, the Holder
shall not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
or other distributions or to receive any notice of meetings of shareholders or
any notice of any proceedings of the Company except as may be specifically
provided for herein.
(l) GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.
(m) AMENDMENTS; WAIVERS. Any provision of this Warrant Certificate may be
amended or waived if and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Holder and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
November 26, 1999.
MANUFACTURERS' SERVICES LIMITED
By__________________________________
Name:
Title:
15
<PAGE>
Acknowledged and Agreed:
[HOLDER]
By ____________________________
Title:
16
<PAGE>
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant by execution of
the Warrant Exercise Subscription Form)
To: Manufacturers' Services Limited
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Common Stock, par value $0.001 per share, of
Manufacturers' Services Limited.
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") at $_______ per Share (the Exercise Price
currently in effect pursuant to the Warrant). The undersigned intends to pay the
aggregate Exercise Price for the Shares in cash, certified or official bank or
bank cashier's check (or a combination of cash and check) as indicated below.
-OR-
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") and wishes, in lieu of paying the Exercise
Price of $_______ per share currently in effect pursuant to the Warrant, to
receive that number of shares reduced by a number of shares of Common Stock
having an aggregate Fair Market Value (as defined in the Warrant) equal to the
aggregate Exercise Price for the Shares.
-OR-
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") at the Exercise Price of $_______ per
share currently in effect pursuant to the Warrant, and intends to deliver as
payment that number of shares of Common Stock having an aggregate Fair Market
Value (as defined in the Warrant) equal to the aggregate Exercise Price for the
Shares.
-OR-
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") at the Exercise Price of $_____ per share
currently in effect pursuant to the Warrant, and intends to deliver as payment
that number of Warrants which, if exercised, would result in a number of shares
of
<PAGE>
Common Stock having an aggregate Fair Market Value (as defined in the Warrant)
equal to the aggregate Exercise Price for the Shares.
-OR-
The undersigned intends to exercise the Warrant to purchase __________
shares of Common Stock (the "Shares") at the Exercise Price of $______ per share
currently in effect pursuant to the Warrant, and intends to pay $______ of the
aggregate Exercise Price for the Shares in cash, certified or official bank or
bank cashier's check (or a combination of cash and check) as indicated below,
and to deliver as payment of $____ of the aggregate Exercise Price that number
of shares of Common Stock having an aggregate Fair Market Value (as defined in
the Warrant) equal to such portion of the aggregate Exercise Price for the
Shares.
-OR-
The undersigned intends to exercise the Warrant to purchase ___________
shares of Common Stock (the "Shares") at the Exercise Price of $______ per share
currently in effect pursuant to the Warrant, and intends to pay $______ of the
aggregate Exercise Price for the Shares in cash, certified or official bank or
bank cashier's check (or a combination of cash and check) as indicated below,
and to deliver as payment of $____ of the aggregate Exercise Price that number
of Warrants which, if exercised, would result in a number of shares of Common
Stock having an aggregate Fair Market Value (as defined in the Warrant) equal to
such portion of the aggregate Exercise Price for the Shares.
Date: ___________ __, ____.
_____________________________________
(Signature of Owner)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
Payment: $___________ cash
$__________ check
___________shares of Common Stock having a Fair Market
Value of $__________
____________ Warrants exercisable for shares of Common Stock having
a Fair Market Value of $_________
2
<PAGE>
WARRANT SUBSCRIPTION FORM
To: Manufacturers' Services Limited
The undersigned irrevocably exercises the Warrant for the purchase of
____________ shares of Common Stock (the "Shares"), par value $0.001 per share,
of Manufacturers' Services Limited (the "Company") at $_____ per Share (the
Exercise Price currently in effect pursuant to the Warrant) and herewith makes
payment of $____________ (such payment being made in cash or by certified or
official bank or bank cashier's check payable to the order of the Company or by
any permitted combination of such cash or check), all on the terms and
conditions specified in the Warrant Certificate, surrenders this Warrant
Certificate and all right, title and interest therein to the Company and directs
that the Shares deliverable upon the exercise of this Warrant be registered or
placed in the name and at the address specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
___________ shares of Common Stock (the "Shares"), par value $0.001 per share,
of Manufacturers' Services Limited (the "Company") at $_____ per Share (the
Exercise Price currently in effect pursuant to the Warrant) (provided that in
lieu of payment of $______, the undersigned will receive a number of Shares
reduced by a number of shares of Common Stock having an aggregate Fair Market
Value (as defined in the Warrant) equal to the aggregate Exercise Price for the
Shares), all on the terms and conditions specified in the Warrant Certificate,
surrenders this Warrant Certificate and all right, title and interest therein to
the Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
_______ shares of Common Stock (the "Shares"), par value $0.001 per share, of
Manufacturers' Services Limited (the "Company") at $______ per share (the
Exercise Price currently in effect pursuant to the Warrant) (such payment being
made by delivering that number of shares of Common Stock having an aggregate
Fair Market Value (as defined in the Warrant) equal to the aggregate Exercise
<PAGE>
Price for the Shares), all on the terms and conditions specified in the Warrant
Certificate, surrenders this Warrant Certificate and all right, title and
interest therein to the Company and directs that the Shares deliverable upon the
exercise of this Warrant be registered or placed in the name and at the address
specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
_______ shares of Common Stock (the "Shares"), par value $0.001 per share, of
Manufacturers' Services Limited (the "Company") at $______ per share (the
Exercise Price currently in effect pursuant to the Warrant) (such payment being
made by delivering that number of Warrants which, if exercised, would result in
a number of shares of Common Stock having an aggregate Fair Market Value (as
defined in the Warrant) equal to the aggregate Exercise Price for the Shares),
all on the terms and conditions specified in the Warrant Certificate, surrenders
this Warrant Certificate and all right, title and interest therein to the
Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase
__________ shares of Common Stock (the "Shares"), par value $0.001 per share, of
Manufacturers' Services Limited (the "Company") at $_______ per Share (the
Exercise Price currently in effect pursuant to the Warrant), and herewith makes
payment of $______ of the aggregate Exercise Price for the Shares in cash,
certified or official bank or bank cashier's check (or a combination of cash and
check), and herewith delivers as payment of $____ of the aggregate Exercise
Price that number of shares of Common Stock having an aggregate Fair Market
Value (as defined in the Warrant) equal to such portion of the aggregate
Exercise Price for the Shares, all on the terms and conditions specified in the
Warrant Certificate, surrenders this Warrant Certificate and all right, title
and interest therein to the Company and directs that the Shares deliverable upon
the exercise of this Warrant be registered or placed in the name and at the
address specified below and delivered thereto.
-OR-
The undersigned irrevocably exercises the Warrant for the purchase of
_________ shares of Common Stock, par value $0.001 per share, of Manufacturers'
Services Limited (the "Company") at $______ per share (the Exercise Price
currently in effect pursuant to the Warrant), and herewith makes
2
<PAGE>
payment of $_____ of the aggregate Exercise Price for the Shares in cash,
certified or official bank or bank cashier's check (or a combination of cash and
check), and herewith delivers as payment of $______ of the aggregate Exercise
Price that number of Warrants which, if exercised, would result in a number of
shares of Common Stock having an aggregate Fair Market Value (as defined in the
Warrant) equal to such portion of the aggregate Exercise Price for the Shares,
all on the terms and conditions specified in the Warrant Certificate, surrenders
this Warrant Certificate and all right, title and interest therein to the
Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.
3
<PAGE>
Date: ___________ __, ____.
_____________________________________
(Signature of Owner)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
4
<PAGE>
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised portion of the Warrant evidenced by the
within Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
WARRANT ASSIGNMENT FORM
Dated _________
FOR VALUE RECEIVED, _______________________________________________
hereby sells, assigns and transfers unto,
__________________________________________________(the "Assignee"),
(please type or print in block letters)
___________________________________________________________________
(insert address)
its right to purchase ________ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint
______________________ Attorney, to transfer the same on the books of the
Company, with full power of substitution in the premises.
Signature_______________________
<PAGE>
Exhibit C
Form of Amendment to Stockholders Agreement
<PAGE>
STOCKHOLDERS AGREEMENT AMENDMENT
AMENDMENT dated as of November 26, 1999 among DLJ Investment Partners II,
L.P., a Delaware limited partnership, DLJ Investment Funding II, Inc., a
Delaware corporation, DLJ ESC II L.P., a Delaware limited partnership and DLJ
Investment Partners, L.P., a Delaware limited partnership (each a "Mezzanine
Holder" and collectively the "Mezzanine Holders"), the parties appearing on the
signature page hereto under the caption "Existing Stockholders", and
Manufacturers' Services Limited, a Delaware corporation (the "Company").
WHEREAS, pursuant to the Preferred Stock and Warrant Subscription
Agreement dated as of November 26, 1999 (the "Subscription Agreement") among the
Company and the Mezzanine Holders, the Mezzanine Holders are acquiring from the
Company (i) shares of preferred stock, par value $.00l per share (the "Preferred
Stock"), of the Company and (ii) warrants (the "Warrants") to purchase common
stock, par value $.00l per share (the "Common Stock"), of the Company, which
will be exercisable only upon the occurrence of certain events;
WHEREAS, the Company has previously entered into a Stockholders Agreement
dated as of January 20, 1995 (the "Stockholders Agreement") among the DLJ
Entities (as defined therein), the Founding Stockholders (as defined therein),
the Company and the other parties thereto as of the date hereof;
WHEREAS, the Stockholders Agreement may be amended or otherwise modified
by an instrument in writing executed by the Company, with the approval of the
board of directors of the Company, and Stockholders (as defined in the
Stockholders Agreement) holding at least 95% of the outstanding Shares (as
defined in the Stockholders Agreement); and
WHEREAS, in connection with the acquisition of the Preferred Stock and the
Warrants by the Mezzanine Holders, the Company (with the approval of the board
of directors of the Company) and Stockholders holding at least 95% of the
outstanding Shares desire to amend or otherwise modify the Stockholders
Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and the Subscription Agreement, the parties hereto amend and otherwise
modify the Stockholders Agreement as follows:
<PAGE>
SECTION 1. Parties to Stockholders Agreement. From the date of this
Amendment, the Mezzanine Holders shall be deemed to be parties to the
Stockholders Agreement, subject to Sections 10(b) and 10(c) of this Amendment.
SECTION 2. Definitions; Interpretation. (a) Capitalized terms used but not
defined in this Amendment shall have the meanings ascribed to them in the
Stockholders Agreement. Each reference to "hereof", "hereunder", "herein" or
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Stockholders Agreement shall
from and after the date of this Amendment refer to the Stockholders Agreement as
amended hereby.
(b) Section 1.1 of the Stockholders Agreement is amended (i) to the extent
that the following terms do not appear in Section 1.1 of the Stockholders
Agreement, by the addition of such terms and (ii) to the extent that the
following terms appear in Section 1.1 of the Stockholders Agreement, by amending
and restating such terms as follows:
"Company Securities" means with respect to any Stockholder, the Common
Stock (and securities convertible into or exchangeable for Common Stock), the
Preferred Stock and any options, warrants (including the Warrants) or other
rights to acquire Common Stock, Preferred Stock or any other equity security
issued by the Company.
"Registrable Stock" means any Company Securities until (i) a registration
statement covering such Company Securities has been declared effective by the
SEC and such securities have been disposed of pursuant to such effective
registration statement, (ii) such Company Securities are sold under
circumstances in which all of the applicable conditions of Rule 144 are met or
under which they may be sold pursuant to Rule 144(k) or (iii) such Company
Securities are otherwise transferred, the Company has delivered a new
certificate or other evidence of ownership for such Company Securities not
bearing the legend required pursuant to this Agreement and such Company
Securities may be resold without subsequent registration under the Securities
Act.
(c) As used in the Stockholders Agreement, the following terms shall have
the following interpretations unless expressly provided to the contrary in this
Amendment: (i) "Other Stockholders" shall be deemed to exclude the Mezzanine
Holders and (ii) "Stockholder" shall be deemed to include the Mezzanine Holders
(subject to Section 10(b) of this Amendment).
SECTION 3. Corporate Governance. (a) The Board shall consist of seven
directors, six of whom will be designated as set forth in Section 2.1 of the
2
<PAGE>
Stockholders Agreement and one of whom will be designated by DLJ Investment
Partners II, L.P. (such director, the "Investment Partners Director"). DLJ
Merchant Banking Partners, L.P. hereby waives its right pursuant to Section 2.1
of the Stockholders Agreement to designate this seventh director.
(b) For so long as the Mezzanine Holders shall own any Preferred Stock,
Warrants or Shares issued upon exercise of the Warrants, each other Stockholder
who is a party hereto agrees that (i) it will vote its Shares or execute written
consents, as the case may be, and take all other necessary action (including
causing the Company to call a special meeting of stockholders) in order to
ensure the election of the Investment Partners Director, (ii) if, at any time,
it is then entitled to vote for the removal of directors of the Company, it will
not vote any of its Shares in favor of the removal of the Investment Partners
Director unless such removal shall be for cause or DLJ Investment Partners II,
L.P. shall have consented to such removal in writing and (iii) the provisions of
Section 2.3 of the Stockholders Agreement shall apply mutatis mutandis.
(c) The Investment Partners Director shall be entitled to be appointed to
such committees of the Board as may be reasonably determined by the Chairman of
the Board.
SECTION 4. Transferability. (a) Any Mezzanine Holder may at any
time transfer any or all of its Company Securities to one or more Persons
without the consent of the Company or any other Stockholder, so long as such
transfer is not in violation of applicable federal, state or foreign securities
laws. None of the provisions of Article 3 of the Stockholders Agreement shall
apply to the Mezzanine Holders or their Company Securities, other than the
provisions of Section 3.2 relating to legends which shall apply to their Company
Securities mutatis mutandis.
(b) Without the consent of DLJ Investment Partners II, L.P., the DLJ
Entities and their Permitted Transferees may not (i) directly or indirectly
transfer any Shares, (ii) request a Demand Registration pursuant to Section 5.1
of the Stockholders Agreement or (iii) request any Incidental Registration
pursuant to Section 5.2 of the Stockholders Agreement, other than, in the case
of clause (i), in connection with a transaction which would constitute a Change
of Control of the Company under the Certificate of Designations, Preferences and
Rights relating to the Preferred Stock. The restrictions contained in the
foregoing sentence shall expire upon the first to occur of the following: (x)
the Mezzanine Holders (defined for purposes of this Section 4(b) to exclude any
Person to whom the initial Mezzanine Holders have transferred any Company
Securities) shall cease to hold any Preferred Stock; (y) one year after the
Demand Registration rights of the Mezzanine Holders have become exercisable
pursuant to Section 6 hereof; and (z)
3
<PAGE>
the Mezzanine Holders shall have failed to request Incidental Registration of
any Company Securities in connection with two registrations of Company
Securities under the Securities Act for which the Mezzanine Holders had
piggyback registration rights pursuant to Section 7 hereof. Nothing in this
Section 4(b) shall be interpreted to restrict the right of the DLJ Entities to
transfer any Shares to their Permitted Transferees in accordance with Section
3.3 of the Stockholders Agreement.
SECTION 5. Certain Agreements Regarding a Sale. (a) The Mezzanine Holders
shall be considered "Other Stockholders" for purposes of Section 4.1 of the
Stockholders Agreement with respect to any Shares issued upon the exercise of
the Warrants.
(b) The Mezzanine Holders shall be considered "Other Stockholders" for the
purposes of Section 4.2 of the Stockholders Agreement with respect to the
Warrants and any Shares issued upon the exercise of the Warrants. The right of
the DLJ Entities under such Section 4.2, at their option, to require all but not
less than all the Other Stockholders (including all Permitted Transferees of the
Other Stockholders) to participate in such transfer shall be deemed to include
the right to require the Mezzanine Holders to exercise their respective Warrants
and to sell to such Third Party the Shares received as a result of such exercise
for the same consideration per Share and otherwise on the same terms and
conditions as the sale by the DLJ Entities; provided that any Mezzanine Holder
that holds Warrants the exercise price per Share of which is greater than the
per share price at which Shares are to be sold to the Third Party may, if
required by the DLJ Entities to exercise such Warrants, in place of such
exercise, submit to irrevocable cancellation thereof without any liability for
payment of any exercise price with respect thereto.
SECTION 6. Demand Registration. The Mezzanine Holders shall have demand
registration rights with respect to their Registrable Stock on the same terms
and conditions as the demand registration rights of the DLJ Entities as set
forth in Section 5.1 of the Stockholders Agreement, and the provisions of such
Section 5.1 shall apply mutatis mutandis to the Registrable Stock of the
Mezzanine Holders as though such Mezzanine Holders were "Selling Stockholders",
subject to the following modifications:
(a) The Mezzanine Holders may request a Demand Registration only after the
earlier to occur of the following: (i) the date that is three years from the
date of this Amendment and (ii) the date that is six months from the date of the
Initial Public Offering.
4
<PAGE>
(b) The Company shall not be obligated to effect more than three Demand
Registrations for the Mezzanine Holders.
(c) The number of shares of Registrable Stock required to be registered by
the Mezzanine Holders in connection with a Demand Registration must have a fair
market value in the reasonable opinion of DLJ Investment Partners II, L.P.
exercised in good faith of at least $5,000,000 or, if less than $5,000,000,
constitute all of the remaining shares of Preferred Stock or Common Stock, as
the case may be, held by the Mezzanine Holders.
(d) If a Demand Registration requested by the Mezzanine Holders involves a
Public Offering and the managing underwriter shall advise the Company and such
Mezzanine Holders that, in its view, (i) the number of Company Securities
requested to be included in such registration (including Common Stock which the
Company proposes to be included which is not Registrable Stock) or (ii) the
inclusion of some or all of the Company Securities owned by the Holders, in
either case, exceeds the Maximum Offering Size, the Company will include in such
registration Company Securities up to the Maximum Offering Size in the priority
set forth in Section 5.1(d) of the Stockholders Agreement in the case of a
Demand Registration made by a DLJ Entity or its Permitted Transferee, with the
exception that first priority shall be given to all Registrable Stock requested
to be registered by the Selling Stockholder and by all other Mezzanine Holders
(allocated, if necessary for the offering not to exceed the Maximum Offering
Size, pro rata among such entities on the basis of the relative number of shares
of Registrable Stock requested to be registered).
(e) Counsel for the Stockholders participating in any Demand Registration
requested by the Mezzanine Holders shall be selected by the Mezzanine Holders.
SECTION 7. Piggyback Registration Rights. The Mezzanine Holders shall have
piggyback registration rights with respect to their Registrable Stock on the
same terms and conditions as the piggyback registration rights of the DLI
Entities and the Other Stockholders as set forth in Section 5.2 of the
Stockholders Agreement, and the provision of such Section 5.2 (other than those
of Section 5.2(c), which are not applicable) shall apply mutatis mutandis to the
Registrable Stock of the Mezzanine Holders; provided that if a registration for
which the Mezzanine Holders have piggyback registration rights involves a Public
Offering and the managing underwriter advises the Company that, in its view, the
number of Company Securities that the Company and Stockholders entitled to
participate therein intend to include in such registration exceeds the Maximum
Offering Size,
5
<PAGE>
the Company will include in such registration Company Securities up to the
Maximum Offering Size in the following priority:
(a) in the case of a Public Offering by the Company for its own account,
in the priority set forth in Section 5.2(b) of the Stockholders Agreement;
provided that (i) any Shares proposed by Mezzanine Holders exercising piggyback
registration rights to be included in such registration shall have priority
equal to the Benchmark Shares; and (ii) any Company Securities other than Shares
proposed by Mezzanine Holders exercising piggyback registration rights to be
included in such registration shall have priority below any Shares proposed to
be registered by the Company but above any Benchmark Shares;
(b) in the case of a Public Offering requested by any DLJ Entity or any of
their Permitted Transferees, in the priority set forth in Section 5.1(d) of the
Stockholders Agreement applicable to a Demand Registration made by a DLJ Entity
or its Permitted Transferee; provided that any Company Securities proposed by
Mezzanine Holders exercising piggyback registration rights to be included in
such registration shall have priority equal to the Benchmark Shares; and
(c) in the case of a Public Offering requested by any Other Stockholder,
in the priority set forth in Section 5.1(d) of the Stockholders Agreement
applicable to a Demand Registration made by an Other Stockholder; provided that
any Company Securities proposed by Mezzanine Holders exercising piggyback
registration rights to be included in such registration shall have priority
equal to the Shares requested to be registered by the Other Stockholders.
SECTION 8. Holdback Agreement. With respect to any registration of
Registrable Stock in connection with a Public Offering in which the Mezzanine
Holders are selling Company Securities, the Mezzanine Holders shall be bound by
the covenants and agreements applicable to the DLJ Entities and the Other
Stockholders in Section 5.3 of the Stockholders Agreement.
SECTION 9. Registration Procedures. The registration procedures and other
covenants and agreements contained in Sections 5.4 through 5.10 of the
Stockholders Agreement shall apply to the Mezzanine Holders.
SECTION 10. Miscellaneous.
(a) Redemption of Preferred Stock upon Initial Public Offering. In
connection with the Initial Public Offering, the Company agrees to use its best
efforts to redeem the Preferred Stock in accordance with Section 5(a) of the
Certificate of Designations, Preferences and Rights of the Preferred Stock,
subject
6
<PAGE>
to any required approval of the lenders under the Company's senior credit
facility, which approval the Company shall use its best efforts to obtain.
(b) Assignability. Notwithstanding Section 6.4 of the Stockholders
Agreement, any Mezzanine Holder may, in connection with a transfer of Company
Securities other than pursuant to a Public Offering, assign its rights (in whole
or in part) under the Stockholders Agreement (other than its rights under
Article 2) to another Person; provided that such Person executes and delivers to
the Company an agreement to be bound by the terms of the Stockholders Agreement
applicable to the Mezzanine Holders (such Person, following such execution and
delivery, being deemed to be a "Mezzanine Holder" for purposes of this
Amendment).
(c) Amendment; Waiver; Termination. Section 6.5 of the Stockholders
Agreement is amended by the insertion of the following at the end thereof: ";
and provided further that any amendment or other modification of this Agreement
that would adversely affect any Mezzanine Holder may be effected only with the
consent of such Stockholder."
(d) Notices. All notices, requests and other communications to the
Mezzanine Holders shall be given to:
if to the Mezzanine Holders to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Director
Fax: (212) 892-7552
with a copy to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2689
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
7
<PAGE>
Attention: John Knight
Fax: (212) 450-4800
(e) Execution by Other Stockholders. Following the execution of this
Amendment, the Company agrees to use commercially reasonable efforts to induce
any Stockholder who is not yet a party to this Amendment to become a party to
this Amendment by executing and delivering to the Company a counterpart
signature page to this Amendment.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the day and year
first above written.
MANUFACTURERS' SERVICES LIMITED
By: _____________________________________
Name: Kevin C. Melia
Title: Chairman and
Chief Executive Officer
DLJ INVESTMENT PARTNERS II, L.P.
By DLJ INVESTMENT PARTNERS II,
INC., Managing General Partner
By: _____________________________________
Name:
Title:
DLJ INVESTMENT FUNDING II, INC.
By: _____________________________________
Name:
Title:
DLJ ESC II L.P.
By DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By: _____________________________________
Name:
Title:
9
<PAGE>
DLJ INVESTMENT PARTNERS, L.P.
By DLJ INVESTMENT PARTNERS, INC.,
Managing General Partner
By: _____________________________________
Name:
Title:
Existing Stockholders:
33,331,504 Shares DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By: ________________________________________
Name:
Title:
14,933,460 Shares DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, NC.
Advisory General Partner
By: ________________________________________
Name:
Title:
10
<PAGE>
865,837 Shares DLJ OFFSHORE PARTNERS, C.V.
By DLJ MERCHANT BANKING, NC.
Advisory General Partner
By: ________________________________________
Name:
Title:
13,367,971 Shares DLJ MERCHANT BANKING FUNDING, INC.
By: ________________________________________
Name:
Title:
8,334,582 Shares DLJ FIRST ESC L.P.
By DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By: ________________________________________
Name:
Title:
11
<PAGE>
_____________ Shares ____________________________________________
Kevin C. Melia
_____________ Shares [Other stockholders]
12
<PAGE>
ESCROW AGREEMENT
Escrow Agreement (the "Escrow Agreement"), dated as of November 26, 1999,
among Manufacturers' Services Limited, a Delaware corporation (the "Company"),
the purchasers set forth on the signature pages hereto (the "Purchasers") and
Snoga, Inc., a Delaware corporation, as escrow agent (the "Escrow Agent").
Capitalized terms used and not otherwise defined herein shall have the meanings
specified in the Subscription Agreement described below.
RECITALS
WHEREAS, the Company and the Purchasers have entered into a Preferred
Stock and Warrant Subscription Agreement, dated as of November 26, 1999 (as
amended, supplemented or otherwise modified, the "Subscription Agreement"),
pursuant to which the Purchasers have agreed to purchase preferred stock of the
Company, par value $.001 per share, having an aggregate liquidation value of
$50,000,000 (the "Preferred Stock") and warrants (the "Warrants" and, together
with the Preferred Stock, the "Securities") to purchase 5% of the fully-diluted
common equity of the Company, subject to the terms and conditions set forth in
the Subscription Agreement.
WHEREAS, pursuant to Section 5.01(f) of the Subscription Agreement, it is
a condition to the Purchasers' obligation to purchase the Securities that,
contemporaneously with the original issuance of the Securities, this Escrow
Agreement shall have been executed and delivered by each of the parties hereto.
AGREEMENT
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Delivery of Escrow Securities.
(a) At or prior to the date of original issuance of the Preferred Stock
(the "Closing Date"), the Company shall deliver, or cause to be delivered to the
Escrow Agent duly authorized and executed certificates (the "Warrant
Certificates") representing certain of the Warrants, as contemplated by the
Subscription Agreement.
(b) The Warrants delivered to the Escrow Agent pursuant to this Escrow
Agreement shall be held in escrow and released therefrom on the terms and
conditions set forth herein.
<PAGE>
SECTION 2. Release of Warrants. (a) If Preferred Stock (or Exchange
Debentures (as defined in the Certificate of Designations, Preferences and
Rights setting forth the terms of the Preferred Stock (the "Certificate of
Designation")) which have been exchanged therefor) remains outstanding on the
first anniversary of the Closing Date (the "First Anniversary Date") and has not
been redeemed by the Company, then the Escrow Agent shall promptly release all
Warrants held in escrow to the applicable Purchaser thereof. Upon the redemption
by the Company prior to the First Anniversary Date of all outstanding Preferred
Stock (or Exchange Debentures which have been exchanged therefor), the Escrow
Agent shall promptly return all Warrants held in escrow to the Company.
(b) The Company will provide, or cause to be provided, to the Escrow Agent
all such information as the Escrow Agent may from time to time reasonably
request.
(c) In connection with any transfer to any other Person by a Purchaser of
its interest in any Warrants held by the Escrow Agent, (i) such Person will
execute and deliver to the Escrow Agent an agreement to be bound by the terms of
this Escrow Agreement, and following such execution and delivery, such Person
will be deemed to be the Purchaser of such Warrants for purposes of this
Agreement and (ii) in accordance with Section (f)(2) of the Warrant Certificate,
the Company shall exchange with the Escrow Agent new Warrants in the name of
such Person and, if such Purchaser's entire interest is not being transferred to
such Person, in the name of such Purchaser.
SECTION 3. Responsibility of the Escrow Agent. The Company and the
Purchasers appoint and designate the Escrow Agent as escrow agent for the
purposes set forth herein, and the Escrow Agent owes no duty to any other person
or entity by reason of this Escrow Agreement. The Escrow Agent accepts the
duties expressly set forth in this Escrow Agreement and undertakes to perform
only such duties relating thereto as are specifically set forth herein. The
Escrow Agent shall have no duty to calculate or verify the calculation of any
amounts, percentages or ratios to be determined hereunder and shall be entitled
to conclusively rely on the amounts set forth in notices delivered to it
hereunder. The parties hereto agree that the following terms and conditions
shall govern and control with respect to the rights, duties, liabilities and
immunities of the Escrow Agent hereunder.
(a) The duties and obligations of the Escrow Agent shall be determined
solely by the express provisions of this Escrow Agreement, and no implied
covenants, duties or obligations (including, without limitation, any duty to
solicit the delivery of any Warrants) shall be read into this Escrow Agreement
against the Escrow Agent, nor shall it have, or be deemed to have, any duties or
2
<PAGE>
responsibilities under the provisions of any other agreements (including,
without limitation, the Subscription Agreement) between the other parties hereto
or any other Person.
(b) The Escrow Agent shall not be liable for any error of judgment, or any
action taken, suffered or omitted by it in good faith, or mistake of fact or
law, or for anything it may do or refrain from doing in connection herewith or
therewith, except its own gross negligence or willful misconduct.
(c) The Escrow Agent may rely and shall be authorized and protected in
acting or refraining from acting in good faith in reliance upon any written
instruction, communication, notice, request, resolution, direction, certificate,
statement, approval, appraisal, promissory note, share or warrant certificate or
other paper or document, not only as to its due execution and the validity and
effectiveness of its provision, but also as to the truth of any information
therein contained, which it in good faith believes to be genuine and to have
been presented by the proper party.
(d) The Escrow Agent may consult with counsel, auditors and other experts
of its own choice and any opinion or advice of counsel or of such auditors or
other experts shall be full and complete authorization and protection with
respect to any action taken or suffered or omitted by the Escrow Agent
hereunder in good faith and in accordance with such opinion or advice of counsel
or of such auditors or other experts within the area of their respective
expertise.
(e) The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through its
agents or attorneys.
(f) The Escrow Agent shall not be responsible for and shall not be under a
duty to examine or pass upon, the validity, binding effect, execution or
sufficiency of this Escrow Agreement, the Warrants or of any agreement
amendatory or supplemental hereto or thereto or the absence or presence of any
liens or encumbrances on the property held in escrow hereunder.
(g) The Escrow Agent shall be under no duty to prepare, conduct or monitor
any filing, recording or registration, re-filing, re-recording or
re-registration of this Escrow Agreement or of any agreement amendatory hereof
or of any instrument or assignment, conveyance or further assurance, or to pay
any taxes, fees or charges in connection therewith, or to give any notice with
respect thereto or to pay, inquire into or prepare, conduct or monitor the
payment of, or be under any duty in respect of or arising out of, any tax or
assessment or other governmental charge which may be levied or assessed on the
property held in
3
<PAGE>
escrow hereunder or any part thereof or any confiscation of such property. No
property held in escrow by the Escrow Agent hereunder shall be subject to any
set-off, counterclaim, recoupment or other right which the Escrow Agent may have
against any of the parties hereto (except with respect to any payments to be
made to the Escrow Agent hereunder) or against any other Person for any reason
whatsoever.
(h) If any controversy arises between the parties hereto or with any third
person with respect to the subject matter of the escrow described herein, the
Escrow Agent shall not be required to determine the outcome of same or take any
action in the premises, but may await the settlement of any such controversy by
final appropriate legal proceedings or otherwise as the Escrow Agent may
require, notwithstanding instructions to the contrary, and in such event the
Escrow Agent shall not be liable for interest or damages, except that the Escrow
Agent shall not deliver the Warrants held in escrow hereunder in any manner
other than in accordance with Section 2 hereof, except in accordance with a
final nonappealable order of a court of competent jurisdiction.
(i) If the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands from any party hereto
which, in its opinion, conflict with any of the provisions of this Escrow
Agreement, it shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by a final
order or judgment of a court of competent jurisdiction.
(j) Without limiting and in furtherance of the foregoing, the Escrow Agent
shall not be liable or responsible for any of the provisions of the Preferred
Stock or the Warrants except for those expressly referred to herein.
SECTION 4. Qualifications. The Escrow Agent shall at all times be Snoga,
Inc., or a bank, trust company or corporation in good standing organized and
doing business under the laws of the United States of America or a State of the
United States, and having combined capital and surplus of not less than one
hundred million dollars ($100,000,000). If the Escrow Agent shall at any time
cease to have the foregoing qualifications, the Escrow Agent shall resign within
30 days thereafter, such resignation to become effective as provided in Section
5 hereof.
SECTION 5. Removal and Resignation. The Escrow Agent and any successor
Escrow Agent may at any time be removed at the written direction of the
Purchasers and the Company. The Escrow Agent or any successor Escrow Agent may
at any time resign and be discharged of its obligations hereunder by
4
<PAGE>
giving written notice to the Company and each holder of the Preferred Stock,
specifying the date upon which it desires that such resignation shall take
effect. Such removal or resignation shall take effect on the date specified in
the notice of removal or resignation, which date shall not be earlier than 30
days after the giving of the notice of removal or resignation unless previously
a successor Escrow Agent shall have been appointed pursuant to Section 6 hereof
and shall have accepted such appointment, in which event such removal or
resignation shall take effect immediately upon the acceptance by such successor
Escrow Agent. The Company agrees to take prompt steps to have a successor Escrow
Agent appointed in the manner hereinafter provided.
SECTION 6. Appointment of Successor Agent. If at any time the Escrow Agent
shall resign or be removed or otherwise become incapable of acting or if at any
time a vacancy shall occur in the office of the Escrow Agent for any other
cause, a successor Escrow Agent (duly qualified as provided in Section 4 above)
shall be appointed by the Company with the consent of the Purchasers by an
instrument in writing delivered to the Escrow Agent within the time specified
below. Upon delivery of said instrument to and acceptance of said instrument by
the successor Escrow Agent, the resignation or removal of the Escrow Agent shall
become effective and such successor Escrow Agent shall become vested with all
the rights, powers, duties and obligations of its predecessor hereunder. If no
successor Escrow Agent shall have been appointed at the effective date of
resignation or within 30 days of a notice of removal, the Escrow Agent or any
other party hereto may petition a court of competent jurisdiction for the
appointment of a successor.
SECTION 7. Compensation, Reimbursement and Indemnification of Escrow
Agent. The Escrow Agent shall be entitled to compensation from the Company as
shall be agreed to in writing from time to time by the Company and the Escrow
Agent for all services rendered by it hereunder, as well as reimbursement from
the Company for all reasonable expenses, disbursements, advances and liabilities
incurred or made by the Escrow Agent hereunder (including the reasonable
compensation, expenses and disbursements of the Escrow Agent's agents and
counsel).
The Company agrees to indemnify the Escrow Agent for, and to hold it
harmless from and against, any loss, liability, claims, actions, damages or
expenses (including reasonable expenses and disbursements of its agents and
counsel) incurred without gross negligence or bad faith on the part of the
Escrow Agent arising out of or in connection with its entering into this Escrow
Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim or liability in the premises.
5
<PAGE>
The provisions of this Section 7 shall survive the termination of this
Escrow Agreement.
SECTION 8. Termination. This Escrow Agreement shall terminate on the
earlier of (i) the redemption by the Company of all outstanding Preferred Stock
(or all outstanding Exchange Debentures which have been exchanged therefor) or
(ii) the First Anniversary Date, following the release by the Escrow Agent of
the Warrants held in escrow to the applicable Purchaser thereof.
SECTION 9. Notices. Except as otherwise expressly provided herein, all
demands, notices, consents, requests and other documents authorized or required
to be given to any party to this Escrow Agreement shall be given in writing and
either personally served on an officer of such party or mailed by registered or
certified first class mail, postage prepaid, return receipt requested, or sent
by facsimile (with a copy sent by first class mail promptly thereafter),
addressed as follows:
if to the Escrow Agent:
Snoga, Inc.
277 Park Avenue
New York, New York 10172
Facsimile No: (212) 892-7272
Attention:
if to the Company, to it at:
Manufacturers' Services Limited
300 Baker Avenue
Concord, MA 01742
Facsimile No: (978) 287-5635
Attention: Dale Johnson, General Counsel
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Facsimile No: (617) 951-7050
Attention: Michael J. Stick, Esq.
6
<PAGE>
if to the Purchasers, to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Director
Fax: (212) 892-7552
with a copy to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2689
and a copy to:
Davis Polk & Wardwell
450 Lexington Ave.
New York, New York 10017
Facsimile: (212) 450-4800
Attention: John K. Knight, Esq.
Any party may change its address by specifying in writing a new address
for such notices to each of the other parties hereto.
SECTION 10. Successors and Assigns; Amendments and Modifications. This
Escrow Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns and shall not inure to the
benefit of any third party except for any holder of Notes who is not a party to
this Escrow Agreement. This Escrow Agreement may not be amended or modified in
any respect without the express written consent of the Company, the Escrow Agent
and the Purchasers, as the case may be.
SECTION 11. Severability. In case any one or more provisions contained in
this Escrow Agreement shall be invalid, illegal or unenforceable in any respect
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions contained herein shall not be in any way affected or impaired thereby
and such provision shall be ineffective in such jurisdiction only to the extent
of such invalidity, illegality or unenforceability.
7
<PAGE>
SECTION 12. New York Law; Submission to Jurisdiction; Waiver of Jury
Trial. THIS ESCROW AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS ESCROW
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS ESCROW AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 13. Counterparts. This Escrow Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
SECTION 14. No Waiver. No course of dealing, nor any delay on the part of
any party hereto in exercising any rights hereunder, or any failure to exercise
the same, shall operate as a waiver of such or any other rights.
SECTION 15. Descriptive Headings. The descriptive headings of the several
sections of this Escrow Agreement are inserted for convenience only and do not
constitute a part of this Escrow Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be duly executed by their respective authorized officers, as of the date
first above written.
SNOGA, INC.
By:
-------------------------------------------
Name:
Title:
MANUFACTURERS' SERVICES LIMITED
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS II, L.P.
By: DLJ INVESTMENT PARTNERS II, INC.,
Managing General Partner
By:
-------------------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING II, INC.
By:
-------------------------------------------
Name:
Title:
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By:
-------------------------------------------
Name:
Title:
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be duly executed by their respective authorized officers, as of the date
first above written.
SNOGA, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
MANUFACTURERS' SERVICES LIMITED
By:
-------------------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS II, L.P.
By: DLJ INVESTMENT PARTNERS II, INC.,
Managing General Partner
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING II, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
9
<PAGE>
DLJ INVESTMENT PARTNERS, L.P.
By: DLJ INVESTMENT PARTNERS, INC.,
Managing General Partner
By: /s/ [ILLEGIBLE]
-------------------------------------------
Name:
Title:
10
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of
November 19, 1999
among
3COM CORPORATION,
MANUFACTURERS' SERVICES LIMITED
and
MANUFACTURERS' SERVICES SALT LAKE CITY OPERATIONS, INC.
relating to the purchase and sale
of
3Com Corporation's Salt Lake City
Manufacturing Facility
<PAGE>
TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS
SECTION 1.1. Definitions ............................................. 1
ARTICLE II- PURCHASE AND SALE OF ACQUIRED BUSINESS .......................... 7
SECTION 2.1. Purchase and Sale ....................................... 7
SECTION 2.2. Excluded Assets ......................................... 8
SECTION 2.3. Assumed Liabilities ..................................... 8
SECTION 2.4. Purchase Consideration .................................. 8
SECTION 2.5. Assignment of Contracts and Rights ...................... 8
SECTION 2.6. Adjustment to Purchase Consideration .................... 9
ARTICLE III - CLOSING ....................................................... 10
SECTION 3.1. Closing ................................................. 10
SECTION 3.2. Inventory Payment ....................................... 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER ....................... 11
SECTION 4.1. Corporate Existence and Power ........................... 12
SECTION 4.2. Corporate Authorization ................................. 12
SECTION 4.3. Governmental Authorization .............................. 12
SECTION 4.4. Noncontravention ........................................ 12
SECTION 4.5. Required Consents ....................................... 13
SECTION 4.6. Absence of Certain Changes .............................. 13
SECTION 4.7. Material Contracts ...................................... 13
SECTION 4.8. Licenses and Permits .................................... 14
SECTION 4.9. Litigation .............................................. 15
SECTION 4.10. Properties .............................................. 15
SECTION 4.11. Taxes ................................................... 16
SECTION 4.12. Intellectual Property ................................... 16
SECTION 4.13. Labor Issues ............................................ 17
SECTION 4.14. Employees ............................................... 18
SECTION 4.15. Finders' Fees ........................................... 18
SECTION 4.16. Compliance with Laws .................................... 18
SECTION 4.17. Environmental Matters ................................... 18
SECTION 4.18. Quarterly Reports ....................................... 19
SECTION 4.19. Y2K Compliance .......................................... 19
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER ..................... 19
SECTION 5.1. Corporate Existence and Power ........................... 19
SECTION 5.2. Corporate Authorization ................................. 19
SECTION 5.3. Governmental Authorization .............................. 20
SECTION 5.4. Noncontravention ........................................ 20
SECTION 5.5. Required Consents ....................................... 20
SECTION 5.6. Financial Statements .................................... 20
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TABLE OF CONTENTS
(continued)
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SECTION 5.7. Litigation .............................................. 21
SECTION 5.8. Finders' Fees ........................................... 21
SECTION 5.9. Financing ............................................... 22
SECTION 5.10. WARN Act ................................................ 22
ARTICLE VI - COVENANTS OF SELLER WITH RESPECT TO ACQUIRED BUSINESS .......... 22
SECTION 6.1. Conduct of the Acquired Business ........................ 22
SECTION 6.2. Access to Information, Confidentiality .................. 23
SECTION 6.3. Notices of Certain Events ............................... 23
SECTION 6.4. SLCM Employees .......................................... 24
SECTION 6.5. No Solicitation ......................................... 24
SECTION 6.6. SAP ..................................................... 24
SECTION 6.7. Preparation of Financial Statements ..................... 25
SECTION 6.8. Asset List .............................................. 25
ARTICLE VII - COVENANTS OF PURCHASER AND PARENT ............................. 25
SECTION 7.1. Access to Information; Confidentiality .................. 25
SECTION 7.2. Notices of Certain Events ............................... 26
SECTION 7.3. No Solicitation ......................................... 26
SECTION 7.4. Intellectual Property ................................... 26
ARTICLE VIII - COVENANTS OF SELLER AND PURCHASER ............................ 26
SECTION 8.1. Commercially Reasonable Efforts; Further Assurances ..... 26
SECTION 8.2. Certain Filings ......................................... 27
SECTION 8.3. Public Announcements .................................... 27
SECTION 8.4. Required Notices and Consents ........................... 27
SECTION 8.5. Facility Personnel ...................................... 27
SECTION 8.6. Taxes ................................................... 29
ARTICLE IX - CONDITIONS TO CLOSING .......................................... 30
SECTION 9.1. Conditions to Obligations of Seller and Purchaser ....... 30
SECTION 9.2. Conditions to Obligations of Seller ..................... 30
SECTION 9.3. Conditions to Obligations of Purchaser .................. 32
ARTICLE X - SURVIVAL; INDEMNIFICATION ....................................... 33
SECTION 10.1. Survival ................................................ 33
SECTION 10.2. Indemnification ......................................... 33
SECTION 10.3. Procedures .............................................. 34
SECTION 10.4. Damages ................................................. 35
SECTION 10.5. Assignment of Claims .................................... 35
SECTION 10.6. Exclusivity ............................................. 35
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TABLE OF CONTENTS
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ARTICLE XI - TERMINATION .................................................... 36
SECTION 11.1. Grounds for Termination ................................. 36
SECTION 11.2. Effect of Termination ................................... 36
SECTION 11.3. Procedure Upon Termination .............................. 36
ARTICLE XII - MISCELLANEOUS ................................................. 37
SECTION 12.1. Notices ................................................. 37
SECTION 12.2. Amendments and Waivers .................................. 38
SECTION 12.3. Expenses ................................................ 38
SECTION 12.4. Successors and Assigns .................................. 38
SECTION 12.5. Governing Law ........................................... 39
SECTION 12.6. Counterparts; Third Party Beneficiaries ................. 39
SECTION 12.7. Entire Agreement; Severability .......................... 39
SECTION 12.8. Captions ................................................ 39
SECTION 12.9. Disclosure Schedules .................................... 39
SECTION 12.10. Representation by Counsel; Interpretation ............... 40
SECTION 12.11. Other Remedies; Specific Performance .................... 40
SECTION 12.12. Consent to Jurisdiction ................................. 40
SECTION 12.13. Waiver of Jury Trial .................................... 41
SECTION 12.14. Suretyship Waivers ...................................... 41
EXHIBIT A INTELLECTUAL PROPERTY LICENSE AGREEMENT
EXHIBIT B REAL PROPERTY PURCHASE AGREEMENT
EXHIBIT C-1 SELLER SUPPLY AGREEMENT
EXHIBIT C-2 PALM SUPPLY AGREEMENT
EXHIBIT D TRANSITION SERVICES AGREEMENT
EXHIBIT E GENERAL ASSIGNMENT AND BILL OF SALE
EXHIBIT F ASSUMPTION AGREEMENT
DISCLOSURE SCHEDULES
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<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of November 19, 1999, is among
3COM CORPORATION, a Delaware corporation ("Seller"), MANUFACTURERS' SERVICES
LIMITED, a Delaware corporation ("Parent") and MANUFACTURERS' SERVICES SALT LAKE
CITY OPERATIONS, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of an electronics manufacturing
facility located at 5742 West Harold Gatty Drive, Salt Lake City, Utah (the
"Facility");
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the Facility and substantially all of the operations
associated with the Facility, upon the terms and conditions set forth herein;
and
WHEREAS, Seller has invited Purchaser to perform, and Purchaser has
performed, certain due diligence and business investigations with respect to the
Facility, and the parties intend that the sale of the Facility be without
representation or warranty by Seller, express or implied, except as specifically
set forth herein and in the Ancillary Agreements (as defined herein) and the
instruments delivered pursuant hereto and thereto.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
(a) The following terms, as used herein, have the following meanings:
"Acquired Assets" means all of Seller's right, title and interest in the
following, as they may exist on the Closing Date.
(i) the Real Property together with the buildings, fixtures,
structures and other improvements erected thereon, and together with all
easements, rights and privileges appurtenant thereto, as more particularly
described in the Real Property Purchase Agreement;
(ii) all of Seller's machinery, equipment, tooling, dies, jigs,
spare parts and supplies located at the Facility and being used for or necessary
to the Acquired Business;
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(iii) all of Seller's raw materials, work in process, supplies,
parts, packaging materials and accessories, other than the Excluded Inventory,
being used for or necessary to the Acquired Business located at the Facility;
(iv) all of Seller's other tangible assets located at the Facility
and being used for or necessary to the Acquired Business, including office
furniture, office equipment and supplies and computer hardware; and
(v) all of Seller's interest in governmental permits, licenses,
registrations, orders and approvals, and warranties and guaranties by third
parties, in each case solely related to the Acquired Business, to the extent
such permits, licenses, registrations, orders, approvals, warranties and
guaranties are separately transferable to Purchaser, it being understood that
Schedule 4.8 indicates that such permits, licenses, registrations, orders,
approvals, warranties and guaranties are not transferable to Purchaser;
(vi) all rights of Seller under the Assumed Contracts; and
(vii) all rights of the Seller in and to the Intellectual Property
(other than the Intellectual Property that is the subject of the Intellectual
Property License Agreement) used or necessary in connection with the Acquired
Business to the extent transferable to Purchaser, as listed in Schedule 4.12 to
the Seller Disclosure Schedule.
Notwithstanding anything in clauses (i) through (vii) above, the Excluded
Assets listed on Schedule 1.1-D to this Agreement shall not be considered
Acquired Assets.
"Acquired Business" means the manufacturing operations associated with the
Facility purchased pursuant to this Agreement, including the Acquired Assets and
the Assumed Liabilities.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person. For purposes of this definition, "control" when used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Ancillary Agreements" means the Real Property Purchase Agreement and the
documents contemplated thereby, the Real Property Lease Agreement, the Escrow
Agreement, the Intellectual Property License Agreement, the Transition Services
Agreement, the Supply Agreements, the general assignment and bill of sale
referred to in Section 3.1(b), the assumption agreement referred to in Section
3.1(c), and each other document or agreement delivered by Seller or Purchaser in
connection with this Agreement.
"Assumed Contracts" means those contracts, agreements, leases, commitments
and sales and purchase orders of Seller relating to the Acquired Business listed
on Schedule 1.1-A to this Agreement.
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"Assumed Liabilities" means those debts, obligations, contracts and
liabilities of Seller of related to or arising out of the conduct of the
Acquired Business listed on Schedule 1.1-B to this Agreement, in each case to
the extent not paid, discharged or cancelled prior to the Closing.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended form time to
time.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Resource Conservation and
Recovery Act of 1976, each as amended, together with all other laws that concern
pollution or protection of the environment and public health and safety,
including laws relating to the emissions, discharges, releases or threatened
releases of pollutants, contaminants or Hazardous Substances into ambient air,
surface water, ground water or lands, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or chemical, industrial, Hazardous
Substances or wastes.
"Escrow Agent" means an escrow agent reasonably satisfactory to Seller and
Purchaser, with which Purchaser shall deposit the Initial Cash Purchase Price.
"Escrow Agreement" means a escrow agreement in form and substance
reasonably satisfactory to Seller, Purchaser and the Escrow Agent, to be entered
into in connection with the Closing.
"Excluded Assets" means those assets listed on Schedule 1.1-C to this
Agreement.
"Excluded Inventory" means raw materials and work in process that
constitute, as of the Closing Date, "Excess Materials" as defined in the Supply
Agreements, "Obsolete Materials," as defined in the Supply Agreements, or is
known to be damaged or defective.
"Excluded Liabilities" means (i) any liability of Seller, including,
without limitation, those incurred in connection with the Acquired Business,
arising out of any Seller Benefit Plan; (ii) any liability of Seller for Taxes,
including, without limitation, those incurred in connection with the Acquired
Business, except as expressly provided in Section 8.6 and (iii) any other
liability of Seller, including, without limitation, those incurred in connection
with the Acquired Business, that is not listed on Schedule 1.1-C to this
Agreement.
"Hazardous Substance" means (i) any substance designated or listed as a
"hazardous substance" under Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 or the regulations adopted
pursuant thereto; (ii) any substance designated or listed as a "hazardous
substance" under Sections 307 or 311 of the Clean Water Act or the regulations
adopted pursuant thereto; (iii) any substance defined, designated or listed as a
"hazardous waste" under Section 1004(5) of the Resource Conservation and
Recovery Act or the regulations adopted pursuant thereto or (iv) any other
substance which is regulated by or may give rise to
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liability under any other laws that concern pollution or protection of the
environment and public health and safety.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property" means any or all of the following and all rights
used in or necessary to the operation of the Acquired Business, whether owned
by, licensed to or otherwise used by Seller, in, arising out of, or associated
therewith: (i) all United States patents and utility models and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation embodying or evidencing any of the foregoing; (iii)
all United States copyrights, copyrights registrations and applications therefor
and all other rights corresponding thereto; (iv) all mask works, mask work
registrations and applications therefor in the United States; (v) all industrial
designs and any registrations and applications therefor in the United States;
(vi) all United States trade names, logos, common law trademarks and service
marks, trademark and service mark registrations and applications therefor and
all goodwill associated therewith; (vii) all databases and data collections and
all rights therein; and (viii) all computer software including all source code,
object code, firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded.
"Intellectual Property License Agreement" means the license agreement
substantially in the form attached hereto as Exhibit A with respect to the
Intellectual Property described therein.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or restriction on
transfer in respect of such property or asset.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Other Employee" means an employee of Seller with respect to the Facility
who is on inactive status and who is on a leave of absence from the Facility
either as a result of a medical disability or a personal leave granted by 3Com.
"Palm" means Palm Computing, Inc., a California corporation, which is a
subsidiary of Seller and which may be reincorporated as a Delaware corporation.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Purchaser Disclosure Schedules" means the Schedules delivered by the
Purchaser to the Seller in connection with this Agreement.
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"Purchaser Material Adverse Effect" means a material adverse effect on (x)
the business, liabilities, assets or condition (financial or otherwise) of
either Parent or Purchaser, except any such effect resulting from or arising in
connection with changes in economic, regulatory or political conditions, or (y)
Purchaser's or Parent's ability to consummate the transactions contemplated
hereby, including Purchaser's or Parent's ability to obtain financing necessary
to consummate such transactions, or Purchaser's ability to satisfy its
obligations under the Supply Agreements, whether or not resulting from or
arising in connection with changes in economic, regulatory or political
conditions.
"Purchase Price Adjustment" means any adjustment to the Purchase
Consideration provided for in Section 2.6.
"Real Property" means the real property and premises on which the Facility
is located, as more particularly described in the Real Property Purchase
Agreement.
"Real Property Escrow Agent" means First American Title Insurance Company,
with which Purchaser may deposit the Real Property Purchase Consideration if
required pursuant to Section 3.1(a) and the Real Property Purchase
Consideration.
"Real Property Escrow Agreement" means an escrow agreement in form and
substance reasonably satisfactory to Seller, Purchaser and the Escrow Agent, to
be entered into in connection with the Real Property Purchase Consideration in
the event the Boundary Line Adjustment is not completed by the Closing Date, as
contemplated by Section 3.1(a).
"Real Property Intangibles" has the meaning assigned to the term
"Intangibles" in the Real Property Purchase Agreement.
"Real Property Lease Agreement" means a lease of the Real Property, on
commercially reasonable terms and otherwise in form and substance reasonably
satisfactory to Seller and Purchaser, pursuant to which Seller will lease the
Real Property to Purchaser until completion of the Boundary Line Adjustment,
which lease shall be on a "triple net" basis with Purchaser being responsible
for payment of a reasonable rent, payment of all taxes and insurance with
respect to the Real Property, and all repair and maintenance of the Real
Property during the term of the lease.
"Real Property Purchase Agreement" means the purchase agreement
substantially in the form attached hereto as Exhibit B with respect to the Real
Property.
"Real Property Purchase Consideration" has the meaning assigned to the
term "Purchase Price" in the Real Property Purchase Agreement.
"Required Consents" means, collectively, the Seller Required Consents and
the Purchaser Required Consents.
"SEC" means the Securities and Exchange Commission or any successor
agency.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller Disclosure Schedules" means the Schedules delivered by the Seller
to the Purchaser in connection with this Agreement.
"Seller Material Adverse Effect" means a material adverse effect on (x)
the business, liabilities, assets or condition (financial or otherwise) of the
Acquired Business, taken as whole, or the ability of the Acquired Business to be
operated after the Closing, except any such effect resulting from or arising in
connection with changes in economic, regulatory or political conditions or (y)
Seller's ability to consummate the transactions contemplated hereby, including
Seller's and Palm's ability to satisfy its respective obligations under the
applicable Supply Agreement, whether or not resulting from or arising in
connection with changes in economic, regulatory or political conditions.
"Supply Agreements" means the supply agreements substantially in the form
attached hereto as Exhibit C-1 and Exhibit C-2 with respect to the commitment of
Purchaser to manufacture, and the commitment of Seller, in the case of Exhibit
C-1, and Palm, in the case of Exhibit C-2, to purchase, products manufactured at
the Facility.
"Transaction Agreements" means this Agreement and the Ancillary
Agreements.
"Transition Services Agreement" means the transition services agreement
substantially in the form attached hereto as Exhibit E with respect to specified
services to be performed by Seller for Purchaser.
"WARN Act" means the Worker Adjustment and Retraining Notification Act of
1988, as amended.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Acquired Assets 1.1
Balance Sheet Date 5.6(a)
Boundary Line Adjustment 3.1(a)
Claim 11.3
Closing 3.1
Closing Inventory Value 2.6(a)
Closing Statement 2.6(a)
Confidential Information 6.2(b)
Damages 10.1
Difference 2.6(e)
Documents 10.2
Environmental Reports 4.17(d)
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Term Section
Established Adjustment 3.1(a)
Excluded Assets 1.2
Facility Recitals
Financial Statements 5.6(a)
GAAP 5.6(a)
Indemnified Party 11.3
Indemnifying Party 11.3
Initial Cash Purchase Price 2.4
Inventory Purchase Price 3.2
Licensed Intellectual Property 4.13
Net Asset Value 2.6(a)
Net Capital Expenditures 2.6(a)
Nondisclosure Agreement 6.2
Permits 4.8
Permitted Liens 4.10(a)
Potential Contributor 11.5
Prepaid Expenses 2.6(a)
Price Allocation 8.6(b)
PTO liability 8.5(g)
Purchase Consideration 2.4
Purchaser Required Consents 5.5
Seller Benefit Plan 4.7(g)
Seller Required Consents 4.5
SLCM Employee 8.5
Tax 4.11
Third Party Claim 11.3
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(c) As used herein, (i) the word "including" shall be deemed to mean
"including without limitation"; and (ii) the words "law" or "laws" shall be
deemed to refer to any United States federal, state or local statute, law,
standard, ordinance, regulation, rule, license, permit, approval, order,
judgment or award of any court or governmental authority.
ARTICLE II
PURCHASE AND SALE OF ACQUIRED BUSINESS
SECTION 2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, at the Closing, Purchaser agrees to purchase from
Seller, and Seller agrees to sell, convey, transfer, assign and deliver to
Purchaser, the Acquired Assets, free and clear of all Liens, other than
Permitted Liens, except to the extent the Real Property and the Real Property
Intangibles may be conveyed after the Closing Date as provided in Section
3.1(a). The parties hereto understand
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that, while certain Intellectual Property (including the Licensed Intellectual
Property) that is the subject of the Intellectual Property License Agreement may
be assigned to Purchaser, to the extent set forth on Schedule 4.12, some of the
Intellectual Property may not be assigned to Purchaser, since it is also related
to the other business of Seller which is not transferred to Purchaser hereunder.
Therefore, only with respect to such Intellectual Property which may be assigned
to Purchaser (as set forth in Schedule 4.12), Seller shall sell, transfer,
convey and assign to Purchaser, free and clear of all Liens other than Permitted
Liens, all right, title and interest of Seller in and to such Intellectual
Property.
SECTION 2.2. Excluded Assets. Purchaser expressly understands and agrees
that the Excluded Assets shall be excluded from the Acquired Assets.
SECTION 2.3. Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement and effective at the time of the Closing, Purchaser
shall unconditionally assume and agree to pay, satisfy and discharge when due in
accordance with their terms, and Purchaser shall fully and forever hold Seller
and its Affiliates harmless against, any and all Assumed Liabilities in
accordance with Section 10.2(b). Seller expressly understands and agrees that
Purchaser will not assume any of the Excluded Liabilities, and Seller shall
fully and forever hold Purchaser and its Affiliates harmless against, any and
all Excluded Liabilities in accordance with Section 10.2(a).
SECTION 2.4. Purchase Consideration. The purchase consideration for the
Acquired Assets (the "Purchase Consideration") consist of $65,000,000 (the
"Initial Cash Purchase Price") plus $20,000,000 (the "Inventory Purchase Price")
plus the Assumed Liabilities, subject to Purchase Price Adjustments as set forth
in Section 2.6. The Initial Cash Purchase Price shall be paid subject to and as
provided in Section 3.1(a). The Inventory Purchase Price shall be paid as
provided in Section 3.2. The Purchase Consideration and the Initial Cash
Purchase Price include the Real Property Purchase Consideration.
SECTION 2.5. Assignment of Contracts and Rights. Notwithstanding any other
provision of this Agreement or the Ancillary Agreements, this Agreement shall
not constitute an agreement to assign any agreement or any right thereunder,
including with respect to any Intellectual Property, if an attempted assignment,
without the consent of a third party, would constitute a breach or in any way
adversely affect the rights of Purchaser or Seller thereunder. Prior to the
Closing, Seller shall use reasonable efforts to obtain such consents of third
parties. If any such consent is not obtained prior to the Closing, (i) Seller
and Purchaser will cooperate and use commercially reasonable efforts to obtain
such consent and (ii) the costs and expenses incurred by Purchaser or Seller in
connection with obtaining such consent shall be paid by the parties as specified
on Schedule 2.5 to the Seller Disclosure Schedule.
SECTION 2.6. Adjustment to Purchase Consideration.
(a) Within 60 days after the Closing Date, Seller shall, at its expense,
prepare and deliver, or cause to be prepared and delivered, to Purchaser a
statement prepared consistent with Seller's internal accounting policies and
procedures, including those employed in the financial reports
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referred to in Section 4.18. (the "Closing Statement") (including calculations
and any applicable supporting reports or information) setting forth:
(i) the book value of raw materials and work in process, except for
the Excluded Inventory, included in the Acquired Assets as of the Closing Date
(the "Closing Inventory Value"),
(ii) as of the Closing Date, the amount of expenses prepaid by
Seller, if any, for any period after the Closing in respect of the Acquired
Assets and identified to Purchaser's reasonable satisfaction, including, without
limitation, those items included on Schedule 2.6 (the "Prepaid Expenses"),
(iii) the difference (the "Net Capital Expenditures") between (A)
the amount of Seller's capital expenditures in respect of the Acquired Assets
and (B) the amount equal to the value received for the sale of fixed assets that
would have been Acquired Assets had they not been sold (other than equipment
sold in connection with Equipment Schedule No. U.S. -EG-01 dated May 17, 1999 to
the Global Master Rental Agreement dated December 1, 1998 with Comdisco, Inc.
referenced on Schedule 2.6 to the Seller Disclosure Schedules), in each case
during the period from June 1, 1999 through immediately prior to the Closing,
and
(iv) the amount of the PTO liability as of the Closing Date.
Purchaser shall reasonably cooperate with Seller in Seller's preparation of the
Closing Statement.
(b) In the event that Purchaser disagrees with the Closing Statement,
Purchaser shall, at its own expense, review or cause to be reviewed Seller's
proposed adjustments to the Purchase Price Adjustments set forth on the Closing
Statement. Such review shall be completed within 30 days after Purchaser's
receipt of the Closing Statement. Any dispute (and only those items in dispute)
concerning the Closing Statement which cannot be resolved by the parties within
15 days after Seller's receipt of Purchaser's proposed adjustments to the
Purchase Price Adjustments set forth on the Closing Statement will be submitted
no later than 30 days after such receipt to an independent accounting firm
mutually selected by Purchaser and Seller, and the determination of such firm
shall be final and binding on the parties. The fees and expenses of such third
party independent accounting firm shall be borne by the party whose proposed net
Purchase Price Adjustment varies more than the other party's proposed net
Purchase Price Adjustment from the net Purchase Price Adjustment determined by
such third party independent accounting firm, provided that if the proposed net
Purchase Price Adjustments of both parties vary by less than $100,000 or by the
same amount from the final net Purchase Price Adjustment, then the fees and
expenses of such independent accounting firm shall be shared equally by the
parties.
(c) Upon final determination of the amounts described in Section 2.6(a)
pursuant to Section 2.6(b):
(i) if the amount equal to the Inventory Purchase Price minus the
Closing Inventory Value (the "Difference") is a positive number, then Seller
shall immediately pay the
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Difference to Purchaser; and if the Difference is a negative number, then
Purchaser shall immediately pay the absolute value of the Difference to Seller.
(ii) Purchaser shall pay the amount of the Prepaid Expenses to
Seller.
(iii) If the amount of the Net Capital Expenditures is positive,
Purchaser shall pay the amount of the Net Capital Expenditures to Seller; and if
such amount is negative, Seller shall pay the absolute value of such amount to
Purchaser.
(iv) Seller shall pay the amount of the PTO liability to the
Purchaser.
(d) Purchase Price Adjustments due to and from Seller and Purchaser
pursuant to Section 2.6(c), shall be netted prior to payment and such netted
Purchase Price Adjustment shall be deemed to be an adjustment to the Purchase
Consideration. All payments under this Section 2.6 shall be made promptly in
immediately available funds.
ARTICLE III
CLOSING
SECTION 3.1. Closing. The closing (the "Closing") of the purchase and sale
of the Acquired Assets and the assumption of the Assumed Liabilities hereunder
shall take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California, as soon as possible, but in no event later
than 5 business days after satisfaction of the conditions set forth in Article
IX, or at such other time or place as Seller and Purchaser may agree. At the
Closing:
(a) If Seller and Purchaser mutually agree, prior to the Closing Date,
Purchaser shall deliver the Initial Cash Purchase Price to the Escrow Agent, in
immediately available funds, in accordance with the Escrow Agreement. Subject to
the following sentences of this Section 3.1(a), (i) if the escrow provided for
in the preceding sentence has been established, the Initial Cash Purchase Price
shall be released by the Escrow Agent in accordance with the Escrow Agreement,
or (ii) if such escrow has not been established, at the closing the Initial Cash
Purchase Price shall be delivered to Seller, in immediately available funds. The
parties acknowledge that the legal description of the Real Property is being
adjusted to conform to certain lot lines within the subdivision in which the
Real Property is located and to divide the Real Property from the adjoining
property owned by Seller (the "Boundary Line Adjustment") to conform to the
legal description set forth in Exhibit A to the Real Property Purchase Agreement
(the "Established Adjustment"). In the event the Boundary Line Adjustment is not
completed as of the Closing Date to Seller's and Purchaser's reasonable
satisfaction for any reason (provided, that neither Seller nor Purchaser shall
have the right to object to the Boundary Line Adjustment if it has been
completed in strict conformance with the Established Adjustment), then at the
Closing (i) that portion of the Initial Cash Purchase Price representing the
Real Property Purchase Consideration shall not be released to Seller, but
instead shall be transferred by the Escrow Agent to the Real Property Escrow
Agent, to be released in accordance with the terms of the Real Property Escrow
Agreement upon completion of the Boundary Line Adjustment, (ii) the Purchaser
and the Seller shall comply with all of the terms
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and conditions of the Real Property Purchase Agreement, including making all of
the deposits required by Section 7 of the Real Property Purchase Agreement into
the Sale Escrow (as defined in the Real Property Purchase Agreement) and (iii)
Seller and Purchaser shall enter into the Real Property Lease with respect to
the Real Property, effective as of the Closing Date;
(b) Seller shall assign and transfer to Purchaser all Acquired Assets
(other than the Real Property, including the Real Property Intangibles) by
delivery of a general assignment and bill of sale in the form attached hereto as
Exhibit E, duly executed by Seller;
(c) Purchaser shall assume from Seller the due payment, performance and
discharge of the Assumed Liabilities in accordance with the terms of this
Agreement by delivery of an assumption agreement substantially in the form
attached hereto as Exhibit F, duly executed by Seller and Purchaser;
(d) Seller shall transfer to Purchaser the Real Property, including the
Real Property Intangibles, (subject to the provisions of Section 3.1(a) above)
pursuant to the provisions of the Real Property Purchase Agreement and deliver
the other documents described in the Real Property Purchase Agreement; and
(e) Seller and Purchaser shall also deliver the certificates and other
contracts, documents and instruments required to be delivered under Article IX,
including the Ancillary Agreements.
SECTION 3.2. Inventory Payment. The Inventory Purchase Price shall be paid
by Purchaser to Seller, in immediately available funds, on the date that is 30
days after the Closing Date. If the Inventory Purchase Price or any portion
thereof is not paid when due, such unpaid amount shall bear interest, payable
upon demand, at a rate per annum equal to 1% per month, compounded monthly.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that:
SECTION 4.1. Corporate Existence and Power. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
SECTION 4.2. Corporate Authorization. Seller has the requisite corporate
power and authority to enter into this Agreement and the other Transaction
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
Transaction Agreements to which it is a party, and performance by Seller of its
obligations hereunder and thereunder, have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes, and the
Ancillary Agreements to which it is a party, when executed and delivered by
Seller, will constitute, valid and legally binding obligations of Seller,
enforceable against the Seller in accordance with their respective terms, except
(i) as may be limited by (x) applicable bankruptcy, insolvency, reorganization
or others laws of general application
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relating to or affecting the enforcement of creditors' rights generally and (y)
the effect of rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under federal or
state securities laws or by principles of public policy thereunder.
SECTION 4.3. Governmental Authorization. Except as set forth on Schedule
4.3 to the Seller Disclosure Schedule, no consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
Seller is required in connection with the consummation of the transactions
contemplated by this Agreement, except compliance with any applicable
requirements of the HSR Act. All of the above have been obtained as of the date
of this Agreement except as disclosed on Schedule 4.3 to the Seller Disclosure
Schedule.
SECTION 4.4. Noncontravention. Except as set forth on Schedule 4.4 to the
Seller Disclosure Schedule, the execution, delivery and performance by Seller of
each Transaction Agreement to which it is a party and the consummation of the
transactions contemplated thereby do not and will not (i) violate the
Certificate of Incorporation or Bylaws of Seller, (ii) assuming compliance with
the governmental matters referred to in Section 4.3, violate in any respect any
applicable law, rule, regulation, judgment, injunction, order or decree, (iii)
assuming the obtaining of all Required Consents, conflict with or constitute a
breach or default under, or give rise to any right of termination, cancellation
or acceleration of any right or obligation of Seller or to a loss of any benefit
to which Seller is entitled under any provision of any material agreement or
other instrument binding upon Seller (or to which Purchaser would be entitled
under an Assumed Contract), or (iv) result in the creation or imposition of any
Lien on any Acquired Asset except for any Permitted Liens, except, in the case
of clauses (ii) and (iii), individually and in the aggregate, as would not
reasonably be expected to have a Seller Material Adverse Effect.
SECTION 4.5. Required Consents. Schedule 4.5 to the Seller Disclosure
Schedule sets forth each agreement or other instrument binding upon Seller
requiring a consent or other action by any Person (the "Seller Required
Consents") as a result of the execution, delivery and performance of this
Agreement, except such consents or actions as would not, individually or in the
aggregate, have a Seller Material Adverse Effect if not received or taken by the
Closing. All of such Seller Required Consents have been obtained as of the date
of this Agreement except as disclosed on Schedule 4.5 to the Seller Disclosure
Schedule.
SECTION 4.6. Absence of Certain Changes. Except as disclosed in Schedule
4.6 to the Seller Disclosure Schedule, the Acquired Business has been conducted
in the ordinary course consistent with past practices by Seller since October
15, 1999 and there has not been:
(a) since October 15, 1999, any damage, destruction or loss, whether or
not covered by insurance, with respect to the Acquired Assets, except for such
occurrences that have not resulted, and are not expected to result, either
individually or in the aggregate, in a Seller Material Adverse Effect;
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(b) since October 15, 1999, any acquisition by Seller relating to assets
or business that is material to the Acquired Business, other than in the
ordinary course of business, consistent with past practices or as contemplated
by this Agreement;
(c) since October 15, 1999, any sale, lease, assignment or disposition by
Seller relating to assets or business material to the Acquired Business, other
than in the ordinary course of business, consistent with past practices or as
contemplated by this Agreement;
(d) since October 15, 1999, any (i) employment, deferred compensation,
severance, retirement or other similar agreement or arrangement entered into
with any SLCM Employee or Other Employee (or any amendment to any such existing
agreement or arrangement) in so far as it relates to the Acquired Business, (ii)
grant of any severance or termination pay to any SLCM Employee or Other Employee
of Seller in so far as it relates to the Acquired Business or (iii) change in
compensation or other benefits payable to any director, officer or employee of
Seller in so far as it relates to the Acquired Business pursuant to any Seller
Benefit Plan, thereof, in each case other than the ordinary course of business
and consistent with past practices or as expressly contemplated by this
Agreement; and
(e) since June 1, 1999, any other event or condition of any character that
has resulted, or could reasonably be expected to result, either individually or
collectively, in a Seller Material Adverse Effect.
SECTION 4.7. Material Contracts. Except for the contracts disclosed in
Schedule 4.7 to the Seller Disclosure Schedule, with respect to the Acquired
Business, Seller is not a party to or bound by:
(a) any material mortgages, indentures, security agreements or other
agreements and instruments relating to the borrowing of money, the extension of
credit or the granting of liens or encumbrances (other than liens in connections
with the leases listed on Schedule 4.7; to the Seller Disclosure Schedule;
(b) employment and consulting agreements;
(c) union or other collective bargaining agreements;
(d) any material licenses of patents, trade secrets, know-how, trademark,
copyrights and other Intellectual Property;
(e) agreements, orders or commitments for the purchase of services, raw
materials, or supplies, or purchase of finished products from or to any one
Person the performance of which will extend over a period of more than one year,
result in a material loss to the Acquired Business or involve consideration in
an amount in excess of $100,000;
(f) contracts or options relating to the sale by Seller of any asset of
the Acquired Business, other than sales of inventory in the ordinary course of
business; or
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(g) bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, accrued vacation pay, group insurance,
welfare agreements or other plans, agreements, trusts or arrangements for the
benefit of employees (each, a "Seller Benefit Plan").
Seller has delivered to Purchaser a complete and correct copy of each
Assumed Contract, as amended to date. Except as disclosed in Schedule 4.7 to the
Seller Disclosure Schedule, with respect to each such Assumed Contract, to
Seller's knowledge: (i) the agreement is legal, valid, binding, enforceable, and
in full force and effect; (ii) subject to the Purchaser obtaining the necessary
consents disclosed in Schedule 4.5 to the Seller Disclosure Schedule, the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in Section 2
above); (iii) neither the Seller nor any other party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; (iv) no party has repudiated any provision of the agreement.
SECTION 4.8. Licenses and Permits. Schedule 4.8 to the Seller Disclosure
Schedule correctly describes each license, franchise, permit, certificate,
approval or other similar authorization of Seller that is material to the
Acquired Business (the "Permits") together with the name of the government
agency or entity issuing such Permit. Except as set forth on Schedule 4.8 to the
Seller Disclosure Schedule, (i) the Permits are valid and in full force and
effect, (i) Seller is not in default, and no condition exists that with notice
or lapse of time or both would constitute a default, under the Permits, (iii)
none of the Permits will be terminated or impaired or become terminable, in
whole or in part, as a result of the transactions contemplated hereby and (iv)
upon consummation of such transactions, Purchaser will acquire all of the right,
title and interest in all the Permits except for those that are not transferable
in accordance with their terms (as disclosed in Schedule 4.8 to the Seller
Disclosure Schedule) or those that are the subject of the Intellectual Property
License Agreement.
SECTION 4.9. Litigation. Except as set forth on Schedule 4.9, there is no
action, suit, investigation or proceeding pending against, or to the knowledge
of Seller, threatened against or affecting, Seller or any of Seller's
properties, in each case solely to the extent relating to the Acquired Business,
before any court or arbitrator or any governmental body, agency or official,
which is reasonably likely to have a Seller Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement nor, to the knowledge of the Seller,
is there any past or present fact, occurrence, action or omission that could
reasonably be expected to form the basis for any such action, claim, suit,
proceeding or investigation that could reasonably be expected to result in a
Seller Material Adverse Effect. There are no judgments, orders, decrees,
citations, fines or penalties heretofore assessed against the Seller affecting
the Acquired Assets or Assumed Liabilities that could reasonably be expected to
have a Seller Material Adverse Effect.
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SECTION 4.10. Properties.
(a) Seller has good title to or a valid and subsisting leasehold interest
in all personal property and assets included in the Acquired Assets. None of
such property or assets is subject to any Lien, except:
(i) Liens disclosed on Schedule 4.10 to the Seller Disclosure
Schedule;
(ii) Liens for taxes, assessments and similar charges that are not
yet due or are being contested in good faith, which shall be the responsibility
of Seller and not Purchaser;
(iii) mechanic's, materialman's and similar charges that are not yet
due or are being contested in good faith, which shall be the responsibility of
Seller and not Purchaser; or
(iv) Liens arising or incurred in the ordinary course of business
that constitute purchase money security interests, which shall be the
responsibility of Seller and not Purchaser.
The Liens described in paragraphs (i)-(iv) of this Section 4.10(a) are,
collectively, the "Permitted Liens."
(b) With respect to the Real Property:
(i) There are no pending or, to Seller's knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions
relating to the Real Property;
(ii) There are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or
parties the right to use or occupancy of any of the Real
Property;
(iii) There are no outstanding options or rights of first refusal to
purchase the Real Property or any portion thereof or interest
therein; and
(iv) There are no parties (other than Seller) in possession of the
Real Property.
(c) Schedule 4.10 to the Seller Disclosure Schedule lists all facts
presently known to Seller that could reasonably be expected to have a material
adverse effect on the operation of the Acquired Business. Purchaser acknowledges
that, except as specifically provided herein and in the Ancillary Agreements,
(i) Purchaser is acquiring the Acquired Assets, including the Real Property, and
the Acquired Business AS IS, and (ii) SELLER MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF ANY KIND OR AS TO ANY MATTER, INCLUDING AS TO THE MERCHANTABILITY
OF ANY OF THE ACQUIRED ASSETS, THEIR FITNESS FOR A PARTICULAR PURPOSE OR THEIR
CONDITION, OR ANY NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
(d) In the reasonable opinion of management of Seller, the Acquired Assets
constitute the assets, properties and rights (when taken together with the
Intellectual Property licensed under the
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Intellectual Property License Agreement and the sealers described on Schedule
1.1-C to the Seller Disclosure Schedules) reasonably necessary to conduct the
Acquired Business as conducted on the date hereof.
SECTION 4.11. Taxes. Seller has in all material respects (a) timely filed
all returns of any kind that specifically relates to the Acquired Business
(rather than Seller's business generally) for all U.S. federal, state or local,
income, payroll, withholding, VAT, excise, sales, use, customs duties, personal
property, use and occupancy, business and occupation, mercantile, real estate,
capital stock and franchise or other tax (all the foregoing taxes, including
interest and penalties thereon and including estimated taxes, being hereinafter
collectively called "Taxes" and individually a "Tax"), (b) paid all Taxes which
are due pursuant to such returns and (c) paid all other Taxes for which a notice
of assessment or demand for payment has been received.
SECTION 4.12. Intellectual Property.
(a) Schedule 4.12 to the Seller Disclosure Schedule includes a correct
list of all material Intellectual Property used or necessary for the operation
of the Acquired Business.
(b) Except as set forth on Schedule 4.12 to the Seller Disclosure
Schedule, to Seller's knowledge, neither the manufacture, sale, use of any
products now or heretofore manufactured or sold by Seller nor the operation of
the Acquired Business infringes (nor has any claim been made on Seller that any
such action infringes) the patents or other Intellectual Property rights of
others.
(c) With respect to the portion of the Intellectual Property that is not
owned by Seller ("Licensed Intellectual Property"), to Seller's knowledge,
Seller owns or possesses adequate licenses or other rights at reasonable market
costs to use the same as necessary to conduct the Acquired Business as now
conducted. Except as set forth on Schedule 4.12 to the Seller Disclosure
Schedule, there is no agreement to which Seller is a party or to which Seller is
legally bound and no restriction or Liens, materially and adversely affecting
the use by Seller and, after the Closing with respect to the Intellectual
Property being transferred under this Agreement or the Ancillary Agreements, the
use by Purchaser, of any of the Licensed Intellectual Property.
(d) Except as disclosed in Schedule 4.12 to the Seller Disclosure
Schedule, (i) each item of Intellectual Property listed therein as being
transferable will be transferred or otherwise available to Purchaser on or after
the Closing and (ii) there is no pending or, to the knowledge of Seller,
threatened litigation or other legal action with respect to any of the
Intellectual Property, and no order, holding, decision or judgment has been
rendered by any Authority, and no agreement, consent or stipulation exists to
which, in any such event, Seller is a party or of which Seller has knowledge,
which would prevent Seller, or after the Closing with respect to the
Intellectual Property being transferred under this Agreement or the Ancillary
Agreements, Purchaser, from using any material portion of the Intellectual
Property.
(e) Except as disclosed in Schedule 4.12 to the Seller Disclosure
Schedule, the operation of the Acquired Business by Purchaser will not result in
Purchaser being required either (i) to pay any material royalties, other
payments or consideration, or (ii) to grant any right, to any third parties,
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either directly or indirectly or through Seller, with respect to the
Intellectual Property rights of such third parties.
SECTION 4.13. Labor Issues. No work stoppage or labor strike involving the
Acquired Business is pending, or to the knowledge of Seller, threatened or
reasonably anticipated. Except as disclosed in Schedule 4.13 to the Seller
Disclosure Schedule, Seller is not involved in, nor has Seller been threatened
with, any labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any SLCM Employee or Other Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, could, individually or in the
aggregate, reasonably be expected to result in a Seller Material Adverse Effect.
Seller has not engaged in any unfair labor practices involving the Acquired
Business which could, individually or in the aggregate, directly or indirectly,
reasonably be expected to result in a Seller Material Adverse Effect. Seller is
not presently, nor has it in the past, been a party to, or bound by, any
collective bargaining agreement negotiated with its SLCM Employees or Other
Employees and no collective bargaining agreement is being negotiated by Seller.
SECTION 4.14. Employees. Schedule 4.14A to the Seller Disclosure Schedule
identifies each SLCM Employee and sets forth each such SLCM Employee's current
title, years of service and current annual compensation. Schedule 4.14B to the
Seller Disclosure Schedule identifies each Other Employee and sets forth each
such Other Employee's title, years of service and annual compensation prior to
the commencement of his or her disability or other absence from active
employment.
SECTION 4.15. Finders' Fees. None of Seller and its Affiliates has any
liability or obligation to pay any fees or commissions to any broker, finder,
investment bank, financial advisor or other agent with respect to the
transactions contemplated by this Agreement for which Purchaser could become
liable or obligated, except for fees and expenses (if any) which shall be solely
the responsibility of (and will be paid by) Seller, and not the Acquired
Business.
SECTION 4.16. Compliance with Laws. Except as disclosed on Schedule 4.16
to the Seller Disclosure Schedule, Seller is not in default or violation of any
law, except where such violation or default has not and could not be reasonably
expected to have a Seller Material Adverse Effect.
SECTION 4.17. Environmental Matters. Except as set forth in Schedule 4.17
to the Seller Disclosure Schedule, to the actual knowledge of Seller, without
inquiry (which knowledge, for the purposes of this Section 4.17 only, shall be
deemed to mean the actual knowledge, without inquiry, of Keith Geisel, Site
Services Operations Manager of the Facility for Seller, and Bob Bronstein, Real
Estate Manager for Seller):
(a) No action, suit, proceeding, hearing, investigation, charge,
complaint, demand or notice has been filed or convened against Seller alleging
any failure to comply with Environmental Laws which has not heretofore been
cured or for which there is any remaining liability;
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(b) Seller has not received any written notice of violation or other
written notification from any federal, state or local governmental authority or
any third party alleging that the Acquired Business is in violation of any
Environmental Laws or requesting information with respect to the Acquired
Business pursuant to any Environmental Law which violation has not heretofore
been cured or for which there is any remaining liability;
(c) Seller is not, with respect to the Acquired Business, the
subject of any administrative or judicial proceedings or investigations pursuant
to any Environmental Laws;
(d) Seller has made available to Purchaser true, accurate and
complete copies of all environmental reports, site assessments and audits which
Seller has prepared, has caused to be prepared, or has otherwise received with
respect to the Acquired Business ("Environmental Reports"); and
(e) Except as set forth in the Environmental Reports, the soil and
groundwater of the Real Property does not contain any Hazardous Substance that,
under any Environmental Laws currently in effect: (i) imposes or reasonably
could be expected to impose on any Person liability for removal, remediation, or
other cleanup, or damage to natural resources; or (ii) reasonably could be
expected to result in the imposition of an encumbrance, lien, restriction,
mortgage or other similar security interest on the Real Property or any Acquired
Asset.
SECTION 4.18. Quarterly Reports. Seller has furnished to Purchaser true
and correct copies of its financial reports consisting of a Total SLC
Manufacturing report, Cost of Goods Sold report, Inventory Trends report and
Capacity Utilization report, a Budget Summary, a Staffing Summary, a Period Cost
Analysis and a Variance Analysis, in each case related to the Acquired Business,
for Seller's fiscal quarter ended May 31, 1999, which such reports present
fairly the financial information with respect to the Acquired Business as of the
dates set forth therein, and were prepared on a basis consistent with Seller's
internal accounting policies and procedures. Nothing herein shall be deemed a
representation or a warranty that any projections contained in such reports
will, in fact, be achieved.
SECTION 4.19. Y2K Compliance. Seller has completed, with respect to the
Facility, a review and analysis of the "Year 2000 issues" described in the "Year
2000 Readiness Disclosures" set forth in its Report on Form 10-Q for its fiscal
quarter ended August 27, 1999.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each of Purchaser and Parent represents and warrants to Seller that:
SECTION 5.1. Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and Purchaser is a corporation duly incorporated, validly existing and in good
standing under the Laws of Delaware.
SECTION 5.2. Corporate Authorization. Each of Purchaser and Parent has the
requisite corporate power and authority to enter into this Agreement and the
other Transaction Agreements to
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which it is a party and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the other Transaction Agreements to
which it is a party, and performance by Purchaser or Parent, as the case may be,
of its obligations hereunder and thereunder, have been duly authorized by all
necessary corporate action on the part of Purchaser or Parent, as the case may
be. This Agreement constitutes, and the Ancillary Agreements to which it is a
party, when executed and delivered by Purchaser or Parent, as the case may be,
will constitute, valid and legally binding obligations of such Person,
enforceable against it in accordance with their respective terms, except (i) as
may be limited by (x) applicable bankruptcy, insolvency, reorganization or
others laws of general application relating to or affecting the enforcement of
creditors' rights generally and (y) the effect of rules of law governing the
availability of equitable remedies and (ii) as rights to indemnity or
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
SECTION 5.3. Governmental Authorization. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
Purchaser or Parent is required in connection with the consummation of the
transactions contemplated by this Agreement, except compliance with any
applicable requirements of the HSR Act. All such qualifications and filings will
have been made or be effective on the Closing.
SECTION 5.4. Noncontravention. The execution, delivery and performance by
Purchaser and Parent of each Transaction Agreement to which it is a party and
the consummation of the transactions contemplated thereby do not and will not
(i) violate the Certificate of Incorporation, in the case of Parent, or the
Articles of Incorporation, in the case of Purchaser, or Bylaws of Parent or
Purchaser, (ii) assuming compliance with the governmental matters referred to in
Section 5.3, violate in any material respect any applicable law, rule,
regulation, judgment, injunction, order or decree, (iii) assuming compliance
with all Required Consents, constitute a default under, or give rise to any
right of termination, cancellation or acceleration of any right or obligation of
Purchaser or Parent or to a loss of any benefit to which Purchaser or Parent is
entitled under any provision of any material agreement or other instrument
binding upon Purchaser or Parent, or (iv) except as disclosed in Schedule 5.4 to
the Purchaser Disclosure Schedule, result in the creation or imposition of any
Lien on any of the assets of Purchaser or Parent, except, in the case of clauses
(ii) and (iii), individually and in the aggregate, as would not have a Purchaser
Material Adverse Effect.
SECTION 5.5. Required Consents. Schedule 5.5 to the Purchaser Disclosure
Schedule sets forth each material agreement or other instrument binding upon
Purchaser or Parent requiring a consent or other action by any Person (the
"Purchaser Required Consents") as a result of the execution, delivery and
performance of this Agreement.
SECTION 5.6. Financial Statements.
(a) Parent has furnished or made available to Seller copies of Parent's
audited financial statements, consisting of its balance sheet as of December 31,
1998 and audited statements of income, cash flows and stockholders' equity for
the fiscal year then ended, and unaudited financial
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statements consisting of its balance sheet as of September 30, 1999 (the
"Balance Sheet Date"), and unaudited statements of income, cash flows and
stockholders' equity for the nine month period then ended (collectively, the
"Financial Statements"). The audited and unaudited financial statements of
Parent included in the Financial Statements fairly present, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in such financial statements or the notes thereto),
the consolidated financial position of Parent and its consolidated subsidiaries
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject to normal year-end audit
adjustments in the case of unaudited interim financial statements).
(b) Since the Balance Sheet Date, the business and operations of each of
Parent and Purchaser have been conducted in the ordinary course of business
consistent with past practice, and there has not been:
(i) any damage, destruction or loss, not covered by insurance,
except for such occurrences that have not resulted, and are not reasonably
expected to result, in a Purchaser Material Adverse Effect;
(ii) any Purchaser Material Adverse Effect with respect to
Purchaser's manufacturing operations;
(iii) any change by Purchaser or Parent in its accounting
principles, methods or practices or in the manner it keeps its accounting books
and records, except any such change required by a change in GAAP; and
(iv) any other event or condition of any character, except for such
events and conditions that have not resulted, either individually or
collectively, in a Purchaser Material Adverse Effect.
SECTION 5.7. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Purchaser or Parent
threatened against or affecting Purchaser or Parent or any of their properties
or assets before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 5.8. Finders' Fees. None of Purchaser or Parent and their
Affiliates has any liability or obligation to pay any fees or commissions to any
broker, finder, investment bank, financial advisor or other agent with respect
to the transactions contemplated by this Agreement for which Seller could become
liable or obligated, except for fees and expenses (if any) which shall be solely
the responsibility of (and will be paid by) Purchaser or Parent.
SECTION 5.9. Financing. Parent has delivered to Seller a true and correct
copy of a letter from DLJ Merchant Banking II, Inc. regarding the financing for
the transactions contemplated by this Agreement.
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SECTION 5.10. WARN Act. Purchaser is not currently planning or
contemplating any actions and has not made any decisions concerning the Facility
which actions would occur on or before the date that is 91 days after the
Closing and which would require the service of notice under the WARN Act, and
has not taken any actions concerning the Facility which actions would require
the service of notice under the WARN Act.
ARTICLE VI
COVENANTS OF SELLER WITH RESPECT TO ACQUIRED BUSINESS
Seller agrees that:
SECTION 6.1. Conduct of the Acquired Business. From the date hereof until
the Closing Date:
(a) Seller will carry on the Acquired Business in the ordinary and normal
course in substantially the same manner as heretofore, except to the extent
Seller reasonably believes necessary or prudent in contemplation of the transfer
of the Acquired Business pursuant to this Agreement, and except as otherwise
expressly provided herein, and shall notify Purchaser promptly of any changes or
deviations from the ordinary and normal course of business.
(b) Seller will maintain and keep the Facility and the equipment of or
related to the Acquired Business in all material respects in as good repair,
working order and condition as at present, except for depreciation due to
ordinary wear and tear and damage due to casualty covered by insurance in
accordance with past practices.
(c) Seller will keep in full force and effect insurance and bonds
comparable in amount and scope of coverage to what is now covering the Acquired
Business and all assets related thereto.
(d) Except for the Real Property Lease Agreement, Seller shall not execute
any new lease, license, or other agreement materially and adversely affecting
the ownership or operation of the Real Property, if such lease, license or other
agreement will be binding on Purchaser or the Real Property after Closing,
without Purchaser's prior written approval.
SECTION 6.2. Access to Information, Confidentiality.
(a) From the date hereof until the Closing Date, subject to the provisions
of the Mutual Nondisclosure Agreement dated July 20, 1999, as amended, among
Seller, Purchaser and Parent (the "Nondisclosure Agreement"), Seller will (i)
give Purchaser and Parent, their counsel, financial advisors, auditors and
other authorized representatives reasonable access to the offices, properties,
books and records of the Acquired Business and to the books and records of
Seller relating to the Acquired Business, (ii) furnish, for the Acquired
Business, to Purchaser and Parent, their counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information relating to the Acquired Business as such Persons may reasonably
request and (iii) instruct its employees, counsel and financial advisors, to
cooperate with Purchaser and Parent in
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their investigation of the Acquired Business. Any investigation pursuant to this
Section shall be conducted in such manner as not to interfere unreasonably with
the conduct of the Acquired Business. Notwithstanding the foregoing, neither
Purchaser nor Parent shall have access to (A) confidential information that
relates to Seller as a whole that is not related to the Acquired Business, (B)
personnel records relating to the Acquired Business relating to individual
performance or evaluation records, medical histories or other information which
in Seller's good faith opinion is sensitive or the disclosure of which could
subject Seller to risk of liability, unless the applicable SLCM Employee
consents in writing and Seller reasonably believes such consent will negate such
risk of liability, (C) any information or materials required to be kept
confidential pursuant to agreements with third parties or by law, or (D) any
privileged attorney-client communications or attorney-work product. In addition,
on and after the Closing Date, Seller shall permit Purchaser to have access to
the items referred to in clause (B) above, but subject to the conditions
specified in clause (B).
(b) Following the Closing, Purchaser shall have the right to use
"Confidential Information" (as defined in the Nondisclosure Agreement) located
at the Facility concerning the Acquired Business and disclose it to third
parties that have signed an agreement not to disclose such Confidential
Information and that have a need to know such Confidential Information, as is
reasonably necessary to conduct the operation of the Acquired Business.
Following the Closing, Seller shall not disclose Purchaser's Confidential
Information specific to Purchaser's operation of the Acquired Business, and
Purchaser shall not disclose Seller's Confidential Information specific to
Seller's operation of the Acquired Business except as described in the first
sentence of this Section 6.2(b).
SECTION 6.3. Notices of Certain Events. Seller shall promptly notify
Purchaser of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any government or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings commenced
relating to the Acquired Business that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
4.9; and
(d) any written notice or communication from any SLCM Employee or Other
Employee to any of Seller's directors at the facility that such employee will
terminate his or her employment with Seller prior to the Closing Date.
SECTION 6.4. SLCM Employees. Seller covenants and agrees that (a) without
Purchaser's prior consent, it shall not increase the salary payable to any SLCM
Employee or Other Employee prior to the Closing Date, except in the ordinary
course of business consistent with past practices, and (b) as of the Closing
Date, the only employees of the Acquired Business shall be the SLCM Employees or
Other Employees. Seller hereby waives, effective on and after the Closing Date,
any
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breach that would result under any agreement made by any SLCM Employee or Other
Employee in favor of Seller not to compete with Seller, its business activities
or otherwise, solely insofar as such breach arises by virtue of such SLCM
Employee's or Other Employee's employment by Purchaser at the Facility after the
Closing Date. Seller agrees that promptly after the Closing (and at least once
per month for the next two months thereafter) it shall cause its supply chain
human resources organization to be notified that Seller is not to solicit any
SLCM Employee or Other Employee for employment at any other location of Seller
for a period of one year after the Closing Date.
SECTION 6.5. No Solicitation. From and after the date of this Agreement
until the earlier of the Closing Date and termination of this Agreement pursuant
to its terms, Seller agrees that Seller will not, and will cause its affiliates,
directors, officers, employees, representatives and agents not to, directly or
indirectly, solicit or initiate or enter into or continue discussions or
transactions with, or encourage, or provide information to, any Person (other
than Buyer and its designees) concerning any sale or other disposition of the
Facility or the Acquired Assets or any other interests of or in the Facility,
and Seller represents that neither it or its Affiliates is party to or bound by
any agreement with respect to any such transaction other than as contemplated by
this Agreement.
SECTION 6.6. SAP. Seller shall use commercially reasonable efforts to
implement a separate enterprise resource planning application, including a
separate instance of SAP (systems, applications and products), for the Acquired
Business on or before November 29, 1999 or such other date as the parties
mutually agree, and if not completed by such date and the transactions
contemplated hereunder have nevertheless been consummated, then Seller shall use
its reasonable best efforts to cause such implementation as soon thereafter as
possible.
SECTION 6.7. Preparation of Financial Statements. At any time and from
time to time after the Closing, at the request of the Parent, the Seller will
use commercially reasonable efforts to cooperate with the Parent in connection
with preparation by or on behalf of Parent of any audited financial statements
of the Acquired Business as if it had been a stand alone business in accordance
with Regulation S-X promulgated under the Securities Act of 1933, as amended,
with respect to the Acquired Business which are required for any filings of the
Parent or its Affiliates with the Securities and Exchange Commission. Parent
agrees to reimburse Seller in a timely manner for Seller's reasonable expenses
related to such cooperation. If requested by Seller, Parent shall provide
personnel, at Parent's expense, to assist Seller in compiling and preparing the
requested information. Seller makes no representation or warranty with regard to
any such information. Purchaser and Parent agree that no information disclosed
by Seller in connection with this Section 6.7 shall be the basis for any claim
for Damages under this Agreement or any Ancillary Agreement.
SECTION 6.8. Asset List. Within 60 days after the Closing Date, Seller
shall deliver to Purchaser a list of the Acquired Assets prepared with the
assistance of a third party auditing firm.
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ARTICLE VII
COVENANTS OF PURCHASER AND PARENT
Each of Purchaser and Parent agrees that:
SECTION 7.1. Access to Information; Confidentiality.
(a) Subject to the provisions of the Nondisclosure Agreement, each of
Purchaser and Parent will, with respect to the Acquired Business, on and after
the Closing Date, afford to Seller and its counsel, financial advisors, auditors
and other authorized representatives reasonable access to its properties, books,
records, employees and auditors to the extent necessary to permit Seller to
comply with legal or regulatory requirements (including tax return filing
obligations) and perform financial reporting or audit obligations relating to
any period ending on or before the Closing Date; provided that any such access
by Seller shall not unreasonably interfere with the conduct of the business of
Purchaser or Parent.
(b) Purchaser agrees that it will establish reasonable procedures with the
goal that none of the SLCM Employees or Other Employees will use, and that each
of them will destroy, any information concerning Seller but not related to the
Acquired Business that would have been considered confidential under the terms
of the Nondisclosure Agreement if such Person had been an employee of Purchaser
at the time such Person acquired such information.
SECTION 7.2. Notices of Certain Events. Purchaser shall promptly notify
Seller of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any government or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings commenced
relating to Purchaser, Parent or the Acquired Business that, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant
to Section 5.7; and
(d) any written notice or communication from any SLCM Employee or Other
Employee that such employee will terminate his or her employment with Seller
prior to the Closing Date.
SECTION 7.3. No Solicitation. From and after the date of this Agreement
until the earlier of the Closing Date and termination of this Agreement pursuant
to its terms, each of Purchaser and Parent agrees that it will not, and will
cause its affiliates, directors, officers, employees, representatives and agents
not to, directly or indirectly, solicit or initiate or enter into or continue
discussions or transactions with, or encourage, or provide information to, any
Person (other than Seller and its designees) concerning the acquisition by
Purchaser or Parent of any manufacturing or assembly facility in the United
States, and each of Purchaser and Parent represents that neither it nor
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its Affiliates are parties to or bound by any agreement with respect to any such
transaction other than as contemplated by this Agreement.
SECTION 7.4. Intellectual Property. To the extent any Intellectual
Property used or necessary in connection with the Acquired Business is not or
cannot be transferred or licensed to Purchaser as provided in this Agreement or
the Ancillary Agreements and Purchaser uses, sells, reproduces, displays,
performs, distributes or otherwise exploits such Intellectual Property,
Purchaser, shall indemnify and hold harmless Seller from any liability in
connection with such use.
ARTICLE VIII
COVENANTS OF SELLER AND PURCHASER
Seller and Purchaser agree that:
SECTION 8.1. Commercially Reasonable Efforts: Further Assurances. Subject
to the terms and conditions of this Agreement, Seller and Purchaser will use
their commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary or desirable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. Seller and Purchaser agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement. Following the
Closing, Seller and Purchaser agree to cooperate and use their commercially
reasonable efforts to enable a smooth and complete transfer of the Acquired
Business as of the Closing Date as contemplated hereunder. Such cooperation
includes Purchaser's agreement to promptly pay invoices received by Seller with
respect to goods ordered by Seller in the ordinary course of business and
delivered to the Facility following the Closing Date, without duplication of any
purchase price adjustment pursuant to Section 2.6.
SECTION 8.2. Certain Filings. Seller and Purchaser shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, including pursuant to the HSR Act
and (ii) in taking such actions or making any such filings, furnishing
information required in connection therewith and seeking timely to obtain any
such actions, consents, approvals or waivers. Seller and Purchaser will promptly
supply to each other copies of all correspondence, filings or communications by
such party with any governmental agency or member of its staff, with respect to
any transactions contemplated by this Agreement and any related or contemplated
or inconsistent transaction, except for documents filed pursuant to Item 4(c) of
the HSR Act.
SECTION 8.3. Public Announcements. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby prior to the
Closing Date and, except as may be required by applicable law will not issue any
such press release or make any such public statement prior to such
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consultation. The parties agree that the initial press release to be jointly
issued by the parties with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed.
SECTION 8.4. Required Notices and Consents. As of the Closing Date, Seller
will have given any notices to third parties that are required to be given in
connection with the transfer to Purchaser of any material Acquired Assets, and
Seller and Purchaser shall use their commercially reasonable efforts to obtain
the Required Consents prior to the Closing. Following the Closing, Purchaser
shall cooperate with Seller in connection with Seller's obtaining any Seller
Required Consents.
SECTION 8.5. Facility Personnel.
(a) Purchaser shall offer employment to those employees of the Facility
listed on Schedule 4.14A to the Seller Disclosure Schedule who are employees of
Seller and actively at work as of the Closing Date (the "SLCM Employees"), with
base salaries (including shift differential) at least as favorable to each SLCM
Employee as existing on the Closing Date with respect to his or her employment
by Seller. As of Closing Date, Purchaser shall offer employment at the Facility
to each Other Employee, such employment to commence at the time such Other
Employee returns from leave (regardless of when such return may occur), with
base salary (including shift differential) at least as favorable to such Other
Employee as existing on the Closing Date with respect to his or her employment
by Seller. An Other Employee shall not be treated as an employee of Purchaser
prior to the date he or she is hired by Purchaser in accordance with the
preceding sentence upon his or her return from leave. Purchaser shall not be
liable for any payments to or benefits for an Other Employee preceding such date
of hire. From and after the Closing, Purchaser shall have complete discretion to
extend to the SLCM Employees and Other Employees such employee benefits, if any,
as it determines, subject only to this Agreement. Following the Closing Date,
Parent shall grant options to purchase Parent's capital stock to some or all of
the SLCM Employees and Other Employees, as determined by Parent, in an aggregate
amount equal to not less than 0.00756 of Parent's outstanding common stock as of
the Closing Date. Such options will have a per share exercise price equal to the
then per share fair market value of Parent's common stock as determined in good
faith by Parent's board of directors, as soon as practicable after the Closing
Date.
(b) At the Closing, each SLCM Employee shall cease to be covered under the
Seller Benefit Plans and, thereafter while employed by Purchaser, instead shall
be covered under Purchaser's employee benefit plans. Seller and Purchaser agree
that Seller shall provide or cause to be provided to each SLCM Employee all
notices required to be provided under applicable law or the provisions of any of
the Seller Benefit Plans in connection with the termination of his or her
employment with Seller or the termination of his or her participation in
Seller's Benefit Plans, except to the extent applicable law requires such notice
to be provided by Purchaser. Seller agrees to use commercially reasonable
efforts to assist Purchaser in the transition of the SLCM Employees to coverage
under Purchaser's employee benefit plans (including, at Purchaser's request,
allowing Purchaser to hold, on a commercially reasonable basis, an information
meeting and employee benefit plan open enrollment meetings with the SLCM
Employees on Seller's premises prior to the Closing Date).
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(c) Purchaser shall credit each SLCM Employee with all service with Seller
prior to the Closing Date and with all amounts paid to each such employee prior
to the Closing Date to the extent that service or pay is relevant under any
employee benefit plan of Purchaser for purposes of determining eligibility to
participate, vesting and level of benefits under Purchaser's severance plan.
(d) Following the Closing Date, (i) Purchaser shall indemnify Seller
against any such liability that Seller might or does incur under the WARN Act as
a result of any actions by Purchaser with respect to the SLCM Employees, and
(ii) Seller shall indemnify Purchaser for any liability that Purchaser might or
does incur as a result of any claim with respect to the Seller Benefit Plans or
any of them.
(e) Commencing on the date of this Agreement, Seller and Purchaser agree
to cooperate fully with respect to the employment-related actions which are
necessary or reasonably desirable to accomplish the transactions contemplated
pursuant to this Agreement, including the provision of records and information
as each may reasonably request (including job titles, short and long-term
disability coverage, life insurance coverage, operator certification and
workers' compensation records and information) and the making of all appropriate
filings under the applicable law.
(f) With respect to SLCM Employees and Other Employees who are required to
be furnished a Form W-2 for the calendar year in which the Closing Date occurs,
Purchaser and Seller agree to follow the "standard procedure" set forth in
Revenue Procedure 96-60 with respect to discharging their respective income and
employment tax withholding and reporting obligations with respect to such
employees.
(g) As promptly as practicable after the Closing Date, Seller shall pay to
the SLCM Employees all salary, overtime and other remuneration and
reimbursements for expenses earned, accrued and/or payable for all periods up to
the Closing Date in a manner consistent with Seller's usual policies for
terminated employees. Notwithstanding the foregoing, the parties hereto
acknowledge that Purchaser currently intends to establish for the benefit of the
SLCM Employees (and for any Other Employees hired by Purchaser) a paid time off
plan or policy similar to Seller's paid time off plan or policy ("Seller's paid
time off plan") and that in lieu of payments by Seller to the SLCM Employees of
their accrued time off (through the Closing) under Seller's paid time off plan
(the "PTO liability"), Purchaser shall assume the PTO liability with respect to
such SLCM Employees.
(h) Both prior to and following the Closing Date, each party shall
reasonably cooperate (at its own expense) with the other party to obtain such
information as may be necessary or appropriate to satisfy the requirements of
this Section 8.5 and otherwise comply with applicable law.
SECTION 8.6. Taxes.
(a) Each party agrees that the transfer of the Acquired Business and the
Acquired Assets pursuant to this Agreement is intended to be considered an
"isolated and occasional sale" under Utah Tax Regulation R865-195-38, which is
exempt from any Utah State or local sales tax. Each party
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agrees to take such actions and make such filings as the other party may
reasonably request in furtherance of the foregoing.
(b) The parties hereto agree to allocate the Purchase Consideration (plus
all consideration attributable to the portion of the Assumed Liabilities which
are treated as purchase price for federal income tax purposes) to each Acquired
Asset in accordance with the applicable provisions of Section 1060 of the Code
(such election and allocation being referred to herein as the "Price
Allocation"). Accordingly, each party hereto shall adopt and utilize such Price
Allocation for purposes of all Tax Returns filed by them and shall not
voluntarily take any position inconsistent with the foregoing in connection with
any examination of any Tax Return, any refund claim, any litigation proceeding
or otherwise. In the event that the foregoing is disputed by any taxing
authority, the party receiving notice of the dispute shall promptly notify the
other parties hereto of such dispute and the parties hereto shall consult with
each other concerning resolution of the dispute. Each party agrees to timely
file Internal Revenue Service Form 8594 reflecting the Price Allocation with its
applicable federal Tax Return for the taxable year that includes the Closing
Date.
(c) If, contrary to the parties' intent, the transfer of the Acquired
Business and the Acquired Assets pursuant to this Agreement is determined to be
subject to Utah State or local sales taxes, Purchaser and Seller agree that each
will be responsible for and make all payments required with respect to one half
of the total amount of such taxes. Each party will indemnify the other party and
hold the other party harmless from and against, any such taxes for which the
indemnifying party is responsible under this Section 8.5(c). Except as provided
in the preceding sentence, Seller will be responsible for and make all payments
required with respect to, and will indemnify Purchaser from and against, any
liabilities of Seller for unpaid Taxes (with respect to the Acquired Business or
the ownership of the Acquired Assets) for the periods ending on or prior to the
Closing Date.
(d) Seller and Purchaser shall allocate real property taxes related to the
Real Property as set forth in Section 7.1.1 of the Real Property Purchase
Agreement.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.1. Conditions to Obligations of Seller and Purchaser. The
obligations of Seller and Purchaser to consummate the purchase and sale of the
Acquired Assets and the assumption of the Assumed Liabilities are subject to the
satisfaction or waiver in a writing (which waiver shall not be considered a
waiver of any other provision of this Agreement unless it specifically so
states) of the following conditions.
(a) any applicable waiting period under the HSR Act relating to the sale
and purchase of the Acquired Assets shall have expired or been terminated;
(b) no provision of any applicable law or regulation and no judgement,
injunction, order or decree shall prohibit the consummation of the Closing;
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SECTION 9.2. Conditions to Obligations of Seller. The obligation of Seller
to consummate the Closing is subject to the satisfaction or waiver in a writing
(which waiver shall not be considered a waiver of any other provision of this
Agreement unless it specifically so states) of the following further conditions:
(a) The Supply Agreements, the Real Property Purchase Agreement, the
Intellectual Property License Agreement and the Transition Services Agreement,
each in the form attached hereto, and each of the other Ancillary Agreements,
each in form and substance reasonably satisfactory to Seller, shall have been
executed and delivered by the parties thereto (other than Seller), shall be in
full force and effect and all transactions thereunder contemplated to have been
consummated on the Closing Date shall have been consummated, or shall be in a
position to be consummated concurrently with the Closing; provided that the Real
Property Lease Agreement shall only have been executed and delivered if required
by Section 3.1(a);
(b) (i) Purchaser shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, (ii) the representations and warranties of Purchaser contained in this
Agreement and in any certificate or other writing delivered by Purchaser
pursuant hereto shall be true at and as of the Closing Date, as if made at and
as of such date, (iii) since September 30, 1999, there shall have been no
material adverse effect on (x) the business, liabilities, assets or condition
(financial or otherwise) of either Parent or Purchaser, except any such effect
resulting from or arising in connection with changes in regulatory or political
conditions, or (y) Purchaser's or Parent's ability to consummate the
transactions contemplated hereby, including Purchaser's or Parent's ability to
obtain financing necessary to consummate such transactions, or Purchaser's
ability to satisfy its obligations under the Supply Agreements, whether or not
resulting from or arising in connection with changes in economic, regulatory or
political conditions, and (iv) Seller shall have received a certificate signed
by an executive officer of Purchaser to the foregoing effect;
(c) subject to Section 2.5, all Purchaser Required Consents, each of which
shall be in form and substance reasonably satisfactory to Seller, shall have
been obtained by Purchaser; provided that for purposes of this Section 9.2(c),
it is understood and agreed that neither (i) any requirement that Purchaser
obtain consent to the transactions contemplated hereby from the lender group
described on Schedule 5.5 to the Purchaser Disclosure Schedule, nor (ii) any
necessity for Purchaser to obtain financing from any third party in order to
obtain any portion of the Purchase Consideration necessary to consummate the
transactions contemplated hereby, shall be considered a condition to Closing;
(d) actions by or in respect of or filings with any governmental body,
agency, official or authority required to permit the consummation of the Closing
to have been taken, made or obtained by Purchaser shall have been taken, made or
obtained by Purchaser, except for any such actions or filings the failure to
take, make or obtain would not reasonably be expected to have a Purchaser
Material Adverse Effect.
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(e) Seller shall have received an opinion on behalf of Purchaser, dated as
of the Closing Date, from counsel to Purchaser, in form and substance reasonably
satisfactory to Seller;
(f) Seller shall have received all documents it may reasonably request
relating to the existence of Purchaser and the authority of Purchaser to enter
into this Agreement and the Ancillary Agreements, and to perform its obligations
hereunder and thereunder, all in form and substance reasonably satisfactory to
Seller;
(g) Seller shall be reasonably satisfied as to the continued employment
of, or positions offered to, the SLCM Employees as of the Closing Date;
(h) Seller shall have received from Purchaser a completed and executed
Utah Exemption Certificate, Form TC-721, which shall provide that the
transactions contemplated hereby constitute a resale that exempt the sale of
inventory from Utah State and local taxes for resale purposes, and qualify for a
manufacturing machinery and equipment exemption for new or expanding operations
under applicable law; and
(i) Seller shall be reasonably satisfied that Seller has completed or will
complete, prior to or concurrent with the planned commencement of operations at
the Facility by Purchaser on November 29, 1999, implementation of a separate
enterprise resource planning application, including a separate instance of SAP
(systems, applications and products), for the Acquired Business during the
period covered by the Transition Services Agreement.
SECTION 9.3. Conditions to Obligations of Purchaser. The obligation of
Purchaser to consummate the Closing is subject to the satisfaction or waiver in
a writing (which waiver shall not be considered a waiver of any other provision
of this Agreement unless it specifically so states) of the following further
conditions:
(a) The Supply Agreements, the Real Property Purchase Agreement, the
Intellectual Property License Agreement and the Transition Services Agreement,
each in the form attached hereto, and each of the other Ancillary Agreements,
each in form and substance satisfactory to Purchaser, shall have been executed
and delivered by the parties thereto (other than Purchaser), shall be in full
force and effect and all transactions thereunder contemplated to have been
consummated on the Closing Date shall have been consummated, or shall be in a
position to be consummated concurrently with the Closing; provided that the Real
Property Lease Agreement shall only have been executed and delivered if required
by Section 3.1(a);
(b) (i) Seller shall have performed in all material respects its
obligations hereunder required to be performed by it on or prior to the Closing
Date, (ii) the representations and warranties of Seller contained in this
Agreement and in any certificate or other writing delivered by Seller pursuant
hereto shall be true at and as of the Closing Date, as if made at and as of such
date, (iii) since June 1, 1999, there shall have been no material adverse effect
on (x) the business, liabilities, assets or condition (financial or otherwise)
of the Acquired Business, taken as whole, or the ability of the Acquired
Business to be operated after the Closing, except any such effect resulting from
or arising in connection with changes in regulatory or political conditions or
(y) Seller's ability
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to consummate the transactions contemplated hereby, including Seller's ability
to satisfy its obligations under the Supply Agreements, whether or not resulting
from or arising in connection with changes in economic, regulatory or political
conditions and (iv) Purchaser shall have received a certificate signed by an
officer of Seller to the foregoing effect;
(c) subject to Section 2.5, all Seller Required Consents, each of which
shall be in form and substance reasonably satisfactory to Purchaser, shall have
been obtained by Seller;
(d) actions by or in respect of or filings with any governmental body,
agency, official or authority required to permit the consummation of the Closing
to have been taken, made or obtained by Seller shall have been taken, made or
obtained by Seller, except for any such actions or filings the failure to take,
make or obtain would not reasonably be expected to have a Seller Material
Adverse Effect.
(e) Purchaser shall have received an opinion on behalf of Seller, dated as
of the Closing Date, from counsel to Seller, in form and substance reasonably
satisfactory to Purchaser;
(f) Purchaser shall have received all documents it may reasonably request
relating to the existence of Seller and the authority of Seller to enter into
this Agreement and the Ancillary Agreements, and to perform its obligations
hereunder and thereunder, all in form and substance reasonably satisfactory to
Purchaser; and
(g) Purchaser shall be reasonably satisfied that Seller has completed or
will complete, prior to or concurrent with the planned commencement of
operations at the Facility by Purchaser on November 29, 1999, implementation of
a separate enterprise resource planning application, including a separate
instance of SAP (systems, applications and products), for the Acquired Business
during the period covered by the Transition Services Agreement.
ARTICLE X
SURVIVAL; INDEMNIFICATION
SECTION 10.1. Survival. The representations and warranties of the parties
hereto contained in this Agreement, the Real Property Agreement and the
Transition Services Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith or therewith (the "Documents") shall
survive the Closing until one year after the Closing Date; provided that the
representations and warranties concerning tax matters and employee benefit
matters shall survive until expiration of limitations applicable to the matters
covered thereby (giving effect to any waiver, mitigation or extension thereof),
if later. Notwithstanding the preceding sentence, any representation or warranty
in respect of which indemnity may be sought under this Agreement shall survive
the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
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SECTION 10.2. Indemnification.
(a) Seller hereby indemnifies Parent, Purchaser and its Affiliates and its
and their officers, directors and employees against and agrees to hold each of
them harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection therewith arising out of any claim,
damages, complaint, demand, cause of action, investigation, suit or other
proceeding) ("Damages") arising out of or relating to (w) any misrepresentation
or breach of warranty made by Seller or the inaccuracy of any representation or
warranty made by Seller in any Document, or (x) nonfulfillment of any agreement
or covenant of Seller contained in any Document, (y) any Excluded Liability or
(z) any liabilities arising from the failure of the parties to comply with
applicable bulk sales laws; provided that (i) Seller shall not be liable under
this Section 10.2 unless the aggregate amount of Damages with respect to all
matters referred to in this Section 10.2(a) exceeds $500,000 and then only to
the extent of such excess and (ii) Seller's maximum liability under this Section
10.2(a) shall not exceed $15,000,000; and provided further that the $500,000
minimum and the $15,000,000 limitation set forth above in this Section 10.2(a)
shall not apply with respect to a misrepresentation or breach of warranty or the
inaccuracy of any representation or warranty or any breach of covenant
concerning tax matters, employee benefit matters, confidentiality, Excluded
Liabilities, matters described in Section 2.5, applicable bulk sales laws and
any Purchase Price Adjustment nor to matters resulting directly from the fraud,
intentional misconduct or gross negligence of Seller.
(b) Purchaser and Parent hereby jointly and severally indemnify Seller and
its Affiliates and its and their officers, directors and employees against and
agrees to hold each of them harmless from any and all Damages arising out of or
relating to (w) any misrepresentation or breach of warranty made by Purchaser or
Parent or the inaccuracy of any representation or warranty made by Purchaser or
Parent in any Document, or (x) the nonfulfillment of any agreement or covenant
of Purchaser or Parent contained in any Document, or (y) any Assumed Liability,
(z) any liability described in Section 7.4; provided that (i) neither Purchaser
nor Parent shall be liable under this Section 10.2(b) unless the aggregate
amount of Damages with respect to all matters referred to in this Section
10.2(b) exceeds $500,000 and then only to the extent of such excess and (ii) the
maximum liability of Purchaser and Parent under this Section 10.2(b) shall not
exceed $15,000,000; and provided, further, that the $500,000 minimum and the
$15,000,000 limitation set forth in this Section 10.2(b) shall not apply with
respect to a misrepresentation or breach of warranty or the inaccuracy of any
representation or warranty or any breach of covenant concerning tax matters,
employee benefit matters, confidentiality, Assumed Liabilities, matters
described in Sections 2.5 and 7.4, any Purchase Price Adjustment or the
Inventory Payment nor to matters relating to the fraud, intentional misconduct
or gross negligence of Purchaser or Parent.
SECTION 10.3. Procedures.
(a) The party seeking indemnification under Section 10.2 (the "Indemnified
Party") agrees to give prompt notice to the party against whom indemnity is
sought (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any suit, action or proceeding
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("Claim") in respect of which indemnity may be sought under such Section and
will provide the Indemnifying Party such information with respect thereto that
the Indemnifying Party may reasonably request. The failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent such failure shall have prejudiced the
Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate in the defense
of any Claim asserted by any third party ("Third Party Claim") and, subject to
the limitations set forth in this Section, shall be entitled to control and
appoint lead counsel reasonably satisfactory to the party seeking
indemnification for such defense, in each case at its expense.
(c) If the Indemnifying Party shall assume the control of the defense of
any Third Party Claim in accordance with the provisions of this Section 10.3,
(i) the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of such Third Party Claim, if the settlement does not
release the Indemnified Party from all liabilities and obligations with respect
to such Third Party Claim or the settlement imposes injunctive or other
equitable relief against the Indemnified Party and (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose. The fees and expenses of
such separate counsel shall be paid by the Indemnified Party.
(d) Each party shall cooperate, and cause their respective Affiliates to
cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearing, trials or appeals, as
may be reasonably requested in connection therewith.
SECTION 10.4. Damages
EXCEPT WITH RESPECT TO DAMAGES TO THIRD PARTIES UNDER INDEMNIFICATION
OBLIGATIONS COVERED BY THIS AGREEMENT OR WITH RESPECT TO BREACH OF
CONFIDENTIALITY OBLIGATIONS UNDER THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE
TO THE OTHER UNDER ANY CONTRACT, STRICT LIABILITY, NEGLIGENCE OR OTHER THEORY
FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING WITHOUT
LIMITATION LOST PROFITS IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT,
IRRESPECTIVE OF WHETHER SUCH PARTY HAD ADVANCE NOTICE OR KNOWLEDGE OF THE
POSSIBILITY OF SUCH DAMAGES.
SECTION 10.5. Assignment of Claims. If the Indemnified Party receives any
payment from an Indemnifying Party in respect of any Damages pursuant to Section
10.2 and the Indemnified Party could have recovered all or part of such Damages
from a third party (a "Potential Contributor") based on the underlying Claim
asserted against the Indemnifying Party, the Indemnified Party shall assign such
of its rights to proceed against the Potential Contributor as are necessary to
permit the Indemnifying Party to recover from the Potential Contributor the
amount of such payment; provided
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that in the event such third party is an insurer, the Indemnifying Party shall
reimburse the Indemnified Party for any increased premium directly attributable
to any such recovery of Damages.
SECTION 10.6. Exclusivity. Subject to Section 12.11, after the Closing,
Section 10.2 will provide the exclusive remedy for any misrepresentation, breach
of warranty, covenant or other agreement arising out of the Documents, except in
connection with a claim for fraud or intentional misrepresentation.
ARTICLE XI
TERMINATION
SECTION 11.1. Grounds for Termination. This Agreement maybe terminated at
any time prior to the Closing:
(a) by mutual written agreement of Seller and Purchaser,
(b) by either Seller or Purchaser if the Closing shall not have been
consummated on or before December 24, 1999;
(c) by either Seller or Purchaser if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction; or
(d) by either Seller or Purchaser in the event of any action by the Board
of Directors of the other to withdraw or modify its approval of this Agreement
or the transactions contemplated hereby.
The party desiring to terminate this Agreement pursuant to clauses 11.1
(b), (c) or (d) shall give notice of such termination to the other party.
SECTION 11.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 11.1, such termination shall be without liability of either
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the (i) failure of either party to
fulfill a condition to the performance of the obligations of the other party,
(ii) failure to perform a covenant of this Agreement or (iii) breach by either
party hereto of any representation or warranty or agreement contained herein,
such party shall be fully liable for any and all Damages incurred or suffered by
the other party as a result of such failure or breach to the extent provided in
this Agreement.
SECTION 11.3. Procedure Upon Termination. In the event of termination of
this Agreement by Purchaser or Seller or by both Purchaser and Seller pursuant
to Section 11.1 hereof, written notice thereof shall forthwith be given to the
other party or parties hereto and the transactions contemplated herein shall be
abandoned without further action by Purchaser or the Seller. In addition, if
this Agreement is terminated as provided herein:
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(a) Each party will redeliver (or destroy, if agreed to by the other party
or if such party requests that they may destroy, and such request is
unreasonably denied by the other party) all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same; and
(b) The confidentiality of all information of a confidential nature
received by any party hereto with respect to the business of any other party
(other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall be maintained in accordance with the Nondisclosure Agreement, which shall
survive termination of this Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Seller, to:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95052
Attention: Randy Heffner
Telecopy: 408-326-6465
Telephone: 408-326-5760
with a copy to:
3Com Corporation
5400 Bayfront Plaza
Santa Clara, CA 95052
Attention: General Counsel
Telecopy: 408-326-6434
Telephone: 408-326-5000
and
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94034
Attention: Kathleen B. Bloch, Esq.
Telecopy: 650-493-6811
Telephone 650-493-9300
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<PAGE>
if to Purchaser or Parent, to:
Manufacturers' Services Limited
300 Baker Avenue
Concord, MA 01742
Attention: Dale Johnson, General Counsel
Telecopy: 978-287-5630
Telephone: 978-287-5635
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Michael J. Stick, Esq.
Telecopy: 617-951-7050
Telephone: 617-951-7000
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 12.2. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement, or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any or other further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 12.3. Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense; it
being understood that all such costs and expenses of the Acquired Business shall
be paid by the Seller and not the Acquired Business.
SECTION 12.4. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, that no party may assign its rights
or obligations hereunder without the prior written consent of 3Com, in the case
of Purchaser or Parent, or Purchaser, in the case of 3Com, except that (i)
Purchaser (but not Parent) may transfer its rights hereunder to an Affiliate of
Purchaser, so long as such Affiliate assumes all obligations hereunder; (ii)
either of Purchaser or Parent may assign its
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rights to the proceeds of any indemnification payments or purchase price
adjustments under this Agreement to any lenders providing the financing
described in Section 5.9, as collateral for its obligations to such lenders and
(iii) Seller may assign its rights hereunder by operation of law or otherwise in
connection with a merger of Seller with or into another Person or the sale of
all or substantially all of the assets of Seller.
SECTION 12.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 12.6. Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 12.7. Entire Agreement; Severability. This Agreement, together
with the Ancillary Agreements and the Nondisclosure Agreement, constitute the
entire agreement between the parties hereto and any of such parties' respective
affiliates with respect to the subject matter of this Agreement and supersedes
all prior communications, agreements and understandings, both oral and written,
with respect to the subject matter of this Agreement. If at any time subsequent
to the date hereof any term or provision of this Agreement shall be determined
to be partially or wholly illegal, void or unenforceable, such provision shall
be of no force and effect to the extent so determined, but the illegality or
unenforceability of such term or provision shall have no effect upon and shall
not impair the legality or enforceability of any other term or provision of this
Agreement.
SECTION 12.8. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 12.9. Disclosure Schedules. The parties acknowledge and agree that
(i) the Schedules to this Agreement may include certain items and information
solely for informational purposes for the convenience of the parties and (ii)
the disclosure by a party of any matter in the Schedules shall not be deemed to
constitute an acknowledgment by the other party that the matter is required to
be disclosed by the terms of this Agreement or that the matter is material.
Nothing in the Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with reasonable particularity. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
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SECTION 12.10. Representation by Counsel; Interpretation. Seller,
Purchaser and Parent each acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is expressly
waived. The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of Seller, Purchaser and Parent.
SECTION 12.11. Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 12.12. Consent to Jurisdiction. Each of the parties agrees that
all actions, suits or proceedings arising out of or based upon this Agreement or
the subject matter hereof shall be brought and maintained exclusively in the
state or federal courts located in the State of New York. Each of the parties by
execution hereof (i) hereby irrevocably submits to the jurisdiction of the state
and federal courts located in the Borough of Manhattan, City of New York, State
of New York for the purpose of any action, suit or proceeding arising out of or
based upon this Agreement or the subject matter hereof and (ii) hereby waives to
the extent not prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
court, that it is immune from extraterritorial injunctive relief, that his or
its property is exempt or immune from attachment or execution, that any such
action, suit or proceeding may not be brought or maintained in the above-named
court should be dismissed on the grounds of forum non conveniens, should be
transferred to any court other than the above-named court, should be stayed by
virtue of the pendency of any other action, suit or proceeding in any court
other than the above-named court, or that this Agreement or the subject matter
hereof may not be enforced in or by the above-named court. Each of the parties
hereto hereby consents to service of process in any such suit, action or
proceeding in any manner permitted by the laws of the State of New York, agrees
that service of process by registered or certified mail, return receipt
requested, at the address specified in or pursuant to Section 12.1 hereof is
reasonably calculated to give actual notice and waives and agrees not to assert
by way of motion, as a defense or otherwise, in any such action, suit or
proceeding any claim that service of process made in accordance with Section
12.1 hereof does not constitute good and sufficient service of process. The
provisions of this Section 12.13 shall not restrict the ability of any party to
enforce in any court any judgment obtained in the state or federal courts
located in the State of New York.
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SECTION 12.13. Waiver of Jury Trial. Each of Seller, Purchaser and Parent
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this agreement or the subject matter hereof.
SECTION 12.14. Suretyship Waivers. Parent hereby expressly waives (a)
diligence, presentment, demand for payment, acceptance or protest under this
Agreement or any of the Documents; (b) discharge due to the disability of
Purchaser with respect to its obligations under this Agreement or any of the
Documents; (c) any requirement that Seller exhaust any right, power or remedy or
proceed against Purchaser or any other Person that may be liable for any
obligations of Purchaser hereunder and (d) notice of acceptance of its
obligations under this Agreement and the other Documents and notice of
non-performance by Purchaser. Parent specifically agrees that it shall not be
necessary or required, and Parent shall not be entitled to require, that Seller
(i) file suit or proceed to assert any claim for personal judgement against
Purchaser in respect of any Damages; (ii) make any effort at collection,
enforcement or recovery of all or any part of the Damages from Purchaser; or
(iii) exercise or assert any other right or remedy to which Seller is or may be
entitled in connection with any such Damages. Following the Closing Date,
Purchaser and Seller may amend or modify this Agreement or any of the Documents,
or settle or comprise any claim hereunder or thereunder, without consent of or
notice to Parent. Parent assumes all responsibility for keeping apprised of the
financial condition of Purchaser and its performance under this Agreement and
the Documents. To the extent any of the following are deemed applicable, Parent
expressly waives, to the extent permitted by law, the benefit of California
Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899 and
1432.
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
SELLER:
3COM CORPORATION
By: /s/ Randy R. Heffner
---------------------------------
Name: Randy R. Heffner
Title: Senior Vice President,
Manufacturing Operations
PURCHASER:
MANUFACTURERS' SERVICES
SALT LAKE CITY OPERATIONS, INC.
By: /s/ Robert E. Donahue
---------------------------------
Name: Robert E. Donahue
Title: President
PARENT:
MANUFACTURERS' SERVICES LIMITED
By: /s/ Kevin C. Melia
---------------------------------
Name: Kevin C. Melia
Title: Chief Executive Officer
[Signature Page to Asset Purchase Agreement]
<PAGE>
EXECUTION COPY
STOCKHOLDERS AGREEMENT
dated as of
January 20, 1995
by and among
DLJ MERCHANT BANKING PARTNERS, L. P.,
DLJ INTERNATIONAL PARTNERS, C.V.,
DLJ OFFSHORE PARTNERS, C.V.,
DLJ MERCHANT BANKING FUNDING, INC.,
CERTAIN TRUSTS,
KEVIN C. MELIA,
ROBERT J. GRAHAM,
JULIE KENT
and
MANUFACTURERS' SERVICES LIMITED
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1 Definitions ...................................................... 1
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Compostion of the Board .......................................... 7
2.2 Removal .......................................................... 7
2.3 Vacancies ........................................................ 8
2.4 Meetings ......................................................... 8
2.5 Action by the Board .............................................. 8
2.6 Conflicting Charter or Bylaw Provisions .......................... 8
2.7 Additional Equity ................................................ 8
ARTICLE 3
RESTRICTIONS ON TRANSFER
3.1 General .......................................................... 9
3.2 Legend on Share Certificates ..................................... 10
3.3 Permitted Transferees ............................................ 11
3.4 The Trusts ....................................................... 11
ARTICLE 4
RIGHTS TO PARTICIPATE IN A SALE
RIGHTS TO COMPEL A SALE;
4.1 Right to Participate in a Sale ................................... 12
4.2 Right to Compel Participation in Certain Transfers ............... 14
4.3 Improper Transfer ................................................ 15
ARTICLE 5
REGISTRATION RIGHTS
5.1 Demand Registration .............................................. 16
5.2 Incidental Registration .......................................... 19
5.3 Holdback Agreements .............................................. 21
5.4 Registration Procedures .......................................... 21
5.5 Indemnification by the Company ................................... 25
5.6 Indemnification by Participating Stockholders .................... 26
i
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Page
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5.7 Conduct of Indemnification Proceedings ............................ 26
5.8 Contribution ...................................................... 27
5.9 Participation in Public Offering .................................. 29
5.10 Other Indemnification ............................................. 29
ARTICLE 6
MISCELLANEOUS
6.1 Entire Agreement ................................................. 29
6.2 Binding Effect; Benefit .......................................... 30
6.3 Exclusive Financial and Investment Banking Advisor ............... 30
6.4 Assignability .................................................... 30
6.5 Amendment; Waiver; Termination ................................... 30
6.6 Notices .......................................................... 31
6.7 Headings ......................................................... 32
6.8 Counterparts ..................................................... 32
6.9 Applicable Law ................................................... 32
6.10 Specific Enforcement ............................................. 32
6.11 Consent to Jurisdiction .......................................... 32
ii
<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT dated as of January 20, 1995 among DLJ Merchant Banking
Partners, L.P., a Delaware limited partnership, DLJ International Partners,
C.V., a Netherlands Antilles limited partnership, DLJ Offshore Partners, C.V., a
Netherlands Antilles limited partnership, DLJ Merchant Banking Funding, Inc., a
Delaware corporation (each of the foregoing, a "DLJ Entity", and collectively,
the "DLJ Entities"), The Kevin C. Melia 1995 Irrevocable Trust (the "Melia
Trust), The Robert J. Graham 1995 Irrevocable Trust (the "Graham Trust"), The
Julie Kent 1995 Irrevocable Trust (the "Kent Trust") (each of the Melia Trust,
Graham Trust and Kent Trust, a "Trust", and collectively, the "Trusts"), Kevin
C. Melia, an individual ("Melia"), Robert J. Graham, an individual ("Graham"),
Julie Kent, an individual ("Kent") (each of the Trusts, Melia, Graham and Kent,
a "Founding Stockholder", and collectively, the "Founding Stockholders"), and
Manufacturers' Services Limited, a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Securities Purchase Agreement dated as of
January 20, 1995 (the "Securities Purchase Agreement") by and among the DLJ
Entities, the Founding Stockholders and the Company, the DLJ Entities,
concurrently with the execution of this Agreement, are acquiring shares
("Shares") of common stock, par value one tenth of $.01 per share ("Common
Stock"), of the Company; and
WHEREAS, the parties hereto desire to enter into this Agreement to
govern certain of their rights, duties and obligations after consummation of the
transactions contemplated by the Securities Purchase Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and the Securities Purchase Agreement, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled
1
<PAGE>
by, or under common control with such Person; provided that no stockholder of
the Company shall be deemed an Affiliate of any other stockholder of the Company
solely by reason of any investment in the Company. For the purpose of this
definition, the term "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Affiliated Employee Benefit Trust" means any trust that is a
successor to the assets held by a trust established under an employee benefit
plan subject to ERISA or any other trust established directly or indirectly
under such plan or any other such plan having the same sponsor.
"Aggregate Ownership" means, with respect to any Stockholder or
group of Stockholders, the total number of Shares "beneficially owned" (as such
term is defined in Rule 13d-3 under the Exchange Act) (without duplication) by
such Stockholder or group of Stockholders as of the date hereof (but adjusted in
accordance with the proviso below), calculated on a Fully Diluted basis and
taking into account any stock dividend, stock split or reverse stock split;
provided that such number of Shares shall be increased (without duplication) (i)
with respect to any DLJ Entity, by any subsequent acquisitions of Shares by such
DLJ Entity within the three year period following the date hereof, (ii) with
respect to any Other Stockholder, by any stock appreciation rights, options,
warrants or other rights to purchase or subscribe for Shares of such Other
Stockholder as and when such stock appreciation rights, options, warrants or
other rights have vested and (iii) with respect to any Trust, by any Shares
subsequently acquired by such Trust as a Permitted Transferee.
"Benchmark Shares" means the aggregate number of Shares sold or
proposed to be sold by the DLJ Entities (other than to their Permitted
Transferees) subsequent to the date hereof until the first to occur of (i) the
aggregate number of Shares so sold or proposed to be sold by the DLJ Entities
(other than to their Permitted Transferees) equals 25% of the Aggregate
Ownership of the DLJ Entities and (ii) the aggregate amount in cash (net of any
commissions, fees or expenses) collectively received or to be received by the
DLJ Entities, without duplication, as a result of the sale subsequent to the
date hereof or proposed sale of any such Shares (other than to their Permitted
Transferees) shall equal the aggregate amount invested by the DLJ Entities as of
such date in Shares.
2
<PAGE>
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in New York City are authorized by law to close.
"Bylaws" means the Amended and Restated Bylaws of the Company, as
amended from time to time.
"Charter" means the Amended and Restated Certificate of
Incorporation of the Company, as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted" means, with respect to Common Stock and without
duplication, all outstanding Shares and all Shares issuable in respect of
securities convertible into or exchangeable for Common Stock, stock appreciation
rights, options, warrants and other rights to purchase or subscribe for Common
Stock or securities convertible into or exchangeable for Common Stock; provided
that, to the extent any of the foregoing stock appreciation rights, options,
warrants or other rights to purchase or subscribe for Common Stock are subject
to vesting, the Shares subject to vesting shall be included in the definition of
"Fully Diluted" only upon and to the extent of such vesting.
"Initial Public Offering" means the initial sale after the date
hereof of Common Stock pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or any successor
form)
"Other Stockholders" means all Stockholders other than the DLJ
Entities, and their respective Permitted Transferees.
"Percentage Interests" means, with respect to Melia, Graham and
Kent, 34.2%, 34.2% and 31.6%, respectively.
"Permitted Transferee" means:
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(i) in the case of any DLJ Entity (A) any other DLJ Entity, (B) any
general or limited partner of any DLJ Entity (a "DLJ Partner"), and any
corporation, partnership, Affiliated Employee Benefit Trust or other
entity that is an Affiliate of any DLJ Partner (collectively, the "DLJ
Affiliates"), (C) any managing director, general partner, director,
limited partner, officer or employee of any DLJ Entity or of any DLJ
Affiliate, or the heirs, executors, administrators, testamentary trustees,
legatees or beneficiaries of any of the foregoing persons referred to in
this clause (C) (collectively, "DLJ Associates"); (D) a trust, the
beneficiaries of which, or a corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of
which, include only DLJ Entities, DLJ Affiliates, DLJ Associates, their
spouses or their lineal descendants or (E) a voting trustee for one or
more DLJ Entities, DLJ Affiliates or DLJ Associates under the terms of a
voting trust designed to conform with the requirements of the Insurance
Law of the State of New York; and
(ii) in the case of any Other Stockholder (A) any Other Stockholder,
(B) a Person to whom Shares are transferred from such Other Stockholder
(1) by will or the laws of descent and distribution or (2) by gift without
consideration of any kind; provided that, in the case of clause (2), such
transferee is the issue or spouse of such Other Stockholder or (C) a trust
that is for the exclusive benefit of such Other Stockholder or its
Permitted Transferees under (B) above.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Public Offering" means an underwritten public offering of
Registrable Stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Registrable Stock" means any Shares until (i) a registration
statement covering such Shares has been declared effective by the SEC and such
shares have been disposed of pursuant to such effective registration statement,
(ii) such Shares are sold under circumstances in which all of the applicable
conditions of Rule 144 are met or under which they may be sold pursuant to Rule
144 (k) or (iii) such Shares are otherwise transferred, the Company has
delivered a new certificate or other evidence of ownership for such Shares not
bearing the legend required pursuant to this Agreement and such Shares may be
resold without subsequent registration under the Securities Act.
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"Registration Expenses" means (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Shares), (iii) printing expenses, (iv) internal expenses
of the Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), (v) reasonable
fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 5.4(h)), (vi) the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, (vii) reasonable fees and expenses of one counsel for the
Stockholders participating in the offering selected (A) by the DLJ Entities, in
the case of any offering in which such entities participate, or (B) in any other
case, by the Other Stockholders holding the majority of Shares to be sold for
the account of all Other Stockholders in the offering, (viii) fees and expenses
in connection with any review of underwriting arrangements by the National
Association of Securities Dealers, Inc. (the "NASD") including fees and expenses
of any "qualified independent underwriter" and (ix) fees and disbursements of
underwriters customarily paid by issuers or sellers of securities; but shall not
include any underwriting fees, discounts or commissions attributable to the sale
of Registrable Stock, or any out-of-pocket expenses (except as set forth in
clause (vii) above) of the Stockholders (or the agents who manage their
accounts) or any fees and expenses of underwriter's counsel.
"Rule 144" means Rule 144 and Rule 144A (or any successor
provisions) under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholder" means each Person (other than the Company) who shall
be a party to this Agreement, whether in connection with the execution and
delivery hereof as of the date hereof, pursuant to Section 6.4, or otherwise, so
long as such Person shall beneficially own any Shares or, in the case of Melia,
Graham and Kent, so long as the DLJ Entities shall be parties to this Agreement
and such Person shall (i) be a director or officer of the Issuer or (ii) (A)
beneficially own any Shares or (B) have any stock
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appreciation rights, options, warrants or other rights to purchase or subscribe
for Common Stock or securities convertible into or exchangeable for Common
Stock.
"Third Party" means a prospective purchaser of Shares in an
arm's-length transaction from a Stockholder where such purchaser is not a
Permitted Transferee of such Stockholder.
(b) The term "DLJ Entities", to the extent such entities shall have
transferred any of their Shares to "Permitted Transferees", shall mean the DLJ
Entities and the Permitted Transferees of the DLJ Entities, taken together, and
any right or action that may be taken at the election of the DLJ Entities may be
taken at the election of the DLJ Entities and such Permitted Transferees.
(c) The term "Other Stockholders", to the extent such stockholders
shall have transferred any of their Shares to "Permitted Transferees", shall
mean the Other Stockholders and the Permitted Transferees of the Other
Stockholders, taken together, and any right or action that may be taken at the
election of the Other Stockholders may be taken at the election of the Other
Stockholders and such Permitted Transferees.
(d) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
beneficially own 1.1(a)
Commission Company 2.7
Commission Company Revenues 2.7
Demand Registration 5.1(a)
DLJSC 6.3
Holders 5.1(a)
Incidental Registration 5.1(a)
Indemnified Party 5.7
Indemnifying Party 5.7
Independent Director 2.1(a)
Inspectors 5.4(g)
LLC Shares 3.4(b)
Maximum Offering Size 5.1(d)
Nominee 2.3(a)
Omnitron Agreement 2.7
Omnitron Shares 2.7
Participating Shares 4.1(a)
Pro Rata Portion 3.1(d)
Purchase Shares 4.1(a)
Records 5.4(g)
Restriction Termination Date 3.1(b)
Section 4.1 Notice 4.1(a)
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Section 4.1 Notice Period 4.1(a)
Section 4.1 Pro Rata Portion 4.1(a)
Section 4.1 Sale 4.1(a)
Section 4.1 Sale Price 4.1(a)
Section 4.1 Seller 4.1(a)
Section 4.2 Notice 4.2(a)
Section 4.2 Notice Period 4.2(a)
Section 4.2 Sale 4.2(a)
Section 4.2 Sale Price 4.2(a)
Selling Stockholder 5.1(a)
transfer 3.1(a)
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Composition of the Board. (a) The Board shall consist initially
of six directors, four of whom will be designated by DLJ Merchant Banking
Partners, L.P., and two of whom will be designated by the Other Stockholders;
provided that one of the directors designated by DLJ Merchant Banking Partners,
L.P. shall not be either an "Affiliate" or an "Associate" (a) such terms are
used within the meaning of Rule 12b-2 under the Exchange Act) of the DLJ
Entities or the Other Stockholders (the "Independent Director") and such
Independent Director shall be designated by DLJ Merchant Banking Partners, L.P.
after consultation with the Other Stockholders. The DLJ Entities shall be
permitted at any time to increase the number of directors from six to seven and
DLJ Merchant Banking Partners, L.P. shall be permitted to designate the seventh
director.
(b) Each Stockholder entitled to vote for the election of directors
to the Board agrees that it will vote its Shares or execute written consents, as
the case may be, and take all other necessary action (including causing the
Company to call a special meeting of stockholders) in order to ensure that the
composition of the Board is as set forth in this Section 2.1; provided that
neither the DLJ Entities, on the one hand, nor the Other Stockholders, on the
other hand, shall be required to vote for the board-designees of the other if
the aggregate number of Shares held by such other is less than 10% of such
other's Aggregate Ownership.
2.2 Removal. Each Stockholder agrees that if, at any time, it is
then entitled to vote for the removal of directors of the Company, it will not
vote any of its Shares in favor of the removal of any director who shall have
been designated or nominated pursuant to Section 2.1 unless such removal shall
be for cause or the Persons entitled to designate or nominate such director
shall have consented to such removal in writing.
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2.3 Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without cause) or otherwise, there shall exist or
occur any vacancy of the Board:
(a) the Person or Persons entitled under Section 2.1 to designate or
nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy may designate another individual (the
"Nominee") to fill such capacity and serve as a director of the Company; and
(b) each Stockholder then entitled to vote for the election of the
Nominee as a director of the Company agrees that it will vote its Shares, or
execute a written consent, as the case may be, in order to ensure that the
Nominee is elected to the Board.
2.4 Meetings. The Board shall hold a regularly scheduled meeting at
least once every calendar quarter.
2.5 Action by the Board. (a) A quorum of the Board shall consist of
four directors, of whom at least three must be designees of DLJ Merchant Banking
Partners, L.P.; provided that the DLJ Entities shall have the right at any time
to increase the number of directors necessary to constitute a quorum of the
Board. All actions of the Board shall require the affirmative vote of at least a
majority of the directors at a duly convened meeting of the Board at which a
quorum is present or the unanimous written consent of the Board; provided that,
in the event there is a vacancy on the Board and an individual has been
nominated to fill such vacancy, the first order of business shall be to fill
such vacancy.
(b) The Board may create executive, compensation and audit
committees, as well as such other committees as it may determine. The DLJ
Entities shall be entitled to majority representation on any committee created
by the Board and, to the extent not prohibited by or inadvisable under
applicable law, the Other Stockholders shall be entitled to at least one
representative on any such committee.
2.6 Conflicting Charter or Bylaw Provisions. Each Stockholder shall
vote its Shares or execute written consents, as the case may be, and take all
other actions necessary, to ensure that the Company's Charter and Bylaws
facilitate and do not at any time conflict with any provision of this Agreement.
2.7 Additional Equity. (a) To the extent that, as of June 23, 1997,
Rathmullen Holdings Limited shall
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fulfill or have fulfilled its obligation to purchase a total of 552,000 "C"
Ordinary Shares ("Omnitron Shares") of Omnitron Services Limited with revenues
earned by the Commission Company ("Commission Company Revenues") pursuant to the
terms of the Omnitron Agreement, the Company shall issue to Melia and Graham (or
their Permitted Transferees), to the extent such Persons are still employed by
the Company, and to the Kent Trust, in each case for no additional
consideration, an aggregate number of additional Shares equal to 800,000
multiplied by a fraction the numerator of which is the number of Omnitron Shares
purchased with Commission Company Revenues and the denominator of which is
552,000, which additional Shares shall be issued to Melia and Graham (or their
Permitted Transferees) and the Kent Trust on the basis of 40%, 40% and 20%,
respectively. "Commission Company" has the meaning assigned to it in the
Omnitron Agreement and "Omnitron Agreement" means the Subscription and
Shareholders Agreement dated May 23, 1994 between Rathmullen Holdings Limited,
Omnitron Limited and Omnitron Services Limited.
(b) The parties hereto acknowledge that the Company desires to
acquire additional contract manufacturing facilities and that such acquisitions
may require additional equity investment in the Company. The DLJ Entities (and
their Permitted Transferees) shall have the exclusive right to provide any such
additional cash equity at the same cost per Share basis as the Shares acquired
by the DLJ Entities pursuant to the Securities Purchase Agreement. In connection
with any such additional equity investment by the DLJ Entities, Melia and Graham
may invest additional cash equity at the same cost per Share basis as the DLJ
Entities in an amount up to 20% of such additional equity investment.
ARTICLE 3
RESTRICTIONS ON TRANSFER
3.1 General. (a) Until the earlier of (i) the tenth anniversary of
the date hereof and (ii) the date upon which the number of Shares held by the
DLJ Entities and their Permitted Transferees falls below 20% of the Aggregate
Ownership of the DLJ Entities, no Other Stockholder may, directly or indirectly,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose of
("transfer") any Shares (or solicit any offers to buy or otherwise acquire, or
to take a pledge of, any Shares), except as permitted or required by Articles 3,
4 and 5 of this Agreement.
(b) After the first anniversary of the Initial Public Offering, any
Other Stockholder may sell any Shares owned by such Stockholder to a Third Party
pursuant to Rule
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144; provided that until the third anniversary of the Initial Public Offering
(the "Restriction Termination Date"), such Stockholder may sell Shares owned by
such Stockholder pursuant to this clause (b) only to the extent that, after
giving effect to such sale, the aggregate number of Shares held by such
Stockholder is at least equal to the greater of (i) 40% of such Stockholder's
Aggregate Ownership and (ii) the percentage of such Stockholder's Aggregate
Ownership that is equal to the aggregate number of shares then beneficially
owned by the DLJ Entities, without duplication, as a percentage of the DLJ
Entities' Aggregate Ownership.
(c) After the Restriction Termination Date, any Other Stockholder
may (in addition to sales pursuant to Rule 144) sell Shares owned by such
Stockholder to a Third Party; provided that (i) the aggregate number of Shares
sold by such Stockholder in any calendar year shall not exceed 25% of such
Stockholder's Aggregate Ownership and (ii) such Shares shall not be sold to any
Person considered by the Board to be a potential competitor of, or otherwise
adverse to, the Company or any of its Stockholders.
(d) Any Other Stockholder may, subject to the limitations set forth
in Sections 5.1(d) and 5.2(b), sell Shares owned by such Stockholder in a Public
Offering; provided that (i) in each of the first two Public Offerings, the
number of Shares that may be sold by such Stockholder in such Public Offering
shall not exceed the lesser of (x) 50% of such Stockholder's Pro Rata Portion
and (y) 20% of such Stockholder's Aggregate Ownership and (ii) thereafter, the
number of Shares that may be sold by such Stockholder in any Public Offering
shall not exceed the lesser of (x) such Stockholder's Pro Rata Portion and (y)
50% of such Stockholder's Aggregate Ownership. "Pro Rata Portion" means, with
respect to each Other Stockholder, the number or Shares beneficially owned by
such Stockholder immediately prior to any Public Offering multiplied by a
fraction the numerator of which is the number of Shares to be sold by the DLJ
Entities and their Permitted Transferees in such Public Offering and the
denominator of which is the aggregate number of shares beneficially owned by the
DLJ Entities and their Permitted Transferees, without duplication, immediately
prior to such Public Offering.
(e) No Stockholder may transfer any Shares at any time except in
compliance with applicable federal, state or foreign securities laws.
3.2 Legend on Share Certificates. (a) In addition to any other
legend that may be required, each certificate for Shares that is issued to any
Stockholder shall bear a legend in substantially the following form:
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"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS
AGREEMENT DATED AS OF JANUARY 20, 1995, COPIES OF WHICH MAY BE OBTAINED
UPON REQUEST FROM MANUFACTURERS' SERVICES LIMITED AND ANY SUCCESSOR
THERETO."
(b) If any Shares shall cease to be Registrable Stock, the Company
shall, upon the written request of the holder thereof, issue to such holder a
new certificate evidencing such Shares without the first sentence of the legend
required by Section 3.2 (a) endorsed thereon. If any Shares cease to be subject
to any restrictions on transfer set forth in this Agreement, the Company shall,
upon the written request of the holder thereof, issue to such holder a new
certificate evidencing such shares without the second sentence of the legend
required by Section 3.2(a) endorsed thereon.
3.3 Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Stockholder may at any time transfer any or all
of its Shares to one or more of its Permitted Transferees without the consent of
the Board or any other Stockholder or group of Stockholders so long as (i) such
Permitted Transferee shall have agreed in writing to be bound by the terms of
this Agreement, and (ii) the transfer to such Permitted Transferee is not in
violation of applicable federal, state or foreign securities laws.
3.4 The Trusts. (a) Each of the Trusts and its trustees shall take
all necessary action so that the provisions of the relevant trust documents are
not inconsistent or in conflict with the provisions of Articles 3, 4 and 5 and,
in the event of any inconsistency or conflict between such trust documents and
this Agreement, the provisions of this Agreement shall control.
(b) Each of the Trusts and its trustees agree that, so long as any
Trust shall own any Shares or shares (or interest therein) of Manufacturers'
Services Limited L.L.C. USA Group ("LLC Shares"), none of the Trusts or their
trustees shall transfer any interest in such Trust to any Person other than a
Person that is a beneficiary, or a Person of a class entitled to become a
beneficiary, of such Trust on the date hereof.
(c) Each of the Trusts and its trustees agree that, so long as any
Trust shall own any LLC Shares (or
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interest therein), none of the Trusts or their trustees shall transfer any LLC
Shares (or interest therein) to any Person. Each of the Trusts and its trustees
agree that the Company or its designee shall have the option, exercisable at any
time, to purchase all of the LLC Shares (or interests therein) owned by the
Trusts for an aggregate amount equal to $1.00, to be divided among the Trusts
based on their respective proportionate interests in all such LLC Shares.
(d) Each of the Trusts and its trustees agree that, so long as such
Trust shall beneficially own any Shares, such Trust shall not (i) conduct any
business other than the holding of cash, Shares and LLC Shares (or interest in
such LLC Shares) and (ii) incur any liabilities, whether accrued, contingent,
absolute, determined, determinable or otherwise.
ARTICLE 4
RIGHTS TO PARTICIPATE IN A SALE;
RIGHTS TO COMPEL A SALE
4.1 Right to Participate in a Sale. (a) If any of the DLJ Entities
(the "Section 4.1 Seller") proposes to sell in one or more series of related
transactions Shares constituting 40% or more of the then outstanding Shares,
calculated on a Fully Diluted basis, to a Third Party (a "Section 4.1 Sale"),
the Section 4.1 Seller shall provide written notice of such proposed Section 4.1
Sale to the Other Stockholders ("Section 4.1 Notice"); provided that none of the
rights described in this Section 4.1 shall apply (i) to transfers to Permitted
Transferees of such DLJ Entity or Entities, (ii) to transfers pursuant to a
Public Offering or Rule 144 or (iii) unless prior to or as a result of the
proposed transfer the DLJ Entities would hold less than 50% of the Aggregate
Ownership of the DLJ Entities. The Section 4.1 Notice shall identify the number
of Shares subject to the Section 4.1 Sale, the per Share consideration for which
a sale is proposed to be made (the "Section 4.1 Sale Price") and all other
material terms and conditions of the proposed Section 4.1 Sale. Each Other
Stockholder shall, as to Shares held by it, have the option, exercisable by
irrevocable written notice to the Section 4.1 Seller within 15 days after
receipt of the Section 4.1 Notice (the "Section 4.1 Notice Period"), to
participate in the Section 4.1 Sale for up to the number of Shares held by such
Stockholder as is specified in such notice to the Section 4.1 Seller (the
"Participating Shares"); provided that if the aggregate number of Shares
proposed to be sold by the Section 4.1 Seller, the other DLJ Entities, if any,
and the Other Stockholders in such Section 4.1 Sale exceeds the number of shares
that such Third Party is willing to purchase (the "Purchase Shares"), then (i)
the number of
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Shares to be sold by each of the Other Stockholders participating in such
Section 4.1 Sale shall be the lesser of (A) the number of Shares specified in
the written notice to the Section 4.1 Seller and (B) an amount equal to its
Section 4.1 Pro Rata Portion of the Purchase Shares and (ii) the number of
Shares to be sold by the Section 4.1 Seller and the other DLJ Entities, if any,
shall be an amount equal to the Purchase Shares reduced by the number of Shares
to be sold by the participating Other Stockholders. "Section 4.1 Pro Rata
Portion" means, with respect to each Other Stockholder at the time of the
Section 4.1 Sale, the proportion (expressed as a percentage) that its ownership
of Shares bears to all Shares outstanding at such time. Each participating Other
Stockholder shall deliver to the Section 4.1 Seller the certificate or
certificates representing the Participating Shares of such Other Stockholder,
together with a limited Power-of-attorney authorizing the Section 4.1 Seller to
transfer such Shares pursuant to the terms and conditions set forth in the
Section 4.1 Notice. Delivery of such certificate or certificates representing
the Participating Shares to be transferred and the limited power-of-attorney
authorizing the Section 4.1 Seller to transfer such Shares shall constitute an
irrevocable acceptance of the Section 4.1 Sale by the Other Stockholder.
(b) The per Share consideration to be paid to the Section 4.1 Seller
and each Other Stockholder participating in the Section 4.1 Sale shall be the
Section 4.1 Sale Price.
(c) Promptly after the consummation of the sale of the Participating
Shares of the Other Stockholders pursuant to the Section 4.1 Sale, the Section
4.1 Seller shall notify such Other Stockholders thereof, shall remit to each of
such Other Stockholders the total consideration for the Participating Shares of
each such Other Stockholder transferred pursuant thereto as computed pursuant to
Section 4.1(b), and shall furnish such other evidence of the completion and time
of completion of such transfer and the terms thereof as may be reasonably
requested by such Other Stockholders.
(d) If at the termination of the Section 4.1 Notice Period any Other
Stockholder shall not have elected to participate in the Section 4.1 Sale, such
Other Stockholder will be deemed to have waived any of and all of its rights
under this Section 4.1 with respect to the sale of any of its Shares pursuant to
such Section 4.1 Sale. The Section 4.1 Seller shall have 120 days following such
termination of the Section 4.1 Notice Period in which to sell the applicable
Shares on substantially the same terms and conditions as were contained in the
Section 4.1 Notice, at a price not higher than 110% of the price contained in
the Section 4.1 Notice. Promptly after any sale pursuant to
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this Section 4.1, the Section 4.1 Seller shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion thereof
(including time of completion) of such transfer and of the terms thereof as the
Company may request. If, at the end of such 120-day period, the Section 4.1
Seller has not completed the sale of all applicable Shares, the Section 4.1
Seller shall return to the Other Stockholders the limited power-of-attorney (and
all copies thereof) together with all certificates representing the Shares which
such Other Stockholders delivered for sale pursuant to this Section 4.1, and all
the restrictions on transfer contained in this Agreement with respect to Shares
owned by such Other Stockholders shall again be in effect.
(e) Notwithstanding anything contained in this Section 4.1, there
shall be no liability on the part of any DLJ Entity to any Other Stockholder if
the sale of Shares pursuant to this Section 4.1 is not consummated for whatever
reason. Any decision as to whether to sell Shares shall be at the Section 4.1
Seller's sole and absolute discretion.
(f) The rights of Other Stockholders described in this Section 4.1
shall terminate upon the Initial Public Offering.
4.2 Right to Compel Participation in Certain Transfers. (a) If the
DLJ Entities (including all Permitted Transferees of the DLJ Entities) should
transfer Shares constituting not less than 100% of the Aggregate Ownership of
such DLJ Entities to any Third Party (other than pursuant to a pledge as
security for a loan) (a "Section 4.2 Sale"), the DLJ Entities may, at their
option, require all but not less than all the Other Stockholders (including all
Permitted Transferees of the Other Stockholders) to participate in such
transfer. Not later than 15 days prior to the proposed date of the Section 4.2
Sale, the DLJ Entities shall provide written notice of the Section 4.2 Sale to
the Other Stockholders ("Section 4.2 Notice") and a copy of the agreement
pursuant to which such Shares are proposed to be transferred (the "Section 4.2
Agreement"). The Section 4.2 Notice shall identify the transferee, the number of
Shares subject to the Section 4.2 Sale, the per Share consideration for which a
transfer is proposed to be made (the "Section 4.2 Sale Price") and all other
material terms and conditions of the Section 4.2 Sale. Each Other Stockholder
shall be required to participate in the Section 4.2 Sale on the terms and
conditions set forth in the Section 4.2 Notice and to tender all its Shares, as
set forth below. Within 10 days following receipt of the Section 4.2 Notice (the
"Section 4.2 Notice Period"), each of the Other Stockholders shall deliver in
escrow to a representative of the DLJ Entities designated in the Section
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4.2 Notice certificates representing all Shares held by such Other Stockholder,
duly endorsed, together with all other documents required to be executed in
connection with such Section 4.2 Sale or, if such delivery is not permitted by
applicable law, an unconditional agreement to deliver such Shares pursuant to
this Section 4.2(a) at the closing for such Section 4.2 Sale against delivery to
such Other Stockholder of the consideration therefor. In the event that a Other
Stockholder should fail to deliver such certificates to the DLJ Entities, the
Company shall cause the books and records of the Company to show that such
Shares are bound by the provisions of this Section 4.2(a) and that such Shares
shall be transferred to the Third Party immediately upon surrender for transfer
by the Other Stockholder thereof.
(b) If, within 120 days after the DLJ Entities give the Section 4.2
Notice, they have not completed the transfer of all the Shares subject to the
Section 4.2 Sale, the DLJ Entities shall return to each of the Other
Stockholders all certificates representing Shares that such Other Stockholders
delivered for transfer pursuant hereto, together with any documents in the
possession of the DLJ Entities executed by the Other Stockholders in connection
with such proposed transfer, and all the restrictions on transfer contained in
this Agreement or otherwise applicable at such time with respect to Shares owned
by the Other Stockholders shall again be in effect.
(c) Promptly after the consummation of the transfer of Shares of the
DLJ Entities and the Other Stockholders pursuant to this Section 4.2, the DLJ
Entities shall give notice thereof to the Other Stockholders, shall remit to
each of the Other Stockholders who have surrendered their certificates the total
consideration for the Shares of such Other Stockholders transferred pursuant
thereto and shall furnish such other evidence of the completion and time of
completion of such transfer and the terms thereof as may be reasonably requested
by such Other Stockholders. The per Share consideration to be paid to the DLJ
Entities and the Other Stockholders shall be the Section 4.2 Sale Price.
4.3 Improper Transfer. Any attempt to transfer any Shares not in
compliance with this Agreement shall be null and void and neither the Company
nor any transfer agent shall give any effect in the Company's stock records to
such attempted transfer.
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ARTICLE 5
REGISTRATION RIGHTS
5.1 Demand Registration. (a) One or more DLJ Entities or their
Permitted Transferees may make a written request and, after the Restriction
Termination Date, the Other Stockholders may make a written request (any such
requesting Person, a "Selling Stockholder") that the Company effect the
registration under the Securities Act of such Selling Stockholder's Registrable
Stock, and specifying the intended method of disposition thereof. The Company
will promptly give written notice of such requested registration (a "Demand
Registration") at least 30 days prior to the anticipated filing date of the
registration statement relating to such Demand Registration to all other
Stockholders, and thereupon will use its best efforts to effect, as
expeditiously as possible, the registration under the Securities Act of:
(i) the Registrable Stock that the Company has been so requested to
register by the Selling Stockholder, then held by the Selling Stockholder;
and
(ii) subject to Section 5.2, all other Registrable Stock that any
other Stockholder entitled to request the Company to effect an Incidental
Registration (as such term is defined in Section 5.2) pursuant to Section
5.2 (all such Stockholders, together with the Selling Stockholder, the
"Holders") has requested the Company to register by written request
received by the Company within 15 days after the receipt by such Holders
of such written notice given by the Company,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock so to be
registered; provided that, subject to Sections 5.1(c) and (e), (i) the Company
shall not be obligated to effect more than four Demand Registrations for the DLJ
Entities and their Permitted Transferees collectively, on the one hand, and one
Demand Registration for the Other Stockholders collectively, on the other hand,
pursuant to this Section 5.1 and (ii) the Company will not be required to effect
more than one Demand Registration in any six-month period; and provided further
that the number of shares of Registrable Stock required to be registered by the
Selling Stockholder must (i) in the case of a Demand Registration made by one or
more DLJ Entities or their Permitted Transferees, have a fair-market value in
the reasonable opinion of DLJ Merchant Banking Partners, L.P. exercised in good
faith of at least (A) $10,000,000 if the Demand Registration would constitute an
Initial Public Offering and (B) $5,000,000 in all other
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cases or (ii) in the case of a Demand Registration made by the Other
Stockholders, have a fair market value in the reasonable opinion of the managing
underwriter of at least $5,000,000.
Notwithstanding the foregoing, in the event of a request for a
Demand Registration made by the Other Stockholders, (i) the Company shall have
the option to either (A) proceed with such Demand Registration pursuant to the
provisions of this Section 5.1 or (B) proceed with a registered primary offering
of Common Stock, in which case, the Other Stockholders shall have the rights set
forth in Section 5.2 and, subject to Sections 5.1(c) and (e), shall have no
further rights to request a Demand Registration pursuant to this Section 5.1 and
(ii) the restrictions contained in the proviso to Section 3.1(d) shall be
applicable to any such sale.
Promptly after the expiration of the 15-day period referred to in
Section 5.1(a) (ii), the Company will notify all the Holders to be included in
the Demand Registration of the other Holders and the number of shares of
Registrable Stock requested to be included therein. The Selling Stockholder
requesting a registration under this Section 5.1(a) may, at any time prior to
the effective date of the registration statement relating to such registration,
revoke such request, without liability to any of the other Holders, by providing
a written notice to the Company revoking such request, in which case such
request, so revoked, shall not be considered a Demand Registration.
(b) The Company will pay all Registration Expenses in connection
with any Demand Registration.
(c) A registration requested pursuant to this Section 5.1 shall not
be deemed to have been effected unless the registration statement relating
thereto (i) has become effective under the Securities Act and (ii) has remained
effective for a period of at least 90 days (or such shorter period in which all
Registrable Stock of the Holders included in such registration has actually been
sold thereunder); provided that if after any registration statement requested
pursuant to this Section 5.1 becomes effective (i) such registration statement
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court solely due to the
actions or omissions to act of the Company and (ii) less than 75% of the
Registrable Stock included in such registration has been sold thereunder, such
registration statement shall be at the sole expense of the Company and shall not
be considered a Demand Registration.
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(d) If a Demand Registration involves a Public Offering and the
managing underwriter shall advise the Company and the Selling Stockholder that,
in its view, (i) the number of Shares requested to be included in such
registration (including Common Stock which the Company proposes to be included
which is not Registrable Stock) or (ii) the inclusion of some or all of the
Shares owned by the Holders, in either case, exceeds the largest number of
Shares which can be sold without having an adverse effect on such offering,
including the price at which such Shares can be sold (the "Maximum Offering
Size"), the Company will include in such registration, in the priorities listed
below, up to the Maximum Offering Size:
the Demand Registration was made by any DLJ Entity or its Permitted
Transferee:
(A) first, all Benchmark Shares requested to be registered by the
Selling Stockholder and by all other DLJ Entities and their Permitted
Transferees (allocated, if necessary for the offering not to exceed the
Maximum Offering Size, pro rata among such entities on the basis of the
relative number of shares of Registrable Stock requested to be
registered);
(B) second, all Registrable Stock other than Benchmark Shares
requested to be included in such registration by all DLJ Entities and
their Permitted Transferees and any other Holder (allocated, if necessary
for the offering not to exceed the Maximum Offering Size, pro rata among
such DLJ Entities and their Permitted Transferees and such other Holders
on the basis of the relative number of shares of Registrable Stock
(excluding any Benchmark Shares) requested to be included in such
registration); and
(C) third, any Common Stock proposed to be registered by the
Company; and
the Demand Registration was made by the Other Stockholders:
(A) first, all Shares requested to be registered by the Other
Stockholders (allocated, if necessary for the offering not to exceed the
Maximum Offering Size, pro rata among such entities on the basis of the
relative number of shares of Registrable Stock requested to be
registered);
(B) second, all Benchmark Shares requested to be registered by the
DLJ Entities and their Permitted Transferees (allocated, if necessary for
the offering not to exceed the Maximum Offering Size, pro rata among
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<PAGE>
such entities on the basis of the relative number of shares of Registrable
Stock requested to be registered);
(C) third, all Registrable Stock other than Benchmark Shares
requested to be included in such registration by all DLJ Entities and
their Permitted Transferees and any other Holder (allocated, if necessary
for the offering not to exceed the Maximum Offering Size, pro rata among
such DLJ Entities and their Permitted Transferees and such other Holders
on the basis of the relative number of shares of Registrable Stock
(excluding any Benchmark Shares) requested to be included in such
registration); and
(4) fourth, any Common Stock proposed to be registered by the
Company.
(e) If Registrable Stock representing at least 50% of the number of
Shares requested to be registered by any Person or Persons making a Demand
Registration and their Permitted Transferees is not included in any Demand
Registration, then such Stockholders may request that the Company effect an
additional registration under the Securities Act of all or part of such
Stockholders' Registrable Stock in accordance with the provisions of this
Section 5.1, and (i) the Company shall pay the Registration Expenses in
connection with such additional registration and (ii) such additional
registration shall not be considered a Demand Registration.
(f) The Company shall not be required to effect registration
pursuant to this Section 5.1 if a majority of the Board determines in good faith
that owing to the business or market conditions or the business or financial
condition of the Company it is inappropriate at such time to undertake a public
offering of Common Stock; provided that the Company may elect not to effect
registration on such grounds only once in any three year period beginning on the
date of such election by the Company, and that within six months shall effect
such registration.
5.2 Incidental Registration. (a) If the Company proposes to register
any of its Common Stock under the Securities Act (other than a registration (A)
on Form S-8 or S-4 or any successor or similar forms, (B) relating to Common
Stock issuable upon exercise of employee stock options or in connection with any
employee benefit or similar plan of the Company or (C) in connection with a
direct or indirect acquisition by the Company of another company), whether or
not for sale for its own account, it will each such time, subject to the
provisions of Section 5.2(b), give prompt written notice at least 30 days prior
to
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the anticipated filing date of the registration statement relating to such
registration to each DLJ Entity and each Other Stockholder, which notice shall
set forth such Stockholder's rights under this Section 5.2 and shall offer such
Stockholders the opportunity to include in such registration statement such
number of shares of Registrable Stock as each such Stockholder may request (an
"Incidental Registration"). Upon the written request of any such Stockholder
made within 15 days after the receipt of notice from the Company (which request
shall specify the number of shares of Registrable Stock intended to be disposed
of by such Stockholder), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Stock which the Company
has been so requested to register by such Stockholders, to the extent requisite
to permit the disposition of the Registrable Stock so to be registered; provided
that (I) if such registration involves a Public Offering, all such Stockholders
requesting to be included in the Company's registration must sell their
Registrable Stock to the underwriters selected as provided in Section 5.4 (f) on
the same terms and conditions as apply to the Company and (II) if, at any time
after giving written notice of its intention to register any stock pursuant to
this Section 5.2(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such stock, the Company shall give
written notice to all such Stockholders and, thereupon, shall be relieved of its
obligation to register any Registrable Stock in connection with such
registration (without prejudice, however, to rights of any DLJ Entity or Other
Stockholder under Section 5.1). No registration effected under this Section 5.2
shall relieve the Company of its obligations to effect a Demand Registration to
the extent required by Section 5.1. The Company will pay all Registration
Expenses in connection with each registration of Registrable Stock requested
pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2 involves a Public
Offering (other than in the case of a Public Offering requested by any DLJ
Entity or any of their Permitted Transferees or the Other Stockholders in a
Demand Registration; in which case the provisions with respect to priority of
inclusion in such offering set forth in Section 5.1(d) shall apply) and the
managing underwriter advises the Company that, in its view, the number of Shares
that the Company and such Stockholders intend to include in such registration
exceeds the Maximum Offering Size, the Company will include in such
registration, in the following priority, up to the Maximum Offering Size:
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(i) first, so much of the Common Stock proposed to be registered by
the Company as would not cause the offering to exceed the Maximum Offering
Size;
(ii) second, all Benchmark Shares requested to be included in such
registration statement by the DLJ Entities and their Permitted Transferees
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among such entities on the basis of the relative
number of shares of Registrable Stock requested to be so included); and
(iii) third, all Registrable Stock other than Benchmark Shares
requested to be included in such registration by any DLJ Entity and its
Permitted Transferees or any Other Stockholder pursuant to this Section
5.2 (allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among such Stockholders on the basis of the
relative number of shares of Registrable Stock (excluding any Benchmark
Shares) so requested to be included in such registration).
(c) Notwithstanding the foregoing, in the event of a request for
inclusion of Shares owned by Other Stockholders pursuant to this Section 5.2,
the restrictions contained in the proviso to Section 3.1(d) shall be applicable
to any such sale.
5.3 Holdback Agreements. If any registration of Registrable Stock
shall be in connection with a Public Offering, each DLJ Entity and its Permitted
Transferees and each Other Stockholder agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144, or any successor
provision, under the Securities Act, of any Registrable Stock, and not to effect
any such public sale or distribution of any other Common Stock of the Company or
of any stock convertible into or exchangeable or exercisable for any Common
Stock of the Company (in each case, other than as part of such Public Offering)
during the 14 days prior to the effective date of such registration statement
(except as part of such registration) or during the period after such effective
date equal to the lesser of (i) such period of time as agreed between such
managing underwriter and the Company and (ii) 180 days.
5.4 Registration Procedures. Whenever Stockholders request that any
Registrable Stock be registered pursuant to Section 5.1 or 5.2, the Company
will, subject to the provisions of such Sections, use its best efforts to effect
the registration and the sale of such Registrable Stock in accordance with the
intended method of
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disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of the Registrable Stock to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such filed registration statement to become and
remain effective for a period of not less than 90 days.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to
participating Stockholder and each underwriter, if any, of the Registrable Stock
covered by such registration statement copies of such registration statement as
proposed to be filed, and thereafter the Company will furnish to such
Stockholder and underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such Stockholder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Stock owned by such Stockholder.
(c) After the filing of the registration statement, the Company will
promptly notify each Stockholder holding Registrable Stock covered by such
registration statement of any stop order issued or threatened by the Commission
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Stockholder holding such Registrable Stock reasonably (in light of such
Stockholder's intended plan of distribution) requests and (ii) cause such
Registrable Stock to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Stockholder to consummate the
disposition of the Registrable Stock owned by such Stockholder; provided that
the Company will not be required
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to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (B) subject itself
to taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction.
(e) The Company will immediately notify each Stockholder holding
such Registrable Stock, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly prepare and make available to
each such Stockholder any such supplement or amendment.
(f) (i) The DLJ Entities will have the right, in their sole
discretion, to select an underwriter or underwriters in connection with any
Public Offering resulting from the exercise by any such DLJ Entity or its
Permitted Transferee of a Demand Registration, which underwriter or underwriters
may include any Affiliate of any DLJ Entity and (ii) the Company will select an
underwriter or underwriters in connection with any other Public Offering. In
connection with any Public Offering, the Company will enter into customary
agreements (including an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of Registrable Stock in any such Public Offering, including the
engagement of a "qualified independent underwriter" in connection with the
qualification of the underwriting arrangements with the NASD.
(g) Upon the execution of confidentiality agreements in form and
substance satisfactory to the Company, the Company will make available for
inspection by any Stockholder and any underwriter participating in any
disposition pursuant to a registration statement being filed by the Company
pursuant to this Section 5.4 and any attorney, accountant or other professional
retained by any such Stockholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection with
such registration statement. Records that the Company determines, in good
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faith, to be confidential and that it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction. Each
Stockholder agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such is made generally available to the public. Each
Stockholder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each such Stockholder and to each
such underwriter, if any, a signed counterpart, addressed to such underwriter,
of (i) an opinion or opinions of counsel to the Company and (ii) a comfort
letter or comfort letters from the Company's independent public accountants,
each in customary form and covering such matters of the type customarily covered
by opinions or comfort letters, as the case may be, as a majority of such
Stockholders or the managing underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
stockholders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
The Company may require each such Stockholder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration.
Each such Stockholder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
5.4(e), such Stockholder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Stockholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5.4(e), and, if so directed by the
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Company, such Stockholder will deliver to the Company all copies, other than any
permanent file copies then in such Stockholder's possession, of the most recent
prospectus covering such Registrable Stock at the time of receipt of such
notice. In the event that the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 5.4 (a)) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 5.4(e) to the date when the Company shall make available to
such Stockholder a prospectus supplemented or amended to conform with the
requirements of Section 5.4(e).
5.5 Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Stockholder holding Registrable Stock covered by a
registration statement, its officers, directors and agents, and each person, if
any, who controls such Stockholder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Stock (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by such Stockholder or on such Stockholder's
behalf expressly for use therein; provided that with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, or in any prospectus, as the case may be, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the prospectus
as amended or supplemented) was not sent or given to the person asserting any
such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Stock concerned to such person if it
is determined that the Company has provided such prospectus and it was the
responsibility of such Stockholder to provide such person with a current copy of
the prospectus (or such amended or supplemented prospectus, as the case may be)
and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have
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cured the defect giving rise to such loss, claim, damage, liability or expense.
The Company also agrees to indemnify any underwriters of the Registrable Stock,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Stockholders
provided in this Section 5.5.
5.6 Indemnification by Participating Stockholders. Each Stockholder
holding Registrable Stock included in any registration statement agrees,
severally but not jointly, to indemnify and hold harmless the Company, its
officers, directors and agents and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Stockholder, but only (i) with respect to information furnished in
writing by such Stockholder or on such Stockholder's behalf expressly for use in
any registration statement or prospectus relating to the Registrable Stock, or
any amendment or supplement thereto, or any preliminary prospectus or (ii) to
the extent that any loss, claim, damage, liability or expense described in
Section 5.5 results from the fact that a current copy of the prospectus (or, in
the case of a prospectus, the prospectus as amended or supplemented) was not
sent or given to the person asserting any such loss, claim, damage, liability or
expense at or prior to the written confirmation of the sale of the Registrable
Stock concerned to such person if it is determined that it was the
responsibility of such Stockholder to provide such person with a current copy of
the prospectus (or such amended or supplemented prospectus, as the case may be)
and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to such
loss, claim, damage, liability or expense. Each such Stockholder also agrees to
indemnify and hold harmless underwriters of the Registrable Securities, their
officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this Section 5.6. As a condition to including Registrable Stock in
any registration statement filed in accordance with Article 5 hereof, the
Company may require that it shall have received an undertaking reasonably
satisfactory to it from any underwriter to indemnify and hold it harmless to the
extent customarily provided by underwriters with respect to similar securities.
5.7 Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to this Article 5,
such person (an "Indemnified Party") shall
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<PAGE>
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses;
provided that the failure of any Indemnified Party so to notify the Indemnifying
Party shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent that the Indemnifying Party is materially prejudiced by
such failure to notify. In any such proceeding, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (ii) in the reasonable judgment of such Indemnified Party
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.
5.8 Contribution. If the indemnification provided for in this
Article 5 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between the Company and the Stockholders
holding Registrable Stock covered by a registration statement on the one hand
and the underwriters
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on the other, in such proportion as is appropriate to reflect the relative
benefits received by the Company and such Stockholders on the one hand and the
underwriters on the other, from the offering of the Registrable Securities, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and such Stockholders on the one hand and of such
underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and each such Stockholder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each such
Stockholder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and such Stockholders on the one hand and such underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such Stockholders bear to the total
underwriting discounts and commissions received by such underwriters, in each
case as set forth in the table on the cover page of the prospectus. The relative
fault of the Company and such Stockholders on the one hand and of such
underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and such Stockholders or by such underwriters. The
relative fault of the Company on the one hand and of each such Stockholder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Stockholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.8 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such
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Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 5.8, no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, and no
Stockholder shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities of such Stockholder
were offered to the public exceeds the amount of any damages which such
Stockholder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each such Stockholder's obligation
to contribute pursuant to this Section 5.8 is several in the proportion that the
proceeds of the offering received by such Stockholder bears to the total
proceeds of the offering received by all such Stockholders and not joint.
5.9 Participation in Public Offering. No Person may participate in
any Public Offering hereunder unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and the provisions of this Agreement in
respect of registration rights.
5.10 Other Indemnification. Indemnification similar to that
specified herein (with appropriate modifications) shall be given by the Company
and each Stockholder participating therein with respect to any required
registration or other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities Act.
ARTICLE 6
MISCELLANEOUS
6.1 Entire Agreement. This Agreement and the Securities Purchase
Agreement constitute the entire agreement among the parties hereto and supersede
all prior
29
<PAGE>
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof.
6.2 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, shall to confer on any Person other than the
parties hereto, and their respective heirs, successors, legal representatives
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
6.3 Exclusive Financial and Investment Banking Advisor. During the
period from and including the date hereof through and including the fifth
anniversary of the date hereof, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC"), or any Affiliate of DLJSC that the DLJ Entities may
choose in their sole discretion, shall be engaged as the exclusive financial and
investment banking advisor of the Company for an annual advisory fee which shall
initially be $0 and which shall increase to $200,000 after the first quarter in
which the Company achieves $75 million in total revenues. DLJSC or such
Affiliate shall be entitled to reimbursement from the Company for all expenses
incurred by DLJSC or such Affiliate (including, without limitation, fees and
expenses of counsel) as financial and investment banking advisor of the Company.
6.4 Assignability. This Agreement shall not be assignable by any
party hereto, except that any Person acquiring Shares who is required by the
terms of this Agreement to become a party hereto shall execute and deliver to
the Company an agreement to be bound by this Agreement and shall thenceforth be
a "Stockholder". Any Stockholder who ceases to own beneficially any Shares shall
cease to be bound by the terms hereof (other than the provisions of Sections
5.5, 5.6, 5.7, 5.8, and 5.10 applicable to such Stockholder with respect to any
offering of Registerable Stock completed before the date such Stockholder ceased
to own any Shares).
6.5 Amendment; Waiver; Termination. No provision of this Agreement
may be waived except by an instrument in writing executed by the party against
whom the waiver is to be effective. No provision of this Agreement may be
amended or otherwise modified except by an instrument in writing executed by the
Company with the approval of the Board and Stockholders holding at least 95% of
the outstanding Shares; provided that any amendment or other modification of
this Agreement that would adversely affect any Founding Stockholder may be
effected only with the consent of such Stockholder.
30
<PAGE>
6.6 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmissions and shall
be given,
if to the Company or the Founding Stockholders to:
Manufacturers' Service Limited
30 Rowes Wharf
Boston, Massachusetts 02110
Attention: Kevin C. Melia
Robert J. Graham
Julie Kent
The Kevin C. Melia 1995
Irrevocable Trust
The Robert J. Graham 1995
Irrevocable Trust
The Julie Kent 1995
Irrevocable Trust
Fax: (617) 330-7655
with a copy to:
Sherburne, Powers & Needham, P.C.
One Beacon Street
Boston, Massachusetts 02108
Attention: Dale R. Johnson
Fax: (617) 523-6850
and a copy to the DLJ Entities at their addresses listed below.
if to the DLJ Entities, to:
DLJ Merchant Banking Funding, Inc.
DLJ Merchant Banking Partners, L.P.
140 Broadway
New York, New York 10005-1285
Attention: David Wilson
Fax: (212) 504-4991
and to:
DLJ International Partners, C.V.
DLJ Offshore Partners, C.V.
c/o DLJ Offshore Management N.V.
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
Attention: Germaine Sprock
Pierson Trust (Curacao) N.V.
31
<PAGE>
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
All notices, requests and other communications shall be deemed received on the
date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
Any notice, request or other written communication sent by facsimile
transmission shall be confirmed by certified mail, return receipt requested,
posted within one Business Day, or by personal delivery, whether courier or
otherwise, made within two Business Days after the date of such facsimile
transmission.
Any Person who becomes a Stockholder shall provide its address and
fax number to the Company, which shall promptly provide such information to each
other Stockholder.
6.7 Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement:
6.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
6.9 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD
TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
6.10 Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
6.11 Consent to Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of, or based
32
<PAGE>
on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby may be brought in the United States District
Court for the Southern District of New York or any other New York State court
sitting in New York City, and each of the parties hereby consents to the
non-exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 6.6 shall be deemed effective service of process on such
party.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized signatories as of the day and
year first above written.
DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By: /s/ David B. Wilson
--------------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ David B. Wilson
--------------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ OFFSHORE PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ David B. Wilson
--------------------------------
Name: David B. Wilson
Title: Senior Vice President
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Thomas E. Siegler
--------------------------------
Name: Thomas E. Sieg1er
Title: Secretary
34
<PAGE>
THE KEVIN C. MELIA 1995 IRREVOCABLE TRUST
By: /s/ Ann Marie Melia
--------------------------------
Name:
Title: Trustee
THE ROBERT J. GRAHAM 1995 IRREVOCABLE TRUST
By: /s/ I. Christina B. Graham
--------------------------------
Name: I. Christina B. Graham
Title: Trustee
THE JULIE KENT 1995 IRREVOCABLE TRUST
By: /s/ Julie Kent, Trustee
--------------------------------
Name:
Title: Trustee
- -----------------------------------
Kevin C. Melia
/s/ Robert J. Graham
- -----------------------------------
Robert J. Graham
/s/ Julie Kent
- -----------------------------------
Julie Kent
MANUFACTURERS' SERVICES LIMITED
By:
--------------------------------
Name:
Title:
35
<PAGE>
STOCKHOLDERS AGREEMENT AMENDMENT
AMENDMENT dated as of November 26, 1999 among DLJ Investment Partners II,
L.P., a Delaware limited partnership, DLJ Investment Funding II, Inc., a
Delaware corporation, DLJ ESC II L.P., a Delaware limited partnership and DLJ
Investment Partners, L.P., a Delaware limited partnership (each a "Mezzanine
Holder" and collectively the "Mezzanine Holders"), the parties appearing on the
signature page hereto under the caption "Existing Stockholders", and
Manufacturers' Services Limited, a Delaware corporation (the "Company").
WHEREAS, pursuant to the Preferred Stock and Warrant Subscription
Agreement dated as of November 26, 1999 (the "Subscription Agreement") among the
Company and the Mezzanine Holders, the Mezzanine Holders are acquiring from the
Company (i) shares of preferred stock, par value $.001 per share (the "Preferred
Stock"), of the Company and (ii) warrants (the "Warrants") to purchase common
stock, par value $.001 per share (the "Common Stock"), of the Company, which
will be exercisable only upon the occurrence of certain events;
WHEREAS, the Company has previously entered into a Stockholders Agreement
dated as of January 20, 1995 (the "Stockholders Agreement") among the DLJ
Entities (as defined therein), the Founding Stockholders (as defined therein),
the Company and the other parties thereto as of the date hereof;
WHEREAS, the Stockholders Agreement may be amended or otherwise modified
by an instrument in writing executed by the Company, with the approval of the
board of directors of the Company, and Stockholders (as defined in the
Stockholders Agreement) holding at least 95% of the outstanding Shares (as
defined in the Stockholders Agreement); and
WHEREAS, in connection with the acquisition of the Preferred Stock and the
Warrants by the Mezzanine Holders, the Company (with the approval of the board
of directors of the Company) and Stockholders holding at least 95% of the
outstanding Shares desire to amend or otherwise modify the Stockholders
Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein and the Subscription Agreement, the parties hereto amend and otherwise
modify the Stockholders Agreement as follows:
<PAGE>
SECTION 1. Parties to Stockholders Agreement. From the date of this
Amendment, the Mezzanine Holders shall be deemed to be parties to the
Stockholders Agreement, subject to Sections 10(b) and 10(c) of this Amendment.
SECTION 2. Definitions; Interpretation. (a) Capitalized terms used but not
defined in this Amendment shall have the meanings ascribed to them in the
Stockholders Agreement. Each reference to "hereof', "hereunder", "herein" or
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Stockholders Agreement shall
from and after the date of this Amendment refer to the Stockholders Agreement as
amended hereby.
(b) Section 1.1 of the Stockholders Agreement is amended (i) to the extent
that the following terms do not appear in Section 1.1 of the Stockholders
Agreement, by the addition of such terms and (ii) to the extent that the
following terms appear in Section 1.1 of the Stockholders Agreement, by amending
and restating such terms as follows:
"Company Securities" means with respect to any Stockholder, the Common
Stock (and securities convertible into or exchangeable for Common Stock), the
Preferred Stock and any options, warrants (including the Warrants) or other
rights to acquire Common Stock, Preferred Stock or any other equity security
issued by the Company.
"Registrable Stock" means any Company Securities until (i) a registration
statement covering such Company Securities has been declared effective by the
SEC and such securities have been disposed of pursuant to such effective
registration statement, (ii) such Company Securities are sold under
circumstances in which all of the applicable conditions of Rule 144 are met or
under which they may be sold pursuant to Rule 144(k) or (iii) such Company
Securities are otherwise transferred, the Company has delivered a new
certificate or other evidence of ownership for such Company Securities not
bearing the legend required pursuant to this Agreement and such Company
Securities may be resold without subsequent registration under the Securities
Act.
(c) As used in the Stockholders Agreement, the following terms shall have
the following interpretations unless expressly provided to the contrary in this
Amendment: (i) "Other Stockholders" shall be deemed to exclude the Mezzanine
Holders and (ii) "Stockholder" shall be deemed to include the Mezzanine Holders
(subject to Section 10(b) of this Amendment).
SECTION 3. Corporate Governance. (a) The Board shall consist of seven
directors, six of whom will be designated as set forth in Section 2.1 of the
2
<PAGE>
Stockholders Agreement and one of whom will be designated by DLJ Investment
Partners II, L.P. (such director, the "Investment Partners Director"). DLJ
Merchant Banking Partners, L.P. hereby waives its right pursuant to Section 2.1
of the Stockholders Agreement to designate this seventh director.
(b) For so long as the Mezzanine Holders shall own any Preferred Stock,
Warrants or Shares issued upon exercise of the Warrants, each other Stockholder
who is a party hereto agrees that (i) it will vote its Shares or execute written
consents, as the case may be, and take all other necessary action (including
causing the Company to call a special meeting of stockholders) in order to
ensure the election of the Investment Partners Director, (ii) if, at any time,
it is then entitled to vote for the removal of directors of the Company, it will
not vote any of its Shares in favor of the removal of the Investment Partners
Director unless such removal shall be for cause or DLJ Investment Partners II,
L.P. shall have consented to such removal in writing and (iii) the provisions of
Section 2.3 of the Stockholders Agreement shall apply mutatis mutandis.
(c) The Investment Partners Director shall be entitled to be appointed to
such committees of the Board as may be reasonably determined by the Chairman of
the Board.
SECTION 4. Transferability. (a) Any Mezzanine Holder may at any time
transfer any or all of its Company Securities to one or more Persons without the
consent of the Company or any other Stockholder, so long as such transfer is not
in violation of applicable federal, state or foreign securities laws. None of
the provisions of Article 3 of the Stockholders Agreement shall apply to the
Mezzanine Holders or their Company Securities, other than the provisions of
Section 3.2 relating to legends which shall apply to their Company Securities
mutatis mutandis.
(b) Without the consent of DLJ Investment Partners II, L.P., the DLJ
Entities and their Permitted Transferees may not (i) directly or indirectly
transfer any Shares, (ii) request a Demand Registration pursuant to Section 5.1
of the Stockholders Agreement or (iii) request any Incidental Registration
pursuant to Section 5.2 of the Stockholders Agreement, other than, in the case
of clause (i), in connection with a transaction which would constitute a Change
of Control of the Company under the Certificate of Designations, Preferences and
Rights relating to the Preferred Stock. The restrictions contained in the
foregoing sentence shall expire upon the first to occur of the following: (x)
the Mezzanine Holders (defined for purposes of this Section 4(b) to exclude any
Person to whom the initial Mezzanine Holders have transferred any Company
Securities) shall cease to hold any Preferred Stock; (y) one year after the
Demand Registration rights of the Mezzanine Holders have become exercisable
pursuant to Section 6 hereof; and (z)
3
<PAGE>
the Mezzanine Holders shall have failed to request Incidental Registration of
any Company Securities in connection with two registrations of Company
Securities under the Securities Act for which the Mezzanine Holders had
piggyback registration rights pursuant to Section 7 hereof. Nothing in this
Section 4(b) shall be interpreted to restrict the right of the DLJ Entities to
transfer any Shares to their Permitted Transferees in accordance with Section
3.3 of the Stockholders Agreement.
SECTION 5. Certain Agreements Regarding a Sale. (a) The Mezzanine Holders
shall be considered "Other Stockholders" for purposes of Section 4. 1 of the
Stockholders Agreement with respect to any Shares issued upon the exercise of
the Warrants.
(b) The Mezzanine Holders shall be considered "Other Stockholders" for the
purposes of Section 4.2 of the Stockholders Agreement with respect to the
Warrants and any Shares issued upon the exercise of the Warrants. The right of
the DLJ Entities under such Section 4.2, at their option, to require all but not
less than all the Other Stockholders (including all Permitted Transferees of the
Other Stockholders) to participate in such transfer shall be deemed to include
the right to require the Mezzanine Holders to exercise their respective Warrants
and to sell to such Third Party the Shares received as a result of such exercise
for the same consideration per Share and otherwise on the same terms and
conditions as the sale by the DLJ Entities; provided that any Mezzanine Holder
that holds Warrants the exercise price per Share of which is greater than the
per share price at which Shares are to be sold to the Third Party may, if
required by the DLJ Entities to exercise such Warrants, in place of such
exercise, submit to irrevocable cancellation thereof without any liability for
payment of any exercise price with respect thereto.
SECTION 6. Demand Registration. The Mezzanine Holders shall have demand
registration rights with respect to their Registrable Stock on the same terms
and conditions as the demand registration rights of the DLJ Entities as set
forth in Section 5.1 of the Stockholders Agreement, and the provisions of such
Section 5.1 shall apply mutatis mutandis to the Registrable Stock of the
Mezzanine Holders as though such Mezzanine Holders were "Selling Stockholders",
subject to the following modifications:
(a) The Mezzanine Holders may request a Demand Registration only after the
earlier to occur of the following: (i) the date that is three years from the
date of this Amendment and (ii) the date that is six months from the date of the
Initial Public Offering.
4
<PAGE>
(b) The Company shall not be obligated to effect more than three Demand
Registrations for the Mezzanine Holders.
(c) The number of shares of Registrable Stock required to be registered by
the Mezzanine Holders in connection with a Demand Registration must have a fair
market value in the reasonable opinion of DLJ Investment Partners II, L.P.
exercised in good faith of at least $5,000,000 or, if less than $5,000,000,
constitute all of the remaining shares of Preferred Stock or Common Stock, as
the case may be, held by the Mezzanine Holders.
(d) If a Demand Registration requested by the Mezzanine Holders involves a
Public Offering and the managing underwriter shall advise the Company and such
Mezzanine Holders that, in its view, (i) the number of Company Securities
requested to be included in such registration (including Common Stock which the
Company proposes to be included which is not Registrable Stock) or (ii) the
inclusion of some or all of the Company Securities owned by the Holders, in
either case, exceeds the Maximum Offering Size, the Company will include in such
registration Company Securities up to the Maximum Offering Size in the priority
set forth in Section 5.1(d) of the Stockholders Agreement in the case of a
Demand Registration made by a DLJ Entity or its Permitted Transferee, with the
exception that first priority shall be given to all Registrable Stock requested
to be registered by the Selling Stockholder and by all other Mezzanine Holders
(allocated, if necessary for the offering not to exceed the Maximum Offering
Size, pro rata among such entities on the basis of the relative number of shares
of Registrable Stock requested to be registered).
(e) Counsel for the Stockholders participating in any Demand Registration
requested by the Mezzanine Holders shall be selected by the Mezzanine Holders.
SECTION 7. Piggyback Registration Rights. The Mezzanine Holders shall have
piggyback registration rights with respect to their Registrable Stock on the
same terms and conditions as the piggyback registration rights of the DLJ
Entities and the Other Stockholders as set forth in Section 5.2 of the
Stockholders Agreement, and the provision of such Section 5.2 (other than those
of Section 5.2(c), which are not applicable) shall apply mutatis mutandis to the
Registrable Stock of the Mezzanine Holders; provided that if a registration for
which the Mezzanine Holders have piggyback registration rights involves a Public
Offering and the managing underwriter advises the Company that, in its view, the
number of Company Securities that the Company and Stockholders entitled to
participate therein intend to include in such registration exceeds the Maximum
Offering Size,
5
<PAGE>
the Company will include in such registration Company Securities up to the
Maximum Offering Size in the following priority:
(a) in the case of a Public Offering by the Company for its own account,
in the priority set forth in Section 5.2(b) of the Stockholders Agreement;
provided that (i) any Shares proposed by Mezzanine Holders exercising piggyback
registration rights to be included in such registration shall have priority
equal to the Benchmark Shares; and (ii) any Company Securities other than Shares
proposed by Mezzanine Holders exercising piggyback registration rights to be
included in such registration shall have priority below any Shares proposed to
be registered by the Company but above any Benchmark Shares;
(b) in the case of a Public Offering requested by any DLJ Entity or any of
their Permitted Transferees, in the priority set forth in Section 5.1(d) of the
Stockholders Agreement applicable to a Demand Registration made by a DLJ Entity
or its Permitted Transferee; provided that any Company Securities proposed by
Mezzanine Holders exercising piggyback registration rights to be included in
such registration shall have priority equal to the Benchmark Shares; and
(c) in the case of a Public Offering requested by any Other Stockholder,
in the priority set forth in Section 5.1(d) of the Stockholders Agreement
applicable to a Demand Registration made by an Other Stockholder, provided that
any Company Securities proposed by Mezzanine Holders exercising piggyback
registration rights to be included in such registration shall have priority
equal to the Shares requested to be registered by the Other Stockholders.
SECTION 8. Holdback Agreement. With respect to any registration of
Registrable Stock in connection with a Public Offering in which the Mezzanine
Holders are selling Company Securities, the Mezzanine Holders shall be bound by
the covenants and agreements applicable to the DLJ Entities and the Other
Stockholders in Section 5.3 of the Stockholders Agreement.
SECTION 9. Registration Procedures. The registration procedures and other
covenants and agreements contained in Sections 5.4 through 5.10 of the
Stockholders Agreement shall apply to the Mezzanine Holders.
SECTION 10. Miscellaneous.
(a) Redemption of Preferred Stock upon Initial Public Offering. In
connection with the Initial Public Offering, the Company agrees to use its best
efforts to redeem the Preferred Stock in accordance with Section 5(a) of the
Certificate of Designations, Preferences and Rights of the Preferred Stock,
subject
6
<PAGE>
to any required approval of the lenders under the Company's senior credit
facility, which approval the Company shall use its best efforts to obtain.
(b) Assignability. Notwithstanding Section 6.4 of the Stockholders
Agreement, any Mezzanine Holder may, in connection with a transfer of Company
Securities other than pursuant to a Public Offering, assign its rights (in whole
or in part) under the Stockholders Agreement (other than its rights under
Article 2) to another Person; provided that such Person executes and delivers to
the Company an agreement to be bound by the terms of the Stockholders Agreement
applicable to the Mezzanine Holders (such Person, following such execution and
delivery, being deemed to be a "Mezzanine Holder" for purposes of this
Amendment).
(c) Amendment; Waiver, Termination. Section 6.5 of the Stockholders
Agreement is amended by the insertion of the following at the end thereof: ";
and provided further that any amendment or other modification of this
Agreement that would adversely affect any Mezzanine Holder may be effected
only with the consent of such Stockholder."
(d) Notices. All notices, requests and other communications to the
Mezzanine Holders shall be given to:
if to the Mezzanine Holders to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Director
Fax:(212) 892-7552
with a copy to:
DLJ Investment Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2689
and a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
7
<PAGE>
Attention: John Knight
Fax: (212) 450-4800
(e) Execution by Other Stockholders. Following the execution of this
Amendment, the Company agrees to use commercially reasonable efforts to induce
any Stockholder who is not yet a party to this Amendment to become a party to
this Amendment by executing and delivering to the Company a counterpart
signature page to this Amendment.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
dully executed by their respective authorized signatories as of the day and year
first above written.
MANUFACTURERS' SERVICES LIMITED
By: /s/ Dale Johnson
--------------------------------
Name: DALE R. JOHNSON
Title: EXEC. V.P.
DLJ INVESTMENT PARTNERS II, L.P.
By DLJ INVESTMENT PARTNERS II,
INC., Managing General Partner
By: /s/
--------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By: /s/
--------------------------------
Name:
Title:
DLJ ESC II L.P.
By DLJ LBO PLANS MANAGEMENT
CORPORATION, General Partner
By: /s/
--------------------------------
Name:
Title:
<PAGE>
DLJ INVESTMENT PARTNERS, L.P.
By DLJ INVESTMENT PARTNERS,
INC., Managing General Partner
By: /s/
--------------------------------
Name:
Title:
Existing Stockholders:
33,331,504 Shares DLJ MERCHANT BANKING PARTNERS, L.P.
By DLJ MERCHANT BANKING, INC.
Managing General Partner
By: /s/
--------------------------------
Name:
Title:
14,933,460 Shares DLJ INTERNATIONAL PARTNERS, C.V.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/
--------------------------------
Name:
Title:
<PAGE>
865,837 Shares DLJ OFFSHORE PARTNERS, CV.
By DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/
--------------------------------
Name:
Title:
13,367,971 Shares DLJ MERCHANT BANKING FUNDING, INC.
By: /s/
--------------------------------
Name:
Title:
8,334,582 Shares DLJ FIRST ESC L.P.
By DLJ LBO PLANS MANAGEMENT CORPORATION,
General Partner
By: /s/
--------------------------------
Name:
Title:
<PAGE>
/s/ Robert J. Graham 1,884,211
- -------------------------------
Robert J. Graham
The Kevin C. Melia 1995 Irrevocable Trust: 443,666
/s/ Anne Marie Melia
- -------------------------------
Anne-Marie Melia, Trustee
Careena M. Melia, Trustee
by: /s/ Anne Marie Melia
---------------------------
Anne-Marie Melia,
by written delegation
The Kevin C. Melia 1995 Irrevocable Trust II: 739,835
/s/ Anne Marie Melia
- -------------------------------
Anne-Marie Melia, Trustee
Careena M. Melia, Trustee
by: /s/ Anne Marie Melia
---------------------------
Anne-Marie Melia,
by written delegation
The Robert J. Graham 1995 Irrevocable Trust 473,665
/s/ Christina LB. Graham
- -------------------------------
Christina LB. Graham, Trustee
/s/ Samuel E. Bain, Jr.
- -------------------------------
Samuel E. Bain, Jr., Trustee
/s/ Robert J. Graham
- -------------------------------
Robert J. Graham, Trustee
[Signature page for MSL Stockholders Agreement Amendment]
<PAGE>
/s/ Janice A. Donahue 240,742
- -------------------------------
Janice A. Donahue
/s/ Janice A. Donahue 33,332
- -------------------------------
Janice A. Donahue
Custodian for Nora Donahue
u/Mass. Unif. Transfers to Minors Act
/s/ Janice A. Donahue 33,332
- -------------------------------
Custodian for Robert F. Donahue
u/Mass. Unif. Transfers to Minors Act
[Signature page for MSL Stockholders Agreement Amendment]
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U.S. $125,000,000
CREDIT AGREEMENT
DATED AS OF AUGUST 21, 1998
AMONG
MANUFACTURERS' SERVICES LIMITED
AND
MSL OVERSEAS FINANCE BV
as Borrowers,
THE LENDERS LISTED HEREIN,
as Lenders,
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent;
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent, as Collateral Agent and as Issuing Lender
and
BANK OF AMERICA INTERNATIONAL LIMITED,
as Sub-Agent
ARRANGED BY:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
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CREDIT AGREEMENT
TABLE OF CONTENTS
Section 1. DEFINITIONS ..................................................... 2
1.1 Certain Defined Terms ........................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement .................................... 31
1.3 Other Definitional Provisions and Rules of Construction ......... 31
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS ...................... 31
2.1 Commitments; Making of Loans; Notes ............................. 31
2.2 Interest on the Loans ........................................... 39
2.3 Fees ............................................................ 44
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments .............. 45
2.5 Use of Proceeds ................................................. 54
2.6 Special Provisions Governing LIBOR Loans ........................ 54
2.7 Special Provisions Governing Offshore Currency Loans ............ 56
2.8 Increased Costs; Taxes; Capital Adequacy ........................ 59
2.9 Obligation of Lenders and Issuing Lender to Mitigate;
Replacement of Lender ........................................... 64
2.10 Covenant to Pay in Relation to Dutch Pledges .................... 65
Section 3. LETTERS OF CREDIT ............................................... 65
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein .......................................... 65
3.2 Letter of Credit Fees ........................................... 69
3.3 Drawings and Reimbursement of Amounts Paid Under
Letters of Credit ............................................... 70
3.4 Obligations Absolute ............................................ 72
3.5 Indemnification; Nature of Issuing Lender' Duties ............... 73
3.6 Increased Costs and Taxes Relating to Letters of Credit ......... 74
3.7 Cash Collateral Pledge .......................................... 75
3.8 Uniform Customs and Practice .................................... 75
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT ....................... 75
4.1 Conditions to Term Loans and Initial Revolving Loans ............ 75
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4.2 Conditions to All Loans ......................................... 80
4.3 Conditions to Letters of Credit ................................. 81
4.4 Items to be Delivered and Authorizations Obtained
After the Closing Date .......................................... 81
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES ........................ 82
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries ....................................... 82
5.2 Authorization of Borrowing, etc ................................. 83
5.3 Financial Condition ............................................. 83
5.4 No Material Adverse Change; No Restricted Junior Payments ....... 84
5.5 Title to Properties; Liens; Real Property ....................... 84
5.6 Litigation; Adverse Facts........................................ 84
5.7 Payment of Taxes ................................................ 85
5.8 Performance of Agreements; Materially Adverse Agreements;
Material Contracts .............................................. 85
5.9 Governmental Regulation ......................................... 85
5.10 Securities Activities ........................................... 86
5.11 Employee Benefit Plans .......................................... 86
5.12 Certain Fees .................................................... 87
5.13 Environmental Protection ........................................ 87
5.14 Employee Matters ................................................ 87
5.15 Solvency ........................................................ 87
5.16 Matters Relating to Collateral .................................. 87
5.17 Disclosure ...................................................... 88
5.18 Year 2000 ....................................................... 89
Section 6. COMPANY'S AFFIRMATIVE COVENANTS ................................. 89
6.1 Financial Statements and Other Reports .......................... 89
6.2 Legal Existence, etc. ........................................... 94
6.3 Payment of Taxes and Claims; Tax Consolidation .................. 94
6.4 Maintenance of Properties; Insurance; Application of Net
Insurance/Condemnation Proceeds ................................. 95
6.5 Inspection Rights; Audits of Inventory and Accounts
Receivable; Lender Meeting ...................................... 95
6.6 Compliance with Laws, etc ....................................... 96
6.7 Year 2000 Compliance ............................................ 96
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6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries;
Offshore Collateral; IP Collateral .............................. 96
6.9 Conforming Leasehold Interests; Matters Relating to Additional
Real Property Collateral Located in the United States ........... 98
6.10 MSL Overseas Charter Documents .................................. 100
Section 7. COMPANY'S NEGATIVE COVENANTS .................................... 100
7.1 Indebtedness .................................................... 100
7.2 Liens and Related Matters ....................................... 101
7.3 Investments; Joint Ventures ..................................... 102
7.4 Contingent Obligations .......................................... 103
7.5 Restricted Junior Payments ...................................... 103
7.6 Financial Covenants ............................................. 103
7.7 Restriction on Fundamental Changes; Asset Sales
and Acquisitions ................................................ 107
7.8 Consolidated Capital Expenditures ............................... 107
7.9 Fiscal Year; Accounting Changes ................................. 108
7.10 Sales and Lease-Backs ........................................... 108
7.11 Sale or Discount of Receivables ................................. 108
7.12 Transactions with Stockholders and Affiliates ................... 108
7.13 Disposal of Subsidiary Equity ................................... 109
7.14 Conduct of Business ............................................. 109
7.15 Amendments of Documents Relating to Subordinated
Indebtedness .................................................... 109
7.16 Amendments to Organization Documents ............................ 110
7.17 Loans by MSL Overseas to Foreign Subsidiaries ................... 110
Section 8. EVENTS OF DEFAULT ............................................... 110
8.1 Failure to Make Payments When Due ............................... 110
8.2 Default in Other Agreements ..................................... 111
8.3 Breach of Certain Covenants ..................................... 111
8.4 Breach of Warranty .............................................. 111
8.5 Other Defaults Under Loan Documents ............................. 111
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc ............ 111
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc .............. 112
8.8 Judgments and Attachments ....................................... 112
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8.9 Dissolution ..................................................... 112
8.10 Employee Benefit Plans .......................................... 113
8.11 Material Adverse Effect ......................................... 113
8.12 Change in Control ............................................... 113
8.13 Invalidity of Guaranties; Failure of Security;
Repudiation of Obligations ...................................... 113
Section 9. THE AGENTS ...................................................... 115
9.1 Appointment ..................................................... 115
9.2 Powers and Duties; General Immunity ............................. 115
9.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness ................................... 117
9.4 Right to Indemnity .............................................. 118
9.5 Successor Agents and Issuing Lender ............................. 118
Section 10. COLLATERAL AGENT ............................................... 119
10.1 Acceptance of Agency ............................................ 119
10.2 Duties of Collateral Agent ...................................... 120
10.3 Exculpatory Provisions .......................................... 120
10.4 Delegation of Duties ............................................ 121
10.5 Reliance by Collateral Agent .................................... 121
10.6 Resignation and Removal of Collateral Agent ..................... 122
10.7 Merger of Collateral Agent ...................................... 123
10.8 Co-Agent; Separate Agent; Trustee ............................... 123
10.9 Release of Collateral ........................................... 124
Section 11. COMPANY GUARANTY ............................................... 125
11.1 Guaranty of the Guarantied Obligations .......................... 125
11.2 Payment by Company; Application of Payments ..................... 125
11.3 Liability of Company Absolute ................................... 126
11.4 Waivers by Company .............................................. 128
11.5 Company's Rights of Subrogation, Contribution, Etc .............. 129
11.6 Subordination of Other Obligations .............................. 129
11.7 Continuing Guaranty; Termination of Guaranty .................... 130
11.8 Financial Condition of MSL Overseas ............................. 130
11.9 Bankruptcy; Post-Petition Interest; Reinstatement
of Company Guaranty ............................................. 130
Section 12. MISCELLANEOUS .................................................. 131
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12.1 Assignments and Participations in Loans and Letters of Credit ... 131
12.2 Expenses ........................................................ 134
12.3 Indemnity ....................................................... 135
12.4 Set-Off; Security Interest in Deposit Accounts .................. 136
12.5 Ratable Sharing ................................................. 136
12.6 Amendments and Waivers .......................................... 137
12.7 Independence of Covenants ....................................... 138
12.8 Notices ......................................................... 138
12.9 Survival of Representations, Warranties and Agreements .......... 139
12.10 Failure or Indulgence Not Waiver; Remedies Cumulative ........... 139
12.11 Marshalling; Payments Set Aside ................................. 139
12.12 Severability .................................................... 139
12.13 Obligations Several; Independent Nature of Lenders' Rights ...... 140
12.14 Headings ........................................................ 140
12.15 Applicable Law .................................................. 140
12.16 Successors and Assigns .......................................... 140
12.17 Consent to Jurisdiction and Service of Process .................. 140
12.18 Waiver of Jury Trial ............................................ 141
12.19 Confidentiality ................................................. 142
12.20 Counterparts; Effectiveness ..................................... 142
Signature pages ............................................................ S-1
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EXHIBITS
I. FORM OF NOTICE OF BORROWING
II. FORM OF NOTICE OF CONVERSION/CONTINUATION
III. FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV. FORM OF TERM NOTE
V. FORM OF REVOLVING NOTE
VI. FORM OF BORROWING BASE CERTIFICATE
VII. FORM OF COMPLIANCE CERTIFICATE
VIII. FORM OF OPINION OF SHERBURNE, POWERS & NEEDHAM, P.C.
IX. FORM OF OPINION OF O'MELVENY & MYERS LLP
X. FORM OF ASSIGNMENT AGREEMENT
XI. FORM OF CERTIFICATE RE NON-BANK STATUS
XII. FORM OF SOLVENCY CERTIFICATE
XIII. FORM OF COMPANY PLEDGE AGREEMENT
XIV. FORM OF COMPANY SECURITY AGREEMENT
XV. FORM OF SUBSIDIARY GUARANTY
XVI. FORM OF SUBSIDIARY PLEDGE AGREEMENT
XVII. FORM OF SUBSIDIARY SECURITY AGREEMENT
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CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of August 21, 1998, and entered
into by and among Manufacturers' Services Limited, a Delaware corporation
("Company"), MSL Overseas Finance BV, a Netherlands private company with limited
liability ("MSL Overseas"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF
(each individually referred to herein as a "Lender" and collectively as
"Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent hereunder
for Lenders (in such capacity, "Syndication Agent"), BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as administrative agent for Lenders (in such
capacity, "Administrative Agent"), as letter of credit issuing bank (in such
capacity, "Issuing Lender"), and as collateral agent (in such capacity,
"Collateral Agent") and BANK OF AMERICA INTERNATIONAL LIMITED, as Sub-Agent.
R E C I T A L S
WHEREAS, Lenders have agreed to extend certain credit facilities to
Borrowers, the proceeds of which will be used by Company and MSL Overseas (i) to
refinance a portion of existing Indebtedness of Company and its Subsidiaries;
(ii) to pay the transaction costs; and (iii) to provide for working capital
and/or other general purposes of Company and its Subsidiaries and will be used
by MSL Overseas to provide for working capital and/or other general purposes of
Company's Foreign Subsidiaries;
WHEREAS, Company has agreed to guarantee the Obligations of MSL
Overseas hereunder and under the other Loan Documents;
WHEREAS, Company (1) desires to secure all of the Obligations
hereunder and under the other Loan Documents by granting to Collateral Agent, on
behalf of Lenders, a first priority Lien on certain of its real property and
substantially all of its personal property (including a pledge of all of the
capital stock (or other ownership interest) of its Domestic Subsidiaries and a
pledge of 65% of the capital stock of each of the Foreign Subsidiaries that are
directly owned by Company or a Domestic Subsidiary) and (2) desires to secure
all of the borrowings of MSL Overseas hereunder by causing its Foreign
Subsidiaries to grant to Collateral Agent, on behalf of Lenders, a first
priority lien on substantially all real and personal property of its Foreign
Subsidiaries and a pledge of the capital stock (or other ownership interest) of
its Subsidiaries that are owned by a Foreign Subsidiary;
WHEREAS, all of Company's Domestic Subsidiaries have agreed to
guarantee the Obligations hereunder and under the other Loan Documents and each
of Company's Domestic Subsidiaries has agreed to secure its guaranty by granting
to Collateral Agent, on behalf of Lenders, a first priority Lien on
substantially all of its personal property and certain of its real property,
including a pledge of all of the capital stock (or other ownership interest) of
each of its Domestic Subsidiaries and 65% of the capital stock (or other
ownership interest) of each of its directly-owned Foreign Subsidiaries;
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WHEREAS, all of Company's Foreign Subsidiaries other than MSL
Overseas have agreed to guarantee the borrowings of MSL Overseas hereunder and
each of Company's Foreign Subsidiaries other than MSL Overseas has agreed to
secure its guaranty by granting to Collateral Agent, on behalf of Lenders, a
first priority Lien on substantially all of its personal property and certain of
its real property.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, MSL Overseas, Lenders,
Syndication Agent, Administrative Agent, Issuing Lender and Collateral Agent
agree as follows:
Section 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"Accounts Receivable" means, as at any date of determination
thereof, the unpaid portion of the obligations as stated on the respective
invoice issued to a customer of a Person with respect to Inventory sold and
shipped or services performed in the ordinary course of business, net of any
credits, rebates or offsets asserted or granted by such Person to the respective
customer; provided that no intercompany account shall be an Account Receivable.
"Adjusted LIBOR" means, for any Interest Period, with respect to
LIBOR Loans, the rate of interest per annum (rounded upward to the next 1/16th
of 1%) determined by Administrative Agent as follows:
Adjusted LIBOR = LIBOR
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1.00 - Eurocurrency Reserve Percentage
Where, Eurocurrency Reserve Percentage means, for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal rounded upward to
the next 1/100th of 1%) in effect on such day (whether or not applicable to any
Lender) under regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities"); and LIBOR means
the rate of interest per annum determined by the Administrative Agent or
Sub-Agent to be the arithmetic mean (rounded upward to the next 1/16th of 1%)
of the rates of interest per annum notified to the Administrative Agent as the
rate of interest at which deposits in Dollars or the Offshore Currency in the
approximate amount of the Loan to be made or continued as, or converted into, a
LIBOR Loan and having a maturity comparable to such Interest Period would be
offered to major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period (except in the case of such Other Currency
not traded in the London market, which shall be determined at such time and in
such offshore market as determined by the Administrative Agent). Adjusted LIBOR
shall be adjusted automatically as to all LIBOR Loans then outstanding as of the
effective date of any change in the Eurocurrency Reserve Percentage.
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"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"Affected Lender" has the meaning assigned to that term in
subsection 2.6C.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Affiliated Fund" means, with respect to any Lender that is a fund
that invests in commercial loans, any other fund that invests in commercial
loans and is managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Agent-Related Person" means an Agent and Sub-Agent and any
successor agent arising under Section 9 or Section 10, together with their
respective Affiliates, and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agents" means, collectively, Syndication Agent, Administrative
Agent and Collateral Agent.
"Agreement" means this Credit Agreement dated as of August 21, 1998,
as it may be amended, supplemented or otherwise modified from time to time.
"Arranger" means Donaldson, Lufkin & Jenrette Securities
Corporation, as arranger of the credit facilities described herein.
"Asset Sale" means the sale by Company or any of its Subsidiaries to
any Person other than Company or any of its Wholly-owned Subsidiaries of (i) any
of the equity ownership of any of Company's Subsidiaries, (ii) substantially all
of the assets of any division or line of business of Company or any of its
Subsidiaries, or (iii) any other assets (whether tangible or intangible) of
Company or any of its Subsidiaries (other than (a) inventory sold in the
ordinary course of business, (b) Cash Equivalents, (c) obsolete equipment or
equipment no longer used or useful in the business of Company or any of its
Subsidiaries sold for not in excess of $1,000,000 in the aggregate for each
Fiscal Year, and (d) any such other assets to the extent that (x) the aggregate
value of such assets sold in any single transaction or related series of
transactions is equal to $1,000,000 or less and (y) the aggregate value of such
assets sold in any Fiscal Year is equal to $3,000,000 or less).
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit X annexed hereto.
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"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Reference Rate
or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Loans" means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
"Beneficiary" has the meaning assigned to such term in subsection
11.2.
"BofA" means Bank of America National Trust and Savings Association.
"Borrowers" means Company and MSL Overseas.
"Borrowing Base Certificate" means a certificate substantially in
the form of Exhibit VI annexed hereto delivered to Administrative Agent by each
Borrower pursuant subsection 6.1(i).
"Business Day" means (i) for all purposes other than as covered by
clauses (ii) and (iii) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of New York or California
or is a day on which banking institutions located in such state are authorized
or required by law or other governmental action to close, (ii) with respect to
all notices, determinations, fundings and payments in connection with the
Adjusted LIBOR or any LIBOR Loans, any day that is a Business Day described in
clause (i) above and that is also a day for trading by and between banks in
Dollar deposits in the London interbank market and (iii) with respect to all
notices, determinations, funding and payments in connection with any Offshore
Currency Loan, a day, excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the States of New York or California or is a day on
which banking institutions in such state are authorized or required by law or
other governmental action to close, on which commercial banks are open for
foreign exchange business in London, England, and on which dealings in the
relevant Offshore Currency are carried on in the applicable offshore foreign
exchange interbank market in which disbursement of or payment in such Offshore
Currency will be made or received hereunder.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Collateralize" means to pledge and deposit with or deliver to
Collateral Agent, for the benefit of Collateral Agent, Issuing Lender and
Lenders, as additional collateral for the Letters of Credit, cash or deposit
account balances pursuant to documentation in form and substance satisfactory to
Collateral Agent and Issuing Lender (which documents are hereby consented to by
Lenders). Derivatives of such term shall have corresponding meanings. Each
Borrower hereby grants Collateral Agent, for the benefit of Collateral Agent,
Issuing Lender and
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Lenders, a security interest in all such cash and deposit account balances. Cash
collateral shall be maintained in blocked deposit accounts at BofA which shall
bear interest at a rate per annum equal to the Federal Funds Effective Rate.
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier I capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"Certificate re Non-Bank Status" means a certificate substantially
in the form of Exhibit XI annexed hereto delivered by a Lender to Administrative
Agent pursuant to subsection 2.8B(iii).
"Closing Date" means August 28, 1998, the date of the initial
funding of the Loans hereunder.
"Collateral" means the Domestic Collateral and the Offshore
Collateral.
"Collateral Agent" means BofA in its capacity as collateral agent
for the Lenders and any successor collateral agent arising under subsection 10.
"Collateral Documents" means the Domestic Collateral Documents and
Offshore Collateral Documents.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"Commitments" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
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"Company" has the meaning assigned to that term in the introduction
to this Agreement.
"Company Borrowing Base" means, as at any date of determination, the
lesser of (i) the difference between (a) the sum of 80% of all Eligible Accounts
Receivable of Company and its Domestic Subsidiaries and 30% of all Eligible
Inventory of Company and its Domestic Subsidiaries (less such amount of Eligible
Inventory to assure that Eligible Inventory at any time does not exceed 35% of
the Company Borrowing Base) and (b) the Term Loans advanced to Company and (ii)
$75,000,000 minus the Total Utilization of Revolving Loan Commitments
attributable to MSL Overseas.
"Company Guaranty" has the meaning assigned to that term in
subsection 10.1.
"Company Pledge Agreement" means the Company Pledge Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of Exhibit XIII annexed hereto, as such Company Pledge Agreement may thereafter
be amended, supplemented or otherwise modified from time to time.
"Company Security Agreement" means the Company Security Agreement
executed and delivered by Company on the Closing Date, substantially in the form
of Exhibit XIV annexed hereto, as such Company Security Agreement may thereafter
be amended, supplemented or otherwise modified from time to time.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit VII annexed hereto delivered to Administrative Agent,
Syndication Agent and Lenders by Company pursuant to subsection 6.1 (iv).
"Computation Date" has the meaning set forth in subsection 2.7A.
"Conforming Leasehold Interest" means any Recorded Leasehold
Interest as to which the lessor has agreed in writing for the benefit of
Collateral Agent (which writing has been delivered to Collateral Agent), whether
under the terms of the applicable lease, under the terms of a Landlord Consent
and Estoppel, or otherwise, to the matters described in the definition of
"Landlord Consent and Estoppel," which interest, if a subleasehold or
sub-subleasehold interest, is not subject to any contrary restrictions contained
in a superior lease or sublease.
"Consolidated Capital Expenditures" means, for any period, the sum
of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and its
Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries, excluding any expenditures that are
reimbursed or reimbursable pursuant to a written agreement with IBM, plus (ii)
to the extent not covered by clause (i) of this definition, the aggregate of all
expenditures by Company and its Subsidiaries during that period to acquire (by
purchase or otherwise) the business, property or fixed assets of any Person, or
the stock or other evidence of beneficial ownership of any Person that, as a
result of such
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acquisition, becomes a Subsidiary of Company, excluding expenditures made or to
be made in respect of Eligible Inventory acquired in connection with the
acquisition of Company's Charlotte, North Carolina Facility.
"Consolidated EBITDA" means, for any period, without duplication,
the sum of the amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv)
total depreciation expense, (v) total amortization expense, and (vi) other
non-cash items reducing Consolidated Net Income, all other non-cash items
increasing Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding, however, any
amortization of debt issuance costs incurred in connection with the Existing
Credit Agreement and the Credit Agreement including the transactions
contemplated thereby and amounts referred to in subsection 2.3 payable to
Arranger and Agents and amounts referred to in subsection 12.2 on or before the
Closing Date.
"Consolidated Leverage Ratio" means, for any Fiscal Quarter, the
ratio of (a) Consolidated Total Debt as of the last day of such Fiscal Quarter
to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on
the last day of such Fiscal Quarter.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; provided
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any Pension Plan, (v) up to
$11,875,000 of losses attributable to operating losses, restructuring charges
and severance obligations relating to the Fremont and Valencia, Spain Facilities
in the Fiscal Quarter ended December 31, 1997 and up to $1,110,000, $1,441,000
and $1,485,000 of losses attributable to operating losses of the Fremont
Facilities in the Fiscal Quarters ended September 27, 1997, December 31, 1997
and April 4, 1998, respectively, and (vi) (to the extent
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not included in clauses (i) through (v) above) any non-recurring gains or net
non-cash nonrecurring losses.
"Consolidated Net Worth" means, as at any date of determination, the
sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficits) of Company and its Subsidiaries on a
consolidated basis determined in conformity with GAAP.
"Consolidated Total Debt" means, as at any date of determination,
the aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Contingent Obligation", as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person (i) with respect
to any Indebtedness, lease, dividend or other obligation of another if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of another
that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, (b)
the obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of such Person for the obligation of another through any agreement
(contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the solvency
or any balance sheet item, level of income or financial condition of another if,
in the case of any agreement described under subclauses (X) or (Y) of this
sentence, the primary purpose or intent thereof is as described in the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Cost of Funds" means with respect to any Offshore Currency, the
rate of interest determined by Administrative Agent or Fronting Offshore Lender,
as the case may be, in respect thereof (which determination shall be conclusive
absent manifest error, lack of good faith, gross negligence or willful
misconduct) to be the cost to Administrative Agent or Fronting Offshore Lender,
as the case may be, of obtaining funds denominated in such Offshore Currency for
the period or, if applicable, the relevant Interest Period during which any
relevant amount in
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such Offshore Currency is outstanding; provided that, "Cost of Funds" with
respect to any eurocurrency, shall be the rate of interest per annum (rounded
upwards to the nearest 1/32 of 1%) determined by the Administrative Agent or
Fronting Offshore Lender, as the case may be, as the rate at which deposits in
the applicable Offshore Currency in the approximate amount of the Offshore
Revolving Loan of Fronting Offshore Lender for such Interest Period would be
offered by its applicable lending office to major banks in the London interbank
market at their request at approximately 11:00 A.M. (London time) two Business
Days prior to the commencement of such Interest Period.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement to which Company or any of its Subsidiaries is
a party.
"Deed of Pledge of Claims" means the deed of pledge of claims dated
August 21, 1998 entered into by MSL Overseas as Pledgor and Collateral Agent as
Pledgee.
"Deed of Pledge of Shares" means the deed of pledge of shares to be
dated August 28, 1993 entered into by MSL as Pledgor and Collateral Agent as
Pledgee.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DLJ" has the meaning assigned to that term in the introduction to
this Agreement.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to any
amount denominated in an Offshore Currency, the equivalent amount in Dollars as
determined by Administrative Agent at such time on the basis of the Spot Rate
for the purchase of Dollars with such Offshore Currency.
"Dollars" and the sign "$" mean the lawful money of the United
States of America.
"Domestic Collateral" means, collectively, all of the real, personal
and mixed property (including capital stock) in which Liens are purported to be
granted pursuant to the Domestic Collateral Documents as security for the
Obligations.
"Domestic Collateral Documents" means the Company Pledge Agreement,
the Company Security Agreement, the Subsidiary Pledge Agreements, the Subsidiary
Security Agreements, the Mortgages, and all other instruments or documents
delivered by Company or any Domestic Subsidiary pursuant to this Agreement or
any of the other Loan Documents in order to grant to Collateral Agent, on behalf
of Lenders, a Lien on any real, personal or mixed property of that Loan Party as
security for the Obligations.
"Domestic Guaranties" means the Company Guaranty and the Subsidiary
Guaranty.
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"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States or any state or territory thereof or the District of Columbia.
"Eligible Accounts Receivable" means, as at any date of
determination, the aggregate dollar value as shown on the books and records of
Company and its Subsidiaries of all Accounts Receivable; provided, however, that
unless otherwise agreed by Requisite Lenders, the following Accounts Receivable
are not Eligible Accounts Receivable:
(i) Accounts Receivable which, at the date of issuance of the
respective invoice therefor, were payable more than sixty-five (65) days
after the date of issuance of such invoice;
(ii) Accounts Receivable which remain unpaid for more than ninety
(90) days after the due date specified in the original invoice or for more
than one hundred and twenty (120) days after invoice date if no due date
was specified;
(iii) Accounts Receivable with respect to which the customer is the
United States of America or any department, agency or instrumentality
thereof unless, with respect to such Accounts Receivable, the Federal
Assignment of Claims Act (31 U.S.C. Section 3727) has been complied with;
(iv) Accounts Receivable with respect to which the customer is an
Affiliate of a Person or a director, officer, agent, stockholder or
employee of a Person or any of its Affiliates, other than Accounts
Receivable resulting from arms-length transactions in the ordinary course
of business;
(v) Accounts Receivable due from a customer if more than twenty-five
percent (25%) of the aggregate amount of Accounts Receivable of such
customer have at the time remained unpaid for more than one hundred and
twenty (120) days after the invoice date or ninety (90) days after the due
date specified in the original invoice;
(vi) As to Accounts Receivable of Company or a Domestic Subsidiary,
Accounts Receivable evidenced by an instrument (as defined in Article 9 of
the UCC) not in the possession of Collateral Agent;
(vii) Accounts Receivable with respect to which Collateral Agent
does not have a valid, First Priority Lien, and Accounts Receivable
subject to any Lien except those in favor of Collateral Agent and
Permitted Encumbrances junior to the Liens in favor of Collateral Agent;
(viii) Accounts Receivable with respect to which the customer is the
subject of any bankruptcy or other insolvency proceeding;
(ix) Accounts Receivable due from a customer other than IBM to the
extent that such Accounts Receivable exceed in the aggregate an amount
equal to twenty-five percent (25%) of the aggregate of all Accounts
Receivable at said date; provided however that notwithstanding the
foregoing, at such time as the Consolidated Leverage Ratio
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<PAGE>
equals or is less than 3.50:1.00 for two consecutive quarters, Accounts
Receivable due from IOMEGA shall be excluded under this clause (ix) only
to the extent that such Accounts Receivable exceed in the aggregate an
amount equal to forty percent (40%) of the aggregate of all Accounts
Receivable at said date; provided further that, if at any time after the
foregoing proviso has become effective, the Consolidated Leverage Ratio
exceeds 3.50:1.00 for two consecutive quarters, the 25% limitation shall
again apply to Accounts Receivable due from IOMEGA;
(x) Accounts Receivable with respect to which the customer's
obligation to pay is conditional or subject to a repurchase obligation or
contractual right to return, including bill and hold sales, guaranteed
sales, sale or return transactions, sales on approvals or consignment
sales;
(xi) Accounts Receivable with respect to which there is any
unresolved dispute with the respective customer (but only to the extent of
such dispute) involving more than $150,000 in the aggregate for all
customers;
(xii) Accounts Receivable with respect to which the customer is
located in New Jersey, Minnesota or any other state denying creditors
access to its courts in the absence of a Notice of Business Activities
Report or other similar filing, unless such Person has either qualified
as a foreign corporation authorized to transact business in such state or
has filed a Notice of Business Activities Report or similar filing with
the applicable state agency for the then current year;
(xiii) Accounts Receivable as to which Company or a Subsidiary of
Company does not have lawful and absolute title and which Accounts
Receivable are not, in such company's reasonable judgement, collectible in
the ordinary course of business; and
(xiv) Accounts Receivable which Requisite Lenders determine in their
reasonable discretion to be unacceptable for borrowing purposes.
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, mutual funds and lease
financing companies; and (B) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Company shall be an Eligible Assignee.
"Eligible Inventory" means as at any date of determination, the
aggregate Dollar value as shown on the books and records of Company and its
Subsidiaries of all Inventory (including raw materials, purchased parts and
work-in-process Inventory); provided, however
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that unless otherwise agreed by Requisite Lenders, the following Inventory is
not Eligible Inventory:
(i) finished goods which do not meet specifications of the purchase
order for such goods in any material respect;
(ii) Inventory with respect to which Collateral Agent does not have
a valid, First Priority Lien;
(iii) Inventory with respect to which there exists any Lien in favor
of any Person other than Collateral Agent, except Permitted Encumbrances
junior to the Liens in favor of Collateral Agent;
(iv) Inventory produced in violation of the Fair Labor Standards Act
or subject to the so-called "hot goods" provisions contained in Title 29
U.S.C. 215(a)(i);
(v) Goods belonging to third parties that have been consigned to
Company or a Subsidiary of Company;
(vi) Inventory in the custody of third parties for processing or
manufacture;
(vii) Inventory in the possession of Company or a Subsidiary of
Company but intended by such company for return to the supplier thereof;
(viii) Inventory in the custody or possession of Company or a
Subsidiary of Company on a sale-on-approval or sale-or -return basis or
subject to any other repurchase or return agreement; provided however,
that Company or a Subsidiary of Company having the right (but not the
obligation) to return Inventory after it has been purchased by Company or
a Subsidiary of Company shall not cause such Inventory not to be Eligible
Inventory;
(ix) Inventory that is unsalable, obsolete, damaged, or otherwise
unfit for sale or consumption in the normal course of business of Company
or a Subsidiary of Company;
(x) Inventory that is subject to any bona fide dispute or other
claim on the part of any Person other than the Lien in favor of Collateral
Agent or to any right of offset or counterclaim; and
(xi) Inventory which Requisite Lenders determine, in their
reasonable discretion, to be unacceptable for borrowing purposes.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is or was maintained or contributed to by
Company, any of its Subsidiaries or any of their respective ERISA Affiliates.
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"Environmental Claim" means any notice, notice of violation, claim,
action, suit, proceeding, demand, abatement order or other order or directive
(conditional or otherwise), by any governmental authority or any other Person,
arising (i) pursuant to or in connection with any actual or alleged violation of
any Environmental Law, (ii) in connection with any Hazardous Materials or any
actual or alleged Hazardous Materials Activity, or (iii) in connection with any
actual or alleged damage, injury, threat or harm to health, safety, natural
resources or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Authorizations, or any other requirements of governmental
authorities relating to (i) environmental matters, including those relating to
any Hazardous Materials Activity, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, in any manner applicable to Company or any of its
Subsidiaries or any Facility, including the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
ss.136 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.), the Oil Pollution Act (33 U.S.C. ss. 2701 et seq.)and the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. ss. 11001 et seq.); each as
amended or supplemented, any analogous present or future state or local statutes
or laws, including laws of jurisdictions outside of the United States, and any
regulations promulgated pursuant to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is
a member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above is a member. Any former ERISA Affiliate of Company or any of
its Subsidiaries shall continue to be considered an ERISA Affiliate of Company
or such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Company or such Subsidiary and with
respect to liabilities arising after such period for which Company or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has bean waived by
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regulation); (ii) the failure to meet the minimum funding standard of Section
412 of the Internal Revenue Code with respect to any Pension Plan (whether or
not waived in accordance with Section 412(d) of the Internal Revenue Code) or
the failure to make by its due date a required installment under Section 412(m)
of the Internal Revenue Code with respect to any Pension Plan or the failure to
make any required contribution to a Multiemployer Plan; (iii) the provision by
the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA
of a notice of intent to terminate such plan in a distress termination described
in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan
with two or more contributing sponsors or the termination of any such Pension
Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which might constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on Company, any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their
respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there
is any potential liability therefor, or the receipt by Company, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could give rise to the imposition on Company, any of its
Subsidiaries or any of their respective ERISA Affiliates of fines, penalties,
taxes or related charges under Chapter 43 of the Internal Revenue Code or under
Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan other than a
Multiemployer Plan or the assets thereof, or against Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust
forming part of any Pension Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien
pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"European Monetary Union" has the meaning set forth in subsection
2.7G.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Existing Credit Agreement" means the Amended and Restated
Multicurrency Credit Agreement, dated as of December 15, 1995, as amended
through the date hereof, among Company, certain of its Subsidiaries, Bank of
America National Trust and Savings Association,
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as Agent, Collateral Agent and Issuing Lender, Bank of America International
Limited, as Sub-Agent and the lenders named therein.
"Facilities" means any and all real property (including all
buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
or any of their Affiliates.
"Federal Funds Effective Rate" means, for any day, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New York
(including any such successor, "H.15(519)") on the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if for any relevant day
such rate is not so published on any such preceding Business Day, the rate for
such day will be the arithmetic mean as determined by Administrative Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by Administrative Agent.
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"First Priority" means with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral (other than Permitted
Encumbrances and Liens permitted pursuant to subsection 7.2A) and (ii) such Lien
is the only Lien (other than Permitted Encumbrances and Liens permitted pursuant
to subsection 7.2A) to which such Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
ending on December 31 of each calendar year.
"Flood Hazard Property" means a Mortgaged Property located in an
area designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards.
"Foreign Borrowing Base" means as at any date of determination, as
to any Foreign Subsidiary, the difference between (a) the sum of 80% of all
Eligible Accounts Receivable of a Foreign Subsidiary and 30% of all Eligible
Inventory of such Foreign Subsidiary and (b) the Term Loans allocable to such
Foreign Subsidiary.
"Foreign Subsidiary" means any Subsidiary of the Company that is not
a Domestic Subsidiary.
"Fronting Offshore Lender" means BofA, or any successor, in its
capacity as Fronting Offshore Lender hereunder.
"Funding and Payment Office" means (i) the offices of Administrative
Agent designated for funding or payment in Schedule 12.8 or (ii) such other
offices of Administrative
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Agent as may from time to time hereafter be designated as such in a written
notice delivered by Administrative Agent to each Borrower and each Lender.
"Funding Date" means the date of the funding of a Loan.
"FX Trading Office" means the Foreign Exchange Trading Center,
#5193, San Francisco, California, of BofA or such other of BofA's offices as
BofA may designate from time to time.
"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"Governmental Authorization" means any permit, license,
authorization, plan, directive, consent order or consent decree of or from
any federal, state or local governmental authority, agency or court.
"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", acutely hazardous waste", "radioactive waste", "biohazardous waste",
"pollutant", "toxic pollutant", "contaminant", "restricted hazardous waste",
"infectious waste", "toxic substances", or any other term or expression
intended to define, list or classify substances by reason of properties
harmful to health, safety or the indoor or outdoor environment (including
harmful properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental
Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived
substance; (iii) any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (iv) any flammable substances or
explosives; (v) any radioactive materials; (vi) any asbestos-containing
materials; (vii) urea formaldehyde foam insulation; (viii) electrical
equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated
by any governmental authority.
"Hazardous Materials Activity" means with respect to the
Facilities any past, current, proposed or threatened activity, event or
occurrence involving any Hazardous Materials, including the use, manufacture,
possession, storage, holding, presence, existence, location, release,
threatened release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation,
disposal, disposition or handling of any Hazardous Materials except in the
normal course of business and in accordance with Environmental Laws, and any
corrective action or response action required by Environmental Law with
respect to any of the foregoing.
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"Hedge Agreement" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively.
"IBM" means International Business Machines Corporation.
"Indebtedness", as applied to any Person, means (i) all
indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, (iv) any obligation owed for all or any part
of the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than
six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
For purposes of this Agreement, Contingent Obligations are not to be
considered Indebtedness. Obligations under Interest Rate Agreements and
Currency Agreements constitute (X) in the case of Hedge Agreements,
Contingent Obligations, and (Y) in all other cases, Investments, and in
neither case constitute Indebtedness.
"Indemnitee" has the meaning assigned to that term in
subsection 12.3.
"Intellectual Property" means all patents, trademarks,
tradenames, copyrights, technology, know-how and processes used in
or necessary for the conduct of the business of Company and its Subsidiaries
as currently conducted that are material to the condition (financial or
otherwise), business operations of Company and its Subsidiaries, taken as a
whole.
"Interest Payment Date" means (i) with respect to any Base Rate
Loan, the last Business Day of each March, June, September and December of
each year, commencing on the first such date to occur after the Closing Date,
and (ii) with respect to any LIBOR Loan, the last Business Day of each
Interest Period applicable to such Loan; PROVIDED that in the case of each
Interest Period of longer than three months "Interest Payment Date" shall
also include each date that is three months, or an multiple thereof, after
the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in
subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a
party.
"Interest Rate Exchanger" means a Lender party to an Interest Rate
Agreement.
"Interest Rate Determination Date" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"Inventory" means, with respect to any Person as of any date of
determination, all goods. merchandise and other personal property which are then
held by such Person for sale or lease, including raw materials, work in process,
packaging, packing and other materials used in assembling or packaging goods or
merchandise for delivery to a customer.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than a Person that prior
to such purchase or acquisition was a Domestic Subsidiary of Company), (ii) any
direct or indirect redemption, retirement, purchase or other acquisition for
value, by any Subsidiary of Company from any Person other than Company or any of
its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct
or indirect loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar expenditures in
the ordinary course of business) or capital contribution by Company or any of
its Subsidiaries to any other Person (other than a Wholly-owned Subsidiary of
Company), including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business, or (iv) Interest Rate Agreements or
Currency Agreements not constituting Hedge Agreements. The amount of any
Investment shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment in
accordance with GAAP.
"IP Collateral" means, collectively, the Intellectual Property that
is a portion of the Domestic Collateral under the Company Security Agreement,
and the Subsidiary Security Agreements.
"Issuing Lender" means BofA in its capacity as issuer of one or more
Letters of Credit hereunder.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
that in no event shall any corporate Subsidiary of any Person or any two or more
corporate Subsidiaries of any Person be considered to be a Joint Venture to
which such Person or any such Subsidiary is a party.
"Landlord Consent and Estoppel" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, reasonably satisfactory in form and substance to
Agents, pursuant to which such lessor agrees, for the benefit of Collateral
Agent, (i) that without any further consent of such lessor or any further action
on the part of the Loan Party holding such Leasehold Property, or with such
consent or further action which such lessor agrees shall not be unreasonably
withheld or delayed, such Leasehold Property may be encumbered pursuant to a
Mortgage and may be assigned to the purchaser at a foreclosure sale or in a
transfer in lieu of such a sale (and to a subsequent third party assignee if any
Agent, any Lender, or an Affiliate of either so acquires such Leasehold Property
or with such consent or further action which such lessor agrees shall not be
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unreasonably withheld or delayed), (ii) that such lessor shall be requested to
agree not to terminate such lease as a result of a default by such Loan Party
thereunder without first giving Collateral Agent notice of such default and at
least 60 days (or, if such default cannot reasonably be cured by Agents within
such period, such longer period as may reasonably be required) to cure such
default, and (iii) to such other matters relating to such Leasehold Property as
Agents may reasonably request.
"L/C Amendment Application" means an application form for amendment
of outstanding standby or commercial documentary letters of credit as shall at
any time be in use at the Issuing Lender as the Issuing Lender shall request.
"Leasehold Property" means any leasehold interest of any Loan Party
as lessee under any lease of real property located in the United States of
America.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 11.1.
"Letter of Credit" or "Letters of Credit" means Commercial Letters
of Credit and Standby Letters of Credit issued or to be issued by Issuing Lender
for the account of a Borrower pursuant to subsection 3.1.
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding plus
(ii) the aggregate amount of all drawings under Letters of Credit honored by
Issuing Lender and not theretofore reimbursed by Company or MSL Overseas
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B).
"LIBOR Loans" means loans bearing interest at rates determined by
reference to Adjusted LIBOR as provided in subsection 2.2A.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Term Loans or Revolving
Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other documents
or certificates executed by Company in favor of Issuing Lender relating to, the
Letters of Credit), the Domestic Guaranties, the Offshore Guaranties, and the
Collateral Documents.
"Loan Party" means each Borrower and each Borrower's Subsidiaries
from time to time executing a Loan Document, and "Loan Panics" means all such
Persons, collectively.
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"Margin Determination Certificate" means an Officer's Certificate of
Company delivered pursuant to 6.1 (iv) setting forth in reasonable detail the
Consolidated Leverage Ratio for the four-Fiscal Quarter period ending as of the
last day of the Fiscal Quarter during which such Officer's Certificate is
delivered.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"Material Adverse Effect" means (i) a material adverse effect upon
the business, operations, properties, assets, condition (financial or otherwise)
or prospects of Company and its Subsidiaries taken as a whole or (ii) the
material impairment of the ability of any Loan Party to perform, or of Agents or
Lenders to enforce, the Obligations.
"Material Contract" means any contract or other arrangement to which
Company or any of its Subsidiaries is a party (other than the Loan Documents)
for which breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect.
"Material Leasehold Property" means a Leasehold Property reasonably
determined by Agents to be of material value as Collateral or of material
importance to the operations of Company or any of its Subsidiaries.
"Mortgage" means (i) a security instrument (whether designated as a
deed of trust or a mortgage or by any similar title) executed and delivered by
Company or any Domestic Subsidiary, substantially in such form as may be
approved by Agents in their sole discretion, with such changes thereto as may be
recommended by Collateral Agent's local counsel based on local laws or customary
local mortgage or deed of trust practices, or (ii) at the option of Agents, in
the case of an Additional Mortgaged Property (as defined in subsection 6.9), an
amendment to an existing Mortgage, in form satisfactory to Agents, adding such
Additional Mortgaged Property to the Real Property Assets encumbered by such
existing Mortgage, in either case as such security instrument or amendment may
be amended, supplemented or otherwise modified from time to time. "Mortgages"
means all such instruments, including any Additional Mortgages (as defined in
subsection 6.9), collectively.
"Mortgaged Property" means an Additional Mortgaged Property (as
defined in subsection 6.9).
"MSL Ireland" means Manufacturers' Services Athlone Ltd., a
Wholly-owned Irish Subsidiary of Company.
"MSL Malaysia" means MSL Technology Services (Malaysia) Sdn Bnd, a
Wholly-owned Malaysian Subsidiary of Company.
"MSL Overseas" has the meaning assigned to that term in the
introduction to this Agreement.
"MSL Overseas Borrowing Base" means, as at any date of
determination, the lesser of(i) the difference between (a) the sum of 80% of
Eligible Accounts Receivable of MSL
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Overseas and Company's other Foreign Subsidiaries and 30% of all Eligible
Inventory of MSL Overseas and Company's other Foreign Subsidiaries (less such
amount of such Eligible Inventory to assure that Eligible Inventory at any time
does not exceed 35% of the MSL Overseas Borrowing Base) and (b) the Term Loans
advanced to MSL Overseas and (ii) $75,000,000 minus the Total Utilization of
Revolving Loan Commitments attributable to Company.
"MSL Spain" means Global Manufacturers' Services Valencia S.A., a
Wholly-owned Spanish Subsidiary of Company.
"Multiemployer Plan" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"Net Asset Sale Proceeds" means, with respect to any Asset Sale,
Cash payments (including any Cash received by way of deferred payment pursuant
to, or by monetization of, a note receivable or otherwise, but only as and when
so received) received from such Asset Sale, net of any bona fide direct costs
incurred in connection with such Asset Sale, including (i) income taxes
reasonably estimated to be actually payable within two years of the date of such
Asset Sale as a result of any gain recognized in connection with such Asset Sale
and (ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such Asset Sale.
"Net Insurance/Condemnation Proceeds" means any Cash payments or
proceeds received by Company or any of its Subsidiaries (i) under any business
interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Company or any of
its Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs incurred by Company or any of its
Subsidiaries in connection with the adjustment or settlement of any claims of
Company or such Subsidiary in respect thereof.
"Notes" means one or more of the Term Notes or Revolving Notes or
any combination thereof.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Administrative Agent pursuant
to subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit II annexed hereto delivered by Company to Administrative
Agent pursuant to subsection 2.2D with respect to the applicable basis for
determining the interest rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice
substantially in the form of Exhibit III annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 3.lB(i) with respect to the proposed
issuance of a Letter of Credit.
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"Obligations" means all obligations of every nature of each Loan
Party from time to time owed to Arranger, Agents, Lenders or any of them under
the Loan Documents, whether for principal, interest, reimbursement of amounts
drawn under Letters of Credit, fees, expenses, indemnification or otherwise.
"Officer's Certificate" means, as applied to any corporation a
certificate executed on behalf of such corporation by its president, its chief
financial officer (or if there is no chief financial officer, its chief
accounting officer) or its treasurer, or, in the case of an Foreign Subsidiary,
a director, the sole administrator or other comparable officer of such
Subsidiary; provided that every Officer's Certificate with respect to the
compliance with a condition precedent to the making of any Loans hereunder shall
include (i) a statement that the officer or officers making or giving such
Officer's Certificate have read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement that,
in the opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"Offshore Collateral" means, collectively, all of the real, personal
and mixed property (including capital stock) in which Liens are purported to be
granted pursuant to the Offshore Collateral Documents as security for the
Obligations of MSL Overseas and Company's other Foreign Subsidiaries.
"Offshore Collateral Documents" means all instruments and documents
delivered by MSL Overseas or any of Company's other Foreign Subsidiaries
pursuant to this Agreement or any of the other Loan Documents in order to grant
to Collateral Agent, on behalf of Lenders, a Lien on any real, personal or mixed
property of that Loan Party as security for the Obligations of MSL Overseas and
Company's other Foreign Subsidiaries.
"Offshore Currency" means at any time Spanish pesetas and, on and
after such time that the European Monetary Union introduces a single currency
for member states participating in the European Monetary Union, such currency,
as described in subsection 2.7G.
"Offshore Currency Loan" means any Revolving Loan denominated in an
Offshore Currency.
"Offshore Guaranty" means, collectively, the guaranties by each
Foreign Subsidiary of the Obligations of MSL Overseas hereunder.
"Offshore Lender" and "Offshore Lenders" means the Lenders that have
Offshore Revolving Loan Commitments or that have made Offshore Revolving Loans,
together with their successors and permitted assigns pursuant to subsection
11.1.
"Offshore Loan Exposure" means, with respect to any Offshore Lender
as of any date of determination (i) prior to the termination of the Offshore
Revolving Loan Commitments, that Lender's Offshore Revolving Loan Commitments
and (ii) after the termination of the Offshore Revolving Loan Commitments, the
sum of(a) the aggregate
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outstanding principal amount of the Offshore Revolving Loans of that Lender plus
(b) in the event that Lender is Issuing Lender, the aggregate Letter of Credit
Usage in respect of all Letters of Credit issued by that Lender payable in an
Offshore Currency (in each case net of any participations purchased by other
Lenders in such Letters of Credit or any unreimbursed drawings thereunder).
"Offshore Participant" means each financial institution that is
designated as an Offshore Participant on Schedule 2.1 annexed hereto, and each
financial institution which becomes, with the approval of Administrative Agent,
an Offshore Participant in an Assignment Agreement.
"Offshore Participation" has the meaning assigned to it in
subsection 2.1A(iii)(b).
"Offshore Revolving Loans" means Revolving Loans made by Offshore
Lenders denominated in an Offshore Currency pursuant to subsection 2.1A(iii).
"Offshore Revolving Loan Commitment" means the commitments of an
Offshore Lender to make Offshore Revolving Loans pursuant to subsection 2.
1A(iii), and "Offshore Revolving Loan Commitments" means such commitments of all
such Lenders in the aggregate.
"Operating Lease" means, as applied to any Person, any lease
(including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease in
accordance with GAAP other than any such lease under which that Person is the
lessor.
"Other Currency" means any lawful currency consisting of a
eurocurrency (other than Offshore Currency) that is approved by all Offshore
Lenders and Administrative Agent or in the case of requested Letters of Credit,
by Issuing Lender and, in the opinion of Offshore Lenders and Administrative
Agent, is freely traded in the offshore interbank foreign exchange markets and
is freely transferable and freely convertible into Dollars.
"Overseas Borrowing Base Provisions" has the meaning set forth in
subsection 7.17.
"Overseas Subsidiary Loan" has the meaning set forth in subsection
7.17.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Encumbrances" means the following types of Liens
(excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by
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ERISA, any such Lien relating to or imposed in connection with any Environmental
Claim, and any such Lien expressly prohibited by any applicable terms of any of
the Collateral Documents):
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of banks and
rights of set-off, statutory or contractual Liens of carriers or
warehousemen, statutory Liens of mechanics, repairmen, workmen and
materialmen, and other Liens imposed by law, in each case incurred in the
ordinary course of business (a) for amounts not yet overdue or (b) for
amounts that are overdue and that (in the case of any such amounts overdue
for a period in excess of 5 days) are being contested in good faith by
appropriate proceedings, so long as (1) such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for
any such contested amounts, and (2) in the case of a Lien with respect to
any portion of the Collateral, such contest proceedings conclusively
operate to stay the sale of any portion of the Collateral on account of
such Lien;
(iii) Liens incurred or deposits made in the ordinary course of
business including in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money), so long as no foreclosure, sale or similar
proceedings have been commenced with respect to any portion of the
Collateral on account thereof, and provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8;
(v) leases or subleases granted to third parties in accordance with
any applicable terms of the Collateral Documents and not interfering in
any material respect with the ordinary conduct of the business of Company
or any of its Subsidiaries or resulting in a material diminution in the
value of any Collateral as security for the Obligations;
(vi) easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct
of the business of Company or any of its Subsidiaries or result in a
material diminution in the value of any Collateral as security for the
Obligations;
(vii) any (a) interest or title of a lessor or sublessor under any
Operating Lease not prohibited hereby, (b) restriction or encumbrance that
the interest or title of such lessor or sublessor may be subject to, or
(c) subordination of the interest of the lessee or sublessee under such
lease to any restriction or encumbrance referred to in the preceding
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clause (b), so long as the holder of such restriction or encumbrance
agrees to recognize the rights of such lessee or sublessee under such
lease;
(viii) Liens arising from filing UCC financing statements relating
solely to leases not prohibited by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(x) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property;
(xi) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of
Company and its Subsidiaries;
(xii) licenses of patents, trademarks and other intellectual
property rights granted by Company or any of its Subsidiaries in the
ordinary course of business and not interfering in any material respect
with the ordinary conduct of the business of Company or such Subsidiary;
(xiii) Liens on assets of Persons that become Subsidiaries after the
date of this Agreement, provided, however, that such Liens existed at the
same time such Persons became Subsidiaries and were not created in
anticipation thereof and, in any event, do not in the aggregate secure
Indebtedness exceeding $250,000; and
(xiv) (a) Any interest or title of a lessor or a sublessor under any
Capital Lease, provided that such Capital Leases are otherwise permitted
hereunder and (b) purchase money security interests on any property
acquired or held by Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness permitted hereby incurred or assumed for
the purpose of financing all or part of the costs of acquiring such
property; provided that (x) any such Lien attaches to such property
concurrently with or within 90 days after the acquisition thereof, (y)
such Lien attaches solely to the property so acquired in such transaction
and its proceeds and (z) the principal amount of Indebtedness secured
thereby does not exceed 100% of the cost of such property including
transportation, installation and sales or use taxes.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"Pledged Collateral" means, collectively, the "Pledged Collateral"
as defined in the Company Pledge Agreement and the Subsidiary Pledge Agreements.
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"Potential Event of Default" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"Pro Rata Share" means the percentage equivalent (expressed as a
decimal rounded to the ninth decimal place) (i) with respect to all payments,
computations and other matters relating to the Term Loan Commitment or the Term
Loan Exposure of any Lender, the percentage obtained by dividing (x) the Term
Loan Exposure of that Lender by (y) the aggregate' Term Loan Exposure of all
Lenders, (ii) with respect to all payments, computations and other matters
relating to the Revolving Loan Commitment or the Revolving Loans of any
Revolving Lender or any Letters of Credit issued or participations therein
purchased (including any Offshore Participations pursuant to subsection 2.1
A(iii)(b)) by any Revolving Lender, the percentage obtained by dividing (x) the
Revolving Loan Exposure of that Lender by (y) the aggregate Revolving Loan
Exposure of all Lenders, and (iii) for all other purposes with respect to each
Lender, the percentage obtained by dividing (x) the sum of the Term Loan
Exposure of that Lender plus the Revolving Loan Exposure of that Lender by (y)
the sum of the aggregate Term Loan Exposure of all Lenders plus the aggregate
Revolving Loan Exposure of all Lenders, in any such case as the applicable
percentage may be adjusted by assignments permitted pursuant to subsection 12.1.
The initial Pro Rata Share of each Lender for purposes of each of clauses (i)
and (ii) of the preceding sentence is set forth opposite the name of that Lender
in Schedule 2.1 annexed hereto.
"PTO" means the United States Patent and Trademark Office or any
successor or substitute office in which filings are necessary or, in the opinion
of Collateral Agent, desirable in order to create or perfect Liens on any IP
Collateral.
"Real Property Asset" means, at any time of determination, any
interest then owned by Company or any Domestic Subsidiary in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with
respect to which a Record Document (as hereinafter defined) has been recorded in
all places necessary or desirable, in the reasonable judgment of Agents, to give
constructive notice of such Leasehold Property to third-party purchasers and
encumbrancers of the affected real property. For purposes of this definition,
the term "Record Document" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof, executed
and acknowledged by the owner of the affected real property, as lessor, or (b)
if such Leasehold Property was acquired or subleased from the holder of a
Recorded Leasehold Interest, the applicable assignment or sublease document,
executed and acknowledged by such holder, in each case in form sufficient to
give such constructive notice upon recordation and otherwise in form reasonably
satisfactory to Agents.
"Reference Rate" means the rate that BofA announces from time to
time as its reference rate, as in effect from time to time. The Reference Rate
is a reference rate set by BofA based upon various factors, including BofA's
costs and desired return, general economic conditions and other factors, and is
used as a reference point in pricing some loans and does not necessarily
represent the lowest or best rate actually charged to any customer. BofA or any
other Lender may make commercial loans or other loans at rates of interest at,
above or below the
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Reference Rate. Any change in the Reference Rate announced by BofA shall take
effect on the opening of business on the day specified in the public
announcement of such change.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Requisite Lenders" means Lenders having or holding 51% or more of
the sum of (i) the aggregate Term Loan Exposure of all Lenders plus (ii) the
aggregate Revolving Loan Exposure of all Lenders.
"Responsible Officer" means the chief executive officer or the
president of Company, or an other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of Company or any other
officer having substantially the same authority and responsibility.
"Restricted Junior Payment" means (i) any distribution, direct or
indirect, on account of any class of stock of Company now or hereafter
outstanding, except a distribution payable solely in shares of that class of
stock payable solely to holders of that class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any class of stock of Company now or hereafter outstanding,
(iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Company now or hereafter outstanding, and (iv) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance (including in-substance or legal defeasance), sinking
fund or similar payment with respect to, any Subordinated Indebtedness that is
not approved by Agents and Requisite Lenders.
"Revolving Lender" means a Lender having a Revolving Loan
Commitment.
"Revolving Loan Commitment" means the commitment of a Lender to make
Revolving Loans to Borrowers pursuant to subsection 2.1A(ii), and "Revolving
Loan Commitments" means such commitments of all Revolving Lenders in the
aggregate.
"Revolving Loan Commitment Termination Date" means July 31, 2002.
"Revolving Loan Exposure" means, with respect to any Revolving
Lender as of any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Revolving Lender's Revolving Loan Commitment
and (ii) after the termination of the Revolving Loan Commitments, the sum of (a)
the aggregate outstanding principal amount of the Revolving Loans of that
Revolving Lender plus (b) in the event that Revolving Lender is an Issuing
Lender, the aggregate Letter of Credit Usage in respect of all Letters of Credit
issued by that Revolving Lender (in each case net of any participations
purchased by other Revolving Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
participations purchased by that Revolving Lender in any outstanding Letters of
Credit or any
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unreimbursed drawings under any Letters of Credit plus (d), without duplication,
in the case of an Offshore Lender, the aggregate principal amount of all
Offshore Revolving Loans (net of any participations therein purchased by
Revolving Lenders that are not Offshore Lenders in Loans of Fronting Offshore
Lender), plus (e) the aggregate Dollar Equivalent of all Offshore Participations
purchased by that Revolving Lender.
"Revolving Loans" means the Loans made by Revolving Lenders to
Company and to MSL Overseas pursuant to subsection 2.1A(ii) and 2.1A(iii).
"Revolving Notes" means (i) the promissory notes of Company and of
MSL Overseas issued pursuant to subsection 2.1D(ii) on the Closing Date and (ii)
any promissory notes issued by Company or MSL Overseas pursuant to the last
sentence of subsection 12.1 B(i) in connection with assignments of the Revolving
Loan Commitments and Revolving Loans of any Revolving Lenders, in each case
substantially in the form of Exhibit V annexed hereto, as they may be amended,
supplemented or otherwise modified from time to time.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Solvency Certificate" means an Officer's Certificate substantially
in the form of Exhibit XII annexed hereto.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
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"Spot Rate" for a currency means the rate quoted by BofA as the spot
rate in the interbank market for the purchase or sale, as the case may be, by
BofA of such currency with another currency through its FX Trading Office at
approximately 8:00 a.m. (San Francisco time) on the date two Business Days prior
to the date as of which the foreign exchange computation is made.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Company or any of its Subsidiaries, (iii) the obligations of third party
insurers of Company or any of its Subsidiaries, (iv) obligations with respect to
Capital Leases or Operating Leases of Company or any of its Subsidiaries, and
(v) performance, payment. deposit or surety obligations of Company or any of its
Subsidiaries, in any case if required by law or governmental rule or regulation
or in accordance with custom and practice in the industry and for other purposes
approved by Issuing Lender and Requisite Lenders; provided that Standby Letters
of Credit may not be issued for the purpose of supporting any Indebtedness
constituting "antecedent debt" (as that term is used in Section 547 of the
Bankruptcy Code).
"Sub-Agent" means Bank of America International Limited and its
successor thereto.
"Subordinated Indebtedness" means Indebtedness of Company
subordinated in right of payment to the Obligations pursuant to documentation
containing maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and substance
satisfactory to Agents and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"Subsidiary Guarantor" means any Subsidiary of Company that executes
and delivers a counterpart of the Subsidiary Guaranty on the Closing Date or
from time to time thereafter pursuant to subsection 6.8.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by existing Domestic Subsidiaries of Company on the Closing Date and
to be executed and delivered by additional Domestic Subsidiaries of Company from
time to time thereafter in accordance with subsection 6.8, substantially in the
form of Exhibit XV annexed hereto, as such Subsidiary Guaranty may hereafter be
amended, supplemented or otherwise modified from time to time.
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"Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement
executed and delivered by an existing Subsidiary Guarantor on the Closing Date
or executed and delivered by any additional Subsidiary Guarantor from time to
time thereafter in accordance with subsection 6.8, in each case substantially in
the form of Exhibit XVI annexed hereto, as such Subsidiary Pledge Agreement may
be amended, supplemented or otherwise modified from time to time, and
"Subsidiary Pledge Agreements" means all such Subsidiary Pledge Agreements,
collectively.
"Subsidiary Security Agreement" means each Subsidiary Security
Agreement executed and delivered by an existing Subsidiary Guarantor on the
Closing Date or executed and delivered by any additional Subsidiary Guarantor
from time to time thereafter in accordance with subsection 6.8, in each case
substantially in the form of Exhibit XVII annexed hereto, as such Subsidiary
Security Agreement may be amended, supplemented or otherwise modified from time
to time, and "Subsidiary Security Agreements" means all such Subsidiary Security
Agreements, collectively.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever called,
by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld
or assessed; provided that "Tax on the overall net income" of a Person shall be
construed as a reference to a tax imposed by the jurisdiction in which that
Person is organized or in which that Person's principal office (and/or, in the
case of a Lender, its lending office) is located or in which that Person
(and/or, in the case of a Lender, its lending office) is deemed to be doing
business on all or part of the net income, profits or gains (whether worldwide,
or only insofar as such income, profits or gains are considered to arise in or
to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in
the case of a Lender, its lending office).
"Term Loan Commitment" means the commitment of a Lender to make Term
Loans to Borrowers pursuant to subsection 2.1A(i), and "Term Loan Commitments"
means such commitments of all Lenders in the aggregate.
"Term Loan Exposure" means, with respect to any Term Loan Lender as
of any date of determination (i) prior to the funding of the Term Loans, that
Lender's Term Loan Commitment and (ii) after the funding of the Term Loans, the
outstanding principal amount of the Term Loan of that Lender.
"Term Loan Lender" means any Lender who holds a Term Loan
Commitment, or who has made a Term Loan hereunder and any assignee of such
Lender pursuant to subsection 12.1B.
"Term Loans" means the Term Loans made by Term Loan Lenders to
Borrowers pursuant to subsection 2.1A(i).
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"Term Notes" means (i) the promissory notes of Company and of MSL
Overseas issued pursuant to subsection 2.1D(i) on the Closing Date and (ii) any
promissory notes issued by Company or by MSL Overseas pursuant to the last
sentence of subsection 12.1B(i) in connection with assignments of the Term Loan
Commitments or Term Loans of any Term Loan Lenders, in each case substantially
in the form of Exhibit IV annexed hereto, as they may be amended, supplemented
or otherwise modified from time to time.
"Title Company" means one or more title insurance companies selected
by Company and reasonably satisfactory to Agents.
"Total Utilization of Revolving Loan Commitments" means, as to
either Borrowers or both Borrowers, as applicable, as at any date of
determination, the sum of(i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made, but not yet applied, for the
purpose of reimbursing the applicable Issuing Lender for any amount drawn under
any Letter of Credit), including Offshore Revolving Loans, plus (ii) the Letter
of Credit Usage.
"UCC" means the Uniform Commercial Code (or any similar or
equivalent legislation) as in effect in any applicable jurisdiction.
"Wholly-owned" means, with respect to a Subsidiary, a Subsidiary of
a Person, 100% of the capital stock, shares or other equity securities (other
than directors' qualifying shares) of which are owned, directly or indirectly
(through one or more Wholly-owned Subsidiaries) by such Person.
"Year 2000 Problems" means limitations in the capacity or readiness
to process (including without limitation calculating, comparing and sequencing)
date related data (including leap year calculations) from, into, or between the
years 1999 and 2000, of any of the hardware, firmware or software systems
associated with information processing and delivery, operations or services
material to the business or operation of Company and its Subsidiaries.
1.2 Accounting Terms: Utilization of GAAP for Purposes of Calculations Under
Agreement.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (ii), (iii)
and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP as in
effect at the time of such preparation (and delivered together with the
reconciliation statements provided for in subsection 6.1(v)). Calculations in
connection with the definitions, covenants and other provisions of this
Agreement shall utilize accounting principles and policies in conformity with
those used to prepare the financial statements referred to in subsection 5.3.
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1.3 Other Definitional Provisions and Rules of Construction.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
D. In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding", and the word "through" means "to and
including".
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; Notes.
A. Commitments. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrowers
herein set forth, each Term Loan Lender hereby severally agrees to make the
Term Loans described in subsection 2.1 A(i), each Revolving Lender hereby
severally agrees to make the Revolving Loans described in subsection 2.1A(ii),
and Offshore Lenders hereby agree to make the Offshore Revolving Loans described
in subsection 2.1A(iii).
(i) Term Loans. Each Term Loan Lender severally agrees to lend to
Borrowers on the Closing Date an amount not exceeding its Pro Rata Share
of the aggregate amount of the Term Loan Commitments to be used for the
purposes identified in subsection 2.5A. The amount of each Term Loan
Lender's Term Loan Commitment is set forth opposite its name on Schedule
2.1 annexed hereto and the aggregate amount of the Term Loan Commitments
is $50,000,000; provided that the Term Loan Commitments of the Term Loan
Lenders shall be adjusted to give effect to any assignments of the Term
Loan Commitments pursuant to subsection 12.1B. Aggregate Term Loans to
Company shall not exceed $15,000,000 and aggregate Term Loans to MSL
Overseas shall not exceed $35,000,000. Each Term Loan Lender's Term Loan
Commitment shall expire immediately and without further action on August
28, 1998, if the Term Loans are not made on or before that date. Each
Borrower may make only one borrowing under the Term Loan Commitments.
Amounts borrowed under this subsection 2.1A(i) and subsequently repaid or
prepaid may not be reborrowed. Term Loans shall be available only in
Dollars.
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(ii) Revolving Loans. Each Revolving Lender severally agrees,
subject to the limitations set forth below with respect to the maximum
amount of Revolving Loans permitted to be outstanding from time to time,
to lend to Borrowers from time to time during the period from the Closing
Date to but excluding the Revolving Loan Commitment Termination Date an
aggregate amount in Dollars not exceeding its Pro Rata Share of the
aggregate amount of the Revolving Loan Commitments, such Loans to be used
for the purposes identified in subsection 2.5B. The original amount of
each Revolving Lender's Revolving Loan Commitment is set forth opposite
its name on Schedule 2.1 annexed hereto and the aggregate original amount
of the Dollar Equivalent of the Revolving Loan Commitments is $75,000,000;
provided that the Revolving Loan Commitments of the Revolving Lenders
shall be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 11.1B; and provided, further that the
amount of the Revolving Loan Commitments shall be reduced from time to
time by the amount of any reductions thereto made pursuant to subsections
2.4B(ii) and 2.4B(iii). Each Revolving Lender's Revolving Loan Commitment
shall expire on the Revolving Loan Commitment Termination Date and all
Revolving Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be paid in full
no later than that date; provided that each Revolving Lender's Revolving
Loan Commitment shall expire immediately and without further action on
August 28, 1998, if the Term Loans are not made on or before that date.
Amounts borrowed under this subsection 2.1A(ii) may be repaid and
reborrowed to but excluding the Revolving Loan Commitment Termination
Date. Revolving Loans shall be available in Dollars and/or in an Offshore
Currency, but Revolving Loans made as Offshore Currency Loans shall be
funded only as provided in subsection 2.1A(iii).
Anything contained in this Agreement to the contrary
notwithstanding:
(a) subject to subsection 2.7F, in no event shall the Total
Utilization of Revolving Loan Commitments of both Borrowers at any
time exceed the Revolving Loan Commitments then in effect;
(b) in no event shall the Revolving Loan Commitments available
to Company (subject to subsection 2.4B(iii)(g)) exceed the then
applicable Company Borrowing Base; and
(c) in no event shall the Revolving Loan Commitments available
to MSL Overseas (subject to subsection 2.4B(iii)(g)) exceed the then
applicable MSL Overseas Borrowing Base.
(iii) Offshore Revolving Loans. (a) Each Offshore Lender severally
agrees, subject to the limitations set forth below with respect to the
maximum amount of Loans permitted to be outstanding from time to time, to
make a portion of its Revolving Loan Commitments available to Borrowers
from time to time during the period from the Closing Date to but excluding
the Revolving Loan Commitment Termination Date by making Offshore
Revolving Loans to either Borrower in an amount equivalent to its Pro
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Rata Share of the Dollar Equivalent of the Offshore Revolving Loan
Commitments, to be used for the purposes identified in subsection 2.5B.
The original Dollar Equivalent of each Offshore Lender's Offshore
Revolving Loan Commitment is set forth opposite its name on Schedule 2.1
annexed hereto (the Offshore Revolving Loan Commitment of Fronting
Offshore Lender being equal to the difference between (x) the aggregate
Dollar Equivalent of the Offshore Revolving Commitments and (y) the
aggregate Dollar Equivalent of the Offshore Revolving Commitments of the
Offshore Lenders other than the Fronting Offshore Lender, notwithstanding
the fact that such Offshore Revolving Loans, when aggregated with Fronting
Offshore Lender's outstanding Revolving Loans and its Pro Rata Share of
the Letter of Credit Usage then in effect, may exceed Fronting Offshore
Lender's Revolving Loan Commitment). The aggregate Dollar Equivalent of
the Offshore Revolving Loan Commitments is $30,000,000; provided that the
Offshore Revolving Loan Commitments of Revolving Lenders shall be adjusted
to give effect to any assignments of the Revolving Loan Commitments
pursuant to subsection 121B; provided, further, that any reduction of the
Revolving Loan Commitments made pursuant to subsection 2.4B(ii) or
2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an
amount less than the then current Dollar Equivalent of the Offshore Loan
Commitments shall result in an automatic corresponding reduction of the
Offshore Revolving Loan Commitments to the amount of the Revolving Loan
Commitments, as so reduced, without any further action on the part of
Borrowers, Administrative Agent or Offshore Lenders. The Offshore
Revolving Loan Commitments shall expire on the Revolving Loan Commitment
Termination Date and all Offshore Revolving Loans and all other amounts
owed hereunder with respect to the Offshore Revolving Loans shall be paid
in full no later than that date; provided that the Offshore Revolving Loan
Commitments shall expire immediately and without further action on August
28, 1998, if the Term Loans are not made on or before that date. Amounts
borrowed under this subsection 2.1A(iii)(a) may be repaid and reborrowed
to but excluding the Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary
notwithstanding, the Offshore Revolving Loans and the Offshore Revolving
Loan Commitments shall be subject to the limitations regarding the
Revolving Loan Commitments available to each Borrower set forth in clauses
(a) - (c) of subsection 2.1A(ii).
(b) Each Revolving Lender that is not an Offshore Lender shall be
deemed to have purchased, and hereby agrees to purchase, a participation
in each outstanding Offshore Revolving Loan made by Fronting Offshore
Lender in an amount equal to its Pro Rata Share of the unpaid amount of
such Offshore Revolving Loan together with accrued interest or fees
thereon (each, an "Offshore Participation"). Upon demand from Fronting
Offshore Lender if any amount in respect of the principal, interest or
fees owing to such Fronting Offshore Lender is not paid when due in
accordance with this Agreement, each such Revolving Lender shall deliver
to Fronting Offshore Lender an amount equal to its respective Offshore
Participation in same day funds and in the relevant Offshore Currency at
the funding and payment office designated by Fronting Offshore Lender. If
any amount required to be paid by any Offshore Participant to Fronting
Offshore Lender pursuant to this subsection 2.1A(iii)(b) is not paid to
such
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Fronting Offshore Lender when due but is paid within three Business Days
after the date such payment is due, such Offshore Participant shall pay to
Fronting Offshore Lender on demand an amount equal to the product of (i)
such amount, times (ii) the Cost of Funds in respect of the related
Offshore Currency determined by such Fronting Offshore Lender during the
period from and including the date such payment is required to the date on
which such payment is immediately available to such Fronting Offshore
Lender, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360.
If such amount required to be paid by any Offshore Participant pursuant to
this subsection 2.1A(iii)(b) is not in fact made available to Fronting
Lender by such Offshore Participant within three Business Days after the
date such payment is due, such Fronting Lender shall be entitled to
recover from such Offshore Participant, on demand, such amount with
interest thereon calculated from such due date at the rate per annum equal
to the rate applicable thereto in accordance with the preceding sentence
plus the Applicable LIBOR Margin in respect of Offshore Revolving Loans. A
certificate of Fronting Offshore Lender submitted to any Offshore
Participant with respect to any amounts owing under this subsection
2.1A(iii)(b) shall be conclusive in the absence of manifest error. In the
event Fronting Offshore Lender receives a payment with respect to any
Offshore Revolving Loan in which Offshore Participations have been
purchased and as to which the purchase price has been requested by
Fronting Offshore Lender and delivered by an Offshore Participant as in
this subsection 2.1A(iii)(b) provided, Fronting Offshore Lender shall
promptly distribute to such Offshore Participant its Pro Rata Share of
such payment. If Fronting Offshore Lender shall pay any amount to an
Offshore Participant pursuant to this subsection 2.1A(iii)(b) in the
belief or expectation that a related payment has been or will be received
or collected and such related payment is not received or collected by
Fronting Offshore Lender then such Offshore Participant will promptly on
demand by Fronting Offshore Lender return such amount to Fronting Offshore
Lender, together with interest thereon at such rate as Fronting Offshore
Lender shall determine to be customary between banks for correction of
errors. If Fronting Offshore Lender determines at any time that any amount
received or collected by Fronting Offshore Lender pursuant to this
Agreement is to be returned to a Borrower under this Agreement or paid to
any other Person or entity pursuant to any insolvency law, any sharing
clause in this Agreement, or otherwise, then, notwithstanding any other
provision of this Agreement, Fronting Offshore Lender shall not be
required to distribute any portion thereof to any Offshore Participant,
and each such Offshore Participant will promptly on demand by Fronting
Offshore Lender repay any portion that Fronting Offshore Lender shall have
distributed to such Offshore Participant, together with interest thereon
at such rate, if any, as Fronting Offshore Lender shall pay to a Borrower
or such other Person or entity with respect thereto. If any amounts
returned to a Borrower pursuant to this subsection 2.1A(iii)(b) are later
recovered by Fronting Offshore Lender, Fronting Offshore Lender shall
promptly pay to each Offshore Participant a proportionate share based on
such Offshore Participant's Offshore Participation.
If Fronting Offshore Lender incurs any costs or expenses (including,
without limitation, in indemnifying Administrative Agent pursuant to
subsection 9.4) in connection with any effort to enforce or protect rights
or interests relating to an Offshore
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Revolving Loan, then, other than in the case of Fronting Offshore Lender's
gross negligence or willful misconduct, each Offshore Participant will
reimburse Fronting Offshore Lender on demand for each such Offshore
Participant's proportionate share based on such Offshore Participant's
Offshore Participation of any portion of such cost or expenses which is
not reimbursed by or on behalf of Borrowers. If Fronting Offshore Lender
recovers any amount for which Fronting Offshore Lender has previously been
reimbursed by an Offshore Participant hereunder, Fronting Offshore Lender
shall promptly distribute to each such Offshore Participant such Offshore
Participant's proportionate share thereof based on its Offshore
Participation.
Anything contained herein to the contrary notwithstanding, the
obligation of each Offshore Participant to purchase an Offshore
Participation in any unpaid Offshore Revolving Loans pursuant to this
subsection 2.1A(iii)(b) shall be absolute and unconditional and shall not
be affected by any circumstance, including (I) any set-off, counterclaim,
recoupment, defense or other right which such Revolving Lender may have
against Fronting Offshore Lender, Company, MSL Overseas or any other
Person for any reason whatsoever; (II) the occurrence or continuation of
an Event of Default or a Potential Event of Default; (III) any adverse
change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its
Subsidiaries; (IV) any breach of this Agreement or any other Loan Document
by any party thereto; or (V) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. In no event
shall the Offshore Participation be construed as a loan or other extension
of credit by a Revolving Lender to Fronting Offshore Lender.
(iv) Several Obligations of Borrowers. The Obligations of each
Borrower shall be several and not joint, subject to the provisions of
Section 11 as to the Obligations of Company with respect to Loans made
available to MSL Overseas.
B. Borrowing Mechanics. Term Loans or Revolving Loans made on any
Funding Date (other than Revolving Loans made pursuant to subsection 3.3B for
the purpose of reimbursing any Issuing Lender for the amount of a drawing under
a Letter of Credit issued by it) shall be in an aggregate minimum amount of
$500,000 and multiples of $500,000 in excess of that amount; provided that Term
Loans or Revolving Loans made on any Funding Date as LIBOR Loans with a
particular Interest Period shall be in an aggregate minimum amount of $3,000,000
and multiples of $100,000 in excess of that amount; provided that Offshore
Revolving Loans shall be in an aggregate minimum amount of $3,000,000 and
multiples of 100,000 units of the applicable Offshore Currency in excess of such
amount. Whenever either Borrower desires that Lenders make Term Loans or
Revolving Loans, such Borrower shall deliver to Administrative Agent a Notice of
Borrowing no later than 9:00 a.m. (San Francisco time) a Business Day which is
at least three Business Days in advance of the proposed Funding Date (in the
case of a LIBOR Loan) or at least one Business Day in advance of the proposed
Funding Date (in the case of a Base Rate Loan); provided that if a Borrower
desires that Offshore Lenders make Offshore Revolving Loans to it, it shall
deliver a Notice of Borrowing no later than 9:00 a.m. (San Francisco time) on a
Business Day which is at least five Business Days in advance of the proposed
Funding Date. The Notice of Borrowing shall specify (i) the
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proposed Funding Date (which shall be a Business Day), (ii) the amount and type
of Loans requested, (iii) in the case of Revolving Loans not made on the Closing
Date, whether such Loans shall be Base Rate Loans or LIBOR Loans, (iv) in the
case of any Loans requested to be made as LIBOR Loans, the initial Interest
Period requested therefor and (v) in the case of Offshore Currency Loans, the
Offshore Currency. Term Loans and Revolving Loans may be continued as or
converted into Base Rate Loans and LIBOR Loans in the manner provided in
subsection 2.2D, and Revolving Loans may be continued as Offshore Currency Loans
in the manner provided in subsection 2.2D. Offshore Currency Loans may be made
only as LIBOR Loans. In lieu of delivering the above-described Notice of
Borrowing, Borrowers may give Administrative Agent telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
that such notice shall be immediately confirmed in writing by delivery of a
Notice of Borrowing to Administrative Agent.
The Dollar Equivalent amount of any Revolving Loans in an Offshore
Currency will be determined by Sub-Agent for such Loan on the Computation Date
therefor in accordance with subsection 2.7A. Upon receipt of the Notice of
Borrowing for a Revolving Loan, which will be provided to Administrative Agent,
Administrative Agent will determine the availability of Revolving Loan
Commitments hereunder as of the date of receipt by Administrative Agent of such
Notice of Borrowing and will promptly notify Sub-Agent and each Revolving Lender
of the amount of such Lender's Pro Rata Share of the Revolving Loan. In the case
of an Offshore Revolving Loan, such notice will provide the approximate Dollar
Equivalent amount of each Offshore Lender's Pro Rata Share of the Offshore
Revolving Loan, and Sub-Agent will, upon its determination of the Dollar
Equivalent amount of the Offshore Revolving Loan as specified in the Notice of
Borrowing, which calculation shall be made as of the date of the Offshore
Revolving Loan, promptly notify Administrative Agent and each Offshore Lender of
the exact amount of such Lender's Pro Rata Share of the Dollar Equivalent of the
Offshore Revolving Loan. In the case of Offshore Revolving Loans, if the
determination by Sub-Agent of the exact amount of the Dollar Equivalent of the
Offshore Revolving Loan as described in the immediately preceding sentence shall
result, due to a change in applicable rates of exchange between Dollars and the
relevant Offshore Currency between the date of the Notice of Borrowing and the
date of such exact determination by Sub-Agent, in the Total Utilization of
Revolving Loan Commitments exceeding the Revolving Loan Commitments then in
effect, the provisions of subsection 2.7F shall apply.
Neither Administrative Agent nor any Lender shall incur any
liability to either Borrower in acting upon any telephonic notice referred to
above that Administrative Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of such
Borrower or for otherwise acting in good faith under this subsection 2.1B, and
upon funding of Loans by Lenders in accordance with this Agreement pursuant to
any such telephonic notice such Borrower shall have effected Loans hereunder.
Each Borrower shall notify Administrative Agent in writing prior to
the funding of any Loans in the event that any of the matters to which such
Borrower is required to certify in the applicable Notice of Borrowing is no
longer true and correct as of the applicable Funding Date, and the acceptance by
such Borrower of the proceeds of any Loans shall constitute a re-
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certification by such Borrower, as of the applicable Funding Date, as to the
matters to which such Borrower is required to certify in the applicable Notice
of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a LIBOR Loan shall be immediately irrevocable, and the
applicable Borrower shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. All Term Loans and Revolving Loans
(including Offshore Revolving Loans) under this Agreement shall be made by
Lenders simultaneously and proportionately to their respective Pro Rata Shares,
it being understood that no Lender shall be responsible for any default by any
other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular type of
Loan requested be increased or decreased as a result of a default by any other
Lender in that other Lender's obligation to make a Loan requested hereunder nor
shall any Revolving Lender who is not an Offshore Lender have any obligation to
fund an Offshore Revolving Loan, but each such Revolving Lender shall have the
obligations with respect to such Offshore Revolving Loans set forth in
subsection 2.1A(iii). Promptly after receipt by Administrative Agent of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Term Lender, Revolving Lender or Offshore
Lender, as the case may be, of the proposed borrowing. Each Lender shall make
the amount of its Loan other than Offshore Currency Loans available to
Administrative Agent not later than 11:00 a.m. (San Francisco time) on the
applicable Funding Date and each Offshore Lender shall make the amount of its
Offshore Currency Loan available to Sub-Agent not later than such time as
Sub-Agent may specify, in each case in same day funds in Dollars or, as to
Offshore Currency Loans, in the applicable Offshore Currency, at the Funding and
Payment Office. Except as provided in subsection 3.3B with respect to Revolving
Loans used to reimburse any Issuing Lender for the amount of a drawing under a
Letter of Credit issued by it, upon satisfaction or waiver of the conditions
precedent specified in subsections 4.1 (in the case of Loans made on the Closing
Date) and 4.2 (in the case of all Loans), Administrative Agent or Sub-Agent
shall make the proceeds of such Loans available to the applicable Borrower on
the applicable Funding Date by causing an amount of same day funds in Dollars or
the applicable Offshore Currency equal to the proceeds of all such Loans
received by Administrative Agent from Term Lenders, Revolving Lenders or
Offshore Lenders, as the case may be, to be credited to the account of the
applicable Borrower or such other account as may be specified in writing by such
Borrower on the books of BofA at the Funding and Payment Office.
Unless Administrative Agent or Sub-Agent, as the case may be, shall
have been notified by any Lender prior to the Funding Date for any Loans that
such Lender does not intend to make available to Administrative Agent or
Sub-Agent, as the case may be, the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent or Sub-Agent, as the case may be, may
assume that such Lender has made such amount available to Administrative Agent
or Sub-Agent, as the case may be, on such Funding Date and Administrative Agent
or Sub-Agent, as the case may be, may, in its sole discretion, but shall not be
obligated to, make available to the applicable Borrower a corresponding amount
on such Funding Date. With respect to Loans other than Offshore Currency Loans,
if such corresponding amount is not in fact made available to Administrative
Agent by such Lender, Administrative Agent shall be entitled
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to recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the rate customarily used by Administrative
Agent for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify the applicable Borrower and such Borrower shall
(subject to such Borrower's right to request additional Loans hereunder equal to
such corresponding amount) immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for Base Rate Loans. With respect to Offshore
Currency Loans, if such a corresponding amount is not made available to
Administrative Agent or Sub-Agent, as the case may be, by such Lender when due
but is made available within three Business Days after the date such payment is
due, such Lender shall pay to Administrative Agent or Sub-Agent, as the case may
be, on demand an amount equal to the product of (i) such amount, times (ii) the
Cost of Funds in respect of the related Offshore Currency determined by
Administrative Agent or Sub-Agent, as the case may be, during the period from
and including the date on which such payment is immediately available to
Administrative Agent or Sub-Agent, as the case may be, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If such a corresponding amount is not made
available to Administrative Agent or Sub-Agent, as the case may be, by such
Lender within three Business Days after the date such payment is due,
Administrative Agent or Sub-Agent, as the case may be, shall be entitled to
recover from such Lender, on demand, the corresponding amount with interest
thereon calculated from such due date at the rate per annum equal to the rate
applicable thereto in accordance with the preceding sentence plus the applicable
LIBOR Margin (as set forth in subsection 2.2A) in respect of Offshore Revolving
Loans.
Nothing in this subsection 2.1C shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that such Borrower may have against any Lender as a result of any
default by such Lender hereunder.
D. Notes. Each Borrower shall execute and deliver on the Closing
Date (i) to each Term Loan Lender (or to Administrative Agent for that Lender) a
Term Note substantially in the form of Exhibit IV annexed hereto to evidence
that Lender's Term Loan, in the principal amount of that Lender's Term Loan and
with other appropriate insertions and (ii) to each Revolving Lender (or to
Administrative Agent for that Lender) a Revolving Note substantially in the form
of Exhibit V annexed hereto to evidence that Lender's Revolving Loans, in the
principal amount of that Lender's Revolving Loan Commitment and with other
appropriate insertions.
Administrative Agent may deem and treat the payee of any Note as the
owner thereof for all purposes hereof unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent as provided in subsection 12.1B(ii). Any request, authority
or consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be
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conclusive and binding on any subsequent holder, assignee or transferee of that
Note or of any Note or Notes issued in exchange therefor.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6
and 2.8, each Term Loan and each Revolving Loan shall bear interest on the
unpaid principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
Adjusted LIBOR. The applicable basis for determining the rate of interest with
respect to any Term Loan or any Revolving Loan shall be selected by the
applicable Borrower initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B, and the basis for determining
the interest rate with respect to any Term Loan or any Revolving Loan may be
changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan
or Revolving Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate.
(a) Subject to the provisions of subsections 2.2E and 2.8, the
Term Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base
Rate plus the Base Rate Margin set forth in the table below opposite
the Consolidated Leverage Ratio for the four-Fiscal Quarter period
for which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.l(iv); or
(II) if a LIBOR Loan, then at the sum of Adjusted LIBOR
plus the LIBOR Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-Fiscal Quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1 (iv):
Consolidated Leverage Ratio Applicable LIBOR Applicable Base
--------------------------- Margin Rate Margin
------ -----------
Greater than or equal to 3.0:1.00 2.50% 1.50%
Less than 3.0:1.00 2.25% 1.25%
provided that, for the first six months after the Closing Date, the
applicable margin for Term Loans that are LIBOR Loans shall be 2.50%
per annum and for Term Loans that are Base Rate Loans shall be 1.50%
per annum.
(b) Subject to the provisions of subsections 2.2E and 2.8, the
Revolving Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base
Rate plus the Base Rate Margin set forth in the table below opposite
the Consolidated
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Leverage Ratio for the four-Fiscal Quarter period for which the
applicable Margin Determination Certificate has been delivered
pursuant to subsection 6.1(iv); or
(II) if a LIBOR Loan, then at the sum of the Adjusted
LIBOR plus the LIBOR Margin set forth in the table below Opposite
the Consolidated Leverage Ratio for the four-Fiscal Quarter period
for which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv):
Consolidated Leverage Ratio Applicable LIBOR Applicable Base
--------------------------- Margin Rate Margin
------ -----------
Greater than or equal to 3.0:1.00 2.25% 1.25%
Greater than or equal to 2.5:1.00
but less than 3.0:1.00 2.00% 1.00%
Less than 2.5:1.00 1.75% 0.75%
provided that, for the first six months after the Closing Date, the applicable
margin for Revolving Loans that are LIBOR Loans shall be 2.25% per annum and for
Revolving Loans that are Base Rate Loans shall be 1.25% per annum.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(iv), the applicable margins
shall automatically be adjusted in accordance with such Margin Determination
Certificate, such adjustment to become effective on the next succeeding Business
Day following the receipt by Administrative Agent of such Margin Determination
Certificate; provided that, for the period commencing on the Business Day
following the date that is six months after the Closing Date, the applicable
margins shall be determined by reference to the Margin Determination Certificate
most recently received by Administrative Agent and provided further that, if at
any time a Margin Determination Certificate is not delivered at the time
required pursuant to subsection 6.1(iv), from the time such Margin Determination
Certificate was required to be delivered until delivery of such Margin
Determination Certificate, such applicable margins shall be the maximum
percentage amount for the relevant Loan set forth above.
B. Interest Periods. In connection with each LIBOR Loan, each
Borrower may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at such Borrower's option, either a one, two, three, six or, if available,
twelve month period; provided that:
(i) the initial Interest Period for any LIBOR Loan shall commence on
the Funding Date in respect of such Loan, in the case of a Loan initially
made as a LIBOR Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Loan converted to a LIBOR Loan;
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(ii) in the case of immediately successive Interest Periods
applicable to a LIBOR Loan continued as such pursuant to a Notice of
Conversion/Continuation, each successive Interest Period shall commence on
the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on the
last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Term Loans
shall extend beyond July 31, 2004 and no Interest Period with respect to
any portion of the Revolving Loans shall extend beyond the Revolving Loan
Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term
Loans shall extend beyond a date on which Borrowers are required to make a
scheduled payment of principal of the Term Loans, unless the sum of (a)
the aggregate principal amount of Term Loans that are Base Rate Loans plus
(b) the aggregate principal amount of Term Loans that are LIBOR Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Term Loans on such date;
(vii) there shall be no more than fifteen Interest Periods
outstanding at any time;
(viii) in the event the applicable Borrower fails to specify an
Interest Period for any LIBOR Loan in the applicable Notice of Borrowing
or Notice of Conversion/Continuation, such Borrower shall be deemed to
have selected an Interest Period of one month; and
(ix) in the event the applicable Borrower fails to specify an
Interest Period in the applicable Notice of Conversion/Continuation for an
Offshore Currency Loan prior to the fifth Business Day prior to the
expiration of the current Interest Period, the Borrower shall be deemed to
have elected to continue such Offshore Currency Loan (in the same Offshore
Currency) for an Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Revolving Loans that are Base Rate
Loans are prepaid pursuant to subsection 2.4B(i), interest accrued on such
Revolving
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Loans through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier.
at final maturity).
D. Conversion or Continuation. Subject to the provisions of
subsection 2.6 and subsection 2.7, each Borrower shall have the option (i) to
convert at any time all or any part of its outstanding Term Loans or Revolving
Loans (a) that are Base Rate Loans equal to $3,000.000 and multiples of $100,000
in excess of that amount to LIBOR Loans, (b) that are LIBOR Loans equal to
$500,000 and multiples of $500,000 in excess of that amount to Base Rate Loans,
or (ii) upon the expiration of any Interest Period applicable to a LIBOR Loan,
to continue all or any portion of such Loan (a) equal to $3,000,000 and
multiples of $100,000 in excess of that amount as a LIBOR Loan or (b) equal to
$3,000,000 and multiples of 100,000 in excess of that amount as an Offshore
Currency Loan.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 9:00 a.m. (San Francisco time) (i) at least
one Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan), (ii) at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a LIBOR Loan payable in dollars) and (iii) at least five
Business Days in advance of a proposed continuation date (in the case of a
continuation of an Offshore Currency Loan). A Notice of Conversion/Continuation
shall specify (I) the proposed conversion continuation date (which shall be a
Business Day), (II) the amount and type of the Loan to be converted/continued,
(III) the nature of the proposed conversion/continuation, (IV) in the case of a
conversion to, or a continuation of, a LIBOR Loan, the requested Interest
Period, (V) in the case of a conversion to, or a continuation of, a LIBOR Loan,
that no Potential Event of Default or Event of Default has occurred and is
continuing and (VI) in the case of a continuation of an Offshore Currency Loan,
the applicable Offshore Currency. In lieu of delivering the above-described
Notice of Conversion/Continuation, the applicable Borrower may give
Administrative Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2D; provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent; provided further that if at any
time the aggregate amount of LIBOR Loans denominated in Dollars is reduced by
payment, prepayment, or conversion of part thereof to less than $3,000,000, such
LIBOR Loans denominated in Dollars shall automatically convert into Base Rate
Loans, and on and after such date the right of any Borrower to continue such
Loans and convert such Loans into LIBOR Loans shall terminate and such LIBOR
Loans shall become due and payable on the last day of the then current Interest
Period and the right of such Borrower to continue such Loans shall terminate.
Upon receipt of written or telephonic notice of any proposed
conversion/continuation under this subsection 2.2D, Administrative Agent shall
promptly transmit such notice by telefacsimile or telephone to each Lender.
Neither Administrative Agent nor any Lender shall incur any
liability to Borrowers in acting upon any telephonic notice referred to above
that Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of such Borrower
or for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to any Loans in accordance with this Agreement pursuant to any
such
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<PAGE>
telephonic notice such Borrower shall have effected a conversion or
continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a LIBOR
Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after
the related Interest Rate Determination Date, and the applicable Borrower shall
be bound to effect a conversion or continuation in accordance therewith. Except
as otherwise provided in subsection 2.7, a Notice of Conversion/Continuation for
conversion to, or continuation of, an Offshore Currency Loan (or telephonic
notice in lieu thereof) shall be irrevocable on and after [four] Business Days
prior to the related Funding Date, and the applicable Borrower shall be bound to
effect a conversion or continuation in accordance therewith.
E. Default Rate. Upon the occurrence and during the continuation of
any Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code or other applicable bankruptcy laws) payable upon
demand at a rate that is 2% per annum in excess of the interest rate otherwise
payable under this Agreement with respect to the applicable Loans (or, in the
case of any such fees and other amounts, at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base Rate
Loans that are Term Loans); provided that, in the case of LIBOR Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such LIBOR Loans shall thereupon become Base Rate
Loans and shall thereafter bear interest payable upon demand at a rate which is
2% per annum in excess of the interest rate otherwise payable under this
Agreement for Base Rate Loans. Payment or acceptance of the increased rates of
interest provided for in this subsection 2.2E is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of any Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed
(i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year,
as the case may be, and (ii) in the case of LIBOR Loans, on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a LIBOR Loan, the
date of conversion of such LIBOR Loan to such Base Rate Loan, as the case may
be, shall be included, and the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted to a LIBOR Loan, the date of conversion of such Base
Rate Loan to such LIBOR Loan, as the case may be, shall be excluded; provided
that if a Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Loan.
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2.3 Fees.
A. Commitment Fees. Company agrees to pay to Administrative Agent.
for distribution to each Revolving Lender in proportion to that Lender's Pro
Rata Share, commitment fees for the period from and including the Closing Date
to and excluding the Revolving Loan Commitment Termination Date equal to the
average of the daily excess of the Revolving Loan Commitments over the sum of
the Total Utilization of Revolving Loan Commitments attributable to both
Borrower's Revolving Loans multiplied by the per annum commitment fee percentage
set forth below opposite the Consolidated Leverage Ratio for the four Fiscal
Quarter period for which the applicable Margin Determination Certificate has
been delivered pursuant to subsection 6.1 (iv):
Consolidated Leverage Commitment Fee
Ratio Percentage
--------------------- --------------
Greater than
or equal to 3.0:1.00 0.50%
less than 3.0:1.00 0.45%
such commitment fees to be calculated on the basis of a 360-day year and the
actual number of days elapsed and to be payable quarterly in arrears on the last
Business Day of each March, June, September and December of each year,
commencing on the first such date to occur after the Closing Date, and on the
Revolving Loan Commitment Termination Date; provided, that for the first six
months after the Closing Date the applicable commitment fee percentage shall be
0.50%. For purposes of determining the amount of Revolving Loans outstanding to
determine the amount of the Commitment Fee, the amount of any Offshore Currency
Loan shall be based on its Dollar Equivalent as of the most recent Computation
Date. Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1 (iv), the applicable commitment
fee percentage shall automatically be adjusted in accordance with such Margin
Determination Certificate, such adjustment to become effective on the next
succeeding Business Day following the receipt by Administrative Agent of such
Margin Determination Certificate; provided that for the period commencing on the
Business Day following the date that is six months after the Closing Date, the
applicable commitment fee percentage shall be determined by reference to the
Margin Determination Certificate most recently received by Administrative Agent
and provided further that in the event that Company fails to deliver a Margin
Determination Certificate timely in accordance with the provisions of subsection
6.1(iv), from the time such Margin Determination Certificate should have been
delivered until such date as such a Margin Determination Certificate is actually
delivered, the applicable commitment fee percentage shall be the maximum
percentage amount set forth above per annum.
B. Offshore Lending Fees. Each Borrower agrees to pay to
Administrative Agent, for distribution to Fronting Offshore Lender, an offshore
lending fee of 0.25% per annum of the amount of Offshore Currency Loans of such
Borrower so fronted (which shall not include such Lender's Pro Rata Share of any
Offshore Revolving Loan if there were no fronting) during
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each Interest Period by Fronting Offshore Lender, such fee to be payable in
arrears on the last Business Day of each March, June, September and December of
each year and computed on a 360-day year for the actual number of days elapsed.
C. Other Fees. Company agrees to pay to Arranger and Agents such
other fees in the amounts and at the times separately agreed upon between
Company, Agents and Arranger.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
General Provisions Regarding Payments.
A. Scheduled Payments of Term Loans.
Borrowers shall severally make principal payments on the Term Loans
in installments on the dates and in the amounts set forth below:
Scheduled Repayment Scheduled Repayment
Date of Term Loans of Company of Term Loans of MSL Overseas
---- ------------------------ -----------------------------
October 31, 1998 $37,500 $87,500
January 31, 1998 $37,500 $87,500
April 30, 1999 $37,500 $87,500
July 31, 1999 $37,500 $87,500
October 31, 1999 $37,500 $87,500
January 31, 1999 $37,500 $87,500
April 30, 2000 $37,500 $87,500
July 31, 2000 $37,500 $87,500
October 3l, 2000 $37,500 $87,500
January 31, 2000 $37,500 $87,500
April 30, 2001 $37,500 $87,500
July 31, 2001 $37,500 $87,500
October 31, 2001 $37,500 $87,500
January 31, 2001 $37,500 $87,500
April 30, 2002 $37,500 $87,500
July 31, 2002 $37,500 $87,500
October 31, 2002 $37,500 $87,500
January 31, 2002 $37,500 $87,500
April 30, 2003 $37,500 $87,500
July 31, 2003 $37,500 $87,500
October 31, 2003 $37,500 $87,500
January 31, 2003 $37,500 $87,500
April 30, 2004 $37,500 $87,500
July 31, 2004 $14,137,500 $32,987,500
----------- -----------
Total $15,000,000 $35,000,000
;provided that the scheduled installments of principal of the Term Loans set
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term
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Loans in accordance with subsection 2.4B(iv); and provided, further that the
Term Loans and all other amounts owed hereunder with respect to the Term Loans
shall be paid in full no later than July 31, 2004, and the final installment
payable by Borrowers in respect of the Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient to
repay all amounts owing by Borrowers under this Agreement with respect to the
Term Loans.
B. Prepayments and Unscheduled Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Each Borrower may, upon not less than one
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, three Business Days' prior written or telephonic notice, in the case of
LIBOR Loans and five Business Days' prior written notice, in the case of
Offshore Revolving Loans, in each case given to Administrative Agent by 9:00
a.m. (San Francisco time) on the date required and, if given by telephone,
promptly confirmed in writing to Administrative Agent (which original written or
telephonic notice Administrative Agent will promptly transmit by telefacsimile
or telephone to each Lender), at any time and from time to time prepay any Term
Loans or Revolving Loans on any Business Day in whole or in part in an aggregate
minimum amount of $500,000 and multiples of $100,000 in the case of a Base Rate
Loan, $3,000,000 and multiples of $100,000 in excess of that amount in the case
of a LIBOR Loan and in an aggregate minimum amount of $3,000,000 and multiples
of 100,000 units of the applicable Offshore Currency in the case of an Offshore
Currency Loan; provided, however, that a LIBOR Loan may only be prepaid on the
expiration of the Interest Period applicable thereto unless Borrowers comply
with subsection 2.6D with respect to any breakage costs resulting from such
prepayment being made on a date prior to the expiration of the applicable
Interest Period. Notice of prepayment having been given as aforesaid, the
principal amount of the Loans specified in such notice shall become due and
payable on the prepayment date specified therein. Any such voluntary prepayment
shall be applied as specified in subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon
not less than three Business Days' prior written or telephonic notice confirmed
in writing to Administrative Agent (which original written or telephonic notice
Administrative Agent will promptly transmit by telefacsimile or telephone to
each Revolving Lender), at any time and from time to time terminate in whole or
permanently reduce in part, without premium or penalty, the Revolving Loan
Commitments in an amount up to the amount by which the Revolving Loan
Commitments exceed the Total Utilization of Revolving Loan Commitments at the
time of such proposed termination or reduction; provided that any such partial
reduction of the Revolving Loan Commitments shall be in an aggregate minimum
amount of $5,000,000 and multiples of $1,000,000 in excess of that amount.
Company's notice to Administrative Agent shall designate the date (which shall
be a Business Day) of such termination or reduction, the Borrower as to which
such reduction applies and the amount of any partial reduction, and such
termination or reduction of the Revolving Loan Commitments shall be effective on
the date specified in Company's notice and shall reduce the Revolving Loan
Commitments of each Revolving Lender proportionately to its Pro Rata Share.
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(iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
Commitments. The Loans shall be prepaid and/or the Revolving Loan Commitments
shall be permanently reduced in the amounts and under the circumstances set
forth below, all such prepayments and/or reductions to be applied as set forth
below or as more specifically provided in subsection 2.4B(iv):
(a) Prepayments and Reductions From Net Asset Sale Proceeds. No
later than the first Business Day following the date of receipt by Company
or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of
any Asset Sale, the applicable Borrower shall prepay the Loans and/or the
Revolving Loan Commitments shall be permanently reduced in an aggregate
amount equal to such Net Asset Sale Proceeds.
(b) Prepayments and Reductions from Net Insurance/Condemnation
Proceeds. No later than the first Business Day following the date of
receipt by Administrative Agent or by Company or any of its Subsidiaries
of any Net Insurance/Condemnation Proceeds, the applicable Borrower shall
prepay the Loans and/or the Revolving Loan Commitments shall be
permanently reduced in an aggregate amount equal to the amount of such Net
Insurance/Condemnation Proceeds; provided, however, that no such
prepayment shall be required to the extent (i) under the terms of any
lease or other agreement existing on the date hereof such Net
Insurance/Condemnation Proceeds are required to be used to replace,
rebuild or repair the asset so damaged, destroyed or taken or (ii) Company
determines to utilize such Net Insurance/Condemnation Proceeds to replace,
rebuild or repair the asset damaged, destroyed or taken, and in each case
referred to in clauses (i) and (ii) above, Company or a Subsidiary of
Company so utilizes such Net Insurance/Condemnation Proceeds within 18
months of the receipt thereof.
(c) Prepayment and Reductions Due to Reversion of Surplus Assets of
Pension Plans. On the date of return to Company or any of its Subsidiaries
of any surplus assets of any Pension Plan of Company or any of its
Subsidiaries, Company shall repay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount (such
amount being the "Net Pension Proceeds") equal to 100% of such returned
surplus assets, net of transaction costs and expenses incurred in
obtaining such return, including incremental taxes payable as a result
thereof.
(d) Prepayments and Reductions Due to Issuance of Equity Securities.
On the date of receipt by Company or any of its Subsidiaries of the Cash
proceeds (any such cash proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "Net Equity Securities
Proceeds"), from the issuance of equity Securities of Company or any of
its Subsidiaries after the Closing Date (other than equity Securities
issued to Company or a Subsidiary), Company shall prepay the Loans and/or
the Revolving Loan Commitments shall
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be permanently reduced in an aggregate amount equal to 50% of such Net
Equity Securities Proceeds; provided that at such time as the Consolidated
Leverage Ratio is less than 3.00:1.00 for two consecutive fiscal quarters,
no such prepayment or reduction shall be required.
(c) Prepayment and Reduction Due to Issuance of Debt Securities. On
the date of receipt by Company or any of the Subsidiaries of the Cash
proceeds (any such cash proceeds, net of underwriting discounts and
commissions and other reasonable costs and expenses associated therewith,
including reasonable legal fees and expenses, being "Net Debt Securities
Proceeds"), from the issuance of debt securities of Company or any of its
Subsidiaries after the Closing Date (other than debt Securities issued to
Company or a Subsidiary), Company shall prepay the Loans and/or the
Revolving Loan Commitments shall be permanently reduced in an aggregate
amount equal to 100% of such Net Debt Securities Proceeds.
(f) Calculations of Net Proceeds Amounts: Additional Prepayments and
Reductions Based on Subsequent Calculations. Concurrently with any
prepayment of the Loans and/or reduction of the Revolving Loan Commitments
pursuant to subsections 2.4B(iii)(a)-(e), Company shall deliver to Agents
an Officer's Certificate demonstrating the calculation of the amount (the
"Net Proceeds Amount") of the applicable Net Asset Sale Proceeds or Net
Insurance/Condemnation Proceeds, Net Pension Proceeds, Net Equity
Securities Proceeds or Net Debt Securities Proceeds (as such terms are
defined in subsection 2.4B(iii)(c), (d) and (e)), as the case may be, that
gave rise to such prepayment and/or reduction. In the event that Company
shall subsequently determine that the actual Net Proceeds Amount was
greater than the amount set forth in such Officer's Certificate, the
applicable Borrower shall promptly make an additional prepayment of the
Loans (and/or, if applicable, the Revolving Loan Commitments shall be
permanently reduced) in an amount equal to the amount of such excess, and
Company shall concurrently therewith deliver to Agents an Officer's
Certificate demonstrating the derivation of the additional Net Proceeds
Amount resulting in such excess.
(g) Prepayments Due to Reductions or Restrictions of Revolving Loan
Commitments. Borrowers shall from time to time prepay the Revolving Loans
to the extent necessary (1) so that the Total Utilization of Revolving
Loan Commitments shall not at any time exceed the Revolving Loan
Commitments then in effect, subject to subsection 2.7F, and (2) to give
effect to the limitations set forth in subsection 2.1A(ii); provided that
if the Total Utilization of Revolving Loan Commitments exceeds the then
applicable Company Borrowing Base or the then applicable MSL Overseas
Borrowing Base solely by reason of a reduction in the Company Borrowing
Base or the MSL Overseas Borrowing Base subsequent to the making of
Revolving Loans, then Company or MSL Overseas, as applicable, may prepay
the Revolving Loans, as aforesaid, within five Business
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Days of the date of reduction of the Company Borrowing Base or the MSL
Overseas Borrowing Base, as applicable.
(iv) Application of Prepayments.
(a) Application of Voluntary Prepayments by Type of Loans and Order
of Maturity. Any voluntary prepayments pursuant to subsection 2.4B(i)
shall be applied as specified by Company in the applicable notice of
prepayment; provided that in the event Company fails to specify the Loans
to which any such prepayment shall be applied, such prepayment shall be
applied first to repay outstanding Term Loans of MSL Overseas to the full
extent thereof, second to repay outstanding Term Loans of Company to the
full extent thereof, third to repay outstanding Revolving Loans of MSL
Overseas to the full extent thereof and fourth to pay outstanding
Revolving Loans of Company to the full extent thereof; provided, that
prepayments by MSL Overseas shall be applied only to Loans of MSL
Overseas. Any voluntary prepayments of the Term Loans pursuant to
subsection 2.4B(i) (whether the application thereof is specified by
Company or not) shall be applied to reduce the scheduled installments of
principal of the Term Loans set forth in subsection 2.4 on a pro rata
basis.
(b) Application of Mandatory Prepayments by Type of Loans. Any
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans and/or a reduction of the Revolving Loan
Commitments pursuant to subsections 2.4B(iii)(a)-(g) shall be applied
first to prepay the Term Loans to the full extent thereof and to reduce
scheduled installments of principal thereof on a pro rata basis, second,
to the extent of any remaining portion of the Applied Amount, to
permanently reduce the Revolving Loan Commitments by the amount of such
prepayment, third, to the extent of any remaining portion of the Applied
Amount, to prepay the Revolving Loans to the full extent thereof and to
further permanently reduce the Revolving Loan Commitments by the amount of
such prepayment, fourth, to the extent of any remaining portion of the
Applied Amount, to provide cash collateral for any outstanding Letters of
Credit to the full extent of the outstanding stated amounts thereof and to
further permanently reduce the Revolving Loan Commitments by the amount of
such cash collateral and, fifth, to the extent of any remaining portion of
the Applied Amount, to further permanently reduce the Revolving Loan
Commitments to the full extent thereof. Any payment of Revolving Loans
and/or reduction in Revolving Loan Commitments shall be applied first to
Revolving Loans and/or Revolving Loan Commitments of MSL Overseas and then
to Revolving Loans and/or Revolving Commitments of Company. Prepayments
made by MSL Overseas and the application of any Applied Amount derived
from an Foreign Subsidiary shall be applied only to Loans of MSL Overseas.
(c) Application of Prepayments to Base Rate Loans and LIBOR Loans.
Considering Term Loans and Revolving Loans being prepaid separately, any
prepayment thereof shall be applied first to Base Rate Loans to the full
extent
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thereof before application to LIBOR Loans, in each case in a manner which
minimizes the amount of any payments required to be made by a Borrower
pursuant to subsection 2.6D.
(d) Application of Mandatory Payments of Term Loans. In the case of
any mandatory prepayment of the Term Loans, any Term Loan Lender or
Lenders may waive the right to receive the amount of such mandatory
prepayment of the Term Loans. If any such Lender or Lenders elect to waive
the right to receive the amount of such mandatory prepayment, 100% of the
amount that otherwise would have been applied to mandatorily prepay the
Term Loans of such Lender or Lenders shall be applied instead to the
prepayment of the Revolving Loans to the extent any are then outstanding
and the remaining amount shall be applied to reduce the Revolving Loan
Commitments; provided that in no event shall the Revolving Loan
Commitments be reduced to an amount below $35,000,000 as a result of this
section 2.4B(iv)(d).
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Borrowers of principal,
interest, fees and other Obligations hereunder and under the Notes shall be made
in Dollars in same day funds, without defense, setoff or counterclaim, free of
any restriction or condition, and delivered to Administrative Agent not later
than 12:00 Noon (San Francisco time) on the date due at the Funding and Payment
Office for the account of Lenders; funds received by Administrative Agent after
that time on such due date shall be deemed to have been paid by Company on the
next succeeding Business Day; provided that all payments by Borrowers of
principal and interest on, and other amounts relating to any Offshore Currency
Loan shall be made in the Offshore Currency in which such Loan is denominated no
later than such time as may be necessary for such payment to be credited on such
date in accordance with normal banking procedures in the place of payment.
Borrowers hereby authorize Administrative Agent, upon written notice to Company
or MSL Overseas, as applicable, to charge its accounts with Administrative Agent
in order to cause timely payment to be made to Administrative Agent of all
principal, interest, fees and expenses due hereunder (subject to sufficient
funds being available in its accounts for that purpose).
(ii) Application of Payments to Principal and Interest; No Prepayment
Premiums. Except as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in any
event, any payments in respect of any Loan on a date when interest is due and
payable with respect to such Loan) shall be applied to the payment of interest
before application to principal. Subject to the provisions of subsections 2.2E
and 2.6D, no payment, prepayment or repayment shall be subject to any prepayment
premium.
(iii) Apportionment of Payments. Aggregate principal and interest payments
in respect of Term Loans and Revolving Loans shall be apportioned among all
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outstanding Loans to which such payments relate, in each case proportionately
to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly
distribute to each Lender, at its primary address set forth below its name on
the appropriate signature page hereof or at such other address as such Lender
may request, its Pro Rata Share of all such payments received by
Administrative Agent and the commitment fees of such Lender when received by
Administrative Agent pursuant to subsection 2.3. Notwithstanding the
foregoing provisions of this subsection 2.4C(iii), if, pursuant to the
provisions of subsection 2.6C, any Notice of Conversion/Continuation is
withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate
Loans in lieu of its Pro Rata Share of any LIBOR Loans, Administrative Agent
shall give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the payment of interest
hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the actual
obligations of Borrowers hereunder or under such Note with respect to any Loan
or any payments of principal or interest on such Note.
D. Application of Proceeds of Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Domestic Collateral. Except as
provided in subsection 2.4B(iii)(a) with respect to prepayments from Net
Asset Sale Proceeds, all proceeds received by Collateral Agent in respect of
any sale of, collection from, or other realization upon all or any part of the
Domestic Collateral under any Domestic Collateral Document shall be promptly
applied in full or in part by Collateral Agent against, the applicable
Secured Obligations (as defined in such Domestic Collateral Document) in the
following order or priority:
(a) To the payment of all reasonable costs and expenses of such
sale, collection or other realization, including reasonable
compensation to Collateral Agent and its agents and counsel, and all
other reasonable expenses, liabilities and advances made or incurred by
Collateral Agent in connection therewith, and all amounts for which
Collateral Agent is entitled to indemnification under such Domestic
Collateral Document and all advances made by Collateral Agent thereunder
for the account of the applicable Loan Party, and to the payment of all
reasonable costs and expenses paid or incurred by Collateral Agent in
connection with the exercise of any right or remedy under such Domestic
Collateral
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Document, all in accordance with the terms of this Agreement and such
Domestic Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such Secured Obligations for the ratable benefit
of the holders thereof; provide that with respect to the Obligations
Collateral Agent shall apply amounts received, first to the payment of
principal, then to the payment of interest and then to the payment of
fees;
(c) thereafter, to the extent of any excess such proceeds, to
Cash Collateralize Letters of Credit for the ratable benefit of the
Issuing Lender thereof and holders of participations; and
(d) thereafter, to the extent of any excess such proceeds, to the
payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
(ii) Application of Proceeds of Offshore Collateral. Except as
provided in subsection 2.4B(iii)(a) with respect to prepayments from Net Asset
Sale Proceeds, all proceeds received by Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Offshore Collateral under any Offshore Collateral Document shall be promptly
applied in full or in part by Collateral Agent against, the applicable
secured obligations (as identified in such Offshore Collateral Document) of
MSL Overseas or any foreign Subsidiary in the following order of priority:
(a) To the payment of all reasonable costs and expenses of such
sale, collection or other realization, including reasonable
compensation to Collateral Agent and its agents and counsel, and all
other reasonable expenses, liabilities and advances made or incurred by
Collateral Agent in connection therewith, and all amounts for which
Collateral Agent is entitled to indemnification under such Offshore
Collateral Document and all advances made by Collateral Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all reasonable costs and expenses paid or incurred by
Collateral Agent in connection with the exercise of any right or remedy
under such Offshore Collateral Document, all in accordance with the
terms of this Agreement and such Offshore Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to the
payment of all other such secured obligations of MSL Overseas and any
other Foreign Subsidiary of Company for the ratable benefit of the
holders thereof; provided that with respect to Obligations Collateral
Agent shall apply amounts received, first to the payment of principal,
then to the payment of interest and then to the payment of fees;
(c) thereafter, to the extent of any excess such proceeds, to
Cash Collateralize Letters of Credit issued at the request of MSL
Overseas for the
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ratable benefit of the Issuing Lender thereof and holders of
participations therein; and
(d) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whosoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct; but in no event to or for the
benefit of Company or any Domestic Subsidiary.
(iii) Application of Payments Under Domestic Guaranties. All
payments received by Collateral Agent under any of the Domestic Guaranties
shall be applied promptly from time to time by Collateral Agent in the
following order of priority:
(a) to the payment of the reasonable costs and expenses of any
collection or other realization under the Domestic Guaranties,
including reasonable compensation to Collateral Agent and its agents
and counsel, and all reasonable expenses, liabilities and advances
made or incurred by Collateral Agent in connection therewith, all in
accordance with the terms of this Agreement and such Domestic
Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Domestic Guaranty) for the ratable benefit of the holders thereof;
provided that with respect to Obligations Collateral Agent shall
apply amounts received, first to the payment of principal, then to
the payment of interest and then to the payment of fees;
(c) thereafter, to the extent of any excess such payments, to
Cash Collateralize Letters of Credit for the ratable benefit of the
Issuing Lender thereof and holders of participations therein; and
(d) thereafter, to the extent of any excess such payments, to
the payment to Company or the applicable Subsidiary Guarantor or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct.
(iv) Application of Payments Under Offshore Guaranties. All payments
received by Collateral Agent under any of the Offshore Guaranties shall be
applied promptly from time to time by Collateral Agent in the following
order of priority:
(a) to the payment of the reasonable costs and expenses of any
collection or other realization under the Offshore Guaranties,
including reasonable compensation to Collateral Agent and its agents
and counsel, and all reasonable expenses, liabilities and advances
made or incurred by Collateral Agent in connection therewith, all in
accordance with the terms of this Agreement and such Offshore
Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other obligations guaranteed by such Offshore
Guaranty for the
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ratable benefit of the holders thereof; provided that with respect
to Obligations Collateral Agent shall apply amounts received, first
to the payment of principal. then to the payment of interest and
then to the payment of fees;
(c) thereafter, to the extent of any excess such payments, to
Cash Collateralize Letters of Credit issued at the request of MSL
Overseas for the ratable benefit of the Issuing Lender thereof and
holders of participations therein; and
(d) thereafter, to the extent of any excess such payments, to
the payment to the applicable Foreign Subsidiary of Company or to
whosoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct; but in no event to or for the
benefit of Company or any Domestic Subsidiary.
2.5 Use of Proceeds.
A. Term Loans. The proceeds of the Term Loans, together with other
funds available to Borrowers, shall be applied by Company to refinance a portion
of existing Indebtedness of Company and its Domestic Subsidiaries and by MSL
Overseas to refinance a portion of existing Indebtedness of Company's Foreign
Subsidiaries and to pay fees and expenses incurred in connection therewith in an
aggregate maximum amount of $3,500,000.
B. Revolving loans. The proceeds of the Revolving Loans shall be
applied by Company to refinance a portion of existing Indebtedness of Company
and its Domestic Subsidiaries by and MSL Overseas to refinance a portion of
existing Indebtedness of Company's Foreign Subsidiaries and for general
corporate purposes, including the financing of acquisitions.
C. Margin Regulations. No portion of the proceeds of any borrowing
under this Agreement shall be used by Company or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation U, Regulation T or Regulation X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board or to violate
the Exchange Act, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
2.6 Special Provisions Governing LIBOR Loans.
Notwithstanding any other provision of this Agreement to the
contrary, the following provisions shall govern with respect to LIBOR Loans as
to the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 11:00 a.m. (London time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the LIBOR Loans for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to Borrowers and each
Lender.
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B. Inability to Determine Applicable Interest Rate. In the event
that Administrative Agent shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any LIBOR Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means
to not exist for ascertaining the interest rate applicable to such Loans on
the basis provided for in the definition of Adjusted LIBOR, Administrative
Agent shall on such date give notice (by telefacsimile or by telephone
confirmed in writing) to Borrowers and each Lender of such determination,
whereupon (i) no Loans may be made as, or converted to, LIBOR Loans until
such time as Administrative Agent notifies Borrowers and Lenders that the
circumstances giving rise to such notice no longer exist and (ii) any Notice
of Borrowing or Notice of Conversion/Continuation given by either Borrower
with respect to the Loans in respect of which such determination was made
shall be deemed to be rescinded by such Borrower.
C. Illegality or Impracticability of LIBOR Loans. In the event
that on any date any Lender shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto but shall be
made only after consultation with Company and Administrative Agent) that the
making, maintaining or continuation of its LIBOR Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not
be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship, as a result of contingencies occurring after the date of
this Agreement which materially and adversely affect the London interbank
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an "Affected Lender" and it shall on that day
give notice (by telefacsimile or by telephone confirmed in writing) to
borrowers and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender).
Thereafter (a) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, LIBOR Loans shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a LIBOR Loan then being requested by either
Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or
convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected
Lender's obligation to maintain its outstanding LIBOR Loans (the "Affected
Loans") shall be terminated at the earlier to occur of the expiration of the
Interest Period then in effect with respect to the Affected Loans or when
required by law, and (d) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the
foregoing, to the extent a determination by an Affected Lender as described
above rates to a LIBOR Loan then being requested by Company pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, such Borrower
shall have the option, subject to the provisions of subsection 2.6D, to
rescind such Notice of Borrowing or Notice of Conversion/Continuation as to
all Lenders by giving notice (by telefacsimile or by telephone confirmed in
writing) to Administrative Agent of such rescission on the date on which the
Affected Lender gives notice of its determination as described above (which
notice of rescission Administrative Agent shall promptly transmit to each
other Lender). Except as provided in the immediately preceding sentence,
nothing in this subsection 2.6C shall affect the obligation of
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any Lender other than an Affected Lender to make or maintain Loans as, or to
convert Loans to, LIBOR Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest
Periods. Borrowers shall compensate each Lender, upon written request by
that Lender (which request shall set forth the basis for requesting such
amounts), for all reasonable losses, expenses and liabilities (including any
interest paid by that Lender to lenders of funds borrowed by it to make or
carry its LIBOR Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any LIBOR Loan does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request for borrowing, or a
conversion to or continuation of any LIBOR Loan does not occur on a date
specified therefor in a Notice of Conversion/Continuation or a telephonic
request for conversion or continuation, (ii) if any prepayment (including any
prepayment pursuant to subsection 2.4B(i)) or other principal payment or any
conversion of any of its LIBOR Loans occurs on a date prior to the last day
of an interest period applicable to that Loan, (iii) if any prepayment of any
of its LIBOR Loans is not made on any date specified in a notice of
prepayment given by any Borrower, or (iv) as a consequence of any other
default by either Borrower in the repayment of its LIBOR Loans when required
by the terms of this Agreement.
E. Booking of LIBOR Loans. Any Lender may make, carry or
transfer LIBOR Loans at, to, or for the account of any of its branch offices
or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of LIBOR Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.8A shall be made as though that Lender had actually funded each
of its relevant LIBOR Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the
definition of Adjusted LIBOR in an amount equal to the amount of such LIBOR
Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of
that Lender to a domestic office of that Lender in the United States of
America; provided, however, that each Lender may fund each of its LIBOR Loans
in any manner it sees fit and the foregoing assumptions shall be utilized
only for the purposes of calculating amounts payable under this subsection
2.6 and under subsection 2.8A.
G. LIBOR Loans After Default. After the occurrence of and
during the continuation of an Event of Default or, upon request of Requisite
Lenders, a Potential Event of Default (i) Borrowers may not elect to have a
Loan be made or maintained as, or converted to, a LIBOR Loan after the
expiration of any Interest Period then in effect for that Loan, other than
outstanding Offshore Currency Loans which may not be continued for an
Interest Period exceeding one month and (ii) subject to the provisions of
subsection 2.6D, any Notice of Borrowing given by any Borrower with respect
to a requested borrowing that has not yet occurred shall be deemed to be
rescinded by such Borrower.
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2.7 Special Provisions Governing Offshore Currency Loans.
A. Determination of Dollar Equivalent. Sub-Agent will determine, as
herein provided, the Dollar Equivalent amount with respect to any Offshore
Currency Loans as of the requested Funding Date. Sub-Agent will determine, as
herein provided, the Dollar Equivalent amount with respect to any (i)
outstanding Offshore Currency Loans as of the last Business Day of each month
and as of any redenomination date pursuant to this Section 2.7 and (ii) with
respect to the Letters of Credit to be denominated in an Offshore Currency, as
of the date of issuance thereof and the date of drawing thereof (each date a
"Computation Date").
B. Inability to Make Offshore Currency Loans. In the case of a
Notice of Borrowing requesting Offshore Currency Loans, Offshore Lenders shall
be under no obligation to make Offshore Currency Loans in the requested Offshore
Currency if Sub-Agent has received notice from any of Offshore Lenders by 4:00
p.m. (London time) four Business Days prior to the day of such Notice of
Borrowing that such Lender cannot provide Loans in the requested Offshore
Currency, in which event Sub-Agent will give notice to Fronting Offshore Lender,
which will advance such funds in an amount equal to such notifying Offshore
Lender's Pro Rata Share of the requested Borrowing, pursuant to the provisions
of subsection 2.1A(iii)(b). In the event that Fronting Offshore Lender has given
notice pursuant to this subsection 2.7B, Sub-Agent will give notice to
Administrative Agent and the applicable Borrower no later than 5:00 p.m. (London
time) on the fourth Business Day prior to the date of the Notice of Borrowing
that such borrowing in the requested Offshore Currency Loan is not then
available, and notice thereof also will be given promptly by Administrative
Agent to Revolving Lenders. If Sub-Agent shall have so notified the requesting
Borrower that any such Offshore Currency Loan is not then available, the
applicable Borrower may by notice to Administrative Agent not later than 8:00
a.m. (London time) three Business Days prior to the requested date of such
Notice of Borrowing, withdraw such Notice of Borrowing. If the requesting
Borrower does so withdraw such Notice of Borrowing, the Offshore Currency Loan
shall not be made and Sub-Agent will promptly so notify each Offshore Lender. If
the requesting Borrower does not so withdraw such Notice of Borrowing,
Administrative Agent will promptly so notify each Revolving Lender and such
Notice of Borrowing shall be deemed to be a Notice of Borrowing that requests a
Base Rate Loan in an aggregate amount equal to the amount originally requested
as expressed in Dollars in the Notice of Borrowing; and in such notice by
Administrative Agent to each Revolving Lender Administrative Agent will state
such aggregate amount of such Loan in Dollars and such Lender's Pro Rata Share
thereof and each Revolving Lender shall make its Pro Rata Share of the Loan
available to Administrative Agent.
C. Inability to Continue Offshore Currency Loans. In the case of a
proposed continuation of Offshore Currency Loans pursuant to subsection 2.2D, no
Offshore Lender shall be under any obligation to continue such Offshore Currency
Loans if Sub-Agent has received notice from such Offshore Lender by 4:00 p.m.
(London time) four Business Days prior to the day of such continuation that such
Lender cannot continue to provide Loans in the relevant Offshore Currency, in
which event Sub-Agent will give notice to Fronting Offshore Lender, which will
advance such funds in an amount equal to such notifying Offshore Lender's Pro
Rata Share of the requested continuation, pursuant to the provisions of
subsection 2.1A(iii)(b). In the event that Fronting Offshore Lender has given
notice pursuant to this subsection 2.7C, then Sub-
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Agent will give notice to Administrative Agent and the requesting Borrower not
later than 5:00 p.m. (London time) on the fourth Business Day prior to the
requested date of such continuation that the continuation of such Offshore
Currency Loans in the relevant Offshore Currency is not then available, and
notice thereof also will be given promptly to Revolving Lenders. If
Administrative Agent shall have so notified the Borrower that any such
continuation of Offshore Currency Loans is not then available, any Notice of
Conversion/Continuation with respect thereto shall be deemed withdrawn and such
Offshore Currency Loans shall be redenominated into Base Rate Loans in Dollars
with effect from the last day of the Interest Period with respect to any such
Offshore Currency Loans. Administrative Agent will promptly notify the Borrower
and Lenders of any such redenomination and in such notice by Administrative
Agent to each Revolving Lender Administrative Agent shall state the aggregate
Dollar Equivalent amount of the redenominated Offshore Currency Loans as of the
Computation Date with respect thereto and such Lender's Pro Rata Share thereof.
D. Event of Default. In addition to subsection 2.6G, upon request of
Lenders having or holding 51% of the Offshore Revolving Loan Exposure, a
Potential Event of Default, all or any part of any outstanding Offshore Currency
Loans shall be redenominated and converted into Base Rate Loans in Dollars with
effect from the last day of the Interest Period with respect to any such
Offshore Currency Loans. Administrative Agent will promptly notify Borrowers of
any such redenomination and conversion request.
E. Other Currency Loans. Borrowers shall be entitled to request that
Revolving Loans hereunder be permitted to be made in an Other Currency. A
Borrower requesting an Other Currency shall deliver to Administrative Agent any
request for designation of an Other Currency in accordance with Section 12.8, to
be received by Administrative Agent not later than 10:00 a.m (San Francisco
time) at least ten Business Days in advance of the Funding Date of any Revolving
Loan proposed to be made in such Other Currency. Upon receipt of any such
request Administrative Agent will promptly notify Sub-Agent, Fronting Offshore
Lender and Offshore Lenders thereof, and Fronting Offshore Lender and each
Offshore Lender will use its commercially reasonable efforts to respond to such
request within two Business Days of receipt thereof. Fronting Offshore Lender
and each Offshore Lender may grant or accept such request in its sole
discretion. Administrative Agent will promptly notify such Borrower of the
acceptance or rejection of any such request. If such request is accepted by
Fronting Offshore Lender, the provisions of this Agreement relating to Offshore
Currency Loans shall apply to Loans made in the Other Currency, as if Such Other
Currency were an Offshore Currency.
F. Currency Exchange Fluctuations. If, on any Computation Date or
such other date upon which such determination shall be made by Administrative
Agent at the request of Lenders, Administrative Agent shall have determined that
the Total Utilization of Revolving Loan Commitments exceed the Revolving Loan
Commitments then in effect by more than $500,000 due to a change in applicable
rates of exchange between Dollars and Offshore Currencies, then Administrative
Agent shall give notice to Borrowers that a prepayment is required under this
Section 2.7F, and Borrowers agree thereupon to make within three Business Days
prepayments of Revolving Loans such that, after giving effect to such
prepayment, the
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Total Utilization of Revolving Loan Commitments does not exceed the Revolving
Loan Commitments then in effect.
G. European Economic and Monetary Union. The European Economic and
Monetary Union (the "European Monetary Union") anticipates the introduction of a
single currency for use by the member states participating in the European
Monetary Union. On the date on which such single currency is so introduced and
adopted for use, it is hereby acknowledged and agreed that the term Offshore
Currency shall include any such single currency.
(i) If, as a result of the implementation of the European Monetary
Union, (a) any currency available for borrowing under this Agreement (a
"National Currency") ceases to be lawful currency of the state issuing the same
and is replaced by a European single or common currency (the "Euro") or (b) any
National Currency and the Euro are at the same time both recognized by the
central bank or comparable governmental authority of the state issuing such
currency as lawful currency of such state, then any amount borrowed hereunder by
any party hereto in such National Currency shall be payable in such National
Currency and any amount borrowed hereunder in the Euro shall be payable in the
Euro. After the European Central Bank and/or the comparable government authority
ceases to recognize any National Currency, then the amount so payable shall be
determined by redenominating or converting such National Currency into the Euro
at the exchange rate officially fixed by the European Central Bank for the
purpose of implementing the European Monetary Union. Prior to the occurrence of
the event or events described in clause (a) or (b) of the preceding sentence,
each amount payable hereunder in any such National Currency will, except as
otherwise provided herein, continue to be payable only in that National
Currency.
(ii) Borrowers shall from time to time, at the request of any
Lender, pay to such Lender the amount of any losses, damages, liabilities,
claims, reduction in yield, additional expense or increased cost incurred by, or
of any reduction in any amount payable to or in the effective return on its
capital to, or any decrease or delay in the payment of interest or other return
foregone by, such Lender or any of its Affiliates as a result of any political,
tax, liquidity, currency exchange or market risk resulting from the introduction
of, changeover to or operation of the Euro in any applicable nation or
eurocurrency market.
(iii) In addition, this Agreement (including, without limitation,
applicable definitions) will be amended to the extent determined by
Administrative Agent (acting reasonably and in consultation with Company) to be
necessary to reflect such implementation of the European Monetary Union and
change in currency and to put Lenders and Borrowers in the same position, so far
as possible, that they would have been in if such implementation and change in
currency had not occurred. Except as provided in the foregoing provisions of
this subsection 2.7G. no such implementation or change in currency nor any
economic consequences resulting therefrom shall (a) give rise to any right to
terminate prematurely, contest, cancel, rescind, alter, modify or renegotiate
the provisions of this Agreement or (b) discharge, excuse or otherwise affect
the performance of any obligations of any Borrower or any Lender or Agent under
this Agreement, any Notes or other Loan Documents.
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2.8 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the
provisions of subsection 2.8B (which shall be controlling with respect to the
matters covered thereby), in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to LIBOR Loans that are
reflected in the definition of Adjusted LIBOR); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Borrowers shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion absent manifest error shall determine) as may be necessary to
compensate such Lender for any such increased cost or reduction in amounts
received or receivable hereunder. Such Lender shall deliver to Borrowers (with a
copy to Administrative Agent) a written statement, setting forth in reasonable
detail the basis for calculating the additional amounts owed to such Lender
under this subsection 2.8A, which statement shall be conclusive and binding upon
all parties hereto absent manifest error.
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B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrowers under
this Agreement and the other Loan Documents shall (except to the extent required
by law) be paid free and clear of, and without any deduction or withholding on
account of, any Tax (other than a Tax on the overall net income of any Lender)
imposed, levied, collected, withheld or assessed by or within the United States
of America or any political subdivision in or of the United States of America or
any other jurisdiction outside the United States of America from or to which a
payment is made by or on behalf of Borrowers or by any federation or
organization of which the United States of America or any such jurisdiction is a
member at the time of payment.
(ii) Grossing-up of Payments. If either Borrower or any other Person is
required by law to make any deduction or withholding on account of any such Tax
from any sum paid or payable by such Borrower to Administrative Agent or any
Lender under any of the Loan Documents:
(a) Such Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as such Borrower
becomes aware of it;
(b) Such Borrower shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to pay
is imposed on such Borrower) for its own account or (if that liability is
imposed on Administrative Agent or such Lender, as the case may be) on
behalf of and in the name of Administrative Agent or such Lender;
(c) the sum payable by such Borrower in respect of which the
relevant deduction, withholding or payment is required shall be increased
to the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such Lender, as
the case may be, receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment been required
or made; and
(d) within 30 days after paying any sum from which it is required by
law to make any deduction or withholding, and within 30 days after the due
date of payment of any Tax which it is required by clause (b) above to
pay, such Borrower shall deliver to Administrative Agent evidence
satisfactory to the other affected parties of such deduction, withholding
or payment and of the remittance thereof to the relevant taxing or other
authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
date hereof (in the case of each Lender listed on the signature pages hereof) or
after the date of the Assignment Agreement pursuant to which such Lender became
a Lender (in the case of each other Lender) in any such requirement for a
deduction, withholding or payment as is mentioned
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therein shall result in an increase in the rate of such deduction, withholding
or payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to such
Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision
thereof (for purposes of this subsection 2.8B(iii), a "Non-US Lender")
shall deliver to Administrative Agent for transmission to Company, on or
prior to the Closing Date (in the ease of each Lender listed on the
signature pages hereof) or on or prior to the date of the Assignment
Agreement pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the determination
of Company or Administrative Agent (each in the reasonable exercise of its
discretion), (1) two original copies of Internal Revenue Service Form 1001
or 4224 (or any successor forms), properly completed and duly executed by
such Lender, together with any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations issued
thereunder to establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other amounts
payable under any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the Internal
Revenue Code and cannot deliver either Internal Revenue Service Form 1001
or 4224 pursuant to clause (l) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service Form W-8 (or
any successor form), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding of
United States federal income tax with respect to any payments to such
Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or other
evidence with respect to United States federal income tax withholding
matters pursuant to subsection 2.8B(iii)(a) hereby agrees, from time to
time after the initial delivery by such Lender of such forms, certificates
or other evidence, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence obsolete or inaccurate
in any material respect, that such Lender shall promptly (1) deliver to
Administrative Agent for transmission to Company two new original copies
of Internal Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue Service Form
W-8, as the case may be, properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is not subject
to deduction or withholding of United States federal income tax with
respect to payments to such Lender under the Loan Documents or (2) notify
Administrative
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Agent and Company of its inability to deliver any such forms, certificates
or other evidence.
(c) Neither Borrower shall be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.8B(ii) if such
Lender shall have failed to satisfy the requirements of clause (a) or
(b)(l) of this subsection 2.8B(iii); provided that if such Lender shall
have satisfied the requirements of subsection 2.8B(iii)(a) on the Closing
Date (in the case of each Lender listed on the signature pages hereof) or
on the date of the Assignment Agreement pursuant to which it became a
Lender (in the case of each other Lender), nothing in this subsection
2.8B(iii)(c) shall relieve either Borrower of its obligation to pay any
additional amounts pursuant to clause (c) of subsection 2.8B(ii) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is no
longer properly entitled to deliver forms, certificates or other evidence
at a subsequent date establishing the fact that such Lender is not subject
to withholding as described in subsection 2.8B(iii)(a).
(d) Notwithstanding anything herein to the contrary, if any Non-US
Lender loses, through its own action or inaction, its exemption from
United States Federal income tax withholding, neither Borrower will be
liable from the date of such change in exemption status for any additional
amount payable pursuant to subsection 2.8B(ii).
(e) If any Lender is entitled to a reduction in the applicable
withholding tax, Administrative Agent may withhold from any interest
payment to such Lender an amount equivalent to the applicable withholding
tax after taking into account such reduction. However, if the forms or
other documentation required by subsection 2.8B(iii)(a) above are not
delivered to Administrative Agent, then Administrative Agent may withhold
from any interest payment to such Lender not providing such forms or other
documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Internal Revenue Code, without
reduction.
(f) If the Internal Revenue Service or any other governmental
authority of the United States or other jurisdiction asserts a claim that
Administrative Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not
delivered or was not properly executed, or because such Lender failed to
notify Administrative Agent of a change in circumstances which rendered
the exemption from, or reduction of withholding tax ineffective, or for
any other reason) such Lender shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by Administrative
Agent as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to
Administrative Agent under this subsection 2.8B together with all costs
and expenses (including covered fees and disbursements). The obligation of
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Lenders under this subsection 2.8B shall survive the payment of all
Obligations and the resignation or replacement of Administrative Agent.
C. Capital Adequacy Adjustment. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, the applicable
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender or such controlling corporation on an after-tax basis for
such reduction. Such Lender shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis of the calculation of such additional amounts, which statement shall
be conclusive and binding upon all parties hereto absent manifest error.
2.9 Obligation of Lenders and Issuing Lender to Mitigate; Replacement of Lender.
A. Mitigation. Each Lender and the Issuing Lender agrees that, as
promptly as practicable after the officer of such Lender or the Issuing Lender
responsible for administering the Loans or Letters of Credit of such Lender or
Issuing Lender, as the case may be, becomes aware of the occurrence of an event
or the existence of a condition that would cause such Lender to become an
Affected Lender or that would entitle such Lender or Issuing Lender to receive
payments under subsection 2.8 or subsection 3.6, it will, to the extent not
inconsistent with the internal policies of such Lender or Issuing Lender and any
applicable legal or regulatory restrictions, use reasonable efforts (i) to make,
issue, fund or maintain the Commitments of such Lender or the affected Loans or
Letters of Credit of such Lender or Issuing Lender through another lending or
letter of credit office of such Lender or Issuing Lender, or (ii) take such
other measures as such Lender or Issuing Lender may deem reasonable, if as a
result thereof the circumstances which would cause such Lender to be an Affected
Lender would cease to exist or the additional amounts which would otherwise be
required to be paid to such Lender or Issuing Lender pursuant to subsection 2.8
or subsection 3.6 would be materially reduced and if, as determined by such
Lender or Issuing Lender in its sole discretion, the making, issuing, funding or
maintaining of such Commitments or Loans or Letters of Credit through such other
lending or letter of credit office or in accordance with such other measures, as
the case may be, would not otherwise materially adversely affect such
Commitments or Loans or Letters of Credit or the interests of such Lender or
Issuing Lender; provided that such Lender or Issuing Lender will not
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be obligated to utilize such other lending or letter of credit office pursuant
to this subsection 2.9 unless Company agrees to pay all incremental expenses
incurred by such Lender or Issuing Lender as a result of utilizing such other
lending or letter of credit office as described in clause (i) above after
reasonable notice thereof and of the effects of the operation of this section. A
certificate as to the amount of any such expenses payable by Borrowers pursuant
to this subsection 2.9 (setting forth in reasonable detail the basis for
requesting such amount) submitted by such Lender or Issuing Lender to Company
(with a copy to Administrative Agent) shall be conclusive absent manifest error.
B. Replacement of Lender. If either Borrower receives a notice of
amounts due pursuant to subsection 2.8A, subsection 2.8B or subsection 2.8C from
a Lender, a Lender defaults in its obligations hereunder or a Lender becomes an
Affected Lender (any such Lender, a "Subject Lender"), so long as (i) no
Potential Event of Default or Event of Default shall have occurred and be
continuing and Company has obtained a commitment from another Lender or an
Eligible Assignee to purchase at par the Subject Lender's Loans and assume the
Subject Lender's Commitments and all other obligations of the Subject Lender
hereunder, (ii) such Lender is not the Issuing Lender with respect to any
Letters of Credit outstanding (unless all such Letters of Credit are terminated
or arrangements reasonably acceptable to the Issuing Lender (such as a
"back-to-back" letter of credit) are made) and (iii) the Subject Lender is
unwilling, unable or fails to withdraw the notice delivered pursuant to
subsections 2.8A, 2.8B or 2.8C, is unwilling to remedy its default and/or
remains an Affected Lender, upon 10 days prior written notice to the Subject
Lender and Administrative Agent, Company may require the Subject Lender to
assign all of its Loans and Commitments to such other Lender or Eligible
Assignee pursuant to the provisions of subsection 12.1B; provided that, prior to
or concurrently with such replacement (i) each Borrower has paid to the Lender
giving such notice all amounts under subsections 2.6D and 2.8 (if applicable)
through such date of replacement, (ii) Company or the applicable assignee have
paid to Administrative Agent the processing fee required to be paid by
subsection 12.1B(i) and (iii) all of the requirements for such assignment
contained in subsection 12.1B, including, without limitation, the consent of
Administrative Agent (if required) and the receipt by Administrative Agent of an
executed Assignment Agreement and other supporting documents, have been
fulfilled.
2.10 Covenant to Pay in Relation to Dutch Pledges.
Each Borrower hereby severally agrees vis-a-vis the Collateral Agent
and the Administrative Agent that it shall pay to the Collateral Agent all
amounts which such Borrower is now or may at any time and from time to time
hereafter be obligated to pay to the Lenders, Agents or any one or more of them
under this Agreement, including any amount due pursuant to guarantees contained
in Section 11 of this Agreement (the "Covenant to Pay Obligations"), if and when
such amounts become due and payable in accordance with the terms of this
Agreement.
Each Borrower severally and the Collateral Agent and the
Administrative Agent agree and acknowledge that the Covenant to Pay Obligations
consist of obligations and liabilities of such Borrower to the Collateral Agent
separate and independent from and without prejudice to the liabilities and
obligations which such Borrower has or may have at any time to the Lenders or
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the Agents under this Agreement. provided that the total liability of each
Borrower under the Covenant to Pay Obligations shall be decreased from time to
time to the extent that such Borrower shall have paid to the Lenders or the
Agents any amount due under this Agreement and the total liability of each
Borrower vis-a-vis the Lenders and the Agents under this Agreement shall be
decreased to the extent that such Borrower shall have paid to the Collateral
Agent any amount due pursuant to the Covenant to Pay Obligations.
Section 3. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. In addition to Borrowers requesting that
Revolving Lenders make Revolving Loans and Offshore Revolving Loans pursuant to
subsection 2.1A, Borrowers may request, in accordance with the provisions of
this subsection 3.1, from time to time during the period from the Closing Date
to but excluding the thirtieth day prior to the Revolving Loan Commitment
Termination Date, that the Issuing Lender issue Letters of Credit for the
account of a Borrower for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, Issuing Lender may, but (except as
provided in subsection 3.1B(ii)) shall not be obligated to, issue such Letters
of Credit in accordance with the provisions of this subsection 3.1; provided
that neither Borrower shall request that Issuing Lender issue (and Issuing
Lender shall not issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
(ii) any Letter of Credit for a Borrower if, after giving effect to
such issuance, the Total Utilization of Revolving Loan Commitments
applicable to such Borrower would exceed the applicable borrowing base;
(iii) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed $10,000,000;
(iv) any Standby Letter of Credit having an expiration date (a) more
than one year after the Revolving Loan Commitment Termination Date or (b)
more than one year after the date of issuance of such Standby Letter of
Credit, unless Requisite Lenders have approved such expiration date in
writing and such Letter of Credit shall be subject to subsection 3.7;
provided that the immediately preceding clause (b) shall not prevent the
Issuing Lender from agreeing that a Standby Letter of Credit will
automatically be extended for one or more successive periods not to exceed
one year each unless the Issuing Lender elects not to extend for any such
additional period provided, however in no event shall the Issuing Lender
be required to issue any Letter of Credit which contains an automatic
renewal provision or similar so-called "evergreen" provision); and
provided, further that the Issuing Lender shall elect not to extend such
Standby Letter of Credit if it has knowledge that an Event of Default has
occurred and is continuing (and
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has not been waived in accordance with subsection 12.6) at the time the
Issuing Lender must elect whether or not to allow such extension;
(v) any Commercial Letter of Credit having an expiration date (a)
later than the earlier of (X) the date that is 30 days prior to the
Revolving Loan Commitment Termination Date (provided that this clause (X)
shall not be applicable with respect to any Commercial Letter of Credit
that is fully supported by cash collateral on terms satisfactory to, and
if such later expiration date shall have been agreed to by, the Issuing
Lender) and (Y) the date which is 180 days from the date of issuance of
such Commercial Letter of Credit or (b) that is otherwise unacceptable to
the Issuing Lender in its reasonable discretion;
(vi) any Letter of Credit, if the Issuing Lender has received
written notice from any Lender, Administrative Agent or a Borrower, on or
prior to the Business Day prior to the requested date of issuance of such
Letter of Credit, that one or more of the applicable conditions contained
in Section 4 is not then satisfied;
(vii) any Letter of Credit, if, upon issuance, there would be more
than ten Letters of Credit outstanding at any time under this Agreement;
or
(viii) any Letter of Credit to be denominated in an Offshore
Currency or Other Currency, if the Issuing Lender has determined that it
is unable to fund obligations in the currency.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever a Borrower desires the issuance of
a Letter of Credit, it shall deliver to the Issuing Lender, with a copy to
Administrative Agent, an irrevocable written Notice of Issuance of Letter
of Credit substantially in the form of Exhibit III annexed hereto no later
than 12:00 Noon (San Francisco time) at least three Business Days (five
Business Days in the case of a Commercial Letter of Credit), or such
shorter period as may be agreed to by the Issuing Lender in any particular
instance, in advance of the proposed date of issuance. The Notice of
Issuance of Letter of Credit shall specify (a) the proposed date of
issuance (which shall be a Business Day), (b) whether the Letter of Credit
is to be a Commercial Letter of Credit or a Standby Letter of Credit, (c)
the face amount of the Letter of Credit, (d) the currency in which the
Letter of Credit shall be denominated, (e) the expiration date of the
Letter of Credit, (f) the name and address of the beneficiary, (g) either
the verbatim text of the proposed Letter of Credit or the proposed terms
and conditions thereof, including a precise description of any documents
to be presented by the beneficiary which, if presented by the beneficiary
on or prior to the expiration date of the Letter of Credit, would require
the Issuing Lender to make payment under the Letter of Credit and (h) such
other matters as the Issuing Lender may reasonably require; provided that
the Issuing Lender, in its reasonable discretion, may require changes in
the text of the proposed Letter of Credit or any such documents.
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The requesting Borrower shall notify the Issuing Lender prior to the
issuance of any Letter of Credit in the event that any of the matters to
which such Borrower is required to certify in the applicable Notice of
Issuance of Letter of Credit is no longer true and correct as of the
proposed date of issuance of such Letter of Credit, and upon the issuance
of any Letter of Credit such Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
such Borrower is required to certify in the applicable Notice of Issuance
of Letter of Credit.
(ii) Issuance of Letter of Credit. Upon satisfaction or waiver (in
accordance with subsection 12.6) of the conditions set forth in subsection
4.3, the Issuing Lender shall issue the requested Letter of Credit in
accordance with the Issuing Lender's standard operating procedures unless
the Issuing Lender shall have received notice from Administrative Agent at
least one Business Day prior to the date of issuance of the requested
Letter of Credit that such issuance is not then permitted under subsection
3.1A as a result of the limitations set forth therein.
(iii) Notification to Revolving Lenders. Upon the issuance of any
Letter of Credit the Issuing Lender shall promptly notify Administrative
Agent and each other Revolving Lender and the applicable Borrower of such
issuance. Together with such notice, Administrative Agent shall notify
each Revolving Lender of such issuance and of the amount of such Lender's
respective participation in such Letter of Credit, determined in
accordance with subsection 3.1C.
C. Revolving Lenders' Purchase of Participations in Letters of
Credit. Immediately upon the issuance of each Letter of Credit, each Revolving
Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from
the Issuing Lender a participation in such Letter of Credit and any drawings
honored thereunder in an amount equal to such Revolving Lender's Pro Rata Share
of the maximum amount which is or at any time may become available to be drawn
thereunder.
D. Amendment of Letters of Credit. From time to time while a Letter
of Credit is outstanding and prior to the Revolving Loan Commitment Termination
Date, Issuing Lender will, upon the written request of a Borrower received by
the Issuing Lender (with a copy sent by such Borrower to the Administrative
Agent) at least five days (or such shorter time as Issuing Lender may agree in a
particular instance in its sole discretion) prior to the proposed date of
amendment, amend any Letter of Credit issued by it. Each such request for
amendment of a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to the Issuing
Lender; (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Lender may reasonably require. The Issuing Lender shall be under no obligation
to amend any Letter of Credit if: (A) the Issuing Lender would have no
obligation at such time to Issue such Letter of Credit in its amended form under
the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed amendment to the Letter of Credit. Administrative
Agent will promptly notify Revolving Lenders of the receipt by it of any L/C
Amendment Application.
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E. Renewal of Letters of Credit. The Issuing Lender and Revolving
Lenders agree that, while a Letter of Credit is outstanding and prior to the
Revolving Loan Commitment Termination Date, at the option of either Borrower and
upon the written request of such Borrower received by the Issuing Lender (with a
copy sent by such Borrower to the Administrative Agent) at least five days (or
such shorter time as the Issuing Lender may agree in a particular instance in
its sole discretion) prior to the proposed date of notification of renewal, the
Issuing Lender shall be entitled to authorize the automatic renewal of any
Letter of Credit issued by it. Each such request for renewal of a Letter of
Credit shall be made by facsimile, confirmed immediately in an original writing,
in the form of an L/C Amendment Application, and shall specify in from and
detail satisfactory to the Issuing Lender; (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Lender may
reasonably require. The Issuing Lender shall be under no obligation so to renew
any Letter of Credit if: (a) the Issuing Lender would have no obligation at such
time to issue or amend such Letter of Credit in its renewed form under the terms
of this Agreement; or (b) the beneficiary of any such Letter of Credit does not
accept the proposed renewal of the Letter of Credit. If any outstanding Letter
of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Lender that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Lender
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.1E upon the request of a Borrower but the
Issuing Lender shall not have received an L/C Amendment Application from such
Borrower with respect to such renewal or other written direction by such
Borrower with respect thereto, the Issuing Lender shall nonetheless be permitted
to allow such Letter of Credit to renew, and such Borrower and Lenders hereby
authorize such renewal, and, accordingly, the Issuing Lender shall be deemed to
have received an L/C Amendment Application from Administrative Borrower
requesting such renewal.
F. Miscellaneous.
(i) The Issuing Lender may, at its election (or as required by the
Administrative Agent at the direction of Requisite Lenders), deliver any notices
of termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Loan Commitment Termination
Date.
(ii) This Agreement shall control in the event of any conflict with
any Notice of Issuance of Letter of Credit, L/C Amendment Application and any
other document relating to any Letter of Credit, including any of the Issuing
Lender's standard form documents for letter of credit issuances (other than any
Letter of Credit).
(iii) The Issuing Lender will also deliver to the Borrower which is
the account party and to Administrative Agent, concurrently or promptly
following its delivery of a Letter of Credit, or amendment to or renewal of a
Letter of Credit, to an advising bank or a beneficiary, a
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true and complete copy of each such Letter of Credit or amendment to or renewal
of a Letter of Credit.
3.2 Letter of Credit Fees.
Borrowers agree to pay the following amounts with respect to Letters
of Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to the Issuing Lender for its own account, equal to 0.25%
per annum of the daily amount available to be drawn under such Letter of
Credit and (b) a letter of credit fee, payable to Administrative Agent for
the account of Revolving Lenders (based upon their respective Pro Rata
Shares), equal to (x) the applicable LIBOR Margin set forth in subsection
2.2A hereof for LIBOR Loans multiplied by (y) the Dollar Equivalent of the
daily amount available from time to time to be drawn under such Letter of
Credit, each such fronting fee or letter of credit fee to be payable in
arrears on and to (but excluding) the last Business Day of each March,
June, September and December of each year and computed on the basis of a
360-day year for the actual number of days elapsed;
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary and
processing charges payable directly to the Issuing Lender for its own
account in accordance with the Issuing Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or
payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2, the Dollar Equivalent of the daily amount available to be drawn under any
Letter of Credit shall be determined as of the close of business on any date of
determination (if the Letter of Credit is denominated in an Offshore Currency,
such determination to be made in accordance with the provisions of subsection
2.7A). Promptly upon receipt by Administrative Agent of any amount described in
clause (i)(b) of this subsection 3.2, Administrative Agent shall distribute to
each Revolving Lender its Pro Rata Share of such amount.
3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit.
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in accordance with the terms
and conditions of such Letter of Credit.
B. Reimbursement by Company of Amounts Paid Under Letters of Credit.
In the event the Issuing Lender has determined to honor a drawing under a Letter
of Credit issued by it, the Issuing Lender shall immediately notify the Borrower
for whose account the Letter of Credit was issued and Administrative Agent. and
such Borrower shall reimburse the Issuing Lender on or before the Business Day
on which such drawing is honored and such notice
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is received (the "Reimbursement Date") in an amount in Dollars and in same day
funds equal to the amount of such honored drawing; provided that, anything
contained in this Agreement to the contrary notwithstanding, (i) unless such
Borrower shall have notified Administrative Agent prior to 10:00 a.m. (San
Francisco time) on the date such drawing is honored that such Borrower intends
to reimburse the Issuing Lender for the amount of such honored drawing with
funds other than the proceeds of Revolving Loans, such Borrower shall be deemed
to have given a timely Notice of Borrowing to Administrative Agent requesting
Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement
Date in an amount in Dollars equal to the amount of such honored drawing and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Revolving Lenders shall, on the Reimbursement Date, make Revolving Loans
that are Base Rate Loans in the amount of such honored drawing, the proceeds of
which shall be applied directly by Administrative Agent to reimburse the Issuing
Lender for the amount of such honored drawing; and provided, further that if for
any reason proceeds of Revolving Loans are not received by the Issuing Lender on
the Reimbursement Date in an amount equal to the amount of such honored drawing,
such Borrower shall reimburse the Issuing Lender, on demand, in an amount in
same day funds equal to the excess of the amount of such honored drawing over
the aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Revolving Lender
from its obligation to make Revolving Loans on the terms and conditions set
forth in this Agreement, and the applicable Borrower shall retain any and all
rights it may have against any Revolving Lender resulting from the failure of
such Lender to make such Revolving Loans under this subsection 3.3B.
C. Payment by Revolving Lenders of Unreimbursed Amounts Paid Under
Letters of Credit.
(i) Payment by Revolving Lenders. In the event that a Borrower shall
fail for any reason to reimburse the Issuing Lender as provided in
subsection 3.3B in an amount equal to the amount of any drawing honored by
the Issuing Lender under a Letter of Credit issued by it, the Issuing
Lender shall promptly notify each other Revolving Lender of the
unreimbursed amount of such honored drawing and of such other Revolving
Lender's respective participation therein based on such Revolving Lender's
Pro Rata Share. Each Revolving Lender shall make available to the Issuing
Lender an amount equal to its respective participation, in Dollars and in
same day funds, at the office of the Issuing Lender specified in such
notice, not later than 12:00 Noon (San Francisco time) on the first
business day (under the laws of the jurisdiction in which such office of
the Issuing Lender is located) after the date notified by the Issuing
Lender. In the event that any Revolving Lender fails to make available to
the Issuing Lender on such business day the amount of such Revolving
Lender's participation in such Letter of Credit as provided in this
subsection 3.3C, the Issuing Lender shall be entitled to recover such
amount on demand from such Revolving Lender together with interest thereon
at the Federal Funds Effective Rate from the Reimbursement Date for three
Business Days and thereafter at the Base Rate. Nothing in this subsection
3.3C shall be deemed to prejudice the right of any Revolving Lender to
recover from the Issuing Lender any amounts made available by such
Revolving Lender to the Issuing Lender pursuant to this subsection 3.3C in
the event that it is determined by the final judgment of a court of
competent jurisdiction that
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the payment with respect to a Letter of Credit by the Issuing Lender in
respect of which payment was made by such Revolving Lender constituted
gross negligence or willful misconduct on the part of the Issuing Lender.
(ii) Distribution to Revolving Lenders of Reimbursements Received
From a Borrower. In the event the Issuing Lender shall have been
reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for
all or any portion of any drawing honored by the Issuing Lender under a
Letter of Credit issued by it, the Issuing Lender shall distribute to each
other Revolving Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing such other
Revolving Lender's Pro Rata Share of all payments subsequently received by
the Issuing Lender from a Borrower in reimbursement of such honored
drawing when such payments are received. Any such distribution shall be
made to a Revolving Lender at its primary address set forth below its name
on the appropriate signature page hereof or at such other address as such
Revolving Lender may request.
D. Interest on Amounts Paid Under Letters of Credit.
(i) Payment of Interest by Borrowers. Each Borrower agrees to pay to
the Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it or the account of such Borrower, interest on the
amount paid by the Issuing Lender in respect of each such honored drawing
from the date such drawing is honored to but excluding the date such
amount is reimbursed by such Borrower (including any such reimbursement
out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a
rate equal to (a) for the period from the date such drawing is honored to
but excluding the reimbursement Date, the rate then in effect under this
Agreement with respect to Revolving Loans that are Base Rate Loans and (b)
thereafter, a rate which is 2% per annum in excess of the rate of interest
otherwise payable under this Agreement with respect to Revolving Loans
that are Base Rate Loans. Interest payable pursuant to this subsection
3.3D(i) shall be computed on the basis of a 360-day year for the actual
number of days elapsed in the period during which it accrues and shall be
payable on demand or, if no demand is made, on the date on which the
related drawing under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender. Promptly
upon receipt by the Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, (a the Issuing Lender shall distribute to each other
Revolving Lender, out of the interest received by the Issuing Lender in
respect of the period from the date such drawing is honored to but
excluding the date on which the Issuing Lender is reimbursed for the
amount of such drawing (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that
such other Revolving Lender would have been entitled to receive in respect
of the letter of credit fee that would have been payable in respect of
such Letter of Credit for such period pursuant to subsection 3.2 if no
drawing had been honored under such Letter of Credit, and (b) in the event
the Issuing Lender shall have been reimbursed by other Revolving Lenders
pursuant to subsection
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3.3C(i) for all or any portion of such honored drawing, the Issuing Lender
shall distribute to each other Revolving Lender which has paid all amounts
payable by it under subsection 3.3C(i) with respect to such honored
drawing such other Revolving Lender's Pro Rata Share of any interest
received by the Issuing Lender in respect of that portion of such honored
drawing so reimbursed by other Revolving Lenders for the period from the
date on which the Issuing Lender was so reimbursed by other Revolving
Lenders to but excluding the date on which such portion of such honored
drawing is reimbursed by the applicable Borrower. Any such distribution
shall be made to a Revolving Lender at its primary address set forth below
its name on the appropriate signature page hereof or at such other address
as such Revolving Lender may request.
3.4 Obligations Absolute.
The obligation of each Borrower to reimburse the Issuing Lender for
drawings honored under the Letters of Credit issued by it for the account of
such Borrower and to repay any Revolving Loans made by Revolving Lenders
pursuant to subsection 3.3B and the obligations of Revolving Lenders under
subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances
including any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which a Borrower or any Revolving Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for
whom any such transferee may be acting), the Issuing Lender or other
Lender or any other Person or, in the case of a Lender, against either
Borrower, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between a Borrower or one of its Subsidiaries and the
beneficiary for which any Letter of Credit was procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(iv) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrowers or
any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
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(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted lack of good faith, gross
negligence or willful misconduct of the Issuing Lender under the circumstances
in question (as determined by a final judgment of a court of competent
jurisdiction).
3.5 Indemnification; Nature of Issuing Lender' Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, each Borrower hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, reasonable costs, charges and expenses (including
reasonable fees, expenses and disbursements of counsel and allocated costs of
internal counsel) which the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit by
the Issuing Lender, other than as a result of (a) lack of good faith, the gross
negligence or willful misconduct of the Issuing Lender as determined by a final
judgment of a court of competent Jurisdiction or (b) subject to the following
clause (ii), the wrongful dishonor by the Issuing Lender of a proper demand for
payment made under any Letter of Credit issued by it or (ii) the failure of the
Issuing Lender to honor a drawing under any such Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lender Duties. As between either Borrower and
the Issuing Lender, such Borrower assumes all risks of the acts and omissions
of, or misuse of the Letters of Credit issued by the Issuing Lender by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Lender shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason as long as the same complies with the
terms of the Letter of Credit; (iii) failure of the beneficiary of any such
Letter of Credit to comply fully with any conditions required in order to draw
upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in interpretation of
technical terms; (vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of the Issuing
Lender, including any Governmental Acts, and none of the above shall affect or
impair, or prevent the vesting of, any of the Issuing Lender's rights or powers
hereunder.
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In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by the Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith. shall not put the Issuing Lender under any
resulting liability to either Borrower.
Notwithstanding anything to the contrary contained in this
subsection 3.5, Company shall retain any and all rights it may have against the
Issuing Lender for any liability arising out of the lack of good faith, gross
negligence or willful misconduct of the Issuing Lender, as determined by a final
judgment of a court of competent jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
Subject to the provisions of subsection 2.8B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Revolving Lender shall determine (which determination shall,
absent manifest error, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any
change therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by the
Issuing Lender or Revolving Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects the Issuing Lender or Revolving Lender (or its
applicable lending or letter of credit office) to any additional Tax
(other than any Tax on the overall net income of the Issuing Lender or
Revolving Lender) with respect to the issuing or maintaining of any
Letters of Credit or the purchasing or maintaining of any participations
therein or any other obligations under this Section 3, whether directly or
by such being imposed on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
any marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or participations
therein purchased by any Revolving Lender; or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting the Issuing Lender or Revolving Lender (or its
applicable lending or letter of credit office) regarding this Section 3 or
any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to the Issuing
Lender or Revolving Lender of issuing or maintaining any Letter of Credit or
agreeing to purchase, purchasing or maintaining any participation therein or to
reduce any amount received or receivable by the Issuing Lender or Revolving
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, the Borrower for whose account the Letter of Credit
was issued
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shall promptly pay to the Issuing Lender or Revolving Lender, upon receipt of
the statement referred to in the next sentence, such additional amount or
amounts as may be necessary to compensate the Issuing Lender or Revolving Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. The Issuing Lender or Revolving Lender shall deliver to Company a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to the Issuing Lender or Revolving Lender under this
subsection 3.6. which statement shall be conclusive and binding upon all parties
hereto absent manifest error.
3.7 Cash Collateral Pledge.
Upon (i) the request of Administrative Agent, (A) if the Issuing
Lender has honored any full or partial drawing request on any Letter of Credit
or (B) if, as of the Revolving Loan Commitment Termination Date, any Letters of
Credit may for any reason remain outstanding and partially or wholly undrawn, or
(ii) the occurrence of the circumstances described in Section 2.4 or Section 8
requiring the Borrowers to Cash Collateralize Letters of Credit, then, each
Borrower shall immediately Cash Collateralize any outstanding Letters of Credit
issued for the account of such Borrower in the applicable currency or
currencies.
3.8 Uniform Customs and Practice.
The Uniform Customs and Practice for Documentary Credits as
published by the International Chamber of Commerce most recently at the time of
issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to the Letters of Credit.
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Term Loans and Initial Revolving Loans.
The obligations of Lenders to make the Term Loans and any Revolving
Loans to be made on the Closing Date are, in addition to the conditions
precedent specified in subsection 4.2, subject to prior or concurrent
satisfaction in form and substance satisfactory to Syndication Agent of the
following conditions:
A. Loan Party Documents. On or before the Closing Date, Borrowers
shall, and shall cause each other Loan Party to, deliver to Lenders (or to
Agents for Lenders with sufficient originally executed copies, where
appropriate, for each Lender and its counsel) the following with respect to
Borrowers or such Loan Party, as the case may be, each, unless otherwise noted,
dated the Closing Date:
(i) Certified copies of the charter documents (such as the
Certificate or Articles of Incorporation) of such Person, together with a
good standing certificate from the Secretary of State of its jurisdiction
of incorporation and each other state in which such Person is qualified as
a foreign corporation to do business and, to the extent generally
available, a certificate or other evidence of good standing as to payment
of any
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applicable franchise or similar taxes from the appropriate taxing
authority of each of such jurisdictions, each dated a recent date prior to
the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary;
(iii) Resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, certified as of the Closing Date by the
corporate secretary or an assistant secretary of such Person as being in
full force and effect without modification or amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person is
a party; and
(vi) Such other documents as Agents may reasonably request.
B. No Material Adverse Effect. Since December 31, 1997, no Material
Adverse Effect shall have occurred.
C. Obligations of Company and its Domestic Subsidiaries with respect
to Mortgages; Mortgage Policies; Etc. With respect to the Leasehold Properties
listed on Schedule 5.5 as of the Closing Date, no Mortgages will be placed on
such Leasehold Properties.
D. Security Interests in Personal and Mixed Property; Offshore
Collateral. Agents shall have received evidence satisfactory to each of them
that Company and Subsidiary Guarantors shall have taken or caused to be taken
all such actions, executed and delivered or caused to be executed and delivered
all such agreements, documents and instruments, and made or caused to be made
all such filings and recordings (other than the filing or recording of items
described in clauses (iii), (iv), (v) and (vii) below) that may be necessary or,
in the opinion of Agents, desirable in order to either assign the interest of
Existing Lender or create in favor of Collateral Agent, for the benefit of
Lenders, a valid and (upon such filing and recording) perfected First Priority
security interest in the entire personal and mixed property Collateral. Such
actions shall include the following:
(i) Schedules to Collateral Documents. Delivery to Agents of
accurate and complete schedules to all of the applicable Collateral
Documents;
(ii) Stock Certificates and Instruments. Delivery to Collateral
Agent of (a) certificates (which certificates shall be accompanied by
irrevocable undated stock powers, duly endorsed in blank and otherwise
satisfactory in form and substance to Agents) representing all capital
stock pledged pursuant to the Company Pledge Agreement and the Subsidiary
Pledge Agreements, (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner satisfactory to Agents)
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evidencing any Collateral, (c) with respect to MSL Overseas, the Deed of
Pledge of Claims and (d) with respect to MSL the Deed of Pledge of Shares;
(iii) Lien Searches and UCC Termination Statements. Delivery to
Agents of (a) the results of a recent search, by a Person satisfactory to
Agents, of all effective UCC financing statements and fixture filings and
all judgment and tax lien filings which may have been made with respect to
any personal or mixed property of any Loan Party, together with copies of
all such filings disclosed by such search, and (b) UCC termination
statements duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective
UCC financing statements or fixture filings disclosed in such search
(other than any such financing statements or fixture filings in respect of
Liens permitted to remain outstanding pursuant to the terms of this
Agreement);
(iv) UCC Financing Statements and Fixture Filings. Delivery to
Collateral Agent of UCC financing statements and, where appropriate,
fixture filings, duly executed by each applicable Loan Party with respect
to all personal and mixed property Domestic Collateral of such Loan Party,
for filing in all jurisdictions as may be necessary or, in the opinion of
Agents, desirable to perfect the security interests created in such
Domestic Collateral pursuant to the Domestic Collateral Documents;
(v) PTO Cover Sheets, Etc. Delivery to Collateral Agent of all cover
sheets or other documents or instruments required to be filed with the PTO
in order to create or perfect Liens in respect of any IP Collateral;
(vi) Opinions of Local Counsel. Delivery to Agents of an opinion of
counsel (which counsel shall be reasonably satisfactory to Agents) under
the laws of each jurisdiction in which any Loan Party or any material,
personal or mixed property Collateral is located with respect to the
creation and perfection of the security interests in favor of Collateral
Agent in such Collateral and such other matters governed by the laws of
such jurisdiction regarding such security interests as Agents may
reasonably request, in each case in form and substance reasonably
satisfactory to Agents dated as of the Closing Date; and
(vii) Perfection of Liens in Offshore Collateral. Subject to the
provisions of subsection 4.4, delivery to Agents of evidence satisfactory
to them of the perfection and priority of Liens in Offshore Collateral
(such Liens to include, without limitation, a security interest in all
Inventory of MSL Spain with a value no less than the value of such
Inventory on the books and records of MSL Spain as of June 30, 1998).
E. Evidence of Insurance. Collateral Agent shall have received a
certificate from Company's insurance broker or other evidence satisfactory to it
that all insurance required to be maintained pursuant to subsection 6.4 is in
full force and effect and that Collateral Agent on behalf of Lenders has been
named as additional insured and/or loss payee thereunder to the extent required
under subsection 6.4.
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F. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received (i)(a) originally executed copies of one or more
favorable written opinions of Sherburne, Powers & Needham, P.C., counsel for
certain Loan Parties, in form and substance reasonably satisfactory to Agents
and their counsel, dated as of the Closing Date and setting forth substantially
the matters in the opinions designated in Exhibit VIII annexed hereto and as to
such other matters as Agents acting on behalf of Lenders may reasonably request
and (b) evidence satisfactory to Agents that Company has requested such counsel
to deliver such opinions to Lenders; and (ii) opinions of counsel as to the
validity and enforceability of the Offshore Guaranties and the Offshore
Collateral Documents in form, scope, and substance reasonably satisfactory to
Agents and their counsel, dated as of the Closing Date.
G. Opinions of Syndication Agent's Counsel. Lenders shall have
received originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, counsel to Syndication Agent, dated as of the Closing
Date, substantially in the form of Exhibit IX annexed hereto and as to such
other matters as Syndication Agent acting on behalf of Lenders may reasonably
request.
H. Fees. Company shall have paid to Administrative Agent and
Arranger the fees payable on the Closing Date referred to in subsection 2.3.
I. Capital Structure and Ownership, Etc. The capital structure and
ownership of Company's Subsidiaries after giving effect to the transactions
described herein shall be as set forth on Schedule 4.11 annexed hereto, and
shall be satisfactory to Arranger and Syndication Agent.
J. Borrowing Base Certificates. Company and MSL Overseas shall have
each delivered to Agents an initial borrowing base certificate.
K. Solvency Certificate. Company shall have delivered to Arranger
and Agents a Solvency Certificate dated the Closing Date.
L. Termination of Existing Credit Agreement and Related Liens,
Existing Letters of Credit. On the Closing Date, Company shall have (a) repaid
in full all Indebtedness outstanding under the Existing Credit Agreement (the
aggregate principal amount of which Indebtedness shall not exceed $83,000,000),
(b) terminated any commitments to lend or make other extensions of credit
thereunder and (c) delivered to Collateral Agent all documents or instruments
necessary to release all Liens securing Indebtedness or other obligations of
Company and its Subsidiaries thereunder.
M. Representations and Warranties; Performance of Agreements.
Company shall have delivered to Agents an Officer's Certificate, in form and
substance satisfactory to Agents, to the effect that the representations and
warranties in Section 5 hereof are true, correct and complete in all material
respects on and as of the Closing Date to the same extent as though made on and
as of that date (or, to the extent such representations and warranties
specifically relate to an earlier date, that such representations and warranties
were true, correct and complete in all material respects on and as of such
earlier date) and that
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Company shall have performed in all material respects all agreements and
satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Closing Date except as otherwise disclosed to
and agreed to in writing by Agents and Requisite Lenders.
N. Necessary Governmental Authorizations and Consents; Expiration of
Waiting Periods, Etc. Company shall have obtained all Governmental
Authorizations (other than as provided in subsection 4.4) and all consents of
other Persons, in each case that are necessary or advisable in connection with
all transactions contemplated by the Loan Documents and each of the foregoing
shall be in full force and effect, in each case other than those the failure to
obtain or maintain which, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. All applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose adverse
conditions on all transactions contemplated by the Loan Documents. No action,
request for stay, petition for review or rehearing, reconsideration, or appeal
with respect to any of the foregoing shall be pending, and the time for any
applicable agency to take action to set aside its consent on its own motion
shall have expired.
0. Financial Statements. Agents shall have received (i) unaudited
financial statements of Company and its Subsidiaries for the Fiscal Quarter most
recently ended prior to the Closing Date, (ii) audited financial statements of
Company and its subsidiaries for the Fiscal Years ended December 31, 1995,
December 31, 1996 and December 31, 1997, (iii) a pro-forma [ILLEGIBLE] sheet of
Company and its Subsidiaries as of the Closing Date, reflecting the proposed
legal and capital structure, which legal and capital structure shall be
satisfactory in all respects to the Arranger and the Syndication Agent and (iv)
projected financial statements [ILLEGIBLE] balance sheets and statements of
operations, shareholders' equity and cash flows) of Company and its Subsidiaries
for the ten-year period after the Closing Date, all of the foregoing to be (x)
substantially consistent with the financial statements described in clause (ii)
above and (y) otherwise in form and substance satisfactory to the Arranger and
Syndication Agent. Arranger shall have had the opportunity, at its option, to
review any such unaudited financial statements with Company's independent public
accountants, at Company's cost.
P. Completion of Proceedings. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by each Agent,
acting on behalf of Lenders, and its counsel shall be satisfactory in form and
substance to Agents and such counsel, and Agents and such counsel shall have
received all such counterpart originals or certified copies of such documents as
Agents may reasonably request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received before that Funding
Date, in accordance with the provisions of subsection 2.1B, an originally
executed Notice of Borrowing, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of
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the requesting Borrower or by any executive officer of such Borrower designated
by any of the above-described officers on behalf of such Borrower in a writing
delivered to Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement provides
shall be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including Regulation T, Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by Company in writing pursuant to subsection 5.6 or 6.1(x) prior to the
making of the last preceding Loans (or, in the case of the initial Loans,
prior to the execution of this Agreement), and there shall have occurred
no development not so disclosed in any such action, suit, proceeding,
governmental investigation or arbitration so disclosed, that, in either
event, would have a Material Adverse Effect.
4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not the
Issuing Lender is obligated to issue such Letter of Credit) is subject to the
following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
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B. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, in each case signed by the chief executive officer, the chief financial
officer or the treasurer of the requesting Borrower or by any executive officer
of such Borrower designated by any of the above-described officers on behalf of
such Borrower in a writing delivered to Administrative Agent, together with all
other information specified in subsection 3.1B(i) and such other documents or
information as the Issuing Lender may reasonably require in connection with the
issuance of such Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and
the date of issuance of such Letter of Credit were a Funding Date.
4.4 Items to be Delivered and Authorizations Obtained After the Closing Date.
A. Post-Closing Deliveries. Company, Agents and Lenders recognize
that it may be impractical for Company to obtain the pledge of stock of MSL
Ireland, MSL Spain, Manufacturers Services Singapore Pte Ltd., a Singapore
corporation, and MSL Malaysia on the Closing Date, to obtain a perfected
security interest in any Offshore Collateral of MSL Malaysia on the Closing
Date or to obtain a security interest in inventory, real property, machinery
or equipment of MSL Spain on the Closing Date. Company shall use all
reasonable efforts to obtain all such security interests, mortgages, pledges,
related items and such documentation as soon as practicable and in any case,
Company, Agents and Lenders agree that (a) Company shall deliver all such
documentation as may be necessary to obtain a perfected security interest in
the Offshore Collateral of MSL Malaysia within 30 days of the Closing Date,
and (b) to the extent that any of such items or documentation (other than
documentation to obtain a perfected security interest in the Collateral of
MSL Malaysia) are not so delivered on the Closing Date with the consent of
Syndication Agent, Company shall deliver such items within 90 days of the
Closing Date (other than documentation to obtain the pledge of stock of MSL
Malaysia, which shall be delivered within 120 days of the Closing Date).
B. Collateral Audit. Company shall permit Agents within 90 days
after the Closing Date, to conduct an audit of all Accounts Receivable and
Inventory of Company and its Subsidiaries.
C. Corporate Structure. Within 30 days after the Closing Date,
Agents shall have received evidence satisfactory to them that MSL SPV Singapore,
Inc. and MSL SPV Malaysia, Inc. shall each have merged with and into Company.
Section 5. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders and the Agents to enter into this
Agreement and to make the Loans, to induce Issuing Lender to issue Letters of
Credit and to induce other Lenders to purchase participations therein, Company
represents and warrants to each Lender and the
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Agents, on the date of this Agreement, on each Funding Date and on the date of
issuance of each Letter of Credit that the following statements are true,
correct and complete:
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Each Loan Party is a corporation (or
local equivalent) duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization as specified in Schedule 5.1
annexed hereto. Each Loan Party has all requisite power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, to enter into the Loan Documents to which it is a
party and to carry out the transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and will not have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged
only in the businesses permitted to be engaged in pursuant to subsection 7.14.
MSL Overseas is engaged in no business other than borrowing hereunder, lending
the proceeds thereof to the Foreign Subsidiaries of Company, other intercompany
borrowings and lending and owning the capital stock of such Subsidiaries other
than MSL Spain.
D. Subsidiaries. All of the Subsidiaries of Company are identified
in Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from
time to time pursuant to the provisions of subsection 6.1(xvii). The capital
stock (or other authorized equity Securities) of each of the Subsidiaries of
Company identified in Schedule 5.1 annexed hereto (as so supplemented) is duly
authorized, validly issued, fully paid and nonassessable and none of such
Securities constitutes Margin Stock. Each of the Subsidiaries of Company
identified in Schedule 5.1 annexed hereto (as so supplemented) is a corporation
(or local equivalent) duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation set forth
therein, has all requisite power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be conducted,
and is qualified to do business and in good standing in every jurisdiction where
its assets are located and wherever necessary to carry out its business and
operations, in each case except where failure to be so qualified or in good
standing or a lack of such power and authority has not had and will not have a
Material Adverse Effect. Schedule 5.1 annexed hereto (as so supplemented)
correctly sets forth the ownership interest of Company and each of its
Subsidiaries in each of the Subsidiaries of Company identified therein.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents have been duly authorized by all necessary
actions on the part of each Loan Party that is a party thereto.
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B. No Conflict. The execution, delivery and performance by Loan
Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to Company or any
of its Subsidiaries, the charter documents (such as the Certificate or the
Articles of Incorporation or Bylaws) of Company or any of Company's Subsidiaries
or any order, judgment or decree of any court or other agency of government
binding on Company or any of Company's Subsidiaries, (ii) conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any Contractual Obligation of Company or any of its Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of Company or any of Company's Subsidiaries (other than
any Liens created under any of the Loan Documents in favor of Collateral Agent
on behalf of Lenders), or (iv) require any approval of or consent of any Person
under any Contractual Obligation of Company or any of Company's Subsidiaries,
except for such approvals or consents which will be obtained on or before the
Closing Date and disclosed in writing to Lenders, except as provided in
subsection 4.4.
C. Governmental Consents. The execution, delivery and performance by
Loan Parties of the Loan Documents and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body, except as
provided in subsection 4.4.
D. Binding Obligation. Each of the Loan Documents has been duly
executed and delivered by each Loan Party that is a party thereto and is the
legally valid and binding obligation of such Loan Party, enforceable against
such Loan Party in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
5.3 Financial Condition.
Company has heretofore delivered to Lenders, at Lenders' request,
the following financial statements and information: (i) the audited consolidated
balance sheet of Company and its Subsidiaries as at December 31, 1997 and the
related consolidated statements of income, shareholders' equity and cash flows
of Company and its Subsidiaries for the Fiscal Year then ended and (ii) the
unaudited consolidated balance sheet of Company and its Subsidiaries as of July
4, 1998 and the related unaudited consolidated statements of income,
shareholders' equity and cash flows of Company and its Subsidiaries for the six
months then ended. All such statements were prepared in conformity with GAAP and
fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from normal year-end adjustments. Company does not (and will
not following the funding of the initial Loans) have any Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the foregoing financial
statements or
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the notes thereto and which in any such case is material in relation to the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company or any of its Subsidiaries.
5.4 No Material Adverse Change; No Restricted Junior Payments.
Since December 31, 1997, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Neither Company nor any of its Subsidiaries has directly or indirectly
declared, ordered, paid or made, or set apart any sum or property for, any
Restricted Junior Payment or agreed to do so except as permitted by subsection
7.5.
5.5 Title to Properties; Liens; Real Property.
A. Title to Properties; Liens. Company and its Subsidiaries have (i)
good, sufficient and legal title to (in the case of fee interests in real
property), (ii) valid leasehold interests in (in the case of leasehold interests
in real or personal property), or (iii) good title to (in the case of all other
personal property), all of their respective properties and assets reflected in
the financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of such financial statements in the
ordinary course of business or as otherwise permitted under subsection 7.7.
Except as permitted by this Agreement, all such properties and assets are free
and clear of Liens.
B. Real Property. As of the Closing Date, Schedule 5.5 annexed
hereto contains a true, accurate and complete list of (i) all real property
owned by Company or any Subsidiary and (ii) all leases, subleases or assignments
of leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in Schedule 5.5 annexed hereto, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of each applicable Loan Party, enforceable
against such Loan Party in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles.
5.6 Litigation; Adverse Facts.
Except as set forth in Schedule 5.6 annexed hereto, there are no
actions, suits, proceedings, arbitration's or governmental investigations
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that are pending or, to
the knowledge of Company, threatened in writing against or affecting Company or
any of its
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Subsidiaries or any property of Company or any of its Subsidiaries and that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in
violation of any applicable laws (including Environmental Laws) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, or (ii) is subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all tax returns
and reports of Company and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes shown on such tax returns to be due and
payable and all assessments, fees and other governmental charges upon Company
and its Subsidiaries and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. Company knows of no proposed tax assessment against Company or any of
its Subsidiaries which is not being actively contested by Company or such
Subsidiary in good faith and by appropriate proceedings, provided that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements; Material
Contracts.
A. Except as set forth in Schedule 5.6, neither Company nor any of
its Subsidiaries is in default in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any of its
Contractual Obligations, and no condition exists than with the giving of notice
or the lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, would not
have a Material Adverse Effect.
B. Neither Company nor any of its Subsidiaries is a party to or is
otherwise subject to any agreements or instruments or any charter or other
internal restrictions which, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
C. Schedule 5.8 contains a true, correct and complete list of all
the Material Contracts in effect on the Closing Date. Except as described on
Schedule 5.8, all such Material Contracts are in full force and effect and no
material defaults currently exist thereunder.
5.9 Governmental Regulation.
Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
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5.10 Securities Activities.
A. Neither Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.
B. Following application of the proceeds of each Loan, not more than
25% of the value of the assets (either of Company only or of Company and its
Subsidiaries on a consolidated basis) subject to the provisions of subsection
7.2 or 7.7 or subject to any restriction contained in any agreement or
instrument, between Company and any Lender or any Affiliate of any Lender,
relating to Indebtedness and within the scope of subsection 8.2, will be Margin
Stock.
5.11 Employee Benefit Plans.
A. Company, each of its Subsidiaries and each of their respective
ERISA Affiliates are in compliance in all material respects with all applicable
provisions and requirements of ERISA and the regulations and published
interpretations thereunder with respect to each Employee Benefit Plan, and have
performed all their obligations under each Employee Benefit Plan. Each Employee
Benefit Plan which is intended to qualify under Section 401(a) of the Internal
Revenue Code is so qualified.
B. No ERISA Event has occurred or is reasonably expected to occur.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code, no Employee Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of Company, any of its Subsidiaries or any of their respective ERISA
Affiliates.
D. As of the most recent valuation date for any Pension Plan, the
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed $1,000,000.
E. As of the most recent valuation date for each Multiemployer Plan
for which the actuarial report is available, the potential liability of Company,
its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221(e)
of ERISA, does not exceed $1,000,000.
F. Each of Company's Foreign Subsidiaries is in compliance in all
material respects with all applicable law with respect to each employee benefit
plan maintained by or contributed to by such Subsidiary.
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5.12 Certain Fees.
Except as set forth in subsection 2.3, no broker's or finder's fee
or commission will be payable with respect to this Agreement or any of the
transactions contemplated hereby, and Company hereby indemnifies Lenders
against, and agrees that it will hold Lenders harmless from, any claim, demand
or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.13 Environmental Protection.
Except as set forth in Schedule 5.13 annexed hereto:
(i) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order, consent decree or settlement agreement with any Person relating to
(a) any Environmental Law, (b) any Environmental Claim, or (c)
any Hazardous Materials Activity; and
(ii) to Company's knowledge there are and have been no conditions,
occurrences, or Hazardous Materials Activities which could reasonably be
expected to result in the basis of an Environmental Claim against Company
or any of its Subsidiaries;
5.14 Employee Matters.
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 Solvency.
Each Loan Party is and, upon the incurrence of any Obligations by
such Loan Party on any date on which this representation is made, will be,
Solvent.
5.16 Matters Relating to Collateral.
A. Creation, Perfection and Priority of Liens. The execution and
delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof pursuant to subsections 4.1D, 6.8
and 6.9 and (ii) the delivery to Collateral Agent of any Pledged Collateral not
delivered to Collateral Agent at the time of execution and delivery of the
applicable Domestic Collateral Document (all of which Pledged Collateral has
been so delivered are effective to create in favor of Collateral Agent for the
benefit of Lenders, as security for the respective Secured Obligations (as
defined in the applicable Collateral Document in respect of any Collateral), a
valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than the filing of any UCC financing
statements delivered to Collateral Agent for filing (but not yet filed) and the
periodic filing of UCC continuation statements in respect of
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UCC financing statements filed by or on behalf of Collateral Agent, subject to
the provisions of subsection 4.4 and subsection 6.8C as to Inventory of MSL
Spain.
B. Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for either (i) the pledge or grant by any Loan Party
of the Liens purported to be created in favor of Collateral Agent pursuant to
any of the Collateral Documents or (ii) the exercise by Collateral Agent of any
rights or remedies in respect of any Collateral (whether specifically granted or
created pursuant to any of the Collateral Documents or created or provided for
by applicable law), except for filings or recordings contemplated by subsection
5.16A, except as described in subsection 4.4 and except as may be required, in
connection with the disposition of any Pledged Collateral, by laws generally
affecting the offering and sale of securities.
C. Absence of Third-Party Filings. Except such as may have been
filed in favor of Collateral Agent as contemplated by subsection 5.16A and
except such as may evidence or perfect Permitted Encumbrances, (i) no effective
UCC financing statement, fixture filing or other instrument similar in effect
under the laws of the United States or any jurisdiction outside the United
States covering all or any part of the Collateral is on file in any filing or
recording office and (ii) no effective filing covering all or any part of the IP
Collateral is on file in the PTO.
D. Margin Regulations. The pledge of Collateral pursuant to the
Collateral Documents does not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
E. Information Regarding Collateral. All written information
supplied to Agents by any Loan Party with respect to any of the Collateral (in
each case taken as a whole with respect to any particular Collateral) was
accurate and complete in all material respects when supplied.
5.17 Disclosure.
No representation or warranty of any Loan Party contained in any
Loan Document or in any other document, certificate or written statement
furnished to Lenders by Company or any of its Subsidiaries for use in connection
with the transactions contemplated by this Agreement contains any untrue
statement of a material fact or omits to state a material fact (known to
Company, in the case of any document not furnished by it) necessary in order to
make the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Company to be reasonable at the time made,
it being recognized by Lenders that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results. There are
no facts known (or which should upon the reasonable exercise of diligence be
known) to Company (other than matters of a general economic nature) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect and that have not been disclosed herein or in such
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other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
5.18 Year 2000.
Company and its Subsidiaries (i) have engaged in a process of
assessment of the existence of the Year 2000 Problems reasonably appropriate to
the scope and complexity of their respective computer systems and (ii) do not
reasonably expect to have any Year 2000 Problem which would reasonably be
expected to have a material adverse effect on the business, operations or
financial performance of Company and its Subsidiaries taken as a whole.
Section 6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to [ILLEGIBLE] preparation of financial statements in
conformity with GAAP. Company will deliver to Agents and Lenders:
(i) Borrowing Base Certificates: in any event: within 15 days after
the end of each calendar month and in addition, from time to time upon the
request of Administrative Agent and at any other date Company may choose,
a Borrowing Base Certificate for (a) Company and its Domestic Subsidiaries
and (b) MSL Overseas and Company's other Foreign Subsidiaries on a
combined and consolidating basis (including details regarding intercompany
loans) as of the last date of such period or the date so requested or
chosen, as the case may be;
(ii) Quarterly Financials: as soon as available and in any event
within 45 days after the end of each of the first three Fiscal Quarters,
the consolidated balance sheet of Company and its Subsidiaries as at the
end of such Fiscal Quarter and the related consolidated statements of
income, stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Quarter and for the period from the beginning
of the then current Fiscal Year to the end of such Fiscal Quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding
figures from the Financial Plan for the current Fiscal Year, all in
reasonable detail and certified by the chief financial officer of Company
that they fairly present, in all material respects, the financial
condition of Company and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments; in addition, as soon as available and in any event within 45
days after
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the end of the fourth Fiscal Quarter, the consolidated balance sheet of
Company and its Subsidiaries as at the end of such Fiscal Quarter and
related consolidated balance sheet of Company and its Subsidiaries as at
the end of such Fiscal Quarter and the related consolidated statements of
income, stockholders' equity and cash flows of Company and its
Subsidiaries for such Fiscal Quarter and for the period from the beginning
of the then current Fiscal Year to the end of such Fiscal Quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding
figures from the Financial Plan for the current Fiscal Year, subject to
changes resulting from audit and normal year-end adjustments (which shall
not be required to be accompanied by any certificates or statements
otherwise required by subdivisions (iv) or (v) below).
(iii) Year-End Financials: as soon as available and in any event
within 100 days after the end of each Fiscal Year, (a) the consolidated
balance sheet of Company and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from
the Financial Plan for the Fiscal Year covered by such financial
statements, all in reasonable detail and certified by the chief financial
officer, chief accounting officer or controller of Company that they
fairly present, in all material respects, the financial condition of
Company and its Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its Subsidiaries
in the form prepared for presentation to senior management for such Fiscal
Year, and (c) in the case of such consolidated financial statements, a
report thereon of PricewaterhouseCoopers or other independent certified
public accountants of recognized national standing selected by Company and
satisfactory to Agents, which report shall be unqualified and shall state
that such consolidated financial statements fairly present, in all
material respects, the consolidated financial position of Company and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards;
(iv) Officer's, Margin Determination and Compliance Certificates:
together with each delivery of financial statements of Company and its
Subsidiaries pursuant to subdivisions (ii) and (iii) above, (a) an
Officer's Certificate of Company stating that the signers have reviewed
the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officer's Certificate, of any condition or event that constitutes
an Event of Default or Potential Event of Default, or, if any such
condition or event existed or
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exists, specifying the nature and period of existence thereof and what
action Company has taken, is taking and proposes to take with respect
thereto; (b) a Margin Determination Certificate demonstrating in
reasonable detail the Consolidated Leverage Ratio for the four consecutive
Fiscal Quarters ending on the day of the accounting period covered by such
financial statements; and (c) a Compliance Certificate demonstrating in
reasonable detail compliance during and at the end of the applicable
accounting periods with the restrictions contained in Section 7, in each
case to the extent compliance with such restrictions is required to be
tested at the end of the applicable accounting period;
(v) Reconciliation Statements: if, as a result of any change in
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries
delivered pursuant to subdivisions (ii), (iii) or (xiii) of this
subsection 6.1 will differ in any material respect from the consolidated
financial statements that would have been delivered pursuant to such
subdivisions had no such change in accounting principles and policies been
made, then (a) together with the first delivery of financial statements
pursuant to subdivision (ii), (iii) or (xiii) of this subsection 6.1
following such change, consolidated financial statements of Company and
its Subsidiaries for (y) the current Fiscal Year to the effective date of
such change and (z) the two full Fiscal Years immediately preceding the
Fiscal Year in which such change is made, in each case prepared on a pro
forma basis as if such change had been in effect during such periods, and
(b) together with each delivery of financial statements pursuant to
subdivision (ii), (iii) or (xiii) of this subsection 6.1 following such
change, a written statement of the chief accounting officer or chief
financial officer of Company setting forth the differences (including any
differences that would affect any calculations relating to the financial
covenants set forth in subsection 7.6) which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each delivery of
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of Section 7 of
this Agreement as they relate to accounting matters, (b) stating whether,
in connection with their audit examination, any condition or event has
come to their attention that caused them to believe Company was not in
compliance with any of the provisions of Section 7, insofar they relate to
accounting matters and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to
obtain knowledge of any such noncompliance that would not be disclosed in
the course of their audit examination, and (c) stating that based on their
audit examination nothing has come to their attention that causes them to
believe either or both that the information contained in the certificates
delivered therewith pursuant to subdivision (iv) above is not correct or
that the matters set forth in the Compliance Certificate delivered
therewith pursuant to clause (c) of subdivision (iv) above for the
applicable Fiscal Year are not stated in accordance with the terms of this
Agreement;
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(vii) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of Company and its Subsidiaries made by such accountants,
including any comment letter submitted by such accountants to management
in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (a) all financial statements, reports, notices and
proxy statements sent or made available generally by Company to its
security holders or by any Subsidiary of Company to its security holders
other than Company or another Subsidiary of Company, (b) all regular and
periodic reports and all registration statements (other than on Form S-8
or a similar form) and prospectuses, if any, filed by Company or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority,
and (c) all press releases and other statements made available generally
by Company or any of its Subsidiaries to the public concerning material
developments in the business of Company or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of Company
obtaining knowledge (a) of any condition or event that constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Lender has given any notice (other than to Administrative Agent) or taken
any other action with respect to a claimed Event of Default or Potential
Event of Default, (b) that any Person has given any notice to Company or
any of its Subsidiaries or taken any other action with respect to a
claimed default or event or condition of the type referred to in
subsection 8.2, (c) of any condition or event that would be required to be
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in
effect of the date hereof) if Company were required to file such reports
under the Exchange Act, or (d) of the occurrence of any event or change
that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature
and period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Event of Default, Potential Event of Default, default, event or
condition, and what action Company has taken, is taking and proposes to
take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer
of Company obtaining knowledge of (X) the institution of, or non-frivolous
threat of, any action, suit, proceeding (whether administrative, judicial
or otherwise), governmental investigation or arbitration against or
affecting Company or any of its Subsidiaries or any property of Company or
any of its Subsidiaries (collectively, "Proceedings") not previously
disclosed in writing by Company to Lenders or (Y) any material development
in any Proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
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(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their respective
counsel to evaluate such matters; and (b) within twenty days after the end
of each Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, Company or any of its
Subsidiaries equal to or greater than $500,000, and promptly after request
by Agents such other information as may be reasonably requested by Agents
to enable Agents and their respective counsel to evaluate any of such
Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the occurrence of
or forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action Company, any of its Subsidiaries or any of
their respective ERISA Affiliates has taken, is taking or proposes to take
with respect thereto and, when known, any action taken or threatened by
the Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a) all
notices received by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates from a Multiemployer Plan sponsor concerning
an ERISA Event; and (b) copies of such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Administrative
Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
later than ten days after the beginning of each Fiscal Year, a
consolidated plan and financial forecast for such Fiscal Year and the next
two succeeding Fiscal Years (the "Financial Plan" for such Fiscal Years),
including (a) a forecasted consolidated balance sheet and forecasted
consolidated statements of income and cash flows of Company and its
Subsidiaries for each such Fiscal Year, together with pro forma financial
covenant calculations for each such Fiscal Year determined in a manner
consistent with financial covenant calculations shown in a Compliance
Certificate and an explanation of the assumptions on which such forecasts
are based, (b) forecasted consolidated statements of income and cash flows
of Company and its Subsidiaries for each quarter of the first such Fiscal
Year, together with an explanation of the assumptions on which such
forecasts are based, (c) the amount of forecasted unallocated overhead for
each such Fiscal Year, and (d) such other information and projections as
any Lender may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by November
1 of each year, a report in form and substance satisfactory to Collateral
Agent outlining all material insurance coverage maintained as of the date
of such report by Company and its Subsidiaries and all material insurance
coverage planned to be maintained by Company and its Subsidiaries in the
twelve months ending on the next succeeding September 30;
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(xv) UCC Search Report: As promptly as practicable after the date of
delivery to Collateral Agent of any UCC financing statement executed by
any Loan Party pursuant to subsection 4.1D(iv) or 6.8A, copies of
completed UCC searches evidencing the proper filing, recording and
indexing of such UCC financing statement and listing all other effective
financing statements that name such Loan Party as debtor, together with
copies of all such other financing statements not previously delivered to
Collateral Agent or contained in a search report delivered to Collateral
Agent naming Company or such Loan Party as debtor;
(xvi) Board of Directors: with reasonable promptness, written notice
of any change in the Board of Directors of Company;
(xvii) New Subsidiaries: promptly upon any Person becoming a
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company
and (b) all of the data required to be set forth in Schedule 5.1 annexed
hereto with respect to all Subsidiaries of Company (it being understood
that such written notice shall be deemed to supplement Schedule 5.1
annexed hereto for all purposes of this Agreement);
(xviii) Certain Contracts: promptly, and in any event within ten
Business Days after any Material Contract to which IOMEGA, IBM or a
subsidiary or division thereof is a party is terminated or amended in a
manner that is materially adverse to Company or a Subsidiary, as the case
may be; and
(xix) Other Information: with reasonable promptness, such other
information and data with respect to Company or any of its Subsidiaries as
from time to time may be reasonably requested by Administrative Agent.
6.2 Legal Existence, etc.
Except as permitted under subsection 7.7, Company will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its legal existence and all rights and franchises material to its
business; provided, however that neither Company nor any of its Subsidiaries
shall be required to preserve any such right or franchise if the Board of
Directors of Company or such Subsidiary shall determine that the preservation
thereof is no longer desirable in the conduct of the business of Company or such
Subsidiary, as the case may be, and that the loss thereof is not disadvantageous
in any material respect to Company, such Subsidiary or Lenders.
6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto;
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provided that no such charge or claim need be paid if it is being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, so long as (1) such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor and
(2) in the case of a charge or claim which has or may become a Lien against any
of the Collateral, such contest proceedings conclusively operate to stay the
sale of any portion of the Collateral to satisfy such charge or claim.
B. Company will not, nor will it permit any of its Subsidiaries to,
File or consent to the filing of any consolidated income tax return with any
Person (other than Company or any of its Subsidiaries).
6.4 Maintenance of Properties; Insurance; Application of Net
insurance/Condemnation Proceeds.
A. Maintenance of Properties. Company will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Company and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
B. Insurance. Company will maintain or cause to be maintained, with
financially sound and reputable insurers, such public liability insurance, third
party property damage insurance, business interruption insurance and casualty
insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may
customarily be carried or maintained under similar circumstances by corporations
of established reputation engaged in similar businesses, in each case in such
amounts (giving effect to self-insurance), with such deductibles, covering such
risks and otherwise on such terms and conditions as shall be customary for
corporations similarly situated in the industry. Without limiting the generality
of the foregoing, Company will maintain or cause to be maintained (i) flood
insurance with respect to each Flood Hazard Property that is located in a
community that participates in the National Flood Insurance Program, in each
case in compliance with any applicable regulations of the Board of Governors of
the Federal Reserve System, and (ii) replacement value casualty insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, with such deductibles, and covering such risks as are at all times
satisfactory to Agents in their commercially reasonable judgment. Each such
policy of insurance shall (a) name Collateral Agent for the benefit of Lenders
as an additional insured thereunder as its interests may appear and (b) in the
case of each business interruption and casualty insurance policy, contain a loss
payable clause or endorsement, satisfactory in form and substance to Agents,
that names Collateral Agent for the benefit of Lenders as the loss payee
thereunder for any covered loss in excess of $1,000,000 and provides for at
least 30 days prior written notice to Agents of any modification or cancellation
of such policy.
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6.5 Inspection Rights: Audits of Inventory and Accounts Receivable; Lender
Meeting.
A. Inspection Rights. Company shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by
Administrative Agent or any Lender to visit and inspect any of the properties of
Company or of any of its Subsidiaries, to inspect, copy and take extracts from
its and their financial and accounting records, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants (provided that Company may, if it so chooses, be present at
or participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may reasonably be
requested.
B. Lender Meeting; Collateral Audit. Company will, upon the request
of Agents or Requisite Lenders, participate in a meeting of Agents and Lenders
once during each Fiscal Year to be held at Company's corporate offices (or at
such other location as may be agreed to by Company and Agents) at such time as
may be agreed to by Company and Agents.
In addition to, and not in limitation of the preceding paragraph, a
representative designated by Agents shall, at Company's expense, and after
reasonable notice and during normal business hours, at least once each Fiscal
Year (but, after the occurrence and during the continuance of an Event of
Default, at such time or times as may be determined by Agents during normal
business hours) be permitted to audit Inventory and Accounts Receivable of
Company and its Subsidiaries.
6.6 Compliance with Laws, etc.
Company shall comply, and shall cause each of its Subsidiaries and
all other Persons on or occupying any Facilities to comply, with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including all Environmental Laws), noncompliance with
which could reasonably be expected to cause, individually or in the aggregate, a
Material Adverse Effect.
6.7 Year 2000 Compliance.
Any reprogramming required to permit the proper functioning, in and
following the year 2000, of(i) Company's and its Subsidiaries' computer systems
and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Company's or its Subsidiaries'
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by October 1, 1999, or, with respect to
financial systems, July 1, 1999, except where the failure to complete such
programming could not reasonably be expected to have a Material Adverse Effect.
The cost to Company or its Subsidiaries of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to Company or its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of others' systems or equipment) will not result in an Event of Default
or a Material Adverse Effect. Except for such of the reprogramming referred to
in the preceding sentence as may be necessary, the computer and management
information systems of Company and its Subsidiaries are and, with ordinary
course upgrading and maintenance, will continue for
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the term of this Agreement to be, sufficient to permit Company and its
Subsidiaries to conduct its business without a Material Adverse Effect.
6.8 Execution of Subsidiary Guaranty and Personal Property Collateral
Documents by Certain Subsidiaries and Future Subsidiaries; Offshore
Collateral; IP Collateral.
A. Execution of Subsidiary Guaranty and Personal Property Collateral
Documents. In the event that any Person becomes a Domestic Subsidiary of Company
after the date hereof, Company will promptly notify Collateral Agent of that
fact and cause such Subsidiary to execute and deliver to Collateral Agent a
counterpart of the Subsidiary Guaranty and a Subsidiary Pledge Agreement and a
Subsidiary Security Agreement and to take all such further actions and execute
all such further documents and instruments (including actions, documents and
instruments comparable to those described in subsection 4.1 D) as may be
necessary or, in the reasonable opinion of Agents, desirable to create in favor
of Collateral Agent, for the benefit of Lenders, a valid and perfected First
Priority Lien on all of the personal and mixed property assets of such Domestic
Subsidiary described in the applicable forms of Domestic Collateral Documents.
B. Execution of Offshore Collateral Documents. In the event that any
Person becomes an Foreign Subsidiary of Company after the date hereof, Company
will promptly notify Collateral Agent of that fact and cause such Subsidiary to
execute and deliver to Collateral Agent such documents and instruments and take
such further actions (including actions, documents and instruments comparable to
those described in subsection 4.1 D) as may be necessary, or in the reasonable
opinion of Agents, desirable to create in favor of Collateral Amount, for the
benefit of Lenders, a valid and perfected First Priority Lien on all of real,
personal and mixed property assets of such Foreign Subsidiary.
C. Security Interest in MSL Spain Inventory. Company shall at all
times cause a First Priority Lien to exist in favor of Collateral Agent on
behalf of Lenders with respect to Inventory of MSL Spain, subject to the
provisions of subsection 4.4; provided that Company shall not be required to
perfect a Lien with respect to any increase in value of Inventory in excess of
mat required pursuant to subsection 4.1 D(vii), except as provided below. No
later than the fifteenth day of any month following a month for which the books
and records of MSL Spain show that the value of Inventory of MSL Spain exceeds
by $5,000,000 or more the value of Inventory as to which a First Priority Lien
is in full force and effect in favor of Collateral Agent, on behalf of Lenders,
Company shall notify Collateral Agent and, within 10 days thereafter, cause MSL
Spain to amend or supplement the applicable Offshore Collateral Document and
make all filings necessary to assure that such a valid and perfected First
Priority Lien exists with respect to such increased amount of Inventory.
D. Subsidiary Charter Documents, Legal Opinions, Etc. In the event
that any Person becomes a Subsidiary of Company after the date hereof, Company
shall deliver to Administrative Agent, together with such Loan Documents, (i)
certified copies of such Subsidiary's Charter documents (such as its Certificate
or Articles of Incorporation), together with a good standing certificate from
the Secretary of State of the jurisdiction of its organization and each other
state in which such Person is qualified as a foreign entity to do business and,
to
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the extent generally available, a certificate or other evidence of good standing
as to payment at any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, each to be dated a recent date
prior to their delivery to Administrative Agent, (ii) a copy of such
Subsidiary's Bylaws or equivalent certified by its secretary or an assistant
secretary as of a recent date prior to their delivery to Administrative Agent,
(iii) a certificate executed by the secretary or an assistant secretary or other
appropriate officer of such Subsidiary as to (a) the fact that the attached
resolutions of the Board of Directors or other governing body of such Subsidiary
approving and authorizing the execution, delivery and performance of such Loan
Documents are in full force and effect and have not been modified or amended and
(b) the incumbency and signatures of the officers or agents of such Subsidiary
executing such Loan Documents, and (iv) a favorable opinion of counsel to such
Subsidiary, in form and substance satisfactory to Agents and their respective
counsel, as to (a) the due organization and good standing of such Subsidiary,
(b) the due authorization, execution and delivery by such Subsidiary of such
Loan Documents, (c) the enforceability of such Loan Documents against such
Subsidiary, (d) such other matters (including matters relating to the creation
and perfection of Liens in any Collateral pursuant to such Loan Documents) as
Agents may reasonably request, all of the foregoing to be reasonably
satisfactory in form and substance to Agents and their respective counsel.
E. IP Collateral. If any Subsidiary becomes an owner of any
Intellectual Property, Company shall cause such Subsidiary to promptly execute
and deliver to Collateral Agent a copyright security agreement or a trademark
security agreement, or such other security agreement as Collateral Agent shall
deem reasonably appropriate and take such further action and execute such
further documents and instruments as may be necessary, or in the opinion of
Collateral Agent, desirable to create in favor of Collateral Agent, for the
benefit of Lenders, a valid and perfected First Priority Lien on such
Intellectual Property.
6.9 Conforming Leasehold Interests: Matters Relating to Additional Real
Property Collateral Located in the United States.
A. Conforming Leasehold Interests. If Company or any of its
Subsidiaries acquires any Leasehold Property other than the Leasehold Property
expected to be acquired by Company at 300 Baker Avenue, Concord, Massachusetts,
Company shall endeavor to, or shall endeavor to cause such Subsidiary to
endeavor to, cause such Leasehold Property to be a Conforming Leasehold
Interest.
B. Additional Mortgages, Etc. From and after the Closing Date, in
the event that (i) Company or any Subsidiary Guarantor acquires any fee interest
in real property or any Material Leasehold Property or (ii) at the time any
Person becomes a Subsidiary Guarantor, such Person owns or holds any fee
interest in real property or any Material Leasehold Property, in either case
excluding any such Real Property Asset the encumbrancing of which requires the
consent of any applicable lessor or (in the case of clause (ii) above)
then-existing senior lienholder, where Company and its Subsidiaries are unable
to obtain such lessor's or senior lienholder's consent (any such non-excluded
Real Property Asset described in the foregoing clause (i) or (ii) being an
"Additional Mortgaged Property"), Company or such Subsidiary Guarantor shall
deliver to Collateral Agent, as soon as practicable after such Person acquires
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such Additional Mortgaged Property or becomes a Subsidiary Guarantor, as the
case may be, the following:
(i) Additional Mortgage. A fully executed and notarized Mortgage (an
"Additional Mortgage"), duly recorded in all appropriate places in all
applicable jurisdictions encumbering the interest of such Loan Party in
such Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel to such
Loan Party, in form and substance reasonably satisfactory to Agents and
their respective counsel, as to the due authorization, execution and
delivery by such Loan Party of such Additional Mortgage and such other
matters as Agents may reasonably request, and (b) if required by Agents,
an opinion of counsel (which counsel shall be reasonably satisfactory to
Agents) in the state in which such Additional Mortgaged Property is
located with respect to the enforceability of the form of Additional
Mortgage recorded in such state and such other matters (including all
matters governed by the laws of such state regarding personal property
security interests in respect of any Collateral) as Agents may reasonably
request, in each case in form and substance reasonably satisfactory to
Agents;
(iii) Landlord Consent and Estoppel; Recorded Leasehold Interest. In
the case of an Additional Mortgaged Property consisting of a Leasehold
Property, (a) a Landlord Consent and Estoppel, unless Company or such
Subsidiary is unable to obtain the Landlord Consent and Estoppel after
using commercially reasonable efforts to obtain the same and (b) evidence
that such Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) If required by Agents, an ALTA mortgagee
title insurance policy or an unconditional commitment therefor (an
"Additional Mortgage Policy") issued by the Title Company with respect to
such Additional Mortgaged Property, in an amount reasonably satisfactory
to Agents, insuring fee simple title to, or a valid leasehold interest in,
such Additional Mortgaged Property vested in such Loan Party and assuring
Agents that such Additional Mortgage creates a valid and enforceable First
Priority mortgage Lien on such Additional Mortgaged Property, subject only
to a standard survey exception and other encumbrances, easements and
restrictions not materially affecting the value or use of the Property,
which Additional Mortgage Policy (1) shall include an endorsement for
mechanics' liens, for future advances under this Agreement and for any
other matters reasonably requested by Agents and (2) shall provide for
affirmative insurance and such reinsurance as Agents may reasonably
request, all of the foregoing in form and substance reasonably
satisfactory to Agents; and (b) evidence satisfactory to Agents that such
Loan Party has (i) delivered to the Title Company all certificates and
affidavits required by the Title Company in connection with the issuance
of the Additional Mortgage Policy and (ii) paid to the Title Company or to
the appropriate governmental authorities all expenses and premiums of the
Title Company in connection with the issuance of the Additional Mortgage
Policy and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Additional
Mortgage in the appropriate real estate records;
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(v) Title Report. If no Additional Mortgage Policy is required with
respect to such Additional Mortgaged Property, a title report issued by
the Title Company with respect thereto, dated not more than 30 days prior
to the date such Additional Mortgage is to be recorded and reasonably
satisfactory in form and substance to Agents;
(vi) Copies of Documents Relating to Title Exceptions. Copies of all
recorded documents listed as exceptions to title or otherwise referred to
in the Additional Mortgage Policy or title report delivered pursuant to
clause (iv) or (v) above:
(vii) Matters Relating to Flood Hazard Properties. (a) Evidence,
which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (I) whether such Additional Mortgaged Property
is a Flood Hazard Property and (2) if so, whether the community in which
such Flood Hazard Property is located is participating in the National
Flood Insurance Program, (b) if such Additional Mortgaged Property is a
Flood Hazard Property, such Loan Party's written acknowledgement of
receipt of written notification from Administrative Agent (I) that such
Additional Mortgaged Property is a Flood Hazard Property and (2) as to
whether the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, and (c) in the
event such Additional Mortgaged Property is a Flood Hazard Property that
is located in a community that participates in the National Flood
Insurance Program, evidence that Company has obtained flood insurance in
respect of such Flood Hazard Property to the extent required under the
applicable regulations of the Board of Governors of the Federal Reserve
System; and
(viii) Environmental Audit. If required by Agents, reports and other
information, in form, scope and substance satisfactory to Agents and
prepared by environmental consultants satisfactory to Agents, concerning
any environmental hazards or liabilities to which Company or any of its
Subsidiaries may be subject with respect to such Additional Mortgaged
Property.
6.10 MSL Overseas Charter Documents.
Company shall, within 90 days after the Closing Date, give evidence
to Administrative Agent that it has caused MSL Overseas to amend its charter
documents to require director independent of Company (and MSL Overseas shall
promptly appoint such director), to require the affirmative vote of such
independent director to file any bankruptcy or insolvency proceeding and to
prohibit MSL Overseas from conducting any business other than (i) incurring
loans under this Agreement and complying with its terms and conditions of this
Agreement and he other Loan Documents and (ii) owning stock and notes of Foreign
Subsidiaries.
Section 7. COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders
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shall otherwise give prior written consent, Company shall perform, and shall
cause each of its Subsidiaries to perform, all covenants in this Section 7.
7.1 Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Company may become and remain liable with respect to the
Obligations;
(ii) MSL Overseas may become and remain liable with respect to all
Loans made to it hereunder and all related Obligations;
(iii) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations permitted by subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iv) (a) Company may become and remain liable with respect to
Indebtedness to any of its Wholly-owned Domestic Subsidiaries, and any
Wholly-owned Domestic Subsidiary of Company may become and remain liable
with respect to Indebtedness to Company or any other Wholly-owned Domestic
Subsidiary of Company; (b) subject to Section 7.17, MSL Overseas may
become and remain liable with respect to Indebtedness to Company's Foreign
Subsidiaries, and any Wholly-owned Foreign Subsidiary of Company may
become and remain liable with respect to Indebtedness to MSL Overseas or
any other Wholly Owned Foreign Subsidiary of Company, (c) Company may
become and remain liable with respect to Indebtedness to MSL Offshore
Finance, B.V., a Netherlands company ("MSL Offshore"), and MSL Offshore
may become and remain liable with respect to Indebtedness to Company, (d)
MSL Offshore may become and remain liable with respect to Indebtedness to
Company's Foreign Subsidiaries (with the exception of MSL Overseas) and
Company's Foreign Subsidiaries (other than MSL Overseas) may become and
remain liable with respect to Indebtedness to MSL Offshore provided that
all such intercompany Indebtedness shall be evidenced by promissory notes,
all such intercompany Indebtedness owed by a Borrower to any of Company's
Subsidiaries shall be subordinate in right of payment to the payment in
full of the Obligations of that Borrower pursuant to the terms of the
applicable promissory notes or any intercompany subordination agreement,
and (e) any payment by any Subsidiary of Company under any Guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
intercompany Indebtedness owed by such Subsidiary to Company or to any of
its Subsidiaries for whose benefit such payment is made;
(v) Company and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in Schedule 7.1 annexed hereto; and
(vi) Company and its Subsidiaries may become and remain liable with
respect to other Indebtedness in an aggregate principal amount not to
exceed $10,000,000 at any
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time outstanding; provided that if such Indebtedness consists of Capital
Leases, such Capital Leases are permitted under the terms of subsections
7.6 and 7.8.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or permit
to exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the UCC of any State or under any similar recording or notice
statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens described in Schedule 7.2 annexed hereto; and
(iv) Other Liens securing Indebtedness in an aggregate amount not to
exceed $1,000,000 at any time outstanding.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A. it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither Company
nor any of its Subsidiaries shall enter into any agreement (other than an
agreement prohibiting only the creation of Liens securing Subordinated
Indebtedness) prohibiting the creation or assumption of any Lien upon any of its
properties or assets, whether now owned or hereafter acquired.
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except as provided herein, Company will not, and will not permit
any of its Subsidiaries to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (i) pay dividends or make any other
distributions on any of such Subsidiary's capital stock owned by Company or any
other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such
Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or
advances to
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Company or any other Subsidiary of Company, or (iv) transfer any of its property
or assets to Company or any other Subsidiary of Company.
7.3 Investments: Joint Ventures.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date as shown on Schedule 7.3;
(iii) Company and its Subsidiaries may make and own additional
equity Investments in the Foreign Subsidiaries in an aggregate amount not
to exceed $5,000,000 plus an amount equal to the aggregate amount of
intercompany Indebtedness of Foreign Subsidiaries that is capitalized by
Company;
(iv) Company and its Subsidiaries may make intercompany loans to the
extent permitted under subsection 7.1(iv);
(v) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted by subsections 7.6 and 7.8; and
(vi) Company and its Subsidiaries may make and own other Investments
in an aggregate amount not to exceed at any time $500,000.
7.4 Contingent Obligations.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of the Subsidiary Guaranty or
the Offshore Collateral Documents;
(ii) Borrowers may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit and Company and its
Subsidiaries may become and remain liable with respect to Contingent
Obligations in respect of other letters of credit in an aggregate amount
at any time not to exceed $100,000;
(iii) Company may become and remain liable with respect to
Contingent Obligations under Hedge Agreements required under subsection
6.10;
(iv) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations under guarantees in the ordinary course
of business of the
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obligations of suppliers, customers, franchisees and licensees of Company
and its Subsidiaries in an aggregate amount not to exceed at any time
$750,000;
(v) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of any Indebtedness of
Company or any of its Subsidiaries permitted by subsection 7.1; and
(vi) Company and its Subsidiaries, as applicable, may remain liable
with respect to Contingent Obligations described in Schedule 7.4 annexed
hereto.
7.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that any Subsidiary may pay dividends or
make other distributions to Company or a Wholly-owned Subsidiary of Company.
7.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. Company shall not permit the
ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense for any
consecutive four-Fiscal Quarter period ending on the dates set forth below to be
less than the correlative ratio indicated:
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Minimum Interest
Fiscal Quarter Ending Date Coverage Ratio
-------------------------- --------------
December 31, 1998 2.25
March 31, 1999 2.25
June 30, 1999 2.50
September 30, 1999 2.50
December 31, 1999 3.00
March 31, 2000 3.00
June 30, 2000 3.00
September 30, 2000 3.00
December 31, 2000 3.00
March 31, 2001 3.00
June 30, 2001 3.00
September 30, 2001 3.00
December 31, 2001 3.00
March 31, 2002 3.00
June 30, 2002 3.00
September 30, 2002 3.00
December 31, 2002 3.00
March 31, 2003 3.00
June 30, 2003 3.00
September 30, 2003 3.00
December 31, 2003 3.00
March 31, 2004 3.00
June 30, 2004 3.00
September 30, 2004 3.00
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B. Maximum Leverage Ratio. Company shall not permit the Consolidated
Leverage Ratio at any time during any of the periods set forth below to exceed
the correlative ratio indicated:
Period Maximum Leverage Ratio
------ ----------------------
September 30, 1998 4.00
December 31, 1998 4.00
March 31, 1999 4.00
June 30, 1999 3.75
September 30, 1999 3.50
December 31, 1999 3.50
March 31, 2000 3.25
June 30, 2000 3.25
September 30, 2000 3.25
December 31, 2000 3.25
March 31, 2001 3.00
June 30, 2001 3.00
September 30, 2001 3.00
December 31, 2001 3.00
March 31, 2002 2.75
June 30, 2002 2.75
September 30, 2002 2.75
December 31, 2002 2.75
March 31, 2003 2.75
June 30, 2003 2.75
September 30, 2003 2.75
December 31, 2003 2.75
March 31, 2004 2.75
June 30, 2004 2.75
September 30, 2004 2.75
C. Minimum Consolidated EBITDA. Company shall not permit
Consolidated EBITDA for the consecutive four-Fiscal Quarter period ending on the
date indicated below to be less than the correlative amount indicated:
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Minimum Consolidated
Fiscal Quarter Ending Date EBITDA
-------------------------- --------------------
$ in millions
September 30, 1998 18.0
December 31, 1998 21.5
March 31, 1999 22.0
June 30, 1999 24.0
September 30, 1999 25.0
December 31, 1999 25.5
March 31, 2000 29.0
June 30, 2000 29.0
September 30, 2000 29.0
December 31, 2000 29.0
March 31, 2001 34.5
June 30, 2001 34.5
September 30, 2001 34.5
December 31, 2001 34.5
March 31, 2002 42.5
June 30, 2002 42.5
September 30, 2002 42.5
December 31, 2002 42.5
March 31, 2003 53.0
June 30, 2003 53.0
September 30, 2003 53.0
December 31, 2003 53.0
March 31, 2004 64.5
June 30, 2004 64.5
September 30, 2004 64.5
December 31, 2004 64.5
D. Minimum Consolidated Net Worth. Company shall not permit
Consolidated Net Worth during the periods set forth below to be less than the
sum of the correlative amount indicated and 50% of the net proceeds of all
equity Securities issued by Company from and after the Closing Date and on or
prior to the date of determination:
Minimum
Period Consolidated Net Worth
------ ----------------------
($ in millions)
December 31, 1998-December 30, 1999 22.0
December 31, 1999-December 30, 2000 30.0
December 31, 2000-December 30, 2001 35.0
December 31, 2001-December 30, 2002 45.0
December 31, 2002-December 30, 2003 55.0
December 31, 2003-December 30, 2004 70.0
December 31, 2004-December 30, 2005 90.0
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7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
Company shall not, and shall not permit any of Company's
Subsidiaries to, alter the corporate, capital or legal structure of Company or
any of Company's Subsidiaries, or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or
sublessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
owned or hereafter acquired, or acquire by purchase or otherwise all or
substantially all the business, property or fixed assets of, or stock or other
evidence of beneficial ownership of, any Person or any division or line of
business of any Person, except:
(i) any Subsidiary of Company may be merged with or into Company or
any Wholly-owned Subsidiary Guarantor, or be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any Wholly-owned
Subsidiary Guarantor; provided that, in the case of such a merger, Company
or such Wholly-owned Subsidiary Guarantor shall be the continuing or
surviving corporation;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures permitted under subsection 7.8;
(iii) Company and its Subsidiaries may dispose of obsolete, worn out
or surplus property in the ordinary course of business; and
(iv) Company and its Subsidiaries may sell or otherwise dispose of
assets in transactions that do not constitute Asset Sales; provided that
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof.
7.8 Consolidated Capital Expenditures.
Company shall not, and shall not permit its Subsidiaries to make or
incur Consolidated Capital Expenditures in any Fiscal Year in an aggregate
amount exceeding the correlative amount indicated for such Fiscal Year, plus an
amount equal to the excess, if any, of the amount permitted for the preceding
Fiscal Year over the actual amount of Consolidated Capital Expenditures for such
previous Fiscal Year (but such increase shall not exceed 50% of the amount of
such excess (without taking into account any amount of increase pursuant to this
proviso)).
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Fiscal Year Maximum Consolidated Capital Expenditure
----------- ----------------------------------------
($ in millions)
1998 10.0
1999 10.0
2000 20.0
2001 20.0
2002 25.0
2003 25.0
2004 25.0
7.9 Fiscal Year: Accounting Changes.
Company shall not change its Fiscal Year-end from December 31 of
each calendar year. Company shall not and shall not suffer or permit any
Subsidiary to make any significant changes in accounting treatment or reporting
practices, except as required or allowed by GAAP, or change the Fiscal Year of
any Subsidiary.
7.10 Sales and Lease-Backs.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, become or remain liable as lessee or as a guarantor or
other surety with respect to any lease, whether an Operating Lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease; provided that Company and its Subsidiaries may become and remain
liable as lessee, guarantor or other surety with respect to any such lease if
and to the extent that Company or any of its Subsidiaries would be permitted to
enter into, and remain liable under, such lease to the extent that the
transaction would be permitted under subsection 7.1, assuming the sale and lease
back transaction constituted Indebtedness in a principal amount equal to the
gross proceeds of the sale.
7.11 Sale or Discount of Receivables.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.
7.12 Transactions with Stockholders and Affiliates.
Except for the transactions described on Schedule 7.12, Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of
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any service) with any holder of 5% or more of any class of equity Securities of
Company or with any Affiliate of Company or of any such holder, on terms that
are less favorable to Company or that Subsidiary, as the case may be, than those
that might be obtained at the time from Persons who are not such a holder or
Affiliate; provided that the foregoing restriction shall not apply to (i) any
transaction between Company and any of its Wholly-owned Subsidiaries or between
any of its Wholly-owned Subsidiaries or (ii) reasonable and customary fees paid
to members of the Boards of Directors of Company and its Subsidiaries.
7.13 Disposal of Subsidiary Equity.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except to qualify directors if
required by applicable law; or
(ii) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge or otherwise encumber or dispose of any shares of capital
stock or other equity Securities of any of its Subsidiaries (including
such Subsidiary), except to Company, another Subsidiary of Company, or to
qualify directors if required by applicable law.
7.14 Conduct of Business.
From and after the Closing Date, (i) Company shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than (a) the
businesses engaged in by Company and its Subsidiaries on the Closing Date and
similar or related businesses and (b) such other lines of business as may be
consented to by Requisite Lenders; (ii) MSL Overseas shall engage in no business
other than borrowing Loans hereunder, lending the proceeds of such Loans to the
Foreign Subsidiaries, and owning the capital stock of such Subsidiaries; and
(iii) MSL SPV Ireland, Inc. shall engage in no business.
7.15 Amendments of Documents Relating to Subordinated Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Subordinated Indebtedness, or make
any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
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7.16 Amendments to Organization Documents.
Company shall provide prior written notice to Agents and Requisite
Lenders of any proposed amendment of the Articles of Association or Memorandum
of Association of MSL Overseas and shall not allow MSL Overseas to make any
amendment of its Articles of Association or Memorandum of Association that, in
the reasonable judgment of Requisite lenders, would have an adverse effect on
the rights of Lenders under this Agreement or the other Loan Documents.
7.17 Loans by MSL Overseas to Foreign Subsidiaries.
MSL Overseas shall not lend the proceeds of any Loans to any Foreign
Subsidiary (any such loan being an "Overseas Subsidiary Loan"), unless the
Foreign Borrowing Base of that Subsidiary equals or exceeds the sum of(i) such
Overseas Subsidiary Loan and (ii) all other outstanding Overseas Subsidiary
Loans made to that Subsidiary with the proceeds of Loans under the Credit
Agreement (the foregoing being referred to as "Overseas Borrowing Base
Provisions"); provided, however, that at such time as the Consolidated Leverage
Ratio equals or is less than 3.50:1.00 for two consecutive quarters, MSL
Overseas may make Overseas Subsidiary Loans hereunder without regard to the
Overseas Borrowing Base Provisions; provided, further, that, if, at any time
after the Overseas Borrowing Base Provisions do not apply by reason of the
foregoing proviso, the Consolidated Leverage Ratio exceeds 3.50:1.00 for two
consecutive quarters, the Overseas Borrowing Base Provisions shall apply until
such time as the foregoing proviso may again become effective in accordance with
its terms. If the Overseas Borrowing Base Provisions apply and if the aggregate
amount of Overseas Subsidiary Loans to an Offshore Subsidiary exceeds the
Offshore Subsidiary's Borrowing Base (an "Excess Loans Condition") such
Subsidiary shall, as soon as possible, but no later than the sixtieth day after
the beginning of such Excess Loans Condition, prepay the amount of any such
loans to the extent that the Foreign Borrowing Base (as it may change from time
to time whether as a result of the effect of clause (ix) of the definition of
"Eligible Accounts Receivable" or otherwise) of such Offshore Subsidiary exceeds
the aggregate amount of such Overseas Subsidiary Loans. It is understood and
agreed that MSL Overseas may utilize the proceeds of any such prepayment to make
additional term loans or additional revolving loans to any other Foreign
Subsidiary subject to compliance with the Overseas Borrowing Base Provisions
(when such provisions are effective) and subject to such other Foreign
Subsidiary's compliance with any applicable laws regarding the incurrence of
such intercompany indebtedness and to such other Foreign Subsidiary's securing
such additional intercompany indebtedness to the same extent as it has secured
other intercompany loans advanced by MSL Overseas from the proceeds of the
Loans.
Section 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan
when due, whether at stated maturity, by acceleration, by notice of voluntary
prepayment, by mandatory
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prepayment or otherwise; failure by Company to pay when due any amount payable
to Issuing Lender in reimbursement of any drawing under a Letter of Credit; or
failure by Company to pay any interest on any Loan or any fee or any other
amount due under this Agreement within five days after the date due; or
8.2 Default in Other Agreements.
(i) Failure of Company or any of its Subsidiaries to pay any
principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Contingent Obligations in either an individual or an aggregate principal
amount of $500,000 or more, in each case beyond the end of any grace period
provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) one or more items of
Indebtedness or Contingent Obligations in the individual or aggregate principal
amounts referred to in clause (i) above, but without duplication as to
Indebtedness supported by a Contingent Obligation, or (b) any loan agreement,
mortgage, indenture or other agreement relating to such item(s) of Indebtedness
or Contingent Obligation(s), if the effect of such breach or default is to
cause, or to permit the holder or holders of that Indebtedness or Contingent
Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that
Indebtedness or Contingent Obligation(s) to become or be declared due and
payable prior to its stated maturity or the stated maturity of any underlying
obligation, as the case may be (upon the giving or receiving of notice, lapse of
time, both, or otherwise); or
8.3 Breach of Certain Covenants.
Failure of Company to perform or comply with any term or condition
contained in subsection 2.5 or 6.2 (as to existence of Company) or Section 7 of
this Agreement; or
8.4 Breach of Warranty.
Any representation, warranty, certification or other statement made
by Company or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by Company or any of its Subsidiaries in
writing pursuant hereto or thereto or in connection herewith or therewith shall
be false in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 8,
and such default shall not have been remedied or waived within 20 days after the
earlier of (i) an officer of Company or such Loan Party becoming aware of such
default or (ii) receipt by Company and such Loan Party of notice from any Agent
or any Lender of such default; or
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8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case shall be commenced
against Company or any of its Subsidiaries under the Bankruptcy Code or under
any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Company or any of its Subsidiaries, or
over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Company or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Company or any of its Subsidiaries, and any such event described in
this clause (ii) shall continue for 90 days unless dismissed, bonded or
discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver; etc.
(i) Company or any of its Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or Company or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (ii) Company or any of its
Subsidiaries shall fail generally, or shall admit in writing its inability
generally, to pay its debts as such debts become due; or the Board of Directors
of Company or any of its Subsidiaries (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process
involving either in any individual case or in the aggregate at any time an
amount in excess of $750,000 (in either case not adequately covered by insurance
as to which a solvent and unaffiliated insurance company has acknowledged
coverage) shall be entered or filed against Company or any of its Subsidiaries
or any of their respective assets and shall remain unpaid, undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any event later
than five days prior to the date of any proposed sale thereunder); or
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8.9 Dissolution.
Any order, judgment or decree shall be entered against Company or
any of its Subsidiaries decreeing the dissolution or split up of Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of Company, any of its Subsidiaries or any of their respective ERISA Affiliates
in excess of $2,000,000 during the term of this Agreement; or there shall exist
an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA), individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), which exceeds $2,000,000; or
8.11 Material Adverse Effect.
Any event or change shall occur that has caused or evidences, either
in any case or in the aggregate, a Material Adverse Effect; or
8.12 Change in Control.
Any Person or any two or more Persons acting in concert (other than
Persons in their capacity as underwriters of an offering of Securities of
Company to the public) shall hereafter have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Exchange Act), directly or indirectly, of Securities of Company (or
other Securities convertible into such Securities) representing 30% or more of
the combined voting power of all Securities of Company entitled to vote in the
election of directors, other than Securities having such power only by reason of
the happening of a contingency; or
8.13 Invalidity of Guaranties: Failure of Security: Repudiation of Obligations.
At any time after the execution and delivery thereof, (i) any
Domestic Guaranty or any Offshore Guaranty for any reason, other than the
satisfaction in full of all Obligations, shall cease to be in full force and
effect (other than in accordance with its terms) or shall be declared to be null
and void, (ii) any Collateral Document shall cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or Collateral Agent shall
not have or shall cease to have a valid and perfected First Priority Lien in any
Collateral purported to be covered thereby, in each case for any reason other
than the failure of any Agent or any Lender to take any action within its
control, or (iii) any Loan Party shall contest the validity or enforceability of
any Loan Document in writing or deny in writing that it has any further
liability, including with respect to future advances by Lenders, under any Loan
Document to which it is a party:
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THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company and MSL Overseas, and the obligation of each Lender to make
any Loan, the obligation of Issuing Lender to issue any Letter of Credit
hereunder shall thereupon terminate, and (ii) upon the occurrence and during the
continuation of any other Event of Default, Administrative Agent shall, upon the
written request or with the written consent of Requisite Lenders, by written
notice to Borrowers, (i) declare the commitment of each Lender to make Loans and
any obligation of Issuing Lender to issue Letters of Credit to be terminated,
and/or (ii) declare all or any portion of the amounts described in clauses (a)
through (c) above to be, and the same shall forthwith become, immediately due
and payable upon such declaration, and the obligation of each Lender to make any
Loan, the obligation of Administrative Agent to issue any Letter of Credit and
the right of any Lender to issue any Letter of Credit hereunder shall thereupon
terminate; provided that the foregoing shall not affect in any way the
obligations of Revolving Lenders under subsection 3.3C(i) or the obligations of
Revolving Lenders to purchase any Offshore Participations as provided in
subsection 2.1A(iii).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent and applied as
follows:
If for any reason the aggregate amount delivered by Borrowers as aforesaid is
less than the amount described in clause (b) above (the "Aggregate Available
Amount"), the aggregate amount so delivered by Company shall be apportioned
among all outstanding Letters of Credit in accordance with the ratio of the
maximum amount available for drawing under each such Letter of Credit, and the
aggregate amount so delivered by MSL Overseas shall be apportioned among all
outstanding Letters of Credit issued for the amount of MSL Overseas (as to such
Letter of Credit, the "Maximum Available Amount") to the Aggregate Available
Amount. Upon any drawing under any outstanding Letters of Credit in respect of
which either Borrower has delivered to Administrative Agent any amounts
described above, Administrative Agent shall apply such amounts to reimburse the
Issuing Lender for the account of such drawing. In the event of cancellation or
expiration of any Letter of Credit in respect of which a Borrower has delivered
any amounts described above, or in the event of any reduction in the Maximum
Available Amount under such Letter of Credit, Administrative Agent shall apply
the amount then on deposit with it in respect of such Letter of Credit (less, in
the case of such a reduction, the Maximum Available Amount under such Letter of
Credit immediately after such reduction) first, to the extent of any excess, as
to amounts paid by Company, to the cash collateralization of any outstanding
Letters of Credit in respect of which a Borrower has failed to pay all or a
portion of the amounts described above and, as to amounts paid by MSL Overseas,
to the cash collateralization of any outstanding Letters of Credit issued for
the account of an Foreign Subsidiary (such cash collateralization to be
apportioned among all such Letters of Credit in the manner described above),
second, to the extent of any further excess, to the payment of any other
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outstanding Obligation in such order as Administrative Agent shall elect
(provided, that amounts paid by MSL Overseas shall be applied to the payment of
obligations of MSL Overseas only), and third, to the extent of any further
excess, to the payment to whomsoever shall be lawfully entitled to receive such
funds.
Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to clause (ii) of such paragraph Borrower shall pay all arrears of
interest and all payments on account of principal which shall have become due
otherwise than as a result of such acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 11.6, then Requisite Lenders, by
written notice to Borrower, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to bind
Lenders to a decision which may be made at the election of Requisite Lenders and
are not intended, directly or indirectly, to benefit either Borrower, and such
provisions shall not at any time be construed so as to grant either Borrower the
right to require Lenders to rescind or annul any acceleration hereunder or to
preclude Administrative Agent or Lenders from exercising any of the rights or
remedies available to them under any of the Loan Documents, even if the
conditions set forth in this paragraph are met.
Section 9. THE AGENTS
9.1 Appointment.
A. Appointment of Administrative Agent and Syndication Agent. BofA
is hereby appointed Administrative Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Administrative Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. DLJ is hereby appointed Syndication Agent hereunder and under the
other Loan Documents and each Lender hereby authorizes Syndication Agent to act
as its agent in accordance with the terms of this Agreement and the other Loan
Documents. Each of Syndication Agent and Administrative Agent agrees to act upon
the express conditions contained in this Agreement and the other Loan Documents,
as applicable. The provisions of this Section 9 are solely for the benefit of
each of Syndication Agent and Administrative Agent, and Lenders and Borrowers
shall have no rights as a third party beneficiary of any of the provisions
thereof. In performing its functions and duties under this Agreement, each of
Syndication Agent and Administrative Agent shall act solely as an agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Company or any
of its Subsidiaries.
B. Appointment of Sub-Agent. Bank of America International Limited,
a bank organized under the laws of England, is hereby appointed Sub-Agent
hereunder. Sub-Agent shall act on behalf of Lenders with regard to any Offshore
Currency Loans and related Loan Documents. Sub-Agent shall have all benefits,
rights and amenities provided to Agents in
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this Section 9 with respect to acts taken by it in connection with Offshore
Currency Loans and related Loan Documents as fully as if the term Agents as used
in this Section 9 included the term Sub-Agent.
9.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon any Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or statements, instruments, reports or certificates or any
other documents furnished or made by such Agent-Related Person to Lenders or by
or on behalf of either Borrower to such Agent-Related Person or any Lender in
connection with the Loan Documents and the transactions contemplated thereby or
for the financial condition or business affairs of either Borrower or any her
Person liable for the payment of any Obligations, nor shall such Agent-Related
Person be required to ascertain or inquire as to the performance or observance
of any of the terms, conditions, provisions, covenants or agreements contained
in any of the Loan Documents or as to the use of the proceeds of the Loans or
the use of the Letters of Credit. Anything contained in this Agreement to the
contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans, the Dollar
Equivalent thereof or the Letter of Credit Usage or the component amounts
thereof.
C. Notice of Default. Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Potential Event of Default or
Event of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to Administrative Agent for the account of
Lenders, unless Administrative Agent shall have received written notice from a
Leader or Company or MSL Overseas referring to this Agreement, describing such
Potential Event of Default or Event of Default and stating that such notice is a
"notice of default". Administrative Agent will notify Lenders of its receipt of
any such notice. Administrative Agent shall take such action with respect to
such Potential Event of Default or Event of Default as may be requested by
Requisite Lenders in accordance with this Agreement; provided, however, that
unless and until Administrative Agent has received any such
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request. Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Potential Event
of Default or Event of Default as it shall deem advisable or in the best
interest of Lenders.
D. Exculpatory Provisions. None of Agents nor any Agent Related
Person shall be liable for any action taken or omitted by any such Person under
or in connection with any of the Loan Documents except to the extent caused by
such Person's gross negligence or willful misconduct. Each Agent shall be
entitled to refrain from any act or the taking of any action (including the
failure to take an action) in connection with this Agreement or any of the other
Loan Documents or from the exercise of any power, discretion or authority vested
in it hereunder or thereunder unless and until such Agent shall have received
instructions in respect thereof from Requisite Lenders (or such other Lenders as
may be required to give such instructions under subsection 12.6) and, upon
receipt of such instructions from Requisite Lenders (or such other Lenders, as
the case may be), such Agent shall be entitled to act or (where so instructed)
refrain from acting, or to exercise such power, discretion or authority, in
accordance with such instructions. Without prejudice to the generality of the
foregoing, (i) each Agent and each Agent-Related Person shall be entitled to
rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and shall be entitled to rely
and shall be protected in relying on opinions and judgments of attorneys (who
may be attorneys for Company and its Subsidiaries), accountants, experts and
other professional advisors selected by it; and (ii) no Lender shall have any
right of action whatsoever against any Agent as a result of such Agent acting or
(where so instructed) refraining from acting under this Agreement or any of the
other Loan Documents in accordance with the instructions of Requisite Lenders
(or such other Lenders as may be required to give such instructions under
subsection 12.6).
E. Agents Entitled to Act as Lender. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection with this Agreement
and otherwise without having to account for the same to Lenders. Lenders
acknowledge that, pursuant to such activities, an Agent may receive information
regarding Company or its Subsidiaries and Affiliates (including information that
may be subject to confidentiality obligations in favor of Company or its
Subsidiaries or Affiliates) and acknowledge that no Agent shall be under an
obligation to provide such information to them.
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9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder that no Agent-Related Person has made any
representation or warranty to it and that it has made and shall continue to make
its own appraisal of the creditworthiness of Company and its Subsidiaries. No
Agent shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and no Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees
to indemnify each Agent and each Agent-Related Person, to the extent that such
Agent or Agent-Related Person shall not have been reimbursed by Company or by
MSL Overseas, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements or allocated costs of internal counsel) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against such Agent in exercising its powers, rights and remedies
or performing its duties hereunder or under the other Loan Documents or
otherwise in its capacity as Administrative Agent, Syndication Agent or
Collateral Agent, as the case may be, in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from any such Person's gross negligence or willful misconduct. If any indemnity
furnished to any Agent or Agent-Related Person for any purpose shall, in the
opinion of such Agent, be insufficient or become impaired, such Agent may call
for additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The undertaking in this
subsection 9.4 shall survive the payment of all Obligations hereunder and the
resignation or replacement of Administrative Agent or Collateral Agent.
9.5 Successor Agents and Issuing Lender.
A. Successor Agents. The Syndication Agent may resign at any time
upon one Business Day's prior notice thereof to Company and Administrative
Agent. Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Syndication Agent, Lenders and Company, and
Administrative Agent may be removed at any time with or without cause by an
instrument or concurrent instruments in writing delivered to Administrative
Agent and signed by Requisite Lenders; provided that Company may propose to
Requisite Lenders the removal of the Administrative Agent. Upon any such notice
of resignation of Syndication Agent or Administrative Agent or any such removal
of Administrative Agent,
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Company shall have the right to propose a successor Syndication Agent or
Administrative Agent, as the case may be, subject to the approval of Requisite
Lenders. If for any reason Requisite Lenders cannot agree on such successor
Administrative Agent or successor Syndication Agent. Requisite Lenders shall
have the right, upon five Business Days' notice to Company, to appoint a
successor Syndication Agent or successor Administrative Agent. If for any reason
Requisite Lenders cannot then agree on a successor Administrative Agent or a
successor Syndication Agent, the resigning Administrative Agent or Syndication
Agent shall have the right to designate a successor Administrative Agent or
Syndication Agent, respectively, after consulting with Company. Upon the
acceptance of any appointment as Administrative Agent or Syndication Agent, as
the case may be, hereunder by a successor Administrative Agent or Syndication
Agent, as the case may be, that successor Administrative Agent or Syndication
Agent, as the case may be, shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed
Administrative Agent or Syndication Agent, as the case may be, and the retiring
or removed Administrative Agent or Syndication Agent, as the case may be, shall
be discharged from its duties and obligations under this Agreement. If no
successor administrative agent has accepted appointment as Administrative Agent
by the date which is 30 days following a resigning Administrative Agent's notice
of resignation, the resigning Administrative Agent's resignation shall
nevertheless thereupon become effective and Lenders shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as
Requisite Lenders appoint a successor Administrative Agent as provided for
above. After any resigning or removed Administrative Agent's or Syndication
Agent's resignation or removal hereunder as Administrative Agent or Syndication
Agent, as the case may be, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent or Syndication Agent, as the case may be, under this
Agreement. Any resignation or removal of Administrative Agent pursuant to
subsection 9.5A shall also constitute the resignation or removal of Bank of
America International Limited or its successor as Sub-Agent and any successor
Administrative Agent appointed to this subsection 9.5A shall, upon its
acceptance of such appointment, either become the successor Sub-Agent, or shall
appoint a successor Sub-Agent for all purposes hereunder.
B. Successor Issuing Lender. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of BofA or its successor as Issuing Lender, and any
successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon
its acceptance of such appointment, become the successor Issuing Lender for all
purposes hereunder.
Section 10. COLLATERAL AGENT
10.1 Acceptance of Agency.
Collateral Agent, for itself and its respective successors, hereby
accepts the agency created hereby upon the terms and conditions hereof.
Collateral Agent is authorized on behalf of all Lenders, without the necessity
of any notice to or further consent from Lenders, from time to time to take any
action with respect to any Collateral or the Collateral Documents which may be
necessary to perfect and maintain perfected the security interest in and Liens
upon the Collateral granted pursuant to the Collateral Documents. Lenders
irrevocably authorize
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Collateral Agent, at its option and in its discretion, to release any Lien
granted to or held by Collateral Agent upon any Collateral (i) upon termination
of the Commitments and payment in full of all Loans and all other Obligations
known to Collateral Agent and payable under this Agreement or any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (iii) constituting
property in which Company or any Subsidiary of Company owned no interest at the
time the Lien was granted or at any time thereafter; (iv) constituting property
leased to Company or any Subsidiary of Company under a lease which has expired
or been terminated in a transaction permitted under this Agreement or is about
to expire and which has not been, and is not intended by Company or such
Subsidiary to be, renewed or extended; or (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full. Upon request by Collateral Agent at any time,
Lenders will confirm in writing Collateral Agent's authority to release
particular types or items of Collateral pursuant to this subsection 10.1,
provided that the absence of any such confirmation for whatever reason shall not
affect Collateral Agent's rights under this Section 10. For the avoidance of
doubt, each Lender hereby (subject to subsection 10.6) appoints Collateral Agent
as and agrees that Collateral Agent shall act as trustee of the security, rights
and benefits constituted by Collateral Documents executed or to be executed by
MSL-Ireland and Collateral Agent hereby declares that it shall hold such
security and such rights and benefits in trust for the benefit of such persons
subject to the terms of these presents. Notwithstanding the foregoing or any
other provision of this Agreement, in the event that Collateral Agent is
required to be designated or described as a trustee in connection with any
Collateral Documents governed by the laws of a jurisdiction other than the
United States or any State thereof, Collateral Agent shall have the obligations
of the trustee only to the extent required by the express provisions of the laws
of any such jurisdiction other than the United States or any State thereof and
not by implication and in any event, Collateral Agent shall not have any
obligations hereunder as a trustee under the laws of the United States or any
State thereof.
10.2 Duties of Collateral Agent.
(a) Subject to subsections 10.2(b) and (c), Collateral Agent hereby
agrees that it shall, for the benefit of Lenders and Administrative Agent,
enforce the security interests of Lenders in the Collateral (including without
limitation any security interests which are held or registered in the name of
BofA but as to which Collateral Agent acts as agent for Lenders hereunder) to
the fullest extent provided under the Collateral Documents.
(b) Notwithstanding any other provision hereof, Collateral Agent
shall be obligated to perform such duties and only such duties as are
specifically set forth in this Agreement and any Collateral Document, and no
implied covenants or obligations shall be read into this Agreement or any such
Collateral Document against Collateral Agent. Collateral Agent shall, subject to
the provisions hereof, exercise the rights and powers vested in it by this
Agreement and any Collateral Document, and shall not be liable with respect to
any action taken by it, or omitted to be taken by it, in accordance with the
direction of Requisite Lenders (except as to matters requiring the consent of
all Lenders required by subsection 12.6).
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(c) Except as herein otherwise expressly provided. Collateral Agent
shall not be under any obligation to take any action which is discretionary with
Collateral Agent under the provisions hereof or of any Collateral Document
except upon the written request of Requisite Lenders.
10.3 Exculpatory Provisions.
(a) Collateral Agent shall not be responsible in any manner
whatsoever for the correctness of any recitals, statements, representations or
warranties herein or in any of the Loan Documents, all of which are made solely
by Company and its Subsidiaries. Collateral Agent makes no representations as to
the value or condition of the Collateral or any part thereof, or as to the title
of the Company or its Subsidiaries thereto or as to the security afforded hereby
or as to the validity, execution (except its own execution), enforceability,
legality or sufficiency of this Agreement, any Collateral Documents or any
Obligations secured by the Collateral Documents (the "Secured Obligations"), and
Collateral Agent shall incur no liability or responsibility in respect of any
such matters. Collateral Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments, or discharging
of Liens upon the Collateral or otherwise as to the maintenance of the
Collateral, except that if Collateral Agent takes possession of any Collateral,
Collateral Agent shall use reasonable care in the preservation of the Collateral
in its possession.
(b) Collateral Agent shall not be required to ascertain or inquire
as to the performance by Company or its Subsidiaries of any of the covenants or
agreements contained herein or in any Collateral Document. Whenever it is
necessary, or in the opinion of Collateral Agent advisable, for Collateral Agent
to ascertain the amount of Secured Obligations, Collateral Agent may rely on
certificates of Lenders as to such amounts.
(c) Collateral Agent shall be under no obligation or duty to take
any action under this Agreement or any Collateral Document if taking such action
(i) would subject Collateral Agent to a tax in any jurisdiction where it is not
then subject to a tax, unless Collateral Agent receives security or indemnity
satisfactory to it against such tax, or (ii) would require Collateral Agent to
qualify to do business in any jurisdiction where it is not then so qualified.
(d) Notwithstanding any other provision of this Agreement,
Collateral Agent shall not be liable for any action taken or omitted to be taken
by it in accordance with this Agreement or any Collateral Document except for
its own gross negligence or willful misconduct.
(e) Collateral Agent shall have the same rights with respect to any
Secured Obligations held by it as any other holder of the Secured Obligations
(each, a "Secured Party") and may exercise such rights as though it were not
Collateral Agent hereunder, as more fully provided in subsection 9.2E.
10.4 Delegation of Duties.
Collateral Agent may execute any of the trusts or powers hereof and
perform any duty hereunder either directly or by or through agents or
attorneys-in-fact, who may include
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officers and employees of Company or MSL Overseas. Collateral Agent shall be
entitled to advice of counsel concerning all matters pertaining to such trusts,
powers and duties. Collateral Agent shall not be responsible for the negligence
or misconduct of any agents or attorneys-in-fact selected by it without gross
negligence or willful misconduct.
10.5 Reliance by Collateral Agent.
(a) Whenever in the administration of or the performance of its
duties under this Agreement or any Collateral Document, Collateral Agent shall
deem it necessary or desirable that a factual matter be proved or established by
Company or MSL Overseas in connection with Collateral Agent taking, suffering or
omitting any action hereunder or thereunder, such matter (unless other evidence
in respect thereof is herein specifically prescribed) may be deemed to be
conclusively proved or established by a certificate of a Responsible Officer
delivered to Collateral Agent, and such certificate shall be full warranty to
Collateral Agent for any action taken, suffered or omitted in reliance thereon,
subject, however, to the provisions of subsection 10.6.
(b) Collateral Agent may consult with counsel, and any opinion of
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered by it hereunder or under any Collateral Document.
Collateral Agent shall have the right at any time to seek instructions
concerning the administration of or the performance of its duties under this
Agreement or under any Collateral Document from any court of competent
jurisdiction.
(c) Collateral Agent may rely, and shall be fully protected in
acting, upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond or other paper or document which
it has no reason to believe to be other than genuine and to have been signed or
presented by the proper party or parties or, in the case of cables, telecopies
and telexes, to have been sent by the proper party or parties. In the absence of
gross negligence or willful misconduct, Collateral Agent may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to Collateral Agent and
conforming to the requirements of this Agreement.
(d) Collateral Agent shall not be under any obligation to exercise
any of the rights or powers vested in Collateral Agent by this Agreement and any
Collateral Document at the request or direction of Requisite Lenders pursuant to
this Agreement or otherwise, unless Collateral Agent shall have been provided
adequate security and indemnity against the costs, expenses and liabilities
which may be incurred by it in compliance with such request or direction,
including such reasonable advances as may be requested by Collateral Agent.
(e) Upon any application or demand by Company or MSL Overseas
(except any such application or demand which is expressly permitted to be made
orally) to Collateral Agent to take or permit any action under any of the
provisions of this Agreement or any Collateral Document, Company or MSL Overseas
shall furnish to Collateral Agent a certificate of a Responsible Officer stating
that all conditions precedent, if any, provided for in this Agreement or in any
Collateral Document relating to the proposed action have been complied with, and
in the case of any such application or demand as to which the furnishing of any
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document is specifically required by any provision of this Agreement or any
Collateral Document relating to such particular application or demand, such
additional document shall also be furnished.
10.6 Resignation and Removal of Collateral Agent.
Collateral Agent may resign at any time upon 30 days' prior notice
thereof to Company, Lenders and Collateral Agents. Collateral Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Collateral Agent and signed by Requisite
Lenders; provided that Company may propose to Requisite Lenders the removal of
the Collateral Agent. Upon any such notice of resignation of Collateral Agent or
any such removal of Collateral Agent, Company shall have the right to propose a
successor Collateral Agent, subject to the approval of Requisite Lenders. If for
any reason Requisite Lenders cannot agree on such successor Collateral Agent,
Requisite Lenders shall have the right, upon five Business Days' notice to
Company, to appoint a successor Collateral Agent. If for any reason Requisite
Lenders cannot then agree on a successor Collateral Agent, the resigning
Collateral Agent shall have the right to designate a successor Collateral Agent
after consulting with Company. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, that successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Collateral
Agent, and the resigning or removed Collateral Agent shall be discharged from
its duties and obligations under this Agreement. After any resigning or removed
Collateral Agent's resignation or removal hereunder as Collateral Agent, the
provisions of this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Collateral Agent, under this
Agreement. If no successor collateral agent has accepted appointment as
Collateral Agent by the date which is 30 days following a resigning Collateral
Agent's notice of resignation, the resigning Collateral Agent's resignation
shall nevertheless thereupon become effective and Lenders shall perform all of
the duties of the Collateral Agent hereunder until such time, if any, as
Requisite Lenders appoint a successor collateral agent as provided for above.
10.7 Merger of Collateral Agent.
Any corporation into which Collateral Agent may be merged, or with
which it may be consolidated or any corporation resulting from any merger or
consolidation to which Collateral Agent shall be a party, shall be Collateral
Agent under this Agreement and any Collateral Document without the execution or
filing of any paper or any further act on the part of the parties hereto.
10.8 Co-Agent; Separate Agent; Trustee.
(a) If at any time or times it shall be necessary or prudent in
order to conform to any law of any jurisdiction in which any of the Collateral
shall be located, or to avoid any violation of law or imposition on Collateral
Agent of taxes by such jurisdiction not otherwise imposed on Collateral Agent,
or Collateral Agent shall be advised by counsel satisfactory to it, that it is
necessary or prudent in the interest of Secured Parties, or Collateral Agent
shall deem it
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desirable for its own protection in the performance of its duties hereunder,
Collateral Agent and Company and MSL Overseas shall execute and deliver all
instruments and agreements necessary or proper to constitute another bank or
trust company, or one or more Persons approved by Collateral Agent and Company
and MSL Overseas, either to act as a separate agent (each a "separate agent"),
as a co-agent (each a "co-agent") or as a trustee (each a "trustee") for the
benefit of Collateral Agent and Secured Parties of all or any of the Collateral
under this Agreement or under any Collateral Document, jointly with Collateral
Agent originally named herein or therein or any successor to Collateral Agent,
or to act as separate agent, co-agent or trustee of any of the Collateral. If
Company and MSL Overseas shall not have joined in the execution of such
instruments and agreements within ten days after it receives a written request
from Collateral Agent to do so, or if an Event of Default is in effect,
Collateral Agent may act under the foregoing provisions of this subsection 10.8
without the concurrence of Company and MSL Overseas and execute and deliver such
instruments and agreements on behalf of Company and MSL Overseas. Company and
MSL Overseas each hereby appoints Collateral Agent as its agent and attorney to
act for it under the foregoing provisions of this subsection 10.8 in either of
such contingencies.
(b) Every separate agent and every co-agent, other than any
successor to Collateral Agent appointed pursuant to subsection 10.6, and each
trustee, shall, to the extent permitted by law, be appointed and act and be
such, subject to the following provisions and
(i) All rights, powers, duties and obligations conferred or imposed
upon Collateral Agent hereunder and under the relevant Collateral Document
shall K conferred or imposed and exercised or performed by Collateral
Agent and any such separate agent, co-agent or trustee jointly, as shall
be provided in the instrument appointing such separate agent, co-agent or
trustee, except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed Collateral Agent
shall be incompetent or unqualified to perform such act or acts, or unless
the performance of such act or acts would result in the imposition of any
tax on Collateral Agent which would not be imposed absent such joint act
or acts, in which event such rights, powers, duties and obligations shall
be exercised and performed by such separate agent, co-agent or trustee;
(ii) No power given hereby or by the relevant Collateral Document,
or which is provided herein or therein, may be exercised by any such
separate agent, co-agent or trustee, or except jointly with, or with the
consent in writing of, Collateral Agent, anything contained herein to the
contrary notwithstanding;
(iii) No agent (including Collateral Agent), separate agent,
co-agent or trustee hereunder shall be personally liable by reason of any
act or omission of any other agent hereunder, co-agent or trustee
hereunder; and
(iv) Company, MSL Overseas or a Subsidiary of either, as applicable,
and Collateral Agent, at any time by an instrument in writing executed by
them jointly, may accept the resignation of or remove any such separate
agent, co-agent or trustee and,
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in that case by any instrument in writing executed by them jointly, may
appoint a successor to such separate agent, co-agent or trustee as the
case may be, anything contained herein to the contrary notwithstanding. If
Company, MSL Overseas or any such subsidiary shall not have joined in the
execution of any such instrument within ten days after it receives a
written request from Collateral Agent to do so, or if an Event of Default
has occurred and is continuing, Collateral Agent shall have the power to
accept the resignation of or remove any such separate agent, co-agent or
trustee and to appoint a successor without the concurrence of Company, MSL
Overseas or any such subsidiary, Company, MSL Overseas or a subsidiary of
either each hereby appointing Collateral Agent as its agent and attorney
to act for it in such connection in such contingency. If Collateral Agent
shall have appointed a separate agent, co-agent or trustee as above
provided, Collateral Agent may at any time, by an instrument in writing,
accept the resignation of or remove any such separate agent, co-agent or
trustee and the successor to any such separate agent, co-agent or trustee
shall be appointed by Company, MSL Overseas or a subsidiary of either and
Collateral Agent, or by Collateral Agent alone pursuant to this subsection
10.8.
10.9 Release of Collateral.
Upon the payment in full of all Obligations other than those
referred to in subsection 12.9 of this Agreement, and any others which survive
the payment of principal and interest on the Loans, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interests granted under the
Collateral Documents shall terminate and all rights to the Collateral shall
revert to the relevant Loan Party. Upon any such termination Collateral Agent
will, at such Loan Party's expense, execute and deliver to such Loan Party such
documents as such Loan Party shall reasonably request to evidence such
termination and such Loan Party shall be entitled to the return, upon its
request and at its expense, against receipt and without recourse to Collateral
Agent, of such of the Collateral as shall not have been sold or otherwise
applied pursuant to the terms of the Loan Documents.
Section 11. COMPANY GUARANTY
11.1 Guaranty of the Guarantied Obligations.
Company hereby irrevocably and unconditionally guaranties the due
and punctual payment in full of all Guarantied Obligations when the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. ss. 362(a)). The term "Guarantied Obligations" is used herein in
its most comprehensive sense and includes:
(a) Any and all Obligations of MSL Overseas and any and all
obligations of MSL Overseas under Interest Rate Agreements to which an Interest
Rate Exchanger is a party, in each case now or hereafter made, incurred or
created, whether absolute or contingent, liquidated or unliquidated, whether due
or not due, and however arising under or in connection with this
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Agreement and the other Loan Documents and the Interest Rate Agreements,
including those arising under successive borrowing transactions under this
Agreement which shall either continue the Obligations of MSL Overseas or from
time to time renew them after they have been satisfied and including interest
which, but for the filing of a petition in bankruptcy or similar insolvency
proceeding with respect to MSL Overseas, would have accrued on any Guarantied
Obligations, whether or not a claim is allowed against MSL Overseas for such
interest in the related bankruptcy or insolvency proceeding; and
(b) Those expenses set forth in subsection 2.3 and 12.8 hereof to
the extent payable by MSL Overseas.
The Obligations of Company under this Section 11, as they may be
amended or supplemented from time to time, are referred to as this "Company
Guaranty".
11.2 Payment by Company: Application of Payments.
Company hereby agrees, in furtherance of the foregoing and not in
limitation of any other right which any Agent, Lender or any Interest Rate
Exchanger (a "Beneficiary") may have at law or in equity against Company by
virtue hereof, that upon the failure of MSL Overseas to pay any of the
Guarantied Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)), Company
will upon demand pay, or cause to be paid, in cash, to Collateral Agent for the
ratable benefit of all Beneficiaries, an amount equal to the sum of the unpaid
principal amount of all Guarantied Obligations then due as aforesaid, accrued
and unpaid fees and interest on such Guarantied Obligations (including interest
which, but for the filing of a petition in bankruptcy or similar insolvency law
with respect to MSL Overseas, would have accrued on such Guarantied Obligations,
whether or not a claim is allowed against Company Guaranty for such interest in
the related bankruptcy or insolvency proceeding) and all other Guarantied
Obligations then owed to Beneficiaries as aforesaid. All such payments shall be
applied promptly from time to time by Administrative Agent as provided in
subsection 2.4D.
11.3 Liability of Company Absolute.
Company agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a Company or
surety other than payment in full of the Guarantied Obligations. In furtherance
of the foregoing and without limiting the generality thereof, Company agrees as
follows:
(a) This Company Guaranty is a guaranty of payment when due and not
of collectibility.
(b) Collateral Agent may enforce this Company Guaranty upon the
occurrence of an Event of Default under this Agreement or the occurrence of an
Early Termination Date (as defined in an Interest Rate Agreement prepared by the
International Swap
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and Derivatives Association, Inc.), or a similar event under an Interest Rate
Agreement notwithstanding the existence of any dispute between MSL Overseas and
any Beneficiary with respect to the existence of such Event of Default.
(c) The obligations of Company hereunder are independent of the
obligations of MSL Overseas under the Loan Documents or the Interest Rate
Agreements and the obligations of any other guarantor of the obligations of MSL
Overseas under the Loan Documents or the Interest Rate Agreements, and a
separate action or actions may be brought and prosecuted against Company whether
or not any action is brought against MSL Overseas or any of such other
guarantors and whether or not MSL Overseas is joined in any such action or
actions.
(d) Company's payment of a portion, but not all, of the Guarantied
Obligations shall in no way limit, affect, modify or abridge Company's liability
for any portion of the Guarantied Obligations which has not been paid. Without
limiting the generality of the foregoing, if Administrative Agent is awarded a
judgment in any suit brought to enforce Company's covenant to pay a portion of
the Guarantied Obligations, such judgment shall not be deemed to release Company
from its covenant to pay the portion of the Guarantied Obligations that is not
the subject of such suit.
(e) Any Beneficiary upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of this
Company Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Company's liability hereunder, from time to time may
(i) renew, extend, accelerate, increase the rate of interest on, or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (ii) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations; (iii) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Company Guaranty or the Guarantied Obligations; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for payment
of the Guarantied Obligations, any other guaranties of the Guarantied
Obligations, or any other obligation of any Person with respect to the
Guarantied Obligations; (v) enforce and apply any security now or hereafter held
by or for the benefit of such Beneficiary in respect of this Company Guaranty or
the Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that such Beneficiary may have against any
such security, in each case as such Beneficiary in its discretion may determine
consistent with this Agreement or the applicable Interest Rate Agreement and any
applicable security agreement, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of Company against MSL Overseas or any security for the
Guarantied Obligations; and (vi) exercise any other rights available to it under
the Loan Documents or the Interest Rate Agreements.
(f) This Company Guaranty and the obligations of Company hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment,
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discharge or termination for any reason (other than payment in full of the
Guarantied Obligations), including the occurrence of any of the following,
whether or not Company shall have had notice or knowledge of any of them: (i)
any failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by operation of
law or otherwise, of the exercise or enforcement of, any claim or demand or any
right, power or remedy (whether arising under the Loan Documents or the Interest
Rate Agreements, at law, in equity or otherwise) with respect to the Guarantied
Obligations or any agreement relating thereto, or with respect to any other
guaranty of or security for the payment of the Guarantied Obligations; (ii) any
rescission, waiver, amendment or modification of or any consent to departure
from, any of the terms or provisions (including provisions relating to events of
default) of this Agreement, any of the other Loan Documents, any of the Interest
Rate Agreements or any agreement or instrument executed pursuant thereto, or of
any other guaranty or security for the Guarantied Obligations, in each case
whether or not in accordance with the terms of this Agreement or such Loan
Document, such Interest Rate Agreement or any agreement relating to such other
guaranty or security; (iii) the Guarantied Obligations, or any agreement
relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect; (iv) the application of payments received from any
source (other than payments received pursuant to the other Loan Documents or any
of the Interest Rate Agreements or from to proceeds of any security for the
Guarantied Obligations, except to the extent such security also serves as
collateral for indebtedness other than the Guarantied Obligations) to the
payment of indebtedness other than the Guarantied Obligations, even though any
Beneficiary might have elected to apply such payment to any part or all of the
Guarantied Obligations; (v) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or evidence of Company,
MSL Overseas or any of Company's Subsidiaries and to any corresponding
restructuring of the Guarantied Obligations; (vi) any failure to perfect or
continue perfection of a security interest in any collateral which secures any
of the Guarantied Obligations; (vii) any defenses, set-offs or counterclaims
which MSL Overseas may allege or assert against any Beneficiary in respect of
the Guarantied Obligations, including failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) any other act or thing or omission, or delay
to do any other act or thing, which may or might in any manner or to any extent
vary the risk of Company as an obligor in respect of the Guarantied Obligations.
11.4 Waivers by Company.
Company hereby waives, for the benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by Company, to (i) proceed against MSL Overseas, any other
guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from MSL Overseas, any such other guarantor
or any other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of any Beneficiary in favor of MSL
Overseas or any other Person, or (iv) pursue any other remedy in the power of
any Beneficiary;
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(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of MSL Overseas including any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of MSL Overseas from any cause other
than payment in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which amounts
to bad faith, gross negligence or willful misconduct;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Company Guaranty and
any legal or equitable discharge of Company's obligations hereunder, (ii) the
benefit of any statute of limitations affecting Company's liability hereunder or
the enforcement hereof, (iii) any rights to set-offs, recoupments and
counterclaims, and (iv) promptness, diligence and any requirement that any
Beneficiary protect, secure, perfect or insure any security interest or lien or
any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
of this Company Guaranty, notices of default under this Agreement, the Interest
Rate Agreements or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Guarantied Obligations or any
agreement related thereto, notices of any extension of credit to MSL Overseas
and notices of any of the matters referred to in subsection 2.4 and any right to
consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or which
may conflict with the terms of this Company Guaranty.
11.5 Company's Rights of Subrogation, Contribution, Etc.
Until the Guarantied Obligations shall have been indefeasibly paid
in full and the Commitments shall have terminated and all Letters of Credit
shall have expired or been cancelled, Company hereby agrees not to assert and
shall subordinate to payment of the Guarantied Obligations any claim, right or
remedy, direct or indirect, that Company now has or may hereafter have against
MSL Overseas or any of its assets in connection with this Guaranty or the
performance by Company of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including (a) any right of subrogation,
reimbursement or indemnification that Company now has or may hereafter have
against MSL Overseas, (b) any right to enforce, or to participate in, any claim,
right or remedy that any Beneficiary now has or may hereafter have against MSL
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Overseas, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been indefeasibly paid in full and
the Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled, Company shall withhold exercise of any right of
contribution Company may have against any other Company of the Guarantied
Obligations. Company further agrees that, to the extent the agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification Company may have against MSL
Overseas or against any collateral or security, and any rights of contribution
Company may have against any such other Company, shall be junior and subordinate
to any rights any Beneficiary may have against MSL Overseas, to all right, title
and interest any Beneficiary may have in any such collateral or security, and to
any right any such person may have against such other Company. If any amount
shall be paid to Company on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guarantied
Obligations shall not have been paid in full, such amount shall be held in trust
for Collateral Agent on behalf of Beneficiaries and shall forthwith be paid over
to Collateral Agent for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms hereof.
11.6 Subordination of Other Obligations.
Any indebtedness of MSL Overseas or any Foreign Subsidiary now or
hereafter held by Company is hereby subordinated in right of payment to the
Guarantied Obligations, and any such indebtedness collected or received by
Company after an Event of Default has occurred and is continuing shall be held
in trust for Collateral Agent on behalf of Beneficiaries and shall forthwith be
paid over to Collateral Agent for the benefit of Beneficiaries to be credited
and applied against the Guarantied Obligations but without affecting, impairing
or limiting in any manner the liability of Company under any other provision of
this Company Guaranty.
11.7 Continuing Guaranty; Termination of Guaranty.
This Company Guaranty is a continuing guaranty and shall remain in
effect until all of the Guarantied Obligations shall have been paid in full and
the Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled. Company hereby irrevocably waives any right to revoke
this Company Guaranty as to future transactions giving rise to any Guarantied
Obligations.
11.8 Financial Condition of MSL Overseas.
Any Loans may be granted to MSL Overseas or continued from time to
time, and any Interest Rate Agreements may be entered into from time to time, in
each case without notice to or authorization from Company regardless of the
financial or other condition of MSL Overseas at the time of any such grant or
continuation or at the time such Interest Rate Agreement is entered into, as the
case may be. No Beneficiary shall have any obligation to disclose or discuss
with Company its assessment, or Company's assessment, of the financial
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condition of MSL Overseas. Company has adequate means to obtain information from
MSL Overseas on a continuing basis concerning the financial condition of MSL
Overseas and its ability to perform its obligations under the Loan Documents and
the Interest Rate Agreements, and Company assumes the responsibility for being
and keeping informed of the financial condition of MSL Overseas and of all
circumstances bearing upon the risk of nonpayment of the Guarantied Obligations.
Company hereby waives and relinquishes any duty on the part of any Beneficiary
to disclose any matter, fact or thing relating to the business, operations or
conditions of MSL Overseas now known or hereafter known by any such person.
11.9 Bankruptcy; Post-Petition Interest; Reinstatement of Company Guaranty.
(a) So long as any Guarantied Obligations remain outstanding,
Company shall not, without the prior written consent of Collateral Agent,
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against MSL Overseas. The
obligations of Company under this Company Guaranty shall not be reduced,
limited, impaired, discharged, deferred, suspended or terminated by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of MSL Overseas or by
any defense which MSL Overseas may have by reason of the order, decree or
decision of any court or administrative body resulting from any such proceeding.
(b) Company acknowledges and agrees that any interest on any portion
of the Guarantied Obligations which accrues after the commencement of any
proceeding referred to in subsection 11.9(a) above (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of said proceeding, such interest as would have
accrued on such portion of the Guarantied Obligations if said proceedings had
not been commenced) shall be included in the Guarantied Obligations because it
is the intention of Agents, Lenders and Interest Rate Exchangers that the
Guarantied Obligations which are guarantied by Company pursuant to this Guaranty
should be determined without regard to any rule of law or order which may
relieve MSL Overseas of any portion of such Guarantied Obligations. Company will
permit any trustee in bankruptcy, receiver, debtor in possession, assignee for
the benefit of creditors or similar person to pay Collateral Agent, or allow the
claim of Collateral Agent in respect of, any such interest accruing after the
date on which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by MSL Overseas, the obligations of Company hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Company Guaranty.
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Section 12. MISCELLANEOUS
12.1 Assignments and Participations in Loans and Letters of Credit.
A. General. Subject to subsection 12.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
further that no such sale, assignment, transfer or participation of any Letter
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Revolving Lender
effecting such sale, assignment, transfer or participation. Except as otherwise
provided in this subsection 12.1, no Lender shall, as between Borrowers and such
Lender, be relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any part
of its Commitments or the Loans, the Letters of Credit or participations
therein, or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
of Credit or participation therein, or other Obligation may (a) be
assigned in any amount to another Lender, or to an Affiliate or Affiliated
Fund of the assigning Lender or another Lender, with the giving of notice
to Company and Administrative Agent or (b) be assigned in an aggregate
amount of not less than $5,000,000 with respect to Revolving Loans,
Revolving Loan Commitments and Letters of Credit or participations therein
or be assigned in an aggregate amount of not less than $1,000,000 with
respect to Term Loans, Term Loan Commitments or other Obligations (or such
lesser amounts as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit and participations therein, and
other Obligations of the assigning Lender or as may be consented to by
Company and Agents) to any other Eligible Assignee with the consent of
Company (which consent shall only be required so long as no Event of
Default has occurred and is continuing) and, with respect to all Lenders
other than DLJ, Syndication Agent and Administrative Agent (which consent
of Company, Syndication Agent and Administrative Agent shall not be
unreasonably withheld or delayed). To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender shall
be relieved of its obligations with respect to its Commitments, Loans,
Letters of Credit or participations therein, or other Obligations or the
portion thereof so assigned. The parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance, an
Assignment Agreement, together with a processing fee of $3,500 (to be
assessed if the assignor is DLJ only in accordance with that certain
letter agreement between Administrative Agent and DLJ) and such forms,
certificates or other evidence, if any, with respect to United States
federal income tax
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withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection
2.8B(iii)(a). Upon such execution, delivery and acceptance from and after
the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to
such Assignment Agreement, relinquish its rights (other than any rights
which survive the termination of this Agreement under subsection 12.9B)
and be released from its obligations under this Agreement (and, in the
case of an Assignment Agreement covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto. The Commitments hereunder shall
be modified to reflect the Commitment of such assignee and any remaining
Commitment of such assigning Lender and, if any such assignment occurs
after the issuance of the Notes hereunder, the assigning Lender shall,
upon the effectiveness of such assignment or as promptly thereafter as
practicable, surrender its applicable Notes to Administrative Agent for
cancellation, and thereupon new Notes shall be issued to the assignee and
to the assigning Lender, substantially in the form of Exhibit IV or
Exhibit V annexed hereto, as the case may be, with appropriate insertions,
to reflect the new Commitments and/or outstanding Term Loans, as the case
may be, of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent. Upon its receipt of an
Assignment Agreement executed by an assigning Lender and an assignee
representing that it is an Eligible Assignee, together with the processing
fee referred to in subsection 12.1B(i) and any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters that such assignee may be required to deliver to
Administrative Agent pursuant to subsection 2.8B(iii)(a), Administrative
Agent shall, if Administrative Agent and Company have consented to the
assignment evidenced thereby (in each case to the extent such consent is
required pursuant to subsection 12.1B(i)), (a) accept such Assignment
Agreement by executing a counterpart thereof as provided therein (which
acceptance shall evidence any required consent of Administrative Agent to
such assignment) and (b) give prompt notice thereof to Company.
Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection 12.1B(ii).
C. Participations. (i) General. The holder of any participation,
other than an Affiliate of the Lender granting such participation, shall
not be entitled to require such Lender to take or omit to take any action
hereunder except action directly affecting (i) the extension of the
scheduled final maturity date of any Loan allocated to such participation
or (ii) a reduction of the principal amount of or the rate of interest
payable on any Loan allocated to such participation, and all amounts
payable by Company hereunder (including amounts payable to such Lender
pursuant to subsections 2.6D, 2.8 and 3.6) shall be determined as if such
Lender had not sold such participation. Borrowers and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 12.4
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and 12.5. (a) any participation will give rise to a direct obligation of
Borrowers to the participant and (b) the participant shall be considered
to be a "Lender".
(ii) Offshore Participations. Notwithstanding any provision to the
contrary contained in this Agreement or the other Loan Documents and so
long as an Offshore Participant has not failed to make any payments
required to be made by such Offshore Participant under subsection
2.1A(iii) or is not otherwise in default under its obligations under
subsection 2.1A(iii), Fronting Offshore Lender hereby agrees that, to the
extent of but only to the extent of such Offshore Participant's
proportionate share based on its Offshore Participation, Fronting Offshore
Lender will not agree to any amendment, modification, termination or
waiver of any provision of this Agreement or the other Loan Documents, or
to any departure by Borrower therefrom, in each case related to the
Offshore Participation, without the prior written consent of such Offshore
Participant. Nothing herein contained shall prevent Fronting Offshore
Lender from consenting to any amendment, modification, termination or
waiver of any provision of this Agreement or the other Loan Documents, and
to any departure by Borrowers therefrom to the extent unrelated to the
Offshore Participations and to the extent that Fronting Offshore Lender's
interest or Pro Rata Share is not related to the Offshore Participations.
(iii) Assignment. Fronting Offshore Lender may from time to time
sell or transfer to other Persons assignments or participations or other
interests in Fronting Offshore Lender's Revolving Loans and Revolving Loan
Commitment, as the case may be, but not in the portion thereof allocated
to the Offshore Participations hereunder. No Offshore Participation may be
sold, pledged, assigned, or otherwise transferred without Fronting
Offshore Lender's prior written consent; provided that this restriction
shall not apply to (1) any such transfer to any of such Offshore
Participant's Affiliates; or (2) a pro rata assignment in accordance with
subsection 12.1B of the Revolving Loan Commitment and Revolving Loan held
by such Offshore Participant.
D. Assignments to Federal Reserve Banks. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 12.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Notes to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and (ii) in no event shall such Federal Reserve
Bank be considered to be a "Lenders" or be entitled to require the assigning
Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 12.19.
F. Representations of Lenders. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of
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the definition thereof; (ii) that it has experience and expertise in the making
of loans such as the Loans; and (iii) that it will make its Loans for its own
account in the ordinary course of its business and without a view to
distribution of such Loans within the meaning of the Securities Act or the
Exchange Act or other federal securities laws (it being understood that, subject
to the provisions of this subsection 12.1, the disposition of such Loans or any
interests therein shall at all times remain within its exclusive control). Each
Lender that becomes a party hereto pursuant to an Assignment Agreement shall be
deemed to agree that the representations and warranties of such Lender contained
in Section 2(c) of such Assignment Agreement are incorporated herein by this
reference.
12.2 Expenses.
Whether or not the transactions contemplated hereby shall be
consummated, Borrowers each agree to pay within five Business Days after demand
(i) all the actual and reasonable costs and expenses of preparation of the Loan
Documents and any consents, amendments, waivers or other modifications thereto;
(ii) all the costs of furnishing all opinions by counsel for Borrowers
(including any opinions requested by Agents or Lenders as to any legal matters
arising hereunder) and of Borrowers' performance of and compliance with all
agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including with respect to confirming
compliance with environmental, insurance and solvency requirements; (iii) the
reasonable fees, expenses and disbursements of O'Melveny & Myers LLP, counsel to
Arranger and Syndication Agent in connection with the negotiation, preparation,
execution and administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and any other documents or matters
requested by a Borrower; (iv) the reasonable fees, expenses and disbursements of
Administrative Agent, including reasonable fees, expenses and disbursements of
counsel (including allocated costs and disbursements of internal counsel) to
Administrative Agent in connection with the negotiation, preparation, execution
and administration of the Loan Documents and any consents, amendments, waivers
or other modifications thereto and any other documents or matters requested by a
Borrower; (v) all the actual costs and reasonable expenses of creating and
perfecting Liens in favor of Collateral Agent on behalf of Lenders pursuant to
any Collateral Document, including filing and recording fees, expenses and
taxes, stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expenses and disbursements of counsel to each of Syndication
Agent, Administrative Agent and Collateral Agent and of counsel providing any
opinions that Syndication Agent, Administrative Agent, Collateral Agent or
Requisite Lenders may request in respect of the Collateral Documents or the
Liens created pursuant thereto; (vi) all the actual costs and reasonable
expenses (including the reasonable fees, expenses and disbursements of any
auditors, accountants or appraisers and any environmental or other consultants,
advisors and agents employed or retained by Syndication Agent, Administrative
Agent, Collateral Agent or their respective counsel) of obtaining and reviewing
any environmental audits or reports provided for under subsection 6.9B; (vii)
and any audits or reports provided for under subsection 4.1J or 6.5B with
respect to Inventory and Accounts Receivable of Company and its Subsidiaries;
(viii) the custody or preservation of any of the Collateral; (ix) all other
actual and reasonable costs and expenses incurred by Arranger, Syndication
Agent, Administrative Agent or Collateral Agent in connection with the
syndication of the Commitments and the negotiation, preparation and execution of
the Loan Documents and
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any consents, amendments, waivers or other modifications thereto and the
transactions contemplated thereby; and (x) after the occurrence of an Event of
Default, all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel) and costs of settlement, incurred by Agents
and Lenders in enforcing any Obligations of or in collecting any payments due
from any Loan Party hereunder or under the other Loan Documents by reason of
such Event of Default (including in connection with the sale of, collection
from, or other realization upon any of the Collateral or the enforcement of the
Guaranties or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings).
12.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 12.2,
whether or not the transactions contemplated hereby shall be consummated, each
Borrower agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Arranger, Agents and Lenders, and the officers,
directors, trustees, employees, agents and affiliates of Arranger, Agents and
Lenders (collectively called the "Indemnitees"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that neither Borrower
shall have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court of competent jurisdiction.
As used herein, "Indemnified Liabilities" means, collectively, any
and all liabilities, obligations, losses, damages (including natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including the costs of any investigation, study, sampling,
testing, abatement, cleanup, removal, remediation or other response action
necessary to remove, remediate, clean up or abate any Hazardous Materials
Activity), expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of external counsel for
Indemnitees and allocated costs of internal counsel of Indemnitees in connection
with any investigative, administrative or judicial proceeding commenced or
threatened by any Person, whether or not any such Indemnitee shall be designated
as a party or a potential party thereto, and any fees or expenses incurred by
Indemnitees in enforcing this indemnity), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws, statutes,
rules or regulations (including securities and commercial laws, statutes, rules
or regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of (i) this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby (including Lenders' agreement to make the Loans hereunder or the use or
intended use of the proceeds thereof or the issuance of Letters of Credit
hereunder or the use or intended use of any thereof, or any enforcement of any
of the Loan Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Guaranties),
(ii) the statements contained in the commitment letter delivered by any Lender
to Company with respect thereto, or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or practice
of Company or any of its Subsidiaries.
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To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this subsection 12.3 may be unenforceable in whole or
in part because they are violative of any law or public policy, each Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by Indemnitees or any of them.
12.4 Set-Off; Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Company and MSL Overseas at
any time or from time to time, without notice to either Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including
Indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts) and any other Indebtedness at any time held or
owing by that Lender to or for the credit or the account of Company against and
on account of the obligations and liabilities of a Borrower to that Lender under
this Agreement, the Letters of Credit and participations therein and the other
Loan Documents, including all claims of any nature or description arising out of
or connected with this Agreement, the Letters of Credit and participations
therein or any other Loan Document, irrespective of whether or not (i) that
Lender shall have made any demand hereunder or (ii) the principal of or the
interest on the Loans or any amounts in respect of the Letters of Credit or any
other amounts due hereunder shall have become due and payable pursuant to
Section 8 and although said obligations and liabilities, or any of them, may be
contingent or unmatured. Each Borrower hereby further grants to each Agent and
each Lender a security interest in all deposits and accounts maintained with
such Agent or such Lender as security for the Obligations.
12.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by
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such purchasing Lender is thereafter recovered from such Lender upon the
bankruptcy or reorganization of Company or MSL Overseas or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Lender ratably to the extent
of such recovery, but without interest. Each Borrower expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Borrowers to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
12.6 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision
of this Agreement or of the Notes, and no consent to any departure by Company or
MSL Overseas therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders and acknowledged by Administrative Agent;
provided that any such amendment, modification, termination, waiver or consent
which: increases the amount of any of the Commitments or reduces the principal
amount of any of the Loans; changes in any manner the definition of "Pro Rata
Share" or the definition of "Requisite Lenders"; changes in any manner any
provision of this Agreement which, by its terms, expressly requires the approval
or concurrence of all Lenders, all Revolving Lenders or all Offshore Lenders;
postpones the scheduled final maturity date of any of the Loans; postpones the
date on which any interest or any fees are payable; decreases the interest rate
borne by any of the Loans (other than any waiver of any increase in the interest
rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount
of any fees payable hereunder; increases the maximum duration of Interest
Periods permitted hereunder; reduces the amount or postpones the due date of any
amount payable in respect of, or extends the required expiration date of, any
Letter of Credit; changes in any manner the obligations of Lenders relating to
the purchase of participations in Letters of Credit; releases any Lien granted
in favor of Collateral Agent with respect to a material portion of the
Collateral, other than in accordance with subsection 10.1 and the other
provisions of the Loan Documents; releases any Subsidiary from its obligations
under a Domestic Guaranty or an Offshore Guaranty, other than in accordance with
the terms of the Loan Documents; or changes in any manner the provisions
contained in subsection 8.1 or this subsection 12.6 shall be effective only if
evidenced by a writing signed by or on behalf of all Lenders and acknowledged by
Administrative Agent; provided, further, that if any matter described in the
foregoing proviso relates only to a Revolving Loan, the approval of all
Revolving Lenders shall be sufficient; if any matter described in the foregoing
proviso relates only to an Offshore Revolving Loan or if any such amendment,
modification, termination, waiver or consent changes in any manner the
definition of "Offshore Currency" or the manner of funding Offshore Currency
Loans, the approval of all Offshore Lenders shall be sufficient; if any matter
described in the foregoing proviso relates only to a Term Loan, the approval of
all Term Loan Lenders shall be sufficient; and if any matter described in the
foregoing proviso relates only to the role of Issuing Lender, the approval of
Issuing Lender shall be sufficient; provided that each of the foregoing shall
also be acknowledged by Administrative Agent. In addition, (i) any amendment,
modification, termination or waiver of any of the provisions contained in
Section 4 shall be effective only if evidenced by a writing signed by or on
behalf of Agents and Requisite Lenders, (ii) no amendment, modification,
termination or waiver of any provision of any Note shall be effective
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without the written concurrence of the Lender which is the holder of that Note,
(iii) no amendment, modification, termination or waiver of any provision of any
Letter of Credit shall be effective without the consent of the Issuing Lender of
such Letter of Credit and no amendment, modification, termination or waiver of
Section 3 that changes in any manner the rights and obligations of an Issuing
Lender with respect to an outstanding Letter of Credit shall be effective
without the consent of that Issuing Lender, and (iv) no amendment, modification,
termination or waiver of any provision of Section 9 or of any other provision of
this Agreement which, by its terms, expressly requires the approval or
concurrence of Agents shall be effective without the written concurrence of
Agents. Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on a Borrower in any case shall entitle either Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 12.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Company, on both Borrowers.
12.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if
a particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
12.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agents shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth on Schedule 12.8 or (i) as to Borrowers and Agents, such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto and (ii) as to each other party, such other address as
shall be designated by such party in a written notice delivered to
Administrative Agent.
12.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Company and MSL Overseas set forth in
subsections 2.6D, 2.8,
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3.5A, 3.6, 12.2, 12.3 and 12.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 12.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
12.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
12.11 Marshalling; Payments Set Aside.
None of Agents or Lenders shall be under any obligation to marshal
any assets in favor of either Borrower or any other party or against or in
payment of any or all of the Obligations. To the extent that a Borrower makes a
payment or payments to Administrative Agent or Lenders (or to Administrative
Agent for the benefit of Lenders), or any of Agents or Lenders enforce any
security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
12.12 Severability.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
12.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
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12.14 Headings.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
12.15 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
12.16 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 11.1). Neither the
rights or obligations of either Borrower hereunder nor any interest therein may
be assigned or delegated by either Borrower without the prior written consent of
all Lenders.
12.17 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST EITHER BORROWER ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE
WITH SUBSECTION 12.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION
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<PAGE>
OVER A BORROWER IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST A
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 12.17 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
12.18 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of the waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 12.18 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
12.19 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant
to the requirements of this Agreement which has been identified as confidential
by Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and
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<PAGE>
agreed by Company that in any event a Lender may make disclosures to Affiliates
and professional advisors of such Lender or disclosures reasonably required by
(a) any bona fide assignee, transferee or participant in connection with the
contemplated assignment or transfer by such Lender of any Loans or any
participations therein or (b) by any direct or indirect contractual
counterparties in swap agreements or such contractual counterparties'
professional advisors provided that such contractual counterparty or
professional advisor to such contractual counterparty agrees in writing to keep
such information confidential to the same extent required of the Lenders
hereunder, or disclosures required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information; and
provided, further that in no event shall any Lender be obligated or required to
return any materials furnished by Company or any of its Subsidiaries.
12.20 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.
[Remainder of page intentionally left blank]
146
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
MANUFACTURERS' SERVICES LIMITED
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Treasurer
-------------------------------
MSL OVERSEAS:
MSL OVERSEAS FINANCE BV
By: /s/ [ILLEGIBLE]
-------------------------------
Title: DIRECTOR
-------------------------------
S-1
<PAGE>
ADMINISTRATIVE AGENT
AND COLLATERAL AGENT:
BANK OF AMERICA NT & SA,
as Administrative Agent and Collateral Agent
By: /s/ Wendy Young
-------------------------------
Title:
-------------------------------
WENDY YOUNG
Vice President
S-2
<PAGE>
LENDERS:
DLJ CAPITAL FUNDING, INC., individually and as
Syndication Agent
By: /s/ [ILLEGIBLE]
-------------------------------
Title:
-------------------------------
S-3
<PAGE>
BANK OF AMERICA NT & SA, individually and as
Issuing Lender
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Managing Director
-------------------------------
S-4
<PAGE>
FLEET NATIONAL BANK
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Vice President
-------------------------------
S-5
<PAGE>
ERSTE BANK
By: /s/ John S. Runnion
-------------------------------
Title:
-------------------------------
JOHN S. RUNNION
FIRST VICE PRESIDENT
/s/ [ILLEGIBLE]
Arcinee Hovanessian
Vice President
Erste Bank New York
S-6
<PAGE>
SUB-AGENT:
BANK OF AMERICA INTERNATIONAL LIMITED,
as Sub-Agent
By: /s/ Graham Radford
-------------------------------
Title:
-------------------------------
GRAHAM RADFORD
ASSISTANT VICE PRESIDENT
S-7
<PAGE>
EXHIBIT I
FORM OF NOTICE OF BORROWING
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Telephone: (925) 675-8416
Facsimile: (925) 675-8500
Pursuant to that certain Credit Agreement dated as of August 21,
1998 (said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Manufacturers' Services Limited, a Delaware corporation
("Company"), Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"), the
financial institutions listed therein as Lenders ("Lenders"), DLJ Capital
Funding, Inc., as Syndication Agent and Bank of America National Trust and
Savings Association, as Administrative Agent ("Administrative Agent"), this
represents [Company's] [MSL Overseas'] request to borrow as follows:
1. Date of borrowing: __________________, _______
2. Amount of borrowing: $___________________
3. Type of Loans: |_| a. Term Loans
|_| b. Revolving Loans
4. Interest rate option: |_| a. Base Rate Loan(s)
|_| b. LIBOR Loans with an initial Interest
Period of ________ month(s)
5. Type of Currency: |_| a. Dollars
(Revolving Loans |_| b. Pesetas
only) |_| c. Euros
|_| d. Other
The proceeds of such Loans are to be deposited in [Company's] [MSL Overseas']
account at Administrative Agent.
The undersigned officer, to the best of his or her knowledge, and
[Company] [MSL Overseas] certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof to
the same extent as tough made on and as of the date hereof, except
to the extent such representations and warranties specifically
1
<PAGE>
relate to an earlier date, in which case such representations and
warranties were true, correct and complete in all material respects
on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from
the consummation of the borrowing contemplated hereby that would
constitute an Event of Default or a Potential Event of Default; and
(iii) [Company] [MSL Overseas] has performed in all material
respects all agreements and satisfied all conditions which the
Credit Agreement provides shall be performed or satisfied by it on
or before the date hereof.
DATED: ____________ [MANUFACTURERS' SERVICES LIMITED
By: _____________________________
Title: __________________________
[MSL OVERSEAS FINANCE BV
By: _____________________________
Title: __________________________
2
<PAGE>
EXHIBIT II
FORM OF NOTICE OF CONVERSION/CONTINUATION
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Telephone: (925) 675-8416
Facsimile: (925) 675-8500
Pursuant to that certain Credit Agreement dated as of August 21,
1998 (said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Manufacturers' Services Limited, a Delaware corporation
("Company"), Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"), the
financial institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent and Bank of America National Trust and Savings Association, as
Administrative Agent, this represents [Company's] [MSL Overseas'] request to
convert or continue Loans as follows:
1. Date of conversion/continuation: ___________________, ________
2. Amount of Loans being converted/continued: ___________________
3. Type of Loans being |_| a. Term Loans
converted/continued: |_| b. Revolving Loans
4. Currency of Loan being |_| a. Dollars
convened/continued: |_| b. Offshore Currency
5. Nature of conversion/continuation:
|_| a. Conversion of Base Rate Loans to LIBOR Loans
|_| b. Conversion of LIBOR Loans to Base Rate Loans
|_| c. Continuation of LIBOR Loans as such
|_| d. Continuation of Offshore Currency Loan as such
5. If Loans are being continued as or converted to LIBOR Loans, the
duration of the new Interest Period that commences on the conversion/
continuation date: _______________ month(s)
6. If Loans are being continued as Offshore Currency Loans, the applicable
Offshore Currency is: ___________.
In the case of a conversion to or continuation of LIBOR Loans, the
undersigned officer, to the best of his or her knowledge, and [Company] [MSL
Overseas] certify that no
3
<PAGE>
Event of Default or Potential Event of Default has occurred and is continuing
under the Credit Agreement.
DATED: ____________ [MANUFACTURERS' SERVICES LIMITED
By: _____________________________
Title: __________________________
[MSL OVERSEAS FINANCE BV
By: _____________________________
Title: __________________________
4
<PAGE>
EXHIBIT III
FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
Bank of America National Trust
and Savings Association
333 South Beaudry, 19th Floor
Los Angeles, California 90017
Attention: International Trade Banking #22621
Telephone: (213) 345-6632
Facsimile: (213) 345-6694
Pursuant to that certain Credit Agreement dated as of August 21,
1998 (said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Manufacturers' Services Limited, a Delaware corporation
("Company"), Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"), the
financial institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent and Bank of America National Trust and Savings Association, as
Administrative Agent, this represents [Company's] [MSL Overseas'] request for
the issuance of a Letter of Credit as follows:
1. Issuing Lender: Bank of America National Trust and Savings
Association
2. Date of issuance of Letter of Credit: _________________, ________
3. Type of Letter of Credit: |_| a. Commercial Letter of Credit
|_| b. Standby Letter of Credit
4. Face amount of Letter of Credit: $_________________________
5. Expiration date of Letter of Credit: _________________, ________
6. Currency in which Letter of Credit shall be denominated. ________
7. Name and address of beneficiary:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
8. Attached hereto is:
|_| a. the verbatim text of such proposed Letter of Credit
|_| b. a description of the proposed terms and conditions of such
Letter of Credit, including a precise description of any documents
to be presented by the beneficiary which, if presented by the
beneficiary on or prior to the expiration
5
<PAGE>
date of such Letter of Credit, would require the Issuing Lender to
make payment under such Letter of Credit.
The undersigned officer, to the best of his or her knowledge, and
[Company] [MSL Overseas] certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof to
the same extent as though made on and as of the date hereof, except
to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and
warranties were true, correct and complete in all material respects
on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from
the issuance of the Letter of Credit contemplated hereby that would
constitute an Event of Default or a Potential Event of Default; and
(iii) [Company] [MSL Overseas] has performed in all material
respects all agreements all conditions which the Credit Agreement
provides shall be performed or by it on or before the date hereof.
DATED: ____________ [MANUFACTURERS' SERVICES LIMITED
By: _____________________________
Title: __________________________
[MSL OVERSEAS FINANCE BV
By: _____________________________
Title: __________________________
6
<PAGE>
EXHIBIT IV
FORM OF TERM NOTE
[MANUFACTURERS' SERVICES LIMITED] [MSL OVERSEAS FINANCE BV]
PROMISSORY NOTE DUE JULY 31, 2004
$(1) _________________
August __ 1998
FOR VALUE RECEIVED, [MANUFACTURERS' SERVICES LIMITED, a Delaware
corporation] [MSL OVERSEAS FINANCE BV] ("Borrower"), promises to pay to (2)
("Payee") or its registered assigns the principal amount of (3) ($[1]) in the
installments referred to below.
Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Credit Agreement dated as of August __, 1998 by and among Borrower,
[Manufacturers' Services Limited] [MSL Overseas Finance BV], the financial
institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, and Bank of America National Trust and Savings Association,
as Administrative Agent and Collateral Agent (said Credit Agreement, as it may
be amended, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
Borrower shall make principal payments on this Note in consecutive
quarterly installments, commencing on October 31, 1998 and ending on July 31,
2004. Each such installment shall be due on the date specified in the Credit
Agreement and in an amount determined in accordance with the provisions thereof;
provided that the last such installment shall be in an amount sufficient to
repay the entire unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon.
This Note is in the aggregate principal amount of___________ and is
issued pursuant to and entitled to the benefits of the Credit Agreement, to
which reference is hereby made for a more complete statement of the terms and
conditions under which the Term Loan evidenced hereby was made and is to be
repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent as provided in
subsection 12.1 B(ii) of the Credit Agreement, Borrower and Administrative Agent
- ----------
(1) Insert amount of Lender's Term Loan in numbers.
(2) Insert Lender's name in capital letters.
(3) Insert amount of Lender's Term Loan in words.
7
<PAGE>
shall be entitled to deem and treat Payee as the owner and holder of this Note
and the Loan evidenced hereby. Payee hereby agrees, by its acceptance hereof,
that before disposing of this Note or any part hereof it will make a notation
hereon of all principal payments previously made hereunder and of the date to
which interest hereon has been paid; provided, however, that the failure to make
a notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Borrower hereunder with respect to payments of principal of
or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Borrower as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 12.1 and 12.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Borrower,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 12.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Borrower and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
8
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
[MANUFACTURERS' SERVICES LIMITED
By: _____________________________
Title: __________________________
[MSL OVERSEAS FINANCE BV
By: _____________________________
Title: __________________________
9
<PAGE>
EXHIBIT V
FORM OF REVOLVING NOTE
[MANUFACTURERS' SERVICES LIMITED] [MSL OVERSEAS FINANCE BV]
PROMISSORY NOTE DUE AUGUST ____, 2002
$(4) _________________
August ___, 1998
FOR VALUE RECEIVED, [MANUFACTURERS' SERVICES LIMITED, a Delaware
corporation] [MSL OVERSEAS FINANCE BV] ("Borrower"), promises to pay to (5)
("Payee") or its registered assigns, on or before August __, 1998, the lesser
of (x)(6) ($[1]) and (y) the unpaid principal amount of all advances made by
Payee to Borrower as Revolving Loans under the Credit Agreement referred to
below.
Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Credit Agreement dated as of August __, 1998 by and among Borrower,
[Manufacturers' Services Limited] [MSL Overseas Finance BV], the financial
institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, and Bank of America National Trust and Savings Association,
as Administrative Agent and Collateral Agent (said Credit Agreement, as it may
be amended, supplemented or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined).
This Note is one of Borrower's "Revolving Notes" in the aggregate
principal amount of______________ and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving Loans
evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement;
provided that all payments of principal and interest on, and other amounts
relating to, any Offshore Currency Loan shall be made in the Offshore Currency
in which such Loan is denominated no later than such time as may be necessary
for such payment to be credited on such date in accordance with normal banking
procedures in the place of payment. Unless and until an Assignment Agreement
effecting the assignment or transfer of this Note shall have been accepted by
Administrative Agent as provided in subsection 12.1B(ii) of the Credit
Agreement, Borrower and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loans evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it
- ----------
(4) Insert amount of Lender's Revolving Loan Commitment in numbers.
(5) Insert Lender's name in capital letters.
(6) Insert amount of Lender's Revolving Loan Commitment in words.
10
<PAGE>
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Borrower hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Borrower as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 12.1 and 12.16 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Borrower,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 12.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Borrower and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
11
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
[MANUFACTURERS' SERVICES LIMITED
By: _____________________________
Title: __________________________
[MSL OVERSEAS FINANCE BV
By: _____________________________
Title: __________________________
12
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
---- --------- --------- --------- --------- -------
13
<PAGE>
EXHIBIT VI
FORM OF BORROWING BASE CERTIFICATE
________________, ______
Reference is made to the Credit Agreement dated as of August 21,
1998 (such agreement, as it may be amended, amended and restated, supplemented
and or otherwise modified from time to time, the "Credit Agreement"; capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement) by and among Manufacturers' Services Limited, a Delaware
corporation ("Company"), MSL Overseas Finance By, a Netherlands private company
with limited liability ("MSL Overseas"), the lenders party thereto, DLJ Capital
Funding, Inc., as Syndication Agent, Bank of America National Trust and Savings
Association, as administrative agent for Lenders, as letter of credit issuing
bank, and as collateral agent and Bank of America International Limited, as
Sub-Agent.
Pursuant to Section 6.1(i) of the Credit Agreement, the undersigned
treasurer of the Company hereby certifies that attached hereto as Annexes A and
B are a true and accurate calculation of the Company Borrowing Base (Annex A)
and MSL Overseas Borrowing Base (Annex B) as of ________________, ______
determined in accordance with the requirements of the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has caused this certificate to
be duly executed as of August 25, 1998.
MANUFACTURERS' SERVICES LIMITED
By__________________________
Title: Treasurer
<PAGE>
ANNEX A
TO BORROWING BASE CERTIFICATE
________________, ______
1. ACCOUNTS RECEIVABLE OF COMPANY AND DOMESTIC SUBSIDIARIES
1. Total Accounts Receivable $_____________
2. Less: Accounts Receivable which remain unpaid
for more than 90 days after the due date $(___________)
3. Less: Other ineligible Accounts Receivable
according to the definition of "Eligible
Accounts Receivable" $(___________)
4. Accounts Receivable determined ineligible by
Requisite Lenders $_____________
5. Eligible Accounts Receivable (I1 less I2 less I3
less I4) $_____________
6. Percentage of Eligible Accounts Receivable to be
included in Borrowing Base ______________
7. Eligible Accounts Receivable to be included in
Borrowing Base (I5 times I6) (____________)
II. INVENTORIES OF THE COMPANY AND DOMESTIC SUBSIDIARIES
1. Total Inventory $_____________
2. Less ineligible inventory according to the
definition of "Eligible Inventory" $(___________)
3. Otherwise ineligible inventory determined by
Administrative Agent to be acceptable for
borrowing purposes $_____________
4. Eligible Inventory (II1 less II2 plus II3) $_____________
2
<PAGE>
5. Percentage of Eligible Inventory to be included
in the Borrowing Base ______________
6. Preliminary Eligible Inventory to be included in
the Borrowing Base (II4 times II5) $_____________
7. Adjustment, in any, to ensure that Eligible
Inventory does not exceed 35% of Borrowing Base $_____________
8. Eligible Inventory to be included in Borrowing
Base (II6 times II7) $_____________
III. COMPANY BORROWING BASE
1. Eligible Accounts Receivable plus Eligible
Inventory (I7 plus II8) $_____________
2. Less Term Loans advanced to Company $(___________)
3. Company Borrowing Base (III1 minus III2) ______________
IV. APPLICABLE CREDIT EXTENSION TO COMPANY
1. Aggregate principal amount of outstanding
Revolving Loans $_____________
2. Letter of Credit usage by the Company $_____________
3. Total Utilization of Revolving Loan Commitment
by Company (IV1 plus IV2) $_____________
4. Available Company borrowing Base (III3 minus
IV3) $
=============
3
<PAGE>
ANNEX B
TO BORROWING BASE CERTIFICATE
I. ACCOUNTS RECEIVABLE OF MSL OVERSEAS AND FOREIGN SUBSIDIARIES
1. Accounts Receivable
MSL Ireland $_____________
MSL Spain $_____________
MSL Singapore $_____________
MSL Malaysia $_____________
Total Accounts Receivable $_____________
2. Less: Accounts Receivable which remain unpaid
for more than 90 days after the due date (____________)
3. Less: Other ineligible Accounts Receivable
according to the definition of "Eligible
Accounts Receivable" (____________)
4. Accounts Receivable determined ineligible by
Requisite Lenders $_____________
5. Eligible Accounts Receivable (I1 less I2 less I3
less I4) $_____________
6. Percentage of Eligible Accounts Receivable to be
included in Borrowing Base ______________
7. Eligible Accounts Receivable to be included in
Borrowing Base (I5 times I6) $_____________
II. INVENTORIES OF MSL OVERSEAS AND COMPANY'S FOREIGN
SUBSIDIARIES
1. Inventory
MSL Ireland $_____________
MSL Spain $_____________
MSL Singapore $_____________
MSL Malaysia $_____________
4
<PAGE>
Total Inventory $_____________
2. Less ineligible inventory according to the
definition of "Eligible Inventory" (____________)
3. Otherwise ineligible Inventory determined by
Administrative Agent to be acceptable for
borrowing purposes ______________
4. Eligible Inventory (II1 less II2 plus II3) $_____________
5. Percentage of Eligible Inventory to be included
in Borrowing Base ______________
6. Preliminary Eligible Inventory to be included in
Borrowing Base (II4 time II5) $_____________
7. Adjustment, if any, to ensure that Eligible
Inventory does not exceed 35% of Borrowing Base $_____________
8. Eligible Inventory to be included in Borrowing
Base (II6 time II7) $
=============
III. MSL OVERSEA BORROWING BASE
1. Eligible Accounts Receivable plus Eligible
Inventory (I7 plus II8) $_____________
2. Less Term Loans advanced to Company (____________)
3. Company Borrowing Base (III1 minus III2) $
=============
IV. APPLICABLE CREDIT EXTENSION TO MSL OVERSEAS
1. Aggregate principal amount of outstanding
Revolving Loans $_____________
2. Letter of Credit usage by the Company Total
Utilization of Revolving Loan Commitment $_____________
3. by Company (IV2 plus IV2) $_____________
4. Available Company Borrowing Base (III3 minus
IV3) $_____________
5
<PAGE>
EXHIBIT VII
FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) I am the duly elected [Title] of Manufacturers' Services
Limited, a Delaware corporation ("Company");
(2) I have reviewed the terms of that certain Credit Agreement dated
as of August ___, 1998 (said Credit Agreement, as it may be amended,
supplemented or otherwise modified, being the "Credit Agreement",
the terms defined therein and not otherwise defined in this
Certificate (including Attachment No. 1 annexed hereto and made a
part hereof) being used in this Certificate as therein defined), by
and among Company, Company's subsidiary, MSL Overseas Finance BV,
the financial institutions listed therein as Lenders, DLJ Capital
Funding, Inc., as Syndication Agent, and Bank of America National
Trust and Savings Association, as Administrative Agent and
Collateral Agent, and the terms of the other Loan Documents, and I
have made, or have caused to be made under my supervision, a review
in reasonable detail of the transactions and condition of Company
and its Subsidiaries during the accounting period covered by the
attached financial statements; and
(3) The examination described in paragraph (2) above did not
disclose, and I have no knowledge of, the existence of any condition
or event which constitutes an Event of Default or Potential Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this
Certificate[, except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate]
are all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking, or proposes to take with respect to each such
condition or event:
____________________________________________________________________________]
The foregoing certifications, together with the computations set
forth in Attachment No. 1 annexed hereto and made a part hereof and the
financial statements delivered with this Certificate in support hereof, are made
and delivered this __________ day of _____________, ____ pursuant to subsection
6.1 (iv) of the Credit Agreement.
14
<PAGE>
MANUFACTURERS' SERVICES LIMITED
By: ___________________________
Title: ________________________
15
<PAGE>
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of _________ __, 199_ and pertains to the period from
____________, ____ to ____________, ____. Subsection references herein relate to
subsections of the Credit Agreement.
A. Indebtedness
1. Indebtedness permitted under subsection 7.1
(vi): $_____________
2. Maximum permitted under subsection 7.1(vi): $10,000,000
B. Liens
1. Indebtedness secured by Liens permitted under
subsection 7.2A(iv): $_____________
2. Maximum permitted under subsection 7.2A(iv): $1,000,000
C. Investments
1. Investments permitted under subsection 7.3(vi): $_____________
2. Maximum permitted under subsection 7.3(vi): $500,000
D. Contingent Obligations
1. Contingent Obligations in respect of other
letters of credit (other than Letters of Credit
pursuant to the Credit Agreement) permitted
under subsection 7.4(ii): $_____________
2. Maximum permitted under subsection 7.4(u): $100,000
3. Contingent Obligations under guarantees of
obligations of suppliers, customers, franchisees
and licensees permitted under subsection
7.4(iv): $_____________
4. Maximum permitted under subsection 7.4(iv): $750,000
E. Minimum Interest Coverage Ratio (for the four-Fiscal
Quarter period ending _____________, _____)
1. Consolidated EBITDA (G.8 below): $_____________
2. Consolidated Interest Expense: $_____________
16
<PAGE>
3. Interest Coverage Ratio (1):(3): ____:1.00
4. Minimum ratio required under subsection 7.6A: ____:1.00
F. Maximum Leverage Ratio (as of ___________, ____)
1. Consolidated Total Debt: $_____________
2. Consolidated EBITDA (G.8 below): $_____________
3. Leverage Ratio (1):(2): ____:1.00
4. Maximum ratio permitted under subsection 7.6B: ____:1.00
G. Minimum Consolidated EBITDA (for the four-Fiscal
Quarter period ending ___________, ____)
1. Consolidated Net Income: $_____________
2. Consolidated Interest Expense: $_____________
3. Provisions for taxes based on income: $_____________
4. Total depreciation expense: $_____________
5. Total amortization expense: $_____________
6. Other non-cash items reducing Consolidated Net
Income: $_____________
7. Other non-cash items increasing Consolidated Net
Income: $_____________
8. Consolidated Adjusted EBITDA (1+2+3+4+5+6-7): $_____________
9. Minimum required under subsection 7.6C: $_____________
H. Minimum Consolidated Net Worth (as of ___________, ____)
1. Consolidated Net Worth: $_____________
2. Minimum required under subsection 7.6D: $_____________
I. Consolidated Capital Expenditures
1. a. expenditures included as additions to
property, plant and equipment per GAAP: $_____________
17
<PAGE>
b. expenditures reimbursed or reimburseable
pursuant to a written agreement with IBM: $_____________
c. acquisition expenditures not included in
a. above, excluding expenditures in
respect of Eligible Inventory acquired in
connection with Company's Charlotte, North
Carolina Facility: $_____________
Consolidated Capital Expenditures for period
(a.-b.+c): $_____________
2. Maximum Consolidated Capital Expenditures Amount
for period: $_____________
3. Actual Consolidated Capital Expenditures for
prior Fiscal Year: $_____________
4. Excess of prior Fiscal Year Maximum Consolidated
Capital Expenditures Amount, over actual prior
Fiscal Year Maximum Consolidated Capital
Expenditures (3 - 2)(0 if a negative number): $_____________
5. 50% of Excess of prior Fiscal Year Maximum
Consolidated Capital Expenditures Amount (25% of
4): $_____________
6. Maximum Consolidated Capital Expenditures Amount
for period plus 4: $_____________
7. Maximum Consolidated Capital Expenditures Amount
for period: $_____________
J. Increases in Inventory (Subsection 6.8C)
1. Change in Inventory of MSL Spain
a. Inventory owned by MSL Spain (book value) $_____________
b. Level of Inventory covered by
Hypothecation of Stocks applicable to MSL
Spain's Inventory $_____________
2. Change in Inventory of MSL Spain = (a) - (b) $_____________
3. Change in Inventory of MSL Spain requiring
action pursuant to subsection 6.8C $5,000,000
18
<PAGE>
K. Overseas Borrowing Base (Subsection 7.17)
1. Consolidated Leverage Ratio current quarter: ____:1.00
2. Consolidated Leverage Ratio prior quarter: ____:1.00
19
<PAGE>
EXHIBIT VIII
FORM OF OPINION OF SHERBURNE, POWERS & NEEDHAM, P.C.
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
ONE BEACON STREET [GRAPHIC] BOSTON [GRAPHIC] MASSACHUSETTS 02108
TELEPHONE (617) 523-2700 [GRAPHIC] FACSIMILE (617) 523-6850
August 28, 1998
Bank of America National Trust
and Savings Association
in its capacity as
Administrative Agent,
Collateral Agent and
Issuing Lender under
the U.S. $125,000,000
Credit Agreement referenced below
for the Lenders listed in said
Credit Agreement
555 California Street
San Francisco, CA 94104
Ladies and Gentlemen:
We have acted as special counsel to Manufacturers' Services Limited, a
Delaware corporation (the "Company"), in connection with that certain U.S.
$125,000,000 Credit Agreement dated as of August 21, 1998 (the "Credit
Agreement") among the Company; MSL Overseas Finance BV, described therein as a
Netherlands private company with limited liability ("MSL Overseas"); the Lenders
listed on the signature pages thereof as Lenders (the "Lenders"); Bank of
America National Trust and Savings Association as Administrative Agent for
Lenders (the "Administrative Agent"), as Collateral Agent for Lenders (the
"Collateral Agent") and as letter of credit issuing lender (the "Issuing
Lender"); DLJ Capital Funding, Inc. as Syndication Agent (the "Syndication
Agent"); and Bank of America International Limited, as Sub-Agent ("Sub Agent").
In the transaction contemplated by the Credit Agreement, we have also acted as
special counsel to Manufacturers' Services Central U.S. Operations Inc., a
Minnesota corporation ("MSL-Central Ops"); Manufacturers' Services Western U.S.
Operations Inc., a California corporation ("MSL-Western Ops"); MSL SPV Spain,
Inc., a Delaware corporation ("SPV Spain"); and Manufacturers' Services
Limited-Corporate, a Massachusetts corporation ("MSL-Corporate" which together
with MSL-Central Ops, MSL-Western Ops and SPV Spain are herein collectively
called the "U.S. Subsidiaries"). We render this opinion pursuant to subsection
4.1F of the Credit Agreement. All capitalized terms used but not defined herein
which are defined in the Credit Agreement shall, whenever used herein, have the
meanings ascribed thereto in the Credit Agreement.
As special counsel to the Company and the U.S. Subsidiaries (collectively
the "Domestic Loan Parties"), we have examined the following, each dated as of
August 21, 1998 (unless otherwise indicated) (collectively "Financing
Documents") in connection with our rendering the opinions hereinafter set forth:
<PAGE>
SHERBURNE, POWERS & NEEDHAM, PC.
August 28, 1998
Page -2-
1. The Credit Agreement, including all Schedules and Exhibits attached
thereto, executed and delivered by the Company;
2. A Term Note dated August 28, 1998 executed and delivered by the Company
to each of the following in the following amounts, respectively:
a) DLJ Capital Funding, Inc. $47,000,000.
b) Erste Bank $3,000,000.
3. A Revolving Note executed and delivered by the Company to each of the
following Revolving Lenders in the following amounts, respectively:
a) Erste Bank $7,000,000.
b) DLJ Capital Funding, Inc. $25,000,000.
c) Bank of America National
Trust and Savings Association $25,000,000.
d) Fleet National Bank $18,000,000.
4. The Company Security Agreement executed and delivered by the Company to
the Collateral Agent;
5. The Company Pledge Agreement executed and delivered by the Company to
the Collateral Agent;
6. Each Subsidiary Security Agreement and Subsidiary Pledge Agreement
executed and delivered by each of the U.S. Subsidiaries other than SPV Spain to
the Collateral Agent;
7. Each Subsidiary Guarantee executed and delivered by each of the U.S.
Subsidiaries to the Collateral Agent;
8. Unsigned English translation from Spanish of "Fees For the Creation of
a Pledge of Shares" dated August ___, 1998, the executed Spanish of original
which is herein called the "Spanish Pledge Agreement"; and
9. UCC-1 Financing Statements (undated), in the form of the one annexed
hereto, executed and delivered by the Domestic Loan Parties, respectively, and
to be filed by Collateral Agent in the respective public offices listed in the
schedule attached hereto (the "Financing Statements").
(Items 4, 5, 6, 7, 8 and 9 are sometimes referred to as the "Domestic
Collateral Documents").
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -3-
Further, as special counsel to the Company and the U.S. Subsidiaries, we
have examined the following (collectively called "Certificates and Authenticated
Documents"):
1. A copy of the Amended and Restated Certificate of Incorporation of the
Company, and 3 amendments thereof on file in the office of the Secretary of
State of Delaware, as certified by said Secretary on July 29, 1998 (the "Company
Certificate of Incorporation"); and a certificate dated July 29, 1998, of said
Secretary attesting to the continued corporate existence and corporate good
standing of the Company as of that date;
2. A certificate of registration to do business dated August 5, 1998
issued by the Secretary of State of Massachusetts relating to the Company;
3. A certificate dated this date delivered to you contemporaneously
herewith by the Secretary of the Company as to (i) the adoption of certain
resolutions authorizing the execution and delivery of those of the Financing
Documents to be executed by it, (ii) the incumbency and signatures of certain
officers of the Company and (iii) the accuracy of the copy of the Company
Certificate of Incorporation and By-Laws attached thereto;
4. A copy of the Certificate of Incorporation of MSL-Central Ops on file
in the office of the Secretary of State of Minnesota and an amendment thereof,
as certified by said Secretary on July 31, 1998 (the "Central Certificate of
Incorporation"); and a certificate dated July 31, 1998, of said Secretary
attesting to the continued corporate existence and corporate good standing of
MSL-Central Ops as of that date;
5. A certificate dated this date delivered to you contemporaneously
herewith by the Secretary of MSL-Central Ops as to (i) the adoption of certain
resolutions authorizing the execution and delivery of the Financing Documents to
be executed by it, (ii) the incumbency and signatures of certain officers of
MSL-Central Ops and (iii) the accuracy of the Central Certificate of
Incorporation as amended and By-Laws attached thereto;
6. A copy of the Articles of Incorporation of MSL-Western Ops on file in
the office of the Secretary of State of California and an amendment thereof, as
certified by said Secretary on August 3, 1998 (the "Western Articles"); and a
certificate dated August 3, 1998, of said Secretary attesting to the continued
corporate existence and corporate good standing of MSL-Western Ops as of that
date;
7. A certificate dated this date delivered to you contemporaneously
herewith by the Secretary of MSL-Western Ops as to (i) the adoption of certain
resolutions authorizing its execution and delivery of the Financing Documents to
be executed by it; (ii) the incumbency and signatures of certain officers of
MSL-Western Ops, and (iii) the accuracy of the Western Articles and By-Laws
attached thereto;
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -4-
8. A copy of the Articles of Organization of MSL Corporate and 2 Articles
of Amendment thereof on file in the office of the Secretary of State of
Massachusetts, as certified by said Secretary on August 3, 1998 (the "Corporate
Articles"), and a certificate dated August 3, 1998 of said Secretary attesting
to the continued corporate existence and corporate good standing of MSL
Corporate as of that date;
9. A Certificate of Foreign Qualification dated August 4, 1998, issued by
the Clerk of the State Corporation Commission of Virginia relating to MSL
Corporate;
10. A certificate dated this date delivered to you contemporaneously
herewith by the Clerk of MSL Corporate as to (i) the adoption of certain
resolutions authorizing the execution and delivery of the Financing Documents to
be executed by it, (ii) the incumbency and signatures of certain officers of MSL
Corporate and (iii) the accuracy of the Corporate Articles and By-Laws attached
thereto;
11. A copy of the Certificate of Incorporation of SPV Spain as certified
by the Secretary of State of Delaware on July 30, 1998 as amended as certified
by said Secretary on July 29, 1998 ("SPV Spain Certificate of Incorporation");
and a certificate dated July 29, 1998 of said Secretary attesting to the
continued corporate existence and corporate good standing of Spy Spain as of
that date;
12. A certificate dated this date delivered to you contemporaneously
herewith by the Secretary of SPV Spain as to (i) the adoption of certain
resolutions authorizing the execution and delivery of the Spanish Pledge, (ii)
the numbering and signatures of certain officers of SPV Spain and (iii) the
accuracy of the SPV Spain Certificate of Incorporation and by laws attached
thereto;
13. An Officer's Certificate attached hereto (the "Officer's
Certificate"); and
14. Such other certificates, documents and records and such other matters
as we have deemed necessary in connection with rendering the opinions herein
expressed.
We have assumed (i) the genuineness of all signatures and seals (if any)
appearing on each such document and the originals thereof, (ii) the genuineness
of each original document inspected by us, (iii) the conformity of all copies
(including facsimile copies) submitted to or obtained by us with the executed
originals of the documents to which they relate and the conformity to the
Spanish original of all English translations thereof, (iv) that the execution
and delivery of all Financing Documents and performance of the respective
obligations thereunder have been duly authorized by all parties thereto, other
than the Domestic Loan Parties, (v) that all Financing Documents have been duly
executed and delivered by all Persons intended thereby to be parties thereto,
other than the Domestic Loan Parties except for SPV Spain with respect to the
Spanish Pledge Agreement; (vi) that all Financing
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -5-
Documents are valid and binding on and enforceable against all parties thereto
other than the Domestic Loan Parties, (vii) that all rights and property
wherever acquired or arising which are the subject of a grant of a security
interest, mortgage, pledge or assignment by any Domestic Loan Party to
Collateral Agent or anyone else under the Domestic Collateral Documents, are
owned by the grantor, pledgor or assignor thereof; and (viii) that except for
the Company and SPV Spain, each a Delaware corporation, each other Domestic Loan
Party which under the Financing Documents or otherwise (a) guaranties, endorses,
or otherwise becomes liable for or (b) grants any security interest, mortgages,
pledges or assigns any of its assets, rights or other property to secure the
debts, liabilities or obligations of another Person (whether such other Person
be the Company, any Domestic Subsidiary or anyone else), under the laws of the
jurisdiction of its incorporation and otherwise has the corporate power and
shall have been deemed to have exercised the corporate power so to do, that its
so doing is not ultra vires, and that it shall have received adequate
consideration therefor.
To the extent that this opinion addresses or is based upon matters of
fact, with your permission we have not made any independent investigation or
verification of the same, other than as herein noted, and with your permission
have relied exclusively upon the representations and warranties as to matters of
fact contained in the Loan Documents, and in the Certificates and Authenticated
Documents, but nothing has come to our attention leading us to question the
accuracy of such representations, warranties or the Certificates and
Authenticated Documents.
You have not asked us to pass upon your power or authority in your various
capacities or the power or authority of the Syndication Agent or the Lenders to
enter into the Loan Documents or to effect the transactions contemplated thereby
(the "Transactions") or upon the applicability to you or them of any foreign,
federal, state or local law ordinance or regulation and, for the purposes of
this opinion, we are assuming that you and they have all requisite power and
authority and have taken all necessary action to enter into and effect the
Transactions.
As used herein, the terms "to our knowledge", "to the best of our
knowledge", "known to us", "we have no knowledge" or similar phrases mean the
conscious awareness of facts or other information by the lawyers in our firm who
had active involvement in negotiating the Transactions and the Loan Documents or
preparing this opinion letter and, solely as to information relevant to a
particular opinion issue or confirmation regarding a particular factual mater,
any lawyer in our firm who was primarily responsible for providing the response
concerning the particular opinion issue or confirmation;
Our opinions set forth herein as to the validity, binding effect and
enforceability of any of the Financing Documents are specifically qualified to
the extent that the validity, binding effect or enforceability of any of them or
of any terms, provisions or conditions therein, or indemnities, covenants,
liabilities, indebtedness or obligations thereunder, or the
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -6-
availability or enforceability of any of the remedies provided therein, are
subject to or limited by (i) applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other statutory or decisional laws,
heretofore or hereafter enacted or in effect, affecting the rights of creditors
generally, (ii) the exercise of judicial or administrative discretion in
accordance with general equitable principles, whether enforcement is sought at
law or in equity, (iii) the application by courts of competent jurisdiction of
laws containing provisions determined to have a paramount public interest, and
(iv) the Lenders' and Agents' duty (a) to deal fairly and act in good faith and
(b) under the Uniform Commercial Code as adopted by The Commonwealth of
Massachusetts, or other applicable jurisdictions which, for purposes hereof is
assumed to be the same as that in the Commonwealth (the "UCC") (a) to act in
respect of any disposition of collateral security or realization thereon in a
commercially reasonable manner. We also do not express an opinion as to the
strict enforceability of each and every remedy and provision of the Financing
Documents in accordance with their terms under all facts and circumstances.
However, it is our opinion that the remedies and provisions contained in each of
such documents are sufficient as a whole, subject to the qualifications stated
elsewhere herein, for the practical realization of the essential benefits
intended thereby.
We express no opinion with respect to the validity, binding effect or
enforceability of any provision in any of the Financing Documents which purports
to waive any requirement of commercial reasonableness, diligent performance,
notice or other care on the part of the Agents or the Lenders with respect to
the recognition or preservation of any person's rights to, or interest in, any
property subject to any Guaranty, Security Agreement or Pledge Agreement or the
security interests granted thereby or purports to waive notice or other
requirements which by the terms of the UCC may not be waived.
Furthermore, we express no opinion as to the validity, binding effect or
enforceability of the provisions of any of the Financing Documents regarding
interest rates, fees, compounding of interest or other charges or whether they
conform to "usury" or similar laws except for a Lender who, as provided in
paragraph (e) of Massachusetts General Laws, Chapter 271, Section 49, is subject
to control, regulation or examination by any state or federal agency or any
Lender who, as provided in paragraph (d) of said section, (1) notifies the
Attorney General of The Commonwealth of Massachusetts of such Lender's intent to
engage in a transaction as transactions which but for such the provisions of
paragraph (d) of said Section would be proscribed under other provisions of that
Section and (2) complies with recordkeeping, renewal notice and other provisions
of said Section.
We have not made any independent investigation of any requirement that the
Company or any Subsidiary qualify to do business as a foreign corporation in any
jurisdiction other than the requirement that the Company qualify to do business
in The Commonwealth of Massachusetts.
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -7-
We are attorneys admitted to practice in the Commonwealth of Massachusetts
and, accordingly, this opinion is limited solely to the laws of the Commonwealth
of Massachusetts as applied by courts located in Massachusetts, the corporate
statutes of the State of Delaware and the federal laws of the United States of
America, to the extent that the same may apply to, or govern matters addressed
in the opinions herein expressed. Insofar as such opinions involve matters
governed by the laws of the State of New York (as the jurisdiction whose laws
have been chosen by you and Lenders as applicable in certain of the Financing
Documents), or the Uniform Commercial Code as now in force in any jurisdiction
other than Massachusetts, we have assumed that such laws are the same in
substantive effect as the laws of the Commonwealth of Massachusetts with respect
to the legality, validity, binding effect and enforceability of those Financing
Documents governed by the laws of such jurisdiction, and with respect to all
other matters addressed in this opinion which are or purport to be governed by
the laws of such jurisdictions. No opinion is given herein as to the validity,
binding effect or enforceability of any choice of law or internal substantive
rules of law contained in any of the Financing Documents or which laws any
tribunal may apply to the Transactions or the Financing Documents.
Based upon and subject to the foregoing, and all other qualifications
herein set forth, we are of the opinion that:
1. The Company (i) is a duly incorporated and validly existing corporation
in good standing under the Delaware General Corporation Law and (ii) has the
corporate power and authority to own and operate its property, to lease the
property it operates as lessee and to carry on its businesses as we understand
they are now conducted.
2. Each of the U.S. Subsidiaries (i) is a duly incorporated and validly
existing corporation in good standing under the laws of the jurisdiction of its
incorporation and (ii) has the corporate power and authority to own and operate
its property, to lease the property it operates as lessee and to carry on its
respective businesses as we understand they are now conducted.
3. Each of the Domestic Loan Parties has the corporate power and authority
to execute and deliver each of the Financing Documents to which it is a party
and to perform its respective obligations thereunder. Each of the Domestic Loan
Parties has taken all necessary corporate action to authorize the granting of
the security interests contemplated to be granted by it by the Domestic
Collateral Documents to which it is a party and to authorize the execution and
delivery of, and performance of its obligations under the Financing Documents to
which it is a party.
4. Each of the Domestic Loan Parties has duly executed and delivered each
of the Financing Documents to which it is a party. Subject to the proviso below,
each Financing Document constitutes the valid and binding obligation of each of
the Domestic Loan Parties
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -8-
which are party thereto, as applicable, enforceable against such Domestic Loan
Party respectively in accordance with its terms; provided, however, that we
render no opinion as to the validity, binding effect or enforceability of the
Spanish Pledge Agreement.
5. The execution and the delivery by a Domestic Loan Party of any of the
Financing Documents to which it is a party, the performance by a Domestic Loan
Party of its respective obligations thereunder, the consummation of the
transactions provided for therein, the compliance by such Domestic Loan Party
with any of the provisions thereof, the borrowings by the Company under the
Credit Agreement and the Company's use of proceeds thereof, all as provided
therein, (a) do not violate any material applicable provision of any law,
statute, rule or regulation of the United States of America or The Commonwealth
of Massachusetts (including, without limitation, Regulations T, U and X of the
Board of Governors of the Federal Reserve System) or of the Delaware General
Corporation Law (except with respect to any state securities or "blue sky" laws,
as to which we express no opinion) to which a Domestic Loan Party is subject,
which violation would have a Material Adverse Effect, (b) do not violate any
provision of its Certificate of Incorporation, Articles of Organization or other
charter document, respectively, or the Bylaws of a Domestic Loan Party, (c) do
not to the best of our knowledge, violate, or constitute a material default
under, any Contractual Obligations of a Domestic Loan Party of which we have
knowledge and (d) will not, to the best of our knowledge, result in or require
the creation or imposition of any Lien on any of properties or revenues of a
Domestic Loan Party, except in favor of Collateral Agent.
6. No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any governmental or
regulatory authority pursuant to any law or regulation of the United States of
America or The Commonwealth of Massachusetts or pursuant to the Delaware General
Corporation Law (except, in each case (i) as required to perfect, or maintain
the perfection of, security interests created under the Domestic Collateral
Documents, (ii) as required to obtain, perfect or maintain assignments or
security interests in patents, trademarks or copyrights or (iii) as have
otherwise been obtained or made) is required to be obtained or made by any
Domestic Loan Party in connection with any action to be taken pursuant to any
Financing Document by any Domestic Loan Party on or prior to the date hereof.
Our opinions set forth in this paragraph 6 address only approvals, consents and
filings required by laws and regulations of general applicability. Without
limiting the foregoing, we render no opinion as to any of the matters in this
paragraph 6 with respect to the Spanish Pledge Agreement, the assets pledged
thereunder or SPV Spain's execution thereof as the same may be governed by the
laws of Spain.
7. To our knowledge, no material litigation, investigation or proceeding
of or before any arbitrator or governmental authority is pending or threatened
against any Domestic Loan Party or against any of its properties or revenues
with respect to the Credit Agreement or any of the other Financing Documents. We
have not conducted and disclaim
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -9-
any obligation to conduct any docket searches or examinations of any other
public records in connection with the opinion expressed in this paragraph 7.
8. No Domestic Loan Party is an "investment company" within the meaning
of, nor is any Domestic Loan Party subject to regulation under, the Investment
Company Act of 1940, as amended.
9. The capital stock of each of the U.S. Subsidiaries listed on the
Schedule annexed hereto has been duly authorized and to the best of our
knowledge constitutes all of the issued and outstanding shares of capital stock
of the U.S. Subsidiaries. Such capital stock is owned of record by the Company,
and, to the best of our knowledge there are no outstanding subscriptions,
options, warrants, calls, rights (including preemptive rights) or any other
agreement or commitment of any nature with respect to the capital stock of such
U.S. Subsidiaries.
10. The provisions of the Company Security Agreement and each of the
Subsidiary Security Agreements are effective to create in favor of the
Collateral Agent valid and enforceable security interests in the Collateral (as
defined in each such agreement) if and to the extent that security interests in
such Collateral may be created under the UCC (the "Code Collateral"). Assuming
(a) the repayment in full of all amounts owing under the Existing Credit
Agreement and the release of the Liens created pursuant thereto, (b) delivery to
the Collateral Agent pursuant to the Company Pledge Agreement and the Subsidiary
Pledge Agreements of the certificates representing the Pledged Shares referred
to in such pledge agreements, along with undated stock powers duly endorsed in
blank and (c) the Collateral Agent takes and continuously holds the certificates
representing the Pledged Shares in good faith and without notice of any adverse
claim, the security interests created in favor of the Collateral Agent under
each of such pledge agreements in such Pledged Shares will constitute valid and
perfected security interests. No filings or recordings are required in order to
perfect the security interests created under such pledge agreements in such
Pledged Shares.
11. The Financing Statements have been duly executed and delivered. If the
Financing Statements, respectively, meet the requirements of the state in which
they are to be filed (except for Massachusetts, whose requirements have been
met), are filed and are accepted for filing in the offices listed on the
schedule annexed hereto, the property and rights to property in which a security
interest is granted to Collateral Agent under the Collateral Documents and the
description of such property and rights in the Collateral Documents is the same
as that in the Financing Statements so filed and a security interest therein can
be perfected by filing financing statements pursuant to the UCC, then subject to
the exceptions and assumptions below, the Collateral Agent's security interests
granted in the Collateral Documents will be perfected. This opinion specifically
assumes that none of the property or rights to property referred to above are or
will become fixtures, accessions, consumer goods, farm products, minerals (or
accounts or other proceeds arising therefrom).
<PAGE>
SHERBURNE, POWERS & NEEDHAM, P.C.
August 28, 1998
Page -10-
The opinion expressed in this paragraph is based upon the information of
locations of Debtors and their property and activities in the Officer's
Certificate and is also based except for Massachusetts on the "Charts" and UCC
Filing section of Volume 1 of the "Secured Transactions Guide" published by CCH
Incorporated. We disclaim any obligation to investigate further whether filing
financing statements in other filing offices is necessary or appropriate and we
claim no expertise in determining the appropriate or necessary places to file
the Financing Statements in any jurisdiction other than in Massachusetts. We
render no opinion with respect to the priority of any security interest,
vis-a-vis any other one or any other Lien and call to your attention the
requirements of the UCC to file continuation statements or amendments under
certain circumstances in order to maintain perfection.
This opinion is specific to the transaction and the documents referred to
herein and is based upon the facts known to us, the documents examined by us and
the law at the date hereof. Therefore, this opinion may not be quoted to or
relied upon by, nor may copies be delivered to, persons other than the
Administrative Agent, the Syndication Agent, the Collateral Agent and the
Lenders and their successors and assigns and should not be assumed to state
general principles of law applicable to transactions of this kind.
Very truly yours,
/s/ Sherburne, Powers & Needham, P.C.
Attachments:
Officer's Certificate
Form of Financing Statement
Schedule of Public Offices
Schedule of Capital Stock
<PAGE>
EXHIBIT IX
FORM OF OPINION OF O'MELVENY & MYERS LLP
August __, 1998
DLJ Capital Funding, Inc.,
as Syndication Agent
Bank of America National Trust and Savings Association, as Administrative Agent,
as Collateral Agent, and as Issuing Lender
and
The Lenders Party to the Credit
Agreement Referenced Below
Re: Loans to Manufacturers' Services Limited and MSL Overseas Finance BV
Ladies and Gentlemen:
We have acted as counsel to DLJ Capital Funding, Inc., as Syndication
Agent (in such capacity, "Agent"), in connection with the preparation and
delivery of a Credit Agreement dated as of August 21, 1998 (the "Credit
Agreement") among Manufacturers' Services Limited, a Delaware corporation
("Company"), Company's subsidiary, MSL Overseas Finance BV, Bank of America
National Trust and Savings Association, as Administrative Agent, Collateral
Agent and Issuing Lender, Bank of America International Limited, as Sub-Agent,
the financial institutions listed therein as lenders, and Agent, and in
connection with the preparation and delivery of certain related documents.
We have participated in various telephone conferences with representatives
of Company, with representatives of Sherburne, Powers & Needham, P.C., counsel
to Company, and with your representatives, during which the Credit Agreement and
related matters have been discussed, and we have also participated in meetings
and conference telephone calls held on and prior to the date hereof (the
"Closing") incident to the funding of the initial loans made under the Credit
Agreement. We have reviewed the forms of the Credit Agreement and the exhibits
thereto, including the forms of the promissory notes annexed thereto (the
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<PAGE>
"Notes"), and the opinion of Sherburne, Powers & Needham, P.C. and Company's
domestic and foreign local counsel (collectively, the "Opinions") and the
officers' certificates and other documents delivered at the Closing. We have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals or copies and the due authority of all persons
executing the same, and we have relied as to factual matters on the documents
that we have reviewed.
Although we have not independently considered all of the matters covered
by the Opinions to the extent necessary to enable us to express the conclusions
therein stated, we believe that the Credit Agreement and the exhibits thereto
are in substantially acceptable legal form and that the Opinions and the
officers' certificates and other documents delivered in connection with the
execution and delivery of, and as conditions to the making of the initial loans
under, the Credit Agreement and the Notes are substantially responsive to the
requirements of the Credit Agreement.
Respectfully submitted,
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EXHIBIT X
FORM OF ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and
between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to that certain Credit Agreement described in the Schedule
of Terms (said Credit Agreement, as amended, supplemented or otherwise modified
to the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender and,
if applicable, an Offshore Participant, arising under the Credit Agreement and
the other Loan Documents with respect to Assignor's Commitments and outstanding
Loans, if any, and Offshore Participation, if any, which represents, as of the
Settlement Date, the percentage interest specified in Item 3 of the Schedule of
Terms of all rights and obligations of Lenders and, if applicable, Offshore
Participants, arising under the Credit Agreement and the other Loan Documents
with respect to the Commitments and any outstanding Loans and any Offshore
Participation (the "Assigned Share"). Without limiting the generality of the
foregoing, the parties hereto hereby expressly acknowledge and agree that any
assignment of all or any portion of Assignor's rights and obligations relating
to Assignor's Revolving Loan Commitment (or any Offshore Participation related
thereto) shall include (i) in the event Assignor is the Issuing Lender with
respect to any outstanding Letters of Credit (any such Letters of Credit being
"Assignor Letters of Credit"), the sale to Assignee of a participation in the
Assignor Letters of Credit and any drawings thereunder as contemplated by
subsection 3.1C of the Credit Agreement and (ii) the sale to Assignee of a
ratable portion of any participations previously purchased by Assignor pursuant
to said subsection 3.1C with respect to any Letters of Credit other than the
Assignor Letters of Credit.
(b) In consideration of the assignment described above, Assignee
hereby agrees to pay to Assignor, on the Settlement Date, the principal amount
of any outstanding Loans included within the Assigned Share, such payment to be
made by wire transfer of immediately available funds in accordance with the
applicable payment instructions set forth in Item 5 of the Schedule of Terms.
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<PAGE>
(c) Assignor hereby represents and warrants that Item 3 of the
Schedule of Terms correctly sets forth the amount of the Commitments, any
Offshore Participation, the outstanding Term Loans and the Pro Rata Share
corresponding to the Assigned Share.
(d) Assignor and Assignee hereby agree that, upon giving effect to
the assignment and assumption described above, (i) Assignee shall be a party to
the Credit Agreement and shall have all of the rights and obligations under the
Loan Documents, and shall be deemed to have made all of the covenants and
agreements contained in the Loan Documents, arising out of or otherwise related
to the Assigned Share, and (ii) Assignor shall be absolutely released from any
of such obligations, covenants and agreements assumed or made by Assignee in
respect of the Assigned Share. Assignee hereby acknowledges and agrees that the
agreement set forth in this Section 1(d) is expressly made for the benefit of
Company, Administrative Agent, Collateral Agent, Assignor and the other Lenders
and their respective successors and permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans and any Offshore Participation shall have no effect on the
Commitments, any Offshore Participation, the outstanding Term Loan and the Pro
Rata Share corresponding to the Assigned Share as set forth in Item 3 of the
Schedule of Terms or on the interest of Assignee in any outstanding Revolving
Loans corresponding thereto, and (iii) from and after the Settlement Date,
Collateral Agent shall make all payments under the Credit Agreement in respect
of the Assigned Share (including all payments of principal and accrued but
unpaid interest, commitment fees and letter of credit fees with respect thereto)
(A) in the case of any such interest and fees that shall have accrued prior to
the Settlement Date, to Assignor, and (B) in all other cases, to Assignee;
provided that Assignor and Assignee shall make payments directly to each other
to the extent necessary to effect any appropriate adjustments in any amounts
distributed to Assignor and/or Assignee by Collateral Agent under the Loan
Documents in respect of the Assigned Share in the event that, for any reason
whatsoever, the payment of consideration contemplated by Section 1(b) occurs on
a date other than the Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Company or any of its Subsidiaries to Assignor or Assignee in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor
27
<PAGE>
shall Assignor be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Loan Documents or as to the use of the proceeds of the
Loans or the use of the Letters of Credit or as to the existence or possible
existence of any Event of Default or Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible
Assignee; that it has experience and expertise in the making of loans such as
the Loans; that it has acquired the Assigned Share for its own account in the
ordinary course of its business and without a view to distribution of the Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of
subsection 12.1 of the Credit Agreement, the disposition of the Assigned Share
or any interests therein shall at all times remain within its exclusive
control); and that it has received, reviewed and approved a copy of the Credit
Agreement (including all Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from
Assignor such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the
other party hereto that it has full power and authority to enter into this
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof, that this Agreement has been duly authorized, executed and
delivered by such party and that this Agreement constitutes a legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time,
upon request of the other such party hereto, to take such additional actions and
to execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Agreement) against whom enforcement of such change,
waiver, discharge or termination is sought.
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(c) Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 12.8 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the
"Effective Date") upon which all of the following conditions are satisfied: (i)
the execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by Company, Administrative Agent, Collateral
Agent and Syndication Agent as evidence of their consent hereto to the extent
required under subsection 12.1B(i) of the Credit Agreement, (iii) the receipt by
Administrative Agent of the processing and recordation fee referred to in
subsection 12.1B(i) of the Credit Agreement, (iv) in the event Assignee is a
Non-US Lender (as defined in subsection 2.8B(iii)(a) of the Credit Agreement),
the delivery by Assignee to Administrative Agent of such forms, certificates or
other evidence with respect to United States federal income tax withholding
matters as Assignee may be required to deliver to Administrative Agent pursuant
to said subsection 2.8B(iii)(a), (v) the execution of a counterpart hereof by
Administrative Agent as evidence of its acceptance hereof in accordance with
subsection 12.1B(ii) of the Credit
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Agreement, (vi) the receipt by Administrative Agent of originals or
telefacsimiles of the counterparts described above and authorization of delivery
thereof.
SECTION 4. Notice Regarding Massachusetts Usury Law. Lenders who are
not subject to control, regulation or examination by any state or federal agency
may be required to file a notice with the Attorney General of the Commonwealth
of Massachusetts in connection with the Massachusetts usury statute, which may
apply, notwithstanding the provisions of the Credit Agreement selecting New York
law to govern the Credit Agreement, to loans under the Credit Agreement. Such
notice was made on the Closing Date of the Credit Agreement on behalf of the
Lenders and all assignees, but each Assignee who is not subject to control,
regulation or examination by any state or federal agency should consult with its
own counsel regarding the necessity or desirability of filing a notice on behalf
of such Assignee upon the date of assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
30
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SCHEDULE OF TERMS
1. Borrower: ______________________
2. Name and Date of Credit Agreement: Credit Agreement dated as of August 21,
1998 by and among Manufacturers' Services Limited, a Delaware corporation,
MSL Overseas Finance BV, the financial institutions listed therein as
Lenders, DLJ Capital Funding, Inc., as Syndication Agent, and Bank of
America National Trust and Savings Association, as Administrative Agent
and as Collateral Agent.
3. Amounts:
Re: Term Loans
(a) Aggregate Commitments of all Lenders: $_________
(b) Assigned Share/Pro Rata Share: ______%
(c) Amount of Assigned Share of Commitments: $_________
(d) Amount of Assigned Share of Term Loans: $_________
4. Amounts:
Re: Revolving Loans
(a) Aggregate Commitments of all Lenders: $_________
(b) Assigned Share/Pro Rata Share: ______%
(c) Amount of Assigned Share of Commitments: $_________
(d) Amount of Assigned Share of Revolving Loans: $_________
(e) Amount of Assigned Offshore Participation, if any: $_________
5. Settlement Date: _____________, ____
6. Payment Instructions:
ASSIGNOR: ASSIGNEE:
__________________ __________________
__________________ __________________
Account # ________ __________________
Attention: _______ Attention: _______
Reference: _______ Reference: _______
7. Notice Addresses:
ASSIGNOR: ASSIGNEE:
__________________ __________________
__________________ __________________
__________________ __________________
Attention: _______ __________________
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See Section 4 of Assignment Agreement regarding the filing of a notice by
certain lenders in the Commonwealth of Massachusetts.
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE],
as Assignor as Assignee
By: ____________________ By: ____________________
Title: _________________ Title: _________________
8. Signatures:
Consented to in accordance with Accepted in accordance with
subsection 12.1B(i) of the Credit subsection 12.1B(ii) of the Credit
Agreement Agreement
MANUFACTURERS' SERVICES LIMITED BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: ____________________ By: ____________________
Title: _________________ Title: _________________
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent
By: ____________________
Title: _________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Collateral Agent
By: ____________________
Title: _________________
- ----------
* Signatures required only under the circumstances set forth in subsection
12.1B(i) of the Credit Agreement. If any Offshore Participation is being
assigned, consent of Administrative Agent is required.
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EXHIBIT XI
FORM OF CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Credit Agreement dated as
of August 21, 1998 (said Credit Agreement, as it may be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement") by and among
Manufacturers' Services Limited., a Delaware corporation, MSL Overseas Finance
BV, the financial institutions listed therein as Lenders, DLJ Capital Funding,
Inc., as Syndication Agent, and Bank of America National Trust and Savings
Association, as Administrative Agent. Pursuant to subsection 2.8B(iii) of the
Credit Agreement, the undersigned hereby certifies that it is not a "bank" or
other Person described in Section 881(c)(3) of the Internal Revenue Code of
1986, as amended.
[NAME OF LENDER]
By: _________________
Title: ______________
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EXHIBIT XII
FORM OF SOLVENCY CERTIFICATE
- 2 -
<PAGE>
FINANCIAL CONDITION CERTIFICATE
This FINANCIAL CONDITION CERTIFICATE (this "Certificate") is
delivered in connection with that certain Credit Agreement dated as of August
21, 1998, (the "Credit Agreement") by and among Manufacturers' Services Limited,
a Delaware corporation (herein the "Company"), MSL Overseas Finance BV, a
Netherlands limited liability company, the financial institutions referred to
therein as Lenders (herein the "Lenders"), DLJ Capital Funding. Inc., as
Syndication Agent and Bank of America NT & SA, as Administrative Agent,
Collateral Agent and Issuing Lender. Capitalized and other defined terms used
herein without definition have the same meanings as in the Credit Agreement.
A. I am, and since August 1997 have been, the duly qualified and
acting Executive Vice President and Chief Financial Officer of the Company. In
such capacity I am the senior financial officer of the Company and participated
actively in the management of its financial affairs and am familiar with its
financial statements and those of its Subsidiaries. I have, together with other
officers of the Company, acted on behalf of the Company in connection with the
negotiation of the Credit Agreement and I am familiar with the terms and
conditions thereof.
B. Company's counsel and I have reviewed this Certificate.
C. In connection with preparing for the consummation of the
transactions constituting loans at closing, payment of fees and expenses, and
the establishment of commitments for future loans as contemplated by the Credit
Agreement (the "Proposed Transactions"), I have participated in the preparation
of, and I have reviewed, pro forma projections of net income and cash flows for
the Company and its Subsidiaries on a consolidated basis for each of the fiscal
years of the Company ending December 31,1998, through December 31, 2004,
inclusive (the "Projected Financial Statements"). The Projected Financial
Statements, attached hereto as Exhibit A, give effect to the consummation of the
Proposed Transactions including use as required by the Credit Agreement of Loans
at Closing and use of such commitments as the Company deems necessary or
appropriate. The Projected Financial Statements were prepared on the basis of
certain assumptions as well as information available at the end of June 1998. I
know of no events or circumstances that have occurred since such date that would
lead me to believe that the Projected Financial Statements if prepared today
based on the same assumptions would be different in any material respect The
Projected Financial Statements also assume inter alia (i) no increase in
interest rates from those assumed in the Projected Financial Statements, (ii) no
adverse changes in the general business climate or conditions in our industry,
and (iii) no adverse change in tax laws.
D. I have also participated in the preparation of, and I have
reviewed, a pro forma summary consolidated balance sheet of the Company and its
Subsidiaries (the "Pro Forma Balance Sheet") as of July 4,1998, which also gives
effect to the Proposed Transactions. The Pro Forma Balance Sheet is attached
hereto as Exhibit B and has been prepared in accordance with GAAP.
E. In connection with the preparation of the Projected Financial
Statements, I have made such investigations and inquiries as I have deemed
necessary and prudent therefor
1
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and, specifically, have relied on historical information, including trends
indicated thereby, with respect to revenues, expenses and other relevant items
supplied by supervisory personnel of the Company and its Subsidiaries. Although
any assumptions and any projections by necessity involve uncertainties and
approximations and are essentially predictions of the future, I believe, based
on my discussions with other members of management, that the assumptions on
which the Projected Financial Statements have been based are not unreasonable.
Based thereon, I believe that the Projected Financial Statements provide
reasonable estimations of future performance of the Company on a consolidated
basis, subject. as stated above, to the uncertainties and approximations
inherent in any projections.
Based on the foregoing, I believe that:
1. Company and the Loan Parties are not now, nor will the
incurrence of the Obligations and receipt of the Loans and
other benefits under the Credit Agreement and the incurrence
of the other obligations and receipt of the Loans and other
benefits contemplated by the Proposed Transactions render
Company or any Loan Party "insolvent" as defined in this
paragraph 1. The recipients of this Certificate and I have
agreed that, in this context, "insolvent" means that the
present fair market value of assets of the Company and any
Loan Party as a going concern is less than the amount that
will be required to pay the probable liability on existing
debts if they become absolute and matured. We have also agreed
that the term "debts" includes any probable legal liability,
whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, but without duplication.
2. By receiving the Loans and incurring the Obligations under the
Credit Agreement, the Company and the Loan Parties are not
incurring any debts beyond their ability to pay them as such
debts become due in accordance with their scheduled terms and
their ability to refinance amounts owing at scheduled
maturities.
3. The incurrence of the Obligations under the Credit Agreement
or any other Loan Document and the receipt of the Loans and
other benefits therefrom will not leave Company or any other
Loan Party with property remaining in its hands constituting
"unreasonably small capital." In reaching this judgment, I
understand that "unreasonably small capital" depends upon the
need for capital of the particular business being conducted
and that funds meeting such needs and, therefore, not being
"unreasonably small" may come from sources including
additional equity contributions, loans from Affiliates, cash
flow from operations and available credit capacity. I have
reached such judgment based on my estimate of the current and
anticipated needs for capital for the businesses conducted or
anticipated to be conducted by Company and its Subsidiaries as
presented in the Projected Financial Statements.
To the best of my knowledge, the Company and the Loan Parties have
not executed the Credit Agreement or any Loan Document or made any transfer
required therein or
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incurred any obligations thereunder, with actual intent to hinder, delay or
defraud either present or future creditors.
I understand that the Lenders are relying on this Certificate in
connection with the extension of credit pursuant to the Credit Agreement.
The foregoing information, to the best of my knowledge and belief,
is true and correct. I have executed this Certificate this ____ day of August
1998.
MANUFACTURERS' SERVICES LIMITED
By: /s/ Robert Donahue
--------------------------------
Name: Robert Donahue
Title: Chief Financial Officer
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Exhibit A
Projected Financial Statements
<PAGE>
EXHIBIT XIII
FORM OF COMPANY PLEDGE AGREEMENT
This COMPANY PLEDGE AGREEMENT (this "Agreement") is dated as of
August __, 1998 and entered into by and between MANUFACTURERS' SERVICES LIMITED,
a Delaware corporation ("Pledgor"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as collateral agent for and representative of (in such
capacity herein called "Secured Party") the financial institutions ("Lenders")
party to the Credit Agreement referred to below and any Interest Rate Exchangers
(as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "Pledged Shares") described in Part A of Schedule I annexed hereto
and issued by the parties named therein and (ii) the indebtedness (the "Pledged
Debt") described in Part B of said Schedule I and issued by the obligors named
therein.
B. Secured Party, DLJ Capital Funding, Inc., as Syndication Agent
and Lenders have entered into a Credit Agreement dated as of August 21, 1998
(said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Pledgor and Pledgor's subsidiary, MSL Overseas Finance BV ("MSL
Overseas") pursuant to which Lenders have made certain commitments, subject to
the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to Pledgor and MSL Overseas.
C. Pledgor may from time to time enter into one or more Interest
Rate Agreements (collectively, the "Interest Rate Agreements") with one or more
Lenders (in such capacity, collectively, "Interest Rate Exchangers") in
accordance with the terms of the Credit Agreement, and it is desired that the
obligations of Pledgor under the Interest Rate Agreements, including the
obligation of Pledgor to make payments thereunder in the event of early
termination thereof, together with all obligations of Pledgor under the Credit
Agreement and the other Loan Documents, be secured hereunder.
D. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Interest Rate
Agreements and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
<PAGE>
SECTION 1. Pledge of Security. Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "Pledged
Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged
Debt, and all interest, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into
and warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; provided, however, that
Pledgor shall not be required to pledge any additional shares of, or any
securities convertible into and warrants, options and other rights to purchase
or otherwise acquire, stock of any Foreign Subsidiary issuer of the Pledged
Shares pursuant to this Section 1(c) to the extent that such pledges would
constitute an investment of earnings in United States property under Section 956
(or a successor provision) of the Internal Revenue Code (the "IRC") that would
trigger an increase in the gross income of a United States shareholder of
Pledgor pursuant to Section 951 (or a successor provision) of the IRC;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights; provided, however, that Pledgor shall not be required
to pledge any additional shares of, or any securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any Foreign Subsidiary issuer
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of the Pledged Shares pursuant to this Section 1(e) to the extent that such
pledges would constitute an investment of earnings in United States property
under Section 956 (or a successor provision) of the LRC that would trigger an
increase in the gross income of a United States shareholder of Pledgor pursuant
to Section 951 (or a successor provision) of the IRC;
(f) all membership interests in a limited liability company or
partnership interests in a partnership of any Person that, after the date of
this Agreement, becomes, as result of any occurrence a direct Subsidiary of
Pledgor and the certificates or other instruments representing such interests;
provided, however, that Pledgor shall not be required to pledge any additional
membership interests or additional partnership interests pursuant to this
Section 1(f) to the extent that such pledges would constitute an investment of
earnings in United States property under Section 956 (or a successor provision)
of the IRC that would trigger an increase in the gross income of a United States
shareholder of Pledgor pursuant to Section 951 (or a successor provision) of the
IRC;
(g) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(h) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of this
Agreement, the term "proceeds" includes whatever is receivable or received when
Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
proceeds of any indemnity or guaranty payable to Pledgor or Secured Party from
time to time with respect to any of the Pledged Collateral.
Notwithstanding anything to the contrary contained in this
Agreement, nothing in this Agreement shall require Pledgor to pledge hereunder
any share of MSL Ireland, MSL Malaysia or Manufacturer's Services Singapore Pte
Ltd., which shares are held by Pledgor in connection with a corporate
restructuring of Pledgor and its Subsidiaries for a period of time which does
not exceed 30 days after the Closing Date (or such longer period of time as may
be approved by Secured Party) and which shares are transferred by Pledgor to MSL
Overseas.
SECTION 2. Security for Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a) or similar provisions of
foreign law), of all obligations and liabilities of every nature of Pledgor now
or hereafter existing under or arising out of or in connection with the Credit
Agreement and the other Loan Documents and the Interest Rate Agreements and all
extensions or renewals thereof, whether for principal, interest (including
interest that, but for the filing of a petition in bankruptcy with respect to
Pledgor, would accrue on such obligations), reimbursement of amounts drawn under
Letters of Credit, payments due for early termination of Interest Rate
Agreements in accordance with the terms of the applicable Interest Rate
Agreements, fees,
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expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated. whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Secured Party
or any Lender or Interest Rate Exchanger as a preference, fraudulent transfer or
otherwise, and all obligations of every nature of Pledgor now or hereafter
existing under this Agreement (all such obligations of Pledgor being the
"Secured Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Upon the occurrence and during the continuance of an Event of
Default (as defined in the Credit Agreement) or the occurrence of an Early
Termination Date (as defined in an Interest Rate Agreement in the form prepared
by the International Swap and Dealers Association Inc. or a similar event under
any similar swap agreement) under any Interest Rate Agreement (either such
occurrence being an "Event of Default" for purposes of this Agreement), Secured
Party shall have the right, without notice to Pledgor, to transfer to or to
register in the name of Secured Party or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in Section
7(a). In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the
Pledged Shares have been duly authorized and validly issued and are fully paid
and non-assessable. All of the Pledged Debt has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
the percentage of the issued and outstanding shares of stock of each issuer
thereof as set forth in Schedule 1 annexed hereto, and there are no outstanding
warrants, options or other rights to purchase, or other agreements outstanding
with respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares. The Pledged Debt
constitutes all of the issued and outstanding intercompany indebtedness
evidenced by a promissory note of the respective issuers thereof owing to
Pledgor.
(c) Ownership of Pledged Collateral. Pledgor is the legal, record
and beneficial owner of the Pledged Collateral free and clear of any Lien except
for the security interest created by this Agreement.
SECTION 5. Transfers and Other Liens; Additional Pledged Collateral;
etc. Pledgor shall:
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(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided that in the event Pledgor makes an Asset Sale permitted by
the Credit Agreement and the assets subject to such Asset Sale are Pledged
Shares, Secured Party shall release the Pledged Shares that are the subject of
such Asset Sale to Pledgor free and clear of the lien and security interest
under this Agreement concurrently with the consummation of such Asset Sale;
provided, further that, as a condition precedent to such release, Secured Party
shall have received evidence satisfactory to it that arrangements satisfactory
to it have been made for delivery to Secured Party of the Net Asset Sale
Proceeds of such Asset Sale;
(b) (i) cause each issuer of Pledged Shares not to issue any stock
or other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to Pledgor, (ii) subject to the proviso in Section
1(c), pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of Pledged Shares, and (iii) subject to the proviso in Section
1(e), pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct
Subsidiary of Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing material loss or depreciation in the value of the Pledged
Collateral other than as shown on financial statements delivered or to be
delivered to Agents under the Credit Agreement;
(e) promptly deliver to Secured Party all written notices received
by it with respect to the Pledged Collateral; and
(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five days prior to the date of any proposed sale
under any judgement, writ or warrant of attachment entered or filed against
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
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SECTION 6. Further Assurances; Pledge Amendments.
(a) Pledgor agrees that from time to time, at the expense of
Pledgor, Pledgor will promptly execute and deliver all further instruments and
documents, and take all further action, that are necessary, or that Secured
Parry may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as are necessary, or
as Secured Party may reasonably request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may
adversely affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
Pledgor, in substantially the form of Schedule II annexed hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Pledgor hereby authorizes Secured Party to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Secured Party
shall for all purposes hereunder be considered Pledged Collateral; provided that
the failure of Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Secured Party therein or otherwise
adversely affect the rights and remedies of Secured Party hereunder with respect
thereto.
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however, that Pledgor
shall not exercise or refrain from exercising any such right if
Secured Party shall have notified Pledgor that, in Secured Party's
reasonable judgment, such action would have a material adverse
effect on the value of the Pledged Collateral or any part thereof;
and provided, further, that Pledgor shall give Secured Party at
least five Business Days' prior written notice of the manner in
which it intends to exercise, or the reasons for refraining from
exercising, any such right. It is understood, however, that neither
(A) the voting by Pledgor of any Pledged Shares for or Pledgor's
consent to the election of directors at a regularly scheduled annual
or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (B) Pledgor's consent to or approval
of any action otherwise permitted under this Agreement and the
Credit Agreement shall be deemed inconsistent with the terms of this
Agreement or the Credit Agreement within the meaning of this Section
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7(a)(i), and no notice of any such voting or consent need be given
to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends
and interest paid in respect of the Pledged Collateral; provided,
however, that any and all
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to
time reasonably request for the purpose of enabling Pledgor to
exercise the voting and other consensual rights which it is entitled
to exercise pursuant to paragraph (i) above and to receive the
dividends, principal or interest payments which it is authorized to
receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i)
shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to exercise
such voting and other consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon
have the sole right to receive and hold as Pledged Collateral such
dividends and interest payments; and
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(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 7(b) shall he received in trust for the benefit of
Secured Party, shall be segregated from other funds of Pledgor and
shall forthwith be paid over to Secured Party as Pledged Collateral
in the same form as so received (with any necessary indorsements).
(c) In order to permit Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including giving or withholding written
consents of shareholders, calling special meetings of shareholders and voting at
such meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon and only upon the
occurrence and during the continuation of an Event of Default and which proxy
shall only terminate upon the payment in full of the Secured Obligations.
SECTION 8. Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion upon and
only upon and during the continuation of an Event of Default to take any action
and to execute any instrument that Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may reasonably deem necessary or desirable for
the collection of any of the Pledged Collateral or otherwise to enforce the
rights of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. Secured Party May Perform. If Pledgor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such
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agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Pledgor.
SECTION 10. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
SECTION 11. Remedies.
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as are
commercially reasonable. Secured Party or any Lender or Interest Rate Exchanger
may be the purchaser of any or all of the Pledged Collateral at any such sale
and Secured Party, as agent for and representative of Lenders and Interest Rate
Exchangers (but not any Lender or Lenders or Interest Rate Exchanger or Interest
Rate Exchangers in its or their respective individual capacities unless
Requisite Lenders or Requisite Obligees (as defined in Section 14(a)) shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of Pledgor, and Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute
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<PAGE>
reasonable notification. Secured Party shall not be obligated to make any sale
of Pledged Collateral regardless of notice of sale having been given. Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Pledgor hereby
waives any claims against Secured Party arising by reason of the fact that the
price at which any Pledged Collateral may have been sold at such a commercially
reasonable private sale was less than the price which might have been obtained
at a public sale, even if Secured Party accepts the first offer received and
does not offer such Pledged Collateral to more than one offeree. If the proceeds
of any sale or other disposition of the Pledged Collateral are insufficient to
pay all the Secured Obligations, Pledgor shall be liable for the deficiency and
the fees of any attorneys employed by Secured Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sales may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may reasonably
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Secured Party in exempt
transactions under the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect.
SECTION 12. Application of Proceeds. All proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral shall be applied as provided in
subsection 2.4D of the Credit Agreement.
SECTION 13. Continuing Security Interest: Transfer of Loans. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations other than those referred to in Section 12.9 of the Credit
Agreement, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors,
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transferees and assigns. Without limiting the generality of the foregoing clause
(c), but subject to the provisions of subsection 12.1 of the Credit Agreement,
any Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise. Upon the
payment in full of all Secured Obligations other than those referred to in
Section 12.9 of the Credit Agreement and any others which survive the payment of
principal and interest on the Loans, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, the security interest granted hereby shall terminate and all rights to
the Pledged Collateral shall revert to Pledgor. Upon any such termination
Secured Party will, at Pledgor's expense, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination and
Pledgor shall be entitled to the return, upon its request and at its expense,
against receipt and without recourse to Secured Party, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
SECTION 14. Secured Party as Collateral Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Credit Agreement; provided that Secured Party shall
exercise, or refrain from exercising, any remedies provided for in Section 11 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement other than those referred
to in Section 12.9 of the Credit Agreement and the other Loan Documents other
than those which survive the payment of principal and interest on the Loans, the
holders of a majority of the aggregate notional amount (or, with respect to any
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Interest Rate
Agreement) under all Interest Rate Agreements (Requisite Lenders or, if
applicable, such holders being referred to herein as "Requisite Obligees"). In
furtherance of the foregoing provisions of this Section 14(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Pledged Collateral
hereunder, it being understood and agreed by such Interest Rate Exchanger that
all rights and remedies hereunder may be exercised solely by Secured Party for
the benefit of Lenders and Interest Rate Exchangers in accordance with the terms
of this Section 14(a).
(b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Credit Agreement. Written notice of resignation by
Collateral Agent pursuant to subsection 10.6 of the Credit Agreement shall also
constitute notice of resignation as Secured Party under this Agreement; removal
of Collateral Agent pursuant to subsection 10.6 of the Credit Agreement shall
also constitute removal as Secured Party under this Agreement; and appointment
of a successor Collateral Agent pursuant to subsection 10.6 of the Credit
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 10.6 of the Credit
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<PAGE>
Agreement by a successor Collateral Agent, that successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Secured Party under this Agreement, and
the retiring or removed Secured Party under this Agreement shall promptly (i)
transfer to such successor Secured Party all sums, securities and other items of
Collateral held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Secured Party under this Agreement, and (ii) execute and deliver to
such successor Secured Party such amendments to financing statements, and take
such other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Collateral Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 15. Amendments; Etc. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
wilting and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 16. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to Agents shall
not be effective until received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or such other addresses as shall be designated by such Person in a
written notice delivered to the other parties hereto.
SECTION 17. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 18. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 19. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT
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<PAGE>
THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 20. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 21. Notice of Interest Rate Agreements. The Collateral Agent
shall not be deemed to have any duty whatsoever to any Interest Rate Exchanger
until it shall have received written notice in form and substance satisfactory
to the Collateral Agent from Pledgor or the Interest Rate Exchanger as to the
existence and terms of the applicable Interest Rate Agreement. Collateral Agent
may require each Interest Rate Exchanger to execute and deliver to Collateral
Agent such instruments as Collateral Agent may require evidencing the agreement
of such Interest Rate Exchanger to the terms of this Agreement as a condition to
such Interest Rate Exchanger's entitlement to the benefits hereof.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES LIMITED
By: __________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 01742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: __________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of
August __, 1998 between Manufacturers' Services Limited, as Pledgor, and Bank of
America National Trust and Savings Association, as Secured Party.
<TABLE>
<CAPTION>
Part A
Stock Number of Shares/Percentage of
Stock Issuer Class of Stock Certificate Nos. Par Value Outstanding Shares
- ------------ -------------- ---------------- --------- ------------------
<S> <C> <C> <C> <C>
<CAPTION>
Part B
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
<S> <C>
</TABLE>
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 199__, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated August __, 1998, between the undersigned and Bank of
America National Trust and Savings Association, as Secured Party (the "Pledge
Agreement," capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
MANUFACTURERS' SERVICES LIMITED
By: ____________________________________
Title:
<TABLE>
<CAPTION>
Stock Number of Shares/Percentage of
Stock Issuer Class of Stock Certificate Nos. Par Value Outstanding Shares
- ------------ -------------- ---------------- --------- ------------------
<S> <C> <C> <C> <C>
<CAPTION>
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
<S> <C>
</TABLE>
<PAGE>
EXHIBIT XIV
FORM OF COMPANY
SECURITY AGREEMENT
This COMPANY SECURITY AGREEMENT (this "Agreement") is dated as of
August __, 1998 and entered into by and between MANUFACTURERS' SERVICES LIMITED,
a Delaware corporation ("Grantor"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as collateral agent for and representative of (in such
capacity herein called "Secured Party") the financial institutions ("Lenders")
party to the Credit Agreement (as hereinafter defined) and any Interest Rate
Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Secured Party, DLJ Capital Funding, Inc., as Syndication Agent,
and Lenders have entered into a Credit Agreement dated as of August 21, 1998
(said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Grantor and Grantor's subsidiary, MSL Overseas Finance BV ("MSL
Overseas") pursuant to which Lenders have made certain commitments, subject to
the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to Grantor and MSL Overseas.
B. Grantor may from time to time enter into one or more Interest
Rate Agreements (collectively, the "Interest Rate Agreements") with one or more
Lenders (in such capacity, collectively, "Interest Rate Exchangers") in
accordance with the terms of the Credit Agreement, and it is desired that the
obligations of Grantor under the Interest Rate Agreements, including the
obligation of Grantor to make payments thereunder in the event of early
termination thereof, together with all obligations of Grantor under the Credit
Agreement and the other Loan Documents, be secured hereunder.
C. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Grantor hereby agrees with Secured
Party as follows:
SECTION 1. Grant of Security. Grantor hereby assigns to Secured
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "Collateral"):
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(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being the
"Equipment");
(b) all inventory in all of its forms (including, but not limited
to, (i) all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in Grantor's business, (iii) all
goods in which Grantor has an interest in mass or a joint or other interest or
right of any kind, and (iv) all goods which are returned to or repossessed by
Grantor) and all accessions thereto and products thereof (all such inventory,
accessions and products being the "Inventory") and all negotiable documents of
title (including without limitation warehouse receipts, dock receipts and bills
of lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "Negotiable Document of Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
arising out of or in connection with the sale or lease of goods or the rendering
of services and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, documents, instruments, general intangibles or other
obligations (provided, however, that Grantor shall not be required to grant a
security interest in any instruments pursuant to this Section 1(c) to the extent
that such grant of a security interest would constitute an investment of
earnings in United States property under Section 956 (or a successor provision)
of the Internal Revenue Code (the "IRC") that would trigger an increase in the
gross income of a United States shareholder of Grantor pursuant to Section 951
(or a successor provision) of the IRC) (any and all such accounts, contract
rights, chattel paper, documents, instruments, general intangibles and other
obligations being the "Accounts", and any and all such security agreements,
leases and other contracts being the "Related Contracts");
(d) the agreements listed in Schedule I annexed hereto, as each such
agreement may be amended, supplemented or otherwise modified from time to time
(said agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "Assigned Agreement" and collectively as
the "Assigned Agreements"), including without limitation (i) all rights of
Grantor to receive moneys due or to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
all claims of Grantor for damages arising out of any breach of or default under
the Assigned Agreements, and (iv) all rights of Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned Agreements,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder;
(e) all deposit accounts, including without limitation all deposit
accounts maintained with Secured Party;
(f) the "Intellectual Property Collateral", which term means:
2
<PAGE>
(i) all rights, title and interest (including rights acquired
pursuant to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all trademarks,
service marks, designs, logos, indicia, tradenames, trade dress, corporate
names, company names, business names, fictitious business names, trade
styles and/or other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter adopted and used,
in its business (including, without limitation, the trademarks
specifically identified in Schedule I, as the same may be amended pursuant
hereto from time to time) (collectively, the "Trademarks"), all
registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign
countries (including, without limitation, the registrations and
applications specifically identified in Schedule I, as the same may be
amended pursuant hereto from time to time) (the "Trademark
Registrations"), all common law and other rights (but in no event any of
the obligations) in and to the Trademarks in the United States and any
state thereof and in foreign countries (the "Trademark Rights"), and all
goodwill of such Grantor's business symbolized by the Trademarks and
associated therewith (the "Associated Goodwill"):
(ii) all rights, title and interest (including rights acquired
pursuant to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all patents and
patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in
the future may be, owned or held by such Grantor and all patents and
patent applications and rights, title and interests in patents and patent
applications under any domestic or foreign law that are presently, or in
the future may be, owned by such Grantor in whole or in part, all rights
(but not obligations) corresponding thereto (including, without
limitation, the right (but not the obligation), exercisable only upon the
occurrence and during the continuation of an Event of Default, to sue for
past, present and future infringements in the name of such Grantor or in
the name of Secured Party or Lenders), and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof (all
of the foregoing being collectively referred to as the "Patents"); it
being understood that the rights and interests included in the
Intellectual Property Collateral hereby shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor
of such Grantor pertaining to patent applications and patents presently or
in the future owned or used by third parties but, in the case of third
parties which are not Affiliates of such Grantor, only to the extent
permitted by such licensing or other contracts and, if not so permitted,
only with the consent of such third parties; and
(iii) all rights, title and interest (including rights
acquired pursuant to a license or otherwise but only to the extent
permitted by agreements governing such license or other use) under
copyright in various published and unpublished works of authorship
including, without limitation, computer programs, computer data bases,
other computer software, layouts, trade dress, drawings, designs,
writings, and formulas owned by Grantor (collectively, the "Copyrights"),
all copyright registrations issued to such Grantor and applications for
copyright registration that have been or may hereafter be issued or
applied for thereon by Grantor in the United States and any state thereof
and in foreign countries (collectively, the "Copyright Registrations"),
all common law and other rights in and to the Copyrights in the United
States and any state thereof and in foreign countries including
3
<PAGE>
all copyright licenses (but with respect to such copyright licenses, only
to the extent permitted by such licensing arrangements) (the "Copyright
Rights"), including, without limitation, each of the Copyrights, rights,
titles and interests in and to the Copyrights and works protectable by
copyright, which are presently, or in the future may be, owned, created
(as a work for hire for the benefit of such Grantor), authored (as a work
for hire for the benefit of such Grantor), or acquired by such Grantor, in
whole or in part, and all Copyright Rights with respect thereto and all
Copyright Registrations therefor, heretofore or hereafter granted or
applied for, and all renewals and extensions thereof, throughout the
world, including all proceeds thereof (such as, by way of example and not
by limitation, license royalties and proceeds of infringement suits), the
right (but not the obligation) exercisable only upon the occurrence and
during the continuation of an Event of Default to renew and extend such
Copyright Registrations and Copyright Rights and to register works
protectable by copyright and the right (but not the obligation)
exercisable only upon the occurrence and during the continuation of an
Event of Default to sue for past, present and future infringements of the
Copyrights and Copyright Rights;
(g) all information used or useful or arising from the business
including all goodwill, trade secrets, trade secret rights, know-how, customer
lists, processes of production, ideas, confidential business information,
techniques, processes, formulas, and all other proprietary information;
(h) to the extent not included in any other paragraph of this
Section 1, all other general intangibles (including without limitation tax
refunds, rights to payment or performance, choses in action and judgments taken
on any rights or claims included in the Collateral);
(i) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(j) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(k) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the ten "proceeds" includes whatever is receivable
or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
Notwithstanding anything to the contrary contained in this
Agreement, nothing in this Agreement shall require Grantor to grant a security
interest hereunder in any shares of MSL Ireland, MSL Malaysia or Manufacturers'
Services Singapore Pte Ltd., which shares are held by Grantor in connection with
a corporate restructuring of Grantor and its Subsidiaries for a period of time
which does not exceed 30 days after the Closing Date (or such longer period of
time as
4
<PAGE>
may be approved by Secured Party) and which shares are transferred by Grantor to
MSL Overseas.
SECTION 2. Security for Obligations. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise taking into account any applicable grace,
notice or cure period (including the payment of amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. ss.362(a)), of all obligations and liabilities of
every nature of Grantor now or hereafter existing under or arising out of or in
connection with the Credit Agreement and the other Loan Documents and the
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Grantor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit, payments
due for early termination of Interest Rate Agreements in accordance with the
terms of the applicable Interest Rate Agreement, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "Underlying Debt"), and all obligations of every nature of
Grantor now or hereafter existing under this Agreement (all such obligations of
Grantor, together with the Underlying Debt, being the "Secured Obligations").
SECTION 3. Grantor Remains Liable. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Representations and Warranties. Grantor represents and
warrants as follows:
(a) Ownership of Collateral. Except for Permitted Encumbrances,
claims of real estate interests in fixtures and the security interest created by
this Agreement, Grantor owns the Collateral free and clear of any Lien and no
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment and
Inventory is, as of the date hereof, located at the places specified in Schedule
II annexed hereto.
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(c) Negotiable Documents of Title. No Negotiable Documents of Title
are outstanding with respect to any of the Inventory.
(d) Office Locations; Other Names. The chief place of business, the
chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at 200
Baker Avenue, Concord, Massachusetts 01742. Grantor has not in the past done,
and does not now do, business under any other name (including any trade-name or
fictitious business name).
(e) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(f) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body other than filing financing statements and continuation
statements under the Uniform Commercial Code and upon certain changes in Grantor
or its property, other forms pursuant to the Uniform Commercial Code is required
for either (i) the grant by Grantor of the security interest granted hereby,
(ii) the execution, delivery or performance of this Agreement by Grantor, or
(iii) the perfection of or the exercise by Secured Party of its rights and
remedies hereunder (except as may have been taken by or at the direction of
Grantor).
(g) Intellectual Property Collateral.
(i) a true and complete list of all Trademark Registrations
and applications to register Trademarks owned or held (whether pursuant to
a license or otherwise) by such Grantor, in whole or in part, is set forth
in Schedule I;
(ii) after reasonable inquiry, such Grantor is not aware of
any pending or threatened claim by any third party that any of the
Intellectual Property Collateral owned by such Grantor is invalid or
unenforceable; and
(iii) no effective security interest or other Lien covering
all or any part of the Intellectual Property Collateral owned by such
Grantor is on file in the United States Patent and Trademark Office or the
United States Copyright Office.
(h) Validity and Enforceability of Intellectual Property Collateral.
Each of the trademarks, service marks, tradenames, copyrights and patents or
applications making up the Intellectual Property owned by such Grantor is valid,
subsisting and enforceable and Grantor is not aware of any pending or threatened
claim by any third party that any of the trademarks, tradenames, copyrights or
patents owned by such Grantor is invalid or unenforceable or that the use of any
of the trademarks, service marks, tradenames, copyrights or patents owned by
such Grantor violates the rights of any third person or of any basis for any
such claim.
(i) Perfection. This Agreement, together with the filing of
financing statements, on form UCC-1 in the jurisdictions shown on Schedule II
and the recording of the Grant of Intellectual Property Security Interest
substantially in the form of Exhibit A ("Grant of
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Intellectual Property Security Interest") describing the Intellectual Property
Collateral with the United States Patent and Trademark Office which have been
made, create a valid, perfected and, except for Permitted Encumbrances, first
priority security interest in the Collateral if and to the extent perfection may
be achieved by such filing, securing the payment of the Secured Obligations.
(j) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by Grantor or on its behalf by its
accountants and counsel with respect to the Collateral is accurate and complete
in all respects.
SECTION 5. Further Assurances.
(a) Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be reasonably necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, Grantor will: (i) at the request of Secured Party mark conspicuously
each item of chattel paper included in the Accounts, each Related Contract and
each of its records pertaining to the Collateral, with a legend, in form and
substance satisfactory to Secured Party, indicating that such Collateral is
subject to the security interest granted hereby, (ii) at the request of Secured
Party, deliver and pledge to Secured Party hereunder all promissory notes and
other instruments (other than checks) and all original counterparts of chattel
paper constituting Collateral, duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to Secured Party, (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other writings or
notices, as may be reasonably necessary or desirable, or as Secured Party may
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby, (iv) at any reasonable time, upon request by
Secured Party, after reasonable notice except if an Event of Default has
occurred and is continuing exhibit the Collateral to and allow inspection of the
Collateral by Secured Party, or persons designated by Secured Party, and (v) at
Secured Party's reasonable request, appear in and defend any action or
proceeding that may affect Grantor's title to or Secured Party's security
interest in all or any part of the Collateral if perfected but not vis-a-vis
Permitted Encumbrances.
(b) Grantor hereby authorizes Secured Party to file one or more
continuation statements and/or amendments to continuation statements, relative
to all or any part of the Collateral without the signature of Grantor. Grantor
hereby authorizes Secured Party to file one or more financing statements and/or
amendments to financing statements relative to all or any part of the Collateral
without the signature of Grantor; provided that Secured Party (i) gives notice
to Grantor of its intention to do so and (ii) Grantor does not respond to such
notice by filing a financing statement within five days of receipt of such
notice. Grantor agrees that a carbon, photographic or other reproduction of this
Agreement or of a financing statement signed by Grantor shall be sufficient as a
financing statement and may be filed as a financing statement in any and all
jurisdictions.
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(c) Without limiting the generality of the foregoing clause (a), if
any Grantor shall hereafter obtain rights to any new Intellectual Property
Collateral or become entitled to the benefit of (i) any patent application or
patent or any reissue, division, continuation, renewal, extension or
continuation-in-part of any Patent or any improvement of any Patent; or (ii) any
Copyright Registration, application for Registration or renewals or extension of
any Copyright, then in any such case, the provisions of this Agreement shall
automatically apply thereto. Each Grantor shall promptly notify Secured Party in
writing of any of the foregoing rights acquired by such Grantor after the date
hereof and of (i) any Trademark Registrations issued or application for a
Trademark Registration or application for a Patent made, and (ii) any Copyright
Registrations issued or applications for Copyright Registration made, in any
such case, after the date hereof. Promptly after the filing of an application
for any (1) Trademark Registration; (2) Patent; and (3) Copyright Registration,
each Grantor shall execute and deliver to Secured Party and record in all places
where this Agreement is recorded a Security Agreement Supplement, substantially
in the form of Exhibit B, pursuant to which such Grantor shall grant to Secured
Party a security interest to the extent of its interest in such Intellectual
Property Collateral; provided, if, in the reasonable judgment of such Grantor,
after due inquiry, granting such interest would result in the grant of a
Trademark Registration or Copyright Registration in the name of Secured Party,
such Grantor shall give written notice to Secured Party as soon as reasonably
practicable and the filing shall instead be undertaken as soon as practicable
but in no case later than immediately following the grant of the applicable
Trademark Registration or Copyright Registration, as the case may be.
(d) Each Grantor hereby authorizes Secured Party to modify this
Agreement without obtaining such Grantor's approval of or signature to such
modification by amending Schedule I, to include reference to any right, title or
interest in any existing Intellectual Property Collateral or any Intellectual
Property Collateral acquired or developed by any Grantor after the execution
hereof or to delete any reference to any right, title or interest in any
Intellectual Property Collateral in which any Grantor no longer has or claims
any right, title or interest.
(e) Grantor will furnish to Secured Party statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral every quarter all in reasonable detail.
SECTION 6. Certain Covenants of Grantor. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity
or corporate structure except as contemplated by the Credit Agreement within 15
days of such change;
(c) give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts;
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(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay all taxes, assessments and other governmental charges
imposed upon the Collateral and all claims (including claims for labor,
services, materials and supplies) against the Collateral for sums that have
become due and payable and that by law have or may become a Lien upon any of its
properties or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided that no such charge or claim need be
paid if it is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, so long as (1) such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor and (2) in the case of a charge or claim which has
or may become a Lien against any of the Collateral, such contest proceedings
conclusively operate to stay the sale of any portion of the Collateral to
satisfy such charge or claim.
SECTION 7. Special Covenants With Respect to Equipment and
Inventory. Grantor shall:
(a) until the sale or lease thereof as permitted hereby keep the
Equipment and Inventory at the places therefor specified on Schedule II annexed
hereto or, upon 30 days' prior written notice to Secured Party, at such other
places in jurisdictions where all action that may be reasonably necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby, or to
enable Secured Party to exercise and enforce its rights and remedies hereunder,
with respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as on this date, ordinary wear and tear
excepted, and in accordance with Grantor's past practices.
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, Grantor's book value
therefor in accordance with Grantor's past practices; and
(d) promptly upon the issuance and delivery to Grantor of any
Negotiable Document of Title, deliver such Negotiable Document of Title to
Secured Party except as otherwise necessary or desirable in the operation of
Grantor's business.
SECTION 8. Insurance. Grantor shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in accordance with the
terms of the Credit Agreement.
SECTION 9. Special Covenants with respect to Accounts and Related
Contracts.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts at the location therefor specified in Section 4
or, upon 30 days' prior written notice to Secured Party, at
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such other location in a jurisdiction where all action that may be reasonably
necessary or desirable, or that Secured Party may reasonably request, in order
to perfect and protect any security interest granted or purported to be granted
hereby, or to enable Secured Party after and during the continuation of an Event
of Default to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Grantor
will hold arid preserve such records and will permit representatives of Secured
Party at any time during normal business hours after reasonable notice unless an
Event of Default has occurred and is continuing to inspect and make abstracts
from such records, and Grantor agrees to render to Secured Party, at Grantor's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto. Promptly upon the request of Secured Party,
Grantor shall deliver to Secured Party complete and correct copies of each
Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, after and
during the continuation of an Event of Default shall take) such action as
Grantor or Secured Party may deem necessary or advisable to enforce collection
of amounts due or to become due under the Accounts; provided, however, that
Secured Party shall have the right at any time, upon the occurrence and during
the continuation of an Event of Default or a Potential Event of Default and upon
written notice to Grantor of its intention to do so, to notify the account
debtors or obligors under any Accounts of the assignment of such Accounts to
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to Grantor thereunder directly to Secured
Party, to notify each Person maintaining a lockbox or similar arrangement to
which account debtors or obligors under any Accounts have been directed to make
payment to remit all amounts representing collections on checks and other
payment items from time to time sent to or deposited in such lockbox or other
arrangement directly to Secured Party and, upon such notification and at the
expense of Grantor, to enforce collection of any such Accounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of the Accounts and the Related Contracts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be promptly applied as provided by Section 18 and (ii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
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SECTION 10. Special Provisions With Respect to the Assigned
Agreements.
(a) Grantor shall at its expense:
(i) perform and observe all terms and provisions of the
Assigned Agreements to be performed or observed by it, maintain the
Assigned Agreements in full force and effect, enforce the Assigned
Agreements in accordance with their terms, and take all such action to
such end as may be from time to time requested by Secured Party; and
(ii) furnish to Secured Party, promptly upon receipt thereof,
copies of all notices, requests and other documents received by Grantor
under or pursuant to the Assigned Agreements, and from time to time
furnish to Secured Party such information and reports regarding the
Assigned Agreements as Secured Party may reasonably request.
(b) Grantor shall not:
(i) cancel or terminate any of the Assigned Agreements or
consent to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give
any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned
Agreements;
(iv) consent to or permit or accept any prepayment of amounts
to become due under or in connection with the Assigned Agreements, except
as expressly provided therein; or
(v) take any other action in connection with the Assigned
Agreements that would impair the value of the interest or rights of
Grantor thereunder or that would impair the interest or rights of Secured
Party.
SECTION 11. Deposit Accounts. Upon the occurrence and during the
continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
by Grantor with Secured Party constituting part of the Collateral.
SECTION 12. Special Provisions With Respect to the Intellectual
Property Collateral.
(a) Each Grantor shall:
(i) diligently keep reasonable records respecting the
Intellectual Property Collateral and at all times keep at least one
complete set of its records concerning such Collateral at its chief
executive office or principal place of business;
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(ii) hereafter use commercially reasonable efforts so as not
to permit the inclusion in any contract to which it hereafter becomes a
party of any provision that could or might in any way materially impair or
prevent the creation of a security interest in, or the assignment of, such
Grantor's rights and interests in any property included within the
definitions of any Intellectual Property Collateral acquired under such
contracts;
(iii) take all steps deemed appropriate in Grantor's
commercially reasonable judgement to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or
in connection with the Intellectual Property Collateral, including,
without limitation, where appropriate entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents;
(iv) use proper statutory notice in connection with its use of
any of the Intellectual Property Collateral;
(v) use a commercially appropriate standard of quality (which
may be consistent with such Grantor's past practices) in the manufacture,
sale and delivery of products and services sold or delivered under or in
connection with the Trademarks; and
(vi) furnish to Secured Party from time to time at Secured
Party's reasonable request statements and schedules further identifying
and describing any Intellectual Property Collateral and such other reports
in connection with such Collateral, all in reasonable detail.
(b) Except as otherwise provided in this Section 12, each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to such Grantor in respect of the Intellectual Property Collateral or any
portion thereof. In connection with such collections, each Grantor may take such
action as such Grantor may deem reasonably necessary or advisable to enforce
collection of such amounts; provided that Secured Party shall, upon request of
Grantor and at its expense, take such action as may be reasonably necessary to
cooperate with Grantor where required in connection with such collection
provided that Grantor shall have made arrangements satisfactory to Secured Party
to indemnify it against any liabilities therefor; and provided, further, Secured
Party shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default and upon written notice to such Grantor of
its intention to do so, to notify the obligors with respect to any such amounts
of the existence of the security interest created hereby and to direct such
obligors to make payment of all such amounts directly to Secured Party, and,
upon such notification and at the expense of such Grantor, to enforce collection
of any such amounts and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by any Grantor of the notice from Secured Party referred to
in the proviso to the preceding sentence and during the continuation of any
Event of Default, (i) all amounts and proceeds (including checks and other
instruments) received by each Grantor in respect of amounts due to such Grantor
in respect of the Intellectual Property Collateral or any portion thereof shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other finds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section
18, and (ii) such Grantor shall not adjust,
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settle or compromise the amount or payment of any such amount or release wholly
or partly any obligor with respect thereto or allow any credit or discount
thereon.
(c) Each Grantor shall have the duty diligently to prosecute, file
and/or make, unless and until such Grantor, in its commercially reasonable
judgment, decides otherwise, (i) any application relating to any of the
Intellectual Property Collateral owned, held or used by such Grantor and
identified on Schedule I, as applicable, that is pending as of the date of this
Agreement, (ii) any Copyright Registration on any existing or future
unregistered but copyrightable works (except for works of nominal commercial
value or with respect to which such Grantor has determined in the exercise of
its commercially reasonable judgment that it shall not seek registration), (iii)
application on any future patentable but unpatented innovation or invention
comprising Intellectual Property Collateral, and (iv) any Trademark opposition
and cancellation proceedings, renew Trademark Registrations and Copyright
Registrations and do any and all acts which are necessary or desirable, as
determined in such Grantor's commercially reasonable judgment, to preserve and
maintain all rights in all Intellectual Property Collateral. Any expenses
incurred in connection therewith shall be borne solely by Grantors. Subject to
the foregoing, each Grantor shall give Secured Party prior written notice of any
abandonment of any Intellectual Property Collateral or any pending patent
application or any Patent.
(d) Except as provided herein, each Grantor shall have the right to
commence and prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution, misappropriation or other damage, or
reexamination or reissue proceedings as are in its commercially reasonable
judgment necessary to protect the Intellectual Property Collateral. Secured
Party shall provide, at such Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action but Secured
Party shall not be required to take any such action including, without
limitation, joining as a necessary party unless it shall be indemnified by
Grantor pursuant to arrangements satisfactory to Secured Party against any and
all liability relating thereto. Each Grantor shall promptly, following its
becoming aware thereof, notify Secured Party of the institution of, or of any
adverse determination in, any proceeding (whether in the United States Patent
and Trademark Office, the United States Copyright Office or any federal, state,
local or foreign court) or regarding such Grantor's ownership, right to use, or
interest in any Intellectual Property Collateral. Each Grantor shall provide to
Secured Party any information with respect thereto requested by Secured Party.
(e) In addition to, and not by way of limitation of, the granting of
a security interest in the Collateral pursuant hereto, each Grantor, effective
upon the occurrence and during the continuation of an Event of Default and upon
written notice from Secured Party, shall grant, sell, convey, transfer, assign
and set over to Secured Party, for its benefit and the ratable benefit of
Lenders, all of such Grantor's right, title and interest in and to the
Intellectual Property Collateral to the extent necessary to enable Secured Party
to use, possess and realize on the Intellectual Property Collateral and to
enable any successor or assign to enjoy the benefits of the Intellectual
Property Collateral. This right shall inure to the benefit of all successors,
assigns and transferees of Secured Party and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license shall be granted free of charge, without requirement that any monetary
payment whatsoever be made to such Grantor. In addition, each Grantor hereby
grants
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to Secured Party and its employees, representatives and agents the right to
visit such Grantor's and any of its Affiliate's or subcontractor's plants,
facilities and other places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and services
sold or delivered under any of the Intellectual Property Collateral (or which
were so utilized during the prior six month period), and to inspect the quality
control and all other records relating thereto upon reasonable advance written
notice to such Grantor and at reasonable dates and times and as often as may be
reasonably requested. If and to the extent that any Grantor is permitted to
license the Intellectual Property Collateral, Secured Party shall promptly enter
into a non-disturbance agreement or other similar arrangement, at such Grantor's
request and expense, with such Grantor and any licensee of any Intellectual
Property Collateral permitted hereunder in form and substance satisfactory to
Secured Party pursuant to which (i) Secured Party shall agree not to disturb or
interfere with such licensee's rights under its license agreement with such
Grantor so long as such licensee is not in default thereunder, and (ii) such
licensee shall acknowledge and agree that the Intellectual Property Collateral
licensed to it is subject to the security interest created in favor of Secured
Party and the other terms of this Agreement.
SECTION 13. Transfers and Other Liens. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
or
(b) except for Permitted Encumbrances and the security interest
created by this Agreement, create or suffer to exist any Lien upon or with
respect to any of the Collateral to secure the indebtedness or other obligations
of any Person.
SECTION 14. Secured Party Appointed Attorney-in-Fact. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion effective
upon the occurrence and during the continuation of any Event of Default to take
any action and to execute any instrument that Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party in accordance with the terms of the Credit
Agreement;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(c) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
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(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Grantor's expense, at any time or from time to
time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
SECTION 15. Secured Party May Perform. If Grantor fails to perform
any agreement contained herein, Secured Party may after reasonable notice to
Grantor itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Grantor in accordance with the terms of the Credit Agreement.
SECTION 16. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 17. Remedies. If any Event of Default shall have occurred
and be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"Code") (whether or not the Code applies to the affected Collateral), and also
may (a) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (b) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (c) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (d) take possession of Grantor's
premises or place custodians in exclusive control thereof, remain on such
premises and use the same and any of Grantor's equipment for the purpose of
completing any work in
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process, taking any actions described in the preceding clause (c) and collecting
any Secured Obligation, and (e) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private
sale, at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as are commercially reasonable. Secured Party or any Lender or
Interest Rate Exchanger may be the purchaser of any or all of the Collateral at
any such sale and Secured Party, as agent for and representative of Lenders and
Interest Rate Exchangers (but not any Lender or Lenders or Interest Rate
Exchanger in its or their respective individual capacities unless Requisite
Lenders or Requisite Obligees (as defined in Section 20(a))shall be entitled,
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Collateral payable by Secured Party at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Grantor, and Grantor hereby waives (to the extent
permitted by applicable law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. Grantor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a commercially reasonable private sale was less than the price which might
have been obtained at a public sale, even if Secured Party accepts the first
offer received and does not offer such Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay all the Secured Obligations, Grantor shall be liable for the deficiency
and the reasonable fees of any attorneys employed by Secured Party to collect
such deficiency.
SECTION 18. Additional Remedies for Intellectual Property
Collateral.
(a) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, (i) Secured
Party shall have the right (but not the obligation) to bring suit, in the name
of any Grantor, Secured Party or otherwise, to enforce any Intellectual Property
Collateral, in which event each Grantor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by Secured
Party in aid of such enforcement and each Grantor shall promptly, upon demand,
reimburse and indemnify Secured Party as provided in Sections 12.2 and 12.3 of
the Credit Agreement and Section 20 hereof, as applicable, in connection with
the exercise of its rights under this Section, and, to the extent that Secured
Party shall elect not to bring suit to enforce any Intellectual Property
Collateral as provided in this Section, each Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement of any of the Intellectual Property Collateral by
others and for that purpose agrees to use its commercially reasonable judgement
in maintaining any action, suit or proceeding against any Person so infringing
reasonably necessary to prevent such infringement; (ii) upon
16
<PAGE>
written demand from Secured Party, each Grantor shall execute and deliver to
Secured Party an assignment or assignments of the Intellectual Property
Collateral and such other documents as are necessary or appropriate to carry out
the intent and purposes of this Agreement; (iii) each Grantor agrees that such
an assignment and/or recording shall be applied to reduce the Secured
Obligations outstanding only to the extent that Secured Party (or any Lender)
receives cash proceeds in respect of the sale of, or other realization upon, the
Intellectual Property Collateral; and (iv) within five Business Days after
written notice from Secured Party, each Grantor shall make available to Secured
Party, to the extent within such Grantor's power and authority, such personnel
in such Grantor's employ on the date of such Event of Default as Secured Party
may reasonably designate, by name, title or job responsibility, to permit such
Grantor to continue, directly or indirectly, to produce, advertise and sell the
products and services sold or delivered by such Grantor under or in connection
with the Trademarks, Trademark Registrations and Trademark Rights, such persons
to be available to perform their prior functions on Secured Party's behalf and
to be compensated by Secured Party at such Grantor's expense on a per diem,
pro-rata basis consistent with the salary and benefit structure applicable to
each as of the date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of
cure, waiver, modification, amendment or otherwise, no longer be continuing,
(ii) no other Event of Default shall have occurred and be continuing, (iii) an
assignment to Secured Party of any rights, title and interests in and to the
Intellectual Property Collateral shall have been previously made, and (iv) the
Secured Obligations shall not have become immediately due and payable, upon the
written request of any Grantor, Secured Party shall promptly execute and deliver
to such Grantor such assignments as may be necessary to reassign to such Grantor
any such rights, title and interests as may have been assigned to Secured Party
as aforesaid, subject to any disposition thereof that may have been made by
Secured Party; provided, after giving effect to such reassignment, Secured
Party's security interest granted pursuant hereto, as well as all other rights
and remedies of Secured Party granted hereunder, shall continue to be in full
force and effect; and provided further, the rights, title and interests so
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Encumbrances.
SECTION 19. Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
SECTION 20. Continuing Security Interest: Transfer of Loans. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 12.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or
17
<PAGE>
otherwise. Upon the payment in full of all Secured Obligations other than any
which survive the payment in full of the principal and interest of the Loans,
the cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to Grantor.
Upon any such termination Secured Party will, at Grantor's expense, execute and
deliver to Grantor such documents as Grantor shall reasonably request to
evidence such termination.
SECTION 21. Secured Party as Collateral Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising any remedies provided for in
Section 17 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents other than any which survive the payment in full of the
principal and interest of the Loans, the holders of a majority of the aggregate
notional amount (or, with respect to any Interest Rate Agreement that has been
terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Interest Rate Agreement) under all Interest Rate
Agreements (Requisite Lenders or, if applicable, such holders being referred to
herein as "Requisite Obligees"). In furtherance of the foregoing provisions of
this Section 21(a), each Interest Rate Exchanger, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize upon
any of the Collateral hereunder, it being understood and agreed by such Interest
Rate Exchanger that all rights an remedies hereunder may be exercised solely by
Secured Party for the benefit of Lenders and Interest Rate Exchangers in
accordance with the terms of this Section 21(a).
(b) Secured Party shall at all times be the same Person that is
Agent under the Credit Agreement. Written notice of resignation by Agent
pursuant to subsection 10.6 of the Credit Agreement shall also constitute notice
of resignation as Secured Party under this Agreement; removal of Agent pursuant
to subsection 10.6 of the Credit Agreement shall also constitute removal as
Secured Party under this Agreement; and appointment of a successor Agent
pursuant to subsection 10.6 of the Credit Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Agent under subsection 10.6 of the Credit
Agreement by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Secured Party under this Agreement, and the retiring or
removed Secured Party under this Agreement shall promptly (i) transfer to such
successor Secured Party all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall
18
<PAGE>
be discharged from its duties and obligations under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder as Secured Party,
the provisions of this Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it under this Agreement while it was Secured
Party hereunder.
SECTION 22. Amendments; Etc. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 23. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to Agents shall
not be effective until received. For the purposes hereof, the addresses of each
party hereto shall be as set forth under such party's name on the signature
pages hereof such other address as shall be designated by such Person in a
written notice delivered to the other parties hereto.
SECTION 24. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or farther exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 25. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 26. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 27. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5.1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR
19
<PAGE>
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Credit Agreement, terms used in Articles 8 and 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 28. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 29. Notice of Interest Rate Agreements. The Collateral Agent
shall not be deemed to have any duty whatsoever with respect to any Interest
Rate Exchanger until it shall have received written notice in form and substance
satisfactory to the Collateral Agent from Grantor or the Interest Rate Exchanger
as to the existence and terms of the applicable Interest Rate Agreement.
Collateral Agent may require each Interest Rate Exchanger to execute and deliver
to Collateral Agent such instruments as Collateral Agent may require evidencing
the agreement of such Interest Rate Exchanger to the terms of this Agreement as
a condition to such Interest Rate Exchanger's entitlement to the benefits
hereof.
[Remainder of page intentionally left blank]
20
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
MANUFACTURERS' SERVICES LIMITED
By: ______________________________
Title:
Notice Address: 200 Baker Avenue
Concord, Massachusetts 01742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: ______________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
SCHEDULE I
TO SECURITY AGREEMENT
Assigned Agreements:
None
Trademarks:
Trademark Registration Registration
Registered Owner Description Number Date
- ---------------- ----------- ------ ----
Manufacturers' Services Service Mark 75-131652 Pending
Limited
Manufacturers' Services Service Mark 75-131651 Pending
Limited
Manufacturers' Services Service Mark 75-131372 Pending
Limited
<PAGE>
SCHEDULE II
TO SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
UCC Filing Jurisdictions:
<PAGE>
EXHIBIT A
FORM OF GRANT OF TRADEMARK SECURITY INTEREST
WHEREAS, MANUFACTURERS' SERVICES LIMITED, a Delaware corporation
("GRANTOR"), owns and uses in its business, and will in the future adopt and so
use, various intangible assets, including the Trademark Collateral (as defined
below); and
WHEREAS, Grantor and Grantor's Subsidiary MSL Overseas Finance B.V. ("MSL
Overseas"), a Netherlands private company with limited liability, have entered
into a Credit Agreement dated as of August 21, 1998 (said Credit Agreement, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "Credit Agreement") with the financial institutions named
therein (collectively, together with their respective successors and assigns
party to the Credit Agreement from time to time, the "Lenders") and Bank of
America National Trust and Savings Association, as collateral agent for the
Lenders (in such capacity, "Secured Party") and as administrative agent and
issuing lender, pursuant to which Lenders have made certain commitments, subject
to the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to MSL Overseas and Grantor; and
WHEREAS, [Company] [Grantor] may from time to time enter, or may from time
to time have entered, into one or more Interest Rate Agreements (collectively,
the "Interest Rate Agreements") with one or more Lenders (in such capacity,
collectively, "Interest Rate Exchangers"); and
WHEREAS, pursuant to the terms of a Company Security Agreement dated as of
August __, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Security Agreement"), among Grantor and Secured Party, Grantor has
agreed to create in favor of Secured Party a secured and protected interest in,
and Secured Party has agreed to become a secured creditor with respect to, the
Trademark Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, subject to the terms and conditions
of the Credit Agreement and the Security Agreement, Grantor hereby grants to
Secured Party a security interest in all of Grantor's right, title and interest
in and to the following, in each case whether now or hereafter existing or in
which Grantor now has or hereafter acquires an interest and wherever the same
may be located (the "Trademark Collateral"):
(i) all rights, title and interest (including rights acquired
pursuant to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all trademarks,
service marks, designs, logos, indicia, tradenames, trade dress, corporate
names, company names, business names, fictitious business names, trade
styles and/or other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter adopted and used,
in its business (including, without limitation, the trademarks
specifically identified in Schedule A) (collectively, the "Trademarks"),
all registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign
countries (including,
A-1
<PAGE>
without limitation, the registrations and applications specifically
identified in Schedule A) (the "Trademark Registrations"), all common law
and other rights (but in no event any of the obligations) in and to the
Trademarks in the United States and any state thereof and in foreign
countries (the "Trademark Rights"), and all goodwill of such Grantor's
business symbolized by the Trademarks and associated therewith (the
"Associated Goodwill"); and
(ii) all proceeds, products, rents and profits of or from any
and all of the foregoing Trademark Collateral and, to the extent not
otherwise included, all payments under insurance (whether or not Secured
Party is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of
the foregoing Trademark Collateral. For purposes of this Grant of
Trademark Security Interest, the term "proceeds" includes whatever is
receivable or received when Trademark Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Trademark Collateral include, and Grantor shall be not deemed to have granted a
security interest in, any of Grantor's rights or interests in any license,
contract or agreement to which Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which Grantor is a party; provided, that immediately
upon the ineffectiveness, lapse or termination of any such provision, the
Trademark Collateral shall include, and Grantor shall be deemed to have granted
a security interest in, all such rights and interests as if such provision had
never been in effect.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Grant of Trademark Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the _____th day of________________, _____.
MANUFACTURERS' SERVICES LIMITED
By: _______________________________
Name:
Title:
A-2
<PAGE>
SCHEDULE A
TO
GRANT OF TRADEMARK SECURITY INTEREST
United States
Trademark Registration Registration
Registered Owner Description Number Date
- ---------------- ----------- ------ ----
Manufacturers' Services Service Mark 75-131652 Pending
Limited
Manufacturers' Services Service Mark 75-131651 Pending
Limited
Manufacturers' Services Service Mark 75-131372 Pending
Limited
A-3
<PAGE>
EXHIBIT B
COMPANY SECURITY AGREEMENT SUPPLEMENT
This SECURITY AGREEMENT SUPPLEMENT, dated _______, is delivered pursuant
to the Security Agreement, dated as of August __, 1998 (as it may be from time
to time amended, modified or supplemented, the "Security Agreement"), among
Manufacturers' Services Limited and Bank of America National Trust and Savings
Association, as Secured Party. Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
Subject to the terms and conditions of the Security Agreement, Grantor
hereby grants to Secured Party a security interest in all of Grantor's right,
title and interest in and to the Intellectual Property Collateral listed on
Supplemental Schedule [1(a)] [1(b)] [1.(c)] attached hereto the following, in
each case whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located. All such
Intellectual Property Collateral shall be deemed to be part of the Collateral
and hereafter subject to each of the terms and conditions of the Security
Agreement.
IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly executed
and delivered by its duly authorized officer as of _______________.
[GRANTOR]
By: _______________________________
Name:
Title:
B-1
<PAGE>
Supplemental Schedule ____
Trademarks:
Trademark Registration Registration
Registered Owner Description Number Date
- ---------------- ----------- ------ ----
Patents Issued:
Patent No. Issue Date Invention Inventor
- ---------- ---------- --------- --------
Patents Pending:
Applicant's Date Application
Name Filed Number Invention Inventor
- ---- ----- ------ --------- --------
U.S. Copyrights:
Copyright Registration No. Date of Issue Registered Owner
- --------- ---------------- ------------- ----------------
Foreign Copyright Registrations:
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
1
<PAGE>
Pending U.S. Copyrights:
Copyright Reference No. Date of Application Copyright Claimant
- --------- ------------- ------------------- ------------------
Pending Foreign Copyrights:
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
2
<PAGE>
EXHIBIT XV
FORM OF SUBSIDIARY
GUARANTY
This SUBSIDIARY GUARANTY is entered into as of August __, 1998 by
[NAME OF GUARANTOR], a _____________ corporation ("Guarantor"), in favor of and
for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
collateral agent for and representative of (in such capacity herein called
"Guarantied Party") the financial institutions ("Lenders") party to the Credit
Agreement (as hereinafter defined), and, subject to subsection 5.12, for the
benefit of the other Beneficiaries (as hereinafter defined).
RECITALS
A. MANUFACTURERS' SERVICES LIMITED, a Delaware corporation
("Company"), and Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"),
have entered into that certain Credit Agreement dated as of August 21, 1998 with
DLJ Capital Funding, Inc., as Syndication Agent, Guarantied Party and Lenders
(said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement"; capitalized
terms defined therein and not otherwise defined herein being used herein as
therein defined).
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Interest Rate Agreements") with or one or more Lenders (in such capacity,
collectively, "Interest Rate Exchangers") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Company under
Interest Rate Agreements, including the obligation of Company to make payments
thereunder in the event of early termination thereof (all such obligations being
the "Interest Rate Obligations"), together with all obligations of Company and
MSL Overseas under the Credit Agreement and the other Loan Documents, be
guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to
Guarantor and thus the Guarantied Obligations (as hereinafter defined) are being
incurred for and will inure to the benefit of Guarantor (which benefits are
hereby acknowledged).
D. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Company's obligations and MSL Overseas'
obligations thereunder be guarantied by Guarantor.
E. Guarantor is willing irrevocably and unconditionally to guaranty
such obligations of Company.
<PAGE>
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make the Loans thereunder, Guarantor hereby agrees as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. As used in this Guaranty, the following terms
shall have the following meanings unless the context otherwise requires:
"Beneficiaries" means Guarantied Party and Lenders.
"Guarantied Obligations" has the meaning assigned to that term in
subsection 2.1.
"Guaranty" means this Guaranty dated as of August ___, 1998, as it
may be amended, supplemented or otherwise modified from time to time.
"payment in full", "paid in full" or any similar term means payment
in full of the Guarantied Obligations, including without limitation all
principal, interest, costs, fees and expenses (including, without
limitation, reasonable legal fees and expenses) of Beneficiaries as
required under the Loan Documents.
1.2 Interpretation.
(a) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise
specifically provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions
of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 Guaranty of the Guarantied Obligations. Subject to the provisions of
subsection 2.2(a), Guarantor hereby irrevocably and unconditionally guaranties,
as primary obligor and not merely as surety, the due and punctual payment in
full of all Guarantied Obligations when the same, taking into account all grace,
notice and cure periods applicable thereto, shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C.
2
<PAGE>
ss. 362(a) or any similar provision of foreign law). The term "Guarantied
Obligations" is used herein in its most comprehensive sense and includes:
(a) any and all Obligations of Company and any and all interest Rate
Obligations, in each case now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or
not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents, including those arising under
successive borrowing transactions under the Credit Agreement which shall
either continue the Obligations of Company or from time to time renew them
after they have been satisfied and including interest which, but for the
filing of a petition in bankruptcy with respect to Company, would have
accrued on any Guarantied Obligations, whether or not a claim is allowed
against Company for such interest in the related bankruptcy proceeding;
and
(b) those expenses set forth in subsection 2.8 hereof.
2.2 Limitation on Amount Guarantied; Contribution by Guarantor. (a)
Anything contained in this Guaranty to the contrary notwithstanding, if any
Fraudulent Transfer Law (as hereinafter defined) is determined by a court of
competent jurisdiction to be applicable to the obligations of Guarantor under
this Guaranty, such obligations of Guarantor hereunder shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance or other challenge as a fraudulent
transfer or fraudulent conveyance or fraudulent obligation under Section 548 of
Title 11 of the United States Code or any applicable provisions of comparable
state law (collectively, the "Fraudulent Transfer Laws"), in each case after
giving effect to all other liabilities of Guarantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of Guarantor (x) in respect of intercompany
indebtedness to Company or other affiliates of Company to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by
Guarantor hereunder and (y) under any guaranty of Subordinated Indebtedness
which guaranty contains a limitation as to maximum amount similar to that set
forth in this subsection 2.2(a), pursuant to which the liability of Guarantor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (to the extent
applicable under the applicable provisions of the Fraudulent Transfer Laws) of
any rights to subrogation, reimbursement, indemnification or contribution of
Guarantor pursuant to applicable law or pursuant to the terms of any agreement
(including without limitation any such right of contribution under a Related
Guaranty (as hereinafter defined) as contemplated by subsection 2.2(b)).
(b) Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement, provided that each such
guarantor is a Domestic Subsidiary other than MSL SPV Spain, Inc. (the "Related
Guaranties") which contain a contribution provision similar to that set forth in
this subsection 2.2(b), together desire to allocate among themselves
(collectively, the "Contributing Guarantors"), in a fair and
3
<PAGE>
equitable manner, their obligations arising under this Guaranty and the Related
Guaranties. Accordingly, in the event any payment or distribution is made on any
date by Guarantor under this Guaranty or a guarantor under a Related Guaranty (a
"Funding Guarantor") that exceeds its Fair Share (as defined below) as of such
date, that Funding Guarantor shall be entitled to a contribution from each of
the other Contributing Guarantors in the amount of such other Contributing
Guarantor's Fair Share Shortfall (as defined below) as of such date, with the
result that all such contributions will cause each Contributing Guarantor's
Aggregate Payments (as defined below) to equal its Fair Share as of such date.
"Fair Share" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Contributing Guarantor to (y) the
aggregate of the Adjusted Maximum Amounts with respect to all Contributing
Guarantors, multiplied by (ii) the aggregate amount paid or distributed on or
before such date by all Funding Guarantors under this Guaranty and the Related
Guaranties in respect of the obligations guarantied. "Fair Share Shortfall"
means, with respect to a Contributing Guarantor as of any date of determination,
the excess, if any, of the Fair Share of such Contributing Guarantor over the
Aggregate Payments of such Contributing Guarantor. "Adjusted Maximum Amount"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty and the Related Guaranties, determined as of such date in
accordance with subsection 2.2(a) or, if applicable, a similar provision
contained in a Related Guaranty; provided that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Contributing
Guarantor for purposes of this subsection 2.2(b), any assets or liabilities of
such Contributing Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder or under any similar provision contained in a Related Guaranty shall
not be considered as assets or liabilities of such Contributing Guarantor.
"Aggregate Payments" means, with respect to a Contributing Guarantor as of any
date of determination, an amount equal to (i) the aggregate amount of all
payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty and the Related Guaranties (including,
without limitation, in respect of this subsection 2.2(b) or any similar
provision contained in a Related Guaranty) minus (ii) the aggregate amount of
all payments received on or before such date by such Contributing Guarantor from
the other Contributing Guarantors as contributions under this subsection 2.2(b)
or any similar provision contained in a Related Guaranty. The amounts payable as
contributions hereunder and under similar provisions in the Related Guaranties
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this subsection 2.2(b) or any
similar provision contained in a Related Guaranty shall not be construed in any
way to limit the liability of any Contributing Guarantor hereunder or under a
Related Guaranty. Each Contributing Guarantor under a Related Guaranty is a
third party beneficiary to the contribution agreement set forth in this
subsection 2.2(b).
2.3 Payment by Guarantor: Application of Payments. Subject to the
provisions of subsection 2.2(a), Guarantor hereby agrees, in furtherance of the
foregoing and not in
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limitation of any other right which any Beneficiary may have at law or in equity
against Guarantor by virtue hereof, that upon the failure of Company to pay any
of the Guarantied Obligations when and as the same, taking into account all
grace, notice and cure periods applicable thereto shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)
or any similar provision of foreign law), Guarantor will upon demand pay, or
cause to be paid, in cash, to Guarantied Party for the ratable benefit of
Beneficiaries, an amount equal to the sum of the unpaid principal amount of all
Guarantied Obligations then due as aforesaid, accrued and unpaid interest on
such Guarantied Obligations (including, without limitation, interest which, but
for the filing of a petition in bankruptcy with respect to Company, would have
accrued on such Guarantied Obligations, whether or not a claim is allowed
against Company for such interest in the related bankruptcy proceeding) and all
other Guarantied Obligations then owed to Beneficiaries as aforesaid. All such
payments shall be applied promptly from time to time by Guarantied Party as
provided in subsection 2.4D of the Credit Agreement.
2.4 Liability of Guarantor Absolute. Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied
Obligations or of the obligations hereunder. In furtherance of the foregoing and
without limiting the generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the occurrence
of an Event of Default under the Credit Agreement or the occurrence of an
Early Termination Date (as defined in an Interest Rate Agreement in the
form prepared by the International Swap and Dealers Association, Inc. or a
similar event under any similar swap agreement) under any Interest Rate
Agreements (either such occurrence being an "Event of Default" for
purposes of this Guaranty).
(c) The obligations of Guarantor hereunder are independent of the
obligations of Company under the Loan Documents or the Interest Rate
Agreements and the obligations of any other guarantor of the obligations
of Company under the Loan Documents, or the Interest Rate Agreements and a
separate action or actions may be brought and prosecuted against Guarantor
whether or not any action is brought against Company or any of such other
guarantors and whether or not Company is joined in any such action or
actions.
(d) Guarantor's payment of a portion, but not all, of the Guarantied
Obligations shall in no way limit, affect, modify or abridge Guarantor's
liability for
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any portion of the Guarantied Obligations which has not been paid. Without
limiting the generality of the foregoing, if Guarantied Party is awarded a
judgment in any suit brought to enforce Guarantor's covenant to pay a
portion of the Guarantied Obligations, such judgment shall not be deemed
to release Guarantor from its covenant to pay the portion of the
Guarantied Obligations that is not the subject of such suit, and such
judgment shall not, except to the extent satisfied by such Guarantor,
limit, affect, modify or abridge any other Guarantors liability hereunder
in respect to the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of Guarantor's liability
hereunder, from time to time may (i) renew, extend, accelerate, increase
the rate of interest on, or otherwise change the time, place, manner or
terms of payment of the Guarantied Obligations, (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with
respect to, or substitutions for, the Guarantied Obligations or any
agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations; (iii) request and accept other
guaranties of the Guarantied Obligations and take and hold security for
the payment of this Guaranty or the Guarantied Obligations; (iv) release,
surrender, exchange, substitute, compromise, settle, rescind, waive,
alter, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect
to the Guarantied Obligations; (v) enforce and apply any security now or
hereafter held by or for the benefit of such Beneficiary in respect of
this Guaranty or the Guarantied Obligations and direct the order or manner
of sale thereof, or exercise any other right or remedy that such
Beneficiary may have against any such security, in each case as such
Beneficiary in its discretion may determine consistent with the Credit
Agreement and any applicable security agreement, including foreclosure on
any such security pursuant to one or more judicial or nonjudicial sales,
and even though such action operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Guarantor against
Company or any security for the Guarantied Obligations; and (vi) exercise
any other rights available to it under the Loan Documents or the Interest
Rate Agreements.
(f) This Guaranty and the obligations of Guarantor hereunder shall
be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other
than payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not
Guarantor shall have had notice or knowledge of any of them: (i) any
failure or omission to assert or enforce or agreement or election not to
assert or enforce, or the stay or enjoining, by order of court, by
operation of law or otherwise, of the exercise or enforcement of, any
claim or demand or any right, power or remedy (whether arising under the
Loan Documents or the Interest Rate Agreements, at law, in
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equity or otherwise) with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Guarantied Obligations; (ii) any
rescission, waiver, amendment or modification of, or any consent to
departure from, any of the terms or provisions (including without
limitation provisions relating to events of default) of the Credit
Agreement, any of the other Loan Documents, any of the Interest Rate
Agreements or any agreement or instrument executed by Company or its
Subsidiaries pursuant thereto, or of any other guaranty or security for
the Guarantied Obligations, in each case whether or not in accordance with
the terms of the Credit Agreement or such Loan Document, such Interest
Rate Agreement or any agreement relating to such other guaranty or
security; (iii) the Guarantied Obligations, or any agreement by Company or
its Subsidiaries relating thereto, at any time being found to be illegal,
invalid or unenforceable in any respect; (iv) the application of payments
received from any source (other than Guarantor or Contributing Guarantors
or the Company or any of its Subsidiaries or other than payments received
pursuant to the other Loan Documents or any of the Interest Rate
Agreements or from the proceeds of any security for the Guarantied
Obligations, except to the extent such security also serves as collateral
for indebtedness other than the Guarantied Obligations) to the payment of
indebtedness other than the Guarantied Obligations, even though any
Beneficiary might have elected to apply such payment to any part or all of
the Guarantied Obligations; (v) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or existence of
Company or any of its Subsidiaries and to any corresponding restructuring
of the Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of
the Guarantied Obligations; (vii) any defenses, set-offs or counterclaims
which Company may allege or assert against any Beneficiary in respect of
the Guarantied Obligations, including but not limited to failure of
consideration, breach of warranty, payment and statute of frauds; and
(viii) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of
Guarantor as an obligor in respect of the Guarantied Obligations.
2.5 Waivers by Guarantor. Guarantor hereby waives, for the benefit of
Beneficiaries:
(a) any right to require any Beneficiary, as a condition of payment
or performance by Guarantor, to (i) proceed against Company, any other
guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from Company, any such other
guarantor or any other Person, (iii) proceed against or have resort to any
balance of any deposit account or credit on the books of any Beneficiary
in favor of Company or any other Person, or (iv) pursue any other remedy
in the power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including, without
limitation, any defense
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based on or arising out of the lack of validity or the unenforceability of
the Guarantied Obligations or any agreement or instrument relating thereto
or by reason of the cessation of the liability of Company from any cause
other than payment in full of the Guarantied Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal;
(d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith, gross negligence or willful misconduct;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of Guarantor's obligations hereunder, (ii)
any rights to set-offs, recoupments and counterclaims, and (iii)
promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property
subject thereto;
(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit
Agreement, the Interest Rate Agreements or any agreement or instrument
related thereto, notices of any renewal, extension or modification of the
Guarantied Obligations or any agreement related thereto, notices of any
extension of credit to Company and notices of any of the matters referred
to in subsection 2.4 and any right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty.
2.6 Guarantor's Rights of Subrogation, Contribution, Etc. Until the
Guarantied Obligations other than those referenced to in Section 12.9 of the
Credit Agreement and any others which survive payment in full of principal and
interest on the Loans, shall have been paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
the Guarantor shall withhold exercise of (a) any claim, right or remedy, direct
or indirect, that such Guarantor now has or may hereafter have against Company
or any of its assets in connection with this Guaranty or the performance by
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute, under common law or
otherwise and including without limitation (i) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Company, (ii) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter
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have against Company, and (iii) any benefit of, and any right to participate in,
any collateral or security now or hereafter held by any Beneficiary, and (b) any
right of contribution Guarantor may have against any other guarantor of any of
the Guarantied Obligations or under a Related Guaranty as contemplated by
subsection 2.2b. Guarantor further agrees that, to the extent the agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
Company or against any collateral or security, and any rights of contribution
such Guarantor may have against any such other guarantor, shall be junior and
subordinate to any rights any Beneficiary may have against Company, to all
right, title and interest any Beneficiary may have in any such collateral or
security, and to any right any Beneficiary may have against such other
guarantor.
2.7 Subordination of Other Obligations. Any indebtedness of Company now or
hereafter held by Guarantor is hereby subordinated in right of payment to the
Guarantied Obligations but until an Event of Default may be collected by
Guarantor and used by it free of any restriction, and any such indebtedness of
Company to Guarantor collected or received by Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to Guarantied
Party for the benefit of Beneficiaries to be credited and applied against the
Guarantied Obligations but without affecting, impairing or limiting in any
manner the liability of Guarantor under any other provision of this Guaranty.
2.8 Expenses. Guarantor agrees to pay, or cause to be paid, on demand, and
to save Guarantied Party and Beneficiaries harmless against liability for, any
and all costs and expenses (including reasonable fees and disbursements of
counsel and allocated costs of internal counsel) incurred or expended by
Guarantied Party or any Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty.
2.9 Continuing Guaranty; Termination of Guaranty. This Guaranty is a
continuing guaranty and shall remain in effect until all of the Guarantied
Obligations shall have been paid in full and the Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled.
Guarantor hereby irrevocably waives any right to revoke this Guaranty as to
future transactions giving rise to any Guarantied Obligations.
2.10 Authority of Guarantor or Company. It is not necessary for any
Beneficiary to inquire into the capacity or powers of Guarantor or Company or
the officers, directors or any agents acting or purporting to act on behalf of
any of them.
2.11 Financial Condition of Company. Any Loans may be granted to Company
or continued from time to time and any Interest Rate Agreements may be entered
into or continued from time to time, in each case without notice to or
authorization from Guarantor regardless of the financial or other condition of
Company at the time of any such grant or continuation or at the time such
Interest Rate Agreement is entered into, as the case may be.
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No Beneficiary shall have any obligation to disclose or discuss with Guarantor
its assessment, or Guarantor's assessment, of the financial condition of
Company. Guarantor has adequate means to obtain information from Company on a
continuing basis concerning the financial condition of Company and its ability
to perform its obligations under the Loan Documents and the Interest Rate
Agreements, and Guarantor assumes the responsibility for being and keeping
informed of the financial condition of Company and of all circumstances bearing
upon the risk of nonpayment of the Guarantied Obligations. Guarantor hereby
waives and relinquishes any duty on the part of any Beneficiary to disclose any
matter, fact or thing relating to the business, operations or conditions of
Company now known or hereafter known by any Beneficiary.
2.12 Rights Cumulative. The rights, powers and remedies given to
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents or any
agreement between Guarantor and any Beneficiary or Beneficiaries or between
Company and any Beneficiary or Beneficiaries. Any forbearance or failure to
exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.13 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty.
(a) So long as any Guarantied Obligations remain outstanding,
Guarantor shall not, without the prior written consent of Guarantied Party in
accordance with the terms of the Credit Agreement, commence or join with any
other Person in commencing any bankruptcy, reorganization or insolvency
proceedings of or against Company. The obligations of Guarantor under this
Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Company or by any defense which Company may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding except as otherwise specifically provided thereby or therein.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantor and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantor pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or similar person to pay Guarantied Party, or allow the claim of
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Guarantied Party in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by Company, the obligations of Guarantor hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
2.14 Notice of Events. As soon as Guarantor obtains knowledge thereof,
Guarantor shall give Guarantied Party written notice of any condition or event
which has resulted in (a) a material adverse change in the financial condition,
results of operation or prospects of Guarantor or Company or (b) a breach of or
noncompliance with any term, condition or covenant contained herein or in the
Credit Agreement, any other Loan Document or any other document delivered
pursuant hereto or thereto. If and to the extent any other guarantor under other
guaranties relating to the Credit Agreement or the Company gives notice,
Guarantor's obligations under this section 2.14 shall have been satisfied.
2.15 Set Off. Subject to subsection 2.2(b), in addition to any other
rights any Beneficiary may have under law or in equity, if any amount shall at
any time be due and owing by Guarantor to any Beneficiary under this Guaranty,
such Beneficiary is authorized at any time or from time to time, without notice
(any such notice being hereby expressly waived), to set off and to appropriate
and to apply any and all deposits (general or special, including but not limited
to indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness of such Beneficiary owing to Guarantor
and any other property of Guarantor held by any Beneficiary to or for the
credit or the account of Guarantor against and on account of the Guarantied
Obligations and liabilities of Guarantor to any Beneficiary under this Guaranty.
2.16 Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of
Guarantor or any of its successors in interest under this Guaranty shall be sold
or otherwise disposed of (including by merger or consolidation) in an Asset Sale
not prohibited by subsection 7.7 of the Credit Agreement or otherwise consented
to by Requisite Lenders, the Guaranty of Guarantor or such successor in
interest, as the case may be, hereunder shall automatically be discharged and
released without any further action by any Beneficiary or any other Person
effective as of the time of such Asset Sale; provided that, as a condition
precedent to such discharge and release, Guarantied Party shall have received
evidence satisfactory to it that arrangements satisfactory to it have been made
for delivery to Guarantied Party of the Net Cash Proceeds of such Asset Sale
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SECTION 3. MISCELLANEOUS
3.1 Survival of Warranties. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Guaranty and the
other Loan Documents and the Interest Rate Agreements and any increase in the
Commitments under the Credit Agreement.
3.2 Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and may be personally served, telexed or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; provided that notices to Agents shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or such
other address as shall be designated by such Person in a written notice
delivered to the other parties hereto.
3.3 Severability. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
3.4 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
3.5 Headings. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 Applicable Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
3.7 Successors and Assigns. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Beneficiaries and their respective successors and
assigns. Guarantor shall not
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assign this Guaranty or any of the rights or obligations of Guarantor hereunder
without the prior written consent of all Lenders. Any Beneficiary may, without
notice or consent, assign its interest in this Guaranty in whole or in part. The
terms and provisions of this Guaranty shall inure to the benefit of any
transferee or assignee of any Loan, and in the event of such transfer or
assignment the rights and privileges herein conferred upon such Beneficiary
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof
3.8 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO GUARANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 3.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
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3.9 Waiver of Trial by Jury. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, each
Beneficiary each (i) acknowledges that this waiver is a material inducement for
Guarantor and Beneficiaries to enter into a business relationship, that
Guarantor and Beneficiaries have already relied on this waiver in entering into
this Guaranty or accepting the benefits thereof, as the case may be, and that
each will continue to rely on this waiver in their related future dealings and
(ii) further warrants and represents that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED
BY GUARANTIED PARTY AND GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
3.10 No Other Writing. This writing is intended by Guarantor and
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
3.11 Further Assurances. At any time or from time to time, upon the
request of Guarantied Party, Guarantor shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.12 Guarantied Party as Collateral Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders, and, by acceptance of the benefits hereof, Interest Rate
Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement.
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(b) Guarantied Party shall at all times be the same Person that is
Collateral Agent under the Credit Agreement. Written notice of resignation by
Collateral Agent pursuant to subsection 10.6 of the Credit Agreement shall also
constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Collateral Agent pursuant to subsection 10.6 of the Credit Agreement
shall also constitute removal as Guarantied Party under this Guaranty; and
appointment of a successor Collateral Agent pursuant to subsection 10.6 of the
Credit Agreement shall also constitute appointment of a successor Guarantied
Party under this Guaranty. Upon the acceptance of any appointment as Collateral
Agent under subsection 10.6 of the Credit Agreement by a successor Collateral
Agent, that successor Collateral Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Guarantied Party under this Guaranty, and the retiring or removed
Guarantied Party under this Guaranty shall promptly (i) transfer to such
successor Guarantied Party all sums held hereunder, together with all records
and other documents necessary or appropriate in connection with the performance
of the duties of the successor Guarantied Party under this Guaranty, and (ii)
take such other actions as may be necessary or appropriate in connection with
the assignment to such successor Guarantied Party of the rights created
hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
3.13 Notice of Interest Rate Agreements.
The Collateral Agent shall not be deemed to have any duty whatsoever
with respect to any Interest Rate Exchanger until it shall have received written
notice in form and substance satisfactory to the Collateral Agent from Grantor
or the Interest Rate Exchanger as to the existence and terms of the applicable
Interest Rate Agreement. Collateral Agent may require each Interest Rate
Exchanger to execute and deliver to Collateral Agent such instruments as
Collateral Agent may require evidencing the agreement of such Interest Rate
Exchanger to the terms of this Agreement as a condition to such Interest Rate
Exchanger's entitlement to the benefits hereof
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first written above.
MANUFACTURERS' SERVICES CENTRAL
U.S. OPERATIONS, INC.
By _____________________________________
Title __________________________________
Address: 200 Baker Avenue
Concord, MA 01742
S-1
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first written above.
MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS, INC.
By _____________________________________
Title __________________________________
Address: 200 Baker Avenue
Concord, MA 01742
S-1
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first written above.
MANUFACTURERS' SERVICES LIMITED -
CORPORATE
By _____________________________________
Title __________________________________
Address: 200 Baker Avenue
Concord, MA 01742
S-1
<PAGE>
EXHIBIT XVI
FORM OF SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (this "Agreement") is dated as of
August __, 1998 and entered into by and between [INSERT NAME OF PLEDGOR IN
CAPS], a _____ corporation ("Pledgor"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION as collateral agent for and representative of (in such
capacity herein called "Secured Party") the financial institutions ("Lenders")
party to the Credit Agreement referred to below and any Interest Rate Exchangers
(as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgor is the legal and beneficial owner of (i) the shares of
stock (the "Pledged Shares") described in Part A of Schedule I annexed hereto
and issued by the parties named therein and (ii) the indebtedness (the "Pledged
Debt") described in Part B of said Schedule I and issued by the obligors named
therein.
B. Secured Party, DLJ Capital Funding, Inc., as Syndication Agent,
and Lenders have entered into a Credit Agreement dated as of August 21, 1998
(said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Manufacturers' Services Limited, a Delaware corporation
("Company") and Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"),
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company and MSL Overseas.
C. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Interest Rate Agreements") with one or more Lenders (in such capacity,
collectively, "Interest Rate Exchangers").
D. Pledgor has executed and delivered that certain Subsidiary
Guaranty dated as of August __, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Guaranty") in favor of Secured Party for the benefit of Lenders and
any Interest Rate Exchangers, pursuant to which Pledgor has guarantied the
prompt payment and performance when due of all obligations of Company and MSL
Overseas under the Credit Agreement and all obligations of Company under the
Interest Rate Agreements, including the obligation of Company to make payments
thereunder in the event of early termination thereof.
<PAGE>
E. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Pledgor hereby agrees with Secured
Party as follows:
SECTION 1. Pledge of Security. Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a security interest in, all of
Pledgor's right, title and interest in and to the following (the "Pledged
Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(b) the Pledged Debt and the instruments evidencing the Pledged
Debt, and all interest, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into
and warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such additional
shares, and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights; provided, however, that
Pledgor shall not be required to pledge any additional shares of, or any
securities convertible into and warrants, options and other rights to purchase
or otherwise acquire, stock of any Foreign Subsidiary issuer of the Pledged
Shares pursuant to this Section 1(c) to the extent that such pledges would
constitute an investment of earnings in United States property under Section 956
(or a successor provision) of the Internal Revenue Code (the "IRC") that would
trigger an increase in the gross income of a United States shareholder of
Pledgor pursuant to Section 951 (or a successor provision) of the IRC;
(d) all additional indebtedness from time to time owed to Pledgor by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
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(e) all shares of, and all securities convertible into and warrants,
Options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary of Pledgor (which shares shall be deemed to be part of the
Pledged Shares), the certificates or other instruments representing such shares,
securities, warrants, options or other rights and any interest of Pledgor in the
entries on the books of any financial intermediary pertaining to such shares,
and all dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares, securities, warrants,
options or other rights; provided, however, that Pledgor shall not be required
to pledge any additional shares of, or any securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any Foreign Subsidiary issuer of the Pledged Shares pursuant to this Section
1(e) to the extent that such pledges would constitute an investment of earnings
in United States property under Section 956 (or a successor provision) of the
IRC that would trigger an increase in the gross income of a United States
shareholder of Pledgor pursuant to Section 951 (or a successor provision) of the
IRC;
(f) all membership interests in a limited liability company or
partnership interests in a partnership of any Person that, after the date of
this Agreement becomes, as result of any occurrence, a direct Subsidiary of
Pledgor and the certificates or other instruments representing such interests;
provided, however, that Pledgor shall not be required to pledge any additional
membership interests or additional partnership interests pursuant to this
Section 1(f) to the extent that such pledges would constitute an investment of
earnings in United States property under Section 956 (or a successor provision)
of the IRC that would trigger an increase in the gross income of a United States
shareholder of Pledgor pursuant to Section 951 (or a successor provision) of the
IRC;
(g) all indebtedness from time to time owed to Pledgor by any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct or indirect Subsidiary of Pledgor, and all interest, cash, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness; and
(h) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of this
Agreement, the term "proceeds" includes whatever is receivable or received when
Pledged Collateral or proceeds are sold, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
proceeds of any indemnity or guaranty payable to Pledgor or Secured Party from
time to time with respect to any of the Pledged Collateral.
SECTION 2. Security for Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a) or similar provisions of
foreign law), of all obligations and liabilities of every nature of Pledgor now
or hereafter existing under or arising out of or in connection with the Guaranty
and all extensions or
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renewals thereof, whether for principal, interest (including interest that, but
for the filing of a petition in bankruptcy with respect to Company, would accrue
on such obligations, whether or not a claim is allowed against Company for such
interest in the related bankruptcy proceeding), reimbursement of amounts drawn
under Letters of Credit, payments due for early termination of Interest Rate
Agreement in accordance with the terms of the applicable Interest Rate
Agreement, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor being the "Secured Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Upon the occurrence and during the continuation of an Event of
Default (as defined in the Credit Agreement) or the occurrence of an Early
Termination Date (as defined in an Interest Rate Agreement in the form prepared
by the International Swap and Dealers Association Inc. or a similar event under
any similar swap agreement) under any Interest Rate Agreement (either such
occurrence being an "Event of Default" for purposes of this Agreement), Secured
Party shall have the right, without notice to Pledgor, to transfer to or to
register in the name of Secured Party or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in Section
7(a). In addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the
Pledged Shares have been duly authorized and validly issued and are fully paid
and non-assessable. All of the Pledged Debt has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and binding
obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares constitute
the percentage of the issued and outstanding shares of stock of each issuer
thereof as set forth in Schedule 1 annexed hereto, and there are no outstanding
warrants, options or other rights to purchase, or other agreements outstanding
with respect to, or property that is now or hereafter convertible into, or that
requires the issuance or sale of, any Pledged Shares. The Pledged Debt
constitutes all of the issued and outstanding intercompany indebtedness
evidenced by a promissory note of the respective issuers thereof owing to
Pledgor.
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(c) Ownership of Pledged Collateral. Pledgor is the legal, record
and beneficial owner of the Pledged Collateral free and clear of any Lien except
for the security interest created by this Agreement.
SECTION 5. Transfers and Other Liens: Additional Pledged Collateral;
etc. Pledgor shall:
(a) not, except as expressly permitted by the Credit Agreement, (i)
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, (ii) create or
suffer to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement, or (iii) permit any
issuer of Pledged Shares to merge or consolidate unless all the outstanding
capital stock of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other constituent
corporation; provided that in the event Pledgor makes an Asset Sale permitted by
the Credit Agreement and the assets subject to such Asset Sale are Pledged
Shares, Secured Party shall release the Pledged Shares that are the subject of
such Asset Sale to Pledgor free and clear of the lien and security interest
under this Agreement concurrently with the consummation of such Asset Sale;
provided, further that, as a condition precedent to such release, Secured Party
shall have received evidence satisfactory to it that arrangements satisfactory
to it have been made for delivery to Secured Party of the Net Asset Sale
Proceeds of such Asset Sale;
(b) (i) cause each issuer of Pledged Shares not to issue any stock
or other securities in addition to or in substitution for the Pledged Shares
issued by such issuer, except to Pledgor, (ii) subject to the proviso in Section
1(c), pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of Pledged Shares, and (iii) subject to the proviso in Section
1(e), pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct
Subsidiary of Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any and
all instruments or other evidences of additional indebtedness from time to time
owed to Pledgor by any obligor on the Pledged Debt, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other evidences of
indebtedness from time to time owed to Pledgor by any Person that after the date
of this Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor;
(d) promptly notify Secured Party of any event of which Pledgor
becomes aware causing material loss or depreciation in the value of the Pledged
Collateral other than as shown on financial statements delivered or to be
delivered to Agents under the Credit Agreement;
(e) promptly deliver to Secured Party all written notices received
by it with respect to the Pledged Collateral; and
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(f) pay promptly when due all taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Pledged Collateral,
except to the extent the validity thereof is being contested in good faith;
provided that Pledgor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five days prior to the date of any proposed sale
under any judgement, writ or warrant of attachment entered or filed against
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
SECTION 6. Further Assurances: Pledge Amendments.
(a) Pledgor agrees that from time to time, at the expense of
Pledgor, Pledgor will promptly execute and deliver all further instruments and
documents, and take all further action, that are necessary, or that Secured
Party may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, Pledgor
will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as are necessary, or
as Secured Party may reasonably request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at Secured
Party's request, appear in and defend any action or proceeding that may
adversely affect Pledgor's title to or Secured Party's security interest in all
or any part of the Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
Pledgor, in substantially the form of Schedule II annexed hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Pledgor hereby authorizes Secured Party to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any Pledge Amendment delivered to Secured Party
shall for all purposes hereunder be considered Pledged Collateral; provided that
the failure of Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Secured Party therein or otherwise
adversely affect the rights and remedies of Secured Party hereunder with respect
thereto.
SECTION 7. Voting Rights; Dividends: Etc.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however, that Pledgor
shall not exercise or refrain from exercising any such right if
Secured Party shall have notified Pledgor that, in Secured Party's
reasonable judgment, such action would have a material adverse
effect on the value of the Pledged Collateral or any part thereof;
and provided, further, that Pledgor shall give Secured Party at
least five Business Days' prior
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written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right. It is
understood, however, that neither (A) the voting by Pledgor of any
Pledged Shares for or Pledgor's consent to the election of directors
at a regularly scheduled annual or other meeting of stockholders or
with respect to incidental matters at any such meeting nor (B)
Pledgor's consent to or approval of any action otherwise permitted
under this Agreement and the Credit Agreement shall be deemed
inconsistent with the terms of this Agreement or the Credit
Agreement within the meaning of this Section 7(a)(i), and no notice
of any such voting or consent need be given to Secured Party;
(ii) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends
and interest paid in respect of the Pledged Collateral; provided,
however, that any and all
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect of
principal or in redemption of or in exchange for any Pledged
Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as Pledged
Collateral in the same form as so received (with all necessary
indorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to
be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to
time reasonably request for the purpose of enabling Pledgor to
exercise the voting and other consensual rights which it is entitled
to exercise pursuant to paragraph (i) above and to receive the
dividends, principal or interest payments which it is authorized to
receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) upon written notice from Secured Party to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it
would otherwise be entitled to exercise pursuant to Section 7(a)(i)
shall cease, and all such rights shall
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thereupon become vested in Secured Party who shall thereupon have
the sole right to exercise such voting and other consensual rights;
(ii) all rights of Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon
have the sole right to receive and hold as Pledged Collateral such
dividends and interest payments; and
(iii) all dividends, principal and interest payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 7(b) shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Pledgor and
shall forthwith be paid over to Secured Party as Pledged Collateral
in the same form as so received (with any necessary indorsements).
(c) In order to permit Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including giving or withholding written
consents of shareholders, calling special meetings of shareholders and voting at
such meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon and only upon the
occurrence and during the continuation of an Event of Default and which proxy
shall only terminate upon the payment in full of the Secured Obligations.
SECTION 8. Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion upon and
only upon and during the continuation of an Event of Default to take any action
and to execute any instrument that Secured Party may deem necessary or advisable
to accomplish the purposes of this Agreement, including:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
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(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may reasonably deem necessary or desirable for
the collection of any of the Pledged Collateral or otherwise to enforce the
rights of Secured Party with respect to any of the Pledged Collateral.
SECTION 9. Secured Party May Perform. If Pledgor fails to perform
any agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13(b).
SECTION 10. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not Secured Party has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
SECTION 11. Remedies.
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as are
commercially reasonable. Secured Party or any Lender or Interest Rate Exchanger
may be the purchaser of any or all of the Pledged Collateral at any such sale
and Secured Party, as agent for and representative of Lenders and Interest Rate
Exchangers (but not any Lender or Lenders or
9
<PAGE>
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Lenders or Requisite Obligees (as defined
in Section 15(a)) shall otherwise agree in writing), shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Pledged Collateral sold at any such public sale, to
use and apply any of the Secured Obligations as a credit on account of the
purchase price for any Pledged Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Pledgor, and Pledgor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice to
Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. Secured
Party shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Pledgor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a commercially reasonable private sale was
less than the price which might have been obtained at a public sale, even if
Secured Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale thereof. Pledgor acknowledges that any such private
sale may be at prices and on terms less favorable than those obtainable through
a public sale without such restrictions (including a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, Pledgor agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Pledged Collateral for the period of time
necessary to permit the issuer thereof to register it for a form of public sale
requiring registration under the Securities Act or under applicable state
securities laws, even if such issuer would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may reasonably
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Secured Party in
10
<PAGE>
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
SECTION 12. Application of Proceeds. All proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral shall be applied as provided in
subsection 2.4D of the Credit Agreement.
SECTION 13. Indemnity and Expenses.
(a) Pledgor agrees to indemnify Secured Party, each Lender and each
Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's or such Lender's or Interest Rate Exchanger's lack
of good faith, gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Pledgor shall pay to Secured Party upon demand the amount of any
and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by Pledgor to perform or observe any of the provisions hereof
SECTION 14. Continuing Security Interest; Transfer of Loans. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations other than those referred to in Section 12.9 of the Credit
Agreement, and any others which survive the payment of principal and interest on
the Loans, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 12.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations other than those referred to
in Section 12.9 of the Credit Agreement, and any others which survive the
payment of principal and interest on the Loans, the cancellation or termination
of the Commitments and the cancellation or expiration of all outstanding Letters
of Credit, the security interest granted hereby shall terminate and all rights
to the Pledged Collateral shall revert to Pledgor. Upon any such termination
Secured Party will, at Pledgor's expense, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination and
Pledgor shall be entitled to the return, upon its request and at its expense,
against receipt and without recourse to Secured Party,
11
<PAGE>
of such of the Pledged Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof
SECTION 15. Secured Party as Collateral Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
the release or substitution of Pledged Collateral), solely in accordance with
this Agreement and the Credit Agreement; provided that Secured Party shall
exercise, or refrain from exercising, any remedies provided for in Section 12 in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement other than those referred
to in Section 12.9 of the Credit Agreement and the other Loan Documents, other
than those which survive the payment of principal and interest on the Loans, the
holders of a majority of the aggregate notional amount (or, with respect to any
Interest Rate Agreement that has been terminated in accordance with its terms,
the amount then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Interest Rate
Agreement) under all Interest Rate Agreements (Requisite Lenders or, if
applicable, such holders being referred to herein as "Requisite Obligees"). In
furtherance of the foregoing provisions of this Section 15(a), each Interest
Rate Exchanger, by its acceptance of the benefits hereof, agrees that it shall
have no right individually to realize upon any of the Pledged Collateral
hereunder, it being understood and agreed by such Interest Rate Exchanger that
all rights and remedies hereunder may be exercised solely by Secured Party for
the benefit of Lenders and Interest Rate Exchangers in accordance with the terms
of this Section 15(a).
(b) Secured Party shall at all times be the same Person that is
Collateral Agent under the Credit Agreement. Written notice of resignation by
Collateral Agent pursuant to subsection 10.6 of the Credit Agreement shall also
constitute notice of resignation as Secured Party under this Agreement; removal
of Collateral Agent pursuant to subsection 10.6 of the Credit Agreement shall
also constitute removal as Secured Party under this Agreement; and appointment
of a successor Collateral Agent pursuant to subsection 10.6 of the Credit
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement. Upon the acceptance of any appointment as Collateral Agent under
subsection 10.6 of the Credit Agreement by a successor Collateral Agent, that
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Secured
Party under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed
12
<PAGE>
Collateral Agent's resignation or removal hereunder as Secured Party, the
provisions of this Agreement shall inure to its benefit as to any actions taken
or omitted to be taken by it under this Agreement while it was Secured Party
hereunder.
SECTION 16. Amendments; Etc. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 17. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to Agents shall
not be effective until received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or (i) such other address as shall be designated by such Person in
a written notice delivered to the other party hereto.
SECTION 18. Failure or Indulgence Not Waiver: Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 20. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 21. Governing Law: Terms: Rules of Construction. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF
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<PAGE>
ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the
Credit Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code
in the State of New York are used herein as therein defined. The rules of
construction set forth in subsection 1.3 of the Credit Agreement shall be
applicable to this Agreement mutatis mutandis.
SECTION 22. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 23. Notice of Interest Rate Agreements. The Collateral Agent shall
not be deemed to have any duty whatsoever to any Interest Rate Exchanger until
it shall have received written notice in form and substance satisfactory to the
Collateral Agent from Pledgor or the Interest Rate Exchanger as to the existence
and terms of the applicable Interest Rate Agreement. Collateral Agent may
require each Interest Rate Exchanger to execute and deliver to Collateral Agent
such instruments as Collateral Agent may require evidencing the agreement of
such Interest Rate Exchanger to the terms of this Agreement as a condition to
such Interest Rate Exchanger's entitlement to the benefits hereof
[Remainder of page intentionally left blank]
14
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES CENTRAL
U.S. OPERATIONS, INC.
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS, INC.
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES LIMITED -
CORPORATE
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
SCHEDULE I
Attached to and forming a part of the Pledge Agreement dated as of
August __, 1998 between _______________ as Pledgor, and Bank of America National
Trust and Savings Association, as Secured Party.
Part A
<TABLE>
<CAPTION>
Stock Number of Shares/Percentage of
Stock Issuer Class of Stock Certificate Nos. Par Value Outstanding Shares
- ------------ -------------- ---------------- --------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
Part B
Debt Issuer Amount of Indebtedness
----------- ----------------------
I-1
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________ 199__, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated August __, 1998, between the undersigned and Bank of
America National Trust and Savings Association, as Secured Party (the "Pledge
Agreement," capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
[NAME OF PLEDGOR]
By: _____________________________
Title:
<TABLE>
<CAPTION>
Stock Number of Shares/Percentage of
Stock Issuer Class of Stock Certificate Nos. Par Value Outstanding Shares
- ------------ -------------- ---------------- --------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
Debt Issuer Amount of Indebtedness
----------- ----------------------
II-1
<PAGE>
EXHIBIT XVII
FORM OF SUBSIDIARY
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is dated as of August __,
1998 and entered into by and between _____________________________ a
___________________ corporation ("Grantor"), and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as collateral agent for and representative of (in such
capacity herein called "Secured Party") the financial institutions ("Lenders")
party to the Credit Agreement (as hereinafter defined) and any Interest Rate
Exchangers (as hereinafter defined).
I.
PRELIMINARY STATEMENTS
A. Secured Party, DLJ Capital Funding, Inc., as Syndication Agent,
and Lenders have entered into a Credit Agreement dated as of August 21, 1998
(said Credit Agreement, as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) with Manufacturers' Services Limited, a Delaware corporation
("Company"), and Company's subsidiary, MSL Overseas Finance BV ("MSL Overseas"),
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Company and MSL Overseas.
B. Company may from time to time enter, or may from time to time
have entered, into one or more Interest Rate Agreements (collectively, the
"Interest Rate Agreements") with one or more Lenders (in such capacity,
collectively, "Interest Rate Exchangers").
C. Grantor has executed and delivered a Subsidiary Guaranty dated as
of August __, 1998 (said Subsidiary Guaranty, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "Guaranty") in
favor of Secured Party for the benefit of Lenders and any Interest Rate
Exchangers, pursuant to which Grantor has guarantied the prompt payment and
performance when due of all obligations of Company and MSL Overseas under the
Credit Agreement and the other Loan Documents and all obligations of Company
under the Interest Rate Agreements, including obligation of Company to make
payments thereunder in the event of early termination thereof.
D. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Grantor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Interest Rate Exchangers to enter into the Interest Rate
Agreements, and for other good and
<PAGE>
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. Grant of Security. Grantor hereby assigns to Secured
Party, and hereby grants to Secured Party a security interest in, all of
Grantor's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Grantor now has or hereafter
acquires an interest and wherever the same may be located (the "Collateral"):
(a) all equipment in all of its forms, all parts thereof and all
accessions thereto (any and all such equipment, parts and accessions being the
"Equipment");
(b) all inventory in all of its forms (including, but not limited
to, (i) all goods held by Grantor for sale or lease or to be furnished under
contracts of service or so leased or furnished, (ii) all raw materials, work in
process, finished goods, and materials used or consumed in the manufacture,
packing, shipping, advertising, selling, leasing, furnishing or production of
such inventory or otherwise used or consumed in Grantor's business, (iii) all
goods in which Grantor has an interest in mass or a joint or other interest or
right of any kind, and (iv) all goods which are returned to or repossessed by
Grantor) and all accessions thereto and products thereof (all such inventory,
accessions and products being the "Inventory") and all negotiable documents of
title (including without limitation warehouse receipts, dock receipts and bills
of lading) issued by any Person covering any Inventory (any such negotiable
document of title being a "Negotiable Document of Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of any kind
arising out of or in connection with the sale or lease of goods or the rendering
of services and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, documents, instruments, general intangibles or other
obligations (provided, however, that Grantor shall not be required to grant a
security interest in any instruments pursuant to this Section 1(c) to the extent
that such grant of a security interest would constitute an investment of
earnings in United States property under Section 956 (or a successor provision)
of the Internal Revenue Code (the "IRC") that would trigger an increase in the
gross income of a United States shareholder of Grantor pursuant to Section 951
(or a successor provision) of the IRC) (any and all such accounts, contract
rights, chattel paper, documents, instruments, general intangibles and other
obligations being the "Accounts", and any and all such security agreements,
leases and other contracts being the "Related Contracts");
(d) the agreements listed in Schedule I annexed hereto, as each such
agreement may be amended, supplemented or otherwise modified from time to time
(said agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "Assigned Agreement" and collectively as
the "Assigned Agreements"), including without limitation (i) all rights of
Grantor to receive moneys due or to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
all claims of Grantor for damages arising out of any breach of or default under
the Assigned Agreements, and (iv) all rights of Grantor to terminate, amend,
supplement, modify or exercise
2
<PAGE>
rights or options under the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder
(e) all deposit accounts, including without limitation all deposit
accounts maintained with Secured Party;
(f) the "Intellectual Property Collateral", which term means:
(i) all rights, title and interest (including rights acquired
pursuant to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all trademarks,
service marks, designs, logos, indicia, tradenames, trade dress, corporate
names, company names, business names, fictitious business names, trade
styles and/or other source and/or business identifiers and applications
pertaining thereto, owned by such Grantor, or hereafter adopted and used,
in its business (including, without limitation, the trademarks
specifically identified in Schedule I, as the same may be amended pursuant
hereto from time to time) (collectively, the "Trademarks"), all
registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign
countries (including, without limitation, the registrations and
applications specifically identified in Schedule 1, as the same may be
amended pursuant hereto from time to time) (the "Trademark
Registrations"), all common law and other rights (but in no event any of
the obligations) in and to the Trademarks in the United States and any
state thereof and in foreign countries (the "Trademark Rights"), and all
goodwill of such Grantor's business symbolized by the Trademarks and
associated therewith (the "Associated Goodwill"):
(ii) all rights, title and interest (including rights acquired
pursuant to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all patents and
patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in
the future may be, owned or held by such Grantor and all patents and
patent applications and rights, title and interests in patents and patent
applications under any domestic or foreign law that are presently, or in
the future may be, owned by such Grantor in whole or in part, all rights
(but not obligations) corresponding thereto (including, without
limitation, the right (but not the obligation), exercisable only upon the
occurrence and during the continuation of an Event of Default, to sue for
past, present and future infringements in the name of such Grantor or in
the name of Secured Party or Lenders), and all re-issues, divisions,
continuations, renewals, extensions and continuations-in-part thereof (all
of the foregoing being collectively referred to as the "Patents"); it
being understood that the rights and interests included in the
Intellectual Property Collateral hereby shall include, without limitation,
all rights and interests pursuant to licensing or other contracts in favor
of such Grantor pertaining to patent applications and patents presently or
in the future owned or used by third parties but, in the case of third
parties which are not Affiliates of such Grantor, only to the extent
permitted by such licensing or other contracts and, if not so permitted,
only with the consent of such third parties; and
(iii) all rights, title and interest (including rights
acquired pursuant to a license or otherwise but only to the extent
permitted by agreements governing such license
3
<PAGE>
or other use) under copyright in various published and unpublished works
of authorship including, without limitation, computer programs, computer
data bases, other computer software, layouts, trade dress, drawings,
designs, writings, and formulas owned by Grantor (collectively, the
"Copyrights"), all copyright registrations issued to such Grantor and
applications for copyright registration that have been or may hereafter be
issued or applied for thereon by Grantor in the United States and any
state thereof and in foreign countries (collectively, the "Copyright
Registrations"), all common law and other rights in and to the Copyrights
in the United States and any state thereof and in foreign countries
including all copyright licenses (but with respect to such copyright
licenses, only to the extent permitted by such licensing arrangements)
(the "Copyright Rights"), including, without limitation, each of the
Copyrights, rights, titles and interests in and to the Copyrights and
works protectable by copyright, which are presently, or in the future may
be, owned, created (as a work for hire for the benefit of such Grantor),
authored (as a work for hire for the benefit of such Grantor), or acquired
by such Grantor, in whole or in part, and all Copyright Rights with
respect thereto and all Copyright Registrations therefor, heretofore or
hereafter granted or applied for, and all renewals and extensions thereof,
throughout the world, including all proceeds thereof (such as, by way of
example and not by limitation, license royalties and proceeds of
infringement suits), the right (but not the obligation) exercisable only
upon the occurrence and during the continuation of an Event of Default to
renew and extend such Copyright Registrations and Copyright Rights and to
register works protectable by copyright and the right (but not the
obligation) exercisable only upon the occurrence and during the
continuation of an Event of Default to sue for past, present and future
infringements of the Copyrights and Copyright Rights;
(g) all information used or useful or arising from the business
including all goodwill, trade secrets, trade secret rights, know-how, customer
lists, processes of production, ideas, confidential business information,
techniques, processes, formulas, and all other proprietary information;
(h) to the extent not included in any other paragraph of this
Section 1, all other general intangibles (including without limitation tax
refunds, rights to payment or performance, choses in action and judgments taken
on any rights or claims included in the Collateral);
(i) all plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all accessions thereto and products thereof;
(j) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the Collateral or are
otherwise necessary or helpful in the collection thereof or realization
thereupon; and
(k) all proceeds, products, rents and profits of or from any and all
of the foregoing Collateral and, to the extent not otherwise included, all
payments under insurance (whether or not Secured Party is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral. For
purposes of this Agreement, the term "proceeds" includes whatever is receivable
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or received when Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.
SECTION 2. Security for Obligations. This Agreement secures, and the
Collateral is collateral security for, the prompt payment or performance in full
when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise taking into account any applicable grace,
notice or cure period (including the payment of amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. ss.362(a) or similar provision of any foreign law),
of all obligations and liabilities of every nature of Grantor now or hereafter
existing under or arising out of or in connection with the Guaranty and all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Company, would accrue on such obligations whether or not a claim
is allowed against Company for such interest in the related bankruptcy
proceeding), reimbursement of amounts drawn under Letters of Credit, payments
due for early termination of Interest Rate Agreements in accordance with the
terms of the applicable Interest Rate Agreement, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Lender as
a preference, fraudulent transfer or otherwise (all such obligations and
liabilities being the "Underlying Debt"), and all obligations of every nature of
Grantor now or hereafter existing under this Agreement (all such obligations of
Grantor, together with the Underlying Debt, being the "Secured Obligations").
SECTION 3. Grantor Remains Liable. Anything contained herein to the
contrary notwithstanding, (a) Grantor shall remain liable under any contracts
and agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 4. Representations and Warranties. Grantor represents and
warrants as follows:
(a) Ownership of Collateral. Except for Permitted Encumbrances,
claims of real estate interests in fixtures and the security interest created by
this Agreement, Grantor owns the Collateral free and clear of any Lien and no
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any filing or recording office.
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(b) Location of Equipment and Inventory. All of the Equipment and
Inventory is, as of the date hereof, located at the places specified in Schedule
II annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of Title
are outstanding with respect to any of the Inventory.
(d) Office Locations; Other Names. The chief place of business, the
chief executive office and the office where Grantor keeps its records regarding
the Accounts and all originals of all chattel paper that evidence Accounts is,
and has been for the four month period preceding the date hereof, located at
____________________________________. Grantor has not in the past done, and does
not now do, business under any other name (including any trade-name or
fictitious business name).
(e) Delivery of Certain Collateral. All notes and other instruments
(excluding checks) comprising any and all items of Collateral have been
delivered to Secured Party duly endorsed and accompanied by duly executed
instruments of transfer or assignment in blank.
(f) Governmental Authorizations. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body other than filing financing statements and continuation
statements under the Uniform Commercial Code and upon certain changes in Grantor
or its property, other forms pursuant to the Uniform Commercial Code is required
for either (i) the grant by Grantor of the security interest granted hereby,
(ii) the execution, delivery or performance of this Agreement by Grantor, or
(iii) the perfection of or the exercise by Secured Party of its rights and
remedies hereunder (except as may have been taken by or at the direction of
Grantor).
(g) Intellectual Property Collateral.
(i) a true and complete list of all Trademark Registrations
and applications to register Trademarks owned or held (whether pursuant to
a license or otherwise) by such Grantor, in whole or in part, is set forth
in Schedule I;
(ii) after reasonable inquiry, such Grantor is not aware of
any pending or threatened claim by any third party that any of the
Intellectual Property Collateral owned by such Grantor is invalid or
unenforceable; and
(iii) no effective security interest or other Lien covering
all or any part of the Intellectual Property Collateral owned by such
Grantor is on file in the United States Patent and Trademark Office or the
United States Copyright Office.
(h) Validity and Enforceability of Intellectual Property Collateral.
Each of the trademarks, servicemarks, tradenames, copyrights and patents or
applications making up the Intellectual Property owned by such Grantor is valid,
subsisting and enforceable and Grantor is not aware of any pending or threatened
claim by any third party that any of the trademarks, servicemarks, tradenames,
copyrights or patents owned by such Grantor is invalid or unenforceable or that
the use of any of the trademarks, tradenames, copyrights or patents owned by
such Grantor violates the rights of any third person or of any basis for any
such claim.
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(i) Perfection. This Agreement, together with the filing of
financing statements, on form UCC-1 in the jurisdictions shown on Schedule II
and the recording of the Grant of Intellectual Property Security Interest
substantially in the form of Exhibit A hereto ("Grant of Intellectual Property
Security Interest") describing the Intellectual Property Collateral with the
United States Patent and Trademark Office which have been made, create a valid,
perfected and, except for Permitted Encumbrances, first priority security
interest in the Collateral, if and to the extent perfection may be achieved by
such filing, securing the payment of the Secured Obligations.
(j) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by Grantor or on its behalf by its
accountants and counsel with respect to the Collateral is accurate and complete
in all respects.
SECTION 5. Further Assurances.
(a) Grantor agrees that from time to time, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be reasonably necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, Grantor will: (i) at the request of Secured Party mark conspicuously
each item of chattel paper included in the Accounts, each Related Contract and
each of its records pertaining to the Collateral, with a legend, in form and
substance reasonably satisfactory to Secured Party, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party, deliver and pledge to Secured Party hereunder all
promissory notes and other instruments (other than checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance reasonably satisfactory to Secured Party, (iii) execute and file
such financing or continuation statements, or amendments thereto, and such other
writings or notices, as may be reasonably necessary or desirable, or as Secured
Party may reasonably request, in order to perfect and preserve the security
interests granted or purported to be granted hereby, (iv) at any reasonable
time, upon request by Secured Party, after reasonable notice except if an Event
of Default has occurred and is continuing exhibit the Collateral to and allow
inspection of the Collateral by Secured Party, or persons designated by Secured
Party, and (v) at Secured Party's reasonable request, appear in and defend any
action or proceeding that may affect Grantor's title to or Secured Party's
security interest in all or any part of the Collateral if perfected but not vis
a vis Permitted Encumbrances.
(b) Grantor hereby authorizes Secured Party to file one or more
continuation statements, and/or amendments to continuation statements, relative
to all or any part of the Collateral without the signature of Grantor. Grantor
hereby authorizes Secured Party to file one or more financing statements and/or
amendments to financing statements relative to all or any part of the Collateral
without the signature of Grantor; provided that Secured Party (i) gives notice
to Grantor of its intention to do so and (ii) Grantor does not respond by filing
a financing statement within five days of receipt of such notice. Grantor agrees
that a carbon, photographic or other reproduction of this Agreement or of a
financing statement signed by Grantor shall be
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sufficient as a financing statement and may be filed as a financing statement in
any and all jurisdictions.
(c) Without limiting the generality of the foregoing clause (a), if
any Grantor shall hereafter obtain rights to any new Intellectual Property
Collateral or become entitled to the benefit of (i) any patent application or
patent or any reissue, division, continuation, renewal, extension or
continuation-in-part of any Patent or any improvement of any Patent; or (ii) any
Copyright Registration, application for Registration or renewals or extension of
any Copyright, then in any such case, the provisions of this Agreement shall
automatically apply thereto. Each Grantor shall promptly notify Secured Party in
writing of any of the foregoing rights acquired by such Grantor after the date
hereof and of (i) any Trademark Registrations issued or application for a
Trademark Registration or application for a Patent made, and (ii) any Copyright
Registrations issued or applications for Copyright Registration made, in any
such case, after the date hereof. Promptly after the filing of an application
for any (1) Trademark Registration; (2) Patent; and (3) Copyright Registration,
each Grantor shall execute and deliver to Secured Party and record in all places
where this Agreement is recorded a Security Agreement Supplement, substantially
in the form of Exhibit B, pursuant to which such Grantor shall grant to Secured
Party a security interest to the extent of its interest in such Intellectual
Property Collateral; provided, if, in the reasonable judgment of such Grantor,
after due inquiry, granting such interest would result in the grant of a
Trademark Registration or Copyright Registration in the name of Secured Party,
such Grantor shall give written notice to Secured Party as soon as reasonably
practicable and the filing shall instead be undertaken as soon as practicable
but in no case later than immediately following the grant of the applicable
Trademark Registration or Copyright Registration, as the case may be.
(d) Each Grantor hereby authorizes Secured Party to modify, this
Agreement without obtaining such Grantor's approval of or signature to such
modification by amending Schedule I, to include reference to any right, title or
interest in any existing Intellectual Property Collateral or any Intellectual
Property Collateral acquired or developed by any Grantor after the execution
hereof or to delete any reference to any right, title or interest in any
Intellectual Property Collateral in which any Grantor no longer has or claims
any right, title or interest.
(e) Grantor will furnish to Secured Party statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral every quarter, all in reasonable detail.
SECTION 6. Certain Covenants of Grantor. Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity
or corporate structure except as contemplated by the Credit Agreement within 15
days of such change;
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(c) give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office or residence or the
office where Grantor keeps its records regarding the Accounts;
(d) if Secured Party gives value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
(e) pay all taxes, assessments and other governmental charges
imposed upon the Collateral before any penalty accrues thereon, and all claims
(including claims for labor, services, materials and supplies) against the
Collateral for sums that have become due and payable and that by law have or may
become a Lien upon any of its properties or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; provided that no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long as
(1) such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor and (2) in the case of a
charge or claim which has or may become a Lien against any of the Collateral,
such contest proceedings conclusively operate to stay the sale of any portion of
the Collateral to satisfy such charge or claim.
SECTION 7. Special Covenants With Respect to Equipment and
Inventory. Grantor shall:
(a) until the sale or lease thereof as permitted hereby keep the
Equipment and Inventory at the places therefor specified on Schedule II annexed
hereto or, upon 30 days' prior written notice to Secured Party, at such other
places in jurisdictions where all action that may be reasonably necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby, or to
enable Secured Party to exercise and enforce its rights and remedies hereunder,
with respect to such Equipment and Inventory shall have been taken;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as on this date, ordinary wear and tear
excepted, and in accordance with Grantor's past practices.
(c) keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, Grantor's book value
therefor in accordance with Grantor's past practices; and
(d) promptly upon the issuance and delivery to Grantor of any
Negotiable Document of Title, deliver such Negotiable Document of Title to
Secured Party except as otherwise necessary or desirable in the operation of
Grantor's business.
SECTION 8. Insurance. Grantor shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in accordance with the
terms of the Credit Agreement.
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SECTION 9. Special Covenants with respect to Accounts and Related
Contracts.
(a) Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, at the location therefor specified in Section 4
or, upon 30 days' prior written notice to Secured Party, at such other location
in a jurisdiction where all action that may be reasonably necessary or
desirable, or that Secured Party may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby, or to
enable Secured Party after and during the continuation of an Event of Default to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Grantor will hold and
preserve such records and will permit representatives of Secured Party at any
time during normal business hours after reasonable notice unless an Event of
Default has occurred and is continuing to inspect and make abstracts from such
records and chattel paper, and Grantor agrees to render to Secured Party, at
Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Promptly upon the request of Secured
Party, Grantor shall deliver to Secured Party complete and correct copies of
each Related Contract.
(b) Grantor shall, for not less than 5 years from the date on which
such Account arose, maintain (i) complete records of each Account, including
records of all payments received, credits granted and merchandise returned, and
(ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to Grantor under the Accounts and Related Contracts. In connection with such
collections, Grantor may take (and, at Secured Party's direction, after and
during the continuation of an Event of Default shall take) such action as
Grantor or Secured Party may deem necessary or advisable to enforce collection
of amounts due or to become due under the Accounts; provided, however, that
Secured Party shall have the right at any time, upon the occurrence and during
the continuation of an Event of Default or a Potential Event of Default and upon
written notice to Grantor of its intention to do so, to notify the account
debtors or obligors under any Accounts of the assignment of such Accounts to
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to Grantor thereunder directly to Secured
Party, to notify each Person maintaining a lockbox or similar arrangement to
which account debtors or obligors under any Accounts have been directed to make
payment to remit all amounts representing collections on checks and other
payment items from time to time sent to or deposited in such lockbox or other
arrangement directly to Secured Party and, upon such notification and at the
expense of Grantor, to enforce collection of any such Accounts and to adjust,
settle or compromise the amount or payment thereof, in the same manner and to
the same extent as Grantor might have done. After receipt by Grantor of the
notice from Secured Party referred to in the proviso to the preceding sentence,
(i) all amounts and proceeds (including checks and other instruments) received
by Grantor in respect of the Accounts and the Related Contracts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be promptly applied as provided by Section 18, and (ii) Grantor
shall
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not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 10. Special Provisions With Respect to the Assigned
Agreements.
(a) Grantor shall at its expense:
(i) perform and observe all terms and provisions of the
Assigned Agreements to be performed or observed by it, maintain the
Assigned Agreements in full force and effect, enforce the Assigned
Agreements in accordance with their terms, and take all such action to
such end as may be from time to time requested by Secured Party; and
(ii) furnish to Secured Party, promptly upon receipt thereof,
copies of all notices, requests and other documents received by Grantor
under or pursuant to the Assigned Agreements, and from time to time
furnish to Secured Party such information and reports regarding the
Assigned Agreements as Secured Party may reasonably request and (B) upon
request.
(b) Grantor shall not:
(i) cancel or terminate any of the Assigned Agreements or
consent to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give
any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned
Agreements;
(iv) consent to or permit or accept any prepayment of amounts
to become due under or in connection with the Assigned Agreements, except
as expressly provided therein; or
(v) take any other action in connection with the Assigned
Agreements that would impair the value of the interest or rights of
Grantor thereunder or that would impair the interest or rights of Secured
Party.
SECTION 11. Deposit Accounts. Upon the occurrence and during the
continuation of an Event of Default, Secured Party may exercise dominion and
control over, and refuse to permit further withdrawals (whether of money,
securities, instruments or other property) from any deposit accounts maintained
by Grantor with Secured Party constituting part of the Collateral.
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SECTION 12. Special Provisions With Respect to the Intellectual
Property Collateral.
(a) Each Grantor shall:
(i) diligently keep reasonable records respecting the
Intellectual Property Collateral and at all times keep at least one
complete set of its records concerning such Collateral at its chief
executive office or principal place of business;
(ii) hereafter use commercially reasonable efforts so as not
to permit the inclusion in any contract to which it hereafter becomes a
party of any provision that could or might in any way materially impair or
prevent the creation of a security interest in, or the assignment of, such
Grantor's rights and interests in any property included within the
definitions of any Intellectual Property Collateral acquired under such
contacts;
(iii) take all steps deemed appropriate in Grantor's
commercially reasonable judgement to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under or
in connection with the Intellectual Property Collateral, including,
without limitation, where appropriate entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents;
(iv) use proper statutory notice in connection with its use of
any of the Intellectual Property Collateral;
(v) use a commercially appropriate standard of quality (which
may be consistent with such Grantor's past practices) in the manufacture,
sale and delivery of products and services sold or delivered under or in
connection with the Trademarks; and
(vi) furnish to Secured Party from time to time at Secured
Party's reasonable request statements and schedules further identifying
and describing any Intellectual Property Collateral and such other reports
in connection with such Collateral, all in reasonable detail.
(b) Except as otherwise provided in this Section 12, each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to such Grantor in respect of the Intellectual Property Collateral or any
portion thereof. In connection with such collections, each Grantor may take such
action as such Grantor may deem reasonably necessary or advisable to enforce
collection of such amounts; provided that Secured Party shall, upon request of
Grantor and at its expense, take such action as may be reasonably necessary to
cooperate with Grantor where required in connection with such collection
provided that Grantor shall have made arrangements satisfactory to Secured Party
to indemnify it against any liabilities therefor; and; provided, further,
Secured Party shall have the right at any time, upon the occurrence and during
the continuation of an Event of Default and upon written notice to such Grantor
of its intention to do so, to notify the obligors with respect to any such
amounts of the existence of the security interest created hereby and to direct
such obligors to make payment of all such amounts directly to Secured Party,
and, upon such notification and at the expense of such Grantor, to enforce
collection of any such amounts and to adjust, settle or compromise the amount or
payment thereof, in the same manner and to the same extent as such Grantor might
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have done. After receipt by any Grantor of the notice from Secured Party
referred to in the proviso to the preceding sentence and during the continuation
of any Event of Default, (i) all amounts and proceeds (including checks and
other instruments) received by each Grantor in respect of amounts due to such
Grantor in respect of the Intellectual Property Collateral or any portion
thereof shall be received in trust for the benefit of Secured Party hereunder,
shall be segregated from other funds of such Grantor and shall be forthwith paid
over or delivered to Secured Party in the same form as so received (with any
necessary endorsement) to be held as cash Collateral and applied as provided by
Section 18, and (ii) such Grantor shall not adjust, settle or compromise the
amount or payment of any such amount or release wholly or partly any obligor
with respect thereto or allow any credit or discount thereon.
(c) Each Grantor shall have the duty diligently to prosecute, file
and/or make, unless and until such Grantor, in its commercially reasonable
judgment, decides otherwise, (i) any application relating to any of the
Intellectual Property Collateral owned, held or used by such Grantor and
identified on Schedule I, as applicable, that is pending as of the date of this
Agreement, (ii) any Copyright Registration on any existing or future
unregistered but copyrightable works (except for works of nominal commercial
value or with respect to which such Grantor has determined in the exercise of
its commercially reasonable judgment that it shall not seek registration), (iii)
application on any future patentable but unpatented innovation or invention
comprising Intellectual Property Collateral, and (iv) any Trademark opposition
and cancellation proceedings, renew Trademark Registrations and Copyright
Registrations and do any and all acts which are necessary or desirable, as
determined in such Grantor's commercially reasonable judgment, to preserve and
maintain all rights in all Intellectual Property Collateral. Any expenses
incurred in connection therewith shall be borne solely by Grantors. Subject to
the foregoing, each Grantor shall give Secured Party prior written notice of any
abandonment of any Intellectual Property Collateral or any pending patent
application or any Patent.
(d) Except as provided herein, each Grantor shall have the right to
commence and prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other actions for
infringement, unfair competition, dilution, misappropriation or other damage, or
reexamination or reissue proceedings as are in its commercially reasonable
judgment necessary to protect the Intellectual Property Collateral. Secured
Party shall provide, at such Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action but Secured
Party shall not be required to take any such action including, without
limitation, joining as a necessary party unless it shall be indemnified by
Grantor pursuant to arrangements satisfactory to Secured Party against any and
all liability relating thereto. Each Grantor shall promptly, following its
becoming aware thereof, notify Secured Party of the institution of, or of any
adverse determination in, any proceeding (whether in the United States Patent
and Trademark Office, the United States Copyright Office or any federal, state,
local or foreign court) or regarding such Grantor's ownership, right to use, or
interest in any Intellectual Property Collateral. Each Grantor shall provide to
Secured Party any information with respect thereto requested by Secured Party.
(e) In addition to, and not by way of limitation of, the granting of
a security interest in the Collateral pursuant hereto, each Grantor, effective
upon the occurrence and during the continuation of an Event of Default and upon
written notice from Secured Party, shall grant, sell, convey, transfer, assign
and set over to Secured Party, for its benefit and the ratable benefit
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of Lenders, all of such Grantor's right, title and interest in and to the
Intellectual Property Collateral to the extent necessary to enable Secured Party
to use, possess and realize on the Intellectual Property Collateral and to
enable any successor or assign to enjoy the benefits of the Intellectual
Property Collateral. This right shall inure to the benefit of all successors,
assigns and transferees of Secured Party and its successors, assigns and
transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license shall be granted free of charge, without requirement that any monetary
payment whatsoever be made to such Grantor. In addition, each Grantor hereby
grants to Secured Party and its employees, representatives and agents the right
to visit such Grantor's and any of its Affiliate's or subcontractor's plants,
facilities and other places of business that are utilized in connection with the
manufacture, production, inspection, storage or sale of products and services
sold or delivered under any of the Intellectual Property Collateral (or which
were so utilized during the prior six month period), and to inspect the quality
control and all other records relating thereto upon reasonable advance written
notice to such Grantor and at reasonable dates and times and as often as may be
reasonably requested. If and to the extent that any Grantor is permitted to
license the Intellectual Property Collateral, Secured Party shall promptly enter
into a non-disturbance agreement or other similar arrangement, at such Grantor's
request and expense, with such Grantor and any licensee of any Intellectual
Property Collateral permitted hereunder in form and substance reasonably to
Secured Party pursuant to which (i) Secured Party shall agree not to disturb or
interfere with such licensee's rights under its license agreement with such
Grantor so long as such licensee is not in default thereunder, and (ii) such
licensee shall acknowledge and agree that the Intellectual Property Collateral
licensed to it is subject to the security interest created in favor of Secured
Party and the other terms of this Agreement.
SECTION 13. Transfers and Other Liens. Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit Agreement;
or
(b) except for Permitted Encumbrances and the security interest
created by this Agreement, create or suffer to exist any Lien upon or with
respect to any of the Collateral to secure the indebtedness or other obligations
of any Person.
SECTION 14. Secured Party Appointed Attorney-in-Fact. Grantor hereby
irrevocably appoints Secured Party as Grantor's attorney-in-fact, with full
authority in the place and stead of Grantor and in the name of Grantor, Secured
Party or otherwise, from time to time in Secured Party's discretion effective
upon the occurrence and during the continuation of any Event of Default to take
any action and to execute any instrument that Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to obtain and adjust insurance required to be maintained by
Grantor or paid to Secured Party pursuant to the terms of the Credit Agreement;
(b) to ask for, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
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(c) to receive, endorse and collect any drafts or other Instruments,
documents and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted
under this Agreement or the Credit Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and other
documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes, and to
do, at Secured Party's option and Grantor's expense, at any time or from time to
time, all acts and things that Secured Party deems necessary to protect,
preserve or realize upon the Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
SECTION 15. Secured Party May Perform. If Grantor fails to perform
any agreement contained herein, Secured Party may after reasonable notice to
Grantor itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Grantor in accordance with the terms of the Credit Agreement.
SECTION 16. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the exercise of
reasonable care in the custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Secured Party shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral. Secured Party shall be deemed to have exercised reasonable care in
the custody and preservation of Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property.
SECTION 17. Remedies. If any Event of Default shall have occurred
and be continuing, Secured Party may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect in any relevant jurisdiction (the
"Code") (whether or not the Code applies to the affected Collateral), and also
may (a) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party
15
<PAGE>
and make it available to Secured Party at a place to be designated by Secured
Party that is reasonably convenient to both parties, (b) enter onto the property
where any Collateral is located and take possession thereof with or without
judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same and any of
Grantor's equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (c) and collecting any Secured
Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
fixture delivery, at such time or times and at such price or prices and upon
such other terms as are commercially reasonable. Secured Party or any Lender or
Interest Rate Exchanger may be the purchaser of any or all of the Collateral at
any such sale and Secured Party, as agent for and representative of Lenders and
Interest Rate Exchangers (but not any Lender or Lenders or Interest Rate
Exchanger in its or their respective individual capacities unless Requisite
Lenders or Requisite Obligees (as defined in Section 22(a) shall otherwise agree
in writing), shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Collateral sold
at any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by Secured
Party at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of Grantor, and Grantor
hereby waives (to the extent permitted by applicable law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Grantor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Collateral may have been sold at such a commercially reasonable
private sale was less than the price which might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not offer
such Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the reasonable fees
of any attorneys employed by Secured Party to collect such deficiency.
SECTION 18. Additional Remedies for Intellectual Property
Collateral.
(a) Anything contained herein to the contrary notwithstanding, upon
the occurrence and during the continuation of an Event of Default, (i) Secured
Party shall have the right (but not the obligation) to bring suit, in the name
of any Grantor, Secured Party or otherwise, to enforce any Intellectual Property
Collateral, in which event each Grantor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by Secured
Party in aid of such enforcement and each Grantor shall promptly, upon demand,
reimburse and indemnify Secured Party as provided in Sections 12.2 and 12.3 of
the
16
<PAGE>
Credit Agreement and Section 20 hereof, as applicable, in connection with the
exercise of its rights under this Section, and, to the extent that Secured Party
shall elect not to bring suit to enforce any Intellectual Property Collateral as
provided in this Section, each Grantor agrees to use all reasonable measures,
whether by action, suit, proceeding or otherwise, to prevent the infringement of
any of the Intellectual Property Collateral by others and for that purpose
agrees to use its commercially reasonable judgement in maintaining any action,
suit or proceeding against any Person so infringing reasonably necessary to
prevent such infringement; (ii) upon written demand from Secured Party, each
Grantor shall execute and deliver to Secured Party an assignment or assignments
of the Intellectual Property Collateral and such other documents as are
necessary or appropriate to carry out the intent and purposes of this Agreement;
(iii) each Grantor agrees that such an assignment and/or recording shall be
applied to reduce the Secured Obligations outstanding only to the extent that
Secured Party (or any Lender) receives cash proceeds in respect of the sale of,
or other realization upon, the Intellectual Property Collateral; and (iv) within
five Business Days after written notice from Secured Party, each Grantor shall
make available to Secured Party, to the extent within such Grantor's power and
authority, such personnel in such Grantor's employ on the date of such Event of
Default as Secured Party may reasonably designate, by name, title or job
responsibility, to permit such Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold or delivered by such
Grantor under or in connection with the Trademarks, Trademark Registrations and
Trademark Rights, such persons to be available to perform their prior functions
on Secured Party's behalf and to be compensated by Secured Party at such
Grantor's expense on a per diem, pro-rata basis consistent with the salary and
benefit structure applicable to each as of the date of such Event of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of
cure, waiver, modification, amendment or otherwise, no longer be continuing,
(ii) no other Event of Default shall have occurred and be continuing, (iii) an
assignment to Secured Party of any rights, title and interests in and to the
Intellectual Property Collateral shall have been previously made, and (iv) the
Secured Obligations shall not have become immediately due and payable, upon the
written request of any Grantor, Secured Party shall promptly execute and deliver
to such Grantor such assignments as may be necessary to reassign to such Grantor
any such rights, title and interests as may have been assigned to Secured Party
as aforesaid, subject to any disposition thereof that may have been made by
Secured Party; provided, after giving effect to such reassignment, Secured
Party's security interest granted pursuant hereto, as well as all other rights
and remedies of Secured Party granted hereunder, shall continue to be in full
force and effect; and provided further, the rights, title and interests so
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Encumbrances.
SECTION 19. Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
17
<PAGE>
SECTION 20. Indemnity and Expenses.
(a) Grantor agrees to indemnify Secured Party and each Lender and
each Interest Rate Exchanger from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Lender's lack
of good faith gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any
and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Secured Party may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of Secured Party hereunder, or (iv) the failure by Grantor
to perform or observe any of the provisions hereof.
SECTION 21. Continuing Security Interest; Transfer of Loans. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, (b) be binding
upon Grantor, its successors and assigns, and (c) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (c), but subject to the provisions of subsection 12.1 of
the Credit Agreement, any Lender may assign or otherwise transfer any Loans held
by it to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations other than any which survive
the payment in hill of the principal and interest of the Loans, the cancellation
or termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to Grantor. Upon any
such termination Secured Party will, at Grantor's expense, execute and deliver
to Grantor such documents as Grantor shall reasonably request to evidence such
termination.
SECTION 22. Secured Party as Collateral Agent.
(a) Secured Party has been appointed to act as Secured Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement, provided that Secured
Party shall exercise, or refrain from exercising any remedies provided for in
Section 17 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents other than any which survive the payment in full of the
principal and interest of the Loans, the holders of a majority of the aggregate
notional amount (or, with
18
<PAGE>
respect to any Interest Rate Agreement that has been terminated in accordance
with its terms, the amount then due and payable (exclusive of expenses and
similar payments but including any early termination payments then due) under
such Interest Rate Agreement) under all Interest Rate Agreements (Requisite
Lenders or, if applicable, such holders being referred to herein as "Requisite
Obligees"). In furtherance of the foregoing provisions of this Section 22(a),
each Interest Rate Exchanger, by its acceptance of the benefits hereof, agrees
that it shall have no right individually to realize upon any of the Collateral
hereunder, it being understood and agreed by such Interest Rate Exchanger that
all rights an remedies hereunder may be exercised solely by Secured Party for
the benefit of Lenders and Interest Rate Exchangers in accordance with the terms
of this Section 22(a).
(b) Secured Party shall at all times be the same Person that is
Agent under the Credit Agreement. Written notice of resignation by Agent
pursuant to subsection 10.6 of the Credit Agreement shall also constitute notice
of resignation as Secured Party under this Agreement; removal of Agent pursuant
to subsection 10.6 of the Credit Agreement shall also constitute removal as
Secured Party under this Agreement; and appointment of a successor Agent
pursuant to subsection 10.6 of the Credit Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Agent under subsection 10.6 of the Credit
Agreement by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Secured Party under this Agreement, and the retiring or
removed Secured Party under this Agreement shall promptly (i) transfer to such
successor Secured Party all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Agent's resignation or removal hereunder as Secured Party, the
provisions of this Agreement shall inure to its benefit as to any actions taken
or omitted to be taken by it under this Agreement while it was Secured Party
hereunder.
SECTION 23. Amendments; Etc. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Grantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 24. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telexed or sent by telefacsimile or
United States mail or courier service and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to Agents shall
not be effective until received. For the purposes hereof, the address of each
party hereto shall be
19
<PAGE>
as set forth under such party's name on the signature pages hereof or such other
address as shall be designated by such Person in a written notice delivered to
the other parties hereto.
SECTION 25. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 26. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 27. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 28. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF
THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit Agreement,
terms used in Articles 8 and 9 of the Uniform Commercial Code in the State of
New York are used herein as therein defined.
SECTION 29. Counterparts. This Agreement may be executed in one or
more counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
SECTION 30. Notice of Interest Rate Agreements. The Collateral Agent
shall not be deemed to have any duty whatsoever with respect to any Interest
Rate Exchange until it shall have received written notice in form and substance
satisfactory to the Collateral Agent from Grantor or the Interest Rate Exchanger
as to the existence and terms of the applicable Interest Rate Agreement.
Collateral Agent may require each Interest Rate Exchanger to execute and deliver
to Collateral Agent such instruments as Collateral Agent may require evidencing
the
20
<PAGE>
agreement of such Interest Rate Exchanger to the terms of this Agreement as a
condition to such Interest Rate Exchanger's entitlement to the benefits hereof
[Remainder of page intentionally left blank]
21
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES CENTRAL
U.S. OPERATIONS, INC.
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS, INC.
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
MANUFACTURERS' SERVICES LIMITED -
CORPORATE
By: _____________________________________
Title:
Notice Address: 200 Baker Avenue
Concord, MA 10742
Attention: Dale Johnson
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Collateral Agent
By: _____________________________________
Title:
Notice Address: Agency Management 10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Wendy Young
S-1
<PAGE>
SCHEDULE I
TO SECURITY AGREEMENT
Assigned Agreements:
None
Trademarks:
None
<PAGE>
SCHEDULE II
TO SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
UCC Filing Jurisdictions:
<PAGE>
EXHIBIT B
SUBSIDIARY SECURITY AGREEMENT SUPPLEMENT
This SECURITY AGREEMENT SUPPLEMENT, dated _______,is delivered pursuant to
the Security Agreement, dated as of August __, 1998 (as it may be from time to
time amended, modified or supplemented, the "Security Agreement"), among
[Grantor] and Bank of America National Trust and Savings Association, as Secured
Party. Capitalized terms used herein not otherwise defined herein shall have the
meanings ascribed thereto in the Security Agreement.
Subject to the terms and conditions of the Security Agreement, Grantor
hereby grants to Secured Party a security interest in all of Grantor's right,
title and interest in and to the Intellectual Property Collateral listed on
Supplemental Schedule [1(a)] [1(b)] [1.(c)] attached hereto the following, in
each case whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located. All such
Intellectual Property Collateral shall be deemed to be part of the Collateral
and hereafter subject to each of the terms and conditions of the Security
Agreement.
IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly executed
and delivered by its duly authorized officer as of_______________
[GRANTOR]
By: ______________________________
Name:
Title:
B-1
<PAGE>
Supplemental Schedule ____
Trademarks:
Trademark Registration Registration
Registered Owner Description Number Date
- ---------------- ----------- ------ ----
Patents Issued:
Patent No. Issue Date Invention Inventor
- ---------- ---------- --------- --------
Patents Pending:
Applicant's Date Application
Name Filed Number Invention Inventor
- ---- ----- ------ --------- --------
U.S. Copyrights:
Copyright Registration No. Date of Issue Registered Owner
- --------- ---------------- ------------- ----------------
Foreign Copyright Registrations:
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
1
<PAGE>
Pending U.S. Copyrights:
Copyright Reference No. Date of Application Copyright Claimant
- --------- ------------- ------------------- ------------------
Pending Foreign Copyrights:
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
2
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
AND LIMITED WAIVER
This FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this
"Amendment") is dated as of February 26, 1999 and entered into by and among
Manufacturers' Services Limited, a Delaware corporation ("Company"), MSL
Overseas Finance B.V., a Netherlands private company with limited liability
("MSL Overseas"), the financial institutions listed on the signature pages
hereof ("Lenders"), Bank of America National Trust and Savings Association,
as administrative agent and as collateral agent ("Administrative Agent" and
"Collateral Agent"), and Bank of America International Limited as sub-agent
("Sub-Agent"), and is made with reference to that certain Credit Agreement
dated as of August 21, 1998 (the "Credit Agreement"), by and among Company,
MSL Overseas, Lenders, Sub-Agent, DLJ Capital Funding, Inc., as Syndication
Agent, and Bank of America National Trust and Savings Association, as
Administrative Agent, as Collateral Agent and as Issuing Lender. Capitalized
terms used herein without definition shall have the same meanings herein as
set forth in the Credit Agreement.
RECITALS
WHEREAS, Company, MSL Overseas, Lenders, Sub-Agent, DLJ Capital
Funding, Inc., as Syndication Agent, and Bank of America National Trust and
Savings Association, as Administrative Agent, as Collateral Agent and as Issuing
Lender entered into the Credit Agreement on August 21, 1998;
WHEREAS, Company and Lenders desire to amend the rates of interest
on the Revolving Loans and Term Loans contained in subsection 2.2A of the Credit
Agreement and to correct dates contained in the amortization schedule set forth
in subsection 2.4A of the Credit Agreement;
WHEREAS, subsection 4.4A of the Credit Agreement provides that
certain security interests, mortgages, pledges, related items and documentation
not delivered on the Closing Date must be delivered by Company within the time
period specified in subsection 4.4A;
WHEREAS, on September 25, 1998 and on November 25, 1998, limited
waivers were executed by the parties to the Credit Agreement, which extended the
time to obtain a perfected security interest in certain collateral;
WHEREAS, it will not be possible to deliver the pledge of stock of
MSL Ireland or MSL Malaysia, or to perfect a security interest in the Offshore
Collateral of MSL Malaysia in the time frames required by the Credit Agreement,
as modified by such limited waivers; and
WHEREAS, Company has requested and the Lenders have agreed (1) to
amend subsection 2.2A of the Credit Agreement to change the rates of interest
charged on Revolving Loans and Term Loans, (2) to amend subsection 2.4A of the
Credit Agreement to correct dates contained in the amortization schedule, (3) to
amend subsection 7.1 of the Credit Agreement to
1
<PAGE>
prohibit MSL Overseas from lending the proceeds of any Loan to MSL Malaysia,
(4) to waive the requirement that Company deliver documentation necessary to
obtain a perfected security interest in the Offshore Collateral of MSL Malaysia
and (5) to extend the period for delivery of the pledge of stock of MSL Ireland
and for the pledge of stock of MSL Malaysia to April 30, 1999.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendment to Subsection 2.2; Interest on the Loans.
A. Subsection 2.2A(a) of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"(a) Subject to the provisions of subsections 2.2E and 2.8, the Term
Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate plus
2.50% per annum; or
(II) if a LIBOR Loan, then at the sum of Adjusted LIBOR plus
3.50% per annum."
B. Subsection 2.2A(b) of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"(b) Subject to the provisions of subsections 2.2E and 2.8, the
Revolving Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate plus
the Base Rate Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-Fiscal Quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv); or
(II) if a LIBOR Loan, then at the sum of the Adjusted LIBOR
plus the LIBOR Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-Fiscal Quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv):
2
<PAGE>
Consolidated Leverage Ratio Applicable LIBOR Applicable Base
- --------------------------- Margin Rate Margin
------ -----------
Greater than or equal to 3.0:1.00 3.00% 2.00%
Greater than or equal to 2.5:1.00 2.75% 1.75%
but less than 3.0:1.00
Less than 2.5:1.00 2.50% 1.50%
provided that, for the period between March 1, 1999 and August 31, 1999, the
applicable margin for Revolving Loans that are LIBOR Loans shall be 3.00% per
annum and for Revolving Loans chat are Base Rate Loans shall be 2.00% per annum.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(iv), the applicable margins
shall automatically be adjusted in accordance with such Margin Determination
Certificate, such adjustment to become effective on the next succeeding Business
Day following the receipt by Administrative Agent of such Margin Determination
Certificate, provided that, for the period commencing on September 1, 1999, the
applicable margins shall be determined by reference to the Margin Determination
Certificate most recently received by Administrative Agent and provided further
that, if at any time a Margin Determination Certificate is not delivered at the
time required pursuant to subsection 6.1(iv), from the time such Margin
Determination Certificate was required to be delivered until delivery of such
Margin Determination Certificate, such applicable margins shall be the maximum
percentage amount for the relevant Loan set forth above."
1.2. Amendment to Subsection 2.4; Repayments, Prepayments and Reductions in
Revolving Loan Commitments; General Provisions Regarding Payments.
Subsection 2.4A is hereby amended by deleting the table set forth therein
and inserting the following in lieu thereof:
Scheduled Repayment Scheduled Repayment
Date of Term Loans of Company of Term Loans of MSL Overseas
- ---- ------------------------ -----------------------------
October 31, 1998 $37,500 $87,500
January 31, 1999 $37,500 $87,500
April 30, 1999 $37,500 $87,500
July 31, 1999 $37,500 $87,500
October 31, 1999 $37,500 $87,500
January 31, 2000 $37,500 $87,500
April 30, 2000 $37,500 $87,500
July 31, 2000 $37,500 $87,500
October 31, 2000 $37,500 $87,500
January 31, 2001 $37,500 $87,500
April 30, 2001 $37,500 $87,500
July 31, 2001 $37,500 $87,500
3
<PAGE>
October 31, 2001 $37,500 $87,500
January 31, 2002 $37,500 $87,500
April 30, 2002 $37,500 $87,500
July 31, 2002 $37,500 $87,500
October 31, 2002 $37,500 $87,500
January 31, 2003 $37,500 $87,500
April 30, 2003 $37,500 $87,500
July 31, 2003 $37,500 $87,500
October 31, 2003 $37,500 $87,500
January 31, 2004 $37,500 $87,500
April 30, 2004 $37,500 $87,500
July 31, 2004 $14,137,500 $32,987,500
----------- -----------
Total $15,000,000 $35,000,000
1.3. Amendment to Subsection 7.1; Indebtedness.
Subsection 7.1 is hereby amended by deleting clause (iv)(b) and inserting
the following in lieu thereof:
"(iv)(b) subject to subsection 7.17, MSL Overseas may become and
remain liable with respect to Indebtedness to Company's Foreign
Subsidiaries, and any Wholly-owned Foreign Subsidiary of Company may
become and remain liable with respect to Indebtedness to MSL
Overseas or any other Wholly-owned Foreign Subsidiary of Company,
provided that MSL Overseas may not lend the proceeds of any Loan to
MSL Malaysia,"
Section 2. WAIVER
Subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Borrowers herein contained, Lenders
hereby waive compliance with the provisions of subsection 4.4A of the Credit
Agreement to the extent, and only to the extent, that subsection 4.4A, as
modified by the limited waivers executed on September 25, 1998 and November 25,
1998, requires the Collateral Agent to: (1) obtain a pledge of the stock of MSL
Malaysia and a pledge of the stock of MSL Ireland prior to April 30, 1999; and
(2) obtain a perfected security interest in the Offshore Collateral of MSL
Malaysia; provided that a pledge of stock of MSL Ireland and a pledge of the
stock of MSL Malaysia shall be obtained on or before April 30, 1999.
Section 3. LIMITATION OF WAIVER
Without limiting the generality of the provisions of subsection 12.6
of the Credit Agreement, the waiver set forth above shall be limited precisely
as written and relates solely to the noncompliance by Borrowers with the
provisions of subsection 4.4A of the Credit Agreement in the manner and to the
extent described above, and nothing in this Amendment shall be deemed to:
4
<PAGE>
(a) constitute a waiver of compliance by Borrowers with
respect to (i) subsection 4.4A of the Credit Agreement in any other
instance or (ii) any other term, provision or condition of the
Credit Agreement or any other instrument or agreement referred to
therein; or
(b) prejudice any right or remedy that Administrative Agent,
Collateral Agent or any Lender may now have (except to the extent
such right or remedy was based upon existing defaults that will not
exist after giving effect to this Amendment) or may have in the
future under or in connection with the Credit Agreement or any other
instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
Section 4. CONDITIONS TO EFFECTIVENESS
Section 1 and Section 2 of this Amendment shall become effective
only upon the satisfaction of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "First Amendment
Effective Date"): on or before the First Amendment Effective Date, Company shall
deliver to Administrative Agent the following:
1. Resolutions of its Board of Directors approving and authorizing the
execution, delivery, and performance of this Amendment, certified as of the
First Amendment Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or amendment;
2. Signature and incumbency certificates of its officers executing this
Amendment; and
3. The opinions of counsel to Company and counsel to MSL Overseas in form
and substance satisfactory to the Agents and their counsel.
Section 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce Lenders to enter into this Amendment, each
Borrower hereby represents, warrants and agrees that after giving effect to this
Amendment:
(a) as of the date hereof, there exists no Event of Default or
Potential Event of Default under the Credit Agreement.
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof
except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of
such earlier date;
5
<PAGE>
(c) as of the date hereof, each Borrower has performed all
agreements to be performed on its part as set forth in the Credit
Agreement, unless performance of any such agreements has been
previously waived; and
(d) as soon as practicable after the execution of this
Amendment, Company will take all necessary action to ensure that
the Liens securing the Obligations under the Credit Agreement
remain First Priority Liens, taking into account the provisions of
this Amendment, including without limitation, the Liens granted on
the Offshore Collateral of MSL Ireland and MSL Spain.
Section 6. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment, subject to the provisions of Section 4 hereof, shall
become effective upon the execution of counterparts hereof by Company, MSL
Overseas, Administrative Agent, Collateral Agent, Syndication Agent, Sub-Agent
and by Lenders constituting Requisite Lenders and receipt by Company, MSL
Overseas, Administrative Agent, Collateral Agent, Syndication Agent and
Sub-Agent of written notification of such execution and authorization of
delivery thereof.
Section 7. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN
DOCUMENTS
On and after the First Amendment Effective Date:
(a) each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import
referring to the Credit Agreement, and each reference in the other
Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended hereby;
(b) except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed; and
(c) the execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver
of any provision of, or operate as a waiver of any right, power or
remedy of the Collateral Agent, the Administrative Agent, or any of
the Lenders under the Credit Agreement or any of the other Loan
Documents.
6
<PAGE>
Section 8. GOVERNING LAW
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Section 9. ACKNOWLEDGEMENT AND CONSENT BY GUARANTORS
Each guarantor listed on the signature pages hereof ("Guarantors")
hereby acknowledges that it has read this Amendment and consents to the terms
thereof and further hereby confirms and agrees that, notwithstanding the
effectiveness of this Amendment, the obligations of each Guarantor under its
applicable Guaranty shall not be impaired or affected and the applicable
Guaranty is, and shall continue to be, in full force and effect and is hereby
confirmed and ratified in all respects.
[the remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
MANUFACTURERS' SERVICES LIMITED
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
------------------------
MSL OVERSEAS:
MSL OVERSEAS FINANCE B.V.
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
------------------------
BANK OF AMERICA NT & SA,
as Administrative Agent and as Collateral
Agent
By:
---------------------------
Title:
------------------------
BANK OF AMERICA INTERNATIONAL
LIMITED, as Sub-Agent
By:
---------------------------
Title:
------------------------
LENDERS:
BANK OF AMERICA NT & SA,
individually and as Issuing Lender
By:
---------------------------
Title:
------------------------
S-1
<PAGE>
GUARANTORS:
MANUFACTURERS' SERVICES LIMITED
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
------------------------
MANUFACTURERS' SERVICES CENTRAL
U.S. OPERATIONS, INC.
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
------------------------
MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS, INC
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
------------------------
MANUFACTURERS' SERVICES ATHLONE
LIMITED
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
------------------------
MSL OVERSEAS FINANCE BV
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
------------------------
S-4
<PAGE>
MANUFACTURERS' SERVICES
SINGAPORE PTE LTD
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
------------------------
GLOBAL MANUFACTURERS' SERVICES
VALENCIA, SA
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
------------------------
S-5
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
AND CONSENT
This SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"Amendment") is dated as of November 23, 1999 and entered into by and among
Manufacturers' Services Limited, a Delaware corporation ("Company"), MSL
Overseas Finance B.V., a Netherlands private company with limited liability
("MSL Overseas"), the financial institutions listed on the signature pages
hereof, Bank of America, N.A. (successor to Bank of America National Trust
and Savings Association), as administrative agent, as collateral agent, and
as issuing lender, DLJ Capital Funding, Inc., as syndication agent, and Bank
of America International Limited as sub-agent, and is made with reference to
that certain Credit Agreement dated as of August 21, 1998, as amended
pursuant to a First Amendment to Credit Agreement and Limited Waiver, dated
as of February 26, 1999 (as so amended, the "Credit Agreement"), by and among
Company, MSL Overseas, Lenders, Sub-Agent, DLJ Capital Funding, Inc., as
Syndication Agent, and Bank of America, N.A. (successor to Bank of America
National Trust and Savings Association), as Administrative Agent, as
Collateral Agent and as Issuing Lender. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
WHEREAS, Company, through its Subsidiary, Manufacturers' Services
Salt Lake City Operations, Inc. ("MSL SLC Ops") desires to acquire certain
assets utilized in an electronics manufacturing facility located in Salt Lake
City, Utah (the "Assets") owned and operated by 3Com Corporation pursuant to
an Asset Purchase Agreement and ancillary agreements (the "Acquisition
Agreements") pursuant to which MSL SLC Ops will acquire the Assets (the
"Acquisition"), for a cash payment of $85,000,000 plus certain assumed
liabilities, subject to an adjustment to be made within 120 days of the
closing of the Acquisition, following an audit of the inventory being
purchased and other matters;
WHEREAS, in order to finance the Acquisition, Company proposes to
issue to Affiliates of DLJ and other investors acceptable to Agents $50,000,000
of Senior Exchangeable Preferred Stock, par value $.001 per share;
WHEREAS, certain provisions of such preferred stock (including,
without limitation, payment of dividends, redemption and exchange) are, and will
continue to be, subject to restrictions contained in the Credit Agreement;
WHEREAS, Company has requested and Agents and Lenders have agreed to
consent to the Acquisition; and
WHEREAS, Company, Agents and Lenders have agreed to amend the Credit
Agreement in certain other respects (including adjusting the borrowing base
formulas for each of Company and MSL Overseas).
<PAGE>
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendment to Subsection 1.1: Definitions.
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding the
following definitions:
"Acquisition" means the transaction described in the recitals to the
Second Amendment.
"Senior Exchangeable Preferred Stock" means the $50.0 million senior
exchangeable preferred stock, par value $.001 per share, issued by Company on or
after the effective date of the Second Amendment, which shall pay dividends to
the holders thereof at a rate of 14% per annum until December 1, 2000 and 15%
per annum thereafter, such dividends to be payable in cash until December 1,
2000 and in kind thereafter and which shall be redeemable by Company at any time
for an amount equal to the par amount thereof plus a premium equal to the
applicable per annum dividend rate, and which must be redeemed by the Company on
November 26, 2006.
"Second Amendment" means the Second Amendment to Credit Agreement
and Consent dated as of November 23, 1999.
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting the definitions of the terms listed below and inserting the following
in lieu thereof:
"BofA" means Bank of America, N.A. (successor to Bank of America
National Trust and Savings Association).
"Borrowing Base Certificate" means a certificate substantially in
the form of Exhibit VI annexed to the Second Amendment delivered to
Administrative Agent by each Borrower pursuant to subsection 6.1(i).
"Company Borrowing Base" means, as at any date of determination, the
lesser of (i) the difference between (a) the sum of (1) 90% of all Eligible
Accounts Receivable of Company and its Domestic Subsidiaries due from IBM that
are unpaid for 30 days or less from the date of the original invoice therefor,
(2) 80% of all Eligible Accounts Receivable of Company and its Domestic
Subsidiaries other than those specified in clause (1) above and (3)(i) until
December 31, 1999, 45% of all Eligible Inventory of Company and its Domestic
Subsidiaries (less such amount of Eligible Inventory to assure that Eligible
Inventory at any time does not exceed 60% of the Company Borrowing Base) and
(ii) after December 31, 1999, 35% of all Eligible Inventory of Company and its
Domestic Subsidiaries (less such amount of Eligible Inventory to assure that
Eligible Inventory at any time does not exceed 50% of the Company Borrowing
Base) and (b) the Term Loans advanced to Company and (ii) $75,000,000 minus the
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<PAGE>
Total Utilization of Revolving Loan Commitments attributable to MSL Overseas.
"Consolidated EBITDA" means, for any period, without duplication,
the sum of amounts for such period of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv)
total depreciation expense, (v) total amortization expense, (vi) legal and out
of pocket expenses incurred in such period related to litigation with Lockheed
Martin Corporation in an amount not in excess of $800,000 in the aggregate for
all periods, (vii) the legal, advisory and out of pocket expenses incurred in
such period related to the proposed acquisition of Bull Electronics Angers and
Bull HN Information Systems, Inc. in an amount not in excess of $500,000 in the
aggregate for all periods, and (viii) other non-cash terms reducing Consolidated
Net Income less other non-cash items increasing Consolidated Net Income, all of
the foregoing determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP; provided that all calculations of
Consolidated EBITDA for any period that includes the date of the Second
Amendment shall be made on a pro forma basis assuming that the Acquisition was
consummated on the first day of such period.
"Foreign Borrowing Base" means as at any date of determination, as
to any Foreign Subsidiary, the difference between (a) the sum of (1) 90% of all
Eligible Accounts Receivable of a Foreign Subsidiary due from IBM that are
unpaid for 30 days or less from the date of the original invoice therefor, (2)
80% of all Eligible Accounts Receivable of such Foreign Subsidiary other than
those specified in clause (1) above and (3)(i) until December 31, 1999, 45% of
all Eligible Inventory of such Foreign Subsidiary and (ii) after December 31,
1999, 35% of all Eligible Inventory of such Foreign Subsidiary and (b) the Term
Loans allocable to such Foreign Subsidiary.
"MSL Overseas Borrowing Base" means, as at any date of
determination, the lesser of (i) the difference between (a) the sum of (1) 90%
of all Eligible Accounts Receivable of MSL Overseas and the Company's other
Foreign Subsidiaries due from IBM that are unpaid for 30 days or less from the
date of the original invoice therefor, (2) 80% of Eligible Accounts Receivable
of MSL Overseas and Company's other Foreign Subsidiaries other than those
specified in clause (1) above and (3)(i) until December 31, 1999, 45% of all
Eligible Inventory of MSL Overseas and Company's other Foreign Subsidiaries
(less such amount of Eligible Inventory to assure that Eligible Inventory at any
time does not exceed 60% of the MSL Overseas Borrowing Base) and (ii) after
December 31, 1999, 35% of all Eligible Inventory of MSL Overseas and Company's
other Foreign Subsidiaries (less such amount of Eligible Inventory to assure
that Eligible Inventory at any time does not exceed 50% of the MSL Overseas
Borrowing Base) and (b) the Term Loans advanced to MSL Overseas and (ii)
$75,000,000 minus the Total Utilization of Revolving Loan Commitments
attributable to Company.
3
<PAGE>
1.2 Amendment to Subsection 2.2: Interest on the Loans.
A. Subsection 2.2A(a) of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"(a) Subject to the provisions of subsections 2.2E and 2.8, the Term
Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate plus
2.75% per annum; or
(II) if a LIBOR Loan, then at the sum of Adjusted LIBOR plus
3.75% per annum."
B. Subsection 2.2A(b) of the Credit Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"(b) Subject to the provisions of subsections 2.2E and 2.8, the
Revolving Loans shall bear interest through maturity as follows:
(I) if a Base Rate Loan, then at the sum of the Base Rate plus
the Base Rate Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-Fiscal Quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv); or
(II) if a LIBOR Loan, then at the sum of Adjusted LIBOR plus
the LIBOR Margin set forth in the table below opposite the
Consolidated Leverage Ratio for the four-Fiscal Quarter period for
which the applicable Margin Determination Certificate has been
delivered pursuant to subsection 6.1(iv):
Consolidated Leverage Ratio Applicable LIBOR Applicable Base
--------------------------- Margin Rate Margin
------ -----------
Greater than or equal to 3.0:1.00 3.25% 2.25%
Greater than or equal to 2.5:1.00
but less than 3.0:1.00 3.00% 2.00%
Less than 2.5:1.00 2.75% 1.75%
provided that, for the period between November 23, 1999 and February 29, 2000,
the applicable margin for Revolving Loans that are LIBOR Loans shall be 3.0% per
annum and for Revolving Loans that are Base Rate Loans shall be 2.0% per annum.
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(iv), the applicable margins
shall automatically be adjusted in accordance with such Margin Determination
Certificate, such adjustment to become effective on
4
<PAGE>
the next succeeding Business Day following the receipt by Administrative Agent
of such Margin Determination Certificate, provided that, for the period
commencing on March 1, 2000, the applicable margins shall be determined by
reference to the Margin Determination Certificate most recently received by
Administrative Agent and provided further that, if at any time a Margin
Determination Certificate is not delivered at the tune required pursuant to
subsection 6.1(iv), from the time such Margin Determination Certificate was
required to be delivered until delivery of such Margin Determination
Certificate, such applicable margins shall be the maximum percentage amount for
the relevant Loan set forth above."
1.3 Amendment to Subsection 7.5: Restricted Junior Payments.
Subsection 7.5 of the Credit Agreement is hereby amended by adding the
following at the end thereof:
"provided, further, that, so long as no Potential Event of Default or
Event of Default has occurred and is continuing or would be caused thereby, on
or prior to December 1, 2000, Company may pay cash dividends on the Preferred
Stock aggregating not in excess of $7.0 million."
1.4 Amendment to Subsection 7.8: Consolidated Capital Expenditures.
Subsection 7.8 of the Credit Agreement is hereby amended by deleting the
number "10.0" in the second column of the table set forth therein opposite
"1999" and inserting "15.0" in lieu thereof.
1.5 Amendment to Exhibits and Schedules.
Exhibit VI to the Credit Agreement is hereby amended by deleting it in its
entirety and inserting Exhibit VI hereto in lieu thereof.
Schedule 5.1 to the Credit Agreement is hereby amended by deleting it in
its entirety and inserting Schedule 5.1 hereto in lieu thereof.
Schedule 5.6 to the Credit Agreement is hereby amended by deleting it in
its entirety and inserting Schedule 5.6 hereto in lieu thereof
Section 2. CONSENT
Subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Borrowers herein contained, Lenders
hereby (a) consent to the Acquisition and (b) agree that Company's and its
Subsidiaries' ability to make Investments and make Consolidated Capital
Expenditures after the Second Amendment Effective Date pursuant to the terms of
the Credit Agreement shall not be affected by this Consent or the Acquisition.
5
<PAGE>
Section 3. LIMITATION OF CONSENT
Without limiting the generality of the provisions of subsection 12.6
of the Credit Agreement, the consent set forth in Section 2 shall be limited
precisely as written and is provided solely with respect to the Acquisition on
the terms and conditions described above and set forth in the Acquisition
Agreements, and nothing in this Amendment shall be deemed to constitute a waiver
of compliance by Borrowers with respect to (i) subsection 7.3, 7.7 or 7.8 of the
Credit Agreement in any other instance or (ii) any other term, provision or
condition of the Credit Agreement or any other instrument or agreement referred
to therein.
Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.
Section 4. CONDITIONS TO EFFECTIVENESS
Section 1 and Section 2 of this Amendment shall become effective
only upon the effectiveness of this Amendment as provided in Section 6 and upon
satisfaction of the following conditions precedent (the date of satisfaction of
such conditions being referred to herein as the "Second Amendment Effective
Date"). Company shall deliver to Administrative Agent the following:
1. Resolutions of the Board of Directors of (a) Company, approving and
authorizing the Acquisition, the issuance of the Preferred Stock and the
execution, delivery, and performance of this Amendment, certified as of the
Second Amendment Effective Date by the corporate secretary or an assistant
secretary and (b) MSL Overseas, approving and authorizing the execution,
delivery and performance of the Amendment, certified as of the Second Amendment
Effective Date by its managing director, in each case as being in full force and
effect without modification or amendment;
2. Signature and incumbency certificates of the officers, managing
director or proxyholder, as the case may be, of each Borrower executing this
Amendment;
3. The opinions of counsel to Company and counsel to MSL Overseas in form
and substance satisfactory to the Agents and their counsel; and
4. Receipt by Administrative Agent, on behalf of each Lender who executes
and delivers a signature page to this Second Amendment on or prior to November
23, 1999, of a fee equal to one-fourth of one percent (.25%) of the sum of such
Lender's Revolving Exposure and Term Loan Exposure.
6
<PAGE>
Section 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce Lenders to enter into this Amendment, each
Borrower hereby represents, warrants and agrees that after giving effect to this
Amendment:
(a) as of the date hereof, there exists no Event of Default or
Potential Event of Default under the Credit Agreement;
(b) all representations and warranties contained in the Credit
Agreement and the other Loan Documents are true, correct and
complete in all material respects on and as of the date hereof
except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of
such earlier date;
(c) as of the date hereof, each Borrower has performed all
agreements to be performed on its part as set forth in the Credit
Agreement, unless performance of any such agreements has been
previously waived;
(d) a true, correct and complete copy of the Acquisition
Agreements, certified by an officer of Company, will be provided to
Agents on or prior to the closing of the Acquisition; and
(e) as soon as practicable after the execution of this
Amendment and the closing of the Acquisition, Company will take all
necessary action to (i) ensure that the Liens securing the
Obligations under the Credit Agreement remain First Priority Liens,
and (ii) comply with the provisions of subsections 6.8 and 6.9 of
the Credit Agreement.
Section 6. COUNTERPARTS; EFFECTIVENESS
This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Amendment, subject to the provisions of Section 4 hereof, shall
become effective upon the execution of counterparts hereof by Company, MSL
Overseas, Administrative Agent, Collateral Agent, Syndication Agent, Sub-Agent
and by Requisite Lenders and, in each case, receipt by Company, MSL Overseas,
Administrative Agent, Collateral Agent, Syndication Agent and Sub-Agent of
written notification of such execution and authorization of delivery thereof.
7
<PAGE>
Section 7. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND OTHER LOAN
DOCUMENTS
On and after the Second Amendment Effective Date:
(a) each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import
referring to the Credit Agreement, and each reference in the other
Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended hereby;
(b) except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed; and
(c) the execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver
of any provision of, or operate as a waiver of any right, power or
remedy of Collateral Agent, Administrative Agent, or any of the
Lenders under the Credit Agreement or any of the other Loan
Documents.
Section 8. GOVERNING LAW
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Section 9. ACKNOWLEDGMENT AND CONSENT BY GUARANTORS
Each guarantor listed on the signature pages hereof ("Guarantors")
hereby acknowledges that it has read this Amendment and consents to the terms
thereof and further hereby confirms and agrees that, notwithstanding the
effectiveness of this Amendment, the obligations of each Guarantor under its
applicable Guaranty shall not be impaired or affected and the applicable
Guaranty is, and shall continue to be, in full force and effect and is hereby
confirmed and ratified in all respects.
[the remainder of page intentionally left blank]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
MANUFACTURERS' SERVICES LIMITED
By:
---------------------------
Title:
-------------------------
MSL OVERSEAS:
MSL OVERSEAS FINANCE B.V.
By:
---------------------------
Title:
-------------------------
BANK OF AMERICA, N.A.
(successor to Bank of America NT&SA),
as Administrative Agent and as
Collateral Agent
By: /s/ Liliana Claar
---------------------------
LILIANA CLAAR
Title: Vice President
-------------------------
BANK OF AMERICA INTERNATIONAL
LIMITED, as Sub-Agent
By: /s/ Julie A. Chadney
---------------------------
JULIE A. CHADNEY
Title: Vice President
-------------------------
S-1
<PAGE>
LENDERS:
BANK OF AMERICA, N.A.,
(successor to Bank of America NT&SA),
individually and as Issuing Lender
By: /s/ Robert Kosche
---------------------------
Title: Vice President
-------------------------
DLJ CAPITAL FUNDING, INC.,
individually and as Syndication Agent
By: /s/ Eric Swanson
---------------------------
Title: Managing Director
-------------------------
FLEET NATIONAL BANK
By: /s/
---------------------------
Title: Vice President
-------------------------
ERSTE BANK
By: /s/ Anca Trifan
---------------------------
ANCA TRIFAN
Title: Vice President
-------------------------
By: /s/ John S. Runnion
---------------------------
JOHN S. RUNNION
Title: First Vice President
-------------------------
S-2
<PAGE>
BLACK DIAMOND CLO 1998-1 LTD.
By: /s/ John H. Cullinane
---------------------------
JOHN H. CULLINANE
Title: DIRECTOR
-------------------------
BDC FINANCE LLC
By:
---------------------------
Title:
-------------------------
BLACK DIAMOND INTERNATIONAL
FUNDING, LTD
By: /s/ David Dyer
---------------------------
DAVID DYER
Title: DIRECTOR
-------------------------
CANADIAN IMPERIAL BANK OF
COMMERCE
By: /s/
---------------------------
Title:
-------------------------
PAM CAPITAL FUNDING, LP
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Mark K. Okada
---------------------------
Title: Executive Vice President
-------------------------
S-3
<PAGE>
SRV-HIGHLAND INC.
By: /s/ Kelly C. Walker
---------------------------
KELLY C. WALKER
Title: VICE PRESIDENT
-------------------------
HIGHLAND LEGACY LIMITED
By: Highland Capital Management, L.P.
as Collateral Manager
By: /s/ Mark K. Okada
---------------------------
Title: Executive Vice President
-------------------------
S-4
<PAGE>
GUARANTORS:
MANUFACTURERS' SERVICES LIMITED
By: /s/ [ILLEGIBLE]
---------------------------
Title: VP & TREASURER
-------------------------
MANUFACTURERS' SERVICES CENTRAL
U.S. OPERATIONS, INC.
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
-------------------------
MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS, INC
By: /s/ Dale Johnson
---------------------------
Title: EXEC. V.P.
-------------------------
MANUFACTURERS' SERVICES ATHLONE
LIMITED
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
-------------------------
MSL OVERSEAS FINANCE BV
By: /s/ Dale Johnson
---------------------------
Title: MANAGING DIRECTOR
-------------------------
S-5
<PAGE>
MANUFACTURERS' SERVICES
SINGAPORE PTE LTD
By: /s/ Dale Johnson
---------------------------
Title: DIRECTOR
-------------------------
GLOBAL MANUFACTURERS' SERVICES
VALENCIA, SA
By: /s/ Dale Johnson
---------------------------
Title: SOLE ADMINISTRATOR
-------------------------
S-6
<PAGE>
SCHEDULE 5.1
TO
SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT
AND TO
CREDIT AGREEMENT AS AMENDED
SUBSIDIARIES OF COMPANY
1. Manufacturers' Services Central US Operations, Inc. Minnesota
2. Manufacturers' Services Western US Operations, Inc. California
3. MSL Japan Ltd Japan
4. MSL Offshore Finance BV Netherlands
5. MSL Overseas Finance BV Netherlands
6. MSL SPV Spain, Inc. Delaware
7. Global Manufacturers' Services Valencia SA Spain
8. MSL SPV Ireland, Inc. Delaware
9. Manufacturers' Services Athlone Ltd Ireland
10. Manufacturers' Services Singapore Pte Ltd Singapore
11. MSL Technology Services (Malaysia) Sdn Bhd Malaysia
12. Manufacturers' Services Salt Lake City Operations, Inc. Delaware
Each subsidiary is 100% owned, either directly or indirectly, by
Manufacturers' Services Limited.
<PAGE>
SCHEDULE 5.6
TO
SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT
AND TO
CREDIT AGREEMENT AS AMENDED
LITIGATION
On or about October 29, 1998, Lockheed Martin Corporation commenced an
action in the Circuit Court for Montgomery County Maryland, entitled LOCKHEED
MARTIN CORPORATION v. DLJ MERCHANT BANKING II, INC., DLJ MERCHANT BANKING
PARTNERS, DLJ MERCHANT BANKING, INC., DLJ MERCHANT BANKING PARTNERS, L.P. AND
DLJ MERCHANT BANKING PARTNERS II, L.P., Case No 193819. The complaint alleges
that the Company breached an August 10, 1997 agreement to acquire a
subsidiary of plaintiff, Lockheed Martin Commercial Electronics Company
("LMCE"), and also breached an implied obligation of good faith and fair
dealing in exercising its contractual right to terminate the agreement. The
complaint alleges that the purchase price for the acquisition, inclusive of
real estate, was $140 million, subject to certain purchase price adjustments,
and, subsequent to the alleged breach, plaintiff sold the subsidiary,
exclusive of real estate, for $70 million. The defendants moved to discuss
the complaint, or in the alternative, for summary judgment, on January 15,
1999. Argument on this motion has been scheduled for January 2000.
Proceedings and discovery to date have largely involved preliminary matters
relating to jurisdiction and revenue. There has been no discovery to date on
issues relating to the merits of the complaint. The Company commends that a
material adverse change in LMCE's business allowed the Company to terminate
the agreement.
<PAGE>
EXHIBIT VI
FORM OF BORROWING BASE CERTIFICATE
---------------
Reference is made to the Credit Agreement dated as of August 21, 1998,
as amended pursuant to a First Amendment to Credit Agreement and Limited
Waiver, dated as of February 26, 1999, as amended pursuant to a Second
Amendment to Credit Agreement and Consent, dated as of November 23, 1999
(such agreement, as it may be amended, amended and restated, supplemented and
or otherwise modified from time to time, the "CREDIT AGREEMENT"; capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement) by and among Manufacturers' Services Limited, a Delaware
corporation ("COMPANY"), MSL Overseas Finance BV, a Netherlands private
company with limited liability ("MSL OVERSEAS"), the lenders party thereto,
DLJ Capital Funding, Inc., as Syndication Agent, Bank of America, N.A.
(successor to Bank of America National Trust and Savings Association), as
administrative agent for Lenders, as letter of credit issuing bank, and as
collateral agent and Bank of America International Limited, as Sub-Agent.
Pursuant to Section 6.1(i) of the Credit Agreement, the undersigned
treasurer of the Company hereby certifies that attached hereto as Annexes A,
B [and C] are a true and accurate calculation of the Company Borrowing Base
(Annex A), the MSL Overseas Borrowing Base (Annex B) [and the Foreign Borrowing
Base (Annex C)] as of , determined in accordance with the
requirements of the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
duly executed as of , .
MANUFACTURERS' SERVICES LIMITED
By
---------------------------
Title: Treasurer
<PAGE>
ANNEX A
TO BORROWING BASE CERTIFICATE
-------------, -----
I. ACCOUNTS RECEIVABLE OF COMPANY AND
DOMESTIC SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
1. Total Accounts Receivable $
------------
2. Less: Accounts Receivable which remain unpaid
for more than 90 days after the due date $( )
------------
3. Less: Other ineligible Accounts Receivable
according to the definition of "Eligible
Accounts Receivable" $( )
------------
4. Accounts Receivable determined ineligible by
Requisite Lenders $( )
------------
5. Eligible Accounts Receivable
(I.1 LESS I.2 LESS I.3 LESS I.4) $
------------
6. Eligible Accounts Receivable due from IBM
that are unpaid for 30 days or less from the
due date ("IBM Eligible Accounts Receivable") $
------------
7. Percentage of IBM Eligible Accounts Receivable
to be included in Borrowing Base 90%
8. IBM Eligible Accounts Receivable to be
included in Borrowing Base (I.6 TIMES I.7) $
------------
9. Eligible Accounts Receivable other than those
specified in I.6 $
------------
10. Percentage of Eligible Accounts Receivable
specified in I.9 above to be included in
Borrowing Base 80%
11. Eligible Accounts Receivable other than those
specified in I.6 above to be included in
Borrowing Base (I.9 TIMES I.10) $
------------
12. Total Eligible Accounts Receivable to be
included in Borrowing Base (I.8 PLUS I.11) $
------------
</TABLE>
2
<PAGE>
II. INVENTORIES OF THE COMPANY AND DOMESTIC
SUBSIDIARIES
[A. PRIOR TO DECEMBER 31, 1999]
<TABLE>
<CAPTION>
<S> <C> <C>
1. [Total Inventory $
-------------
2. Less ineligible inventory according to
the definition of "Eligible Inventory" $( )
------------
3. Otherwise ineligible inventory determined by
Administrative Agent to be acceptable for
borrowing purposes $
-------------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
-------------
5. Percentage of Eligible Inventory to be
included in the Borrowing Base 45%
6. Preliminary Eligible Inventory to be included
in the Borrowing Base (II.4 TIMES II.5) $
-------------
7. Adjustment, if any, to ensure that Eligible
Inventory does not exceed 60% of Borrowing
Base $( )
------------
8. Eligible Inventory to be included in Borrowing
Base (II.6 MINUS II.7)] $
-------------
[B. AFTER DECEMBER 31, 1999]
1. [Total Inventory $
-------------
2. Less ineligible inventory according to
the definition of "Eligible Inventory" $( )
------------
3. Otherwise ineligible inventory determined by
Administrative Agent to be acceptable for
borrowing purposes $
-------------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
-------------
5. Percentage of Eligible Inventory to be
included in the Borrowing Base 35%
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
6. Preliminary Eligible Inventory to be included
in the Borrowing Base
(II.4 TIMES II.5) $
-------------
7. Adjustment, if any, to ensure that Eligible
Inventory does not exceed 50% of Borrowing Base $( )
-------------
8. Eligible Inventory to be included in Borrowing
Base (II.6 MINUS II.7)] $
--------------
III. COMPANY BORROWING BASE
1. Eligible Accounts Receivable plus Eligible
Inventory (I.12 PLUS II.8) $
--------------
2. Less Term Loans advanced to Company $( )
-------------
3. Company Borrowing Base
(III.1 MINUS III.2)
--------------
IV. AVAILABLE COMPANY BORROWING BASE
1. Aggregate principal amount of outstanding
Revolving Loans of Company $
--------------
2. Letter of Credit usage by the Company $
--------------
3. Total Utilization of Revolving Loan Commitments
by Company (IV.1 PLUS IV.2) $
--------------
4. Total Utilization of Revolving Loan Commitments
by MSL Overseas (B.IV.3) $
--------------
5. $75,000,000 minus Total Utilization of Revolving
Loan Commitments by MSL Overseas $
--------------
6. Available Company Borrowing Base
(LESSER OF III.3 and IV.5) $
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
V. APPLICABLE CREDIT EXTENSION TO COMPANY
1. Credit Extension Available to Company
(IV.6 MINUS IV.3) $
-----------
</TABLE>
<PAGE>
ANNEX B
TO BORROWING BASE CERTIFICATE
,
-------------- ----
<TABLE>
<S> <C> <C>
I. ACCOUNTS RECEIVABLE OF MSL OVERSEAS AND FOREIGN SUBSIDIARIES*
1. Accounts Receivable
MSL Ireland $
-----------
MSL Spain $
-----------
MSL Singapore $
-----------
Total Accounts Receivable $
-----------
2. Less: Accounts Receivable which remain unpaid for
more than 90 days after the due date $( )
-----------
3. Less other ineligible Accounts Receivable according
to the definition of "Eligible Accounts Receivable" $( )
-----------
4. Accounts Receivable determined ineligible by
Requisite Lenders $( )
-----------
5. Eligible Accounts Receivable
(I.1 LESS I.2 LESS I.3 LESS I.4) $( )
-----------
6. Eligible Accounts Receivable due from IBM that are
unpaid for 30 days or less from the due date ("IBM
Eligible Accounts Receivable") $
-----------
7. Percentage of IBM Eligible Accounts Receivable to
be included in Borrowing Base 90%
8. IBM Eligible Accounts Receivable to be included in
Borrowing Base (I.6 TIMES I.7) $
-----------
9. Eligible Accounts Receivable other than those
specified in I.6 above $
-----------
</TABLE>
- -------------------
* All Accounts Receivable and Inventory of MSL Malaysia are ineligible.
6
<PAGE>
<TABLE>
<S> <C> <C>
10. Percentage of Eligible Accounts Receivable specified in
I.9 above to be included in Borrowing Base 80%
11. Eligible Accounts Receivable other than those specified
in I.6 above to be included in Borrowing Base
(I.9 TIMES I.10) $
-----------
12. Total Eligible Accounts Receivable to be included in
Borrowing Base (I.8 PLUS I.11) $
-----------
II. INVENTORIES OF MSL OVERSEAS AND COMPANY'S FOREIGN SUBSIDIARIES
[A. PRIOR TO DECEMBER 31, 1999]
1. [Inventory
MSL Ireland $
-----------
MSL Spain $
-----------
MSL Singapore $
-----------
Total Inventory $
-----------
2. Less ineligible inventory according to the definition
of "Eligible Inventory" ( )
-----------
3. Otherwise ineligible Inventory determined by
Administrative Agent to be acceptable for borrowing
purposes $
-----------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
-----------
5. Percentage of Eligible Inventory to be included in
Borrowing Base 45%
6. Preliminary Eligible Inventory to be included in
Borrowing Base (II.4 TIMES II.5) $
-----------
7. Adjustment, if any, to ensure that Eligible Inventory
does not exceed 60% of Borrowing Base $( )
-----------
8. Eligible Inventory to be included in Borrowing Base
(II.6 LESS II.7) $ ]
-----------
-----------
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
[B. AFTER DECEMBER 31, 1999]
1. [Inventory
MSL Ireland $
-----------
MSL Spain $
-----------
MSL Singapore $
-----------
Total Inventory $
-----------
2. Less ineligible inventory according to the definition
of "Eligible Inventory" $( )
-----------
3. Otherwise ineligible Inventory determined by
Administrative Agent to be acceptable for borrowing
purposes
-----------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
-----------
5. Percentage of Eligible Inventory to be included in
Borrowing Base 35%
6. Preliminary Eligible Inventory to be included in
Borrowing Base (II.4 TIMES II.5) $
-----------
7. Adjustment, if any, to ensure that Eligible Inventory
does not exceed 50% of Borrowing Base $( )
-----------
8. Eligible Inventory to be included in Borrowing Base
(II.6 LESS II.7) $ ]
-----------
-----------
III. MSL OVERSEAS BORROWING BASE
1. Eligible Accounts Receivable plus Eligible Inventory
(I.7 PLUS II.8) $
-----------
2. Less Term Loans advanced to MSL Overseas ( )
-----------
3. MSL Overseas Borrowing Base (III.1 MINUS III.2) $
-----------
-----------
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
IV. APPLICABLE MSL OVERSEAS BORROWING BASE
1. Aggregate principal amount of outstanding
Revolving Loans of MSL Overseas $
-----------
2. Letter of Credit usage by MSL Overseas $
-----------
3. Total Utilization of Revolving Loan Commitments
by MSL Overseas (IV.1 PLUS IV.2) $
-----------
4. Total Utilization of Revolving Loan Commitments
by Company (A.IV.3) $
-----------
5. $75,000,000 MINUS Total Utilization of Revolving
Loan Commitments by Company $
-----------
6. Available MSL Overseas Borrowing Base (LESSER OF
III.3 and IV.5) $
-----------
-----------
V. APPLICABLE CREDIT EXTENSION TO MSL OVERSEAS
1. Credit Extension Available to Company
(IV.6 MINUS IV.3) $
-----------
-----------
</TABLE>
9
<PAGE>
ANNEX C
TO BORROWING BASE CERTIFICATE
--------------, -----
I. ACCOUNTS RECEIVABLE OF FOREIGN SUBSIDIARY
1. Total Accounts Receivable $
----------
2. Less: Accounts Receivable which remain unpaid for
more than 90 days after the due date $( )
----------
3. Less: Other ineligible Accounts Receivable according
to the definition of "Eligible Accounts Receivable" $( )
----------
4. Accounts Receivable determined ineligible by
Requisite Lenders $( )
----------
5. Eligible Accounts Receivable
(I.1 LESS I.2 LESS I.3 LESS I.4) $
----------
6. Eligible Accounts Receivable due from IBM that are
unpaid for 30 days or less from the due date ("IBM
Eligible Accounts Receivable") $
----------
7. Percentage of IBM Eligible Accounts Receivable to
be included in Borrowing Base 90%
8. IBM Eligible Accounts Receivable to be included in
Borrowing Base (I.6 TIMES I.7) $
----------
9. Eligible Accounts Receivable other than those
specified in I.6 $
----------
10. Percentage of Eligible Accounts Receivable specified
in I.9 above to be included in Borrowing Base 80%
11. Eligible Accounts Receivable other than those
specified in I.6 above to be included in Borrowing
Base (I.9 TIMES I.10) $
----------
12. Total Eligible Accounts Receivable to be included in
Borrowing Base (I.8 PLUS I.11) $
----------
10
<PAGE>
II. INVENTORY OF FOREIGN SUBSIDIARY
[A. PRIOR TO DECEMBER 31, 1999]
1. [Total Inventory $
----------
2. Less ineligible inventory according to the definition
of "Eligible Inventory" $( )
----------
3. Otherwise ineligible inventory determined by
Administrative Agent to be acceptable for borrowing
purposes $
----------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
----------
5. Percentage of Eligible Inventory to be included in
the Borrowing Base 45%
6. Eligible Inventory to be included in the Borrowing
Base
(II.4 TIMES II.5)] $
----------
[B. AFTER DECEMBER 31, 1999]
1. [Total Inventory $
----------
2. Less ineligible inventory according to the definition
of "Eligible Inventory" $( )
----------
3. Otherwise ineligible inventory determined by
Administrative Agent to be acceptable for borrowing
purposes $
----------
4. Eligible Inventory
(II.1 LESS II.2 PLUS II.3) $
----------
5. Percentage of Eligible Inventory to be included in
the Borrowing Base 35%
6. Eligible Inventory to be included in the Borrowing
Base
(II.4 TIMES II.5)] $
----------
11
<PAGE>
III. FOREIGN SUBSIDIARY BORROWING BASE
1. Eligible Accounts Receivable plus Eligible Inventory
(I.12 plus II.8) $
----------
2. Less Term Loans allocable to Foreign Subsidiary $( )
----------
3. Foreign Subsidiary Borrowing Base
(III.1 MINUS III.2)
----------
IV. APPLICABLE CREDIT EXTENSION TO FOREIGN SUBSIDIARY
1. Aggregate principle amount of Overseas Subsidiary
Loans allocable to Foreign Subsidiary $
----------
2. Available Foreign Subsidiary Borrowing Base
(III.3 MINUS IV.1) $
----------
12
<PAGE>
[LETTERHEAD]
November 24, 1999 OUR FILE NUMBER
VIA FACSIMILE 218.107-017
- -------------
TO THE PERSONS LISTED ON WRITER'S DIRECT DIAL
THE FACSIMILE COVER SHEET 213-430-7492
Re: MANUFACTURERS' SERVICES LIMITED WRITER'S E-MAIL ADDRESS
CREDIT AGREEMENT - SECOND [email protected]
-------------------------
AMENDMENT
---------
Ladies and Gentlemen:
Please be advised that as of the date hereof all conditions precedent to
the effectiveness of that certain Second Amendment to Credit Agreement and
Consent (the "Amendment"), entered into by and among Manufacturers' Services
Limited, a Delaware corporation (the "Company"), MSL Overseas Finance, B.V.,
a Netherlands private company with limited liability ("MSL Overseas"), the
financial institutions listed on the signature pages thereof, DLJ Capital
Funding, Inc., as syndication agent, Bank of America, N.A. (successor to Bank
of America NT&SA), as administrative agent, issuing lender and collateral
agent, and Bank of America International Limited, as sub-agent, amending that
certain Credit Agreement dated as of August 21, 1998, as amended pursuant to
a First Amendment to Credit Agreement and Limited Waiver, dated as of
February 26, 1999, by and among Company, MSL Overseas, the financial
institutions listed on the signature pages thereof, DLJ Capital Funding,
Inc., as syndication agent, Bank of America, N.A. (successor to Bank of
America NT&SA), as administrative agent, issuing lender and collateral agent,
and Bank of America International Limited, as sub-agent contained in Section 4
of the Amendment have been satisfied and the Amendment is effective.
Please find attached change pages to the Amendment, marked against the
version you previously received and reflecting certain changes made to
conform the Amendment to the senior exchangeable preferred stock documents.
Hard copies of the executed Amendment will be distributed next week.
Please do not hesitate to contact me in the meantime if you should have
any questions.
Very truly yours,
/s/CAROLYN WESSLING
--------------------------
Carolyn Wessling
for O'MELVENY & MYERS LLP
Attachments
cc: Michael Newman, Esq.
LA1872703.1
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 20, 1995 by and between
Manufacturers' Services Limited, a Delaware corporation (the "Company"), and
Kevin C. Melia ("Executive").
WHEREAS, Executive is currently serving as Chairman of the Board, Chief
Executive Officer and President of the Company;
WHEREAS, the Company has entered into a Securities Purchase Agreement
dated as of January 20, 1995 (the "Securities Purchase Agreement") by and among
certain investors denominated collectively therein as the "DLJ Entities",
Executive and certain other investors denominated collectively therein as the
"Founders" and the Company;
WHEREAS, Executive is one of the Founders and Executive and the Company
wish to enter into this Agreement, including without limitation the restrictive
covenants set forth in Section 6, in connection with the sale of Common Stock
(as hereinafter defined) to the DLJ Entities pursuant to the Securities Purchase
Agreement;
WHEREAS, the Company considers it essential to its best interest and the
best interest of its stockholders to foster the continued employment of
Executive by the Company from and after the date of the closing of such purchase
of Common Stock; and
WHEREAS, Executive is willing so to continue his employment on the
terms hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Definitions. (a) As used herein, the following terms shall have the
meanings set forth below:
"Agreement" means this Employment Agreement.
"Base Salary" has the meaning set forth in Section 4.1 hereof.
"Board" means the Board of Directors of the Company.
"Bonus" has the meaning set forth in Section 4.2 hereof.
"Cause" means (i) Executive's Willful and continued failure substantially
to perform his duties as described herein (other than (x) as a result of total
or partial incapacity due to physical or mental illness, (y) for Good Reason, or
(z) as a result of the Company's material
<PAGE>
breach of its obligations under this Agreement) following the notice and cure
period provided for in Section 5.1, (ii) Executive's dishonesty in the
performance of his duties or (iii) the conviction of Executive of, or the entry
of a plea of guilty by Executive to, a felony involving the Executive's personal
conduct under the laws of the United States or any state thereof or conviction
of, or the entry of a plea of guilty to, a crime involving the Executive's
personal conduct in any other jurisdiction in which the Company does business
which would constitute a felony under the laws of the United States or any state
thereof if such crime had been committed within the jurisdiction of the United
States or any state thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Company" means Manufacturers' Services Limited, a Delaware corporation.
"Compensation Committee" means the Compensation Committee of the Board.
"Confidential Information" has the meaning set forth in Section 7 hereof.
"Disability" means physical or mental incapacity resulting in Executive
being unable for a period of six (6) consecutive months or for an aggregate of
six (6) months in any twenty-four (24) consecutive month period to perform his
duties. Any question as to the existence of the Disability of Executive as to
which Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive shall be final and
conclusive for all purposes of this Agreement.
"Effective Date" means January 20, 1995.
"Employment Term" has the meaning set forth in Section 2 hereof.
"Executive" means Kevin C. Melia.
"Fair Market Value" means, with respect to any share of Common Stock the
right to purchase or sell which is granted hereunder, the fair market value of
such share of Common Stock at the time of exercise of such right to purchase or
sell as determined by the Board. If Executive shall object to any such
determination, the Board shall retain an independent appraiser reasonably
satisfactory to Executive to determine such fair market value.
-2-
<PAGE>
"Good Reason" means:
(i) Executive is not elected or appointed to, or is removed from,
the positions described in Section 3 hereof for any reason other than for
Cause or by reason of Executive's death or Disability;
(ii) Executive is assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with Executive's position as described in
Section 3 hereof;
(iii) the Company appoints an employee to a position at the Company
senior to that of the Executive;
(iv) the Company requires Executive to relocate to an area more than
100 miles from Executive's current location;
(v) breach by the Company of any of its material agreements under
this Agreement; or
(vi) a fifty percent (50%) change in ownership (other than as a
result of a public offering) or a sale of substantially all of the Common
Stock or substantially all of the assets of the Company to one other
party.
"Initial Term" has the meaning set forth in Section 2 hereof.
"Management Stock Option Plan" means the 1995 Non-Qualified Stock Option
Plan of the Company.
"Note" means a three year term note bearing interest at the Prime Rate.
"Notice of Termination" means a written notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
"Options" means options to purchase capital stock of the Company granted
to Executive pursuant to any stock option plan of the Company.
"Other Stockholders" has the meaning assigned to such term in the
Stockholders Agreement.
"Permitted Transferee" has the meaning assigned to Permitted Transferees
of Other Stockholders in the Stockholders Agreement.
-3-
<PAGE>
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Put Right" has the meaning set forth in Section 5.2(c) hereof.
"Stockholders Agreement" means the Stockholders Agreement dated as of
January 20, 1995 by and among the Company, the Founders and the DLJ Entities.
"Willful" means, when applied to any action or omission of Executive, that
Executive, in acting or omitting to act, did so without a good faith belief that
such action or omission was in, or was not contrary to, to the best interests of
the Company.
2. Term of Employment. Subject to the provisions of Sections 5.1 - 5.4
herein, inclusive, Executive shall be employed by the Company for a period
commencing on the Effective Date and ending on the third anniversary thereof
(the "Initial Term"); provided that the Employment Term shall be automatically
extended thereafter until terminated by not less than three months' prior
written notice given by the Company or Executive to the other of its or his, as
the case may be, intent to terminate this Agreement (the Initial Term, together
with any extensions thereof, is hereinafter referred to as the "Employment
Term").
3. Position. (a) During the term hereof, Executive shall be appointed and
shall serve as Chief Executive Officer and President of the Company and in the
performance of such duties shall report directly to (and only to) the Board.
Subject to applicable law and the overall policy directives of the Board,
Executive shall have complete autonomy with respect to the day-to-day management
of the business and affairs of the Company and shall have all executive powers
and authority which are necessary to enable him to discharge his duties as
President and Chief Executive Officer of the Company.
(b) During the term of his employment hereunder, Executive shall serve on
the Board and as Chairman of the Board.
(c) During the term of his employment hereunder, the Company shall not
employ or otherwise retain any other person who is afforded executive
responsibilities equal to or greater than those of Executive.
(d) During the term of his employment hereunder, Executive shall in good
faith and consistent with his ability, experience and talent perform the duties
set forth in this Section 3 and shall devote all of his productive time and
efforts to the performance of such duties.
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4. Compensation
4.1 Base Salary. The Company shall pay Executive an annual base salary
("Base Salary") at the initial rate of $150,000 to be increased by the Company
to the annual rate of $350,000 in the event that the Company achieves
$75,000,000 in revenues in any one fiscal quarter as reflected in the
consolidated financial statements for such fiscal quarter (such increase to take
effect promptly after the receipt by the Board of the consolidated financial
statements for such fiscal quarter). Base Salary shall be payable in regular
installments in accordance with the Company's usual payment practices but not
less frequently than semi-monthly during the Employment Term. Base Salary shall
be reviewed at least semi-annually on an ongoing basis for adjustment in
accordance with Executive's performance.
4.2 Bonus. With respect to each fiscal year, all or part of which is
contained in the Employment Term, Executive shall be eligible to receive, in
addition to his Base Salary, a cash bonus (the "Bonus") consisting of (i) a
"Target Bonus" paid quarterly if earned at a rate of up to 50% of his Base
Salary, plus (ii) a "Super Achievement Bonus" paid annually if earned at a rate
of up to an additional 50% of Base Salary. The Target Bonus and Super
Achievement Bonus will be based on the Company achieving a certain percentage of
EBIT for such fiscal year as established in the "Annual Operating Plan" and in
the "DLJ Memo", respectively, as defined and illustrated in Exhibit A, which is
attached hereto and incorporated herein by reference. The Bonus will be payable
promptly following the receipt by the Board of the consolidated audited
financial statements for such fiscal year.
4.3 Benefits. Executive shall be entitled to participate in all of the
Company's incentive and benefit plans and arrangements, including, without
limitation, all employee incentive and benefit plans or arrangements currently
available or made available in the future by the Company to its senior
executives, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements, but on a basis no less
favorable than that afforded to any other director, officer or employee of the
Company. The Company shall also provide to Executive all health, major medical,
hospitalization and disability insurance on the same terms as such benefits are
provided to other senior executives of the Company. Executive will be entitled
to four (4) weeks paid vacation for each twelve (12) month period following the
Effective Date. Unused vacation from any year may be utilized only in the next
succeeding year, and in no event will Executive receive cash compensation for
unused vacation from a prior year.
4.4 Business Expenses. Reasonable travel, entertainment and other business
expenses incurred by Executive in the performance of his duties hereunder shall
be reimbursed by the Company in accordance with Company policies.
5. Termination. Executive's employment may be terminated by either party
at any time. In the event of any such termination, the rights of the parties
will be determined as set forth in this Section 5.
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<PAGE>
5.1 Termination For Cause by the Company. (a) If Executive's employment is
terminated by the Company for Cause, he shall be entitled to receive his Base
Salary through the date of termination. All vested and unvested Options held by
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof at the time of termination will terminate upon termination of
Executive's employment pursuant to this Section 5.1. All other benefits due
Executive following termination of Executive's employment pursuant to this
Section 5.1 shall be determined in accordance with the plans, policies and
practices of the Company. If Executive's employment is proposed to be terminated
for Cause pursuant to clause (i) of the definition of Cause, the Company shall
give Executive written notice of the event or circumstances constituting Cause
and thirty (30) days from the date of such notice to cure such event or
circumstances, if curable.
(b) In the event of termination of Executive for Cause, the Company shall
have the right to purchase from Executive, any Permitted Transferee of Executive
or any trust for the benefit thereof all shares of Common Stock then owned by
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof at a price per share payable, at the option of the Company, in cash or a
Note, in an amount equal to the lesser of Fair Market Value and the initial cost
per share of such share of Common Stock.
5.2 Executive's Disability or Death. (a) If Executive's employment
hereunder is terminated in the event of Executive's Disability or death,
Executive (or his estate) shall continue to receive the higher of (i) one year's
Base Salary calculated at the level at the time of Executive's Disability or
death plus an amount equal to the previous year's Bonus received by Executive
and (ii) Base Salary of Executive for the remainder of the Initial Term as if
such termination had not occurred, reduced by any disability benefits paid in
lieu of Base Salary under the Company's employee benefit plans as then in
effect. All other benefits due Executive following termination of Executive's
employment for Disability or death shall be determined in accordance with the
plans, policies and practices of the Company.
(b) In the event Executive's Employment is terminated by death or
Disability, (i) vested Options held at the time of termination by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof will
remain outstanding, (ii) Options scheduled to vest over time will continue to
vest in accordance with the vesting schedule set forth in the stock option award
plan or agreement applicable to such Options and (iii) all other Options will
terminate.
(c) In the event Executive's employment is terminated by death or
Disability, Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof shall have the right to sell to the Company (x) all shares
of Common Stock then owned by Executive, any Permitted Transferee of Executive
or any trust for the benefit thereof and (y) all shares of Common Stock to be
acquired upon the exercise of all vested Options then held by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof, at a
price per share payable, at the option of the Company, in cash or a Note, equal
to Fair Market Value (less, in the case of any share of Common Stock subject to
vested Options, the
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<PAGE>
applicable exercise price of such Options) (the "Put Right"); provided that (i)
such Put Right will only arise during a sixty (60) day period following
termination of Executive's employment by the Company by death or Disability and
(ii) the purchase by the Company will not constitute an event of default under
the terms of any of the Company's outstanding debt obligations.
5.3. Termination of Employment Without Cause by the Company. (a) If
Executive's employment is terminated by the Company without Cause (other than by
reason of Disability or death), Executive shall continue to receive his Base
Salary for the remainder of the Initial Term as if such termination had not
occurred or, if greater, the sum of (i) one year's Base Salary calculated at the
level at the time of Executive's termination and (ii) an amount equal to the
previous year's Bonus received by Executive.
(b) In the event of such a termination of employment by the Company
without Cause, during the period from the date of termination through the date
Executive ceases receiving payments in lieu of Base Salary pursuant to Section
5.3(a) above, Executive will continue to receive any welfare benefits provided
to him pursuant to Section 4.3 hereof at a level substantially comparable to
that in effect immediately prior to such termination or the Company will pay
Executive, in cash, the equivalent value of such welfare benefits after payment
of any of Executive's applicable taxes. All other benefits due Executive
following such termination of employment by the Company without Cause shall be
determined in accordance with the plans, policies and practices of the Company.
(c) In the event of such a termination of employment by the Company
without Cause, Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof shall have the Put Right; provided that (i) such Put Right
will only arise during a sixty (60) day period following termination of
Executive's employment by the Company without Cause and (ii) the purchase by the
Company will not constitute an event of default under the terms of any of the
Company's outstanding debt obligations.
(d) In the event of a termination of employment by the Company without
Cause, (i) vested Options held by Executive, any Permitted Transferee of
Executive or any trust of the benefit thereof at the time of such termination
will remain outstanding and subject to the Put Right, (ii) Options scheduled to
vest over time will continue to vest in accordance with the vesting schedule set
forth in the stock option award plan or agreement applicable to such Options and
(iii) all other Options will terminate; provided that if Executive fails to
comply with any of the provisions of Section 6.1 of this Agreement the Options
described in clauses (i) and (ii) of this sentence will immediately thereupon
terminate.
(e) If Executive's employment is terminated by Executive for Good Reason,
such termination shall be treated for purposes of this Section 5.3 as a
termination of Executive's employment by the Company without Cause. Executive
shall give the Company written notice of the event or circumstance constituting
Good Reason and thirty (30) days from the date of such notice to cure such event
or circumstance, if curable.
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<PAGE>
5.4 Voluntary Termination of Employment by Executive. (a) If Executive
terminates his employment with the Company for any reason (other than death,
Disability or Good Reason as provided in Sections 5.2 and 5.3 hereof), Executive
shall be entitled to the same payments he would have received if his employment
had been terminated by the Company for Cause.
(b) Upon a voluntary termination, (i) vested Options held by Executive,
any Permitted Transferee of Executive or any trust for the benefit thereof at
the time of such termination will remain outstanding and (ii) all other Options
will terminate.
(c) Upon a voluntary termination, the Company shall have the right to
purchase from Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof all shares of Common Stock then owned by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof at a
price per share payable, at the option of the Company, in cash or a Note, in an
amount equal to Fair Market Value. Such right must be exercised within twelve
(12) months following such transaction and shall lapse from and after the date
of the initial public offering of shares of Common Stock.
(d) Upon a voluntary termination, the Company shall have the right at any
time (without regard to whether any exercise notice has been delivered) to
purchase from Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof all vested Options then held by Executive, any Permitted
Transferee of Executive or any trust for the benefit thereof at an aggregate
price payable, at the option of the Company, in cash or a Note, in an amount
calculated by subtracting the aggregate exercise price of such vested Options
from the aggregate Fair Market Value of the shares of Common Stock for which
such vested Options are exercisable. Such right must be exercised within twelve
(12) months following such termination and shall lapse from and after the date
of the initial public offering of shares of Common Stock.
5.5 Mitigation. Anything in this Agreement to the contrary
notwithstanding, in the event that Executive provides services for pay to anyone
other than the Company or any of its affiliates or subsidiaries from the date of
termination of Executive's employment hereunder until the date Executive ceases
receiving payments pursuant to Sections 5.1 - 5.4 hereof, inclusive, any medical
or other welfare benefits to which Executive is entitled from the Company during
such period pursuant to this Agreement shall be reduced by the medical and other
welfare benefits which Executive is eligible to receive during such period as a
result of Executive's performing such services.
5.6 Notice of Termination. Any purported termination of employment by the
Company or by Executive shall be communicated by written Notice of Termination
to the other party hereto.
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<PAGE>
6. Non-Competition; Non-Solicitation.
6.1 Non-Competition. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the company and accordingly agrees that
during the Employment Term or during any period that Executive receives or is
entitled to receive any severance payments under this Agreement or under any
other severance arrangement of the Company, Executive will not enter into
competitive endeavors and will not undertake any commercial activity which is
contrary to the best interests of the Company or its affiliates, including
becoming an employee, officer, director, agent or owner of any outstanding
shares of, or any other equity interest in, any company, firm, business, person
or other entity in any geographic area which derives more than ten percent (10%)
of its profits, revenues or earnings before taxes from electronic contract
manufacturing; provided, that Executive may own up to two percent (2%) of the
stock of any such company whose stock is registered for public trading.
6.2 Non-Solicitation. In the event of a termination of employment of
Executive for any reason, Executive shall refrain from directly or indirectly
soliciting or hiring employees of the Company, directly or indirectly inducing
any such employees to terminate their employment by the Company, or seeking to
employ any such employees, in each case, for two years after Executive's
termination; provided that in the event of a termination without Cause, the
restrictions in this clause 6.2 shall lapse on the first anniversary of the date
of such termination.
7. Confidentiality. Executive acknowledges that the nature of Executive's
engagement by the Company is such that Executive will have access to
Confidential Information (as hereinafter defined) which has value to the
Company. During and after his employment by the Company, Executive shall keep
all of the Confidential Information in confidence and shall not disclose any of
the same to any other person, except the Company's personnel, agents and
representatives and other persons designated in writing by the Company or except
as otherwise required by law. The term "Confidential Information", as used
herein, means all information or material relating to the Company not generally
known by non-Company personnel which (i) is marked "Confidential Information",
"Proprietary Information" or other similar marking, (ii) is known by Executive
to be considered confidential and proprietary by the Company or (iii) derives
value by virtue of the fact that it is not generally known; provided that the
term "Confidential Information" does not include information that was or becomes
generally available publicly other than through disclosure by Executive in
violation of this Agreement.
8. Non-Compliance. If after termination Executive fails to comply with any
provisions of Section 6 the Company shall have the right to purchase from
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof all shares of Common Stock then owned by Executive, any Permitted
Transferee of Executive or any trust for the benefit thereof at a price per
share payable, at the option of the Company, in cash or a Note,
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<PAGE>
in an amount equal to the lesser of Fair Market Value and the initial cost per
share of such share of Common Stock.
9. Specific Performance. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Sections 6.1, 6.2 or 7 hereof would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available; provided,
however, that if the Company obtains any such equitable relief at any time
during the Initial Term, it shall thereby waive its rights under Section 8
hereof.
10. Enforceability. It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in Sections 6.1,
6.2 and 7 hereof to be reasonable, if a final judicial determination is made by
a court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction against
Executive, the provisions of this Agreement shall not be rendered void but shall
be deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
11. Miscellaneous.
11.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
11.2. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein; however, this Agreement shall not
supersede the Securities Purchase Agreement, the Stockholders Agreement or any
stock option agreement or indemnification agreement between Executive and the
Company, which agreements shall be interpreted in accordance with their terms.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
11.3. No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
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<PAGE>
11.4. Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
11.5 Assignment. Absent the prior written consent of the Company, this
Agreement shall not be assignable by Executive, except that Executive may assign
payments due hereunder to a trust established for the exclusive benefit of any
Permitted Transferee of Executive.
11.6. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees of
Executive and successors and assigns of the Company.
11.7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
given to the respective addresses or telecopy numbers set forth on the execution
page or this Agreement, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company or to such other address as either party may have furnished to the other
in writing in accordance herewith. Each such notice or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the execution page of this Agreement if a copy of
such notice or other communication is sent by certified mail, return receipt
requested, and is posted within one business day, or is personally delivered,
whether by courier or otherwise, within two business days, after the date of
such telecopy, (ii) if given by prepaid overnight courier, one business day
after deposit with such courier or (iii) if given by United States mail, postage
prepaid, three business days after deposit with the United States postal
service; provided that notice of change of address shall be effective only upon
receipt.
11.8. Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such Federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
11.9. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
---------------------------------
Kevin C. Melia
24 Grasshopper Lane
Acton, MA 01720
Fax: (508)266-1839
MANUFACTURERS' SERVICES LTD.
By:
------------------------------
Thompson Dean, Director
200 Baker Avenue
Concord, Massachusetts 01742
Fax: (508)287-5635
<PAGE>
June 20, 1997
PRIVATE AND CONFIDENTIAL
Mr. Robert E. Donahue
6 Zylpha Road
Harwich Port, MA 02646
Dear Bob:
I am pleased to offer you an executive position with Manufacturers'
Services Limited (the "Company") on the following terms and conditions:
1. Your title will be Executive Vice President and Chief Financial
Officer, and you will report to me. You will be based at the Company's office in
Concord, Massachusetts.
2. Your compensation will consist of the following:
(a) Base Salary at the annual rate of $250,000 payable in
accordance with the Company's payroll practices and
procedures.
(b) Incentive compensation as follows:
(i) Assuming you are able to begin your employment no later
than the first week of August, a bonus in the amount of up to
$200,000 for 1997. Of this amount, $100,000 is guaranteed and
will be paid after the end of the year with other annual
bonuses. You may earn the remaining amount of bonus, up to
$50,000 for each of the Company's third and fourth quarters,
by achieving MBO goals for each quarter to be mutually agreed
with me within 30 days of your employment start date.
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<PAGE>
(ii) For 1998, your incentive compensation will consist of:
(A) a Target Bonus paid quarterly, if earned, at a rate of up
to 50% of Base Salary, plus (B) a Super Achievement Bonus paid
annually, if earned, at a rate of up to 50% of Base Salary.
The Target Bonus and Super Achievement Bonus will be
determined in accordance with the Company's 1998 Incentive
Compensation Plan, and your performance will be reviewed, at
least quarterly, on an on-going basis. A copy of the Company's
1997 Incentive Compensation Plan has been furnished to you for
your information, although there is no guarantee that the 1998
Incentive Compensation Plan will be the same. You will
participate in the formulation of the 1998 Plan.
(c) Stock options pursuant to the Company's Non-qualified Stock
Option Plan. You will be eligible to participate in this Plan
and receive options on terms and conditions that are
comparable to those for executives in positions similar in
rank and compensation to yours with your particular level of
participation based on: (1) the specific terms and conditions
of the Plan; (2) approval of the Compensation Committee of the
Company's Board of Directors; (3) your performance as an
executive of the Company; and (4) the Company's achievement of
corporate goals and objectives.
(d) Initially, you will be granted options to purchase 400,000
shares of the Company's stock at $1.00 per share. These
options will vest pro rata over a four-year period based
solely on time. The other terms and conditions of the Stock
Option Plan will be furnished to you with your initial grant.
3. In addition to your compensation set forth above, you will be eligible
to receive health and life insurance and other employee benefits in accordance
with the terms and conditions of the respective Company benefit plans and other
plans and policies in force and effect, which may be changed, expanded or
diminished from time to time, during the course of your employment by the
Company. A summary of the Company's current employee benefits is enclosed. One
difference of which you should be aware in connection with Company provided life
insurance is that the Company provides a $1 million life insurance policy to
certain executives, including the Company's CFO. This is an exception to the
limit of $250,000 described in the enclosed benefits summary.
2
<PAGE>
4. In order to assist you with expenses you may incur in making the
transition to your new position, we will pay you a lump sum of $60,000 with your
first paycheck. This amount will be subject to normal withholdings.
5. For a period of three months following your employment start date, you
may purchase shares of the Company's stock at such price and on such other terms
as we mutually agree.
6. As a condition of your employment by the Company, you agree to sign the
Company's Agreement with Respect to Confidential Information and Inventions and
Non-Competition ("Confidentiality Agreement"), which has been furnished to you.
7. Under the Immigration Reform and Control Act of 1986, employers are
required to verify employment eligibility of all new employees. Upon joining the
Company, you will be asked to complete INS form I-9 (employment eligibility
verification) and to provide for our review either (1) a United States passport,
certificate of Naturalization or Citizenship or Alien Registration card with
employment authorization and photograph, or (2) a driver's license or other
official photograph identification and original Social Security card or birth
certificate.
8. By signing this offer letter, you represent that you are not subject to
any restrictions (including, without limitation, any restrictions in connection
with any previous employment) that prevent you from accepting this offer of
employment or that materially and adversely affect (or may in the future, so far
as you can reasonably foresee, materially and adversely affect) your ability to
fulfill your responsibilities as an executive of the Company.
9. Your employment will be on an at-will basis, and either you or the
Company may terminate your employment, at any time, with or without "Cause" (as
defined herein). If your employment is terminated by the Company (and for this
purpose the Company includes any successor in interest) other than for Cause,
death or Disability (as defined herein), you will be entitled to salary
continuation payments during the 12-month period following termination. The
total of all such payments, which shall be payable in 26 equal installments in
accordance with the Company's payroll practices and procedures, shall be an
amount equal to the sum of (i) your Base Salary for the fiscal year of
termination, plus (ii) your incentive compensation earned during the prior
fiscal year, provided that (x) the total amount payable to you hereunder shall
not exceed two times your Base Salary for the year of termination, (y) salary
continuation payments shall terminate upon your breach of the Confidentiality
Agreement, and (z) in further consideration for the salary continuation
payments, you will sign and deliver to the Company a general release. For this
purpose:
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(a) "Cause" means (i) your willful and continued failure
substantially to perform your duties (other than (x) as a result of total or
partial incapacity due to physical or mental illness, or (y) for Good Reason),
(ii) your dishonesty in the performance of your duties, (iii) your breach of the
Confidentiality Agreement or (iv) your conviction of, or the entry of a plea of
guilty by you to, a felony involving your personal conduct under the laws of the
United States or any state thereof or conviction of, or the entry of a plea of
guilty to, a crime involving your personal conduct in any other jurisdiction
which crime would constitute a felony under the laws of the United States or any
state thereof if such crime had been committed within the jurisdiction of the
United States or any state thereof.
(b) "Disability" means physical or mental incapacity resulting in
your being unable to perform your essential functions for an aggregate of more
than six months during any period of twenty-four consecutive months. Any
question as to the existence of your Disability as to which you and the Company
cannot agree will be determined by a qualified independent physician mutually
acceptable to you and the Company. If you and the Company cannot agree as to a
qualified independent physician, each will appoint such a physician and those
two physicians will select a third, who will make such determination in writing.
Such determination of Disability made in writing to the Company and to you will
be final and conclusive for all purposes of your employment.
(c) "Good Reason" means:
(i) you are removed from your position of Executive Vice President
and Chief Financial Officer for any reason other than for Cause or by reason of
your death or Disability;
(ii) you are assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with your position or you are required to report
directly to any person other than the Company's Chief Executive Officer;
(iii) breach by the Company of any of its material employment
obligations to you; or
(iv) your Base Salary or the percentage of your Base Salary used to
calculate your Incentive Compensation is reduced other than for reasons of your
performance after written notice and a reasonable opportunity to cure.
10. Your employment will be subject to, and the terms of this letter will
be interpreted in accordance with, the laws of the Commonwealth of Massachusetts
without regard to its conflict of laws rules.
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11. The foregoing terms and conditions supersede any prior discussions
relating to your employment by the Company. Please acknowledge your acceptance
of these terms and conditions by signing and dating the enclosed copy of this
offer letter. Please return the enclosed copy and the signed Confidentiality
Agreement to Mr. Dale Johnson at this address.
Bob, I want to take this opportunity to say that we look forward to your
joining the Manufacturers' Services team, and we believe that you will make a
significant contribution to Manufacturers' Services' growth.
Very truly yours,
MANUFACTURERS' SERVICES LIMITED
By:___________________________________
Kevin C. Melia
Chairman, CEO and President
Accepted and Agreed:
_________________________________
Robert E. Donahue
Dated: ____________, 1997
<PAGE>
[LOGO]
MANUFACTURERS'
SERVICES LTD.
September 27, 1995
PRIVATE AND CONFIDENTIAL
Mr. Rodolfo Archbold
518 Tumbling Hawk
Acton, MA 01718
Dear Rodolfo:
I am pleased to offer you an executive position with Manufacturers'
Services Limited ("MSL") on the following terms and conditions:
1. Your title will be Vice President of Technology, and you will report
directly to me. It is anticipated that your position will require substantial
travel.
2. Your compensation will consist of the following:
(a) Base Salary at the annual rate of $125,000 payable in
accordance with MSL's payroll practices and procedures.
(b) Incentive compensation consisting of (i) a Target Bonus paid
quarterly at a rate of up to 40% of Base Salary, plus (ii) a
Super Achievement Bonus paid annually at a rate of up to 40%
of Base Salary. The Target Bonus and Super Achievement Bonus
will be based, respectively, on achieving or exceeding
mutually agreed to goals and objectives for MSL and for your
individual performance. Your performance against the agreed to
goals and objectives will be reviewed, at least quarterly, on
an on-going basis.
200 BAKER AVENUE
CONCORD, MASSACHUSETTS USA
01742-2121
508.287.5630
FAX 508.287.5635
<PAGE>
[LOGO]
(c) Stock options pursuant to a stock option plan. MSL's Board of
Directors has approved the granting of stock options as
compensation, and a specific plan is now being drafted for
final Board approval. Options granted will vest over a
four-year period with 50% of the options in any grant vesting
ratably based on time and 50% vesting based on performance.
You will be eligible to participate in this plan and receive
options on terms and conditions that are comparable to those
for executives in positions similar in rank and compensation
to yours with your level of participation based on: (1) the
specific terms and conditions of the plan; (2) approval of the
Compensation Committee of MSL's Board of Directors; (3) your
performance as a manager of MSL; and (4) your achievement of
mutually agreed to corporate and personal goals and
objectives. Initially, you will be granted options on 20,000
shares of MSL stock when the equity investment of MSL's
institutional investors reaches a pre-agreed level, which we
anticipate will occur shortly. Thereafter, you will be
eligible to receive additional options annually according to
the foregoing criteria and subject to the terms of the stock
option plan.
3. In addition to the compensation set forth above, you will be eligible
to receive health and life insurance and other employee benefits in accordance
with the terms and conditions of the respective company benefit and other
plans/policies in force and effect, which may be changed, expanded or diminished
from time to time, during the course of your employment by MSL.
4. As a condition of your employment by MSL, on your date of hire you
agree to sign MSL's Agreement with Respect to Confidential Information and
Inventions and Non-Competition.
5. Under the Immigration Reform And Control Act of 1986, employers are
required to verify employment eligibility of all new employees. Upon joining
MSL, you will be asked to complete I.N.S. Form I-9 (Employment Eligibility
Verification) and to provide, for our review: (i) a driver's license or other
official photograph identification card, and (ii) an original Social Security
card, birth certificate, Unites States passport, Certificate of Naturalization
or Citizenship, or Alien Registration Card with employment authorization and
photograph.
6. By signing this offer letter, you represent that you are not subject to
any restrictions (including, without limitation, any restrictions in connection
with any previous employment) that prevent you from accepting this offer of
employment or that materially and adversely affect (or may in the future, so far
as you can reasonably foresee, materially and adversely affect) your ability to
fulfill your responsibilities as an employee of MSL.
7. Your employment will be on an at-will basis, and either you or MSL may
terminate your employment, at any time, with or without cause.
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<PAGE>
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8. The foregoing terms and conditions supersede any prior discussions
related to your employment by MSL. Please acknowledge your acceptance of these
terms and conditions by signing, dating and returning to me the enclosed
duplicate original of this offer letter.
Rodolfo, I want to take this opportunity to say that we look forward to
your joining MSL's management team, and we believe that you will make a
significant contribution to MSL's growth.
Very truly yours,
MANUFACTURERS' SERVICES LIMITED
By: ______________________________________
Robert J. Graham
Executive Vice President and COO
Accepted and Agreed:
________________________________
Rodolfo Archbold
Dated:____________, 1995
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<PAGE>
[LOGO]
MANUFACTURERS'
SERVICES LTD.
January 4, 1996
PRIVATE AND CONFIDENTIAL
Mr. Dale R. Johnson
14 Schooner Ridge
Marblehead, MA 01945
Dear Dale:
I am pleased to offer you an executive position with Manufacturers'
Services Limited ("MSL") effective February 1,1996 on the following terms and
conditions:
1. Your title will be Executive Vice President and General Counsel, and
you will report directly to me. You will be based in Concord, Massachusetts,
although you will spend most of your time in Boston at the offices of Sherburne,
Powers & Needham, P.C. ("SP&N") so that you can utilize SP&N's facilities and
have available secretarial assistance for MSL matters. You will spend as much
time in MSL's Concord office and you will travel as much as necessary to fulfill
your responsibilities to the company.
2. Your compensation will consist of the following:
(a) Ease Salary at the annual rate of $170,000 payable in
accordance with MSL's payroll practices and procedures.
(b) Incentive compensation consisting of (i) a Target Bonus paid
quarterly at a rate of up to 50% of Base Salary, plus (ii) a
Super Achievement Bonus paid annually at a rate of up to 50%
of Base Salary. The Target Bonus and Super Achievement Bonus
will be based, respectively, on achieving or exceeding
mutually agreed to goals and objectives for MSL and for your
individual performance. Your performance against the agreed to
goals and objectives will be reviewed, at least quarterly, on
an on-going basis. As a member of MSL's executive staff, the
payment of your incentive compensation also will be subject to
certain terms and conditions established by the Compensation
Committee of MSL's Board of Directors, which terms and
conditions have been explained to you.
200 BAKER AVENUE
CONCORD, MASSACHUSETTS USA
01742-2121
508.287.5630
FAX 508.287.5635
<PAGE>
[LOGO]
(c) Stock options pursuant to a stock option plan. MSL's Board of
Directors has approved the granting of stock options as
compensation, and a specific plan is now being drafted for
final Board approval. Options granted will vest over a
four-year period with 50% of the options in any grant vesting
ratably based on time and 50% vesting based on performance.
You will be eligible to participate in this plan and receive
options on terms and conditions that are comparable to those
for executives in positions similar in rank and compensation
to yours with your level of participation based on: (1) the
specific terms and conditions of the plan; (2) approval of the
Compensation Committee of MSL's Board of Directors; (3) your
performance as a manager of MSL; and (4) your achievement of
mutually agreed to corporate and personal goals and
objectives. In your capacity as an outside legal consultant to
the company, you have already been granted options on 75,000
shares of MSL stock. You will be eligible to receive
additional options annually according to the foregoing
criteria and subject to the terms of the stock option plan
when adopted.
3. In addition to the compensation set forth above, you will be eligible
to receive health and life insurance and other employee benefits in accordance
with the terms and conditions of the respective company benefit and other
plans/policies in force and effect, which may be changed, expanded or diminished
from time to time, during the course of your employment by MSL.
4. You must be able to travel between Boston and Concord frequently and on
immediate notice. Therefore, MSL will pay for a monthly parking pass for you in
SP&N's office building so that you may always have your automobile available.
5. MSL recognizes that you have an ethical and professional obligation to
SP&N and to those SP&N clients for whom you currently have primary
responsibility. MSL will allow you to spend a reasonable amount of time advising
SP&N and its clients and making a smooth transition from private practice to
your new position, provided that your activities for SP&N and its clients do not
interfere with the timely performance of your duties for MSL.
6. As a condition of your employment by MSL, on your date of hire you
agree to sign MSL's Agreement with Respect to Confidential Information and
Inventions and Non-Competition.
7. Under the Immigration Reform And Control Act of 1986, employers are
required to verify employment eligibility of all new employees. Upon joining
MSL, you will be asked to complete I.N.S. Form I-9 (Employment Eligibility
Verification) and to provide, for our review: (i) a driver's license or other
official photograph identification card, and (ii) an original Social Security
card, birth certificate, United States passport, Certificate of Naturalization
or Citizenship, or Alien Registration Card with employment authorization and
photograph.
-2-
<PAGE>
[LOGO]
8. By signing this offer letter, you represent that you are not subject to
any restrictions (including, without limitation, any restrictions in connection
with any previous employment) that prevent you from accepting this offer of
employment or that materially and adversely affect (or may in the future, so far
as you can reasonably foresee, materially and adversely affect) your ability to
fulfill your responsibilities as an employee of MSL.
9. Your employment will be on an at-will basis, and either you or MSL may
terminate your employment, at any time, with or without cause.
10. The foregoing terms and conditions supersede any prior discussions
related to your employment by MSL. Please acknowledge your acceptance of these
terms and conditions by signing, dating and returning to me the enclosed
duplicate original of this offer letter.
Dale, I want to take this opportunity to say that we look forward to your
joining MSL's executive team, and we believe that you will make a significant
contribution to MSL's growth.
Very truly yours,
MANUFACTURERS' SERVICES LIMITED
By: /s/ Kevin C. Melia
-------------------------------------
Kevin C. Melia
Chairman, CEO and President
Accepted and Agreed:
/s/ Dale R. Johnson
- ---------------------------
Dale R. Johnson
Dated: Jan. 31, 1996
--------------
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<PAGE>
[LOGO]
MANUFACTURERS'
SERVICES
June 25, 1996
Dale R. Johnson
14 Schooner Ridge
Marblehead, MA 01945
Dear Dale:
As we discussed, in recognition of your performance as an executive of
Manufacturers' Services Limited ("MSL") and in consideration of your continuing
employment, MSL has agreed to the following severance terms:
If your employment is terminated by MSL (and for the purposes of this
letter MSL includes any successor in interest) other than for Cause, death or
Disability, you will be entitled to salary continuation payments during the
12-month period following termination. The total of all such payments, which
shall be payable in 26 equal installments in accordance with MSL's payroll
practices and procedures, shall be an amount equal to the sum of (i) your Base
Salary for the year of termination, plus (ii) your incentive compensation
(Target Bonus and Super Achievement Bonus) earned during the prior year,
provided that (x) the total amount payable to you hereunder shall not exceed two
times your Base Salary for the year of termination and (y) salary continuation
payments shall terminate upon your material breach of the Agreement with Respect
to Confidential Information and Inventions and Non-Competition (the
"Non-Competition Agreement") that you have entered into with MSL. For this
purpose:
(a) "Cause" means (i) your willful and continued failure
substantially to perform your duties as described herein (other than (x) as a
result of total or partial incapacity due to physical or mental illness, (y) for
Good Reason, or (z) as a result of MSL's material breach of its obligations
pursuant to this letter agreement) following written notice to you and a 60-day
cure period, (ii) your dishonesty in the performance of your duties, (iii) your
material breach of the Non-Competition Agreement or (iv) your conviction of, or
the entry of a plea of guilty by you to, a felony involving your personal
conduct under the laws
MANUFACTURERS' SERVICES LTD.
200 BAKER AVENUE
CONCORD, MASSACHUSETTS USA
01742-2121
508.287.5630
FAX 508.287.5635
<PAGE>
[LOGO]
of the United States or any state thereof or conviction of, or the entry of a
plea of guilty to, a crime involving your personal conduct in any other
jurisdiction which crime would constitute a felony under the laws of the United
States or any state thereof if such crime had been committed within the
jurisdiction of the United States or any stare thereof.
(b) "Disability" means physical or mental incapacity resulting in
your being unable to perform your essential functions for an aggregate of more
than six months during any period of twenty-four consecutive months. Any
question as to the existence of your Disability as to which you and MSL cannot
agree will be determined in writing by a qualified independent physician
mutually acceptable to you and MSL. If you and MSL cannot agree as to a
qualified independent physician, each will appoint such a physician and those
two physicians will select a third, who will make such determination in writing.
Such determination of Disability made in writing to MSL and to you will be final
and conclusive for all purposes of your employment.
(c) "Good Reason" means:
(i) you are removed from your current position of Executive Vice
President and General Counsel for any reason other than for Cause or by
reason of your death or Disability;
(ii) you are assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with your position or you are required to
report directly to any person other than MSL's Chief Executive Officer or
any Chief Operating Officer;
(iii) breach by MSL of any of its material employment obligations to
you;
(iv) you are required to relocate outside the greater Boston area;
or
(v) your Base Salary or the percentage of your Base Salary used to
calculate your Incentive Compensation is reduced other than for reasons of
your performance after written notice and a reasonable opportunity to
cure.
<PAGE>
[LOGO]
This letter is intended to be incorporated into and become an integral
part of your present employment agreement with MSL. Except as provided above,
all of the other terms and conditions of your present employment agreement will
continue in full force and effect. Please acknowledge your agreement and
acceptance by signing the enclosed copy of this letter and returning it to me
for MSL's files.
Very truly yours,
MANUFACTURERS' SERVICES LIMITED
By: /s/ Kevin C. Melia
-----------------------------------
Kevin C. Melia
Chairman, CEO and President
Accepted and Agreed:
/s/ Dale R. Johnson
- -------------------------
Dated: 6/25/96
------------------
<PAGE>
January 23, 1998
PRIVATE AND CONFIDENTIAL
Mr. James N. Poor
66 Amble Road
Chelmsford, MA 01824
Dear Jim:
I am pleased to offer you a position with Manufacturers' Services Limited
(the "Company"), on the following terms and conditions:
1. Your title will be Vice President, Human Resources, and you will report
to me. You will be based at the Company's headquarters office in Concord,
Massachusetts, but your responsibilities will require some travel.
2. Your compensation will consist of the following:
(a) Base Salary at the bi-weekly rate of $5,000.00 payable in
accordance with the Company's payroll practices and
procedures.
(b) The opportunity to earn a Target Incentive bonus in an amount
up to 40% of your Base Salary and a Super Achievement
Incentive bonus with no cap in accordance with the Company's
1998 Cash Incentive Compensation Plan. The amount of Target
Incentive and Super Achievement Incentive you earn will be
based on the Company achieving or exceeding a specified
profitability target and on your accomplishing Personal
Performance Goals, which will be established. All cash
incentive compensation is paid annually.
<PAGE>
3. You will be granted options to purchase 65,000 shares of the Company's
stock pursuant to the Company's Non-Qualified Stock Option Plan, a copy of which
will be provided to you with your Award Agreement for such options.
4. In addition to your compensation set forth above, you will be eligible
to receive health and life insurance and other employee benefits in accordance
with the terms and conditions of the respective Company benefit plans and other
plans and policies in force and effect, which may be changed, expanded or
diminished from time to time, during the course of your employment by the
Company. You will be entitled to twenty days of vacation each year consistent
with the Company's vacation policy. A summary of the Company's 1998 benefits is
enclosed.
5. As a condition of your employment by the Company, you agree to sign the
Company's Agreement with Respect to Confidential Information and Inventions
(Confidentiality Agreement), which is also enclosed.
6. Under the Immigration Reform and Control Act of 1986, employers are
required to verify employment eligibility of all new employees. Upon joining the
Company, you will be asked to complete INS form I-9 (employment eligibility
verification) and to provide for our review either (1) United States passport,
certificate of Naturalization or Citizenship, or Alien Registration card with
employment authorization and photograph, or, (2) a driver's license or other
official photograph identification card, and original Social Security card or
birth certificate.
7. By signing this offer letter, you represent that you are not subject to
any restrictions (including, without limitation, any restrictions in connection
with any previous employment) that prevent you from accepting this offer of
employment or that materially and adversely affect (or may in the future, so far
as you can reasonably foresee, materially and adversely affect) your ability to
fulfill your responsibilities as an employee of the Company.
8. Your employment will be on an at-will basis, and either you or the
Company may terminate your employment, at any time, with or without "Cause" (as
defined herein). If your employment is terminated by the Company (and for this
purpose the Company includes any successor in interest) other than for Cause,
death or Disability (as defined herein), you will be entitled to salary
continuation payments during the 12-month period following termination. The
total of all such payments, which shall be payable in 26 equal installments in
accordance with the Company's payroll practices and procedures, shall be an
amount equal to the sum of (i) your Base Salary for the fiscal year of
termination, plus (ii) your incentive compensation earned during the prior
fiscal year, provided that (x) the total amount payable to you hereunder shall
not exceed two times your Base Salary for the year of termination, (y) salary
continuation payments shall terminate upon your breach of the Confidentiality
<PAGE>
Agreement, and (z) in further consideration for the salary continuation
payments, you will sign and deliver to the Company a general release. For this
purpose:
(a) "Cause" means (i) your willful and continued failure
substantially to perform your duties (other than (x) as a result of total or
partial incapacity due to physical or mental illness, or (y) for Good Reason),
(ii) your dishonesty in the performance of your duties, (iii) your breach of the
Confidentiality Agreement or (iv) your conviction of, or the entry of a plea of
guilty by you to, a felony involving your personal conduct under the laws of the
United States or any state thereof or conviction of, or the entry of a plea of
guilty to, a crime involving your personal conduct in any other jurisdiction
which crime would constitute a felony under the laws of the United States or any
state thereof if such crime had been committed within the jurisdiction of the
United States or any state thereof.
(b) "Disability" means physical or mental incapacity resulting in
your being unable to perform your essential functions for an aggregate of more
than six months during any period of twenty-four consecutive months. Any
question as to the existence of your Disability as to which you and the Company
cannot agree will be determined by a qualified independent physician mutually
acceptable to you and the Company. If you and the Company cannot agree as to a
qualified independent physician, each will appoint such a physician and those
two physicians will select a third, who will make such determination in writing.
Such determination of Disability made in writing to the Company and to you will
be final and conclusive for all purposes of your employment.
(c) "Good Reason" means:
(i) you are assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with your position;
(ii) breach by the Company of any of its material employment
obligations to you; or
(iii) your Base Salary or the percentage of your Base Salary used to
calculate your incentive compensation is reduced other than for reasons of your
performance after written notice and a reasonable opportunity to cure.
9. Your employment will be subject to, and the terms of this letter will
be interpreted in accordance with, the laws of the Commonwealth of Massachusetts
without regard to its conflict of laws rules.
10. The foregoing terms and conditions supersede any prior discussions
related to your employment by the Company. Please acknowledge your acceptance of
these terms and conditions by signing and dating the enclosed copy of this offer
letter.
<PAGE>
Please return the enclosed copy and the signed Confidentiality Agreement
to Mr. Dale Johnson at this address.
Jim, I want to take this opportunity to say that we look forward to your
joining the Company's team, and we believe that you will make a significant
contribution to the Company's growth.
Very truly yours,
MANUFACTURERS' SERVICES LIMITED
By:___________________________________
Robert Donahue
Chief Financial Officer
Accepted and Agreed:
_______________________________
James N. Poor
Dated: ____________, 1998
<PAGE>
Exhibit 10.7
MANUFACTURERS' SERVICES LIMITED
SECOND AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION PLAN
This Second Amended and Restated Non-Qualified Stock Option Plan dated as
of January 1, 1999 amends and restates the Non-Qualified Stock Option Plan dated
as of December 4, 1996, as previously amended and restated on February 26, 1998.
SECTION 1. PURPOSE. The purposes of the Second Amended and Restated
Manufacturers' Services Limited Non-Qualified Stock Option Plan (the "Plan") are
to (a) encourage the retention of the services of executive personnel, key
employees and directors of the Company, and other non-employee consultants and
contractors and (b) provide incentive to all such personnel and employees to
devote their utmost effort and skill to the advancement and betterment of the
Company by permitting them to participate in ownership of the Company and
thereby in any success or increased value of the Company. The Plan shall become
effective as of the Effective Date.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that is directly or indirectly
controlling, controlled by, or under common control with the Company and (ii)
any entity in which the Company has a significant equity interest, in each case
as determined by the Committee.
"Board" or "Board of Directors" shall mean the Board of Directors of the
Company.
"Cause" shall mean "Cause" as defined in any Employment Agreement or, if
there is no such Employment Agreement, or if such Employment Agreement does not
contain any such defined term, then "Cause" shall mean (a) a willful breach or
habitual neglect of the duties to be performed by the Participant, after
reasonably specific written warning and opportunity to cure; PROVIDED THAT, in
the event of such breach or habitual neglect the Participant shall have no
opportunity to cure any subsequent breach or neglect of duties, (b) an act of
fraud by the Participant on the Company or (c) the breach by the Participant of
any Non-Compete Agreement or Non-Disclosure Agreement or the non-compete
provisions of such Employment Agreement, whether or not such Non-Compete
Agreement or Non-Disclosure Agreement or the non-compete provisions of such
Employment Agreement are enforceable by specific performance or other equitable
or legal remedies. A finding of Cause shall be determined in good faith in the
sole discretion of the Board.
"Change of Control" shall mean (i) a merger or consolidation in which the
Company is a constituent corporation and immediately following which transaction
securities of the surviving
<PAGE>
or resulting corporation possessing less than 50% of the combined voting power
of such corporation's outstanding voting securities (computed on either an
actual or fully diluted basis) with respect to matters submitted to a vote of
the stockholders generally shall then be owned in the aggregate by persons who
immediately prior to such transaction were the stockholders of the Company; (ii)
a sale or transfer by the Company or any of its Subsidiaries of substantially
all of the consolidated assets of (x) the Company or (y) all of the Subsidiaries
to an entity (other than the Company) which is not a Subsidiary of the Company;
(iii) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act) (other than DLJMBP, DLJIP, DLJOP, DLJMBF or any affiliate of any
of them or any "group", within the meaning of such Section 13(d)(3), of which
any of them is a part) is or becomes the beneficial owner, (other than as a
result of an initial public offering of Shares of the Company) directly or
indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding voting securities with
respect to matters submitted to a vote of the stockholders generally; or (iv)
the Company adopts a plan of dissolution or liquidation or liquidates or
dissolves.
"Cliff Vesting Options" shall mean those Options, including Share Value
Options, the vesting of which is contingent upon the passage of a period of up
to eight years from the Grant Date but which vesting may be accelerated upon the
occurrence of certain events.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean (a) a committee of the Board of Directors designated
by the Board to administer the Plan which, to the extent the Board determines it
is desirable to comply with or qualify under Rule 16b-3 of the Exchange Act and
Section 162(m) of the Code, shall be composed of not less than the number of
persons required by such Rule or such Section, each of whom is a "Non-Employee
Director" within the meaning of Rule 16b-3 and an "outside director" for
purposes of Section 162(m) or (b) if the Board has not so designated a
committee, the Board.
"Company" shall mean Manufacturers' Services Limited, a Delaware
corporation, together with any successor thereto.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due to
the Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Disability" shall mean "Disability" as defined in any Employment Agreement
or, if there is no such Employment Agreement, or if such Employment Agreement
does not contain any such defined term, then "Disability" shall mean the
physical or mental incapacity of the Participant and consequent inability of the
Participant, for a period of six (6) consecutive months or for an aggregate of
twelve (12) months in any twenty-four (24) consecutive month period, to perform
his duties with the Company. Any question as to the existence of the Disability
of such Participant as to which the Participant and the Company cannot agree
shall be determined in
2
<PAGE>
writing by a qualified independent physician mutually acceptable to the
Participant and the Company. If the Participant and the Company cannot agree as
to a qualified independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such determination in
writing. The determination of Disability made in writing to the Company and the
Participant shall be final and conclusive for all purposes of the Plan.
"Effective Date" shall mean December 4, 1996, the date the Plan becomes
effective.
"Employee" shall mean (i) an officer or employee of the Company or of any
Affiliate, (ii) a director of the Company or of any Affiliate or (iii) a
non-employee consultant or contractor to the Company or to any Affiliate.
"Employment Agreement" shall mean, with respect to a Participant, any
employment agreement by and between the Company and such Participant.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expiration Date" shall mean, subject to cancellation of any Option as set
forth in the applicable Option Agreement, the tenth anniversary of the Grant
Date of the Option.
"Fair Market Value" shall mean, with respect to any Share, unless otherwise
defined in an applicable Option Agreement, the fair market value of such Share
as determined by the Board.
"Founding Stockholder" shall have the meaning set forth in the Securities
Purchase Agreement.
"Grant Date" shall have the meaning set forth in the applicable Option
Agreement.
"Non-Compete Agreement" shall mean, with respect to a Participant, any
non-compete agreement by and between the Company and such Participant requiring
such Participant to refrain from providing services in any capacity to the
Company's competitors.
"Non-Disclosure Agreement" shall mean, with respect to a Participant, any
non-disclosure agreement by and between the Company and such Participant
requiring such Participant to refrain from disclosing "Confidential Information"
to anyone not authorized to receive such information.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan.
"Option" shall mean a Non-Qualified Stock Option.
"Option Agreement" shall mean any written agreement evidencing the grant of
an Option, which may, but need not, be executed or acknowledged by a
Participant.
3
<PAGE>
"Ordinary Option" shall mean an Option that is not a Share Value Option.
"Participant" shall mean any Employee or Founding Stockholder selected by
the Committee to receive an Option under the Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean the Manufacturers' Services Limited Second Amended and
Restated Non-Qualified Stock Option Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the staff thereof.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of January 20, 1995 by and among the Company, the DLJ
Entities (as defined therein) and the Founding Stockholders (as defined
therein).
"Share Value Option" shall mean an Option, the vesting of which is
contingent upon the Company achieving a certain share value on specified dates,
in each case in the manner set forth in the applicable Option Agreement.
"Shares" shall mean shares of the Company's common stock, par value $.001
per share, or such other securities of the Company as may be designated by the
Committee from time to time.
"Subsidiary" shall mean any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions (including, in the case
of a partnership, a general partner) are at the time directly or indirectly
owned by the Company.
"Time Vesting Options" shall mean those Ordinary Options the vesting of
which is contingent only upon the passage of time and continued employment.
"Vested Options" shall mean Options which have become exercisable pursuant
to the terms of the Plan and any applicable Option Agreement.
SECTION 3. ADMINISTRATION. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan, the Securities Purchase Agreement
and applicable law, and in addition to other express powers and authorizations
conferred on the Committee by
4
<PAGE>
the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the number of Shares to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Options; (iii) determine the terms and conditions of any
Options; (iv) determine whether, to what extent, and under what circumstances
Options may be settled or exercised in cash, Shares, other securities, or other
property, or canceled, forfeited, or suspended and the method or methods by
which Options may be settled, exercised, canceled, forfeited, or suspended; (v)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other property, and other amounts payable with respect to an
Option shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vi) interpret and administer the Plan and any
instrument or agreement relating to, or Option made under, the Plan; (vii)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
(viii) accelerate the exercise date of any Option; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan or any Option
Agreement, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Option shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any Affiliate,
any Participant, any Designated Beneficiary, any holder or beneficiary of any
Option, any shareholder and any Employee.
SECTION 4. SHARES AVAILABLE FOR OPTIONS. (a) SHARES AVAILABLE. Subject
to the provisions of subsections 4(b) and 4(c) hereof, the number of Shares with
respect to which Ordinary Options may be granted under the Plan shall be ten
million seven hundred and fifty thousand (10,750,000). Subject to the provisions
of sub-sections 4(b) hereof, the number of Shares with respect to which Share
Value Options may be granted under the Plan shall be one million two hundred
fifty thousand (1,250,000). If, after the Effective Date of the Plan, any Shares
covered by an Option granted under the Plan are forfeited, or if an Option is
settled for cash or otherwise terminates or is canceled without the delivery of
Shares, then the Shares covered by such Option, or to which such Option relates,
or the number of Shares otherwise counted against the aggregate number of Shares
with respect to which such Options may be granted, to the extent of any such
settlement, forfeiture, termination or cancellation, shall again be, or shall
become, Shares with respect to which such Options may be granted.
(b) ADJUSTMENTS. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee
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shall, in such manner as it may deem equitable, adjust any or all of (i) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Options may be granted under
Section 4(a) or 4(c), as applicable, both in the aggregate and with respect to
permissible Options to any Participant, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Options, and (iii) the grant or exercise price with
respect to any Option, which adjustments may include, if deemed appropriate,
provision for a cash payment to the holder of an outstanding Option.
(c) SOURCES OF SHARES DELIVERABLE PURSUANT TO EXERCISES OF OPTIONS. Any
Shares delivered pursuant to the exercise of an Option may consist, in whole or
in part, of authorized and unissued Shares or of treasury Shares.
SECTION 5. ELIGIBILITY. Any Employee, including any officer or director
of the Company, or any Affiliate, who, to the extent the Committee determines it
is desirable to qualify for exemption under Rule 16b-3 or Section 162(m) of the
Code, is not a member of the Committee, and any Founding Stockholder shall be
eligible to be designated a Participant.
SECTION 6. STOCK OPTIONS. (i) GRANT. Subject to the provisions of this
Plan, any applicable Option Agreement and the Securities Purchase Agreement, the
Committee shall have sole and complete authority to determine the Employees to
whom Options shall be granted, the number of Shares to be covered by each
Option, the Option price therefor and the conditions and limitations applicable
to the exercise of the Option.
(ii) EXERCISE PRICE. Each Option shall represent the right to purchase one
Share. Subject to the provisions of this Plan, any applicable Option
Agreement and the Securities Purchase Agreement, the Committee shall
establish the exercise price per Share at the time each Option is granted.
(c) EXERCISE. Subject to the provisions of this Plan, any applicable Option
Agreement and the Securities Purchase Agreement, Options shall be exercisable at
such times, throughout a period commencing on the date such Options become
exercisable in accordance with their terms ending upon the expiration or
termination of such Options, as determined in the sole discretion of the
Committee. Subject to the provisions of this Plan the Committee may impose in
any Option Agreement such conditions with respect to the exercise of each Option
as it may deem necessary or advisable.
(d) PAYMENT. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the Option exercise price, or provision
therefor, is received by the Company. Such payment may be made in cash, or its
equivalent, or, if and to the extent permitted by the Committee, by tendering
Shares owned by the Participant (which have been held by the Participant for a
minimum period of at least six months prior to such exercise and which are not
the subject of any pledge or other security interest), or by a combination of
the foregoing, PROVIDED THAT the combined value of all cash and cash equivalents
and the Fair Market Value of
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any such Shares so tendered to the Company as of the date of such tender is at
least equal to such Option exercise price.
(e) TERM OF OPTION. Subject to such earlier cancellation as is set forth in
the applicable Option Agreement, each Option granted under the Plan shall be
deemed forfeited and canceled on the Expiration Date. The Committee shall
provide to the Participant written notice of such Expiration Date 60 days prior
to such Expiration Date; PROVIDED THAT failure of the Committee to provide such
written notice shall have no effect on the terms of the Options set forth in the
Plan and any applicable Option Agreement.
SECTION 7. TERMINATION OF EMPLOYMENT. Except as may be set forth in any
Option Agreement or Employment Agreement, the following provisions of this
Section 7 shall govern the treatment of Options upon the termination of the
Participant's employment by the Company and each of the Subsidiaries:
(i) If the Participant's employment is terminated by the Company (or
applicable Subsidiary) for Cause, all Options, whether vested or unvested,
will automatically be forfeited and unexercisable and the Company shall have
the right to purchase from the Participant any Shares previously acquired
upon the exercise of Options held by the Participant at a price equal to the
lesser of the Fair Market Value or the initial purchase price of such
Shares; PROVIDED HOWEVER that in the event the Shares become publicly
traded, the Company shall no longer have such repurchase right.
(ii) (A) With respect to Options granted prior to January 1, 1997, if the
Participant's employment is terminated by the Company other than for Cause,
(x) unvested Time Vesting Options shall continue to vest and become
exercisable in accordance with the vesting schedule set forth in the
Participant's Option Agreement and, in addition to each other Option which
is already vested and exercisable on such date, shall remain exercisable by
the Participant or his or her representative, devisees or heirs, as
applicable, until the date six months following the later of (1) the date of
such termination of employment and (2) the date on which such Option becomes
vested; PROVIDED THAT in the case of any breach by the Participant of any
Non-Compete Agreement or Non-Disclosure Agreement or any non-solicitation or
confidentiality provision contained in any Employment Agreement to which the
Participant is a party, all Options shall be deemed immediately forfeited
and canceled and (y) all unvested Cliff Vesting Options and Share Value
Options shall be deemed immediately forfeited and canceled.
(B) With respect to Options granted on or after January 1, 1997, if the
Participant's employment is terminated by the Company other than for Cause,
all unvested Options shall be deemed immediately forfeited and canceled and
all vested Options shall remain exercisable by the Participant or his or her
representative, devisees or heirs as applicable for a period of six months
following such termination of employment; PROVIDED THAT in the case of any
breach by the Participant of any Non-Compete Agreement or Non-Disclosure
Agreement or any non-solicitation or
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confidentiality provision contained in any Employment Agreement to which the
Participant is a party, all Options shall be deemed immediately forfeited
and canceled.
(iii) (A) Upon the occurrence of a Change of Control, in which the net
purchase price for the Company or the stock or assets of the Company, as
applicable, is at least $3.00 per share, or the equivalent thereof as
determined by an independent financial advisor selected in the discretion of
the Committee, all outstanding Options as of the date of the Change of
Control shall be vested and immediately exercisable, and remain exercisable
for a period of six (6) months following such Change of Control.
(B) Upon the occurrence of a Change of Control, under any other
circumstances than those set forth in the preceding paragraph, (x) unvested
Time Vesting Options shall continue to vest and become exercisable in
accordance with the vesting schedule set forth in the Participant's Option
Agreement and, in addition to each other Option which is already vested and
exercisable on such date, shall remain exercisable by the Participant or his
or her representative, devisees or heirs, as applicable, until the
expiration of the exercise period of such Option and (y) all unvested Cliff
Vesting Options and Share Value Options shall be deemed immediately
forfeited and canceled.
(iv) If the Participant's employment is terminated voluntarily by the
Participant (other than by reason of the Participant's death or Disability),
(x) all unvested Options shall be deemed immediately forfeited and canceled
and (y) the Company shall have the right to purchase from the Participant
(A) all vested Options held by such Participant at a price equal to the Fair
Market Value of the Shares at such time less the aggregate exercise price
for such Options and (B) any Shares held by the Participant previously
acquired upon the exercise of Options held by the Participant at a price
equal to the Fair Market Value of such Shares; PROVIDED HOWEVER, that in the
event the Shares become publicly traded, the Company shall no longer have
the right to purchase such Shares.
(v) (A) With respect to Options granted prior to January 1, 1997, if the
Participant's employment is terminated by reason of the Participant's death
or Disability (x) unvested Time Vesting Options shall continue to vest and
become exercisable in accordance with the vesting schedule set forth in the
Participant's Option Agreement and, in addition to each other Option which
is already vested and exercisable on such date, shall remain exercisable by
the Participant or his or her representative, devisees or heirs, as
applicable, until the date one year following the later of (1) the date of
such termination or employment and (2) the date on which such Option becomes
vested; PROVIDED THAT in the case of any breach by the Participant of any
Non-Compete Agreement or Non-Disclosure Agreement or any non-solicitation or
confidentiality provision contained in any Employment Agreement to which the
Participant is a party, all Options shall be deemed immediately forfeited
and canceled and (y) all unvested Cliff Vesting Options and Share Value
Options shall be deemed immediately forfeited and canceled.
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(B) With respect to Options granted on or after January 1, 1997, if the
Participant's employment is terminated by the reason of the Participant's
death or Disability, all unvested Options shall be deemed immediately
forfeited and canceled and vested Options shall remain exercisable by the
Participant or his or her representative, devisees or heirs, as applicable,
for a period of one year following such termination of employment; PROVIDED
THAT in the case of any breach by the Participant of any Non-Compete
Agreement or Non-Disclosure Agreement or any non-solicitation or
confidentiality provision contained in any Employment Agreement to which the
Participant is a party, all Options shall be deemed immediately forfeited
and canceled.
SECTION 8. AMENDMENT AND TERMINATION. (a) AMENDMENTS TO THE PLAN. The
Board may amend, alter, suspend, discontinue, or terminate the Plan or any
portion thereof at any time; PROVIDED THAT no such amendment, alteration,
suspension, discontinuation or termination shall be made without shareholder
approval if the Board determines such approval is necessary to qualify for or
comply with any tax or regulatory requirement.
(b) AMENDMENTS TO OPTIONS. Unless otherwise set forth in an applicable
Option Agreement, the Committee may waive any conditions or rights under, amend
any terms of, or alter, suspend, discontinue, cancel or terminate, any Option
theretofore granted, prospectively or retroactively; PROVIDED THAT, any such
waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to the extent be
effective without the consent of the affected Participant, holder or
beneficiary.
(c) ADJUSTMENT OF OPTIONS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
SECTION 9. GENERAL PROVISIONS. (a) NONTRANSFERABILITY. (i) Each Option,
and each right under any Option, shall be exercisable only by the Participant
(or, to the extent permitted in an Option Agreement, by such Participant's
Transferee (as defined in the Option Agreement)) during the Participant's
lifetime, or, if permissible under applicable law, by the Participant's
Designated Beneficiary or by a transferee receiving such Option pursuant to a
qualified domestic relations order ("QDRO"), as determined by the Committee.
(ii) Unless otherwise set forth in an Option Agreement, no Option may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent
and distribution or pursuant to a QDRO, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or
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encumbrance shall be void and unenforceable against the Company or any
Affiliate unless otherwise set forth in an Option Agreement; PROVIDED THAT
the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
(b) NO RIGHTS TO OPTIONS. No Employee, Participant or other Person shall
have any claim to be granted any Option, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Options. The terms and conditions of Options need not be the same with
respect to each recipient.
(c) SHARE CERTIFICATES. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to Option or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the SEC, any stock exchange upon which
such Shares or other securities are then listed, and any applicable federal or
state laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(d) CONSEQUENCES OF CASH OUT. Notwithstanding any other provision of the
Agreement, the payment to the Optionee at any time of an amount equal to the
excess, if any, of the Fair Market Value at such time of the underlying Shares
subject to such Option over the aggregate exercise price of such Option, in
consideration of the cancellation thereof, shall extinguish any rights of the
Optionee in connection therewith.
(e) DELEGATION. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or any
Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Options to, or to cancel, modify or waive rights with respect to, or to alter or
discontinue Options held by, Employees who are not officers or directors of the
Company for purposes of Section 16 of the Exchange Act, or any successor section
thereto, or who are otherwise not subject to such Section.
(f) WITHHOLDING. A Participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Option, from any payment due or
transfer made under any Option or under the Plan or from any compensation or
other amount owing to a Participant the amount (in cash, Shares, other
securities, other Options or other property) of any applicable withholding
taxes in respect of an Option, its exercise, or any payment or transfer under
an Option or under the Plan and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for the payment of
such taxes. The Committee may provide for additional cash payments to holders
of Options to defray or offset any tax arising from the grant, vesting,
exercise or payments of any Option.
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(g) OPTION AGREEMENTS. Each Option hereunder shall be evidenced by an
Option Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Option and any rules applicable thereto.
(h) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, Shares and other types of Options provided
for hereunder (subject to shareholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only in
specific cases.
(i) NO RIGHT TO EMPLOYMENT. The grant of an Option shall not be construed
as giving a Participant the right to be employed by or retained in the employ of
the Company or any Affiliate. Further, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Option
Agreement.
(j) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Option, no Participant or holder or beneficiary of any Option shall have any
rights as a shareholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares.
(k) GOVERNING LAW. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Option Agreement shall be
determined in accordance with the laws of Delaware.
(l) SEVERABILITY. If any provision of the Plan or any Option is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as
to any Person or Option, or would disqualify the Plan or any Option under any
law deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to the applicable laws, or if it cannot be construed
or deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Option, such provision shall be stricken
as to such jurisdiction, Person or Option and the remainder of the Plan and any
such Option shall remain in full force and effect.
(m) OTHER LAWS. The Committee may refuse to issue or transfer any Shares or
other consideration under an Option if, acting in its reasonable discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recovery under Section 16(b) of the Exchange Act, and any payment
tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Option shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Option granted hereunder shall be construed as an offer to
sell securities of the Company, and no such offer shall be outstanding, unless
and until the Committee in its reasonable discretion has determined that any
such offer, if
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made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(n) NO TRUST OR FUND CREATED. Neither the Plan nor any Option shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Option, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(o) NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Option, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated or otherwise eliminated.
(p) HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 10. TERM OF THE PLAN. (a) EFFECTIVE DATE. The Plan shall be
effective as of the Effective Date.
(b) EXPIRATION. No Option shall be granted under the Plan after December 4,
2006. Unless otherwise expressly provided in the Plan or in an applicable Option
Agreement, any Option granted hereunder may, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Option or to waive any conditions or rights under any such Option shall,
continue after December 4, 2006.
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OFFICE/WAREHOUSE LEASE
THIS INDENTURE of lease, entered into this 14 day of April, 1997, by and between
AMBERJACK, LTD., an Arizona corporation, hereinafter referred to as "Lessor",
and MANUFACTURER'S SERVICES LIMITED - ROSEVILLE, INC., a Minnesota corporation,
hereinafter referred to as "Tenant".
DEFINITIONS:
"Property" - That certain real property located in the City of Arden Hills,
County of Ramsey and State of Minnesota and legally described on Exhibit A
attached hereto and made a part hereof, including all buildings and site
improvements located thereon all in accordance with the site plan thereof
attached hereto and incorporated herein as Exhibit B.
"Premises" - All of that certain office/warehouse building to be constructed by
Lessor as set forth herein and, upon completion, containing in the aggregate
approximately 154,264 square feet located upon the Property, consisting of
approximately 105,364 square feet of production area, 30,000 square feet office
space and 18,900 square feet of warehouse space, as measured from the outside
walls of the Premises. The Premises includes exclusive access to and exclusive
use of all parking areas, driveways, truck docks and landscaped areas on the
Property, and all licenses and easements appurtenant to the Property. The
Premises are to have the direct and unrestricted legal right of access on foot,
by private and commercial vehicles and trucks to the public ways for ingress and
egress.
W I T N E S S E T H:
TERM:
1. For and in consideration of the rents, additional rents, terms, provisions
and covenants herein contained, Lessor hereby lets, leases and demises to Tenant
the Premises for the initial term of one hundred twenty (120) months commencing
thirty (30) days after Lessor has provided written notice to Tenant that
"Lessor's Work" and the "Tenant Improvements" (as hereinafter defined) are
substantially complete, accompanied by a temporary or permanent certificate of
occupancy that permits the Tenant's manufacturing operations (sometimes called
the "Commencement Date") and expiring at the end of the tenth (10th) "Lease
Year," as hereinafter defined (the "Expiration Date"). If the Certificate of
Occupancy delivered by Lessor is temporary only, Lessor shall within a
reasonable period procure a permanent certificate of occupancy for Tenant at no
cost to Tenant. At the time the actual Commencement Date is determined, the
parties agree to confirm in writing the specific Commencement Date and
Expiration Date, which written confirmation shall become a part of this Lease.
As used herein, the term "Lease Year" shall mean each successive period of
twelve (12) consecutive calendar months, commencing on each anniversary of the
Commencement Date during the Lease Term or, if the Commencement Date falls on a
day
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other than the first day of the month, each anniversary of the first day of the
first full calendar month following the Commencement Date.
OPTIONS TO RENEW:
2. (a) Options. In addition to the initial Lease Term, and provided that no
"Material Tenant Default" (as hereinafter defined) shall have occurred and
be then continuing, Tenant shall have the option ("Renewal Option") to
extend the term of the Lease for up to two (2) additional terms of five
(5) years each (the "Option Periods") immediately following the initial
term of this Lease. Each Renewal Option shall expire on the later of (i) a
date two hundred seventy (270) days prior to the expiration of the initial
lease term or the then current Option Period as applicable, or (ii) ten
(10) days after written reminder notice from the Lessor given not earlier
than thirty (30) days prior to the date set forth in subsection (i) above,
unless prior to such date, Tenant shall give Lessor written notice of its
unconditional election to exercise the Renewal Option (the "Notice to
Extend"). Upon exercise as required hereunder, the Lease Term shall
thereupon be deemed to be automatically renewed and extended for the
Option Period without the need for further act by Lessor or Tenant upon
all the same terms and conditions except as to Base Rent which shall be at
the then current "Market Rate", determined as set forth in subsection (b)
below. The initial term of this Lease and, if each Renewal Option is
exercised, the Option Periods are hereby collectively referred to herein
as the "Lease Term." If Tenant fails to exercise the first five year
Renewal Option, the second Renewal Option shall lapse and be of no further
force and effect. The Renewal Options are personal to Tenant and may not
be assigned to, and shall not be exercisable by, any third party. For
purposes of this Section 2(a), the term "Material Tenant Default" shall
mean a Tenant Default (as defined in Section 2.0 hereof) in any way
relating to (i) the payment of any Base Rent, Additional Rent or any other
amount payable by Tenant hereunder; (ii) Tenant's obligations hereunder
with respect to the care and maintenance of the Property or the Premises;
or (iii) any of Tenant's obligations under Section 14 (Use), 18 or 19
(Insurance), 24 (Assignment and Subletting) or 37 (Hazardous Material).
(b) Market Rate During Option Period. The term "Market Rate" shall mean
the rental per annum per square foot (net of any share of Operating
Expenses or Real Estate Taxes payable by Tenant) prevailing at the time in
arms-length industrial and office warehouse lease transactions in
comparable Class A, full-service industrial and office warehouse buildings
in the Minneapolis-St. Paul metropolitan area, taking into account all
relevant factors with respect to the Option Period, including length of
term, tenant creditworthiness, size of the premises, extent of leasehold
improvements, the basis for tenant payment of taxes, operating expenses,
utilities, parking, allowances, age of the facility, and other factors
affecting rent in the market.
Within thirty (30) days of receipt by Lessor of the Notice to Extend,
Lessor shall provide Tenant with Lessor's good faith estimate of the
Market Rate payable during the applicable Option Period. If Tenant agrees
with Lessor's estimate of the Market Rate, or if Lessor and Tenant reach
an agreement that a different figure more accurately reflects the Market
Rate, then such agreed sum shall constitute the Market Rate during such
applicable Option
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Period. If Lessor and Tenant have not agreed on the Market Rate at least
six (6) months prior to the expiration of the then current Lease Term,
then Tenant may require evaluations by licensed real estate professionals
to determine the Market Rate by delivering written notice ("Evaluation
Notice") to Lessor at least six (6) months prior to the Expiration Date or
at least six (6) months prior to expiration of the then current Option
Period, as applicable. Failure of Tenant to require such evaluations
shall, in the absence of a different agreement by Lessor and Tenant at the
time, result in a forfeiture of the Renewal Option. Upon delivery of such
Evaluation Notice to Lessor, both Lessor and Tenant shall be bound to the
Option Period and to the Market Rate as determined by the evaluation by
the licensed real estate professional as hereinafter provided in paragraph
(c) of this Section 2.
(c) Evaluation Procedure. Within ten (10) days after Tenant notifies
Lessor that it is requiring evaluations as stated above, each party at its
cost and by giving notice to the other party, shall appoint a licensed
commercial real estate professional ("Real Estate Professional") with at
least ten (10) years experience leasing similar commercial industrial and
office warehouse building properties in the Minneapolis-St. Paul
metropolitan area to evaluate the Market Rate at that time. If either
party fails to appoint a Real Estate Professional within the allotted
time, the single Real Estate Professional appointed by the other party
shall be the sole Real Estate Professional. If a Real Estate Professional
is appointed by each party and the Real Estate Professionals so appointed
area unable to agree upon the Market Rate within thirty (30) days after
the appointment of the second, the two Real Estate Professionals shall
appoint a third similarly qualified Real Estate Professional within five
(5) days after the expiration of that thirty (30) day period. The third
Real Estate Professional shall be a person who has not previously been
employed by Tenant or Lessor in any capacity. The third Real Estate
Professional shall complete his evaluation within fifteen (15) days after
appointment. The Market Rate determined by a majority of the three Real
Estate Professionals shall be the "Market Rate" during such applicable
Option Period. If a majority are unable to agree within the allotted time,
the two evaluations of Market Rate that are nearest to one another in
amount shall be added together and divided by two (2), and the resulting
quotient shall be the agreed Market Rate. Notwithstanding anything
contained herein to the contrary, the Market Rate shall in no event be
less than the Annual Base Rent payable in the last Lease Year of the then
current term of the Lease. Tenant shall pay the fees of the Real Estate
Professional it appoints; Lessor shall pay the fees of the Real Estate
Professional it appoints; and the fees of any third Real Estate
Professional shall be paid equally by Lessor and Tenant. If only one Real
Estate Professional serves, the costs and fees shall be paid equally by
Lessor and Tenant.
Both Lessor and Tenant shall be bound by the decision of the aforesaid
Real Estate Professional as to the Market Rate.
LESSOR'S WORK:
3. Lessor shall construct, at its cost and expense and with no right of
reimbursement from Tenant other than the charges provided for in Sections 4, 5
and 6 of this Lease, all
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improvements set forth and described on the Outline Specifications dated March
26, 1997 prepared by Welsh Construction Corp. ("Contractor"), a copy of which is
attached hereto as Exhibit C and made a part hereof ("Lessor's Work"). Lessor
and Tenant have each approved those certain plans and specifications listed and
described as Exhibit C-1 attached hereto and incorporated herein ("Lessor's Work
Plans"). Any reasonable changes in Lessor's Work which are necessary in order to
comply with applicable laws, rules, regulations, orders or requirements of any
governmental body having jurisdiction, or of the local board of Fire
Underwriters or other local bodies exercising similar functions, shall not
require the approval of Tenant, nor shall any such changes affect, change or
invalidate this Lease. Notwithstanding the foregoing, any such change which
materially or adversely limits, restricts or diminishes Tenant's use and
enjoyment of the Premises for the purposes specified herein shall require
Tenant's approval, such approval shall not be unreasonably withheld, delayed or
conditioned. Lessor shall in any event provide written notice of any and all
such changes required by applicable law, whether or not Tenant's consent thereto
is required. Lessor represents and warrants that no utility easements over
abutting lands are required to bring utilities from public right of way to the
Property.
TENANT IMPROVEMENTS:
4. Attached hereto as Exhibit D is a copy of the Outline Specifications dated
February 3, 1997 prepared by Contractor and relating to all work other than
Lessor's Work required to be constructed or performed on the Premises necessary
to render the Premises ready for occupancy by Tenant (the "Tenant
Improvements"). Attached hereto as Exhibit D-1 is a description of plans and
specifications which have been approved by Lessor and Tenant for the Tenant
Improvements (the "Tenant Improvement Plans"). Any material changes in the
Tenant's Improvement Plans shall require the prior written approval of Tenant
and Lessor. Lessor's Work and the Tenant Improvements shall be performed in a
good and workmanlike manner, using new, first class materials, and in compliance
with all applicable laws and regulations of the federal, state and municipal
governments, or any department of division thereof.
Lessor shall complete Lessor's Work and the Tenant Improvements (collectively,
the "Project"), along with all driveways, parking areas and other improvements
to the Property described and depicted on Exhibit B hereto and deliver the same,
in operational and broom clean condition, along with a temporary certificate of
occupancy to Tenant that permits Tenant's manufacturing operations, on or before
August 1, 1997 (the "Target Date"), subject to "Force Majeure", as defined in
Section 38 hereof. Upon completion of Lessor's Work and the Tenant Improvements,
the Premises shall be in conformance with all applicable ordinances, statutes,
regulations and other laws. Lessor shall provide to Tenant periodic written
reports of the status of completion of Lessor's Work and Tenant Improvements and
updates on the projected Target Date, given not less frequently than once per
month.
In the event that Lessor shall fail to complete the Project and deliver the same
to the Tenant as required hereunder as of December 1, 1997, the Tenant shall be
entitled to a credit of one (1) day of free Base Rent, allocable at the
beginning of the Lease Term, for each day beyond December 1, 1997 until the
Project is delivered to Tenant as required under this Section 4,
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excluding any days of delay either (i) due to Force Majeure, and (ii) caused by
Tenant, its agents, employees and contractors, subject to a maximum of one full
month of free Base Rent.
Notwithstanding anything contained herein to the contrary, in the event that,
for reasons other than Force Majeure, or delays caused by Tenant, its agents,
employees and contractors, Lessor fails to complete the Project and deliver the
same to the Tenant as required hereunder on or before March 31, 1998, Tenant
shall be entitled to terminate this Lease by written notice to the Lessor given
prior to February 1, 1998. Such termination shall be effective if Lessor falls
to deliver to Tenant prior to March 31, 1998 at least a temporary certificate of
occupancy which permits manufacturing operations at and from the Premises. If
Lessor falls to do so, this Lease shall be terminated and neither party shall
have further liability to the other hereunder. Without limiting the generality
of the foregoing, upon such termination Lessor shall have no obligation to
return or repay to Tenant any previously paid installments of Tenant's TI
Contribution.
Lessor shall assign to Tenant all guarantees and warranties in connection with
Lessor's Work and Tenant Improvements, including without limitation a one (1)
year warranty of Lessor's Work and the Tenant Improvements from Contractor, to
the extent such guarantees and warranties relate to portions of the Property
which are required to be maintained and repaired by Tenant herein. Attached
hereto as Exhibit E is a list of all warranties which Lessor shall require in
connection with the Project. Lessor shall use reasonable efforts to obtain all
applicable warranties from contractors performing work under the Tenant
Improvement Plans. Tenant acknowledges that, subject to Lessor's repair and
maintenance obligations set forth herein, Lessor makes no warranties to Tenant
of any nature whatsoever hereunder with respect to the Premises. Lessor agrees
to cooperate reasonably with Tenant in assigning any claims Lessor may have
against Lessor's Architect or the Contractor as to any negligence or willful
misconduct of such parties to the extent Tenant is damaged thereby.
Upon any dispute between Tenant and Lessor with respect to the completion of
Lessor's Work, and/or the Tenant Improvements or the compliance thereof with
applicable laws and with Exhibits C-1 and D-1 as the same may be amended by
written agreement of Lessor and Tenant, such dispute shall be submitted to
Genesis Architecture ("Lessor's Architect") and The Tegra Group ("Tenant's
Architect") for their joint decision, which joint decision shall be final and
binding on both Lessor and Tenant. If any such dispute shall not be resolved by
such architects, such dispute shall be submitted to arbitration, to be conducted
by and in accordance with the rules of the American Arbitration Association.
Lessor's Work and the Tenant Improvements shall be completed by Contractor.
Based on the approved Tenant Improvement Plans, the total cost of constructing
the Tenant Improvements is Two Million Seven Hundred Thousand Seven Hundred
Forty Seven Hundred Forty and 00/100 Dollars ($2,700,740.00), of which Lessor
agrees to pay the sum of One Million Fifteen Thousand Seven Hundred Forty and
00/100 Dollars ($1,015,740.00). The balance of the cost of constructing the
Tenant Improvements of One Million Six Hundred Eighty-Five Thousand and 00/100
Dollars ($1,685,000.00) shall be paid by Tenant ("Tenant's TI Contribution") in
accordance with the following schedule:
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(i) The sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) shall be paid on May 31, 1997;
(ii) The additional sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) shall be paid on June 30, 1997;
(iii) The additional sum of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) shall be paid on July 31, 1997; and
(iv) The balance shall be paid within five (5) days after delivery to
Tenant of at least a temporary certificate of occupancy which
permits manufacturing operations at and from the Premises.
Each payment required above shall be conditioned upon receipt from Lessor's
Architect of written certification that the Lessor has theretofore incurred
costs for the Tenant Improvements in an amount equal to 1.6 (i.e., $2,700,740
divided by $1,685,000) times the amount of the payment then due from Tenant plus
all previous payments made to Lessor as part of Tenant's TI Contribution, and
approval of such certification from Tenant's Architect, which approval shall not
be unreasonably withheld, delayed or conditioned.
Lessor shall consider in good faith any change orders requested by Tenant in
writing, whether to Lessor's Work or the Tenant Improvements, so long as (i)
Tenant pays to Lessor in cash any extra design or construction cost arising
therefrom and (ii) either Lessor determines that such change orders shall not
delay completion of Lessor's Work or the Tenant Improvements or Tenant consents
in writing to delays caused thereby.
In order to secure the payment of Tenant's TI Contribution, Tenant agrees,
within thirty (30) days of the date hereof, to provide to Lessor an irrevocable
letter of credit in the amount of $1,700,000 from a recognized lending
institution, and on terms, acceptable to Lessor in its reasonable discretion.
BASE RENT:
5. Tenant agrees to pay to Lessor, at the address stated in Section 7 below, or
otherwise as requested by Lessor in writing, as base rent ("Base Rent"),
exclusive of any other charge provided for in this Lease to be paid by Tenant,
the following sums for the following periods. Base Rent shall be payable in
equal monthly installments, in advance, commencing on the Commencement Date and
continuing on the first day of each subsequent month during the Lease Term. In
the event the Commencement Date occurs on a day other than the first day of a
month, or terminates on a day other than the last day of a month, the rent
payable during such first or last month shall be adjusted on a pro rata basis.
Monthly
Applicable Period Base Rent
----------------- ---------
(a) From Commencement Date through $63,633.90
last day of fifth Lease Year
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(b) From first day of sixth Lease Year $70,190.12
through last day of tenth Lease Year
It is expressly agreed and understood that the full amount of the Base Rent
pursuant to this Section 5 hereof shall be absolutely payable to Lessor by
Tenant at the time and in the manner specified herein without any set off,
deduction, or abatement of any nature whatsoever except as otherwise expressly
set forth in this Lease, without regard to whether Tenant occupies the Premises
during all or any part of the Lease Term.
ADDITIONAL RENT:
6. Tenant shall pay to Lessor throughout the term of this Lease the
following:
(a) Tenant shall pay a sum equal to one hundred percent (100%) of the Real
Estate taxes. The term "Real Estate Taxes" shall mean all real estate
taxes, all assessments and any taxes in lieu thereof which may be levied
upon or assessed against the Property and all Improvements thereon.
Tenant, in addition to all other payments to Lessor by Tenant required
hereunder shall pay to Lessor, in each year during the term of this Lease
and any extension or renewal thereof, such real estate taxes and
assessments which are payable in such year, in the manner and at the times
set forth below. Lessor agrees that all special assessments shall be
amortized over the longest period allowed by law. There are no special
assessments levied or pending with respect to the Property as of the date
hereof. The Property constitutes a separate tax parcel and is not taxed
together with other land of the Lessor.
Any tax year commencing during any Lease Year shall be deemed to
correspond to such Lease Year. In the event the taxing authorities include
in such real estate taxes and assessments the value of any improvements
(excluding Tenant Improvements) made by Tenant, or of machinery,
equipment, fixtures, inventory or other personal property or assets of
Tenant, and indicate the same in writing, then Tenant shall pay all the
taxes attributable to such items in addition to its proportionate share of
said aforementioned real estate taxes and assessments. A photostatic copy
of the tax statement submitted by Lessor to Tenant shall be sufficient
evidence of the amount of taxes and assessments assessed or levied against
the Property of which the Premises are a part. Lessor shall have the
right, but not the obligation, to contest the amount or validity, or
otherwise seek a reduction or abatement, of any Real Estate Taxes or a
reduction in the assessed valuation of the Property. Any savings or
rebates received by or awarded to Lessor in any such proceedings, net of
appraiser fees, attorneys' fees and other costs and expenses incurred by
Lessor in connection therewith (all of which shall be reimbursed to Lessor
out of such savings or award, or, if such award relates to future Real
Estate Taxes, in conjunction with and at the time of payment of the next
due installment thereof) shall inure to the benefit of Tenant.
Tenant shall have the right, at Tenant's sole expense, to contest the
amount or validity, or otherwise seek a reduction or abatement, of any
real estate taxes or a reduction in
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the assessed valuation of the Property, by appropriate proceedings
diligently conducted in good faith, provided that Tenant shall first have
notified Lessor of its intention to do so and Lessor shall have failed to
notify Tenant, within fifteen (15) days of receipt of such notice that
Lessor intends to contest the same in its own name. If Tenant proceeds
with any such contest, Lessor shall cooperate in good faith therewith and
execute any reasonable documents necessary to enable Tenant to pursue such
contest. Any such contest, whether by Lessor or Tenant, shall not delay or
defer Tenant's obligation to timely reimburse Lessor for payment of each
installment of real estate taxes.
(b) A sum equal to one hundred percent (100%) of the annual aggregate
"Operating Expenses" reasonably and in good faith incurred by Lessor in
the operation, maintenance and repair of the Property. The term "Operating
Expenses" shall be limited to those items and categories of expenses
listed on Exhibit G.
(c) The payment of the sums set forth in this Section 6 shall be in
addition to the Base Rent payable pursuant to Section 5 of this Lease. The
sums due under this Section 6, along with all other amounts to be paid by
Tenant to Lessor hereunder other than Base Rent shall hereinafter be
referred to as "Additional Rent." All sums due pursuant to Exhibit G shall
be due and payable within thirty (30) days of delivery of written
certification by Lessor setting forth the computation of the amount due
from Tenant and including all reasonable detail, invoices, paid receipts
and other backup documentation. If Tenant disputes in good faith its
obligation to pay any such Operating Expense billed by Lessor, Tenant
shall notify the Lessor in writing, stating the basis for such dispute and
such dispute shall be timely submitted to binding arbitration to be
conducted by and in accordance with the Rules of The American Arbitration
Association. Tenant shall not be deemed in default hereunder for failure
to pay the disputed portion of any item of Operating Expense until the
dispute is resolved. In the event the Lease Term shall begin or expire at
any time during the calendar year, the Tenant shall be responsible for his
pro-rata share of Additional Rent under subdivisions a. and b. during the
Lease and/or occupancy time.
Prior to commencement of this Lease and prior to the commencement of each
calendar year thereafter commencing during the term of this Lease or any
renewal or extension thereof, Lessor may estimate for each calendar year
(i) the total amount of Real Estate Taxes; and (ii) the total amount of
Operating Expenses. Said estimates will be in writing and will be
delivered or mailed to Tenant.
The amount of Real Estate Taxes and Operating Expenses payable during each
calendar year, so estimated, shall be payable as Additional Rent, in equal
monthly installments, in advance, on the first day of each month during
such calendar year at the option of Lessor. In the event that such
estimate is delivered to Tenant before the first day of January of such
calendar year, said amount, so estimated, shall be payable as Additional
Rent in equal monthly installments, in advance on the first day of each
month during such calendar year. In the event that such estimate is
delivered to Tenant after the first day of January of such calendar year,
said amount, so estimated, shall be payable as Additional Rent in equal
monthly installments, in advance, on the first day
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of each month over the balance of such calendar year, with the number of
installments being equal to the number of full calendar months remaining
in such calendar year.
Upon completion of each calendar year during the term of this Lease or any
renewal or extension thereof, Lessor shall cause its property manager to
determine the actual amount of the Real Estate Taxes, and Operating
Expenses payable in such calendar year and deliver a written certification
of the amounts thereof to Tenant. If Tenant has underpaid Real Estate
Taxes or Operating Expenses for such calendar year, Tenant shall pay the
balance due within twenty (20) days after the receipt of such statement.
If Tenant has overpaid Real Estate Taxes or Operating Expenses for such
calendar year, Lessor shall credit such excess against the most current
monthly installment or installments due Lessor for its estimate of Real
Estate Taxes and Operating Expenses for the next following calendar year.
A pro rata adjustment shall be made for a fractional calendar year
occurring during the term of this Lease or any renewal or extension
thereof based upon the number of days of the term of the Lease during said
calendar year as compared to three hundred sixty-five (365) days and all
additional sums payable by Tenant or credits due Tenant as a result of the
provisions of this Section 6 shall be adjusted accordingly.
Tenant shall have the right, during reasonable business hours and upon
five (5) days prior notice to Lessor, to inspect all of Lessor's books and
records with respect to Operating Expenses for the Property, which
inspection shall be held at the office of Lessor's property manager. If
any such inspection discloses that the amount paid by Tenant in any
calendar year was overstated, Lessor shall refund such excess amounts to
Tenant within ten (10) days after receipt of Tenant's demand therefor,
unless Lessor shall, within said ten (10) day period, notify that Lessor
disputes the correctness of such inspection. In the event that Lessor
questions or disputes the correctness of such inspection, the accountant
employed by Tenant and Lessor's property manager shall endeavor to
reconcile the question or dispute within thirty (30) days thereafter. If
such parties are unable to resolve such dispute or question within said
thirty (30) day period, then either party shall be free to submit the
matter to a court of competent jurisdiction.
COVENANT TO PAY RENT:
7. Except as otherwise expressly set forth in Section 35 hereof, the covenants
of Tenant to pay the Base Rent and the Additional Rent are each independent of
any other covenant, condition, provision or agreement contained in this Lease.
All rents are payable to Lessor at:
AmberJack, Ltd.
c/o Welsh Companies, Inc.
8200 Normandale Boulevard, Suite 200
Minneapolis, Minnesota 55437
or at such other address of which Lessor shall notify Tenant in writing.
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UTILITIES:
8. Tenant shall pay, when due, all charges for sewer usage or rental, garbage
disposal, refuse removal, water, electricity, gas, fuel oil, L.P. gas, telephone
and/or other utility services or energy source furnished to the Premises during
the term of this Lease, or any renewal or extension thereof. If Lessor elects to
furnish any of the foregoing utility services or other services furnished or
caused to be furnished to Tenant, then the rate charged by Lessor shall not
exceed the rate Tenant would be required to pay to a utility company or service
company furnishing any of the foregoing utilities or services. The charges
thereof shall be deemed Additional Rent in accordance with Section 6.
CARE AND REPAIR OF PROPERTY:
9. (a) Tenant shall, at all times throughout the term of this Lease,
including renewals and extensions, and at its sole expense, keep and
maintain the Premises in a clean, safe, sanitary and good condition,
reasonable wear and tear (as defined in Section 30 hereof) and damage by
fire or other casualty against which Lessor is required to insure
hereunder or taking by eminent domain excepted, and in compliance with all
applicable laws, codes, ordinances, rules and regulations. Tenant's
obligations hereunder shall include but not be limited to the maintenance,
repair and replacement (subject to the provisions of subsection 9(b) of
this Lease relating to Lessor's obligation with respect to certain
replacements), if necessary, of heating, air conditioning fixtures,
equipment, and systems, all lighting and plumbing fixtures and equipment,
fixtures, motors and machinery, all interior walls, partitions, doors and
windows, including the regular painting thereof, all exterior entrances,
windows, doors and docks and the replacement of all broken glass (except
in the case of gross negligence or willful misconduct by Lessor, its
agents, servants and contractors). Tenant shall obtain and maintain during
the term of the Lease a maintenance contract with a reputable HVAC
contractor acceptable to the Lessor in its reasonable discretion for the
servicing, maintenance and repair of the heating, ventilation and air
conditioning system serving the Premises (the "HVAC System") and shall
provide a copy of such contract to Lessor for its approval. Tenant shall
cause all regularly scheduled servicing and maintenance of the HVAC System
thereunder to be performed in a timely manner and shall, upon request,
provide evidence thereof to the Lessor. Tenant shall keep and maintain the
HVAC System in good condition and repair throughout the term of the Lease,
including without limitation all repairs to and replacements thereof as
necessary. When used in this provision, the term "repairs" shall include
replacements or renewals when necessary, and all such repairs made by the
Tenant shall be equal in quality and class to the original work. Tenant
shall also repair, at its expense, any damage to the Property or the
Premises caused by the negligence or willful act of Tenant, its agents,
employees, contractors or licensees. Notwithstanding anything in the
foregoing to the contrary, Tenant's obligations under this Section 9(a)
shall exclude any repairs or replacements which are Lessor's express
responsibility under this Lease.
If Tenant fails, refuses or neglects to maintain or repair the Premises as
required in this Lease after notice shall have been given Tenant, in
accordance with Section 33 of this
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Lease, not less than fifteen (15) days in advance (except in the care of a
bona fide emergency, in which case no such notice is necessary) Lessor may
make such repairs without liability to Tenant for any loss or damage that
may accrue to Tenant's merchandise, fixtures or other property or to
Tenant's business by reason thereof (except in the case of negligence or
willful misconduct by Lessor, it agents, servants and contractors) and
upon completion thereof, Tenant shall pay to Lessor all costs plus 15 %
for overhead incurred by Lessor in making such repairs upon presentation
to Tenant of a bill therefor. Notwithstanding the foregoing, the Lessor
shall endeavor in good faith to minimize any interference with the conduct
of Tenant's business at and from the Premises when making any such
repairs.
(b) Lessor shall repair, at its sole expense (and without reimbursement
from Tenant as Operating Expenses), the structural portions of the
Premises and all utility lines serving the Premises up to the exterior
walls thereof, provided however where structural repairs or repairs to
utility lines are required to be made by reason of the negligence or
wrongful acts of Tenant, its agents, employees, contractors, invitees or
visitors, the costs thereof shall be borne by Tenant and payable by Tenant
to Lessor upon demand. Lessor shall also, at its expense, when necessary
replace theroof on the Premises; provided, however, that the cost of
repairs (as opposed to replacement) to the roof, to the extent not covered
by any roof warranty or guaranty, shall constitute Operating Expenses. The
Lessor shall also maintain and repair as necessary, subject to
reimbursement thereof from Tenant as Operating Expenses, the parking and
driveway areas of the Property and all landscaped areas on the Property.
Lessor shall also, at its expense (and without reimbursement from Tenant),
repair in a good and workmanlike manner all damage to the Property caused
by the negligence or wrongful act of Lessor, its agents, employees,
contractors or licensees.
All maintenance which is the responsibility of the Lessor shall be
provided promptly and diligently, upon the condition that the Lessor shall
not be liable for damages for failure to do so due to causes beyond its
control.
Notwithstanding the foregoing to the contrary, the Tenant shall not be
responsible for any maintenance or repairs which are (i) covered by any
warranties or guarantees running in favor of Lessor which are not assigned
to Tenant hereunder, or (ii) required as a result of any negligence or
wrongful acts or omissions of Lessor, it being agreed that Lessor shall be
responsible at its sole cost for the items set forth in subsections
(i)-(ii) above.
(c) All capital improvements which are required to be made after the date
of this Lease to the Premises in order to comply with any governmental law
or regulation in force as of the Commencement Date shall be borne by
Lessor.
(d) Any and all capital improvements to be made to the Premises from and
after the date hereof by virtue of the specific use and activity being
conducted thereon by Tenant (as opposed to general use of similar
commercial real estate) shall be borne exclusively by Tenant.
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(e) Any and all other capital improvements required to be made to the
Premises from and after the date hereof that are required under any
governmental statute, ordinance, rule, regulation and other law which was
not applicable to the Premises at the time it was constructed, shall be in
the first instance performed by Lessor, subject to the terms set forth
below. Upon completion of such capital improvements, Tenant shall
reimburse Lessor for a portion of the cost of any such capital improvement
based upon a fraction, the numerator of which is the number of full
calendar months remaining in the then current term of the Lease and the
denominator of which is the number of months in the reasonably useful life
of such capital improvement. Upon exercise of any Renewal Option, Tenant
shall pay to Lessor an additional portion of the cost of any such capital
improvement based upon the number of calendar months in said renewal term.
SIGNS:
10. Any sign, lettering, picture, notice or advertisement installed on or in any
part of the Property and visible from the exterior of the Premises, shall be
approved (which approval shall not be unreasonably withheld, delayed or
conditioned) and installed by Lessor at Tenant's reasonable expense. In the
event of a violation of the foregoing by Tenant, Lessor may, if Tenant does not
remedy such violation within fifteen (15) days after written notice from Lessor,
remove the same without any liability and may charge the reasonable expense
incurred by such removal to Tenant. Attached hereto and incorporated herein as
Exhibit F is a copy of Tenant's initial sign proposal and criteria, which Lessor
hereby approves.
ALTERATIONS, INSTALLATION, FIXTURES:
11. Except for those repair and maintenance obligations set forth elsewhere in
this Lease, Tenant shall not make any exterior or structural alterations in any
portion of the Premises, without, in each instance, first obtaining the written
consent of Lessor. Lessor shall not unreasonably withhold, delay or condition
such consent so long as Tenant provides to Lessor in advance a surety bond or
other adequate security for the payment of all costs to be incurred in
connection with such alterations and so long as the proposed alterations in
Lessor's reasonable judgment (i) will not in any way impair or otherwise alter
the structural integrity of the Premises; (ii) will not adversely affect any
utility lines, pipes or equipment lying outside of the exterior walls of the
Premises; (iii) will not in any way decrease the fair market value of the
Property and (iv) will not involve any change in use of the Property. Tenant
shall be permitted to (i) repaint the interior of the Premises, replace any
carpeting or wall covering in the Premises, all without regard to cost, or (ii)
make other interior non-structural alterations and improvements without Lessor's
prior consent, provided, however, that in any event, Tenant shall give to Lessor
prior written notice of, and plans relating to, any such alteration or
improvements. Within fifteen (15) days after receipt of any such plans and
specifications, Lessor shall notify Tenant in writing as to whether Lessor
expects Tenant to remove the proposed alterations or improvements at the
expiration of the Lease Term and restore the Premises to their prior condition.
In connection with any alterations, Tenant shall provide lien waivers, evidence
of appropriate insurance and sworn construction statements if such items are
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reasonably requested by Lessor or its lender. Without cost or expense to Lessor,
Lessor shall cooperate with Tenant in the obtaining of any and all licenses,
building permits, certificates of occupancy or other governmental approvals
which may be required in connection with any such alterations, and Lessor shall
execute, acknowledge and deliver any documents reasonably required in
furtherance of such purposes. In the event alterations are required by any
governmental agency by reason of the specific use and occupancy of the Premises
by Tenant (i.e., as opposed to being applicable generally to similar commercial
facilities within the subject jurisdiction), Tenant shall make such alterations
at its own cost and expense after first obtaining Lessor's approval of plans and
specifications therefor. Lessor shall see to it that at the time of the delivery
of the Premises and the Property, the same will be in full compliance with the
Americans With Disabilities Act of 1990 ("ADA") or similar statutes or law and
regulations as of the Commencement Date, including, without implied limitations,
in compliance with all accessibility guidelines, to the extent that the
provisions thereof relate to similar commercial facilities generally. Subject to
the preceding sentence, thereafter, the Tenant shall be responsible for
improvements or modifications to the Premises required or necessary to comply,
as it expressly applies to Tenant, with the ADA or similar statutes or law.
POSSESSION:
12. Except as hereinafter provided, Lessor shall deliver possession of the
Premises to Tenant in the condition required by this Lease on or before the
Commencement Date. The rentals herein reserved shall commence on the
Commencement Date; provided, however, that if Tenant assumes occupancy of the
Premises prior to the Commencement Date and commences manufacturing operations
therein, the terms of such occupancy shall in all respects be the same as that
of a Tenant under this Lease, including without limitation the obligation to pay
Base Rent and Additional Rent based upon that portion of the Premises in which
Tenant has assumed occupancy and commenced manufacturing operations. Lessor
shall have no responsibility or liability for loss or damage to fixtures,
facilities or equipment installed or left on the Premises.
SECURITY AND DAMAGE DEPOSIT:
13. Tenant contemporaneously with the execution of this Lease, has deposited
with Lessor the sum of Seventy-Four Thousand Eight Hundred Eighteen and
04/100 Dollars ($74,818.04), receipt of which is acknowledged hereby by
Lessor, which deposit is to be held by Lessor, without liability for
interest, as a security and damage deposit for the faithful performance by
Tenant during the term hereof or any extension hereof. Prior to the time
when Tenant shall be entitled to the return of this security deposit,
Lessor may co-mingle such deposit with Lessor's own funds and to use such
security deposit for such purpose as Lessor may determine. Notwithstanding
the foregoing to the contrary, in the event Lessor transfers title to the
Property to a party with a tangible net worth of less than Five Million
and 00/100 Dollars ($5,000,000.00), Lessor shall require such transferee
to segregate the security deposit in a separate account and agree in
writing not to co-mingle said security deposit with such transferee's own
funds. In the event Lessor transfers title to the Property to a party with
a tangible net worth of Five Million and 00/100 Dollars ($5,000,000.00)
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and such transferee wishes to co-mingle such deposit with its own funds,
such transferee shall, as a condition thereto, provide to Tenant such
transferee's most recent financial statement, which shall have at least
been reviewed by independent certified public accountants, in order to
substantiate such transferee's then current tangible net worth. Any such
writing shall name Tenant and its assigns as third party beneficiaries.
Lessor shall provide to Tenant an executed original of any such writing.
In the event of the failure of Tenant to keep and perform any of the
terms, covenants and conditions of this Lease to be kept and performed by
Tenant during the term hereof or any extension hereof, then Lessor either
with or without terminating this Lease, may (but shall not be required to)
apply such portion of said deposit as may be necessary to compensate or
repay Lessor for all losses or damages sustained or to be sustained by
Lessor due to such breach on the part of Tenant, including, but not
limited to overdue and unpaid rent, any other sum payable by Tenant to
Lessor pursuant to the provisions of this Lease, damages or deficiencies
in the reletting of Premises, and reasonable attorney's fees incurred by
Lessor. Should the entire deposit or any portion thereof, be appropriated
and applied by Lessor, in accordance with the provisions of this
paragraph, Tenant upon written demand by Lessor, shall remit forthwith to
Lessor a sufficient amount of cash to restore said security deposit to the
original sum deposited, and Tenant's failure to do so within five (5) days
after receipt of such demand shall constitute a breach of this Lease. Said
security deposit shall be returned to Tenant, less any depletion thereof
as the result of the provisions of this paragraph, at the end of the term
of this Lease or any renewal thereof, or upon the earlier termination of
this Lease. Tenant shall have no right to anticipate return of said
deposit by withholding any amount required to be paid pursuant to the
provision of this Lease or otherwise.
In the event Lessor shall sell the Property, or shall otherwise convey or
dispose of its interest in this Lease, Lessor may assign said security deposit
or any balance thereof to Lessor's assignee, whereupon Lessor shall be released
from all liability for the return or repayment of such security deposit and
Tenant shall look solely to the said assignee for the return and repayment of
said security deposit. Said security deposit shall not be collaterally assigned
or encumbered by Tenant without the written consent of Lessor, and any
assignment or encumbrance without such consent shall not bind Lessor. In the
event of any rightful and permitted assignment of this Lease by Tenant, said
security deposit shall be deemed to be held by Lessor as a deposit made by the
assignee, and Lessor shall have no further liability with respect to the return
of said security deposit to the Tenant.
USE:
14. The Premises shall be used and occupied by Tenant for office and warehouse
purposes and for light manufacturing for assembly and storage of electronic
components and related uses, so long as such use is permissible under all
applicable laws, ordinances and governmental regulations affecting the Property.
The Premises shall not be used in such manner that, in accordance with any
requirement of law or of any public authority, Lessor shall be obliged on
account of the purpose or manner of said use to make any addition or alteration
to or in the Premises. Tenant shall occupy the Premises, conduct its business
and control its agents, employees, contractors, invitees and visitors in such a
way as is lawful and will not permit or create any nuisance, unreasonable noise
or odor, or otherwise interfere with or disturb any
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other tenant or occupant of any adjacent property in its normal business
operations. Tenant's use of the Premises shall conform to all reasonable rules
and regulations relating to the use of the Property, as may be adopted from time
to time, which, in any event, shall be uniformly applicable to and enforced
against the tenants of any other adjacent or contiguous property owned by
Lessor. To the extent the same is done in a manner consistent with all
applicable laws, ordinances and governmental regulations, Lessor consents to
Tenant's storage on the Property outside of the Premises of loaded and unloaded
trailers and nitrogen and other gas tanks; provided, however, that by so
consenting Lessor assumes no liability with respect to such stored property.
Tenant acknowledges that the site plan attached hereto as Exhibit B, which site
plan has been approved by Tenant, includes not more than 411 parking spaces on
the Property.
ACCESS TO PREMISES:
15. The Tenant agrees to permit the Lessor and the authorized representatives of
the Lessor to enter the Premises, upon reasonable advance notice (other than in
the case of a bona fide emergency in which case Lessor shall be required to give
only such notice, telephonic or otherwise, as is practicable and reasonable
under the circumstances) at all times during usual business hours for the
purpose of inspecting the same and making any necessary repairs to the Premises
and performing any work therein that may be necessary to comply with any laws,
ordinances, rules, regulations or requirements of any public authority or of the
Board of Fire Underwriters or any similar body or that the Lessor may reasonably
deem necessary to prevent material waste or deterioration in connection with the
Premises. Nothing herein shall imply any duty upon the part of the Lessor to do
any such work which, under any provision of this Lease, the Tenant may be
required to perform and the performance thereof by the Lessor shall not
constitute a waiver of the Tenant's default in failing to perform the same. The
Lessor may, during the progress of any work in the Premises, keep and store upon
the Premises all necessary materials, tools and equipment; provided, however,
that Lessor shall do so, if at all, in a manner intended to minimize, to the
extent possible, any interference with, inconvenience to or disturbance of
Tenant's business. The Lessor shall not in any event be liable for
inconvenience, annoyance, disturbance, loss of business, or other damage of the
Tenant by reason of making repairs or the performance of any work in the
Premises, or on account of bringing materials, supplies and equipment into or
through the Premises during the course thereof and the obligations of the Tenant
under this Lease shall not thereby be affected in any manner whatsoever.
Lessor reserves the right to enter upon the Premises at any time in the event of
an emergency and at reasonable hours to exhibit the Premises to prospective
purchasers or others; and to exhibit the Premises to prospective Tenants and to
the display "For Lease" or similar signs on the Property adjacent to abutting
public roadways during the last nine (9) months of the term of this Lease, all
without hindrance or molestation by Tenant.
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EMINENT DOMAIN:
16. In the event of any eminent domain or condemnation proceeding or sale to the
condemning authority in lieu thereof in respect to the Property during the term
thereof, the following provisions shall apply:
(a) If the whole of the Property shall be acquired or condemned by eminent
domain for any public or quasi-public use or purpose, then the term of
this Lease shall cease and terminate as of the date possession shall be
taken in such proceeding and all rentals shall be paid up to that date.
(b) If any part constituting less than the whole of the Property shall be
acquired or condemned as aforesaid, and in the event that such partial
taking or condemnation shall materially affect the Premises so as to
render the Premises unsuitable for the business of the Tenant, in the
commercially reasonable opinion of either Lessor or Tenant, then the term
of this Lease shall cease and terminate as of the date possession shall be
taken by the condemning authority and rent shall be paid to the date of
such termination. In the event that either Lessor or Tenant desire to
terminate this lease as aforesaid, such party shall give written notice of
termination within thirty (30) days after, as to Lessor, the effective
date of such taking or, as to Tenant, receipt of written notice of the
effective date of such taking.
In the event of a partial taking or condemnation of the Property, as a
result of which this Lease is not terminated as set forth in the preceding
paragraph, this Lease shall continue in full force and effect but with a
proportionate abatement of the Base Rent and Additional Rent based on the
portion, if any, of the Premises taken. Lessor reserves the right, at its
option, to restore the Premises to substantially the same condition as
they were prior to such condemnation. In such event, Lessor shall give
written notice to Tenant, within thirty (30) days following the date
possession shall be taken by the condemning authority, of Lessor's
intention to restore. Upon Lessor's notice of election to restore, Lessor
shall commence restoration and shall restore the Premises with reasonable
promptness, subject to delays beyond Lessor's control and delays in the
making of condemnation or sale proceeds adjustments by Lessor; and Tenant
shall have no right to terminate this Lease except as herein provided.
Upon completion of such restoration, the rent shall be adjusted based upon
the portion, if any, of the Premises restored.
(c) In the event of any condemnation or taking as aforesaid, whether whole
or partial, the Tenant shall not be entitled to any part of the award paid
for such condemnation and Lessor is to receive the full amount of such
award, the Tenant hereby expressly waiving any right to claim to any part
thereof.
(d) Although all damages in the event of any condemnation shall belong to
the Lessor whether such damages are awarded as compensation for diminution
in value of the leasehold or to the fee of the Premises, Tenant shall have
the right to claim and recover from the condemning authority, but not from
Lessor, such compensation as
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may be separately awarded or recoverable by Tenant in Tenant's own right
on account of any and all damage to Tenant's business by reason of the
condemnation and for or on account of any cost or loss to which Tenant
might be put in removing Tenant's merchandise, furniture, fixtures,
leasehold improvements and equipment, and for the unamortized portion of
Tenant's TI Contribution (based on full amortization thereof over a
presumed ten year lease term) and subsequent alterations or improvements
paid for by Tenant, amortized over the unexpired balance of a presumed ten
(10) year lease term. However, Tenant shall have no claim against Lessor
or make any claim with the condemning authority for the loss of its
leasehold estate, any unexpired term or loss of any possible renewal or
extension of said lease or loss of any possible value of said lease, any
unexpired term renewal or extension of said Lease.
DAMAGE OR DESTRUCTION:
17. In the event of any damage or destruction to the Premises by fire or other
cause during the term hereof, Tenant shall in any event promptly notify Lessor
thereof, and the following provisions shall apply:
(a) If the cost of restoration as reasonably estimated by Lessor will
equal or exceed seventy-five percent (75%) of said replacement cost of the
Premises, then either Lessor or Tenant may, no later than the forty-fifth
(45th) day following the damage, give the other party written notice of
election to terminate this Lease.
(b) If the cost of restoration as estimated by Lessor shall amount to less
than seventy-five percent (75%) of said replacement cost of the Premises,
or if, despite the cost, neither party elects to terminate this Lease,
Lessor shall restore the Premises, including the Tenant Improvements, but
excluding, unless Lessor otherwise consents in writing in advance, any
leasehold improvements constructed by or on behalf of Tenant after
completion of the initial construction of the Premises, and all trade
fixtures, contents and personal property of Tenant, all of which Tenant
shall separately insure, with reasonable promptness, subject to delays
beyond Lessor's control and delays in the making of insurance adjustments
by Lessor. Lessor agrees to make and pursue resolution, on commercially
reasonable terms, of any insurance claim diligently and in good faith.
(c) In the event of either of the elections to terminate, this Lease shall
be deemed to terminate on the date of the receipt of the notice of
election and all rents shall be paid up to that date. Notwithstanding
termination of the Lease, Lessor shall allow Tenant a reasonable
opportunity, not exceeding thirty (30) days from the effective date of
termination, to remove its trade fixtures and other Tenant property from
the Premises. Tenant shall have no claim against Lessor for the value of
any unexpired term of this Lease.
(d) In any case where damage to the Premises shall materially affect the
Premises so as to render them unsuitable in whole or in part for the
purposes for which they are demised hereunder, then, unless such
destruction was caused by the negligence or
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breach of the terms of this Lease by Tenant, its agents, employees,
contractors, invitees or visitors, a portion of the Base Rent and
Additional Rent based upon the extent to which the Premises or the parking
areas on the Property are rendered unsuitable shall be abated until
repaired or restored. If the destruction or damage was caused by
negligence or breach of the terms of this Lease by Tenant as aforesaid and
if Lessor shall elect to rebuild, the rent shall not abate and the Tenant
shall remain liable for the same. For purposes of this Section 17(d),
Lessor acknowledges that Lessor's property manager shall not be deemed to
be an agent, employee, contractor, invitee or visitor of Tenant.
(e) Notwithstanding the foregoing to the contrary, in the event that
Lessor has, for reasons within its reasonable control, not completed
restoration of the Premises within one hundred eighty (180) days after the
date of such damage or destruction, or, for reasons not within of Lessor's
reasonable control, including without limitation delays in the making of
insurance adjustments by Lessor, within sixteen (16) months after the date
of such damage or destruction, Tenant may terminate this Lease on sixty
(60) days advance written notice unless, within such 60 day period, Lessor
shall complete restoration or repair of the Premises, in which case this
Lease shall not be terminated.
CASUALTY INSURANCE:
18. (a) Lessor shall at all times during the term of this Lease, at its
expense, maintain at commercially reasonable cost a so-called "all risk"
policy or policies of insurance with premiums paid in advance issued by an
insurance company licensed to do business in the State of Minnesota
insuring the Premises, including without limitation all Tenant
Improvements but excluding, unless Lessor otherwise consents in writing,
any leasehold improvements constructed by or on behalf of Tenant after the
completion of initial construction of the Premises, in an amount equal to
its full insurable value on a full replacement cost basis against loss or
damage by fire, explosion or other insurance hazards and contingencies,
provided that Lessor shall not be obligated to insure any furniture, trade
fixtures, equipment, machinery, goods or supplies not covered by this
Lease which Tenant may bring upon the Premises.
(b) Tenant shall not carry any stock of goods or do anything in or about
the Premises which will in any way impair or invalidate the obligation of
the insurer under any policy of insurance required by this Lease;
provided, however, that Tenant in lieu of removing such goods or ceasing
such activities provide to Lessor a substitute insurance policy acceptable
to Lessor in its reasonable discretion.
(c) Lessor hereby waives and releases all claims, liability and causes of
action against Tenant and its agents, servants and employees for loss or
damage to, or destruction of, the Property or any portion thereof,
including the buildings and other improvements situated thereon, resulting
from fire, explosion and other perils included in standard "all risk"
insurance, whether caused by the negligence of any of said persons or
otherwise. Likewise, Tenant hereby waives and releases all claims,
liabilities and causes of action against Lessor and its agents, servants
and employees for
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loss or damage to, or destruction of, any of the improvements, fixtures,
equipment, supplies, merchandise and other property, whether that of
Tenant or of others in, upon or about the Property resulting from fire,
explosion or the other perils included in standard extended coverage
insurance, whether caused by the negligence of any of said persons or
otherwise. The waiver shall remain in force whether or not the Tenant's
insurer shall consent thereto.
(d) If Tenant installs any electrical equipment that overloads the power
lines to the building or its wiring, Tenant shall, at its own expense,
make whatever changes are necessary to comply with the requirements of the
insurance underwriter, insurance rating bureau and governmental
authorities having jurisdiction.
PUBLIC LIABILITY INSURANCE:
19. Tenant shall during the term hereof, keep in full force and effect at its
expense a policy or policies of public liability insurance with respect to the
Property, including the Premises and the business of Tenant, on terms with
companies approved in writing by Lessor, which approval shall not be
unreasonably withheld, delayed or conditioned, in which both Tenant and Lessor
shall be covered by being named as insured parties under reasonable limits of
liability not less than $2,000,000 in the aggregate. Such policy or policies
shall provide that thirty (30) days written notice must be given to Lessor prior
to cancellation thereof. Tenant shall furnish evidence satisfactory to Lessor at
the time this Lease is executed that such coverage is in full force and effect.
Lessor may, at its option, maintain additional or supplemental public liability
insurance in its own name with respect to the Property, and the reasonable cost
thereof shall be reimbursed to Lessor by Tenant as Operating Expenses.
DEFAULT OF TENANT:
20. (a) For purposes of this Lease, any of the following shall constitute a
"Tenant Default": (i) any failure of Tenant to pay any Base Rent or any
installment of Tenant's TI Contribution due hereunder within ten (10) days
after written notice of default (provided, however, that if Lessor shall
give three such notices in any twelve month period, no notice of any
further default shall be required during the balance of the twelve month
period commencing the first date of such notice); or (ii) any failure of
Tenant to pay any Additional Rent which is not being contested in good
faith pursuant to the provisions of Section 6(c) hereof within ten (10)
days after written notice of default; or (iii) any failure of Tenant to
perform any other of the terms, conditions or covenants of this Lease to
be observed or performed by Tenant for more than thirty (30) days after
written notice of such failure shall have been given to Tenant; provided,
however, that if such default cannot with due diligence be wholly cured
within such thirty (30) days, Tenant shall have such longer period as may
be reasonably necessary to cure the default, so long as Lessor proceeds
promptly to commence the cure of same within such thirty (30) day period
and diligently prosecutes the cure to completion, or (iv) if Tenant or any
guarantor of this Lease shall file or have filed against it any petition
or claim for relief under any federal or state law relating to bankruptcy
or insolvency or for reorganization or for the appointment of a receiver
or trustee of all or
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a portion of Tenant's or any such guarantor's property (and, as to
involuntary proceedings only, such petition or claim is not dismissed in
one hundred twenty (120) days), or (v) if Tenant or any such guarantor
makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, or if Tenant shall abandon the Premises or
suffer this Lease to be taken under any writ of execution or (vi)
Manufacturer's Services Ltd., a Delaware corporation ("Guarantor") shall
otherwise be in default in the performance of any covenant or agreement
under the Lease Guaranty of even date herewith signed by Guarantor in
favor of Lessor (the "Lease Guaranty") and such default shall continue for
a period of thirty (30) days after written notice thereof shall have been
given to Tenant. Upon the occurrence of a Tenant Default, then Lessor, in
addition to its rights of remedies it may have, shall have, with judicial
process, the immediate right of re-entry and may remove all persons and
property from the Premises and such property may be removed and stored in
a public warehouse or elsewhere at the cost of, and for the account of
Tenant, all without being guilty of trespass or becoming liable for any
loss or damage which may be occasioned thereby. Notwithstanding the
foregoing to the contrary, no further notices of default under subsections
(i) and (ii) above shall be required hereunder this Section 20(a) if
Tenant willfully and persistently fails to pay Base Rent hereunder in such
a manner that a reasonable person would conclude that Tenant is not
performing its payment obligations hereunder in good faith and in a timely
manner.
(b) Should Lessor elect to re-enter the Premises as herein provided, or
should it take possession of the Premises pursuant to legal proceedings,
it may either terminate this Lease or it may from time to time, without
terminating this Lease, make such alterations and repairs as may be
necessary in order to relet the Premises, and relet the Premises or any
part thereof upon such term or terms (which may be for a term extending
beyond the term of this lease) and at such rental or rentals and upon such
other terms and conditions as Lessor in its sole discretion may deem
advisable. Lessor shall make reasonable efforts to mitigate damages but
shall under no circumstances be obligated to prefer the Property in its
marketing and leasing efforts over other available property owned,
operated or managed, in whole or in part, by Lessor. Upon each such
reletting all rentals received by the Lessor from such reletting shall be
applied first to the payment of any indebtedness other than rent due
hereunder from Tenant to Lessor; second, to the payment of any costs and
expenses of such reletting, including brokerage fees (prorated based on a
fraction, the numerator of which is the number of days remaining in the
then current Lease term hereunder and the denominator of which is the
number of days in the initial lease term for the substitute tenant) and
attorney's fees and a portion of the cost of such alterations and repairs,
prorated based on a fraction calculated as set forth immediately above;
third, to the payment of the rent due and unpaid payment of future rent as
the same may become due and payable hereunder. If such rentals received
from such reletting during any month be less than that to be paid during
that month by Tenant hereunder, Tenant, upon demand, shall pay any such
deficiency to Lessor. No such re-entry or taking possession of the
Premises by Lessor shall be construed as an election on its part to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction. Notwithstanding any such reletting without
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termination, Lessor may at any time after such re-entry and reletting
elect to terminate this Lease for any such breach, in addition to any
other remedies it may have, it may recover from Tenant all damages it may
incur by reason of such breach, including the cost of recovering the
Premises, reasonable attorney's fees, and including the worth at the time
of such termination of the excess, if any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the remainder of the
stated term over the then reasonable rental value of the Premises for the
remainder of the stated term, all of which amounts shall be immediately
due and payable from Tenant to Lessor. In the event of termination of this
Lease after a Tenant Default, Lessor shall under no circumstances be
obligated to return or repay to Tenant any previously paid installments of
Tenant's TI Contribution.
(c) In the event suit shall be brought for recovery of possession of the
Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant
herein contained on the part of Tenant to be kept or performed, and a
breach shall be established, Tenant shall pay to Lessor all reasonable
expenses incurred therefor, including a reasonable attorney's fee,
together with interest on all such expenses at the rate of four percent
(4%) per annum in excess of the "base" or "prime" rate of interest (or
equivalent successor rate) as may be set or announced by Norwest Bank
Minnesota, National Association, Minneapolis, Minnesota, as the same
changes from time to time (the "Default Rate"), from the date of such
breach of the covenants of this Lease.
(d) Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Lessor
obtaining possession of the Premises, by reason of the violation by Tenant
of any of the covenants or conditions of this Lease, or otherwise. Tenant
also waives any demand for possession of the Premises, and any demand for
payment of rent and any notice of intent to re-enter the Premises, or of
intent to terminate this Lease, other than the notices above provided in
this section, and waives any and every other notice or demand prescribed
by any applicable statutes or laws.
(e) No remedy herein or elsewhere in this Lease or otherwise by law,
statute or equity, conferred upon or reserved to Lessor or Tenant shall be
exclusive of any other remedy, but shall be cumulative, and may be
exercised from time to time and as often as the occasion may arise.
COVENANTS TO HOLD HARMLESS:
21. Except in case of fire or other casualty against which Lessor is required to
insure hereunder, or damage or loss caused by the exercise of eminent domain,
unless the liability for damage or loss is caused by the negligence of Lessor,
its agents, contractors or employees or is due to Lessor's default in the
performance of any of its obligations, duties, covenants, representations or
warranties hereunder, Tenant shall hold harmless Lessor from any liability for
damages to any person or property in or upon the Premises and the Property,
including the
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person and the property of Tenant and its employees and all persons in the
Premises at its or their invitation or sufferance, and from all damages
resulting from Tenant's failure to perform the covenants of this Lease. In the
event of any claim or assertion of liability against Lessor in any manner
covered by Tenant's indemnification obligation set forth in the foregoing
sentence, Tenant may contest such claim or assertion of liability so long as it
proceeds diligently and in good faith with respect thereto and, in connection
therewith, shall employ competent counsel acceptable to Lessor (the approval of
which shall not be unreasonably withheld, delayed or conditioned). Lessor agrees
to give prompt notice to Tenant of any such claim or assertion of liability. If
Tenant so engages counsel acceptable to Lessor as aforesaid, Tenant's indemnity
hereunder shall not include reimbursement to Lessor of any separate fees for
Lessor's independent legal counsel. All property kept, maintained or stored on
the Premises shall be so kept, maintained or stored at the sole risk of Tenant.
Tenant agrees to pay all sums of money in respect of any labor, service,
materials, supplies or equipment furnished or alleged to have been furnished to
Tenant in or about the Property, and not furnished on order of Lessor, which may
be secured by any Mechanic's, Materialmen's or other lien to be discharged at
the time performance of any obligation secured thereby matures, provided that
Tenant may contest such lien so long as (i) Tenant proceeds with such contest
diligently and in good faith, and (ii) Tenant provides to the Lessor a surety
bond or other security acceptable to Lessor in an amount equal to 125% of the
amount of such lien within ten (10) days after receipt by Tenant of notice of
such lien, but if such lien is reduced to final judgment and if such judgment or
process thereon is not stayed, or if stayed and said stay expires, then and in
each such event, Tenant shall forthwith pay and discharge said judgment and
lien. Lessor shall have the right to post and maintain on the Premises, notices
of non-responsibility under the laws of the State of Minnesota.
NON-LIABILITY:
22. Except in the case of fire or other casualty against which Lessor is
required to insure hereunder or damage or loss caused by the exercise of eminent
domain, Lessor shall not be liable for damage to any property of Tenant or of
others located on the Property, nor for the loss of or damage to any property of
Tenant or of others by theft or otherwise. Lessor shall not be liable for any
injury or damage to persons or property resulting from fire, explosion, any
injury or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or snow or leaks from any part of
the Property or from the pipes, appliances, or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any such
damage caused by other Tenants or persons in the Property, occupants of adjacent
property, of the buildings, or the public or caused by operations in
construction of any private, public or quasi-public work. All property of Tenant
kept or stored on the Premises shall be so kept or stored at the risk of Tenant
only and Tenant shall hold Lessor harmless from any claims arising out of damage
to the same, including subrogation claims by Tenant's insurance carrier.
SUBORDINATION:
23. Lessor warrants that the Property is not encumbered by any Mortgage (as
defined below) as of the date hereof. In the event that the Property becomes
encumbered by a Mortgage prior
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to the earlier of (i) Commencement Date, or (ii) the date on which a Memorandum
of Lease is recorded with the Ramsey County Recorder pursuant to Section 29
hereof, Lessor shall cause the mortgagee thereunder to execute and deliver to
Tenant a subordination, nondisturbance and attornment agreement as required
below in this Section 23. This Lease shall be subject and subordinate to the
lien of any and all Mortgages (as defined below) hereafter encumbering the
Premises and placed thereon by Lessor, its successor or assigns, and to
renewals, modifications, replacements and extensions of such Mortgages;
provided, however, that the subordination herein contained shall not be
effective with respect to any Mortgage unless the holder of such Mortgage (the
"Mortgagee") shall execute and deliver a subordination, nondisturbance and
attornment agreement providing that, in the event the Mortgage shall be
foreclosed, the Mortgagee shall accept a deed in lieu thereof, or the Mortgagee
shall be or become a mortgagee-in-possession of the Property (any of which
events shall be a "Foreclosure"), so long as no Tenant Default shall have
occurred and be construing, and so long as Tenant shall attorn to Mortgagee or
purchaser upon Foreclosure, (i) the Lease shall not terminate by any reason of
such Foreclosure, (ii) Tenant's possession of the Premises shall not be
disturbed, (iii) the Mortgagee or purchaser upon such Foreclosure, its or his
successors or assigns, shall recognize Tenant and all its rights hereunder and
shall be obligated to fully and completely perform Lessor's duties and
obligations under this Lease arising from and after the date of such
Foreclosure, and (iv) Tenant shall not, unless otherwise required by applicable
law, be named as a party in any action for Foreclosure. For purposes hereof, the
term "Mortgage" shall mean any mortgage, deed of trust or similar consensual
lien on the Property securing loans made to Lessor, its successors and assigns,
by any bank, savings bank, savings and loan association, trust company,
insurance company, pension fund, any lending affiliate of any of the foregoing,
or any other institutional lender.
ASSIGNMENT OR SUBLETTING:
24. So long as no Tenant Default shall have then occurred and be continuing, and
subject to the terms and limitations set forth below, Tenant shall have the
right to assign this Lease or sublet the Premises (to no more than three (3)
subtenants in the aggregate at any one time) or any portion thereof only with
the prior written consent of Lessor, which consent shall not be unreasonably
withheld if (i) as to an assignment or as to a sublease of more than 30,000
square feet, the proposed assignee or subtenant is reasonably creditworthy, (ii)
the proposed assignee or subtenant assumes, in a written assumption agreement in
form and substance acceptable to Lessor in its commercially reasonable
discretion, Tenant's obligations hereunder (as to subtenants, excluding the
obligation as to pay Base Rent or Additional Rent) and otherwise agrees to be
bound by the terms hereof, from and after the date of assignment of this Lease.
Notwithstanding the foregoing, under no circumstances will Tenant be released
from any obligations hereunder, nor will Guarantor be released from its
obligations under the Lease Guaranty, upon any such assignment or sublease,
including without limitation any "Intracorporate Transfer" or space sharing
arrangement as contemplated below in this Section 24. Should Tenant sublease in
accordance with the terms of this Lease, any increase in rental received by
Tenant over the per square foot rental rate which is being paid by Tenant (after
reimbursement to the Tenant of reasonable costs incurred in consummating such
sublease, including, without implied limitation, attorneys' fees, brokerage
commissions and the cost of making changes by reason thereof in the Premises
such commissions and costs of
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changes in the Premises to be amortized of the term of occupancy of the Premises
by the assignee or sublessee) shall be forwarded to and retained by Lessor,
which increase shall be in addition to the Base Rent and Additional Rent due
Lessor under this Lease.
Notwithstanding the above, Tenant may, without the approval of Lessor, assign
the Lease, or any part thereof, or sublease the Premises, in whole or in part,
to any of the following (collectively, "Intracorporate Transfers"): (a) a parent
or affiliate of Tenant; or (b) any corporation a majority of whose voting stock
is owned by Tenant; or (c) any corporation in which or with which Tenant, its
corporate successors or assigns, is merged or consolidated, in accordance with
applicable statutory provisions for merger or consolidation of corporation, so
long as the liabilities of the corporations participating in such merger or
consolidation are assumed by the corporation surviving such merger or created by
such consolidation; or (d) any corporation acquiring this Lease and all or
substantially all of Tenant's assets; or (e) any corporate successor to a
successor corporation becoming such by either of the methods described in
subsections (c) or (d). For purposes of this section, the term "affiliate" shall
mean any entity directly controlled by Tenant, under the direct (through one or
more levels or entities) control of tenant or under the common direct control
with Tenant. In no event shall Tenant be permitted to use, in a step
transaction, a series of one or more of such Intracorporate Transfers to
"spin-off" this Lease to independent third parties, that is, if the assignment
to such independent third party would not otherwise be permitted hereunder. As
an example of the foregoing, Tenant shall not assign this Lease to an affiliate
corporation whose assets consist solely of this Lease and the rights granted
herein and thereafter sell the stock of such affiliate corporation to an
independent third party.
Any assignment of this Lease or subletting of the Premises permitted under this
Lease shall be subject to the following conditions:
(1) that the initial Tenant and any assignee(s) of Tenant which has
assumed such obligations in a writing with Lessor shall remain liable for
the full performance of all Tenant obligations hereunder during the entire
term of this Lease; and
(2) that any sublease shall be subject and subordinate to this Lease, and
the subtenant shall comply with all the terms and conditions of this Lease
(excepting the rental provisions contained herein), including without
limitation of all restrictions upon the use of the Premises contained
herein; and
(3) a copy of the document of the assignment or subletting is delivered to
Lessor within fifteen (15) days after the full execution thereof by both
parties thereto; and
(4) any assignee shall assume in writing all of the Tenant's obligations
arising from and after the date of assignment under this Lease.
Notwithstanding the foregoing to the contrary, the foregoing limitation shall
not prevent Tenant from allocating space within the Premises (not exceeding
twenty percent (20%) of the aggregate square feet on the Premises, all without
creation of separate entrances to the Premises, to joint venture partners or
associated entities with whom Tenant is engaged in work
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<PAGE>
in the ordinary course of Tenant's business, so long as (i) each such party
agrees in a writing directed to Lessor to be bound by the terms of this Lease
(other than the obligation to pay Base Rent or Additional Rent), (ii) Tenant
provides immediate written notice to Lessor of such space sharing arrangement,
(iii) the activities being conducted at and from the Premises by such party do
not, in Lessor's reasonable judgment, increase Lessor's insurance premiums
(unless such increase is paid by Tenant) or its risk of incurring liability,
damages or costs for environmental hazards. No such space sharing arrangement,
with or without Lessor's consent, shall in any way whatsoever relieve Tenant of
any of its obligations, duties or liabilities hereunder.
Notwithstanding the foregoing to the contrary, in the event of any proposed
assignment of this Lease or subletting, of space within the Premises (other than
an Intracorporate Transfer), the Lessor shall, for a period of ten (10) business
days after receipt of written request for approval of such assignment or
sublease from the Tenant, have the right to terminate this Lease as to the
portion of the Premises proposed to be sublet by written notice to Tenant
("Lessor's Termination Notice"). Upon receipt of Lessor's Termination Notice,
Tenant shall have -period of ten (10) business days in which to rescind its
request for approval of assignment this Lease or subletting of the Premises. If
Tenant fails to deliver to Lessor written notice rescission of such request
within said ten (10) business day period, this Lease shall be deem terminated on
a date sixty (60) days after receipt of Lessor's Termination Notice (unless
Lessor and Tenant otherwise agree in writing). If this Lease is terminated as to
a portion the Premises only, Base Rent and Additional Rent shall be prorated on
an equitable basis.
ATTORNMENT:
25. In the event of a sale or assignment of Lessor's interest in the Property,
or the Premises or this Lease, or if the Property come into custody or
possession of a mortgagee or any other party whether because of a mortgage
foreclosure, or otherwise, Tenant shall attorn to such assignee or other party
and recognize such party as Lessor hereunder; provided, however, Tenant's
peaceable possession will not be disturbed so long as Tenant performs its
obligations under this Lease. Tenant shall execute, on demand, any commercially
reasonable attornment agreement, as determined by Tenant in its reasonable
judgment, required by any such party to be executed, containing such provisions
and such other provisions as such party may reasonably require.
NOVATION IN THE EVENT OF SALE:
26. In the event of the bona fide sale of the Property in an arm's length
transaction, Lessor shall be and hereby is relieved of all of the covenants and
obligations created hereby accruing from and after the date of sale (other than
the obligation to complete the Project as required by Section 4 hereof, and such
sale shall result automatically in the purchaser assuming and agreeing to carry
out all the covenants and obligations of Lessor herein. Notwithstanding the
foregoing provisions of this section, Lessor, in the event of a sale of the
Premises, shall cause to be included in this agreement of sale and purchase a
covenant whereby the purchaser of the Premises assumes and agrees to carry out
all of the covenants and obligations of Lessor herein,
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<PAGE>
and identifies Tenant as an intended third party beneficiary of such agreement.
Lessor agrees to provide to Tenant an executed original counterpart of any such
agreement.
The Tenant agrees at any time and from time to time upon not less than fifteen
(15) business days prior Written request by the Lessor to execute, acknowledge
and deliver to the Lessor a statement in writing certifying that this Lease is
unmodified and in full force and effect, or if modified, stating the
modifications, that there are no outstanding defaults or, if that not be the
case, specifying any defaults then in existence, and the dates to which the Base
Rent, acceptable to Tenant in its reasonable discretion and other charges have
been paid in advance, if any, it being intended that any such statement
delivered pursuant to this paragraph may be relied upon by any prospective
purchaser of the fee or mortgagee or assignee of any mortgage upon the fee of
the Premises. The failure of Tenant to do so within fifteen (15) days after
written request by the Lessor shall constitute a Tenant Default, without any
requirement of further demand or notice to Tenant. Tenant hereby appoints Lessor
as its attorney-in-fact for the purpose of executing, in the name of Tenant, any
statement required to be executed by Tenant under this Section 26 upon the
failure of Tenant to do so within the time frame specified above.
SUCCESSORS AND ASSIGNS:
27. The terms, covenants and conditions hereof shall be binding upon and inure
to the successors and assigns of the parties hereto.
QUIET ENJOYMENT:
28. Lessor warrants that it has full right to execute and to perform this Lease
and to grant the estate demised, and that Tenant, upon payment of the rents and
other amounts due and the performance of all the terms, conditions, covenant and
agreements on Tenant's part to be observed and performed under this Lease, may
peaceably and quietly enjoy the Premises for the business uses permitted
hereunder, subject, nevertheless, to the terms and conditions of this Lease,
without hindrance, molestation or disturbance by Lessor or persons claiming
through, under or over Lessor.
RECORDING:
29. Promptly upon execution hereof, Lessor and Tenant agree to join in the
execution of a Memorandum of Lease for the purposes of recordation. Said
Memorandum of Lease shall describe the parties, the Premises and the term of the
Lease and shall incorporate this Lease by reference.
SURRENDER:
30. On the Expiration Date or upon the termination of this Lease or Tenant's
right to possession of the Premises upon a day other than the Expiration Date,
Tenant shall peaceably surrender the Premises broom-clean in good order,
condition and repair, excepting only reasonable wear and tear, damage by fire or
other casualty to be insured against by Lessor
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hereunder, and any taking by eminent domain. For purposes of this Lease, the
term "reasonable wear and tear" shall be based on the presumptions that: (i)
Tenant shall have conducted its business at and from the Premises for not more
than ten (10) hours per day, five (5) days per week in the office area and
twenty-two (22) hours per day seven (7) days per week in the production area,
and (ii) the HVAC System will be operated for twenty-four (24) hours per day
seven (7) days per week to ensure a controlled environment in the production
area. The Tenant shall surrender the HVAC System in good working order and
condition. Not later than thirty (30) days following the Expiration Date or
earlier date of termination of this Lease or Tenant's right to possession of the
Premises, Tenant shall provide to Lessor an inspection report with respect to
the HVAC System performed by a registered engineer or HVAC contractor acceptable
to Lessor certifying to Lessor, in form and substance acceptable to Lessor in
its reasonable discretion, that the HVAC System is in good working order and
condition and that all necessary maintenance of and repairs to the HVAC System
have been completed. On or before the Expiration Date or upon termination of
this Lease on a day other than the Expiration Date, Tenant shall, at its
expense, remove all trade fixtures, personal property and equipment from the
Premises; any property not so removed by Tenant shall be deemed to have been
abandoned. Tenant shall also remove, at its expense, all alterations and
improvements which Lessor has given notice in writing to Tenant to remove
pursuant to the provisions of Section 11 hereof; provided, however, that Tenant
shall have no obligation to remove the Tenant Improvements described in Section
4 hereof. Any damage caused in the removal of such items shall be repaired by
Tenant and at its expense prior to the expiration of the Lease Term or earlier
termination of this Lease or Tenant's right to possession of the Premises. All
alterations, additions, improvements and fixtures (other than trade fixtures)
which shall have been made or installed by Lessor or Tenant upon the Premises
and all floor covering so installed (other than alterations which Lessor has
given notice in writing to Tenant to remove pursuant to the provisions of
Section 11 hereof) shall remain upon and be surrendered with the Premises as a
part thereof, without disturbance, molestation or injury, and without charge, at
the expiration of termination of this Lease. Tenant shall promptly surrender all
keys for the Premises to Lessor at the place then fixed for payment of rent and
shall inform Lessor of combinations of any locks and safes on the Premises.
Tenant's obligations under this Section 30 shall be continuing obligations and
shall survive termination of this Lease or the expiration of the Lease Term.
HOLDING OVER:
31. In the event of a holding over by Tenant after expiration or termination of
this Lease without the consent in writing of Lessor (excluding any period during
which Lessor and Tenant are both negotiating in good faith an extension of the
Lease Term), Tenant shall pay rent for such occupancy at the rate of one hundred
twenty-five percent (125%) of the last-current Base Rent, prorated for the
entire holdover period. Tenant shall also pay all Additional Rent accruing
during the holdover period. Except as otherwise agreed in writing, any holding
over with the written consent of Lessor shall constitute Tenant a month-to-month
tenant.
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CONSENTS:
32. Whenever provision is made under this Lease for either party securing the
consent or approval by the other, such consent or approval shall only be in
writing. No such consent by either party shall be unreasonably withheld, delayed
or conditioned.
NOTICES:
33. Any notice required or permitted under this Lease shall be given or secured
if personally delivered or sent by registered or certified return receipt mail
to Manufacturers' Services Limited, with a copy to Tenant at the Premises and to
Lessor at One State Farm Plaza, Bloomington, Illinois 61710, Attention:
Investment Real Estate E-10, with a copy to the address then fixed for the
payment of rent as provided in Section 7 of this Lease, and either party may by
like written notice at any time designate a different address to which notices
shall subsequently be sent or rent to be paid. Any mailed notice shall be deemed
given if refused when received or tendered for delivery.
LESSOR SELF HELP:
34. Except as otherwise provided herein, the Tenant covenants and agrees that if
it shall any time fail to take out, pay for, maintain or deliver any of the
insurance policies above required, or, subject to Tenant's right to contest in
good faith disputed items of Additional Rent as set forth in Section 6(c)
hereof, fail to make any other payment or perform any other act on its part to
be made or performed as in this Lease provided and such default shall continue
beyond applicable notice and grace periods, then the Lessor may, but shall not
be obligated so to do, upon not less than ten (10) days prior notice to the
Tenant (other than payments necessary to obtain or maintain insurance coverages
required hereunder or to avoid the imposition of penalties, in which case no
such notice is required) and without waiving or releasing the Tenant from any
obligations of the Tenant in this Lease contained, pay any such cost or expense,
effect any such insurance coverage and pay premiums therefor, and may make any
other payment or perform any other act on the part of the Tenant to be made and
performed as in this Lease provided, in such manner and to such extent as the
Lessor may deem desirable, and in exercising any such right, to also pay all
necessary and incidental costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees. All reasonable sums so paid by Lessor and all
reasonable, necessary and incidental costs and expenses in connection with the
performance of any such act by the Lessor, together with interest thereon at the
Default Rate from the date of making of such expenditure by Lessor, shall be
deemed Additional Rent hereunder, and shall be payable to Lessor on demand.
Tenant covenants to pay any such sum or sums with interest as aforesaid and the
Lessor shall have the same rights and remedies in the event of the nonpayment
thereof by Tenant as in the case of default by Tenant in the payment of the Base
Rent payable under this Lease.
LESSOR'S DEFAULT:
35. Any of the following occurrences, conditions or acts by Lessor shall
constitute a "Lessor Default": (a) Lessor's failure to make any payments of
money due Tenant hereunder
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within ten (10) days after the receipt of written notice from Tenant that same
is overdue; or (b) Lessor's failure to perform any non-monetary obligation of
Lessor hereunder within thirty (30) days after receipt of written notice from
Tenant to Lessor specifying such default and demanding that the same be cured;
provided that, if such default cannot with due diligence be wholly cured within
such thirty (30) days, Lessor shall have such longer period as may be reasonably
necessary to cure the default, so long as Lessor proceeds promptly to commence
the cure of same within such thirty (30) day period and diligently prosecutes
the cure to completion and provided further that in the case of an emergency,
Tenant shall be required to give only such notice as is reasonable under the
circumstances.
Upon the occurrence of a Lessor Default, at Tenant's option, in addition to any
other remedies which it may have, and without its actions being deemed a cure of
Lessor's default, Tenant may (i) pay or perform such obligations and offset all
reasonable sums so paid by Tenant and all reasonable necessary and incidental
costs and expenses paid or incurred by Tenant in connection therewith against
the Base Rent, Additional Rent and other charges due Lessor hereunder unless, by
written notice to Tenant, Lessor contests whether a Lessor Default has occurred
or is continuing, in which case such right of offset shall only be effective if
final, non-appealable judgment against Lessor shall have been entered by a court
of competent jurisdiction; or (ii) sue for damages. Any amounts so determined to
be due from Lessor to Tenant hereunder shall bear interest at the Default Rate
from the date such costs or expenses were incurred.
GENERAL:
36. The Lease does not create the relationship of principal agent or of
partnership or of joint venture or of any association between Lessor and Tenant,
the sole relationship between the parties hereto being that of Lessor and
Tenant.
No waiver of any default of Tenant or Lessor hereunder shall be implied from any
omission by Lessor or Tenant to take any action on account of such default if
such default persists or is repeated, and no express waiver shall affect any
default other than the default specified in the express waiver and that only for
the time and to the extent therein stated. One or more waivers by Lessor or
Tenant shall not then be construed as a waiver of a subsequent breach of the
same covenant, term or condition. The consent to or approval by Lessor of any
act by Tenant requiring Lessor's consent or approval shall not waive or render
unnecessary Lessor's consent to or approval of any subsequent similar act by
Tenant shall be construed to be both a covenant and a condition. No action
required or permitted to be taken by or on behalf of Lessor under the terms or
provisions of this Lease shall be deemed to constitute an eviction or
disturbance of Tenant's possession of the Premises so long as, in taking such
action, Lessor acts in a manner consistent with its obligations hereunder. All
preliminary negotiations are merged into and incorporated in this Lease. The
laws of the State of Minnesota shall govern the validity, performance and
enforcement of this Lease.
This Lease and the exhibits, if any, attached hereto and forming a part hereof,
constitute the entire agreement between Lessor and Tenant affecting the Premises
and there are no other agreements, subsequent alteration, amendment, change or
addition to this Lease shall be
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<PAGE>
binding upon Lessor or Tenant unless reduced to writing and executed in the same
form and manner in which this Lease is executed.
If any agreement, covenant or condition of this Lease or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such agreement, covenant or
condition to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each agreement,
covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
The responsibility of either Lessor or Tenant hereunder is only to perform the
respective covenants, duties and obligations of such party hereunder. In the
event of the failure of either party to do so, the defaulting party shall be
liable to the non-defaulting party only for the direct losses, damages, costs
and expenses from such default, along with other costs and expenses expressly
set forth herein, and shall not be liable for loss of profits, indirect or
consequential damages.
HAZARDOUS MATERIAL:
37. (a) Tenant covenants through the Lease Term, at Tenant's sole cost and
expense, promptly to comply strictly with all laws and ordinances and the
orders, rules and regulations and requirements of all federal, state and
municipal governments and appropriate departments, commission, boards, and
officers thereof, relating to the use, handling, storage, transport or
disposal of "Hazardous Material," as defined below.
(b) In the event any Hazardous Material (hereinafter defined) is brought
or caused to be brought into or onto the Property or the Premises by
Tenant, its agents, contractors, employees or invitees, Tenant shall
handle any such material in compliance with all applicable federal, state
and/or local regulations. For purposes of this section, "Hazardous
Material" means and includes any hazardous, toxic or dangerous waste,
substance or material defined as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation, and Liability Act, any
so-called "Superfund" or "Superlien" law, or any federal, state or local
statute, law, ordinance, code, rule, regulation, order decree regulating,
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or materials, as now or at
any time hereafter in effect. Tenant shall submit to Lessor on or before
January 15 of each calendar year during the term hereof copies of its
approved hazardous materials communication plan, OSHA monitoring plan, and
permits required by the Resource Recovery and Conservation Act of 1976, if
Tenant is required to prepare, file or obtain any such plans or permits,
all Material Data Safety Sheets prepared by, for or on behalf of Tenant
and any and all reports, log sheets or other documentation which Tenant
submits or provides to any governmental agency or entity in connection
with the use, handling, storage, transport or disposal of any Hazardous
Material (all of the foregoing being hereinafter collectively referred to
as "Tenant Environmental Documentation." Lessor shall have the right, at
reasonable times and on reasonable advance notice, to inspect (and, if
Lessor so desires, copy) any or all
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Tenant Environmental Documentation and Tenant shall cooperate in good
faith with Lessor in connection with any request for inspection thereof.
In addition, at any time that Lessor shall have any reasonable cause to
believe that a release of any Hazardous Material has occurred in violation
of any applicable law either on the Property or affecting the Property,
Lessor may enter the Property and the Premises at reasonable times and on
reasonable advance notice to conduct any inspections or tests which
Lessor, in its commercially reasonable discretion, deems necessary or
advisable to determine the existence, nature, extent or cause of such
release. Lessor shall conduct all such inspections and testing in a manner
intended to minimize any interference with the business of Tenant. Tenant
agrees to cooperate in good faith in connection with any such inspection
or test. The costs of all such inspections and testing shall be borne by
Lessor; provided, however, that Tenant shall reimburse Lessor for the
costs of all such inspections and testing if the identified release was
caused by Tenant, its agents, employees or contractors. Subject to the
limitations set forth in Section 36 above concerning loss of profits,
indirect or consequential damages, Tenant will indemnify and hold harmless
Lessor from any losses, liabilities, damages, costs or expenses (including
reasonable attorneys' fees) which Lessor may suffer or incur as a result
of any introduction, spill or release of any kind or nature whatsoever
caused by Tenant, its agents, employees, contractors, or licensees into or
onto the Property or the Premises, or any adjacent property, of any
Hazardous Material at any time during the Lease Term. This section shall
survive the expiration or sooner termination of this Lease. By way of
clarification and not limitation, the parties agree that the Lessor's
property manager from time to time or said property manager's employees,
agents, contractors or licensees are not employees, agents, contractors or
licensees of Tenant.
(c) Tenant acknowledges receipt of (i) a certain Phase 1 Environmental
Site Assessment Update dated August 29, 1996 prepared by Braun Intertec
Corporation with respect to the Property; and (ii) a certain Phase 1
Environmental Site Assessment prepared by Nova Environmental Services,
Inc. Dated March 22, 1990 with respect to the Property (collectively, the
"Environmental Reports"). Even though Landlord may otherwise have no
responsibility or liability to any party therefor (due to lack of
association with any pre-existing condition or due to the off-site
source(s) thereof), and subject to the limitations set forth in Section 36
above concerning loss of profits, indirect or consequential damages,
Landlord hereby agrees that it will hold harmless and defend Tenant from
any costs, liabilities or expenses to which Tenant may be exposed in
connection with governmentally required remediation or cleanup of any
pre-existing Hazardous Material conditions at the Property which are
referred to in the Environmental Reports. This section shall survive the
expiration or sooner termination of this Lease.
(d) The Tenant shall provide to Landlord immediate notice of any (A)
notice of any violation, proposed violation, claim, administrative or
judicial complaint, order or proposed order, relating to the Property
alleging violations of any federal, state or local environmental law or
regulation requiring Lessor or Tenant to take any action in connection
with the release of any Hazardous Material or (B) any notice from a
federal, state or local governmental agency or private party alleging that
Lessor or Tenant may
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be liable or responsible for costs associated with a response or cleanup
of a release of any Hazardous Material.
FORCE MAJEURE:
38. Either party's failure to perform the terms and conditions of this Lease, in
whole or in part, shall not be deemed a breach or a default hereunder or give
rise to any liability of such party to the other if such failure is attributable
to any unforeseeable event beyond such party's reasonable control and not caused
by the negligent acts or omissions or the willful misconduct of such party,
including, without limitation, flood, drought, earthquake, storm, pestilence,
lightning, and other natural catastrophes and acts of God; epidemic, war, riot,
civic disturbance or disobedience, and act of the public enemy; fire, accident,
wreck, washout, and explosion; strike, lockout, labor dispute, and failure,
threat of failure, or sabotage of such party's facilities; delay in
transportation or car shortages, or inability to obtain necessary labor,
materials, components, equipment, services, energy, or utilities through such
party's usual and regular sources at usual and regular prices; and any law,
regulation, order or injunction of a court or governmental authority, whether
valid or invalid and including, without limitation, embargoes, priorities,
requisitions, and allocations or restrictions of facilities, equipment or
operations. In the event of the occurrence of such a Force Majeure event, the
party unable to perform promptly shall notify the other party.
CAPTIONS:
39. The captions are inserted only as a matter of convenience and for reference,
and in no way define, limit or describe the scope of this Lease nor the intent
or any provision thereof.
LESSOR ESTOPPEL:
40. Lessor shall, upon receipt of a request from Tenant therefor, execute and
deliver to Tenant or to any proposed lender or purchaser of Tenant, or its
assets, a certificate certifying that this Lease is in full force and effect and
that there are no outstanding defaults and if that not be the case, specifying
any defaults then in existence and containing such other reasonable information
as is customarily included in Lessor Estoppel Certificates which, in any event,
shall be acceptable to Lessor in its reasonable discretion.
ATTACHMENTS:
41. See also Exhibits A through inclusive, which Exhibits are attached hereto
and made a part hereof.
Exhibit Description
------- -----------
Exhibit A Legal Description
Exhibit B Site Plan of Premises
Exhibit C Outline Specification for Lessor's Work
Exhibit C-l List of Approved Plans for Lessor's Work
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Exhibit D Outline Specification for Tenant Improvements
Exhibit D-l List of Approved Plans for Tenant Improvements
Exhibit E List of Warranties
Exhibit F Tenant's Sign Criteria
Exhibit G List of Operating Expenses
SUBMISSION:
42. Submission of this instrument to Tenant or proposed Tenant or his agents or
attorneys for examination, review, consideration or signature does not
constitute or imply an offer to lease reservation of space, or option to lease,
and this instrument shall have no binding legal effect until execution hereof by
both Lessor/Owner and Tenant or its agents.
REPRESENTATION:
43. It is agreed and understood that Mr. Brian Doyle, agent or broker with Welsh
Companies, Inc., is representing Lessor, and that Mr. Michael Fardy, agent of
Welsh Companies, Inc. is representing Tenant, and all leasing or brokerage
commissions payable to Welsh Companies, Inc. (including the above-named agents)
shall be paid by Lessor. Tenant represents and warrants that it has not engaged
the services of any other sales or leasing representative or broker in
connection with this Lease or the Premises.
SUBMISSION OF LEASE:
44. Submission of this Lease to Tenant prior to execution hereof by Lessor does
not constitute and shall not be interpreted as, an offer by Lessor. This Lease
shall become a binding contract only upon execution hereof by both Lessor and
Tenant. However, this Lease shall be null and void in all respects if the same
has not been signed by both Lessor and Tenant, and executed original
counterparts thereof delivered to each such party, by 5:00 p.m., Central
Standard Time on April ___, 1997.
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IN WITNESS WHEREOF, the Lessor and the Tenant have caused these presents to be
executed in form and manner sufficient to bind them at law, as of the day and
year first above written.
Tenant: Lessor:
MANUFACTURER'S SERVICES LIMITED - AMBERJACK, LTD.
ROSEVILLE, INC.
By: /s/ Anthony R. Cammavano By: /s/ Neil O. Brown
-------------------------------- ---------------------------------
Its: Division V.P. Its: President
------------------------------- --------------------------------
And: Robert B. O'Dell
--------------------------------
Its: Assistant Secretary
--------------------------------
STATE OF MINNESOTA )
) ss:
COUNTY OF HENNIPIN )
On this 14 day of April, 1997, personally came before me, a Notary Public
within and for said County, Ramsey, the Division VP of Manufacturer's Service,
Limited - Roseville, Inc., a Minnesota corporation, and acknowledged that he
executed the same as his free act and deed on behalf of such corporation.
/s/ Ruth M. Belmonte
[NOTARY SEAL] -------------------------------------
Notary Public
My commission expires: 1/31/2000
--------------
STATE OF ILLINOIS )
) ss:
COUNTY OF MCLEAN )
On this 16th day of April, 1997, personally came before me, a Notary Public
within and for said County, Neil O. Brown and Robert O'Dell, being respectively
the, President and Assistant Secretary of AmberJack, Ltd., an Arizona
corporation, acknowledged that they executed the same as their free act and deed
on behalf of such corporation.
/s/ Lori Collier
-------------------------------------
Notary Public
My commission expires:
--------------
[NOTARY SEAL]
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EXHIBIT A
(Legal Description)
Parcel 1:
The South 30 acres of the Northwest 1/4 of Section 21, Township 30, Range
23, except the West 884 feet thereof and except the following:
Beginning at the point on the South line of said 30 acres, 2033.0
feet East of the Southwest corner thereof; thence East to the
Southeast corner thereof; thence North to the Northeast corner
thereof; thence West along the North line of said 30 acres to a
point 1768.0 feet East of the Northwest corner thereof; thence South
28 degrees 41 minutes East 559.7 feet, more or less, to the point of
beginning, except part deeded to State of Minnesota in Book "1729"
RCR, page 988 and Book "2033" RCR, page 528:
Parcel 2:
That part of the South 30 acres of the South Half of the Northwest Quarter
of Section 21, Township 30 North, Range 23 West, Ramsey County, Minnesota,
described as follows:
Beginning at a point on a line run parallel with and distant 33 feet
Easterly of Line 1 described below, distant 200 feet Northerly of
its intersection with the East and West quarter line of said
Section 21; thence run Southeasterly to a point on said East and
West quarter line, distant 220 feet Easterly of said intersection;
thence run Westerly along said East and West quarter line for 141.92
feet; thence deflect to the right on a non-tangential curve, concave
to the Northeast, having a delta angle of 57 degrees 43 minutes 04
seconds, a radius of 167 feet and a chord azimuth of 335 degrees 03
minutes 51 seconds, for 168.23 feet, more or less, to an
intersection with said 33 foot parallel line; thence run northerly
on said 33 foot parallel line for 52.28 feet to the point of
beginning;
Line 1: Beginning at a point on the North line of said Section
21, distant 1180 feet East of the Northwest corner
thereof; thence run Southerly at an angle of 75 degrees
28 minutes 41 seconds from said North section line
(measured from West to South) for 1105.99 feet; thence
deflect to the left at an angle of 17 degrees 04 minutes
13 seconds for 167.08 feet; thence deflect to the right
on an 00 degree 44 minute 14 second curve (delta angle
07 degrees 08 minutes 33 seconds) for 968.91 feet;
thence on a tangent to said curve for 600 feet and there
terminating.
together with
That part of the South 30 acres of the South Half of the
Northwest Quarter of Section 21, Township 30 North,
Range 23 West, Ramsey County, Minnesota, described as
follows:
<PAGE>
Parcel 2 (continued)
From a point on Line 1 described above, distant 499.53
feet North of its point of termination, run Easterly at
right angles to said Line 1 for 33 feet to the point of
beginning; thence continue Easterly on the last
described course for 33 feet; thence run Northerly
parallel with said Line 1 for 170.53 feet, more or less,
to the North line of said South 30 acres; thence run
West on said North line to its intersection with a line
run parallel with and distant 33 feet East of said Line
1; thence run South on said 33 foot parallel line for
167.76 feet, more or less, to the point of beginning.
Note: Parcel designations are for convenience of reference only and do not
constitute an integral part of the legal description.
<PAGE>
EXHIBIT B
[GRAPHIC]
[OFFICE/WAREHOUSE FACILITY SITE PLAN]
<PAGE>
EXHIBIT C
OUTLINE SPECIFICATION FOR
THE DESIGN AND CONSTRUCTION OF
Office/Warehouse
Arden Hills Interstate Center
Phase I
Arden Hills, Minnesota
Prepared by:
Welsh Construction Company
March 26, 1997
<PAGE>
2
TABLE OF CONTENTS
01000 GENERAL CONDITIONS 3
02000 SITE WORK 6
03000 CONCRETE 8
04000 MASONRY 9
05000 METALS 9
06000 CARPENTRY AND MILLWORK 9
07000 THERMAL AND MOISTURE PROTECTION 9
08000 DOORS AND WINDOWS 10
09000 FINISHES 11
10000 SPECIALTIES 11
11000 EQUIPMENT 11
15000 MECHANICAL 11
16000 ELECTRICAL 12
ALLOWANCES 13
QUALIFICATIONS 14
LIST OF EXHIBITS 15
<PAGE>
3
01000 GENERAL CONDITIONS
1. INTENT
This outline specification and the preliminary drawings outline the
general scope of work for the design and construction of a 154,264 square
foot office/warehouse facility in Arden Hills, Minnesota. Contractor shall
provide all design, supervision, labor, materials, equipment, and general
requirements necessary for the complete and timely construction of the
project specified herein.
2. DESIGN
A. Architecture and Engineering: Contractor shall prepare a complete
set of working drawings and specifications in accordance with these
outline documents, applicable building codes and zoning
requirements, and the requirements of the owner. Additions or
deletions to the scope of work incorporated into the final drawings
and specifications at the direction of the owner will result in an
appropriate adjustment to the contract price.
3. SUPERVISION
A. Project Manager Contractor shall assign a project manager to this
project who shall be responsible for the complete execution of all
work. The project manager's responsibilities shall include
interfacing the project as required with the owner and the developer
throughout the entire design and construction process, obtaining the
required building permits, and managing the construction process
through completion of the project.
B. Superintendent: Contractor shall assign a superintendent to this
project who shall be responsible for the supervision of all field
construction in progress. The superintendent's responsibilities
shall include the scheduling and direct supervision of field
construction forces, interfacing as required with building
inspection officials, and ensuring compliance of work in place with
drawings and specifications.
4. CONSTRUCTION SCHEDULE
Contractor shall prepare a progress schedule for the project. This
schedule shall indicate the dates for starting and completion of the
various stages of construction, and shall be updated on a regular basis to
reflect the actual progress of the work.
This proposal is based upon a five-month construction schedule with
construction commencing on or about February 15, 1997. No winter weather
costs are included in the contract price. Utility costs are projected to
be the responsibility of the owner on/or about June 1,1997.
<PAGE>
4
5. TEMPORARY CONSTRUCTION
Contractor shall provide all required temporary construction, temporary
facilities and temporary utilities required to complete project
construction including heated weathertight enclosures, temporary roadways
and parking areas, erosion control structures, material storage areas,
enclosures for tools and other equipment, a heated and air-conditioned
field office, temporary utility services for construction use, and
temporary toilet facilities as required.
6. CLEAN-UP
Contractor shall be responsible for construction trash removal services
and shall at all times keep the building and site free from accumulation
of debris. Upon completion, the building shall be turned over to owner in
a "broom clean" condition.
7. WARRANTY
Contractor warrants that all materials and equipment shall be new unless
otherwise specified, and shall be free from defects for a period of one
year from the date of substantial completion of the work. Any extended
warranties obtained from suppliers or subcontractors shall be passed on to
the owner.
8. INSURANCE
Contractor shall maintain Worker's Compensation insurance, Comprehensive
Public Liability insurance, and Builder's Risk insurance, "All Risk" form,
for this project for the duration of the work. Deductible losses shall be
the responsibility of the owner.
9. QUALITY ASSURANCE
Contractor shall prepare and implement a Quality Assurance project for
this project. The Quality Assurance program shall include independent
agency testing and observation of soils, bituminous paving, roofing, steel
connections, and cast-in-place concrete, as well as inspection of work in
progress by project designers. The owner will have the right to perform
inspections and independent tests at any time.
10. ITEMS FURNISHED BY THE OWNER
The following items shall be furnished by the owner prior to commencement
of design work by contractor. If requested by the owner, the contractor
shall assist in the selection of agencies to perform these services.
A. Property Survey: The owner will retain a registered land surveyor to
prepare a survey for the proposed site. The survey will conform to
the "Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys" jointly established and adopted in 1992 by the American
Land Title Association and the American Congress on Surveying and
Mapping, meeting the accuracy requirements of an urban class survey,
showing as additional items, the land area and the contours of
<PAGE>
5
the project site, building setbacks, the location of all utilities
service the project site which are on or adjacent to the project
site, and all easements. Owner shall obtain all easements necessary
for access to the project site, including easements for installation
and maintenance of utilities, and (as necessary) easements, leases
or licenses for the use of area outside the project site for the
storage of materials or equipment used or useful in the performance
of the project.
B. Hazardous Materials Reports: When there is reason to suspect the
presence of hazardous materials on the site or within an existing
structure, or when such materials are discovered during
construction, the owner will retain an independent testing agency to
perform investigation and testing and to prepare a Hazardous
Materials Report. Removal, containment, disposal or other procedures
required for dealing with such materials will be the responsibility
of the owner, and the contract time will be extended by the
resulting period of delay, if any.
11. SOIL REPORT
Contractor shall retain an independent testing agency to perform
subsurface exploration (soil borings) and prepare and engineered
foundation report (Soil Report) for the proposed project. The building
design and site preparation shall conform to the requirements of the soil
report. Soil conditions encountered during excavation substantially
different from those described in the Soil Report may result in an
equitable adjustment to the contract price, as documented and necessary,
(up or down, as applicable) subject to Owner's reasonable approval, which
shall not be unreasonably withheld or denied.
12. PERMITS AND FEES
Contractor shall pay for all required building permits necessary for the
construction of the project. An allowance of $ 28,500.00 is included for
SAC (and WAC) charges. Park dedication fees and other assessments will be
paid by the owner,
13. BONDS
A. Performance & Payment Bond: If requested by the owner, contractor
shall furnish a surety company's payment and performance bond in the
amount equal to the full amount of the contract. The bond shall be
issued by a financially responsible surety company. All costs for
furnishing a bond (including those applicable to change orders) will
be the responsibility of the owner as an extra cost to the contract.
B. Site Improvement & Landscaping Bond: The owner will provide any site
improvement or landscaping bonds required by the local governmental
authority. Contractor shall assist the owner and/or the developer in
preparing any required documentation for the bonds.
<PAGE>
6
14. RECORD DOCUMENTS
Upon completion of the project, contractor shall provide the owner with a
complete set of record documents including record drawings, a list of
subcontractors used on the project, manufacturer's warranties, operation
and maintenance manuals for major pieces of equipment, and instruction
manuals when appropriate for building systems.
15. PROGRESS PAYMENTS
This proposal is based upon contractor receiving monthly progress
payments. Contractor shall submit an Application for Payment to the owner
on or about the 5th of each month for work completed during the previous
month. Payment will be due to the contractor within (30) days of owner's
receipt of Application for Payment.
A retainage equal to 10% of each Application for Payment shall be withheld
until the project reaches 50% completion, after which, no additional
retainage shall be withheld. No retainage to be held on General
Conditions.
It is the owner's responsibility to secure adequate financing for the
project.
16. EQUAL EMPLOYMENT OPPORTUNITY POLICY
Contractor shall comply with all current Federal, State and local laws
governing Equal Employment Opportunity.
02000 SITEWORK
1. EARTHWORK
The contractor shall provide all required site clearing, mass excavation
and filling, structural excavation and backfill and fine grading as
required for the proposed building structure, paved areas, and proper site
drainage.
Topsoil shall be stockpiled during construction from on-site materials and
spread over disturbed areas to be landscaped with sod, seed or other plant
materials.
For proposal purposes, the contractor has included earthwork required for
a complete project contingent upon the following conditions:
A. A balanced site not requiring imported or exported materials.
B. Existing soil conditions suitable for 3000 PSF spread footings at
normal footing depths, pavement subgrades, and utility installations
without soil correction.
C. Ground water levels lower than planned excavations for foundations
and utilities.
Actual soil conditions differing from those stated above will result in an
appropriate adjustment to the contract price
<PAGE>
7
2. UTILITIES
The contractor shall provide on-site utility work required for connection
to utility services, contingent upon adequate utility services located
immediately adjacent to the site via publicly accessible utility
easements. Fees imposed by serving utility companies for the installation
of on-site electrical, telephone, or gas mains arc not anticipated and are
not included in the contract price.
A. Sanitary sewer: Sanitary sewer service shall be provided complete
including connection to the sewer main in the street and an on-site
sewer main to the building.
B. Water: Water service shall be provided to the building for domestic
water and fire protection systems complete including connection to
the water main in the street and on-site water main to the building.
Water mains and tire hydrants shall be provided for fire service as
required by the local fire marshall.
C. Storm Drainage: Provisions shall be made for the proper drainage of
storm water from roof, parking, drive and landscaped areas.
D. Electrical: Electrical service to the building shall be provided by
the serving utility company.
E. Gas: Gas service to the building shall be provided by the serving
utility company.
F. Telephone: Telephone service to the building shall be provided by
the serving utility company.
3. LANDSCAPING
Site landscaping shall be designed and installed in accordance with the
requirements of the City of Arden Hills and as approved by the owner. An
allowance of $ 59,341 has been included to cover seeding, sodding,
imported topsoil, trees, mulch, edging and shrubbery noted on the contract
documents. An allowance of $15,450.00 has been included for irrigation
systems to support the landscaping design.
4. BITUMINOUS AND CONCRETE PAVING
Bituminous and concrete paving shall be provided complete including curb
cuts and driveways as indicated on the site plan.
Paved areas subject to truck traffic shall consist of 10" of aggregate
base and 4" of MNDOT #2341 bituminous wearing surface. Paved areas subject
to car traffic shall consist of 6" of aggregate base and 3" of MNDOT #2341
bituminous wearing surface.
Concrete dolly pads shall be provided at the truck docks and shall consist
of 8" of granular base and 6" of 4000 PSI air entrained concrete,
reinforced with welded wire or fiber mesh. Open, sawcut control joints
shall be provided for the control of shrinkage cracking. A dolly strip
15-ft wide and 520-ft long is included in the contract price.
<PAGE>
8
The bituminous and concrete design indicated are included for proposal
purposes. As a part of the final design work for this project, the soil
testing agency will make recommendations for engineered paving designs
based on actual soil conditions and proposed usages. Actual paving designs
differing from those stated above will result in an appropriate adjustment
to the contract price.
Cast-in-place concrete curbs and gutters shall be provided at the
perimeter of all paved parking and drive areas.
Parking area striping and traffic markings shall be provided as indicated
on the drawings.
5. SITE LIGHTING
Parking and drive areas shall be lighted with (8) each, 25-ft high,
pole-mounted metal halide fixtures mounted on concrete bases with
timeclock control. Building mounted fixtures will be utilized where
possible.
03000 CONCRETE
1. CONCRETE FOUNDATIONS
Concrete foundations shall be spread footings consisting of strip
footings, pads, piers, and cast-in-place walls constructed with concrete
and reinforcing steel as required by the final structural design.
2. CONCRETE SLABS
The interior slab on grade shall be constructed of 6" thick 4000 PSI
concrete. Slabs shall be reinforced with welded wire or fiber mesh cast in
place on a 6" (+/- 1") sand cushion.
Smooth dowel connections shall be provided at slab on grade construction
joints. Sawcut control joints shall be provided for the control of
shrinkage cracking. These sawcut joints are not assumed to be caulked.
Concrete slabs shall be treated with liquid applied curing compound.
3. PRE-CAST CONCRETE
Exterior walls shall be 12" thick. Insulated, pre-cast concrete panels
with a flat exterior finish.
4. SIDEWALKS
Sidewalks shall be constructed with 3000 PSI, air entrained,
non-reinforced concrete. Sidewalks shall be broom finished unless
indicated otherwise on the drawings.
<PAGE>
9
04000 MASONRY
1. CONCRETE BLOCK
Interior walls at the warehouse area shall be constructed of concrete
block where indicated on the drawings.
05000 METALS
1. STRUCTURAL STEEL
The structural framing system for the building shall consist of steel
columns, beams or truss girders, bar joists, and white primed metal roof
deck with column locations as indicated on the drawings.
A minimum clear height of 24-ft shall be provided under the steel
structure in warehouse areas.
2. MISCELLANEOUS METALS
Steel tread dock stairs, access ladders and concrete filled pipe bollards
shall be provided as indicated on the drawings. Steel casings shall be
provided at overhead door openings.
06000 CARPENTRY AND MILLWORK (Per scope indicated in the contract drawings)
1. MISCELLANEOUS CARPENTRY
Roof cants, curbs and other miscellaneous blocking shall be provided as
required.
07000 THERMAL AND MOISTURE PROTECTION
1. BUILDING INSULATION
The overall building thermal envelope shall conform to the requirements of
the Minnesota Energy Code.
A. Exterior pre-cast walls: Exterior pre-cast wall panels shall include
2-1/2" of expanded polystyrene insulation to provide an approximate
overall R value of 12.
B. Perimeter subgrade Walls: Perimeter masonry or concrete subgrade
foundation walls shall be insulated from top of footing (or frost
line) to bottom of slab with 2" of extruded polystyrene insulation
applied to the inside face of the wall.
C. Roof insulation: Roof areas shall be insulated with rigid insulation
installed over metal deck to provide an approximate overall R value
of 22. A thermal barrier shall be provided on the metal roof deck
where required by fire or building codes.
<PAGE>
10
2 ROOFING SYSTEM
The roofing system shall consist of a 3-ply built-up asphalt bituminous
membrane over rigid insulation. Roof edge fascia and other visible
flashings shall be pre-finished metal. Roof areas shall drain to interior
roof drains. The roofing system shall be guaranteed free from defects for
a period of 10 years by the roofing manufacturer.
A ship's ladder and roof hatch shall be provided for roof access.
08000 DOORS AND WINDOWS (Per scope indicated in the contact drawings)
1. PEDESTRIAN DOORS
Warehouse area doors shall be flush hollow metal doors set in hollow metal
frames.
A. Hollow Metal Doors: Hollow metal doors shall be 3'-0" x 7'-0", flush
face panel design. Exterior hollow metal doors shall be insulated
and weatherstripped. Hollow metal doors shall be painted.
B. Hollow Metal Frames: Hollow metal frames shall be painted.
C. Finish Hardware: Door hardware shall be manufactured by Schlage,
Yale, Corbin or approved equal commercial grade, US26D finish, with
its function appropriate for its intended use. The keying system
shall allow doors to be keyed alike within a given area and tied
into a building master.
2. OVERHEAD DOORS
Overhead doors shall be manually operated 8'-0" x 10'-0" and 12'-0" x
14'-0" insulated steel sectional doors with high lift track and
weatherstripping as noted on the contract drawings.
3. WINDOW SYSTEM
Windows shall be 1" thick thermal panes set in clear anodized aluminum
frames with a thermal-break design. Areas behind glass spandrel sections
shall be insulated.
Entrance door frame finish shall match the style of window framing system.
Aluminum thresholds shall be provided for exterior doors. Panic devices
shall be provided at entrance doors where required by code.
<PAGE>
11
09000 FINISHES (Per scope indicated in the contact drawings.)
1. Building Finishes: Building exterior finishes to be painted pre-cast
concrete and prefinished sheet metal flashings.
2. Painting: Door frames, metal doors, and miscellaneous metals shall be
painted unless provided with factory finish. Ferrous metals shall be
painted, unless provided with a factory-applied finish. Paint materials
and coverage shall be acceptable for each application and exposure.
10000 SPECIALTIES (Per scope indicated in the contract drawings)
Fire extinguishers shall be provided as required by local fire codes and
shall be housed in painted metal cabinets in finished areas, and
surface-mounted in unfinished areas.
2. SIGNS
Code required building and site signs shall be provided for handicapped
parking signs and traffic control signs.
11000 EQUIPMENT
1. DOCK BUMPERS
Dock bumpers shall be provided at each dock door.
15000 MECHANICAL (Per scope indicated on the contract drawings)
1. PLUMBING
A piped, interior roof drainage system shall be provided from roof drains
to connections with the exterior storm drainage system. Above grade,
horizontal portions of the drain pipes shall be insulated. Provisions
shall be made for emergency overflow drainage of ponded roof water, in
accordance with buiding code requirements.
2. HEATING, VENTILATION, AND AIR CONDITIONING
Heating only in the warehouse area is included assuming 123,411 sq ft.
Office areas shall be heated cooled and ventilated to normal office
conditions in accordance with ASHRAE design standards by means of
roof-mounted packaged mechanical units which are to be installed as part
of the tenant improvement and are excluded from this scope of work.
A wall-mounted electric cabinet unit heater shall provide supplementary
heat in the electrical room.
<PAGE>
12
Warehouse areas shall be heated by means of gas-fired unit heaters to
maintain an average temperature of 55(degrees)F based on ASHRAE design
conditions.
3. FIRE PROTECTION SPRINKLER SYSTEM
A complete ESFR wet automatic fire protection system shall be provided for
the facility in accordance with the requirements of applicable codes, NFPA
standards and the local fire marshall. The area assumed for this system is
123,411 sq ft. Smoke evacuation systems are excluded.
16000 ELECTRICAL (Per the scope identified on the contract drawings)
1. POWER DISTRIBUTION
A complete electrical system shall be provided in accordance with
applicable codes from a 120/208V, 3-phase 3600-amp service to panelboards
with circuit breakers and distribution as required to provide power for
building systems, lighting, and convenience outlets.
2. LIGHTING
A. Warehouse and dock areas: Fluorescent fixtures will be installed to
provide an average of 15 food candles.
B. Exterior building mounted lights: Wall-mounted high pressure sodium
or metal halide fixtures will be installed at each loading dock
door.
C. Exit and emergency lighting: As required by code.
3. COMMUNICATIONS
A telephone service entrance conduit shall be provided from the telephone
terminal room to a point 3-feet outside the building for use by the
telephone company.
4. FIRE DETECTION
Monitoring of the fire protection flow switch system only is included in
the contract price.
<PAGE>
13
ALLOWANCES
The following allowances shall be included for the total installed cost (labor,
material, freight, and taxes) of each item indicated unless specified otherwise:
1. An allowance of $7,500 is included for exterior building signage including
monument signs.
2. An allowance of $59,341 is included for landscaping as described.
3. An allowance of $15,450.00 is included for landscaping as described
herein.
4. An allowance of $28,500 is included for SAC/WAC charges as described
herein.
<PAGE>
14
QUALIFICATIONS
The following items are not included in the scope of work proposed herein:
1. Interim financing costs.
2. Special permit fees such as park dedication fees, acreage fees and other
special assessments.
3. Removal of hazardous materials from site.
4. Soil correction work.
5. Winter construction costs (November 1, 1996 through March 31, 1997)
6. Off-site utility and street work, other than utility connections, curb
cuts and driveways indicated on the drawings.
7. Tenant improvements
8. Draperies or other window treatments.
9. Special fire protection systems such as in-rack sprinklers, pre-action
systems, halon or dry sprinkler systems.
10. Water treatment or conditioning.
11. Telephone equipment, telephones or communication wiring.
12. Security systems and fire alarm systems, other than code-required systems.
13. Central station monitoring of fire or security systems.
14. Smoke evacuation systems.
15. Dedicated electrical circuits or other special computer wiring.
<PAGE>
15
LIST OF EXHIBITS
The following exhibits, together with this outline specification, form the basis
for this proposal:
Drawings as follows:
1. As prepared by Genesis Architecture:
Drawing No Drawing Title Date
---------- ------------- ----
A-1 Site plan/index 1/14/97
A-2 Overall floor plan 1/14/97
A-3 Partial plan - west 1/14/97
A-4 Partial plan - east 1/14/97
A-5 Roof plan 1/14/97
A-6 Elevations 1/14/97
A-7 Elevations 1/14/97
A-8 Wall section 1/14/97
A-9 Wall section/details 1/14/97
A-10 Partial plans/elev/details 1/14/97
A-11 Details 1/14/97
A-12 Details 1/14/97
2. As prepared by HKS Associates Inc.:
Drawing No Drawing Title Date
---------- ------------- ----
C-1 Existing conditions 1/8/97
boundary survey
C-2 Site/layout plan 1/8/97
C-3 Grading, drainage, 1/8/97
erosion
C-4 Utilities plan 1/8/97
C-5 General details 1/8/97
C-6 General details 1/8/97
L-1 Landscape development 1/8/97
L-2 Landscape area detail 1/8/97
L-3 Landscape detail 1/8/97
3. As prepared by the McSherry Group Inc:
Drawing No Drawing Title Date
---------- ------------- ----
S-1 Title sheet 1/7/97
S-2 Foundation plan 1/7/97
S-3 Foundation plan 1/7/97
S-4 Roof framing plan 1/7/97
S-5 Roof framing plan 1/7/97
S-6 Sections and details 1/7/97
S-7 Sections and details 1/7/97
S-8 Sections and details 1/7/97
<PAGE>
EXHIBIT C-1
(APPROVED PLANS FOR LESSOR'S WORK)
The following plans dated January 8, 1997 prepared by Genesis Architecture:
Sheet Plan
----- ----
C-1 Existing Conditions and Boundary Survey
C-2 Site/Layout Plan
C-3 Grading, Drainage, Erosion Plan
C-4 Utilities Plan
C-5 General Details
C-6 General Details
C-7 General Details
L-1 Landscape Development Plan
L-2 Landscape Area Detail Sheet
L-3 Landscape Detail Sheet
A-1 Site Plan - Index & Code Review
A-2 Overall Floor Plan
A-3 Partial Plan - West
A-4 Partial Plan - East
A-5 Roof Plan
A-6 Elevations
A-7 Elevations
A-8 Wall Section
A-9 Wall Section - Details
A-10 Partial Plans/Elev. Details
A-11 Details
A-12 Details
S-1 Title Sheet
S-2 Foundation Plan
S-3 Foundation Plan Cont.
S-4 Roof Framing Plan
S-5 Roof Framing Plan Cont.
S-6 Sections & Details
S-7 Sections & Details
S-8 Sections & Details
<PAGE>
EXHIBIT D
OUTLINE SPECIFICATION FOR
THE DESIGN AND CONSTRUCTION OF
MSL TENANT IMPROVEMENTS
Arden Hills Interstate Center
Phase I
Arden Hills, Minnesota
Prepared by:
Welsh Construction Company
February 3, 1997
<PAGE>
2
TABLE OF CONTENTS
01000 GENERAL CONDITIONS 3
03000 CONCRETE 5
05000 METALS 5
06000 CARPENTRY AND MILLWORK 6
08000 DOORS AND WINDOWS 6
09000 FINISHES 7
10000 SPECIALTIES 7
11000 EQUIPMENT 8
15000 MECHANICAL 8
16000 ELECTRICAL 12
ALLOWANCES 15
QUALIFICATIONS 16
ALTERNATES AND UNIT PRICES 17
LIST OF EXHIBITS 18
<PAGE>
3
01000 GENERAL CONDITIONS
1. INTENT
This outline specification and the preliminary drawings outline the
general scope of work for the design and construction of a 154,264 square
foot office/warehouse facility in Arden Hills, Minnesota. Contractor
shall provide all design, supervision, labor, materials, equipment, and
general requirements necessary for the complete and timely construction of
the project specified herein. General conditions are based on performing
this project concurrently with the base building construction.
2. DESIGN
A. Architecture and Civil/Structural Engineering: Contractor shall
prepare a complete set of working drawings and specifications in
accordance with these outline documents, applicable building codes
and zoning requirements, and the requirements of the owner.
Additions or deletions to the scope of work incorporated into the
final drawings and specifications at the direction of the owner will
result in an appropriate adjustment to the contract price.
B. Mechanical and Electrical Engineering: The tenant and contractor
shall produce outline electrical and mechanical specifications
describing the scope of work and incorporating the items defined in
Division 15 and 16 herein.
3. SUPERVISION
A. Project Manager: Contractor shall assign a project manager to this
project who shall be responsible for the complete execution of all
work. The project manager's responsibilities shall include
interfacing the project as required with the owner and tenant
throughout the entire design and construction process, obtaining the
required building permits, and managing the construction process
through completion of the project.
B. Superintendent: Contractor shall assign a superintendent to this
project who shall be responsible for the supervision of all field
construction in progress. The superintendent's responsibilities
shall include the scheduling and direct supervision of field
construction forces, interfacing as required with building
inspection officials, and ensuring compliance of work in place with
drawings and specifications.
4. CONSTRUCTION SCHEDULE
Contractor shall prepare a progress schedule for the project. This
schedule shall indicate the dates for starting and completion of the
various stages of construction, and shall be updated on a regular basis to
reflect the actual progress of the work.
This proposal is based upon a five-month construction schedule with
construction commencing on or about February 15, 1997 and completing on or
about July 30, 1997. No
<PAGE>
4
winter weather costs or overtime costs are included in the contract price.
A copy of the preliminary construction schedule is attached to this
proposal.
5. TEMPORARY CONSTRUCTION
Contractor shall provide all required temporary construction, temporary
facilities and temporary utilities required to complete project
construction including heated weathertight enclosures, temporary roadways
and parking areas, erosion control structures, material storage areas,
enclosures for tools and other equipment, a heated and air-conditioned
field office, temporary utility services for construction use, and
temporary toilet facilities as required.
6. CLEAN-UP
Contractor shall be responsible for construction trash removal services
and shall at all times keep the building and site free from accumulation
of debris. Upon completion, the building shall be turned over to owner in
a "broom clean" condition.
7. WARRANTY
Contractor warrants that all materials and equipment shall be new unless
otherwise specified, and shall be free from defects for a period of one
year from the date of substantial completion of the work.
8. INSURANCE
Contractor shall maintain Worker's Compensation insurance, Comprehensive
Public Liability insurance, and Builder's Risk insurance, "All Risk" form,
for this project for the duration of the work.
9. QUALITY ASSURANCE
Contractor shall prepare and implement a Quality Assurance project for
this project. The Quality Assurance program shall include independent
agency testing and observation of soils, bituminous paving, roofing, steel
connections, and cast-in-place concrete, as well as inspection of work in
progress by project designers.
10. HAZARDOUS MATERIALS REPORTS
When there is reason to suspect the presence of hazardous materials on the
site or within an existing structure, or when such materials are
discovered during construction, the owner will retain an independent
testing agency to perform investigation and testing and to prepare a
Hazardous Materials Report. Removal, containment, disposal or other
procedures required for dealing with such materials will be the
responsibility of the building owner.
<PAGE>
5
11. SOIL REPORT
Contractor shall retain an independent testing agency to perform
subsurface exploration (soil borings) and prepare and engineered
foundation report (Soil Report) for the proposed project. Building design
and site preparation shall conform to the requirements of the soil report.
12. PERMITS AND FEES
Contractor shall pay for all required building permits necessary for the
construction of the project.
03000 CONCRETE
1. CONCRETE SLABS
Concrete dolly pads shall be provided at the truck docks and shall
consist of 8" of granular base and 6" of 4000 PSI air entrained concrete,
reinforced with welded wire or fiber mesh. Open, sawcut control joints
shall be provided for the control of shrinkage cracking. Nitrogen tank pad
and a compactor slab have been included as part of the tenant
improvements.
Cast-in-place concrete curbs and gutters shall be provided at the
perimeter of all paved parking and drive areas as part of the base
building package.
Slab on grade shall consist of 4" thick 4000 PSI concrete in the proposed
office areas and 6" thick 4000 PSI concrete in the manufacturing area.
Slabs shall be reinforced with welded wire or fiber mesh in the proposed
warehouse areas, cast in place on a 6" (+/- 1") sand cushion. The
mezzanine slab shall be as designed by the structural engineer and placed
on metal decking.
Smooth dowel connections shall be provided at slab on grade construction
joints. Sawcut control joints shall be provided for the control of
shrinkage cracking. These sawcut joints are not assumed to be caulked.
Concrete slabs shall be treated with liquid applied curing compound.
Curing compounds will be reviewed to ensure compatibility with the
conductive floor system.
05000 METALS
1. STRUCTURAL STEEL
The structural framing system for the building shall consist of steel
columns, beams or truss girders, bar joists, and white primed metal roof
deck with column locations as indicated on the drawings.
A minimum clear height of 24-ft shall be provided under the steel
structure in warehouse areas. The mezzanine area will be constructed on
the east end of the building and has been
<PAGE>
6
assumed to be constructed at the same time as the remainder of the
structural steel. Costs exceeding $6.45/sq ft for the mezzanine structure
shall be treated as a change in scope.
2. MISCELLANEOUS METALS
Stairs, handrail, steel tread dock stairs, access ladders and concrete
filled pipe bollards shall be provided as indicated on the drawings and in
the manufacturing area adjacent to the dock enclosures. Steel casings
shall be provided at overhead door openings.
06000 CARPENTRY AND MILLWORK (Per scope indicated in the contract drawings)
1. MISCELLANEOUS CARPENTRY
Roof cants, curbs and other miscellaneous blocking shall be provided as
required.
2. FINISH CARPENTRY
An allowance has been made for the finish carpentry and millwork in the
entry area and for the installation of shelving and rods in the closets.
08000 DOORS AND WINDOWS (Per scope indicated in the contract drawings)
1. DOORS
A. Interior suite doors shall be 3'-0" x 7'-0" solid core plane-sliced
red oak veneer doors. Doors accessing the warehouse area shall be
hollow metal of the appropriate fire rating. Doors shall be stained,
sealed, or painted.
B. Finish hardware: All interior door hardware to be Schlage "S series
or equal, and exterior door hardware shall be Schlage "D" series or
equal. Locksets are included at suite access doors only.
C. Frames: All wood swing doors shall be set in painted 18 gauge hollow
metal frames. Exterior door frame to be 16 gauge hollow metal frame.
Office and conference room door frames will have a 1' x 7' sidelight
attached to the frame.
2. OVERHEAD DOORS
Overhead doors shall be manually operated 8'-0" x 10'-0" insulated steel
sectional doors with high lift track and weatherstripping as noted on the
contract drawings.
3. WINDOW SYSTEM
Windows shall be 1" thick thermal panes set in clear anodized aluminum
frames with a thermal-break design. Areas behind glass spandrel sections
shall be insulated.
<PAGE>
7
Entrance door frame finish shall match the style of window framing system.
Aluminum thresholds shall be provided for exterior doors. Panic devices
shall be provided at entrance doors where required by code.
09000 FINISHES (Per scope indicated in the contract drawings.)
1. Exterior Building Finishes: Building exterior finishes to be painted
pre-cast concrete and prefinished sheet metal flashings. Door frames,
metal doors, and miscellaneous metals shall be painted unless provided
with factory finish. Ferrous metals shall be painted, unless provided with
a factory-applied finish. Paint materials and coverage shall be acceptable
for each application and exposure.
2. Interior Building Finishes:
a. Ceilings: Ceilings throughout the office shall be 2' x 4' with
Armstrong Second Look II acoustical ceiling tile or equivalent
installed in the building standard exposed grid system at a height
of 9'-0" above finished concrete floor. The ceiling grid will be
installed continuous throughout the suite, except as noted on the
contract drawings. The warehouse area ceilings shall be exposed
prime white painted structural steel and metal deck.
b. Floors: The typical floor finish in office areas shall be carpet. A
carpet allowance of $10.00/sq yd is included for direct-glue
installation. Four-inch carpet base is included throughout the
office. Toilet rooms shall receive ceramic tile floor or equivalent.
The floor in the entry vestibule shall receive quarry tile. The
warehouse area floor shall be existing concrete floor. The
production area shall receive an allowance for Forbo AS2000
conductive floor tile.
c. Walls: Typically, interior partition walls throughout the suite will
be constructed of 3-5/8" metal studs at 24" on center with on layer,
each side of 5/8" drywall and shall extend to the underside of the
acoustical ceiling grid. Exterior walls in finished areas shall be
furred out, insulated if needed, and receive one layer of 5/8"
drywall. Partition walls in demising locations and warehouse
demising and separation walls shall be built to the underside of the
roof deck above. All demising walls to deck will include insulation
in the stud cavity. Toilet room walls shall be built to 12-ft AFF
and will include insulation in the stud cavity. A 4-ft high wainscot
of ceramic tile on plumbing walls shall be provided extending 2-ft
past fixtures on all sidewalls. All walls in the office area will be
taped and sanded smooth and shall receive two finish coats of
eggshell latex paint. The warehouse walls shall be finished and
painted white.
10000 SPECIALTIES (Per scope indicated in the contract drawings)
1. FIRE EXTINGUISHERS
Fire extinguishers shall be provided as required by local fire codes and
shall be housed in painted metal cabinets in finished areas, and
surface-mounted in unfinished areas.
<PAGE>
8
2. TOILET ROOM SIGNAGE
One restroom sign indicating handicap accessibility shall be included for
each restroom as required by code.
3. TOILET ROOM ACCESSORIES
Toilet accessories include mirror, handicap grab bars as required by code,
toilet paper holders, soap dispensers, and paper towel dispensers.
11000 EQUIPMENT
1. DOCK EQUIPMENT
Dock bumpers shall be provided at each dock door. Five dock levelers, dock
seals, and draft curtains have been included. The dock leveler capacity
will be 20,000 lbs.
15000 MECHANICAL
1. PLUMBING
A piped, interior roof drainage system shall be provided from roof drains
to connections with the exterior storm drainage system. Above grade,
horizontal portions of the drain pipes shall be insulated. Provisions
shall be made for emergency overflow drainage of ponded roof water, in
accordance with building code requirements. Domestic hot and cold water
will be installed to accommodate handicapped toilets, urinals, lavatories,
sinks, and mop basins.
The following systems are included:
a. Install (1,140) ft of waste piping
b. Install (45) floor drains
c. Install (510) ft of cold and hot water piping
d. Install (625) ft of air mains
e. Install (1,375) ft of air branch piping
f. Install (93) air drops to 4-ft off finished floor with a valve
g. Provide connection to (1) owner's air compressor
h. Install (625) ft of vacuum mains
i. Install (760) ft of vacuum branch piping
j. Install (53) vacuum drops to 4-ft off finished floor
k. Install (540) ft of nitrogen mains
l. Install (665) ft of nitrogen branch piping
m. Install (53) nitrogen drops to 4-ft off finished floor with valve
n. Provide connection to (1) tank header
o. Install (625) ft of DI water mains
p. Install (650) ft of DI water branch lines
q. Install (53) DI water drops to 4-ft off finished floor with valve
r. Provide connection to (1) DI tank
<PAGE>
9
s. Provide connection to (1) vacuum pump
t. Install (10) handicap tank-type toilets
u. Install (16) elongated tank-type toilets
v. Install (9) urinals
w. Install (19) lavatories
x. Install (5) electric water coolers
y. Install (2) double-compartment kitchen sinks
z. Install (3) mop basins
aa. Install (3) 6-gallon electric water heaters
bb. Install (1) 40-gallon electric water heater
cc. Provide pipe insulation
dd. Permits are included
ee. Plumbing plans are included
Service drop locations will be coordinated with the tenant's equipment.
Areas to be served are noted on the MSL provided layout drawing.
2. HEATING, VENTILATION, AND AIR CONDITIONING
The following is included within this scope of work:
a. Install (1) 3-ton rooftop heat/cool unit with economizer to serve
the two conference rooms on the northeast side of the building.
b. Install (1) 3-ton rooftop unit with low ambient controls to serve
the computer room.
c. Install (2) 7.5-ton rooftop heat/cool unit with economizer to serve
the breakroom.
d. Install (1) 750 CFM power roof ventilator to serve the breakroom.
e. Install (2) 7.5-ton rooftop heat/cool units with economizers to
serve the west side of the office area, including the conference
rooms, lobby, and restrooms.
f. Install (4) 20-ton rooftop heat/cool units with economizers to serve
open office area.
g. Install (1) 800 CFM power roof ventilator to serve the restrooms and
janitor closet.
h. Install (1) 1.5KW electric entry heater to serve the west entry
area.
i. Install (1) 2KW electric entry heater to serve the main entry area.
j. Install (2) restroom exhaust fans to serve restrooms on east side by
the conference rooms.
k. Install (1) 6-ton rooftop heat/cool unit with economizer to serve
the locker and meeting room areas.
l. Install (1) 1,000 CFM power roof ventilator to serve the locker room
area.
m. Install (1) 1.5KW electric entry heater to serve the locker area
entry.
n. Install (3) 20-ton rooftop heat/cool units with economizers to serve
the main process line area.
o. Install (5) 20-ton rooftop heat/cool units with economizers to serve
the east side of the production area.
p. Install (3) 20-ton rooftop heat/cool units with economizers to serve
the west side of the production area.
q. Provide main and branch spiral ductwork from all 20-ton rooftop
units serving the production and process areas.
r. Install (1) 75 MBH unit heaters to serve the shipping and receiving
areas.
<PAGE>
10
s. Install (1) 500 CFM power roof ventilator to serve the solder pot
area. Re-hang existing hood.
t. Install (1) 1,600 CFM power roof ventilators to serve the two-wash
machine. This fan will be epoxy coated. Plastic exhaust ductwork
from wash machine to PRVs.
u. Install (2) 1,600 CFM power roof ventilators to serve the process
machines. Exhaust ductwork from process machines to PRVs. Note: We
assume tenant will be moving his equipment and the blast gates that
are on the equipment now.
v. Install (2) 1,200 CFM power roof ventilators to serve the wave
solder machines. Note: These PRVs are the upblast type.
w. Install (1) 700 CFM explosion-proof power roof ventilator to serve
the chemical storage room. This fan will be epoxy coated. Exhaust
ductwork to within one foot of the floor, with high and low air
intakes. One air transfer with a fire damper. Note: The exhaust
quantities are our best guess without exact CFM ratings from the
tenant.
x. Install (1) 4,000 CFM power roof ventilator to serve the compressor
room. Install (1) 30 x 24, 2-position motorized intake damper for
air transfer into the room. This fan will be controlled by a
thermostat. Note: This damper will be mounted on the high side wall
with a duct drop to the floor to eliminate noise transfer
y. Install (11)38 LB/HR steam humidifier mounted in each of the 20-ton
rooftop units serving the production and process area.
x. Provide vent piping from one test oven to the outside. Note: Assume
oven has its own fan built-in.
z. Install (2) branch supplies and one return air transfer to serve the
security room. These will have special registers and grills that are
tamper proof and used in correctional facilities.
aa. Provide main and branch supply ductwork in the office area.
bb. Provide unit heater vent piping.
cc. Provide exhaust fan vent piping.
dd. Provide gas piping.
ee. Provide steam piping.
ff. Provide (4) 250 MBH unit heaters to serve the warehouse area, last
(3) bays.
Equipment
---------
1 - GCS16-413 Lennox rooftop unit with economizer
1 - GCS16-513 Lennox rooftop unit with low ambient controls
1 - GCS24-713 Lennox rooftop unit with economizer
4 - GCS24-953 Lennox rooftop unit with economizers
15 - LGA24OS Lennox rooftop units with economizers
1 - LF24-75 Lennox unit heater
4 - LF24-250 Lennox unit heater (for warehouse area)
11 - VMl6 Dri-Steam humidifiers
2 - 362 Broan exhaust fans
1 - 2E437 Dayton electric entry heater
2 - 2E878 Dayton electric entry heaters
1 - GB100-4 Greenheck power roof ventilators
1 - CUBE160-7 Greenheck power roof ventilator - epoxy coated
2 - CUBE140-4 Greenheck power roof ventilators
<PAGE>
11
2 - CUBE 160-5 Greenheck power roof ventilators
1 - GB100-4 Greenheck explosion-proof power roof ventilator - epoxy
coated
1 - GB180-15 Greenheck power roof ventilator
1 - GB8O-4 Greenheck power roof ventilator
2 - GB9O-4 Greenheck power roof ventilators
3 - LGA24OS Lennox rooftop units with economizers
1 - GB9O-4 Greenheck power roof ventilator
1 - GB8O-4 Greenheck power roof ventilator.
1 - GB8O-4 Greenheck power roof ventilator
1 - CUBE160-7 Greenheck power roof ventilator
3 - VM16 Dri Steam humidifiers
Steam Piping
The contractor shall install steam piping for humidifiers.
Vent Piping
The contractor will install vent piping from exhaust fans and unit
heaters. Installation of vent piping from the process equipment to the new
power roof ventilators is included.
Registers, Grilles, and Diffusers
Install 2-ft linear supply diffusers above the windows and 2 x 2 lay-in
supply diffusers for the interior areas in the office areas. Aluminum
eggcrate for returns is included.
Ductwork and Dampers
Install main and branch supply ductwork in the office area, expose spiral
ductwork in the production and process areas. Provide exhaust ductwork to
the power roof ventilators.
Ductwork Insulation
Supply ductwork in office areas will be insulated with 1-inch duct liner.
Engineered Drawings
The contractor will provide engineered drawings for this project as
required by Minnesota State Statute's 326.02 to 326.15.
System Start-up
The new system will be started and tested for proper operation.
Last Three Bays of Building
a. Install (3) 20-ton rooftop heat/cool units with economizers.
b. Install exposed spiral ductwork with duct-mounted supply registers.
<PAGE>
12
Smoking Room
a. Install (1) 840 CEM power roof ventilator
b. Install exhaust ductwork for smoking room.
c. Install air transfer ductwork. Note: This is based on 14 people in
the room.
Fuji Production Line Exhaust
a. Install (1) 500 CFM power roof ventilator with exhaust ductwork
connected to exhaust outlets on machine. Note: This CFM quantity is
our best guess. No actual exhaust quantities have been given.
Wave Solder Machine Exhaust
a. Install (1) 1,200 CFM power roof ventilator with exhaust ductwork
connected to outlets on machine. Note: This is an up-blast type PRV.
Humidification for Last Three Bays
a. Install (3) 39 Lb/Hr steam humidifiers mounted to serve each of the
three 20-ton rooftop units serving this space.
3. FIRE PROTECTION SPRINKLER SYSTEM
A complete ESFR wet automatic fire protection system shall be provided for
the manufacturing area in accordance with the requirements of applicable
codes, NFPA standards and the local fire marshall. Smoke evacuation
systems are excluded. The office and other non-manufacturing areas will be
protected by a light hazard system.
16000 ELECTRICAL
1. POWER DISTRIBUTION
a. Wire and install (66) single pole switches
b. Wire and install (14) 3-way switches
c. Wire and install (140) duplex general-duty receptacles
d. Wire and install (2) 4-plex dedicated phone board receptacles
e. Wire and install (2) electric water cooler receptacles
f. Wire and install (4) vending machine receptacles
g. Wire and install (3) coffee maker receptacles
h. Wire and install (3) microwave receptacles.
i. Wire process line Fuji #1 (conveyors, MPM UP2000, Fuji GL-V, 2- Fuji
CP VI, Fuji IP III, MTU, Heller 18000S, Wave Solder, and Post Wave
assembly area)
j. Wire process line #2 (conveyors, glue dispenser, MPM 1050,
Quad QSP-2. Quad IVC, Heller 1700S, Wave Input Module, Solder
machine, water wash and assembly area)
<PAGE>
13
k. Wire process line #3 and #4 (conveyors, glue dispenser, MPM 1050,
Quad QSP-2, Quad IVC, Heller 1700S and task modules)
l. Wire line #5 (PTH area)
m. Wire and install (14) 20A, 120V cord drops
n. Wire (15) 20A, 120V connections in the main component store/kitting
area
o. Install (100) telephone/data openings (no wiring included)
p. Wire and install (20) rooftop GFl protected receptacles
q. Increase building service to 2500A, 480V, 3-phase
r. Furnish and install (320) ft of 100A and 200A, 208V bussduct over
process lines.
2. LIGHTING
a. Furnish and install (629) 2 x 4 lay-in fixtures with acrylic lens
and electronic ballasts.
b. Furnish and install (300) 400-watt MH high bay fixtures.
c. Furnish and install (10) 2 x 4 fixtures with plaster frames
d. Furnish and install (24) exit signs with emergency lights
e. Furnish and install (2) 300-watt incandescent explosion-proof
fixtures and switch
f. Furnish and install (14) 8-ft 2-lamp strip fixtures
g. Furnish and install (20) fluorescent recessed cans in the main lobby
3. SERVICE
a. Wire (20) sets of office furniture.
b. Wire (1) elevator
c. Wire (2) 6-gallon water heaters.
d. Wire (1) large lockerroom water heater
e. Wire pre-work area
f. Wire (21) cubicles in the area of process lines #2, #3 and #4.
g. Wire computer room [(5) 208V, 30A 3-phase connections, (10) 20A,
120V connections]
h. Wire Tool Shop equipment [(5) 208V, 30A single-phase connections,
(10) 20A, 120V connections)
i. Wire receiving area [(10) 20A, 120V connections]
j. Wire shipping area [(1) shrink wrap, (1) floor scale, (1) lift
table, (6) 20A, 120V connections]
k. Wire (2) 20A, 120V connections and (1) 30A, 208V single-phase
connections in the BBN mech. assembly/test area.
l. Wire (1) Vista oven, 150A, 480V
m. Wire (1) ESS oven, 100A, 480V
n. Wire (1) system test area compressor
o. Wire (1) thermal cycle chamber
p. Wire approximately 150 HP of air compressors
q. Wire (1) analytical/calibration labs
r. Wire (1) x-ray
s. Wire (2) overhead door operators
t. Wire (1) trash compactor
u. Wire liquid nitrogen task controls
<PAGE>
14
v. Wire (1) vacuum pump
w. Wire (1) Industriever 2000
x. Ground VCT flooring
y. Wire (2) 3-ton HVAC units
z. Wire (1) 6-ton HVAC unit
aa. Wire (4) 7.5-ton HVAC units
bb. Wire (1) 8.5-ton HVAC unit
cc. Wire (15) 20-ton HVAC units
dd. Wire (11) humidifiers
ee. Wire (5) unit heaters
ff. Wire (4) entry heaters
gg. Wire (10) PRVs
hh. Wire (2) exhaust fans
ii. Wire (1) explosion-roof PRY
jj. Furnish and install (40) ceiling fans (switched from breakers)
kk. Disconnect equipment at old facility
ll. Wire (1) fire pump
3. COMMUNICATIONS
A telephone service entrance conduit shall be provided from the telephone
terminal room to a point 3-feet outside the building for use by the
telephone company.
<PAGE>
15
ALLOWANCES
The following allowances shall be included for the total installed cost (labor,
material, freight, and taxes) of each item indicated unless specified otherwise:
1. An allowance of $20,000 is included for building permits for the tenant
improvements.
2. Entryway millwork and reception desk: We have included an allowance of
$7,500.00 for millwork and drywall soffits in the reception area.
3. Wallcovering allowance: We have included an allowance of $3,000.00 for the
installation of wallcovering in the entryway.
4. Building signage allowance: We have included a $3,000.00 allowance for the
installation of interior signs.
5. Conductive flooring allowance: We have included an allowance of
$409,500.00 for 97,500 sq ft of Farbo AS2000 flooring.
6. Food service allowance: We have included $15,360.00 for the installation
of a food service area on the 2nd floor mezzanine level.
7. Window treatment allowance: We have included a $12,250.00 allowance for
the installation of window treatments throughout the building.
8 Elevator allowance: An allowance of $40,000.00 has been included for the
installation of a hydraulic elevator to service the mezzanine level.
9 Security/Fire Alarm systems: An allowance of $15,000.00 has been included
for the installation of a security/fire alarm system as required to meet
MSL's requirements.
<PAGE>
16
QUALIFICATIONS
The following items are not included in the scope of work proposed herein:
1. Special fire protection systems such as in-rack sprinklers, pre-action
systems, halon or dry sprinkler systems.
2. Water treatment or conditioning other than those noted in this
specification.
3. Telephone equipment, telephones or communication wiring.
4. Central station monitoring of fire or security systems.
5. Smoke evacuation systems other than smoke vents.
6. Overtime has not been included in this proposal.
7. Muzak or interoffice communications systems.
8. Office furniture, moveable partitions.
9. Relocation of existing equipment including de-ionized water tanks and
controls, compressors, laboratory equipment, ovens, fume hoods, process
equipment, etc.
<PAGE>
17
ALTERNATES AND UNIT PRICING
1. Upgrade carpet to $12.00/sq yd. $11,180.00
2. Painting of exposed precast walls in the manufacturing area: $ 6,772.00
3. Painting of exposed joist to match prefinished decking in the $18,744.00
manufacturing area.
4. Paracube light fixture unit price: $32.10/each
5. Wire additional (4) 20-ton LGA24OS Lennox rooftop units for $25,200.00
additional mezzanine area.
6. Install (4) 20-ton LGA24OS Lennox rooftop units with $65,100.00
economizers for the additional mezzanine area.
7. Eye wash stations. $525.00/ea
8. Provide (26) power tank toilets in lieu of standard. $3,425.00
<PAGE>
18
LIST OF EXHIBITS
The following exhibits, together with this outline specification, form the basis
for this proposal:
Drawings as follows:
1. As prepared by Genesis Architecture:
Drawing No Drawing Title Date
---------- ------------- ----
A-1 Floor plan 12/16/96
A-1 Site plan - index & code review 1/6/97
A-2 Overall floor plan 1/6/97
A-3 Partial plan - west 1/6/97
A-4 Partial plan - east 1/6/97
A-5 Roof plan 1/6/97
A-6 Elevations 1/6/97
A-7 Elevations 1/6/97
A-8 Wall section 1/6/97
A-9 Wall section - details 1/6/97
A-10 Partial plans - elev. details 1/6/97
A-11 Details 1/6/97
A-12 Details 1/6/97
2. As prepared by MSL:
Drawing No Drawing Title
---------- -------------
SK-2 Equipment layout plan (attached)
3. As prepared by Welsh Construction:
Schedule dated February 2, 1997.
<PAGE>
EXHIBIT D-l
(TENANT IMPROVEMENT PLANS)
Floor Plans dated December 15, 1996 prepared by Genesis Architecture.
<PAGE>
EXHIBIT E
Warranties
Welsh Construction Corp. will furnish a one-year warranty per Paragraph 7 of the
Outline Specification for the Design and Construction of Office/Warehouse, Arden
Hills Interstate Center, Phase I, Arden Hills, Minnesota.
In addition, the following warranties shall be assigned to AmberJack, Ltd.:
- - Roofing: 10 year manufacturer's warranty
- - Insulated window units: 10 year manufacturer's warranty
- - Window Frames: 1 year manufacturer's warranty
- - Precast Panels: 1 year manufacturer's warranty
- - Electrical Equipment: 1 year warranty as to workmanship, and as provided
by manufacturer as to materials
- - HVAC Equipment: 1 year warranty as to workmanship, and as provided by
manufacturer as to materials
- - Asphalt Paving: 1 year warranty
- - Landscaping: 1 year warranty
<PAGE>
EXHIBIT F
(TENANT'S SIGN CRITERIA)
1) Monument Sign - Lessor's Cost
- As shown on Details Plan A-11 dated 01/04/97
2) Tenant Sign - Lessee's Cost
- 36" height x 20" long sign
- Limited maximum sign surface
- Mounted letters
- Tenant graphics locations shown on Extension Elevations Plan A-10
dated 01/04/97
3) Address Sign-Lessor's Cost
- 36" height entrance address number surface mounted center on doors,
as shown on Exterior Elevation Plan A-6 dated 01/04/97
<PAGE>
EXHIBIT G
ATTACHED TO AND MADE PART OF
LEASE DATED APRIL 14, 1997
BY AND BETWEEN AMBERJACK, LTD.,
AS LESSOR
AND MANUFACTURER'S SERVICES LIMITED-ROSEVILLE, INC.
A MINNESOTA CORPORATION
AS TENANT
The following items are identified as the Operating Expenses necessary to
maintain and operate the Property.
1. Water and Sewer Services: The City water and sewer service to property, to
include any irrigation water supply.
2. Building Maintenance: To include sprinkler monitoring, two inch drain
test, plumbing repair and maintenance, electrical repair and maintenance,
window washing, roof repair, seasonal inspections of roof deck and
flashings, other building repairs (excluding any repairs specified in the
Lease to be performed by Lessor at its expenses and without reimbursement
from Tenant), pest control and other utilities not paid directly by
Tenant.
3. Repair Maintenance Parking Lots: Sweeping of parking lot, restripe of all
parking stalls and miscellaneous asphalt parking lot repairs.
4. Landscape Maintenance: Monthly contract service for all grounds and
landscaping.
5. Snow Removal: Snow removal costs for all parking lot and sidewalk areas.
6. Insurance: Property and casualty insurance and Lessor's public liability
insurance.
7. Administrative Fee: Monthly management fees in an amount equal to 1.75% of
the aggregate amount of Base Rent, Real Estate Taxes and Operating
Expenses payable to Lessor for such month.
The Tenant reserves the right to contract directly with vendors of its own
choosing for the services to be rendered for the benefit of the Property and
described at numbers 2 through 5 above. Tenant shall do so only upon at least
thirty (30) days prior written notice to Lessor and shall be entitled to
continue such direct contracts with such vendors so long as the Property is
being maintained in accordance with the standards set forth in Section 9(a) of
the Lease.
<PAGE>
================================================================================
LEASE
================================================================================
INTERNATIONAL BUSINESS MACHINES CORPORATION
LANDLORD
and
MANUFACTURERS' SERVICES WESTERN U.S. OPERATIONS, INC.
TENANT
================================================================================
Dated: May 5, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
1. PREMISES ..................................................... 1
Section 1.01. Lease of Premises ............................ 1
Section 1.02. Common Facilities ............................ 1
2. TERM ......................................................... 1
Section 2.01. Initial Term ................................. 1
Section 2.02. Extended Term ................................ 1
Section 2.03. Early Termination ............................ 2
Section 2.04. Term of This Lease ........................... 2
3. BASIC RENT AND ADDITIONAL RENT ............................... 2
Section 3.01. Basic Rent ................................... 2
Section 3.02. Additional Rent .............................. 2
Section 3.03. Real Estate Taxes ............................ 3
Section 3.04. Personal Property
Taxes ........................................ 4
4. SERVICES ..................................................... 4
Section 4.01. Services Provided by Landlord ................ 4
Section 4.02. Landlord's Failure to Provide
Services ..................................... 8
5. TENANT'S PARKING SPACES ...................................... 8
6. USE OF LEASED PREMISES ....................................... 9
7. REPAIRS AND MAINTENANCE ...................................... 9
Section 7.01. Landlord ..................................... 9
Section 7.02. Tenant ....................................... 10
Section 7.03. Landlord's Failure to Make
Repairs ...................................... 10
Section 7.04. Emergency Repairs ............................ 11
8. FIRE AND OTHER CASUALTY - INSURANCE .......................... 11
Section 8.01. Damage or Destruction ........................ 11
Section 8.02. Casualty Insurance ........................... 13
9. CONDEMNATION ................................................. 13
Section 9.01. Taking - Lease Ends .......................... 13
Section 9.02. Taking - Lease Continues ..................... 14
Section 9.03. Temporary Taking ............................. 14
Section 9.04. Landlord's Award ............................. 14
Section 9.05. Tenant's Award ............................... 14
Section 9.06. Restoration by Landlord ...................... 15
Section 9.07. Definitions .................................. 15
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TABLE OF CONTENTS
ARTICLE PAGE
10. ALTERATIONS AND IMPROVEMENTS ................................. 15
Section 10.01. Tenant's Changes - No Approval .............. 15
Section 10.02. Tenant's Changes - Landlord's
Approval .................................... 15
Section 10.03. Tenant's Owned Property ..................... 16
Section 10.04. Removal of Tenant's Owned
Property .................................... 16
11. LANDLORD'S ACCESS ............................................ 17
12. COMPLIANCE WITH LAWS ......................................... 17
Section 12.01. Tenant's Compliance with Laws ............... 17
Section 12.02. Landlord's Compliance with Laws ............. 17
13. SURRENDER OF POSSESSION ...................................... 18
14. SIGNS ........................................................ 18
Section 14.01. Tenant's Signs .............................. 18
Section 14.02. Directory Board ............................. 18
Section 14.03. Compliance with Laws ........................ 18
15. SUBORDINATION AND NON-DISTURBANCE ............................ 18
16. MECHANICS' LIENS ............................................. 19
17. DEFAULT ...................................................... 19
Section 17.01. Default by Tenant ........................... 19
Section 17.02. Suspension of Tenant Default ................ 20
Section 17.03. Default by Landlord ......................... 20
18. HOLDOVER ..................................................... 21
19. NOTICES ...................................................... 21
20. ASSIGNMENT AND SUBLETTING .................................... 21
Section 20.01. Assignment or Sublease ...................... 21
Section 20.02. Liability of Tenant ......................... 22
21. EQUAL EMPLOYMENT OPPORTUNITY ................................. 22
22. QUITE ENJOYMENT .............................................. 23
23. WAIVER ....................................................... 23
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TABLE OF CONTENTS
ARTICLE PAGE
24. PARTIAL INVALIDITY ........................................... 23
25. RULES AND REGULATIONS ........................................ 24
Section 25.01. Tenant's Obligation ......................... 24
Section 25.02. Standards Applicable to
Landlord .................................... 24
Section 25.03. Landlord's Enforcement ...................... 24
Section 25.04. Conflict .................................... 24
26. ESTOPPEL CERTIFICATES ........................................ 24
Section 26.01. Tenant's Estoppel Certificate.. ............. 24
Section 26.02. Landlord's Estoppel Certificate. ............ 25
27. COUNTERPARTS ................................................. 25
28. BROKER ....................................................... 25
29. ARBITRATION .................................................. 26
Section 29.01. Applicability ............................... 26
Section 29.02. Notice and Demand ........................... 26
Section 29.03. Selection of Arbitrator ..................... 27
Section 29.04. Scope ....................................... 27
30. EXCUSABLE DELAY .............................................. 27
31. MISCELLANEOUS ................................................ 28
Section 31.01. Rules of Interpretation ..................... 28
Section 31.02. No Exclusive Remedies ....................... 28
Section 31.03. Governing Laws .............................. 28
Section 31.04. Non-Disclosure of Lease ..................... 28
32. MEMORANDUM OF LEASE .......................................... 29
33. ENVIRONMENTAL OBLIGATIONS .................................... 29
Section 33.01. Approved and Prohibited
Chemicals ................................... 29
Section 33.02. Tenant's Indemnity .......................... 30
Section 33.03. Notification of Spill or
Release/Remediation ......................... 30
Section 33.04. Definitions ................................. 31
34. LEASED PREMISES "AS IS" ...................................... 31
35. REPRESENTATIONS OF LANDLORD .................................. 32
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TABLE OF CONTENTS
ARTICLE PAGE
36. INDEMNITIES .................................................. 33
Section 36.01 Landlord's Indemnity ......................... 33
Section 36.02 Tenant's Indemnity ........................... 33
Section 36.03 Survival ..................................... 33
37. LABOR HARMONY ................................................ 34
38. OTHER AGREEMENTS ............................................. 35
39. BINDING AGREEMENT ............................................ 35
40. TRANSITION SPACE ............................................. 35
41. ENTIRE AGREEMENT ............................................. 36
EXHIBITS A-l and A-2 - DESCRIPTION OF LEASED PREMISES
EXHIBIT B - DESCRIPTION OF PROJECT AND BUILDING
PARKING AREA
ATTACHMENT A - ELECTRICITY AND COMPRESSED AIR SPECS
ATTACHMENT B - TENANT RULES AND REGULATIONS
ATTACHMENT C - LANDLORD FIT-UP WORK AND METER INSTALLATION
SCHEDULE A - REIMBURSEMENT
SCHEDULE B - APPROVED CHEMICALS
iv
<PAGE>
LEASE
THIS LEASE, made as of May 5, 1998, between INTERNATIONAL BUSINESS
MACHINES CORPORATION, a New York corporation, having its principal office at New
Orchard Road, Armonk, New York 10504, hereinafter called "Landlord," and
MANUFACTURERS' SERVICES WESTERN U.S. OPERATIONS, INC., a California corporation,
having an office at 5600 Mowry School Road, Newark, California 94560 hereinafter
called "Tenant."
ARTICLE ONE
PREMISES
Section 1.01. LEASE OF PREMISES. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, upon and subject to the covenants,
agreements, provisions and conditions of this Lease, the buildings described on
EXHIBITS A-l and A-2 (the "Leased Premises"), situated within the Landlord's
industrial complex described on the plan marked EXHIBIT B. The complex,
including the Leased Premises, is collectively referred to in this Lease as the
"Project."
Section 1.02. COMMON FACILITIES. This Lease includes the right of Tenant
to use the Common Facilities in common with other tenants of the Project. The
words "Common Facilities" shall mean all of the facilities in or around the
Project designed and intended for use by the tenants of the Project in common
with Landlord and each other.
ARTICLE TWO
TERM
Section 2.01. INITIAL TERM. Tenant shall lease the Leased Premises for an
initial Term of three (3) years ("Initial Term") to commence on (Closing Date),
1998 (the "Term Commencement Date"), subject to extension as hereinafter
provided. If the Initial Term commences on a date other than the first day of a
month, it shall expire at the end of the day three (3) years from the last day
of the month in which it commenced.
Section 2.02. EXTENDED TERM. Tenant shall have the option to extend the
term of this Lease for the Leased Premises for one (1) two (2) year term (the
"Extended Term"). The option shall be exercised by written notice to Landlord
given at least six (6)
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months prior to the expiration of the Initial Term. The Extended Term shall be
upon the same covenants, agreements, provisions and conditions that are
contained herein for the Initial Term, except for provisions that are
inapplicable to an Extended Term.
Section 2.03. EARLY TERMINATION. If for any reason the Outsourcing Base
Agreement entered into between the parties hereto as of the date hereof is
terminated, this Lease and the Term shall also terminate effective on the date
of termination of the Outsourcing Base Agreement.
Section 2.04. TERM OF THIS LEASE. The word "Term" shall mean the Initial
Term and any Extended Term which may become effective.
ARTICLE THREE
BASIC RENT AND ADDITIONAL RENT
Section 3.01. BASIC RENT.
(a) Commencing on the Term Commencement Date and subject to the provisions
of this Lease, Tenant shall pay the Basic Rent of One Million Four Hundred Four
Thousand Dollars ($1,404,000.00) payable in equal monthly installments in
advance of One Hundred Seventeen Thousand Dollars ($117,000.00) on the first day
of each calendar month during the Initial Term. For any period of less than one
month, Basic Rent shall be apportioned based on the number of days in that
month. Tenant will pay the Basic Rent and Additional Rent to IBM Real Estate
Services at 3200 Windy Hill Road, Atlanta, Georgia 30339, Attention: Sally
Maxwell, WGllC or to such other person or at such other place as Landlord may
designate in writing.
(b) During the Extended Term, Tenant shall pay the Basic Rent of One
Million Five Hundred Forty-Four Thousand Four Hundred Dollars ($1,544,400.00)
payable in equal monthly installments in advance of One Hundred Twenty-Eight
Thousand Seven Hundred Dollars ($128,700.00) on the first day of each calendar
month during the Extended Term.
Section 3.02. ADDITIONAL RENT. In addition to Basic Rent, Tenant shall pay
Additional Rent which shall mean all sums of money payable by Tenant under this
Lease other than Basic Rent.
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Section 3.03. REAL ESTATE TAXES.
(a) Landlord shall pay when due all ad valorem taxes, special assessments
and other charges of Governmental Authorities which shall be levied or assessed
or which become liens at any time upon the Leased Premises, including Substitute
Taxes (hereinafter called "Real Estate Taxes"). During the Initial Term, Tenant
shall not be liable for the payment of Real Estate Taxes. During the Extended
Term, Tenant shall be responsible for Tenant's share of Real Estate Taxes
imposed on the Project, which shall mean eleven percent (11%). As part of the
Basic Rent, Tenant shall pay Landlord one-twelfth (1/12) of Tenant's share of
estimated Real Estate Taxes within ten (10) days after receipt of Landlord's
monthly bill for Real Estate Taxes. Such estimated taxes will be the Real Estate
Taxes paid in the last year of the Initial Term. When actual Real Estate Taxes
for the first year of the Extension Term become known, Landlord shall issue a
reconciliation statement within thirty (30) days after it receives the Real
Estate Tax bill issued by the taxing authority. If Tenant has overpaid, Landlord
will credit the overpaid amount against the next Basic Rent payment due
hereunder. If Tenant has underpaid, Tenant shall pay Landlord the underpaid
amount within thirty (30) days after receipt of Landlord's reconciliation
statement and a copy of such Real Estate Tax bill.
(b) During the Initial Term and any Extended Term, Tenant shall pay any
increased Real Estate Taxes resulting from and to the extent expressly allocable
to: (i) any improvements or alterations made after the date hereof on or in the
Leased Premises by or for Tenant, (ii) the installation of any of Tenant's
Personal Property (defined below), (iii) any use of the Leased Premises by
Tenant, and (iv) any other activity on the Leased Premises by or on behalf of
Tenant.
(c) The words "Substitute Taxes" shall mean a tax, assessment or charge
imposed by Law which is payable as a substitute for any existing tax, assessment
or charge which is imposed on real or personal property owners as a class or on
the Project or personal property thereon; a supplement to existing taxes,
assessments or charges imposed by Law; or any tax, assessment or charge imposed
by Law, which is related to the Project or personal property thereon, but
expressly excluding any general income, franchises, capital stock, estate or
inheritance taxes, and rent or other receipts received from the rental of the
Leased Premises, unless such income, revenues or/and taxes, to the extent they
relate directly to the lease or ownership of the Project, are determined by a
Governmental Authority to be in lieu of Real Estate Taxes.
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Section 3.04. PERSONAL PROPERTY TAXES. During the Initial Term, Tenant
shall not be liable for the payment of Tenant's Personal Property Taxes. During
the Extended Term, Tenant shall be responsible for taxes assessed on Tenant's
Personal Property. Within ten (10) days after receipt of Landlord's monthly bill
for taxes assessed on personal property at the Complex, Tenant shall pay
one--twelfth (1/12) of all estimated ad valorem taxes, assessments and other
charges of Governmental Authorities (including Substitute Taxes) which shall be
levied or assessed or which become liens at any time upon fixtures, machinery,
equipment, furniture and other tangible personal property ("Tenant's Personal
Property") located on, or used in connection with the occupancy, operation,
maintenance, repair or management of the Leased Premises during the Extended
Term. Such estimated taxes shall be the taxes paid in the last year of the
Initial Term and estimated payments shall be reconciled against actuals in the
same manner and in the same time frame as Real Estate Taxes.
ARTICLE FOUR
SERVICES
Section 4.01. SERVICES PROVIDED BY LANDLORD. Landlord shall, subject to
reimbursement as provided in SCHEDULE A hereto, furnish to Tenant the following
services, utilities, supplies and facilities:
(1) Access to the Leased Premises twenty-four (24) hours a day, seven (7)
days a week in accordance with the provisions of ATTACHMENT B.
(2) Heat, ventilation and air conditioning to be provided to meet the
comfort levels of 68 degrees F to 78 degrees F. There will be no winter
humidification. Chilled water shall be metered at its entrance to the Leased
Premises and Tenant shall be charged at the rate set forth in SCHEDULE A.
(3) Hot and cold running domestic water for Tenant's drinking, lavatory
and toilet purposes as currently furnished, to be provided as part of the Basic
Rent.
(4) Electric power in accordance with the provisions of ATTACHMENT A, use
to be measured by meter and charged at the rate set forth in SCHEDULE A.
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(5) Compressed air in accordance with the provisions of ATTACHMENT A, use
to be measured by meter and charged at the rate set forth in SCHEDULE A.
(6) Security services, as follows: Landlord will provide limited security
services to protect Landlord's assets as part of the Basic Rent. Additional
security services may be provided upon and subject to a separate agreement
between the parties. Day to day building dock security shall be Tenant's
responsibility. Landlord shall provide all lock services with reimbursement in
accordance with SCHEDULE A. Tenant shall not alter any lock or install a new or
additional lock or any bolt on any door of the Leased Premises without prior
written consent of Landlord, such consent not to be unreasonably withheld or
delayed. Tenant shall not duplicate any keys provided by Landlord.
IT IS AGREED THAT LANDLORD IS NOT AN INSURER AND THAT IT IS NOT THE
INTENTION OF THE PARTIES THAT LANDLORD ASSUME RESPONSIBILITY FOR AND TENANT
HEREBY RELEASES LANDLORD FROM ANY CLAIM OF LOSS OR MISFEASANCE IN THE
PERFORMANCE OF THE SECURITY SUPPORT SERVICES LISTED ABOVE OR FOR ANY LOSS OR
DAMAGES SUSTAINED THROUGH BURGLARY, THEFT, ROBBERY, FIRE OR OTHER CAUSES, OTHER
THAN DUE TO GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD.
(7) Removal of ice and snow, lawn mowing and general upkeep of the Common
Facilities and Building Parking Area, as necessary and appropriate, to be
provided as part of the Basic Rent.
(8) Telecommunications, as follows: Physical wiring for telecommunications
infrastructure will be provided by the Landlord in accordance with ATTACHMENT C.
However, this Service is not included in the Basic Rent and will be provided
upon and subject to a separate agreement between the parties.
(9) Exclusive use of the shipping and receiving dock attached to Building
002 for Tenant's loading, unloading, delivery and pick-up activity at the Leased
Premises, including access thereto twenty-four (24) hours a day, seven (7) days
a week.
(10) Mail service as follows: Tenant will be provided a distinct mailing
address for the Leased Premises. Landlord will not provide any mail service.
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(11) Vending machine requirements, to be provided by Landlord's vendor.
Tenant shall reimburse Landlord for any charges incurred by Landlord therefor.
(12) Emergency control services, when requested by Tenant, to be provided
by Landlord's Project Operations and Security function as follows:
(i) Landlord will provide emergency response assistance for fire,
chemical spills, and the like to the extent that Landlord has
qualified emergency personnel on staff. Tenant is responsible for
any costs incurred by Landlord for each incident if resulting from
needs of Tenant's employees, agents, contractors or other invitees.
(ii) Landlord will assist Tenant in developing an emergency action
plan for the Leased Premises and Tenant shall communicate this plan
to its employees. The plan shall address: (a) who shall report an
emergency; (b) who shall initiate an evacuation in the absence of
Tenant's site manager; (c) how will emergencies be reported; d) what
shall Tenant do after calling and; (e) the matters described in the
section "Safety and Security" of ATTACHMENT B.
(13) (iii) The Leased Premises will be inspected by Landlord each month
to assure compliance with code and insurance company requirements.
Technicians will test the sprinkler, smoke detection and other
extinguishing systems as appropriate. The inspections will also
cover the condition and location of portable fire extinguishers,
storage of chemicals, operation of fire doors, and any other
conditions that are potential fire hazards. When deficiencies are
found to exist within the exterior walls, floor slabs and exterior
roof of the Leased Premises, corrective action by Landlord will be
required at its expense. Landlord's technician will contact Tenant
to make arrangements before entering Tenant's area to perform a
monthly inspection. Each monthly inspection may not include all of
the items listed in this paragraph.
(ii) At least annually, Landlord's property insurer shall tour the
Leased Premises with Landlord's fire marshal to review Tenant's
operations and the Leased Premises for compliance with the insurer's
requirements. Landlord's fire marshal will obtain
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prior approval from Tenant before conducting these inspections.
(iii) Landlord shall inspect and maintain the fire valves and
hydrants.
(iv) Tenant agrees that the Project Operations and Security function
shall control all open flame producing work through a permit process
which may include permits for welding, soldering, and spark
producing equipment. Tenant will obtain the permits by calling
Landlord's assigned fire technician. The technician will permit the
work upon compliance with the appropriate fire regulations.
(v) Landlord's security function will contact Tenant in advance to
conduct annual evacuation drills of the Leased Premises as set forth
in Tenant's Rules.
(vi) Confined spaces at the Project are clearly marked with yellow
and black signs. Under no circumstances shall Tenant or its
employees or invitees enter one of these spaces unless issued a
permit by Landlord's safety function.
(14) Environmental and chemical management as follows:
(i) Landlord shall provide limited environmental engineering support
and chemical management support to Tenant. Landlord agrees to
interact with and submit to federal, state, and local environmental
regulatory agencies applications, reports and the like on behalf of
Tenant upon receipt of appropriate and timely information from
Tenant. Tenant shall sign all documentation and shall remain solely
accountable for the accuracy of all information furnished to
Landlord and for compliance with all environmental Laws applicable
to Tenant's operations.
(ii) Disposal and treatment of Hazardous Materials and nonhazardous
chemical wastes generated by Tenant shall be handled, treated,
stored and disposed of by Tenant in accordance with the Law (defined
in Article 12).
(iii) Tenant shall maintain a chemical shipping and receiving dock
and an appropriate storage area(s), each approved by Landlord, which
approval shall not be unreasonably withheld or delayed.
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Section 4.02. LANDLORD'S FAILURE TO PROVIDE SERVICES.
(a) If after notice to Landlord of a default in furnishing or paying for
any utilities, services or facilities to be furnished to Tenant hereunder,
Landlord fails or refuses to cure such default within a reasonable time under
the circumstances, specified by Tenant in the notice, Tenant may declare an
event of default and cure such default. Landlord shall reimburse Tenant within
thirty (30) days after Landlord receives Tenant's invoice.
(b) Except as provided in ARTICLE TWENTY-NINE, the remedies set forth in
this Article shall be in addition to other remedies granted to Tenant elsewhere
in this Lease or at law or in equity, and shall not affect any claim for actual
or constructive eviction or other claim for damages or relief to which Tenant
may be entitled.
(c) If Landlord disputes any default declared by Tenant pursuant to this
Article, including the reasonableness of time granted to cure the default, the
actual costs incurred to cure or reasonableness of those costs, Landlord may
submit the disputed matter to arbitration in accordance with ARTICLE TWENTY-NINE
within five (5) days after receiving Tenant's notice of the alleged default or
invoice.
ARTICLE FIVE
TENANT'S PARKING SPACES
(a) Landlord shall, as part of the Basic Rent, provide Tenant with Two
hundred fifty (250) nonexclusive, unreserved, parking spaces for Tenant's use
within the Building Parking Area outlined on EXHIBIT B. The Building Parking
Area shall be available for use twenty-four (24) hours a day, every day of the
year during the Term and shall be illuminated when necessary to maintain a safe
environment. Further, Landlord shall keep and maintain the Building Parking Area
in a clean and safe condition, including replacement of light bulbs and
ballasts, at Landlord's sole expense.
(b) If Tenant, its employees, licensees or guests are not able to use the
Building Parking Area and access ways thereto because of unauthorized use by
others, Landlord shall take whatever steps are necessary to end and prevent
further unauthorized use including, if appropriate, posting signs, distributing
parking stickers and towing away unauthorized vehicles.
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ARTICLE SIX
USE OF LEASED PREMISES
Tenant shall have the right to use the Leased Premises for office and
manufacturing, packaging, assembly of electronic computing equipment and related
devises, and for related outsourcing services and for no other purposes. Such
uses shall be in accordance with the provision entitled "Use of Facilities" as
set forth in ATTACHMENT B. In no event shall Tenant allow Hazardous Materials
(defined in ARTICLE THIRTY-THREE) to be used, stored or disposed of within the
Project, except as specifically authorized in Section 33(a).
ARTICLE SEVEN
REPAIRS AND MAINTENANCE
Section 7.01. LANDLORD.
(a) Landlord shall provide labor and material to support required
maintenance and repairs for the Leased Premises base building systems and
supporting equipment. This service is included as part of the Basic Rent.
Repairs to the Leased Premises which are required by reason of acts or omissions
of Tenant, its employees or invitees within the Leased Premises (such as
clogging of or damage to base systems or damage to walls or sprinkler heads by a
fork truck), other than repairs required by reasonable wear and tear, shall be
made by Landlord at Tenant's expense in accordance with the costs and fees set
forth in SCHEDULE A. Minimal maintenance support (emergencies only) will be
provided after first shift hours, Monday through Friday and for eight of
Landlord's annually designated holidays.
(b) Tenant shall maintain Tenant's tools and equipment, including
peripheral equipment that is controlled by the tool or operator control panel
and which may be considered part of the tool as well as the automated storage
and retrieval machinery and equipment in Building No. 003. Landlord's facilities
maintenance function shall be responsible for the source of the service, up to
the first valve/main disconnecting device on the service branch line extending
from the main service line to Tenant's equipment/tool. Maintenance of such valve
or disconnecting device shall be performed by Landlord, subject to reimbursement
of all such engineering maintenance costs and fees set forth in SCHEDULE A.
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(c) Landlord shall maintain all services upstream of the last mechanical
or electrical service disconnecting device, prior to entering Tenant's equipment
or tool. Landlord shall be responsible for actuating the main disconnecting
device to induce power, air, water, or other facilities service to Tenant's
equipment and tools after performing Tenant's tool/service connection acceptance
process. Only Landlord's maintenance personnel will be permitted to perform this
task.
(d) Landlord will not maintain fume hoods, sinks, gas storage cabinets,
and the like. Landlord shall maintain a roof installed manufacturing exhaust fan
or similar type of equipment. Tenant shall reimburse Landlord for such
engineering maintenance activity in accordance with SCHEDULE A.
(e) In addition to the foregoing, Landlord shall perform all repairs and
restoration work required by ARTICLE EIGHT, FIRE AND OTHER CASUALTY - INSURANCE
and ARTICLE NINE, CONDEMNATION.
Section 7.02. TENANT. At its expense, Tenant shall perform all repairs and
replacements to the interior of the Leased Premises which are not specifically
agreed upon in Section 7.01 to be Landlord's obligations; except that,
notwithstanding the foregoing to the contrary, in no event shall Tenant be
responsible for such repairs or replacements if caused by the acts or omissions
of Landlord, its employees or invitees.
Section 7.03. LANDLORD'S FAILURE TO MAKE REPAIRS.
(a) If after notice by Tenant, Landlord fails or refuses to perform any
repairs, restoration work, or replacements which it is required to perform under
Section 7.01 or elsewhere in this Lease within a reasonable time specified by
Tenant in its notice, Tenant may declare an event of default and cure such
default. Landlord, shall reimburse Tenant within thirty (30) days after Landlord
receives Tenant's invoice.
(b) Except as provided in ARTICLE TWENTY-NINE, the remedies set forth in
this Article shall be in addition to other remedies granted to Tenant elsewhere
in this Lease or at law or in equity, and shall not affect any claim for actual
or constructive eviction or other claim for damages or relief to which Tenant
may be entitled.
(c) If Landlord disputes any default declared by Tenant pursuant to this
Article, including the reasonableness of time granted to cure the default, the
actual costs incurred to cure, or reasonableness of those costs, Landlord may
submit the
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disputed matter to arbitration in accordance with ARTICLE TWENTY-NINE within
five (5) days after receiving Tenant's notice of the alleged default or invoice.
Section 7.04. EMERGENCY REPAIRS. If during the Term repairs, restoration
work or replacements become necessary because of an emergency and the provisions
hereof require the Landlord to make these repairs and replacements, Tenant may
perform them if, in Tenant's opinion, they are necessary to preserve safety or
health of the occupants in the Leased Premises, or Tenant's Property, or are
required by the Laws; provided, however, that Tenant shall first make a
reasonable effort to inform Landlord and grant Landlord a reasonable time under
the circumstances to perform before making them. Tenant shall invoice Landlord
for such costs and expenses and, if Landlord fails to pay the sums stated in the
invoice within ten (10) days after receipt thereof from Tenant, or Landlord
fails to dispute the need for such repairs or replacements or amounts spent to
make them and does not submit the matter to arbitration pursuant to Article
Twenty-Nine, Tenant may offset the amount stated in the invoice against the
Basic Rent.
ARTICLE EIGHT
FIRE AND OTHER CASUALTY - INSURANCE
Section 8.01. DAMAGE OR DESTRUCTION.
(a) If any portion of the Leased Premises is damaged by fire, earthquake,
flood or other casualty, or by any other cause of any kind or nature (the
"Damaged Property") and the Damaged Property can, in the opinion of Landlord's
architect reasonably exercised, be repaired within ninety (90) days from the
date of the damage, Landlord shall proceed immediately to make such repairs as
required by paragraph (c). This Lease shall not terminate, but Tenant shall be
entitled to a pro rata abatement of Basic Rent payable during the period
commencing on the date of the damage and ending on the date the Damaged Property
is repaired as aforesaid and the Leased Premises are delivered to Tenant. The
extent of rent abatement shall be based upon the portion of the Leased Premises
rendered untenantable, unfit or inaccessible for use by Tenant for the purposes
stated in this Lease during such period. When required by this Article, the
architect's opinion shall be delivered to Tenant within ten (10) days from the
date of the damage. The architect's opinion shall be made in good faith after a
thorough investigation of the facts required to make an informed judgment. The
architect shall consider and include as part of his evaluation the period of
time
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necessary to obtain the required approvals of the mortgagee, insurer and
municipal authorities, to order and obtain materials, and to engage contractors.
(b) If (1) in the opinion of Landlord's architect reasonably exercised,
the Damaged Property cannot be repaired within ninety (90) days from the date of
the damage, or (2) Landlord commenced and proceeds with due diligence but fails
to complete the repair of the Damaged Property as required by paragraph (c)
within the ninety (90) day period, subject to an extension of time allowed for
an Excusable Delay, or (3) the Term will expire within one (1) year from the
date of the damage and Tenant fails to extend the Term in accordance with any
right granted in Section 2.02 within thirty (30) days from the date of the
damage, or (4) in the opinion of Landlord's architect reasonably exercised, the
Damaged Property exceeds twenty-five percent (25%) of the then replacement cost
of the Leased Premises (excluding foundations and Tenant's Personal Property),
either party may terminate this Lease as follows: for the reason stated in
subparagraphs (1) or (4), by notice to the other within twenty (20) days from
the date on which the architect's opinion is delivered to Tenant; (2) for the
reason stated in subparagraph (2), by such notice within twenty (20) days from
the end of the ninety (90) day period, as it may have been extended by an
Excusable Delay, and (3) for the reason stated in subparagraph (3), by such
notice within thirty (30) days from the date of the damage. Upon termination,
Basic Rent shall be apportioned as of the date of the damage and all prepaid
Basic Rent and Additional Rent shall be repaid].
(c) If neither party exercises its option to terminate hereunder Landlord
shall, with due diligence, repair the Damaged Property as a complete
architectural unit of substantially the same usefulness, design and construction
existing immediately prior to the damage; provided, that, Tenant shall pay for
all of Tenant's improvements. Tenant shall be entitled to a pro rata abatement
of Basic Rent in the manner and to the extent provided in paragraph (a).
(d) If by operation of this Article Landlord undertakes in good faith but
fails to complete repairs of the Damaged Property as required by the provisions
of this Article and deliver the Leased Premises to Tenant within one-hundred
twenty (120) days from the date of the damage, for any reason other than a
material and adverse delay caused by Tenant, if Tenant fails to waive the delay,
either party may terminate this Lease by notice to the other within thirty (30)
days from the date of the damage. If either party elects to terminate, this
Lease and the Term shall
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end on the date specified in the notice and Basic Rent shall be apportioned as
of the date of the damage and all prepaid Basic Rent shall be repaid.
(e) The word "repair" shall include rebuilding, replacing, and restoring
the Damaged Property.
Section 8.02. CASUALTY INSURANCE.
(a) From and after the date hereof, Landlord shall maintain a policy of
insurance covering the Project against loss, damage, or destruction caused by
boiler explosion, machine breakdown, fire and the perils specified in an "all
risk" or the standard extended coverage endorsement, by vandalism and malicious
mischief, and by sprinkler, gas, water, steam and sewer leakage. The amount of
insurance shall be an amount to be reasonably determined by Landlord, and such
coverage shall remain in force during the Term.
(b) Landlord and Tenant each hereby waives its respective right of
recovery against the other and each releases the other from any claim arising
out of loss, damage or destruction to the Project (including the Leased
Premises), and contents thereon or therein whether or not such loss, damage or
destruction may by attributable to the fault or negligence of either party or
its respective agents, invitees, contractors or employees. Each casualty
insurance policy shall include a waiver of the insurer's rights of subrogation
against the party hereto who is not an insured under said policy. Each party
shall look solely to the proceeds of its respective casualty insurance policy
(and to its own funds to the extent it is self-insured) to compensate it for any
such loss, damage or destruction.
ARTICLE NINE
CONDEMNATION
Section 9.01. TAKING - LEASE ENDS. If at any time during the Term the
whole of the Leased Premises shall be taken for any public or quasi-public use,
under any statute or by right of eminent domain, this Lease shall terminate on
the date of such taking except as provided in Section 9.03. If less than all of
the Leased Premises shall be so taken and in Tenant's reasonable opinion the
remaining part is insufficient for the conduct of Tenant's business Tenant may,
by notice to Landlord within sixty (60) days after the date Tenant is notified
of such taking, terminate this Lease. If Tenant exercises its option, this Lease
and the Term shall end on the date specified in Tenant's notice
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and the Basic Rent shall be apportioned and paid to the date specified in
Tenant's notice.
Section 9.02. TAKING - LEASE CONTINUES. If less than all of the Leased
Premises shall be taken and, in Tenant's reasonable opinion communicated by
notice to Landlord within sixty (60) days after Tenant is notified of such
taking, Tenant is able to gain access to and continue the conduct of its
business in the part not taken, this Lease shall remain unaffected, except that
Tenant shall be entitled to a pro rata abatement of Basic Rent based upon the
nature of the space taken (office, manufacturing, test, assembly, storage,
parking area) and upon the proportion which the area of the Leased Premises or
Building Parking Area, as case may be, so taken bears to the area of the Leased
Premises or Building Parking Area, as case may be, immediately prior to such
taking.
Section 9.03. TEMPORARY TAKING. If the use and occupancy of the whole or
any part of the Leased Premises is temporarily taken for a public or
quasi-public use for a period less than the balance of the Term, at Tenant's
option to be exercised in writing and delivered to Landlord not later than sixty
(60) days after the date Tenant is notified of such taking, this Lease and the
Term shall terminate on the date specified in Tenant's notice or shall continue
in full force and effect. If this Lease remains in effect Tenant shall be
entitled to a pro rata abatement of Basic Rent and Additional Rent in the manner
and to the extent provided in Section 9.02.
Section 9.04. LANDLORD'S AWARD. Landlord shall be entitled to receive the
entire award or awards in any condemnation proceeding without deduction
therefrom for any estate vested in Tenant and Tenant shall receive no part of
such award or awards from Landlord or in the proceedings except as otherwise
expressly provided in this Article. Subject to the foregoing, Tenant hereby
assigns to Landlord any and all of Tenant's right, title and interest in and to
such award or awards or any part thereof.
Section 9.05. TENANT'S AWARD. If there is a taking hereunder, Tenant shall
be entitled to receive out of the award or, if allowed by the Laws, to appear,
claim, prove and receive in the condemnation proceeding (1) the unamortized
value over the Term of the Tenant's improvements, alterations, replacements and
other similar changes to the Leased Premises, provided the same shall have been
paid for by Tenant but regardless of whether the same might be considered by the
Laws or otherwise as a part of the Building or shall be or become Landlord's
Property under the provisions of this Lease; (2) the value of Tenant's Personal
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Property (defined in ARTICLE TEN) that is damaged, destroyed or taken hereunder;
and (3) special awards or allowances paid to tenants when their rental space is
taken by eminent domain.
Section 9.06. RESTORATION BY LANDLORD. If there is a taking hereunder and
this Lease is continued Landlord shall, at its expense, proceed with reasonable
diligence to repair, replace and restore the Leased Premises physically altered
by the taking as a complete architectural unit of substantially the same
proportionate usefulness, design and construction existing immediately prior to
the date of taking.
Section 9.07. DEFINITIONS. Taking by condemnation or eminent domain
hereunder shall include the exercise of any similar governmental power and any
sale, transfer or other disposition of the Leased Premises or land in lieu or
under threat of condemnation. The word "Leased Premises," as used in this
Article only, shall mean any part of the Leased Premises, Building Parking Area
and access ways thereto.
ARTICLE TEN
ALTERATIONS AND IMPROVEMENTS
Section 10.01. TENANT'S CHANGES - NO APPROVAL. Tenant may place and
replace Tenant's Personal Property (defined in Section 3.04) in the Leased
Premises as it may desire at its own expense without Landlord's consent;
provided that, with respect to tools and equipment, installation and removal is
coordinated with Landlord as to allocation of the responsibilities described in
Section 7.01 above.
Section 10.02. TENANT'S CHANGES - LANDLORD'S APPROVAL.
(a) Tenant may make alterations, improvements, replacements and other
changes to the Leased Premises, including the Leased Premises Service Systems,
Building Service Systems and the Structure if Landlord consents thereto, which
consent shall not be unreasonably withheld or delayed and provided Tenant
complies with subsection 10.02(b).
(b) Landlord has the right, but not the obligation, to contract for all
engineering and construction services requested by Tenant to be performed within
the Leased Premises, and, if Landlord elects such option Tenant shall reimburse
Landlord therefor in accordance with the costs and fees set forth in SCHEDULE A.
All work shall be designed and constructed in accordance with the latest edition
of Landlord's general,
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mechanical and electrical specifications ("Landlord's Specifications") a copy of
which Tenant acknowledges it has received. Tenant shall approve a design
estimate and a preliminary cost estimate prior to initiation of design by or on
behalf of Landlord. Upon completion of the design, Tenant shall approve the
construction bid prior to start of construction by or on behalf of Landlord.
Tenant shall be responsible for all design and construction costs including
those incurred for canceled projects.
(c) The words "Leased Premises Service Systems" shall mean the electrical,
HVAC, mechanical, plumbing, safety and health and telecommunication
(voice/data/signal) systems that directly service the Leased Premises from a
localized point of distribution into the Leased Premises. Such systems are
dedicated to the Leased Premises at their available capacities and do not
service any buildings other than the Leased Premises.
(d) The words "Building Service Systems" shall mean the electrical, HVAC,
mechanical, plumbing, safety and health and telecommunication
(voice/data/signal) systems that service the Leased Premises and other buildings
in the Project. Such systems provide the main source of supply and distribution
to the Leased Premises.
(e) The word "Structure" shall mean bearing walls, roof, exterior walls,
support beams, foundation, window frames, floor slabs and support columns of the
Leased Premises.
Section 10.03. TENANT'S OWNED PROPERTY. All of Tenant's Personal Property
and all non-structural alterations, improvements, replacements and changes made
prior to or during the Term by or on behalf of Tenant (collectively, "Tenant's
Owned Property") shall be owned by and remain the property of Tenant.
Section 10.04. REMOVAL OF TENANT'S OWNED PROPERTY. Tenant may remove all
or any of Tenant's Owned Property at any time during the Term or, at its option,
Tenant may abandon the same, in whole or in part, to Landlord at the expiration
or earlier termination of the Term by vacating the Leased Premises without
removing the same. If Tenant removes such things or any of them, Tenant shall
not be required to remove pipes, wires and the like from the walls, ceilings or
floors, provided Tenant properly cuts, disconnects and caps such pipes and wires
and seals them off as required by Laws.
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ARTICLE ELEVEN
LANDLORD'S ACCESS
(a) Landlord shall have the right (1) at all reasonable times during
Tenant's business hours to inspect the Leased Premises and to show the same to
prospective mortgagees and purchasers; (2) during the last six (6) months of the
Term, to show the same to prospective tenants and (3) at all times to make
repairs or replacements as required by this Lease or as may be necessary;
provided, however, that Landlord shall use all reasonable efforts not to disturb
Tenant's use and occupancy of the Leased Premises and, except when there is an
emergency, Landlord notifies a representative of Tenant, located at the Leased
Premises, at least five (5) business day prior to the date of the requested
access.
(b) Landlord shall have the right to enter the Leased Premises after
Tenant's business hours to perform its service obligations hereunder and at all
times to enter in emergencies.
(c) Tenant may designate one or more areas in the Leased Premises as
secure areas, and Landlord shall have no right of access thereto without being
accompanied by Tenant's designated representative except in the case of
emergencies. However, until Landlord is allowed access, any inability of
Landlord to perform an obligation on its part to be performed hereunder because
Landlord is denied such access, shall not constitute a default of Landlord in
the performance of such obligation.
ARTICLE TWELVE
COMPLIANCE WITH LAWS
Section 12.01. TENANT'S COMPLIANCE WITH LAWS. Tenant shall comply with all
federal, state and local statutes, rules, ordinances, orders, codes and
regulations, and legal requirements and standards issued thereunder (the "Laws")
which are applicable to Tenant's use and manner of use of the Leased Premises.
Nothing herein shall be deemed to impose any obligation upon Tenant for any
elements of the Structure, Leased Premises Service Systems or Building Service
Systems.
Section 12.02. LANDLORD'S COMPLIANCE WITH LAWS. Except as specifically
provided in Section 12.01, Landlord shall comply with all Laws which (1) affect
the Project or (2) relate to the performance by Landlord of any duties or
obligations to be performed by Landlord under this Lease.
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ARTICLE THIRTEEN
SURRENDER OF POSSESSION
Subject to Section 7.02 above, at the expiration or earlier termination of
the Term, Tenant will peaceably yield up the Leased Premises to Landlord in its
present "as is" condition, reasonable wear and tear and damage by the elements
or Landlord excepted.
ARTICLE FOURTEEN
SIGNS
Section 14.01. TENANT'S SIGNS. Tenant and an Affiliated Person of Tenant
may place its signs in and on the Leased Premises at its expense.
Section 14.02. DIRECTORY BOARD. Landlord, at Tenant's expense, may place a
sign in front of the Leased Premises which is approved by Tenant. Landlord shall
install and pay for directional signs from the Project's entrance to the
Building.
Section 14.03. COMPLIANCE WITH LAWS. All signs installed by Landlord and
Tenant shall comply with applicable Laws and shall be installed in good
workmanlike manner.
ARTICLE FIFTEEN
SUBORDINATION AND NON-DISTURBANCE
This Lease shall be subordinate and subject to all ground and underlying
leases and to any mortgages thereon and to any mortgages covering the fee of the
Project, and to all renewals, modifications or replacements thereof; provided,
however, that with respect to any future ground lease, underlying lease and/or
mortgage, on or before the effective date thereof, Landlord shall obtain from
its ground lessor, underlying lessor and/or mortgagee, as the case may be, and
file on the public record a written agreement with Tenant, binding on their
respective legal representatives, successors and assigns, which provides, among
other provisions, that so long as this Lease shall be in full force and effect
(a) Tenant shall not be joined as a defendant in any proceeding which may be
instituted to terminate or enforce the ground or underlying lease or to
foreclose or enforce the mortgage and (b) Tenant's possession and use of the
Leased Premises in accordance with the provisions of this Lease shall
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not be affected or disturbed by reason of the subordination to or any
modification of or default under the ground or underlying lease or mortgage. If
the ground or underlying lessor and/or mortgagee or any successor in interest
shall succeed to the rights of Landlord under this Lease, whether through
possession, surrender, assignment, subletting, judicial or foreclosure action,
or delivery of a deed or otherwise, Tenant will attorn to and recognize such
successor-landlord as Tenant's landlord provided the successor-landlord accepts
such attornment and recognizes Tenant's rights of possession and use of the
Leased Premises in accordance with the provisions of this Lease.
ARTICLE SIXTEEN
MECHANICS' LIENS
Within thirty (30) days after notice to Tenant that a mechanics' or other
similar lien has been filed against the Project, Tenant shall discharge by
payment, bond or otherwise those liens if for work, labor, services or materials
claimed to have been performed at or furnished to the Leased Premises for or on
behalf of Tenant, excepting liens which have been filed by a contractor,
supplier, materialman or laborer retained by Landlord.
ARTICLE SEVENTEEN
DEFAULT
Section 17.01. DEFAULT BY TENANT. If Tenant shall default in the payment
of Basic Rent and the default shall continue for five (5) days after notice
thereof from Landlord, or if Tenant shall default in the performance or
observance of any of its other covenants or obligations set forth in this Lease,
and if the default shall continue for thirty (30) days after notice thereof from
Landlord specifying in what manner Tenant has defaulted (except that if the
default cannot be cured within said thirty (30) day period, this period shall be
extended for a reasonable additional time, provided that Tenant commences to
cure the default within the thirty (30) day period and proceeds diligently
thereafter to effect such cure) Landlord may (1) cure the default and any costs
and expenses incurred by Landlord therefor shall be deemed Additional Rent or
(2) lawfully enter the Leased Premises and repossess the same as the former
estate of Landlord and expel Tenant and those claiming under Tenant without
being deemed guilty of any manner of trespass and without prejudice to any other
remedies which Landlord may have for arrears of Basic Rent or Additional Rent
preceding breach of
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covenant. Upon entry and repossession as aforesaid, this Lease shall terminate,
at the sole option of Landlord, by notifying Tenant that the Lease has been
terminated.
Section 17.02. SUSPENSION OF TENANT DEFAULT. Subject to Section 17.03
below, if Tenant shall dispute any sum claimed by Landlord to be due and payable
hereunder and Tenant shall give Landlord written notice specifying in reasonable
detail the basis for its dispute, Tenant may deposit the amount in dispute with
an independent escrow agent selected by the parties hereto, to be held by the
agent pending resolution of the dispute by arbitration or otherwise. Tenant
shall not be deemed to be in default hereunder by reason of such deposit until
the dispute is resolved in favor of Landlord and Tenant fails to cause the agent
to pay the amount determined to be payable to Landlord within ten (10) days
after Tenant is notified of the determination. Tenant and Landlord shall
negotiate in good faith to resolve the dispute by agreement, failing which
either may proceed to arbitration in accordance with ARTICLE TWENTY-NINE.
Section 17.03. DEFAULT BY LANDLORD. If Landlord defaults in the
performance or observance of any of its covenants or obligations set forth in
this Lease, Tenant shall give Landlord notice specifying in what manner Landlord
has defaulted and if the default shall not be cured by Landlord within the
period of time provided for elsewhere in this Lease, and otherwise within thirty
(30) days after the delivery of such notice (except that if the default cannot
be cured within said thirty (30) day period, this period shall be extended for a
reasonable additional time, provided that Landlord commences to cure the default
within the thirty (30) day period and proceeds diligently thereafter to effect
such cure) Tenant may declare an event of default. If Tenant declares an event
of default and Landlord fails to exercise its rights to arbitrate the dispute
pursuant to ARTICLE TWENTY-NINE, Tenant may deposit such amount estimated by
Tenant to cure the default with an escrow agent in the manner agreed upon in
Section 17.02 above, to be held in escrow so long as Landlord remains in
default. Or, Tenant may cure the default and invoice Landlord for costs and
expenses (including reasonable attorneys' fees and court costs) incurred by
Tenant therefor. If Landlord does not reimburse Tenant within thirty (30) days
after it receives Tenant's invoice, and Landlord does not arbitrate the dispute
pursuant to ARTICLE TWENTY-NINE, Tenant may exercise its rights under law and in
equity to recover such sums.
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ARTICLE EIGHTEEN
HOLDOVER
If Tenant remains in the Leased Premises beyond the expiration or earlier
termination of the Term, such holding over in itself shall not constitute a
renewal or extension of this Lease but, in such event a tenancy from month to
month shall arise at one-twelfth (1/12) of one hundred fifty percent (150%) of
the then Basic Rent. The provisions of this Article do not waive Landlord's
rights of re-entry or any other right hereunder.
ARTICLE NINETEEN
NOTICES
Any notice, request or demand under this Lease shall be in writing, and
shall be considered properly delivered when addressed as hereinafter provided,
and (a) served personally, (b) registered or certified (return receipt
requested) and deposited in a United States general or branch post office, or
(c) sent by a private express mail carrier. Any notice, request or demand by
Tenant to Landlord shall be addressed to International Business Machines
Corporation, 8501 IBM Drive, Charlotte, North Carolina 28262, Attention: Jimmy
Kovac, Building 201, until otherwise directed in writing by Landlord and, if
requested in writing by Landlord, simultaneously served on or sent to Landlord's
first mortgagee at the address specified in such request. Any notice, request or
demand by Landlord to Tenant shall be addressed to Manufacturers' Services
Western U.S. Operations, Inc., c/o Herbert L. Watkins, 7345 IBM Drive,
Charlotte, North Carolina 28262, with copies addressed simultaneously to
Manufacturers' Services Limited, 200 Baker Avenue, Concord, Massachusetts 01742
Attention: General Counsel, until otherwise directed in writing by Tenant.
Rejection or other refusal to accept a notice, request or demand, or the
inability to deliver the same because of a changed address of which no notice
was given, shall be deemed to be receipt of the notice, request or demand sent.
ARTICLE TWENTY
ASSIGNMENT AND SUBLETTING
Section 20.01. ASSIGNMENT OR SUBLEASE.
(a) Without the consent of Landlord, Tenant may assign this Lease or
sublet all or any part of the Leased Premises at any
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time during the Term to (a) an Affiliated Person of Tenant, (b) Tenant's
partner, (c) a successor entity created by merger, reorganization,
recapitalization, or acquisition, or (d) any Person purchasing the business
which is carried on within the Leased Premises. For purposes of this Section,
the words "Affiliated Person of Tenant" mean a Person, directly or indirectly,
through one or more intermediaries, controlling Tenant, controlled by Tenant or
under common control with Tenant, including Manufacturers' Services Limited, the
Delaware corporation, and corporations wholly owned or controlled by it.
(b) Except as authorized in paragraph (a) above, without the prior written
consent of Landlord in each case, which Landlord shall not unreasonably withhold
or delay, Tenant shall not, whether voluntarily or by operation of Law, assign,
encumber or otherwise transfer this Lease or any interest herein, or sublet the
Leased Premises or any part thereof, or permit the Leased Premises to be
occupied by anyone other than Tenant or Tenant's employees. For purposes of this
Lease, an assignment shall include any transfer of any interest in this Lease or
the Leased Premises by Tenant pursuant to a merger, division, consolidation or
liquidation, or pursuant to change in ownership of Tenant involving a transfer
of voting control in Tenant (whether by transfer of partnership interests,
corporate stock or otherwise)
Section 20.02. LIABILITY OF TENANT. If Tenant assigns or sublets
hereunder, Tenant shall notify Landlord thereof and Tenant shall remain
responsible for the faithful performance and observance of all of its covenants
and obligations set forth in this Lease unless the net worth of the assignee or
subtenant exceeds Twenty-Five Million and 00/100 Dollars ($25,000,000.00), in
which case Landlord shall release Tenant from any obligations under this Lease
from and after the date of assignment.
ARTICLE TWENTY-ONE
EQUAL EMPLOYMENT OPPORTUNITY
There are incorporated in this Lease the provisions of Executive Order
11246 (as amended) of the President of the United States on Equal Employment
Opportunities and the rules and regulations issued pursuant thereto with which
Landlord represents that it will comply unless exempted.
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ARTICLE TWENTY-TWO
QUIET ENJOYMENT
Provided Tenant performs the covenants and obligations in this Lease on
Tenant's part to be performed, Landlord covenants and agrees to take all
necessary steps to secure and to maintain for the benefit of Tenant the quiet
and peaceful possession of the Leased Premises and Building Parking Area for the
Term, without hindrance, claim or molestation by Landlord or any other Person.
ARTICLE TWENTY-THREE
WAIVER
Failure by either party to complain of any action, inaction or default of
the other party shall not constitute a waiver of the aggrieved party's rights
hereunder. Waiver by either party of any right to claim a default of the other
party shall not constitute a waiver of any right to claim a subsequent default
of the same obligation or to claim any other default, past, present or future.
To the extent enforceable under applicable Laws, Landlord and Tenant hereby
waive trial by jury in any action, proceeding or counterclaim brought by either
against the other concerning any matters whatsoever arising out of or in any way
connected with this Lease or the relationship of the parties hereunder.
ARTICLE TWENTY-FOUR
PARTIAL INVALIDITY
If any covenant, condition or provision of this Lease, or the application
thereof to any Person or circumstance, shall be held to be invalid or
unenforceable, then in each such event the remainder of this Lease or the
application of such covenant, condition or provision to any other Person or any
other circumstance (other than those as to which it shall be invalid or
unenforceable) shall not be thereby affected, and each covenant, condition and
provision hereof shall remain valid and enforceable to the fullest extent
permitted by the Laws.
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ARTICLE TWENTY-FIVE
RULES AND REGULATIONS
Section 25.01. TENANT'S OBLIGATION. Tenant shall abide by and observe
rules and regulations which are set forth on ATTACHMENT B as well as any others
which are necessary for the safety, security, care and appearance of the Project
or the preservation of good order therein, or for the operation and maintenance
of the Project or equipment therein (the "Rules and Regulations"); provided the
same are in conformity with common practice and usage in a quality industrial
complex in Charlotte, North Carolina and surrounding environs, are not
inconsistent with the provisions of this Lease and apply to all tenants and
occupants of the Project, and provided further that a copy thereof is received
by Tenant.
Section 25.02. STANDARDS APPLICABLE TO LANDLORD. Landlord shall (a) not
discriminate against Tenant in enforcing the Rules and Regulations; (b) not
unreasonably withhold or delay its consent to any approval required by Tenant
under the Rules and Regulations, and (c) exercise its judgment in good faith in
any instance when the exercise of Landlord's judgment under the Rules and
Regulations is required.
Section 25.03. LANDLORD'S ENFORCEMENT. Landlord shall use its reasonable
efforts to obtain compliance of the Rules and Regulations by all tenants and
other occupants within the Project limits, but Landlord may permit reasonable
waivers so long as such waivers do not unreasonably interfere with or materially
and adversely affect Tenant in the conduct of its business in the Leased
Premises or violate any rights granted to Tenant under this Lease.
Section 25.04. CONFLICT. If there is a conflict between or ambiguity
created by the provisions of this Lease and the Rules and Regulations published
pursuant to this Article, the provisions of this Lease shall control and be
binding on the parties hereto.
ARTICLE TWENTY-SIX
ESTOPPEL CERTIFICATES
Section 26.01. TENANT'S ESTOPPEL CERTIFICATE. Tenant agrees, at any time
and from time to time, upon not less than ten (10) days prior notice from
Landlord, to execute, acknowledge and deliver to Landlord or any Person
designated by Landlord a
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statement in writing (1) certifying that this Lease is unmodified and in full
force and effect (or if there have been modifications, that this Lease is in
full force and effect as modified and stating the modifications); (2) whether or
not the Term has commenced and if it has commenced, stating the dates to which
the Basic Rent and Additional Rent have been paid by Tenant; (3) stating, to the
best of Tenant's knowledge, whether or not Landlord is in default in the
performance of any covenant, agreement or condition contained in this Lease, and
if Tenant has knowledge of such a default, specifying each such default; and (4)
any other reasonable statements which are customarily required by an owner of or
a lender secured by real property.
Section 26.02. LANDLORD'S ESTOPPEL CERTIFICATE. Prior to commencement of
and during the Term Landlord shall, within ten (10) days after receipt of
Tenant's request, deliver an estoppel certificate to Tenant or any Person
designated by Tenant relative to the status of this Lease and/or any ground
lease, underlying lease and/or mortgage encumbering the Project, in a form
reasonably satisfactory to Tenant.
ARTICLE TWENTY-SEVEN
COUNTERPARTS
When several counterparts of this Lease have been executed, each shall be
considered an original for all purposes; provided, however, that all
counterparts shall, together, constitute one and the same instrument.
ARTICLE TWENTY-EIGHT
BROKER
The parties warrant and represent to each other that no Person has
negotiated or brought about this transaction. Tenant shall defend, indemnify and
save harmless Landlord from and against any claim which may be asserted against
Landlord by any Person if (a) the claim is made in connection with this
transaction and (b) Tenant retained the claiming Person. Tenant shall reimburse
Landlord for reasonable expenses, losses, costs and damages (including
reasonable attorneys' fees and court costs if Tenant fails or refuses to defend
as herein required) incurred by Landlord in connection with such claims.
Landlord shall defend, indemnify and save harmless Tenant from and against any
claim which may be asserted against Tenant by any Person if the claim (a) is
made in connection with this transaction and (b) arises out of conversations or
dealings between Landlord and any
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claiming Person other than a Person retained by Tenant for this transaction.
Landlord shall reimburse Tenant for reasonable expenses, losses, costs and
damages (including reasonable attorneys' fees and court costs if Landlord fails
or refuses to defend as herein required) incurred by Tenant in connection with
such claims. This Article shall survive the expiration or earlier termination of
this Lease.
ARTICLE TWENTY-NINE
ARBITRATION
Section 29.01. APPLICABILITY.
(a) If arbitration is agreed upon hereunder as a dispute resolution
procedure, the arbitration shall be conducted as provided in this Article. All
proceedings shall be conducted according to the Commercial Arbitration Rules of
the American Arbitration Association, except as hereinafter provided. No action
at law or in equity in connection with any such dispute shall be brought until
arbitration hereunder shall have been waived, either expressly or pursuant to
this Article. The judgement upon the award rendered in any arbitration hereunder
shall be final and binding on both parties hereto and may be entered in any
court having jurisdiction thereof.
(b) During an arbitration proceeding pursuant to this Article, the
parties shall continue to perform and discharge all of their respective
obligations under this Lease, except as otherwise provided in this Lease.
Section 29.02. NOTICE AND DEMAND. All disputes that may be arbitrated in
accordance with this Article shall be raised by notice to the other party, which
notice shall state with particularity the nature of the dispute and the demand
for relief, making specific reference by article number and title of the
provisions of this Lease alleged to have given rise to the dispute. The notice
shall also refer to this Article and shall state whether or not the party giving
the notice demands arbitration under this Article. If no such demand is
contained in the notice, the other party against whom relief is sought shall
have the right to demand arbitration under this Article within five (5) business
days after such notice is received. Unless one of the parties demands
arbitration, the provisions of this Article shall be deemed to have been waived
with respect to the dispute in question.
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Section 29.03. SELECTION OF ARBITRATOR. Tenant and Landlord shall
mutually and promptly select one person who has demonstrated at least fifteen
(15) years' experience in commercial real estate matters and, in particular, the
subject matter of the dispute, to act as arbitrator hereunder. If a selection is
not made within thirty (30) days after a demand for arbitration is made, upon
the request of either party the arbitrator shall be appointed by the American
Arbitration Association. The arbitration proceedings shall take place at a
mutually acceptable location in White Plains, New York or New York City.
Section 29.04. SCOPE. When resolving any dispute, the arbitrator shall
apply the pertinent provisions of this Lease without departure therefrom in any
respect. The arbitrator shall not have the power to change any of the provisions
of this Lease, but this Section shall not prevent in any appropriate case the
interpretation, construction and determination by the arbitrator of the
applicable provisions of this Lease to the extent necessary in applying the same
to the matters to be determined by arbitration.
ARTICLE THIRTY
EXCUSABLE DELAY
Whenever a party hereto is required by the provisions of this Lease to
perform an obligation and such party is prevented beyond its reasonable control
from doing so by reason of an Excusable Delay, such party shall be temporarily
relieved of its obligation to perform, provided it promptly notifies the other
party of the specific delay and exercises due diligence to remove or overcome
it. The words "Excusable Delay" shall mean any delay due to strikes, lockouts or
other labor or industrial disturbance; civil disturbance; future order of any
government, court or regulatory body claiming jurisdiction; act of the public
enemy; war, riot, sabotage, blockade or embargo; failure or inability to secure
materials, supplies or labor through ordinary sources by reason of shortages or
priority or similar regulation or order of any government or regulatory body;
lightning, earthquake, fire, storm, hurricane, tornado, flood, washout or
explosion, or act or omission of one party hereto which prevents the party
claiming delay from complying, or which materially and adversely interferes with
the claiming party's ability to comply with an obligation under this Lease on
its part to be performed.
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ARTICLE THIRTY-ONE
MISCELLANEOUS
Section 31.01. RULES OF INTERPRETATION. This Lease shall be strictly
construed neither against Landlord or Tenant, Landlord and Tenant hereby
agreeing that both parties have participated fully and equally in the
preparation of this Lease and that legal counsel was consulted by each before
each signed and delivered a counterpart of this Lease to the other party; each
provision hereof shall be deemed both a covenant and a condition running with
the land; except as otherwise expressly provided in this Lease and its EXHIBITS
and Attachments, the singular includes the plural and the plural includes the
singular, "or" is not exclusive; a reference to an agreement or other contract
includes supplements and amendments thereto to the extent permitted by this
Lease; a reference to the Laws includes any amendment or supplement to such
Laws; a reference to a Person includes its permitted successors and assigns;
accounting provisions shall have the meanings assigned to them by generally
accepted accounting principles and practices applied on a consistent basis; the
words "such as," "include," "includes" and "including" are not limiting; except
as specifically agreed upon in this Lease, any right may be exercised at any
time and from time to time and all obligations are continuing obligations
throughout the Term; in calculating any time period, the first day shall be
excluded and the last day shall be included and all days are calendar days
unless otherwise specified; the word "Person" shall mean any partnership,
corporation (limited or otherwise), individual, trust, association and any other
entity; and the words "Governmental Authority" shall mean local, state and
federal governmental and quasi-governmental agencies, departments, commissions,
boards and bureaus.
Section 31.02. NO EXCLUSIVE REMEDIES. No remedy or election given by any
provision in this Lease shall be deemed exclusive unless so indicated, but each
shall, wherever possible, be cumulative in addition to all other remedies at Law
or in equity which either party may have arising out of an event of default of
the other party.
Section 31.03. GOVERNING LAWS. This Lease shall be governed in all
respects by the Laws of the State of New York.
Section 31.04. NON-DISCLOSURE OF LEASE.
(a) Prior to the Term Commencement Date, Landlord and Tenant and their
respective agents, employees and contractors
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shall not disclose the existence of this Lease without written consent of the
other.
(b) Landlord and Tenant and their respective agents, employees and
contractors shall keep the provisions of this Lease in confidence and shall not
publish or disclose the same at any time during the Term except as permitted by
ARTICLE THIRTY-TWO and paragraph (c) below.
(c) This Section shall not apply to disclosures that must be made by
Landlord or Tenant to obtain financing for the Project, sale of the Project or
any part of the Leased Premises or business carried on therein, assignment of
this Lease, or subletting of the Leased Premises.
ARTICLE THIRTY-TWO
MEMORANDUM OF LEASE
This Lease shall not be filed on the public record by either Landlord or
Tenant. However, either party may request that a memorandum of this Lease be
filed in a form reasonably acceptable to both. The requesting party shall pay
all costs of filing.
ARTICLE THIRTY - THREE
ENVIRONMENTAL OBLIGATIONS
Section 33.01. APPROVED AND PROHIBITED CHEMICALS.
(a) Tenant covenants that no Hazardous Materials shall be brought onto,
or stored or used at the Leased Premises by Tenant or any of its employees,
agents, independent contractors, licensees, assignees, subtenants or other
invitees, except for materials that are typically found at suburban commercial
office complexes and the chemicals listed in SCHEDULE B, titled "Approved
Chemicals." Without limiting the foregoing, Tenant acknowledges that the
following substances are "Prohibited Substances" and shall not be brought onto
the Leased Premises;
Phenol compounds
Methylene chloride
1, 2 Dichlorobenzene
Trichloroethylene
Class I, Group I, ozone depleting chemicals
1,1,1 Trichloroethane (TCA)
Mercury (other than elemental mercury)
PCBs
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PBBs
Dioxin
Glycol Ethers
(b) Tenant may make a written request for a particular Hazardous Material
to be approved by Landlord for use at the Leased Premises. Landlord shall
respond to Tenant's request within five (5) business days from receipt of the
request and Landlord's consent shall not be unreasonably withheld or delayed.
(c) Additional Hazardous Materials may be added to the foregoing list of
Prohibited Substances upon written notice by Landlord to Tenant if use of such
Hazardous Materials in production is prohibited in the future by the
environmental Laws. Further, the parties agree that Landlord, in its sole
discretion, may prohibit the following Hazardous Materials from being used in
production processes at the Leased Premises:
Perchloroethylene
Hydrochlorofluorocarbons (HCFCs)
Low level radioactive waste
No Hazardous Materials shall be placed into the plumbing or waste treatment
systems of the Leased Premises.
Section 33.02. TENANT'S INDEMNITY. Tenant shall hold harmless, indemnify
and defend Landlord and any mortgagee and their respective directors, employees,
successors and assigns, from and against any Environmental Damages (defined
below) resulting from events occurring on or about the Leased Premises during
the Term and caused by Tenant or its employees or invitees, except for
Environmental Damages caused by the negligence or misconduct of any one or more
of Landlord or the mortgagee and their respective directors, employees,
successors and assigns. Tenant's indemnification obligation hereinabove set
forth shall survive the expiration or earlier termination of the Term.
Section 33.03. NOTIFICATION OF SPILL OR RELEASE/
REMEDIATION.
Tenant shall promptly notify Landlord when Tenant becomes aware of (1) the
presence of Hazardous Materials within the Leased Premises which were not
previously authorized by Landlord in accordance with the provisions of this
Section or approved in writing by Landlord, and (2) the release to the Project
(including the Leased Premises) or to the air of Hazardous Materials, whether or
not caused or permitted by Tenant. Such
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notice shall include as much detail as reasonably possible, including identity
of the location, type and quantity of Hazardous Materials released. Tenant, at
its sole expense, shall promptly take all actions required by the applicable Law
to return the Leased Premises to the condition existing prior to the events
which resulted in Environmental Damages for which it is responsible hereunder.
Section 33.04. DEFINITIONS.
(a) "Environmental Damages" shall mean all claims, judgements, damages
(including punitive damages), losses, penalties, fines, liabilities (including
strict liability), encumbrances and liens, and any other costs and expenses,
resulting from the existence on or in, or release to the ground or air of
Hazardous Materials in violation of or alleged to be in violation of the Laws
applicable thereto, including any attorneys' fees, disbursements, consultant's
fees and other costs resulting from (a) investigation and defense of any alleged
claim and (b) directive of any Governmental Authorities, whether or not the
claims or directives are groundless, false or fraudulent or ultimately defeated,
and (c) any settlement or judgement.
(b) "Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste (including constituents thereof) which is or becomes regulated
by one or more Governmental Authorities and shall include the Prohibited
Substances. The words "Hazardous Material" include any material or substance
which is (1) listed or defined as a "hazardous waste," "extremely hazardous
waste," "restricted hazardous waste," "hazardous substance" or "toxic substance"
under the Laws, (2) petroleum and its byproducts, (3) asbestos, radon gas, urea
formaldehyde foam insulation, (4) polychlorinated biphenyl, or (5) designated as
a hazardous or toxic waste or substance or words of similar import pursuant to
the Federal Water Pollution Control Act (33 U.S.C. 1317), the Federal Resource
Conservation and Recovery Act, (42 U.S.C. 6903), the Comprehensive Environmental
Response, Compensation and Liability Act, as amended (42 U.S.C. 9601 et seq.),
the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), or the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.).
ARTICLE THIRTY-FOUR
LEASED PREMISES "AS IS"
Except for (i) Landlord's work required to be performed by Landlord
pursuant to and as described in ATTACHMENT C, (ii) such
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representations, warranties and covenants, if any, with respect to the "Real
Estate," as provided in the Outsourcing Base and (iii) such representations,
warranties, covenants and indemnities with respect to environmental matters, as
provided in this Lease, Tenant accepts possession of the Leased Premises in
their "AS IS" condition "WITH ALL FAULTS" and Landlord shall not be required to
perform any work or furnish any materials or provide any services to or in
connection with the Leased Premises during the Term except as specifically
agreed upon in this Lease. The parties acknowledge and agree that the Basic Rent
has been established in material reliance on Tenant accepting the Leased
Premises in their "AS IS" condition "WITH ALL FAULTS."
ARTICLE THIRTY-FIVE
REPRESENTATIONS OF LANDLORD
Landlord hereby represents and warrants to Tenant as of the date of
delivery of possession of the Leased Premises to Tenant as follows: (a) there
are no liens on the Leased Premises which would prevent Tenant from using the
Leased Premises for Tenant's permitted uses (as defined in ARTICLE SIX); (b) all
fixtures and electrical and mechanical systems are in good working order,
including plumbing and glass; (c) to the best of Landlord's knowledge, the
Leased Premises are in compliance in all material respects with all Laws, and
other requirements of Governmental Authorities, (including 1 the Resource
Conservation and Recovery Act, 43 U.S.C. 6901 et seq., the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. 9601 et seq.,
The Clean Water Act, 33 U.S.C. 1251 et seq., and all environmental, health and
safety laws, ordinances, rules and regulations relating to regulation or control
of hazardous or toxic substances wastes, or related materials), relating to the
use, condition and occupancy of the Leased Premises; (d) to the best of
Landlord's knowledge, the Leased Premises are free from structural defects and
the roof is water tight; (e) the permitted uses of Tenant may be conducted on
the Leased Premises, (f) the Leased Premises have not been used to generate,
manufacture, or dispose of Hazardous Materials, and have never had Hazardous
Materials released or spilled thereon which violated the Law and (g) Landlord
has not been given notice by any Governmental Authority of any actual or
suspected environmental impairment activities on the Leased Premises. Landlord
agrees, throughout the Term, to modify the Leased Premises as necessary for the
Leased Premises to remain in compliance in all material respects with all
applicable building and zoning codes as they may be amended or modified.
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ARTICLE THIRTY-SIX
INDEMNITIES
Section 36.01. LANDLORD'S INDEMNITY. Landlord hereby agrees to indemnify,
defend and hold harmless Tenant, its shareholders, officers, directors,
employees and lenders (to the extent they have an interest in the Leased
Premises, Tenant's Personal Property or any aspect of the business conducted at
the Leased Premises), and each of their respective successors and assigns, from
and against any and all costs (including reasonable attorneys' fees and the fees
of other expert consultants) fines, penalties, claims, actions, demands,
expenses and judgments for loss, damage or injury to property or person
resulting from or occurring by reason of (i) any breach by Landlord of its
obligations set forth in this Lease, or (ii) the presence of any Hazardous
Materials in, on, under or about the Leased Premises resulting from use or
activities of any Person on or about the Leased Premises other than Tenant, its
shareholders, officers, directors, employees and lenders (to the extent stated
above); provided such presence of Hazardous Materials is a violation of the Law.
Section 36.02. TENANT'S INDEMNITY. Supplementing Section 33.02, titled
"Tenant's Indemnity," Tenant hereby agrees to indemnify, defend and hold
harmless Landlord, its shareholders, directors, officers, employees and lenders
(to the extent they have an interest in any part of the Project, Landlord's
equipment and other personal property thereon or any aspect of the business
conducted by Landlord at the Project), and each of their respective successors
and assigns, from and against any and all costs (including reasonable attorneys'
fees and the fees of other expert consultants) fines, penalties, claims,
actions, demands, expenses and judgments for loss, damage or injury to property
or person resulting from or occurring by reason of (i) any breach by Tenant of
its obligations set forth in this Lease, or (ii) the presence of any Hazardous
Materials in, on, under or about the Project resulting from Tenant's or its
employees' or invitees' use or activities on or about the Leased Premises;
provided such presence is a violation of the Law.
Section 36.03. SURVIVAL.
This ARTICLE THIRTY-SIX shall survive the expiration or earlier
termination of this Lease.
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ARTICLE THIRTY-SEVEN
LABOR HARMONY
(a) Landlord and Tenant acknowledge the importance of maintaining a
work environment at the Project that will not subject any neutral employer to
any interruption of its operations due to a labor disturbance or activity
(herein a "labor disturbance"), whether or not such disturbance or activity is
protected by labor Laws involving the employees of another employer at the
Project, or the employees of any of their respective contractors,
subcontractors, suppliers or other invitees. Landlord and Tenant shall make
reasonable good faith efforts to avoid strikes, picketing and other labor
disturbances at the Project by their respective employees, contractors,
subcontractors, suppliers and other invitees.
(b) If there is a labor disturbance adversely affecting the Project,
Landlord or Tenant, as appropriate, agrees to take prompt, reasonable and
lawful action to isolate the location of that disturbance so as not to
interrupt the business operations of the other or its occupants. As soon as
either becomes aware that a labor disturbance is threatened, it shall notify
the other and shall take prompt, reasonable and lawful action to ensure that any
labor disturbance will not affect the business operations of the other and
is limited to as small and specific an area as possible. Such action may
include establishing a separate gate reserved for the employees, contractors,
suppliers, or other invitees of the employer primarily involved in the labor
disturbance and another separate gate or gates for the employees, contractors,
subcontractors, suppliers and other invitees of all those not involved in the
dispute. The party involved in the labor disturbance shall promptly post
the gates located on its property with appropriate signs and shall notify, in
writing, the labor organization or other group creating the labor disturbance
that separate reserved gates have been established. The party involved in the
labor disturbance shall take any action reasonably necessary to ensure for
that Person's use. However, all actions taken by Landlord or Tenant hereunder
shall be limited to those permitted by Laws, including the National Labor
Relations Act.
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ARTICLE THIRTY-EIGHT
OTHER AGREEMENTS
Landlord and Tenant are parties to the Outsourcing Base Agreement and
other agreements executed and delivered as of the date hereof in connection with
the outsourcing of part of Landlord's business to Tenant (such agreements are
collectively called the "Other Agreements"). Landlord and Tenant shall comply
with all of the provisions of the Other Agreements and, anything herein to the
contrary notwithstanding, the provisions of this Lease shall not supersede,
alter, amend or modify the provisions of the Other Agreements. If there is any
conflict between the provisions of this Lease and any provisions of the Other
Agreements, the provisions of the Other Agreements shall control.
ARTICLE THIRTY-NINE
BINDING AGREEMENT
This Lease shall bind and inure to the benefit of Tenant's and Landlord's
respective representatives, successors and permitted assigns. By delivering to
the other a signed counterpart of this Lease, Landlord and Tenant each hereby
represent and warrant to the other that (a) execution and delivery of this Lease
and performance of the obligations on its part to be performed hereunder are
within its power and authority and have been duly authorized by all necessary
action required by its organization; (b) this Lease is valid, legal and binding
obligation of each and enforceable in accordance with its terms; and (c) this
Lease has been validly signed and delivered by duly authorized representatives
of Landlord and Tenant.
ARTICLE FORTY
TRANSITION SPACE
From the Term Commencement Date until the date that Tenant relocates all
of its business operations and personnel into the Leased Premises, former
employees of Landlord who become Tenant's employees on the Term Commencement
Date are hereby permitted to remain at their current location in Building No.
103. The terms of this Lease shall apply as if the current location of the
employee were part of the Leased Premises until such time as all of the
employees at a discreet location are moved to the Leased Premises; except that
certain utilities shall be charged in accordance with the agreements set forth
on SCHEDULE A.
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ARTICLE FORTY-ONE
ENTIRE AGREEMENT
This Lease, including all EXHIBITS and Attachments referred to herein,
contains the entire agreement of Landlord and Tenant with respect to the matters
stated herein, and may not be modified except by an instrument in writing which
is signed by both parties and delivered by each to the other. Such EXHIBITS and
Attachments are incorporated herein as fully as if their contents were set out
in full at each point of reference to them.
IN WITNESS WHEREOF, this Lease has been executed by the duly authorized
representatives of Landlord and Tenant as of the date first written above.
WITNESS: MANUFACTURERS' SERVICES WESTERN
U.S. OPERATIONS,
/s/ Dale Johnson By: /s/ Kevin Melia
- ------------------------ ---------------------------
General Counsel Title: President, CEO
------------------------
WITNESS: INTERNATIONAL BUSINESS MACHINES
CORPORATION
/s/ A.R. Wolfert By: /s/ J.Robb Mayo
- ------------------------ ---------------------------
A.R. Wolfert J. Robb Mayo
Associate General Counsel Director of US Real Estate
IBM Real Estate Services Operations and Investments
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EXHIBIT A-1
DESCRIPTION OF LEASED PREMISES
APPROXIMATE RENTABLE
BUILDING NO. USE SQUARE FEET
- ------------ --- -----------
002 Warehouse 153,439
(Receiving)
002 Office, Lab 44,029
(Mezzanine)
003 Warehouse 76,015
(Storage)
<PAGE>
IBM CHARLOTTE
-------------
Warehouse: Bldg's 002 / 003
[GRAPHIC OF A FLOOR PLAN]
EXHIBIT A-2
<PAGE>
EXHIBIT B
DESCRIPTION OF PROJECT
AND
BUILDING PARKING AREA
(next page)
<PAGE>
IBM CHARLOTTE
-------------
Site Profile
[GRAPHIC OF A SITE PROFILE]
EXHIBIT B
<PAGE>
ATTACHMENT A
ELECTRICITY AND COMPRESSED AIR SPEC
Electricity provided to the premises will be at a nominal 120/208 volts,
single phase and 480 volts, three phase service up to the capacity of the
Building 002 substation (2000 kva). All substations in Buildings 002 and 003
will be metered and charged at the rate set forth in Schedule A.
Oil free compressed air shall be provided at 90 psi and maximum dewpoint
of 40 degrees F at Tenant's service connection. Usage will be metered at the
entrance to the space and charged at the rate set forth in Schedule A.
<PAGE>
ATTACHMENT B
PAGE 1 of 6
TENANT RULES AND REGULATIONS
Attached to and made part of
Lease
between
International Business Machines Corporation
and
XYZ
January 1, 1998
Tenant shall comply with the following rules and regulations:
Landlord reserves the right to delete, modify, and add additional rules
provided Tenant is furnished a copy thereof. For the purpose of these rules, the
word "Tenant" shall include Tenant's employees, agents, contractors,
representatives and other invitees.
BADGE ACCESS
(a) Tenant will be allowed access to the Leased Premises and to
designated public areas of the Project, including the cafeteria and IBM lobby,
by badge. Tenant's access badges will be provided by Landlord at no cost to
Tenant and must be worn at all times while on the Project except within the
Leased Premises. Badge holders must badge-in individually and must not allow
persons behind them to enter unless they "light the light" with their own badge.
If they do not have a badge or their badge does not work, direct them to the
main lobby central security center in Building 301 for visitor sign in, or for a
temporary badge, or for determination of why their badge does not work. If a
badge is lost or stolen, Landlord must be notified immediately. Landlord
reserves the right to challenge persons leaving or entering any part of the
Project. Visitors are provided dated, temporary badges and require an escort at
all times within the Project public areas.
(b) In Landlord's sole discretion, Tenant's employees and invitees will
be allowed internal access to the Project's cafeteria during breakfast and lunch
periods. Landlord reserves the right, in its reasonable discretion, to withdraw
permission to use the internal access route and, thereafter prohibit further use
thereof by Tenant's employees and invitees'.
<PAGE>
ATTACHMENT B
PAGE 2 of 6
TENANT RULES AND REGULATIONS
COMMON FACILITIES
(a) The sidewalks, halls, passages, elevators, stairways, exits,
entrances, and other common areas shall not be obstructed by Tenant or used for
any purpose other than ingress to or egress from any part of the Project. The
halls, passages, exits, entrances, elevators, stairways, balconies, and roof are
not for the use of the general public. Landlord shall in all cases retain the
right to control and prevent access thereto of all persons whose presence, in
the sole judgment of Landlord, shall be prejudicial to the safety, character,
reputation, and interests of the Project and its occupants. However, nothing
stated above shall be construed to prevent access of the Leased Premises to
Tenant and to persons with whom Tenant normally deals in the ordinary of its
business unless such persons are engaged in illegal activities or misconduct
such as erratic or aggressive behavior. Tenant shall not go upon the roof of the
Leased Premises without the written consent of the Landlord which Landlord may
withhold in its sole discretion.
(b) Tenant shall not park in areas other than the Building Parking Area.
Illegally parked vehicles may be towed at Tenant's expense.
(c) Tenant shall not repair, adjust, improve or alter the Building
Service Systems without the expressed consent of Landlord.
VISITORS
(a) Visits by anyone to the Project other than the Leased Premises (but
including the cafeteria and IBM lobby) who is employed by an IBM Competitor must
be pre-approved by IBM, whether or not the visitor is representing the competing
company at the time of the visit. An "IBM Competitor" is anyone who is in a
business that competes with the business carried on by IBM at the Project and
any other business specified in writing by IBM to Tenant reasonably related
to IBM's business at the Project.
(b) Any visit to the Project by a person who is a representative of any
organization of, or located within, a restricted trade country, as defined from
time to time by the U.S. Export Regulations, requires the prior approval of
Landlord and Landlord's lawyers.
<PAGE>
ATTACHMENT B
PAGE 3 of 6
TENANT RULES AND REGULATIONS
USE OF FACILITIES
(a) The bathroom facilities shall not be used for any purpose other than
that for which they were constructed and no foreign substance of any kind
whatsoever shall be thrown therein. The expense of any breakage, stoppage, or
damage resulting from a violation of this rule shall be borne by Tenant who (or
whose employees, agents, contractors, or other invitees) caused the violation.
(b) If Landlord, by notice in writing to Tenant, shall object to any
curtain, blind, shade, or screen attached to, or hung in, or used in connection
with, any window or door of the Leased Premises, such use of curtain, blind,
shade or screen shall be forthwith discontinued by Tenant.
(c) None of Tenant's Personal Property or other items heavier than the
lift capacity of the freight elevator of the Leased Premises shall be brought
into or installed in the Leased Premises without Landlord's written approval.
Tenant shall not place a load upon any floor of the Leased Premises which
exceeds the design load of the floor.
(d) No portion of the Leased Premises shall be used for cooking, lodging
or sleeping except customary and reasonable office microwave ovens and
refrigerators for employee use. All contract vending requirements shall be
provided by Landlord's vending contractor.
(e) Except for noise caused by Tenant's card manufacturing process, which
Landlord agrees is acceptable, Tenant shall not make noises, cause disturbances
or vibrations, or use or operate any electrical or electronic devices that emit
sound or other waves or disturbances or create odors if unreasonably offensive
to anyone or if they interfere with the operation of any device, equipment or
radio or television broadcasting or reception, in each case as determined by
Landlord in its sole discretion. Animals shall not be brought onto the Project,
except for assistance of the disabled without the consent of Landlord, which it
may withhold in its sole discretion.
(f) Smoking is prohibited in all areas of the Leased Premises, which
includes hallways, rest rooms, lobbies, stairwells, elevators, and any other
Common Facility, whether occupied or unoccupied. Tenant shall prohibit any
employee and invitees from smoking or carrying a lighted cigar, cigarette,
<PAGE>
ATTACHMENT B
PAGE 4 of 6
TENANT RULES AND REGULATIONS
pipe, etc. "Smoking" means inhaling, exhaling, burning, or carrying any lighted
cigar, pipe cigarette, weed, plant or other combustible substance in any manner
or in any form.
ADVERTISING, SOLICITATION, SALES
(a) Without Landlord's prior written consent, Tenant shall not use the
name or picture of the Project (except for a picture of the Leased Premises) or
the name "IBM" or "International Business Machines Corporation" or any affiliate
of IBM in its advertising or other publicity, or on its stationary, on the
Internet or in any other medium.
(b) Tenant shall not canvass or solicit business from other tenants or
occupants at the Project, and shall not exhibit, sell or offer to sell, use,
rent or exchange in or from the Leased Premises.
(c) Tenant shall not conduct any auction, fire, bankruptcy, going out of
business, liquidation or similar sales anywhere at the Project.
APPROVALS/PERMITS
(1) Without limiting any other obligation required by provisions of the
Lease, Tenant must obtain a permit or approval from Landlord (not to be
unreasonably withheld or delayed) before:
a. Using a laser or x-ray
b. Disturbing asbestos containing material (ACM) or presumed asbestos
containing material (PACM)
c. Working in an area where there is reasonable potential to disturb
ACM or PACM
d. Internal combustion engine use indoors
e. Blasting or explosives use
f. Explosive (powder) actuated fastening tool use
g. Airlifting, crane, mobile crane, or hoist use
h. Use of powered industrial vehicles
i. Cutting, welding, burning, or open flame work
j. Entering a confined space
k. Moving or relocating any emergency equipment
l. Fire alarm work or sprinkler impairment
m. Using salamanders or heaters
n. Installing an air emission source regulated by the Mecklenburg
County Department of Environmental Protection
<PAGE>
ATTACHMENT B
PAGE 5 of 6
TENANT RULES AND REGULATIONS
o. Connecting to or disconnecting from the Building Service Systems,
storm drain, or sanitary sewer
p. Introduction of a Hazardous Material except as authorized in ARTICLE
THIRTY-THREE
(2) Approvals/permits shall be requested through Landlord's Safety,
Environmental and Industrial Hygiene Department.
(3) Tenant shall notify Landlord prior to using any ionizing radiation
source.
SAFETY AND SECURITY
(a) In the event of an emergency evacuation of any part of the Leased
Premises, occupants will be notified via the Project's public address system.
There will be a distinctive set of tones followed by an announcement. All
occupants must become familiar and group assembly location. Evacuation route
maps which must be posted by Tenant in the Leased Premises. In an evacuation,
Tenant's employee's and invitees will go to a pre-selected area outside the
Leased Premises. All personnel will be accounted for by Tenant. Whenever Tenant
calls for an evacuation, the emergency must be reported on 4-2222 so that
appropriate emergency personnel can respond. Landlord shall furnish emergency
number decals required for every phone. Tenant shall call 4-2220 to obtain them.
(b) All fire and medical emergencies as well as threats and acts of
violence must be reported immediately to the IBM Building 301 Security Center,
ext. 42222.
(c) Weapons of any sort (e.g., guns, knives, archery equipment,
explosives, and ammunition) are not permitted on the Project. The manufacture,
use, distribution, sale, or possession of illegal drugs or alcoholic beverages
or other controlled substances, except for purposes approved by Landlord in its
sole discretion, is prohibited on the Project.
(d) Landlord reserves the right to exclude or expel from the Project any
person who, in the sole judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who poses a security risk to the Project or any
occupant or invitee of the Project, or who shall in any manner threatens to do
or does any act in violation of the Law or these rules.
<PAGE>
ATTACHMENT B
PAGE 6 of 6
TENANT RULES AND REGULATIONS
(e) Cameras and recording devices may be used solely within the Leased
Premises at any time without the consent of Landlord but may not be used at any
other portion of the Project without Landlord's written consent. Tenant must
obtain a camera pass for any camera brought into any building at the Project,
including the Leased Premises.
(f) Tenant will, become familiar with and comply with the most current
version of the IBM CHARLOTTE GUIDE TO SAFETY & SECURITY, copies of which Tenant
agrees it has received.
NOTIFICATIONS TO LANDLORD
(a) Tenant shall immediately notify Landlord of any serious injury,
illness, or threat occurring at the Leased Premises and of any significant
damage to the Leased Premises. Tenant shall follow up with a written statement
of the facts of the incident by the close of the next business day.
(b) Tenant shall notify Landlord if a charge of noncompliance with OSHA or
any other regulatory agency is filed against Tenant in connection with Tenant's
operations performed at the Project.
NONHAZARDOUS WASTE STORAGE /DISPOSAL
Tenant shall store all of its trash, refuse, and waste materials within
the Leased Premises or in such location as Landlord may designate. All trash,
refuse, and waste materials shall be stored in adequate containers so as not to
constitute a health or fire hazard or a nuisance. No burning of trash, refuse,
and waste materials shall be allowed
<PAGE>
ATTACHMENT C
LANDLORD FIT-UP WORK AND METER INSTALLATION
Prior to December 31, 1998, Landlord shall, at its sole expense, complete the
following:
1. Relocate complete manufacturing lines from Building 103 to the Leased
Premises.
2. Install meters to measure the amount of electricity, chilled water and
compressed air consumed within the Leased Premises. Compressed air and
chilled water meters will be installed at the entrance of these services
to the Leased Premises. Electrical consumption meters will be installed at
each unit substation within the Leased Premises.
3. Install physical wiring for telephone infrastructure within the Leased
Premises.
<PAGE>
SCHEDULE A
PAGE 1 of 2
REIMBURSEMENT
FOR
UTILITIES AND SERVICES
PRICING - 1998
UTILITY PRICES
Electricity $ per kWh $0.05
Chilled Water $ per Ton Hr. $0.08
Compressed Air $ per 100 SCF $O.035
SERVICES
Repairs caused by acts/omissions of Tenant at Landlord's cost.
If requested by Tenant and the specs and other terms are agreed upon in writing,
housekeeping services at Landlord's cost.
Engineering and construction management at Landlord's cost.
Construction at Landlord's cost.
No other services will be provided or offered to Tenant except for those
specifically agreed upon in this Lease.
ELECTRICITY
(1) Referring to the electricity charge, Landlord shall furnish
electricity during the transition period described below and during the Initial
Term (defined in Section 2.01) at no cost to Tenant. Tenant shall pay for
electrical consumption during the Extended Term (defined in Section 2.02) in
accordance with this Schedule A.
(2) Referring to the electricity charge, $0.05/KWH is an estimate to be
paid by Tenant. Within forty-five (45) days following the end of each lease
year, beginning forty-five (45) days following the end of the first lease year,
Landlord shall compare the actual payments made by Tenant based on $0.05/KWH
against the average rate/KWH paid by Landlord to the electric utility servicing
the Project during such lease year. To the extent actual payments made by Tenant
exceed the payments it
<PAGE>
SCHEDULE A
PAGE 2 of 2
REIMBURSEMENT
FOR
UTILITIES AND SERVICES
PRICING - 1998
would have made if such average cost/KWH had been charged, Landlord shall credit
the amount of such excess payment against the Basic Rent due in March of the
year of such reconciliation. If for any reason the Term has ended prior to March
of any year, Landlord shall, within thirty (30) days after completing its
reconciliation, pay Tenant the excess amount, if any. This paragraph (3) shall
survive the end of the Term.
GENERAL
(1) Once each year during the Term, beginning on the first day of the
second lease year, the prices listed above may be changed by Landlord upon
thirty (30) day written notice from Landlord to Tenant; except that in no event
shall the utility costs be changed except to the extent changed by the utility
provider.
(2) For jobs costing more than Fifty Thousand Dollars ($50,000.00),
Landlord and Tenant shall arrange for monthly reimbursements to be paid to
Landlord for work agreed upon to be in place the previous month.
TRANSITION PERIOD
Notwithstanding any provision in this Lease to the contrary, during the
transition period, Tenant shall pay the Basic Rent plus Eight Thousand Dollars
($8,000.00) each month as an estimated payment for chilled water and compressed
air. Within ninety (90) days after the initial twelve (12) consecutive full
calendar months following the date that all of Tenant's employees will have
relocated to Building No. 002 and 003, the charges for these two (2) utilities
will be adjusted to reflect the actual cost that Tenant incurred during such
first twelve (12) month period.
<PAGE>
SCHEDULE B
Page 1 of 5
APPROVED CHEMICALS
CHEMICAL NAME
3-IN-ONE OIL
30W OIL
3M 2214
141 PGMNT INK WHITE YELLOW ORA
309 EPOXY PART A
309 EPOXY PART B
3M 2216 GRAY EPOXY KIT A/B
3M 2216 GRAY EPOXY PART A
3M 2216 GRAY EPOXY PART B
3M 2290 EPOXY ADHESIVE/COATING
3M 826 ADHESIVE
3M DESK & OFFICE CLEANER NO.57
3M EC-1838 ADHESIVE KIT A/B
3M EC-1838 ADHESIVE PART A
3M EC-1838 ADHESIVE PART B
AMOCO SUPERMIL M-125
ACETONE
AIR DRY WATERBORNE ACRYLIC (36
AMOCO SUPERMIL M-125
ARMITAGE GRAPHITE GRAY TOUCH U
ARMITAGE WM-04061A PEARL WHITE
ABMITAGE WM-04071A LIGHT GRAY
ARMITAGE WM-04105A RAVEN BLACK
ARMITAGE WM-04111A CLASSIC BLU
ARMITAGE WM-04117A #733 PEBBLE
ARO LIGHT OIL 29665, LUBRIPLAT
ALVANIA 2 GREASE
ALVANIA EP GREASE 2
ANDEROL 732
ACL STATICIDE
ALPHA SOLDER 60/40 ROSIN CORE,
BASIC-H INDUSTRIAL CLEANER
BORDEN E601 EPOXY PART A
BORDEN E601 EPOXY PART B
BORDEN EPOXY E-601 PARTS A/B K
BOSTIK ANTI-SEIZE
CA-20
CITRUS HAND CLEANER
CA-40H INSTANT ADHESIVE
CARBOLINE Fl NEOPRENE ADHESIVE
CHESTERTON PENETRATING OIL 813
DEXTRON ATF
DOW CORNING 44 GREASE
DOW CORNING MOLYKOTE 340
DARINA #1 (IBM #23) GREASE
<PAGE>
SCHEDULE B
Page 2 of 5
APPROVED CHEMICALS
DEEP CHARCOAL V-6320 (P/N 2108
DOW CORNING MOLYKOTE 340 HEATS
DOW CORNING MOLYKOTE GN (ARO 4
DOW CORNING RTV 3145
DOW CORNING RTV 732 BLACK
DOW CORNING RTV 732 CLEAR OR W
DARINA 1 GREASE
DOW CORNING RTV 3145
DTE 797 LIGHT OIL
ELECTRODAG 504
EPK 0151 RESIN
ESPREE MAG WHEEL CLEANER
ESPREE WHEEL MAGIC
EK-40 WHITE FASTCURE EPOXY HAR
EK-40 WHITE FASTCURE EPOXY KIT
EK-40 WHITE FASTCURE EPOXY RES
FABER CASTELL,INK, UNIT-PAINT MA
FINGER LAKES 3-D DEGREASER
FLUOROLAST LC-8125
FULTON INDELIBLE INK (CAROLINA
FAST DRY ACRYLIC ENAMEL (F78/1
GE RTV 128
GENESOLV 2004 (HCFC)
GE RTV 162
GLYPTAL 1276
GE RTV 106
GE SCS 1202 WHITE
GENERAL PURPOSE CHAIN LUBE
HIGH PERF. EPOXY MASTIC - BASE
HIGH PERF. EPOXY MASTIC ACTIVA
HYSOL 1C EPOXY (IBM 1209)
HYSOL 0151 EPOXY PART B
HYSOL 309 EPOXY KIT A/B
HYSOL TE 400 HIPER HOT MELT AD
IBM 3891XP, 3892X2 INKJET INK
IMMERSION EPOXY ACTIVATOR
INSTA-FOAM COMPONENT A
INSTA-FOAM COMPONENT B
INSTAFILL COMPONENT A
INSTAFILL COMPONENT B
INSTAPAK HOLSTER SOLVENT
INSTAPAK PORT CLEANER (AEROSOL
ISOPROPYL ALCOHOL
JENNY APL COMPOUND
JET-MELT ADHESIVE 3764-AE/PG/T
KRYLON PEBBLE GRAY SPRAY PAINT
<PAGE>
SCHEDULE B
Page 3 of 5
APPROVED CHEMICALS
KESTER 44 SOLDER
KRYLON GRAY PRIMER 1318
KRYLON BRASS PAINT
KRYLON DEEP CHARCOAL SPRAY PAI
KRYLON PEARL WHITE SPRAY PAINT
KRYLON RAVEN BLACK SPRAY PAINT
LILLY AIR DRY PAINT CLASSIC BL
LILLY PEBBLE GRAY 75502-1359
LOCTITE 222
LOCTITE 262 MEDIUM STRENGTH
LOCTITE 271
LOCTITE 290
LOCTITE 380 (BLACK MAX)
LOCTITE 414
LOCTITE 420
LOCTITE 609 (FORMERLY 601)
LOCTITE 80 GRADE E
LOCTITE 87 GRADE AV
LOCTITE 88 GRADE A
LOCTITE GRADE D ADHESIVE
LOCTITE PRISM 403
LUBRIPLATE 70
LUBRIPLATE MOLTEX 800
LIQUID WRENCH
LITTON 037075 BLUE
LITTON 037750 ORANGE
LOCTITE 242
LOCTITE 404
LOCTITE 495
LOCTITE 76820 NMS CLEAN UP SOL
LOW TEMP. EPOXY MASTIC ACTIVAT
LUBRIPLATE 90s
LUBRIPLATE CHAIN & CABLE FLUID
609 (LOCTITEFORMERLY 601)
MENTOR OIL 28
MOBIL 600W CYLINDER OIL
MOBIL DTE 797 LIGHT OIL (IBM 6
MOO #2 LUBRICANT
MOLYBDENUM DISULFIDE
MOROIL INDLUBE 5-220
MPG-2 GREASE MARKED
6816 WHITE INK 8036056
METHYL ALCOHOL
METHYL ETHYL KETONE
METHYL ISOBUTYL KETONE
METROLAB GRANITE SURFACE PLATE
<PAGE>
SCHEDULE B
Page 4 of 5
APPROVED CHEMICALS
MOBILGREASE #28
N-METHYL-2-PYRROLIDINONE
NOKORODE SOLDERING PASTE
NOVUS PLASTIC POLISH #1
NOVUS PLASTIC POLISH #2
NYETACT 515M
PERMABOND 910
PROGEL BATTERY CLEANER
PRONTO
PROPANE
PACTRA XF2 WHITE ENAMEL
PRISM 401 SURF-INSENSITIVE 401
PROFESSIONAL WHISTLE RTU ALL P
PRONTO CA-50 GEL INSTANT ADHES
PERMABOND 910
RTV 732 CLEAR OR WHITE
RTV133
RANDOLPH CLASSIC BLUE V-6327 S
RANDOLPH LIGHT GRAY V-1633 SPR
RANDOLPH PEARL WHITE V-6075 SP
RANDOLPH PEBBLE GRAY V-6324 SP
RANDOLPH RAVEN BLACK E-3382 SP
RANGER 278 MARKING INK
RELIANCE PEBBLE GRAY TOUCH UP
SHELL DARINA 1 GREASE (IBM #23
SILASTIC J RTV CURING AGENT
SILASTIC J RTV SILICONE RUBBER
SOLDER
STAR BRITE WHITE TEFLON LUBRIC
STECO TAP MAGIC CUTTING FLUID
SAFETAP
SAFETY RED PAINT
SAFETY YELLOW AEROSOL PAINT 03
STAR BRITE, LUBRICANT, STAR BRIT
SUPER AGITENE
SUPER HPO MOTOR OIL SAE lOW
SCOTCH-WELD DP-100 PLUS (A) CL
SCOTCH-WELD DP-100 PLUS (B) CL
SCOTCH-WELD DP-100 PLUS 2-PART
TELLUS 100 OIL (IBM 10)
TEXWIPE MICRO-DUSTER TX1O4, TX
TORQUE SEAL F-900 ALL COLORS
TRIDENT JETWRITE INK
TEMPO BLACK ULTRA-HIGH TEMPERA
TEXACO CAPELLA OIL
TC-208 THERM. COND. GREASE
<PAGE>
SCHEDULE B
Page 5 of 5
APPROVED CHEMICALS
TX 2500 THRU 2504 MICRODUSTER
ULTRAJET 2000, FREEZIT 2000, ES1
VALVOLINE SAE 140 OIL
WD-40 OIL
WL-24529A IBM TAIWAN T UP ECOL
YELLOW 77 WIRE PULLING LUBRICANT
<PAGE>
The following sets forth all of the direct and indirect subsidiaries of
Manufacturers' Services Limited. If indented, the corporation is a
wholly-owned subsidiary of the corporation under which it is listed.
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE REGISTRANT JURISDICTION
OF INCORPORATION
- --------------------------------------------------------------------------------
<S> <C>
Manufacturers' Services Central US Operations, Inc. Minnesota
Manufacturers' Services Salt Lake City Operations, Inc. Delaware
Manufacturers' Services Western US Operations, Inc. California
MSL Japan Ltd. Japan
MSL Offshore Finance BV Netherlands
MSL Overseas Finance BV Netherlands
Manufacturers' Services Athlone Limited Ireland
MSL Technology Services (Malaysia) Sdn Bhd Malaysia
Manufacturers' Services Singapore Pte Ltd. Singapore
MSL SPV Ireland, Inc. Delaware
MSL SPV Spain, Inc. Delaware
Global Manufacturers' Services Valencia S.A. Spain
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated February 2, 2000 relating to the financial statements and
financial statement schedule of Manufacturers' Services Limited, which appear
in such Registration Statement. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 0 23,969 24,182
<SECURITIES> 0 0 0
<RECEIVABLES> 0 118,513 131,301
<ALLOWANCES> 0 698 728
<INVENTORY> 0 87,487 125,164
<CURRENT-ASSETS> 0 235,034 299,265
<PP&E> 0 33,786 62,814
<DEPRECIATION> 0 19,802 30,536
<TOTAL-ASSETS> 0 277,608 411,783
<CURRENT-LIABILITIES> 0 180,694 200,992
<BONDS> 0 0 0
0 0 0
0 0 39,204
<COMMON> 0 75 78
<OTHER-SE> 0 39,099 48,543
<TOTAL-LIABILITY-AND-EQUITY> 0 277,608 411,783
<SALES> 562,666 837,993 920,722
<TOTAL-REVENUES> 562,666 837,993 920,722
<CGS> 526,787 792,734 865,489
<TOTAL-COSTS> 526,787 792,734 865,489
<OTHER-EXPENSES> 39,899 36,245 38,483
<LOSS-PROVISION> 232 319 339
<INTEREST-EXPENSE> 7,723 10,161 8,081
<INCOME-PRETAX> (12,906) (745) 5,820
<INCOME-TAX> 4,372 3,294 3,810
<INCOME-CONTINUING> (17,278) (4,039) 2,010
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 (2,202) 0
<CHANGES> 0 0 0
<NET-INCOME> (17,278) (6,241) 2,010
<EPS-BASIC> (0.27) (0.08) 0.02
<EPS-DILUTED> (0.27) (0.08) 0.02
</TABLE>
