-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bnoma9CLkpzOwen84Run1s8epQNPbHxGmrdKCghfIs81MJBI3ItwZoHJL5lmnn8V aBw0SeHsD7GBpYNPqbG0Kg== 0000950123-97-007465.txt : 19970912 0000950123-97-007465.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950123-97-007465 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970818 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970902 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DII GROUP INC CENTRAL INDEX KEY: 0000899047 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 841224426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21374 FILM NUMBER: 97674253 BUSINESS ADDRESS: STREET 1: 6273 MONARCH PARK PLACE CITY: NIWOT STATE: CO ZIP: 80503 BUSINESS PHONE: 3036522221 FORMER COMPANY: FORMER CONFORMED NAME: DOVATRON INTERNATIONAL INC DATE OF NAME CHANGE: 19930319 8-K 1 THE DII GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 August 18, 1997 (Date of earliest event reported) The DII Group, Inc. (Exact name of registrant as specified in its charter) Delaware 0-21374 84-1224426 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 6273 Monarch Park Place Suite 200 Niwot, Colorado 80503 (Address and zip code of principal executive offices) (303) 652-2221 Registrant's telephone number, including area code 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 18, 1997, Multilayer Tek L.P. ("Multek"), a wholly-owned subsidiary of The DII Group, Inc. (the "Company"), completed the acquisition of IBM's high volume printed circuit board fabrication facility located in Austin, Texas pursuant to a Purchase Agreement dated as of August 5, 1997. IBM operated this high volume facility for internal production since 1981, and more recently for the merchant market. The acquired assets include approximately 70 acres and the buildings thereon which comprise approximately 700,000 square feet of printed circuit board manufacturing and related facilities, production equipment and inventory. The real estate and buildings are occupied pursuant to a ninety-nine year lease with the rent included in the purchase price, pending the subdivision of the Multek site from the IBM complex as well as other separation matters, at which time fee title will be transferred to Multek. The purchase price for the assets was approximately $46 million, subject to certain post-closing adjustments, and was based upon arms'-length negotiation between IBM and the Company. In connection with the acquisition, IBM and Multek entered into a three-year Supply Agreement, pursuant to which Multek will supply IBM with printed circuit boards. Multek intends to utilize the facility's production capacity to expand its customer base beyond the requirements of IBM. The acquisition was financed with loan proceeds under the Company's credit facility with Norwest Bank Colorado, N.A., The Chase Manhattan Bank, Harris Trust and Savings Bank and NBD Bank. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. EXHIBIT NUMBER DESCRIPTION - -------------- ----------- *2.1 Purchase Agreement, dated as of August 5, 1997, by and among International Business Machines Corporation, a New York corporation ("Seller"), Multilayer Tek, L.P., a Texas limited partnership ("Buyer") and The DII Group, Inc., a Delaware corporation ("Guarantor") 2.2 Exhibit A to Purchase Agreement -- Assignment and Assumption Agreement *2.3 Exhibit C to Purchase Agreement -- Lease *2.4 Exhibit E to Purchase Agreement -- Project Operations Agreement +2.5 Exhibit F to Purchase Agreement -- Supply Agreement 2.6 Exhibit G to Purchase Agreement -- Bill of Sale 2.7 Exhibit H to Purchase Agreement -- Special Warranty Deed - ---------- * Schedules are not included and will be furnished supplementally to the Commission upon request. + Confidential treatment has been requested as to portions of this exhibit. 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. The DII Group, Inc. Date: August 29, 1997 By: /s/ Thomas J. Smach --------------------------------- Name: Thomas J. Smach Title: Chief Financial Officer 3 4 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - -------------- ----------- *2.1 Purchase Agreement, dated as of August 5, 1997, by and among International Business Machines Corporation, a New York corporation ("Seller"), Multilayer Tek, L.P., a Texas limited partnership ("Buyer") and The DII Group, Inc., a Delaware corporation ("Guarantor") 2.2 Exhibit A to Purchase Agreement -- Assignment and Assumption Agreement *2.3 Exhibit C to Purchase Agreement -- Lease *2.4 Exhibit E to Purchase Agreement -- Project Operations Agreement +2.5 Exhibit F to Purchase Agreement -- Supply Agreement 2.6 Exhibit G to Purchase Agreement -- Bill of Sale 2.7 Exhibit H to Purchase Agreement -- Special Warranty Deed - ---------- * Schedules are not included and will be furnished supplementally to the Commission upon request. + Confidential treatment has been requested as to portions of this exhibit. EX-2.1 2 PURCHASE AGREEMENT 1 EXHIBIT 2.1 TABLE OF CONTENTS ARTICLE I. DEFINITIONS. 1 SECTION 1.1. CERTAIN DEFINITIONS. 1 ARTICLE II. PURCHASE AND SALE OF ASSETS. 9 SECTION 2.1. TRANSFERRED ASSETS. 9 SECTION 2.2. EXCLUDED ASSETS. 9 SECTION 2.3. CONSIDERATION. 9 SECTION 2.4. ASSUMED LIABILITIES. 9 Section 2.5 Interim Operations for Buyer's Account 10 ARTICLE III. CLOSING. 10 SECTION 3.1. CLOSING DATE. 10 SECTION 3.2. DELIVERY BY BUYER. 10 SECTION 3.3. DELIVERY BY SELLER. 11 ARTICLE IV. TAX MATTERS. 12 SECTION 4.1. ALLOCATION OF PURCHASE PRICE. 12 SECTION 4.2. FILING OF RETURNS AND PAYMENT OF TAXES. 13 SECTION 4.3. REFUNDS AND CREDITS. 13 SECTION 4.4. TRANSFER TAXES. 14 ARTICLE V. OTHER MATTERS. 14 SECTION 5.1. CONSENTS AND SUBCONTRACTED WORK. 14 SECTION 5.2. EMPLOYEES AND EMPLOYEE BENEFITS. 16 SECTION 5.3. FURTHER ACTION. 19 -i- 2 SECTION 5.4. DUE DILIGENCE. 19 ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF BUYER. 19 SECTION 6.1. INCORPORATION. 19 SECTION 6.2. AUTHORITY. 19 SECTION 6.3. NO CONFLICT. 20 SECTION 6.4. GOVERNMENTAL CONSENTS - BUYER. 20 SECTION 6.5. NO BROKER 20 SECTION 6.6. LICENSES AND PERMITS. 20 SECTION 6.7. ENVIRONMENTAL MATTERS. 21 ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF 21 SELLER. SECTION 7.1. INCORPORATION. 21 SECTION 7.2. AUTHORITY. 21 SECTION 7.3. NO CONFLICT. 21 SECTION 7.4. GOVERNMENTAL CONSENTS - SELLER. 22 SECTION 7.5. NO BROKER. 22 SECTION 7.6. TITLE TO PERSONAL PROPERTY. 22 SECTION 7.7. ACTIONS, SUITS, PROCEEDINGS. 22 SECTION 7.8. CONTRACTS. 22 SECTION 7.9. LICENSES AND PERMITS. 23 SECTION 7.10. ENVIRONMENTAL REPRESENTATIONS. 23 SECTION 7.11. FINANCIAL STATEMENTS AND REPORTS. 25 SECTION 7.12. LABOR AND EMPLOYMENT MATTERS. 25 -ii- 3 SECTION 7.13. INVENTORIES. 25 Section 7.14. Equipment. 25 SECTION 7.15. CUSTOMERS. 26 SECTION 7.16. SUPPLIERS; RAW MATERIALS. 26 SECTION 7.17. REAL ESTATE. 26 Section 7.18. Employee Benefit Plans for Transferred Employees. 27 Section 7.19. Forecast. 27 SECTION 7.20. DISCLOSURE. 27 SECTION 7.21. EXCLUSIVE WARRANTIES. 27 ARTICLE VIII. COVENANTS AND AGREEMENTS. 28 SECTION 8.1. HSR FILINGS. 28 Section 8.2 Purchase of Equipment 28 SECTION 8.3. AMENDED SCHEDULES. 28 SECTION 8.4. SALE OF REAL ESTATE. 28 SECTION 8.5. SALE "AS IS" WITH ALL FAULTS 30 SECTION 8.6. BUYER PERMITS AND FINANCIAL ASSURANCE. 30 SECTION 8.7. GUARANTEE OF THE GUARANTOR. 30 SECTION 8.8. NON-SOLICITATION 31 Section 8.9. Satisfaction of Closing Conditions 31 ARTICLE IX - COVENANTS OF SELLER 31 SECTION 9.1. CONDUCT OF THE BUSINESS. 31 SECTION 9.2. ACCESS TO INFORMATION. 31 -iii- 4 ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF 32 BUYER. SECTION 10.1. PERFORMANCE. 32 SECTION 10.2. AUTHORIZATION, EXECUTION AND DELIVERY OF OPERATIVE 32 AGREEMENTS. SECTION 10.3. NO DEFAULT. 32 SECTION 10.4. CONSENTS, ETC.; BURDENSOME CONDITIONS. 33 SECTION 10.5. GOVERNMENTAL RULES. 33 SECTION 10.6. STANDARD CLOSING DOCUMENTS. 33 SECTION 10.7. REPRESENTATIONS AND WARRANTIES. 34 SECTION 10.8. PROCEEDINGS. 34 SECTION 10.9. WAIVER OF CONDITIONS BY BUYER. 34 ARTICLE XI. CONDITIONS PRECEDENT TO OBLIGATIONS OF 34 SELLER. SECTION 11.1. PERFORMANCE. 34 SECTION 11.2. AUTHORIZATION, EXECUTION AND DELIVERY OF OPERATIVE 35 AGREEMENTS. SECTION 11.3. NO DEFAULT. 35 SECTION 11.4. CONSENTS, ETC.; BURDENSOME CONDITIONS. 35 SECTION 11.5. GOVERNMENTAL RULES. 35 SECTION 11.6. STANDARD CLOSING DOCUMENTS. 35 SECTION 11.7. REPRESENTATIONS AND WARRANTIES. 36 SECTION 11.8. PROCEEDINGS. 36 SECTION 11.9. WAIVER OF CONDITIONS BY SELLER. 37 -iv- 5 ARTICLE XII. ENVIRONMENTAL INDEMNITIES 37 SECTION 12.1. SELLER'S INDEMNITY 37 SECTION 12.2. BUYER INDEMNITY. 38 SECTION 12.3. SURVIVAL. 39 ARTICLE XIII. INDEMNITY. 39 SECTION 13.1. SURVIVAL. 39 SECTION 13.2. BUYER INDEMNIFICATION. 39 SECTION 13.3. SELLER INDEMNIFICATION. 39 SECTION 13.4. PROCEDURES. 40 SECTION 13.5. INSURANCE. 40 SECTION 13.6. INDEMNITY IS THE EXCLUSIVE REMEDY. 41 SECTION 13.7. EXCLUSION OF CERTAIN DAMAGES. 41 ARTICLE XIV. GENERAL. 41 SECTION 14.1. TERMINATION OF AGREEMENT. 41 SECTION 14.2. PUBLIC ANNOUNCEMENTS. 42 SECTION 14.3. NO THIRD-PARTY BENEFICIARIES. 42 SECTION 14.4. COSTS. 42 SECTION 14.5. BULK SALES. 42 SECTION 14.6. MODIFICATION AND WAIVER. 42 SECTION 14.7. CONSTRUCTION; REPRESENTATION. 42 SECTION 14.8. SEVERABILITY. 43 SECTION 14.9. GOVERNING LAW. 43 -v- 6 SECTION 14.10. NOTICES. 43 SECTION 14.11. ASSIGNMENT. 44 SECTION 14.12. COUNTERPARTS. 44 SECTION 14.13. ENTIRE AGREEMENT. 45 SCHEDULES SCHEDULE 1.1.(E) ENCUMBRANCES SCHEDULE 2.1.(II) EQUIPMENT SCHEDULE 2.1.(III) INVENTORY Schedule 2.1.(iv) Contracts Schedule 2.1.(vi) Transferable Permits SCHEDULE 2.4. ASSUMED LIABILITIES SCHEDULE 5.2.A. EMPLOYEES Schedule 5.2(b) Buyer's Terms of Employment for Transferred Employees Schedule 5.2(e) Seller's Separation Pay Plan SCHEDULE 6.7.(A) ENVIRONMENTAL STUDIES AND REPORTS RECEIVED BY BUYER Schedule 7.4 Governmental Consents -- Seller Schedule 7.7 Actions, Suits Proceedings Schedule 7.8.(b) Outstanding PCB Bids Schedule 7.8.(c) Customer Backlog SCHEDULE 7.9. LICENSES AND PERMITS SCHEDULE 7.10.(A) EXCEPTIONS TO SECTIONS 7.10(A) -vi- 7 SCHEDULE 7.10.(B) ENVIRONMENTAL JUDGMENTS, ORDERS, DECREES, CHARGES, COMPLAINTS, LAWSUITS OR INVESTIGATIONS AGAINST REAL ESTATE SCHEDULE 7.10.(C) PERMITS REQUIRED Schedule 7.10.(d) Spills or Leaks Schedule 7.10.(e) Hazardous Substances Schedule 7.14. Impaired Equipment Schedule 7.15. Customer Information Schedule 7.16. Supplier Information Schedule 7.18. Employee Benefit Plans Schedule 7.19. Forecast Schedule 8.2. Purchased Equipment EXHIBITS EXHIBIT A: ASSUMPTION AGREEMENT INTENTIONALLY OMITTED EXHIBIT C: LEASE INTENTIONALLY OMITTED EXHIBIT E: PROJECT OPERATIONS AGREEMENT EXHIBIT F: SUPPLY AGREEMENT EXHIBIT G: BILL OF SALE Exhibit H: Special Warranty Deed -vii- 8 - -------------------------------------------------------------------------------- AGREEMENTS LISTING 1. PURCHASE AGREEMENT 2. INTELLECTUAL PROPERTY AGREEMENTS a. INTELLECTUAL PROPERTY AGREEMENT b. PATENT LICENSE AGREEMENT 3. LEASE (INTERIM REAL ESTATE LEASE) 4. PROJECT OPERATIONS AGREEMENT 5. SUPPLY AGREEMENT 6. ASSIGNMENT AND ASSUMPTION AGREEMENT - -------------------------------------------------------------------------------- 9 AUGUST 5, 1997 PURCHASE AGREEMENT THIS AGREEMENT, dated as of August 5, 1997, by and among International Business Machines Corporation , a New York corporation ("Seller"), Multilayer Tek L.P., a Texas limited partnership ("Buyer") and The DII Group, Inc., a Delaware corporation ("Guarantor") (herein "Agreement); W I T N E S S E T H: WHEREAS, Seller wishes to sell certain assets used in the manufacturing of certain printed wire boards including the premises used for such manufacturing in Austin, Texas; and WHEREAS, Buyer wishes to purchase from Seller, and Seller wishes to sell to Buyer, such assets for the purchase price and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises set forth above and the respective covenants, agreements, representations and warranties hereinafter set forth, Buyer and Seller (collectively, the "Parties") hereby agree as follows: ARTICLE I. DEFINITIONS. SECTION 1.1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings specified below: "AFFILIATE" shall mean, as to any Person , any other Person which is directly or indirectly controlling, controlled by or under common control with such Person. "ALLOCATION STATEMENTS" shall have the meaning set forth in Section 4.1., below. "ANTITRUST DIVISION" shall have the meaning set forth in Section 8.1., below. -10- 10 "ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.4., below. "ASSUMPTION AGREEMENT" shall mean the Assignment and Assumption Agreement in the form set out in Exhibit A to be entered into by Buyer and Seller on the Closing Date and by which Buyer assumes the Assumed Liabilities. "BILL OF SALE" shall mean the Bill of Sale in the form set out in Exhibit G. "BEST KNOWLEDGE OF SELLER" shall mean the knowledge acquired based upon reasonable inquiry of IBM's current management of the IBM printed wire board plant operations at the Real Estate as of the date hereof and as of the Closing Date holding the title of Project Manager, Manufacturing Engineering Support or higher title, and the Site Operations Manager. "BURDENSOME CONDITION" shall mean any action taken, or credibly threatened, by or before any Governmental Authority or other Person to challenge the legality of the transactions contemplated by the Operative Agreements or that would otherwise deprive a Party of the material benefit of any such transaction, including (i) the pendency of an investigation by a Governmental Authority (formal or informal), (ii) the institution of any litigation, or threat thereof, (iii) an order by a Governmental Authority of competent jurisdiction preventing consummation of the transactions contemplated by the Operative Agreements or placing material conditions or limitations upon such consummation or (iv) the issuance of any subpoena, civil investigative demand or other request for documents or information relating to such transactions that is unreasonably burdensome in the reasonable judgment of the applicable Person; provided, however, that failure to obtain the Subdivision for any reason shall not be considered a Burdensome Condition. "CLOSING" shall have the meaning set forth in Section 3.1., below. "CLOSING DATE" shall have the meaning set forth in Section 3.1., below. "CODE" shall have the meaning set forth in Section 4.1., below. "COMPLEX" shall have the meaning specified in the Project Operations Agreement. "CONSENSUAL TRANSFERS" shall have the meaning specified in Section 5.1., below. "COVENANT BREACH" shall have the meaning set forth in Section 11.2., below. "EMPLOYEES" shall have the meaning set forth in Section 5.2., below. -11- 11 "ENCUMBRANCE" shall mean with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance, lease, license, easement, encroachment, burden, title defect, restriction, limitation or other adverse claim of any kind, whether disclosed by the Title Report, the Survey (as defined in the definition of "Permitted Encumbrances" below) or otherwise, in respect of such property or asset, other than Permitted Encumbrances. "ENVIRONMENTAL BASELINE" shall mean the measurement for each chemical constituent identified on the Multek Site by ERM - Southwest, Inc., based on the mean of existing well data to include, as a minimum, two (2) sampling events and a maximum of five (5) sampling events. ERM shall provide each party hereto with a copy of the Environmental Baseline by and dated August 8, 1997. "ENVIRONMENTAL LAW" shall mean any applicable federal, state or local law, statute, ordinance, judgment, governmental directives, regulations or other laws, generally and publicly promulgated by a Governmental Authority having jurisdiction over the Real Estate, including such environmental laws as the Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation and Liability Act, Federal Emergency Planning and Community Rights-to-Know Act, Hazardous Materials Transportation Act, the Clean Water Act, and the Clean Air Act, and any State of Texas or local counterparts thereof, as any of the foregoing have been amended prior to the Closing Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2., below. "FACILITY" shall mean the Buildings located on the Real Estate. "FTC" shall have the meaning set forth in Section 8.1., below. "GOVERNMENTAL ACTIONS" shall mean any authorizations, consents, approvals, waivers, exceptions, variances, franchises, permissions, permits, and licenses of, and filings and declarations with, Governmental Authorities. "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign court, governmental or administrative agency or commission or other governmental agency, authority, instrumentality or regulatory body having appropriate jurisdiction. "GOVERNMENTAL RULE" shall mean any statute, law, treaty, rule, code, ordinance, regulation, order or publicly promulgated written administrative guidelines of -12- 12 any Governmental Authority or any judgment, decree, injunction, writ, order or like action of any Federal, state, local, or foreign court, arbitrator or other judicial tribunal of competent jurisdiction. "GUARANTOR" shall mean The DII Group, Inc., a Delaware corporation. "HAZARDOUS SUBSTANCE" shall mean any hazardous waste, hazardous material, pollutant, or contaminant and words of similar import, including any substance defined as such by any applicable Environmental Law. "HSR" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "INDEMNIFIED PARTY" shall have the meaning set forth in Section 11.4., below. "INDEMNIFYING PARTY" shall have the meaning set forth in Section 11.4., below. "INTELLECTUAL PROPERTY AGREEMENT" shall mean the agreement in the agreed-to form to be entered into between Seller and Buyer on the Closing Date relating to intellectual property matters. "LAW(S)" shall have the meaning specified in the Project Operations Agreement. "LEASE" shall mean the Lease Agreement in the form set out in Exhibit C to be entered into between Seller and Buyer on the Closing Date. "LOSS" shall mean any and all damage, loss, liability and expense, including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any claim, action, suit or proceeding. "MAKING THE UTILITIES/SERVICES INDEPENDENT" shall have the meaning set forth in Section 8.4., below. "MULTEK SITE" shall have the meaning specified in the Project Operations Agreement. "NEWLY DISCOVERED CONTAMINATION" shall mean contamination discovered by Buyer within two (2) years of the anniversary of the Closing Date that existed on the Real Estate prior to the Closing Date and that either violated an Environmental Law or exceeded a published standard or guideline established on or prior to the Closing Date by a Governmental Authority pursuant to an Environmental Law or violated a Law or exceeded a published standard or guideline established on or -13- 13 prior to the first anniversary of the Closing Date by a Governmental Authority pursuant to a Law in effect on the first anniversary of the Closing Date, and which continues to be a violation of said Law or in exceedance of said published standard or guideline at the time of its discovery. "OPERATIVE AGREEMENTS" shall mean this Agreement, the Intellectual Property Agreement, the Patent License Agreement, the Lease, the Bill of Sale, the Assignment and Assumption Agreement, the Project Operations Agreement and the Supply Agreement. "PATENT LICENSE AGREEMENT" shall mean the agreement in the agreed-to form to be entered into between Seller and Buyer on the Closing Date relating to patent license matters. "PERMITTED ENCUMBRANCES" shall mean: (i) [intentionally ommitted] (ii)(A) any servitudes, easements, restrictions, rights-of-way, reservations or other similar rights in the Real Estate or any interest therein, (w) described in that certain Title Commitment No. GF129920-Z-34 dated March 26, 1997 and revised June 24, 1997 (the "Title Commitment") prepared by Fidelity National Title Company (the "Title Company"), (x) to use the Access Roads (as defined in the Project Operations Agreement) provided the same are in form and substance acceptable to the parties, their respective counsel and the Title Company; (y) reasonably determined by Seller to be required in connection with making the Utilities/Services Independent provided the same are in form and substance acceptable to the parties, their respective counsel and the Title Company; and (z)reasonably required by either party in connection with the services to be provided by one Party to the other pursuant to the Project Operations Agreement provided the same are in form and substance acceptable to the parties, their respective counsel and the Title Company; (B) preprinted exclusions from coverage and conditions and stipulations contained in a title policy issued by Fidelity or any other nationally recognized title company selected by Buyer; (C) facts disclosed by that certain survey dated January 16, 1997, and last revised June 25, prepared by McAngus Surveying Company, Inc. (the "Survey"); and any (D) other Encumbrances which are consented to or caused by Buyer or anyone claiming by or through Buyer; (iii) liens existing as of the Closing Date for Taxes either not due and payable or due but for which notice of assessment has not been given; (iv) undetermined or inchoate liens, charges and privileges existing as of the Closing Date incidental to current operations and any statutory liens, charges, adverse claims, security interests or encumbrances of any nature whatsoever existing as of the Closing Date and claimed or held by any Governmental Authority that have -14- 14 not at the time been filed or registered against title to the Transferred Assets or that relate to obligations that are not due or delinquent; (v) security given in the ordinary course of business as of the Closing Date to any public utility, Governmental Authority or to any statutory or public authority in connection with the Transferred Assets; and (vi) the Encumbrances described on Schedule 1.1.(E). Notwithstanding the foregoing, no Encumbrance arising under the Code or ERISA with respect to the operation, termination, restoration or funding of any employee benefit plan or arrangement sponsored by, maintained by or contributed to by Seller or any member of its ERISA Group or arising in connection with any excise tax or penalty tax with respect to such plan or arrangement shall be a Permitted Encumbrance. "PERSON" shall mean any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Authority or other entity, and shall include any successor (by merger or otherwise) of such entity. "PRE-CLOSING TAX PERIOD" shall have the meaning set forth in Section 4.2., below. "PROJECT OPERATIONS AGREEMENT" shall mean the agreement for site operational services in the form set out in Exhibit E to be entered into between Seller and Buyer on the Closing Date. "PURCHASE PRICE" shall have the meaning specified in Section 2.3., below. "REAL ESTATE" shall mean the real estate described and defined as the "Leased Premises" in the Lease. "REAL ESTATE CLOSING" shall have the meaning set out in Section 8.4.(b), below. "REMEDIATION" shall have the meaning specified in the Services Agreement attached as Exhibit B to the Project Operations Agreement. "RETAINED LIABILITIES" shall mean all liabilities of Seller other than the Assumed Liabilities, and the obligations assumed by Buyer pursuant to the terms of this Agreement, including Section 5.1., below and the Assumption Agreement. Retained Liabilities, specifically includes, without limitation, the liabilities identified in items (iii), (iv) and (v) of the definition of Permitted Encumbrances. -15- 15 "SUBCONTRACTED WORK" shall have the meaning set forth in Section 5.1., below. "SUBDIVISION" shall mean (i) the issuance by the City of Austin, Texas (the "City") of a land status report which confirms that the Multilayer Site (as defined in the Project Operations Agreement) is a "grandfathered" legal lot and the separation of the Multilayer Site by the Travis Central Appraisal District as a separate tax parcel from the IBM Property (as defined in the Project Operations Agreement), and, if required, the recording, at IBM's expense, of all documents necessary to effect the legal separation of the Multilayer Site as a separate tax parcel, or (ii) if not "grandfathered," the issuance of all other final approvals from the City of Austin to effect the legal separation of the Multilayer Site as a separate tax parcel and the recording, at Seller's expense, of all documents necessary to effect the legal separation of the Multilayer Site as a separate tax parcel. The word "grandfathered" in this context means that the Multilayer Site and the IBM Property in their current configuration are not required to go through the City's subdivision process and are considered legal lots by the City. "SUBSIDIARY" of any Person shall mean a corporation, company, or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, limited liability company, joint venture or unincorporated association), but more than 50% of whose ownership interest representing the right to make decisions for such entity is, now or hereafter owned or controlled, directly or indirectly, by such Person, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists. "SUPPLY AGREEMENT" shall mean the agreement in the form set out in Exhibit F to be entered into between Seller and Buyer on the Closing Date. "TAX" OR "TAXES" shall mean all taxes, charges, fees, duties, excises, assessments, levies, impositions and withholdings or other charges imposed by any Governmental Authority, whether foreign or domestic (including, but not limited to, taxes based upon or measured by gross receipts, income, capital stock or net worth, estimated profits, sales, use or occupation, value added, ad valorem, transfer, conveyance, franchise, withholding, payroll, social security, employment, severance, excise, property, stamp or other taxes), together with any and all interest, penalties and additions to tax attributable to, or imposed with respect to such amounts and any obligations under any agreements or arrangements with any Person with respect to such amounts. "TAX RETURNS" shall have the meaning set forth in Section 4.2., below. "TRANSFERRED ASSETS" shall mean (i) the leasehold interest in the Real Estate pursuant to the terms of the Lease ; (ii) all machinery, equipment, furniture, -16- 16 office equipment, communications equipment, vehicles, storage tanks, spare and replacement parts and other tangible property (and interests in any of the foregoing) listed on sub-schedule 2.1.(ii), whether or not located at the Facility (the "Equipment"); (iii) all raw materials, work-in-process, finished goods, supplies, spare parts, samples and stores listed on sub-schedule 2.1.(iii), whether or not located at the Facility (the "Inventory"), as the same may be depleted or augmented prior to the Closing Date while being managed in the ordinary course of business (or otherwise, with the prior consent of Buyer); (iv) subject to Section 5.1., below, all contracts, agreements, options, leases, licenses, sales and purchase orders, commitments and other instruments of any kind, to which Seller is a party, that are listed on sub-schedule 2.1.(iv) (collectively, the "Contracts"); (v) except with respect to Taxes, subject to Section 5.1., below, all of Seller's rights, claims, credits, causes of action or rights of setoff against third parties under the Consensual Transfers, whether liquidated or unliquidated, fixed or contingent, and all rights of Seller under or pursuant to all warranties, representations and guarantees made by suppliers, manufacturers, contractors and other third parties in connection with any of the Transferred Assets; (vi) subject to Section 5.1., below, all licenses, permits, approvals, certificates, consents, orders or other authorizations issued or granted by any Governmental Authority that are owned by, granted to or held by Seller and are listed on sub-schedule 2.1.(vi) (the "Transferable Permits"); (vii) subject to the provisions of Section 2.1., below, with respect to intellectual property matters, originals or copies of all books, records, files and papers of Seller (or any portions thereof) that relate to and which are required to continue the operations of Seller's printed wire board plant in Austin, Texas, either in hard copy or computer format, including, invoices, sales and promotional literature, sales and purchase correspondence, lists of suppliers, customers, personnel and employment records of the Transferred Employees, maintenance records and schedules for the Facility and the Equipment, and documentation developed or used for accounting and marketing, (other than Tax returns, reports, forms, documents or memoranda); (viii) all goodwill associated with the Transferred Assets; and (ix) insurance proceeds received by Seller under any insurance policy of Seller which are attributable to any loss or damage to the Transferred Assets from and including the date of execution of this Agreement to but excluding the Closing Date, other than any such loss or damage substantially repaired, replaced or made whole by Seller. "TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 5.2., below. "WARRANTY BREACH" shall have the meaning set forth in Section 11.2., below. -17- 17 ARTICLE II. PURCHASE AND SALE OF ASSETS. SECTION 2.1. TRANSFERRED ASSETS. Upon the terms and subject to the conditions hereof, as of the Closing Date (as defined in Section 3.1. hereof) with respect to all Transferred Assets other than the conveyance of fee title to the Real Estate, and as of the Real Estate Closing with respect to the conveyance of fee title to the Real Estate, Seller hereby agrees to sell, transfer, convey, assign and deliver to Buyer free and clear of all Encumbrances, and Buyer hereby agrees to purchase and accept from Seller, all right, title and interest of Seller in and to the Transferred Assets, but excluding cash accounts. Intellectual property matters are addressed exclusively in the Patent License Agreement and the Intellectual Property Agreement (herein the "Intellectual Property Agreements") and are not a subject matter of this Agreement. SECTION 2.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary in this Agreement or any agreements contemplated by this Agreement, the following assets (collectively, the "Excluded Assets") will be retained by Seller, and are excluded from the Transferred Assets: (a) any interest in or right to use any trademark or service mark owned by Seller or any of its Affiliates, any associated logo or any derivative thereof, either alone or in conjunction with other words; (b) any interest in any contractual arrangement with Seller or any of its Affiliates; (c) all other assets of Seller or any of its Affiliates which do not comprise the Transferred Assets or the Real Estate; and (d) any interests of Seller or any of its Affiliates in the Complex other than the Real Estate. SECTION 2.3. CONSIDERATION. The price to be paid by Buyer to Seller for the Transferred Assets and Assumed Liabilities ("Purchase Price") shall be (a) forty million dollars $40,000,000; (b) plus any additional consideration to be paid by Buyer pursuant to Section 8.2., below. Buyer shall pay to Seller by electronic funds transfer, such sum in immediately available funds at the Closing, in U.S. dollars. SECTION 2.4. ASSUMED LIABILITIES. Upon the terms and subject to the conditions hereof, as of the Closing but retroactive to August 1, 1997, Seller will assign and transfer to Buyer, and Buyer will assume, and shall fully perform and discharge, on a timely basis and in accordance with their respective terms, the liabilities and obligations of Seller listed on Schedule 2.4. and Schedule 2.1., hereto (the "Assumed Liabilities") pursuant to the terms and conditions of the Assumption Agreement but solely to the extent arising out of goods supplied or acquired or services rendered or -18- 18 received after August 1, 1997. The Assumed Liabilities shall, except as otherwise set forth herein, exclude liabilities and obligations of Seller to or from any of its Affiliates. SECTION 2.5. INTERIM OPERATIONS FOR BUYER'S ACCOUNT. (a) The parties expressly agree that, from and after August 1, 1997, through the Closing Date (the "Interim Period"), Seller has conducted the printed wire board manufacturing operations and all related operations and activities at the Real Estate (the "Manufacturing Operations") and will continue to do so through the Closing Date for the account of, and at the risk of, Buyer. To the maximum extent legally permissible without title to the Transferred Assets passing to Buyer before the Closing Date, Buyer and Seller intend that, unless the Closing does not occur as provided in this Agreement, Buyer shall be in the economic position of the owner of the Transferred Assets (other than the Real Estate) from August 1, 1997, and that, notwithstanding any of the other provisions of the Operative Agreements, Seller has hereby transferred to Buyer, effective August 1, 1997, and Buyer has assumed, effective August 1, 1997, any and all risks associated with the conduct of the Manufacturing Operations (and it is accordingly the intention of the parties that the Closing under this Agreement shall relate primarily to the timing of the payment of the Purchase Price hereunder, Buyer assuming management and control of the Transferred Assets and the passage of title to the Transferred Assets). During the Interim Period, Seller shall continue to conduct the Manufacturing Operations in the ordinary course as the current management of Seller's Manufacturing Operations reasonably determines to be in the best interests of the Manufacturing Operations, subject to Section 9.1. Any increase or decrease in the value of the Transferred Assets during the Interim Period shall accrue to and be for the account of Buyer, without any adjustment to the Purchase Price; provided, however, that title to the Transferred Assets shall not pass to Buyer before the Closing Date. Notwithstanding the provisions of this Section 2.5., Buyer assumes no responsibility for any retirement or post-employment benefits respecting Employees who retire from Seller during the Interim Period. (b) During the Interim Period, (i) all cash received by Seller by or in respect of the Manufacturing Operations (other than any cash received in respect of the Excluded Assets and the Retained Liabilities) and the Transferred Assets and proceeds from the disposition of assets that would otherwise have been Transferred Assets shall be deemed to have been received by Seller for the account of Buyer and (ii) all cash expended by Seller with respect to the Manufacturing Operations (other than any cash expended in respect of the Excluded Assets and the Retained Liabilities), the Tenant's Obligations as defined in Section 2.02. of the Lease and the Transferred Assets but excluding amounts paid by Seller pursuant to Section 8.2., below, shall be deemed to have been expended from the account of Buyer. (c) As soon as practicable after the Closing Date, Buyer shall invoice Seller for all products and services provided by the Manufacturing Operations to Seller during the Interim Period (the "Invoice Amount"). -19- 19 (d) As soon as practicable after the Closing Date, Seller shall determine: (A) the overhead charges (including corporate allocations and payments and allocations related to the Employees) provided by or on behalf of Seller to or in respect of the Manufacturing Operations and the Transferred Assets during the Interim Period (the amount of such charges to be determined on a basis consistent in all material respects with the basis on which such charges were made during the period ending June 30, 1997); (B) the 15% discount on stock of Seller purchased by Employees through Seller's Employee Stock Purchase Plan during the Interim Period; and (C) any Taxes attributable to the Manufacturing Operations during the Interim Period. (e) In the event that (i) the sum of the cash received in accordance with Section 2.5.(b)(i) and the Invoice Amount exceeds the sum of the cash expended in accordance with Section 2.5.(b)(ii) and the amounts determined in accordance with Section 2.5.(c), then Seller shall promptly pay to Buyer the amount of such excess in immediately available funds, in U.S. dollars; or (ii) the sum of the cash expended in accordance with Section 2.5.(b)(ii) and the amounts determined in accordance with Section 2.5.(c) exceeds the sum of the cash received in accordance with Section 2.5.(b)(i) and the Invoice Amount then Buyer shall promptly pay to Seller the amount of such excess in immediately available funds, in U.S. dollars in addition to the payment made by Buyer to Seller pursuant to Section 2.3. (f) In the event the Closing does not occur for any reason, the parties agree that the provisions of this Section 2.5. shall be null and void. ARTICLE III. CLOSING. SECTION 3.1. CLOSING DATE. Subject to the conditions set forth in Articles X and XI, below, the closing of the transactions provided for in this Agreement and the other Operative Agreements (other than the Real Estate Closing) (the "Closing") shall take place at the offices of Seller at 10:00AM on the later of the tenth calendar day following the date this Agreement is executed and the fifth business day following the expiration or early termination of all HSR waiting periods and the satisfaction or waiver of the other conditions set forth in Articles X and XI hereof, or at such other time or on such other date as may be agreed by Seller and Buyer (the "Closing Date"). All transactions provided for herein to occur on and as of the Closing Date shall be deemed to have occurred simultaneously and to be effective as soon as the Parties have executed the Operative Documents or as of the close of business on the Closing Date, whichever first occurs. SECTION 3.2. DELIVERY BY BUYER. At the Closing, Buyer will deliver or cause to be delivered to Seller the following: (a) payment of the Purchase Price in the manner specified in Section 2.3 hereof; -20- 20 (b) the Assumption Agreement, duly executed by Buyer; (c) the Lease, duly executed by Buyer. (d) the Project Operations Agreement, duly executed by Buyer; (e) the Intellectual Property Agreements, duly executed by Buyer; (f) the Supply Agreement, duly executed by Buyer; (g) a copy of the Certificate of limited partnership of Buyer, certified as of a recent date by the Secretary of State of the State of Texas; (h) a copy of the Certificate of Incorporation of Guarantor, certified as of a recent date by the Secretary of State of the State of Delaware; and (i) the certificates required by Section 11.6., below. SECTION 3.3. DELIVERY BY SELLER. At the Closing, Seller will deliver or cause to be delivered to Buyer the following: (a) The Bill of Sale duly executed by Seller, vesting in Buyer all right, title and interest of Seller in and to the Transferred Assets, other than the Real Estate, as provided in this Agreement; (b) the Assumption Agreement, duly executed by Seller; (c) the Lease, duly executed by Seller; (d) the Project Operations Agreement, duly executed by Seller; (e) the Supply Agreement, duly executed by Seller; (f) the Intellectual Property Agreements, duly executed by Seller; and (g) a copy of the Certificate of Incorporation of Seller, certified as of a recent date by the Secretary of State of the State of New York; and (h) the certificates required by Section 10.6., below. ARTICLE IV. TAX MATTERS. SECTION 4.1. ALLOCATION OF PURCHASE PRICE. Buyer and Seller hereby agree that (a) one million five hundred thousand dollars ($1,500,000) of the Purchase Price shall be allocated to intellectual property licensed pursuant to the Intellectual -21- 21 Property Agreements; (b) no more than thirty-million dollars ($30,000,000 ) shall be allocated to the Real Estate and Facility, at Buyer's discretion; and (c) the balance of the Purchase Price shall be allocated to the manufacturing equipment, furniture and fixtures and inventory at Buyer's discretion. In addition, as soon as practicable after the Closing Date, but in no event later than 90 days prior to the due date of the Internal Revenue Service Form 8594, Buyer shall provide to Seller statements ("Allocation Statements") allocating the total of the Purchase Price (and other payments properly treated as additional Purchase Price for Tax purposes) to the different Transferred Assets, pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended, and the treasury regulations promulgated thereunder (hereinafter, the "Code"). The allocation with respect to the Real Estate and Facility will be prepared based on a valuation from a nationally recognized appraisal firm. Buyer and Seller shall each file all income, franchise and other Tax returns, reports and forms ("Tax Returns") and execute such other documents as may be required by any Governmental Authority, in a manner consistent with the Allocation Statements. Buyer shall prepare the Form 8594 under Section 1060 of the Code within 30 days after preparation of the Allocation Statements, and deliver such form to Seller within thirty (30) days after finalization, but no later than sixty (60) days prior to the due date of such form. Buyer and Seller agree to file such form with each relevant taxing authority and to refrain from taking any position inconsistent with such form or the Allocation Statements. SECTION 4.2. FILING OF RETURNS AND PAYMENT OF TAXES. Seller shall prepare and file, or cause to be prepared and filed, with the appropriate Governmental Authority all Tax Returns, and shall pay, or cause to be paid, when due all Taxes relating to the Transferred Assets and the Real Estate attributable to any time period ending on or prior to the Closing Date (herein the "Pre-Closing Tax Period"). Buyer shall prepare and file, or cause to be prepared and filed, with the appropriate Governmental Authority all Tax Returns, and shall pay, or cause to be paid, when due all Taxes relating to the Transferred Assets and the Real Estate attributable to any taxable period which is not part of the Pre-Closing Tax Period. If, in order to properly prepare its Tax Returns or other documents required to be filed with Governmental Authorities, it is necessary that a Party be furnished with additional information, documents or records relating to the Transferred Assets or the Real Estate, both Seller and Buyer agree to use reasonable efforts to furnish or make available such nonprivileged information at the other's request, cost and expense: provided, however, that neither Party shall be entitled to review or examine the Tax Returns of the other Party. SECTION 4.3. REFUNDS AND CREDITS. Any refunds and credits attributable to the Pre-Closing Tax Period shall be for the account of Seller and any refunds and credits attributable to the period which is not part of the Pre-Closing Tax Period shall be for the account of Buyer. -22- 22 SECTION 4.4. TRANSFER TAXES. (a) All transfer, documentary, sales, use, registration, value-added and any other similar Taxes and related fees incurred in connection with this Agreement and the other Operative Agreements, and the transactions contemplated hereby and thereby, shall be borne by Buyer. To the extent legally able to do so, Buyer and Seller shall cooperate with each other to obtain exemptions from such Taxes, provided that neither Party shall be obligated to seek any exemption that would require any audit by a Governmental Authority of its books and records. Notwithstanding any other provision of this Agreement, Buyer shall not bear any income, windfall or Profits Taxes that are the legal obligation of Seller. (b) Notwithstanding the foregoing, Seller shall be responsible for any tax imposed on the transfer of the Real Estate. ARTICLE V. OTHER MATTERS. SECTION 5.1. CONSENTS AND SUBCONTRACTED WORK. Seller and Buyer shall use reasonable efforts to obtain, as soon as practicable, all requisite consents to transfers, assignments and novations, of all of the Contracts, Transferred Assets and the Assumed Liabilities (the "Consensual Transfers"). The Parties shall cooperate (including, where necessary, entering into appropriate instruments of novation and assumption as shall be agreed upon) to have Seller released from all liability to third parties with respect to the Consensual Transfers and the Parties will each solicit such releases concurrently with the solicitation of consents from third parties to the transfer, assignment and novation, to Buyer of the Consensual Transfers as soon as practicable). Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Consensual Transfers or any claim, right or benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a breach or other contravention thereof, be ineffective with respect to any party thereto or in any way adversely affect the rights of Buyer or Seller thereunder. In no event shall Seller or Buyer be obligated to pay any money to any Governmental Authority or any other Person or to offer or grant other financial or other accommodations to any Governmental Authority or any other Person in connection with obtaining any consent, waiver, confirmation, novation or approval with respect to any Consensual Transfers. If any such consent, waiver, confirmation, or novation or approval is not obtained with respect to any Consensual Transfers, then Seller and Buyer will cooperate to establish an arrangement reasonably satisfactory to Buyer and Seller under which Buyer would obtain, to the extent practicable, the claims, rights, and benefits and assume the corresponding liabilities and obligations thereunder in accordance with this Agreement (including by means of any subcontracting, sublicensing or subleasing arrangement) or under which Seller would enforce for the benefit of Buyer, with Buyer assuming and agreeing to pay Seller's obligations, any and all claims, rights and benefits of Seller -23- 23 against a third party thereto. In such event (i) Seller will promptly pay to Buyer when received all moneys received by it under any Consensual Transfers or any claim, right or benefit arising thereunder and (ii) Buyer will promptly pay, perform or discharge when due any obligation or liability arising thereunder. If and to the extent that consents to assignment or novation, as the case may be, are obtained after the Closing Date, Seller and Buyer agree that such Consenual Transfers shall thereafter be Transferred Assets and Assumed Liabilities for all purposes under this Agreement. SECTION 5.2. EMPLOYEES AND EMPLOYEE BENEFITS. (a) Schedule 5.2.A. contains a list of the individuals employed by Seller at the date hereof in connection with the Transferred Assets (including active employees and employees who are on leave of absence or sick leave, but excluding employees who are receiving benefits as of the Closing Date under Seller's Long Term Disability Plan or Medical Disability Income Plan) (herein the "Employees") (and will be updated by Seller to reflect ordinary course changes to such list between the date hereof and the Closing Date). (b) Buyer shall hire, and employ, effective as of the Closing Date, all Employees (the "Transferred Employees") at not less than the same salary as each such Transferred Employee received from Seller as of the Closing Date and on the terms, conditions, and benefits plans, specified on Schedule 5.2.(b), and Buyer hereby covenants and agrees not to decrease such salaries or change the terms, condition or benefit plans specified on Schedule 5.2.(b) for the period beginning on the Closing Date and ending December 31, 1997. (c) Buyer hereby covenants and agrees not to terminate the employment of more than one hundred (100) Transferred Employees, (actually or constructively) during the period which begins on the Closing Date and ends six months after the Closing Date. (d) In accordance with the provisions of Section 13.4., below, Buyer shall defend, indemnify and hold Seller harmless from any and all liabilities, obligations, and Losses with respect to all employment matters concerning the employment by Buyer of, or offers or terms and conditions of employment by Buyer to, Transferred Employees including, without limitation, any Loss arising from or associated with the Worker's Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 et. seq. (the "WARN Act") as well as separation payments in accordance with the express agreement of Buyer and Seller in Section 5.2.(e), below), and for complying on and after the Closing Date with the requirements of all applicable laws with respect to all such Transferred Employees Subject to Sections 5.2.(e), 5.2.(g), and 5.2.(j) below, Buyer and Seller agree that Buyer is not assuming any obligation of Seller to the Transferred Employees. -24- 24 (e) If Buyer terminates the employment of any Transferred Employee (actually or constructively), other than for cause, at any time within the six-month period following the Closing Date, Buyer shall pay to each such Transferred Employee a severance payment equal to those benefits to which such Transferred Employee would have been entitled under Seller's severance benefit plans as disclosed on Schedule 5.2.(e) had Seller terminated the employment of such Transferred Employee, other than for cause, immediately prior to the Closing. (f) Prior to but not including the Closing Date, the Seller shall comply in all material respects with the WARN Act with respect to employment terminations caused by Seller prior to the Closing Date and shall indemnify and hold the Buyer harmless from and against any and all Losses that the Buyer may incur by reason of Seller's noncompliance with the WARN Act. Prior to the Closing Date, Seller shall notify Buyer of all employment terminations by Seller of Employees previously employed by Seller in connection with the Transferred Assets at the Real Estate. On and after the Closing Date, Buyer shall comply in all material respects with the WARN Act and shall indemnify and hold Seller harmless from and against any and all Losses that Seller may incur by reason of any non-compliance. (g) With respect to any benefit plans, programs and services of Buyer in existence or adopted hereafter, all the years of service with Seller of each Transferred Employee, as reflected in Seller's records for use in its plans, shall be taken into account by Buyer for all relevant purposes, including credit for eligibility and vesting and, in the case of Buyer's vacation benefits, for benefit accrual. For the foregoing purpose, Seller shall provide Buyer with copies of records with respect to each Transferred Employee's service on the Closing Date. (h) Other than as specified in Section 5.2(j), below, no Transferred Employee or any spouse or beneficiary under any of Seller's employee plans, or under any plan from time to time established by Buyer for the benefit of the Transferred Employees, shall be entitled to assert any claim based on any of the provisions of this Agreement against either party to this Agreement (or any of its Subsidiaries or Affiliates). (i) Seller shall be responsible for paying, in accordance with its applicable benefit plan provisions, those welfare benefit plan liabilities (including worker's compensation, unemployment, and other government-mandated obligations) which are submitted on behalf of a Transferred Employee (or his or her covered dependents) for claims arising out of events occurring prior to the Closing Date. Buyer shall be responsible for paying all claims arising out of accidents, injuries or events which occur on and after the Closing Date. (j) Buyer shall develop and implement a 1997 profit-sharing plan for the benefit of all Transferred Employees. Regardless of business results for 1997, the profit-sharing plan shall, at a minimum, make a guaranteed payment no later than -25- 25 March 14, 1998 to each Transferred Employee other than Transferred Employees who either retire from Seller or commence a pre-retirement leave of absence from Seller within thirty (30) days of the Closing Date ("Retirees"). This guaranteed, minimum payment shall be based on each Transferred Employee's most recent Personal Business Commitments (PBC) rating in Seller's records and on each Transferred Employee's Earnings (as such term is defined in Seller's 1997 U.S. Variable Pay Program) from Seller up to the Closing Date. Buyer shall be free, in its sole discretion, to provide additional profit-sharing payments in addition to the guaranteed minimum payments described herein. The guaranteed minimum payments shall be calculated in accordance with the following table: PBC Rating Percentage of Transferred Employees' Earnings (as such term is defined in Seller's 1997 U.S. Variable Pay Program) Extraordinary (1) 15 percent Achieved (2) 10 percent Achieved some (3) 6 percent or no rating of record
Seller shall calculate the amount of the guaranteed minimum payment due to each Transferred Employee other than Retirees within 30 days after the Closing Date and shall transfer an amount equal to the sum of the payments so calculated on or before March 14, 1998 to Buyer which shall make the guaranteed minimum payments to each of the Transferred Employees other than Retirees and shall withhold such taxes as may be required by law no later than March 14, 1998. At the option of Buyer, Seller shall make the transfer of the amount so calculated within 30 days of the Closing Date discounted to the date of payment back from March 14, 1998 at a rate of 9 percent per annum. Buyer shall hold all moneys transferred by Seller under this provision in escrow for the benefit of the Transferred Employees other than Retirees and shall not commingle such transferred moneys with its other assets. Once Seller has transferred such amount to the Buyer, Buyer shall assume all liability for the guaranteed minimum payments to the Transferred Employees other than Retirees and shall indemnify and hold Seller harmless with respect to any claims against Seller with respect to the payments described herein. Seller shall make variable pay program payments to Retirees in accordance with Seller's 1997 U.S. Variable Pay Program. Buyer warrants and covenants that it shall make the guaranteed minimum payments described above without a setoff of any kind against Seller or the Transferred Employees including those Transferred Employees other than Retirees who separate -26- 26 from Buyer's employment for any reason. In the event of the death of a Transferred Employee other than Retirees prior to March 14, 1998, Buyer shall make the guaranteed payment to the estate of such Transferred Employee. Notwithstanding anything to the contrary elsewhere in this Agreement, Transferred Employees other than Retirees shall be entitled to enforce any claim to payment under this provision of the Agreement against Buyer. (k) Subject to the other provisions of this Section 5.2., nothing herein shall prevent Buyer or its Affiliates from (i) terminating, reassigning, promoting, or demoting individual personnel or changing adversely or favorably the titles, powers, duties, responsibilities, functions, locations, salaries, other compensation or terms and conditions of employment of individual personnel or (ii) adopting benefits plans that are different from Seller's or modifying, adding or eliminating any employee benefit plan, arrangement, program, policy or procedure. (l) At Closing, Seller will provide Buyer with information regarding each Transferred Employee's 1997 annual vacation entitlement under Seller's vacation plan, prorated through Closing. The information will also indicate the amount of vacation each Transferred Employee has taken from January 1, 1997 through Closing. Seller shall pay each Transferred Employee his or her equivalent daily salary for the number of days by which his or her 1997 annual vacation days, prorated through the Closing Date, exceed the number of vacation days actually taken by each such Transferred Employee prior to the Closing Date. (m) Except as approved by Buyer (which approval will not be unreasonably withheld), prior to Closing Seller will not take any of the following actions with respect to or affecting Transferred Employees other than such actions which are taken on a company-wide basis : (i) increase the rate or terms of compensation payable generally or to become payable generally to such Employees other than routine salary increases; (ii) commit itself to any additional pension, profit sharing, bonus, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, continuation pay, termination pay, retirement or other employee benefit plan, agreement or arrangement, or increase the rate or terms of any employee plan or benefit arrangement, or (iii) enter into any employment agreement with or for the benefit of any such Employee, provided, however, that nothing in this clause (iii) shall preclude payments under the terms of the existing incentive compensation plans of Seller in accordance with past practice; (n) Prior to the Closing Date, Seller agrees to obtain Buyer's consent to any communication by Seller to be generally distributed to Transferred Employees regarding employee benefits arrangements to be implemented by Buyer after the Closing Date. SECTION 5.3. FURTHER ACTION. Except as otherwise provided in Section 8.4, below, with respect to conveyance of fee title to the Real Estate, each of -27- 27 the Parties agrees to execute and deliver after the Closing Date such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable, in the opinion of both parties' counsel jointly, in order to consummate or implement expeditiously the transactions contemplated by the Operative Agreements. In addition, Seller agrees, promptly upon the request of Buyer, and at no additional expense to Seller, other than the expenses associated with the preparation of appropriate instruments of transfer, assignment, or novation, as the case may be, to take all actions reasonably requested by Buyer to perfect the transfer to Buyer of the Transferred Assets. SECTION 5.4. DUE DILIGENCE. Buyer has engaged in the entire due diligence effort it deemed appropriate prior to signing this Agreement. ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer and Guarantor each hereby jointly and severally represents and warrants to Seller as follows: SECTION 6.1. INCORPORATION. Buyer is a duly organized and validly existing limited partnership in good standing under the laws of the State of Texas, and Guarantor is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware, each with all requisite power and authority to own its properties and conduct its business, including, in the case of Buyer, its performance of the Assumed Liabilities, and each is duly qualified in each jurisdiction in which its ownership of property, including, in the case of Buyer, the Transferred Assets and the Real Estate, and its conduct of business, including, in the case of Buyer, its performance of the Assumed Liabilities, requires such qualification except where the failure to so qualify would not have a material adverse effect upon Buyer's acquisition of the Transferred Assets hereunder or the performance by Buyer or Guarantor of its respective obligations under this Agreement or the other Operative Agreements. SECTION 6.2. AUTHORITY. Each of Buyer and Guarantor has the requisite power and authority to execute and deliver this Agreement and each of the other Operative Agreements, and to perform its respective obligations hereunder and thereunder. This Agreement has been, and each of the other Operative Agreements will be, duly and validly authorized, executed and delivered by each of Buyer and Guarantor and this Agreement constitutes, and each of the other Operative Agreements will constitute, the valid and binding agreement of Guarantor and Buyer enforceable against each of Guarantor and Buyer in accordance with its respective terms. No other partnership proceedings on the part of Buyer or corporate proceedings on the part of Guarantor are necessary to authorize Buyer's or Guarantor's execution or performance of this Agreement or any of the other Operative Agreements and the transactions contemplated hereby or thereby. -28- 28 SECTION 6.3. NO CONFLICT. The execution and delivery by each of Buyer and Guarantor of this Agreement and each of the other Operative Agreements does not, and the performance of its obligations hereunder and thereunder will not: (a) conflict with, or result in a breach of, any of the provisions of Buyer's Agreement of Limited Partnership or Guarantor's Certificate of Incorporation or By-Laws; (b) (i) breach, violate or contravene any applicable Governmental Rule, or (ii) create any right of termination or acceleration or encumbrance that in the aggregate would have a material adverse effect on the authority or ability of either to perform either its obligations under this Agreement or the other Operative Agreements; or (c) conflict in any respect with, or result in a breach of or default under, any contract, license, franchise, permit or any other agreement or instrument to which either Buyer or Guarantor is a party or by which either Buyer or Guarantor or any of the properties of either one of them may be affected or bound that in the aggregate would have a material adverse effect on the authority or ability of either Buyer or Guarantor to perform its obligations under this Agreement or the other Operative Agreements. SECTION 6.4. GOVERNMENTAL CONSENTS - BUYER. No material consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority or other Person on the part of Buyer or Guarantor is required in connection with the execution or delivery by Buyer or Guarantor of this Agreement or any of the other Operative Agreements or the consummation by Buyer or Guarantor of the transactions contemplated hereby or thereby, other than the premerger notification required by HSR and expiration or early termination of the HSR waiting period. SECTION 6.5. NO BROKER. Neither Buyer nor Guarantor has engaged any Person who is entitled to any fee or commission as a finder or a broker in connection with the negotiation of this Agreement or the other Operative Agreements or the consummation of the transactions contemplated hereby or thereby, and Buyer and Guarantor shall be responsible for all liabilities and claims (including costs and expenses of defending against same) arising in connection with any claim by a finder or broker that it acted on behalf of Buyer or Guarantor in connection with the transactions contemplated hereby or thereby. SECTION 6.6. LICENSES AND PERMITS. Each of Buyer and Guarantor has made its own investigation of the Governmental Actions Buyer or Guarantor will require on and after the Closing Date and agrees that Buyer is responsible for obtaining such Governmental Actions for its operations on and after the Closing, subject to Seller's obligations hereunder to transfer from Seller to Buyer the Transferable Permits and the provisions of Section 5.1., above. -29- 29 SECTION 6.7. ENVIRONMENTAL MATTERS. Each of Buyer and Guarantor represents that it has received and read the reports and related data set forth on Schedule 6.7(a) hereto. ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and warrants to Buyer as follows: SECTION 7.1. INCORPORATION. Seller is a duly incorporated and validly existing corporation in good standing under the laws of the State of New York, with all requisite corporate power and authority to own its properties and conduct its business, and is duly qualified in each jurisdiction in which its ownership of property requires such qualification except where the failure to so qualify would not have a material adverse effect upon the Transferred Assets. SECTION 7.2. AUTHORITY. Seller has the requisite corporate power and authority to execute and deliver this Agreement and each of the other Operative Agreements, and to perform its obligations hereunder and thereunder. This Agreement has been, and each of the other Operative Agreements will be, duly and validly authorized, executed and delivered by Seller and this Agreement constitutes, and each of the other Operative Agreements will constitute, the valid and binding agreement of Seller enforceable against Seller in accordance with its respective terms. No other corporate proceedings on the part of Seller are necessary to authorize Seller's execution or performance of this Agreement or any of the other Operative Agreements and the transactions contemplated hereby or thereby. SECTION 7.3. NO CONFLICT. The execution and delivery by Seller of this Agreement and each of the other Operative Agreements does not, and the performance by Seller of its obligations hereunder and thereunder will not: (a) conflict with, or result in a breach of, any of the provisions of its Certificate of Incorporation or By-Laws; (b) (i) breach, violate or contravene any applicable Governmental Rule, or (ii) create any right of termination or acceleration or encumbrance that, in the aggregate would have an adverse effect on the Transferred Assets or the Real Estate or the authority or ability of Seller to perform either its obligations under this Agreement or the other Operative Agreements; or (c) conflict in any respect with, or result in a breach of or default under, any contract, license, franchise, permit or any other agreement or instrument (other than the assignment provisions of any Consensual Transfer which shall be subject to Section 5.1., hereof) ) to which it is a party or by which it or any of the Transferred Assets or Real Estate may be bound that would have an adverse effect on the -30- 30 Transferred Assets or the Real Estate or the authority or ability of Seller to perform either its obligations under this Agreement or the other Operative Agreements. SECTION 7.4. GOVERNMENTAL CONSENTS - SELLER. Other than as set forth on Schedule 7.4., no consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority or other Person on the part of Seller, is required in connection with the execution or delivery by Seller of this Agreement or any of the other Operative Agreements or the consummation by Seller of the transactions contemplated hereunder or thereunder, other than the premerger notification required by HSR and expiration or early termination of the HSR waiting period. SECTION 7.5. NO BROKER. Seller has engaged no Person who is entitled to any fee or commission as a finder or a broker in connection with the negotiation of this Agreement or the other Operative Agreements or the consummation of the transactions contemplated hereby or thereby, and Seller shall be responsible for all liabilities and claims (including costs and expenses of defending against same) arising in connection with any claim by a finder or broker that it acted on behalf of Seller in connection with the transactions contemplated hereby or thereby. SECTION 7.6. TITLE TO PERSONAL PROPERTY. Seller has good and valid title to all tangible Transferred Assets listed on Sub-Schedules 2.1(ii) and 2.1(iii) hereto, free and clear of any Encumbrances (except those assets disposed of in the ordinary course of business after the date hereof). SECTION 7.7. ACTIONS, SUITS, PROCEEDINGS. Other than as set forth on Schedule 7.7., there are no actions, suits, hearings, arbitrations, or proceedings pending or, to the Best Knowledge of Seller, threatened in writing against the Transferred Assets, at law or in equity, including any administrative proceedings with any regulatory authority. There is no existing default by Seller or, to the Best Knowledge of Seller, any of its Affiliates, with respect to any judgment, order, writ, injunction or decree of any Governmental Authority which will affect the Transferred Assets. Other than as set forth on Schedules 7.7 or 7.10(a),(b),(c),(d), or (e), there are no existing orders, judgments or decrees of any Governmental Authority which will affect the Transferred Assets. SECTION 7.8. CONTRACTS. (a) Except as specifically disclosed on Schedule 2.1.(iv), each Contract is a legal, valid, and binding obligation of Seller, and, to the Best Knowledge of Seller, of each other party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditor's rights generally, or by general principles of equity. Seller has performed or is performing all material obligations required to be performed by it under such contracts and is not (with or without notice, lapse of time or both) in breach or default in any material respect thereunder; and, except as otherwise specifically disclosed on Schedule 2.1.(iv), to the Best Knowledge of Seller, no other party to any of such -31- 31 contracts is (with or without notice, lapse of time or both) in breach or default in any material respect thereunder. (b) Except as disclosed in Schedule 7.8(b), to the Best Knowledge of Seller, Seller has not submitted any bid for its printed wire board products or services manufactured or provided at the Real Estate which is currently outstanding and which, if accepted or awarded, would result in a Contract where the volume of purchases of materials, supplies, goods, services, equipment or other assets from Seller's printed wire board manufacturing operations at the Real Estate under any such resulting contract could be reasonably expected to exceed $1,000,000 (one million dollars). To the Best Knowledge of Seller, Schedule 7.8(b) identifies each such bid and party to which such bid was made. To the Best Knowledge of Seller, all such bids (y) were submitted in the ordinary course of business and (z) were based on assumptions believed by the management of Seller's printed wire board manufacturing operations at the Real Estate to be reasonable when the bid was made. (c) To the Best Knowledge of Seller, Schedule 7.8(c) sets forth, with respect to each customer (including divisions of Seller) Contract having unfilled backlog as of the date hereof in excess of one hundred thousand dollars ($100,000), the backlog of Seller thereunder as of such date, the name of the customer and a brief description of the products and services to be provided. (d) Except as set forth in Schedule 7.8(c), to the Best Knowledge of Seller, all of the Contracts constituting the backlog of the Seller as it relates to Seller's printed wire board manufacturing operations at the Real Estate, were entered into the ordinary course of business and based upon assumptions believed by the management of Seller's printed wire board manufacturing operations at the Real Estate to be reasonable at the time such Contract was entered into. SECTION 7.9. LICENSES AND PERMITS. Seller or its Affiliates have the licenses and permits and other governmental authorizations and approvals as set forth on Schedule 7.9., and such licenses and permits constitute all material licenses and permits required by Seller pursuant to Governmental Rules to conduct its printed wire board manufacturing operations at the Real Estate immediately prior to the Closing Date. All such licenses and permits held by Seller which are material to Seller's use of the Transferred Assets prior to the Closing are valid and in full force and effect. Seller or its Affiliates will use its reasonable efforts to cooperate with Buyer (a) at Seller's expense, to transfer the Transferable Permits to Buyer; and (b) at Buyer's expense, to obtain any additional permits required by Buyer. SECTION 7.10. ENVIRONMENTAL REPRESENTATIONS. The following representations and warranties are the sole and exclusive representations and warranties made by Seller to Buyer relating to environmental matters at the Real Estate: -32- 32 (a) Except as set forth on Schedule 7.10.(a), to the Best Knowledge of Seller as of the Closing Date, Seller's operations at the Real Estate are in compliance in all material respects with all applicable Environmental Law. (b) Except as set forth on Schedule 7.10.(b), to the Best Knowledge of Seller as of the Closing Date, neither the Seller's operations at the Real Estate nor the Real Estate is subject to any judgment, order or consent decree of any court, or quasi-judicial or administrative agency having jurisdiction over the Real Estate, and to the Best Knowledge of Seller as of the Closing Date there are no charges, complaints, lawsuits or governmental investigations pending or threatened in writing against the Real Estate or Seller involving violations of Environmental Law at the Real Estate, in each case that would have a material adverse effect on Buyer's possession of the Real Estate or use of the Real Estate in the same manner as used by Seller immediately prior to the Closing Date. (c) Except as set forth on Schedule 7.10.(c), at the Closing Date, Seller has in full force and effect, all material permits, licenses and other authorizations that are required under Environmental Law with respect to the operation of Seller's business at the Real Estate as of the Closing Date. (d) Except as set forth on Schedule 7.10.(d), to the Best Knowledge of Seller as of the Closing Date, there have been no leaks, spills or releases of Hazardous Substances by Seller on or to the Real Estate which violate an Environmental Law or which are required to be remediated by Governmental Authorities. (e) Except as set forth in Schedule 7.10.(e), to the Best Knowledge of Seller as of the Closing Date, there are no Hazardous Substances under the Real Estate of Seller except as may be naturally occurring. (f) Without having performed any investigations or inquiries or other due diligence concerning the presence of any asbestos containing material ("ACM") on the Multek Site (including all improvements thereon) Seller is aware of no ACM on or under the Multek Site, other than the ACM present in the gasket material in the steam piping system. To the Best Knowledge of Seller, as of the Closing Date, there is no friable asbestos on the Real Estate. (g) To the Best Knowledge of Seller as of the Closing Date, there are no known underground storage tanks located on the Real Estate of Seller. (h) Except as set forth in Schedules 7.10.(a) through 7.10.(e), to the Best Knowledge of Seller, Seller has not received (i) any written notice or claim that it is or may be liable to any party as a result of a release or threatened release of Hazardous Substances on or which has migrated from the Real Estate of Seller to the property of adjoining landowners, or (ii) any letter or written request for information under Section -33- 33 104 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9604) affecting the Real Estate or comparable state laws affecting the Real Estate, and (iii) to the Best Knowledge of Seller, none of its operations at the Real Estate are subject to any investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to a release or threatened release of Hazardous Substances on or from the Real Estate of Seller. SECTION 7.11. FINANCIAL STATEMENTS AND REPORTS. Seller has previously delivered or made available to Buyer historical management reports on Seller's expense, cost and assets related to Seller's printed wire board manufacturing operations at the Real Estate. To the Best Knowledge of Seller, this financial information is based on Seller's ledger and cost system reports. SECTION 7.12. LABOR AND EMPLOYMENT MATTERS. To the Best Knowledge of Seller, (a) Seller is not engaged in, nor since January 1, 1995, has it engaged in, unfair labor practices with respect to the Employees, and there is no labor strike, dispute (other than routine individual grievances), slowdown or stoppage pending or, to the Best Knowledge of Seller, threatened, against or directly affecting the Transferred Assets; (b) no union representation question or union or other organizational activity that would be subject to the National Labor Relations Act (29 U.S.C. Sections 151 et seq.) exists respecting the Employees; (c) no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is pending by any of the Employees; (d) no collective bargaining agreement exists with respect to the Employees, which is binding on Seller; (e) Seller has not experienced any material work stoppage or other material labor difficulties with respect to the Employees during the period beginning January 1, 1995; (f) Seller is not delinquent in any material respect in payments to any of its current or former Employees for any wages, salaries, commissions or other direct compensation for any services performed by them or amounts required to be reimbursed to such Employees; and (g) Seller has not received any written notice nor does it have any knowledge or any threatened labor or civil rights dispute, controversy or grievances (other than routine individual grievance) by any of the Employees or any other unfair labor practice proceeding to claims of, or obligations to, any Employee or group of Employees. SECTION 7.13. INVENTORIES. The levels of Inventory have been maintained by Seller in the ordinary course of business, and except as specifically stated on Schedule 2.1(iii), all such Inventories are owned free and clear of all Encumbrances. SECTION 7.14. EQUIPMENT. To the Best Knowledge of Seller: (a) the Equipment listed on Schedule 2.1.(ii) constitutes all material machinery and manufacturing equipment required by Seller to conduct its printed wire board manufacturing operations at the Real Estate immediately prior to the Closing Date; and (b) except as indicated on Schedule 7.14., on the Closing Date, the Equipment listed on Schedule 2.1.(ii) is in working order in all material respects, ordinary wear and tear -34- 34 excepted, and subject to downtime for normal repairs and routine preventative maintenance conducted in the ordinary course of business. SECTION 7.15. CUSTOMERS. To the Best Knowledge of Seller, Schedule 7.15 sets forth (a) the names and addresses of all customers of Seller that ordered goods and services from Seller's printed wire board plant in Austin, Texas during the twelve-month period ended December 31, 1996 and (b) the amount for which each such customer was invoiced during such period. To the Best Knowledge of Seller, no such customer described in clause (a) of the first sentence of this Section has otherwise threatened in writing to cease using such products, goods or services, or to substantially reduce the use of such products, goods or services solely as a result of the consummation of the transactions contemplated by this Agreement. SECTION 7.16. SUPPLIERS; RAW MATERIALS. To the Best Knowledge of Seller, Schedule 7.16 sets forth (a) the names and addresses of all suppliers (including without limitation Seller and any Affiliates thereof) from which Seller's printed wire board plant in Austin, Texas ordered raw materials, supplies, merchandise and other goods and services with an aggregate purchase price for each such supply of $120,000 (one hundred twenty thousand dollars) or more during the twelve-month period ended December 31, 1996 and (b) the amount for which each such supplier invoiced Seller during such period. SECTION 7.17. REAL ESTATE. (a) Seller will continue to operate the Real Estate in a manner which is consistent with the manner in which the Real Estate is now operated by Seller and will not enter, except with the written consent of Buyer, into new service or maintenance agreements which will be Consensual Transfers from the date of this Agreement until the Closing Date, except for those which are cancelable at will or upon thirty (30) days' notice. (b) To the Best Knowledge of Seller, Seller has furnished to Buyer copies of all existing agreements in Seller's physical possession at the Real Estate affecting the Real Estate requested by Buyer, including all contracts for service or maintenance of the Real Estate, all governmental documents relating to the occupancy of the Real Estate and "as built" plans and specifications, and Seller has provided Buyer access to the books and records relating to the operation of the Real Estate and copies of any other documents relating to the Real Estate that are within the possession of Seller and have been requested by Buyer. (c) To the Best Knowledge of Seller, Seller has not received any written notice from any insurance company which has issued a policy with respect to the Real Estate requesting performance of any structural or other major repairs or alterations to the Real Estate which has not been complied with. -35- 35 (d) To the Best Knowledge of Seller, on the Closing Date, the material structural components of the Facility have not materially and adversely interfered with Seller's conduct of its printed wire board manufacturing operations at the Real Estate as of the Closing Date. (e) Seller's Complex, as a whole, was originally ISO 9001 certified on December 11, 1992, has received a "revision date" to such certification of December 2, 1996, and such certification has a renewal date of December 11, 1998. SECTION 7.18. EMPLOYEE BENEFIT PLANS FOR TRANSFERRED EMPLOYEES. Except as set forth on Schedule 7.18., with respect to the Transferred Employees. Seller does not maintain or contribute to any pension, profit sharing, retirement, fringe benefit, deferred compensation, stock purchase, stock option, incentive, bonus, vacation, severance, disability, hospitalization, medical insurance or life insurance plan, oral or written commitment of any nature regarding retiree health care, or program or any other type of employee benefit plan, program or arrangement within the meaning of Section 3(3) of ERISA, including without limitation any defined benefit plan ("Defined Benefit Plan") within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code or any defined contribution plan ("Defined Contribution Plan") within the meaning of Section 3(34) of ERISA or Section 414(j) of the Code or any multiemployer plan ("Multiemployer Plan") within the meaning of Section 3(37) and 4001(a)(3) of ERISA (hereinafter each individually referred to as a "Plan" and collectively referred to as the "Plans") for the benefit of any Transferred Employee. SECTION 7.19. FORECAST. Schedule 7.19. contains a copy of Seller's 9707 forecast. To the Best Knowledge of Seller, Schedule 7.19 was prepared by the management of Seller's printed wire board manufacturing plant at the Real Estate in the ordinary course of business consistent with past practice. SECTION 7.20. DISCLOSURE. No representation or warranty made by Seller in this Agreement or any Schedule hereto or certificate required to be furnished by or on behalf of Seller to Buyer pursuant to the terms hereof contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact required to make the statements contained herein or therein not misleading. SECTION 7.21. EXCLUSIVE WARRANTIES. (a) Except for the express representations and warranties set forth in this Agreement, Seller makes no representation or warranty, express or implied, with respect to the Transferred Assets, the Real Estate and the Assumed Liabilities which are being sold "AS IS" in all respects with all faults, including all environmental matters and liabilities (other than such environmental liabilities expressly retained by Seller pursuant to the express terms of this Agreement). SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF BUYER'S, WHETHER OR NOT SELLER HAS BEEN MADE AWARE OF ANY SUCH PURPOSE. -36- 36 ARTICLE VIII. COVENANTS AND AGREEMENTS. SECTION 8.1. HSR FILINGS. In connection with the filings by Seller and Buyer with the Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice (the "Antitrust Division") of premerger notification in accordance with HSR with respect to the purchase and sale of the Transferred Assets, the Real Estate and Assumed Liabilities pursuant to this Agreement and the other Operative Agreements, Seller and Buyer each agrees to furnish, and to cause its Affiliates to furnish, promptly to the FTC and the Antitrust Division any additional information reasonably requested by either of them pursuant to HSR in connection with such filings and shall diligently take, or cooperate in the taking of, all steps that the Parties mutually agree are necessary or reasonably desirable and proper to expedite the termination of the waiting period under HSR; provided, however, that neither Seller nor Buyer shall be required to comply with any Burdensome Condition. SECTION 8.2. PURCHASE OF EQUIPMENT. As requested by Buyer, Seller shall buy out the remaining lease obligations and/or obtain title to the equipment and machinery specified on Schedule 8.2. effective as of the Closing Date and conditional upon the Closing for a total aggregate purchase price for all such equipment and machinery not to exceed $6,500,000 (six million five hundred thousand dollars). Buyer shall pay to Seller the actual aggregate price negotiated and paid by Seller pursuant to this Section 8.2 as additional consideration at Closing in accordance with Section 2.3., above. SECTION 8.3. AMENDED SCHEDULES. If, prior to the date which is six months after the date of this Agreement, Buyer identifies in writing to Seller any assets which were not listed in Schedule 2.1(ii) through 2.1(vi) hereunder as Transferred Assets and which Seller agrees are assets which were required by Seller to conduct its printed wire board manufacturing operations at the Real Estate immediately prior to Closing, Seller shall, subject to the applicable terms and conditions of this Agreement, amend the relevant schedule to add such assets thereto and such assets shall thereafter be considered Transferred Assets for all purposes under this Agreement. SECTION 8.4. SALE OF REAL ESTATE. (a) From and after the Closing Date, Seller shall proceed to use its reasonable good faith efforts to complete the Subdivision, and to make the utilities/services Independent in certain respects as more fully described in the Project Operations Agreement ("making the Utilities/Services Independent"). Seller shall pay all expenses associated with the Subdivision and for making the Utilities/Services Independent; provided that in no event shall Seller be obligated to spend more than four million U.S. dollars ($4,000,000) in the aggregate for making the Utilities/Services Independent. A failure of or refusal by the City of Austin and/or Travis Central Appraisal District to take all required actions to complete the Subdivision for any reason shall not constitute a breach by Seller hereunder. If the Subdivision is not completed as aforesaid, or if making the Utilities/Services -37- 37 Independent cannot, in Seller's good faith and sole opinion, be performed for an aggregate expense less than or equal to four million U.S. dollars ($4,000,000), then Buyer's exclusive remedy and Seller's exclusive liability shall be for Buyer to continue to occupy the Real Estate for the balance of the ninety-nine (99) year term of the Lease and otherwise the Lease shall remain in full force and effect upon the same terms and conditions stated therein. (b) If the Subdivision has been accomplished, and Seller has completed making the Utilities/Services Independent , the Parties shall schedule a closing (the "Real Estate Closing") to occur no later than ten (10) days after the date on which both the Subdivision and making the Utilities/Services Independent shall have been completed ("Real Estate Closing Date"). At the Real Estate Closing, Seller shall convey to Buyer insurable fee simple title to the Real Estate (the Title Company insuring indefeasibility of title), in its "As Is" condition in all respects "with all faults," together with (i) non-exclusive easements in recordable form to use the Access Roads (as defined in the Project Operations Agreement), (ii) all other easements in recordable form determined by Seller and Buyer to be required in connection with making the Utilities/Services Independent, and (iii) all other easements in recordable form required by either Party in connection with the services to be provided by one Party to the other pursuant to the Project Operations Agreement; subject, however, to (y) Permitted Encumbrances, and (z) any taking under powers of eminent domain (the word "taking" as used herein shall encompass, without limitation, a taking by or for utility easements). Notwithstanding the foregoing, Seller shall cause to be discharged at or prior to the Real Estate Closing (or cause Buyer's Title Company to insure against collection out of the Real Estate on account of) any fee mortgages or liens against the Real Estate except if caused by Buyer or anyone claiming by, through or under Buyer. Fee title shall be conveyed by a Texas statutory form of Special Warranty Deed in the form attached as Exhibit H. Any conveyance or similar transfer Taxes imposed upon the transfer of the Real Estate shall be paid by Seller, and the cost of any surveys, other than the Survey, updates to the Title Commitment and the cost of any title policies, environmental reports other than the Environmental Baseline, and any other costs or fees associated with such purchase shall be paid by Buyer. Seller shall execute and deliver such customary affidavits as are reasonably required by the Title Company to issue Buyer's Title Policy, without exception for matters other than the Permitted Encumbrances. (c) At the Real Estate Closing, adjustment shall be made as of 11:59PM of the day immediately preceding the Real Estate Closing, in accordance with the customs of the Real Estate Board of New York, Inc., between the parties for: (i) real estate Taxes; (ii) water rates and charges; (iii) sewer Taxes and rents; -38- 38 (iv) any other utilities/services, whether or not they have been made independent as part of making the Utilities/Services Independent and which customarily require adjustment; and (v) periodically recurring fees, and governmental and transferable licenses or permits, if any, issued in respect of the fee ownership of the Real Estate. (d) At the Real Estate Closing, the Lease shall be canceled effective as of the transfer of fee title to the Real Estate to Buyer as required herein. The Project Operations Agreement shall survive the Real Estate Closing and shall remain in full force and effect in accordance with its terms. SECTION 8.5. SALE "AS IS" WITH ALL FAULTS. Except for the express representations set forth in Sections 7.10. and 7.17., above, the Parties acknowledge and agree that the Basic Fixed Rent, defined in the Lease, and the Purchase Price allocated to the Real Estate, were established in material reliance on Buyer accepting the Real Estate in its "AS IS" condition "WITH ALL FAULTS." SECTION 8.6. BUYER PERMITS . Buyer shall exercise its reasonable efforts to satisfy and to effectuate on or prior to the Closing Date, or as soon thereafter as is practicable, the transfer or issuance of all licenses and permits it may require to operate its business on the Real Estate on and after the Closing Date. SECTION 8.7. GUARANTEE OF THE GUARANTOR. The Guarantor hereby unconditionally and absolutely guarantees to Seller the performance and payment of any and all monetary and other obligations of Buyer under this Agreement and the Operative Agreements to which Buyer in accordance herewith and therewith is a party, independently of the obligations of Buyer, and the Guarantor hereby agrees to indemnify Seller against any Loss incurred by reason of any failure of Buyer to perform and pay such obligations in such manner. This guarantee is a direct, absolute, unconditional, irrevocable, present and continuing guarantee of performance and payment, and is a direct and primary obligation of the Guarantor, and is in no way conditional or contingent upon any attempt to enforce performance upon, or collection from, Buyer or upon any other event, contingency or circumstances whatsoever. This shall be a continuing guarantee and shall cover and secure any balance owing by Buyer under this Agreement and the Operative Agreements to which Buyer is a party and Seller shall not be obligated to exhaust its recourse against Buyer before being entitled to payment from the Guarantor, of all and every of the obligations hereby guaranteed. The obligations of the Guarantor set forth above shall not be subject to any deduction, diminution, abatement, setoff, recoupment, suspension, deferment, reduction, or defense (other than valid defenses Buyer has against Seller and all other rights of Buyer under this Agreement and the Operative Agreements, and full and strict compliance by the Guarantor of its obligations hereunder) and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way -39- 39 affected by, any circumstance or condition whatsoever (whether or not the Guarantor or Buyer shall have any knowledge or notice thereof), other than full and strict compliance by the Guarantor of its obligations hereunder. SECTION 8.8. NON-SOLICITATION. (a) Seller agrees that, for a period of two years from the Closing Date, it will not, directly or indirectly, solicit for employment or hire any Transferred Employee (so long as such person is employed by Buyer); provided, however, that the foregoing provision will not prevent Seller from employing any such person who contacts Seller on his or her own initiative without any direct or indirect solicitation by or encouragement from Seller and provided, further, that solicitation shall not include general employment advertising or the use of an independent employment agency or search firm not specifically directed to employees of Buyer or any of its Affiliates. (b) Each of Buyer and Guarantor agree that, for a period of two years from the Closing Date, it will not, directly or indirectly, solicit for employment or hire any employee of Seller or any of its subsidiaries employed at the Complex or with whom Buyer had contact in connection with this transaction (so long as such person is employed by Seller); provided, however, that the foregoing provision will not prevent either Buyer of Guarantor from employing any such person who contacts either Buyer or Guarantor on his or her own initiative without any direct or indirect solicitation by or encouragement from Buyer or Guarantor and provided, however, that solicitation shall not include general employment advertising or the use of an independent employment agency or search firm not specifically directed to employees of Seller or any of its Affiliates. SECTION 8.9. SATISFACTION OF CLOSING CONDITIONS. Buyer and Seller shall use their reasonable good faith efforts to cause all conditions to the Closing within the control of such Party to be timely satisfied and, subject to the conditions in Articles IX and X, respectively, to consummate the Closing. ARTICLE IX - COVENANTS OF SELLER SECTION 9.1. CONDUCT OF THE BUSINESS. (a) From the date hereof until the Closing Date, Seller shall continue to operate the printed wire board plant in Austin, Texas in the ordinary course and use its reasonable good faith efforts to preserve intact the Transferred Assets and relationships with third parties (including other business units of Seller), and to keep available the services of those of the Employees who are regular, full-time Employees (subject to the rights of any Employees to resign, retire or take a retirement bridge leave of absence, and the right of Seller to dismiss any Employee in accordance with existing policies of Seller). SECTION 9.2. ACCESS TO INFORMATION. Except as may be deemed appropriate to ensure compliance with respect to any applicable Laws (including, without limitation, any requirements with respect to security clearances and any -40- 40 antitrust regulations) and subject to any confidentiality obligations or applicable privileges (including, without limitation, the attorney-client privilege), from the date of this Agreement until the Closing Date, Seller (a) will give Buyer and its authorized representatives reasonable access to the offices, properties, books, and records of Seller relating to the Transferred Assets during normal business hours and upon reasonable prior notice, (b) will furnish to Buyer and its authorized representatives such financial and operating data and other information relating to the Transferred Assets as Buyer may reasonably request and (c) will instruct its employees and representatives to cooperate with Buyer in its investigation of the Transferred Assets, all for the purpose of enabling Buyer and its authorized representatives to conduct, at their own expense, business and financial reviews, investigations and studies of the Transferred Assets. Notwithstanding the foregoing or any other provision of this Agreement, Buyer shall not have access to such price and other competitive information as may invoke antitrust or similar legal restrictions. Each Party shall use its good faith reasonable efforts after the Closing Date to provide to the other Party and its representatives at the other Party's expense information reasonably requested by the other Party relating to the Transferred Assets to the extent required by the other Party to permit the other Party to determine any matter relating to its rights and obligations under the Operative Agreements and its compliance with applicable tax and financial reporting requirements, and in connection with any claim asserted in connection with an Assumed Liability. ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All obligations of Buyer to effect the Closing hereunder are, subject to the satisfaction at Closing of the following conditions precedent: SECTION 10.1. PERFORMANCE. Seller shall have performed and complied in all material respects with each agreement, covenant and condition in each Operative Agreement to which it is or is specified to be a Party, which agreement, covenant or condition is required to be performed or complied with by Seller at or before the Closing. SECTION 10.2. AUTHORIZATION, EXECUTION AND DELIVERY OF OPERATIVE AGREEMENTS. Seller shall have duly authorized, executed and delivered each Operative Agreement to which it is or is specified to be a Party, and an executed counterpart thereof shall have been delivered to Buyer. SECTION 10.3. NO DEFAULT. Each Operative Agreement shall be in full force and effect without any event having occurred or condition existing that constitutes, or with the giving of notice or passage of time (or both) would constitute, a default thereunder or breach thereof (other than a default or breach on the part of Buyer or any of its Affiliates) or would give any party thereto (other than Seller or any such Affiliate) the right to terminate or not to perform any obligation thereunder. -41- 41 SECTION 10.4. CONSENTS, ETC.; BURDENSOME CONDITIONS. (a) With the exception of the transfer of the Transferable Permits all Governmental Actions required to be taken, given or obtained by Seller in connection with the transactions contemplated by this Agreement and the other Operative Agreements shall (i) have been taken, given or obtained, (ii) be in full force and effect and (iii) not be subject to any pending proceedings or appeals, administrative, judicial or otherwise (and the time for appeal shall have expired or, if an appeal shall have been taken, it shall have been dismissed); (b) the waiting period under HSR shall have expired or been terminated; and (c) no Burdensome Condition shall exist with respect to Buyer in connection with any transactions contemplated by the Operative Agreements. SECTION 10.5. GOVERNMENTAL RULES. (a) No Governmental Rule shall have been instituted, issued or proposed to restrain, enjoin or prevent the transactions contemplated by the Operative Agreements or to invalidate, suspend or require modification of any material provision of any Operative Agreement. (b) No change shall have occurred since the date of this Agreement in any Governmental Rule that, in the good faith opinion of Buyer, would make it illegal for Buyer to consummate the transactions contemplated by the Operative Agreements or subject Buyer to any material fine, penalty or other liability under or pursuant to any Governmental Rule because of its consummation of the transactions contemplated by the Operative Agreements. SECTION 10.6. STANDARD CLOSING DOCUMENTS. Buyer shall have received, with respect to Seller: (a) a certificate, dated the Closing Date, of the secretary, assistant secretary or another appropriate authorized signatory of Seller certifying: (i) that a true and correct copy of the resolutions, delegations or other written evidence of corporate action of the appropriate authority within Seller duly authorizing or ratifying its execution, delivery and performance of the Operative Agreements to which it is or is specified to be a Party and the consummation of the transactions contemplated thereby, is attached to such certificate, and as to the absence of other resolutions, delegations or other corporate action relating thereto; and (ii) as to the absence of proceedings for the merger, consolidation, sale of all or substantially all the assets, dissolution, liquidation or similar proceedings with respect to Seller; -42- 42 (b) an incumbency certificate signed by an appropriate officer or other authorized signatory of Seller dated the Closing Date as to the signatures and titles of the officers or authorized signatories of Seller executing any Operative Agreement and any other documents delivered in connection with any Operative Agreement; (c) a certificate signed by an appropriate officer or other authorized signatory of Seller dated the Closing Date certifying that the conditions set forth in Section 10.1., 10.2., 10.3., 10.4., and 10.7. (with respect to Seller) have been satisfied; and (d) a certificate signed by an appropriate officer or other authorized signatory of Seller dated the Closing Date certifying that the representations and warranties set forth in Article VII are true and correct in all respects (in case of any representation or warrant qualified by materiality) or in all material respects (in the case of any representation or warranty not qualified by materiality) as of the Closing Date. SECTION 10.7. REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Article VII shall be true and correct in all respects (in case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualifications) as of the date of this Agreement and as of the Closing Date with the same effect as if made at and as of the Closing Date. SECTION 10.8. PROCEEDINGS. All corporate and legal proceedings taken by Seller in connection with the transactions contemplated hereby and all documents relating thereto shall be reasonably satisfactory in form and substance to Buyer, and certified or other copies of all relevant documents as Buyer shall have reasonably requested shall have been provided to Buyer or its counsel. SECTION 10.9. WAIVER OF CONDITIONS BY BUYER. Buyer may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by Buyer of any of its rights pursuant to Article XII or XIII of this Agreement if Seller shall be in default of any of its express representations, warranties or covenants set forth in this Agreement. ARTICLE XI. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. All obligations of Seller to effect the Closing hereunder are, at its option, subject to the satisfaction at Closing of the following conditions precedent: SECTION 11.1. PERFORMANCE. Each of Buyer and Guarantor shall have performed and complied in all material respects with each agreement, covenant and condition in each Operative Agreement to which it is or is specified to be a Party, which -43- 43 agreement, covenant or condition is required to be performed or complied with by Buyer or Guarantor at or before the Closing. SECTION 11.2. AUTHORIZATION, EXECUTION AND DELIVERY OF OPERATIVE AGREEMENTS. Each of Buyer and Guarantor shall have duly authorized, executed and delivered each Operative Agreement to which it is or is specified to be a Party, and an executed counterpart thereof shall have been delivered to Seller. SECTION 11.3. NO DEFAULT. Each Operative Agreement shall be in full force and effect without any event having occurred or condition existing that constitutes, or with the giving of notice or passage of time (or both) would constitute, a default thereunder or breach thereof (other than a default or breach on the part of Seller or any of its Affiliates) or would give any party thereto (other than Buyer or its Affiliates) the right to terminate or not to perform any obligation thereunder. SECTION 11.4. CONSENTS, ETC.; BURDENSOME CONDITIONS. (a) All Governmental Actions required to be taken, given or obtained by each of Buyer and Guarantor in connection with the transactions contemplated hereby shall (i) have been taken, given or obtained, (ii) be in full force and effect and (iii) not be subject to any pending proceedings or appeals, administrative, judicial or otherwise (and the time for appeal shall have expired or, if an appeal shall have been taken, it shall have been dismissed). (b) The waiting period under HSR shall have expired or been terminated. (c) No Burdensome Condition shall exist with respect to Seller in connection with any transactions contemplated by the Operative Agreements. SECTION 11.5. GOVERNMENTAL RULES. (a) No Governmental Rule shall have been instituted, issued or proposed to restrain, enjoin or prevent the transactions contemplated by the Operative Agreements or to invalidate, suspend or require modification of any material provision of any Operative Agreement. (b) No change shall have occurred since the date of this Agreement in any Governmental Rule that, in the good faith opinion of Seller, would make it illegal for Seller to consummate the transactions contemplated by the Operative Agreements or subject Seller to any material fine, penalty or other liability under or pursuant to any Governmental Rule in connection with any such transaction. SECTION 11.6. STANDARD CLOSING DOCUMENTS. Seller shall have received, with respect to each of Buyer and Guarantor: (a) a certificate, dated the Closing Date, of the secretary, assistant secretary or another appropriate authorized signatory of each of Buyer and Guarantor certifying: -44- 44 (i) that a true and correct copy of the Agreement of Limited Partnership of Buyer and the charter and By-laws of Guarantor is attached to each such certificate: (ii) that a true and correct copy of the resolutions, delegations or other written evidence of corporate action of the appropriate authority within each of Buyer and Guarantor and, if applicable, the stockholders of each of Buyer and Guarantor duly authorizing or ratifying its execution, delivery and performance of the Operative Agreements to which each is or is specified to be a Party and the consummation of the transactions contemplated thereby, is attached to each such certificate, and as to the absence of other resolutions, delegations or other corporate action relating thereto; and (iii) as to the absence of proceedings for the merger, consolidation, sale of all or substantially all the assets, dissolution, liquidation or similar proceedings with respect to each of Buyer and Guarantor; (b) an incumbency certificate signed by an appropriate officer or other authorized signatory of each of Buyer and Guarantor dated the Closing Date as to the signatures and titles of the officers or authorized signatories of each of Buyer and Guarantor executing any Operative Agreement and any other documents delivered in connection with any Operative Agreement; (c) a certificate signed by an appropriate officer or other authorized signatory of each of Buyer and Guarantor dated the Closing Date certifying that the conditions set forth in Section 11.1., 11.2., 11.3., 11.4., and 11.7. (with respect to each of Buyer and Guarantor) have been satisfied; and (d) a certificate signed by an appropriate officer or other authorized signatory of each of Buyer and Guarantor dated the Closing Date certifying that the representations and warranties set forth in Article VI are true and correct in all material respects as of the Closing Date. SECTION 11.7. REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Article VI shall be true and correct in all material respects (in case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualifications) as of the date of this Agreement and at the Closing with the same effect as if made at and as of the Closing Date. SECTION 11.8. PROCEEDINGS. All limited partnership and legal proceedings taken by Buyer and all corporate and legal proceedings taken by Guarantor in connection with the transactions contemplated hereby and all documents relating thereto shall be reasonably satisfactory in form and substance to Seller, and certified or other copies of all relevant documents as Seller shall have reasonably requested shall have been provided to Seller or its counsel. -45- 45 SECTION 11.9. WAIVER OF CONDITIONS BY SELLER. Seller may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by Seller of any of its rights pursuant to Article XII or XIII of this Agreement if Buyer shall be in default of any of its express representations, warranties or covenants set forth in this Agreement. ARTICLE XII. ENVIRONMENTAL INDEMNITIES SECTION 12.1. SELLER'S INDEMNITY. (a) Subject to the maximum aggregate liability of eight million dollars ($8,000,000) specified in Section 13.3.(c), below, Seller agrees that it shall bear the expenses of, and responsibility for, any monitoring or remediation, required by a Governmental Authority at time of Closing or required by any Governmental Authority to address any violation of Environmental Law or an exceedance of a published standard or guideline established by a Governmental Authority in effect at the Closing Date with respect to any contaminant identified in the Environmental Baseline. Subject to the maximum aggregate liability of eight million dollars ($8,000,000) specified in Section 13.3.(c), below, Seller shall also bear the cost of any Remediation required to address Newly Discovered Contamination. Seller's obligation to conduct such monitoring or remediation shall terminate upon the earlier of (i) receipt of notice from any Governmental Authority with jurisdiction that the Remediation is acceptable or (ii) three (3) years after the last monitoring requirement imposed by a Governmental Authority has been completed, it being understood that no other Remediation has been required of Seller for any such contamination specified in the first sentence of this Section by such Governmental Authority prior to the expiration of such period. All Remediation shall be performed to the remediation levels and requirements in effect at the Closing Date as established by any Governmental Authority with jurisdiction over the Real Estate, except that Remediation required as a result of Newly Discovered Contamination shall be performed to the published remediation standards or guidelines established within one year of the Closing Date. Seller shall have the sole right to negotiate with any Governmental Authority, and all Remediation shall be conducted under Seller's exclusive direction, provided that Seller may not agree to any condition, clause or settlement that (i) creates liability on behalf of Buyer, (ii) burdens Buyer's title to the Real Estate, or (iii) could reasonably be anticipated to have a significant adverse effect upon the health and safety of Buyer's employees, without the written consent of Buyer, which consent shall not be unreasonably withheld. (All monitoring and remediation activities required to be performed by Seller pursuant to this Section 12 shall be referred to collectively as the "Seller's Remediation.") Except as herein provided, Seller's Remediation shall not be subject to Sections 13.3.(b) and (c). -46- 46 (b) Buyer agrees to use its reasonable good faith efforts to cooperate with Seller in all matters relating to Seller's Remediation. During the course of any Seller's Remediation, Buyer shall, and hereby does, grant to Seller, its agents, employees, contractors and consultants, all access reasonably necessary to perform such Seller's Remediation at reasonable times and in compliance with any health, safety or security requirements of Buyer. Such access shall include use of utilities at the parking and storage space. Buyer also hereby agrees to allow Seller to install and maintain any remediation devices at, on or under the Real Estate, including, but not limited to, monitoring wells or groundwater recovery and treatment systems, that are required by any Governmental Authority or that Seller deems reasonably necessary to perform Seller's Remediation, provided that, whenever possible, such remediation devices shall be located to minimize impact on Buyer's operations. During the course of Seller's Remediation, Seller shall use reasonable good faith efforts to avoid or minimize interference with the ongoing business of Buyer. Buyer may, at its own expense, monitor the Remediation. Upon request, Seller shall provide to Buyer, at no expense, copies of all data, draft and final reports, and correspondence from or to any Governmental Authority relating to Seller's Remediation. Seller shall provide such documentation as soon as it is received and, where practical, at least five Business Days prior to filing it with any Government Authority. Seller shall consult with Buyer prior to executing any Consent Order or otherwise accepting any obligation imposed by a Governmental Authority. Buyer shall be entitled, at its own expense, to participate in any meetings with any Governmental Authority concerning Seller's Remediation. Seller shall give Buyer reasonable access to information necessary to allow Buyer to undertake such activities, including, but not limited to, any materials or data created by any of Seller's consultants after the Closing Date, other than any such information that would otherwise be protected by the attorney-client privilege, or any attorney work product doctrine or other privilege pertaining to confidentiality. (c) Subject to the maximum aggregate liability of eight million dollars ($8,000,000) specified in Section 13.3.(c), below, Seller shall indemnify and hold Buyer harmless from all Losses (i) arising from Seller's negligent act or omission in performing Seller Remediation brought by Governmental Authorities or third parties other than Affiliates of Buyer, (ii) arising from the off-site transportation, treatment, storage or disposal of Hazardous Material from the Real Estate by Seller at any time prior to the Closing Date, or (iii) arising from any violation of any Environmental Law in effect at the Closing Date, due to conditions existing or events occurring prior to the Closing Date. This indemnification obligation shall not include indirect or consequential Loss or expenses, but shall include Loss incurred by Buyer attributable to the diminution of value of the Real Estate proven by Buyer to have been caused by additional Liens, deed restrictions or deed recordations not otherwise in effect as of the Closing Date and imposed pursuant to Environmental Law solely as a result of Seller's Remediation. Except as herein provided, Seller's obligations under this paragraph (c) shall not be subject to Sections 13.3.(b) and (c). -47- 47 SECTION 12.2. BUYER INDEMNITY. Notwithstanding any other provisions of this Agreement to the contrary, Buyer shall: (i) bear the expense and the responsibility for any monitoring or remediation of, (ii) indemnify and hold Seller harmless from all Losses arising out of, and (iii) assume all liabilities for any violation of Law or exceedance of a published standard or guideline established by a Governmental Authority relating to the Real Estate that is not a Seller Remediation and that occurs after the Closing Date and during the time of Buyer's ownership or operation of the Real Estate. SECTION 12.3. SURVIVAL. The indemnification provisions in this Section shall survive the Closing indefinitely. ARTICLE XIII. INDEMNITY. SECTION 13.1. SURVIVAL. Subject to Section 12.3., above, (a) the representations set forth in Sections 6.1., 6.2., 7.1., 7.2., and 7.6. shall survive the Closing until the third anniversary of the date of this Agreement; and (b) all other representations and warranties of the Parties contained in this Agreement shall survive the Closing until the first anniversary of the date of this Agreement. SECTION 13.2. BUYER INDEMNIFICATION. Subject to Section 13.7., below, Buyer hereby indemnifies Seller against and agrees to hold Seller harmless from any Loss incurred or suffered by Seller arising out of any misrepresentation or breach of warranty contained in this Agreement (a "Warranty Breach") by Buyer or any breach of covenant or agreement made or to be performed pursuant to this Agreement (a "Covenant Breach") by Buyer. SECTION 13.3. SELLER INDEMNIFICATION. (a) Subject to the limitations in Article XII and Sections 13.3.(b) and (c), and 13.7. below, Seller hereby indemnifies Buyer against and agrees to hold Buyer harmless from (i) any Loss incurred or suffered by Buyer arising out of a Warranty Breach by Seller or Covenant Breach by Seller; or (ii) a Retained Liability; provided that Seller's indemnity with respect to any Retained Liability (other than Seller's indemnity obligations under Article XII) and with respect to any Warranty Breach relating to Section 7.6., above, shall not be subject to Sections 13.3.(b) or (c) below; provided further however, that Seller's indemnity under Article XII shall be subject to the maximum aggregate liability of eight million dollars ($8,000,00) specified in Section 13.3.(c) below. (b) Seller shall not be liable under this Section 13.3. with respect to any individual Warranty Breach or Covenant Breach by Seller where the Loss resulting therefrom is less than $100,000, and no such individual Warranty Breach or Covenant Breach shall be aggregated for purposes of Section 13.3.(c), below; and -48- 48 (c) Seller shall not be liable under this Section 13.3. with respect to any Warranty Breach and or Covenant Breach by Seller unless the aggregate amount of Losses with respect to all Warranty Breaches and Covenant Breaches by Seller exceeds $400,000 and then only to the extent of such excess up to a maximum aggregate liability of $8,000,000. SECTION 13.4. PROCEDURES. (a) Each of Buyer pursuant to Sections 5,2,12.1. and 13.3. and Seller pursuant to Sections 5.2, 12.2., and 13.2. (the "Indemnified Party") agrees to give prompt notice to the other Party (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 this Agreement, including the amount and other details of such claim ; provided, however, that the failure of the Indemnified Party to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its indemnification obligations hereunder, except to the extent that the Indemnifying Party shall have been prejudiced by such lack of timely and adequate notice. The Indemnifying Party, if it shall acknowledge in writing to the Indemnified Party that it is fully liable (up to the indemnification limits) to the Indemnified Party for any and all Losses associated with such claim, shall have the right, at its election, to take over the defense or settlement of such claim at its own expense by giving prompt notice to that effect to the Indemnified Party. If the Indemnifying Party shall have so assumed the defense of any claim, the Indemnifying Party shall be authorized to consent to a settlement of, or the entry of any judgment arising from, any such claim, without the prior written consent of the Indemnified Person; provided, however, that a condition to any such settlement shall be a complete release of the Indemnified Person with respect to such claim. The Indemnified Party shall at all times have the right, at its option and expense, to participate fully in, but not to control, any such defense. If the Indemnifying Party does not, within thirty days after receipt of the Indemnified Party's notice of claim, (x) give such notice to take over the defense of such claim and proceed diligently to defend the claim or (y) object to such claim in writing to the Indemnified Party, then the Indemnified Party shall have the right, but not the obligation, to undertake the defense of such claim for the account of and at the risk of the Indemnifying Party and the Indemnifying Party shall be bound by any defense or settlement that the Indemnified Party may make as to such claim. The parties shall cooperate in defending any third party claim, and the defending party shall have reasonable access to the books, records and personnel which are pertinent to the defense and which are in the possession or control of the other party. The parties agree that any Indemnified Party may, at its own expense, join an Indemnifying Party in any action, claim or proceeding brought by a third party, as to which any right of indemnity created by this Agreement would or might apply, for the purpose of enforcing any right of indemnity granted to such Indemnified Party pursuant to this Agreement. (b) Any claim for indemnification made directly by a party and which does not result from a third party claim or action, shall be asserted by written notice. The other party shall have a period of sixty days within which to respond thereto. If the other party does not respond within such sixty-day period, such party shall be deemed -49- 49 to have accepted responsibility to make payment and shall have no further right to contest the validity of such claim. SECTION 13.5. INSURANCE. The amount of any Loss for which indemnification is provided shall be net of any amounts that the Indemnified Party recovers under insurance policies or agreements with respect to such Loss. The Indemnified Party shall take all reasonable actions to secure payment from insurance policies before putting forward a claim for any Loss to the Indemnifying Party. SECTION 13.6. INDEMNITY IS THE EXCLUSIVE REMEDY. Each party hereto acknowledges and agrees that, after the Closing Date, its sole and exclusive remedy with respect to any and all claims relating to or arising out of a breach of any representation, warranty, covenant or agreement made by the other party in this Agreement shall be pursuant to the indemnification provisions herein. Nothing set forth in this Agreement shall be deemed to prohibit or limit either party's right at any time before, on or after the Closing Date, to seek injunctive or other equitable relief for the failure of the other party to perform any covenant or agreement contained herein. SECTION 13.7. EXCLUSION OF CERTAIN DAMAGES. NEITHER BUYER NOR SELLER SHALL BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING LOSS OF PROFITS OR GOODWILL, IN CONNECTION WITH ANY ASPECT OF THIS AGREEMENT. ARTICLE XIV. GENERAL. SECTION 14.1. TERMINATION OF AGREEMENT. (a) This Agreement and the obligations to consummate the transactions contemplated hereby and by the other Operative Agreements may be terminated upon written notice to the other Party hereto at any time before the Closing Date as follows: (i) by Seller, on the one hand, or by Buyer, on the other hand, if the Closing shall not have occurred on or prior to September 15, 1997; (ii) by Seller, at any time prior to the Closing, if there has been a material Warranty Breach or Covenant Breach by Buyer; (iii) by Buyer, at any time prior to Closing, if there has been a material Warranty Breach or Covenant Breach by Seller; or (iv) by either Seller or Buyer if, in its reasonable opinion, a Burdensome Condition exists with reference to Seller or Buyer, respectively; provided, however, that prior to such termination such Party shall have exercised reasonable efforts to negotiate with the relevant Governmental Authority for removal of the Burdensome Condition; -50- 50 in which case this Agreement and all obligations of the Parties hereunder, except obligations under Sections 14.2. and 14.4. shall terminate, unless the Parties otherwise mutually agree. (b) Notwithstanding the provisions of this Section, termination of this Agreement shall not relieve any Party of its liability for breach of any of the provisions of this Agreement or its obligations under Sections 14.2. and 14.4. SECTION 14.2. PUBLIC ANNOUNCEMENTS. No public release, announcement or other form of publicity concerning this Agreement or the transactions contemplated by this Agreement shall be issued by either party hereto without the prior consent of the other party, except as such release or announcement may be required by law or the rules and regulations of any securities exchange (including the NASDAQ Stock Market), in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance, provided that a period of 24 hours shall be deemed to be reasonable time for purposes of this provision. SECTION 14.3. NO THIRD-PARTY BENEFICIARIES. Except as provided to the contrary in Article V hereof, this Agreement is for the sole benefit of the Parties hereto and nothing herein expressed or implied herein or therein shall give or be construed to give to any Person, other than the Parties, any legal or equitable rights hereunder or thereunder. SECTION 14.4. COSTS. Each Party shall be responsible for the costs and expenses incurred by it in the negotiation, execution and delivery of this Agreement and, except as otherwise provided elsewhere herein or in the other Operative Agreements, the consummation of the transactions contemplated hereby or thereby. SECTION 14.5. BULK SALES. Buyer hereby waives compliance with any applicable bulk sales or similar laws. Buyer shall discharge the Assumed Liabilities in accordance with their terms and Buyer agrees that Seller shall have no liability for any failure of Buyer to discharge the Assumed Liabilities in accordance with their terms. Seller shall indemnify and hold harmless Buyer against any and all liabilities which may be asserted by third parties against Buyer as a result of Seller's noncompliance with any such bulk sales or similar laws, other than the Assumed Liabilities. SECTION 14.6. MODIFICATION AND WAIVER. No modification or waiver of any provision of this Agreement and no consent by either Party to any departure therefrom shall be effective unless in a writing referencing the particular article hereof or thereof to be modified or waived and signed by a duly authorized officer or representative of each Party, and the same will only then be effective for the period and on the conditions and for the specific instances and purposes specified in such writing. -51- 51 SECTION 14.7. CONSTRUCTION; REPRESENTATION. This Agreement has been negotiated by the Parties and their respective counsel and will be fairly interpreted in accordance with its and their terms and without any strict construction in favor of or against either Party. SECTION 14.8. SEVERABILITY. If any one or more provisions contained in this Agreement, or the application of such provision to any person or circumstance, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. SECTION 14.9. GOVERNING LAW. (a) This Agreement, valued in excess of One Million Dollars ($1,000,000), shall be deemed to have been made at Armonk, New York, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of New York applicable to agreements executed, delivered and performed within such State, without regard to the principles of conflicts of laws thereof. (b) Each of the Parties hereby consents to the exclusive jurisdiction of any state or federal court located within the county of New York in the State of New York. Each of the Parties hereby: (i) waives trial by jury, (ii) waives any objection to venue of any action instituted under this Agreement, and (iii) consents to the granting of such legal or equitable relief as is deemed appropriate by any aforementioned court. SECTION 14.10. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given and shall be effective (a) when delivered by messenger or courier, or (b) five days after deposit for mailing by registered or certified mail, postage prepaid, return receipt requested, when also transmitted by telecopy, as follows: (a) if to Seller, to: International Business Machines Corporation New Orchard Road Armonk, New York 10504 Attention: Mr. Lee A. Dayton Vice President, Corporate Development and Real Estate Facsimile: (914) 499-7803 with a copy to: International Business Machines Corporation New Orchard Road Armonk, New York 10504 -52- 52 Attention: Mr. Donald D. Westfall Associate General Counsel Facsimile: (914) 499.6006 (b) if to Buyer, to: Multilayer Tek L.P. 11400 Burnet Road Austin, Texas 87858 Attention: General Manager Facsimile: (512) 838.7141 with a copy to: The DII Group, Inc. 6273 Monarch Park Place Suite 200 Niwot, CO 80503 Attention: Senior Vice President and Chief Financial Officer Facsimile: (303) 652.0602 and a copy to: Curtis, Mallet-Prevost, Colt & Mosle 101 Park Avenue New York, NY 10178 Attention: Jeffrey N. Ostrager Facsimile: (212) 697.1559 or to such person or address as either of the Parties shall hereafter designate to the other from time to time by similar written notice. SECTION 14.11. ASSIGNMENT. This Agreement shall be binding upon, and inure to the benefit of, and be enforceable by, the successors and assigns of the Parties; provided, that, neither Party may assign its rights or obligations hereunder without the written consent of the other Party, which consent shall not be unreasonably withheld. -53- 53 SECTION 14.12. COUNTERPARTS. This Agreement may be executed by the Parties in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. SECTION 14.13. ENTIRE AGREEMENT. This Agreement, together with the other Operative Agreements and the Agreement for Exchange of Confidential Information dated February 2, 1997 , between Buyer and Seller, comprise the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and representations, oral or written, between Seller and Buyer relating hereto or thereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives and become effective as of the date and year first above written. MULTILAYER TEK L.P. INTERNATIONAL BUSINESS MACHINES CORPORATION By: /s/ Carl R. Vertuca, Jr. By: /s/ K.P. Tang -------------------------------------- -------------------------------- Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc., in its Capacity Title: as General Partner Title: Corporate Development Officer -------------------------------------- ----------------------------- Date: August 5, 1997 Date: August 5, 1997 ---------------------------------------- ----------------------------- THE DII GROUP, INC. By: /s/ Carl R. Vertuca, Jr. ------------------------------ Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc., in its Capacity Title: as General Partner ------------------------------ Date: August 5, 1997 ------------------------------
-53- EX-2.2 3 ASSIGNMENT AND ASSUMPTION 1 EXHIBIT 2.2 ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of August 18, 1997 (this "Agreement"), between Multilayer Tek L.P. ("Buyer"), and INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation ("Seller"). WHEREAS Buyer and Seller have entered into a Purchase Agreement dated as of August 5, 1997 (the "Purchase Agreement"), providing for, among other things, the purchase by Buyer of the Transferred Assets from Seller; and WHEREAS, in conjunction with such purchase, Seller desires to sell, transfer, convey, assign and deliver to Buyer, and Buyer wishes to accept and assume, all of Seller's rights, obligations, title and interest in and to the Assumed Liabilities. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: 1. DEFINED TERMS. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement. Nothing contained herein shall be deemed to alter or amend the terms and provisions of the Purchase Agreement, and in the event of any conflict between the terms and provisions of this Agreement and the Purchase Agreement, the terms and provisions of the Purchase Agreement shall be deemed to govern and be controlling in all circumstances. 2. ASSIGNMENT. Seller hereby irrevocably sells, transfers, conveys, assigns and delivers to Buyer all of its rights, title and interest in and to the Assumed Liabilities. 3. ASSUMPTION. Buyer does hereby accept such sale, transfer, conveyance, assignment and delivery of all of Seller's right, title and interest in and to the Assumed Liabilities by Seller and assumes all obligations and liabilities of Seller thereunder pursuant to the terms and conditions of the Purchase Agreement. 4. EFFECTIVE TIME. The assignment by Seller, and the acceptance thereof by Buyer, of the Assumed Liabilities, pursuant to this Agreement, shall be effective as of the date hereof. 5. NONCONTRAVENTION. Pursuant to Section 5.1. of the Purchase Agreement, certain of the Assumed Liabilities may require the consent of third parties to any assignment. Such assignments to Buyer are made subject to the obtaining of such consents and shall be effective as of the date of such consent. The execution of 2 this Agreement shall not be interpreted, and is not intended to be interpreted, as any action taken by Seller that would be contrary to the terms and conditions of any contract requiring the consent of any third party to such assignment. Buyer and Seller shall fully cooperate with each other in an attempt to obtain such consents, as set forth in the Purchase Agreement. 6. NOTICES. All notices and other communications hereunder shall be as set forth in the Purchase Agreement. 7. AMENDMENT. This Agreement may be amended, modified or supplemented, and any provision hereof may be waived, only by written agreement of the parties. 8. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not limit or otherwise affect the meaning or interpretation of this Agreement. 9. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York without reference to its principles of conflict of law. 10. SEVERABILITY. If any one or more provisions contained in this Agreement, or the application of such provision to any person or circumstance, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 11. THIRD PARTY ACTIONS. Seller and Buyer hereby agree to cooperate in defending or prosecuting any claims or litigation relating to the transfer of title as provided herein, and to make available and furnish appropriate documents and testimony in connection therewith. 12. ASSIGNMENT. Pursuant to Section 12.10. of the Purchase Agreement, neither this Agreement nor any of the rights or obligations hereunder shall be assigned by either party hereto without the prior written consent of the other party, such consent not to be unreasonably withheld. Any purported assignment of this Agreement other than in accordance with this paragraph 12 shall be null and void and of no force or effect. 13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument and shall become a binding Agreement when one or more of the counterparts have been signed by each of the parties and delivered to the other party. -2- 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. Multilayer Tek L.P. By: /s/ Carl R. Vertuca, Jr. ----------------------------------------- Title: Senior Vice President, Chief Financial Officer and Secretary of Multek Texas Inc., in its capacity as General Partner -------------------------------------- Date: August 18,1997 --------------------------------------- The DII Group, Inc. By: /s/ Carl R. Vertuca, Jr. ----------------------------------------- Title: Senior Vice President, Chief Financial Officer and Secretary of Multek Texas Inc., in its capacity as General Partner -------------------------------------- Date: August 18,1997 --------------------------------------- INTERNATIONAL BUSINESS MACHINES CORPORATION By: /s/ Mark S. Payton ----------------------------------------- Title: Corporate Development Consultant -------------------------------------- Date: August 18, 1997 --------------------------------------- -3- EX-2.3 4 LEASE 1 EXHIBIT 2.3 LEASE BETWEEN INTERNATIONAL BUSINESS MACHINES CORPORATION (LANDLORD) AND MULTILAYER TEK L.P. (TENANT) ________, 1997 2 TABLE OF CONTENTS ARTICLE PAGE 1. Other Agreements................................. 1 2. Lease of Premises................................ 2 Section 2.01. Lease of Premises.................. 2 Section 2.02. Net Lease.......................... 2 Section 2.03. IBM Property....................... 3 Section 2.04. Access to the Complex.............. 3 3. Term............................................. 3 Section 3.01. Term............................... 3 Section 3.02. Termination Upon Conveyance of Fee Title.......................... 4 Section 3.03 Ownership of Leased Premises....... 4 4. Rent and Tenant's Obligations.................... 4 Section 4.01. Basic Fixed Rent................... 4 Section 4.02. Tenant's Obligations............... 4 Section 4.03. Real Estate Taxes.................. 4 Section 4.04. Personal Property Taxes............ 5 5. Leased Premises "As Is".......................... 6 6. Services......................................... 6 7. Parking.......................................... 6 8. Use of Leased Premises........................... 7 9. Repairs and Maintenance.......................... 7 10. Insurance........................................ 7 Section 10.01. Casualty Insurance................ 7 Section 10.02. Liability Insurance............... 8 Section 10.03. Default........................... 9 11. Alterations and Improvements..................... 9 12. Access by Landlord............................... 10 3 TABLE OF CONTENTS ARTICLE PAGE 13. Compliance with Laws............................. 10 14. Mechanics' Liens................................. 10 15. Separation of Utilities/Services................. 11 16. Default.......................................... 11 Section 16.01. Default by Tenant................. 11 Section 16.02. Default by Landlord............... 11 Section 16.03. Payment Offset.................... 12 Section 16.04. Separate Agreement ............... 13 17. Notices.......................................... 13 18. Transfer or Encumbrance.......................... 14 Section 18.01. Transfer or Encumbrance........... 14 Section 18.02. Liability of Landlord............. 16 Section 18.03. Transfer of Landlord.............. 16 19. Equal Employment Opportunity..................... 16 20. Quiet Enjoyment.................................. 16 21. No Waiver........................................ 17 22. Partial Invalidity............................... 17 23. Estoppel Certificates............................ 17 Section 23.01. Tenant's Estoppel Certificate..... 17 Section 23.02. Landlord's Estoppel Certificate... 17 24. Memorandum of Lease.............................. 18 25. The DII Group, Inc. Guarantee.................... 18 EXHIBIT A DESCRIPTION OF LEASED PREMISES AND ENCUMBRANCES EXHIBIT B SECURED AREAS 4 LEASE THIS LEASE, made as of the ____ day of ________, 1997, between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation, having its principal office at Armonk, New York 10504 (hereinafter referred to as "Landlord"), and MULTILAYER TEK L.P., a Texas limited partnership, having an office at 11400 Burnet Road, Austin, Texas 78758 (hereinafter referred to as "Tenant"). RULES OF CONSTRUCTION Except as otherwise specifically defined herein, all words shall be given the meaning assigned to them in the Project Operations Agreement; 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 other 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; all EXHIBITS hereto shall be considered as part of this Lease, subject to Article ONE and Section 16.03; accounting provisions have the meanings assigned to them by generally accepted accounting principles 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 of this Lease; 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; and, when used herein with its initial letter capitalized, a word shall be given the meaning assigned to it in this Lease. ARTICLE ONE Other Agreements Landlord and Tenant are parties to the Asset Purchase Agreement, Project Operations Agreement and other agreements executed and delivered as of the date hereof in connection with the sale of Landlord's panel manufacturing business to Tenant 1 5 (such agreements are collectively called the "Other Agreements" and the Other Agreements together with this Lease are collectively called the "Operative Agreements"). Landlord and Tenant shall comply with all of the provisions of the Other Agreements (including the Project Operations Agreement) 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 (including the Project Operations Agreement). 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 TWO Lease of Premises SECTION 2.01. 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, that certain parcel of land ("Land") located in the City of Austin, State of Texas and more particularly described in EXHIBIT A, annexed hereto and those certain buildings located on the Land, known as Buildings 60, 61, 63, 64 and 65 (herein collectively called the "Buildings") together with all mechanical, electrical, plumbing, sewage and waste treatment, sprinkler, telecommunications and any other building equipment and systems located within or outside of the Buildings, and other improvements owned by Landlord and located on and under the Land, excepting all Excluded Assets as that term is defined in the Asset Purchase Agreement, subject only to the "Permitted Encumbrances" as defined in the Asset Purchase Agreement, including the Encumbrances described in EXHIBIT A. The Land, the Buildings and all other improvements now or hereafter located on the Land or in the Buildings, excepting Excluded Assets, are herein collectively called the " Leased Premises." SECTION 2.02. Net Lease. (a) It is the intent of the parties that this Lease is in effect "triple net" so as to provide for the assumption by Tenant of all obligations and responsibilities with respect to the Leased Premises and Multek's use and operations thereon, excepting only Landlord's obligation with respect to Subdivision and making the Utilities/Services Independent as described in the Project Operations Agreement. 2 6 All costs, expenses, charges, fees, liabilities and obligations (herein collectively "Tenant's Obligations") of every kind, character and nature whatsoever relating to the Leased Premises and its use and operation which may arise during the term of this Lease or the Project Operations Agreement, whether foreseeable or not foreseeable, structural or non-structural, reasonable or unreasonable, major or minor, shall be the sole responsibility of and be paid by Tenant excepting only the following, which shall be paid for by Landlord: (a) certain agreed upon costs and expenses to be incurred by Landlord to complete the Subdivision and to make the Utilities/Services Independent, (b) costs and expenses incurred by Tenant by reason of the negligence or wilful misconduct of Landlord and (c) costs and expenses of Remediation of IBM's Contamination. Without limiting the foregoing, the obligations of Tenant under this Lease shall not be affected by reason of loss or damage to or destruction of the Leased Premises or any of the Buildings, or portion thereof, from any cause or the taking of the Leased Premises or any of the Buildings or any portion thereof by eminent domain, except that Tenant's Obligations hereunder shall be equitably abated in the proportion that the damaged or taken property bears to the remaining Leased Premises. To the extent permitted by Law, Tenant hereby waives any and all rights which it may now have or which at any time hereafter may be conferred upon it by statute or otherwise, to terminate, cancel, quit or surrender this Lease. (b) Supplementing but not limiting paragraph (a), Tenant shall not be relieved of any obligation to complete the Real Estate Closing pursuant to the conditions of the Asset Purchase Agreement, and Tenant shall not be entitled to any refund of any part of the consideration paid by Tenant as Buyer to IBM as Seller pursuant to the Asset Purchase Agreement, or be relieved of Tenant's Obligations, by reason of any loss or damage to or destruction of the Leased Premises on or after the Term Commencement Date (defined in Section 3.01), it being the intent of the parties that this Lease be "triple net" as aforesaid. SECTION 2.03. IBM Property. The Multek Site is contiguous to the IBM Property on which Landlord operates a business operation and from which Landlord will provide certain Services to the Leased Premises in accordance with and subject to the provisions of the Project Operations Agreement. 3 7 SECTION 2.04. Access to the Complex. In accordance with and subject to the provisions of the Project Operations Agreement (including Section 1.1 of EXHIBIT B thereto), (a) Landlord shall continue to own and shall maintain, repair and replace the Access Roads, (b) Landlord hereby irrevocably grants to Tenant, and to Tenant's employees, contractors, subcontractors, licensees, tenants and other agents and invitees (collectively "Tenant's Agents"), non-exclusive access to the Leased Premises over the Access Roads, and (c) Tenant hereby grants to Landlord and to Landlord's employees, contractors, subcontractors, licensees and agents access to the Leased Premises as is reasonably required for Landlord to perform its obligations under the Project Operations Agreement. ARTICLE THREE Term SECTION 3.01. Term. Tenant hereby leases the Leased Premises for a term of ninety-nine (99) years plus ten (10) successive renewal terms of ten (10) years each, exercisable by Tenant giving Landlord notice at least six (6) months prior to the expiration of the Term (the initial ninety-nine (99) year period and each renewal period collectively referred to herein as the "term of this Lease" or the "Term"), to commence on the date hereof (the "Term Commencement Date") and expire at 11:59 pm on the day preceding the ninety-ninth (99th) anniversary of the Term Commencement Date, as the Term may be extended by Tenant, or as the Term may be terminated earlier in accordance with the provisions of this Lease. SECTION 3.02. Termination Upon Conveyance of Fee Title. If Landlord completes "making the Utilities/Services Independent" and the "Subdivision" (as each term is defined in the Project Operations Agreement), then upon Landlord's conveyance to Tenant of fee title to the Leased Premises, issuance of a fee title insurance policy to Tenant which insures indefeasible title, and subject only to the Permitted Encumbrances, this Lease shall be canceled in accordance with Section 8.4(d) of the Asset Purchase Agreement. SECTION 3.03. Ownership of Leased Premises. Landlord shall not claim ownership of the Leased Premises for purposes of United 4 8 States federal, state or local taxation except as required by Section 4.03 and by the Laws. ARTICLE FOUR Rent and Tenant's Obligations SECTION 4.01. Basic Fixed Rent. Part of the consideration paid by Tenant to Landlord pursuant to the provisions of the Asset Purchase Agreement includes payment in full for all basic fixed rent due and owing hereunder. SECTION 4.02. Tenant's Obligations. In addition to Basic Fixed Rent, which Landlord acknowledges it has received in full, Tenant shall be responsible for all of Tenant's Obligations (defined in Section 2.02), including all payments arising therefrom. In the event of nonpayment of Tenant's Obligations, Landlord may exercise any of the rights and remedies to which Landlord is entitled under Article 6 of the Project Operations Agreement. Tenant shall pay Tenant's Obligations to Landlord at IBM Corporation, 11400 Burnet Road, Austin, TX 78758, Attention: Mr. Steve O'Connor, or to such other Person or at such other place as Landlord may designate in writing from time to time. SECTION 4.03. 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"). The parties agree that, pending the Subdivision and sale of the Leased Premises to Tenant and creation of a separate tax lot and separate assessment of the Leased Premises by the taxing Governmental Authority (after which Tenant shall pay Real Estate Taxes directly to the taxing Governmental Authority), Tenant's share of Real Estate Taxes imposed on the Complex shall be twenty-four percent (24%) for Real Estate Taxes. If the Subdivision is not completed, then this Lease shall remain in full force and effect and Tenant shall have the right, upon reasonable advance notice to Landlord, to audit Landlord's books and records with respect to the tax allocation for the purpose of verifying or contesting the twenty-four percent (24%) allocation applicable to the balance of the 5 9 Term. Any dispute with respect to the allocation shall be resolved by Mediation. Tenant shall pay Landlord one-twelfth (1/12) of Tenant's share of estimated Real Estate Taxes, which is agreed to be one of Tenant's Obligations, 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 current year plus three percent (3%) of such Real Estate Taxes. When actual Real Estate Taxes for the current year become known, Landlord shall issue a reconciliation statement within forty-five (45) days after it receives the Real Estate Tax bill issued by the taxing authority. If Tenant overpaid, Landlord will reimburse Tenant at the time it issues the reconciliation statement and shall include such Real Estate Tax bill. If Tenant 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) 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 Tenant's Personal Property (defined below), (iii) any use of the Leased Premises by Tenant, (iv) any Multek Contamination, and (v) any other activity on the Leased Premises by or on behalf of Tenant. SECTION 4.04. Personal Property Taxes. Within ten (10) days after receipt of Landlord's monthly bill for taxes assessed on Personal Property, Tenant shall pay one-twelfth (1/12) of all estimated ad valorum 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 personal property ("Personal Property") located on, or used in connection with the occupancy, operation, maintenance, repair or management of the Leased Premises. Such estimated taxes shall be the taxes paid in the current year plus three percent (3%) and estimated payments shall be reconciled against actuals in the same manner and in the same time frame as Real Estate Taxes. ARTICLE FIVE Leased Premises "AS IS" 6 10 Except for (i) Landlord's work required to be performed by Landlord pursuant to Article FIFTEEN hereof, (ii) such representations, warranties and covenants with respect to the "Real Estate," as provided in the Asset Purchase Agreement and (iii) such representations, warranties, covenants and indemnities with respect to environmental matters, as provided in the Asset Purchase Agreement and the Project Operations Agreement, Tenant accepts possession of the Leased Premises in their "AS IS" condition "WITH ALL FAULTS" and Landlord shall not be required to perform any additional work or furnish any additional materials or provide any additional services to or in connection with the Leased Premises during the term of this Lease except as specifically provided in this Lease or the Project Operations Agreement. The parties acknowledge and agree that the Basic Fixed Rent was established in material reliance on Tenant accepting the Leased Premises in their "AS IS" condition "WITH ALL FAULTS." ARTICLE SIX Services Landlord shall furnish to Tenant and Tenant shall accept and pay for the Services in accordance with and subject to the provisions of the Project Operations Agreement, including Section 1.9 of EXHIBIT B thereof, and Landlord shall have no obligations or responsibilities to Tenant or in connection with the Leased Premises excepting only those expressly stated herein and in the Project Operations Agreement. ARTICLE SEVEN Parking Located on the Land are parking areas (the "Parking Areas") for the exclusive use of Tenant. Subject to specific grants of access agreed upon elsewhere in this Lease, Landlord, and Landlord's employees, contractors, subcontractors, licensees, tenants and other agents and invitees (collectively, "Landlord's Agents") shall not be permitted to use the Parking Areas without Tenant's consent unless there is an emergency, a requirement to comply with a Law or directive of a Governmental Authority, or by 7 11 reason of a labor disturbance. Supplementing Section 2.02 and Article FIVE, Tenant shall keep, maintain, repair and replace the Parking Area and all sidewalks and paved dock areas located on the Land at its sole cost and expense. Landlord shall, in accordance with and subject to the provisions of the Project Operations Agreement, repair and replace the Access Roads. ARTICLE EIGHT Use of Leased Premises Tenant or any other Affiliate of The DII Group, Inc. may use the Leased Premises for the manufacturing operations currently conducted on the Leased Premises by Landlord as well as any other uses by them which is authorized by Law; provided, however, that Tenant shall obtain the written consent of Landlord to any change in Tenant's use of the Leased Premises for purposes other than the manufacturing operations, which consent shall not be unreasonably withheld or delayed if Landlord determines that the proposed change in use (a) does not materially change the volume of traffic or type of vehicle use at the Complex, (b) does not violate or threaten violation of the provisions of the Project Operations Agreement, and (c) complies with Law. ARTICLE NINE Repairs and Maintenance Except as provided in Section 2.02 and Article FIVE, Tenant shall perform or caused to be performed all maintenance and make all repairs and replacements, without exception except for those necessitated by the negligence or willful misconduct of Landlord, its employees, contractors, subcontractors, licensees, and agents, as may be necessary to the Leased Premises at its sole cost and expense. Without limitation, Tenant shall perform all repairs and restoration required by reason of a casualty or condemnation. ARTICLE TEN Insurance 8 12 SECTION 10.01. Casualty Insurance. During the term of this Lease, Tenant shall purchase and maintain, at Tenant's sole cost and expense, property damage insurance, written on an "all risk" of physical loss or damage basis, to cover all loss or damage to or destruction of any portion of the Leased Premises and Personal Property (defined in Section 4.04) in an amount of not less than eighty percent (80%) of the full cost to replace the Buildings and other structures located on the Leased Premises (including all Personal Property necessary to maintain Tenant's business operations on the Leased Premises but excluding foundations). Such amounts shall meet any co-insurance clause of Tenant's policies. 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 any improvements located in or on the Leased Premises (in the case of Tenant) and to any improvements located in or on the IBM Property (in the case of Landlord), including all Personal Property on either property, to the extent such party actually receives full and complete payment or reimbursement (excepting deductible amounts) for any such loss, damage or destruction under an insurance policy required to be carried hereunder but notwithstanding the fact that such loss, damage or destruction may be attributable to the negligence of either party or Landlord's Agents (defined in Article 7) or Tenant's Agents (defined in Section 2.04). 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 first 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. This waiver and release applies to any self-insured (deductible) portion of the loss, damage or destruction, and such waiver and release is fully effective and enforceable notwithstanding the fact that Tenant or Landlord failed to purchase and maintain insurance coverage required herein which may have reimbursed it for such loss, damage or destruction. SECTION 10.02. Liability Insurance. (a) During the term of this Lease, Tenant shall purchase and maintain, at Tenant's sole cost and expense, general commercial public liability insurance against any claims by reason of personal injury (including death) or property loss, 9 13 damage or destruction, occurring on the Leased Premises, except for the gross negligence or misconduct of Landlord, its employees, suppliers, contractors or subcontractors, in an amount of not less than one million U.S. dollars ($1,000,000.00) combined single limit for injury (including death) and for damage to property, with umbrella coverage of not less than twenty million U.S. dollars ($20,000,000.00). Tenant shall cause Landlord to be included as an additional insured under each such policy. Each policy shall contain provisions, if and to the extent available at no additional cost to Tenant, that the policy will not be cancelable except upon at least thirty (30) days prior notice to all insureds, including Landlord, and that the act or omission of one insured will not invalidate the policy coverage of any of the other insureds. Tenant shall furnish evidence reasonably satisfactory to Landlord that the insurance is in effect at or before the Term Commencement Date. Tenant may self insure for up to Two Million Five Hundred Thousand U.S. dollars ($2,500,000.00). (b) During the Term of this Lease, Landlord shall purchase and maintain, at Landlord's sole cost and expense, general commercial public liability insurance against any claims by reason of personal injury (including death) or property damage occurring on or about the IBM Property, except for the gross negligence or misconduct of Tenant, its employees, suppliers, contractors, or subcontractors, in an amount not less than one million U.S. dollars ($1,000,000.00) combined single limit for injury (including death) and for damage to property, with umbrella coverage of not less than twenty million U.S. dollars ($20,000,000.00). Landlord shall cause Tenant to be included as an insured under each such policy. Each policy shall contain provisions, if and to the extent available, that the policy will not be cancelable except upon at least thirty (30) days prior notice to all insureds, including Tenant, and that the act or omission of one insured will not invalidate the policy of any of the other insureds. Landlord shall furnish evidence reasonably satisfactory to Tenant that the insurance is in effect at or before the Term Commencement Date. IBM may self insure for up to five million U.S. dollars ($5,000,000.00). SECTION 10.03 Default. If either party fails to maintain and pay for the insurance coverage required above, that party shall be in default hereunder and, in addition to other rights 10 14 and remedies available to the non-defaulting party under this Lease or under the Project Operations Agreement, the non-defaulting party may purchase the required insurance coverage and the defaulting party shall reimburse the non-defaulting party for all costs and expenses incurred therefor within thirty (30) days after the defaulting party receives an invoice demanding payment. Tenant's obligation to purchase and pay for such insurance coverage is one of Tenant's Obligations. ARTICLE ELEVEN Alterations and Improvements Supplementing Section 2.02 and Article FIVE, Tenant may perform any and all initial construction, and may make any alterations and improvements within the Leased Premises, whether structural or non-structural, foreseeable or not foreseeable, reasonable or unreasonable, minor or major, at its sole cost and expense, subject to compliance with the Laws and the provisions of this Lease and the Project Operations Agreement; provided, however, that none of the foregoing adversely affects or requires modification to wastewater, materials storage, or any other environmental permit or license issued to Landlord, or requires Landlord to obtain a new or substitute permit or license. Without exception, Landlord shall have no obligations with respect to initial construction or subsequent alterations or improvements except as provided in Article FIFTEEN. 11 15 ARTICLE TWELVE Access by Landlord (a) Landlord shall have the right to enter the Leased Premises on prior reasonable oral notice to Tenant's representative, designated from time to time, to complete Landlord's work described in Article FIFTEEN and for purposes agreed upon in the Project Operations Agreement; otherwise, Landlord shall not have the right to enter the Leased Premises without prior written notice to Tenant's representative. In both cases, Landlord shall use reasonable good faith efforts not to disturb Tenant's use and occupancy of the Leased Premises. (b) Tenant has designated the areas outlined on EXHIBIT B as secured areas, and Landlord shall have no right of access thereto without being accompanied by Tenant's designated representative except in the case of emergencies. If there is an emergency, Landlord shall exercise reasonable good faith efforts to contact Tenant's designated representative by telephone for such purposes. (c) For purposes of this Article, Tenant's designated representative is its General Manager (telephone number 512-823-7181). ARTICLE THIRTEEN Compliance with Laws Subject to the representations, covenants, warranties and indemnities provided in the Project Operations Agreement with respect to environmental matters, Tenant shall comply with all Laws applicable to the Leased Premises. Without limitation, Tenant shall be responsible, at Tenant's sole cost and expense, for any restoration, alterations, replacements or repairs required to be made pursuant to any Laws and as provided in the Project Operations Agreement. ARTICLE FOURTEEN Mechanics' Liens 12 16 During the term of this Lease, Tenant shall discharge by payment, bond or otherwise those mechanics' liens filed against the Complex (or any part thereof) for work, labor, services or materials claimed to have been performed at or furnished to the Leased Premises (or any part thereof) for or on behalf of Tenant. If not so discharged within sixty (60) days after the date of filing, Landlord may discharge the lien in any manner it selects and Tenant shall pay Landlord as one of Tenant's Obligations all reasonable costs and expenses incurred by Landlord therefor, including attorneys' fees. ARTICLE FIFTEEN Separation of Utilities/Services Landlord shall make application for and use reasonable good faith efforts to complete the Subdivision, if required by the City of Austin, and make the Utilities/ Services Independent subject, however, to the provisions of the Project Operations Agreement. ARTICLE SIXTEEN Default SECTION 16.01. Default by Tenant. Without limiting Landlord's rights and remedies which are granted in the Operative Agreements (defined in the Asset Purchase Agreement), and except as agreed upon in Section 10.03, if Tenant shall default in the payment of Tenant's Obligations and such default shall continue for ten (10) days after receipt of notice thereof from Landlord, or if Tenant shall default in the performance or observance of any other covenants or obligations set forth in this Lease, and if such default shall continue for thirty (30) days after receipt of notice thereof from Landlord specifying in what manner Tenant has defaulted (except that if such 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 such default within the thirty (30) day period and proceeds diligently thereafter to effect such cure), Landlord may (1) cure such default and any costs and expenses incurred by Landlord therefor shall be deemed Tenant's Obligations and shall be paid on demand or (2) exercise any one or more rights or remedies to 13 17 which Landlord is entitled under the Project Operations Agreement. SECTION 16.02. Default by Landlord. Except for events of default specified in and remedies granted in the Other Agreements, and except as agreed upon in Section 10.03, if Landlord shall default in the performance or observance of any covenants or obligations set forth in this Lease, and if such default shall continue for thirty (30) days after receipt of notice thereof from Tenant specifying in what manner Landlord has defaulted (except that if such 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 such default within the thirty (30) day period and proceeds diligently thereafter to effect such cure), Tenant may exercise any one or more rights or remedies to which Tenant is entitled under the Other Agreements. SECTION 16.03 Payment Offset. (a) If after notice to Landlord of its failure (i) to furnish Services to be furnished to Tenant by Landlord hereunder, or (ii) to pay Tenant sums due under the Project Operations Agreement for Services furnished by Tenant to Landlord, Landlord fails or refuses to cure such default within the time period agreed upon in this Agreement therefor (or otherwise within a reasonable time specified by Tenant in its notice if such time period has not been agreed upon herein), Tenant may declare an event of default and purchase such Services from a third party. If Landlord disputes any default declared by Tenant pursuant to this Section, or the costs incurred by Tenant to cure the default, or the reasonableness of time granted to cure the default, Landlord may submit the disputed matter to Mediation in accordance with Article SIX of the Project Operations Agreement within five (5) business days after receiving Tenant's notice or invoice. If the matter is submitted to Mediation as aforesaid and the Mediator renders a decision in favor of Tenant, within thirty (30) days after the decision is rendered, Landlord shall pay Tenant the amount stipulated to be paid to Tenant in the decision, failing which Tenant may deduct such amount from the sums due and to become due to Landlord for Services furnished to Tenant. If Tenant declares an event of default and Landlord fails to exercise its right to Mediation, within thirty (30) days 14 18 after Landlord receives Tenant's invoice, Landlord shall pay Tenant all costs and expenses claimed by Tenant by reason of the default, failing which Tenant may deduct any such costs and expenses from the sums due and to become due to Landlord for Services furnished to Tenant. (b) If after notice to Tenant of its failure (i) to furnish Services to be furnished to Landlord by Tenant hereunder, or (ii) to pay Landlord sums due under the Project Operations Agreement for Services furnished by Landlord to Tenant, Tenant fails or refuses to cure such default within the time period agreed upon in this Agreement therefor (or otherwise within a reasonable time specified by Landlord in its notice if such time period has not been agreed upon herein), Landlord may declare an event of default and purchase such Services from a third party. If Tenant disputes any default declared by Landlord pursuant to this Section, or the costs incurred by Landlord to cure the default, or the reasonableness of time granted to cure the default, Tenant may submit the disputed matter to Mediation in accordance with Article SIX of the Project Operations Agreement within five (5) business days after receiving Landlord's notice or invoice. If the matter is submitted to Mediation as aforesaid and the Mediator renders a decision in favor of Landlord, within thirty (30) days after the decision is rendered, Tenant shall pay Landlord the amount stipulated to be paid to Landlord in the decision, failing which Landlord may deduct such amount from the sums due and to become due to Tenant for Services furnished to Landlord. If Landlord declares an event of default and Tenant fails to exercise its right to Mediation, within thirty (30) days after Tenant receives Landlord's invoice, Tenant shall pay Landlord all costs and expenses claimed by Landlord by reason of the default, failing which Landlord may deduct any such costs and expenses from the sums due and to become due to Tenant for Services furnished to Landlord. SECTION 16.04. Separate Agreement. This Lease is separate from and independent of the Other Agreements. No default by Landlord or Tenant under any of the Other Agreements shall constitute a default hereunder, and no default by Landlord or Tenant under this Lease shall constitute a default under the Other Agreements. ARTICLE SEVENTEEN 15 19 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 served (a) by telecopy, (b) five (5) days after deposit for mailing by registered or certified mail, postage prepaid, (return receipt requested), or (c) sent by a reputable messenger or nationally recognized overnight courier. Any notice, request or demand by Landlord to Tenant shall be addressed to Tenant at the Leased Premises, Attention the General Manager, with copies addressed and sent simultaneously to Multilayer Technology Inc. at 16 Hammond, Irvine, CA 92718, Attention: President, and to The DII Group, Inc., 6273 Monarch Park Place, Longmont, CA 80503, Attention: Chief Financial Officer, until otherwise directed in writing by Tenant and, if requested in writing by Tenant, simultaneously served on or sent to such other parties as Tenant may request. Any notice, request or demand by Tenant to Landlord shall be addressed to Landlord, IBM Corporation, Real Estate Services, Armonk, New York 10504, Attention: Mr. Thomas P. Crohan, with copies addressed and sent simultaneously to Landlord, at the same address, Attention: Associate General Counsel, and to the Austin Contract Administrator, IBM Corporation, 11400 Burnet Road, Austin, Texas 78758, until otherwise directed in writing by Landlord, or to such person or address as either of the parties shall hereafter designate to the other from time to time by similar written notice. 16 20 ARTICLE EIGHTEEN Transfer or Encumbrance SECTION 18.01. Transfer or Encumbrance. (a) Except as otherwise provided in this Article, Tenant shall not without first obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed (i) sublet all or any part of the Leased Premises or (ii) assign, mortgage, pledge, hypothecate or otherwise encumber or transfer this Lease or any interest therein. Neither Landlord nor Tenant shall make application to subdivide the Land or modify the existing zoning designation of the Land, without the written consent of the other party, except that Landlord is hereby authorized to proceed with the completion of the Subdivision. (b) Notwithstanding the foregoing, without the consent of Landlord, Tenant may sublet the Leased Premises or mortgage, pledge, or assign its leasehold interest in the Leased Premises only to an Affiliate or as security for any financing required by Tenant; provided that Tenant first notifies Landlord at least thirty (30) days before Tenant plans to close any such transaction; provided, however, that the foregoing thirty (30) day notice requirement shall not be applicable to any financing in connection with the transaction contemplated by the Operative Agreements. (c) Tenant may, from time to time during the term of this Lease, mortgage, hypothecate, or encumber, in whole or in part, its leasehold estate, provided in each case that Tenant or holder of the leasehold mortgage shall promptly deliver to Landlord, in the manner herein provided for the giving of notice to Landlord, a true copy of the leasehold mortgage and any assignment thereof, and shall notify Landlord of the address of the holder of the leasehold mortgage to which notices from Landlord may be sent. (d) If Tenant encumbers or hypothecates its interest in this Lease as security for a loan, and provided that Tenant delivers written notice to Landlord of the name and address of the lender of such loan, then Landlord hereby agrees that Landlord will give written notice of any default under the terms of this Lease, by registered or certified mail, to such lender at 17 21 the address contained in such notice. Provided Tenant gives to Landlord written notice of the name and address of such lender as required above, no notice of default by Landlord to Tenant shall be deemed to have been duly given to Tenant unless and until a copy thereof has been mailed to such lender at the address provided. Such lender, in case Tenant shall be in default under this Lease, shall, within the period and otherwise as herein provided, have the right to remedy such default, or cause the same to be remedied, and Landlord shall accept such performance by or at the instance of such lender as if the same had been made by Tenant, provided the remedy is in accordance with the terms of this Lease. Provided Tenant gives to Landlord written notice of the name and address of such lender as required above, Landlord shall not exercise any remedies granted to Landlord under the Operative Agreements because of any default or breach thereunder on the part of Tenant if such lender (i) within sixty (60) days after mailing of written notice to such lender from Landlord of its intention to exercise any remedies granted to Landlord under the Operative Agreements for such default or breach, shall cure such default or breach if the same can be cured by the payment of expenditure of money, or (ii) shall diligently take action to obtain possession of the Leased Premises (including possession by receiver) and to cure such default or breach in the case of a default or breach which cannot be cured unless and until such lender has obtained possession and shall, during such time, pay all rental and all other payments required to be made under this Lease and the Project Operations Agreement, or (iii) if such default or breach is not so curable under the foregoing subparagraphs (i) or (ii), shall institute and carry forward with due diligence foreclosure or sale proceedings under its mortgage securing such loan and pay all rental and all other payments required to be made under this Lease and the Project Operations Agreement until such time as Tenant's interest in this Lease and the Project Operations Agreement shall be sold upon such foreclosure or sale proceedings pursuant to said mortgage; provided, however, such lender shall not be required to continue such action for possession or such foreclosure or sale proceedings if such default or breach shall be cured by Tenant. Upon completion of any such foreclosure or sale proceedings under said mortgage, the purchaser (whether such lender or otherwise) at such sale will be recognized by Landlord as Tenant under the terms of this Lease and as successor to Tenant under the Project Operations Agreement for all purposes and the purchaser and 18 22 Landlord shall be bound hereby for the remaining term of this Lease and the Project Operations Agreement. A lender who acquires title to Tenant's interest in this Lease and the Project Operations Agreement by acceptance of a deed in lieu of foreclosure shall be deemed a "purchaser" for these purposes. (e) In connection with any financing to consummate the transaction contemplated by the Operative Agreements, Landlord shall execute such amendments or modifications of this Lease as Tenant's lender may reasonably request provided that such amendment or modification shall not (i) alter the financial obligations of Tenant or Landlord, nor (ii) materially diminish Landlord's rights or materially increase Landlord's obligations hereunder, nor (iii) require representations, warranties or indemnities in addition to those set forth in the Asset Purchase Agreement. SECTION 18.02. Liability of Landlord. If Tenant mortgages, pledges, hypothecates, assigns or otherwise encumbers or transfers its interest in the Leased Premises to an Affiliate or as security for financing as aforesaid, Tenant shall notify Landlord thereof and provide Landlord with a duplicate executed original of the instrument of assignment. Any instrument of assignment shall include the assumption by the assignee of all of Tenant's obligations, responsibilities, and liabilities set forth in the Operative Agreements including Tenant's Obligations. Notwithstanding any such encumbrance, Tenant shall remain responsible for the faithful performance and observance of all of the covenants and obligations on Tenant's part to be performed under the Operative Agreements. SECTION 18.03. Transfer by Landlord. Landlord may assign, mortgage, pledge, hypothecate or otherwise encumber or transfer its interest in this Lease and the Project Operations Agreement as landlord and owner at any time without the consent of Tenant or any successor in interest to Tenant; provided that such assignment, mortgage, pledge, hypothecation or other encumbrance or transfer is subordinated to any first lien on the Leased Premises and Tenant's leasehold estate and shall not adversely affect Tenant's mortgage, pledge or assignment of its leasehold interest as a tenant of the Leased Premises or the rights of any lender which is secured by Tenant's leasehold estate. ARTICLE NINETEEN 19 23 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 and Tenant represent that they will comply unless exempted. ARTICLE TWENTY Quiet Enjoyment Provided Tenant performs the covenants and obligations in this Lease on Tenant's part to be performed, Landlord covenants and agrees to secure and to maintain for the benefit of Tenant the quiet and peaceful possession of the Leased Premises for the term of this Lease, without unlawful hindrance, claim or molestation by Landlord or any other Person. 20 24 ARTICLE TWENTY ONE No 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 for any default of the other party shall not constitute a waiver of any right for either a subsequent default of the same obligation or for any other default, past, present or future. ARTICLE TWENTY TWO 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 by a court of law, 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. ARTICLE TWENTY THREE Estoppel Certificates SECTION 23.01. Tenant's Estoppel Certificate. Tenant agrees, at any time and from time to time, upon not less than ten (10) business days prior notice from Landlord, to execute, acknowledge and deliver to Landlord or any Person designated by Landlord a statement in writing providing substantially the following: (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 of this Lease has commenced and if it has commenced, stating whether all of Tenant's Obligations have been paid by Tenant; and (3) stating, to the best of Tenant's knowledge, whether or not Landlord is in default in the performance of any covenant, agreement or 21 25 condition contained in this Lease, and if Tenant has knowledge of such a default, specifying each such default. SECTION 23.02. Landlord's Estoppel Certificate. During the term of this Lease, at any time and from time to time, Landlord shall, within ten (10) business days after Tenant's request, deliver an estoppel certificate to Tenant or a Person designated by Tenant, in the form described in Section 23.01 (modified insofar as clause (3) is concerned to reflect Landlord's knowledge of a Tenant default), relative to the status of this Lease. ARTICLE TWENTY FOUR Memorandum of Lease Unless Tenant's lender requires this Lease to be recorded, this Lease shall not be recorded by either Landlord nor Tenant, but either party may record a memorandum of this Lease and the other party, if requested, shall execute a memorandum of this Lease for recording purposes. If Tenant's lender requires that this Lease be recorded, Tenant shall pay the cost thereof. ARTICLE TWENTY FIVE The DII Group, Inc. Guaranty The DII Group, Inc. (the "Guarantor") hereby unconditionally and absolutely guarantees to Landlord the performance and payment of any and all monetary and other obligations of Tenant under this Lease and the other Operative Agreements to which Tenant in accordance herewith and therewith is a party, independently of the obligations of Tenant, and the Guarantor hereby agrees to indemnify Landlord against any Loss (as defined in the Asset Purchase Agreement) incurred by reason of any failure of Tenant to perform and pay such obligations in such manner. This guarantee is a direct, absolute, unconditional, irrevocable, present and continuing guarantee of performance and payment, and is a direct and primary obligation of the Guarantor, and is in no way conditional or contingent upon any attempt to enforce performance upon, or collection from, Tenant or upon any other event, contingency or circumstances whatsoever. This shall be a continuing guarantee and shall cover and secure any balance owing 22 26 by Tenant under this Lease and the other Operative Agreements to which Tenant is a party, and Landlord shall not be obligated to exhaust its recourse against Tenant before being entitled to payment from the Guarantor, of all and every of the obligations hereby guaranteed. The obligations of the Guarantor set forth above shall not be subject to any deduction, diminution, abatement, setoff, recoupment, suspension, determent, reduction, or defense (other than valid defenses Tenant has against Landlord and all other rights of Tenant under this Lease and the other Operative Agreements, full and strict compliance by the Guarantor of its obligations hereunder) and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not the Guarantor or Tenant shall have any knowledge or notice thereof), other than full and strict compliance by the Guarantor of its obligations hereunder. IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year first above written. INTERNATIONAL BUSINESS MACHINES CORPORATION /s/Alex Makler By: /s/Mark S. Payton - ----------------------------- ------------------------------- ATTEST CORPORATE DEVELOPMENT Title: CONSULTANT --------------------------- Date: August 18, 1997 --------------------------- MULTILAYER TEK L.P. /s/Alex Makler By: /s/Carl R. Vertuca, Jr. - ----------------------------- ------------------------------- ATTEST Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc.,in its capacity as Title: General Partner --------------------------- 23 27 Date: August 18, 1997 AS TO ARTICLE 25 ONLY: THE DII GROUP, INC. /s/Alex Makler By: /s/Carl R. Vertuca, Jr. - ----------------------------- ------------------------------- ATTEST Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc.,in its capacity as Title: General Partner --------------------------- Date: August 18, 1997 24 28 STATE OF NEW YORK ) : ss.: COUNTY OF WESTCHESTER ) On the 18th day of August, 1997, before me personally appeared Mark S. Payton to me known, who, being duly sworn did depose and say that he resides at 318 Garder Road, Monroe, CT that he is CORPORATE DEVELOPMENT CONSULTANT of International Business Machines Corporation, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/Paulette Lemay Peters ------------------------ Notary Public STATE OF New York ) : ss.: COUNTY OF New York ) On the 18th day of August, 1997, before me personally appeared Carl R. Vertucan, Jr. to me known, who, being duly sworn did depose and say that he is President of Multek Texas, the General Partner of Multilayer Tek L.P., the Texas limited partnership described in and which executed the foregoing instrument; and that he signed his name thereto on behalf of said partnership. /s/Kathleen Lee Skubina ----------------------- Notary Public 29 STATE OF New York ) : ss.: COUNTY OF New York ) On the 18th day of August, 1997, before me personally appeared Carl R. Vertuca, Jr. to me known, who, being duly sworn did depose and say that he resides at _______________, that he is Chief Financial Officer of The DII Group, Inc., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/Kathleen Lee Skubina ----------------------- Notary Public 30 EXHIBIT A* DESCRIPTION OF LEASED PREMISES AND ENCUMBRANCES *Exhibit A is not included and will be furnished supplementally to the Commission upon request. 31 EXHIBIT B SECURED AREAS (a) Building No. 064 - Shipping/Receiving (CAS badge access area) (b) Building No. 061 - Chemical Distribution Center (c) IT Server Room - Location to be determined and provided in writing to Landlord within thirty (30) days from the Term Commencement Date. 32 ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of August 18, 1997 (this "Agreement"), between Multilayer Tek L.P. ("Buyer"), and INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation ("Seller"). WHEREAS Buyer and Seller have entered into a Purchase Agreement dated as of August 5, 1997 (the "Purchase Agreement"), providing for, among other things, the purchase by Buyer of the Transferred Assets from Seller; and WHEREAS, in conjunction with such purchase, Seller desires to sell, transfer, convey, assign and deliver to Buyer, and Buyer wishes to accept and assume, all of Seller's rights, obligations, title and interest in and to the Assumed Liabilities. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: 1. DEFINED TERMS. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Purchase Agreement. Nothing contained herein shall be deemed to alter or amend the terms and provisions of the Purchase Agreement, and in the event of any conflict between the terms and provisions of this Agreement and the Purchase Agreement, the terms and provisions of the Purchase Agreement shall be deemed to govern and be controlling in all circumstances. 2. ASSIGNMENT. Seller hereby irrevocably sells, transfers, conveys, assigns and delivers to Buyer all of its rights, title and interest in and to the Assumed Liabilities. 3. ASSUMPTION. Buyer does hereby accept such sale, transfer, conveyance, assignment and delivery of all of Seller's right, title and interest in and to the Assumed Liabilities by Seller and assumes all obligations and liabilities of Seller thereunder pursuant to the terms and conditions of the Purchase Agreement. 4. EFFECTIVE TIME. The assignment by Seller, and the acceptance thereof by Buyer, of the Assumed Liabilities, pursuant to this Agreement, shall be effective as of the date hereof. 5. NONCONTRAVENTION. Pursuant to Section 5.1. of the Purchase Agreement, certain of the Assumed Liabilities may require the consent of third parties to any assignment. Such assignments to Buyer are made subject to the obtaining of such consents and shall be effective as of the date of such consent. The execution of 33 this Agreement shall not be interpreted, and is not intended to be interpreted, as any action taken by Seller that would be contrary to the terms and conditions of any contract requiring the consent of any third party to such assignment. Buyer and Seller shall fully cooperate with each other in an attempt to obtain such consents, as set forth in the Purchase Agreement. 6. NOTICES. All notices and other communications hereunder shall be as set forth in the Purchase Agreement. 7. AMENDMENT. This Agreement may be amended, modified or supplemented, and any provision hereof may be waived, only by written agreement of the parties. 8. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not limit or otherwise affect the meaning or interpretation of this Agreement. 9. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York without reference to its principles of conflict of law. 10. SEVERABILITY. If any one or more provisions contained in this Agreement, or the application of such provision to any person or circumstance, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 11. THIRD PARTY ACTIONS. Seller and Buyer hereby agree to cooperate in defending or prosecuting any claims or litigation relating to the transfer of title as provided herein, and to make available and furnish appropriate documents and testimony in connection therewith. 12. ASSIGNMENT. Pursuant to Section 12.10. of the Purchase Agreement, neither this Agreement nor any of the rights or obligations hereunder shall be assigned by either party hereto without the prior written consent of the other party, such consent not to be unreasonably withheld. Any purported assignment of this Agreement other than in accordance with this paragraph 12 shall be null and void and of no force or effect. 13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument and shall become a binding Agreement when one or more of the counterparts have been signed by each of the parties and delivered to the other party. -2- 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. Multilayer Tek L.P. By: /s/ Carl R. Vertuca, Jr. ----------------------------------------- Title: Senior Vice President, Chief Financial Officer and Secretary of Multek Texas Inc., in its capacity as General Partner -------------------------------------- Date: August 18,1997 --------------------------------------- The DII Group, Inc. By: /s/ Carl R. Vertuca, Jr. ----------------------------------------- Title: Senior Vice President, Chief Financial Officer and Secretary of Multek Texas Inc., in its capacity as General Partner -------------------------------------- Date: August 18,1997 --------------------------------------- INTERNATIONAL BUSINESS MACHINES CORPORATION By: /s/ Mark S. Payton ----------------------------------------- Title: Corporate Development Consultant -------------------------------------- Date: August 18, 1997 --------------------------------------- -3- EX-2.4 5 PROJECT OPERATIONS AGREEMENT 1 EXHIBIT 2.4 PROJECT OPERATIONS AGREEMENT BY AND BETWEEN INTERNATIONAL BUSINESS MACHINES CORPORATION AND MULTILAYER TEK L.P. _______, 1997 2 TABLE OF CONTENTS RULES OF CONSTRUCTION ARTICLE 1. DEFINITIONS/GLOSSARY ARTICLE 2. MANAGEMENT OF THE COMPLEX Section 2.1 Management of the Complex Section 2.2 Utilities, Services and Access Roads Section 2.3 Gift Policy Section 2.4 Labor Harmony ARTICLE 3. PAYMENT OF OPERATING EXPENSES/CHARGES Section 3.1 Approved Budget Section 3.2 Expenses and Charges Section 3.3 Annual Statement; Reconciliation Section 3.4 Audit; Cost of Audit Section 3.5 Tax on Expenses/Charges Section 3.6 Regulated Services ARTICLE 4. UTILITY METERS Section 4.1 Pricing Section 4.2 Meter Readings Section 4.3 Meter Calibration and Adjustment Section 4.4 Failure of a Meter ARTICLE 5. INSURANCE Section 5.1 Liability Insurance Section 5.2 Casualty Insurance Section 5.3 Liability Insurance Section 5.4 Waiver of Claims and Subrogation ARTICLE 6. DISPUTE RESOLUTION; DEFAULT Section 6.1 Initiation of Dispute Resolution Section 6.2 Mediation Section 6.3 Pending Resolution Section 6.4 Events of Default Section 6.5 Remedies Section 6.6 Attorneys Fees; Jury Trial Section 6.7 Limitation on Subcontractor/Consultant Liability ARTICLE 7. TERM ARTICLE 8. RESTRICTIONS i 3 Section 8.1 Uses Section 8.2 Signs Section 8.3 Rules and Regulations Section 8.4 Compliance with Laws ii 4 TABLE OF CONTENTS ARTICLE 9. RIGHT OF FIRST OPPORTUNITY Section 9.1 First Opportunity Section 9.2 Continuing Right Section 9.3 IBM Affiliate Section 9.4 Third Party Offer Section 9.5 Termination Section 9.6 Successors and Assigns Section 9.7 Financing/Refinancing ARTICLE 10. INDEPENDENT UTILITIES/SERVICES - SUBDIVISION ARTICLE 11. MISCELLANEOUS Section 11.1 Notices Section 11.2 Estoppel Certificates Section 11.3 Governing Law Section 11.4 Entire Agreement; Amendments Section 11.5 Transfers Section 11.6 Severability Section 11.7 Binding Effect Section 11.8 Separate Agreement Section 11.9 No Third Party Beneficiary Section 11.10 Force Majeure Section 11.11 No Warranties Section 11.12 No Waiver ARTICLE 12. THE DII GROUP, INC. GUARANTEE Exhibit A Description of the IBM Property Exhibit A1 Description of the Multek Site Exhibit B Services Agreement Exhibit C Sign Criteria Exhibit D Rules and Regulations Exhibit E Holidays Exhibit F 1997/1998 Approved Budget iii 5 PROJECT OPERATIONS AGREEMENT This Agreement (hereinafter the "Agreement"), is made as of ______, 1997, by and between INTERNATIONAL BUSINESS MACHINES CORPORATION ("IBM") a New York corporation, having its principal office at Armonk, New York 10504, and MULTILAYER TEK L.P. ("Multek") a Texas limited partnership, having its principal office at 11400 Burnet Road, Austin, Texas 78758. WITNESSETH: WHEREAS, IBM is the owner of the Complex and has leased the Multek Site, which is a portion of the Complex, to Multek; and WHEREAS, it is the intention of the parties hereto that IBM sell the Multek Site to Multek and Multek purchase the Multek Site from IBM, upon and subject to the provisions of the Asset Purchase Agreement; and WHEREAS, during the term of the Lease and subsequent ownership of the land comprising the Multek Site by Multek, IBM will provide the Services described in EXHIBIT B to Multek, and Multek shall provide the Services, also described in EXHIBIT B, to IBM; and WHEREAS, because the Multek Site shall remain an integral part of the Complex by reason of Central Utility 4 6 Services to be provided from a location off the Multek Site, the configuration of the access roads, and economies of operations, IBM and Multek wish to establish agreements for management of the entire Complex. NOW, THEREFORE, IBM and Multek agree as follows. RULES OF CONSTRUCTION In this Agreement 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, addenda and amendments thereto to the extent permitted by this Agreement; a reference to the Law includes any amendment or supplement to the same; all EXHIBITS hereto shall be considered a part of this Agreement; accounting provisions 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 Agreement, any right hereunder may be exercised at any time and from time to time and all obligations hereunder are continuing obligations throughout the Term; in calculating any time period, the first day shall be excluded and the last day shall be included unless the last day is a Saturday, Sunday or Holiday, and then it is also excluded; all days are calendar days unless otherwise specified; words of masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders; and, when used herein with its initial letter capitalized, a word shall be given the meaning assigned to it in this Agreement. ARTICLE 1. DEFINITIONS/GLOSSARY Accountant. An independent certified public accounting firm of national reputation for quality and integrity which is mutually selected. Affiliate. A Person controlled by IBM or DII Group, Inc., directly or indirectly, through one or more intermediaries controlled or under common control with one of them. The word control is intended to mean, in this context, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, the number of 2 7 voting shares of the controlled corporation necessary to possess the power to direct or cause the direction of the management and policies of the controlled corporation, and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled Person. Approved Budget. Defined in Article 3. Buildings. Those structures located on the Multek Site. Central Utility System. The Utility System and Utility Plant located at the Complex. Closing Date. The date that IBM sells Multek the assets used for the manufacture of panel circuit boards, including lease of the Multek Site pursuant to the terms of the Lease. Complex. The land designated "Lot 1" and "Lot 2" as more particularly described in EXHIBITS A and A1, together with all improvements thereon, and as shown on the Survey. The Complex includes the Multek Site and the IBM Property. Consent. Written consent, which shall not be unreasonably withheld or delayed, but which may be granted subject to reasonable conditions and restraints. Consumer Price Index. The Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics of the United States Department of Labor, All Items (1982-1984 = 100), or any successor index thereto, appropriately adjusted; provided that if there shall be no successor index and the parties shall fail to agree upon a substitute index within thirty (30) days, or if the parties shall fail to agree upon the appropriate adjustment of such successor or substitute index within thirty (30) days, a substitute index or the appropriate adjustment of such successor or substitute index, as the case may be, shall be determined by mediation pursuant to Article 6. Force Majeure. Acts of God and organized or wildcat labor strikes or lockouts which have the direct and 3 8 immediate effect of preventing performance of an obligation set forth in this Agreement; acts of the public enemy; insurrection; riot; sabotage; war; government orders, moratoriums, curtailment of or interference with utility supply, or restraints which usurp, temporarily or otherwise, the right to construct, use or occupy any part of the Complex; those catastrophic meteorological or geological events which have the direct and immediate effect of preventing performance of an obligation set forth in this Agreement, or any other event beyond the reasonable control of the party claiming such event. Governmental Authorities. Local, state, federal or foreign court, governmental or administrative agency or commission or other governmental agency, authority, instrumentality or regulatory body. Hazardous Substance. "Hazardous waste," "hazardous material," "pollutant" or "contaminant" and words of similar import including any substance defined as such by any applicable Environmental Laws. Holiday. State or federal holidays recognized as holidays by IBM and Multek, consisting initially of those listed on EXHIBIT E and subject to adjustment with the Consent of the other if they result in a shutdown or curtailment of the Services to be provided each to the other pursuant to EXHIBIT B hereto. IBM Property. The land designated as "Lot 2," as more particularly described in EXHIBIT A, together with all improvements thereon, and as partially shown on the Survey. IBM Service Charges. Defined in Section 3.1. Impositions. Any ad valorem taxes, special assessments and all other charges imposed by Law which are assessed, levied or imposed against the Complex. They include special and unforeseen taxes, and all interest paid with respect to the foregoing when the Impositions are paid in installments and interest is charged. Impositions include "Substitute Taxes" and payments in lieu of taxes, or other charges imposed on property owners as a class or on the Complex by the Laws. 4 9 Laws. All applicable existing and future laws, ordinances, codes, regulations and other requirements of Governmental Authorities and having the force of law of Governmental Authorities and having jurisdiction over the Complex and its operation. Lease. The Lease dated as of even date herewith under which IBM leases the Multek Site (referred to in the Lease as the "Leased Premises") to Multek as "Tenant." Major Increases. Defined in Section 3.2. Making the Utilities/Services Independent. IBM's obligation to physically separate the Services described in Sections 2, 7, 9 and 10 of EXHIBIT B, and to disconnect the telephones and computer network systems from IBM's telephone and computer systems in accordance with the terms agreed upon between the parties in ATTACHMENT G-3 to EXHIBIT B, and the obligation of IBM to pay and incur the cost thereof as agreed upon in Article 10, so that the IBM Property and Multek Site shall each independently receive the same utilities and services. Manager. The Person engaged to operate and maintain the Central Utility System and to perform the overall management and administration of the IBM Property, common areas of the Complex, and to provide Services to Multek pursuant to EXHIBIT B hereto. Initially, IBM shall be the Manager. A successor Manager may be selected by IBM after consultation with Multek. Mediation. The dispute resolution process described in Article 6. Multek Site. The land designated as "Lot 1," as more particularly described in EXHIBIT A1, together with all Buildings and other improvements thereon, and as shown on the Survey. Multek Operating Expenses. Defined in Section 3.1. Operative Agreements. This Agreement, unless specifically excluded, the Intellectual Property Agreement, the Patent License Agreement, the Lease, the Assignment and Assumption Agreement, the Supply Agreement and the Asset 5 10 Purchase Agreement, each made between the parties hereto and, except for the Asset Purchase Agreement, dated as of even date herewith. Permitted Encumbrances. The Encumbrances listed on EXHIBIT A and EXHIBIT A1. Person. An individual, partnership, limited liability company, trust, joint venture, Governmental Authority, corporation, firm or other entity, and shall include any successor (by merger or otherwise) of such entity. Services. Described in EXHIBIT B. Subdivision. (i) (a) The issuance by the City of Austin, Texas (the "City") of a land status report which confirms that the Multek Site is a "grandfathered" legal lot and (b) the separation of the Multek Site by the Travis Central Appraisal District as a separate tax parcel from the IBM Property and, if required, the recording, at IBM's expense, of all documents necessary to effect the legal separation of the Multek Site as a separate tax parcel or, (ii) if not "grandfathered," all other final approvals from the City of Austin and Travis Central Appraisal District to effect the legal separation of the Multek Site as a separate tax parcel, all at IBM's expense. The word "grandfathered" in this context means that the Multek Site and the IBM Property in their current configuration are not required to go through the City's subdivision process and are considered legal lots by the City and Travis Central Appraisal District. Substitute Taxes. 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 Complex or personal property thereon; a supplement to existing taxes, assessments or charges imposed by Law; or any tax, assessment or charge imposed by Law, other than an Imposition, which is related to the Complex or personal property thereon, but expressly excluding any general income, franchise, 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 6 11 ownership of the Complex, are determined by a Governmental Authority to be in lieu of Real Estate Taxes. Survey. The survey map (job no. 96-387) prepared by McAngus Surveying Company, Inc., dated January 16, 1997, last revised June 25, 1997. Term. Defined in Article 7. Term of the Lease. Defined in the Lease. Utility Plant. The machines, equipment, valves, pipes and the like which produce cooling tower water, steam, chilled water and compressed air, and meters which measure electricity, together with the structure which houses these items and the parcel of land on which it is located. Utility System. Each of the following systems to the extent located on or servicing the Complex, each as described in EXHIBIT B, excluding systems or parts thereof that only serve or will only serve Multek and IBM: chilled water, cooling tower water, steam and compressed air, subject to the addition of new systems or elimination of existing systems. The Utility System includes all equipment used to the point of entry to the Buildings as set forth in EXHIBIT B. ARTICLE 2. MANAGEMENT OF THE COMPLEX Section 2.1 Management of the Complex. Multek has leased the Multek Site from IBM on a "triple net" basis pursuant to the provisions of the Lease, and Multek shall purchase the Multek Site if and when IBM makes the Utilities/Services Independent and completes the Subdivision. Whether Multek leases or purchases the Multek Site, as determined by the applicable provisions of the Operative Agreements, IBM and Multek shall in good faith cooperate in the management of the Complex by IBM and any successor Manager, as herein provided. Section 2.2 Utilities, Services and Access Roads. In accordance with and subject to Article 10, the parties have agreed that IBM shall make the Utilities/Services Independent, prior to which IBM shall 7 12 supply certain regulated Services to Multek as a tenant under the Lease, upon and subject to the provisions of EXHIBIT B. Thereafter, IBM shall continue to furnish certain non-regulated Services to Multek, and Multek shall furnish certain Services to IBM, in each case upon and subject to the provisions of EXHIBIT B. Each party hereto shall be entitled to non-exclusive use of the Access Roads, as herein provided in and subject to EXHIBIT B, including ATTACHMENT E and SCHEDULE 10 hereto. Section 2.3 Gift Policy. IBM and Multek acknowledge that their respective business practice is to prohibit employees from accepting trade discounts which are not available to others and from accepting gifts or gratuities arising out of business relationships. Therefore, IBM and Multek agree to adopt the same business practice with respect to the Complex and with respect to all employees thereof engaged in management and operation of the Complex. Neither IBM or Multek shall give or offer trade discounts to employees of the other or their respective family members which are not available to the general public, nor give or offer employees of IBM or Multek or their respective employees or family members gifts or gratuities of any type. Section 2.4 Labor Harmony. (a) IBM and Multek acknowledge the importance of maintaining a work environment at the Complex that will not subject any neutral employer to any interruption of its operations due to a labor disturbance or activity, whether or not such disturbance or activity is protected by labor Laws involving the employees of another employer at the Complex, or the employees of any of their respective contractors, subcontractors, suppliers or other invitees (herein a "labor disturbance"). IBM and Multek shall make reasonable good faith efforts to avoid strikes, picketing and other labor disturbances at the Complex by their respective employees, contractors, subcontractors, suppliers and other invitees. (b) If there is a labor disturbance adversely affecting the Multek Site or IBM Property, IBM or Multek, as appropriate, agrees to take prompt, reasonable and lawful 8 13 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 that each Person uses only the gate reserved and designated for that Person's use. However, all actions taken by IBM or Multek hereunder shall be limited to those permitted by Laws, including the National Labor Relations Act. 9 14 ARTICLE 3. PAYMENT OF OPERATING EXPENSES/CHARGES Section 3.1 Approved Budget. The cost of Services to be furnished by IBM to Multek pursuant to EXHIBIT B, which shall include a pro rata share of the estimated fixed costs (such as Utility Plant overhead costs) as well as the cost of commodities (such as chilled water costs) which were consumed by Multek the previous month as well as the cost of other Services, shall be collectively called "Multek Operating Expenses." The cost of Services to be furnished by Multek to IBM pursuant to EXHIBIT B shall be collectively called "IBM Service Charges." For the period beginning on the first day of the Term and ending December 31, 1997 and, thereafter, no later than September 1 of the year prior to the commencement of each ensuing calendar year, IBM, after consultation with Multek, shall submit to Multek a proposed budget for Multek Operating Expenses and IBM Service Charges which shall cover a good faith estimate of Multek Operating Expenses and, based on Multek's input during consultation, IBM Service Charges for the ensuing calendar year. Multek and IBM shall provide such backup information relating to the proposed budget which the other may reasonably request. Upon Consent of both parties to the proposed budget, the budget shall be an "Approved Budget" for the ensuing calendar year. If at any time during the Term, there is a Major Increase (defined in subsection 3.2(c) below), Multek shall receive a statement from IBM which identifies the Major Increase. IBM shall provide such back up information relating to the Major Increase which Multek may reasonably request. Upon consent of both parties to the proposed changes in the Approved Budget arising out of the Major Increase, the revised budget shall supersede and replace and become the new "Approved Budget." If the parties are unable to agree on the proposed changes, the issues shall be submitted for Mediation. The Approved Budget for the balance of the year 1997 and for calendar year 1998 is set forth in EXHIBIT F and is a summary of the agreed upon charges set forth in SCHEDULES 1-14 of EXHIBIT B. Section 3.2 Expenses and Charges. (a) No later than forty-five (45) days after the end of the calendar month during which Services were provided to 10 15 Multek, Multek shall pay IBM a sum equal to one twelfth of the annual sums set forth in the Approved Budget. Each shall be due from Multek, net of one twelfth of any IBM Service Charges which are set forth in the Approved Budget. (b) Subject to the rights of Multek herein, IBM is hereby authorized to make the expenditures and incur the obligations provided for in the Approved Budget. If Multek or IBM cannot reach agreement on the Approved Budget by November 15 of any year, or if Multek or IBM exercises rights granted herein to dispute any item of Multek Operating Expenses, IBM Services Charges or Major Increases, IBM shall continue to manage and operate the Complex in accordance with the most recent Approved Budget plus, because the parties cannot reach agreement on the Approved Budget by November 15 of the current year for the ensuing year, an increase of the then current years' Approved Budget by the greater of the percentage increase in the Consumer Price Index during a twelve (12) month period starting on September 1 of the prior year and ending on August 31 of the then current year, or four percent (4%). On of before December 15 of the then current year, the controverted portions of the proposed budget shall be submitted to Mediation and the decision of the Mediator shall be final and binding on the parties hereto. (c) IBM and Multek shall each from time to time inform the other about any "Major Increases" in actual costs and expenses that were not anticipated in the Approved Budget. "Major Increases" shall mean any expenditure that is reasonably expected to cause actual annual costs to exceed (i) any line item of the Approved Budget by more than ten percent (10%) or (ii) five percent (5%) of the total Annual Budget. Neither Multek nor IBM shall be entitled to dispute any Major Increase by IBM with respect to Multek Operating Expenses and by Multek with respect to IBM Service Charges if each in its reasonable discretion after consultation with the other determines that (x) there is an emergency requiring immediate action for the protection of the Complex, Multek, IBM or the general public, or (y) sums exceeding or which are not part of the Approved Budget need to be spent to avoid the suspension of necessary Services or to comply with Laws, or (z) the expenditure is for purchase of a non-regulated utility, currently located on the Complex, which is necessary for the operations of Multek or 11 16 IBM; provided in any case under (x) or (y), each party shall inform the other as soon as possible of the necessity for and the nature and cost of such emergency repairs or compliance. Section 3.3 Annual Statement; Reconciliation. Within a reasonable time, not to exceed ninety (90) days after the end of the estimated duration set forth in ATTACHMENT F to EXHIBIT B, IBM shall deliver to Multek statements of the aggregate payments made by Multek for Multek Operating Expenses and actual Multek Operating Expenses, and Multek shall deliver to IBM statements of the aggregate payments made by IBM for IBM Service Charges and actual IBM Service Charges, in each case for the period covered. Each such statement shall include the difference between payments and actuals. Within forty-five (45) days after IBM receives Multek's statement of IBM Service Charges, IBM shall issue a reconciliation statement which includes a summary of both statements and determines whether Multek owes additional sums or is entitled to a rebate, net of IBM Service Charges. Any sums owed by or to Multek shall be payable to or by IBM within forty-five (45) days after delivery of such statement. Any continuation of Calibration/Instrument Support, Tool Room Support and Analytical Lab Support after expiration of the initial time periods set forth in ATTACHMENT F to EXHIBIT B shall be furnished at competitive market prices to be negotiated by the parties. Section 3.4 Audit; Cost of Audit. (a) Complete and accurate books, records, documents, accounts and other evidence (hereinafter collectively called "the Records") shall be established and maintained by IBM if directly pertinent to the Multek Operating Expenses and by Multek if directly pertinent to the IBM Service Charges. The Records must be kept for the balance of the calendar year in which they were made and for five (5) additional years thereafter. No more often than once each calendar year during the Term and within twelve (12) months after the end of the Term, Multek and IBM, or their respective representative and any other Person authorized to conduct an examination, including the Accountants, shall have access to the Records during normal business hours at an office of IBM 12 17 or Multek, as appropriate, in Austin, Texas or, if no such office is available, at a mutually agreeable and reasonable venue, for the purpose of inspection, auditing and copying. Each party shall take reasonable steps to protect any of the Records from public disclosure. (b) Each party may examine the Records established and maintained by the other for any purpose, including compliance with generally accepted accounting principles consistently applied and with all cost allocation formulae or guidance set forth in this Agreement. Such audit may include a reconciliation of any charges, assessments or other cost allocations found to be made in a manner inconsistent with this Agreement. If found to be so, the reconciliation shall include reimbursement to the adversely affected party of any interest or similar cost incurred as a result of such initially inconsistent charge, assessment or allocation, including interest not earned as a result of having made payment of such charge. Interest shall be paid from the date the party paid such sums to the date of payment at the floating prime rate of Chase Manhattan Bank N.A. in effect in New York, New York, on short-term business loans to customers of the highest credit standing. Section 3.5 Tax on Expenses/Charges. If any Governmental Authority having jurisdiction determines pursuant to Law that any component of Multek Operating Expenses or IBM Service Charges is subject to taxation (such as, without limitation, a sales or value added tax), such tax shall be paid by the Person who benefited from the Service covered by the Multek Operating Expenses or IBM Service Charges; except that taxes shall not include income, franchise and corporate taxes. IBM and Multek shall each separately account for and identify such component if claiming payment therefor. Section 3.6 Regulated Services. Notwithstanding any provision in this Agreement to the contrary, IBM shall furnish electricity, Domestic Water and Waste Water services to Multek in accordance with Section 1.9 of EXHIBIT B to this Agreement, including charges allowed for such utilities and billing periods required by 13 18 Law. Any inclusion of these utility charges in the Approved Budget shall be consistent with Section 1.9 and the Law. ARTICLE 4. UTILITY METERS Section 4.1 Pricing. Supplementing Section 3.1, Multek shall pay Multek Operating Expenses for the supply of commodity/utility Services by IBM pursuant to the pricing formulas set forth in EXHIBIT B. These charges shall include a pro rata share, based on usage, of operating expenses and capital improvements associated with the production and distribution of such Services from the Central Utility System or elsewhere and delivered to the Multek Site, including those associated with the maintenance, repair and replacement of the Utility Plant and, unless unlawful with respect to regulated utilities, the meters which measure consumption. Consumption charges and the cost of meters and metering shall be billed to Multek as herein provided in this Article 4 and in EXHIBIT B. The parties agree that the Building 60 metered utilities for Chilled Water, Compressed Air and steam shall be the quantity measured by the meter in Building 60 minus the quantity measured by the meter in Building 45. Section 4.2 Meter Readings. IBM shall read all meters according to IBM's regular meter reading schedule. Upon a timely request from Multek prior to a scheduled reading, an employee of Multek may attend. Not later than thirty (30) days after the end of each scheduled metering period, IBM shall send Multek a statement in accordance with Section 3.2 which shows the usage of metered utilities during the monthly metering period. Section 4.3 Meter Calibration and Adjustment. (a) Each meter used for the purposes of billing Multek shall be tested and calibrated by IBM at intervals consistent with manufacturers recommendations and, as required by the City of Austin regulations. Multek shall provide IBM representatives reasonable access to the Multek Site for such purposes. Any meter found to be inaccurate 14 19 shall be restored to accurate condition or an accurate meter substituted. Multek shall reimburse IBM for fifty percent (50%) of all costs incurred by IBM for the foregoing as a Multek Operating Expense, except that IBM shall pay for the testing and recalibration within ten (10) days prior to or after the Closing Date. (b) IBM shall make or cause to be made special tests of meters used to measure Multek's usage upon reasonable request of Multek and at reasonable times. Except as prohibited by the City of Austin regulations, the cost of all such tests of these meters and required calibrations shall be included in Multek Operating Expenses. The result of all tests and calibrations shall be open to examination by Multek upon reasonable request and at reasonable times. If, as a result of any test, any meter is found to be inaccurate, then the readings of such meter previously taken shall be re-examined and, if there is greater than a two percent (2%) deviation from the manufacturer=s tolerances, a reconciliation statement shall be issued to Multek within thirty (30) days after such determination together with a payment to Multek or a request for additional sums from Multek (to be paid within forty-five (45) days of receipt of the reconciliation), as the case may be. IBM shall recalibrate and test the inaccurate meters and each party shall pay fifty percent (50%) of the expense incurred by IBM therefor. Section 4.4 Failure of a Meter. Should any metering equipment at any time fail to register or should the registration thereof be so erratic as to be meaningless, the usage being measured by any such meters shall be determined from (a) estimates on the basis of past usage during a similar period and under similar conditions, or if paragraph (a) cannot be determined, (b) estimates on the basis of usage registered by a new or repaired meter during a subsequent period. ARTICLE 5. INSURANCE Section 5.1 Liability Insurance. 15 20 (a) IBM and Multek shall each maintain in effect at all times during the Term the coverages described in this Article 5, including "property damage" and a "commercial general liability insurance" policy providing coverage on an "occurrence," rather than on a "claims made" basis. The liability policy shall include coverage for property damage, personal injury (including death) as well as independent contractors and products-completed operations liability. Section 5.2 Casualty Insurance. During the Term, Multek shall furnish and maintain, at Multek's sole cost and expense, property damage insurance, written on an "all risk" of physical loss or damage basis, to cover all loss or damage to or destruction of any portion of the Leased Premises in an amount of not less than eighty percent (80%) of the full cost to replace the Buildings and other structures located on the Multek Site (excluding the foundations but including all personal property, fixtures, equipment and machinery necessary to operate and maintain Multek's business operations on the Multek Site). Such amounts shall meet any co-insurance clause of Multek's policies. Section 5.3 Liability Insurance. (a) During the Term, Multek shall purchase and maintain, at Multek's sole cost and expense, general commercial public liability insurance against any claims by reason of personal injury (including death) and property loss, damage or destruction, occurring on or about the Multek Site except for the gross negligence or misconduct of IBM, its employees, suppliers, contractors or subcontractors, in an amount of not less than one million U.S. dollars ($1,000,000.00) combined single limit for injury (including death) and for damage to property, with umbrella coverage of not less than twenty million U.S. dollars ($20,000,000.00). Multek shall cause IBM to be included as an additional insured under such policy. Each such policy shall contain provisions, if and to the extent available at no additional cost to Multek, that the policy will not be cancelable except upon at least thirty (30) days prior notice to all insureds, including IBM, and that the act or omission of one insured will not invalidate the policy coverage of any of the other insureds. Multek shall furnish evidence reasonably satisfactory to IBM that the 16 21 insurance is in effect at or before the commencement of the Term. Multek may self insure for up to Two Million Five Hundred Thousand U.S. Dollars ($2,500,000.00). (b) During the Term, IBM shall purchase and maintain, at IBM's sole cost and expense, general commercial public liability insurance against any claims by reason of personal injury (including death) and property damage occurring on or about the IBM Property, except for the gross negligence or misconduct of Multek, its employees, suppliers, contractors, or subcontractors, in an amount not less than one million U.S. dollars ($1,000,000.00) combined single limit for injury (including death) and for damage to property, with umbrella coverage of not less than twenty million U.S. dollars ($20,000,000.00). IBM shall cause Multek to be included as an additional insured under such policy. Each such policy shall contain provisions, if and to the extent available, that the policy will not be cancelable except upon at least thirty (30) days prior notice to all insureds, including Multek, and that the act or omission of one insured will not invalidate the policy of any of the other insureds. IBM shall furnish evidence reasonably satisfactory to Multek that the insurance is in effect at or before the commencement of the Term. IBM may self insure for up to five million U.S. dollars ($5,000,000.00). (c) Each party shall have provided the other with evidence that the insurance coverage required under this Article 5 is in full force and effect. At least thirty (30) days prior to termination of any such coverage, each party shall provide the other with evidence that such coverage will be renewed or replaced upon termination with insurance that complies with these provisions. Such evidence of insurance shall be in the form of a standard certificate of insurance and shall contain sufficient information to allow each party to determine whether there has been compliance with these provisions. (d) All policies of insurance required under this paragraph shall be issued by financially responsible insurers with a current A.M. Best Company rating of at least A-VIII. Section 5.4 Waiver of Claims and Subrogation. 17 22 IBM and Multek 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 any improvements located in or on the Multek Site (in the case of Multek) and to any improvements located in or on the IBM Property (in the case of IBM), including all personal property, fixtures, equipment and machinery on either property, to the extent such party actually receives full and complete payment or reimbursement (excepting deductible amounts) for any such loss, damage or destruction under any insurance policy required to be carried hereunder but notwithstanding the fact that such loss, damage or destruction may be attributable to the negligence of either party or Landlord's Agents or Tenant's Agents. 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 first 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. This waiver and release applies to any self insured (deductible) portion of the loss, damage or destruction, and such waiver and release is fully effective and enforceable notwithstanding the fact that IBM or Multek has failed to purchase and maintain insurance coverage required herein which may have reimbursed it for such loss, damage or destruction. ARTICLE 6. DISPUTE RESOLUTION; DEFAULT Section 6.1 Initiation of Dispute Resolution. Except for disputes for which different dispute resolution procedures have been agreed upon in EXHIBIT B, if there is a dispute under this Agreement, the following shall control. (a) If informal discussions have not resolved a dispute between the parties, any party hereto may at any time by written notice ("Initiation Notice") to the other, initiate the dispute resolution procedure set forth herein. All such disputes shall be subject to the procedures set forth in this Section 6.1 and Section 6.2 below. 18 23 (b) Upon issuance and receipt of any Initiation Notice, the matter in question shall be referred in writing for resolution to Multek or IBM, as applicable, at the addresses set forth in Article 9.1. Section 6.2 Mediation. (a) If the matter in question has not been resolved by the parties within fifteen (15) days after receipt of any Initiation Notice, and if any party wishes to pursue the matter, it shall initiate the following non-binding procedure (herein called "Mediation"), by written notice to the other party. Upon initiation of Mediation, the parties agree to try in good faith to settle the matter under the Commercial Mediation Rules of the American Arbitration Association before resorting to litigation. (b) The Mediation shall be held within thirty (30) days after selection of a Mediator. The parties shall agree on the selection of one Mediator who demonstrates at least fifteen (15) years' experience with the subject matter of the Mediation. If the parties cannot agree upon the selection of a Mediator within fifteen (15) days after receipt of the notice initiating the Mediation, the Mediator shall be selected in accordance with the Commercial Mediation Rules of the American Arbitration Association. (c) At least five (5) business days prior to the first scheduled Mediation session, each party shall provide the Mediator with a brief written memorandum on the issues to be resolved, the facts surrounding the dispute and its position with regard to the issues. Such memoranda shall be filed on a confidential basis and shall not be exchanged between the parties. If either party to the Mediation has a substantial need for information and documents in the possession of the other party in order to prepare for the Mediation, the parties shall attempt to agree upon the extent of and the schedule for the expeditious exchange of such information, with the help of the Mediator, if required. (d) If any such dispute, claim or controversy remains unresolved as of the earlier of (i) the 31st day after the first Mediation session, or (ii) the 61st day after receipt of the notice initiating Mediation, or (iii) the 61st day after receipt of the notice is received by the alleged 19 24 offending party from the aggrieved party, whether or not a party has initiated Mediation, either party may exercise all rights and remedies set forth in this Article 6, subject to the limitations and conditions, if any, agreed upon in this Agreement. Section 6.3 Pending Resolution. During any period after the Initiation Notice and during the Mediation, (a) neither party shall be relieved of its obligation to timely pay amounts claimed by the other in good faith to be due on account of Multek Operating Expenses or IBM Service Charges and IBM or Multek (as the case may be) may proceed to exercise all remedies available in Section 6.5 on account of non-payment; (b) neither party shall be relieved of its obligation to timely pay any reconciliation amounts due the other pursuant to reconciliation statements issued by either party or its Accountant and IBM or Multek (as the case may be) may proceed to exercise all remedies available in Section 6.5 on account of non-payment, except that such payments shall be deposited with counsel for the party who gave the Initiation Notice until the matter in dispute is finally resolved; (c) neither party shall be relieved of its obligation to cause Services to be provided in accordance with the provisions of this Agreement, except as authorized in Section 6.5, and each may proceed to exercise all remedies available in Section 6.5 on account thereof; (d) except to enforce the obligations in paragraphs (a),(b) and (c) above, and except to avoid the running of any applicable statute of limitations or similar rule, no party may exercise the remedies granted to it below until it has completed the processes (to the extent applicable) set forth in Sections 6.1 and 6.2, but nothing in this Article 6 shall be construed as limiting or delaying notice of an Event of Default or running of cure periods; (e) notwithstanding any delay arising out of the Mediation, interest on any amount determined to be due shall accrue, commencing as of the date the contested sums have been paid or are owed, on all amounts mutually agreed upon or determined by the Mediator to be due to a party, to be calculated in the manner agreed upon in subsection 3.4(b); and (f) notwithstanding any delay arising out of the Mediation, any party mutually agreed upon or determined by the Mediator to have committed an Event of Default shall be liable for damages, if any, from the date 20 25 of such Event of Default. The remedies reserved in paragraphs (a),(b) and (c) above may be exercised simultaneously with any of the processes set forth in Sections 6.1 and 6.2. Section 6.4 Events of Default. (a) IBM. The following shall constitute an Event of Default by IBM: (i) failure of IBM to pay money due Multek in accordance with the terms of this Agreement and such failure shall continue for at least thirty (30) days after written notice thereof; or (ii) failure of IBM to comply with any other provision of this Agreement on its part to be performed hereunder and such failure shall continue for more than forty-five (45) days after written notice from Multek to IBM which specifies in reasonable detail the alleged act or omission of non-compliance; provided, however, that if and so long as (1) the failure is reasonably curable by IBM, (2) Multek does not have reasonable grounds for establishing that Multek could cure the failure materially more rapidly than IBM, (3) the continuation of the failure is not materially prejudicial to Multek, and (4) IBM promptly commences and thereafter diligently and continuously prosecutes the curing of the failure, IBM shall have such additional time as is reasonably necessary to cure the failure; or (iii) a general assignment by IBM for the benefit of creditors; (iv) the institution by or against IBM of a case or other proceeding under any section or chapter of any Texas bankruptcy/insolvency Law or the Federal Bankruptcy Code, now existing or hereafter amended or effective, which proceeding is not dismissed, stayed or discharged within a period of sixty (60) calendar days after the filing thereof, or if stayed, which stay is thereafter lifted 21 26 without a contemporaneous discharge or dismissal of such proceeding; (v) a proposed plan of arrangement is adopted or other action by IBM's creditors is taken as a result of a general meeting of IBM's creditors; (vi) the appointment of a receiver, custodian, trustee or like officer to take possession of assets of IBM, which receivership remains undischarged for a period of thirty (30) calendar days from the date of its imposition; (vii) admission by IBM in writing of its inability to pay its debts as they mature; or (viii) attachment, execution or other judicial seizure of all or any substantial part of IBM's assets. (b) Multek. The following shall constitute an Event of Default by Multek: (i) failure of Multek to pay money due IBM in accordance with the terms of this Agreement and such failure shall continue for at least thirty (30) days after written notice thereof; (ii) failure of Multek to comply with any other provision of this Agreement on its part to be performed and such failure shall continue for more than forty-five (45) days after written notice from IBM to Multek which specifies in reasonable detail the alleged act or omission of non-compliance; provided, however, that if and so long as (i) the failure is reasonably curable by Multek, (ii) IBM does not have reasonable grounds for establishing that IBM could cure the failure materially more rapidly than Multek, (iii) the continuation of the failure is not materially prejudicial to IBM, and (iv) Multek promptly commences and thereafter diligently and continuously prosecutes the curing of the failure, Multek shall have such additional time as is reasonably necessary to cure the failure; 22 27 (iii) a general assignment by Multek for the benefit of creditors; (iv) the institution by or against Multek of a case or other proceeding under any section or chapter of any Texas bankruptcy/insolvency Law or the Federal Bankruptcy Code, now existing or hereafter amended or effective, which proceeding is not dismissed, stayed or discharged within a period of sixty (60) calendar days after the filing thereof, or if stayed, which stay is thereafter lifted without a contemporaneous discharge or dismissal of such proceeding; (v) a proposed plan of arrangement is adopted or other action by Multek's creditors is taken as a result of a general meeting of Multek's creditors; (vi) the appointment of a receiver, custodian, trustee or like officer to take possession of assets of Multek, which receivership remains undischarged for a period of thirty (30) calendar days from the date of its imposition; (vii) admission by Multek in writing of its inability to pay its debts as they mature; or (viii) attachment, execution or other judicial seizure of all or any substantial part of Multek's assets. Section 6.5 Remedies. (a) Multek: Upon the occurrence of an Event of Default by IBM, Multek shall have the right to pursue any one or all of the following remedies in addition to any other remedies available at Law or in equity which are not inconsistent with the following remedies of this Article 6: (i) direct damages incurred by Multek as well as other remedies available at Law or in equity, excepting consequential, indirect, punitive, and special damages which are hereby excluded and waived by Multek; 23 28 (ii) specific performance and all other injunctive remedies; (iii) the right to cure an Event of Default at the expense of IBM; and (iv) the right to terminate any and all Services except Services, (including the Nonterminable Services described in Section 26.1 of EXHIBIT B,) which are provided to IBM and are essential to IBM's manufacturing operations, as determined in good faith by IBM. (b) IBM: Upon the occurrence of an Event of Default by Multek, IBM shall have the right to pursue any one or all of the following remedies in addition to any other remedies available at Law or in equity which are not inconsistent with the following remedies of this Article 6: (i) direct damages incurred by IBM as well as other remedies available at Law or in equity, excepting consequential, indirect, punitive, and special damages which are hereby excluded and waived by IBM; (ii)specific performance and all other injunctive remedies; and (iii) the right to cure an Event of Default at the expense of Multek. (iv) the right to terminate any and all Services except Services, (including the Nonterminable Services described in Section 26.1 of EXHIBIT B,) which are provided to Multek and are essential to Multek's manufacturing operations, as determined in good faith by Multek. Section 6.6 Attorneys Fees; Jury Trial. (a) In the event of any Mediation or/and litigation between IBM and Multek hereunder, the Person who substantially prevails shall be entitled, in addition to all other remedies granted to it above, to reimbursement of all 24 29 reasonable attorneys fees and costs and expenses of Mediation or/and litigation incurred by such substantially prevailing Person. The Mediator or judge shall determine which Person substantially prevailed. (b) In any action, proceeding or counterclaim brought by IBM or Multek against the other concerning any matters whatsoever arising out of or in any way connected with this Agreement or the relationship hereunder of IBM and Multek, each hereby waives trial by jury. Section 6.7 Limitation on Subcontractor/Consultant Liability. In no event shall the subcontractors or consultants or other third party providers retained by IBM be liable hereunder to Multek, or subcontractors or consultants or other third party providers retained by Multek be liable hereunder to IBM, in either case under any equitable or legal theory, for Losses arising out of failure of such subcontractor, consultant or other third party providers to furnish Services as required herein. The word "Losses" shall mean all losses, liabilities, damages and claims and all related costs and expenses, including any and all attorneys' fees and costs of investigation, litigation, settlement, judgment, interest and penalties. ARTICLE 7. TERM The term of this Agreement shall commence as of the date hereof and shall continue for a period of ninety-nine (99) years. ARTICLE 8. RESTRICTIONS Section 8.1 Uses. Multek or any other Affiliate of DII Group, Inc. may use the Multek Site for the manufacturing operations currently conducted on the Multek Site by IBM as well as any other uses by them which is authorized by Law; provided, however, that Multek shall obtain the written consent of IBM to any change in Multek's use of the Multek Site for purposes other than manufacturing operations, which consent shall not be unreasonably withheld or delayed if IBM determines in good faith that the proposed change in use (a) 25 30 does not materially change the volume of traffic or type of vehicle use at the Complex, (b) does not violate or threaten violation of the provisions of the Project Operations Agreement, and (c) complies with Law. Section 8.2 Signs. All signs posted upon or within the Complex by IBM, Multek or any other Person occupying the Complex shall conform to the sign criteria set forth in EXHIBIT C. Section 8.3 Rules and Regulations. IBM and Multek shall each comply with the Rules and Regulations set forth in EXHIBIT D, and each shall make reasonable good faith efforts to cause its partners, directors, employees, agents, licensees, contractors, tenants, subtenants and other invitees to comply therewith. IBM may from time to time, with the consent of Multek which shall not be unreasonably withheld or delayed, amend or supplement the Rules and Regulations for the general safety, benefit and convenience of IBM and Multek; provided that in no event shall any amended or supplementary Rules and Regulations be inconsistent with the terms of this Agreement. IBM shall give thirty (30) days written notice to Multek of any proposed, amended or supplementary Rules and Regulations at least forty-five (45) days prior to the proposed effective date thereof. IBM represents that up to the day prior to the Term Commencement Date, the operations and activities performed at the Multek Site have been, to Best Knowledge of IBM, within the scope of the Rules and Regulations and have not violated these Rules and Regulations. The words "Best Knowledge of IBM" means the knowledge acquired based upon reasonable inquiry of IBM's Site Operations Manager of the IBM printed wire board plant operations at the Multek Site as of the date hereof and as of the Closing Date. Section 8.4 Compliance with Laws. IBM and Multek shall each comply with all Laws applicable to the condition, occupancy, use and manner of use of the Multek Site and IBM Property, as applicable, except that violation of any Laws which relate solely to IBM's operations on the IBM Property or Multek's operations 26 31 on the Multek Site and which do not adversely affect the other party in any way or the condition, use or manner of use of any other areas of the Complex, shall not constitute an Event of Default by the violator. 27 32 ARTICLE 9. RIGHT OF FIRST OPPORTUNITY Section 9.1 First Opportunity. (a) Multek agrees that (i) if at any time it considers selling, assigning, subletting, or otherwise transferring its interest in the Multek Site or/and any of the Buildings or other improvements now or hereafter located on the Multek Site, or (ii) if Multek at any time considers subdividing or rezoning the Multek Site, in each case Multek shall first notify IBM of such plans before soliciting third parties to pursue such plans, and shall include with the notification a business term sheet which sets forth the terms of Multek's proposed transaction (whether it is a sale, lease, or otherwise). IBM is hereby granted thirty (30) days after receipt of Multek's proposal to submit a counterproposal and enter into negotiations with Multek based on the business term sheet proposed. The counterproposal may take the form of an offer to purchase or lease the assets proposed to be marketed, rezoned or subdivided by Multek. Multek agrees that it shall neither take any of the actions set forth above in (i) or (ii), nor solicit or consider proposals received from others during the thirty (30) day period unless and until (x) IBM waives its rights hereunder; (y) IBM fails to submit a counterproposal as required below; or (z) IBM and Multek have been unable to reach an acceptable agreement after complying with the terms set forth below. (b) Upon receipt of an IBM counterproposal, IBM and Multek shall work together for a period of thirty (30) days in good faith to refine and revise aspects of the IBM counterproposal to make it acceptable to Multek and IBM. If after using their good faith efforts, Multek and IBM are unable to reach a mutually acceptable agreement, IBM shall, at the end of such thirty (30) day period, deliver to Multek in writing a detailed plan (the "Rejected Plan") setting forth all material terms and conditions of the final proposal proffered by IBM and rejected by Multek. Thereafter, Multek may solicit proposals from others, but only on the same terms set forth in the Rejected Plan or terms which are more favorable to Multek than those set forth in the Rejected Plan. If Multek does not accept a third party proposal which is more favorable to Multek than those set forth in the Rejected Plan, this process shall be repeated until Multek transfers the asset to IBM pursuant to 28 33 the terms of the Rejected Plan or to a third party on terms more favorable to Multek than those set forth in the Rejected Plan. For purposes of this Agreement, the above referenced thirty (30) day period, as applicable, are hereinafter individually referred to as a "Negotiation Period." Section 9.2 Continuing Right. (a) This right of first opportunity shall be a continuing right with respect to all or any portion of the Multek Site and any one or more of the Buildings and other improvements thereon. The failure by IBM to submit a proposal with respect to a particular portion of the Multek Site or particular Building or improvement, or the rejection by Multek of an IBM proposal with respect to a particular portion of the Multek Site or particular Building or improvement shall not limit, alter or terminate IBM's right of first opportunity hereunder with respect to the remaining portion of the Multek Site or particular Building or improvement. In addition, if Multek rejects an IBM proposal or IBM fails to timely make a proposal with respect to a particular portion of the Multek Site or particular Building within the parameters given by Multek in its business term sheet, and the Multek Site or particular Building or improvement is not transferred or encumbered within two hundred seventy (270) days after the expiration of (i) the applicable thirty (30) day period if IBM fails to deliver a proposal or (ii) the applicable Negotiation Period if Multek has rejected an IBM proposal, Multek shall again comply with the terms of Section 9.1 of this Agreement by resubmitting its latest business term sheet to IBM, together with all of the then relevant information, and working in good faith with IBM for a period of thirty (30) days to reach a mutually acceptable agreement as required by Section 9.1. Section 9.3 IBM Affiliate. If Multek and IBM reach a mutually acceptable agreement as to the transfer or encumbrance of a portion of the Multek Site or a particular Building or improvement, IBM may assign its rights with respect to such transfer or encumbrance to an Affiliate of IBM at the closing of the transaction without the consent of Multek. Any such assignment shall not alter or affect IBM's rights with respect to the remaining portions of the Multek Site or a particular Building or improvement. 29 34 Section 9.4 Third Party Offer. If Multek receives an unsolicited bona fide offer from a third party, which is acceptable to Multek, for a transaction of the type contemplated in subsection 9.1(a)(i), Multek shall notify IBM of such transaction, the name of the offeror, the offered consideration and provisions of the offer. Within thirty (30) days after receipt of Multek's notice, IBM may elect by notice to Multek to enter into the offered transaction for the consideration and upon the other provisions stated in Multek's notice; except that the transaction shall close the later of thirty (30) days after IBM elects to enter into the offered transaction or the date agreed upon by the offeror. Should IBM fail to exercise this right within the time and in the manner required above, or waives such right in writing, Multek shall be free to consummate such transaction to the named offeror, for the consideration and upon the other provisions set forth in Multek's notice to IBM; however, Multek agrees that such transaction shall be subject to the provisions of this Agreement and the Lease, including this Article 9. If such transaction is not consummated within two hundred seventy (270) days after the expiration of the earlier of the date IBM fails to exercise its right as hereinabove required or the date IBM waives such right in writing, the rights granted to IBM and the restrictions on Multek in this subsection shall once again apply to the offer described above as well as to any new offer. Section 9.5 Termination. Notwithstanding anything in this Agreement to the contrary, all rights and obligations of Multek and IBM set forth in this Article 9 shall terminate effective upon the date ten (10) years after the date hereof. Section 9.6 Successors and Assigns. All rights and obligations of Multek and IBM set forth in this Article 9 shall inure to the benefit of and be binding upon the successors and assigns of each party, including third parties who acquire title to the Multek Site by foreclosure or deed in lieu of foreclosure or otherwise. Either party may file a short form memorandum of this Article 9 on the public record. 30 35 Section 9.7 Financing/Refinancing. Notwithstanding any provision of this Agreement to the contrary, in no event shall Article 9 apply (i) to any financing or (ii) to any sale, sublease, assignment, pledge, mortgage or other transfer or encumbrance to an Affiliate. ARTICLE 10. INDEPENDENT UTILITIES/SERVICES - SUBDIVISION From and after the Closing Date (as defined in the Asset Purchase Agreement) IBM shall proceed to use its reasonable good faith efforts to obtain the Subdivision and to make the Utilities/Services Independent as more fully described in Sections 2, 7, 9 and 10 of EXHIBIT B hereto, and to disconnect the telephone and computer network systems as agreed upon in ATTACHMENT G-3 of EXHIBIT B. IBM shall pay all reasonable expenses associated with the Subdivision and for making the Utility/Services Independent as agreed upon in the Asset Purchase Agreement. A failure of or refusal by the City of Austin or any other Governmental Authority to approve the Subdivision for any reason shall not constitute a breach by IBM under the Operative Agreements. If the Subdivision is not approved or so long as IBM fails to make the Utilities/Services Independent, then Multek's exclusive remedy and IBM's exclusive liability hereunder shall be for IBM to lease the Leased Premises to Multek and Multek to lease the Leased Premises from IBM in accordance with the terms of the Lease which shall remain in full force and effect upon the same terms and conditions stated therein. 31 36 ARTICLE 11. MISCELLANEOUS Section 11.1 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 served (i) by telecopy, (ii) five (5) days after deposit for mailing by registered or certified mail, postage prepaid, (return receipt requested), or (iii) sent by a reliable messenger or nationally known overnight courier. Any notice, request or demand by IBM to Multek shall be addressed to Multek at the Multek Site, Attention General Manager, with copies addressed and sent simultaneously to Multilayer Technology, Inc. at 16 Hammond, Irvine, CA 92718, Attention President, and to The DII Group, Inc., 6273 Monarch Park Place, Longmont, CA 80503, Attention: Chief Financial Officer, until otherwise directed in writing by Multek and, if requested in writing by Multek, simultaneously served on or sent to such other parties as Multek may request. Any notice, request or demand by Multek to IBM shall be addressed to IBM Corporation, Real Estate Services, Armonk, New York 10504, Attention: Director, US Real Estate Operations and Investments, with copies addressed and sent simultaneously to IBM, at the same address, Attention: Associate General Counsel, and to the Austin Contract Administrator, IBM Corporation, 11400 Burnet Road, Austin, Texas 78758, until otherwise directed in writing by IBM, or to such person or address as either of the parties shall hereafter designate to the other from time to time by similar written notice. Section 11.2 Estoppel Certificates. IBM and Multek each agree, at any time and from time to time upon not less than ten (10) days prior notice from one to the other, to execute, acknowledge and deliver to the other or any other Person designated by the requesting Person, an "estoppel" certificate, so called, confirming information customarily found in such certificates with respect to this Agreement or the Lease. Section 11.3 Governing Law. 32 37 (a) This Agreement and the other Operative Agreements, valued in excess of One Million Dollars ($1,000,000.00), shall be deemed to have been delivered at and made at Armonk, New York, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the Laws of the State of New York applicable to agreements executed, delivered and performed within New York State, without regard to the principles of conflicts of Laws thereof. (b) IBM and Multek hereby consent to the jurisdiction of any state or federal court located within the county of New York, the State of New York. Each hereby (i) waives trial by jury, (ii) waives any objection to venue of any action instituted under this Agreement or under the other Operative Agreements, and (iii) consents to the granting of such legal or equitable relief as is deemed appropriate by any aforementioned court. These consents and waivers apply to all Operative Agreements. Section 11.4 Entire Agreement; Amendments. This Agreement together with the other Operative Agreements and the Confidentiality and Nondisclosure Agreement dated February 27, 1997, between IBM and Multek, including all exhibits and other attachments referred to herein and therein, contain the entire agreement of IBM and Multek with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and representations, oral or written, between IBM and Multek relating thereto or hereto. Section 11.5 Transfers. This Agreement and the obligations and rights hereunder shall not be assigned, hypothecated, pledged or otherwise transferred or encumbered by either party hereto except that either party may, in its sole discretion, transfer or assign its rights and obligations hereunder (a) to any one of its Affiliates and (b) to a purchaser, lessor, lessee or source of funding if a party sells, leases or otherwise transfers or assigns its leasehold or fee interest in the Complex. Section 11.6 Severability. 33 38 If any covenant, condition or provision of this Agreement, 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 Agreement 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 applicable Laws. Section 11.7 Binding Effect. This Agreement shall be binding upon the signatories hereto and their respective successors and permitted assigns to the same extent as if each successor and permitted assign were named as a party to this Agreement. Section 11.8 Separate Agreement. This Agreement is separate from and independent of the Operative Agreements. Without Limitation, no Event of Default by IBM or Multek under any of the Operative Agreements other than the Lease shall constitute a default under the Lease, and no default by IBM or Multek under the Lease shall constitute an Event of Default under any of the other Operative Agreements. Section 11.9 No Third Party Beneficiary. This Agreement is intended for the exclusive benefit of the parties hereto, and except as otherwise expressly provided herein, shall not be for the benefit of, and shall not create any rights in, or be enforceable by any other Person. Section 11.10 Force Majeure. If either party hereto (the "Delayed Party") is at any time delayed or interrupted in providing a Service or any other non-monetary obligation on its part to be performed hereunder by reason of a Force Majeure event, then the Delayed Party shall use all reasonable efforts to again provide such Service or perform such obligation as required by this Agreement but such delay or interruption shall not 34 39 be an Event of Default of the Delayed Party. The occurrence or happening of a Force Majeure event which has the effect of preventing performance of one or more obligations shall suspend time conditions or limitations with respect to performance of the affected obligations(s) but only for so long as the event or its direct consequences continue to preclude such performance. Section 11.11 No Warranties. (a) MULTEK AND IBM AGREE THAT THE PARTY PROVIDING A SERVICE HAS NOT, EXPRESSLY OR BY IMPLICATION OR INFERENCE, MADE ANY REPRESENTATIONS, WARRANTIES OR GUARANTEES WITH RESPECT THERETO, AND EACH SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR SUITABILITY OR FITNESS OF ANY OF THE SERVICES FOR A PARTICULAR PURPOSE OF THE OTHER PARTY, WHETHER OR NOT EITHER PARTY HAS BEEN MADE AWARE OF ANY SUCH PURPOSE BY ANY PERSON. (b) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, THE PARTIES ACKNOWLEDGE AND AGREE THAT THE BASIC FIXED RENT, DEFINED IN THE LEASE, AND PURCHASE PRICE ALLOCATED TO THE MULTEK SITE, DEFINED IN THE ASSET PURCHASE AGREEMENT, WERE ESTABLISHED IN MATERIAL RELIANCE ON MULTEK ACCEPTING THE MULTEK SITE IN THEIR "AS IS" CONDITION "WITH ALL FAULTS." Section 11.12 No 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 for any default of the other party shall not constitute a waiver of any right for either a subsequent default of the same obligation or for any other default, past, present or future. ARTICLE 12. THE DII GROUP, INC. GUARANTEE The DII Group, Inc. (the "Guarantor") hereby unconditionally and absolutely guarantees to IBM the performance and payment of any and all monetary and other obligations of Multek under this Agreement and the other Operative Agreements to which Multek in accordance herewith and therewith is a party, independently of the obligations of Multek, and the Guarantor hereby agrees to indemnify IBM against any Loss 35 40 (as defined in the Asset Purchase Agreement) incurred by reason of any failure of Multek to perform and pay such obligations in such manner. This guarantee is a direct, absolute, unconditional, irrevocable, present and continuing guarantee of performance and payment, and is a direct and primary obligation of the Guarantor, and is in no way conditional or contingent upon any attempt to enforce performance upon, or collection from, Multek or upon any other event, contingency or circumstances whatsoever. This shall be a continuing guarantee and shall cover and secure any balance owing by Multek under this Agreement and the other Operative Agreements to which Multek is a party, and IBM shall not be obligated to exhaust its recourse against Multek before being entitled to payment from the Guarantor, of all and every of the obligations hereby guaranteed. The obligations of the Guarantor set forth above shall not be subject to any deduction, diminution, abatement, setoff, recoupment, suspension, determent, reduction, or defense (other than valid defenses Multek has against IBM and all other rights of Multek under this Agreement and the other Operative Agreements, and full and strict compliance by the Guarantor of its obligations hereunder) and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not the Guarantor or Multek shall have any knowledge or notice thereof), other than full and strict compliance by the Guarantor of its obligations hereunder. 36 41 INTERNATIONAL BUSINESS MACHINES CORPORATION Kevin Halloran By:/s/ Mark S. Payton ATTEST ------------------------------------ Title:Corporate Development Consultant Date: August 18, 1997 MULTILAYER TEK L.P. Alex B. Makler By:/s/Carl R. Vertuca, Jr. ATTEST ------------------------------------ Title: Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc. in its capacity as General Partner. Date: August 18, 1997 AS TO ARTICLE 12 ONLY: THE DII GROUP, INC. Alex B. Makler By:/s/Carl R. Vertuca, Jr. ATTEST ------------------------------------ 37 42 Title: Senior Vice President, Chief Financial Officer and Secretary Date: August 18, 1997 38 43 STATE OF NEW YORK ) : ss.: COUNTY OF WESTCHESTER ) On the 18th day of August, 1997, before me personally appeared MARK S. PAYTON to me known, who, being duly sworn did depose and say that he resides at 318 Garder Road, Monroe, CT, that he is Corporate Development Consultant of International Business Machines Corporation, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Paulette Lemay Peters ------------------------------------ Notary Public STATE OF ) : ss.: COUNTY OF ) On the 18th day of August, 1997, before me personally appeared Carl R. Vertuca, Jr. to me known, who, being duly sworn did depose and say that is the Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc., in its capacity as General Partner of Multilayer Tek L.P., the Texas limited partnership described in and which executed the foregoing instrument; and that he signed his name thereto on behalf of said limited partnership. /s/ Kathryn Lee Skubina ------------------------------------ Notary Public 44 STATE OF ) : ss.: COUNTY OF ) On the 18th day of August, 1997, before me personally appeared Carl R. Vertuca, Jr. to me known, who, being duly sworn did depose and say that he resides at , that he is Chief Financial Officer of The DII Group, Inc., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Kathryn Lee Skubina ----------------------------------- Notary Public 45 EXHIBIT A* DESCRIPTION OF THE IBM PROPERTY * Exhibit A is not included and will be furnished supplementally to the Commission upon request. 46 EXHIBIT A1* DESCRIPTION OF THE MULTEK SITE * Exhibit A1 is not included and will be furnished supplementally to the Commission upon request. EXHIBIT B SERVICES AGREEMENT (attached hereto and made a part hereof) (Part of the Project Operations Agreement) Except as otherwise specifically defined herein, all words shall be given the meaning assigned to them in the Project Operations Agreement, to which this Agreement is attached. All references herein to Multek shall include, without limitation, Multek and each of its Affiliates. In accordance with and subject to the provisions of this Project Operations Agreement, certain services, utilities, supplies and facilities (the "Services") shall be furnished by IBM to Multek and to the Multek Site, including Buildings 60, 61, 63, 64, and 65 (the "Buildings"), and certain Services shall be furnished by Multek to IBM. 1. General Provisions: 1.1 (a) IBM reserves the right to stop any Services or restrict or prohibit access to the Access Roads, and Multek reserves the right to stop any Services, in each case when required by Laws, or when necessary by reason of accident, emergency, Force Majeure event, required maintenance, repairs or replacements, rule or regulation of a third party Service provider (e.g. utility company), in each case for as long as may be reasonably required; provided, however, that IBM and Multek shall each exercise reasonable good faith efforts, in accordance with commercially reasonable standards, to minimize any interference with the 47 operation of the business of the other and shall, if practicable, provide reasonable notice thereof to the other (which may be oral). Neither party shall be liable to the other for any loss or damage which it incurs because of the interruption of any Service if the party causing the interruption acts reasonably under the circumstances. (b) IBM and Multek shall negotiate in good faith to mutually agree upon arrangements for IBM to stop any Services for repairs, alterations, replacements or improvements which are necessary or desirable in IBM's sole judgement. If IBM and Multek fail to agree on the time of the shutdown within a reasonable period under the circumstances, as determined by IBM, IBM shall have the right to stop any Services for a period not greater than twenty-four (24) hours. However, (i) except in an emergency or as required by Law, IBM may not stop any Services for a period greater than twenty-four (24) hours without the consent of Multek, which consent shall not be unreasonably withheld or delayed; (ii) if IBM stops any Services, IBM shall exercise reasonable efforts to minimize any interference with the operation of Multek's business and shall provide reasonable notice thereof to Multek. (c) Further and notwithstanding anything to the contrary contained herein, IBM shall have the right to have planned, seventy-two (72) hour continuous, simultaneous shutdown of all Services once during each calendar year of the Term at a time to be mutually agreed upon in good faith by both parties at least forty five (45) days prior to such shutdown date. If, however, the parties do not agree on a planned shutdown within thirty (30) days after notice to Multek of IBM's planned shutdown date, the shutdown may be scheduled by IBM in its sole discretion during the Memorial Day or Labor Day weekend as IBM shall specify in a notice from IBM to Multek not later than thirty (30) days prior to the scheduled 48 shutdown by IBM. If additional shutdowns should, in IBM's sole judgement, be required for maintenance, alterations, replacements or improvements, IBM and Multek shall negotiate in good faith to mutually agree upon the times and duration of any additional shutdown. 1.2 Multek shall first notify IBM before making any modifications to the systems of the Buildings which may impact the existing firm maximum (which means existing plus available) capacities/volumes/ pounds/ gallons, or which impact agreed upon delivery variations, as each is set forth in SCHEDULE 12 of this Agreement, specifying the proposed scope and manner of proposed modifications and when they are planned to be done. IBM and Multek, acting in good faith, shall mutually agree upon the times and dates Multek shall make such modifications and whether these changes will, in IBM's reasonable judgment, adversely affect its ability to provide Services as required by this Agreement. Failure by Multek to notify IBM, and to resolve any dispute regarding the impact of the proposed change shall relieve IBM of any responsibility or liability hereunder in connection with any Services affected by the proposed change. 1.3 If there is a curtailment of a utility Service ("curtailed Service") to the Multek Site by action or fault of a third party Service provider, such as a "brownout," IBM shall endeavor in good faith to provide to Multek, if reasonably feasible, an equitable pro rata share of the curtailed Service which remains available to the Complex. Multek and IBM shall each pay fifty percent (50%) of any costs required to allocate the curtailed Service. 1.4 All mechanical Services which require water treatment, including steam, cooling tower water and chilled water, will be chemically treated by IBM in accordance with the then current practice. IBM will advise Multek of the chemicals used to treat such water. However, IBM shall not be 49 liable for degradation of piping and equipment located on the Multek Site. 1.5 IBM shall promptly provide Multek with copies of all notices of possible health hazards and similar raw utility concerns received by IBM from IBM's suppliers of raw utilities. 1.6 IBM shall promptly provide Multek with copies of any notices of impending rate changes received by IBM from third party Service providers which affect rates being charged to Multek hereunder. However, IBM's failure to do so shall not constitute an Event of Default by IBM or excuse Multek from paying increases on account of any such rate changes; provided, that if IBM has not billed Multek for charges based on the revised rate change within twenty-four (24) months after IBM is notified of the change, IBM shall have conclusively waived any claim to be paid such charges. 1.7 Multek shall own and maintain, repair and replace, at its sole cost and expense, all meters presently installed or to be installed by or on behalf of Multek on the Multek Site; except that until the term of the Lease ends, IBM shall own all submeters which measure regulated utilities. As provided in Article 4 of the Project Operations Agreement, IBM shall determine the accuracy of all utility meters and certify the accuracy to Multek. Multek shall allow IBM access to all meters at all reasonable times. 1.8 If Multek requests additional Services which will result in requirements for capacities/volumes/pounds/ gallons which exceed the existing firm maximum (which means existing plus available) capacity/volumes/pounds/ gallons, or which impact agreed upon delivery variations, as each is set forth in SCHEDULE 12 of this Agreement on the date hereof, and IBM (in its reasonable discretion) determines that capacity must be added, IBM shall notify Multek of such determination and the estimated cost of adding 50 such capacity. If Multek still requests such additional services, IBM shall manage the design and construction of the added facilities with architects and contractors selected by IBM, and Multek shall pay all design, construction and other costs and expenses, including the fees of consultants, attorneys and Governmental Authorities, which are incurred by IBM to satisfy Multek's request. Similarly, if IBM requests that Multek store additional new chemicals and/or waste product at the existing CDC, or that Multek treat greater volumes of waste product at the WFC (defined in Section 11), and Multek (in its reasonable discretion) determines that capacity must be added, Multek shall notify IBM of such determination and the estimated cost of the additional capacity. If IBM still makes its request, Multek shall manage the design and construction of the added facilities with architects and contractors selected by Multek, and IBM shall pay all design, construction and other costs and expenses, including the fees of consultants, attorneys and Governmental Authorities, to satisfy IBM's request. 1.9 Until such time as IBM has completed making the Utilities/Services Independent and has obtained the Subdivision, and the Real Estate Closing (defined in the Asset Purchase Agreement) has been completed, IBM shall facilitate the supply of electricity, Domestic Water and Waste Water service to Multek in accordance with and subject to provisions of the Project Operations Agreement, including Sections 2, 9 and 10 of this Agreement and the following provisions. (a) All electricity, Domestic Water, and Waste Water service provided by IBM to Multek is furnished at IBM's cost (without markup of any kind), solely as an incident of Multek's tenancy under the Lease and only for Multek's use. Multek shall not resell or allow the use by others of any Waste Water service, electricity, or Domestic Water furnished by IBM hereunder. 51 (b) Supplementing and confirming other provisions of the Project Operations Agreement: (i) Multek's electricity, Domestic Water and Waste Water service shall be submetered. (ii) Electrical consumption, Domestic Water consumption, and Waste Water charges based on Domestic Water consumption for common areas and facilities will be IBM's and not Multek's responsibility. (iii) Any disputes relating to the computation of Multek's bill for electricity, Domestic Water consumption or Waste Water charges, or the accuracy of the submetering device, will be resolved by Mediation between Multek and IBM. (iv) Multek acknowledges that by signing the Project Operations Agreement, IBM has provided Multek with a true and correct copy of 30 T.A.C. Section 291.125. (c) Bills for Multek's electricity consumption, Domestic Water consumption and Waste Water services shall be rendered by IBM for the same period as the bills issued by the City of Austin or its successor. Bills will be issued to Multek based upon submeter usage. (d) A bill for any of these services is delinquent if not paid by the due date indicated on the bill, unless the bill is issued less than seven (7) days before the due date, in which case the due date is seven (7) days after the date the bill was issued. The date the bill is issued is the postmark date on the envelope of the bill or on the bill itself. If the due date falls on a weekend or Holiday, the due date for payment purposes shall be the next date after the due date. 52 (e) Estimated bills will be rendered if the meter has been tampered with or is out of order and, in such case, the bill shall be distinctly marked as such. (f) If billings are determined to be in error, IBM shall calculate a billing adjustment. If Multek has overpaid, the adjustment shall be made for the entire period of the overcharges. If Multek was underbilled, IBM will backbill Multek for the amounts underbilled for a period not to exceed six (6) months. If the underbilling is $25.00 or more, Multek may enter into a deferred payment plan for the same length of time as that of the underbilling. (g) Unless clearly designated by Multek, all payments received from Multek shall be applied first to sums due IBM under the Project Operations Agreement other than utilities, and then to utilities. A reconnect fee of $10.00 shall be applied if electric service is reconnected after being disconnected for nonpayment of bills. (h) Electric, Domestic Water and Waste Water service may be disconnected if: (i) Multek fails to pay its electric, Domestic Water and Waste Water bill within twelve (12) days from the date the bill was issued (this provision shall supersede Article 6 of the Project Operations Agreement for purposes of this clause); and (ii) IBM has mailed or hand-delivered to Multek a termination notice at least five (5) days prior to the date of disconnection. (i) Prior to furnishing Domestic Water and electricity to Multek during the term of the Lease, IBM shall calibrate all submeters which will be used to measure Domestic Water and electricity. Costs of calibration shall be shared as agreed upon in Section 4.3 of the Project 53 Operations Agreement to which this EXHIBIT B is attached. 2. Electrical Power Service IBM agrees that electrical power is one of four (4) Utility/Services that IBM shall make Independent. Until accomplished, the following shall apply: 2.1 All electrical substations (the "Substations") are located in the Buildings. The existing switch gear is located on the IBM Property as part of the Utility Plant. The intent of the parties is to run a direct feed from the City of Austin electrical facility to a new switch gear to be located on the Multek Site. Until that work is completed, IBM shall make reasonable efforts to arrange with the City of Austin to rent IBM's switch gear to the City so that electrical service will be supplied to Multek by the City through IBM's existing switchgear. Until then or until electricity is made Utility/Services Independent, IBM shall provide the Services described on SCHEDULE 1. 2.2 Electric meters are located within the Utility Plant and operational to measure consumption of electricity furnished to Multek. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. Multek shall pay for electricity provided through the Substations as measured by these electric meters in accordance with the following. The City of Austin or, if the City and IBM or the City and Multek agree, IBM shall cause the meters to be read on a monthly basis to determine the electrical consumption during each particular monthly billing period. The electrical consumption as determined by such meter readings shall be multiplied by the then (at the time of the particular meter readings) applicable service classification rates at which IBM purchases electricity from the utility company (including any and all sales taxes, fuel charges, time of day 54 charges, as well as any and all other component charges thereof). The product thus obtained shall constitute the electric consumption charge to be paid by Multek for the particular monthly billing period to which the meter readings and the City's or IBM's bill relates, and shall be payable within forty-five (45) days after the receipt of the bill therefor by Multek. 2.3 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 1, the electrical power feed from the electrical service center or point of delivery from the public utility up to points it enters the Buildings. Multek owns and shall maintain, repair and replace, at its sole cost and expense, the electrical system extending from the entry point into the Buildings, including all cables, wiring, conduit and equipment such as panels, lights, switches, and tools. In addition, Multek owns and shall maintain, at its sole cost and expense, the diesel generators, associated controls, batteries, equipment and distribution system located within the Buildings. Both parties shall comply with all Laws applicable to the maintenance, repair and replacement of its electrical equipment and facilities, and IBM with respect to the supply of electricity to Multek during the transition period. 55 3. Steam Service 3.1 IBM shall provide non-potable Uncontaminated process steam to the Buildings (with condensate return) in accordance with SCHEDULE 2. For purposes of this Sections 3, 5, and 6, the word "Uncontaminated" shall mean free of process chemicals or other pollutants which would impair the use of the steam or water, as the case may be, for its intended purpose or use. Steam meters are in place and operational to measure Multek's use of steam. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. 3.2 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 2, the steam, condensate and pipe distribution systems located in the Utility Plant as well as the Utility System extending up to the points they enter the Buildings. Multek owns and shall maintain, repair and replace, at its sole cost and expense, the steam and condensate systems in the Buildings from the Buildings' entry points. 3.3 IBM shall cause the steam meters to be read on a monthly basis to determine the use of steam during each particular monthly billing period. The steam use as determined by such meter readings shall be multiplied by the then, at the time of the steam meter(s) reading, "Steam Rate." The Steam Rate agreed upon for calendar year 1997 is set forth in SCHEDULE 2. The product thus obtained shall constitute the equivalent of the steam use charge to be paid by Multek in respect of the particular monthly billing period to which IBM's bill shall relate. 3.4 IBM represents that the steam and condensate system is a closed loop system and, as currently operated and existing on the Closing Date, is (i) in working order; (ii) Uncontaminated; and (iii) sufficient to return all condensate in an Uncontaminated 56 condition. Multek shall use all steam in a closed loop system and return all condensate to the Utility Plant in an Un-contaminated condition. If there is any such impairing contamination caused or discovered by Multek or IBM in the steam and/or condensate system, the party which causes or discovers such contamination shall immediately orally notify the other party (confirmed in writing within forty-eight (48) hours of the oral notice). The party who caused such contamination (the "offending party") shall take action within twenty-four (24) hours to correct the cause of such contamination. To the extent the offending party does not take action within the twenty-four (24) hour period to correct the cause of such contamination (and prosecute same with due diligence and continuity to completion), the other party may correct such contamination and bill the offending party for any and all costs incurred by the other party therefor. The offending party shall reimburse the other party for such costs within forty-five (45) days after receipt of a bill therefor as well as for any costs incurred by the other party to repair or replace any parts or equipment damaged by such contamination by the offending party. 4. Compressed Air Service 4.1 IBM shall provide the compressed air, cooled and dried for production only and not for human consumption (hereinafter the "Compressed Air") to Buildings in accordance with the provisions of SCHEDULE 3. 4.2 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 3, sufficient air compressors and compressed air piping distribution system necessary to supply the Compressed Air to the Buildings' entry points. 4.3 Multek owns and shall maintain, repair and replace, at its sole cost and expense, internal Compressed Air piping (to receive and convey the Compressed Air) 57 in the Buildings, from the Buildings' entry points. 4.4 IBM has installed consumption meters in the Buildings to measure energy required to produce the Compressed Air used by Multek. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. 4.5 IBM shall cause the consumption meters to be read on a monthly basis to determine the use of Compressed Air during each particular monthly billing period. The use of Compressed Air, as determined by such meter readings, shall be multiplied by the Compressed Air Rate in effect at the time of the particular meter readings. The Compressed Air Rate agreed upon for 1997 is set forth in SCHEDULE 3. The product thus obtained shall constitute the Compressed Air use charge to be paid by Multek in respect of the particular monthly billing period to which IBM's bill shall relate. The bill shall be payable within forty-five (45) days after the receipt thereof by Multek. 4.6 If there is an unplanned equipment outage, IBM, at Multek's request, shall exercise reasonable efforts to obtain rental air compressors to continue to supply compressed air to Multek and will endeavor to do so in a reasonable period of time. Multek shall pay IBM for such rental air compressors within forty-five (45) days after receipt of IBM's bill therefor. 4.7 Multek may elect to permanently discontinue purchasing Compressed Air from IBM. To make such election, Multek shall give not less that thirty (30) days prior notice to IBM. As of the effective termination date as provided in the notice, IBM shall no longer be required to furnish Compressed Air to Multek, and IBM in its sole discretion may sell to third parties or otherwise dispose of its 58 compressors that it used to produce Compressed Air for Multek. 5. Chilled Water Service 5.1 IBM shall provide non-potable Uncontaminated chilled water ("Chilled Water"), in accordance with the provisions of SCHEDULE 4. 5.2 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 4, a chilled water Utility System necessary to supply such Chilled Water from the Utility Plant to the Buildings' entry points. Multek owns and shall maintain, repair and replace, at its sole cost and expense, a chilled water piping system to receive and convey the Chilled Water, from the Buildings' entry points. 5.3 IBM has installed meters in the Buildings to measure Multek's use of Chilled Water. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. 5.4 IBM shall cause the Chilled Water meters to be read on a monthly basis to determine the use of Chilled Water during each particular monthly billing period. The Chilled Water use, as determined by such meter readings, shall be multiplied by the Chilled Water Rate in effect at the time of the particular meter readings. The Chilled Water Rate agreed upon for 1997 is set forth in SCHEDULE 4. The product thus obtained shall constitute the Chilled Water use charge to be paid by Multek in respect of the particular monthly billing period to which IBM's bill shall relate. The bill shall be payable within forty-five (45) days after the receipt thereof by Multek. 5.5 IBM represents that the Chilled Water system is a closed loop system and, as currently operated and existing on the Closing Date, is (i) in working order; (ii) Uncontaminated; and (iii) sufficient to return all Chilled Water in an Uncontaminated condition. Multek shall use all Chilled Water in 59 a closed loop system and return all chilled Water to the Utility Plant in an Uncontaminated condition. If there is any such impairing contamination caused or discovered by Multek or IBM in the Chilled Water System, the party which causes or discovers such contamination shall immediately orally notify the other party (confirmed in writing within forty-eight (48) hours of the oral notice). The party who caused such contamination (the "offending party") shall take action within twenty-four (24) hours to correct the cause of such contamination. To the extent the offending party does not take action within the twenty-four (24) hour period to correct the cause of such contamination (and prosecute same with due diligence and continuity to completion), the other party may correct such contamination and bill the offending party for any and all costs incurred by the other party therefor. The offending party shall reimburse the other party for such costs within forty-five (45) days after the receipt of a bill therefor as well as for any costs incurred by the other party to repair or replace any parts or equipment damaged by such contamination by the offending party. 6. Cooling Tower Water 6.1 IBM shall provide non-potable Uncontaminated cooling tower water ("Cooling Tower Water") in accordance with the provisions of SCHEDULE 5. 6.2 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 5, a cooling tower water system necessary to supply such Cooling Tower Water from the Utility Plant to the Buildings' entry points. Multek owns and shall maintain, repair and replace, at its sole cost and expense, a cooling tower water piping system to receive and convey the Cooling Tower Water from the Buildings' entry points. 6.3 The Cooling Tower Water Rate agreed upon for 1997 is set forth in SCHEDULE 5 and shall constitute the Cooling Tower Water use charge to be paid by 60 Multek in respect of the particular monthly billing period to which IBM's bill shall relate. The bill shall be payable within forty-five (45) days after the receipt thereof by Multek. 6.4 IBM represents that the Cooling Tower Water system is a closed loop system and, as currently operated and existing on the Closing Date, is (i) in working order; (ii) Uncontaminated; and (iii) sufficient to return all Cooling Tower Water in an Uncontaminated condition. Multek shall use all Cooling Tower Water in a closed loop system and return all cooling tower water to the Utility Plant in an Uncontaminated condition. If there is any such impairing contamination caused or discovered by Multek or IBM in the Cooling Tower Water System, the party which causes or discovers such contamination shall immediately orally notify the other party (confirmed in writing within forty-eight (48) hours of the oral notice). The party who caused such contamination (the "offending party") shall take action within twenty-four (24) hours to correct the cause of such contamination. To the extent the offending party does not take action within the twenty-four (24) hour period to correct the cause of such contamination (and prosecute same with due diligence and continuity to completion), the other party may correct such contamination and bill the offending party for any and all costs incurred by the other party therefor. The offending party shall reimburse the other party for such costs within forty-five (45) days after the receipt of a bill therefor as well as for any costs incurred by the other party to repair or replace any parts or equipment damaged by such contamination by the offending party. 6.5 Multek understands that IBM has reduced the cost of Cooling Tower Water as well as Chilled Water by implementing a recycling program. To the extent that Multek does not continue this recycling program, a written description of which has been delivered to Multek, the cost of Cooling Tower Water as well as Chilled Water shall increase. 61 7. Fire Protection Water System, Detectors and Extinguisher Service IBM agrees that the fire protection water system is one of four (4) Utility/Services that IBM shall make Independent. Until accomplished, the following shall apply: 7.1 (a) IBM shall make available to Multek the existing fire loop system servicing the Buildings. This fire loop system consists of piping which connects to the City of Austin water supply system up to the entry points to the Buildings, as well as the hydrants and backflow preventers which are located on the IBM Property. (b) IBM owns and shall maintain, repair and replace, subject to reimbursement herein provided, the existing fire loop system. Multek owns and shall maintain, repair and replace, at its sole cost and expense, the internal fire protection water system (including alarms, detectors, extinguishers, piping, and wiring) from the point the system enters the Multek Site, including any systems which serve the Buildings, tank farms, industrial waste treatment plant and the chemical distribution center located on the Multek Site. Both parties shall comply with all Laws applicable to the maintenance, repair and replacement of its fire protection equipment and facilities, and IBM with respect to the supply of the fire protection water to Multek during the transition period. 7.2 At such times when there has been use of fire protection water for the benefit of the Multek Site, IBM shall cause a reading to be made from the water meters. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek to determine the amount of water that was used unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. IBM shall bill Multek therefor in accordance with SCHEDULE 6, using the then City of Austin's water rate (including sales, use and other taxes and charges) charged to IBM. Multek shall pay IBM's bill(s) therefor within forty-five (45) days after the receipt thereof by 62 Multek. If fire protection water shall be used at locations at other areas on the Complex at the same time when used for the benefit of the Multek Site, then IBM, in good faith, shall solely determine the allocation of such use when reading the water meters and prorate its bill to Multek accordingly. 8. Fuel Oil 8.1 Multek shall own and shall maintain, at its sole expense, the existing fuel oil tanks and all associated piping and equipment located on the Multek Site. Multek, in its sole discretion, may demolish and close any or all such tanks on thirty (30) days prior notice to IBM. All fuel oil tanks on the Multek Site are marked on ATTACHMENT I. 8.2 Multek shall make its own arrangements for supply of fuel oil to the Buildings. Multek shall receive or otherwise transfer fuels to or from transport trucks or vehicles only at places that provide secondary containment so as to prevent the unplanned releases of fuel to the environment. Multek shall use its best efforts to cause its suppliers to use the shortest route from off-site to the tank farm and shall be responsible, as provided in Sections 16 and 17, for all spills and other releases to the environment from such fuel oil tanks anywhere on or about the Complex. 9. Domestic Water Service IBM agrees that domestic water is one of four (4) Utilities/ Services that IBM shall make Independent. Until accomplished, the following shall apply: 9.1 IBM shall provide Multek with potable domestic water ("Domestic Water") in accordance with the provisions of SCHEDULE 6. 9.2 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 6, domestic water piping and equipment necessary to supply Domestic Water from the point of delivery 63 from the City of Austin to the Building's entry points. Multek owns and shall maintain, repair and replace, at its sole cost and expense, internal domestic water piping and equipment from the Buildings' entry points. Both parties shall comply with all Laws applicable to the maintenance, repair and replacement of its Domestic Water System, and IBM with respect to the supply of Domestic Water to Multek during the transition period. 9.3 IBM has installed meters to measure Multek's use of Domestic Water. These meters have not been certified, but readings from them shall be conclusive and binding on IBM and Multek unless clearly shown by one party to be inaccurate and, if the parties are unable to agree, through Mediation. 9.4 IBM shall cause the Domestic Water meters to be read on a monthly basis to determine the use of Domestic Water during each particular monthly billing period. The Domestic Water use, as determined by such meter readings, shall be multiplied by the rates in effect at the time of the meter readings (including sales, use and other taxes and charges) at which IBM purchases water from the City of Austin. The product thus obtained and other charges agreed upon in SCHEDULE 6 shall constitute the Domestic Water use charge to be paid by Multek in respect of the particular monthly billing period to which IBM's bill shall relate. The bill shall be payable within forty-five (45) days after the receipt thereof by Multek. 10. Sanitary Waste System Service IBM agrees that the sanitary waste system is one of four (4) Utilities/Services that IBM shall make Independent. Until accomplished, the following shall apply: 10.1 IBM owns and shall maintain, repair and replace, subject to reimbursement as herein provided in SCHEDULE 6, the sanitary waste system which services the entire Complex, except for the Internal Sanitary 64 System. Multek owns and shall maintain, repair and replace, at its sole cost and expense, the internal sanitary waste system from the point of entry into the Buildings, including pumps and piping within the Buildings (the "Internal Sanitary System"). Both parties shall comply with the Laws applicable to the maintenance, repair and replacement of its Sanitary Waste System, and IBM with respect to the supply of sanitary waste Services during the transition period. 10.2 If there is any blockage or stoppage in the system, other than in the Internal Sanitary System, which is caused by Multek's negligence or misconduct, Multek shall reimburse IBM for any costs incurred by IBM to clear or to correct the same. If there is any blockage or stoppage in the Internal Sanitary System which is caused by IBM's negligence or misconduct, IBM shall reimburse Multek for any costs incurred by Multek to clear or correct the same. Multek shall use and maintain, repair and replace the Internal Sanitary System in accordance with Laws at its sole cost and expense. Multek shall be liable for and shall promptly perform at its sole cost and expense any and all cleanup of the Internal Sanitary System required by any Laws due to the discharge of any unlawful substances into the Internal Sanitary System or any other part of the sanitary system serving the Complex. 10.3 The parties have agreed that for 1997, Multek shall pay to IBM the amount set forth in SCHEDULE 6 for this Service. Such payments shall be made within forty-five (45) days after Multek's receipt of IBM's bills therefor, which bills shall be accompanied by a copy of the underlying bill received from the City of Austin. IBM shall bill Multek on the same cycle as IBM is billed by the City of Austin. 11. Industrial Waste Water Service The existing industrial waste water treatment plant ("WCF") is located on the Multek Site. The plant shall be operated by Multek, at its sole expense, whether or not title to the Multek Site is 65 transferred to Multek; except that if IBM decides not to construct a new industrial waste water treatment plant on another part of the Complex, the following shall apply and Multek shall provide WCF Services to IBM for a fee: 11.1 Multek shall maintain, repair and replace, subject to reimbursement by IBM as herein provided, the WCF which is comprised of the industrial waste water structures, piping, transfer tanks and pumping equipment located on the Multek Site. 11.2 Multek shall process, in compliance with all applicable Laws (including IBM's City of Austin Waste Water Permit), IBM's industrial waste water in accordance with the provisions of SCHEDULE 7. 11.3 The parties have agreed that for 1997, IBM shall pay Multek the amount set forth in SCHEDULE 7 for this Service. IBM shall pay Multek such amount within forty-five (45) days after the month during which the Service was provided. 11.4 IBM will provide data to Multek establishing the levels or concentrations of all pollutants in IBM's effluent which are regulated and required to be reported to the City of Austin and that demonstrates that IBM's wastewater discharges will meet the City of Austin's wastewater effluent limitation standards after being properly treated at the WCF. In accordance with current procedures, IBM will provide such data to Multek twice a week. IBM, upon discovery, shall immediately notify Multek of any concentration of contamination in its discharge or any upset which would cause the permit limits to be exceeded. IBM shall reimburse Multek for any fine or penalty levied against Multek because of any such exceedance. 12. Security IBM shall provide control of access to the Complex by badge readers, subject to its right to terminate this Service pursuant to Section 26, in accordance with the provisions of SCHEDULE 8. 13. Stormwater Runoff 66 13.1 As part of the cost of making the Utility/Services Independent, IBM, at its sole cost and expense, has completed or will complete physical modifications to the stormwater collection system so that stormwater will not run off from the Multek Site or IBM Property to the other; the one exception will be the runoff of Multek's two (2) parking lots which are located to the east of Building No. 60. The parties have agreed that once these physical modifications are complete, IBM will test the runoff to determine and define the quality of the stormwater runoff from the Multek Site. To the extent that such monitoring demonstrates that the runoff is sufficiently uncontaminated and IBM and Multek reasonably conclude that no additional collection and/or treatment requirements will be imposed in connection with obtaining a permit for the discharge of such stormwater pursuant to Federal regulations, Multek shall assume all responsibility for and with respect to the stormwater runoff from the Multek Site at its sole cost and expense. If there is a dispute with respect to stormwater runoff, the parties will resolve the issue by Mediation. 13.2 As part of the Services to be provided under Section 13, IBM shall provide the Services described in SCHEDULE 9. 14. Landscaping, Grounds Service and Access Roadway Maintenance Consistent with the current service contracts and service levels stated therein, as determined by IBM and its service provider, IBM shall provide landscape, grounds, and access roadway maintenance services to the applicable portions of the Complex in accordance with the provisions of SCHEDULE 10. To the extent IBM uses treated industrial waste waters to irrigate the Multek Site under IBM's Service contracts, these waters will not contain any Hazardous Substance that would cause Multek to incur liability for remedial activity under any environmental Laws. IBM shall indemnify Multek for any costs Multek incurs to remediate contamination required by Law to be remediated and which results from contaminated irrigation waters supplied by IBM; provided, Multek can demonstrate that such 67 contamination was the proximate cause of any such required remediation. 15. Environmental General 15.1 Notwithstanding the provisions of this Section 15 to the contrary, neither IBM or Multek shall install any underground storage tanks, injection or dry wells, or surface impoundments of any kind on the Complex. Either may install or use above ground storage tanks (including piping and valves), so long as the installation of the tanks and use of the contents in the tanks is for operations at the Complex; is in compliance with applicable Laws; is necessary for the conduct of the business activities at the Complex, and is in accordance with safe and workmanlike procedures that reasonably minimize any threat to and are protective of human health and the environment. The party hereto who installs or uses an above ground storage tank is solely responsible for any liability or claim resulting from, relating to or arising out of such installation or use, and it shall indemnify and hold the other party hereto and their respective directors, employees, and lenders, successors and assigns harmless from and defend them against any liability or claim resulting from, relating to or arising out of such installation or use. 15.2 IBM and Multek are strictly prohibited from disposing of any Hazardous Substances on the Complex. Each party hereto shall be solely responsible for arranging for the proper and legally-authorized temporary storage on or off the Complex, transportation to and from the Complex, and for off-site disposal of all Hazardous Substances brought upon, used, stored, transported to or generated by it or its agents at the Complex. If required by Laws, the party hereto intending to transport and dispose of Hazardous Substances shall obtain an EPA hazardous waste generator identification number for the transportation to and disposal of such wastes and waste waters at off-site disposal areas. 68 15.3 Neither IBM nor Multek (other than as required by Law) shall, without the approval of the other, which either may withhold from the other in its sole discretion, permit any part of the Complex to become, under any applicable Laws, (1) a hazardous waste treatment or disposal facility except an industrial waste water treatment plant; (2) a solid waste treatment or disposal facility (including an incineration facility, a solid waste landfill or a public disposal facility); (3) a solid or hazardous waste transfer station; (4) a nuclear or radioactive material storage facility; (5) a medical waste treatment or disposal facility; (6) a waste tire collection site; (7) a mining waste storage or disposal facility; (8) a used oil recycling, marketing or burning facility; (9) a special wastes treatment or disposal facility; or (10) a facility that accepts, receives, collects, stores, treats, or disposes of solid wastes, Hazardous Substances or other wastes that are generated off the Complex. 15.4 IBM and Multek are each responsible for compliance of their respective employees, contractors, subcontractors, tenants, subtenants and other invitees with these provisions. 15.5 (a) IBM and Multek shall each be responsible for obtaining (except during any transition period, as herein provided) and maintaining any environmental permits or approvals, or making any notifications or reports, that are required under any applicable Laws or permits for conduct of, on or related to the portion of the Complex it or their respective employees, contractors, subcontractors, tenants, subtenants and other invitees control or possess. If, as contemplated, Multek operates its facilities under a permit or license issued to IBM, Multek shall comply with all obligations and responsibilities imposed on IBM by such permit or license. Until the permits are transferred into Multek's name, if Multek causes IBM to violate any provision of such permit or license, then Multek shall indemnify and save IBM and its employees and directors harmless from and defend them against 69 any claim, liability, cost, fee, expense or damage arising out of such violations; provided, that such violation is not caused by IBM. (b) IBM will continue to perform at its sole expense the groundwater monitoring and sampling obligations associated with the Corrective Action part of IBM's State RCRA Hazardous Waste Permit, HW50130, as more fully explained in that Permit, as it applies to the tank farms located on the Multek Site. Multek will allow access to IBM and its contractors to perform such monitoring and sampling. IBM shall be responsible for closure of all wells associated with its RCRA Corrective Action compliance plan. IBM will also cap any voluntary monitoring wells on the Multek Site that Multek designates in writing to IBM within six (6) months following the Closing Date that Multek does not want to continue. For any voluntary well that Multek does not want capped, Multek shall assume all responsibility and maintenance for such well(s) within six (6) months following the Closing Date. 15.6 If either IBM or Multek receives prior notification of any planned visits or inspections of any part of the Complex by any Governmental Authority having jurisdiction over environmental matters, IBM or Multek, as applicable, must, as soon as reasonably possible after the date for the visit or inspection is scheduled, orally notify the other party of such planned visit. If any Governmental Authority having jurisdiction over environmental matters makes an unplanned visit to or inspection of any portion of the Complex, the Person (Multek or IBM) first made aware of such visit or inspection must, as soon as reasonably possible, orally notify the other party. Unless required by Law or a Governmental Authority having jurisdiction over environmental matters, neither IBM or Multek shall be entitled to participate in any such visit or inspection of the portion of the Complex occupied by the other without the consent of the other; except that during the period of time that either IBM or Multek is operating its facilities under a permit or license issued to the other, the other shall be entitled to participate 70 in any such visit or inspection of the Multek Site. 16. Environmental Conditions 16.1 (a) IBM and Multek agree that the level of Hazardous Substances, if any, present in the soil and groundwater in, on and under the Multek Site shall be as set forth in the Environmental Baseline described in the Asset Purchase Agreement; except that (i) for a period of one (1) year from the Closing Date, monthly samplings shall be taken at the Building 60 sump on Multek's Site to determine the Baseline for copper and 1,1,1 TCA (trichloroethane) in that area, and (ii) for a period of two (2) years from the Closing Date, Multek shall have the right to establish that the chemicals 1,1 dichloroethane, 1,1 dichloroethylene, methyl chloride and 1,1,1 TCA (trichlorethane) in the Southwest sump area on Multek's Site are Newly Discovered Contamination, provided that Multek does not use those four (4) chemicals in any of its operations during the said two (2) year period. (b) Multek and IBM agree that the Baseline shall be determinative of the environmental conditions, the types of contaminants, their volumes, quantities and levels of concentration in the soil and groundwater on the Multek Site as of the Closing Date with respect to any Hazardous Substances identified in the Baseline. (c) If after the Closing Date, Multek discovers a Hazardous Substance on the Multek Site that was not identified in the Baseline, Multek shall have the burden of proving that any such Hazardous Substance existed on the Multek Site prior to the Closing Date or was otherwise caused by IBM. If a dispute arises as to the existence of a Hazardous Substance on the Multek Site before the Closing Date that was not identified in the Baseline, the parties, if they cannot agree that it existed prior to the Closing Date, shall first submit the matter to Mediation. 16.2 (a)(1) Multek shall be solely responsible for the following which shall be called "Multek Contamination": (i) 71 Hazardous Substances which become present on, in or under the Complex after the Closing Date and which were caused by Multek, its employees, agents, contractors, suppliers and/or other invitees, and/or (ii) Hazardous Substances which were spilled on or released to the Multek Site prior to the Closing Date but which become violations of Law or which exceed cleanup standards established by Law only after the Closing Date unless such Hazardous Substances constitute Newly Discovered Contamination (as defined in the Asset Purchase Agreement), in which case Multek shall only be responsible for changes in Law that occur after the first anniversary of the Closing Date. (2) In no event, however, shall Multek be liable or responsible for Hazardous Substances caused by a spill or release by IBM, its employees, agents, contractors, suppliers and/or other invitees after the Closing Date when such spill or release, which is caused by IBM, has impacted the Multek Site by constituting a violation of the Laws or by exceeding a cleanup standard established by Law or by increasing the levels of any contaminant on the Multek Site above the Baseline plus any Multek Contamination. Such Hazardous Substances are hereinafter called "IBM Contamination." (b) If Multek discovers Newly Discovered Contamination, IBM shall be responsible for Remediation to the cleanup levels imposed by Law in effect at the Closing Date or those in effect on the first anniversary of the Closing Date. If IBM is already engaged in remediating chemicals identified as Newly Discovered Contamination, and if the level of cleanup imposed by Law becomes more stringent after the first anniversary of the Closing Date for such chemicals, IBM shall continue to be responsible for Remediation to the more stringent standard, but Multek shall reimburse IBM for incremental costs of Remediation required to comply with the more stringent cleanup level. 16.3 (a) If Multek Contamination violates a Law or exceeds a standard established by Law, then Multek shall be solely responsible for the Remediation thereof to 72 the cleanup standards or guidelines established by a Law. (b) If IBM Contamination violates a Law or exceeds a standard established by Law, then IBM shall be solely responsible for the Remediation thereof to the cleanup standards or guidelines established by a Law. (c) If a Governmental Authority institutes administrative action or a lawsuit in which IBM or Multek is named as a party (including as a third-party defendant) for failure or refusal of the "responsible party" (which shall mean Multek if Multek's Contamination or IBM if IBM's Contamination) to perform Remediation at the Complex, and such action or suit determines that the responsible party has failed to perform Remediation, the responsible party shall reimburse the other party hereto and otherwise pay for any and all direct damages, penalties, fines, settlements, costs or expenses, including reasonable attorneys' fees, consultant fees, laboratory fees, and investigation and defense costs and direct costs of Remediation (hereinafter collectively called the "Environmental Costs") incurred by the other party by reason of a directive or order of a Governmental Authority or court of law requiring the other party to perform Remediation which is the responsibility hereunder of the responsible party. Without limitation, Environmental Costs may result from or be attributable to the other party's participation in such action or law suit or to the failure or refusal of the responsible party, as determined by a Governmental Authority or court of law, to comply with the Laws relating to Remediation at the Complex. Notwithstanding any provisions of this Agreement to the contrary, in no event shall either party be liable to the other or any other Person for consequential, special or indirect damages of any kind. (d) As used herein, the word "Remediation" means and includes investigation, sampling, testing, reporting, analysis, laboratory work, removal, cleanup, and similar activities relating to IBM's Contamination (if IBM is the responsible party) or Multek's Contamination (if Multek is the responsible party), above, on or under the Complex. (e) Upon discovery and notice to the responsible party of any release of Hazardous Substances to the environment at 73 the Complex, the responsible party shall promptly investigate the same, report its findings to the other party and report the actions taken or proposed to be taken by the responsible party with respect to any such release. (f) In the event of a sudden spill or abrupt release to the environment which is immediately discovered after its release, the responsible party will promptly take steps to clean up the release and/or contain it so that it will not impact the property or operations of the other party on the Complex. (g) Notwithstanding anything herein to the contrary, the foregoing shall not be deemed to constitute a waiver of the other party's rights at Law, if any, to seek recovery for damage it sustains by reason of the spill or other release caused by or attributable to the responsible party, its employees, contractors, agents, suppliers and/or other invitees, but in no event shall the other party be entitled to recover damages for levels of contamination below Baseline plus either Multek's Contamination levels (if Multek is the other party) or IBM's Contamination levels (if IBM is the other party). 16.4 IBM and Multek recognize that Multek's activities on the Multek Site and IBM's activities on the IBM Property may impact upon the other party's property, employees, invitees, equipment, and operations. Therefore, Multek and IBM agree that if there is a release, spill, discharge, malfunction, other episodic event or any condition or use of the party's property that might reasonably be expected to impact on the other party's property in any significant respect, each shall provide prompt notice thereof with sufficient detail to enable the other to take appropriate actions in response thereto; provided, however, that any and all legal obligations of the party with respect to such event, including reporting and emergency response actions as required, shall take precedence over the requirement to notify the other party but such notification of the other party shall occur as soon as possible after compliance with such legal 74 obligations (if it is not practicable to have same occur simultaneously therewith). 16.5 If Multek or IBM shall make any application for new or changed operating permits applicable to any operations conducted at the Complex, the party filing the application shall promptly notify the other party of its action(s). 16.6 If either Multek or IBM is required by a Governmental Authority to provide environmental information that is best known by the other party, within thirty (30) days of the request therefor, Multek and/or IBM will each provide to the other all such pertinent information. 75 17. Chemical Storage and Handling 17.1 IBM agrees that the chemical distribution center ("CDC") is located on the Multek Site and has been used by IBM to store unused chemicals and chemical waste products. The existing CDC shall be owned and maintained, repaired and replaced by Multek, at its sole expense. Until IBM removes IBM's Chemicals and its chemical waste products from the existing CDC, Multek shall provide chemical storage and disposal Services in accordance with the provisions of SCHEDULE 11. IBM shall remove such chemicals and wastes from the existing CDC upon completion of a new CDC on the IBM Property and receipt of all required municipal approvals to use the new CDC. IBM agrees to remove or cause to be removed any IBM chemical waste products stored by Multek within ninety (90) days following their first storage. IBM also agrees to diligently pursue completion of the new CDC on the IBM Property as well as the receipt of all required municipal approvals to use the new CDC. 17.2 The unused chemicals used by IBM on the IBM Property are listed on ATTACHMENT B ("IBM's Chemicals"). The unused chemicals used by Multek on the Multek Site are listed on ATTACHMENT C ("Multek's Chemicals"). The unused chemicals that are listed both on ATTACHMENTS B and C are listed on ATTACHMENT D. Multek shall receive, store and handle IBM's Chemicals and, in addition, other unused chemicals and waste products of IBM in accordance with the provisions of SCHEDULE 11 to the extent only, however, that, with respect to additional unused chemicals and waste products, there is current capacity to store such additional unused chemicals and waste products as well as Multek's and IBM's Chemicals. If IBM shall request that a new type of unused chemical, not listed on ATTACHMENT B, be received, stored and/or handled by Multek, IBM shall give notice to Multek, specifying the type of unused chemical and quantities it wishes to have received, stored and/or handled. Each such notice shall be accompanied by the manufacturer's 76 material safety data sheets applicable to such chemical. Similarly, if Multek intends to store and/or handle a new type of unused chemical, which is not listed on ATTACHMENT C, Multek shall give notice to IBM, specifying the type of unused chemical and quantities it wishes to store and/or handle. Each such notice shall be accompanied by the manufacturer's material safety data sheet applicable to each such chemical. IBM shall have the right to review and approve such storage and handling of a new chemical if Multek is then operating under IBM's permit, or IBM's permit will require modification, provided, however, such approval by IBM shall not be unreasonably withheld. IBM agrees to assist Multek in its application to transfer either permit to Multek. 17.3 (a) All storage, labeling and handling of IBM's Chemicals or waste products by Multek's personnel shall be in accordance with IBM's RCRA Hazardous Waste permit and with the City of Austin's Hazardous Substances ordinance permit. IBM's permit shall not be modified except with the consent of IBM which it may not unreasonably withhold. IBM agrees to assist Multek in its application to transfer permits to Multek. (b) Multek shall, subject to TNRCC approval, conduct certain activities authorized under IBM's RCRA Part B Hazardous Waste Permit until such time as units have been characterized by the TNRCC as less than ninety (90) day storage facilities or temporary accumulation units. While Multek operates under IBM's RCRA Part B Hazardous Waste Permit, Multek will comply with all obligations and responsibilities imposed by the Permit on Multek's operations. Multek further agrees not to make any changes, modifications, alterations or the like to the current operations, production, chemical usage or any other change that would cause IBM to be in violation of the Permit without first obtaining IBM's written consent, which consent shall not be unreasonably withheld. Multek shall indemnify and save IBM and its employees and directors harmless from and defend them against any claim, liability, loss, cost, 77 fee or damage arising out of any such violation; provided, that any such violation is not caused by IBM. 17.4 All of IBM's Chemicals and waste products shall be physically segregated in and about the CDC from Multek's Chemicals and waste products. 17.5 After IBM completes construction of a new CDC and removes IBM's Chemicals and waste products from the existing CDC, Multek shall be responsible, at its sole cost and expense, for all chemical handling, distribution, storage and transportation in connection with the existing CDC. Without limitation, Multek shall provide its own bulk unloading of Multek's Chemicals from transport vehicles into Multek's tank farm located on the Multek Site. Multek shall be fully responsible for such bulk unloading responsibility and shall conduct appropriate inspections for the potential leakage and spillage of chemicals, both along the Access Roads and on the Multek Site. Multek shall at all times be required and prepared to promptly respond to leaks, spills and other environmental incidents arising out of this activity (a Multek Contamination) so as to limit the extent and duration of incidents and to effectively implement remedies in accordance with Laws and directives of Governmental Authorities. Multek shall receive or otherwise transfer chemicals to or from transport vehicles (truck) only on the Multek Site and only at places that provide secure secondary containment to prevent the unplanned release of chemicals to the environment. 17.6 Multek represents that with respect to IBM's Chemicals and waste products, Multek has, and with respect to new chemicals and waste products accepted by Multek, will have the necessary equipment, facilities, personnel, expertise and resources to handle all of IBM's Chemicals and waste products, and represents further that Multek shall handle IBM's Chemicals and waste products in a proper, lawful and safe manner. Multek shall be responsible for any and all damage and liability 78 caused by or arising out of IBM's Chemicals and waste products while located on the Multek Site, except to the extent of any damage resulting from defective packaging of IBM's Chemicals by the manufacturer or IBM prior to their receipt by Multek, and except to the extent of damage caused by negligent acts or omissions of IBM's employees, contractors or others acting on behalf of IBM. 17.7 For the chemical storage and handling services provided to IBM pursuant to this Section 17, the parties have agreed that for 1997 IBM shall pay to Multek, on the first day of each calendar month for so long as IBM's Chemicals and waste products remain in the existing CDC, the amount set forth in SCHEDULE 11. 18. Temporary Occupancy IBM now occupies and uses about 24,000 square feet on the second floor of Building No. 64 for administrative purposes. Multek hereby authorizes IBM employees to remain in and to continue using the space for a period of two (2) months upon and subject to the provisions of SCHEDULE 13. 19. Cost of Utility Plant Multek agrees to pay IBM for a pro rata share based on usage of the cost and expense of operating the Utility Plant in accordance with the provisions of SCHEDULE 14. 20. Waste Generator 20.1 Multek shall be deemed to be the sole generator and owner of any and all waste, whether hazardous waste or not, generated by Multek, its agents, employees, contractors or anyone claiming by or through Multek in connection with the operation of its business and use of the Multek Site and IBM shall not have any liability with respect to such waste. Multek shall dispose of such waste at its sole cost and expense and liability in such manner as it determines is appropriate and in accordance with all Laws. 79 20.2 IBM shall be deemed to be the sole generator and owner of any and all waste, whether hazardous waste or not, generated by IBM, its agents, employees, contractors or anyone claiming by or through IBM in connection with the operation of its business and use of the IBM Property and Multek shall not have any liability with respect to such waste. IBM shall dispose of such waste at its sole cost and expense and liability in such manner as it determines is appropriate and in accordance with all Laws. 21. Natural Gas Multek owns and shall maintain, repair and replace, at its sole expense, the existing natural gas supply lines and associated meters and equipment which are located on the Multek Site and used for the operation of the treater tower incineration operation. 22. Easements 22.1 Notwithstanding any provisions in the Project Operations Agreement or the Lease to the contrary, Multek is prohibited from entry to the buildings and other structures located on the IBM Property, or entry to the parcel shown on ATTACHMENT I and improved by softball fields, tennis courts and other recreational improvements, and IBM is prohibited from entry to the Buildings and other structures on the Multek Site, in each case unless specifically authorized herein or under another Operative Agreement, or invited to enter by the other. Subject to these prohibitions, IBM and Multek each hereby grants to the other nonexclusive reciprocal easements appurtenant to the IBM Property and Multek Site, over and across the exterior walkways, sidewalks, entrances, exits and access roads (described in ATTACHMENT E and, to the extent agreed upon to date, marked on ATTACHMENT I) as they now exist or as may exist in the future for vehicular and pedestrian traffic as may be from time to time necessary and desirable for ingress, egress and passage to and from and about the Complex for the benefit of the respective employees and invitees of IBM and Multek, and for police, fire and medical personnel and equipment. A more detailed description of these easements are set forth in ATTACHMENT E, some or all of which 80 easements shall be recorded in the Travis County real estate records as determined by the parties, their respective counsel and the title company. 22.2 IBM shall maintain, replace and repair the Access Roads in accordance with and subject to the provisions of SCHEDULE 10. Any damage to the Access Roads by Multek or its employees, contractors, suppliers or other invitees shall be repaired by IBM at Multek's sole cost and expense. IBM shall not make any material change to the access roads, including any material change to the configuration of the entrances and exits as they are now configured, if such change will adversely affect the operations of Multek on the Multek Site, IBM shall provide notice to Multek of all such material changes before making them and IBM will not make such change without the consent of Multek which it shall not unreasonably withhold or delay. If there is a dispute, the parties shall submit the matter to Mediation. 23. Other Services 23.1 Multek shall offer IBM the additional Services described on ATTACHMENT F. 23.2 IBM shall offer Multek the additional Services described on ATTACHMENT G. 23.3 Without limitation, Multek agrees to perform for itself those Services described on ATTACHMENT H. The parties agree that IBM shall not be required to perform any Services for or deliver any Services to Multek except as specifically agreed upon in the Project Operations Agreement. 23.4 Multek's employees who are located at the Multek Site may use the softball fields, tennis courts and other recreational improvements shown on ATTACHMENT I for three (3) years from the Closing Date, for a fee of Ten Thousand Dollars ($10,000.00) for each twelve (12) month period, and subject to coordination of such use with uses by IBM as determined by IBM in consultation with Multek. 81 24. Cafeteria Multek agrees to provide independent cafeteria, vending and other food services and recognizes that IBM shall not provide any of these amenities to Multek. Multek agrees to advise its employees, contractors, suppliers and other invitees accordingly and to instruct them not to enter the cafeteria. 25. Failure to Provide Services Neither Multek nor IBM shall be liable or responsible to the other for any failure, interruption, inadequacy, defect or change in the character or supply of any Service, including electricity, Domestic Water, Waste Water service, compressed air, chilled water, cooling tower water, telephone, and any and all other Services to be furnished by one to the other hereunder unless directly caused by the gross negligence or wilful misconduct of the Service provider. In no event, even if either Multek or IBM is grossly negligent, or even if its employees, tenants, suppliers, agents, licensees, subcontractors, contractors or other invitees engage in negligent or wilful misconduct, shall Multek or IBM or its respective employees, tenants, suppliers, agents, licensees, contractors, subcontractors or other invitees be liable for any consequential, indirect, punitive or special damages which may be sustained by the other, for whatever reason under any circumstance. Multek and IBM agree that its exclusive remedy is set forth in Article 6 of the Project Operations Agreement. 26. Right to Terminate Certain Services 26.1 Nonterminable Services. Subject to Section 6.5 of this Project Operations Agreement, titled "Remedies," certain Services furnished pursuant to specific provisions hereof shall not, except as herein provided, be terminated (the "Nonterminable Services"). The Services to be provided to IBM by Multek that Multek may not terminate for any reason or cause without the consent of IBM, which it may withhold in its sole discretion, are for the term of this Agreement, Industrial Waste Water and Chemical Storage and Handling. The Services to be provided to Multek by IBM that Multek may not terminate for any reason or cause without the consent of IBM, which it may withhold in its sole discretion, are landscaping and grounds maintenance service and the repair and replacement of the access roads, each as 82 described in the applicable SCHEDULES hereto. The Services to be provided to Multek by IBM that IBM may not terminate for any reason or cause without the consent of Multek, which it may withhold in its sole discretion, are (a) for the term of this Agreement, Chilled Water, Cooling Tower Water, Compressed Air and Steam and, (b) until the date they are made Services/Utilities Independent, Electricity, Domestic Water, the Fire Protection Water System and the Sanitary Waste System, and (c) until nine (9) months after the Closing Date, or when Multek has completed it installation, whichever is sooner, the Information Technology and Material Logistics Transitions Services as described in ATTACHMENT G-3 hereto; except that, in the case of Chilled Water, Cooling Tower Water, Compressed Air and Steam, IBM may unilaterally elect in its sole discretion to transfer to Multek the obligation to furnish these Services provided that IBM establishes the necessary easements and rights-of-way to allow Multek access to and operation of the Central Utility System. Or, IBM and Multek may agree that IBM will sell the Central Utility System to Multek. Notwithstanding any provision in this Agreement to the contrary, the party receiving a nonterminable Service may, in its sole discretion, upon not less that one hundred eighty (180) days notice to the party providing such Service, terminate such Service. 26.2 Terminable Services. With respect to all Services other than the Nonterminable Services (the "Terminable Services"), Multek and IBM, at any time and from time to time may elect, on not less than one hundred eighty (180) days prior written notice to the other (the "Service Termination Notice"), to terminate any one or more of the Terminable Services effective as of a date (the "Service Termination Date") specified in the Service Termination Notice, subject to the following provisions hereof. The Service Termination Date for a particular Terminable Service shall be specified in the Service Termination Notice and shall, if applicable, correspond with the earliest possible expiration date of the particular Service contract pursuant to which the particular Service to be terminated is rendered to the terminating party. The Service provider shall advise the terminating party within thirty (30) days of receipt of the terminating party's written inquiry of the Service provider as to whether or not there is an 83 applicable Service contract and if so the expiration date or any permitted earlier cancellation date thereof. If a cancellation fee shall be payable for such earlier cancellation, the terminating party shall notify the Service provider whether to so cancel and the terminating party in such event shall pay such cancellation fee. If there is no Service contract, the Service Termination Date shall be not earlier than six (6) months after the giving of the Service Termination Notice unless an earlier date is agreed upon by the parties hereto. If the Service Termination Notice is given, then automatically on the Service Termination Date, the particular Service specified in the Service Termination Notice shall be terminated and the Service provider shall have no responsibility to, and shall not, furnish any such terminated Service to the terminating party. If the terminating party thereafter contracts for any of the terminated Service, whether furnished by the terminating party directly or through a third party contractor, the terminating party shall be subject to the applicable provisions of the Project Operations Agreement. 27. Sales Taxes Notwithstanding anything to the contrary contained herein, if and to the extent that sales, use or other taxes are required to be paid to any Governmental Authority on account of any Services furnished by IBM to Multek, or by Multek to IBM, pursuant to the terms of this Agreement, the Service provider may bill the receiver of Services for all such taxes due and owing and the receiver of Services shall pay the amount to the Serviced provider within forty-five (45) days after receipt therefor. 84 ATTACHMENT A PERMITS - - EPA Stormwater General Permit - - TNRCC RCRA (Part B) Hazardous Waste Permit - - TNRCC RCRA Compliance Plan - - TNRCC Air Permits R-7382 and R-18126 - - City of Austin Waste Water Discharge Permit - - City of Austin Hazardous Materials Ordinance Permit (HMO) - - City of Austin Registered Industrial Plant Certification 85 ATTACHMENT B* IBM'S CHEMICALS As listed and described in that certain binder entitled _____________________, dated ________________, prepared by IBM. In addition to IBM's obligation to notify Multek of any new unused chemicals which shall be delivered to and stored on the IBM Property, once each year IBM shall update the binder and deliver an updated copy to Multek. * Attachment B is not included and will be furnished supplementally to the Commission upon request. 86 ATTACHMENT C* MULTEK'S CHEMICALS As listed and described in that certain binder entitled _____________________, dated ________________, prepared by IBM and approved by Multek. In addition to Multek's obligation to notify IBM of any new unused chemicals which shall be delivered to and stored on the Multek Site, once each year Multek shall update the binder and deliver an updated copy to IBM. * Attachment C is not included and will be furnished supplementally to the Commission upon request. 87 ATTACHMENT D* COMMON CHEMICALS As listed and described in that certain binder entitled _______________, and dated ________________, prepared by IBM. Once each year IBM shall compare the most recent updates to the binder described in ATTACHMENTS B and C, make any modifications necessary to document changes to the then most recent ATTACHMENT D, and deliver an updated copy of ATTACHMENT D to Multek. * Attachment D is not included and will be furnished supplementally to the Commission upon request. 88 ATTACHMENT E EASEMENTS
NO IBM TO Multek Multek TO IBM - -- ------------- ------------- 1. Access around north end Bldg. 060. 2. Access through entrance #2 off of Burnet Rd. 3. Access through entrance #1 off of Braker Lane. 4. Electrical service from City of Austin substation to Bldg. 060. Access to piping & electrical in Bldg. 060 to 045. 5. Railroad spur to Tank Farm. 6. Chemical trench to WCF. 7. Conveyance of drainage into IBM's stormwater collection facility. 8. Access to piping & electrical service into & through Bldg. 060, 045 service. 9. Railroad spur. 10. Cross tie access from C.U.P. to main site. 11. Access to monitoring wells for monitoring /sampling (see Section 15.5(b)).
The following easements which will be defined during the time IBM is making the Utilities/Services Independent: Sanitary sewer lines, fuel oil lines, deionized water lines and natural gas lines. 89 ATTACHMENT F ADDITIONAL SERVICES TO IBM The following Services shall be offered by Multek to IBM, subject to Multek's right to terminate these Services pursuant to Section 26:
ESTIMATED ADDITIONAL SERVICE DURATION/MONTHS 1997 CHARGE - ------------------ --------------- ----------- D.I. WATER 6* $3,700 + $10.26 (ATTACHMENT F1) per 1000 gallons - estimate is $11,672/mo. AIR ABATEMENT 3 $4,000/mo. MAINTENANCE (ATTACHMENT F2) CHEMICAL SPILL 3 Each spill priced RESPONSE based on cost of (ATTACHMENT F3) labor, materials and disposal. CALIBRATION/INST. 3* Based on request/ SUPPORT actuals - estimate (ATTACHMENT F4) $15,500 per month. TOOL ROOM SUPPORT 3* Each request priced. (ATTACHMENT F5) Estimate is $54,000 per month. ANALYTICAL LAB 6* Each request priced. SUPPORT Estimate is $20,000 (ATTACHMENT F6) per month. RO WATER (ATTACHMENT F7) 6* $1,000 maintenance plus $8.00/1000 gallons. Estimate is $7,000/mo.
IBM reserves the right to require Multek to continue furnishing these Services at charges to be negotiated between the parties, based on the cost formula used to determine the costs set forth above; except that the charges for the Services described in ATTACHMENTS F4, F5 AND F6 shall be furnished at competitive market prices to be negotiated by the parties. * Attachments F-1 through F-7 are not included and will be furnished supplementally to the Commission upon request. 90 ATTACHMENT G* ADDITIONAL SERVICES TO MULTEK The following Services shall be offered by IBM to Multek, subject to IBM's right to terminate these Services pursuant to Section 26:
ESTIMATED ADDITIONAL SERVICE DURATION/MONTHS 1997 CHARGE - ------------------ --------------- ----------- MAILROOM 6 $500 + postage (ATTACHMENT G-1) ENGINEERING DATE BASE 3 $5,000 (ATTACHMENT G-2) INFORMATION TECHNOLOGY 9* Per ATTACHMENT (ATTACHMENT G-3) ATTACHMENT G-4 9* Per ATTACHMENT INTENTIONALLY OMITTED TRANSITION SERVICES 1* Per ATTACHMENT (ATTACHMENT G-5)
* Attachments G-1 through G-5 are not included and will be furnished supplementally to the Commission upon request. 91 ATTACHMENT H* SERVICES MULTEK TO SELF-PERFORM * Attachment H is not included and will be furnished supplementally to the Commission upon request. 92 ATTACHMENT I* RECREATIONAL IMPROVEMENTS * Attachment I is not included and will be furnished supplementally to the Commission upon request. 93 SCHEDULE 1* ELECTRICAL SWITH GEAR AND METERS * SCHEDULE 1 is not included and will be furnished supplementally to the Commission upon request. 94 SCHEDULE 2* STEAM * SCHEDULE 2 is not included and will be furnished supplementally to the Commission upon request. 95 SCHEDULE 3* COMPRESSED AIR * SCHEDULE 3 is not included and will be furnished supplementally to the Commission upon request. 96 SCHEDULE 4* CHILLED WATER * SCHEDULE 4 is not included and will be furnished supplementally to the Commission upon request. 97 SCHEDULE 5* COOLING TOWER WATER * SCHEDULE 5 is not included and will be furnished supplementally to the Commission upon request. 98 SCHEDULE 6* DOMESTIC WATER/WASTE WATER * SCHEDULE 6 is not included and will be furnished supplementally to the Commission upon request. 99 SCHEDULE 7* ENVIRONMENTAL WCF * SCHEDULE 7 is not included and will be furnished supplementally to the Commission upon request. 100 SCHEDULE 8* SECURITY CAS (CONTROL ACCESS SYSTEM) * SCHEDULE 8 is not included and will be furnished supplementally to the Commission upon request. 101 SCHEDULE 9* RETENTION/DETENTION/ STORM WATER RUN-OFF * SCHEDULE 9 is not included and will be furnished supplementally to the Commission upon request. 102 SCHEDULE 10* LANDSCAPING, GROUNDSKEEPING, & ACCESS ROADWAYS * SCHEDULE 10 is not included and will be furnished supplementally to the Commission upon request. 103 SCHEDULE 11* ENVIRONMENTAL CDC * SCHEDULE 11 is not included and will be furnished supplementally to the Commission upon request. 104 SCHEDULE 12* SERVICES IBM TO PROVIDE TO MULTEK (ON-GOING) * SCHEDULE 12 is not included and will be furnished supplementally to the Commission upon request. 105 SCHEDULE 13* BUILDING 064 INDIRECT SPACE LEASE * SCHEDULE 13 is not included and will be furnished supplementally to the Commission upon request. 106 SCHEDULE 14* CENTRAL UTILITY PLANT OPERATION * SCHEDULE 14 is not included and will be furnished supplementally to the Commission upon request. 107 EXHIBIT C PAGE 1 of 3 SIGN CRITERIA The objective of these sign criteria is to provide and maintain a consistent design integrity for the Complex. The sign criteria are intended to provide adequate information to personnel and visitors of the Complex with a minimum of signs. All occupants of the Complex will be expected to conform to the Complex sign criteria. The sign criteria are applicable only to the exterior of buildings and the open areas of the Complex. Sign criteria for interior occupant space will be the responsibility of each occupant/owner of that space, including IBM and Multek (whether as a tenant or an owner). In order to maintain Complex sign uniformity and provide each occupant with adequate signage, the following are rules for installation and maintenance of signs: - - IBM shall be responsible for a design standard for exterior building and entry signs and for administering, coordinating, maintaining and enforcing the Complex sign program. Multek agrees that the existing design standard at the Complex is acceptable and shall be the design standard for directional, parking, entrance and building exterior signs and the like. Multek agrees to pay IBM its proportional share of the cost to maintain all Complex signs. - - Multek and IBM shall each be responsible at its sole cost for design, fabrication, installation, maintenance, modification, and/or removal of all signs on its property, in each case in compliance with Laws. IBM shall be responsible for signs on the road system up to the boundary line of the Multek Site. Multek shall be responsible for signs for the road system, parking area and Buildings on the Multek Site. 108 - - Multek and IBM may remove, at the other's expense, any sign on the Complex which is not authorized hereunder. - - IBM and Multek shall each be entitled to install the following signs: - - A sign on each of their respective buildings with the appropriate identification of their choice. Each sign throughout the Complex shall be of standard and equal size. - - Directional roadway signs to the main lobby/receptionist areas from Complex entrances. Multek will designate one location and the sign will direct traffic to that location only. - - Directional roadway signs to the shipping/receiving areas from all Complex entrances. - - Signs identifying the parking areas from the Complex roadway. SIGN CRITERIA PAGE 2 of 3 - - No signs shall have moving parts or contain or be subject to any flashing or internal illumination. No part of the sign shall extend above the roof line. Signs indicating a company's name will be allowed on no more than two facades and must be appropriately scaled and designated for the structure. A front yard sign near the street will also be allowed when appropriate. No private signs other than directional signs shall be allowed along the road signs. EX-2.5 6 SUPPLY AGREEMENT 1 EXHIBIT 2.5 SUPPLY AGREEMENT THIS SUPPLY AGREEMENT IS MADE AS OF THE 18TH DAY OF AUGUST, 1997 B E T W E E N: INTERNATIONAL BUSINESS MACHINES CORPORATION, A CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK, (HEREINAFTER CALLED "IBM") - AND - MULTILAYER TEK L.P. A LIMITED PARTNERSHIP UNDER THE LAWS OF TEXAS (HEREINAFTER CALLED "SELLER") 2 TABLE OF CONTENTS - ----------------- 1.0 DEFINITIONS............................................................3 2.0 STATEMENT OF WORK......................................................6 3.0 PURCHASE OF PRODUCTS...................................................7 3.1 Orders.................................................................7 4.0 PRICE.................................................................14 5.0 DELIVERY..............................................................18 6.0 TERM AND TERMINATION..................................................19 7.0 PRODUCT QUALITY.......................................................21 8.0 CERTIFICATION, AUDIT, INSPECTION and ACCEPTANCE.......................22 9.0 WARRANTY..............................................................23 10.0 INDEMNITY............................................................25 11.0 LIABILITY............................................................26 12.0 PREFERRED SUPPLIER...................................................27 13.0 CAPACITY RESERVATION FEE.............................................31 14.0 INTELLECTUAL PROPERTY................................................32 15.0 INTELLECTUAL PROPERTY AND SYSTEMS ACCESS.............................32 16.0 GENERAL..............................................................32 17.0 ORDER OF PRECEDENCE..................................................36 18.0 COMPLETE AGREEMENT...................................................37 EXHIBIT 1...................................................................38 APPROVED SUBCONTRACTORS...................................................38 EXHIBIT 2...................................................................39 ELECTRONIC DATA INTERCHANGE/ELECTRONIC FUNDS TRANSFER.....................39 TRADING PARTNER AGREEMENT.................................................39 EXHIBIT 3...................................................................41 IBM PRODUCT INFORMATION AND IBM COMPUTER PROGRAMS.........................41 APPENDIX A.................................................................42 **** DIVISION.............................................................42 1.0 PART NUMBER AND PRICE LIST............................................42 APPENDIX B.................................................................45 **** DIVISION............................................................45 1.0 PART NUMBER AND PRICE LIST............................................45 3 1.0 DEFINITIONS For purposes of this Agreement, the following capitalized terms shall have the following meanings: 1.1 "ACCELERATED DELIVERY" means a delivery which is rescheduled to arrive on IBM's dock sooner than the Delivery Date previously specified in an Order. 1.2 ****REDACTED INFORMATION**** 1.3 ****REDACTED INFORMATION**** 1.4 ****REDACTED INFORMATION**** 1.5 ****REDACTED INFORMATION**** 1.6 "AFFILIATE" means as to a party hereto any corporation, company or other entity which controls, is controlled by, or is under common control with, a party hereto. 1.7 "AGREEMENT" means the Base Agreement, Exhibits, Division Appendices, Specifications, CHARPNS.FILE and IBM Orders. 1.8 "ARRAY" refers to Products delivered to IBM as two or more contiguous Products on a single panel. 1.9 "BASE AGREEMENT" means this Supply Agreement, less Exhibits, Division Appendices, Specifications, CHARPNS.FILE and IBM Orders. 1.10 ****REDACTED INFORMATION**** 1.11 "BUSINESS DAYS" means consecutive calendar days, less all Saturdays, Sundays and holidays generally observed in the U.S. by IBM. IBM will notify Seller, within a reasonable time after IBM establishes the holidays it will observe, of the specific holidays and their dates. 1.12 **** means **** a in a document titled "CHARPNS.FILE," dated April 18, 1997, (a complete copy of which has been received by Seller). 1.13 "CHANGED PRODUCT" means a modified printed wire board that results from changes to the Specifications, technology, materials or processes for a which was being purchased by IBM from Seller pursuant to this Agreement prior to the implementation of the change to such Product. IBM may, at its discretion, assign a different part number or product name to a Changed Product. 1.14 **** means a printed wire board identified by part number or product name and which is specified in Appendix A as of the Commencement Date. 4 1.15 **** means a printed wire board identified by part number or product name and which is specified in the **** Appendix as of the Commencement Date. 1.16 "DAYS" refers to consecutive calendar days. 1.17 "DELIVERY DATE" refers to the date of arrival of Products on IBM's dock. 1.18 "DIVISION APPENDICES" mean the appendices attached to the Base Agreement, identifying part numbers and initial unit prices, Product specific information, and terms and conditions specific to certain operating divisions within IBM. 1.19 "ENTERPRISE CAPABILITY ASSESSMENT" is a process that allows IBM and Seller to perform detailed supply assessments and establish best-can-do Product supply delivery schedules. 1.20 "EXHIBIT" shall mean an attachment to the Base Agreement, other than Division Appendices. 1.21 "LEAD-TIME" means the number of Business Days between the date Seller receives an IBM Order until the date specified for each delivery requested in such Order. Lead-Times are specific to each individually scheduled delivery of Products. Normal Lead-Times are set forth in Section 3.5.2 and referenced in Sections 3.6.1 and 3.6.4.1. 1.22 **** means a printed wire board **** by IBM in the applicable Division Appendix or Specifications. 1.23 "NET ORDERS" means the aggregate dollar amount of Orders issued to Seller by IBM during an annual period which Orders specify Scheduled Delivery Dates not later than six months after the last Day of such annual period, less the aggregate dollar amount of any cancellations by IBM of such Orders or portions thereof. 1.24 "NEW PRODUCT" means a Product manufactured with unused materials, and which has not been used or reconditioned prior to shipment to IBM's delivery destination, unless authorized in writing by IBM prior to such shipment. 1.25 ****REDACTED INFORMATION**** 1.26 ****REDACTED INFORMATION**** 1.27 "NON-VENDOR OPERATIONS" means all manufacturing operations other than Vendor Operations. 1.28 "ORDER" means a purchase order placed by IBM for Products as contemplated by this Agreement. Order may also be referred to as "IBM Order". Individual Orders may specify multiple Delivery Dates. 1.29 "ORDERING LOCATION" shall mean IBM division, location or organization, including, but not limited to, Austin ECAT, Greenock ECAT and Rochester ECAT, that may order Products under this Agreement. References in this Agreement to "IBM" shall also be construed to include "IBM Ordering Locations". 1.30 "OTHER ADDITIONAL PRODUCT" means a printed wire board other than **** Product that IBM agrees to purchase from Seller pursuant to the terms of this Agreement. 1.31 "PANEL" shall mean a 19 1/2" X 24" fiberglass and copper composite. 5 1.32 "PRODUCTS" shall mean the following printed wire boards, which unless otherwise agreed by the parties in writing are fully manufactured for IBM by Seller at the Austin, TX panel plant facility pursuant to IBM Orders and according to IBM Specifications: **** Products are manufactured using only Non-vendor Operations, except to the extent they may be manufactured using Vendor Operations pursuant to Section 2.3, **** 1.33 ****REDACTED INFORMATION**** 1.34 **** refers to any printed wire board specified by IBM as **** which may be purchased by IBM under this Agreement. 1.35 "SECTIONS" shall mean numbered sections of this Agreement unless otherwise specified. 1.36 "SCHEDULED DELIVERY DATE" refers to the agreed date of arrival of Products on IBM's dock as specified in IBM Orders. 1.37 **** means a printed wire board manufactured by Seller ****, and identified by IBM in the applicable Division Appendix or Specifications. 1.38 "SPECIFICATIONS" shall mean designs, drawings, prints and written descriptions and requirements for Products that have been provided to Seller as of the date of this Agreement by IBM, or which may be provided to Seller during the term of this Agreement by IBM prior to the manufacture of Products to which the Specifications apply. 1.39 "SUBSIDIARY" shall mean a corporation, company, or other entity (a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are; or (b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of the ownership interest representing the right to make the decisions for such corporation, company or other entity, is now or hereafter, owned or controlled, directly or indirectly, by a party hereto, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists. 1.40 "TRANSIT TIME" means the duration of time during which Products are in transit from Seller's location to IBM's specified delivery destination, measured by the number of Business Days beginning with the date Products are delivered by Seller to IBM's designated carrier until the date of arrival of such Products on IBM's dock. 1.41 "TRY-FOR-FIT" is a means of analyzing the potential quantity and Delivery Dates of Products which may be purchased under this Agreement as referenced in Section 3.4. 1.42 "UNIQUE MATERIALS" means materials used in the manufacture of Products by Seller which cannot be used by Seller in the manufacture of any other IBM Product or third party product in the event IBM cancels an Order, decreases the quantity of Products specified in an Order or delays delivery of Products specified in an Order for more than ninety (90) days. 1.43 "VENDOR OPERATIONS" means those manufacturing operations which Seller subcontracts, or may subcontract, to third party suppliers pursuant to Section 2.3. 6 2.0 STATEMENT OF WORK During the term of this Agreement, Seller shall perform each and all of the following responsibilities: 2.1 Upon receipt of an IBM Order, Seller shall manufacture and sell to IBM New Products meeting all the Specifications made applicable to each Product pursuant to this Agreement, and in accordance with the terms and conditions of this Agreement. Seller will deliver to IBM only that quantity of Products authorized by IBM's Orders at the prices specified in the Orders. All Products delivered to IBM by Seller must be New Products unless otherwise previously authorized by IBM in writing prior to actual delivery of the Products. 2.2 Seller shall provide all labor and materials necessary to perform Seller's obligations under this Agreement. 2.3 Except with respect to the approved subcontractors and approved Vendor Operations set forth in Exhibit 1, Seller's right to subcontract manufacturing operations to a third party, including any Subsidiary or Affiliate company, is subject to the prior written approval of the chairperson of the IBM Printed Circuit Commodity Council, or from the chairperson's successor or designee. Seller agrees that Seller shall remain responsible for all of its obligations as specified in this Agreement even if Seller is permitted to subcontract any manufacturing operations required by an IBM Order to any third party. Seller agrees to enter into a binding agreement with its subcontractors sufficient to impose the same obligations and requirements upon the subcontractor as are accepted by Seller under this Agreement. Further, Seller agrees that any agreements it may reach with its subcontractors will not contain terms or conditions which may conflict with Seller's ability to perform its obligations under this Agreement. IBM agrees that it will consider Multilayer Technology, Inc. (Multek) locations in Irvine, CA and Roseville, MN as potential subcontractors to perform the Vendor Operations set forth in Exhibit 1. If Multek's Irvine, CA or Roseville, MN locations are qualified by IBM for any of the Vendor Operations specified in Exhibit 1, the qualified location(s) will be included as an approved subcontractor to perform only the Vendor Operation(s) approved by IBM for that location. IBM will make a reasonable effort to complete its qualification process within ninety (90) Days following the first effective date of this Agreement. Qualification of said Multek locations to perform the specified Vendor Operations will not be unreasonably withheld. 2.4 If requested by IBM and at no additional cost to IBM, Seller shall comply with IBM's reasonable requests to make available to IBM, or to others IBM may designate, such data necessary to inspect, maintain or operate any Products delivered hereunder, including data similar to the type provided to IBM prior to the execution of this Agreement by suppliers of similar products. 3.0 PURCHASE OF PRODUCTS 3.1 ORDERS Seller agrees to make a good faith effort to provide all quantities of Products ordered or rescheduled by IBM on the Delivery Dates requested by IBM, whether or not such quantities and/or Delivery Dates were forecasted by IBM. Seller shall supply Products to IBM in accordance with and only in response to Orders which may be issued by IBM from time to time during the term of this Agreement. This Agreement does not authorize Seller to produce or deliver any Product other than pursuant to IBM's Orders. IBM may issue electronic (via Electronic Data Interchange, "EDI") or written Orders. Seller must provide written or electronic notice of acceptance or rejection of Orders to IBM within **** for Normal Lead-Time Orders and within **** for Orders requesting deliveries in less than Normal Lead-Times from the date Seller 7 receives IBM's Order. If IBM does not receive Seller's response within this period, Orders shall be deemed accepted by Seller. Subject to the other terms of this Agreement, if Seller rejects IBM's Order, then as to the quantity of Products contained in IBM's Order, IBM may at its sole discretion fulfill its Product requirements pursuant to Section 12.6 3.2 CONTENTS OF ORDERS Unless otherwise stated below, all Orders for Products submitted by IBM will contain the following: (a) price (b) quantities ordered, (c) Scheduled Delivery Dates, (d) engineering change level (optional), (e) destination, (f) required method of shipment (optional), and (g) part number 3.3 FORECASTS This Section 3.3 does not apply to **** or **** which are covered by the provisions contained in Section 3.9. 3.3.1 On the Commencement Date of this Agreement, the chairperson of the IBM Printed Circuit Commodity Council, or his/her successor or designee, will provide a current written forecast of demand for Products, ****REDACTED INFORMATION**** 3.3.2 The forecasts provided to Seller are for planning purposes only. Notwithstanding anything in this Agreement to the contrary, IBM makes no representations or guarantees concerning the forecasts, including the Products or quantities specified in a forecast. **** 3.4 TRY-FOR-FIT At IBM's option and pursuant to IBM's Enterprise Capability Assessment (ECA) process, on approximately one-month intervals, IBM may provide Seller with a list of Products and estimated quantities and Delivery Dates for the Products, known as a "Try-For-Fit Volume Set". With respect to the Products contained in the list, on the second Business Day following its receipt, Seller agrees to provide to IBM a written best-can-do delivery schedule, indicating the quantity of Products Seller can supply to IBM and associated Lead-Times. Notwithstanding anything contained herein to the contrary, Seller's best-can-do response shall be considered a commitment on Seller's part with regard to quantities and Lead-Times, provided IBM submits an Order associated with all or part of the Try-For-Fit Volume Set within ten (10) Days after IBM's receipt of Seller's best-can-do response. IBM shall have no obligation to issue Orders pursuant to the ECA process set forth above. **** The provisions set forth elsewhere in this Agreement with regard to Lead-Times and price will apply to Orders placed pursuant to the foregoing ECA process. Seller agrees to participate with IBM in implementation of other aspects of the ECA process as requested by IBM. 3.5 DELIVERY LEAD-TIMES This Section 3.5 does not apply to **** or **** which are covered by the provisions contained in Section 3.9. 3.5.1 Lead-Times and resulting Scheduled Delivery Dates specified in Orders will be determined by mutual agreement of the parties prior to issuing Orders. 8 3.5.2 "Normal Lead-Times" for deliveries of Products shall be deemed to be the applicable number of Business Days set out in the table below, plus the applicable Transit Time for the Ordering Location as specified below. Deliveries having Normal Lead-Times shall be deemed to be "Normal Lead-Time Deliveries". Seller may not request price premium charges for Normal Lead-Time Deliveries. IBM may issue Orders requesting Product deliveries with Lead-Times less than Normal Lead-Time. Seller agrees, **** after receipt of IBM's requested Order, to notify IBM in writing of its acceptance of the Order or rejection of the Order or to initiate negotiations for Delivery Dates, delivery quantities and price premium charges subject to Section 3.6.4. If IBM does not receive Seller's written response **** of Seller's receipt of IBM's Order, the Order will be deemed accepted by Seller with no liability on IBM's part for price premium charges. Subject to the other terms of this Agreement and except as set forth in Section 12.1.3, as to the quantity of Products contained in IBM's Order, if Seller rejects IBM's Order, IBM may at its sole discretion fulfill its Product requirements pursuant to Section 12.6. NORMAL LEAD-TIMES EXPRESSED IN BUSINESS DAYS ## *** All Other Products First Product ** ** Order Follow-On Orders ** ** ## **** Transit Times for IBM's delivery destinations in Austin, Texas shall be deemed to be zero (0) Days. Transit times for all other IBM delivery destinations within the continental United States shall be deemed to be three (3) Business Days. Transit times for IBM delivery destinations outside of the continental United States shall be deemed to be five (5) Business Days. For Products delivered to non-U.S. locations as requested by IBM Orders, unless otherwise agreed by the parties in writing, IBM will provide Seller, at IBM's expense, instructions and all necessary declarations and certificates in properly executed form required for Seller to ship Products to non-U.S. locations on IBM's behalf pursuant to IBM's export licenses. 3.6 RESCHEDULES DURING THE FROZEN ZONE This Section 3.6 does not apply to **** or **** which are covered by the provisions contained in Section 3.9. 3.6.1 THE FROZEN ZONE The "Frozen Zone" shall mean, for each Product identified in an Order, a period of time immediately preceding the Delivery Date specified for such Product in the Order equal to the number of Normal Lead-Time Business Days set forth in Section 3.5.2 for such Product. 9 3.6.2 DELIVERY DELAY OR QUANTITY DECREASE IBM may during the Frozen Zone request Seller to delay delivery of Products or to decrease the quantity of Products that were specified in an Order. IBM will notify Seller of its request by issuing an electronic or written notice to Seller. Seller agrees, **** after receipt of IBM's request, to either notify IBM in writing of its acceptance or rejection of the request, or to initiate negotiations for Delivery Dates, delivery quantities and/or prices (as the case may be). Any such negotiations shall be subject to Section 3.8.2. If IBM does not receive Seller's written or electronic response **** after Seller's receipt of IBM's request or Seller and IBM are unable to agree on delivery dates, delivery schedules and/or prices, then IBM's request shall be deemed to be rejected by Seller. Rejection of a request by Seller shall constitute a cancellation by IBM as to the quantity of Product requested by IBM to be delayed or decreased from the affected delivery, and the provisions of Section 3.8, Cancellation of Orders, will apply to such quantities. **** 3.6.3 ACCELERATED DELIVERY OR QUANTITY INCREASES IBM may submit a request during the Frozen Zone for an Accelerated Delivery, or a request to increase the quantity of Products that were specified in an Order. IBM will notify Seller of its request by issuing an electronic or written notice to Seller. Seller agrees, **** after receipt of IBM's request, to notify IBM in writing of either its acceptance or rejection of the request, or to initiate negotiations for Delivery Dates, delivery quantities and/or price premium charges (as the case may be), subject to Section 3.6.4. If IBM does not receive Seller's written or electronic response **** after Seller's receipt of IBM's request, the request will be deemed accepted by Seller with no liability on IBM's part for price premium charges. Except as set forth in Section 12.1.3, if Seller rejects IBM's request, then as to the quantity of Products contained in IBM's Accelerated Delivery or quantity increase request, IBM may at its sole discretion fulfill its Product requirements pursuant to Section 12.6. 3.6.4 PREMIUM CHARGES 3.6.4.1 If IBM issues Orders for Products containing delivery Lead-Times less than the applicable Normal Lead-Times set out in Section 3.5.2, or IBM requests Accelerated Deliveries, or an increase in the quantity of Products that are specified in an Order pursuant to Section 3.6.3, then prior to accepting any such Order or Accelerated Delivery request, or increased delivery quantity request, Seller agrees to notify IBM of any price premium charges anticipated by Seller. IBM and Seller will negotiate Delivery Dates, delivery quantities and price premium charges, if any, in good faith, and IBM will be liable for any price premium charges which are agreed upon by IBM and Seller. If the parties can not agree on Delivery Dates, delivery quantities, or price premium charges, then as to the quantity of Product upon which no agreement is reached, IBM may at its sole discretion fulfill its Product requirements pursuant to Section 12.6. **** 3.6.4.2 The following table indicates the maximum price premium charges (expressed as a percent of the agreed purchase price for Normal Lead-Time Orders that the Seller may charge for Products, except first Product Orders, meaning the first occurrence of an Order issued for a particular Product which will be negotiated in good faith by the parties. IBM will not be liable for any price premium charges except under the conditions and for the amounts specifically provided for in this Agreement. MAXIMUM PRICE PREMIUMS* 10 **** REDACTED TABLE**** 3.7 RESCHEDULES OUTSIDE THE FROZEN ZONE Seller agrees to accept IBM's requests for Seller to either delay Product deliveries or to decrease the quantity of Product(s) contained in a scheduled delivery , provided any such request is received by Seller prior to the commencement of the Frozen Zone and except with respect to Unique Materials to the extent specified in the following paragraph, IBM shall incur no price premium charges, cancellation charges or other liability. If prior to the commencement of the Frozen Zone IBM requests Seller to delay Product deliveries containing Unique Materials or to decrease a scheduled delivery quantity for Product(s) containing Unique Materials, then IBM will be liable for cancellation charges for such Unique Materials, provided such Unique Materials were purchased or ordered by Seller in no greater quantities or Lead Times as are necessary to support the manufacture of IBM Products requested by IBM Orders. Seller shall dispose of such unused Unique Materials according to IBM's instructions and at IBM's sole discretion. IBM's sole and exclusive liability for Unique Materials shall be for any reasonably incurred and documented costs, including reasonable disposal costs. With respect to IBM's notice to delay of Product deliveries, or decrease the quantity of Product on order, Seller agrees to give written confirmation of receipt of IBM's notice within a reasonable time. IBM may request Seller, prior to the commencement of the Frozen Zone, to make Accelerated Deliveries or to increase the quantity of Products on order. IBM will notify Seller of its request by issuing an electronic or written notice to Seller. If IBM does not receive Seller's written or electronic acceptance or rejection **** after receipt of IBM's request, then IBM's request shall be deemed accepted by Seller with no liability on IBM's part for price premiums. If Seller rejects IBM's request, then as to the quantity of Products contained in IBM's Accelerated Delivery or Quantity Increase request, IBM may at its sole discretion fulfill its Product requirements pursuant to Section 12.6. 3.8 CANCELLATION OF ORDERS This Section does not apply to **** or **** which are covered by the provisions contained in Section 3.9. 3.8.1 Subject to the express provisions of this Agreement, IBM may cancel any or all Orders, or parts thereof, issued pursuant to this Agreement at any time by giving written or electronic notice of such cancellation to Seller. In the event such cancellation shall be due to a condition which would be a basis for termination for cause by IBM as set forth in Section 6.2, or if IBM cancels deliveries for cause pursuant to Section 3.8.4, IBM shall have no liability and shall not be subject to any charges for such cancellation. 3.8.2 IBM may cancel Orders or portions thereof for convenience during the Frozen Zone and IBM shall have no liability and no obligation to make any payments to Seller other than for Products delivered prior to such cancellation, for completed and partially completed Products, and for Unique Materials not incorporated in delivered Products or in completed or partially completed Products, provided such Unique Materials were purchased or ordered by Seller in no greater quantities or lead times as are necessary to support the manufacture of IBM Products requested by IBM Orders . IBM's payment for completed and partially completed Products shall be for any reasonably incurred and documented costs negotiated by the two parties up to a maximum 11 amount indicated by the table below. Seller shall dispose of Unique Materials according to IBM's instructions and at IBM's sole discretion. IBM's sole and exclusive liability for Unique Materials shall be for any reasonably incurred and documented costs, including reasonable disposal costs. MAXIMUM CANCELLATION CHARGES STATE OF COMPLETION PERCENT OF SELLING PRICE *** ** *** ** *** ** *** ** *** ** *** ** 3.8.3 If IBM cancels Orders or portions thereof outside the Frozen Zone, IBM shall have no liability and shall not be subject to charges for such cancellation, except for Unique Materials under the conditions and for the amounts set forth in Section 3.7. IBM will not be liable for any charges as a result of cancellation by IBM of Orders or portions thereof other than those set forth above in Section 3.7 and 3.8.2. Cancellation charges represent IBM's entire liability related to the cancellation of deliveries, Orders or any portion thereof. Seller agrees to dispose of any completed or partially completed Products in Seller's possession, for which IBM becomes liable for cancellation charges, according to IBM's instructions and at IBM's sole discretion. 3.8.4 Except as set forth in Section 16.6, Force Majeure, if Seller does not comply with the terms of an Order, (including, but not limited to, failure to meet a Scheduled Delivery Date, delivery of less than the ordered quantity of Products, or Delivery to the wrong location), then IBM may notify Seller of its intent to cancel the Order(s), or portions thereof. **** 3.9 **** REDACTED INFORMATION**** The following provisions apply only to **** and to **** Normal Lead-Times do not apply to **** or to **** Lead-Times for such Products shall be negotiated to mutual agreement by IBM and Seller. IBM will not be liable for price premium charges for **** or for **** irrespective of Lead-Times specified in IBM Orders, and irrespective of IBM requests for Accelerated Deliveries or requests for increased quantities of Products that are specified in an Order for such Products IBM may cancel Orders for convenience and may request changes in Scheduled Delivery Dates and delivery quantities. Changes in Scheduled Delivery Dates and in delivery quantity associated with **** and will be negotiated in good faith by Seller and IBM. IBM's sole and exclusive liability for cancellation of **** and **** for convenience shall be for any of Seller's reasonably incurred and documented costs . IBM shall have no requirement to provide forecasts for **** or for **** Products. 3.10 PULL LOGISTICS "Pull Logistics" means a process whereby Product is manufactured and delivered by Seller based upon IBM's actual consumption of the Product. The overall objective is to minimize IBM inventories while providing greater flexibility and faster response in fulfilling IBM's variable customer demand. Seller agrees to participate with IBM in the implementation of Pull Logistics business processes on terms which will be negotiated to mutual agreement of the parties. 12 3.11 ELECTRONIC DATA INTERCHANGE (EDI) The parties agree to make a good faith effort to execute within forty-five (45) Days after the Commencement Date of this Agreement a separate Electronic Data Interchange/Electronic Funds Transfer Trading Partner Agreement, substantially upon the same terms and conditions set forth in Exhibit 2 to this Agreement. 3.12 PACKAGING Seller will package all Products according to Specifications provided by IBM. Any packaging costs will be identified by Seller, but will be included as a part of the per unit price IBM pays for Products. 3.13 **** REDACTED INFORMATION**** 4.0 PRICE 4.1 **** REDACTED INFORMATION**** 4.2 PRICE FOR PRODUCTS 4.2.1 INITIAL PRICES The per unit purchase price for **** that IBM may purchase under this Agreement, will **** each, irrespective of quantity ordered, Lead-Times or manufacturing complexity. The price IBM will pay for **** will be determined by mutual agreement of the parties prior to issuing Orders. The initial per unit purchase price for **** and **** that IBM may purchase under the terms of this Agreement are set forth in Division Appendices A and B, attached hereto. **** **** REDACTED INFORMATION**** 4.2.2 PRICE MODEL 4.2.2.1 Except with respect to the conditions set forth in Section 4.2.2.3 below, a price model agreed to by IBM and Seller will be used to establish prices and price changes (as the case may be) to the following Products: **** REDACTED INFORMATION**** 4.2.2.2 The price model agreed upon by the parties as of the Commencement Date shall be in effect for **** the Commencement Date. From time to time thereafter, but not more than two times annually by IBM and **** by Seller, either party may initiate good faith negotiations to amend or modify the price model that is used to establish the prices for Products purchased under this Agreement. 4.2.2.3 ****REDACTED INFORMATION**** 4.2.2.4 ****REDACTED INFORMATION**** 13 4.2.2.5 ****REDACTED INFORMATION**** 4.2.2.6 ****REDACTED INFORMATION**** 4.2.3 **** REDACTED INFORMATION**** 4.2.3.1 ****REDACTED INFORMATION**** 4.2.3.2 ****REDACTED INFORMATION**** 4.2.3.3 ****REDACTED INFORMATION**** 4.4 NONRECURRING CHARGES Any nonrecurring engineering (NRE) and test charges which Seller anticipates may be incurred in connection with IBM Orders must be quoted by Seller at the time Seller's unit price quote is received for the Products giving rise to the NRE and test expense. Seller will not commit funds for NRE and test without an IBM Order for same. Any NRE and test charges are subject to mutual agreement by the parties. 4.5 PAYMENT TERMS All prices for Products purchased under this Agreement will be invoiced and paid in U.S. Dollars. IBM will pay for Products within the applicable number of Days as is set out in the following table from the date IBM Accounts Payable receives an acceptable invoice from Seller, or from the same number of Days from the Delivery Date of Products for which an acceptable invoice has been received, whichever is later. Nevertheless, in no case shall the payment period for delivered Products commence **** to the Delivery Date set out in the affected Order. Subject to Section 3.1, IBM and Seller will make a good faith effort within forty-five Days after execution of this Agreement to establish the necessary systems to provide for payment of Seller's invoices by means of electronic funds transfers and to agree to the specific terms for such transfers. PERIOD INVOICE IS RECEIVED BY IBM PAYMENT TERMS Period Beginning Period Ending Agreement execution date 60 Days after execution 61 Days after execution Termination or expiration *** of this Agreement *** 14 5.0 DELIVERY 5.1 SHIPMENT OF PRODUCTS All shipments of Products shall be FOB Seller's manufacturing location in Austin, Texas. Seller agrees to ship Products using IBM's designated commercial carriers, and that it will deal directly with the carriers for scheduling the shipment of Products to IBM's designated delivery destination(s) on the Delivery Date specified in IBM's Orders. Seller will ship Products to IBM freight collect, meaning IBM's designated carrier will invoice IBM directly for transportation of Products from Seller's dock to IBM's delivery destination. IBM may, without additional cost or other liability to IBM, change the destination for any delivery or the designated carrier specified in IBM Orders by giving Seller written notice at any time prior to shipment of the Product affected by IBM's change request. Any deviation from IBM's shipping instructions must be approved by IBM in advance of the shipment . 5.2 ON-TIME DELIVERY With regard to on-time delivery of Product, TIME IS OF THE ESSENCE. Seller agrees to make its best effort to achieve and maintain one hundred percent (100%) on-time delivery. On-time delivery is defined for purposes of this Agreement as the arrival of the requested quantity of Products at IBM's requested destination on the Scheduled Delivery Date specified in IBM's Order(s), subject to Section 5.3 below. Seller agrees to ship Product to arrive at IBM's delivery destination on the Delivery Date specified in IBM's Order, based upon the transit time quoted by IBM's designated carrier. Seller shall not be responsible for failure to make on-time delivery, for the sole reason that IBM's specified carrier failed to perform. 5.3 EARLY DELIVERY Seller shall not deliver Products more than three (3) Business Days in advance of the Scheduled Delivery Date as stated in IBM's Order without IBM's prior written approval. If earlier deliveries are made without IBM's written prior approval, IBM may elect to delay receipt or passage of title until the Scheduled Delivery Date or to return or store the Products at Seller's expense. Seller will not deliver Products in quantities in excess of those set forth in the Order without IBM's prior approval. 5.4 DELAYS IN DELIVERY Seller shall notify IBM immediately if for any reason Seller anticipates that it may fail to comply, or fails to comply, with the terms of this Agreement or of an Order, (including, but not limited to, failure to meet a Scheduled Delivery Date, delivery of less than the ordered quantity of Products, or Delivery to the wrong location). If Seller so notifies IBM, Seller will deliver to IBM the quantity of Products specified by IBM Orders in the most expeditious manner possible, except to the extent IBM cancels. If Seller's failure to comply with the terms of an Order are for any reason other than Force Majeure as defined in Section 16.6 below, then Seller shall be responsible for any additional or incremental premium transportation costs associated with delivery of Product(s). Further, if Seller fails to take corrective action acceptable to IBM or to negotiate a resolution satisfactory to IBM within the required period specified in Section 3.8.4, then, Seller shall be responsible for IBM's reasonable and actual costs incurred as a result of such delay. These costs, as determined by IBM, may include by way of example but not limitation, overtime, premium transportation, and the cost of cover related to procurement of alternate sources of supply, which will be counted toward satisfaction of IBM's Business Commitment and, if applicable, Purchase Commitment. 5.5 Notwithstanding anything contained in this Agreement to the contrary, except for payment by Seller of any required premium transportation costs in the event Seller does not meet its on time 15 delivery obligations ****, If Seller is not in compliance with its on-time delivery obligations under this Agreement, Seller agrees within one hundred and twenty Days after execution of this Agreement to provide a written delivery improvement plan as a part of its good faith efforts to satisfy all Product delivery requirements under this Agreement. Such plan shall not be deemed to supersede or to lessen any of Seller's Product delivery obligations under this Agreement. IBM's agreement not to exercise its remedies pursuant to this section does not constitute a waiver by IBM of its rights to exercise its remedies in the event of a breach by Seller of its obligations in this section. 6.0 TERM AND TERMINATION 6.1 TERM This Agreement shall commence as of the date of the last signature below ("Commencement Date") and shall expire three years later subject to Section 12, unless earlier terminated according to the provisions of Section 6.2 below. 6.2 TERMINATION Notwithstanding anything in this Agreement to the contrary, this Agreement or individual Appendices to this Agreement may be terminated by either party for cause in the event one or more of the following conditions exist during any term of this Agreement: 6.2.1 (a) in the event of a breach or default by the other party of a material obligation of such party under this Agreement, except for a breach or default by Seller under Section 3.8.4, which is not remedied within a reasonable time, **** after a written notice is given by the other party of such default or breach, or (b) subject to Section 5.5, in the event of a repeated breach or default by Seller during any calendar quarter under Section 3.8.4 which is not remedied by Seller within the period required in Section 3.8.4, even if IBM has elected to obtain the Product from alternative sources; 6.2.2 upon the entry of a request for any kind of insolvency proceeding, or the commencement of any action taken against the other party relating to a liquidation, dissolution or similar action, including an assignment for the benefit of creditors, or upon admission by it in writing of its inability to pay its debts generally as they become due; or 6.2.3 notice of the inability of the other party to perform due to the existence of a Force Majeure event as defined in Section 16.6. 6.3 IBM RIGHTS UPON TERMINATION 6.3.1 Upon receipt of notice of termination from IBM of this Agreement for a material or repeated breach by the Seller, Seller agrees that it will not start any new production of Products previously ordered, continue production of work in process, or issue Seller purchase orders for Product components and materials, including labeling and packaging materials, unless requested by IBM subsequent to its termination notice. IBM may, at its sole option (a) cancel all or any portion of the outstanding Orders without liability; (b) require completion and delivery of all or part of any remaining Product(s) on order as of the date of termination, and buy them; and/or (c) require delivery of all or part of the inventory of Product components and materials, including labeling and packaging material purchased by the Seller for use in Products, and buy them. IBM shall have no liability for Products, or for Product components and materials, including labeling and packaging materials, or for partially completed Products which are not accepted by IBM subsequent to termination. 16 6.3.2 Within ten (10) Business Days after receipt of termination notice from IBM, Seller agrees to prepare and submit to IBM a written inventory in reasonable detail of each of the following items in Seller's possession as of the date of termination: (a) all fully manufactured Products, (b) Product documentation, (c) Product components and materials, including labeling and packaging materials, (d) partially completed Products, (e) a detailed listing of its open material purchase orders issued to support IBM's Orders and related Seller liabilities. 6.3.3 The terms IBM Product Information and IBM Computer Programs, as used herein, shall have the same meaning as defined in the concurrently executed Intellectual Property Agreement. Upon termination by IBM, Seller agrees to return all IBM Product Information and IBM Computer Programs within thirty (30) Days after receipt of a termination notice from IBM; or, if IBM exercises its option to require completion and delivery of all or part of any remaining Product(s) on order as of the date of termination, within ten (10) Days following completion of open Orders necessitating the use thereof, whichever is later. 6.3.4 If IBM exercises its options to purchase Products or materials pursuant to Section 6.3.1(b) or (c), IBM will pay for such Products or materials within forty-five (45) Days after receipt by IBM Accounts Payable of an acceptable invoice from Seller. 6.4 SELLER'S RIGHTS UPON TERMINATION Upon termination by Seller due to a breach by IBM, Seller may, at its option, either: 6.4.1 complete Product(s) on order as of the date of termination and sell them to IBM at prices set out in Section 6.5 or, 6.4.2 sell to IBM, at prices set out in Section 6.5, all of its Product components and materials, including labeling and packaging materials in Seller's inventory which were previously ordered by Seller to support the manufacture of the quantity of Products and Delivery Dates requested by IBM Orders, and which cannot be canceled or otherwise disposed of at no cost to Seller. Seller agrees that IBM shall have first right of refusal to purchase any such Product components and materials, including labeling and packaging. 6.5 PRICES UPON TERMINATION The price for completed Products shall be the mutually agreed price in effect for such completed Products immediately prior to termination or cancellation of Orders. The price for partially completed Products shall be calculated according to Section 3.8.2 above. The price for Product components and materials, including labeling and packaging materials purchased by Seller, shall be agreed upon by the parties, but shall be no higher than the costs used to establish the price set out in the most recent Order for Products composed of those components and materials, including labeling and packaging materials, plus a reasonable mark-up. 7.0 PRODUCT QUALITY 7.1 QUALITY OBJECTIVE Seller agrees that it will take all necessary actions to ensure that the Products purchased by IBM do not exceed the failure rates that are agreed to by the parties pursuant to Section 7.4, and that the Products conform to their Specifications. Seller also agrees to the objective of continuous quality improvement during the term of this Agreement. 7.2 SUPPLIER QUALITY PROCEDURES 17 Seller agrees that it will manufacture Products pursuant to written quality procedures which emphasize defect prevention and early detection of defects in its manufacturing processes. The procedures shall also identify a method for isolating defective Parts and/or components, for implementing corrective actions, and for conducting adequate manufacturing and test measurements using statistical process controls (SPC). Such procedures shall be made available for inspection by IBM upon reasonable notice from IBM. 7.3 FINAL TEST AND INSPECTION Final testing of the Products shall be performed by Seller to verify prior to delivery to IBM that the Products conform to their Specifications. Seller agrees to screen and remove all defective Product from each lot prior to delivery, except as may be allowed by applicable Specifications when Products are delivered as an Array. 7.4 SPQL PERFORMANCE Shipped Product Quality Level (SPQL) is defined as the quality level of the Product(s), expressed as a percentage of defective Products delivered. The SPQL will be calculated for each of the three product categories indicated in the table below, and will be measured monthly by IBM at IBM's electronic card assembly manufacturing locations or other locations as may be designated by IBM. Seller agrees that the defect rate for Products ordered by Austin ECAT, Rochester ECAT and Greenock ECAT and delivered to IBM or to IBM's designee will not exceed the SPQL limits specified in the table below. For Other Additional Products ordered by any Ordering Locations Seller agrees that the defect rate for Products delivered to IBM or to IBM's designee will not exceed the lower of a) the SPQL limits specified in the table below, b) the SPQL limits set out in IBM Product Specifications, or c) as otherwise provided to Seller by IBM prior to Seller's acceptance of Orders. At IBM's discretion, confirmed no-defect-found Products returned to Seller may be excluded for purposes of calculating SPQL measurements. The SPQL targets represent IBM's desired SPQL for years other **** Notwithstanding the SPQL targets specified in the table, IBM and Seller agree that the actual SPQL requirement for Products delivered subsequent to the first year of this Agreement, will be negotiated in good faith within sixty (60) Days after execution of this Agreement. MAXIMUM SPQL LIMITS AND TARGETS PRODUCT CATEGORY SPQL LIMITS *** SPQL TARGET *** *** ** ** *** ** ** *** ** ** BY WAY OF EXAMPLE, The SPQL is calculated as follows: Example: 10 defective Products / 1,000 Products delivered = 1 percent (1.0%) SPQL The SPQL in this example is stated in parts per million (PPM) as: 1 percent (1.0%) X 1,000,000 = 10,000 PPM. 7.5 FAILURE ANALYSIS 18 If IBM returns defective Products to Seller, Seller agrees to implement (within forty-eight (48) hours of IBM's notification of the defect) all actions which are necessary to ensure that no additional defective Products are delivered to IBM, and further agrees as soon as reasonably possible to implement all corrective actions that are necessary to prevent reoccurrence of the defect. Seller further agrees to conduct a detailed failure analysis and to report the failure analysis data to IBM within twenty (20) Business Days of receipt of the defective Product at Seller's location. Such failure analysis shall be sufficient to accurately identify the specific defect(s) causing the failure, and shall include the following Items 1 through 8 (below). 1. Part number, 2. Quantity returned, quantity analyzed, 3. Serial number of returned Products, 4. The reported failure mode, 5. The preliminary verification of failure mode, 6. The final verified failure mode, 7. Root cause of failure, and 8. Corrective actions taken to prevent reoccurrence. Seller agrees to preserve and maintain all data associated with Product failure analysis and corrective actions and to make that data available to IBM upon request. 8.0 CERTIFICATION, AUDIT, INSPECTION AND ACCEPTANCE 8.1 CERTIFICATION Seller will conform to the requirements of ISO 9002 at all times. Seller represents and warrants that it currently is, or within 180 Days after the effective date of this Agreement shall become ISO 9002 certified, and shall retain such certification thereafter at all times during the term of this Agreement. If at any time hereafter certification under ISO 9002 is no longer generally appropriate, Seller will ensure that it is certified under another comparable standard which is acceptable to both parties. 8.2 IBM'S AUDIT IBM may perform at reasonable intervals source audits and process audits of reasonable scope at the Seller's manufacturing facilities, including Seller's manufacturing, test, quality and failure analysis processes and operations, sufficient to determine, in IBM's sole judgment, whether Product quality and technical Specifications are being met by the Seller. IBM shall advise Seller in advance of the scope and method by which such audits are to be conducted. **** This provision does not relieve Seller of its obligation to deliver Products conforming to agreed Product Specifications and SPQL limits, or waive IBM's rights of inspection and acceptance at destination. 8.3 ACCEPTANCE TESTS IBM may conduct, at its own expense, incoming inspection, source inspection and/or acceptance tests to determine whether Products furnished by Seller conform to Specifications, as set forth in this Agreement. IBM may reject any Product(s) which it finds do not meet Specifications or other requirements of this Agreement, and IBM may return the rejected Product to Seller without liability for transportation, duty, brokerage fees, or other related expenses. IBM may reject an entire delivered lot if a single sample fails to meet the required Specifications. If requested by Seller, an IBM Ordering Location performing incoming inspections, will communicate to Seller its lot rejection criteria. Such criteria shall not be deemed to supersede or to lessen any of Seller's obligations under this Agreement. 19 If IBM has not notified Seller of any defects in delivered Products within thirty (30) Days after delivery, said Products shall be deemed accepted. Acceptance by IBM of Products shall not relieve Seller of any responsibility under Product warranties or other warranties under this Agreement, including without limitation responsibility for latent defects, fraud, gross negligence, title defects, or infringement or warranty. Failure by IBM to perform testing shall not be construed as a waiver to later asserting claims based on these above-mentioned defects. 8.4 NONCONFORMING ACCEPTANCE Seller agrees to notify IBM of any known nonconformance to Specifications of any completed Products or work in process if and when such nonconformance is first suspected or observed by Seller. IBM may choose to accept Products delivered to IBM by Seller which fail to conform in some minor aspect to Specifications without prejudice to its right to reject nonconforming items in the future. If IBM so chooses, IBM will notify Seller of its intent to accept nonconforming Products. Seller agrees to negotiate in good faith a price reduction for such Products based upon IBM's reasonable and actual added expenses or costs incurred by IBM to correct and otherwise deal with such deficiencies. After the parties agree on a price, IBM will notify Seller that IBM has accepted the nonconforming Products. If the Parties cannot agree on a price for these nonconforming Products, IBM may return the nonconforming Product(s) to Seller pursuant to Section 9.3, below. No Products for which IBM has issued a notice of nonconformance shall be deemed accepted. 9.0 WARRANTY 9.1 SELLER REPRESENTATIONS AND WARRANTIES Seller represents and warrants it has the right to enter into this Agreement. Seller further represents and warrants that at all times during the term of this Agreement (a) Seller's performance of this Agreement will not violate the terms of any license, contract, note or other obligation to which Seller is a party or any statute, law, regulation or ordinance to which Seller is subject, including, without limitation, all health, safety and environmental statutes, laws, regulations and ordinances; (b) no claim, lien or action is pending or to the best of Seller's knowledge threatened against Seller or its suppliers (except claims against suppliers that exist as of the execution date of this Agreement), Subsidiaries, Affiliates or parent company which would interfere with IBM's, its Subsidiaries', distributor's or customers' receipt and use of the Products; (c) to the best of Seller's knowledge, **** (d) none of the Products contain nor are any of the Products manufactured using any known ozone depleting substances including, without limitation chloroflourocarbons, halons, methylchloroforms, and carbon tetrachlorides, (e) all Products provided to IBM under this Agreement are New Products and do not contain anything used or reconditioned. 9.2 PRODUCT WARRANTY Seller expressly warrants that for a period **** from the Delivery Date to IBM, all Products will conform to the Specifications, including without limitation, quality requirements, drawings, or other descriptions furnished by IBM, and will be free from defects in materials and workmanship. It is specifically agreed that the above warranties shall survive acceptance and IBM's Product test procedure. Seller's warranty also covers latent defects resulting from Seller's workmanship, process, and/or raw material used. Seller shall have no warranty obligation for products manufactured and shipped by IBM prior to the Commencement Date of this Agreement. 9.3 WARRANTY PERFORMANCE IBM may return any defective Product to Seller at Seller's expense. Prior to return of a defective Product, IBM agrees to obtained a "Returned Material Authorization" (RMA) number from Seller 20 and to reference said RMA number in the shipping documents contained with the returned defective Products. Seller agrees that RMA numbers for defective Products will not be unreasonably withheld. For Products other than Quick Turn Products, Seller agrees, at IBM's option, to either repair or replace a defective Product or to reimburse IBM the purchase price for such defective Product at Seller's own expense **** after receipt of such Product from IBM. **** If a rejected Product returned by IBM to the Seller passes all of Seller's inspection and test criteria, the Product shall be classified as "no-defect-found" and shall be returned to IBM at IBM's expense **** after receipt of such Product from IBM. The purchase price to be reimbursed to IBM for a defective Product returned by IBM to Seller for reimbursement, shall be the original purchase price of the Product if said price can be determined with reasonable certainty - or if the original purchase price cannot be determined with reasonable certainty, then the highest unit price IBM shall have paid for the returned Product in the most recent quarter prior to rejection during which IBM purchased the Product. Notwithstanding the foregoing, if repair or replacement is not possible due to unavailability of needed materials within the time required by IBM, Seller will reimburse IBM the purchase price associated with the Product, and pay IBM the cost of cover and other damages associated with Seller's inability to repair or replace the defective Products. 9.4 PRODUCT WARRANTY EXCEPTIONS ****REDACTED INFORMATION**** **** *** *** 9.5 TITLE TO PRODUCTS Seller warrants title to all Products purchased by and delivered to IBM under this Agreement to be free and clear of all liens, encumbrances, security interests or other adverse interests or claims. Title and risk of loss shall pass from Seller to IBM upon Seller's delivery of Products to IBM's designated carrier. 9.6 IMPLIED WARRANTIES THESE WARRANTIES REPLACES ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 10.0 INDEMNITY 10.1 INTELLECTUAL PROPERTY INDEMNITY ****REDACTED INFORMATION**** 10.2 PRODUCT LIABILITY INDEMNITY 21 IBM shall, at its own expense, protect, defend, indemnify, save and hold harmless Seller from and against any claim of product liability or negligence based solely on the defective design of a Product, provided that the Product manufactured by Seller conforms in all respects to the Product Specifications provided by IBM to Seller and/or, **** Seller shall, at its own expense, protect, defend, indemnify, save and hold harmless IBM and its Subsidiaries, Affiliates, distributors and customers from and against any claim or product liability or negligence based solely on the defective manufacture of the Product or that the Product contains defective materials or workmanship. 10.3 GOVERNMENT REGULATION Seller shall, at its own expense, protect, defend, indemnify, save and hold harmless IBM, and its Subsidiaries, Affiliates, distributors and customers from and against any claim of any failure of Seller to comply with any governmental law, statute, ordinance, administrative rule or regulation. IBM shall, at its own expense, protect, defend, indemnify, save and hold harmless Seller from and against any claim of any failure of IBM to comply with any governmental law, statute, ordinance, administrative rule or regulation. 10.4 NOTIFICATION Each party shall promptly notify the other one if it is or becomes aware of any right of, or protection accorded to, a third party that might affect Seller's ability to provide Products under this Agreement or limit IBM's freedom to buy such Products. Regarding any IBM defense and indemnification of Seller under Sections 10.1, 10.2 and 10.3, IBM shall pay any settlement and the resulting costs, damages, expenses and attorney's fees finally awarded by a court for such claims provided that Seller (a) promptly notifies IBM in writing of the claim: and (b) allows IBM to control, and cooperates with IBM in the defense and any related settlement negotiation. Regarding any Seller defense and indemnification of IBM under Sections 10.1, 10.2 and 10.3, Seller shall pay any settlement and the resulting costs, damages, expenses and attorney's fees finally awarded by a court for such a claim provided that IBM: (a) promptly notifies Seller in writing of the claim: and (b) allows Seller to control, and cooperates with Seller in the defense and any related settlement negotiation. 11.0 LIABILITY 11.1 Neither Seller nor IBM will be liable to the other for lost profits, consequential, punitive, or incidental damages, even if informed of their possibility. This limitation does not apply to Seller's or IBM's liabilities in Section 10.0 (Indemnity), Section 14.0 (Intellectual Property) and Section 16.2 (Confidential Information and Advertising). 11.2 Except with respect to Sections 3.8.4, 5.4, and 10.0 and IBM's shortfall payment obligations under Section 12.3, the total liability of IBM and Seller to each other, regardless of the form of action, whether contract or tort, is limited to payments due and owing to Seller under the Order(s) at issue and amounts paid under this Agreement. 12.0 PREFERRED SUPPLIER Seller will be considered a preferred supplier to IBM during the term of this Agreement, subject to the terms of this Section 12.0 and to other relevant terms and conditions as may be set out 22 elsewhere in this Agreement. As a preferred supplier, Seller will be granted the benefits specified in the following Sections 12.1, 12.2 and 12.5 and subject to the conditions and limitations expressly set forth in this Agreement. 12.1 ****REDACTED INFORMATION**** It is IBM's intent to issue Orders to Seller for a quantity of Products and/or services, which if subsequently delivered by Seller meeting all required Specifications at the prices and upon the Scheduled Delivery Dates specified in such Orders and pursuant to all other terms of this Agreement, ****REDACTED INFORMATION**** ****REDACTED TABLE**** 12.1.1 ****REDACTED INFORMATION**** ****REDACTED TABLE**** ****REDACTED INFORMATION**** 12.1.2 ****REDACTED INFORMATION**** 12.1.3 ****REDACTED INFORMATION**** 12.2 ****REDACTED INFORMATION**** 12.2.1 ****REDACTED INFORMATION**** 12.2.2 ****REDACTED INFORMATION**** 12.2.3 ****REDACTED INFORMATION**** 23 12.2.4 ****REDACTED INFORMATION**** 12.3 ****REDACTED INFORMATION**** 12.4 ****REDACTED INFORMATION**** 12.5 ****REDACTED INFORMATION**** 12.6 IBM is under no obligation to purchase any Products from Seller, except as expressly stated in this Agreement. Subject to the terms of this Agreement, if Seller rejects or is unable to or fails to accept any IBM's Order(s) or Order modification(s), IBM may at its sole discretion, award the relevant business to an internal IBM supplier, to an IBM Subsidiary, or to a third party supplier. If after accepting IBM's Order, Seller fails to perform pursuant to such Order in breach of its obligations under this Agreement for any reason, then in addition to any other remedies available to IBM, IBM may at its sole discretion, award the relevant business to an internal IBM supplier, to an IBM Subsidiary, or to a third party supplier. ****REDACTED INFORMATION**** 12.7 Notwithstanding anything contained herein to the contrary, nothing in this Agreement shall be construed to limit or preclude IBM's right to procure (at its sole discretion) printed wire boards as a component of a higher level assembly from any non-IBM source and upon any terms, including assemblies used as components in IBM Products. This Agreement shall not apply to any such purchases. 12.8 Seller and IBM agree to meet once per calendar quarter to review forecasts, prices and other contract-related issues at a time and place mutually agreeable to both parties. 13.0 ****REDACTED INFORMATION**** 13.1 **** Payments owed by IBM will be paid thirty (30) Days after receipt by IBM Accounts Payable of an acceptable invoice from Seller. **** 13.2 ****REDACTED INFORMATION**** 24 14.0 INTELLECTUAL PROPERTY IBM agrees to provide to Seller, subject to the terms of the Intellectual Property Agreement between IBM and Seller, the IBM Product Information and IBM Computer Programs specified in Exhibit 3. 15.0 INTELLECTUAL PROPERTY AND SYSTEMS ACCESS 15.1 ACCESS TO SYSTEMS AND COMPUTER PROGRAMS The parties agree that they will make a reasonable effort to mutually agree within sixty (60) Days after the Commencement Date on the software and systems to which Seller will require continued access for performance of work under this Agreement, and to establish a migration plan to revoke Seller's access to systems and terminate Seller's license to the systems and computer programs not necessary for Seller's performance under this Agreement (unless IBM grants or has granted such license or access to Seller in another agreement). Seller's access to unnecessary systems and software will be revoked as quickly as reasonably possible, but in no event later than nine (9) months after the execution of this Agreement. When deemed necessary by IBM and to the extent it has the right to do so, IBM will grant Seller additional licenses and provide access to additional systems at no charge to Seller for the purpose of Seller performing work for IBM, including upgrades as and when released by IBM. 15.2 If IBM grants access to IBM systems, as described in Section 15.1, such access will be granted to Seller substantially under the same terms as IBM's other current agreements and processes for allowing suppliers access to IBM systems. However, IBM is under no obligation to disclose the specific terms of any agreements it may have with third parties. If the software contemplated in Section 15.1 is an IBM software program that IBM licenses externally to its customers, IBM will supply the software to Seller under the terms of IBM's applicable standard license agreement. 16.0 GENERAL 16.1 TECHNOLOGY, PROCESS AND ENGINEERING CHANGES 16.1.1 Seller shall provide the affected IBM Ordering Site(s) with a written notice of any reportable change within sixty (60) Days prior to the implementation of such change. A reportable change is defined as: 1) a raw material supplier source change for Fiberglass Cloth, Copper Foil, Epoxy Resin, Copper Surface Finish Chemistry, Copper Plate Chemistry, and Solder Mask Material; 2) a source change for a subcontract surface finishing operation affecting the copper solderable surface or connector plugable surface; or 3) introduction of new process technologies. IBM shall have the right to accept or reject the change at any time within thirty (30) Days after notice. 16.1.2 IBM will make a reasonable effort to accommodate Seller's request for change; however, IBM is not obligated to accept any changes proposed by Seller, and IBM's rejection of Seller's proposed change shall not obligate IBM to pay a different price for Products or to agree to different delivery terms for Products during the term of this Agreement. 16.1.3 IBM may, at any time and from time to time, by notice to Seller, request changes to the Product Specifications. Within 15 Business Days of IBM's request, or within a different time period as may be mutually agreed, Seller shall submit a written report to IBM setting forth the probable effect, if any, of the requested change on prices, payments, Scheduled Delivery Dates or other material factors. Seller shall not proceed with any change unless authorized in writing by IBM. The parties shall promptly amend this Agreement and/or any affected Order issued under this 25 Agreement, whichever is appropriate, to incorporate any mutually agreed changes. Any such amendment shall itemize all specific changes to Specifications, prices, payments, Scheduled Delivery Dates, Lead-Times and all other applicable changes to this Agreement or to Orders issued hereunder. If the parties cannot agree to a proposed change, or cannot agree on a mutually satisfactory basis for implementation of a proposed change, then IBM shall have the option to procure the affected Product from another supplier and remove such Product from this Agreement. If the Parties fail to agree to the proposed change, and IBM elects to purchase such Changed Product from another supplier, then such purchases will count toward satisfaction of IBM's Business Commitment and, if applicable, Purchase Commitments provided Seller is qualified by IBM to manufacture such Changed Product . If IBM notifies Seller of safety or emergency changes to the Product Specifications, Seller shall make its best efforts to give IBM the same information described in this Section 16.1.3 within five (5) Business Days of such request. 16.2 CONFIDENTIAL INFORMATION AND ADVERTISING 16.2.1 Unless specifically requested by IBM and unless a mutually agreed to written confidentiality agreement is first executed by Seller and IBM, Seller shall not disclose to IBM any information deemed by Seller or by third parties to be confidential. Otherwise, it is understood that any information received by IBM, including but not limited to manuals, drawings, and documents, will not be of a confidential nature, nor restrict in any manner the use or disclosure of such information, irrespective of labeling or notification to the contrary. Any confidential information disclosed to Seller by IBM will be treated in accordance with the terms of Seller's confidentiality obligations as specified in the concurrently executed Intellectual Property Agreement between IBM and Seller. 16.2.2 Seller shall not in any manner disclose to third parties the terms and conditions of this Agreement or the terms and conditions of Orders issued under this Agreement, without first obtaining the prior written consent of IBM, except as may be required by law or government rule or regulation. 16.3 ASSIGNMENT Except with respect to the rights expressly granted in Section 2.3, Seller may not assign or transfer any rights or duties under this Agreement without prior written approval by IBM. Any attempt to do so is void. IBM may at its discretion assign or transfer any its duties under this Agreement without Seller's consent. The foregoing shall not constitute a novation of any of IBM's obligations without Seller's written consent. 16.4 GRATUITIES Seller warrants that neither it nor any of its employees, agents, or representatives has or will offer any gratuity to IBM's employees, agents, or representatives for any reason, including a view towards securing favorable treatment from IBM. 16.5 COMPLIANCE WITH LAW In the performance of this Agreement and related Orders Seller and IBM shall comply with all applicable federal, state, municipal, and local laws, orders and regulations, including without limitation, those affecting environmental and labor laws, price, production, purchase, sale, use and export of Products(s), and environmental and labor laws. Seller agrees to comply with all applicable export control laws and regulations and Seller hereby gives its written assurance that Products, in whole or in part, are not intended to be shipped directly or indirectly to prohibited countries. 26 16.6 FORCE MAJEURE Neither Seller nor IBM shall be liable to the other for failure to perform any of its obligations hereunder during any period in which such performance is delayed by circumstances beyond its reasonable control including, but not limited to, fire, flood, war, embargo, strike, riot, prolonged scarcity of necessary raw materials, inability to secure transportation or the intervention of any governmental authority, provided that the party suffering such delay immediately notifies the other of the delay. If such delaying cause shall continue for more than ten (10) Business Days, the party injured by the inability of the other to perform shall have the right upon written notice to treat this Agreement as suspended during the delay and reduce any commitment in proportion to the duration of the delay, and if such delaying cause shall continue for more than one hundred twenty (120) Days, the party injured by the inability of the other to perform shall have the right upon written notice to terminate this Agreement as set forth in Section 6.2.3. In instances of Force Majeure then IBM will give Multilayer Technology, Inc. manufacturing locations in Roseville, MN and Irvine, CA first right of refusal to sell Products to IBM under the same terms agreed upon by Seller provided that such locations are qualified by IBM to supply the Products requested, which qualification shall not be unreasonably withheld. 16.7 TRADEMARK Nothing in this Agreement gives either party the right to use the other party's name, trademark, or logo except where authorized in writing by the trademark owner in conjunction with this Agreement. 16.8 MODIFICATION AND WAIVER No modification or waiver of any provision of this Agreement and no consent by either party to any departure therefrom shall be effective unless in a writing referencing the particular Section thereof to be modified and signed by a duly authorized officer or representative of each party, and the same will only then by effective for the period and on the conditions and for the specific instances and purposes specified in such writing. 16.9 GOVERNING LAW (a)This Agreement has been delivered at and shall be deemed to have been made at Armonk, New York, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of New York applicable to agreements executed, delivered and performed within such State, without regard to the principles of conflicts of laws thereof. (b)Each of the parties hereby consents to the exclusive jurisdiction of any state or federal court located within the county of New York in the State of New York. Each of the parties hereby: (i) waives trial by jury, (ii) waives any objection to venue of any action instituted under this Agreement, and (iii) consents to the granting of such legal or equitable relief as is deemed appropriate by any aforementioned court. 16.10 SEVERABILITY If any one or more provisions contained in this Agreement, or the application of such provision to any person or circumstance, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision thereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 16.11 SURVIVAL 27 The provisions set forth in Sections 1, 6.3, 6.4, 6.5, 9, 10, 11, 16 (except 16.1), 17 and 18 shall survive and continue after any expiration, termination or cancellation of this Agreement and shall remain in effect until fulfilled and shall apply to the respective party's successors and assigns. 16.12 NOTICES Any notice which Seller and IBM desire or are obligated to give to the other shall be given in writing or by EDI and sent to the appropriate address shown below or to such other address as the one to receive the notice may have last designated in writing in the manner herein provided. A notice shall be deemed to have been received on the earlier of: (a) the date when actually received; or (b) seven (7) Days after being transmitted by facsimile with the original deposited in the mail, postage prepaid, registered or certified mail, or (c) if by EDI, promptly confirmed in writing, properly addressed as follows: IBM PCCo Ordering IBM Ordering Site in SELLER Sites in Austin, Texas Charlotte, North and Greenock, Scotland Carolina Multilayer Tek L.P. 11400 Burnet Road IBM Corporation IBM Corporation Austin, Texas 78758 P.O. Box 30 6800 IBM Drive Attn: General Manager Spango Valley Charlotte, NC 28262 Greenock, Scotland Attn: Michael K. Copy to: Attn: John Thompson Robinson Multilayer Technology, Inc. IBM Ordering Site in 16 Hammond Rochester, Minnesota Irvine, CA 92718 Attn: President IBM Corporation 3605 Hwy. 52 North The DII Group, Inc. Rochester, MN 55901 6273 Monarch Park Attn: David Dutelle Place, Suite 200 Bldg. 107-2 Niwot, CO 80503 Attn: Chief Financial Officer If the parties are unable to agree on any items related to this Agreement, they will promptly refer such items to the coordinators named above. If the dispute or disagreement cannot be resolved at this level, then the parties will involve the appropriate executive managers of Seller and IBM for resolution. For Seller this shall be the president of Seller and for IBM this shall be the IBM Corporate Director of Manufacturing. The parties agree if necessary to escalate any issue related to this Agreement in the manner set forth above prior to pursuing any action for breach of this Agreement. 16.13 AGENCY This Agreement does not create, and is not intended to create, a principal to agent, employer to employee, partnership, joint venture, or any other relationship except that of independent contractors between Seller and IBM. 16.14 HEADINGS 28 The headings contained in this Agreement are for reference purposes only and shall not limit or otherwise affect the meaning or interpretation of this Agreement. 16.15 RIGHTS OF SUBSIDIARIES IBM and IBM's Subsidiaries may exercise any of their rights under this Agreement. 16.16 CONSTRUCTION This Agreement has been negotiated by the parties and their respective counsel and will be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either party. 16.17 COUNTERPARTS This Agreement may be executed by the parties in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. 17.0 ORDER OF PRECEDENCE The business relationship between the parties shall be governed by the terms and conditions set forth in Orders, Division Appendices, Exhibits, and the Base Agreement. Standard, preprinted terms and conditions (boiler plate) contained in any Order, invoice or acknowledgment are hereby deemed to be deleted from any Orders, invoice or acknowledgment issued by a party under this Agreement. Orders issued by IBM hereunder will include Order specific terms and conditions which, if accepted by Seller, shall form part of this Agreement between the parties. Notwithstanding anything contained herein to the contrary, wherever in conflict the order of precedence of this Agreement shall be (i) Order(s), (ii) Division Appendice(s), (iii) Exhibits, and (iv) the Base Agreement. 29 18.0 COMPLETE AGREEMENT This Base Agreement and its Exhibits, Division Appendices, Specifications, CHARPNS.FILE and Orders issued thereunder, set forth the complete Agreement between the parties on this subject and replace all prior or contemporaneous communications or agreements, written or oral, about this subject. Any modifications to this Agreement must be in writing and signed by an authorized representatives of Seller and IBM. IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE EXECUTED BY THEIR RESPECTIVE DULY AUTHORIZED REPRESENTATIVES. INTERNATIONAL BUSINESS MACHINES CORPORATION Multilayer Tek L.P. BY: TYPE NAME BY: TYPE NAME /s/ Mark S. Payton /s/ Carl R. Vertuca, Jr. - ------------------------------- ----------------------------------- (Signature) (Signature) Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc., in its capacity TITLE: Business Development Consultant TITLE: as General Partner DATE: August 18, 1997 DATE: August 18, 1997 Multlayer.Doc - August 2, 1997 11:44 PM Page 29 of 40 30 EXHIBIT 1 APPROVED SUBCONTRACTORS This Exhibit is attached to and made a part of a certain Supply Agreement dated ____________ between International Business Machines Corporation and ____________________, herein after called Seller. The following subcontractors are considered approved for the Seller to use for the manufacture of Products ordered by IBM, but only as to the specific subcontractor location and manufacturing operations set out in the table below for each respective subcontractor. ****REDACTED TABLE**** 31 EXHIBIT 2 ELECTRONIC DATA INTERCHANGE / ELECTRONIC FUNDS TRANSFER TRADING PARTNER AGREEMENT You and International Business Machines Corporation (IBM) intend to create legally binding purchase and sale obligations by the electronic transmission of business documents (Documents) and agree that the following terms and conditions apply to such transmissions: 1. TRANSMISSION - Each party may electronically transmit and receive Documents through the assistance of a network in accordance with mutually agreed upon standards. Each party, at its own expense, shall provide and maintain the equipment, software, services, including network changes, and testing necessary to effectively and reliably transmit and receive documents. 2. RECEIPT - A Document is received when it arrives at the receiving party's mailbox. Upon receipt of any Document, the receiving party shall promptly send an acknowledgment which will conclusively establish receipt of a Document. If any Document is received in an unintelligible or garbled form, the receiving party shall promptly notify the originating party (if identifiable from the received Document) in a reasonable manner. In the absence of such a notice, the originating party's records of the contents of such Document shall prevail. 3. SIGNATURE AND ENFORCEABILITY - Each party shall adopt as its signature an electronic identification consisting of symbol(s) or code(s) (User ID) that shall be affixed to or contained in each Document. Each party will maintain security procedures to prevent unauthorized use or disclosure of either party's User ID. Any Document containing, or to which there is affixed, a User ID shall be considered: (a) a "writing" or "in writing"; (b) to have been "signed"; (c) an "original" when printed form electronic files or records established and maintained in the normal course of business; and (d) admissible to the same extent and under the same conditions as other business records originated and maintained in documentary form. 4. THIRD PARTY SERVICE PROVIDERS - Documents will be transmitted electronically to each party either directly or through any third party service provider (Provider) with which either party may contact. Either party may modify its election to use, not use or change a Provider upon 60 days' prior written notice. Each party shall be responsible for the costs of any Provider with which it contracts. Neither party shall be liable for the acts or omissions of its Provider while transmitting, receiving, storing or handling Documents, or performing related activities for such party. 5. TRANSACTION TERMS - Unless specifically superseded in other 32 written agreements between the parties, the terms and conditions of the attached form(s) will be incorporated and will apply to all Documents. 6. CONFIDENTIAL INFORMATION - The parties agree that all information transmitted under this Agreement shall be subject to Section 15.2 of the Supply Agreement. 7. ELECTRONIC FUNDS TRANSFER - By completing this Section 7, you hereby authorize IBM to initiate electronic credit entries to the account listed below. You agree that such transactions will be governed by the National Automated Clearing House Association rules. This authority is to remain in effect until IBM has received written notification of termination in such time and such manner as to afford IBM a reasonable opportunity to act on it. Account Party (if different) Address City , State, Zip Financial Institution Contact Name/Title Contact Phone Number Address City, State, Zip Account Number (max 17) Bank Routing Transit Code (max 9) 8. LIMITATION OF REMEDIES - Neither party shall be liable to the other for any special, incidental, exemplary, or consequential damages arising from or as a result of: (1) any delay, omission, or error in the electronic transmission or receipt of any Documents; or (2) any delay, omission, or error of an electronic credit entry by IBM, even if the other party has been advised of the possibilities of such damages. In addition, neither party shall be liable for any damages claimed by the other party based on any third party claim. In no event will either party be liable for any damages caused by the other party's failure to maintain security procedures to prevent the unauthorized use or disclosure of its User ID. 9. TERMINATION - Either party may terminate this Agreement at any time by giving the other party thirty (30) days prior written notice. 10. GENERAL - This agreement does not imply any commitment to purchase products or services by either party. This agreement will be governed by the laws of the State of New York. This agreement and the Supply Agreement shall be the complete and exclusive statement of the agreement between the parties relating to the matters specified in this Agreement. 11. In event of conflict between this Agreement and the Supply 33 Agreement, the Supply Agreement controls. The parties acknowledge that they have read this Agreement, understand it and agree to be bound by its terms. By: International Business Machines Corporation By ___________________________________________ (Trading Partner Name) _______________________________________________________________________________ Authorized Signature Authorized Signature Name __________________________ Name _______________________________ Title __________________________ Title _______________________________ Date __________________________ Date _______________________________ 34 EXHIBIT 3 IBM PRODUCT INFORMATION AND IBM COMPUTER PROGRAMS This Exhibit is attached to and made a part of a certain Supply Agreement, dated ____________, 1997 between International Business Machines Corporation (IBM) and _______________________,hereinafter referred to as the "Seller". IBM PRODUCT INFORMATION Part Number EC Number Document Name Origin - ---------- --------- ------------- ------ 1665493 896641 Eric Rochester 99F2281 C47037 MBG Engineering Specification Endicott 99F2291 C47037 MGD I & II Raw Carrier Specification Endicott 19G2848 C48745 CDAM Raw Card Carrier Endicott 87G5228 896648 Fred Raw Card Specification Endicott 88F6573 C47842 Bronco and Palomino Carrier Endicott 80F7263 C47852 MGE Raw Carrier Endicott 28F1815 C47115 MGLC Raw Carrier Endicott 5892823 A23255 Rochester Special PCB Specification Raleigh 89X3355 C45551 MGA Raw Carrier Endicott 89X3356 C17416 MGA/MGLC Carrier Modification Endicott 62X5165 C47146 Max Raw Carrier Endicott IBM COMPUTER PROGRAMS I.D. Number Program Name Description Media Type - ----------- ------------ ----------- ---------- None None None None 35 APPENDIX A ****REDACTED INFORMATION**** This Appendix is attached to and made a part of a certain Supply Agreement, dated ____________, 1997 between International Business Machines Corporation (IBM) and ________________________,hereinafter referred to as the "Seller". This Division Appendix is an arrangement between IBM's **** manufacturing locations in Austin, Texas and Greenock, UK, and the Seller. 1.0 PART NUMBER AND PRICE LIST The following is a list of the individual Product part numbers, Product names and initial per unit purchase prices for Products which may be purchased by **** locations in Austin, Texas and Greenock, UK under the terms of the Supply Agreement. Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 00M0027 Michigan 2 CPU E ** N N N Y 00M0028 Cardinal CPU Ent ** N N N Y 00M0030 Mich 3 CPU Entek ** N N N Y 00M0031 Kite Planar/DCEC ** N N N Y 00M8002 Thunderbird CPU ** N N N Y 01K2092 3x3 riser card ** Y N N Y 01K2098 5x5 riser card ** Y N N Y 03M1022 Butterfly INV ** N N N Y 03M1039 B-FLY TOP EC ** N N N Y 03M1040 B-FLY BOT EC ** N N N Y 03M1080 B-FLY BOT ** N N N Y 05M1036 BTFYTP P2 ** N N N Y 06G6870 Shortstop (PS/2) ** Y N N Y 06H3639 Chickenhawk ** Y N N Y 06H3857 Rockets P3 ** N N N Y 06H6039 Diamond Back ** N N N Y 06H6383 TRAXX-2 ** N N N Y 06H6391 TRAXX-T ** Y N N Y 06H7089 Caverun Memory ** Y N N Y 06H7309 Rockets P6 ** N N N Y 06H7739 Bigcat/Fatcat ** N N N Y 06H8600 PORKY ** N N N Y 06H9241 Caverun Proc EC ** Y N N Y 07H0449 Panther ** Y N N Y 07H1188 Porky P2 ** N N N Y 11H5595 JOKER ** N N N Y 11H6187 SIZZLER ** N N N Y 11H6216 Sizzler P5 ** N N N Y 11J8901 Kinzie 4 ** N N N Y 11J9069 Michigan mmx EVD ** N N N Y 36 Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 11J9076 Michigan mmx svg ** N N N Y 12H0842 Blitzen 3x3 ** Y N N Y 12H0844 Blitzen 5x5 ** Y N N Y 12H0864 Flash Point ** N N N Y 12J0233 Michigan 13 slf ** N Y N N 12J4438 5X5 Riser Card ** Y N N Y 30E1047 Thunderbird CPU ** N N N Y 36H1507 Michigan 2 SLC ** N Y N N 36H2797 Monroe ** N N N Y 36H3143 Monroe ec ** N N N Y 36H3234 MI13 XGA VIDEO ** N N N Y 36H3327 Mich 13 xga vide ** N N N Y 39H8241 Joker P7 ** N N N Y 40H4331 Goober ** N N N Y 40H6035 Cross Fire ** N N N Y 40H6430 Cardinal SLC EC ** N Y N N 40H6435 Cardinal SLC P3 ** N Y N N 40H6446 Cardinal CPU ** N N N Y 40H6451 Cardinal SLC P4 ** N Y N N 40H6464 Cardinal SLC ** N Y N N 41G9384 MVT Homerun Base ** N N N Y 60H6986 Meteorite EC ** N N N Y 62H5871 Michigan 2 SLC ** N Y N N 71G6478 VIZCAYA Planar ** N N N Y 75H7479 Cavern PCI Bridg ** Y N N Y 75H9692 Reynard ** Y N N Y 76H0604 Reynard 1 ** Y N N Y 82G2465 Elmer P5 ** N N N Y 84F8316 National ** N N N Y 88G1023 Robin Yasu ** N N N Y 88G4143 Robin ** N N N Y 88G4225 Seawolf ** N N N Y 90G9557 T-Bird CPU ** N N N Y 90G9573 T-Bird DRAM ** N N N Y 90X8029 Shotgun IV ** N N N Y 91G0345 T-Bird Planar SLC ** N Y N N 91G0397 T-Bird E Dram ** N N N Y 91G1043 Firebird CPU ** N N N Y 91G1051 F-Bird PlanarSLC ** N Y N N 91G1087 F-Bird Enh Vid ** N N N Y 91G1094 F-Bird Std Video ** N N N Y 91G1419 F-Bird Lite Vide ** N N N Y 91G1484 Michigan 2 CPU ** N N N Y 91G1512 Michigan 2 Slim ** N N N Y 91G1515 Michigan 2 CD Vi ** N N N Y 91G1567 Michigan 2 Enh V ** N N N Y 91G1685 Kite Planar & DC ** N N N Y 91G1800 Mich 3 SVGA ** N N N Y 91G1813 Mich CPU ** N N N Y 91G2014 Mich 3 XGA ** N N N Y 91G2046 Kite dc ec ** N N N Y 91G2070 Kite planar/dc ** N N N Y 93H1975 Crossfire ** N N N Y 37 Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 93H4790 Avenger ** N N N Y 93H7022 Avenger ** N N N Y 96G3660 Meteorite P4 ** N N N Y 96G3710 Meteorite P5 ** N N N Y 38 APPENDIX B ****REDACTED INFORMATION**** This Appendix is attached to and made a part of a certain Supply Agreement, dated ____________, 1997 between International Business Machines Corporation (IBM) and ________________________,hereinafter referred to as the "Seller". This Division Appendix is an arrangement between **** manufacturing location in Austin, Texas and Rochester, Minnesota, and Seller. 1.0 PART NUMBER AND PRICE LIST The following is a list of the individual Product part numbers, Product names and initial per unit purchase prices for Products which may be purchased by IBM's Austin, Texas and Rochester, Minnesota **** under the terms of the Supply Agreement. Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 00G1221 Graph EC-Pedena ** N N N Y 06H3733 Cubrun ** N N Y N 06H6386 Corvette SE ** Y N N Y 07H0506 Copperhead CPU ** Y N N Y 10G8748 Salmon EC (AWD ** N N N Y 11H4410 Ruby RSS 12 ** N N N Y 11H5654 Sunbase ** Y N N Y 11H5655 Sunspot ** N N N Y 11H6073 Sandalfoot ** N N N Y 11H8086 Night Bloomer ** Y N N Y 11H8576 Ruby RSS Fullup ** N N N Y 11H8935 Huron ** N N Y N 11H9771 doral i/o ** N N N Y 12H0707 Carolina 7.0 ** N N N Y 12H1223 Rainbow 4P ** N N N Y 12H2045 Ruby GPSS ** N N Y N 12H2050 RSS12 C/R ** N N N Y 12H2054 Ruby RSS ** N N N Y 12H2188 Early Bloomer ** N N N Y 12H2208 Thunderbolt I/O ** N N N Y 39H8122 Ruby SPAN ** Y N N Y 39H8142 Rainb4 CPU ** N N N Y 39H8617 Sky Blue ** Y N N Y 39H9169 Durandoak ** Y N N Y 39H9243 Durandoak EC ** Y N N Y 39H9980 Thunderbolt CPU ** Y N N Y 40H0330 Magenta ** N N N Y 40H0417 Panola SIB ** N N N Y 40H2175 Lightning I/O ** N N N Y 40H3408 Ruby Span PCI ** Y N N Y 40H3593 Magenta ** N N N Y 39 Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 40H3649 Durandoak B ** Y N N Y 40H5061 Tiger ** N N N Y 40H5396 T-Bolt 2 CPU ** Y N N Y 40H6215 Lightning I/O EC ** N N N Y 40H6590 Night Bloomer UL ** Y N N Y 40H7746 Mint ** Y N N Y 43G0119 Flathead ** Y N N Y 43G0678 Lega 2 (AWD) ** Y N N Y 43G1952 Bonnie ** Y N N Y 43G2024 Clyde ** Y N N Y 43G2201 Eagle/Packmule ** N N Y N 43G2254 Lace DE ** Y N N Y 51G8027 Lega 4 (AWD) ** Y N N Y 51G8641 Lace - SE (AWD ** Y N N Y 51G8969 Shoshone ** N N Y N 51G9505 Sandburr I/O ** N N N Y 51G9583 Hawthorne ** N N Y N 52G0469 Ruby RSS 54 ** N N N Y 52G0586 Ruby SPAN ** Y N N Y 52G0639 Ruby VOO ** Y N N Y 52G0717 604 L2 Cache ** Y N N Y 52G3240 Rainbow 3P ** N N N Y 52G4085 Ped 4 -- Proc ** N N N Y 52G4095 Ped 4 -- Graph ** Y N N Y 52G5835 Silverbell ** N N Y N 52G9706 Corvette DE ** Y N N Y 65G4253 Stealth X-150 EC ** N N N Y 65G4418 Patriot TR ** N N N Y 65G4427 Patriot ET ** N N N Y 65G4662 Sidewinder E ** N N N Y 65G4672 Sidewinder TR ** N N N Y 65G7445 Baby Blue ** N N N Y 65G7906 Rainbow 5 I/O ** N N N Y 65G7918 Rainbow 5 CPU ** N N N Y 65G7931 RB5 L2 Cache ** N N N Y 65G8133 Rainbow 6A ** N N N Y 71G0226 Cleansweep ** N N Y N 73H0446 supermint base d ** Y N N Y 73H0727 Thdrbt IO ** N N N Y 73H3266 Lightining IO EC ** N N N Y 73H3558 Early Bloomer ** Y N N Y 73H3564 Night Bloomer ** Y N N Y 73H3600 Thunderbolt 2CPU ** Y N N Y 73H4292 Edmonton ** N N Y N 73H4310 Vancouver ** N N Y N 76H2668 Copperhead ** Y N N Y 8184187 Baby Blue PCI ** Y N N Y 8184301 RAINBOW 3 ** N N N Y 8184340 Rainbow 3 ** N N N Y 8184596 Navajo ** N N Y N 81F8378 llano io ** N N N Y 88G1088 Corvette Turbo ** Y N N Y 88G2449 Ruby GPSS ** N N Y N 40 Part ** ** ** ** Number Product Name Price ------ ------------ ----- -- -- -- -- 88G2829 Baby Blue RB4 ** N N N Y 88G2942 Rainbow 4 CPU ** N N N Y 88G3661 Regal ** N N N Y 88G3720 Yakima ** N N Y N 93H1702 Tiger Mint ** Y N N Y 93H1884 Supermint base t ** Y N N Y 93H2039 Halifax ** N N N Y 93H2420 TBolt CPU BGA ** Y N N Y 93H2788 Mint ec ** Y N N Y 93H2790 Supermint base ** Y N N Y 93H3160 Doral cpu ** Y N N Y 93H3312 Supermint base ** Y N N Y 93H3322 Supermint tiger ** Y N N Y 93H3438 Orca ** N N Y N 93H3637 San Remo ** Y N N Y 93H3738 Wildcat io ** N N N Y 93H3793 Corvette de ec ** Y N N Y 93H3971 P-sidewinder ** N N N Y 93H4479 Keywest I/O ** N N N Y 93H4969 Supermint dimms ** Y N N Y 93H5039 Early Bloomer UL ** Y N N Y 93H5168 Doral CPU ** Y N N Y 93H5281 T-Bolt CPU BGA ** Y N N Y 93H5295 T-bolt cpu ** Y N N Y 93H5426 Victory CPU ** Y N N Y 93H5867 Pegassus x4d ** N N Y N 93H6197 T-bolt 233 ** Y N N Y 93H6393 Orca E/C ** Y N N Y 93H7890 San Remo ** Y N N Y 93H8342 Owttawa ** N N N Y EX-2.6 7 BILL OF SALE 1 EXHIBIT 2.6 BILL OF SALE Bill of Sale and Assignment (this "Bill of Sale") dated as August 18, 1997 between International Business Machines Corporation, a New York corporation ("Seller"), and Multilayer Tek L.P. ("Buyer"). Buyer and Seller have entered into a Purchase Agreement dated as of August 5, 1997 (the "Purchase Agreement), for the sale by Seller to Buyer of certain Transferred Assets as described in the Purchase Agreement. All capitalized terms not otherwise defined herein shall have the respective meanings provided in the Purchase Agreement. NOW THEREFORE, for good and valuable consideration (including the payment by Buyer of the Purchase Price for the Transferred Assets), the adequacy and receipt of which is hereby acknowledged: 1. Pursuant to the terms and conditions of the Purchase Agreement, Seller does hereby sell, assign, transfer, convey and deliver (collectively, "sell") to Buyer the Transferred Assets (as defined in the Purchase Agreement, but excluding the leasehold interest in the Real Estate), free and clear of all Encumberances. 2. This Bill of Sale shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. 3. In the event any one or more of the provisions contained in this Bill of Sale should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. -1- 2 4. This Bill of Sale is executed pursuant to the Purchase Agreement and is entitled to the benefits and subject to the provisions thereof and shall bind and inure to the benefit of the parties and their respective successors and assigns. IN WITNESS WHEREOF, the parties have caused this Bill of Sale to be duly executed as of the day and year first above written. MULTILAYER TEK L.P. INTERNATIONAL BUSINESS MACHINES CORPORATION - --------------------------------------- ----------------------------------- By: /s/ Carl R. Ventuca, Jr. By: /s/ Mark S. Payton Senior Vice President, Chief Financial Officer and Secretary of Multek Texas, Inc., in its capacity Title: Corporate Development Consultant Title: as General Partner -------------------------- -2- EX-2.7 8 SPECIAL WARRANTY DEED 1 EXHIBIT 2.7 SPECIAL WARRANTY DEED STATE OF TEXAS ) ) COUNTY OF ) Date: , 1997 ----------- Grantor: Grantor's Mailing Address (including county): --------------------------- --------------------------- --------------------------- Grantee: Grantee's Mailing Address (including county): --------------------------- --------------------------- --------------------------- Reservations from and Exceptions to Conveyance and Warranty: [To Be Added] Grantor, for the consideration and subject to the reservations from and exceptions to the conveyance and warranty set forth above, has GRANTED, SOLD and CONVEYED and does hereby GRANT, SELL and CONVEY to Grantee the Property, together with all and singular the improvements located thereon and all rights and appurtenances pertaining thereto, including all right, title and interest of Grantor in and to adjacent streets, alleys, rights-of-way, roadways, strips and gores, easements and in-the-ground utilities. TO HAVE AND TO HOLD the Property to Grantee, Grantee's heirs, executors, administrators, legal representatives, successors and assigns forever. Grantor binds Grantor and Grantor's heirs, executors, administrators, legal representatives, successors and assigns to warrant and forever defend all and singular the Property to Grantee and Grantee's heirs, executors, administrators, legal representatives, successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, except as to the reservations from and exceptions to conveyance and warranty set forth above. 2 Wherever the context of this Deed so requires, the singular shall include the plural, the plural shall include the singular and any gender shall include all other genders. BY:___________________________________ Name:_________________________________ Title:________________________________ STATE OF TEXAS ) ) COUNTY OF__________ ) This instrument was acknowledged before me on this _____ day of ______________, 1997, by _________________________________(title) of _________, a ___________________ corporation, on behalf of said corporation. _______________________________________ Notary Public, State of ___________ ________________________________________ (Printed or Stamped Name of Notary) My Commission Expires: __________ After recording, please return to: Richard L. Whitley, Esq. McGinnis, Lochridge & Kilgore, L.L.P. 1300 Capital Center 919 Congress Avenue Austin, Texas 78701 -2- -----END PRIVACY-ENHANCED MESSAGE-----