Project Operations Agreement

PROJECT OPERATIONS AGREEMENT


BY AND BETWEEN


INTERNATIONAL BUSINESS MACHINES CORPORATION


AND


MULTILAYER TEK L.P.


_______, 1997


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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


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Section 8.1 Uses
Section 8.2 Signs
Section 8.3 Rules and Regulations
Section 8.4 Compliance with Laws


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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


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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.


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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.


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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 establ ...