Exhibit 99.4
TRANSITION SERVICES AGREEMENT
Transition Services Agreement (this “
Agreement ”)
dated as of [ ], 2007 among MPC PRO, LLC, a Delaware limited
liability company (“ Buyer ”) and GATEWAY, INC., a
Delaware corporation (“ Seller ”) (together, the
“ Parties ”).
RECITALS
WHEREAS , Purchaser and
Seller are parties to an Asset Purchase Agreement dated as of
September 4, 2007 (the “ Purchase
Agreement ”) pursuant to which
Buyer is purchasing from Seller certain assets and liabilities
associated with Seller’s “Professional Division”
and that portion of its “Consumer Direct” division that
provides business-related products (collectively, the
“ Business ”);
WHEREAS , in connection
with and as a condition precedent to the closing of the
transactions contemplated by the Purchase Agreement, Seller has
agreed to provide certain transition services to Buyer on the terms
and conditions hereinafter set forth, all as contemplated by the
Purchase Agreement;
NOW, THEREFORE , for
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1 . Services
Provided.
(a) Commencing on the Closing Date and
during the term of this Agreement, Seller shall provide to Buyer
the services described in the Schedules attached hereto
(collectively, the “ Services ”) for the time period
and to the extent specified with respect to each such Service in
the applicable Schedule and upon the other terms and conditions set
forth in this Agreement for the time period and to the extent
specified with respect to each such service in the applicable
Schedule and upon the terms and conditions set forth in the
Agreement. All time periods specified in the Schedules commence on
the Closing Date. For the avoidance of doubt, the Services set
forth in the Schedules attached hereto shall be the only services
of any kind that Seller shall be obligated to provide to Buyer
pursuant to this Agreement. Notwithstanding the foregoing, under no
circumstances shall Seller be obligated to (i) provide, or cause to
be provided, any Services in a manner inconsistent with the manner
in which such Services were provided to the Business prior to the
Closing Date, except to the extent explicitly provided in an
exhibit or (ii) increase, or cause to be increased, the amount or
scope of such Services beyond the levels that were provided to the
Business prior to the Closing Date, except to the extent explicitly
provided in an exhibit.
(b) Seller agrees to undertake certain
buy/sell activity of components on behalf of Buyer in the course of
providing the Services, which shall include the
procuring of components from component suppliers and
the selling of such components to Original Design Manufacturers
(“ ODMs ”), in connection with and in support of the manufacture
at such ODMs of finished goods that are being ordered from such
ODMs by Seller for subsequent sale to Buyer (“
Buy/Sell Activity ”). The Buy/Sell Activity shall be conducted in a manner
consistent with Seller’s buy/sell activities for the Business
prior to the Closing Date.
(c) Each of Seller and Buyer shall appoint a person to act as its
project manager (each, a “ Project
Manager ”) to deal with issues
arising out of the performance of this Agreement and to discuss
such issues with the other Party’s Project Manager as often
as reasonably necessary or desirable in order to facilitate the
orderly provision of the Services. The names of the Project
Managers initially designated by the Parties are set forth on
Exhibit 1. In the event that any of the individuals listed on
Exhibit 1 (or such individual’s successor) shall cease for
any reason to continue as a Project Manager, the Party for whom
such individual served as Project Manager shall promptly, but in
any event within 10 business days following the day such project
manager ceased to serve as such, appoint a replacement Project
Manager, and provide notice to the other Parties hereto of such
individual’s name and appointment.
(d) Seller shall have the right to retain third parties selected by
Seller to provide Services on its behalf from time to time. The use
or selection by Seller of any such third party shall be in
Seller’s sole and absolute discretion and shall not be
subject to approval by Buyer; provided that if requested by Buyer,
Seller shall keep Buyer reasonably informed from time to time
regarding any significant use of such third parties. Seller shall
remain responsible, in accordance with the terms of this Agreement,
for the performance of any Service it causes to be so provided by a
third party.
(e) Notwithstanding any other provision of this Agreement, in
providing the Services, Seller shall not be obligated to: (i) hire
any additional employees; (ii) maintain the employment of any
specific employee; (iii) purchase, lease or license any additional
equipment or software; or (iv) pay any costs related to the
transfer or conversion of data to Buyer or any alternate supplier
of services.
(f)
If Seller reasonably believes it is unable (i) to
provide any of the Services because the provision thereof would
result in a significant disruption of Seller’s operations or
(ii) in the case of data systems, to support the function which the
data system relates because of a failure to obtain necessary
consents, licenses, sublicenses or approvals, the Parties shall
cooperate in good faith to determine the best alternative approach.
Until such alternative approach is found or the problem otherwise
resolved to the mutual satisfaction of the parties, Seller shall
use commercially reasonable efforts to (1) continue providing the
Service or (2) in the case of data systems, support the function to
which the data system relates or permit Buyer to have access to the
data system so that Buyer can support the function itself. To the
extent an agreed-upon written alternative approach requires payment
above and beyond that which is included in
Seller’s
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charge for the Service in question, Buyer shall be
responsible for such payment as a result of such alternative
approach.
(g) Notwithstanding any other provision of this Agreement, if a
Buyer Default occurs and is continuing, Seller shall have no
obligation to, and may in its sole discretion refuse to, provide
Services and/or engage in Buy/Sell Activity. For purposes of this
Agreement a “ Buyer
Default ” shall be deemed to have
occurred upon (i) the occurrence of any Event of Default under the
Note (as such term is defined in the Purchase Agreement) or (ii)
any failure by Buyer (or the Wells Fargo Business Credit operating
division of Wells Fargo Bank, National Association, on behalf on
Buyer) to pay any amounts due pursuant to any Invoice under this
Agreement by the date that is five (5) Business Days after the date
on which such payment is due, subject to the procedures regarding
Invoice Objections set forth in Section 2(e) hereof. Whenever in
this Agreement any Party is permitted or required to make a
determination in its “sole discretion”, such Party
shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting any other Party or person.
SECTION 2 .
Fees.
(a) In consideration for the Services to be provided by Seller
hereunder, Buyer shall pay to Seller a total fee of $6,150,000,
payable as follows: (i) eight bi-weekly installments of $723,530
due on the second, fourth, sixth, eighth, tenth, twelfth,
fourteenth and sixteenth Friday after the Closing Date and (ii) one
payment of $361,760 due on the seventeeth Friday after the Closing
Date.
(b) If any Extended Services are provided by Seller pursuant to
Section 3(a), Buyer shall pay to Seller $606,000 for each week or
part thereof that Seller performs such Extended Services, payable
on the Friday of every week during which such Extended Services are
being performed.
(c) Buyer shall reimburse Seller for all software license fees paid
by Seller in the course of providing the Services that would not
have been incurred by Seller but for the provision of Services to
Buyer pursuant to this Agreement (“ Incremental Software License Fees ”). Prior to providing the Services, Seller shall provide
Buyer with written notice setting forth the expected Incremental
Software License Fees associated with providing such Services to
Buyer. If Buyer provides written or verbal approval of such
expected Incremental Software License Fees, Buyer shall pay the
actual Incremental Software License Fees on the Friday following
receipt by Buyer of a notice from Seller setting forth the amounts
actually paid by Seller and amounts owed by Buyer hereunder. If
Buyer does not approve of an expected Incremental Software License
Fee, Seller may decline to provide any Services that Seller
reasonably believes requires a software license for which Buyer has
not agreed to pay the applicable Incremental Software License
Fees.
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(d) Buyer shall reimburse Seller for all Buy/Sell Activity
undertaken by Seller in the course of providing the Services, as
specified below:
(i) Buyer shall
reimburse Seller for all components, accessories and finished goods
purchased by Seller on behalf of Buyer in the course of providing
the Services, subject to a percentage markup over amounts paid by
Seller for such items. Such percentage markup shall be (i) one-half
percent (0.5%) during the first eight-week period following the
Closing Date, (ii) one percent (1%) during the second eight-week
period following the Closing Date and (iii) two percent (2%)
thereafter. At the end of each Invoice Period, Seller shall
estimate Buyer’s portion of the total purchased components,
accessories and finished goods based on Buyer’s proportion of
total product production being produced on behalf of Seller and
Buyer by ODMs, with any product production that is in support of
orders from Buyer deemed to be product that is produced for Buyer.
Seller shall then apply the appropriate percentage markup to such
estimated Buyer’s portion of the total purchased components,
accessories and finished goods to determine an estimate of the
total amount owed by Buyer to Seller for Buy/Sell Activity during
such Invoice Period (the “ Estimated
Buy/Sell Total ”). If the actual
amount of purchased components, accessories and finished goods
attributable to Buyer for an Invoice Period after applying the
appropriate percentage markup to such amount (the “
Actual Buy/Sell Total ”) is less than the corresponding Estimated Buy/Sell
Total, Seller will reimburse such difference to Buyer within 15
days after the date of the Invoice for the related Invoice
Period. If the Actual Buy/Sell Total is greater than the
corresponding Estimated Buy/Sell Total, Buyer will reimburse such
difference to Seller within 15 days after the date of the Invoice
for the related Invoice Period.
(ii) Buyer shall reimburse Seller
for its portion of ODM layering charges, which shall be allocated
to Buyer in proportion to its portion of the total product
production produced on behalf of Seller and Buyer by ODMs. In the
event that such ODM layering charges result in a credit to Buyer,
such credit shall be reflected on the Invoice for the Invoice
Period in which it is determined that a credit is due.
(iii)
Buyer shall reimburse Seller for its portion of ODM
charges for excess and obsolete components, which shall be
allocated to Buyer where such excess and obsolete components were
ordered for Buyer’s product production (taking into
consideration any production decommits from Buyer).
(iv)
Buyer will reimburse Seller for its portion of those
charges associated with the movement and storage of components,
accessories and finished goods, including but not limited to
transportation, warehousing and handling cost. Buyer’s
portion of such charges shall be allocated to Buyer in proportion
to Buyer’s proportion of the total product
production
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produced on behalf of Seller and Buyer by ODMs, with
any product production that is in support of orders from Buyer
deemed to be product that is produced for Buyer.
On the fifth business day following the Closing
Date, and at the end of each week thereafter for so long as Seller
performs Services for Buyer under this Agreement (each, an
“ Invoice Period
”), Seller will provide a statement to Buyer,
listing in reasonable detail the buy/sell activity undertaken by
Seller hereunder and listing the amounts paid by Seller and amounts
owed by Buyer hereunder (each, an “ Invoice ”).
(e) If Buyer disagrees with the amount set forth on an Invoice,
Buyer shall send to Seller a reasonably detailed written notice of
such disagreement (the “ Invoice
Objection ”) no later than the 10th
day after the date of the Invoice, in the case of an Invoice for
freight costs or service costs and no later than the 25th day after
the date of the Invoice, in the case of any other Invoice.
Notwithstanding any Invoice Objection made by Buyer, Buyer shall in
any event pay any portion of the amount set forth on the Invoice
with which it agrees no later than the 15th day after the date of
the Invoice, in the case of an Invoice for freight costs or service
costs, and no later than the 30th day after the date of the
Invoice, in the case of any other Invoice, to the extent that such
amount is not paid in accordance with the terms of the
Intercreditor Agreement referenced in Section 10.09 of the Purchase
Agreement (the “ Intercreditor
Agreement ”). If no Invoice
Objection is received by Seller by the applicable date set forth in
the first sentence of this Section 2(e), such Invoice shall be
deemed final and conclusive and agreed to by Buyer, and Buyer shall
pay the full amount of such Invoice by the applicable date set
forth in the second sentence of this Section 2(e). Buyer and Seller
shall resolve any Invoice Objection and any other disputes or
disagreements relating to Invoices in accordance with the
procedures provided for in Section 7.
(f)
The Applicable Gateway Weekly Payoff Amount (as
defined in the Intercreditor Agreement) that Seller shall provide
in the applicable weekly statement to Wells Fargo, National
Association (“ Wells
Fargo ”) under the Intercreditor
Agreement shall be the amount specified as payable by Buyer on the
Invoice for the related week; provided that Seller may, in its sole
discretion, increase the Applicable Gateway Weekly Payoff Amount to
be included in any applicable weekly stateme
