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EXHIBIT 2.1
EXECUTION COPY
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RESTRUCTURING AGREEMENT
Dated as of June 21, 1999
among
CIRRUS LOGIC INC.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CIREL INC.
MICRUS HOLDINGS INC.,
and
MICRUS
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EXECUTION COPY
RESTRUCTURING AGREEMENT dated as of June
21, 1999, among CIRRUS LOGIC INC. a Delaware
corporation ("CIRRUS"), INTERNATIONAL BUSINESS
MACHINES CORPORATION, a New York corporation
("IBM"), CIREL INC., a California corporation
(the "CIRRUS Partner"), MICRUS HOLDINGS INC., a
Delaware corporation (the "IBM Partner") and
MICRUS, a New York general partnership (the
"Partnership").
WHEREAS, the Parties desire to enter into this Restructuring
Agreement in connection with the restructuring of the Partnership;
WHEREAS, the Partnership was formed by the CIRRUS Partner and
the IBM Partner pursuant to that certain Partnership Agreement dated as of
September 30, 1994, between the CIRRUS Partner and the IBM Partner (as amended,
the "Partnership Agreement") and the obligations of each of IBM and CIRRUS, in
their capacity as Parents of each Affiliated Partner, are set forth in that
certain Participation Agreement dated as of September 1, 1994, among IBM, the
IBM Partner, CIRRUS and the CIRRUS Partner (as amended, the "Participation
Agreement");
WHEREAS, CIRRUS agreed to purchase certain products from the
Partnership pursuant to that certain Agreement for Purchase of Products entered
into in connection with the formation of the Partnership, between CIRRUS and the
Partnership (as amended, the "Product Purchase Agreement");
WHEREAS, the Parties desire to enter into an integrated
agreement to restructure their respective obligations with respect to the
Partnership under the Partnership Agreement, the Participation Agreement and the
Product Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, the Parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Certain Definitions. (a) Capitalized terms used
but not defined in this Agreement shall have the respective meanings assigned to
them in Article XIV.
(b) As used herein, the term "Agreement" means this
Restructuring Agreement together with any Exhibits, Schedules, Appendices and
Attachments hereto, as it may be amended from time to time.
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ARTICLE II
Consideration
SECTION 2.01. Consideration Received by CIRRUS. CIRRUS has asked
IBM to take the following actions:
(a) with respect to certain lease obligations of the
Partnership, agree that, in specified circumstances, IBM (and not CIRRUS) shall
pay up to $264 million in lease payments, which reflects 100% of the Scheduled
Payments from the Cut-off Date through December 31, 2000, and Termination
Payments on December 31, 2000, under both the Partnership's CIRRUS-Guaranteed
Leases and the Partnership's Jointly-and-Severally-Guaranteed Leases;
(b) provide a notice mechanism pursuant to which requests made
to CIRRUS by Lease Payees for the payments described in (a) above will be
referred to IBM;
(c) with respect to certain lease guarantees issued jointly and
severally by IBM and CIRRUS, in specified circumstances, waive IBM's rights,
including without limitation its rights of subrogation and contribution, against
CIRRUS in case of any payments made by IBM and relieve CIRRUS of its obligations
to support the Partnership pursuant to the Participation Agreement;
(d) reduce the proportion of the Partnership's production
capacity that is subject to CIRRUS' take-or-pay obligation, thereby reducing
CIRRUS' take-or-pay obligation by an amount currently estimated to be
approximately $123 million (one hundred twenty-three million dollars) for the
period from April 1, 1999, through December 31, 2000; and relieve CIRRUS from
all of its take-or-pay obligations thereafter, which obligations are currently
estimated to be approximately $270 million (two hundred seventy million
dollars);
(e) reduce the price that CIRRUS pays the Partnership for each
wafer sold to CIRRUS under the Product Purchase Agreement (which reduction will
reflect a reduction in the intellectual property component of such price from
$325 (three hundred twenty-five dollars) per wafer to $270 (two hundred seventy
dollars) per wafer); and
(f) pay all expenses associated with winding down the
Partnership as a going concern after the Closing Date, including, without
limitation, employee termination and dismantling of equipment (and provided
that, to the extent any costs arise from activities prior to the Closing Date,
such costs will be allocated and paid for by CIRRUS and IBM pursuant to the
terms of the Partnership Agreement and the Participation Agreement), for which
CIRRUS' portion of such expenses under the Partnership Agreement are currently
estimated to be approximately $23 million (twenty-three million dollars).
SECTION 2.02. Consideration Received by IBM. IBM is prepared to
agree to take the actions described in Section 2.01, to the extent set forth in
this Agreement, in exchange for the execution and
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delivery of this Agreement and the non-refundable payment of the funds and
irrevocable transfer of property, each on the Closing Date, as set forth below:
(a) payment to IBM of $135 million (one hundred thirty-five
million dollars) (of which $120 million (one hundred twenty million) of such
payment represents compensation to IBM for its waiver of CIRRUS' obligation, as
described in Section 2.01(d), to purchase Products in excess of the amounts set
forth herein from the Partnership) in cash, by wire transfer of immediately
available funds to the account specified in Schedule 2.02(a);
(b) transfer to the Escrow Agent of a designated number of
shares of CIRRUS common stock (the "Shares"), represented by physical
certificates registered in the name of IBM or its designee, which number of
Shares shall be computed so that the average closing price of CIRRUS common
stock on the 20 Business Days prior to the Closing Date multiplied by the number
of Shares equals U.S. $32 million (thirty-two million dollars)(which amount
represents compensation for lost intellectual property royalties for the period
from January 1, 2001, through December 31, 2003). The Shares will be released to
IBM on the Escrow Release Date, at which time they will be subject to an
effective Shelf Registration Statement. In the event that the value of the
Shares on such date is less than $32 million (thirty-two million dollars),
CIRRUS will pay IBM the difference in such value in cash;
(c) transfer of the Transferred Assets from CIRRUS to IBM,
accompanied by a Bill of Sale in the form of Annex IX hereto and free of any
claims by CIRRUS against the Partnership or IBM for back rent or other charges
for the Partnership's use of the Transferred Assets prior to the Closing Date;
(d) transfer of the partnership interest of the CIRRUS Partner,
in the Partnership to an IBM designee, together with an acknowledgment by CIRRUS
that, except as specifically set forth in such acknowledgment, (i) no payments,
receivables, accounts, intercompany notes or other obligations are owed by the
Partnership to CIRRUS, the CIRRUS Partner or any other CIRRUS Subsidiary and
(ii) any such obligations that had been owed to such entities by the Partnership
have been satisfied or waived in their entirety; and
(e) forgiveness by CIRRUS, effective November 15, 1999, of any
amounts owed to CIRRUS by the Partnership for the use of the Transferred Assets
prior to the Closing Date (provided that amounts owed to CIRRUS for use of the
Accrued .25 Micron Tools from April 1, 1999, through the Closing Date shall not
be so forgiven), including forgiveness of any amounts accrued by the Partnership
as obligations payable to CIRRUS for the use of such assets, together with an
acknowledgment that the Partnership will cease making such accruals on the
Closing Date (items (a) through (e) collectively, the "Consideration").
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ARTICLE III
Partnership Obligations
SECTION 3.01. Assignment of Partnership Obligations. It is a
condition to the effectiveness of this Agreement that the rights and obligations
of the Partnership pursuant to the Product Purchase Agreement be assigned to
IBM. By execution and delivery of this Agreement, CIRRUS acknowledges and
consents to this assignment. It is understood and agreed that obligations to
sell Product pursuant to the existing Product Purchase Agreement or pursuant to
this Agreement shall be obligations of IBM and IBM shall have all rights to
payment for such Product. CIRRUS agrees to accept performance from IBM, provided
that Products are fabricated by the Partnership at its current facility and not
through any other IBM Affiliate or other facility without CIRRUS's prior written
consent (such consent not to be unreasonably withheld).
SECTION 3.02. Post-Closing Liabilities. Subject to the
provisions of Article IV, after the Closing Date, and for so long as there has
not been a Major Default by CIRRUS hereunder, IBM shall pay all obligations of
the Partnership arising solely out of activities of IBM or the Partnership, or
any of their respective Subsidiaries or Affiliates, to the extent such
activities occurred after the Closing Date. In the event of a Major Default,
CIRRUS shall become liable to IBM for the Partnership's past, present and future
obligations, in the amounts and proportions that it would have owed if the
CIRRUS Partner had retained its partnership interest therein, notwithstanding
the fact that (i) the CIRRUS Partner's actual interest in the Partnership shall
not revert to it and (ii) only the obligations, and not the attendant benefits,
associated with the CIRRUS Partner's interest in the Partnership shall revert to
it in the event of Major Default.
SECTION 3.03. CIRRUS Liabilities After December 31, 2000. If
CIRRUS has not committed a Major Default at any time during the period from the
Closing Date up to and including the later of (i) December 31, 2000, and (ii)
the date on which all outstanding amounts due and payable under Section 6.03
hereof have been paid, then, effective as of such date, the waivers contained
herein shall convert to a permanent termination of the Partnership Agreement,
the Participation Agreement, the Product Purchase Agreement and each of the
agreements set forth on Schedule 3.03, and, except as specifically provided in
such agreements for any obligations that survive the termination thereof, no
Party shall be under any further obligation to any other Party thereunder.
SECTION 3.04. Effect of Lapse of Waiver. If the waivers
contained herein lapse or are otherwise terminated by reason of a Major Default
by CIRRUS, then the Consideration received by IBM shall be applied against any
increased liability CIRRUS incurs as a result of such lapse or termination of
such waivers, provided, however, that under no circumstances shall any
retroactive portion of such increased liabilities be reduced as a result of
IBM's use, prior to such Major Default, of any manufacturing capacity to which
CIRRUS would have been entitled had its obligations not been waived pursuant to
this Agreement. For purposes of this Section 3.04, the value of any non-cash
portion of
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the Consideration, other than the Shares, shall for such purposes be calculated
based on the fair market value thereof on the Closing Date. The value of the
Shares shall not be applied against any additional liabilities incurred by
CIRRUS until the Escrow Release Date, at which time the amount to be so applied
shall be the value of the Shares, together with any cash payment pursuant to
Section 5.04, received by IBM on the Escrow Release Date. Notwithstanding the
foregoing, payment of the Consideration to IBM shall in all respects remain
non-refundable and irrevocable.
SECTION 3.05. Partnership Taxes. (a) CIRRUS shall take into
account and be responsible for its distributive share, as determined under the
Partnership Agreement, of the taxable income or loss of the Partnership through
the Closing Date. The amount of such taxable income or loss shall be calculated
as if the Partnership had closed its books on such date.
(b) CIRRUS agrees to reimburse IBM, within 30 days from
receiving notice from IBM, for 50% (fifty percent) of the fees and expenses paid
by IBM or the Partnership to third-party accounting firms for the purpose of
determining the amount the Partnership's taxable income or loss according to the
methodology set forth in Section 3.05(a).
ARTICLE IV
IBM Supplemental Payment Obligations
For so long as CIRRUS has not committed a Major Default under
any other provision of this Agreement, IBM will do the following:
SECTION 4.01. Lease Payments and Termination Fees. (a) Subject
to Section 4.04 below, IBM will cause the Partnership (i) to pay Scheduled
Payments required to be paid pursuant to the Enumerated Leases at the times and
in the amounts specified by the Enumerated Leases and (ii) to pay Termination
Payments, if any, pursuant to the terms of the Enumerated Leases; provided,
however, that IBM shall not be obligated to make Scheduled Payments or
Termination Payments on an accelerated basis if such payments are accelerated
solely as a result of a default by CIRRUS, its Subsidiaries or Affiliates, under
a CIRRUS-issued guarantee on an Enumerated Lease and, but for such default, such
accelerated payments would not otherwise be due (any such payment, an
"Accelerated Payment").
(b) If the Partnership does not timely make a Scheduled Payment
or a Termination Payment (other than an Accelerated Payment) required to be made
pursuant to any Enumerated Lease to the extent identified on Annex I, IBM agrees
that, upon written request of CIRRUS, IBM promptly will make any such payment
directly to the applicable Lease Payee. In addition, IBM agrees that it will not
(and IBM agrees it will not permit the Partnership to) seek to recover from the
CIRRUS Partner pursuant to Section 6.01(f) of the Partnership Agreement or
otherwise or recover from CIRRUS pursuant to Section 5.02 of the Participation
Agreement or otherwise any amount needed by the Partnership timely to make a
Scheduled Payment or a Termination Payment.
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SECTION 4.02. Notice and Referral of Lease Payees' Demands. (a)
If CIRRUS receives any demand for payment from any applicable Lease Payee for
any Scheduled Payment or Termination Payment under an Enumerated Lease, CIRRUS
agrees that it will, as soon as practicable (and in any event not later than
three Business Days after a demand), (i) advise the Lease Payee making the
demand that IBM has agreed to accept responsibility for making such payment
(assuming that such a payment (A) is in fact due and payable, (B) is not an
Accelerated Payment, (C) does not exceed the Covered Amount Per Lease or the
Aggregate Covered Amount and (D) is not subject to a good faith defense to
payment), (ii) refer the Lease Payee making the demand to the IBM Notice Party,
and (iii) give the IBM Notice Party a brief written description of the
circumstances of the demand for payment (together with a true, correct and
complete copy of any writing furnished to CIRRUS by the Lease Payee making the
demand or by any attorney, agent or other person purporting to act on behalf of
any such Lease Payee).
(b) Subject to Section 4.04, CIRRUS agrees that it will give the
IBM Notice Party, as soon as practicable (and in any event not later than three
Business Days after any subsequent communications), a brief written description
of the circumstances of any subsequent communications with any applicable Lease
Payee (or any attorney, agent, or other person purporting to act on behalf of
any such Lease Payee), together with a true, correct and complete copy of any
additional writing furnished to CIRRUS by the Lease Payee making the demand (or
by any attorney, agent or other person purporting to act on behalf of any such
Lease Payee).
SECTION 4.03. Waiver of Subrogation and Contribution. For so
long as CIRRUS has not committed a Major Default under this Agreement, IBM
agrees to waive exercise of its rights, including without limitation its rights
of subrogation and contribution resulting from any payment made by it pursuant
to Section 4.01 above.
SECTION 4.04. Limitation on Lease Payments and Termination Fees.
(a) Notwithstanding any contrary provision in an Enumerated Lease or Annex I,
the maximum amount of payments subject to Section 4.01 above, for any individual
Enumerated Lease, shall not exceed the applicable Covered Amount Per Lease and
the aggregate amount of such payments shall not exceed the Aggregate Covered
Amount. At no time shall IBM be required to make a payment on any individual
Enumerated Lease that exceeds either the applicable Covered Amount Per Lease or
the Aggregate Covered Amount.
(b) Nothing in this Agreement shall require IBM or the
Partnership to make any Scheduled Payment or Termination Payment that is subject
to a bona fide dispute or is being contested in good faith by appropriate
proceedings until the dispute is resolved to IBM's reasonable satisfaction or
the proceedings have been finally completed.
(c) IBM's agreement, with respect to Scheduled Payments or
Termination Payments, is limited to those payments and is separately limited by
the applicable Covered Amount Per Lease and the Aggregate Covered Amount. IBM is
not assuming any of the leases to which these
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payments relate. IBM is not assuming any guarantees of any Enumerated Leases to
which these payments relate. Without limitation, IBM is not assuming payments of
any other nature or type under the Enumerated Leases, whether for attorneys'
fees, taxes, indemnification or otherwise, except as specifically set forth
herein.
(d) CIRRUS agrees that it will timely make all payments
associated with any lease on which CIRRUS is the lessee, with respect to
equipment used by the Partnership, that is not an Enumerated Lease.
(e) CIRRUS also agrees that it will timely pay, and will timely
reimburse IBM or the Partnership for any payment either IBM or the Partnership
makes on, any payment obligation under an Enumerated Lease that is (i) due and
payable under such Enumerated Lease but is not a Scheduled Payment or a
Termination Payment (regardless of whether IBM has exceeded the applicable
Covered Amount Per Lease for such Enumerated Lease) or (ii) a Scheduled Payment
or Termination Payment that is due and payable, but is in excess of the
applicable Covered Amount Per Lease for such Enumerated Lease (any such
obligation, in the case of either (i) or (ii), an "Excess Payment Obligation").
CIRRUS shall pay 100% of any Excess Payment Obligation upon written notice from
IBM or the Partnership that such obligation is due and payable, (regardless of
whether such Excess Payment Obligation arises under a CIRRUS-Guaranteed Lease or
a Jointly-and-Severally-Guaranteed Lease) and shall reimburse IBM for any
payments it makes in respect thereof. Notwithstanding the foregoing, IBM will be
responsible for any Termination Payment, fees and expenses or other payment,
whether in excess of the Covered Amount Per Lease or otherwise, if such payment,
fees or expenses are payable due to (A) IBM's or the Partnership's election to
terminate an Enumerated Lease prior to December 31, 2000, (B) any other action
on the part of IBM or the Partnership that it elects to take solely at its
option and that it is not obligated to take, directly or indirectly, pursuant to
the terms of any Enumerated Lease or (C) any failure on the part of IBM or the
Partnership to take any action that it is obligated to take pursuant to this
Article IV. Neither IBM nor the Partnership, nor any of their respective
Affiliates, will amend, consent to the amendment of or seek or grant any waiver
in respect of any Enumerated Lease where such amendment or waiver would increase
any amounts payable by CIRRUS in respect of such Enumerated Lease, related
guarantee or other document hereunder, thereunder or otherwise, compared to the
amounts that would be payable by CIRRUS in the absence of such amendment or
waiver, without CIRRUS' prior written consent (which may be given or withheld in
CIRRUS' sole discretion) and any such purported amendment or waiver shall be
null or void.
SECTION 4.05. Winding Down. IBM agrees that it will pay all
expenses associated with winding down the Partnership as a going concern after
the Closing Date, including, without limitation, employee termination and
dismantling of equipment. Notwithstanding the foregoing, CIRRUS, IBM and their
respective Affiliated Partners will pay all liabilities relating to the
Partnership's activities to the extent such activities took place prior to the
Closing Date, in accordance with the terms of the Partnership Agreement and the
Participation Agreement (including in accordance with any dispute resolution
mechanisms therein).
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SECTION 4.06. Prohibition on Amendments. CIRRUS agrees that it
will not amend or purport to amend the terms of any guarantee of any Enumerated
Lease or any other document related thereto without the prior written consent of
IBM (which may be given or withheld in IBM's sole discretion) and any such
purported amendment shall be null and void.
SECTION 4.07. CIRRUS Guarantees on Enumerated Leases. (a) In the
event that any Enumerated Lease has not expired or been terminated by March 31,
2001 (any such lease, a "Continuing Enumerated Lease"), then IBM and the
Partnership will negotiate in good faith with the Lease Payee on such Continuing
Enumerated Lease in order to secure the removal of CIRRUS' guarantee obligations
under such lease and, in the case of any CIRRUS-Guaranteed Lease that is also a
Continuing Enumerated Lease, replace such obligations with a guarantee by IBM
that is substantially equivalent to the guarantee IBM would execute if it
exercised its "special cure right" under such lease; provided, however, that
neither IBM nor the Partnership will be obligated to make any payment to any
such Lease Payee in order to secure such release.
(b) If after taking the efforts described in Section 4.07(a),
IBM is unable to secure the release of CIRRUS' guarantee on a Continuing
Enumerated Lease, IBM will elect either (i) to terminate such Enumerated Lease
or (ii) to agree to pay CIRRUS for any direct damages CIRRUS incurs solely as a
result of any default by IBM or the Partnership (other than a failure to make
any Accelerated Payment) under such Continuing Enumerated Lease.
ARTICLE V
Stockholder's Rights
SECTION 5.01. Escrow of Shares. On the Closing Date, CIRRUS will
deposit with the Escrow Agent a number of Shares equivalent to (i) $32 million
(thirty-two million dollars) divided by (ii) the Current CIRRUS Stock Price on
the Closing Date. The Shares so deposited will be represented by physical
certificates registered on the Closing Date in the name of IBM or its designee.
SECTION 5.02. Escrow Agreement. On the Closing Date, CIRRUS and
IBM will execute an Escrow Agreement in the form of Annex V hereto, which will
provide that CIRRUS will pay all costs and expenses of the Escrow Agent and be
solely responsible for all indemnification of the Escrow Agent.
SECTION 5.03. Release of Escrowed Shares. On the Escrow Release
Date, the Escrow Agent shall, pursuant to the Escrow Agreement, release the
Shares held by it to IBM. Notwithstanding the preceding sentence, if the value
of the Shares on the Escrow Release Date, calculated based on the Current CIRRUS
Stock Price on the Escrow Release Date (such value, the "Total Share Value"),
exceeds $32 million (thirty-two million dollars), then the Escrow Agent shall
only release to IBM a number of Shares equal in value to the Adjusted Share
Value and shall
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release the balance of such Shares to CIRRUS, together with a stock power
validly executed by IBM, and CIRRUS shall on such date register such excess
Shares in its own name or that of its designee.
SECTION 5.04. Undervalued Shares. If on the Escrow Release Date,
the Total Share Value is less than $32 million (thirty-two million dollars),
then CIRRUS shall pay IBM, on the Escrow Release Date by wire transfer of
same-day funds, an amount in cash equal to (i) $32 million (thirty-two million
dollars) minus (ii) the Total Share Value. The payment described in this Section
5.04 shall be in addition to any payments CIRRUS makes pursuant to Sections
5.05(b), 5.06 or 5.07 hereof.
SECTION 5.05. Effective Shelf Registration Statement. (a) On the
Closing Date, Cirrus and IBM will execute a Registration Rights Agreement, in
the form of Annex III hereto, which shall provide as follows:
(i) CIRRUS shall use best efforts to ensure that a shelf
registration statement (the "Shelf Registration Statement") under the Securities
Act of 1933, as amended, with respect to the Shares shall have been declared
effective by the U.S. Securities and Exchange Commission (the "SEC") by the
earlier of (A) April 3, 2000, or (B) 90 days after the Escrow Release Date,
listing IBM as a selling shareholder thereunder and permitting IBM to sell
Shares pursuant thereto from time to time. In addition, CIRRUS shall use best
efforts to ensure that IBM is permitted to sell the Shares on the Escrow Release
Date (or such later date as the Shelf Registration Statement is required to be
declared effective hereunder) and any day thereafter, and that the Shelf
Registration Statement remains continuously effective for a period of the lesser
of (x) one year from the Escrow Release Date (or one year from such later date
as the Shelf Registration Statement is required to be declared effective
hereunder) or (y) the date on which IBM has sold all its Shares.
(ii) IBM will cooperate with CIRRUS by providing information
reasonably requested by CIRRUS to ensure that the Shelf Registration Statement
is timely filed and declared effective.
(iii) CIRRUS will be responsible for all costs, other than
underwriting discounts and fees and expenses of IBM's counsel, associated with
the Shelf Registration Statement and the preparation of any prospectus with
respect thereto. CIRRUS shall provide IBM with customary indemnities associated
with such Shelf Registration Statement, including indemnity for prospectus
disclosure. IBM shall provide CIRRUS with customary indemnities associated with
an unaffiliated selling shareholder with respect to information provided to
CIRRUS by IBM expressly for the purpose of being included in any prospectus
forming a part of the Shelf Registration Statement.
(b) In the event that the Shelf Registration Statement has not
been declared effective by the earlier of (i) 90 days after the Escrow Release
Date or (ii) April 3, 2000, then IBM may, at its sole option, elect within five
Business Days thereafter to cause CIRRUS to purchase up to all its Shares at the
Escrow Release Price Per Share, and to pay for such Shares in cash by wire
transfer of same-day funds. If,
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on any date after the Escrow Release Date on which the Shelf Registration
Statement is required to be effective hereunder, the Shelf Registration
Statement for any reason ceases to be continuously in effect for 10 consecutive
Business Days, IBM may elect, upon written notice to CIRRUS, to cause CIRRUS to
purchase up to all its Shares within 30 (thirty) Business Days from the date of
such notice, at a purchase price equal to the sum of (A) $32 million (thirty-two
million dollars) (minus any payment made by CIRRUS pursuant to Section 5.04)
plus (B) Interest thereon, minus (C) the Aggregate Share Proceeds, if any.
(c) Subject to Section 5.05(b), if the Escrow Release Date
occurs prior to April 3, 2000, CIRRUS shall, within 45 days after the Escrow
Release Date, file the Shelf Registration Statement with the SEC.
SECTION 5.06. CIRRUS Cash Option on Shares.
(a) CIRRUS may elect, at its sole option, to purchase on the
Escrow Release Date all (but not less than all) the Shares released to IBM on
the Escrow Release Date at the Escrow Release Price Per Share. Such purchase
shall be paid for by CIRRUS in cash by wire transfer of same-day funds on the
Escrow Release Date.
(b) If at any time during the 180-day period after the Escrow
Release Date each of the following three conditions applies: (i) IBM has engaged
in a disciplined trading program with a goal of selling all of its Shares in a
manner consistent with the provisions of the Shareholder Agreement, (ii) the
Current CIRRUS Stock Price is less than the quotient of (x) $32 million
(thirty-two million dollars) (minus the amount of any payment made by CIRRUS
pursuant to Section 5.04) divided by (y) the total number of Shares released to
IBM on the Escrow Release Date (such quotient, the "Minimum Share Price"), and
(iii) as part of the trading program described in (i) above, IBM has sold at
least 15% (fifteen percent) of its Shares at prices per share below the Minimum
Share Price, then CIRRUS may, by giving notice to IBM on such date, elect to
purchase all (but not less than all) of IBM's remaining Shares for a price equal
to (A) $32 million (thirty-two million dollars) (minus the amount of any payment
made by CIRRUS pursuant to Section 5.04) plus (B) Interest thereon minus (C) the
Aggregate Share Proceeds. Subject to the last sentence of Section 5.07, such
election by CIRRUS shall not require any cash payment by IBM to CIRRUS. Any such
purchase by CIRRUS shall be paid for in cash within three days of the date of
such notice, by wire transfer of same-day funds.
SECTION 5.07. Price Protection. If (i) during the 180-day period
after the Escrow Release Date, IBM has engaged in a disciplined trading program
with the goal of selling all of its Shares in a manner consistent with the
provisions of the Shareholder Agreement, (ii) IBM has sold at least 15% (fifteen
percent) of its Shares during such 180-day time period (regardless of the price
at which such Shares were sold) and (iii) at the end of such 180-day period, IBM
has received an aggregate net amount (after brokerage commissions and similar
costs) of proceeds from such sales that is less than $32 million (thirty-two
million dollars) (minus the amount of any payment made by CIRRUS pursuant to
Section 5.04) plus interest thereon calculated using a 5%
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(five percent) annual percentage rate from the Escrow Release Date (such
interest, the "Interest", and such aggregate net proceeds, including Interest
thereon, the "Aggregate Share Proceeds"), regardless of whether IBM has sold all
of or less than all of its Shares, then IBM may, at its sole option, elect to
cause CIRRUS to pay IBM an amount in cash, within 20 Business Days of receiving
notice from IBM to such effect, equal to (A) $32 million (thirty-two million
dollars) (minus the amount of any payment made by CIRRUS pursuant to Section
5.04) plus (B) the Interest thereon minus (C) the Aggregate Share Proceeds, in
which case IBM shall transfer to CIRRUS the remaining Shares held by it, if any.
In the event that, at the end of such 180-day period, the Aggregate Share
Proceeds exceeds $48 million (forty-eight million dollars) (minus the amount of
any payment made by CIRRUS pursuant to Section 5.04) plus Interest thereon, then
IBM will transfer to CIRRUS any remaining Shares held by it and any such excess
Aggregate Share Proceeds.
SECTION 5.08. Shareholder Agreement. IBM and CIRRUS will execute
a Shareholder Agreement on the Closing Date, in the form of Annex IV hereto,
pursuant to which IBM will agree (i) to exercise any voting rights it receives
in connection with its ownership of the Shares as directed by CIRRUS, (ii) to
limit its ownership of CIRRUS Stock (subject to certain exceptions for IBM's
employee benefit plans) and (iii) to refrain, on any one day, from selling on
any national securities exchange or automated quotation system an amount of
Shares in excess of 50% of the average daily trading volume of shares of CIRRUS
common stock traded on the Nasdaq National Market for the five Business Days
preceding the date of such sale.
SECTION 5.09. Notice of CIRRUS Change of Control. In the event
of a CIRRUS Change of Control, CIRRUS shall, within three Business Days, provide
written notice to the IBM Notice Party of the occurrence of such CIRRUS Change
of Control.
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ARTICLE VI
Substitute Product Purchase Requirements
SECTION 6.01. Waiver of Certain Purchase Requirements. So long
as CIRRUS has not committed a Major Default hereunder, IBM agrees that it will
waive (and IBM agrees that it will cause the Partnership to waive) compliance by
CIRRUS with the ongoing purchase requirements of CIRRUS to the Partnership
contained in the Product Purchase Agreement and the purchase requirements and
prices set forth in this Article VI shall apply. Automatically upon the
occurrence of a Major Default, the waiver of compliance with the original
Product Purchase Agreement shall lapse and be of no further effect, and CIRRUS
shall be responsible to IBM for the full amount of payments (past, present and
future) that would have been due in the absence of this waiver had the higher
minimum purchase requirements and intellectual property charges been fully
applied pursuant to the Product Purchase Agreement in the manner that would
apply absent the effectiveness of such waiver, provided, however, that under no
circumstances shall the amount of any past obligations that would have been due
in the absence of this waiver be reduced by reason of IBM's use, prior to such
Major Default, of the manufacturing capacity associated with such obligations.
Payments for past requirements waived shall be immediately due and payable upon
a Major Default by CIRRUS and future payments following the Major Default shall
be due and payable as and when required by the terms of the original Product
Purchase Agreement (subject to the Monthly Settlement Process).
Nothing in the preceding paragraph shall deprive IBM of any
rights or remedies, at law or in equity, that it may have for a breach of this
Agreement (whether or not such breach constitutes a Major Default).
SECTION 6.02. Existing Purchase Requirements. It is understood
and agreed that the Product Purchase Agreement obligates CIRRUS, in the absence
of the waiver contained in this Agreement, to do the following:
(a) For the period from April 1, 1999, through December 31,
1999, either (i) purchase 60% (sixty percent) of the Partnership's output, which
represents approximately 138,000 (one hundred thirty-eight thousand) equivalent
wafers at a price estimated in the Partnership's annual plan to be $980 (nine
hundred eighty dollars) per equivalent wafer (subject to the terms and
conditions set forth in the Product Purchase Agreement, including, without
limitation, Section 8.10 of the Product Purchase Agreement), plus an
intellectual property component of $325 (three hundred twenty-five dollars) per
physical wafer or (ii) pay the Partnership CIRRUS' share of the Partnership's
fixed costs, currently estimated to be equivalent to $750 (seven hundred fifty
dollars) multiplied by the amount, if any, by which 138,000 (one hundred
thirty-eight thousand) exceeds the number of equivalent wafers actually
purchased during such period;
(b) For the period from January 1, 2000, through December 31,
2000, either (i) purchase 60% (sixty percent) of the Partnership's output, which
is approximately 184,000 (one hundred eighty-four
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thousand) equivalent wafers at a price currently estimated to be $900 (nine
hundred dollars) per equivalent wafer (subject to the terms and conditions set
forth in the Product Purchase Agreement, including, without limitation, Section
8.10 thereof), plus an intellectual property component of $325 (three hundred
twenty-five dollars) per physical wafer or (ii) pay the Partnership CIRRUS'
share of the Partnership's fixed costs, currently estimated to be equivalent to
$700 (seven hundred dollars) multiplied by the amount, if any, by which 184,000
exceeds the number of equivalent wafers actually purchased during such period;
and
(c) For the period from January 1, 2001, through December 31,
2003, purchase 60% (sixty percent) of the Partnership's output, which is
estimated to be 184,000 (one hundred eighty-four thousand) equivalent wafers per
year at prices calculated using the same factors as those used to calculate the
prices set forth in Sections 6.02(a) and (b), taking into account any decrease
in production costs.
SECTION 6.03. Waiver and Substitution of Purchase Requirements.
So long as there has not occurred a Major Default hereunder, IBM and the
Partnership hereby agree to waive the obligations set forth in Section 6.02 and
substitute therefor the following reduced volume and purchase price obligations:
(a) For the period from April 1, 1999, through December 31,
1999, Cirrus shall either (i) purchase and pay for 52,500 (fifty-two thousand
five hundred) equivalent wafers at the price of $980 (nine hundred eighty
dollars) per equivalent wafer, which purchases shall be made in each of the
three calendar quarters during such period in amounts equal to the Quarterly
Purchase Requirement for each such quarter (subject to the terms and conditions
set forth in the Product Purchase Agreement) plus $270 per physical wafer, or
(ii) pay IBM $750 (seven hundred fifty dollars) multiplied by the Quarterly
Shortfall (subject to any increases described in Section 6.03(e) below) at the
end of each quarter in which a Quarterly Shortfall exists.
(b) For the period from January 1, 2000, through December 31,
2000, Cirrus shall either (i) purchase and pay for 100,000 (one hundred
thousand) equivalent wafers at the price of $900 (nine hundred dollars) per
equivalent wafer, which purchases shall be made in each of the four calendar
quarters during such period (subject to the terms and conditions set forth in
the Product Purchase Agreement) plus $270 per physical wafer, or (ii) pay IBM
$700 (seven hundred dollars) multiplied by the Quarterly Shortfall (subject to
any increases described in Section 6.03(e) below) at the end of each quarter in
which a Quarterly Shortfall exists.
(c) CIRRUS shall continue to provide forecasts, pursuant to the
terms of the Product Purchase Agreement.
(d) For any future month in which CIRRUS anticipates that the
number of Products it actually will purchase during such month will be less than
90% of the Monthly Production Par Value for such month, CIRRUS shall, at least
30 days prior to the beginning of such month,
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provide a Monthly Shortfall Notice setting forth its Reduced Monthly Purchase
Forecast.
(e) The wafer load in any month within a calendar quarter will
be between 90% and 110% of the Monthly Production Par Value for such month,
provided that the aggregate wafer load for any calendar quarter shall be equal
to 100% of the Quarterly Purchase Requirement. For any calendar quarter in which
there is a Monthly Shortfall, (i) the payment described in Section 6.03(a)(ii)
shall increase to $980 (nine hundred eighty dollars) multiplied by such Monthly
Shortfall and (ii) the payment described in Section 6.03(b)(ii) shall increase
to $900 (nine hundred dollars) multiplied by such Monthly Shortfall, in each
case payable at the end of the month in which the Monthly Shortfall exists.
(f) The wafer load in any week will be between 90% and 110% of
the Weekly Production Par Value for such week. For any week in which there is a
Weekly Shortfall, (i) the payment described in Section 6.03(a)(ii) shall
increase to $980 (nine hundred eighty dollars) multiplied by such Weekly
Shortfall and (ii) the payment described in Section 6.03(b)(ii) shall increase
to $900 (nine hundred dollars) multiplied by such Weekly Shortfall, in each case
payable at the end of each month in which such Weekly Shortfall exists.
(g) If CIRRUS at any time delivers a Shortfall Notice, IBM will
not, for 90 days following the commencement of the period to which such
Shortfall Notice applies, be under any obligation to increase the number of
Products that it sells to CIRRUS to an amount greater than the amount specified
in the Reduced Purchase Forecast. In addition, subsequent to the issuance of a
Shortfall Notice, IBM may refuse to sell CIRRUS any amount of Products in excess
of the amount set forth in the Reduced Monthly Purchase Forecast, unless CIRRUS
provides IBM 60 days' notice of its intent to increase such amount (such
increase not to exceed 110% of the amount of the Weekly and Monthly Par Values
for the weeks and months applicable to such increase).
(h) The per physical wafer price reductions set forth in
Sections 6.03(a)(i) and 6.03(b)(i) above represent a reduction in the
intellectual property component of such prices from $325 (three hundred
twenty-five dollars) to $270 (two hundred seventy dollars) per physical wafer
purchased.
(i) The Products described in Sections 6.02(a) and (b) and
Sections 6.03(a) and (b) above shall be equivalent Semiconductor Wafers
referenced by RMT COMPLEXITY to 5A 3LM, where 5A 3LM has a complexity equal to
1.0. It is understood and agreed that wafer costs for technologies having a
different complexity factor will be computed based on the current costing
methodology used in the Partnership.
(j) At any time after the Closing Date and prior to August 1,
1999, CIRRUS may elect, at its sole option, to increase the amount of Products
it intends to purchase (i) pursuant to Section 6.03(a)(i), up to a maximum of
138,000 Products at a price equal to $230 (two hundred thirty dollars) per
equivalent wafer plus $270 (two hundred seventy dollars) per physical wafer and
(ii) pursuant to
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Section 6.03(b)(i), up to a maximum of 184,000 Products at a price equal to $200
(two hundred dollars) per equivalent wafer plus $270 (two hundred dollars) per
physical wafer.
(k) CIRRUS hereby agrees (i) not to shift the production of any
existing Products away from the Partnership to any third-party supplier and (ii)
in cases where the Partnership would be a reasonably suitable manufacturer for
any new Products, not to source the production of such new Products at any
third-party supplier, if, in the case of either (i) or (ii), doing so would
reduce the number of Products to be purchased by CIRRUS below the amounts set
forth in Sections 6.03(a)(i) and 6.03(b)(i), provided, however, for the purposes
of clause (i) of this paragraph (k), that CIRRUS may temporarily shift
production elsewhere during any period in which the Partnership is unable
(through no fault of CIRRUS) to deliver material amounts of the ordered
quantities, subject to a right of first refusal by IBM to produce such
undelivered ordered quantities in another IBM facility.
(l) IBM shall not, during any calendar quarter, be obligated to
deliver to CIRRUS, as part of CIRRUS' Quarterly Purchase Requirement, a number
of .25 micron equivalent wafers in excess of the .25 Micron Quarterly
Allocation. Notwithstanding the foregoing, IBM will use commercially reasonable
efforts to produce the .25 Micron Additional Quarterly Output for CIRRUS at the
Partnership's or another IBM facility, with such production commencing on April
1, 2000 and ending on December 31, 2000. Any .25 Micron Additional Quarterly
Output, which will be provided to CIRRUS in excess of its Quarterly Purchase
Requirement, will be provided to CIRRUS pursuant to IBM's then current standard
foundry terms and conditions, at prices to be mutually agreed upon by IBM and
CIRRUS.
(m) IBM and the Partnership hereby acknowledge and consent that,
upon IBM's assumption of all the Partnership's rights and obligations under the
Product Purchase Agreement pursuant to Section 3.01 hereof, any changes to or
termination of the licences granted to the Partnership by IBM shall not in any
way affect (A) IBM's ability to sell Products to CIRRUS under this Agreement or
the Product Purchase Agreement or (B) CIRRUS' rights in respect of such
Products.
(n) CIRRUS shall continue to make payments pursuant to the
Monthly Settlement Process, as in effect immediately prior to the execution of
this Agreement and as more fully set forth in Annex II hereto. In addition, the
dollar amount and number of days of any arrearage hereunder shall be calculated
pursuant to the Monthly Settlement Process.
SECTION 6.04. Applicable Provisions of Product Purchase
Agreement. For the avoidance of doubt, the provisions of the Product Purchase
Agreement, to the extent applicable to the purchases set forth in Section 6.03
above, shall remain in full force and effect, including, without limitation, the
following provisions:
Sections 1.3, 2.0, 4.0, 5.0, 6.0, 7.1 through 7.12, the first
three sentences of 7.14, 7.15, 8.1, the final paragraph of 8.4, 9.0,
10.0, 11.0, 13.1 through 13.9 (except for the last
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paragraph of 13.5), 14.0, 15.0, 16.0, 18.0, 19.0, 20.0, 21.0, 22.1
through 22.4, 22.8 through 22.12, 23.0, 24.1 through 24.3, 26.0, 27.0,
28.0 (except for the last sentence of 28.1), 29.0, 30.0, 31.0 (to the
extent it relates to sections that remain applicable hereunder) and
32.0.
SECTION 6.05. Inapplicable Provisions of Product Purchase
Agreement. (a) For the avoidance of doubt, the following provisions of the
Product Purchase Agreement are hereby waived or are otherwise inapplicable for
so long as there has not occurred a Major Default hereunder:
Sections 1.1, 1.7, 1.9, 1.10, 1.17, 1.18, 3.0, 7.13, the three
final sentences of 7.14, 8.2, 8.3, all but the final paragraph of 8.4,
8.5, 8.6, 8.9, 8.10, 8.11, 12.0, the last paragraph of 13.5, 17.0, 22.5,
22.6, 22.7, 24.4, 25.0 and the last sentence of 28.1.
(b) References in the Product Purchase Agreement to the "Cirrus
Capacity Allocation" shall be deemed to mean CIRRUS' obligations pursuant to
Section 6.03, which meaning shall be substituted for the definition of such term
set forth in the Product Purchase Agreement.
(c) Any provision of the Product Purchase Agreement that is not
expressly waived in Section 6.05(a) shall remain in full force and effect, to
the extent applicable.
(d) Notwithstanding the provisions of this Section 6.05, under
no circumstances shall IBM be liable to CIRRUS for any amount resulting from
IBM's use, prior to a Major Default, of any manufacturing capacity to which
CIRRUS would have been entitled had the waiver contained herein not been in
effect.
SECTION 6.06. Product Purchases after 2000. In the event that
IBM agrees to sell Products to CIRRUS during the period of January 1, 2001,
through December 31, 2001, at prices acceptable to each of CIRRUS and IBM at
such time, IBM shall reduce the then current price of each Product sold to
Cirrus by $100 (one hundred dollars) per equivalent wafer up to a maximum amount
equal to the lesser of (i) $7 million (seven million dollars) or (ii) the total
payments made by Cirrus pursuant to Section 6.03(b)(ii) above. Notwithstanding
the above, CIRRUS shall be relieved of its obligation to purchase Products from
IBM or the Partnership and IBM or the Partnership shall have no obligation to
sell Products to Cirrus after December 31, 2000.
SECTION 6.07. Conditions to Performance. It is understood and
agreed that IBM's ongoing obligations pursuant to Section 4.01 and Section 4.04
to this Agreement are conditioned upon the absence of a Major Default hereunder.
It is understood and agreed that CIRRUS' ongoing obligations pursuant to this
Article VI and to Section 4.04(e) to this Agreement are conditioned upon the
absence of any material breach by IBM in performing its obligations hereunder.
SECTION 6.08. Post-Closing Reconciliation. Within 30 Business
Days after the Closing Date, the Parties will, by mutual
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agreement, reconcile (i) the amounts paid by CIRRUS for Products shipped to it
after April 1, 1999, and (ii) any unpaid invoices issued to CIRRUS by the
Partnership in respect of Products shipped to it during such period, in each
case to reflect the pricing that would apply to such Products under Section
6.03(a). Any reconciliation in favor of CIRRUS will be reflected as a credit to
CIRRUS's account at the Partnership, and will not require any cash payment by
the Partnership to CIRRUS.
SECTION 6.09. Remedies. If either Party is in material breach,
other than a material breach by CIRRUS that is also a Major Default, of any
provision of this Article VI, the non-defaulting Party must provide notice to
the defaulting Party, which notice shall identify the provision to this Article
VI that the defaulting Party has breached. If such default is not cured within
30 days of receipt of such notice, the non-defaulting Party shall be entitled to
enforce the applicable provisions of the Product Purchase Agreement and of this
Article VI and to collect damages subject to the limitations set forth in the
applicable provisions of the Product Purchase Agreement and this Article VI.
Nothing in this Section 6.09 shall be construed to limit any of IBM's rights in
the event of a Major Default by CIRRUS.
ARTICLE VII
Closing
SECTION 7.01. Closing. At the Closing, in reliance upon the
representations and warranties set forth in this Agreement and subject to the
fulfillment and satisfaction of, or waiver by, the applicable Party of the
conditions set forth in this Agreement, the following events shall occur:
(a) CIRRUS shall pay the Consideration to IBM in the manner
described in Section 2.02.
(b) The CIRRUS Partner shall convey its interest in the
Partnership to IBM or its designee by executing a Partnership Assignment in the
form of Annex VIII hereto.
(c) The Partnership shall assign its rights and obligations
under the Product Purchase Agreement to IBM, IBM shall accept and assume all
such rights and obligations and CIRRUS shall reaffirm its consent to such
assignment and assumption, in each case by such Party's executing an Assignment,
Assumption and Consent in the form of Annex VII hereto.
(d) CIRRUS shall pay all transfer taxes that become due as a
result of the transfer of (i) the CIRRUS Partner's partnership interest, (ii)
the Transferred Assets and (iii) the Shares, in each case to be effected at the
Closing.
(e) CIRRUS, IBM and the Escrow Agent will execute the Escrow
Agreement in the form of Annex V hereto and CIRRUS will pay the Escrow Agent all
fees required thereunder.
(f) CIRRUS and IBM will execute the Registration Agreement in
the form of Annex III hereto.
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(g) CIRRUS will execute a Release, in the form of Annex VI
hereto, pursuant to which it shall (i) forgive, effective November 15, 1999, any
amounts owed to CIRRUS by the Partnership for the use of the Transferred Assets
prior to the Closing Date, including any amounts accrued by the Partnership as
obligations payable to CIRRUS for the use of such assets, and (ii) acknowledge
that the Partnership will cease making such accruals on the Closing Date,
provided that accruals relating to the use of the .25 Micron Tools from April 1,
1999, through the Closing Date shall not be reversed, and the Partnership shall
cease making accruals with respect to the .25 Micron Tools on the Closing Date.
(h) CIRRUS and IBM shall execute a Bill of Sale in the form of
Annex IX hereto to effect the transfer of the Transferred Assets.
(i) CIRRUS and IBM shall deliver each of the relevant documents
indicated in Section 8.06.
(j) CIRRUS shall deliver a schedule setting forth any changes in
the information provided in Section 10.05.
(k) CIRRUS shall reimburse IBM for 50% (fifty percent) of any
fees paid by IBM to governmental entities in connection with filings under the
Hart--Scott--Rodino Antitrust Improvements Act of 1976 (to the extent IBM has
not otherwise been reimbursed at the time of such filings).
(l) Each of the Parties shall execute any other instrument
reasonably requested by any other Party for the purpose of consummating the
transactions contemplated hereby.
SECTION 7.02. Time and Place of Closing. The Closing shall take
place at the offices of IBM in Fishkill, NY, at 10:00 a.m. on the Closing Date,
or at such other place or time or on such other date as may be agreed upon by
the Parents.
The transfers referred to in Section 7.01 shall be accomplished,
in the case of cash, by wire transfer in immediately available funds to the
account designated on Schedule 2.02(a) and, in the case of the Transferred
Assets to be transferred to IBM on the Closing Date, pursuant to instruments of
transfer duly executed and delivered on the Closing Date by each appropriate
Party, and in form and substance reasonably satisfactory to each Party.
ARTICLE VIII
Conditions to Closing
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The obligation of each Party to complete the transactions set
forth in Section 7.01 shall be subject to the fulfillment, as of the Closing
Date, to the satisfaction of, or waiver by, such Party of the conditions set
forth below in this Article VIII (except that the obligations of such Party and
its Affiliates shall not be subject to such Party's or its Affiliates' own
compliance with Sections 8.01, 8.02, 8.03, 8.06, 8.07 and 8.08):
SECTION 8.01. Performance. Each Party shall have performed and
complied in all material respects with each agreement, covenant and condition in
each Operative Document 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
such Party at or before the Closing.
SECTION 8.02. Authorization, Execution and Delivery of Operative
Documents. Each Party shall have duly authorized, executed and delivered each
Operative Document to which it is or is specified to be a Party and an executed
counterpart thereof shall have been delivered to each other Party thereto and to
each Parent.
SECTION 8.03. No Default. Each Operative Document shall be in
full force and effect at the Closing 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 under or breach of such Operative
Document or would give any Party to such Operative Document the right to
terminate or not to perform any obligation under such Operative Document.
SECTION 8.04. Consents, Approvals, etc.; Burdensome Conditions.
(a) All Governmental Actions (other than immaterial Governmental Actions such as
routine qualifications to do business intended to be obtained as needed)
required to be taken, given or obtained in connection with the transactions
contemplated by the Operative Documents shall (i) have been taken, given or
obtained, (ii) be in full force and effect at the Closing and (iii) not be
subject to any pending proceedings or appeals, administrative, judicial or
otherwise (other than such immaterial Governmental Actions), and the time for
appeal shall have expired or, if an appeal shall have been taken, it shall have
been dismissed.
(b) All consents and approvals of any other Person necessary or
advisable in order to consummate in all material respects the transactions
contemplated by the Operative Documents, excluding written consents to the
assignment of third party contracts, shall have been obtained and shall be in
full force and effect at the Closing.
(c) No Burdensome Condition shall exist with respect to either
Parent or any of its Affiliates or the Partnership in connection with the
transactions contemplated by the Operative Documents.
(d) The waiting period required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 for the transactions contemplated hereby
shall have expired or been terminated.
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SECTION 8.05. Governmental Rules. (a) No Governmental Rule shall
have been instituted, threatened, issued or proposed to set aside, restrain,
enjoin or prevent the consummation of the transactions contemplated by the
Operative Documents.
(b) No change shall have occurred since the date of this
Agreement in any Governmental Rule that, in either Parent's opinion, would make
it illegal for such Parent, its Affiliated Partner or the Partnership to
consummate any of the transactions contemplated by the Operative Documents or
subject any such Person to an unreasonably burdensome penalty or other
unreasonably burdensome liability or other obligation under or pursuant to any
Governmental Rule in connection with the transactions contemplated by the
Operative Documents.
SECTION 8.06. Standard Closing Documents. Each Parent and its
Affiliated Partner shall have received, with respect to the other Parent and the
other Parent's Affiliated Partner:
(a) in the case of CIRRUS only, a certificate dated the Closing
Date of the secretary, assistant secretary or another appropriate authorized
signatory of CIRRUS certifying that a true and correct copy of the resolutions,
delegations or other written evidence of corporate action of the appropriate
authority within CIRRUS and the stockholders of CIRRUS, duly authorizing or
ratifying its execution, delivery and performance of the Operative Documents and
the consummation of the transactions contemplated thereby, are attached to such
certificate, and as to the absence of other resolutions, delegations or other
corporate action relating thereto;
(b) an incumbency certificate signed by an appropriate officer
or other authorized signatory of such Party dated the Closing Date as to the
signatures and titles of the officers or authorized signatories of such Party
executing any Operative Document on behalf of such Party (whether as a Party
thereto or on behalf of the Partnership as a general partner thereof), and any
other documents delivered in connection with the Operative Documents; and
(c) a certificate signed by an appropriate officer or other
authorized signatory of such Party dated the Closing Date certifying that the
conditions set forth in this Article VIII (with respect to such Party) have been
satisfied by such Party.
SECTION 8.07. Representations and Warranties. The
representations and warranties of each Party in Article IX, of CIRRUS and the
CIRRUS Partner in Article X and of each Party in any other of the Operative
Documents shall be true and correct in all material respects as of the date of
this Agreement and at the Closing with the same effect as if made at and as of
the Closing, except to the extent such representations or warranties expressly
relate to an earlier time.
SECTION 8.08. Proceedings. All corporate or partnership and
legal proceedings taken by each Party in connection with the transactions
contemplated by the Operative Documents and all documents relating to the
transactions contemplated thereby shall be reasonably satisfactory in form and
substance to each Parent and its counsel, and
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certified or other copies of all relevant documents as either Parent shall have
reasonably requested shall have been provided to such Parent or its counsel.
SECTION 8.09. Form of Operative and Other Documents. Each of the
Operative Documents (other than this Agreement), including schedules and
attachments, shall, in each case, be in substantially the form agreed upon by
the Parties in writing on the date hereof with blanks appropriately completed
and dates adjusted to reflect the Closing Date as appropriate.
SECTION 8.10. UCC Searches and Release of Liens. If the lien
searches conducted by IBM for UCC financing statements, judgment liens and tax
liens with respect to CIRRUS and its Subsidiaries, as debtors (conducted at the
state and local levels in the jurisdictions set forth on Schedule 10.01)
disclose that Liens exist for any Transferred Assets, CIRRUS shall deliver
evidence of the termination of such Lien, including evidence of termination on
Form UCC-3, signed by the secured party. In addition, CIRRUS shall provide
evidence of termination for any Lien discovered by IBM as to which IBM has given
CIRRUS notice as soon as practicable prior to the Closing, not reflected in such
searches, whether existing before or after the date of such searches. At
Closing, CIRRUS shall reimburse IBM for the reasonable cost of such searches.
ARTICLE IX
Representations and Warranties of Each Parent and
its Affiliated Partner
Each Parent and its Affiliated Partner represents and warrants
to the other Parent and its Affiliated Partner as of the date of this Agreement
and as of the Closing Date, with respect to itself (and in the case of each
Parent, with respect to its Affiliated Partner), as follows:
SECTION 9.01. Organization, Ownership Interest, etc. (a) It is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization or incorporation and has the power and authority to
carry on its business as then conducted, to own or hold under lease its
properties and to enter into and perform its obligations under each Operative
Document to which it is or is specified to be a Party.
(b) It is duly qualified to own or lease its properties and
generally to conduct its business as currently, or proposed to be, conducted in
each jurisdiction necessary for purposes of the transactions contemplated by the
Operative Documents, except where failure to so qualify would not have a
material adverse effect on such Person or the Partnership.
SECTION 9.02. Authorization; No Conflict. It has duly
authorized, or will prior to the Closing duly authorize and ratify, by all
necessary action, the execution, delivery and performance of each
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Operative Document to which it is or is specified to be a Party (and, in the
case of each Partner, each Operative Document to which the Partnership is or is
specified to be a Party), and its execution and delivery thereof, its
consummation of the transactions contemplated thereby and its compliance
therewith does not and will not (a) require any approval of its stockholders or
partners or any approval or consent of any trustee or holder of any of its
Indebtedness or obligations, (b) contravene any Governmental Rule applicable to
or binding on it or any of its properties if such contravention would have a
material adverse effect on it or any of the Transferred Assets to be transferred
by it or on its ability to perform any of its obligations under any Operative
Document, (c) contravene or result in any breach of or constitute any default
under its charter or By-laws, or contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien, upon any of
its property or the property of the Partnership under, any material indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, loan or
credit agreement or other material agreement or document to which it is a party
or by which it or any of its properties is bound or affected or by which the
property of the Partnership is bound or affected, (d) require any negotiation
with or notice to any labor union or violate, or require any procedure to be
followed under, any collective bargaining or other agreement with employees or
(e) require any Governmental Action, in each case (a) through (e), except such
as have been duly obtained, made or taken and which are in fully force and
effect.
SECTION 9.03. Enforceability. (a) It has duly executed and
delivered this Agreement and, upon the execution and delivery of this Agreement
by each other Party hereto, this Agreement will constitute its legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
(A) for the enforceability of the phrase "or employ" as used in Section
11.04(a)(i), as to which the Parties express no opinion, and (B) as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies.
(b) As of the Closing Date, it will have duly executed and
delivered each other Operative Document to which it is or is specified to be a
Party and, upon the execution and delivery of each such other Operative Document
by each other Party thereto, each such other Operative Document will constitute
its legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting the enforcement of
creditors' rights generally or the availability of equitable remedies. After
giving effect to the Closing, it will not be in default under or in respect of
any Operative Document.
SECTION 9.04. Proceedings. There are no actions or proceedings
pending, or to its knowledge threatened, by or before any Governmental Authority
that, if adversely determined, would have a material adverse effect on its
ability to perform any of its material obligations under any Operative Document.
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SECTION 9.05. Litigation. There are no lawsuits, claims,
arbitrations or other proceedings or investigations pending, or to its knowledge
threatened, by or against or affecting it or any of its Subsidiaries or any of
their respective properties that materially relate to any of the transactions
contemplated by the Operative Documents.
SECTION 9.06. No Transfer Taxes. Such Party is not currently
aware of any transfer taxes that would be due as a result of the transfer to IBM
of the Shares or the Transferred Assets or the consummation of any other
transaction to take place on the Closing Date.
ARTICLE X
Representations and Warranties of CIRRUS and
the CIRRUS Partner
In addition to the representations and warranties set forth in
Article IX, each of CIRRUS and the CIRRUS Partner represents and warrants as of
the date of this Agreement and as of the Closing Date, with respect to itself
(and in the case of CIRRUS, with respect to the CIRRUS Partner), as follows:
SECTION 10.01. Organization, Ownership Interest, etc. (a) CIRRUS
owns the CIRRUS Partner directly or indirectly, free and clear from all Liens.
The CIRRUS Partner owns its interest in the Partnership directly, free and clear
of all Liens.
(b) CIRRUS' chief executive office is located in the State of
California, in the county of Alameda. In addition, CIRRUS owns real or personal
property material to the conduct of its business in the states and counties set
forth on Schedule 10.01.
SECTION 10.02. Proceedings. In addition to the representations
and warranties set forth in Section 9.04, there are no actions or proceedings
pending, or to its knowledge threatened, by or before any Governmental Authority
that, if adversely determined, would have a material adverse effect on any of
the Transferred Assets to be transferred to IBM.
SECTION 10.03. Special Purpose Representation as to CIRRUS
Partner. The CIRRUS Partner has not conducted any business, does not have any
outstanding Indebtedness or other obligations or own or hold any assets other
than, in each case, as permitted under Section 10.03 of the Partnership
Agreement.
SECTION 10.04. List of Transferred Assets; Title to Transferred
Assets. (a) Schedule 10.04-A contains a true and complete list of the
Transferred Assets to be transferred to IBM.
(b) On the Closing Date, CIRRUS will have transferred, or caused
to be transferred, to IBM unencumbered, good and marketable title to the
Transferred Assets, free and clear of the claims of others and of all Liens,
including Liens securing any guarantee issued by CIRRUS under
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any Enumerated Lease, other than Liens created by IBM or the Partnership.
(c) There are no outstanding rights, options, agreements or
other commitments giving any Person any present or future right to require
CIRRUS, the CIRRUS Partner or any of CIRRUS' Affiliates to Transfer to any
Person any ownership or possessory interests in, or grant any Lien on, any of
the Transferred Assets.
SECTION 10.05. CIRRUS Shares. (a) As of March 31, 1999, the
authorized shares of common stock of CIRRUS were 280,000,000, the number of
issued and outstanding shares of CIRRUS were 60,103,000, and after giving effect
to the exercise of options, warrants, and similar rights, would have been
81,329,438. All the issued and outstanding shares of common stock of CIRRUS had
been duly authorized and validly issued, fully-paid and non-assessable as of
such date, and since such date there have been no material share issuances that
adversely impact CIRRUS' ability to issue the Shares on the Closing Date.
(b) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, and the issuance of the Shares will not be
subject to any preemptive or similar rights.
SECTION 10.06. Litigation. In addition to the representations
and warranties set forth in Section 9.05:
(a) There are no lawsuits, claims, arbitrations or other
proceedings or investigations pending, or to its knowledge threatened, by or
against or affecting it or any of its Subsidiaries or any of their respective
properties that materially relate to, or could materially adversely affect the
rights of the Partnership or IBM in respect of, any of the Transferred Assets or
the conduct of the business of the Partnership following the Closing.
(b) There is no outstanding judgment, order or decree of any
Governmental Authority applicable to it or any of its Subsidiaries that relates
to or could materially adversely affect the Transferred Assets or the conduct of
the business of the Partnership following the Closing.
SECTION 10.07. Compliance with Other Instruments. It is not in
default in any material respect in the performance of any material obligation,
agreement, instrument or undertaking to which it is a party or by which it or
any of its properties is bound which default could, and there is no such
obligation, agreement, instrument or undertaking which could, materially
adversely affect the conduct of the business of the Partnership following the
Closing.
SECTION 10.08. No Defaults Under Lease Guarantees. CIRRUS is not
in default on any guarantee issued by CIRRUS under any Enumerated Lease.
SECTION 10.09. No Special New York Obligations. The transfer by
CIRRUS of its interest in the Partnership and the
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Transferred Assets will not give rise to the assumption by the Partnership or
IBM of any obligations to the State of New York or any political subdivision
thereof that were incurred by CIRRUS or its Subsidiaries in connection with any
grants, incentives, tax credits or other benefits received by CIRRUS from the
State of New York or any political subdivision thereof in connection with
CIRRUS' conducting business in such State or subdivision, by means of CIRRUS'
participation in the Partnership or otherwise.
ARTICLE XI
Covenants
SECTION 11.01. Covenants. Each Party agrees with the other that:
(a) Performance of Obligations. It shall fully and faithfully
carry out all of its obligations under each Operative Document to which it is a
Party.
(b) Conduct of Businesses. Until the Closing, it shall not, and
shall not permit any of its Subsidiaries to, take any action that would, or
could be reasonably foreseen to, result in any of its or its Affiliated
Partner's representations and warranties set forth herein becoming untrue or in
any of the conditions set forth herein to be satisfied by it or its Affiliated
Partner prior to or at the Closing not being so satisfied.
SECTION 11.02. Further Assurances. Following the execution and
delivery of this Agreement and prior to the Closing, each Party shall and shall
cause its Subsidiaries to (and IBM and CIRRUS shall cause the Partnership to)
take all reasonable actions necessary or appropriate to ensure that the
conditions to Closing set forth herein to be satisfied by such Party (or the
Partnership) are satisfied reasonably promptly following such execution and
delivery, and to obtain (and cooperate with the others in obtaining) any
Governmental Action required to be obtained or made by it in connection with any
of the transactions contemplated by this Agreement; provided that no Burdensome
Condition shall exist with respect to such Person or any of its Affiliates in
connection therewith.
SECTION 11.03. Public Announcements. (a) Prior to the Closing,
the Parties shall not (and shall not permit any of their respective Subsidiaries
to), without the prior written consent of the other Parent, issue any press
release or make any public announcement with respect to any Operative Document
or the transactions contemplated thereby or publicly file all or any part of any
Operative Document or any description thereof except as required by any
Governmental Rule or as necessary to secure any Governmental Action.
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(b) At or following the Closing, each Parent shall not (and
shall not permit any of its Subsidiaries to):
(i) issue any public release or announcement or issue or
distribute any document to be used in connection with the private or
public sale of debt or equity securities without the prior written
consent of the other Parent if such release, announcement or document
refers to such other Parent (or any of its Subsidiaries) in connection
with the Partnership, except as may be required by any applicable
Governmental Rule, in which case such Parent shall (or shall cause the
Person required to make such disclosure to) allow such other Parent
reasonable time to comment on such release or announcement in advance of
its issuance and use reasonable efforts to accept the reasonable
comments of such other Parent; or
(ii) publicly file all or any part of any Operative Document or
any description thereof, except as may be required by any applicable
Governmental Rule, in which case such Parent shall (or shall cause the
Person required to make such filing to) cooperate with the other Parent,
to the extent reasonable and practicable, in obtaining any confidential
treatment for such filing requested by the other Parent.
SECTION 11.04. Employee Matters. (a) Prior to January 1, 2003,
CIRRUS shall not, without the prior written consent of IBM, directly or
indirectly, (i) solicit or employ any employee or officer of the Partnership or
(ii) solicit any employee of the Microelectronics Division of IBM, in each case
other than by means of general solicitations that are not specifically or
intentionally directed at such employees.
(b) Prior to January 1, 2003, the Microelectronics Division of
IBM shall not, without the prior written consent of CIRRUS, directly or
indirectly solicit any employee or officer of CIRRUS, other than by means of
general solicitations that are not specifically or intentionally directed at
such employees.
SECTION 11.05. Special Purpose Covenant. Between the date hereof
and the Closing Date, the CIRRUS Partner shall not, and CIRRUS shall not permit
the CIRRUS Partner to, (a) conduct any business other than being a general
partner of the Partnership and performing its obligations with respect thereto,
(b) issue or become liable in respect of any Indebtedness or
other obligations or become a party to or bound by any contract or other
document other than (i) any necessary or appropriate incidents of corporate
existence and qualification, (ii) pursuant to this Agreement or the other
Operative Documents to which it is or becomes a party or other documents
delivered at the Closing, (iii) as a result of its status as a general partner
of the Partnership or (iv) as a result of its status as a consolidated
Subsidiary of its Parent for income tax purposes,
(c) offer, sell or issue any of its securities, or
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(d) own or hold any assets other than (x) $10,000 (ten thousand
dollars) or less in capital and surplus, (y) its right, title and interest in
and to the Partnership and (z) distributions received form the Partnership,
which when received, immediately shall be (1) distributed or dividended to the
owners of its equity securities, (2) applied to reduce or discharge an
obligation or liability, (3) contributed to the Partnership or (4) otherwise
disposed of so that such Partner will then be in compliance with this Section
11.05.
SECTION 11.06. Information Provided to Lessors. IBM shall
cooperate in good faith to aid CIRRUS' efforts to persuade the beneficiaries of
those certain two outstanding letters of credit to remove CIRRUS' obligations to
maintain such letters of credit. Such cooperation shall be limited to IBM's
providing a letter, in the form of Annex X hereto, to such beneficiaries
describing the terms of this Agreement. Under no circumstances shall IBM be
obligated to enter into any agreement with such beneficiaries or assume any
obligation other than as specifically set forth in this Agreement.
ARTICLE XII
Indemnification
SECTION 12.01. Indemnification. After the Closing Date, and for
so long as this Agreement remains in full force and effect, the terms of this
Agreement shall supersede the indemnification and payment provisions set forth
in Section 12.03 of the Partnership Agreement and Section 5.02 of the
Participation Agreement to the extent a request for indemnification or payment
relates to a Claim arising solely out of activities that occurred, in their
entirety, after the Closing Date and no part of which occurred at any time on or
prior to the Closing Date. For any claim relating to activities any part of
which occurred prior to such Closing Date, the Parties may continue to make
claims for indemnification or payment pursuant to the terms of the Partnership
Agreement and the Participation Agreement.
SECTION 12.02 Indemnification after December 31, 2000. (a) IBM
hereby agrees, subject to the conditions set forth below and effective as of the
later of (A) January 1, 2001, and (B) the date on which all outstanding amounts
due and payable under Section 6.03 hereof have been paid, to indemnify and hold
harmless CIRRUS, its Subsidiaries and Affiliates, from and against any Losses
resulting from any Claims, proceedings or investigations that have been or are
in the future brought or threatened by third parties against CIRRUS in
connection with, relating to or arising out of the conduct of the business of
the Partnership or the ownership of its properties (other than any actions by
CIRRUS, its Subsidiaries and Affiliates relating thereto) after December 31,
2000 (any such claim an "Indemnified Claim"). The foregoing indemnification is,
in its entirely, issued subject to the following conditions and shall only be
effective upon the satisfaction thereof: (i) there has been no Major Default at
any time prior to January 1, 2001, and (ii) there has been no other material
breach by CIRRUS hereunder that remains uncured on January 1, 2001, provided
that,
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for purposes of this subclause (ii), CIRRUS has been given notice of, and 30
days to cure, any such material breach.
(b) IBM shall at its expense assume the defense of all Claims,
proceedings or investigations relating to any Indemnified Claim, after which IBM
shall not be responsible for any fees, costs or expenses of separate counsel
retained by CIRRUS; provided, however, that if IBM shall fail to assume such
defense of an Indemnified Claim, CIRRUS shall be free to defend itself and IBM
shall reimburse CIRRUS for all fees, costs and expenses in connection with such
defense. Subject to the preceding sentence, CIRRUS shall have the right (but not
the obligation) to participate at its own expense in the defense of any Claim,
proceeding or investigation for which indemnity may be sought under this Section
12.02.
(c) The indemnification set forth in Section 12.02(a) shall not
inure to the benefit of CIRRUS (or any of its Affiliates) in respect of any of
such Losses to the extent that such Losses (x) arise out of or are based upon
the gross negligence or wilful misconduct of CIRRUS (or an Affiliate of CIRRUS)
or CIRRUS' defaulting in the performance or observance of any of its covenants
or agreements expressly set forth herein or (y) constitute a tax, levy or
similar governmental charge not imposed upon IBM, any of its Subsidiaries or the
Partnership or on their respective properties. It is understood and agreed that,
for the purpose of the preceding sentence, Losses shall be deemed not to arise
out of or be based upon the gross negligence or wilful misconduct of CIRRUS (or
any of its Affiliates) solely because it arises out of or is based upon the
gross negligence or wilful misconduct of a director, officer or employee of
CIRRUS (or any of its Affiliates) if at the time of such gross negligence or
wilful misconduct such director, officer or employee was also an employee or a
member of the governing board of the Partnership acting in his capacity as such.
(d) The provisions of this Section 12.02 shall survive each of
the termination of the Operative Documents, the Partnership Agreement, the
Participation Agreement or the Product Purchase Agreement.
SECTION 12.03. Assertion of Claims. (a) In the event that a
Person (the "Indemnified Party") desires to assert its right to indemnification
from a person (an "Indemnifying Party") required to indemnify such Indemnified
Party under this Article XII, the Indemnified Party will give the Indemnifying
Party prompt notice of the Indemnified Claim, and the Indemnifying Party will
undertake the defense thereof (unless the Claim is asserted against or related
to or results from any action or failure to take action by such Indemnifying
Party). The failure to promptly notify the Indemnifying Party hereunder shall
not relieve the Indemnifying Party of its obligations hereunder, except to the
extent that the Indemnifying Party is actually prejudiced by the failure to so
notify promptly.
(b) The Indemnified Party shall not settle or compromise any
Claim without the written consent of the Indemnifying Party unless the
Indemnified Party agrees in writing to forego any and all claims for
indemnification from the Indemnifying Party with respect to such Claim.
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However, if the Indemnifying Party, within a reasonable time after notice of any
such Claim, fails to defend such Claim, the Indemnified Party will have the
right to undertake the defense, compromise or settlement of such Claim on behalf
of and for the account and risk of the Indemnifying Party, subject to the right
of the Indemnifying Party to assume the defense of such Claim at any time prior
to settlement, compromise or final determination thereof.
(c) If the Indemnifying Party has undertaken the defense of a
Claim and (i) if there is a reasonable expectation that (x) a Claim may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments or (y) the Indemnified Party may have
legal defenses available to it that are different from or additional to the
defenses available to the Indemnifying Party, or (ii) if the Indemnifying Party
shall not have employed counsel reasonably satisfactory to the Indemnified
Party, the Indemnified Party shall nevertheless have the right at the
Indemnified Party's cost and expense, to defend such Claim.
ARTICLE XIII
Miscellaneous
SECTION 13.01. Survival. Except as may otherwise be specifically
provided in this Agreement, all covenants, agreements, representations and
warranties of the Parties made in or pursuant to this Agreement shall survive
the execution and delivery of the Operative Documents and the closing of the
transactions contemplated thereby and the expiration or other termination of any
other Operative Document, notwithstanding any investigation by or on behalf of
any Party. In addition, and without limiting the generality of the foregoing,
the consent and transfer described in Section 7.01(c) shall similarly survive
any such event.
SECTION 13.02. Legal Disputes; Attorneys' Fees. In any legal
dispute arising under this Agreement that is determined by the final and
unappealable judgment or order of a court in favor of one Party hereto, the
Party against whom such judgment or order is rendered (or its Parent) shall pay
to the other Party (or its Parent), promptly upon request therefor and receipt
of reasonably complete itemization and documentation thereof, the reasonable
attorneys' fees and expenses of such other Party relating to such dispute.
SECTION 13.03. Assignment. Except as otherwise specifically
provided in this Agreement, CIRRUS shall not Transfer, or grant or permit to
exist any Lien on, this Agreement or any of its rights hereunder without the
prior written consent of IBM (which consent may be withheld in IBM's sole
discretion), and any such purported Transfer or Lien without such consent shall
be void. If IBM assigns any of its obligations hereunder, IBM shall remain
secondarily liable to CIRRUS for such obligations.
SECTION 13.04. Amendment and Waiver. No amendment to this
Agreement or any other Operative Document shall be effective unless it
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shall be in writing, identify with specificity the provisions that are thereby
amended or waived and be signed by each Party thereto. Any failure of a Party to
comply with any obligation, covenant, agreement or condition contained in this
Agreement or any other Operative Document may be waived by the Party entitled to
the benefits thereof only by a written instrument duly executed and delivered by
the Party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance. No failure to exercise and no delay in exercising any
right, remedy, power or privilege hereunder or under the other Operative
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
SECTION 13.05. Remedies. (a) In no event will any Party to this
Agreement or any other Operative Document be liable to another Party hereto or
thereto for special, indirect, punitive or incidental damages, lost profits,
lost savings or any other consequential damages, even if such Party has been
advised of the possibility of such damages, resulting from the breach by it of
any of its obligations thereunder or breach by it or any of its Affiliates of
any of their respective obligations under any Operative Document or from the use
of any confidential or other information.
(b) Except as may otherwise be specifically provided in this
Agreement or any other Operative Document, the rights and remedies of the
Parties under this Agreement or any other Operative Document are cumulative and
are not exclusive of any rights or remedies that the Parties would otherwise
have. Equitable relief, including the remedies of specific performance and
injunction, shall be available with respect to any actual or attempted breach of
this Agreement or any other Operative Document.
SECTION 13.06. Table of Contents; Headings. The Table of
Contents and Article and Section headings of this Agreement or any other
Operative Document are for convenience of reference only and shall not affect
the construction of or be taken into consideration in interpreting this
Agreement or any other Operative Document.
SECTION 13.07. Parties in Interest; Limitation on Rights of
Others. This Agreement and any other Operative Document shall be binding upon
and inure to the benefit of the Parties hereto and their permitted successors
and assigns. Nothing in this Agreement or any other Operative Document, whether
express or implied, shall give or be construed to give any Person (other than
the Parties hereto) any legal or equitable right, third party beneficiary right,
remedy or claim under or in respect of this Agreement or any other Operative
Document. No Lease Payee under any CIRRUS-Guaranteed Lease or
Jointly-and-Severally-Guaranteed Lease shall have any rights of any nature or
kind pursuant to this Agreement.
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SECTION 13.08. Counterparts; Effectiveness. (a) This Agreement
and any other Operative Document may be executed by the Parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same contract.
(b) This Agreement shall not become effective until one or more
counterparts have been executed by each Party hereto and delivered to the other
Parties hereto.
SECTION 13.09. Entire Agreement. This Agreement, together with
the other Operative Documents and the Exhibits, Schedules, Appendices and
Attachments thereto, any agreement entered into simultaneously therewith, the
Product Purchase Agreement, the Partnership Agreement and the Participation
Agreement, constitute the entire agreement of all the Parties with respect to
the subject matter hereof and thereof and supersede all prior written and oral
agreements and understandings with respect to such subject matter.
SECTION 13.10. Construction. References in this Agreement or any
other Operative Document to any gender include references to all genders, and
references in this Agreement or any other Operative Document to the singular
include references to the plural and vice versa. References in this Agreement or
any other Operative Document to a Party or other Person include their respective
successors and assigns. The words "include", "includes" and "including" when
used in this Agreement or any other Operative Document shall be deemed to be
followed by the phrase "without limitation". Unless the context otherwise
requires, references in this Agreement or any other Operative Document to
Articles, Sections, Exhibits, Schedules, Appendices and Attachments shall be
deemed references to Articles and Sections of, and Exhibits, Schedules,
Appendices and Attachments to, this Agreement. Unless the context otherwise
requires, the words "hereof", "hereby" and "herein" and words of similar meaning
when used in this Agreement or any other Operative Document refer to this
Agreement or the relevant Operative Document in its entirety and not to any
particular Article, Section or provision of this Agreement or any other
Operative Document.
SECTION 13.11. Governing Law. This agreement and every other
Operative Document shall in all respects 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 conflict of laws principles of such State.
SECTION 13.12. Waiver of Jury Trial and Certain Damages. Each
Party to this Agreement or any other Operative Document waives, to the fullest
extent permitted by applicable law, (i) any right it may have to a trial by jury
in respect of any action, suit or proceeding arising out of or relating to any
Operative Document and (ii) any right it may have to receive damages or
indemnification from any other Party to any Operative Document in respect of any
act, omission or event relating to such Operative Document or the transactions
contemplated by the Operative Documents based on any theory of liability for any
special, indirect, consequential or punitive damages. Each Party to any such
agreement or instrument (x) certifies that no representative, agent or attorney
of another Party to any Operative Document has represented,
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expressly or otherwise, that such other Party would not, in the event of
litigation, seek to enforce the foregoing waiver and (y) acknowledges that it
has been induced to enter into such agreement or instrument by, among other
things, the mutual waivers and certifications set forth above in this Section
13.12.
SECTION 13.13. Jurisdiction; Consent to Service of Process. (a)
Each Party to this Agreement or any other Operative Document hereby irrevocably
and unconditionally submits, for itself and its property, to the jurisdiction of
any Federal court of the United States of America sitting in the Southern
District of New York, and any appellate court from any such court, in any suit,
action or proceeding arising out of or relating to the Operative Documents, or
for recognition or enforcement of any judgment resulting from any such suit,
action or proceeding, and each Party hereby irrevocably and unconditionally
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in such Federal court.
(b) It shall be a condition precedent to each Party's right to
bring any such suit, action or proceeding (unless such suit, action or
proceeding is brought solely to obtain discovery or to enforce a judgment) that
such suit, action or proceeding, in the first instance, be brought in such
Federal court, and if such Federal court refuses to accept jurisdiction with
respect thereto, such suit, action or proceeding may be brought in any other
court with jurisdiction; provided that the foregoing condition precedent shall
not apply to any suit, action or proceeding by a Party seeking indemnification
or contribution pursuant to any Operative Document or otherwise in respect of a
suit, action or proceeding against such Party if such suit, action or proceeding
by such Party seeking indemnification or contribution is brought in the same
court as the suit, action or proceeding against such Party.
(c) No Party to this Agreement or any other Operative Document
may move to (i) transfer any such suit, action or proceeding from such Federal
court to another jurisdiction, (ii) consolidate any such suit, action or
proceeding brought in such Federal court with a suit, action or proceeding in
another jurisdiction or (iii) dismiss any such suit, action or proceeding
brought in such Federal court for the purpose of bringing the same in another
jurisdiction.
(d) Each Party to this Agreement or any other Operative Document
hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, (i) any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to the Operative Documents in any Federal court sitting in the Southern
District of New York, (ii) the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court and (iii) the
right to object, with respect to such suit, action or proceeding, that such
court does not have jurisdiction over such Party.
(e) Each Party to this Agreement or any other Operative Document
irrevocably consents to service of process in the manner provided for the giving
of notices pursuant to this Agreement. Nothing
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in this Article shall affect the right of any Party to such agreement or
instrument to serve process in any other manner permitted by law.
SECTION 13.14. Default Interest. If any Party defaults in the
payment of any of its obligations under this Agreement, such Party shall pay
interest on such defaulted obligation, to the Party to whom such obligation is
owed, in U.S. dollars for the period from (and including) the date of such
default to (but excluding) the date of actual payment of such obligation (after
as well as before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) of 15.0%.
SECTION 13.15. Notices. All notices and other communications to
be given to any Party under this Agreement or any other Operative Document shall
be in writing and any notice shall be deemed given when delivered by hand,
courier or overnight delivery service or three days after being mailed by
certified or registered mail, return receipt requested, with appropriate postage
prepaid, or when received in the form of a telegram or facsimile, and shall be
directed to the address or facsimile number of such Party specified below (or at
such other address or facsimile number as such Party shall designate by like
notice):
(a) If to IBM:
International Business Machines Corporation
Route 52, East Fishkill
Hopewell Junction, NY 12533
Telephone: (914) 892-5050
Telecopy: (914) 892-5541
Attention of John E. Kelly, III
General Manager
With a copy to:
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Telephone: (914) 499-7392
Telecopy: (914) 499-6006
Attention of Gregory C. Bomberger, Esq.
With a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention of William H. Widen, Esq.
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(b) If to the IBM Partner:
MiCrus Holdings Inc.
In care of International Business Machines
Corporation
Route 52, East Fishkill
Hopewell Junction, NY 12533
Telephone: (914) 892-5281
Telecopy: (914) 892-5153
Attention of August N. Franze
With a copy to:
International Business Machines Corporation
Hopewell Junction, NY 12533
Telephone: (914) 892-5020
Telecopy: (914) 892-5358
Attention of John T. Higgins, Esq.
With a copy to:
International Business Machines Corporation
New Orchard Road
Armonk, NY 10504
Telephone: (914)499-7392
Telecopy: (914) 499-6006
Attention of Gregory C. Bomberger, Esq.
With a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention of William H. Widen, Esq.
(c) If to CIRRUS:
CIRRUS Logic Inc.
4210 South Industrial Drive
Austin, TX 78744
Telephone: (512) 912-3337
Telecopy: (512) 912-3136
Attention of David French
With a copy to:
CIRRUS Logic Inc.
3100 West Warren Avenue
Freemont, CA 94538
Telephone: (510) 226-2257
Telecopy: (510) 249-4230
Attention of Glenn C. Jones
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And a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304
Telephone: (650) 813-5600
Telecopy: (650) 494-0792
Attention of David Wilson, Esq.
(d) If to the CIRRUS Partner:
Cirel Inc.
In care of
CIRRUS Logic Inc.
4210 South Industrial Drive
Austin, TX 78744
Telephone: (512) 912-3337
Telecopy: (512) 912-3136
Attention of David French
With a copy to:
CIRRUS Logic Inc.
3100 West Warren Avenue
Freemont, CA 94538
Telephone: (510) 226-2257
Telecopy: (510) 249-4230
Attention of Glenn C. Jones
And a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304
Telephone: (650) 813-5600
Telecopy: (650) 494-0792
Attention of David Wilson, Esq.
(e) If to the Partnership:
MiCrus
1580 Route 52
Hopewell Junction, NY 12533
Attention of Chief Executive officer
ARTICLE XIV
Definitions
The following terms shall have the specified meanings:
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".25 Micron Additional Quarterly Output" means equivalent wafers
manufactured using the .25 micron process, provided to CIRRUS in excess of
CIRRUS' Quarterly Purchase Requirement in amounts not to exceed the following
amounts in each quarter indicated below (such amounts calculated using an RMT
Complexity of 1.28 to 1.0):
.25 Micron
Calendar Quarter Equivalent Wafers
---------------- -----------------
2nd Quarter 2000 3200
3rd Quarter 2000 4480
4th Quarter 2000 4480
".25 Micron Quarterly Allocation" means equivalent wafers
manufactured using the .25 micron process provided to CIRRUS as part of CIRRUS'
Quarterly Purchase Requirement in amounts not to exceed the following amounts in
each quarter indicated below (such amounts calculated using an RMT Complexity of
1.28 to 1.0):
.25 Micron
Calendar Quarter Equivalent Wafers
---------------- -----------------
2nd Quarter 1999 5120
3rd Quarter 1999 5120
4th Quarter 1999 5120
1st Quarter 2000 6400
2nd Quarter 2000 7040
3rd Quarter 2000 7040
4th Quarter 2000 7040
"Accelerated Payment" is defined in Section 4.01(a).
"Accrued .25 Micron Tools" means the assets designated as such on
Schedule 10.04-A.
"Adjusted Share Value" means (i) $32 million (thirty-two million
dollars) plus (ii) 50% (fifty percent) of any Total Share Value in excess of $32
million (thirty-two million dollars), provided that the Adjusted Share Value
shall in no case be in excess of $48 million (forty-eight million dollars).
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by or is under common control with, such
Person; provided, however, that the term Affiliate, (a) when used in relation to
the Partnership, shall not include either Parent or any of its Affiliates and
(b) when used in relation to a Parent or any of its Affiliates, shall not
include the Partnership or any of its Subsidiaries. The term "control"
(including its correlative meanings "controlled by" and "under common control
with") means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Affiliated Partner" means, when used in relation to CIRRUS, the
CIRRUS Partner, and when used in relation to IBM, the IBM Partner.
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"Aggregate Covered Amount" means the sum of each Covered Amount
Per Lease for every Enumerated Lease; provided that under no circumstances shall
such amount exceed $264 million.
"Burdensome Condition" means, with respect to any proposed
transaction, any action taken, or credibly threatened, by any Governmental
Authority or other Person to challenge the legality of such proposed
transaction, including (i) the pendency of a governmental investigation (formal
or informal), (ii) the institution of a suit or the threat thereof (A) seeking
to restrain, enjoin or prohibit the consummation of such transaction or part
thereof, to place any condition or limitation upon such consummation or to
invalidate, suspend or require modification of any provision of any Operative
Document or (B) challenging the acquisition by IBM of the CIRRUS Partner's
interest in the Partnership, (iii) an order by a court of competent jurisdiction
having any of the consequences described in (ii)(A) or (ii)(B) above, or placing
any conditions or limitations upon such consummation that are unreasonably
burdensome in the reasonable judgment of the applicable Person or (iv) the
issuance of any subpoena, civil investigative demand or other request for
documents and information that is unreasonably burdensome in the reasonable
judgment of the applicable Person.
"Business Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York or California) on
which banks are open for business in New York, New York and San Francisco,
California.
"CIRRUS" means CIRRUS Logic Inc., a Delaware corporation.
"CIRRUS Change of Control" means the occurrence of any of the
following events:
(a) if any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any successor provisions to either of the foregoing),
including any group acting for the purpose of acquiring, holding, voting or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, except that a person will be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of 35% or more of the total voting power of the voting stock of
CIRRUS (for purposes of this clause (a), such person or group shall be deemed to
beneficially own any voting stock of a corporation held by any other corporation
(the "parent corporation") so long as such person or group beneficially owns,
directly or indirectly, in the aggregate a majority of the total voting power of
the voting stock of such parent corporation); or
(b) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets of
CIRRUS, considered as a whole (other than a disposition of such assets as an
entirety or virtually as an entirety to a wholly-owned Subsidiary of CIRRUS)
shall have occurred, or CIRRUS merges,
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consolidates or amalgamates with or into any other person or any other person
merges, consolidates or amalgamates with or into CIRRUS, in any such event
pursuant to a transaction in which the outstanding voting stock of CIRRUS is
reclassified into or exchanged for cash, securities or other property, other
than any such transaction where:
(1) the outstanding voting stock of CIRRUS is reclassified into
or exchanged for other voting stock of CIRRUS or for voting stock of the
surviving corporation, and
(2) the holders of the voting stock of CIRRUS immediately prior
to such transaction own, directly or indirectly, not less than a
majority of the voting stock of CIRRUS or the surviving corporation
immediately after such transaction and in substantially the same
proportion as before the transaction; or
(c) the shareholders of CIRRUS shall have approved any plan of
liquidation or dissolution of CIRRUS.
"CIRRUS-Guaranteed Leases" means the leases indicated as such on
Annex I.
"CIRRUS Partner" means Cirel Inc., a California corporation.
"Claim" means any claim, action, complaint, cause of action,
judgment, liability, obligation, damages, debt, demand or suit, at law or in
equity.
"Closing" means the closing of the transactions described in
Section 7.01 of this Agreement.
"Closing Date"means July 10, 1999, or if all the conditions set
forth in Article VIII of this Agreement have not been satisfied or waived by
that date, as promptly as practicable after the satisfaction or waiver of the
remaining conditions; provided, however, that in no event will the Closing Date
be later than August 15, 1999, without the written agreement of both Parents.
"Consideration" is defined in Section 2.02.
"Continuing Enumerated Lease" is defined in Section 4.07.
"Covered Amount Per Lease" means, for any individual Enumerated
Lease, the lesser of (i) the sum of (A) the Scheduled Payments for such
Enumerated Lease from the Cut-off Date through December 31, 2000, plus (B) the
Termination Payment for such Enumerated Lease at December 31, 2000, minus (C)
the sum of all Scheduled Payments on such Enumerated Lease that were made by
either the Partnership or IBM after the Cut-off Date and (ii) the amount
actually paid by the Partnership or IBM to terminate all obligations under such
Enumerated Lease.
"Current CIRRUS Stock Price" means, for any date indicated, the
average closing price of CIRRUS common stock on the Nasdaq National Market for
the 20 (twenty) Business Days preceding such date.
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"Cut-off Date" means June 20, 1999.
"Enumerated Lease" means each of the CIRRUS-Guaranteed Leases and
the Jointly-and-Severally-Guaranteed Leases indicated on Annex I.
"equivalent wafer" means a wafer with an RMT Complexity of 1.0.
"Escrow Agent" means State Street Bank and Trust Company of
California, N.A.
"Escrow Release Date" means the earlier of (i) April 3, 2000, or
(ii) the date on which a CIRRUS Change of Control occurs.
"Escrow Release Price Per Share" means either (i) in any case
where the Total Share Value on the Escrow Release Date is less than or equal to
$32 million (thirty-two million dollars), the Total Share Value divided by the
total number of Shares deposited with the Escrow Agent on the Closing Date or
(ii) in any other case, the Adjusted Share Value divided by the number of Shares
actually released to IBM on the Escrow Release Date.
"Excess Payment Obligation" is defined in Section 4.04(e).
"Excluded Assets" means each of the assets set forth on Schedule
10.04-B.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time, consistently applied.
"Governmental Action" means any authorization, consent, approval,
order, waiver, exception, variance, franchise, permission, permit or license of,
or any registration, filing or declaration with, by or in respect of, any
Governmental Authority.
"Governmental Authority" means any Federal, state, local or
foreign governmental Person, authority, agency, court, regulatory commission or
other governmental body, including the Internal Revenue Service and the
Secretary of State of any State, or any stock exchange having competence in the
matter.
"Governmental Rule" means any statute, law, treaty, rule, code,
ordinance, regulation, license, permit, certificate or order of any Governmental
Authority or any judgment, decree, injunction, writ, order or like action of any
court or other judicial or quasi judicial tribunal.
"IBM" means International Business Machines Corporation, a New
York corporation.
"IBM Notice Party" means August N. Franze, at the address
indicated in Section 13.15(b).
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"IBM Partner" means MiCrus Holdings Inc., a Delaware corporation.
"Indebtedness" of any Person means, without duplication, (a) all
obligations (whether present or future, contingent or otherwise, as principal or
surety or otherwise) of such Person in respect of borrowed money or in respect
of deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (f) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise
to be secured by) any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all guarantees by
such Person of Indebtedness of others, (h) all obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real or personal property (or a combination thereof), which
obligations would be required to be classified and accounted for as capital
leases on a balance sheet of such Person prepared in accordance with GAAP, (i)
all obligations of such Person (whether absolute or contingent) in respect of
interest rate swap or protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (j) all
obligations of such Person as an account Party in respect of letters of credit
and bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any partnership (other than the Partnership) in which such
Person is a general partner.
"Indemnified Claim" is defined in Section 12.02(a).
"Indemnified Party" is defined in Section 12.03(a).
"Indemnifying Party" is defined in Section 12.03(a).
"Interest" is defined in Section 5.07.
"Jointly-and-Severally-Guaranteed Leases" means the leases
indicated as such on Annex I.
"Lease Payee" means any lessor, lender, trustee, agent or other
party, together with their permitted successors and assigns, to whom the
Partnership is obligated to make Scheduled Payments or Termination Payments
pursuant to the terms of an Enumerated Lease.
"Lien" means, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital or operating lease or title retention agreement relating to
such asset and (c) in the case of securities, any purchase option, call or
similar right with respect to such securities.
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"Losses" means any and all losses, damages, liabilities, costs,
charges, expenses (including interest, penalties and reasonable attorneys' fees
and expenses), judgments, fines and amounts paid in settlement.
"Major Default" means the occurrence of one or more of the
following:
(a) CIRRUS is more than 60 days in arrears paying any invoice or
invoices in an aggregate amount of $500,000 (five hundred thousand dollars) or
more relating to its take-or-pay obligations hereunder (with the first date of
such arrearage commencing on the 31st day after the date of such invoice) and
remains so for more than five Business Days after receiving notice from IBM of
such arrearage.
(b) The aggregate amount of all unpaid obligations that are five
or more days in arrears exceeds $25 million (twenty-five million dollars) of
obligations from CIRRUS to IBM pursuant to the Operative Documents, the
Participation Agreement, the Partnership Agreement and the Product Purchase
Agreement, and such aggregate amount remains in excess of $25 million for more
than five Business Days after receiving notice from IBM of such arrearage.
(c) With respect to the Shares to be transferred to IBM pursuant
to Article V, (i) IBM does not receive the requisite amount of Shares within 20
Business Days of the Escrow Release Date, (ii) CIRRUS does not make any cash
payment that it is required to make with respect to the Shares within 20
Business Days of the date such payment becomes due and payable or (iii) CIRRUS
fails to fulfill its obligation to either (A) cause a Shelf Registration
Statement to be declared effective and to remain continuously effective pursuant
to the Registration Agreement and Section 5.05 hereof or (B) make the payment
described in Section 5.05(b) hereof.
(d) IBM is deprived of, or CIRRUS or its successors or assigns
repudiates or recovers or seeks to repudiate or recover, any material element
(regardless of the dollar amount thereof) of the Consideration paid to IBM
pursuant to this Agreement.
(e) CIRRUS or its successors or assigns repudiates or seeks to
repudiate any obligation to purchase Products hereunder.
(f) CIRRUS fails to pay its share, pursuant to the terms of the
Partnership Agreement and the Participation Agreement (subject to any dispute
resolution mechanisms contained therein), of any obligation or claim in excess
of $500,000 (five hundred thousand dollars) relating to actions by the
Partnership, any part of which actions took place prior to the Closing Date,
within 20 Business Days of IBM's request for such payment.
"Minimum Share Price" is defined in Section 5.06(b).
"Monthly Production Par Value" means, for any month in a given
calendar quarter, an amount equal to (i) the number of production
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days in such month multiplied by (ii) the quotient of (A) the applicable
Quarterly Purchase Requirement divided by (B) the number of production days in
such quarter.
"Monthly Settlement Process" means the process by which CIRRUS
settles its outstanding amounts owing under Article VI hereof, as such process
was in effect immediately prior to the execution hereof and as more fully set
forth on Annex II hereto.
"Monthly Shortfall" means (a) during any month for which CIRRUS
has failed to timely provide a Monthly Shortfall Notice, the amount, if any, by
which 90% of the Monthly Production Par Value for such month exceeds the number
of Products actually purchased by CIRRUS during such month, or (b) for any month
in which CIRRUS has timely provided a Monthly Shortfall Notice, the amount, if
any, by which 100% of the Reduced Monthly Purchase Forecast such month exceeds
the number of Products actually purchased by CIRRUS during such month.
"Monthly Shortfall Notice" means a written notice provided to the
Partnership with a copy to IBM by CIRRUS (a) stating that CIRRUS intends to
purchase fewer than 90% of the Monthly Production Par Value for such future
month and (b) containing a Reduced Monthly Purchase Forecast.
"Operative Documents" means this Agreement, and each of the
documents executed on the Closing Date pursuant hereto, together with all
annexes, schedules and exhibits thereto.
"Participation Agreement" means the Participation Agreement dated
as of September 1, 1994, among IBM, the IBM Partner, CIRRUS and the CIRRUS
Partner, as the same has been amended from time to time in accordance with the
provisions thereof.
"Partner" means each of the CIRRUS Partner and the IBM Partner,
each a general partner of the Partnership, and any other Person who becomes a
partner in the Partnership in accordance with the terms of the Partnership
Agreement.
"Partnership" means MiCrus, a New York general partnership,
formed by the CIRRUS Partner and the IBM Partner pursuant to the Partnership
Agreement.
"Partnership Agreement" means the Partnership Agreement dated as
of the September 30, 1994, between the CIRRUS Partner and the IBM Partner, as
the same has been amended from time to time in accordance with the provisions
thereof.
"Party" means any Parent, Affiliated Partner or the Partnership
and "Parties" means more than one Party, but need not, unless the context
otherwise requires, mean every Party.
"Person" means any individual, firm, company, corporation,
unincorporated association, partnership, trust, joint venture, Governmental
Authority or other entity, and shall include any successor (by merger or
otherwise) of such entity.
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"physical wafer" means any silicon wafer shipped to IBM or CIRRUS
by the Partnership
"Product" has the meaning ascribed to it in the Product Purchase
Agreement.
"Product Purchase Agreement" means the Agreement to Purchase
Products, entered into in connection with the formation of the Partnership,
between CIRRUS and the Partnership pursuant to which CIRRUS agreed to purchase
Products from the Partnership, as the same has been amended from time to time in
accordance with the provisions thereof.
"Quarterly Purchase Requirement" means, for any given quarter,
the number of equivalent wafers indicated below for such calendar quarter:
CALENDAR QUARTER EQUIVALENT WAFERS
---------------- -----------------
2nd Quarter, 1999 17,500
3rd Quarter, 1999 17,500
4th Quarter, 1999 17,500
1st Quarter, 2000 22,000
2nd Quarter, 2000 24,000
3rd Quarter, 2000 27,000
4th Quarter, 2000 27,000
"Quarterly Shortfall" means, for any given quarter, the amount,
if any, by which the applicable Quarterly Purchase Requirement during such
quarter exceeds the number of Products actually purchased by CIRRUS from IBM.
"RMT COMPLEXITY" means the ratio of the raw machine time ("RMT")
of a wafer of the relevant technology to the RMT of a 5A 3LM wafer. RMT shall
continue to be calculated pursuant to the method set forth in that certain 1999
Interim Operating Plan of the Partnership until such time as IBM and CIRRUS
agree to change such method.
"Reduced Monthly Purchase Forecast" means a forecast of the
number of Products that CIRRUS intends to purchase during any future month that
provides for the purchase of fewer Products than 90% of the Monthly Production
Par Value for such month.
"Scheduled Payment" means each monthly or other periodic rental
payment on an Enumerated Lease, as set forth on Annex I.
"Semiconductor Wafer" has the meaning ascribed to it in Appendix
A to the Product Purchase Agreement.
"Shares" is defined in Section 2.02(b).
"Subsidiary" of any Person means any other Person
(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
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(ii) which does not have outstanding shares or securities (as may
be the case in a partnership, joint venture or unincorporated
association), but more than 50% of whose ownership interest representing
the right to make decisions for such other Person is,
now or hereafter owned or controlled, directly or indirectly, by such Person,
but such other Person shall be deemed to be a Subsidiary only so long as such
ownership or control exists; provided, however, that the term Subsidiary as used
in any Operative Document, when used in relation to a Parent or any of its
Affiliates, shall not include the Partnership or any of its Subsidiaries.
"Termination Payment" means any payment (including any
termination premium), other than a Scheduled Payment, on an Enumerated Lease to
terminate all obligations under such Enumerated Lease.
"Total Share Value" is defined in Section 5.03.
"Transfer" means any transfer, sale, assignment, conveyance,
issuance, license, sublicense or other disposal or delivery, including by
merger, consolidation, dividend or distribution, whether made directly or
indirectly, voluntarily or involuntarily, absolutely or conditionally, or by
operation of law or otherwise.
"Transferred Assets" means all assets, other than the Excluded
Assets, currently owned by CIRRUS that remain on the Partnership's premises on
the Closing Date, including the assets listed on Schedule 10.04-A to this
Agreement.
"Weekly Production Par Value" means, for any given week, an
amount equal to (i) the number of production days in such week multiplied by
(ii) the quotient of (A) the Monthly Production Par Value for such month divided
by (B) the number of production days in such month. For weeks spanning two
calendar months, the Weekly Production Par Value shall be calculated ratably by
reference to (x) the Weekly Production Par Value of the week immediately
preceding and succeeding such week and (y) the number of production days in such
week that fall within each month.
"Weekly Shortfall" means, (a) for any week falling within a month
for which CIRRUS has failed to timely provide a Monthly Shortfall Notice, the
amount, if any, by which 90% of the Weekly Production Par Value for such week
exceeds the number of Products actually purchased by CIRRUS during such month,
or (b) for any week falling within a month for which CIRRUS has timely provided
a Monthly Shortfall Notice, the amount, if any, by which that portion of the
Reduced Monthly Purchase Forecast allocable to such week exceeds the number of
Products actually purchased by CIRRUS during such week.
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IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the Parties as of the date first above written.
CIRRUS LOGIC INC.,
by
---------------------------------------
Name:
Title:
INTERNATIONAL BUSINESS MACHINES CORPORATION,
by
---------------------------------------
Name:
Title:
CIREL INC.,
by
---------------------------------------
Name:
Title:
MICRUS HOLDINGS INC.,
by
---------------------------------------
Name:
Title:
MICRUS,
by
---------------------------------------
Name:
Title:
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TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01 Certain Definitions....................................... 1
ARTICLE II
Consideration
SECTION 2.01 Consideration Received by CIRRUS.......................... 2
SECTION 2.02 Consideration Received by IBM............................. 3
ARTICLE III
Partnership Obligations
SECTION 3.01 Assignment of Partnership Obligations..................... 4
SECTION 3.02 Post-Closing Liabilities.................................. 5
SECTION 3.03 CIRRUS Liabilities After December 31, 2000................ 5
SECTION 3.04 Effect of Lapse of Waiver................................. 5
SECTION 3.05 Partnership Taxes......................................... 6
ARTICLE IV
IBM Supplemental Payment Obligations
SECTION 4.01 Lease Payments and Termination Fees....................... 6
SECTION 4.02 Notice and Referral of Lease Payees' Demands.............. 7
SECTION 4.03 Waiver of Subrogation and Contribution.................... 7
SECTION 4.04 Limitation on Lease Payments and Termination Fees......... 7
SECTION 4.05 Winding Down.............................................. 9
SECTION 4.06 Prohibition on Amendments................................. 9
SECTION 4.07 CIRRUS Guarantees on Enumerated Leases.................... 9
ARTICLE V
Stockholder's Rights
SECTION 5.01 Escrow of Shares.......................................... 10
SECTION 5.02 Escrow Agreement.......................................... 10
SECTION 5.03 Release of Escrowed Shares................................ 10
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SECTION 5.04 Undervalued Shares........................................ 11
SECTION 5.05 Effective Shelf Registration Statement.................... 11
SECTION 5.06 CIRRUS Cash Option on Shares.............................. 12
SECTION 5.07 Price Protection.......................................... 13
SECTION 5.08 Shareholder Agreement..................................... 13
SECTION 5.09 Notice of CIRRUS Change of Control........................ 14
ARTICLE VI
Substitute Product Purchase Requirements
SECTION 6.01 Waiver of Certain Purchase Requirements................... 14
SECTION 6.02 Existing Purchase Requirements 15
SECTION 6.03 Waiver and Substitution of Purchase Requirements.......... 15
SECTION 6.04 Applicable Provisions of Product Purchase Agreement....... 19
SECTION 6.05 Inapplicable Provisions of Product Purchase Agreement..... 19
SECTION 6.06 Product Purchases after 2000.............................. 20
SECTION 6.07 Conditions to Performance................................. 20
SECTION 6.08 Post-Closing Reconciliation............................... 20
SECTION 6.09 Remedies.................................................. 20
ARTICLE VII
Closing
SECTION 7.01 Closing................................................... 21
SECTION 7.02 Time and Place of Closing................................. 22
ARTICLE VIII
Conditions to Closing
SECTION 8.01 Performance............................................... 23
SECTION 8.02 Authorization, Execution and Delivery of Operative
Documents................................................. 23
SECTION 8.03 No Default................................................ 23
SECTION 8.04 Consents, Approvals, etc.; Burdensome Conditions.......... 23
SECTION 8.05 Governmental Rules........................................ 24
SECTION 8.06 Standard Closing Documents................................ 24
SECTION 8.07 Representations and Warranties............................ 25
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SECTION 8.08 Proceedings............................................... 25
SECTION 8.09 Form of Operative and Other Documents..................... 25
SECTION 8.10 UCC Searches and Release of Liens......................... 25
ARTICLE IX
Representations and Warranties of Each Parent and
its Affiliated Partner
SECTION 9.01 Organization, Ownership Interest, etc..................... 26
SECTION 9.02 Authorization; No Conflict................................ 26
SECTION 9.03 Enforceability............................................ 27
SECTION 9.04 Proceedings............................................... 27
SECTION 9.05 Litigation................................................ 28
SECTION 9.06 No Transfer Taxes......................................... 28
ARTICLE X
Representations and Warranties of CIRRUS and
the CIRRUS Partner
SECTION 10.01 Organization, Ownership Interest, etc..................... 28
SECTION 10.02 Proceedings............................................... 28
SECTION 10.03 Special Purpose Representation as to CIRRUS Partner....... 28
SECTION 10.04 List of Transferred Assets; Title to Transferred Assets... 29
SECTION 10.05 CIRRUS Shares............................................. 29
SECTION 10.06 Litigation................................................ 29
SECTION 10.07 Compliance with Other Instruments......................... 30
SECTION 10.08 No Defaults Under Lease Guarantees........................ 30
SECTION 10.09 No Special New York Obligations........................... 30
ARTICLE XI
Covenants
SECTION 11.01 Covenants................................................. 30
SECTION 11.02 Further Assurances........................................ 31
SECTION 11.03 Public Announcements...................................... 31
SECTION 11.04 Employee Matters.......................................... 32
SECTION 11.05 Special Purpose Covenant.................................. 32
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SECTION 11.06 Information Provided to Lessors........................... 33
ARTICLE XII
Indemnification
SECTION 12.01 Indemnification........................................... 33
SECTION 12.02 Indemnification after December 31, 2000................... 33
SECTION 12.03 Assertion of Claims....................................... 35
ARTICLE XIII
Miscellaneous
SECTION 13.01 Survival.................................................. 35
SECTION 13.02 Legal Disputes; Attorneys' Fees........................... 36
SECTION 13.03 Assignment................................................ 36
SECTION 13.04 Amendment and Waiver...................................... 36
SECTION 13.05 Remedies.................................................. 37
SECTION 13.06 Table of Contents; Headings............................... 37
SECTION 13.07 Parties in Interest; Limitation on Rights of Others....... 37
SECTION 13.08 Counterparts; Effectiveness............................... 37
SECTION 13.09 Entire Agreement.......................................... 37
SECTION 13.10 Construction.............................................. 38
SECTION 13.11 Governing Law............................................. 38
SECTION 13.12 Waiver of Jury Trial and Certain Damages.................. 38
SECTION 13.13 Jurisdiction; Consent to Service of Process............... 39
SECTION 13.14 Default Interest.......................................... 40
SECTION 13.15 Notices................................................... 40
ARTICLE XIV
Definitions................................................ 43
Schedule 2.02(a) IBM Wire Transfer Instructions
Schedule 3.03 Terminated Agreements
Schedule 10.01 Lien Search Locations
Schedule 10.04-A Transferred Assets; Accrued .25 Micron Tools
Schedule 10.04-B Excluded Assets
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Annex I Enumerated Leases
Annex II Monthly Settlement Process
Annex III Form of Registration Agreement
Annex IV Form of Shareholder Agreement
Annex V Form of Escrow Agreement
Annex VI Form of Release of Accruals
Annex VII Form of Assignment, Assumption and Consent
Annex VIII Form of Partnership Assignment
Annex IX Form of Bill of Sale
Annex X Form of IBM Letter to Lessors
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