EXHIBIT 2.1
AGREEMENT OF MERGER (this "AGREEMENT"), dated July 18, 2001, by and
among Cirrus Logic, Inc., a Delaware corporation ("CIRRUS"), Target Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Cirrus
("ACQUISITION SUB"), LuxSonor Semiconductors, Inc., a California corporation
(the "COMPANY"), and all of the shareholders of the Company, identified in
Exhibit A attached hereto and represented by Harold Liang in his capacity as the
appointed representative and attorney-in-fact of such shareholders (the
"SHAREHOLDERS' REPRESENTATIVE").
W I T N E S S E T H:
WHEREAS, Cirrus desires to acquire the Company and Company desires to be
acquired by Cirrus;
WHEREAS, it is intended that the acquisition be consummated through a
merger of the Acquisition Sub with and into the Company, with the Company being
the surviving entity, pursuant to the terms and conditions of this Agreement
(the "MERGER") and that such transaction be treated for federal income tax
purposes as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "CODE");
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that the Merger is advisable and is fair to, and in the best interest
of, the Company, (ii) adopted and approved the Merger and this Agreement and
(iii) resolved to recommend that the shareholders of the Company (the
"SHAREHOLDERS") adopt and approve the Merger and this Agreement;
WHEREAS, Cirrus and Acquisition Sub are unwilling to enter into this
Agreement unless Shareholders holding in the aggregate at least a majority
(50.1%) of the outstanding shares of each of the Company Common Stock and the
Company Preferred Stock (cumulatively, the "COMPANY SHARES") on a fully diluted
basis (the "PRINCIPAL SHAREHOLDERS") within two (2) business days from the
execution and delivery of this Agreement, enter into a voting agreement with
Cirrus and Acquisition Sub (the "VOTING RIGHTS AGREEMENT") pursuant to which
such Principal Shareholders agree to vote all Company Shares owned by such
Principal Shareholders in favor of the Merger; and
WHEREAS, the Shareholders have agreed to indemnify Cirrus, Acquisition
Sub and certain others in respect of certain liabilities arising out of the
Company's representations and warranties hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS, INTERPRETATION AND CONSTRUCTION
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"24/7" shall have the meaning set forth in Section 3.17(k).
"2001 BUDGET" shall have the meaning set forth in Section 3.18(a)(iii).
"AAA" shall have the meaning set forth in Section 13.3.
"ACQUISITION SUB" shall have the meaning set forth in the Preamble.
"AFFILIATE" of any Person means any Person directly or indirectly
controlling, controlled by, or under common control with, such Person; provided
that, for the purposes of this definition, "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and polices of
such Person, whether through the ownership of voting securities or partnership
interests, by contract or otherwise.
"AGREEMENT" shall have the meaning set forth in the Preamble.
"ANTITRUST AUTHORITY" means the Federal Trade Commission, the Antitrust
Division of the United States Department of Justice, the attorneys general of
the several states of the United States and any other Governmental
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Authority having jurisdiction with respect to the transactions contemplated
hereby pursuant to applicable Antitrust Laws.
"ANTITRUST LAWS" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended and all other
federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
"ASSUMED OPTIONS" shall have the meaning set forth in Section 2.2(b).
"AVERAGE CLOSING PRICE" shall mean the average closing price per share
of Cirrus Common Stock on the NASDAQ National Market in the most recent ten (10)
trading days ending on the second trading day prior to the signing of this
Agreement.
"BOOKS AND RECORDS" shall have the meaning set forth in Section 3.23.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which,
in the State of California or Texas, shall be a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
"CERTIFICATES" means the stock certificates representing the Company
Shares.
"CERTIFICATES OF MERGER" shall have the meaning set forth in Section
2.1.
"CGCL" means the California General Corporation Law.
"CIRRUS" shall have the meaning set forth in the Preamble.
"CIRRUS COMMON STOCK" means the common stock of Cirrus, par value $0.001
per share.
"CIRRUS DISCLOSURE LETTER" shall have the meaning set forth in
Section 4.
"CIRRUS INDEMNITEES" shall have the meaning set forth in Section
11.2(a).
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"CLAIM NOTICE" shall have the meaning set forth in Section 11.3.
"CLOSING" shall have the meaning set forth in Section 2.11.
"CLOSING DATE" shall have the meaning set forth in Section 2.11.
"COBRA" shall have the meaning set forth in Section 3.13(f).
"CODE" shall have the meaning set forth in the Recitals.
"COMMERCIAL SOFTWARE RIGHTS" means packaged commercially available
software programs that are generally available to the public through retail
dealers in computer software.
"COMPANY" shall have the meaning set forth in the Preamble.
"COMPANY COMMON STOCK" means the common stock of the Company, without
par value.
"COMPANY DISCLOSURE LETTER" shall have the meaning set forth in Section
3.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.6.
"COMPANY INDEMNITEES" shall have the meaning set forth in Section
11.2(b).
"COMPANY PREFERRED STOCK" means the preferred stock of the Company,
without par value.
"COMPANY SHARES" shall have the meaning set forth in the Recitals.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
6.3.
"CONSENTS" shall have the meaning set forth in Section 3.5.
"CONTRACTS" shall have the meaning set forth in Section 3.18(b).
"DGCL" means the Delaware General Corporation Law.
"DISSENTING SHARES" shall have the meaning set forth in Section 2.3.
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"EFFECTIVE TIME" shall have the meaning set forth in Section 2.1.
"EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section
3.13(a).
"EMPLOYMENT AGREEMENT" shall have the meaning set forth in Section
8.1(e).
"EMPLOYMENT AGREEMENT ADDENDA" means the certain addenda to the
Employment Agreements between Cirrus and each of Harold Liang, Mark Rygh, Ed
Miller, Alex Kipnis and Jeff Fratus, to be delivered in accordance with Section
8.1(e).
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, mortgage, deed of trust, right-of-way, encumbrance
or adverse interest of any kind.
"ERISA" shall have the meaning set forth in Section 3.13(a).
"ESCROW AGENT" shall have the meaning set forth in the Escrow Agreement.
"ESCROW AGREEMENT" shall mean the escrow agreement duly executed by
Cirrus, the Shareholders' Representative on behalf of the Shareholders and the
Escrow Agent substantially in the form attached hereto as Exhibit G.
"EXCHANGE PERCENTAGE" as to any specified class of Company security
means the percentage of the Merger Consideration with respect to Company
securities within such class, as set forth in Schedule 2.2., subject to
adjustment as provided in Section 2.3(b).
"FORMER PLANS" shall have the meaning set forth in Section 3.13(c).
"GAAP" means U.S. generally accepted accounting principles consistently
applied, as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean (i) the United States of America or
any other country or nation, (ii) any state, commonwealth, territory or
possession of the United States of America or any other country or nation, and
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any political subdivision thereof, including counties, municipalities and the
like, and (iii) any agency, authority or instrumentality of any of the
foregoing, including any court, tribunal, department, bureau, commission or
board.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNITEE" shall have the meaning set forth in Section 11.3.
"INDEMNITOR" shall have the meaning set forth in Section 11.3.
"INDEMNITY FUND" shall have the meaning set forth in Section 2.2(c).
"INTELLECTUAL PROPERTY" means property described in any of the following
categories: (i) domestic and foreign patents and patent applications; (ii)
trademarks, service marks and other indicia of origin, pending trademark and
service mark registrations, and intent-to-use registrations or similar
reservations of marks; (iii) registered copyrights and mark works and
applications for registration thereof; (iv) Internet domain name applications
and reservations therefor; (v) URL's and the corresponding Internet sites
(including any content of material accessible or displayed thereon); and (vi)
confidential information not otherwise listed in (i)-(v) above, including,
without limitation, inventions (whether or not patentable), invention
disclosures, moral and economic rights of authors and inventors (however
denominated), technical data, customer lists, corporate and business names,
trade names, trade dress, brand names, know how, formulae, methods (whether or
not patentable), designs, processes, procedures, technology, source codes,
object codes, computer software programs, databases, data collectors,
technology, and other proprietary information or material of any type, in all
cases owned by the Company and/or any of the Subsidiaries or used in connection
with the business of the Company and/or any of the Subsidiaries (and all
derivatives, improvements and refinements of any of the foregoing whether or not
recorded) together with all goodwill associated with any of the foregoing, and
all agreements and other rights relating to intellectual property used by the
Company and/or any of the Subsidiaries.
"IRS" shall have the meaning set forth in Section 3.13(j).
"KEY EMPLOYEES" shall have the meaning set forth in Section 2.2(d).
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"LOSSES" shall have the meaning set forth in Section 11.2(c).
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in Section
3.1.
"MERGER" shall have the meaning set forth in the Recitals.
"MERGER CONSIDERATION" means sixty-five million dollars ($65,000,000),
subject to adjustment as provided in Section 2.3(b).
"OPTION PLAN" shall have the meaning set forth in Section 2.2(b).
"PERMITS" shall have the meaning set forth in Section 3.11(b).
"PERSON" means a natural person, partnership, joint venture,
corporation, trust, limited liability company, unincorporated organization,
group, entity or Governmental Authority.
"PRINCIPAL SHAREHOLDERS" shall have the meaning set forth in the
Recitals.
"PRODUCTS" means all products and services sold, licensed, developed or
otherwise provided by the Company to customers or other third parties, or
supported or tested by the Company.
"RETURNS" shall have the meaning set forth in Section 3.15(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
"SERVER" shall have the meaning set forth in Section 3.17(k).
"SHAREHOLDERS" shall have the meaning set forth in the Recitals.
"SHAREHOLDERS' REPRESENTATIVE" shall have the meaning set forth in the
Preamble.
"SITES" shall have the meaning set forth in Section 3.17(k).
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"SUBSIDIARY" means any Person in which the Company owns or controls,
directly or indirectly, at least a majority in voting power of the outstanding
equity securities or other interests, or any Person of which the Company is a
general partner or has an equivalent or similar power or role to direct or cause
the direction of the management and policies of such Person.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 2.1.
"TAXES" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges including, without limitation, all federal, state,
local, foreign and other income, franchise, profits, capital gains, capital
stock, transfer, sales, use, occupation, property, excise, severance, windfall
profits, stamp, license, payroll, withholding and other taxes, assessments,
charges, duties, fees, levies or other governmental charges of any kind
whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of any return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and includes any liability
for such amounts as a result of being a member of a combined, consolidated,
unitary or affiliated group.
"TECHNOLOGY SYSTEMS" shall have the meaning set forth in Section
3.25(a).
"TRADE CREDIT AGREEMENT" shall mean the trade credit agreement dated
June 22, 2001 by and between Cirrus and the Company.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement, the
Voting Rights Agreement, the Employment Agreements, the Employment Agreement
Addenda, and the various other agreements, certificates, and documents provided
for herein and therein.
"URL" means Uniform Resource Locator.
"VOTING RIGHTS AGREEMENT" shall have the meaning set forth in the
Recitals.
"WORKING CAPITAL" means short-term assets in excess of short-term
liabilities as determined in accordance with GAAP.
"YEAR 2000 COMPLIANT" shall have the meaning set forth in Section
3.25(a).
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SECTION 1.2 INTERPRETATION. Unless the context otherwise requires:
(a) references to a party shall include such party's heirs,
successors and permitted assigns and transferees of such party's rights and/or
obligations;
(b) references to this Agreement or any other agreement, document or
instrument is a reference to this Agreement or that other agreement, document or
instrument as amended, varied, novated or substituted from time to time;
(c) references to Sections, Schedules and Exhibits are to sections,
schedules and exhibits to this Agreement;
(d) headings are included for convenience only and shall not affect
the interpretation of this Agreement;
(e) words importing the singular number shall include the plural and
vice versa, and words importing any gender shall include all genders; and
(f) "including" means including, without limitation.
SECTION 1.3. CONSTRUCTION. No rule of construction shall be applied
to the disadvantage of a party because that party was responsible for or
participated in the preparation of this Agreement or any part of it.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. On the terms and subject to the conditions
set forth in this Agreement, Acquisition Sub shall merge with and into the
Company (with such merger referred to herein as the Merger) at the Effective
Time (as defined in this Section 2.1). From and after the Effective Time, the
separate corporate existence of Acquisition Sub shall cease and the Company
shall continue as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). The "EFFECTIVE TIME" shall be the time as is specified in the
certificates of merger attached hereto as Exhibit B (the "CERTIFICATES OF
MERGER") and other appropriate documents prepared in
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accordance with the relevant provisions of each of the CGCL and the DGCL and
filed by the Company and Acquisition Sub with the Secretary of State of the
State of California and with the Secretary of State of the State of Delaware.
The Merger shall have the effects of a merger as set forth in the CGCL and the
DGCL. The Surviving Corporation shall continue to be governed by the laws of the
State of California, and the separate corporate existence of the Surviving
Corporation with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. Without limiting the generality of the
foregoing, all the properties, rights, privileges, powers and franchises of the
Company and the Acquisition Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Acquisition Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.2. CONVERSION AND ASSUMPTION OF COMPANY SECURITIES.
(a) COMPANY SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any party, each Company Share issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares and Company Shares held in the Company's treasury) shall be converted
into and represent the right to receive (i) such number of shares of Cirrus
Common Stock as equals the product of the applicable Exchange Percentage set
forth in Schedule 2.2 attached hereto for the class of such Company Share
multiplied by a fraction equal to: (A) 83.664365% of the Merger Consideration,
over (B) the Average Closing Price; and (ii) such cash amount as equals the
product of the applicable Exchange Percentage set forth in Schedule 2.2 hereto
for the class of such Company Share multiplied by 16.335635% of the Merger
Consideration.
(b) COMPANY OPTIONS. At the Effective Time, each issued and
outstanding option to purchase or otherwise acquire Company Shares (whether or
not vested) ("ASSUMED OPTIONS") issued pursuant to the Company's 1995 Stock
Option Plan, dated November 4, 1995 (the "OPTION PLAN") shall be assumed by
Cirrus in connection with the Merger. Each Assumed Option so assumed by Cirrus
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan immediately prior to the Effective
Time (including, without limitation, any vesting schedule or repurchase rights,
but not taking into account any changes thereto, including the acceleration
thereof, provided for in the Option Plan resulting from the Merger), except that
(i) each Assumed Option will be exercisable for that number of shares of Cirrus
Common Stock equal to the product of
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the applicable Exchange Percentage set forth in Schedule 2.2 attached hereto for
such Assumed Option multiplied by a fraction equal to: (A) the product of the
Merger Consideration multiplied by the number of Company Shares that were
issuable upon exercise of such Assumed Option immediately prior to the Effective
Time, over (B) the Average Closing Price, rounded down to the nearest whole
number of shares of Cirrus Common Stock, and (ii) the per share exercise price
for the shares of Cirrus Common Stock issuable upon exercise of such Assumed
Option will be equal to the quotient determined by dividing: (A) the product of
the exercise price per Company Share at which such Assumed Option was
exercisable immediately prior to the Effective Time multiplied by that number of
Company Shares that were issuable upon the exercise of the Assumed Option prior
to the Effective Time, over (B) that number of shares of Cirrus Common Stock for
which the Assumed Option will be exercisable, rounded up to the nearest whole
cent.
(c) PAYMENT OF THE MERGER CONSIDERATION. Cirrus shall instruct the
Shareholders' Representative to deliver to the Shareholders as provided in this
Section 2.2(c) and Section 2.2(d) promptly following the Closing in accordance
with Section 9.2(a) the shares of Cirrus Common Stock into which the Company
Shares are converted pursuant to Section 2.2(a). Cirrus shall deliver at the
Closing the cash portion of the Merger Consideration (including all earnings
thereof, the "INDEMNITY FUND", but excluding the cash payment for fractional
shares pursuant to Section 2.3) to the Escrow Agent, which shall be held in
escrow subject to the Escrow Agreement as the sole recourse for the
Shareholders' indemnity obligations hereunder.
(d) HOLDBACK. Notwithstanding anything in this Section 2.2 to the
contrary, Cirrus shall instruct the Shareholders' Representative to transfer to
each of Harold Liang, Mark Rygh, Ed Miller, Alex Kipnis and Jeff Fratus
(collectively, the "KEY EMPLOYEES") fifty percent (50%) of the shares of Cirrus
Common Stock to which they are entitled pursuant to the first sentence of
Section 2.2(c). The Key Employees shall be entitled to receive the remaining
fifty percent (50%) of the shares of Cirrus Common Stock to which they would
otherwise be entitled pursuant to the first sentence of Section 2.2(c) as
provided in their respective Employment Agreement Addenda delivered to Cirrus
pursuant to Section 8.1(e). The Key Employees shall have the right to receive
the cash equivalent of such Cirrus Common Stock, as provided in their respective
Employment Agreement Addenda, based upon the Average Closing Price, if all Key
Employees give written notice to such effect to Cirrus within fifteen (15) days
from the date of this Agreement, together with an opinion of counsel to the
Shareholders, reasonably satisfactory to Cirrus,
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that the implementation of such an election would not affect the status of the
Merger as a "reorganization" within the meaning of Section 368 of the Code.
(e) TREASURY STOCK. Each Company Share held in the Company's
treasury immediately prior to the Effective Time shall be cancelled and retired
without payment of any consideration therefor.
(f) ACQUISITION SUB STOCK. Each share of common stock of the
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and thereafter evidence one share of common stock of the
Surviving Corporation.
(g) RESTRICTIONS ROLLOVER. If any Company Shares outstanding
immediately prior to the Effective Time are subject to a repurchase option, risk
of forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company, then, except to the extent
otherwise provided in such agreement, the shares of Cirrus Common Stock issued
in exchange for such Company Shares will also be subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Cirrus Common Stock may be marked with an appropriate legend to
such effect.
SECTION 2.3. DISSENTING SHARES. (a) For purposes of this Agreement,
"DISSENTING SHARES" means Company Shares held as of the Effective Time by a
Shareholder who has not voted such Company Shares in favor of this Agreement and
the Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with the CGCL and not effectively withdrawn or forfeited
prior to the Effective Time. Dissenting Shares shall not be converted into or
represent the right to receive the Merger Consideration, unless prior to the
Effective Time such Shareholder shall have forfeited such Shareholder's right to
appraisal under the CGCL or withdrawn, with the consent of the Company, such
Shareholder's demand for appraisal. If such Shareholder has so forfeited or
withdrawn such Shareholder's right to appraisal of Dissenting Shares, then as of
the occurrence of such event, such Shareholder's Dissenting Shares shall cease
to be Dissenting Shares and shall be entitled to participate in the Merger.
(b) APPRAISAL NOTICE. The Company shall give Cirrus (i) prompt
notice of any written demands for appraisal of any Company Shares, withdrawals
of such demands, and any other instruments that relate to such demands received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with
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respect to demands for appraisal under the CGCL. The Company shall not, except
with the prior written consent of Cirrus, make any payments with respect to any
demands for appraisal of Company Shares or offer to settle or settle any such
demands. At the Closing, the Merger Consideration shall be reduced to the extent
of the aggregate value of the Cirrus Shares and cash to which the Dissenting
Shares would otherwise be entitled pursuant to Section 2.2(a) if such Dissenting
Shares had participated in the Merger, and the applicable Exchange Percentage(s)
shall be proportionately adjusted to reflect such reduction. If and to the
extent that the Dissenting Shares receive an appraised value in excess of the
amount by which the Merger Consideration is decreased, Cirrus shall be
reimbursed for such excess amount from the Indemnity Fund.
SECTION 2.4. FRACTIONAL SHARES. No certificates or script
representing fractional shares of Cirrus Common Stock shall be issued to
Shareholders upon conversion of Company Shares into shares of Cirrus Common
Stock in the Merger, and such Shareholders shall not be entitled to any voting
rights, rights to receive any dividends or distributions or other rights as a
stockholder of Cirrus with respect to any fractional shares of Cirrus Common
Stock. In lieu of any such fractional shares, Cirrus shall transfer to each
Shareholder, otherwise entitled to receive a fraction of a share of Cirrus
Common Stock (after aggregating all fractional shares of Cirrus Common Stock to
which such Shareholder otherwise would be entitled) in the Merger, cash (rounded
to the nearest whole cent) without interest, in an amount equal to the product
obtained by multiplying such fraction by the Average Closing Price.
SECTION 2.5. DIVIDENDS. No dividends or other distributions with
respect to shares of Cirrus Common Stock with a record date on or after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Cirrus Common Stock represented thereby by reason of the
conversion of shares of Company Shares pursuant to Section 2.2(a) hereof and no
cash payment in lieu of fractional shares of Cirrus Common Stock shall be paid
to any such holder pursuant to Section 2.4 hereof until such Certificate is
surrendered in accordance with this Agreement. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid, without interest, to the Person in whose name the shares of Cirrus Common
Stock represented by such certificate are registered at the time of such
surrender, the amount of any cash payable in lieu of fractional shares of Cirrus
Common Stock to which such holder is entitled pursuant to Section 2.4 hereof and
the proportionate amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to shares of Cirrus
Common Stock.
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SECTION 2.6. WITHHOLDING RIGHTS. Cirrus shall be entitled to deduct
and withhold from the consideration otherwise payable to any Person pursuant to
this Article II such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign laws relating to Taxes. To the extent that amounts are so
withheld by Cirrus, such amounts shall be treated for all purposes of this
Agreement as having been paid to the Shareholders in respect of which such
deduction and withholding was made by Cirrus. Such withholding may be made from
any transfer of shares of Cirrus Common Stock otherwise required to be made
pursuant to Sections 2.2(a), (b), (c) and (d) or in respect of any such
withholding requirement applicable to payment of cash otherwise required to be
made pursuant to such Sections or Section 2.4.
SECTION 2.7. NO FURTHER RIGHTS. From and after the Effective Time,
other than the common stock of the Surviving Corporation pursuant to Section
2.2(f), no Company Shares shall be deemed to be outstanding, and holders of
Certificates shall cease to have any rights with respect thereto, except as
provided herein or by law. The stock transfer books of the Company shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of Company Shares thereafter on the records of the
Company.
SECTION 2.8. ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION.
The Articles of Incorporation of Acquisition Sub as in effect immediately prior
to the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation.
SECTION 2.9. BYLAWS OF THE SURVIVING CORPORATION. The Bylaws of
Acquisition Sub as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation.
SECTION 2.10. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of the Surviving Corporation from and after the Effective
Time shall be as set forth in Schedule 2.10, each to hold such office, subject
to the applicable provisions of the Articles of Incorporation and Bylaws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified.
SECTION 2.11. CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING"), shall take place at 10:00 A.M. at the offices of
White & Case LLP, 3000 El Camino Real, 5 Palo Alto Square, 10th Floor, Palo
Alto, CA 94306 two (2) Business Days after the last of the conditions set forth
in
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Article VIII hereof is satisfied or waived, other than those conditions that by
their nature are to be satisfied at the Closing, or at such other date, time or
place as the parties hereto shall agree in writing. The date on which the
Closing shall occur is herein referred to as the "CLOSING DATE." If the Closing
shall not occur on or before October 12, 2001, then the parties shall have no
further obligation to consummate the transactions contemplated by this Agreement
or otherwise to perform as provided therein, except that (i) all rights of the
parties theretofore accrued hereunder shall remain unaffected and shall be
enforceable as provided herein, and (ii) the obligations of the Company and the
Shareholders provided for in Section 6.3 and the obligations of Cirrus and
Acquisition Sub provided for in Section 7.1 shall continue in force until June
30, 2004.
SECTION 2.12. ADDITIONAL ACTION. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either or both of the
Company and the Acquisition Sub reasonably necessary in order to consummate the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth in the corresponding sections of the disclosure letter delivered by
the Company to Cirrus prior to entering into this Agreement (the "COMPANY
DISCLOSURE LETTER"), the Company hereby represents and warrants to Cirrus and
Acquisition Sub as of the date hereof and as of the Closing Date (except as
otherwise indicated) as follows:
SECTION 3.1. DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. The
Company and each of the Subsidiaries is a corporation or other limited liability
enterprise duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Company and each of the
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified, or
licensed, individually or in the aggregate, would be reasonably
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likely to have an effect (or any development or developments which individually
or in the aggregate could reasonably be expected to result in any effect) that
is materially adverse on the business, properties, assets, liabilities
(contingent or otherwise), financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole, other than any effect (i)
relating to the economy in general or (ii) relating to the industry in which the
Company operates in general and not specifically relating to the Company or to
an action of the Company, that affects the ability of the Company to consummate
the transactions contemplated by the Transaction Documents (a "MATERIAL ADVERSE
EFFECT"). The Company has, prior to the date of this Agreement, made available
to Cirrus complete and correct copies of the Articles of Incorporation and
Bylaws (or similar constitutive documents) for the Company and each of the
Subsidiaries.
SECTION 3.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has
the requisite power and authority to execute and deliver the Transaction
Documents to which it is a party, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Transaction Documents to which the Company is a party, and
the consummation by it of the transactions contemplated thereby, have been duly
authorized and approved by the Company's Board of Directors, and no other action
on the part of the Company, other than the approval of the transactions
contemplated hereby (including the Merger) by the Shareholders in accordance
with applicable law, is necessary to authorize the execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby. Such of the Transaction Documents as have
been executed and delivered by the Company on or prior to the date hereof have
been, and on the Closing Date such other of the Transaction Documents to which
the Company is a party will have been, duly executed and delivered by the
Company and are and will be valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally, and general equitable principles.
SECTION 3.3. CAPITALIZATION. (a) The Company has an authorized
capitalization consisting of (a) 40,000,000 shares of Company Common Stock of
which 10,071,246 shares of Company Common Stock are outstanding as of the date
of this Agreement; and (b) 13,401,903 shares of Company Preferred Stock of which
350,000 shares are designated as Series A, 420,000 shares are designated as
Series B, 3,288,635 are designated as
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Series C, 888,889 are designated as Series D, 621,334 are designated as Series
E, 5,333,045 are designated as Series F and 2,500,000 are designated as Series
G, of which respectively 350,000, 420,000, 3,288,635, 888,889, 621,334,
5,333,045, and 1,350,000 shares are outstanding as of the date of this
Agreement. All outstanding shares of capital stock of the Company and the
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable.
Other than options to acquire 3,807,260 shares of Company Common Stock granted
under the Option Plan, there are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements or commitments, contingent or otherwise, providing for
the purchase, redemption, acquisition, retirement, issuance or sale by the
Company or any of the Subsidiaries of any shares of capital stock of the Company
or any of the Subsidiaries or other securities exchangeable or convertible into
capital stock of the Company or any of the Subsidiaries, and there are no stock
appreciation rights or phantom stock plans outstanding with respect to the
capital stock of the Company or any of the Subsidiaries. There are no rights,
agreements, restrictions or Encumbrances (including without limitation,
preemptive rights, rights of first refusal, rights of first offer, proxies,
voting agreements, voting trusts, registration rights agreements or
shareholders' agreements), whether or not the Company or any of the Subsidiaries
is a party thereto, on or with respect to the Company Shares, pursuant to any
provision of any applicable law, contract or otherwise, on or with respect to
the purchase, sale or voting of any shares of capital stock, whether outstanding
or issuable upon conversion, exchange or exercise of any other security, of the
Company or any of the Subsidiaries. The Company and the Subsidiaries have no
outstanding bonds, debentures, notes or other obligations, the holders of which
have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote).
(b) The stock register of the Company accurately records: (i) the
name and address of each Person owning Company Shares and (ii) the certificate
number of each Certificate evidencing such Company Shares, the number of shares
evidenced by each such certificate, the date of issuance thereof and, in the
case of cancellation of such Certificate, the date of cancellation.
(c) The number of Company Shares set forth opposite the name of each
Shareholder on Schedule 3.3(c) are owned of record and beneficially solely by
such Shareholder free and clear of all Encumbrances.
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SECTION 3.4. SUBSIDIARIES. Set forth in Schedule 3.4 attached hereto
is an accurate and complete list of all Subsidiaries. All of the outstanding
shares of capital stock of each Subsidiary are validly issued, fully paid and
non-assessable and are owned by the Company free and clear of all Encumbrances.
There are no restrictions of any kind which prevent or restrict the payment of
dividends by any of the Subsidiaries.
SECTION 3.5. CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and
delivery by the Company of the Transaction Documents to which it is a party and
the consummation by the Company of the transactions contemplated thereby will
not: (a) violate or conflict with any provision of the Articles of Incorporation
or Bylaws (or similar constitutive documents) of the Company or any of the
Subsidiaries; (b) violate or conflict with any statute, ordinance, rule,
regulation, order or decree of any court or Governmental Authority applicable to
the Company or any of the Subsidiaries or by which any of their respective
properties or assets are or may be bound; (c) require any filing with, or
permit, consent or approval of, or the giving of any notice to, any Governmental
Authority or other Person ("CONSENTS"); or (d) result in a violation or breach
of, conflict with or constitute (with or without due notice or lapse of time or
both) a default under, or result in the creation of any Encumbrance upon any of
the properties or assets of the Company or any of the Subsidiaries under, or
give rise to any obligation, right of termination, cancellation, acceleration,
payment or increase of any obligation or loss of a material benefit under, any
of the terms, conditions or provisions of any agreement, instrument or other
obligation to which the Company or any of the Subsidiaries is a party, or by
which it or any of its properties or assets are or may be bound, except for any
such violations, breaches, conflicts, defaults, Encumbrances, increases or
losses which, individually or in the aggregate, will not have a Material Adverse
Effect.
SECTION 3.6. COMPANY FINANCIAL STATEMENTS. The Company has, prior to
the date of this Agreement, made available to Cirrus true and complete copies of
the Company's unaudited year-end balance sheet for each of the Company's fiscal
years ended December 31, 1998, December 31, 1999 and December 31, 2000, each of
the Company's unaudited balance sheets for the fiscal quarters ended June 30,
September 30 and December 31, 2000, and the Company's unaudited balance sheet as
of March 31, 2001, and the related unaudited statements of operations of the
Company for such fiscal years, quarters and three-month period ended March 31,
2001 (the "COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements
present fairly the consolidated and unconsolidated
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financial position of the Company as of the dates thereof and the results of its
operations for the periods then ended in accordance with GAAP consistently
applied.
SECTION 3.7. NO FORESEEABLE CHANGE. Since January 1, 2001, there have
been no changes with respect to the Company, any of the Subsidiaries or their
businesses that could individually or in the aggregate have a Material Adverse
Effect, other than changes in general economic and business conditions that do
not relate specifically to the Company and the Subsidiaries.
SECTION 3.8. ABSENCE OF CERTAIN CHANGES. Since January 1, 2001, (a)
there has been no material adverse change in the business, assets, liabilities,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company, (b) the business of the Company has been conducted in
all material respects only in the ordinary course consistent with past practice,
and (c) the Company has not taken any of the actions set forth in Section
6.1(b).
SECTION 3.9. TITLE TO PROPERTIES; ENCUMBRANCES. The Company and each
of the Subsidiaries has good, valid and marketable title to, or, in the case of
leased properties and assets, valid leasehold interests in, (a) all of its
tangible properties and assets (real and personal), including, without
limitation, all the properties and assets reflected in the most recent balance
sheet contained in the Company Financial Statements, except for properties and
assets which have been sold or otherwise disposed of in the ordinary course of
business after the date of such balance sheet, and (b) none of the tangible
properties and assets purchased by the Company or any of the Subsidiaries since
such date is subject to any Encumbrance. Schedule 3.9 sets forth a complete and
accurate list of all of the Company's and Subsidiaries' tangible property that
is used in the Company and each of the Subsidiary's businesses as of May 31,
2001 except for properties and assets which have been sold or otherwise disposed
of in the ordinary course of business after such date.
SECTION 3.10. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. All accounts
receivable of the Company and each of the Subsidiaries, whether reflected in the
Company Financial Statements or otherwise, represent sales actually made in the
ordinary course of business, and are current and collectible net of any reserves
shown on the Company Financial Statements (which reserves are adequate and were
calculated consistent with the Company
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and/or the Subsidiary's ordinary business practice). All accounts payable of the
Company and each of the Subsidiaries, whether reflected in the Company Financial
Statements or otherwise, have been duly and properly paid in accordance with
their terms, consistent with the prevailing practice between the Company and/or
the Subsidiary and the relevant trade creditor.
SECTION 3.11. COMPLIANCE WITH LAWS.
(a) LAWS AND DECREES. The Company and the Subsidiaries are in
compliance with all applicable federal, state, local and foreign statutes, laws,
regulations, orders, judgments and decrees, except for failures to comply or
violations which, individually or in the aggregate, have not had, and will not
have, a Material Adverse Effect.
(b) APPROVALS AND LICENSES. The Company and the Subsidiaries hold,
to the extent required by applicable law, all permits, approvals, licenses,
authorizations, certificates, rights, exemptions and orders from Governmental
Authorities (the "PERMITS") that are required for the operation of the business
of the Company and the Subsidiaries as now conducted, and there has not occurred
any default under any such Permit, except for any which, individually or in the
aggregate, have not had, and will not have, a Material Adverse Effect.
SECTION 3.12. LITIGATION. To the best of the Company and each of the
Subsidiaries' knowledge, there is no action, suit, proceeding at law or in
equity, or any arbitration or any administrative or other proceeding by or
before (or any investigation by) any Governmental Authority, pending or
threatened against or affecting the Company or any of the Subsidiaries, or any
of their respective properties or rights. Neither the Company nor any of the
Subsidiaries is subject to any judgment, order or decree entered in any action,
suit or proceeding.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) PLANS. Schedule 3.13 sets forth an accurate and complete list of
each domestic and foreign employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA"), whether or not subject to ERISA, and
each stock option, stock appreciation right, restricted stock, stock purchase,
stock unit, performance share, incentive, bonus,
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profit-sharing, savings, deferred compensation, health, medical, dental, life
insurance, disability, accident, supplemental unemployment or retirement,
employment, severance or salary or benefits continuation or fringe benefit plan,
program, arrangement, agreement or commitment maintained by the Company of any
Affiliate thereof (including, for this purpose and for the purpose of all of the
representations in this Section 3.13, any predecessors to the Company or its
Affiliates and all employers (whether or not incorporated) that would be treated
together with the Company and/or any such Affiliate as a single employer (within
the meaning of Section 414 of the Code) or to which the Company or any Affiliate
thereof contributes (or has any obligation to contribute)), has any liability or
is a party (collectively, the "EMPLOYEE BENEFIT PLANS"). No Employee Benefit
Plan is subject to Title IV of ERISA or the minimum funding standards of Section
302 of ERISA or Section 412 of the Code. Neither the Company nor any of its
Subsidiaries has ever maintained or contributed to, or had any obligation to
contribute to (or borne any liability with respect to) any "multiple employer
plan" (within the meaning of the Code or ERISA) or any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(b) STATUS OF PLANS. Each Employee Benefit Plan (including any
related trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has at all times been
maintained and operated in substantial compliance with its terms and the
requirements of all applicable laws, including, without limitation, ERISA and
the Code. No complete or partial termination of any Employee Benefit Plan has
occurred or is expected to occur. Neither the Company nor any of its
subsidiaries has any commitment, intention or understanding to create, modify or
terminate any Employee Benefit Plan. Except as required to maintain the
tax-qualified status of any Employee Benefit Plan intended to qualify under
Section 401(a) of the Code, no condition or circumstance exists that would
prevent the amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) NO LIABILITIES. There are no liabilities or obligations under
any Employee Benefit Plan or any such plan, program, arrangement, agreement or
commitment previously maintained by the Company or any Affiliate (or any other
entity described in Section 3.13(a)) ("FORMER PLANS") with respect to which
Cirrus could have any liability or obligation (including any successor liability
under the Code or ERISA).
-21-
Neither the Company nor any of its Subsidiaries has incurred any
liability for any tax or excise tax arising under Chapter 43 of the Code, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such liability.
There are no actions, suits, claims or disputes pending, or, to the best
knowledge and belief of the Company and the Subsidiaries, threatened,
anticipated or expected to be asserted against or with respect to any Employee
Benefit Plan or the assets of any such plan (other than routine claims for
benefits and appeals of denied routine claims). No civil or criminal action
brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is
pending, threatened, anticipated, or expected to be asserted against the Company
or any of its Subsidiaries or any fiduciary of any Employee Benefit Plan, in any
case with respect to any Employee Benefit Plan. No Employee Benefit Plan or any
fiduciary thereof has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental agency.
(d) CONTRIBUTIONS. Full payment has been timely made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its subsidiaries is a party, to have
paid as contributions or premiums thereto as of the last day of the most recent
fiscal year of such Employee Benefit Plan ended prior to the date hereof. All
such contributions and/or premiums have been fully deducted for income tax
purposes and no such deduction has been challenged or disallowed by any
governmental entity, and to the best knowledge and belief of the Company and its
Subsidiaries no event has occurred and no condition or circumstance has existed
that could give rise to any such challenge or disallowance. The Company and each
of the Subsidiaries have made adequate provision for reserves to meet
contributions and premiums and any other liabilities that have not been paid or
satisfied because they are not yet due under the terms of any Employee Benefit
Plan, applicable law or related agreements. Benefits under all Employee Benefit
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has, as currently in effect, been
determined to be so qualified by the Internal Revenue Service. Each trust
established in connection with any Employee Benefit Plan which is intended to be
exempt from Federal income
-22-
taxation under Section 501(a) of the Code has, as currently in effect, been
determined to be so exempt by the Internal Revenue Service.
(f) COBRA. The Company and each of its Subsidiaries have complied
with all obligations arising in connection with the transactions contemplated by
this Agreement under Part 6 of Subtitle B of Title I or ERISA and Section 4980B
of the Code ("COBRA").
(g) NO OTHER BENEFITS. No Employee Benefit Plan provides for
post-employment or retiree health, life insurance or other welfare benefits
(except to the extent required by COBRA) Neither the Company nor any of its
Subsidiaries has any unfunded liabilities pursuant to any Employee Benefit Plan
that is not intended to be qualified under Section 401(a) of the Code. No
Employee Benefit Plan holds as an asset any interest in any annuity contract,
guaranteed investment contract or any other investment or insurance contract,
policy or instrument issued by an insurance company that, to the knowledge of
the Company and the Subsidiaries, are or may be the subject of bankruptcy,
conservatorship, insolvency, liquidation, rehabilitation or similar proceedings.
(h) NO TRIGGERING EVENT. The execution of this Agreement and the
consummation of the transactions contemplated hereby do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, which (either alone or upon the occurrence
of any additional or subsequent event) will or may result in any payment,
"parachute payment" (as such term is defined in Section 280G of the Code),
severance, bonus, retirement or job security or similar-type benefit, or
increase any benefits or accelerate the payment or vesting of any benefits to
any employee or former employee or director of the Company or its Affiliates.
(i) NO SEVERANCE BENEFIT. No Employee Benefit Plan provides for the
payment of severance, termination, change in control or similar-type payments or
benefits.
(j) DOCUMENTS. The Company has delivered to Cirrus true and complete
copies of all material documents in connection with each Employee Benefit Plan,
if any, including, without limitation: (i) all Employee Benefit Plans as in
effect on the date hereof, together with all amendments thereto, including, in
the case of any Employee Benefit Plan not set forth in writing, a written
description thereof; (ii) all current summary plan descriptions, summaries of
material modifications, and material communications, (iii) the annual report on
Internal
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Revenue Service ("IRS") Form 5500-series, including any attachments thereto, for
each of the last three plan years, (iv) the most recent actuarial valuation
report, and (v) the most recent IRS determination letter.
SECTION 3.14. EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Each of the
Company and the Subsidiaries is in compliance in all material respects with all
federal, state, foreign, or other applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice; (ii) no
representation question exists respecting the employees of the Company or any of
the Subsidiaries; and (iii) neither the Company nor any of the Subsidiaries has
experienced any unfair labor practice charge or complaint, strike, slowdown,
stoppage or other labor dispute or difficulty during the last three years. No
employee of the Company or any of the Subsidiaries is covered by a collective
bargaining agreement.
SECTION 3.15. TAXES.
(a) TAX RETURNS. The Company and each of the Subsidiaries has timely
filed with the appropriate taxing authorities all federal, state and other
returns, statements, forms and reports for Taxes ("RETURNS") that are required
to be filed by, or with respect to, the Company and the Subsidiaries on or prior
to the Closing Date. The Returns (including any schedule or attachment thereto
or any amendment thereof) reflect all liability for Taxes of the Company and
each of the Subsidiaries for the periods covered thereby. Neither the Company
nor any Subsidiary currently is the beneficiary of any extension of time within
which to file any Return. No claim has ever been made by any jurisdiction where
any of the Company and the Subsidiaries does not file Returns, that the Company
or any Subsidiary is or may be subject to taxation by that jurisdiction.
(b) PAYMENT OF TAXES. Each of the Company and the Subsidiaries has
timely paid all Taxes that are currently due and payable except for those
contested in good faith and for which adequate reserves have been made on the
Company Financial Statements.
(c) OTHER TAX MATTERS.
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(i) Neither the Company nor any of the Subsidiaries has been
the subject of an audit or other examination of Taxes by any
Governmental Authority with respect to any taxable period for which the
statute of limitations has not expired, nor has the Company or any of
the Subsidiaries received any written notices with respect to such
taxable periods relating to any issue which could affect the Tax
liability of the Company or any of the Subsidiaries that has not been
resolved or paid in full.
(ii) Neither the Company nor any of the Subsidiaries has been
included as a member in any "consolidated," "unitary" or "combined"
Return (other than Returns which include only the Company and any or all
of the Subsidiaries) with respect to Taxes for any taxable period for
which the statute of limitations has not expired.
(iii) All Taxes which the Company or any of the Subsidiaries
is or has been required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(iv) There are no tax sharing, allocation, indemnification or
similar agreements or arrangements in effect as between the Company, any
Subsidiary, or any predecessor or Affiliate of any of them and any other
party under which Cirrus or the Company or any of the Subsidiaries could
be liable for any Taxes of any Person.
(v) Neither the Company nor any of the Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 or
any similar provision of the Code or any other corresponding applicable
tax laws by reason of a voluntary change in accounting method initiated
by the Company or any of the Subsidiaries, and neither the Internal
Revenue Service nor any other taxing authority has initiated or proposed
any such adjustment or change in accounting method.
(vi) Neither the Company nor any of the Subsidiaries (A) has
entered into an agreement or waiver extending any statute of limitations
relating to the payment or collection of Taxes of the Company or any of
the Subsidiaries or agreed to any extension of time with respect to a
Tax assessment or deficiency, or (B) is presently contesting the Tax
liability of the Company or any of the Subsidiaries.
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(vii) No election under 341(f) of the Code has been made to
treat the Company as a consenting corporation, as defined in Section
341(f) of the Code.
(viii) None of the Company and the Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Section 280G of the Code.
(ix) The Company has not redeemed any Company Shares in a
manner that would cause the transactions contemplated hereby to fail to
qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Code. The Company has not redeemed any Company Shares or made any
distributions, and no Person related to the Company within the meaning
of Treasury Regulation Section 1.368-1(e)(3)(i)(B) has acquired any
Company Shares, in a manner that would cause the transactions
contemplated hereby to violate the continuity of interest requirement
set forth in Treasury Regulation Section 1.368-1(e).
(x) The Company operates at least one significant historic
business line, or owns at least a significant portion of its historic
business assets, in each case within the meaning of Section 1.368-1(d).
SECTION 3.16. LIABILITIES. Except as set forth in the most recent
balance sheet contained in the Company Financial Statements, neither the Company
nor any of the Subsidiaries has any outstanding claims, liabilities or
indebtedness, contingent or otherwise, other than liabilities not exceeding
$25,000 to trade creditors incurred subsequent to the date of such balance sheet
in the ordinary course of business not involving borrowings by the Company or
any Subsidiary. Neither the Company nor any of the Subsidiaries is in default in
respect of the terms or conditions of any indebtedness.
SECTION 3.17. INTELLECTUAL PROPERTY.
(a) REGISTRATIONS. Schedule 3.17(a) is a complete list of all
Intellectual Property used or held for use in the business of the Company or the
Subsidiaries (except for unregistered copyrights, know how and trade secrets).
To the extent indicated on Schedule 3.17(a), the Intellectual Property listed on
Schedule 3.17(a) has been duly
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registered in, filed in or issued by the United States Patent and Trademark
Office, United States Copyright Office or Network Solutions, Inc., the
appropriate government or officially recognized offices in the various states of
the United States and the appropriate government or officially recognized
offices of other jurisdictions (foreign and domestic), and each such
registration, filing and issuance (i) has not been abandoned, canceled or
otherwise compromised and (ii) remains in full force and effect as of the
Closing Date. Copies of all items of Intellectual Property which have been
reduced to writing or other tangible form have been delivered by the Company to
Cirrus (including, without limitation accurate and complete copies of all
related licenses, and amendments and modifications thereto).
(b) LICENSES. Schedule 3.17(b) sets forth all licenses to which the
Company or any of the Subsidiaries is a party, whether as licensor, licensee, or
otherwise with respect to any of the Intellectual Property, other than
Commercial Software Rights. To the extent any Intellectual Property is used
under license in the business of the Company and/or any Subsidiary, no notice of
a material default has been sent or received by the Company or any of the
Subsidiaries under any such license which remains uncured, and the execution,
delivery or performance of the Company's or its Subsidiary's obligations
hereunder will not result in such a default. Each such license agreement (other
than Commercial Software Rights) is a legal, valid and binding obligation of the
Company and/or the Subsidiaries, as the case may be, and each of the other
parties thereto, enforceable in accordance with the terms thereof and the
transactions contemplated by this agreement will not breach the terms thereof.
(c) NO INFRINGEMENT. Each of the Company and the Subsidiaries owns
or is licensed to use, all of the Intellectual Property, free and clear of any
Encumbrances without obligation to pay any royalty or any other fees with
respect thereto. Neither the Company's nor any Subsidiary's use of the
Intellectual Property (including, without limitation, the manufacturing,
marketing, licensing, sale or distribution of product and the general condition
and operations of the business of the Company or any of its Subsidiaries)
violates, infringes, misappropriates or misuses any intellectual property rights
of any third party. Each of the Company and the Subsidiaries has the exclusive
right to file, prosecute and maintain all applications and registrations with
respect to the Intellectual Property. There are no actions that must be taken or
payments that must be made by the Company or any of its Subsidiaries within 180
days following the Closing Date that, if not taken, will adversely effect the
Intellectual Property or the right of the Company or any of its Subsidiaries to
use same as where used as of the Closing Date.
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(d) DISCLOSURE REQUIREMENTS. The Company and each of the
Subsidiaries has used all necessary and commercially reasonable efforts to
comply with all applicable disclosure requirements in the application for and
maintenance of any patent, trademark or copyright of the Company and each
Subsidiary.
(e) FEES AND FILINGS. Each item of the Intellectual Property is
valid and subsisting and each registration, filing or issuance relating to the
Intellectual Property has been maintained effective by the Company and each of
the Subsidiaries through making all requisite filings, renewals and/or related
maintenance products in connection with such Intellectual Property and file all
necessary documents and certificates in connection with such Intellectual
Property with the relevant patent, copyright, trademark or other authorities in
the United States or foreign jurisdictions, as the case may be, for the purposes
of preserving such Intellectual Property and maintaining the Company and each of
the Subsidiary's interest therein.
(f) NO NOTICE OF INFRINGEMENT. As of the Closing Date, neither the
Company nor any of the Subsidiaries has received any written notice of any
claim, threat of claim, nor any correspondence that might, directly or
indirectly, imply the existence of a claim, from any Person relating to the
right of the Company or any of the Subsidiaries to use any of the Intellectual
Property. The Intellectual Property set forth in Schedule 3.17 constitutes all
the Intellectual Property necessary to operate the business of the Company and
the Subsidiaries as of the Closing Date in the manner in which it is presently
operated or contemplated to be operated.
(g) NO PENDING CLAIMS. There are no pending or threatened claims, in
writing or otherwise, by any Person: (i) of unfair competition or trade
practices by the Company or any of the Subsidiaries under the laws of any
jurisdiction applicable to the Company or any of the Subsidiaries; (ii)
challenging the right of the Company and/or any of its Subsidiaries to use any
Intellectual Property or indicating that the failure to take a license would
result in such a claim; (iii) alleging any violation, infringement, misuse or
misappropriation by the Company and/or any of its Subsidiaries of Intellectual
Property owned by any Person; or (iv) assertion of any opposition, interference,
invalidity, termination, abandonment, unenforceability, or other infirmity of
any Intellectual Property. To the knowledge of the Company, neither the Company
nor any Subsidiaries know of any valid basis for such claims. Moreover, neither
the Company nor any of the Subsidiaries has made any claim in writing of a
violation, infringement, misuse or misappropriation by any Person (including,
without limitation, any employee or former
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employee of the Company or any of the Subsidiaries of its rights to, or in
connection with, any Intellectual Property, which claim is pending. Neither the
Company nor any of its Subsidiaries has entered into any agreement to indemnify
any other Person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in purchase orders or
license agreements arising in the ordinary course of business.
(h) NO UNFAIR COMPETITION. The operation of the businesses of the
Company and the Subsidiaries as such business currently is conducted, or is
reasonably contemplated to be conducted, including the Company and Subsidiaries'
design, development, manufacture, marketing and sale of the products or services
of the Company and the Subsidiaries (including without limitation, products
currently under development) have not and does not infringe, misuse or
misappropriate the rights of any third party.
(i) NO PROCEEDINGS. To the knowledge of the Company and the
Subsidiaries, there are no interferences, oppositions or other contested
proceedings, either pending or threatened, in the United States Copyright
Office, the United States Patent and Trademark Office, or any other Governmental
Authority relating to any pending application with respect to the Company's and
its Subsidiaries' Intellectual Property. There is no proceeding or action
pending before any tribunal (including the United States Patent and Trademark
office or equivalent authority anywhere in the world), or threatened, that
relates to any Intellectual Property of the Company or any of the Subsidiaries.
(j) NO IMPEDIMENTS TO PATENTS. The Company and each of the
Subsidiaries is not barred by its own action from seeking patents (whether U.S.
or foreign, where applicable) on material potentially patentable inventions of
the Company and the Subsidiaries by "on sale" or similar bars to patentability
or by failure to apply for a patent on such inventions within the time required
under the laws of any applicable jurisdiction.
(k) SITES AND SERVERS. For the twelve month period prior to the
Closing Date, the Internet domain names and URL's constituting part of the
Company's and its Subsidiaries' Intellectual Property (together with any content
and other materials accessible and/or displayed thereon, the "SITES") direct and
resolve to the appropriate Internet protocol addresses and are and have been
maintained and accessible to Internet users on those certain
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computers used by the Company to make the Sites so accessible (the "SERVER")
approximately twenty-four (24) hours per day, seven (7) days per week ("24/7")
and are and have been operational for downloading content from the Server on a
24/7 basis. The Company has fully operational back-up copies of the Sites (and
all related software, databases and other information), made from the current
versions of the Sites as accessible to Internet users on the Server (and copied
directly therefrom), which copies will have been made at least every two weeks
from the date hereof until the Closing Date. Such back-up copies have been and
are kept in a safe and secure environment, fit for the back-up of media, and are
not located at the same location as the Server. The Company has no reason to
believe that the Sites will not operate on the Server or will not continue to be
accessible to Internet users on a 24/7 basis prior to, at the time of, and after
the Closing Date.
(l) CONFIDENTIALITY. The Company and each of the Subsidiaries has
taken all necessary and reasonable steps required under the circumstances to
protect and preserve the confidentiality of all proprietary non-public
information relating to the Intellectual Property constituting part of or
relating to intellectual property of other Persons provided to the Company or
its Subsidiaries. All use and/or disclosure of such information to any third
party (other than (i) to competent regulators, accountants and counsel in each
instance acting in their professional capacities, or (ii) pursuant to competent
judicial or equivalent order) has been pursuant to the terms of a written
agreement between such third parties and the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has breached any agreements of
non-disclosure or confidentiality or is currently alleged or claimed to have
done so.
(m) WRITTEN AGREEMENTS. To the extent any work, invention or
material has been developed or created by a third party exclusively for the
Company or its Subsidiaries, the Company or its Subsidiaries has entered into
and maintains a written agreement with such third party with respect thereto and
the Company or its Subsidiaries has obtained ownership of, or license to, all
Intellectual Property in such work, material or invention by operation of law or
by valid assignment.
SECTION 3.18. MATERIAL CONTRACTS. (a) Schedule 3.18(a) sets forth all
of the following to which the Company or any Subsidiary is a party or by which
it is bound:
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(i) any agreement or commitment that involves the
performance of services by it of an amount or value in the aggregate in
excess of $100,000;
(ii) any agreement, indenture or other instrument which
contains restrictions on payment of dividends or the making of any other
distribution in respect of its capital stock;
(iii) any agreement or commitment to be performed relating to
capital expenditures in excess of $100,000 in any calendar year other
than those capital expenditures approved and clearly identified as part
of the Company's fiscal year 2001 budget (the "2001 BUDGET"), an
accurate and complete copy of such budget being attached to Schedule
3.18;
(iv) any agreement, indenture or instrument relating to
indebtedness for borrowed money or the deferred purchase price of
property (excluding trade payables in the ordinary course of business);
(v) any loan or advance to or investment in any Person
(other than Subsidiaries), or any agreement or commitment relating to
the making of any such loan, advance or investment;
(vi) any profit-sharing agreement;
(vii) any guaranty, suretyship or other contingent liability
in respect of any indebtedness or obligation of any Person;
(viii) any management service, consulting or any other similar
type of agreement, requiring payments by or to the Company or any
Subsidiary in the aggregate in excess of $100,000;
(ix) any confidentiality, nondisclosure or similar agreement
to which the Company or any Subsidiary is a party and in respect of
which the Merger could cause a breach of such agreement or could result
in a liability to Cirrus or the Company following the Closing;
(x) any agreement or commitment limiting the ability of the
Company or any of the Subsidiaries to engage in any line of business or
to compete with any Person; or
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(xi) any amendment or supplement in respect of any of the
foregoing.
(b) Except as set forth on Schedule 3.18(b), each agreement,
commitment, indenture, instrument, loan, advance, investment, guarantee,
suretyship or contingent liability, including all amendments, modifications and
supplements thereto (collectively "CONTRACTS"), is in full force and effect, and
(i) there exists no default or event of default or event, occurrence, condition
or act (including the consummation of the transactions contemplated hereby) on
the part of the Company or any Subsidiary, or to the knowledge of the Company or
any Subsidiary on the part of any other party thereto, which, with the giving of
notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default thereunder; (ii) no approval or
consent of, or notice to, any Person is needed in order that each of the
foregoing shall continue in full force and effect in accordance with its terms
without penalty, acceleration or rights of early termination by reason of the
consummation of the transactions contemplated by this Agreement; and (iii) the
consummation of the transactions contemplated hereby will not alter in any
material respect the rights and obligations of any of the parties to the
Contracts.
SECTION 3.19. PRODUCTS. Schedule 3.19 lists and describes each of the
Products of the Company and the Subsidiaries. Each of the Products has been and
is in conformity with all applicable contractual commitments, all express and
implied warranties with respect thereto and all legal requirements applicable
thereto. If the Company or any Subsidiary obtained, by license, the right to
sell, license, develop or otherwise provide any Product under sublicense or
other agreement with a third party, this representation and warranty is based
solely on the Company's knowledge. The Company and each of the Subsidiaries has
no liability for, and to the Company's knowledge no basis exists for, any
liability for any replacement, repair or remediation of any Product or for any
other damages or refunds in connection with any Product. Schedule 3.19 sets
forth a description of all guaranties, warranties and other indemnities to which
any of the Products is subject, other than the Company's and any Subsidiary's
applicable standard terms and conditions of sale and standard guaranties and
warranties, copies of which have been provided to Cirrus.
SECTION 3.20 OWNED REAL PROPERTY. Schedule 3.20 attached hereto
contains an accurate and complete list of all real property owned by the Company
and any of the Subsidiaries. The Company and the Subsidiaries have title to all
of their respective real properties, free and clear of all title defects or
encumbrances of any nature whatsoever
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and are not subject to any right of way, covenants, conditions or building use
restrictions, exceptions, variances, reservations or limitations of any nature
whatsoever that could materially limit the use of such property as currently
used, and the fixed and current assets owned by the Company and each of the
Subsidiaries include all rights, properties and other assets necessary to permit
the Company and each of the Subsidiaries to conduct business in the same manner
as their businesses have been conducted prior to the date hereof.
SECTION 3.21. LEASES. Schedule 3.21 attached hereto contains an
accurate and complete list of all leases to which the Company or any Subsidiary
is a party (as lessor or lessee). Each such lease is in full force and effect;
all rents and additional rents due to date on each such lease have been paid; in
each case, the lessee has been in peaceable possession since the commencement of
the original term of such lease and no waiver, indulgence or postponement of the
lessee's obligations thereunder has been granted by the lessor. Neither the
Company nor any Subsidiary has violated any of the terms or conditions under any
such lease in any material respect, and to the knowledge of the Company all of
the covenants to be performed by any other party under any such lease have been
fully performed and no default by such party exists thereunder. The Company and
the Subsidiaries have good and marketable leasehold interests in all leased real
property described in each such lease, free and clear of any Encumbrances. All
such property is in a state of good maintenance and repair and is adequate and
suitable for the purposes for which it is presently being used.
SECTION 3.22. INSURANCE. Set forth on Schedule 3.22 attached hereto is
a list of all insurance policies which the Company and each of the Subsidiaries
maintain with respect to their respective businesses, properties and employees.
Such policies are in full force and effect and are free from any right of
termination on the part of the insurance carriers. Such policies, with respect
to their amounts and types of coverage, are comparable to those typically
carried by similarly situated companies in the same or similar businesses. Since
January 1, 2001, there has not been any material adverse change in the
relationship of the Company or any Subsidiary with any of its insurers or any
material increase in any of the premiums payable pursuant to such policies.
SECTION 3.23. BOOKS AND RECORDS. All minute books of the Company and
each of the Subsidiaries have been made available to Cirrus. The minute books of
the Company and the Subsidiaries contain accurate records of all meetings of,
and all corporate action taken by (including action taken by written consent),
the
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respective shareholders and Boards of Directors of the Company and each
Subsidiary. Neither the Company nor any Subsidiary has any of its records,
systems, controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
(collectively, "BOOKS AND RECORDS") that are not under the exclusive ownership
and direct control (including all means of access thereto and therefrom) of the
Company or a Subsidiary.
SECTION 3.24. AGREEMENTS WITH AFFILIATES. Set forth on Schedule 3.24
is a list of all agreements, arrangements, commitments and understandings,
whether written or oral, between the Company and any officer, director or
Affiliate of the Company or any of the Subsidiaries.
SECTION 3.25. TECHNOLOGY SYSTEMS OPERABILITY.
(a) OPERABILITY OF TECHNOLOGY SYSTEMS. All of the computer hardware,
computer software, electronic data processing equipment, controllers, microchips
embedded in computer or non-computer equipment and any other computerized or
electronic equipment or components (collectively, the "TECHNOLOGY SYSTEMS") of
the Company and the Subsidiaries are in good working condition, excepting normal
wear and tear, and are Year 2000 Compliant. For purposes of this Agreement, the
term "YEAR 2000 COMPLIANT" shall mean that the Technology Systems, without human
intervention, accurately and completely recognize, receive, record, manipulate,
calculate, process, sequence, store, transmit and output or produce, without
error or interruption, dates and date-related data from and after 12:00 a.m. on
January 1, 2000, time periods that include January 1, 2000 and information that
is dependent on or relates to such dates or time periods (including, without
limitation, leap year calculations in that same manner and with the same
accuracy, functionality, data interaction and performance as when dates or time
periods prior to January 1, 2000 are involved) and do not, as a consequence of
the change of centuries or of the fact that data from more than one century is
being processed, cause an abnormal termination of execution, an endless loop,
incorrect values, or invalid results, or otherwise fail to perform accurately,
completely and in a timely fashion in accordance with their respective
specifications and functionalities. As Year 2000 Compliant, the Technology
Systems of the Company and its Subsidiaries are able to store and output date
information in a manner that is unambiguous as to Century.
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(b) NO ADVERSE EFFECT. None of the Technology Systems of the Company
or the Subsidiaries, nor any of the Products or services sold or licensed by the
Company or the Subsidiaries to third parties has been adversely affected by the
onset of the year 2000, nor does the Company or the Subsidiaries have any reason
to believe that any such Technology Systems, Products or services will be so
adversely affected.
(c) STATUS OF SUPPLIERS ET AL. All of the suppliers, licensees,
vendors, contractors, distributors and service providers of the Company and the
Subsidiaries are Year 2000 Compliant.
(d) CONTINGENCY PLANS. The Company and the Subsidiaries have
established, and put in place, commercially reasonable contingency plans to
address, correct and otherwise attend to in a timely fashion any and all
problems that may occur with its Technology Systems and/or supply and
distribution systems as a result of (i) a failure of such systems to be Year
2000 Compliant or (ii) such systems otherwise being adversely affected by the
onset of the year 2000.
(e) NO CLAIMS OR DEMANDS. As of the Closing Date, neither the
Company nor any of the Subsidiaries has received any written claims or demands
from any third parties asserting that the Products, Technology Systems or supply
and distribution systems of the Company or any of the Subsidiaries fail to be
Year 2000 Compliant. Neither the Company nor its Subsidiaries know of any valid
basis for such a claim or demand.
SECTION 3.26. FISCAL 2001 BUDGET. The Fiscal 2001 Budget previously
delivered to Cirrus is an accurate and complete copy of such budget, and it has
not since been amended or supplemented in any manner.
SECTION 3.27. PROJECTIONS. The projections listed in Schedule 3.27 as
previously delivered by the Company to Cirrus are based on certain assumptions,
estimates and qualifications which the Company's Board of Directors believes to
be reasonable.
SECTION 3.28. BROKER'S OR FINDER'S FEE. Except as set forth on
Schedule 3.28, neither the Company nor any of the Subsidiaries has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated hereby.
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SECTION 3.29. COPIES OF DOCUMENTS. The Company has made available for
inspection and copying by Cirrus accurate and complete copies of all documents
referred to in this Agreement and the Exhibits and Schedules thereto, and all
amendments, supplements and waivers thereof.
SECTION 3.30. LONG-TERM INDEBTEDNESS. The Company has no long-term
indebtedness.
SECTION 3.31. DISCLOSURE. The statements made by the Company in the
Transaction Documents to which it is a party (including, without limitation, the
representations and warranties made by the Company therein in the Schedules and
Exhibits thereto), when taken as a whole, do not include or contain any untrue
statement of a material fact, and do not omit to state any material fact
required to be stated in order for such statements not to be misleading.
SECTION 3.32. RELATIONSHIPS. The relationship of the Company and the
Subsidiaries after the Effective Time with their present suppliers, customers,
licensors, vendors and contractors will not be materially adversely affected as
a result of the change of control of the Company and the Subsidiaries pursuant
to the Transaction Documents.
SECTION 3.33. SHAREHOLDERS' REPRESENTATIVE; AUTHORITY AND VALIDITY.
The Shareholders' Representative has the requisite power and authority to
execute and deliver the Transaction Documents, as applicable, on behalf of the
Shareholders. The execution and delivery of the Transaction Documents by the
Shareholders' Representative have been duly authorized and approved by the
Shareholders, and no other action on the part of the Shareholders is necessary
to authorize the execution and delivery of the Transaction Documents by the
Shareholders' Representative. The Transaction Documents as have been executed
and delivered by the Shareholders' Representative on or prior to the date hereof
have been, and on the Closing Date such other of the Transaction Documents to
which the Shareholders' Representative is a party will have been, duly executed
and delivered by the Shareholders' Representative and are and will be valid and
binding obligations enforceable against the Shareholders in accordance with
their terms.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF CIRRUS AND ACQUISITION SUB
SECTION 4. REPRESENTATIONS AND WARRANTIES OF CIRRUS AND ACQUISITION
SUB. Except as set forth in the corresponding sections of the disclosure letter
delivered by Cirrus to the Company prior to entering into this Agreement (the
"CIRRUS DISCLOSURE LETTER"), Cirrus and Acquisition Sub hereby represent and
warrant to the Company as of the date hereof and as of the Closing Date (except
as otherwise indicated) as follows:
SECTION 4.1. DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER.
Each of Cirrus and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Acquisition Sub has no employees, liabilities, assets (other than cash) or
contractual obligations, other than the obligations created by this Agreement.
SECTION 4.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of Cirrus
and Acquisition Sub has the requisite power and authority to execute and deliver
the Transaction Documents to which it is a party, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Transaction Documents to which it is
a party, and the consummation by it of the transactions contemplated thereby,
will have been duly authorized and approved by it, and no other action on the
part of Cirrus and/or Acquisition Sub is necessary to authorize the execution,
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby. The Transaction Documents as have been
executed and delivered by Cirrus and Acquisition Sub on or prior to the date
hereof have been, and on the Closing Date such other of the Transaction
Documents to which Cirrus and/or Acquisition Sub is a party will have been, duly
executed and delivered by Cirrus and Acquisition Sub and are and will be valid
and binding obligations enforceable against Cirrus and Acquisition Sub, as the
case may be, in accordance with their terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
general equitable principles. Cirrus' and the Acquisition Sub's Board of
Directors each have (i) approved the Merger, which approval satisfies in full
any applicable
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requirements of the DGCL and CGCL, and (ii) determined that in their opinion the
Merger is in the best interests of the stockholders of Cirrus and Acquisition
Sub.
SECTION 4.3. CAPITALIZATION. The authorized capital stock of Cirrus
consists of 280,000,000 shares of Cirrus Common Stock and 5,000,000 shares of
preferred stock, of which approximately 73,600,000 shares of Cirrus Common Stock
(excluding 6,400,000 treasury shares held by Cirrus) are outstanding on the date
of this Agreement. All issued and outstanding shares of Cirrus Common Stock are,
and all of the shares of Cirrus Common Stock issuable pursuant to this Agreement
when issued as provided herein will be, duly authorized, validly issued, fully
paid and nonassessable.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and
delivery of the Transaction Documents to which it is a party by Cirrus and
Acquisition Sub and the consummation by them of the transactions contemplated
thereby will not: (a) violate or conflict with any provision of the Certificate
of Incorporation or Bylaws of Cirrus or Acquisition Sub; (b) violate or conflict
with any statute, ordinance, rule, regulation, order or decree of any court or
any Governmental Authority applicable to Cirrus or Acquisition Sub or by which
any of their respective properties or assets are or may be bound, (c) require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any Governmental Authority, except, if required, for prior notification and
reporting requirements under the HSR Act, or (d) result in a violation or breach
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default, or result in the creation of any Encumbrance upon any of the
properties or assets of the Company or any of the Subsidiaries, or give rise to
an obligation, right of termination, cancellation, acceleration, payment or
increase of any obligation or a loss of a material benefit, any of the terms,
conditions or provisions of any agreement, instrument or other obligation to
which Cirrus or Acquisition Sub is a party, or by which any of its properties or
assets are or may be bound, except for any such violations, breaches, conflicts,
defaults, Encumbrances, increases or losses which, individually or in the
aggregate, will not have a material adverse effect on the business, assets,
liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of Cirrus and Acquisition Sub, taken as a whole or on
the ability of Cirrus and Acquisition Sub to consummate the transactions
contemplated by the Transaction Documents.
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SECTION 4.5. BROKER'S OR FINDER'S FEE. Neither Cirrus nor Acquisition
Sub has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary in connection with the transactions contemplated hereby,
except for such fees or commissions as are listed in Schedule 4.5.
SECTION 4.6 LEGAL PROCEEDINGS. No claim, action, proceeding or
investigation is pending before any court, arbitrator or administrative,
governmental or regulatory authority or body which seeks to delay or prevent the
consummation of the transactions contemplated hereby or which would reasonably
be likely to materially and adversely affect or restrict Cirrus' ability to
consummate the transactions contemplated hereby.
ARTICLE V
TAX MATTERS
SECTION 5.1. REORGANIZATION QUALIFICATION. The parties hereto intend
that the transactions consummated pursuant to this Agreement be treated for
federal income tax purposes as a merger which qualifies as a "reorganization"
within the meaning of Section 368 of the Code and shall report such transactions
in a manner consistent therewith on all federal income tax returns, reports,
declarations, claims for refund, or statements (including any schedule or
amendment thereto). The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Section 354(a)(1) of the Code.
SECTION 5.2. COOPERATION WITH TAX MATTERS. Each party hereto shall
cooperate to the extent reasonably requested by any other party in connection
with the filing of Returns and any audit, litigation or other proceeding
involving the Company with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
SECTION 5.3. TRANSFER AND OTHER TAXES. All transfer, documentary,
sales, use, stamp, registration and other Taxes and fees (including any
penalties and interest) incurred in connection with the payment of the Merger
Consideration and the transactions contemplated by this Agreement shall be paid
when due by the Shareholders
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participating in the Merger pursuant to Section 2.2(a), and such Shareholders
shall, at their expense, file and cause to be filed all necessary Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees.
ARTICLE VI
PRE-CLOSING COVENANTS OF THE COMPANY
SECTION 6.1. CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME. Except
as permitted or required by this Agreement or otherwise consented to in writing
by Cirrus, until the Closing, the Company shall take all action, or refrain from
taking any action, necessary to ensure that:
(a) Each of the Company and the Subsidiaries:
(i) conducts its operations only according to its usual
regular and ordinary course of business in substantially the same manner
as heretofore conducted, and uses commercially reasonable efforts to
preserve intact its business organization, to keep available the
services of its current employees and to preserve its present
relationships with customers, suppliers and other Persons with which it
has a business relationship;
(ii) preserves all of its right, title and interest in and to
the assets of the Company and each Subsidiary, including, without
limitation, its product designs, layouts, drawings, net lists,
engineering documentation, user documentation, masks and other
manufacturing tools, firmware and software, and test programs, except
such of the assets as are consumed in the ordinary course of business
consistent with past practice between the date hereof and the Closing
Date;
(iii) maintains in good operating condition and repair,
ordinary wear and tear excepted, all of the tangible property of the
Company and each Subsidiary;
(iv) maintains in force all insurance in effect on the date
of this Agreement;
(v) maintains all of the Books and Records consistent with
past practices;
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(vi) operates its business in compliance with all applicable
laws, rules and regulations; and
(vii) extends trade credit only in the ordinary course of
business, consistent with past practice.
(b) Neither the Company nor any of the Subsidiaries shall:
(i) amend its Articles of Incorporation or Bylaws (or
similar constitutive documents);
(ii) issue or sell, or authorize the issuance or sale of, any
shares of its capital stock or any other securities;
(iii) issue or sell, or authorize the issuance or sale of, any
securities convertible into, or options, warrants or rights to purchase
or subscribe to its capital stock or any other securities;
(iv) enter into any arrangement or contract with respect to
the issuance or sale of any shares of its capital stock or any other
securities, or make any changes in its capital structure;
(v) sell or agree to sell or create or agree to create any
Encumbrance on any stock or other equity interest owned by it in any
other Person;
(vi) declare, pay or set aside any dividend or other
distribution or payment with respect to, or split, combine, redeem or
reclassify, or purchase or otherwise acquire, any shares of its capital
stock or other securities, or make any other payments to its
shareholders or Affiliates;
(vii) enter into any contract or commitment with respect to
capital expenditures individually or in the aggregate in excess of
$100,000;
(viii) acquire any interest in the equity, assets or business
of any Person;
(ix) except to the extent required under applicable law, rule
or regulation, or as permitted or required by this Agreement, increase
the compensation or fringe benefits of, or pay any bonuses to, any of
its directors, officers or employees or grant any severance or
termination pay, or enter into any employment, consulting or severance
agreement or arrangement with any present or former director, officer or
other
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employee, or establish, adopt, enter into, amend or terminate any
collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any of
its directors, officers or employees;
(x) create any Encumbrance on any of its assets or incur or
modify any indebtedness or other liability (other than the incurrence of
trade payables in the ordinary course of business) or issue any debt
securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for the obligations of any Person, or
make any loan or other extension of credit;
(xi) purchase or sell any assets other than Products in the
ordinary course of business;
(xii) enter into any capital lease or lease any of its assets;
(xiii) enter into any material contract, transaction or
activity;
(xiv) pay or set aside any dividend or make or set aside any
other distribution with respect to, or redeem, purchase or otherwise
acquire, any shares of its capital stock or other securities, or make
any other payment to the Shareholders or any Affiliate thereof or of the
Company or any Subsidiary;
(xv) make or rescind any tax election or settle or compromise
any tax liability;
(xvi) make any change in its accounting policies or procedures
or make any changes in any accounting method or, except upon the written
advice of its independent auditors, its system of internal accounting
controls;
(xvii) except in the ordinary course of business, pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of claims, liabilities or
obligations reflected or reserved against in the Company Financial
Statements;
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(xviii) increase or decrease prices charged to its customers
other than in the ordinary course of business;
(xix) enter into any contract or transaction with any of its
directors, officers, Shareholders or Affiliates, other than as expressly
provided in this Agreement;
(xx) file or cause to be filed or be a party to any action,
suit or proceeding at law or in equity, or any arbitration, or any
administrative or other proceeding by or before any Governmental
Authority;
(xxi) or engage in any new line of business; or
(xxii) agree, in writing or otherwise, to take any of the
foregoing actions.
(c) The Company shall notify Cirrus and Acquisition Sub in writing
of any material adverse change since the date hereof in the business, assets,
liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company or any of the Subsidiaries promptly upon
becoming aware thereof.
SECTION 6.2. FULL ACCESS AND DISCLOSURE. During the period commencing
on the date hereof until the Closing Date, the Company shall, and shall cause
each of the Subsidiaries to, afford Cirrus and Acquisition Sub and their
respective employees, advisors, accountants, agents and representatives
reasonable access during normal business hours to the personnel, properties and
Books and Records of the Company and those of the Subsidiaries in order that
they may have the opportunity to make reasonable investigations of the affairs
of the Company and the Subsidiaries; provided, however, neither the right to
make such investigations nor the making of any such investigation shall affect
the representations and warranties made in this Agreement or the right of Cirrus
and/or Acquisition Sub to enforce them. The Company shall promptly furnish to
Cirrus and Acquisition Sub such additional financial and operating data and
other information and respond to such inquiries as either of them shall from
time to time reasonably request.
SECTION 6.3. CONFIDENTIALITY. Until June 30, 2004, the Company and
the Shareholders shall, and the Company shall cause the Company's and
Subsidiaries' respective officers, directors, other employees, agents,
representatives and Affiliates to execute agreements (naming Cirrus as an
intended third party beneficiary) obligating
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them to treat and hold as confidential all non-public information relating to
trade secrets, processes, patent and trademark applications, product
development, price, customer and supplier lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts, operations
methods, product development techniques, business acquisition plans, new
personnel acquisition plans and all other non-public information (collectively,
"CONFIDENTIAL INFORMATION") with respect to Cirrus and Acquisition Sub; provided
that Confidential Information shall not include information that: (i) is as of
the date hereof, or subsequently becomes, generally available to the public
through no fault of, or breach of any confidentiality obligation by, a party
hereto, (ii) the Person to whom such information is disclosed can demonstrate to
have had such information in its possession without any breach of any applicable
law or regulation or other obligation of confidentiality of such Person or a
third party, or (iii) is independently developed by the Person to whom such
information is disclosed without the use of any Confidential Information
disclosed either in furtherance or in violation hereof. The Company and any
Shareholders, and their respective officers, directors, other employees, agents,
representatives and Affiliates, may disclose such Confidential Information, if
he, she or it becomes legally compelled to disclose such information. In such
case, the Person needing to disclose such Confidential Information shall provide
Cirrus with prompt written notice of any requirement or effort made by any
Person to compel disclosure on such Confidential Information so that Cirrus may,
if it desires, seek a protective order or other remedy. The Person compelled to
make such disclosure shall exercise its commercially reasonable efforts to
obtain assurances that confidential treatment will be accorded such Confidential
Information, and in any event, only that portion of the Confidential Information
which is legally required to be disclosed may be disclosed. Notwithstanding
anything to the contrary in this Agreement, the parties acknowledge that
remedies at law for any breach of any obligation under this Section 6.3 are
inadequate and that in addition thereto the party seeking to enforce this
Section 6.3 shall be entitled to equitable relief, including injunction and
specific performance, in the event of any such breach. Notwithstanding the
foregoing, the obligations of the Company under this Section 6.3 shall cease at
the Effective Time.
SECTION 6.4. COOPERATION. The Company shall, and the Company shall
cause each of the Subsidiaries to:
(a) cooperate and use commercially reasonable efforts to take, or cause
to be taken, all appropriate action, and to make, or cause to be made, all
filings necessary, proper or advisable under applicable laws and regulations, to
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consummate and make effective the transactions contemplated by this Agreement
and the Transaction Documents, including, without limitation, its commercially
reasonable efforts to obtain, prior to October 12, 2001, such Permits and
Consents as are necessary for consummation of the transactions contemplated by
the Transaction Documents; and
(b) promptly assist, cooperate and use commercially reasonable efforts
to take, or cause to be taken, all appropriate action necessary for the
registration of shares of Cirrus Common Stock pursuant to Section 7.4.
SECTION 6.5. HSR NOTIFICATION.
(a) The Company shall:
(i) take promptly all actions necessary to make the filings
required of it or any of its Affiliates under any applicable Antitrust
Laws in connection with the Transaction Documents and the transactions
contemplated thereby;
(ii) if requested by Cirrus, comply at the earliest practicable
date with any formal or informal request for additional information or
documentary material received by it or any of its Affiliates from any
Antitrust Authority; and
(iii) cooperate with Cirrus in connection with (A) any filing
made by them or either of them under applicable Antitrust Laws and (B)
resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement initiated by any Antitrust Authority.
(b) The Company shall use commercially reasonable efforts to resolve
such objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law. Without limiting the
generality of the foregoing, "commercially reasonable efforts" as used in this
Section 6.5 shall include, if required:
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(i) filing with the appropriate Antitrust Authorities no
later than the fifth (5th) day following the date hereof a Notification
and Report Form pursuant to the requirements of the HSR Act or any
filings or notification required with respect to the transactions
contemplated by this Agreement;
(ii) if requested substantially complying with any formal
request for additional information or documentation material from an
Antitrust Authority within sixty (60) days following the date of its
receipt or such other date specified therein; and
(iii) cooperating with and not frustrating or impeding
Cirrus's strategy or negotiating positions with any Antitrust Authority.
(c) The Company shall promptly inform Cirrus of any material
communication made to, or received by the Company from, any Antitrust Authority
or any other Governmental Authority regarding any of the transactions
contemplated by the Transaction Documents.
SECTION 6.6. COVENANT TO SATISFY CLOSING CONDITIONS. The Company
shall satisfy or cause to be satisfied, on or before October 12, 2001, the
conditions to the obligations of Cirrus and Acquisition Sub to consummate the
transactions contemplated hereby set forth in Sections 8.1(b), (e), (f), (g) and
(m) and shall use commercially reasonable efforts to effect or cause to be
effected all such other matters within its control that may be necessary or
desirable for the satisfaction of all such other conditions to the obligations
of Cirrus to consummate the transactions contemplated hereby.
ARTICLE VII
PRE-CLOSING COVENANTS OF CIRRUS AND
ACQUISITION SUB
SECTION 7.1. CONFIDENTIALITY. Until the Effective Time, Cirrus and
Acquisition Sub shall, and shall cause their respective officers, directors,
other employees, agents, representatives and Affiliates to, treat and hold as
confidential all Confidential Information of the Company and the Subsidiaries.
Cirrus and Acquisition Sub or any such officers, directors, other employees,
agents, representatives and Affiliates may disclose any such Confidential
Information if, prior to the Effective Time, he, she or it becomes legally
compelled to disclose such information. In
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such case, Cirrus shall provide the Company with prompt written notice of such
requirement so that the Company may, if it desires, seek a protective order or
other remedy. Cirrus shall exercise commercially reasonable efforts to obtain
assurances that confidential treatment will be accorded such Confidential
Information, and in any event, Cirrus shall furnish only that portion of the
Confidential Information which is legally required to be disclosed.
Notwithstanding anything to the contrary in this Agreement, the parties
acknowledge that remedies at law for any breach of any obligation under this
Section 7.1 are inadequate and that in addition thereto the party seeking to
enforce this Section 7.1 shall be entitled to equitable relief, including
injunction and specific performance, in the event of any such breach.
SECTION 7.2. COOPERATION. Cirrus and Acquisition Sub shall cooperate
and use commercially reasonable efforts to take, or cause to be taken, all
appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations, to consummate and
make effective the transactions contemplated by the Transaction Documents,
including, without limitation, their commercially reasonable efforts to obtain,
prior to October 12, 2001, all Permits and Consents as are necessary for
consummation of the transactions contemplated by the Transaction Documents.
SECTION 7.3. HSR ACT. (a) Cirrus shall:
(i) take promptly all actions necessary to make any filings
required of it or any of its Affiliates under any applicable Antitrust
Laws in connection with the Transaction Documents and the transactions
contemplated thereby;
(ii) if requested by the Company, comply, at the earliest
practicable date with any formal or informal request for additional
information or documentary material received by it or any of its
Affiliates from any Antitrust Authority; and
(iii) cooperate with the Company in connection with (A) any
filing made by it under applicable Antitrust Laws and (B) resolving any
investigation or other inquiry concerning the transactions contemplated
by this Agreement initiated by any Antitrust Authority.
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(b) Cirrus shall use commercially reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law. Without limiting the
generality of the foregoing, "commercially reasonable efforts" as used in this
Section 7.3 shall include, if required:
(i) filing with the appropriate Antitrust Authorities no
later than the fifth (5th) day following the date hereof a Notification
and Report Form with respect to the transactions contemplated by this
Agreement; and
(ii) substantially complying with any formal request for
additional information or documentary material from an Antitrust
Authorities within sixty (60) days following the date of its receipt or
such other date specified therein.
(c) Cirrus shall promptly inform the other parties hereto of any
material communication made to, or received by Cirrus or Acquisition Sub from,
any Antitrust Authority or any other Governmental Authority regarding any of the
transactions contemplated by the Transaction Documents.
SECTION 7.4. COVENANT TO SATISFY CLOSING CONDITIONS. Cirrus shall
satisfy, or cause to be satisfied, on or before October 12, 2001, the conditions
to the obligations of the Company to consummate the transactions contemplated
hereby set forth in Section 8.2(b), and shall use its best efforts to effect or
cause to be effected all such other matters within its control that may be
necessary or desirable for the satisfaction of all such other conditions to the
obligations of the Company to consummate the transactions contemplated hereby.
SECTION 7.5. CIRRUS SECURITIES REGISTRATION OR EXEMPTION. Promptly following
the date of this Agreement, Cirrus shall use commercially reasonable efforts, in
reliance upon the exemption provided for in Section 3(a)(10) of the Securities
Act, to submit an application for a permit authorizing the sale and issuance of
shares of Cirrus Common Stock (i) to be issued to the Shareholders pursuant to
Section 2.2(a) for resale by the recipients thereof, and (ii) issuable upon
exercise of the Assumed Options, pursuant to Section 25121 of the California
Corporate Securities Law of 1968, as amended, and to obtain the permit as
promptly as practicable after submitting such application. If such permit is not
obtained as of the Closing Date, Cirrus shall use reasonable best efforts to
register with the United
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States Securities and Exchange Commission the shares of Cirrus Common Stock (i)
to be issued to the Shareholders pursuant to Section 2.2(a) for resale by the
recipients thereof, and (ii) issuable upon exercise of the Assumed Options, on
one or more registration statements on such forms on which Cirrus may qualify to
register, and to have such registration statements declared effective under the
Securities Act as promptly as practicable after such filings.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO OBLIGATION OF CIRRUS AND ACQUISITION SUB.
The obligations of Cirrus and Acquisition Sub to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions precedent:
(a) The representations and warranties of the Company made in the
Transaction Documents to which it is a party shall be true in all material
respects (without regard to any materiality qualifications set forth therein) on
the date hereof and on the Closing Date;
(b) The Company shall have performed and complied in all material
respects with all agreements and covenants required by the Transaction Documents
to be performed and complied with by it at or prior to the Closing Date;
(c) The Shareholders shall have approved the execution, delivery and
performance by the Company of the Transaction Documents to which it is a party;
(d) The Principal Shareholders shall have executed and delivered to
Cirrus the Voting Rights Agreement together with the irrevocable proxy provided
for therein to vote their Company Shares with respect to certain matters;
(e) Each of the employees of the Company identified on Schedule
8.1(e) shall have entered into an Employment Agreement with Cirrus in the form
attached as Exhibit C, and Harold Liang, Mark Rygh, Ed Miller,
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Alex Kipnis and Jeff Fratus shall have entered into such Employment Agreement
Addenda in the form attached as Exhibit D;
(f) There has been no material adverse change in the business,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company or any of the Subsidiaries, and the
businesses of the Company and each of the Subsidiaries have been conducted in
all material respects only in the ordinary course consistent with past practice
and neither the Company nor any of the Subsidiaries has taken any of the actions
set forth in Section 6.1(b);
(g) omitted;
(h) If applicable, the mandatory waiting period under the HSR Act
shall have expired or been terminated, and all governmental authorizations,
consents, waivers and approvals required in connection with the execution,
delivery and performance of this Agreement, including without limitation from
the Antitrust Authorities, shall have been duly obtained and shall be in form
and substance reasonably satisfactory to Cirrus;
(i) No legal action or proceeding shall have been instituted seeking
to restrain, prohibit, invalidate or otherwise adversely affect the consummation
of the transactions contemplated by any of the Transaction Documents or which,
if adversely decided, could materially adversely affect the operation of the
business of the Company or Cirrus;
(j) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by any of the Transaction
Documents shall have been issued and remain in effect;
(k) All Consents and all approvals described in Schedule 8.1(k)
shall have been filed, occurred or been obtained and shall be in full force and
effect;
(l) Cirrus shall have completed, with results satisfactory to
Cirrus, due diligence of the Company and the Subsidiaries;
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(m) The employment agreements between the Company and certain of its
employees identified on Schedule 8.1(m) shall have been terminated or expired;
(n) Other than as set forth in Schedule 3.3(c), the Company shall
have no securities outstanding, including without limitation capital stock, and
options or warrants to acquire capital stock or other securities; and
(o) The Company shall have provided to Cirrus audited financial
statements, reasonably satisfactory to Cirrus, for each of the Company's fiscal
years ended December 31, 1998, December 31, 1999 and December 31, 2000.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation
of the Company to consummate the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions precedent:
(a) The representations and warranties of Cirrus and Acquisition Sub
made in each of the Transaction Documents to which either or both of them are a
party shall be true and correct in all respects (without regard to any
materiality qualifications set forth therein) on the date hereof and as of the
Closing Date;
(b) Cirrus and Acquisition Sub shall have performed and complied in
all material respects with all agreements and covenants required by any of the
Transaction Documents to be performed and complied with by them prior to the
Closing Date;
(c) The mandatory waiting period under the HSR Act shall have
expired or been terminated, and all other Governmental authorizations, consents,
waivers and approvals required in connection with the execution, delivery and
performance of the Transaction Documents, including, without limitation, from
the Antitrust Authorities, shall have been duly obtained and shall be in form
and substance reasonably satisfactory to the Company;
(d) No legal action or proceeding shall have been instituted or
threatened seeking to restrain, prohibit, invalidate or otherwise adversely
affect the consummation of the transactions contemplated hereby or by the
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Transaction Documents or which, if adversely decided, could materially adversely
affect the operation of the business of Cirrus or the Company; and
(e) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by any of the Transaction
Documents shall have been issued and remain in effect.
ARTICLE IX
CLOSING DELIVERIES AND ACTIONS
SECTION 9.1. CLOSING DELIVERIES AND ACTIONS OF THE COMPANY.
(a) At the Closing, the Company shall deliver to Cirrus:
(i) a certificate of legal existence and good standing of
the Company from the Secretary of State of California;
(ii) a certificate of an executive officer of the Company in
form reasonably satisfactory to Cirrus certifying that as of the Closing
Date the representations and warranties made herein by the Company are
true in all respects (without regard to any materiality qualifications
set forth therein) and that the Company has performed and complied in
all material respects with all agreements and covenants required by any
of the Transaction Documents to be performed and complied by it prior to
the Closing Date;
(iii) a certificate of an executive officer of the Company in
form reasonably satisfactory to Cirrus certifying that as of the Closing
Date the Company has performed and complied in all respects with all
agreements and covenants and conditions required by the Trade Credit
Agreement and all other documents delivered by the Company pursuant
thereto to be performed and complied with prior to the Closing Date;
(iv) a certificate of an executive officer of the Company in
form reasonably satisfactory to Cirrus certifying the total amount of
the Transaction Expenses paid by the Company prior to Closing and
providing in reasonable detail how such amount was calculated;
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(v) the Escrow Agreement, duly executed by the Company and
the Shareholders' Representative on behalf of all of the Shareholders;
(vi) an opinion of counsel to the Company addressed to Cirrus
dated as of the Closing Date, satisfactory in form and substance to
Cirrus with respect to the matters set forth in Exhibit E;
(vii) Certificates representing all outstanding Company Shares
other than Dissenting Shares;
(viii) a copy of the Certificate of Merger to be filed by the
Company pursuant to Section 2.1; and
(ix) such other documents as Cirrus shall reasonably request
consistent with the terms hereof.
(b) At the time of the Closing, Acquisition Sub shall file, with
the assistance of the Company, its Certificate of Merger pursuant to Section 2.1
with the Secretary of State of the State of California.
SECTION 9.2. CLOSING DELIVERIES AND ACTIONS OF CIRRUS AND ACQUISITION
SUB.
(a) At the Closing, Cirrus and Acquisition Sub shall deliver to the
Company (except where otherwise indicated):
(i) subject to Section 2.2(d), certificates evidencing
shares of Cirrus Common Stock, as provided in the first sentence of
Section 2.2(c), shall be delivered to the Shareholders' Representative
for delivery to the Shareholders;
(ii) cash in lieu of fractional shares of Cirrus Common
Stock, pursuant to Section 2.4, by wire transfer to the Shareholders'
Representative for delivery to the Shareholders;
(iii) a certificate of legal existence and good standing of
each of Cirrus and Acquisition Sub from the Secretary of State of the
State of Delaware;
(iv) a certificate of an executive officer of each of Cirrus
and Acquisition Sub in form reasonably satisfactory to the Company
certifying that as of the Closing Date the representations and
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warranties made herein by Cirrus and Acquisition Sub are true in all
material respects (without regard to any materiality qualifications set
forth therein) and that Cirrus and Acquisition Sub have performed and
complied in all material respects with all agreements and covenants
required by any of the Transaction Documents to be performed and
complied with by them prior to the Closing Date;
(v) the Escrow Agreement, duly executed by Cirrus;
(vi) the Indemnity Fund as provided in the second sentence of
Section 2.2(c), shall be delivered to the Escrow Agent by wire transfer
as provided in Schedule 9.2;
(vii) the Assumed Options to the Persons entitled thereto as
provided in Section 2.2(b); and
(viii) an opinion of counsel to Cirrus and Acquisition Sub
addressed to the Company dated as of the Closing Date, satisfactory in
form and substance to the Company with respect to the matters set forth
in Exhibit F;
(ix) a copy of the Certificate of Merger to be filed by
Acquisition Sub pursuant to Section 2.1; and
(x) such other documents as the Company shall reasonably
request consistent with the terms hereof.
(b) At the time of the Closing, Acquisition Sub shall file with the
Secretary of State of the State of Delaware its Certificate of Merger pursuant
to Section 2.1.
SECTION 9.3. ALL DELIVERIES AND ACTIONS DEEMED SIMULTANEOUS; ESCROW
AGREEMENT. All deliveries and actions made at the Closing shall be deemed to
have been made or occurred simultaneously irrespective of when made or
occurring, and unless all such deliveries and actions have been made or
occurred, none shall have been deemed to have been made or occurred, and if made
shall be returned to the delivering party or parties, and if occurred shall be
canceled. The Closing shall not occur unless the Escrow Agent executes and
delivers counterparts of the Escrow Agreement to each of the parties thereto.
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ARTICLE X
POST-CLOSING COVENANTS OF THE COMPANY,
THE SHAREHOLDERS AND CIRRUS
SECTION 10.1. APPRAISAL RIGHTS. The Company shall give Cirrus and
Acquisition Sub prompt notice of any written demands for appraisal, withdrawals
of demands for appraisal and any other related instrument received by the
Company after the Closing Date, and the Company shall not settle any demand for
appraisal at an amount per share in excess of the consideration per share
Shareholders shall have received upon conversion of their Company Shares to
shares of Cirrus Common Stock pursuant to Section 2.
SECTION 10.2. CERTIFIED TAX NUMBERS. The Shareholders' Representative
shall, within thirty (30) days from the date of the Escrow Agreement, provide
the Escrow Agent with certified tax identification numbers for each of the
Shareholders on appropriate forms W-8 or W-9 and such other forms and documents
relative to the Indemnity Fund as the Escrow Agent may reasonably request. If
the Escrow Agent does not receive such Tax reporting documentation, the Escrow
Agent may, to the extent required by the Code, withhold interest and other
income earned on the investment of the Indemnity Fund.
SECTION 10.3. CONTINUITY OF BUSINESS ENTERPRISE. Cirrus will continue
at least one significant historic business line of the Company, or use at least
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Reg. Section 1.368-1(d), except that Cirrus
may transfer the Company's historic business assets (i) to a corporation that is
a member of Cirrus' "qualified group" within the meaning of Reg. Section
1.368-1(d)(4)(ii), or (ii) to a partnership if (A) one or more members of
Cirrus' "qualified group" have active and substantial management functions as a
partner with respect to the Company's historic business or (B) members of
Cirrus' "qualified group" in the aggregate own an interest in the partnership
representing a significant interest in the Company's historic business, in each
case within the meaning of Reg. Section 1.368-1(d)(4)(iii).
SECTION 10.4. EMPLOYEE BONUS PLAN. Cirrus shall take all actions
reasonably necessary to establish a $7.0 million dollar retention bonus plan and
a $2.0 million additional bonus plan that will go into effect at the Effective
Time and that will cover all of the current employees of the Company who become
employees of Cirrus or
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Acquisition Sub as well as new employees of Cirrus or Acquisition Sub that are
primarily engaged in work related to the projects of the Company.
SECTION 10.5. ASSUMED OPTION SHARES. Cirrus shall take all corporate
actions necessary to reserve for issuance a sufficient number of shares of
Cirrus Common Stock for delivery upon exercise of all Assumed Options on the
terms set forth in Section 2.2(b).
ARTICLE XI
INDEMNIFICATION
SECTION 11.1. SURVIVAL. The representations and warranties of the
parties contained in this Agreement (including without limitation obligations
with respect to indemnification under this Article XI), the other Transaction
Documents and in any certificate delivered pursuant hereto or thereto, shall
survive the Closing for a period of eighteen (18) months following the Closing
Date, except that the Company's representations and warranties relating to Taxes
made in Section 3.15 shall survive for the duration of the statute of
limitations applicable thereto; provided, that the delivery of a Claim Notice
(as defined in Section 11.3 hereunder) within such eighteen (18) month period
shall extend the period of survival applicable to any claim set forth therein
through the date such claim is conclusively resolved.
SECTION 11.2. INDEMNIFICATION.
(a) BY THE SHAREHOLDERS. The Shareholders, jointly and severally,
shall indemnify, defend and hold harmless, to the extent provided in Section
11.3, Cirrus, Acquisition Sub, and their respective shareholders, directors,
officers and other employees, agents, advisors, successors and assigns ("CIRRUS
INDEMNITEES") from and against any and all Losses to the extent such Losses are
based upon, arise out of or relate to:
(i) any misrepresentation or breach of warranty made by the
Company herein;
(ii) any failure of the Company or any Shareholder to perform
or comply with any of the Company's or Shareholder's obligations under
any Transaction Document or any certificate or other document delivered
pursuant thereto;
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(iii) any obligation to any broker or finder employed or
alleged to have been employed by or on behalf of the Company or any
Shareholder or any Affiliate of either of them; and
(iv) as of the Effective Time, the Company having less than
one million dollars ($1,000,000) of Working Capital.
(b) BY CIRRUS. Cirrus and Acquisition Sub, jointly and severally,
shall indemnify, defend and hold harmless the Company and its respective
Shareholders, directors, officers and other employees, agents, advisors,
successors and assigns (the "COMPANY INDEMNITEES") from and against any and all
Losses to the extent such Losses are based upon, arise out of or relate to:
(i) any misrepresentation or breach of warranty made by
Cirrus or Acquisition Sub herein;
(ii) any failure by Cirrus or Acquisition Sub or either of
them to perform or comply with any of their obligations under any
Transaction Document or certificate or other document delivered pursuant
thereto; and
(iii) any obligation to any broker or finder employed or
alleged to have been employed by or on behalf of Cirrus or Acquisition
Sub or any Affiliate of either of them.
(c) LOSSES. For purposes of this Agreement, "LOSSES" means any and
all liabilities, obligations, losses, damages, deficiencies, demands, claims,
fines, penalties, interest, assessments, judgments, actions, proceedings and
suits of whatever kind and nature and all costs and expenses relating thereto
(including without limitation reasonable attorneys' fees incurred in connection
with the investigation, defense and/or prosecution thereof).
SECTION 11.3. ASSERTION OF CLAIMS. If any Cirrus Indemnitee or any
Company Indemnitee (either, an "INDEMNITEE") believes it has a right to
indemnification pursuant to Section 11.2, such Indemnitee (and in the case of
any Shareholder, the Shareholders' Representative) shall provide notice in
writing thereof ("CLAIM NOTICE") to the Escrow Agent with a copy to the
Shareholders' Representative or to Cirrus (either, an "INDEMNITOR"), as the case
may be. The Claim Notice shall set forth in reasonable detail the nature of the
claim for which indemnification is
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sought, the factual basis of such claim and a good faith estimate of the dollar
value of the Losses for which indemnification is sought. No such estimate shall
have any effect on the extent to which Cirrus or the Shareholders, as the case
may be, shall have an obligation to indemnify an Indemnitee. All claims made
against and paid out of the Indemnity Fund to the Cirrus Indemnitees shall be
made and paid in accordance herewith and with the terms of the Escrow Agreement.
SECTION 11.4. NOTICE OF AND RIGHT TO DEFEND THIRD PARTY CLAIMS.
Promptly upon becoming aware of the commencement of any suit, action or
proceeding by a third party in respect of which indemnification may be sought
under this Article XI, the Indemnitee shall provide notice in writing to the
Indemnitor with respect thereto pursuant to Section 11.3. The failure by such
Indemnitee to so notify promptly such Indemnitor of any claim with respect to
such suit, action or proceeding shall not relieve such Indemnitor from any
liability which it may have to such Indemnitee in connection therewith, except
to the extent such Indemnitor has been prejudiced by such omission. If a Claim
Notice is given in connection with any such suit, action or proceeding commenced
against an Indemnitee, the Indemnitor shall be entitled to participate therein,
and, to the extent that it may wish, to assume the defense or conduct the
settlement thereof; provided, however, that the Shareholders shall have no right
to assume the defense or conduct the settlement of any suit, action or
proceeding if the amount claimed by the plaintiff(s) therein, as alleged in the
complaint or any amended complaint or as determined by any Cirrus Indemnitee in
good faith after seeking advice of counsel exceeds the amount then remaining in
the Indemnity Fund. The Shareholders' Representative may, at no expense to the
Cirrus Indemnittees or the Company, continue to observe the defense or
settlement of any such suit, action or proceeding. After notice from the
Indemnitor to the Indemnitee of its election to so assume the defense, conduct
or settlement thereof, the Indemnitor will not be liable to the Indemnitee for
any legal or other expenses subsequently incurred by the Indemnitee in
connection with the defense, conduct or settlement thereof following such
notice. The Indemnitee shall cooperate in all reasonable aspects with the
Indemnitor in connection with any such claim assumed by the Indemnitor and shall
make available to the Indemnitor all pertinent information under the
Indemnitee's control that is pertinent to the claim.
SECTION 11.5. LIMITATIONS OF LIABILITY.
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(a) BASKET. No amount shall be payable by an Indemnitor (or if such
Indemnitor is the Shareholders, all of the Shareholders collectively) to an
Indemnitee with respect to indemnification of claims for misrepresentation or
breach of warranty pursuant to this Article XI unless and until the aggregate
amount of such claims required to be indemnified by the Indemnitor pursuant
hereto exceeds one hundred thousand dollars ($100,000), in which case the
Indemnitor shall be liable to the Indemnitee for the entire amount of all such
claims, not to exceed:
(i) in the case of such claims made against the
Shareholders, the aggregate amount in the Indemnity Fund from time to
time, except that no such limitation shall apply in the event of any
claims by Cirrus or Acquisition Sub relating to fraud by the Company and
its Subsidiaries, and their respective Shareholders, directors, officers
and other employees, agents, advisors, successors and assigns; and
(ii) in the case of such claims made against Cirrus, fifteen
percent (15%) of the Merger Consideration in the aggregate, except that
no such limitation shall apply in the event of any claims by the Company
or the Shareholders relating to fraud by Cirrus and Acquisition Sub, and
their respective shareholders, directors, officers and other employees,
agents, advisors, successors and assigns.
(b) INSURANCE. The amount of any Losses indemnifiable pursuant to
this Article XI shall be reduced by the amount of any insurance proceeds
received by the Indemnitee in respect of such claim (and if such proceeds are
received following an indemnification payment in respect of the relevant claim,
the Indemnitee shall pay to the Indemnitor an amount equal to the lesser of (i)
the amount of such proceeds and (ii) the amount of any indemnification payments
made by the Indemnitor in respect of the relevant claim).
(c) NO PUNITIVE OR CONSEQUENTIAL DAMAGES. An Indemnitee may not
recover punitive damages or consequential, indirect or special damages in any
claim made for indemnification or otherwise with respect to the Transaction
Documents and the transactions contemplated thereby.
(d) DUTY TO MITIGATE LOSSES. Nothing herein shall be deemed to
relieve any Indemnitee hereto from any duty to mitigate any Losses under
applicable law.
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(e) NO DOUBLE RECOVERY. No Indemnitee shall be entitled to be
indemnified more than once under this Agreement for the same claim.
(f) SOLE REMEDY. This Article XI shall provide for the sole remedy
for any misrepresentation or breach or warranty or breach of covenant or other
agreement in this Agreement, except in the case of fraud or as provided in
Article XII.
SECTION 11.6. SHAREHOLDERS' REPRESENTATIVE. No individual Shareholder
may directly assert any of his, her, or its rights under this Article XI. Any
rights to indemnification or defend any third party claims by a Shareholder must
be asserted or conducted solely through the Shareholders' Representative.
ARTICLE XII
CERTAIN CONTINGENCIES
SECTION 12.1. CERTAIN CONTINGENCIES. Notwithstanding anything in
Article XI to the contrary, in the event that:
(a) the Voting Rights Agreement is not executed by the Principal
Shareholders and the Company and delivered to Cirrus within two (2) business
days from the date of this Agreement; and
(b) (i) prior to the Effective Time, the Company has breached in
any material respect any representation, warranty, covenant or other
agreement contained in the Transaction Documents;
(ii) prior to the Effective Time, the Board of Directors of
the Company (or any committee thereof) shall have withdrawn, modified,
conditioned, qualified or amended its recommendation to approve and
adopt the Merger;
(iii) prior to the Effective Time, the Shareholders shall have
voted against approval and adoption of the Merger; or
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(iv) prior to October 12, 2001, the Shareholders shall have
failed to approve and adopt the Merger,
then Cirrus and Acquisition Sub shall have no further obligation to perform and
comply with the Transaction Documents and the Company shall promptly pay Cirrus
in immediately available funds the amount of three million dollars ($3,000,000)
for its out-of-pocket expenses (including, without limitation, printing fees,
filing fees, fees and expenses of its legal and financial advisors and all fees
and expenses payable to any financing sources and lost profits related to the
transactions contemplated hereby). Such payment shall not relieve the Company or
the Shareholders from their continuing obligations pursuant to Section 6.3.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. EXPENSES. Cirrus agrees to pay the Company's transaction
expenses directly and exclusively associated with the Merger up to a maximum of
one million five hundred thousand dollars ($1,500,000), less any payments that
have been made by the Company prior to the Closing ("TRANSACTION EXPENSES"). Any
amount in excess of one million five hundred thousand dollars ($1,500,000) will
remain the responsibility of and shall be paid by the Shareholders. For purposes
of this Section 13.1, Transaction Expenses shall be limited to the fees and
disbursements of counsel, investment bankers, accountants and any other advisors
or consultants incurred directly and exclusively in connection with the Merger.
SECTION 13.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered (return receipt requested) or mailed by certified mail (return receipt
requested) or by nationally recognized courier service or by facsimile
transmission upon electronic confirmation of receipt thereof during normal
business hours at the following addresses (or at such other address for a party
as shall be specified by like notice). The date a notice shall be deemed
provided shall be the date of the return receipt requested if provided by U.S.
Mail, the date of delivery if personally delivered or delivered by a nationally
recognized courier service or the date of electronic confirmation if by
facsimile transmission:
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If to the Company, to:
LuxSonor Semiconductors, Inc.
3358 Gateway Boulevard
Fremont, CA 94538
Attention: Harold Liang
Telephone: (510) 683-4668
Facsimile Number: (510) 683-4669
with a copy to:
Heller, Ehrman, McAuliffe & White LLP
275 Middlefield Road
Menlo Park, CA 94025
Attention: Lucas S. Chang, Esq.
Telephone: (650) 324-7100
Facsimile: (650) 324-6060
If to the Shareholders' Representative, to:
Harold Liang
275 Middlefield Road
Menlo Park, CA 94025-3506
Telephone: (650)324-7000
Facsimile Number: (650) 324-6097
If to Cirrus or Acquisition Sub, to:
Cirrus Logic, Inc.
4210 South Industrial Drive
Austin, TX 78744
Attention: Steven D. Overly, Esq.
Telephone: (512) 912-3234
Facsimile Number: (512) 912-3136
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036-6700
Attention: Neal F. Grenley, Esq.
Telephone: (212) 819-8200
Facsimile Number: (212) 354-8113
SECTION 13.3. DISPUTE RESOLUTION. Any controversy, dispute or claim
arising out of or relating to the Transaction Documents, or the breach or
termination thereof, which has not been settled by negotiation within thirty
(30) days following written notice by one party to one or more other parties of
the existence of such dispute,
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controversy or claim, shall be finally settled by arbitration under the
Commercial Arbitration Rules of the American Arbitration Association ("AAA") by
three arbitrators. In such event, the claimant will deliver a written notice to
the respondent(s) and the AAA initiating arbitration and naming an arbitrator.
Within twenty (20) days after receipt of such arbitration notice, the
respondent(s) shall name an arbitrator. Within twenty (20) days from the naming
of the two arbitrators, the two arbitrators shall name a third arbitrator. If
there are multiple claimants and/or multiple respondents, all claimants and/or
all respondents shall attempt to agree upon naming their respective arbitrator.
If the claimants or respondents, as the case may be, fail to name their
respective arbitrator, or if the two arbitrators fail to name a third
arbitrator, or if within twenty (20) days after any arbitrator shall resign or
otherwise cease to serve as such a replacement arbitrator is not named by the
party that originally named such arbitrator, such arbitrator as to which
agreement cannot be reached or as to which a timely appointment is not made
shall be named by the AAA. The place of arbitration shall be Austin, Texas. The
award of the arbitrators may be entered in any court of competent jurisdiction.
The costs of the arbitration shall be shared by the disputing parties equally.
SECTION 13.4. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
the Schedules and Exhibits hereto) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject matter hereof, and
(ii) shall not be assigned by operation of law or otherwise.
SECTION 13.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to the provisions thereof relating to conflicts of law.
SECTION 13.6. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
SECTION 13.7. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not effect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
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SECTION 13.8. INVESTIGATION. The representations and warranties
contained herein or in the certificates or other documents delivered at or prior
to the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
SECTION 13.9. AMENDMENT. This Agreement may not be amended except by
an instrument in writing signed by or on behalf of the parties hereto.
SECTION 13.10. THIRD PARTY BENEFICIARIES. This Agreement is for the
exclusive benefit of the parties and their heirs, personal representatives,
successors and permitted assigns, and is not intended to create any rights or
obligations in any Person not a party hereto except as provided in Article XI as
to the rights of Cirrus Indemnitees and Company Indemnitees to indemnification
pursuant to Article XI.
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IN WITNESS WHEREOF, Cirrus, Acquisition Sub, the Company and the
Shareholders' Representative have executed this Agreement, or caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.
CIRRUS LOGIC, INC.
By /s/ STEVEN D. OVERLY
---------------------------------------------
Name: Steven D. Overly
Title: Senior Vice President, Administration,
and General Counsel
TARGET ACQUISITION CORPORATION
By /s/ STEVEN D. OVERLY
---------------------------------------------
Name: Steven D. Overly
Title: Vice President, Secretary
LUXSONOR SEMICONDUCTORS, INC.
By /s/ HAROLD LIANG
---------------------------------------------
Name: Harold Liang
Title: President/CEO
[SHAREHOLDERS' REPRESENTATIVE], as attorney-in-fact on behalf of the
Shareholders
By /s/ HAROLD LIANG
---------------------------------------------
Name: Harold Liang
Title: President/CEO
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