[ARTICLE] 5
[MULTIPLIER] 1
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential
treatment has been requested. Confidential portions
omitted have been filed separately with the Commission.
PARTICIPATION AGREEMENT dated as of September l,
1994, among CIRRUS LOGIC, INC., a California
corporation ("CIRRUS"), INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("IBM"), CIREL,
INC., a California corporation (the "CIRRUS Partner"),
and MICRUS HOLDINGS INC., a Delaware corporation (the
"IBM Partner").
The parties desire to enter into this Agreement in connection with the
formation of a general partnership by the CIRRUS Partner and the IBM Partner
pursuant to the Partnership Agreement to operate within the scope of activity
set forth in the Partnership Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
DEFINITIONS, RULES OF CONSTRUCTION
AND DOCUMENTARY CONVENTIONS
SECTION 1.01. Certain Definitions.
(a) Capitalized terms used but not defined in this Agreement shall have the
respective meanings assigned to them in Appendix A.
(b) As used herein, the term "Agreement" means this Participation Agreement
together with any Exhibits, Schedules, Appendices and Attachments hereto.
SECTION 1.02. Additional Definition.
The following capitalized terms shall have the meanings assigned in this
Agreement:
Term Defined In
"322 Fabrication Employees" Section 7.01(a)
"Affected Contract Commitment" Section 5.10(b)
"Agreement" Section 1.01(b)
"CIRRUS Functional Area Report" Section 5.10(o)
"Customer-IBM Patent License" Section 6.10(c)(i)
"Disabled Capacity Allocation" Section 5.10(a)
"Existing Customer" Section 6.02(b)
"Functional Area" Section 5.10(o)
"Indemnified Parent" Section 9.02(a)
"Key Customers" Section 5.10(d)
"Loadable Capacity" Section 5.10(c)
"ramp-up tooling" Section 5.12
"Reimbursing Parent" Section 9.02(a)
"Turn Customer" Section 5.10(b)
SECTION 1.03. Rules of Construction and Documentary Conventions.
The rules of construction and documentary conventions set forth in
Appendix A hereto shall apply to this Agreement.
ARTICLE II
CLOSING; INITIAL FUNDING
SECTION 2.01. Closing.
At the Closing, in reliance upon the representations and warranties set
forth in this Agreement and subject to the fulfillment to the satisfaction of,
or waiver by, the applicable party of the conditions set forth in this
Agreement, the following events shall occur:
(a) each party shall execute and deliver each Operative Document not
previously executed and delivered by it, to the extent it is specified to be a
party thereto;
(b) the Partnership shall be formed (if it has not previously been formed);
and
(c) each Partner shall cause the Partnership to execute and deliver each
Operative Document not previously executed by the Partnership, to the extent
the Partnership is specified to be a party thereto.
The parties agree that the Partnership may be formed at any time prior to
the Closing.
SECTION 2.02. Time and Place of Closing.
The Closing shall take place at the Facility at 10:00 a.m. on the Closing
Date, or at such other place or time or on such other date as may be agreed
upon by the Parents.
SECTION 2.03 Initial Funding.
Subject only to the Closing having previously occurred, on the Initial
Funding Date:
(a) the CIRRUS Partner shall transfer or cause the transfer of the
CIRRUS Assets to the Partnership;
(b) the IBM Partner shall transfer or cause the transfer of the IBM
Assets to the Partnership; and
(c) the Partnership shall make a special cash distribution to the IBM
Partner pursuant to Section 6.02(b) of the Partnership Agreement.
The transfers referred to in Sections 2.03(a) and (b) shall be
accomplished, in the case of cash, by wire transfer in immediately available
funds to an account of the Partnership and, in the case of all other Assets to
be transferred to the Partnership on the Initial Funding Date, pursuant to
instruments of transfer duly executed and delivered on the Initial Funding
Date by each appropriate party, and in form and substance reasonably
satisfactory to each Parent. The transfer referred to in Section 2.03(c) shall
be accomplished by wire transfer in immediately available funds to an account
of IBM.
ARTICLE III
CONDITIONS TO CLOSING
The obligation of each Parent and such Parent's Affiliated Partner to
complete the transactions set forth in Section 2.01 shall be subject to the
fulfillment, as of the Closing Date, to the satisfaction of, or waiver by,
such Parent of the conditions set forth below in this Article III (except that
the obligations of such Parent and its Affiliated Partner shall not be subject
to either's own compliance with Sections 3.01, 3.02, 3.03, 3.06, 3.07, 3.08,
3.09, 3.10 and 3.11):
SECTION 3.01. Performance.
Each party and the Partnership shall have performed and complied in all
material respects with each agreement, covenant and condition in each
Operative Document to which it is or is specified to be a party, which
agreement, covenant or condition is required to be performed or complied with
by such Person at or before the Closing.
SECTION 3.02. Authorization, Execution and Delivery of Operative Documents.
Each party and the Partnership shall have duly authorized, executed and
delivered each Operative Document to which it is or is specified to be a party
and an executed counterpart thereof shall have been delivered to each other
party thereto and to each Parent.
SECTION 3.03. No Default.
Each Operative Document shall be in full force and effect at the Closing
without any event having occurred or condition existing that constitutes, or
with the giving of notice or passage of time (or both) would constitute, a
default under or breach of such Operative Document or would give any party to
such Operative Document the right to terminate or not to perform any
obligation under such Operative Document.
SECTION 3.04. Consents, Approvals, etc.; Burdensome Conditions.
(a) All Governmental Actions (other than immaterial Governmental Actions
such as routine qualifications to do business intended to be obtained as
needed) required to be taken, given or obtained in connection with the
transactions contemplated by the Operative Documents shall (i) have been
taken, given or obtained, (ii) be in full force and effect at the Closing and
(iii) not be subject to any pending proceedings or appeals, administrative,
judicial or otherwise (other than such immaterial Governmental Actions), and
the time for appeal shall have expired or, if an appeal shall have been taken,
it shall have been dismissed.
(b) All consents and approvals of any other Person necessary or advisable
in order to consummate in all material respects the transactions contemplated
by the Operative Documents, excluding written consents to the assignment of
third party contracts, shall have been obtained and shall be in full force and
effect at the Closing.
(c) No Burdensome Condition shall exist with respect to either Parent or
any of its Affiliates or the Partnership in connection with the transactions
contemplated by the Operative Documents.
SECTION 3.05. Governmental Rules.
(a) No Governmental Rule shall have been instituted, threatened, issued or
proposed to set aside, restrain, enjoin or prevent the consummation of the
transactions contemplated by the Operative Documents.
(b) No change shall have occurred since the date of this Agreement in any
Governmental Rule that, in either Parent's opinion, would make it illegal for
such Parent, its Affiliated Partner or the Partnership to consummate any of
the transactions contemplated by the Operative Documents or subject any such
Person to an unreasonably burdensome penalty or other unreasonably burdensome
liability or other obligation under or pursuant to any Governmental Rule in
connection with the transactions contemplated by the Operative Documents.
SECTION 3.06. Standard Closing Documents.
Each Parent and its Affiliated Partner shall have received, with respect
to the other Parent and the other Parent's Affiliated Partner:
(a) a certificate dated the Closing Date of the secretary, assistant
secretary or another appropriate authorized signatory of such party
certifying:
(i) that a true and correct copy of the charter and by-laws of such
party is attached to such certificate;
(ii) that a true and correct copy of the resolutions, delegations or
other written evidence of corporate action of the appropriate authority within
such party and the stockholders of such party, duly authorizing or ratifying
its execution, delivery and performance of the Operative Documents to which it
is or is designated to be party and the consummation of the transactions
contemplated thereby, are attached to such certificate, and as to the absence
of other resolutions, delegations or other corporate action relating thereto;
and
(iii) as to the absence of proceedings for the merger, consolidation,
sale of all or substantially all the assets, dissolution or liquidation with
respect to such party;
(b) an incumbency certificate signed by an appropriate officer or other
authorized signatory of such party dated the Closing Date as to the signatures
and titles of the officers or authorized signatories of such party executing
any Operative Document on behalf of such party (whether as a party thereto or
on behalf of the Partnership as a general partner thereof), and any other
documents delivered in connection with the Operative Documents; and
(c) a certificate signed by an appropriate officer or other authorized
signatory of such party dated the Closing Date certifying that the conditions
set forth in Sections 3.01 through 3.05, 3.07 and 3.18 (with respect to such
party) have been satisfied by such party.
SECTION 3.07. Representations and Warranties.
The representations and warranties of each party in Article IV and in any
other of the Operative Documents shall be true and correct in all material
respects as of the date of this Agreement and at the Closing with the same
effect as if made at and as of the Closing, except to the extent such
representations or warranties expressly relate to an earlier time.
SECTION 3.08. No Material Adverse Change.
Each Parent shall be reasonably satisfied that, since the date of this
Agreement, there shall not have occurred any material adverse change in the
other Parent or its Affiliated Partner or in the prospects for the
Partnership.
SECTION 3.09. Proceedings.
All corporate or partnership and legal proceedings taken by each party and
the Partnership in connection with the transactions contemplated by the
Operative Documents and all documents relating to the transactions
contemplated thereby shall be reasonably satisfactory in form and substance to
each Parent and its counsel, and certified or other copies of all relevant
documents as either Parent shall have reasonably requested shall have been
provided to such Parent or its counsel.
SECTION 3.10. Opinion of Counsel to CIRRUS.
IBM and the IBM Partner shall have received an opinion addressed to them,
dated the Closing Date, of X. X. Xxxxx, Corporate Counsel of CIRRUS and the
CIRRUS Partner, in form, substance and scope reasonably satisfactory to IBM.
SECTION 3.11. Opinion of Counsel to IBM.
CIRRUS and the CIRRUS Partner shall have received an opinion addressed to
them, dated the Closing Date, of Xxxxxxx X. Xxxxxxxxx, Esq., counsel to IBM
and the IBM Partner, in form, substance and scope reasonably satisfactory to
CIRRUS.
SECTION 3.12. Due Diligence.
Prior to the Closing, each Parent shall have completed its due diligence
and business review with respect to the transactions contemplated by the
Operative Documents and the results of such review shall be satisfactory to
such Parent in its sole discretion.
SECTION 3.13. Insurance.
Arrangements reasonably satisfactory to each Partner shall have been made
to provide the Partnership with insurance coverage complying with the
requirements of the Partnership Agreement.
SECTION 3.14. Support Arrangements, etc.
Each Parent shall be reasonably satisfied that other than as provided in
the Operative Documents, (i) no support agreements covering resources,
services, facilities or utilities required for the business of the Partnership
as then proposed to be conducted immediately after the Closing need to be and
have not been obtained and (ii) arrangements for obtaining bank accounts,
Federal tax identification numbers and similar items for the Partnership have
been made.
SECTION 3.15. Employment and Certain Other Arrangements.
(a) Each Partner shall be reasonably satisfied (i) that the staffing of the
Partnership shall be adequate for the conduct of the business of the
Partnership contemplated to be conducted after the Closing and (ii) as to the
terms and circumstances of any Person's acceptance of employment or service
and transfer. The key employees of the Partnership as agreed by the Partners
shall have accepted conditional offers of employment.
(b) The composition of the initial management team, and the compensation
plans, benefits and incentive programs for the Partnership's management, shall
comply with the description thereof set forth in the Initial Business Plan.
SECTION 3.16. Partnership Finances.
Each Parent shall be reasonably satisfied that, after giving effect to the
Closing and the capitals contributions required pursuant to Section 6.01 of
the Partnership Agreement, the Partnership will have sufficient cash and
financial resources to conduct its business as proposed to be conducted in the
Initial Business Plan through June 30, 1995.
SECTION 3.17. Form of Operative and Other Documents.
Each of the Operative Documents (other than this Agreement), including
schedules and attachments, and the Initial Business Plan shall, in each case,
either be (a) in substantially the form agreed upon by the parties in writing
on the date hereof with blanks appropriately completed and dates adjusted to
reflect the Closing Date as appropriate or (b) if not in such agreed form or
if no agreement has been reached with respect to any particular such document,
in form, substance and scope satisfactory to each party to such agreement in
its sole discretion.
SECTION 3.18. Business Plan.
The Parents and the Partners shall have each approved in writing and
delivered the Initial Business Plan of the Partnership including the portion
agreed to by IBM and CIRRUS as of the execution of this Agreement.
SECTION 3.19. Sale and Lease of Third Party Assets.
The Third Party Lessor shall have purchased the Third Party Assets from
IBM for proceeds of not less than $150,000,000 and shall have executed and
delivered the Third Party Lease leasing such assets to the Partnership.
SECTION 3.20. Additional Equipment Acquisitions; IBM Initial Equipment Lease.
(a) Accountants and tax counsel for IBM and CIRRUS shall have determined
whether it will be feasible to provide the Partnership with the ramp-up
tooling in a manner that would result in the Partnership's being deemed to be
the owner of such ramp-up tooling for tax purposes but not for accounting
purposes in accordance with GAAP. Only if it can be established prior to the
Closing that the acquisition of such ramp-up tooling may be structured in a
manner that would achieve the above tax and accounting results without
additional unreimbursed cost to IBM or the IBM Partner, then, as a condition
to the obligations of CIRRUS to complete the transactions to be effected at
the Closing, IBM shall agree to use its reasonable best efforts to cooperate
with CIRRUS in obtaining the ramp-up tooling in such manner.
(b) Accountants and tax counsel for IBM and CIRRUS shall have determined
whether it will be feasible to structure the IBM Initial Equipment Lease as an
operating lease rather than a capital lease for accounting purposes in
accordance with GAAP. Only if it can be established prior to the Closing that
the IBM Initial Equipment Lease may be structured in a manner that would
achieve this accounting result without additional unreimbursed cost to IBM or
the IBM Partner, then, as a condition to the obligations of CIRRUS to complete
the transactions to be effected at the Closing, the IBM Initial Equipment
Lease to be entered into at the Closing will be so structured.
SECTION 3.21. IBM Restrictions.
Prior to the Closing, IBM shall provide to CIRRUS a list of types of
Products that the Partnership will not manufacture in order to assure
compliance with restrictions contained in IBM's existing agreements with third
parties (in addition to those specified in Section 5.16). Upon receipt of said
list, CIRRUS may elect not to proceed with the Closing if said listing is not
acceptable to it. Alternatively, if CIRRUS elects to proceed with the Closing,
CIRRUS shall be deemed to have agreed that the Partnership shall refrain from
manufacturing Products as described on said list, which list shall be annexed
hereto as Schedule 3.21.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Each Parent and its Affiliated Partner represents and warrants to the
other Parent and its Affiliated Partner as of the date of this Agreement and
as of the Closing Date, with respect to itself (and in the case of each
Parent, with respect to its Affiliated Partner), as follows:
SECTION 4.01. Organization, Ownership Interest, etc.
(a) It is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization or incorporation and has the power
and authority to carry on its business as then conducted, to own or hold under
lease its properties and to enter into and perform its obligations under each
Operative Document to which it is or is specified to be a party.
(b) It is, or in the case of each Partner will be in a timely fashion, duly
qualified to own or lease its properties and generally to conduct its business
as currently, or proposed to be, conducted in each jurisdiction necessary for
purposes of the transactions contemplated by the Operative Documents, except
where failure to so qualify would not have a material adverse effect on such
Person or the Partnership.
(c) In the case of each Parent, as of the Closing Date all the ownership
interest in such Parent's Affiliated Partner will be directly or indirectly
owned and held by such Parent, free and clear from all Liens (other than
Permitted Liens). In the case of CIRRUS, all the ownership interest in CIRRUS
Barbados is and will be directly or indirectly owned and held by CIRRUS, free
and clear of all Liens (other than Permitted Liens).
SECTION 4.02. Authorization; No Conflict.
It has duly authorized, or will prior to the Closing duly authorize and
ratify, by all necessary action, the execution, delivery and performance of
each Operative Document to which it is or is specified to be a party (and, in
the case of each Partner, each Operative Document to which the Partnership is
or is specified to be a party), and its execution and delivery thereof, its
consummation of the transactions contemplated thereby and its compliance
therewith does not and will not (a) require any approval of its stockholders
or partners or any approval or consent of any trustee or holder of any of its
Indebtedness or obligations, (b) contravene any Governmental Rule applicable
to or binding on it or any of its properties if such contravention would have
a material adverse effect on it or any of the Assets to be transferred by it
or on its ability to perform any of its obligations under any Operative
Document, (c) contravene or result in any breach of or constitute any default
under its charter or by-laws, or contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien (other
than Permitted Liens) upon any of its property or the property of the
Partnership under, any material indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, loan or credit agreement or other material
agreement or document to which it is a party or by which it or any of its
properties is bound or affected or by which the property of the Partnership is
bound or affected, (d) require any negotiation with or notice to any labor
union or violate, or require any procedure to be followed under, any
collective bargaining or other agreement with employees or (e) require any
Governmental Action, in each case (a) through (e), except such as have been
duly obtained, made or taken and which are in full force and effect.
SECTION 4.03. Enforceability.
(a) It has duly executed and delivered this Agreement and, upon the
execution and delivery of this Agreement by each other party hereto, this
Agreement will constitute its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
(b) As of the Closing Date, it will have duly executed and delivered each
other Operative Document to which it is or is specified to be a party and,
upon the execution and delivery of each such other Operative Document by each
other party thereto, each such other Operative Document will constitute its
legal, valid and binding obligation, enforceable against it in accordance with
its terms except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting the enforcement of creditors'
rights generally or the availability of equitable remedies. After giving
effect to the Closing, it will not be in default under or in respect of any
Operative Document.
SECTION 4.04. Proceedings.
There are no actions or proceedings pending, or to its knowledge
threatened, by or before any Governmental Authority that, if adversely
determined, would have a material adverse effect on it, on any of the Assets
to be transferred by it, on the conduct of the business of the Partnership
following the Closing as contemplated in the initial Business Plan or on its
ability to perform any of its material obligations under any Operative
Document.
SECTION 4.05. Special Purpose Representation as to Partners.
In the case of each Partner, as of the Closing Date, such Partner will not
have conducted any business, have any outstanding Indebtedness or other
obligations or own or hold any assets other than, in each case, as permitted
under Section 10.03 of the Partnership Agreement.
SECTION 4.06. No Broker's or Finder's Fees.
In the case of each Parent, neither it nor any of its Subsidiaries has
incurred any liability for any broker's or finder's fees or commissions or
similar payments in connection with any of the transactions contemplated by
any Operative Document which will, directly or indirectly, become the
responsibility of, or be borne by, the Partnership or the other Parent (or any
of their respective Affiliates); provided that fees and expenses payable to
[*] and [*] in connection with the Third Party Lease will be payable by the
Partnership either directly or as part of the [*] of the equipment covered by
the Third Party Lease.
SECTION 4.07. List of Assets; Title to Assets.
(a) In the case of CIRRUS and the CIRRUS Partner, Schedule 4.07(a), to be
appended to this Agreement at the Closing, will set forth the cash
contribution to be made by the CIRRUS Partner to the Partnership on the
Initial Funding Date.
(b) In the case of IBM and the IBM Partner, Schedule 4.07(b), to be
appended to this Agreement at the Closing, will contain a true and complete
list of the IBM Assets. The equipment subject to the IBM Equipment Leases
(other than the IBM Supplemental Equipment Lease) and the Third Party Lease
will, at the Closing, be in good operating condition, subject to reasonable
wear and tear, and, to the knowledge of IBM, will not then be in need of
repairs (other than customary periodic servicing) that could reasonably be
expected to cost [*] or more individually or [*] or more in the aggregate.
(c) On the Initial Funding Date, each Parent will have transferred, or
caused to be transferred, to the Partnership unencumbered, good and marketable
title to the Assets to be transferred by it, free and clear of the claims of
others and of all Liens (other than Permitted Liens referred to in clauses (a)
and (c) of the definition thereof).
(d) In the case of each Parent, other than pursuant to the Operative
Documents, there are no outstanding rights, options, agreements or other
commitments giving any Person any present or future right to require it or any
of its Affiliates (or, following the Closing, the Partnership or any of its
Affiliates) to Transfer to any Person any ownership or possessory interests
in, or grant any Lien on, any of the Assets to be transferred by it to the
Partnership.
SECTION 4.08. Scope and Value of Assets.
In the case of IBM and the IBM Partner, Schedule 4.08, to be appended to
this Agreement at the Closing, will correctly set forth (a) the aggregate
value of the IBM Assets, valued at the lesser of cost and fair market value,
(b) the aggregate book value of the IBM Assets for financial reporting
purposes, (c) the aggregate tax basis in the IBM Assets and (d) the respective
fair market values, book values for financial reporting purposes and tax bases
for each non-cash item of the IBM Assets.
SECTION 4.09. Litigation; Decrees.
(a) There are no lawsuits, claims, arbitrations or other proceedings or
investigations pending, or to its knowledge threatened, by or against or
affecting it or any of its Subsidiaries or any of their respective properties
that (i) relate to, or could materially adversely affect the rights of the
Partnership in respect of, any of the Assets to be transferred by it or the
conduct of the business of the Partnership following the Closing as
contemplated by the Initial Business Plan or (ii) relate to any of the
transactions contemplated by the Operative Documents.
(b) Other than, in the case of IBM and the IBM Partner, the Consent Decree,
there is no outstanding judgment, order or decree of any Governmental
Authority applicable to it or any of its Subsidiaries that relates to or could
materially adversely affect the Assets to be transferred by it or the conduct
of the business of the Partnership following the Closing as contemplated by
the Initial Business Plan.
SECTION 4.10. Compliance with Other Instruments.
It is not in default in any material respect in the performance of any
material obligation, agreement, instrument or undertaking to which it is a
party or by which it or any of its properties is bound which default could,
and there is no such obligation, agreement, instrument or undertaking (other
than, in the case of IBM and the IBM Partner, the Consent Decree) which could,
materially adversely affect the conduct of the business of the Partnership
following the Closing as contemplated by the Initial Business Plan.
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of Parents.
Each Parent agrees with the other Parent that:
(a) Performance of Obligations. It shall fully and faithfully carry out
all its obligations under each Operative Document to which it is a party.
(b) Conduct of Businesses. Until the Closing, it shall not, and shall
not permit any of its Subsidiaries to, take any action that would, or could be
reasonably foreseen to, result in any of its or its Affiliated Partner's
representations and warranties set forth herein becoming untrue or in any of
the conditions set forth herein to be satisfied by it or its Affiliated
Partner prior to or at the Closing not being so satisfied.
(c) Products and Services. IBM will be the supplier of information
processing hardware, software and services to the Partnership under IBM's then
standard customer agreements at those prices and upon those other terms and
conditions that IBM offers to its most favored unaffiliated customers
purchasing comparable quantities, except as may be otherwise provided in the
Operative Documents.
(d) Ownership Interest. Subject to Section 10.01 of the Partnership
Agreement, and except pursuant to a written agreement among the Parents and
their Affiliated Partners, such Parent will not Transfer or cause its
Affiliated Partner to Transfer, directly or indirectly, any interest in the
Partnership to a third party, other than a Subsidiary of such Parent domiciled
in the United States. All the ownership interest in such Parent's Affiliated
Partner shall at all times be directly or indirectly owned and held by such
Parent or a Subsidiary of such Parent domiciled in the United States free and
clear from all Liens (other than Permitted Liens).
(e) Change of Control and Dissolution. It will furnish the information
and enter into the agreements referred to in Sections 10.08, 10.10, 10.11 and
11.02(d) of the Partnership Agreement to be furnished or entered into by such
Parent on a timely basis.
SECTION 5.02. Parent Undertaking as to Affiliated Partner Obligations.
Each Parent agrees with the other Parent that it shall cause all
covenants, conditions, representations, warranties and agreements to be
performed or observed by such Parent's Affiliated Partner expressly set forth
in Sections 6.01, 10.01, 10.02, 10.03, 10.04, 10.05, 10.06, 10.07, 10.08,
10.10, 10.11 and 11.02 of the Partnership Agreement to be fully and faithfully
observed, and shall not cause or permit to exist (i) an Event of Default under
paragraph (a) or (b) of the definition of such term in Appendix A with respect
to such Affiliated Partner or (ii) except as otherwise permitted pursuant to
the Partnership Agreement, any event of dissolution of the Partnership caused
by such Affiliated Partner (other than, in each case (i) and (ii), a
Bankruptcy Event of such Affiliated Partner resulting from its status as a
general partner of the Partnership or acts or omissions in its capacity as
such). Nothing in Section 5.01 or in this Section 5.02 shall be construed to
create any right in any Person other than a Parent.
SECTION 5.03. Liabilities.
Each Parent represents, warrants and agrees that the Partnership has not
and shall not assume any Indebtedness, liabilities, obligations or commitments
of such Parent or any of its Affiliates as a result of or arising out of the
transfer by such Parent of the Assets to be transferred by it to the
Partnership, which Indebtedness, liabilities, obligations or commitments
relate to any period before the Initial Funding Date. This Section 5.03 shall
be enforceable against such Parent by the Partnership.
SECTION 5.04. Further Assurances.
Following the execution and delivery of this Agreement and prior to the
Closing, each party shall and shall cause its Subsidiaries to (and, in the
case of each Partner, at the Closing shall cause the Partnership to), take all
reasonable actions necessary or appropriate to ensure that the conditions to
Closing set forth herein to be satisfied by such party (or the Partnership)
are satisfied reasonably promptly following such execution and delivery, and
to obtain (and cooperate with the others in obtaining) any Governmental Action
required to be obtained or made by it in connection with any of the
transactions contemplated by this Agreement; provided that no Burdensome
Condition shall exist with respect to such Person or any of its Affiliates in
connection therewith.
SECTION 5.05. Public Announcements.
(a) Prior to the Closing, the Parents, the Partners and the Partnership
shall not (and shall not permit any of their respective Subsidiaries to),
without the prior written consent of the other parties to this Agreement,
issue any press release or make any public announcement with respect to any
Operative Document or the transactions contemplated thereby or publicly file
all or any part of any Operative Document or any description thereof except as
required by any Governmental Rule or as necessary to secure any Governmental
Action. The initial announcement of the transactions contemplated by the
Operative Documents shall be made by joint press release of the Parents.
(b) At or following the Closing, each Parent shall not (and shall not
permit any of its Subsidiaries to):
(i) issue any public release or announcement concerning the operations
of the Partnership without first allowing the other Parent reasonable time to
comment on such release or announcement in advance of its issuance and using
reasonable efforts to accept the reasonable comments of such other Parent;
(ii) issue any public release or announcement or issue or distribute any
document to be used in connection with the private or public sale of debt or
equity securities without the prior consent of the other Parent if such
release, announcement or document refers to such other Parent (or any of its
Subsidiaries) in connection with the Partnership, except as may be required by
any applicable Governmental Rule, in which case such Parent shall (or shall
cause the Person required to make such disclosure to) allow such other Parent
reasonable time to comment on such release or announcement in advance of its
issuance and use reasonable efforts to accept the reasonable comments of such
other Parent; or
(iii) publicly file all or any part of any Operative Document or any
description thereof, except as may be required by any applicable Governmental
Rule, in which case such Parent shall (or shall cause the Person required to
make such filing to) cooperate with the other Parent, to the extent reasonable
and practicable, in obtaining any confidential treatment for such filing
requested by the other Parent.
SECTION 5.06. Nonsolicitation of Employees.
So long as the business of the Partnership is being continued directly or
indirectly by the Partnership, each Parent shall not, without the prior
written consent of the Partnership, directly or indirectly, solicit, induce,
recruit or encourage any employee or officer of the Partnership to leave his
or her employment with the Partnership [*] In the event of dissolution of the
Partnership, either Parent (or any Affiliate of either Parent) may employ any
employee or former employee of the Partnership, but neither Parent (nor any of
their Affiliates) shall be required to employ any such Person.
SECTION 5.07. Other Activities.
Each Parent and its Affiliated Partner (for itself and, in the case of
each Affiliated Partner, on behalf of the Partnership) acknowledges and agrees
that:
(a) either Parent and any of its Affiliates (other than its Affiliated
Partner) may engage in other business ventures and dealings of every nature,
independently or with others, including within the scope of the activities of
the Partnership and whether or not competitive with the business of the
Partnership (or any of its Affiliates) or of the other Parent (or any of its
Affiliates) and regardless of the effect on the Partnership, and none of the
Partnership (nor any of its Affiliates) nor the other Parent (nor any of its
Affiliates) shall have any rights in such ventures or dealings or to the
income and profits derived therefrom; and
(b) the other Parent and its Affiliates, any of their respective
employees, including any Seconded Employee and Liaison Representative, and any
member of the Governing Board appointed by the other Parent's Affiliated
Partner shall not be obligated to refer to the Partnership any business
opportunity presented to or developed by any of them.
SECTION 5.08. Additional Arrangements.
(a) CIRRUS and the CIRRUS Partner acknowledge and agree that, for so long
as IBM owns directly or indirectly more than 50 percent of the Partnership,
the Partnership will, for various purposes, be required to take actions as a
Subsidiary of IBM, including complying with contracts and obligations that
apply to IBM Subsidiaries generally, and that the obligations of the
Partnership as a Subsidiary of IBM may adversely affect its business,
operations and affairs. Neither the Partnership nor CIRRUS (or any of its
Affiliates) shall have any claim or rights against IBM (or any of its
Affiliates) as a result of such requirements and obligations.
(b) Subject to Section 5.10 of this Agreement, IBM agrees that it shall not
enter into any agreement or undertake any obligation requiring the Partnership
to take action as a Subsidiary of IBM that materially adversely affects the
out-of-pocket costs of the Partnership allocable to the CIRRUS Partner, other
than any agreement or obligation that is entered into or undertaken to comply
with any Governmental Rule, if such agreement or obligation (i) is
intentionally induced against the Partnership by IBM to harm the Partnership
and is not in response to the contractual or other requirements of another
party to such agreement or obligation; (ii) does not bind Subsidiaries of IBM
generally as such agreement or obligation binds the Partnership and does not
bind IBM's Microelectronics Division (or successor division within IBM) as
such agreement or obligation binds the Partnership; and (iii) is not approved
in writing by CIRRUS.
(c) Any agreement or commitment between IBM and a third party that is not
otherwise a Limiting Agreement and that places a volume limitation on or
otherwise restricts in any material respect the production and sale of
specified types of Integrated Circuits by IBM and its Subsidiaries may, at
IBM's election, be treated as a Limiting Agreement pursuant to which the
Partnership's manufacture and sale of such Integrated Circuits would be
prohibited. If IBM elects to treat any such agreement or commitment as a
Limiting Agreement, the terms and conditions of Section 5.10 shall apply in
all respects to said agreement or commitment. If IBM does not so elect, the
terms and conditions of Section 5.10 shall not apply.
SECTION 5.09. Waiver of Conflict of Interest, etc.
(a) Each Parent and its Affiliated Partner (for itself and, in the case of
each Affiliated Partner, on behalf of the Partnership) hereby:
(i) waive any claim or cause of action against each of the other Parent,
such other Parent's Affiliates, any member of the Governing Board appointed by
such other Parent `s Affiliated Partner and any employee of such other Parent
or any of its Affiliates (including any Seconded Employee and Liaison
Representative) that may from time to time arise in respect of a breach of any
duty to the Partnership or any of its Subsidiaries by any such Person as a
result of a conflict of interest between the Partnership or any of its
Subsidiaries and such other Parent or any of its Affiliates other than the
breach of a duty expressly imposed pursuant to an Operative Document or other
agreement to which the Partnership and the other Parent or any of its
Affiliates are parties;
(ii) acknowledge and agree that (A) in the event of any conflict of
interest between the Partnership or any of its Subsidiaries and the other
Parent or any of its Affiliates that may from time to time arise, each of such
other Parent, such other Parent's Affiliates, any member of the Governing
Board appointed by such other Parent's Affiliated Partner and any employee of
such other Parent or any of its Affiliates (including any Seconded Employee
and Liaison Representative) may, in the absence of bad faith, act in the best
interests of such other Parent or any of its Affiliates and (B) each such
Person shall not be obligated (1) to reveal to the Partnership or any of its
Subsidiaries confidential information belonging to or relating to the business
of such other Parent or any of its Affiliates or (2) to recommend or take any
action in its capacity as a general partner of the Partnership, member of the
Governing Board or employee (including as a Seconded Employee or a Liaison
Representative), as the case may be, that prefers the interests of the
Partnership or any of its Subsidiaries over the interests of such other Parent
or any of its Affiliates; and
(iii) acknowledge and agree that, to the fullest extent permitted by
applicable law, the other Parent's Affiliated Partner and any member of the
Governing Board appointed by such other Parent's Affiliated Partner and any
employee of such other Parent or employee of any of its Affiliates shall not,
now or in the future, be liable, responsible or accountable in damages or
otherwise to such Parent or its Affiliated Partner or the Partnership for any
acts reasonably believed by such other Parent's Affiliated Partner, member of
the Governing Board or employee to be within the scope of the authority
conferred on such Person by the Partnership Agreement, or for such Person's
failure or refusal to perform any act except those expressly required by the
terms of the Partnership Agreement, or for such Person's performance of, or
omission to perform, any acts on advice of the Accountants or legal counsel
for the Partnership, or for such Person's performance of any acts required by,
or such Person's omission to perform any acts prohibited by, any Governmental
Rule.
(b) The waivers, acknowledgments and agreements set forth in Section
5.09(a) shall not apply to (i) any act of fraud, gross negligence or willful
misconduct by any member of the Governing Board in the performance of his
duties as a member of the Governing Board or (ii) any alleged claim or cause
of action against a Partner, any of such Partner's Affiliates or any of their
respective employees based upon the breach or non-performance by such Person
of an express contractual undertaking in an Operative Document.
SECTION 5.10. Limiting Arrangements.
(a) Capacity Load--Individual Limiting Agreements. If (i) IBM provides
CIRRUS with less than [*] prior notice of the existence of a Limiting
Agreement which would be the sole cause of CIRRUS' inability to utilize
greater than [*] of the CIRRUS Capacity Allocation in accordance with the
CIRRUS Sales Agreement (herein referred to as the "Disabled Capacity
Allocation") for the production of Semiconductor Wafers containing
Semiconductor Chips that are being produced by the Partnership for CIRRUS at
the time of such notice, (ii) CIRRUS has elected not to exercise its rights,
if any, pursuant to Section 5.10(d) with respect to such Limiting Agreement,
(iii) CIRRUS has taken all reasonable measures to eliminate or mitigate the
effect of such Limiting Agreement on the Disabled Capacity Allocation
including use of its reasonable best efforts to reallocate its orders to or
production from third party suppliers so as to substitute other products into
production in the Partnership and replace utilization of the Disabled Capacity
Allocation or otherwise reasonably attempt to utilize the resulting Disabled
Capacity Allocation and also exercise reasonable efforts to utilize its rights
under Section 7.13 of the CIRRUS Sales Agreement as to any portion of such
Disabled Capacity Allocation and (iv) CIRRUS continues to have Disabled
Capacity Allocation due to such Limiting Agreement representing in excess of
[*] of the CIRRUS Capacity Allocation, then the following shall apply:
(i) if IBM has given CIRRUS less than [*] advance notice of the effect
of the Limiting Agreement on the CIRRUS Capacity Allocation, (A) CIRRUS may
cause IBM either to utilize, or bear all Costs associated with, all the
Disabled Capacity Allocation that remains unutilized by CIRRUS for up to [*]
less the period of advance notice given by IBM, and (B) thereafter, for the
remaining period of up to [*] from the date of notice less the period covered
by clause (A) (including the advance notice period referred to in said clause
(A)), CIRRUS may cause IBM either to utilize, or bear all Costs associated
with, [*] of the Disabled Capacity Allocation that remains unutilized by
CIRRUS; and
(ii) if IBM has given CIRRUS at least [*] advance notice, but less than
[*] advance notice, CIRRUS and IBM agree to equally utilize or equally share
all Costs associated with the Disabled Capacity Allocation that remains
unutilized by CIRRUS for a period of [*] from the date of notice less the
amount of advance notice provided by IBM
(b) Computation of Disabled Capacity Allocation. For the purpose of
measuring the loss of the CIRRUS Capacity Allocation resulting from a Limiting
Agreement, Disabled Capacity Allocation shall be computed with respect to all
CIRRUS Customers that, at the time IBM gives CIRRUS notice as to the existence
of a Limiting Agreement, are party to a contract or have then-effective
binding future purchase orders for the purchase of Semiconductor Chips
affected by such Limiting Agreement ("Affected Contract Commitment") and, in
the case of a determination of Disabled Capacity Allocation for purposes of
Section 5.10(a), with respect to Turn Customers, as:
(i) the sum of (A) that number of Semiconductor Wafers that will be
required to manufacture such Semiconductor Chips that CIRRUS is contractually
obligated to deliver to such Customers during the [*] following the date of
notice plus (B) the number of Semiconductor Wafers that were required to
produce such Semiconductor Chips that were sold to such Customers during the
[*] preceding the date of notice plus (C) for the purpose of determining
Disabled Capacity Allocation in connection with Section 5.l0(a) only (but not
Section 5.10(d)), that number of Semiconductor Wafers that were required to
produce such Semiconductor Chips that were sold to Turn Customers during the
[nine months] preceding the date of notice
divided by
(ii) the total number of Semiconductor Wafers that could be produced for
CIRRUS during the same [*] period including the [*] following the date of
notice and the [*] preceding the date of notice utilizing all of the CIRRUS
Capacity Allocation.
"Turn Customer" shall mean each of up to a maximum of [*] customers of
CIRRUS identified by CIRRUS in writing to IBM in response to IBM's notice to
CIRRUS as to a Limiting Agreement that in the regular course of their business
dealings with CIRRUS do not enter into binding purchase contracts for the
purchase of Semiconductor Chips but which customarily purchase such
Semiconductor Chips from CIRRUS on a month-to-month basis and which have,
within the month preceding notice from IBM as to the applicable Limiting
Agreement, taken delivery of Semiconductor Chips manufactured pursuant to the
CIRRUS Sales Agreement, the manufacture of which would be so restricted by
such Limiting Agreement. CIRRUS shall be entitled to designate different Turn
Customers in response to notices as to each different Limiting Agreement.
(c) Capacity Load--Aggregate Impact. If at any time:
(i) CIRRUS would be unable, solely as a result of Limiting Agreements
entered into after the Closing and in effect at such time as to which IBM has
notified CIRRUS, to use the CIRRUS Capacity Allocation in accordance with the
CIRRUS Sales Agreement to produce Semiconductor Wafers containing those types
of specified Integrated Circuits so restricted that, for the [*] immediately
preceding the then [*], had accounted for the greater of (1) [*] of total
CIRRUS revenues and (2) CIRRUS revenues of [*]
(ii) Loadable Capacity as of the end of the most recently ended fiscal
quarter is less than [*] total Semiconductor Wafer output for the Facility
utilizing the CIRRUS Capacity Allocation for the [*] ending with the most
recent [*] and
(iii) CIRRUS is not at such time entitled to invoke the Limiting
Agreement Procedure set forth in Section 10.11 of the Partnership Agreement on
the basis of Section 5.l0(d), then
CIRRUS shall be entitled to invoke the Limiting Agreement Procedure set forth
in Section 10.11 of the Partnership Agreement .
As used herein, "Loadable Capacity" shall mean the sum of (i) the
aggregate number of Semiconductor Wafers corresponding to the CIRRUS Capacity
Allocation that the Partnership made available to CIRRUS and its Subsidiaries
pursuant to the CIRRUS Sales Agreement during the [*] period ending as of the
close of the most recently ended calendar quarter and (ii) the aggregate
number of Semiconductor Wafers manufactured for CIRRUS and its Subsidiaries
which CIRRUS plans to acquire from sources other than the Partnership in the
next [*] that: (A) are design rule and parametrically compatible with a
process installed or planned to be installed within the next [*] at the
Facility; (B) could be manufactured and sold by the Partnership in accordance
with and subject to terms and conditions of the licenses granted pursuant to
the IBM License Agreements and without restriction by reason of the provisions
of Section 5.10, 5.16 or 6.02 of this Agreement; and (C) when manufactured by
the Partnership, results in a net die cost per wafer as calculated on a per
usable die per wafer basis (including taking into account relative yield loss)
that is not materially in excess of the net die cost per wafer to CIRRUS or
its Subsidiaries from the alternative source for such production, when taking
into consideration the planned production quantities of such parts (after
ramp-up, in steady state production). Payments pursuant to Section 8.4 of the
CIRRUS Sales Agreement to the Partnership will be excluded from the above
calculations.
For the purpose of the preceding clause (ii)(A), a Semiconductor Wafer
shall be deemed design rule and parametrically compatible if CIRRUS, using its
customary and usual porting procedures, could transfer production of such
Semiconductor Wafer from the alternative production facility to the Facility
for manufacture using a process installed or planned to be installed within
the next [*] at the Facility. Example: As a further point of reference in
determining what constitutes Loadable Capacity, during the negotiation of this
Agreement CIRRUS described a [*] including judgments on (i) lack of license
restrictions under the IBM Patent License; (ii) impact of the restrictions of
Sections 5.10, 5.16 and 6.02 of this Agreement; and (iii) such compatibility;
which resulted in Loadable Capacity under the [*] These judgments would also
apply to and be similarly made with respect to any future determination of
what constitutes Loadable Capacity.
(d) Effect on CIRRUS Customers. If (i) IBM provides CIRRUS with less than
[*] prior notice of the existence of a Limiting Agreement which would prohibit
the Partnership from manufacturing for and selling to CIRRUS in accordance
with the CIRRUS Sales Agreement Semiconductor Wafers containing Semiconductor
Chips in order to satisfy Affected Contract Commitments, which Semiconductor
Chips are at the time of such notice actually being manufactured for CIRRUS
solely by the Partnership, (ii) CIRRUS has elected not to exercise its rights,
if any, pursuant to Section 5.10(a) and (iii) CIRRUS has taken all reasonable
measures to eliminate or mitigate the effect of such Limiting Agreement on the
Affected Contract Commitments, including the reallocation of its production
sources and attempting to facilitate its Customers' movement of the supply of
the affected orders to alternative sources of supply, then the following shall
apply:
(i) If such Limiting Agreement would result in a Disabled Capacity
Allocation exceeding [*] of the CIRRUS Capacity Allocation on an annual basis,
as determined pursuant to Section 5.10(b), such that CIRRUS would be in
material breach of its contractual obligations to the affected customers,
then, at IBM's option, IBM may (w) agree with CIRRUS upon mutually
satisfactory terms and conditions pursuant to which IBM would manufacture
elsewhere such Semiconductor Wafers containing such Integrated Circuits for
CIRRUS required for the satisfaction of the Affected Contract Commitments; (x)
remove or resolve such impact of such Limiting Agreement upon the Disabled
Capacity Allocation; (y) agree to indemnify and hold CIRRUS harmless from and
against amounts of CIRRUS' actual out of pocket expenses paid to Customers to
satisfy CIRRUS' liability for damages under existing contract commitments or
otherwise to release and cancel such existing contract commitments (i.e., cost
of cover) prohibited by such Limiting Agreement, including reasonable attorney
fees incurred by CIRRUS in connection with the release from or cancellation of
such contract commitments; or (z) notify CIRRUS that IBM has chosen not to
undertake any of the foregoing options, and that CIRRUS may therefore invoke
the procedures in Section 10.11 of the Partnership Agreement within 30 days of
receipt of such notice from IBM; provided, however, that if CIRRUS' inability
to utilize the Disabled Capacity Allocation causes more than a de minimis
impact on its ability to continue to supply any Key Customer as of the time of
notice from IBM as to the existence of a Limiting Agreement, then CIRRUS may
invoke the procedure in Section 10.11 of the Partnership Agreement despite
IBM's offer to indemnify CIRRUS pursuant to clause (y). If CIRRUS invokes
such procedures, the parties agree to amend the Operative Documents as
contemplated by Section 10.11(d) of the Partnership Agreement. If CIRRUS does
not invoke such procedures within 30 days of receipt of the notice from IBM
referred to in clause (z), the Partnership shall continue to operate without
any further adjustments resulting from said Limiting Agreement other than the
effect the existence of said Limiting Agreement, may have upon a determination
as to the availability of any remedies pursuant to Section 5.10(c).
(ii) If such Limiting Agreement would result in a Disabled Capacity
Allocation of not greater than [*] of the CIRRUS Capacity Allocation on an
annual basis, as determined pursuant to Section 5.10(b), then for each such
Limiting Agreement, (y) IBM shall indemnify CIRRUS and hold CIRRUS harmless
from CIRRUS' actual out of pocket expenses paid to Customers to satisfy CIRRUS
liability for damages under existing contract commitments or otherwise to
release and cancel such existing contract commitments (i.e., cost of cover)
prohibited by such Limiting Agreement, including reasonable attorney fees
incurred by CIRRUS in connection with the release from or cancellation of such
contract commitments up to a maximum amount of [*] per Limiting Agreement; and
(z) CIRRUS and IBM shall equally share and indemnify each other for one-half
of such costs, expenses and amounts that exceed [*].
"Key Customers" means (x) those largest revenue-producing customers of
CIRRUS which accounted for [*] of total consolidated revenues for CIRRUS and
its Subsidiaries for the [*] immediately preceding the current fiscal quarter
at the time of determination plus (y) up to [*] additional customers of CIRRUS
identified to IBM in writing prior to the date of notice of such Limiting
Agreement. Not more frequently than quarterly, CIRRUS shall have the right to
replace previously designated additional Key Customers by written notice to
IBM.
(e) Any notice and response referred to in this Section 5.10 shall include
a references to this specific Section of this Agreement and formally indicate
that such notice or response is in fact the notice or response intended by the
party under this Section.
(f) For the purpose of this Section 5.10, calculations based on the CIRRUS
Capacity Allocation will be determined without reference to any changes due to
the operation of this Section 5.10.
(g) If IBM, directly or through its Subsidiaries, is prohibited through
arrangements with third parties from making or selling any Integrated
Circuits, including CIRRUS Chips, CIRRUS RMM Chips and Subassembly Chips, or
if contracts or obligations that may be entered into as described in Section
5.08 prohibit IBM or its Subsidiaries from making or selling any such
Integrated Circuits, then the Partnership shall not make or sell any
Semiconductor Wafer containing such Integrated Circuits unless IBM or CIRRUS
obtains the rights required to remove the prohibition so that the Partnership
will be permitted to make and sell such Integrated Circuits. IBM shall be
under no obligation to obtain any such rights.
(h) IBM shall have the prior right to audit CIRRUS information, and CIRRUS
agrees to provide IBM with access to such CIRRUS information, sufficient to
enable IBM to determine the applicability of CIRRUS' rights pursuant to this
Section 5.10.
(i) CIRRUS agrees to reasonably cooperate with IBM to remove or resolve the
impact of any Limiting Agreements entered into by IBM upon utilization by
CIRRUS of the CIRRUS Capacity Allocation to the extent IBM attempts, at lt.
option, to do so.
(j) For the purpose of this Section 5.10 all revenue calculations will be
based on the consolidated revenue of CIRRUS and all CIRRUS Subsidiaries.
(k) "Limiting Agreements" shall mean any consensual third party commitments
or obligations of IBM that prohibit the Partnership from making or selling any
Integrated Circuits in Semiconductor Wafers to CIRRUS to the extent such
commitments or obligations apply to CIRRUS implementations of Integrated
Circuits in Semiconductor Wafers actually being produced by the Partnership as
of the time of notice of such Limiting Agreement or capable of being produced
by CIRRUS in the Partnership, as applicable, pursuant to the terms of this
Section and any other commitments or obligations that are deemed Limiting
Agreements by IBM pursuant to Section 508(c); provided however, that Limiting
Agreements shall not include (i) any agreements containing prohibitions,
limitations or restrictions resulting from licensing needs under the
intellectual property of third parties, or the expiration, renewal, extension
or modification of such rights or licenses and (ii) those agreements to which
IBM is a party that relate to the manufacture of Products subject to Section
5.16 or Schedule 3.21.
(l) IBM and CIRRUS shall mutually consult to determine as to whether the
Partnership will be prohibited pursuant to the terms and conditions of a
notified Limiting Agreement from producing and selling CIRRUS Chips, CIRRUS
RMM Chips and Subassembly Chips to CIRRUS; provided, however, that IBM will
not reveal the names of the parties involved in a Limiting Agreement or any
confidential information of any third parties. Any determination as to the
scope of prohibitions in any Limiting Agreement shall be made by IBM, which
determination shall be conclusive on the parties.
(m) Information provided between CIRRUS and IBM pursuant to this Section
5.10 shall (x) be treated as Business Confidential Information for the purpose
of the CIRRUS/IBM Confidentiality and Invention Rights Agreement; and (y) be
disclosed within IBM and CIRRUS on a ''need to know" basis only for the
purposes of complying with this Section 5.10.
(n) When IBM gives CIRRUS notice as to the applicability of a Limiting
Agreement, IBM shall have the opportunity, but not the obligation, to explore
solutions to reduce or eliminate the impact such Limiting Agreement would have
with regard to CIRRUS' Disabled Capacity Allocation or Affected Contract
Commitments. Such solutions may include (i) making a new arrangement for an
exception with the other party to the Limiting Agreement or (ii) arranging to
manufacture such impacted Semiconductor Wafers for CIRRUS elsewhere. CIRRUS
agrees reasonably to cooperate in such efforts where such actions involve
CIRRUS or CIRRUS Customers.
(o) During the term of the Partnership, CIRRUS shall provide IBM a [*]
report ("CIRRUS Functional Area Report") setting forth Functional Areas and
the relevant percentage of the CIRRUS Capacity Allocation for which CIRRUS
intends to use the CIRRUS Capacity Allocation pursuant to the CIRRUS Sales
Agreement for the [four fiscal quarters] immediately following the fiscal
quarter in which such CIRRUS Functional Area Report is provided to IBM. Such
Functional Area Report shall serve as the basis for IBM's reasonable efforts
to notify CIRRUS of any Limiting Agreements pursuant to this Section 5.10
which affect such Functional Areas identified in such CIRRUS Functional Area
Report; provided, however, that CIRRUS shall have further provided IBM with
such additional information as IBM shall reasonably request in connection with
ascertaining the application of the Limiting Agreements to such CIRRUS
Functional Areas identified in such CIRRUS Functional Area Report. For
purposes of this Section 5.10, "Functional Area" shall mean types of
Semiconductor Chips or Semiconductor Wafers segmented among significant chip
design areas for the projected period.
SECTION 5.11. Expenses.
Whether or not the transactions contemplated by the Operative Documents
shall be consummated (a) each party shall bear its own expenses in connection
therewith and (b) any transfer Taxes and similar Taxes with respect to any
Asset transferred to the Partnership shall be for the account of the
transferee.
SECTION 5.12. Future Requirements.
The Parents agree to share equally in the expenditures required during the
period of approximately 15 months after the Initial Funding Date, in
accordance with the schedule annexed as an Exhibit to the Business Plan. All
tooling that the Partnership may require ("ramp-up tooling") will be leased,
loaned or otherwise provided to the Partnership by the Parents or their
respective Affiliated Partners (or by a third party subject to guarantee by
the respective Parent) in equal shares and under substantially identical
rates, terms and condition. The Parents shall provide or cause to be provided
to the Partnership either valid leasehold interests in or the unencumbered
right to use (upon terms and conditions to be mutually agreed upon by the
Partners) the assets comprising the ramp-up tooling or, if ownership of such
assets is to be transferred to the Partnership, unencumbered, good and
marketable title to such assets. The Parents and the Partners shall cooperate
in identifying the ramp-up assets that may be required and the manner in which
they will be provided to the Partnership. Any such equipment provided directly
by a Parent or its Affiliates shall be in good repair and fit for its intended
use.
SECTION 5.13. New York State Assistance.
CIRRUS agrees that the financing and other economic incentives it proposes
to acquire from the New York State Urban Development Corporation and the New
York Job Development Authority shall not require the support, assistance or
other action of IBM, the IBM Partner or the Partnership except, in the case of
the Partnership, for an acknowledgment of a security interest in favor of the
lender or lenders with respect to certain ramp-up tooling which may be leased
by CIRRUS to the Partnership. CIRRUS will not take any action in pursuing such
financing or other economic incentives that would otherwise commit the
properties, assets, businesses or operations of the Partnership or that would
purport to commit the properties, assets, businesses or operations of IBM or
the IBM Partner, and CIRRUS shall be solely responsible for all liabilities
and undertakings to the State of New York, or any agency thereof, in
connection with any such financing or other economic incentives.
SECTION 5.14. Sales by CIRRUS.
CIRRUS agrees that it will not sell any RMM Chips other than CIRRUS RMM
Chips and that it will only sell CIRRUS RMM Chips and Subassembly Chips to
customers that meet the requirements set forth in Sections 6.01(b) and (d),
respectively, and only if and to the extent then so licensed pursuant to
Section 3.8 of the IBM Patent License in the case of CIRRUS RMM Chips or only
if approved in writing by the IBM Director of Licensing (or designee) in
accordance with Section 6.01(e) (which approval has not expired) in the case
of Subassembly Chips. CIRRUS further agrees that it shall use its best efforts
both to assure that the agreements made by its customers referred to in
Sections 6.01(b)(ii)(C) and 6.01(d)(iii) are accurate and to enforce any such
agreements that its customers may breach.
SECTION 5.15. Proration of Payments.
CIRRUS and IBM each agree promptly to pay any amounts that may be required
to be paid by such party as Proration of Payments in accordance with the
definition thereof as may be required pursuant to the Partnership Agreement.
SECTION 5.16. Existing IBM Restrictions.
(a) Notwithstanding Section 5.08 or 5.10 or any other provisions of this
Agreement or of any other Operative Document, unless IBM and CIRRUS expressly
agree in a writing specifically referencing this Section, the Partnership
shall not manufacture the following Products (within the meaning of the CIRRUS
Sales Agreement):
(i) any Product which is an Intel compatible microprocessor ("Intel
compatible microprocessor" includes any microprocessor capable of processing
the Intel X86 instruction set or an instruction set compatible therewith or
part of either instruction set (including Products compatible therewith
sometimes known as clones), provided the term "Intel compatible
microprocessor'' shall not include the IBM MC196 16-Bit Microcontroller);
(ii) prior to December 31, 1998, any Product which is manufactured for
the United States Department of Defense or any equivalent foreign agency but
not including any commercial off-the-shelf Product or commercially available
standard Product;
(iii) any Product implementing the Power PC architecture or any part
thereof including any part of the Power PC instruction set (including Products
compatible therewith sometimes known as clones) unless such Product is an
embedded controller manufactured under contract with and for IBM or
manufactured under a non-patent intellectual property license from IBM,
provided nothing contained in this Section 5.16(a)(iii) shall prevent the
manufacture of any Product which attaches to a Product implementing the Power
PC architecture or instruction set as described above and complements its
function provided such Product does not itself execute a substantial portion
of the Power PC instruction set;
(iv) any Product which is a NAND (not and) flash (memory) chip;
(v) any Product that is Sound Blaster compatible when running in the DOS
environment or in the DOS mode of any other operating system, including
windows or OS/2 ("Sound Blaster compatible" shall mean that the Product is
capable of running one or more Sound Blaster Programs and "Sound Blaster
Program" is any program that is capable of running on a Creative Sound Blaster
audio board or card); and
(vi) any Product incorporating an aluminum nitride substrate.
(b) This Section 5.16 shall not restrict CIRRUS from independently
obtaining any right that negates the applicability of the relevant IBM
obligations to third parties with respect to the output manufactured by the
Partnership and sold to CIRRUS under the CIRRUS Sales Agreement.
(c) CIRRUS may from time to time, but not more often than semiannually,
inquire of IBM as to the status of the Partnership's inability to manufacture
any of the Products referred to in Section 5.16(a). To the extent that any of
the Limiting Agreements shall be terminated, amended by the parties or
interpreted by a court of competent jurisdiction in a final, non-appealable
order to be less restrictive on the Partnership than the restrictions
described above or otherwise pursuant to Section 3.21 or 5.10 of this
Agreement, IBM agrees that the restrictions imposed by such Limiting Agreement
on the Partnership (and CIRRUS through the Partnership) shall be deemed
modified to a scope that reflects such termination, amendment or
interpretation.
ARTICLE VI
SALE OF PRODUCT
SECTION 6.01. Additional Procedures for Semiconductor Wafer Purchases by
CIRRUS from the Partnership.
(a) Each order by CIRRUS to the Partnership pursuant to the CIRRUS Sales
Agreement for Semiconductor Wafers containing CIRRUS Chips, Subassembly Chips
or other Semiconductor Chips that the Partnership is authorized to manufacture
for CIRRUS pursuant to the IBM License Agreements and the CIRRUS Sales
Agreement shall identify the products as set forth in the CIRRUS Sales
Agreement. If CIRRUS elects to exercise its rights under this Section 6.01
(corresponding to the rights granted to the Partnership by IBM under Section
3.8 of the IBM Patent License), CIRRUS will provide IBM with the appropriate
information reasonably necessary for IBM to make the determinations referred
to in this Section 6.01.
(b) CIRRUS at its option may request of the Partnership in writing to
request of IBM that IBM license the Partnership to make for sale to CIRRUS
Semiconductor Wafers containing specified CIRRUS RMM Chips which are to be
sold by CIRRUS, subject to the Partnership receiving a license from IBM
pursuant to Section 3.8 of the IBM Patent License, if one of the following two
conditions is met:
(i) CIRRUS establishes to IBM's reasonable satisfaction that such CIRRUS
RMM Chips are not covered by any claim of any patent of IBM (provided,
however, that the condition set forth in this Section 6.01(b)(i) shall not be
met with regard to any orders placed after IBM gives to the Partnership
written notice of IBM's determination that one or more claims of one or more
patents of IBM cover such CIRRUS RMM Chips); or
(ii) each of the following is satisfied:
(A) prior to requesting a license for any such CIRRUS RMM Chips from
the Partnership, CIRRUS contacts the IBM Director of Licensing or his
designee and provides the following information in a signed writing or by a
signed facsimile (with original signed confirmation with a copy to the
Partnership by mail):
(l) the identity of the specified CIRRUS Customer for such CIRRUS
RMM Chips, and
(2) the duration of the commitment to deliver such CIRRUS RMM
Chips to such CIRRUS Customer (if such period is less than [*], a request
that the CIRRUS Customer be approved pursuant to this Section 6.01 for
the following [*] period);
(B) except where CIRRUS establishes to IBM's reasonable satisfaction
that the specified CIRRUS Customer will always use or combine the specified
CIRRUS RMM Chips in the specified CIRRUS Customer's non-RMM Products, the
IBM Director of Licensing or his designee has provided approval in writing
(that shall be renewed by CIRRUS for the specified CIRRUS Customer with
respect to the specified CIRRUS RMM Chips after the earlier of (x) [*], or
(y) the termination of the license granted by IBM to such specified CIRRUS
Customer with respect to the specified CIRRUS RMM Chips) that the specified
CIRRUS Customer has a license under those patents of IBM covering such
CIRRUS RMM Chips and their combination and use in the specified CIRRUS
Customer's RMM Products as set forth in Section 6.01(c) and for the
duration of the commitment specified in Section 6.01(b)(ii)(A)(2), which
shall not exceed [*];
(C) the specified CIRRUS Customer is bound by a written agreement or
in purchase documentation with CIRRUS that such CIRRUS Customer will not
resell such CIRRUS RMM Chips before incorporating them into its own
products; and
(D) CIRRUS agrees to include with each order for the specified
CIRRUS RMM Chips to be sold by CIRRUS to a specified CIRRUS Customer a
written certification to the Partnership by an officer of CIRRUS that the
requirements of this Section 6.01(b) have been satisfied.
(c) IBM will grant to the Partnership the license pursuant to Section 3.8
of the IBM Patent License required as a condition for the Partnership to make
for and sell to CIRRUS the Semiconductor Wafers containing the specified
CIRRUS RMM Chips and for CIRRUS to sell such CIRRUS RMM Chips if either the
condition set forth in Section 6.01(b)(i) is met, or CIRRUS and the specified
CIRRUS Customer meet the criteria of Section 6.01(b)(ii), including (unless
the exception in Section 6.01(b)(ii)(B) is satisfied) the conditions that:
(i) such CIRRUS Customer is a party to a patent license agreement with
IBM ("Customer/IBM Patent License"), the terms of which allow such CIRRUS
Customer to make, use, sell or otherwise transfer RMM Products and Patented
Combinations and to use RMM Chips in such RMM Products and Patented
Combinations;
(ii) the Customer/IBM Patent License covers all patents of IBM covering
such CIRRUS RMM Chips issued on or before the date of the sale of such CIRRUS
RMM Chips by CIRRUS to such CIRRUS Customer;
(iii) no license under any claims of any patent of IBM covering RMM
Products licensed to such CIRRUS Customer under the Customer/IBM Patent
License has terminated for any reason; and
(iv) such CIRRUS Customer is not in default under the Customer/IBM Patent
License, including any payment or royalty provisions.
(d) CIRRUS may order Semiconductor Wafers containing a specific type of
Subassembly Chips from the Partnership and sell such Subassembly Chips to
specific CIRRUS Customers only under the following conditions:
(i) prior to ordering any Subassembly Chips from the Partnership, CIRRUS
shall contact the IBM Director of Licensing or his designee and provide the
following information in a writing signed by CIRRUS or by a signed facsimile
(with original signed confirmation with a copy to the Partnership by mail):
(A) identity of the CIRRUS customer,
(B) the specific type of Subassembly into which the Subassembly
Chips will be incorporated, and
(C) the duration of the commitment to deliver Subassembly Chips to
such CIRRUS customer; and
(ii) the IBM Director of Licensing or his designee shall have provided
permission in writing or by a signed facsimile (with original signed
confirmation with a copy to the Partnership by mail) for CIRRUS to order such
Subassembly Chips and sell such Subassembly Chips to such customer for the
duration of the commitment specified in Section 6.01(d)(i)(C);
(iii) such customer in the contract or purchase documentation between
CIRRUS and such Customer agrees not to resell such Subassembly Chips, but to
incorporate them into its own Subassemblies which are licensed under the
Customer/IBM Patent License and CIRRUS has no reason to believe that such
contract provision will be violated; and
(iv) CIRRUS includes with each order for Subassembly Chips a written
certification to the Partnership by an officer of CIRRUS to the effect that:
(A) the conditions set forth in Sections 6.01(d)(i)-(iii) for the
specified Subassembly Chips have been satisfied and the approval of the
CIRRUS customer that will purchase such Subassembly Chips from CIRRUS has
not expired, and
(B) CIRRUS has no reason to believe that its customers that have
purchased Subassembly Chips have breached their agreement described in
Section 6.01(d)(iii).
(e) IBM will not unreasonably withhold the permission required as a
condition for CIRRUS to sell Subassembly Chips to a particular CIRRUS customer
referred to in Section 6.01(d) so long as:
(i) such customer is a party to a Customer/IBM Patent License, the terms
of which allow such customer to make, use, sell or otherwise transfer
Subassembly Chips, Subassemblies and Patented Combinations;
(ii) the Customer/IBM Patent License covers all patents of IBM filed up
to the date of the sale of such chips from CIRRUS to such customer;
(iii) no license under any IBM Licensed Chip Claim licensed to such
customer under the Customer/IBM Patent License has terminated for any reason;
and
(iv) such customer is not in default under the Customer/IBM Patent
License, including any payment or royalty provisions.
(f) The rights of CIRRUS pursuant to Sections 6.01(d) and 6.01(e) may be
exercised by CIRRUS Barbados in accordance with Section 7.15 of the CIRRUS
Sales Agreement, provided, however, (i) all the terms, conditions and
restrictions of this Article VI applicable to CIRRUS and its customers shall
apply to the same extent to CIRRUS Barbados and its customers and (ii) CIRRUS
shall be responsible in all respects for the performance of CIRRUS Barbados
hereunder.
SECTION 6.02. Termination Due to Litigation.
If, at any time, a customer of CIRRUS is a party to patent litigation with
IBM or any of its Subsidiaries, the following shall apply:
(a) IBM shall be entitled to direct the Partnership to cease or not
commence the production and sale of any Semiconductor Wafers containing CIRRUS
Chips, RMM Chips or Subassembly Chips to CIRRUS for sale to any such customer
if IBM's litigation counsel states in a written opinion that such CIRRUS
Chips, RMM Chips or Subassembly Chips are "related" to such patent litigation.
CIRRUS Chips, RMM Chips or Subassembly Chips shall be deemed "related" to such
patent litigation if the origin of such Chips becomes part of any defense
raised in such patent Litigation. Such defenses may include the defenses of
patent exhaustion and the existence of any implied licenses. Any termination
of the production and sale of any Semiconductor Wafers pursuant to this
Section 6.02(a) shall (i) continue only for so long as the customer of CIRRUS
is involved in patent litigation with IBM; (ii) apply only to those
Semiconductor Wafers to be sold to that customer of CIRRUS that is "related"
to such patent litigation; and (iii) be invoked no more than [*]. In the
event that the Partnership does not cease such production and sale within [*]
after being so directed, then IBM may terminate the licenses to the
Partnership under the IBM Patents and Patents of third parties licensed by IBM
to the Partnership covering CIRRUS Chips, CIRRUS RMM Chips or Subassembly
Chips made by the Partnership for CIRRUS for sale to such customer; and
(b) In the event that sales of CIRRUS Chips, CIRRUS RMM Chips or
Subassembly Chips to an "Existing Customer" that has purchased such chips from
CIRRUS prior to the commencement of such patent litigation are interrupted as
a result of IBM exercising its rights under Section 3.6.1 of the IBM Patent
License, then IBM will make available to CIRRUS a limited license to have such
chips made under the IBM Licensed Chip Claims at a single foundry for sale
only to such Existing Customer, such limited license to last for a maximum
duration of [*] from the date written notice of such litigation is given to
CIRRUS under said Section 3.6.1 if such chips are being manufactured for
CIRRUS at the time of such notice of litigation at another foundry. If such
chips are not being manufactured for CIRRUS at another foundry at the time of
such notice of litigation, then (i) such limited license shall be extended in
duration for an additional period of the lesser of [*] or the period required
for such single foundry to commence shipping such chips to CIRRUS; and (ii)
the Partnership may continue to manufacture such chips for CIRRUS only during
such extended period, provided such extended period may not be further
extended pursuant to Section 3.10 of the IBM Patent License. "Existing
Customer" is defined herein as a customer of CIRRUS and its Subsidiaries for
at least [*] that has purchased at least [*] of product shipments from CIRRUS
and its Subsidiaries during the preceding [*] period. Such limited license to
have chips made at such single foundry shall be limited only to have made the
identical type of chips that would have been made by the Partnership but for
the cessation of production in accordance with Section 3.6.1 of the IBM Patent
License and the rate of production and sales shall be limited to the number of
such chips per month that CIRRUS is actually producing at the Partnership at
the time of such notice of litigation or is obligated by contract to sell to
such Existing Customer at the commencement of such patent litigation,
whichever is greater. CIRRUS shall not disclose to such single foundry any of
the IBM Know-How or any other know-how used by the Partnership, and such
single foundry shall have no rights to use any IBM Know-How or any such
know-how.
SECTION 6.03. Compliance with Procedures.
(a) IBM shall have the right to have an independent auditor audit and
verify compliance with the conditions of Sections 6.01 and 6.02, and if IBM
has reasonable grounds to believe that any of the conditions of Section 6.01
or 6.02 have been violated, IBM shall give notice of such violation to the
Partnership and CIRRUS. If such violation is not cured within [*] following
such notice, IBM may direct the Partnership not to make for or sell any wafers
containing RMM Chips or Subassembly Chips to CIRRUS if the RMM Chips or
Subassembly Chips therefrom are produced in violation of Section 6.01 or 6.02,
or are produced for a Customer that is not in compliance with Section 6.01 or
6.02.
(b) In those situations where a customer of CIRRUS claims not to need a
license from IBM for the use or sale of certain chips because such customer
claims to have acquired such chips from CIRRUS and also claims that such chips
were made by the Partnership, IBM shall have the right to request and CIRRUS
shall confirm whether or not such customer of CIRRUS has purchased certain
CIRRUS Chips, RMM Chips or Subassembly Chips from CIRRUS and whether the
wafers containing such Chips were sold to CIRRUS by the Partnership. CIRRUS
shall answer any such request from IBM within [*] following the date of such
request.
SECTION 6.04. Excess Capacity.
CIRRUS shall use its best efforts to coordinate its orders from its
various third-party suppliers so as to permit the full utilization by CIRRUS
of the CIRRUS Capacity Allocation. In the event that after exercising such
best efforts [*], CIRRUS remains unable to fully utilize the CIRRUS Capacity
Allocation, the following provisions apply:
(a) CIRRUS shall first offer to IBM any Unutilized Capacity.
(b) If IBM decides not to use the Unutilized Capacity, CIRRUS shall be
permitted to manufacture for resale to a CIRRUS Customer Semiconductor Wafers
to be manufactured using such Unutilized Capacity that include Semiconductor
Chips (other than RMM Chips), Subassembly Chips or CIRRUS Chips only if the
following conditions are satisfied:
(i) CIRRUS is under contract to sell such other wafers to such Customer
for delivery within the [*];
(ii) CIRRUS may not use more than [*] of the total CIRRUS Capacity
Allocation for the manufacture of such other wafers; and
(iii) the price to be paid to the Seller by CIRRUS for such other wafers
shall be not less than the equivalent price that CIRRUS offers to IBM pursuant
to Section 6.04(a) plus applicable per wafer charges pursuant to Section 8.4
of the CIRRUS Sales Agreement.
(c) CIRRUS shall be entitled to exercise the foregoing right to engage in
alternative production [*].
(d) If CIRRUS does not, within [*] following IBM's rejection of the offer
to use the Unutilized Capacity, enter into an agreement with a customer
referred to in Section 6.04(b)(i), CIRRUS must again offer the Unutilized
Capacity to IBM.
(e) CIRRUS shall continue to be obligated under the CIRRUS Sales Agreement
in all respects other than in its obligation to cause the Partnership to
manufacture only CIRRUS Chips, RMM Chips and Subassembly Chips.
SECTION 6.05. Remedies.
(a) In the event that CIRRUS sells any RMM Chips or Subassembly Chips made
by the Partnership in violation of Section 6.01 or breaches its covenant
contained in Section 5.14, then, in addition to any other remedies available
to IBM or the IBM Partner under the Operative Documents, IBM shall have the
following remedies unless CIRRUS cures all such violations within [*]
following notice of such violations from IBM:
(i) IBM shall be entitled to direct the Partnership to cease the
production and sale of such RMM Chips or Subassembly Chips to CIRRUS;
(ii) IBM shall be entitled to injunctive relief against CIRRUS for the
ordering, selling, marketing or any other activities relating to such RMM
Chips or Subassembly Chips; and
(iii) CIRRUS shall be liable to IBM for liquidated damages in the case
of a sale of RMM Chips, in the amount of [*] of the retail selling price of
the RMM Product, including any rotating cylinder or disk and all other
elements used for recording and/or reproducing information, into which RMM
Chips are ultimately incorporated for retail sale.
(b) In the event that IBM sells any IBM Subassembly Chips made by the
Partnership in violation of Section 2.2.2. of the CIRRUS Patent License, then,
in addition to any other remedies available to CIRRUS or the CIRRUS Partner
under the Operative Documents, CIRRUS shall have the following remedies unless
IBM cures all such violations within [*] following notice of such violations
from CIRRUS:
(i) CIRRUS shall be entitled to direct the Partnership to cease the
production and sale of such IBM Subassembly Chips to IBM; and
(ii) CIRRUS shall be entitled to injunctive relief against IBM for the
ordering, selling, marketing or any other activities relating to such IBM
Subassembly Chips.
SECTION 6.06. No Licenses between IBM and CIRRUS.
(a) No licenses, immunities or other rights of any kind are granted
hereunder by either CIRRUS to IBM or by IBM to CIRRUS, directly or by
implication, estoppel or otherwise, with respect to any existing or future
intellectual property and no release is granted by either IBM or CIRRUS to
each other for any claims of any kind, whether or not asserted, including any
claims of patent infringement which may exist against the other or their
respective customers, whether or not known; and no such licenses, immunities
or other rights shall arise from the consummation of this Agreement, or any
other Operative Document, or from any acts, statements or dealings leading to
such consummation.
(b) No licenses or other rights are granted hereunder by either IBM to
CIRRUS or CIRRUS to IBM, directly or by implication, estoppel or otherwise,
with respect to any trade secrets or know-how, and no such licenses or other
rights shall arise from the consummation of this Agreement or any other
Operative Document or from any acts, statements or dealings leading to such
consummation. Neither party is required hereunder to furnish or disclose to
the other any technical or other information under this Agreement.
(c) [*]
SECTION 6.07. Verification of IBM Information.
IBM agrees to provide to an independent auditor of CIRRUS that is
reasonably acceptable to IBM the information required to be furnished pursuant
to Section 2.2.3 of the CIRRUS Patent License.
ARTICLE VII
EMPLOYEES
SECTION 7.01. Selection of Partnership Employees.
(a) IBM employees presently working at the facility to be leased to the
Partnership pursuant to the IBM Real Estate Lease ("322 Fabrication
Employees") shall be given the first opportunity to interview to become
employees of the Partnership. However, all employees shall be hired through an
arms-length interview process based upon specific needs and qualifications.
The candidates shall complete an application process to be agreed upon by the
Partners.
(b) All then-current full-time 322 Fabrication Employees who wish to be
hired by the Partnership will be interviewed, and the Partnership will offer
to employ, conditional upon Closing and such offer not being withdrawn, as the
Partnership employees, on January 1, 1995, those full-time 322 Fabrication
Employees agreed to by the Partners as well as any additional employees
required to run the Partnership's manufacturing facility, on the terms and
conditions as to salary and benefits to be agreed upon by the Partners prior
to Closing. The Partners will mutually approve a minimum of [*] Partnership
employment offers to potential employees starting immediately after the date
of execution of this Agreement. If the Partners have not agreed upon a total
of [*] such offers by [*] from the date of execution of this Agreement, then
the Partners will approve immediately Partnership employment offers to
sufficient current full-time 322 Fabrication Employees such that all
employment offers will total a minimum of [*]. Key skills by job category
required for the Partnership shall be agreed upon by the Partners prior to
Closing.
SECTION 7.02. Employee Benefits.
(a) The benefits plan outline for all Partnership employees shall be agreed
upon by the Partners prior to the Closing.
(b) The salary and bonus plan for all regular employees of the Partnership
shall be agreed upon by the Partners prior to Closing. The Partners shall also
mutually agree upon a self-funding bonus plan through cost-savings for certain
employees of the Partnership which will be included as an appendix to said
salary and bonus plan and which may thereafter be amended or modified only
upon the written agreement of the Partners or through the approval of a
subsequent annual Business Plan that includes such amendment or modification.
The Partners estimate that [*] of the cost savings over the Initial Business
Plan will be utilized for this purpose over the life of the Partnership.
(c) IBM shall transfer to an account designated by the Partners funds to
provide for such retirement benefits as have accrued through December 31,
1994, for those IBM employees who are offered and accept offers of employment
pursuant to Section 7.01, and report to work as regular employees of the
Partnership. CIRRUS may engage the service of a qualified actuary to review
the amount to be transferred and will have complete access to the actuarial
assumptions used in arriving at the proposed amount and the estimated cost for
the Initial Business Plan.
ARTICLE VIII
TERMINATION
SECTION 8.01. Termination.
This Agreement may be terminated at any time before Closing:
(a) by either Parent if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the other
Parent or its Affiliated Partner set forth in this Agreement and, if it is
susceptible of cure, it has not been cured within [*] after notice thereof to
such other Parent;
(b) by either Parent if a Burdensome Condition with respect to the
transactions contemplated by this Agreement shall have, in such Parent's
reasonable judgment, been imposed on such Parent or any of its Affiliates;
provided that prior to such termination, it will have exercised reasonable
efforts to negotiate an arrangement reasonably acceptable to it with the
appropriate Governmental Authority to eliminate such Burdensome Condition; or
(c) by either Parent, in its sole discretion, if the Closing has not
occurred before October 15, 1994.
Upon such termination, the parties shall promptly cause the Partnership to
be dissolved (if it has previously been formed) and its affairs wound up.
This Agreement (except for Sections 5.05, 5.11 and 5.13 which shall survive
any such termination) shall thereupon become void and (except as aforesaid)
there shall be no liability or obligation on the part of either Parent or its
Affiliated Partner, except to the extent that such termination results from
the breach by a Parent or its Affiliated Partner of any of their respective
representations, warranties, covenants or agreements set forth herein.
ARTICLE IX
CONTRIBUTION; JOINT AND SEVERAL LEASE GUARANTEES
SECTION 9.01. Reimbursement.
(a) Each Parent hereby agrees to reimburse the other Parent and its
Affiliated Partner for any loss, damage, liability, cost or expense of the
Partnership arising during the period that both Partners are general partners
of the Partnership and incurred by the other Parent or its Affiliated Partner
after the Closing solely as a result of such other Parent's Affiliated
Partner's status as a general partner of the Partnership (including acts or
omissions in its capacity as such) to the extent necessary so that such other
Parent and its Affiliated Partner shall not bear any portion of a loss,
damage, liability, cost or expense of the Partnership in an amount in excess
of such other Parent's Affiliated Partner's Percentage in the Partnership at
the time such loss, damage liability, cost or expense arose (except to the
extent that such excess is attributable to the willful misconduct or gross
negligence of such other Parent or its Affiliated Partner or to such other
Parent's Affiliated Partner exceeding its authority under the Partnership
Agreement or defaulting in the performance or observance of its agreements and
covenants under Section 10.03 of the Partnership Agreement).
(b) So long as both Partners are general partners of the Partnership,
reimbursement pursuant to Section 9.01(a) shall not be available to either
Parent or Partner until demand shall have been made by such Parent and Partner
to collect or recover the relevant amount from the Partnership and such demand
shall not have been satisfied.
(c) The provisions of this Section 9.01 shall survive the termination of
this Agreement or any other Operative Document, the dissolution of the
Partnership and the withdrawal of either Partner from the Partnership.
SECTION 9.02. Joint and Several Lease Guarantees.
(a) Each Parent (the "Reimbursing Parent") agrees to pay to the other
Parent (the "Indemnified Parent") on written demand an amount equal to 50% of
the excess, if any, of (i) the aggregate amount paid by the Indemnified Parent
as guarantor under the Joint and Several Lease Guarantees over (ii) the
aggregate amount paid by the Reimbursing Parent as guarantor under the Joint
and Several Lease Guarantees, together with interest on such amount at a rate
equal to 15% per annum from the date of demand until such amount is paid.
(b) Each Reimbursing Parent also agrees to pay, promptly upon receipt of a
written statement specifying the applicable items, all costs, expenses and
attorney's fees incurred by the Indemnified Parent in connection with the
Joint and Several Lease Guarantees and in enforcing against the Reimbursing
Parent the reimbursement agreement contained in this Section 9.02. Subject to
the foregoing, each Reimbursing Parent hereby waives promptness, diligence and
notice with respect to any of its obligations under this Section 9.02 and any
requirement that any beneficiary of the Joint and Several Lease Guarantees
exhaust any right to take any action against the Partnership or any other
Person.
(c) The obligations of the Reimbursing Parent under this Section 9.02 to
reimburse the Indemnified Parent shall be absolute, unconditional and
irrevocable under any and all circumstances and irrespective of:
(i) any lack of validity or enforceability of the Joint and Several
Lease Guarantees or the underlying leases;
(ii) any amendment or waiver of or any consent to departure from all or
any of the terms and conditions of the underlying leases;
(iii) the existence of any claim, set-off, defense or other right that
the Partnership or any other Person may at any time have against the
applicable lessor or any other Person, whether in connection with this
Agreement, the Joint and Several Lease Guarantees or the underlying leases or
in connection with any unrelated transaction;
(iv) the availability of any procedural defenses to enforcement,
including absence of jurisdiction, venue or service of process; and
(v) the availability of any substantive defenses to enforcement,
including lack of notice, extension of time periods, failure to enforce rights
against the Partnership or any other Person, laches or change in position or
any other circumstance which might vary the risk of or otherwise constitute a
defense available to or discharge of either Parent.
(d) The mutual obligations of the Parents hereunder are subject to
modification or termination in accordance with Sections 10.08, 10.10, 10.11,
11.02 and 11.03 of the Partnership Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. [*]
SECTION 10.02. Survival.
Except as may otherwise be specifically provided in this Agreement, all
covenants, agreements, representations and warranties of the parties made in
or pursuant to this Agreement shall survive the execution and delivery of the
Operative Documents and the closing of the transactions contemplated thereby
and the expiration or other termination of any other Operative Document,
notwithstanding any investigation by or on behalf of any party.
SECTION 10.03. Legal Disputes; Attorneys' Fees.
In any legal dispute arising under this Agreement which is determined by
the final and unappealable judgment or order of a court in favor of one party
hereto, the party against whom such judgment or order is rendered (or its
Parent) shall pay to the other party (or its Parent), promptly upon request
therefor and receipt of reasonably complete itemization and documentation
thereof, the reasonable attorneys' fees and expenses of such other party
relating to such dispute.
SECTION 10.04. Not a Partnership.
Nothing contained in this Agreement shall be deemed or construed to make
IBM and CIRRUS Partners or joint venturers with each other. The only
partnership will be formed between the IBM Partner and the CIRRUS Partner
pursuant to the Partnership Agreement upon the consummation of the
transactions contemplated by this Agreement and the Partnership Agreement .
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties as of the date first above written.
CIRRUS LOGIC, INC.,
by /s/ XXXXXXX X. XXXXXXXXX
Name: Xxxxxxx X. Xxxxxxxxx
Title: President, CEO
INTERNATIONAL BUSINESS MACHINES CORPORATION,
by /s/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: General Manager
Microelectronics Division
CIREL, INC.,
by /s/ XXXXXXX X. XXXXXXXXX
Name: Xxxxxxx X. Xxxxxxxxx
Title: President, CEO
MICRUS HOLDINGS INC.,
by /s/ XXXX X. XXXXXXX
Name: Xxxx X. Xxxxxxx
Title: President
PARTICIPATION AGREEMENT
Dated as of September 1, 1994
among
CIRRUS LOGIC, INC.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CIREL, INC.
and
MICRUS HOLDINGS INC.
TABLE OF CONTENTS
ARTICLE I
Definitions, Rules of Construction and
Documentary Conventions
SECTION 1.01. Certain Definitions
SECTION 1.02. Additional Definitions
SECTION 1.03. Rules of Construction and
Documentary Convention
ARTICLE II
Closing; Initial Funding
SECTION 2.01. Closing
SECTION 2.02. Time and Place of Closing
SECTION 2.03. Initial Funding
ARTICLE III
Conditions to Closing
SECTION 3.01. Performance
SECTION 3.02. Authorization, Execution and
Delivery of Operative Documents
SECTION 3.03. No Default
SECTION 3.04. Consents, Approvals, etc.;
Burdensome Conditions
SECTION 3.05. Governmental Rules
SECTION 3.06. Standard Closing Documents
SECTION 3.07. Representations and Warranties
SECTION 3.08. No Material Adverse Change
SECTION 3.09. Proceedings
SECTION 3.10. Opinion of Counsel to CIRRUS
SECTION 3.11. Opinion of Counsel to IBM
SECTION 3.12. Due Diligence
SECTION 3.13. Insurance
SECTION 3.14. Support Arrangements, etc.
SECTION 3.15. Employment and Certain Other Arrangements
SECTION 3.16. Partnership Finances
SECTION 3.17. Form of Operative and Other Documents
SECTION 3.18. Business Plan
SECTION 3.19. Sale and Lease of Third Party Assets
SECTION 3.20. Additional Equipment Acquisitions;
IBM Initial Equipment Lease
SECTION 3.21. IBM Restrictions
ARTICLE IV
Representation, and Warranties of the Parties
SECTION 4.01. Organization, Ownership Interest, etc.
SECTION 4.02. Authorization; No Conflict
SECTION 4.03. Enforceability
SECTION 4.04. Proceedings
SECTION 4.05. Special Purpose Representation as to Partners
SECTION 4.06. No Broker's or Finder's Fees
SECTION 4.07. List of Assets; Title to Assets
SECTION 4.08. Scope and Value of Assets
SECTION 4.09. Litigation; Decrees
SECTION 4.10. Compliance with Other Instruments
ARTICLE V
Covenants
SECTION 5.01. Covenants of Parents
SECTION 5.02. Parent Undertaking as to Affiliated
Partner Obligations
SECTION 5.03. Liabilities
SECTION 5.04. Further Assurances
SECTION 5.05. Public Announcements
SECTION 5.06. Nonsolicitation of Employees
SECTION 5.07. Other Activities
SECTION 5.08. Additional Arrangements
SECTION 5.09. Waiver of Conflict of Interest, etc.
SECTION 5.10. Limiting Arrangements
SECTION 5.11. Expenses
SECTION 5.12. Future Requirements
SECTION 5.13. New York State Assistance
SECTION 5.14. Sales by Cirrus
SECTION 5.15. Proration of Payments
SECTION 5.16. Existing IBM Restrictions
ARTICLE VI
Sale of Product
SECTION 6.01. Additional Procedures for Semiconductor Wafer
Purchases by CIRRUS from the Partnership
SECTION 6.02. Termination Due to Litigation
SECTION 6.03. Compliance with Procedures
SECTION 6.04. Excess Capacity
SECTION 6.05. Remedies
SECTION 6.06. No Licenses between IBM and CIRRUS
SECTION 6.07 Verification of IBM Information
ARTICLE VII
Employees
SECTION 7.01. Selection of Partnership Employees
SECTION 7.02. Employee Benefits
ARTICLE VIII
Termination
SECTION 8.01. Termination
ARTICLE IX
Contribution; Joint and Several Lease Guarantees
SECTION 9.01. Reimbursement
SECTION 9.02. Joint and Several Lease Guarantees
ARTICLE X
Miscellaneous
SECTION 10.01. [*]
SECTION 10.02. Survival
SECTION 10.03. Legal Disputes; Attorneys' Fees
SECTION 10.04. Not a Partnership
APPENDIX A
DEFINITIONS, RULES OF CONSTRUCTION AND
DOCUMENTARY CONVENTIONS
In any agreement or instrument that incorporates the definitions set
forth in this Appendix and states that the rules of construction and
documentary conventions set forth herein shall apply to such agreement or
instrument, then, unless such agreement or instrument otherwise requires:
ARTICLE I
Definitions
The following terms shall have the specified meanings:
"Accountants" means such firm of nationally recognized independent
certified public accountants for the Partnership as is appointed pursuant to
the Partnership Agreement from time to time. Initially, the Accountants shall
be Price Waterhouse.
"Affiliate" of any Person means any other Person which directly or
indirectly controls, is controlled by or is under common control with, such
Person; provided, however, that the term Affiliate, (a) when used in relation
to the Partnership, shall not include either Parent or any of its Affiliates
and (b) when used in relation to a Parent or any of its Affiliates, shall not
include the Partnership or any of its Subsidiaries. The term "control"
(including its correlative meanings "controlled by" and "under common control
with") means possession, directly or indirectly, of power to direct or cause
the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Affiliated Partner" means, when used in relation to CIRRUS, the CIRRUS
Partner, and when used in relation to IBM, the IBM Partner.
"Agreed Fair Market Value" means those agreed prices for wafers sold by
the Partnership to CIRRUS and IBM as set forth in an Exhibit to the Initial
Business Plan.
"Assets" means, with respect to CIRRUS or the CIRRUS Partner, the CIRRUS
Assets, and with respect to IBM or the IBM Partner, the IBM Assets.
"Bankruptcy Event" means, with respect to any Person, the occurrence or
existence of any of the following events or conditions: such Person (1) is
dissolved; (2) becomes insolvent or fails or is unable or admits in writing
its inability generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any bankruptcy
or insolvency law or other similar law affecting creditors' rights, or a
petition is presented for its winding up or liquidation and, in the case of
any such proceeding or petition instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency or bankruptcy
or the entry of an order for relief or the making of an order for its winding
up or liquidation or (B) is not dismissed, discharged, stayed or restrained in
each case within 60 days of the institution or presentation thereof; (5) has a
resolution passed for its winding-up or liquidation; (6) seeks or becomes
subject to the appointment of an administrator, receiver, trustee, custodian
or other similar official for it or for all or substantially all its assets
(regardless of how brief such appointment May be, or whether any obligations
are promptly assumed by another entity or whether any other event described in
this clause (6) has occurred and is continuing); (7) any event occurs with
respect to it which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (1) through (6)
above; or (8) takes any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the foregoing acts.
"Burdensome Condition" means, with respect to any proposed transaction,
any action taken, or credibly threatened, by any Governmental Authority or
other Person to challenge the legality of such proposed transaction, including
(i) the pendency of a governmental investigation (formal or informal), (ii)
the institution of a suit or the threat thereof (A) seeking to restrain,
enjoin or prohibit the consummation of such transaction or part thereof, to
place any condition or limitation upon such consummation or to invalidate,
suspend or require modification of any provision of any Operative Document,
(B) challenging the acquisition by either Partner of its interest in the
Partnership or (C) seeking to impose limitations on the ability of either
Partner effectively to exercise full rights as a general partner in the
Partnership, including the right to act on all matters properly presented to
the Partners pursuant to the Partnership Agreement, (iii) an order by a court
of competent jurisdiction having any of the consequences described in (ii)(A),
(ii)(B) or (ii)(C) above, or placing any conditions or limitations upon such
consummation that are unreasonably burdensome in the reasonable judgment of
the applicable Person or (iv) the issuance of any subpoena, civil
investigative demand or other request for documents and information that is
unreasonably burdensome in the reasonable judgment of the applicable Person.
"Business Day" means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York or California) on which banks
are open for business in New York, New York and San Francisco, California.
"Business Plan" means each 12-month business plan, including budgets and
projections for the Partnership for each relevant period, adopted in
accordance with Section 3.04(a) of the Partnership Agreement and complying
with Section 3.04(b) of the Partnership Agreement.
"Capital Transaction" means a disposition by the Partnership of property
which is or has been property of a character subject to the allowance for
depreciation provided in Section 167 of the Code if such disposition results
in the recognition of gain or loss by the Partnership.
"Change of Control of CIRRUS" means the acquisition by a Subject Acquirer
of more than 35% of the outstanding common shares of CIRRUS representing the
right to vote for CIRRUS's Board of Directors, or any consolidation, merger or
other reorganization of CIRRUS in which CIRRUS is not the continuing or
surviving corporation or pursuant to which shares of such common stock would
be converted into cash, securities or other property.
"CIRRUS" means CIRRUS Logic, Inc., a California corporation.
"CIRRUS Assets" means the cash contributions to the Partnership to be
made by the CIRRUS Partner on the Initial Funding Date.
"CIRRUS Barbados" means CIRRUS International, Ltd., a corporation formed
under the laws of Bermuda.
"CIRRUS Capacity Allocation" shall have the meaning set forth in the
CIRRUS Sales Agreement.
"CIRRUS Chips" means Semiconductor Chips whose designs, specifications
and working drawings are furnished by CIRRUS and have [*] of the functional
chip area and functional circuit content designed and developed:
(i) by employees of CIRRUS for CIRRUS or any of its Subsidiaries;
(ii) by a third party as a work for hire under copyright law for CIRRUS
or any of its Subsidiaries;
(iii) by a third party from which CIRRUS or any of its Subsidiaries has
acquired ownership of designs, specifications and working drawings, only when
the following conditions are met:
(a) no more than [*] of the sales of such chips are sold back to
such third party, and
(b) if payment by CIRRUS for ownership of such designs,
specifications and working drawings is by other than a lump sum payment, no
more than [*] of the sales price of such chips by CIRRUS shall be paid to such
third party as consideration for the sale of such designs, specifications and
working drawings to CIRRUS or any of its Subsidiaries, which [*] amount shall
be calculated based on the [*] or
(iv) by a third party from which CIRRUS has licensed designs,
specifications and working drawings, only when the following conditions are
met:
(a) no more than [*] of the sales of such chips are sold back to
such third party, as calculated on a CIRRUS fiscal year basis, and
(b) if payment by CIRRUS for such license is by other than a lump
sum payment, then no more than an average of a [*] royalty over a five year
period shall be paid to such third party, which [*] amount shall be calculated
based on the [*] and
(c) CIRRUS does not purchase such third party's customer base;
provided that such functional chip area and functional circuit content
perform integral functions of such Semiconductor Chips and can be identified
by CIRRUS to the Partnership in a verifiable and documented manner; and
provided, further, that RMM Chips and Subassembly Chips shall not be
considered to be CIRRUS Chips.
"CIRRUS Equipment Lease" means the equipment lease to be entered into
between the Partnership and CIRRUS with respect to future tooling and
equipment requirements pursuant to Section 5.12 of the Participation
Agreement.
"CIRRUS/IBM Confidentiality and Invention Rights Agreement" means the
Confidentiality and Invention Rights Agreement to be entered into between
CIRRUS and IBM at the Closing.
"CIRRUS License Agreements" means the CIRRUS Patent License and the
CIRRUS/IBM Confidentiality and Invention Rights Agreement.
"CIRRUS/Manufacturing Confidentiality Agreement" means the
Confidentiality Agreement to be entered into between the Partnership and
CIRRUS at the Closing.
"CIRRUS Patent License" means the license agreement to be entered into
between CIRRUS and the Partnership at the Closing providing for the royalty-
free license to the Partnership of certain CIRRUS patents.
"CIRRUS Patents" shall have the meaning set forth in the CIRRUS Patent
License.
"CIRRUS Partner" means Cirel, Inc., a California corporation.
"CIRRUS Sales Agreement" means the agreement to be entered into between
CIRRUS and the Partnership at the Closing for the sale of Semiconductor Wafers
by the Partnership to CIRRUS.
"CIRRUS RMM Chips" shall have the meaning set forth in the IBM Patent
License.
"Closing" means the closing of the transactions described in Section 2.01
of the Participation Agreement.
"Closing Date" means September 30, 1994, or if all the conditions set
forth in Article III of the Participation Agreement have not been satisfied or
waived by that date, as promptly as practicable after the satisfaction or
waiver of the remaining conditions; provided, however, that in no event will
the Closing Date be later than October 15, 1994, without the written agreement
of both Partners.
"CMOS" means complementary metal oxide semiconductor.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference to a particular provision of the
Code or a Treasury Regulation means, where appropriate, the corresponding
provision of any successor statute or regulation.
"Confidentiality and Inventions Agreements" means the CIRRUS/IBM
Confidentiality and Invention Rights Agreement, the CIRRUS/Manufacturing
Company Confidentiality Agreement and the IBM/Manufacturing Company
Confidentiality Agreement.
"Consent Decree" means the Final Judgment, entered January 25, 1956, as
amended, in the matter entitled United States of America v. International
Business Machines Corporation, C.A. No. 72-344 (S.D.N.Y.).
"Cost" shall have the meaning set forth in the CIRRUS Sales Agreement or
the IBM Sales Agreement, as the case May be.
"Customers" shall have the meaning set forth in the CIRRUS Sales
Agreement.
"Deadlock" means a failure or inability to resolve a dispute between the
CIRRUS Partner and the IBM Partner on any matter requiring their mutual
approval after having exhausted the dispute resolution process set forth in
Section 2.15 of this Appendix A.
"Designated Individuals" has the meaning set forth in Section 2.15(a) of
this Appendix A.
"Engineering Change" means a mechanical or electrical change to the
Product which affects form, fit, function, maintainability or
manufacturability.
"Event of Default" means, with respect to a Partner, the occurrence or
existence of any of the following events or conditions:
(a) a Bankruptcy Event of such Partner, such Partner's Parent or any
Subsidiary of such Parent that has a direct or indirect ownership interest in
such Partner;
(b) the failure of such Partner to make any required capital contribution
when due under the Partnership Agreement;
(c) the material breach by such Partner or its Parent of any of the
specified material obligations identified in the respective Operative
Documents as 'Events of Default' under the Partnership Agreement, which breach
is not cured (together with the payment of interest on any unpaid amount from
the due date therefor computed at a rate of 15% per annum based on the actual
number of days elapsed in a 360-day year) within 30 days following written
notice thereof to such Partner and its Parent by the Partnership or the other
Partner;
(d) the failure by such Partner or Parent to make any payment when due as
specified in an Operative Document in an aggregate unpaid amount in excess of
$7 million, which breach is not cured (together with the payment of interest
on any unpaid amount from the due date therefor computed at a rate of 15% per
annum based on the actual number of days elapsed in a 360-day year) within 30
days following written notice thereof to such Partner and its Parent by the
Partnership or the other Partner; or
(e) a breach by either Parent of its covenant contained in
Section 5.01(d) of the Participation Agreement .
"Facility" means IBM's building located in East Fishkill, New York,
designated "Building 322" prior to the signing of the Partnership Agreement
(including ancillary non-production support areas) and leased to the
Partnership at the Closing.
"Fiscal Quarter" means, unless changed by the Governing Board, a calendar
quarter.
"Fiscal Year" means, unless changed by the Governing Board, a calendar
year or, in the case of the Partnership's first Fiscal Year, such portion of a
calendar year beginning on the Closing Date or, in the case of the
Partnership's final Fiscal Year, such portion of a calendar year ending on the
date that the Partnership is liquidated in accordance with Article XI of the
Partnership Agreement or ending on the date on which a termination of the
Partnership shall have occurred within the meaning of Code
Section 708(b)(1)(B).
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time, consistently applied.
"GAAS" means generally accepted auditing standards in the United States
as in effect from time to time.
"Governing Board" has the meaning set forth in Section 5.01 of the
Partnership Agreement.
"Governmental Action" means any authorization, consent, approval, order,
waiver, exception, variance, franchise, permission, permit or license of, or
any registration, filing or declaration with, by or in respect of, any
Governmental Authority.
"Governmental Authority" means any Federal, state, local or foreign
governmental Person, authority, agency, court, regulatory commission or other
governmental body, including the Internal Revenue Service and the Secretary of
State of any State, or any stock exchange having competence in the matter.
"Governmental Rule" means any statute, law, treaty, rule, code,
ordinance, regulation, license, permit, certificate or order of any
Governmental Authority or any judgment, decree, injunction, writ, order or
like action of any court or other judicial or quasijudicial tribunal.
"Harmful Code" means any computer code, programming instruction or a set
of instructions that is intentionally constructed with the ability to damage,
interfere with or otherwise adversely affect computer programs, data files or
hardware without the consent or intent of the computer user. This definition
includes self-replicating and self-propagating programming instructions
commonly called viruses or worms.
"IBM" means International Business Machines Corporation, a New York
corporation.
"IBM Assets" means the cash contributions, assets and properties
initially to be transferred to the Partnership on the Initial Funding Date by
the IBM Partner, as set forth in Schedule 4.07 to the Participation Agreement.
"IBM Capacity Allocation" shall have the meaning set forth in the IBM
Sales Agreement.
"IBM Chips" shall have the meaning set forth in the CIRRUS Patent
License.
"IBM Director of Licensing" means that person appointed from time to time
to said position within IBM, to whom notice May be given in accordance with
Section 9.1.2 of the IBM Patent License.
"IBM Equipment Leases" means each of the following:
(a) the "IBM Initial Equipment Lease" to be entered into between the
Partnership and IBM at the Closing providing for the leasing to the
Partnership of existing machinery and equipment listed on a Schedule thereto;
and
(b) the "IBM Supplemental Equipment Lease" to be entered into between the
Partnership and IBM with respect to future tooling and equipment requirements
pursuant to Section 5.12 of the Participation Agreement.
"IBM Know-How" shall have the meaning set forth in the IBM Know-How
License.
"IBM Know-How License" means the license agreement to be entered into
between IBM and the Partnership at the Closing providing for the license to
the Partnership of certain IBM Know-How.
"IBM License Agreements" means the IBM Patent License and the IBM Know-
How License.
"IBM Licensed Chip Claims" means the claims of the IBM Patents except for
the IBM RMM Chip Claims.
"IBM/Manufacturing Company Confidentiality Agreement" means the
Confidentiality Agreement to be entered into between the Partnership and IBM
at the Closing.
"IBM Partner" means MiCrus Holdings Inc., a Delaware corporation.
"IBM Patent License" means the license agreement to be entered into
between IBM and the Partnership at the Closing providing for the license to
the Partnership of certain patents.
"IBM Patents" shall have the meaning set forth in the IBM Patent License.
"IBM Real Estate Lease" means the lease to be entered into between the
Partnership and IBM at the Closing providing for the leasing to the
Partnership of the real property component of the manufacturing facility to be
used in the conduct of the Partnership's business commonly known as Building
322 located in Fishkill, New York.
"IBM RMM Chip Claims" means the (i) claims of the IBM Patents in which
the claimed invention is contained on a single RMM Chip and (ii) claims
covering processes for making such chips.
"IBM Sales Agreement" means the agreement to be entered into between IBM
and the Partnership at the Closing for the sale of Semiconductor Wafers by the
Partnership to IBM.
"IBM Services Agreement" means the agreement to be entered into between
the Partnership and IBM at the Closing relating to the provision of certain
site and administrative services by IBM to the Partnership.
"Indebtedness" of any Person means, without duplication, (a) all
obligations (whether present or future, contingent or otherwise, as principal
or surety or otherwise) of such Person in respect of borrowed money or in
respect of deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charge. are customarily paid,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person,
(e) all obligations of such Person issued or assumed as the deferred purchase
price of property or services, (f) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all guarantees by such Person of Indebtedness of others, (h) all obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property (or a
combination thereof), which obligations would be required to be classified and
accounted for as capital leases on a balance sheet of such Person prepared in
accordance with GAAP, (i) all obligations of such Person (whether absolute or
contingent) in respect of interest rate swap or protection agreements, foreign
currency exchange agreements or other interest or exchange rate hedging
arrangements and (j) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any partnership (other than the
Partnership) in which such Person is a general partner.
"Initial Business Plan" means the initial business plan of the
Partnership as agreed to by the Partners and the Parents pursuant to the
Operative Documents.
"Initial Funding Date" means December 30, 1994.
"Integrated Circuit" means an integral unit including a plurality of
active and/or passive circuit elements formed at least in part of
Semiconductor Material and associated on, or in, a single substrate, such unit
forming, or contributing to the formation of, an electrical circuit.
"Intellectual Property" means any rights under applicable law with
respect to intellectual property, including patents, patent applications,
patent rights, trademarks, trademark registrations, trademark applications,
licenses, service marks, business marks, brand names, trade names, all other
names and slogans embodying business or product goodwill (or both), copyright
registrations, mask works, copyrights (including copyrights in computer
programs, software, including all source code and object code, development
documentation, programming tools, drawings, specifications and data), rights
in designs, trade secrets, technology, inventions, discoveries and
improvements, know-how, proprietary rights, formulae, processes, technical
information, confidential and proprietary information, and all other
intellectual property rights, whether or not subject to statutory registration
or protection.
"Inventions" shall have the meaning set forth in the IBM Patent License.
"Joint and Several Lease Guarantees" means those Joint and Several Lease
Guarantees of certain lease payments to be provided by CIRRUS and IBM in
support of lease obligations incurred by the Partnership under the Third Party
Lease, the IBM Equipment Leases (excluding the IBM Supplemental Equipment
Lease) and the IBM Real Estate Lease.
The term "knowledge", when used in relation to a Person, includes the
knowledge of such Person's Subsidiaries and general partners.
"Liaison Representative" means the representative of its respective
Parent that each Partner is entitled to select in order to receive information
concerning the Partnership pursuant to Section 8.04 of the Partnership
Agreement.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (c) in
the case of securities, any purchase option, call or similar right with
respect to such securities.
"Limiting Agreement" shall have the meaning set forth in Section 5.10(k)
of the Participation Agreement.
"Magneto-Optical Disk Drive" shall have the meaning set forth in the IBM
Patent License.
Any reference to any event, change or effect being "material" with
respect to any Person means an event, change or effect which is or, insofar as
reasonably can be foreseen, will be material to the condition (financial or
otherwise), properties, assets, liabilities, capitalization, licenses,
businesses, operations or prospects of such Person and, in the case of the
Partnership, the capital accounts of the Partners.
"Net Profits" and "Net Losses" means, subject to Section 7.03 of the
Partnership Agreement, the taxable income and tax loss of the Partnership for
Federal income tax purposes for a given Fiscal Year, increased by the amount
of any tax-exempt income of the Partnership during such Fiscal Year and
decreased by the amount of any Code Section 705(a)(2)(B) expenditures (within
the meaning of Treasury Regulation Section 1.704-l(b)(2)(iv)(i)) of the
Partnership during such Fiscal Year; provided, however, that, in the case of
Section 704(c) Property, depreciation for each Fiscal Year shall be an amount
equal to (x) the depreciation for Federal income tax purposes with respect to
such Section 704(c) Property for such Fiscal Year multiplied by (y) a fraction
(i) the numerator of which is the fair market value of such Section 704(c)
Property on the date of contribution or revaluation and (ii) the denominator
of which is the basis of such Section 704(c) Property on the date of
contribution or revaluation for Federal income tax purposes; and provided
further, however, that if the basis of such Section 704(c) Property for
Federal income tax purposes is zero, depreciation for each Fiscal Year shall
be computed under any reasonable method in accordance with Treasury Regulation
Section 1.704-l(b)(2)(iv)(g)(3) that is approved by both Partners.
"Operative Documents" means the Participation Agreement, the Partnership
Agreement, the Third Party Lease, the IBM Equipment Leases, the CIRRUS
Equipment Lease, the IBM Real Estate Lease, the Joint and Several Lease
Guarantees, the IBM Patent License, the IBM Know-How License, the CIRRUS
Patent License, the IBM Sales Agreement, the CIRRUS Sales Agreement, the IBM
Services Agreement and the Confidentiality and Inventions Agreements.
"Patented Combinations" means any combination of a CIRRUS Chip, RMM Chip
or Subassembly Chip or portions of any thereof with each other or with any
other product, device or apparatus, which combination is covered by at least
one claim of any patent of IBM.
"Parent" means, with respect to the IBM Partner, IBM and, with respect to
the CIRRUS Partner, CIRRUS.
"Participation Agreement" means the Participation Agreement dated as of
September 1, 1994, among CIRRUS, IBM, the CIRRUS Partner and the IBM Partner,
an the same May be amended from time to time in accordance with the provisions
thereof.
"Partner" means each of the CIRRUS Partner and the IBM Partner, each a
general partner of the Partnership, and any other Person who becomes a partner
in the Partnership in accordance with the terms of the Partnership Agreement.
"Partnership" means MiCrus, a New York general partnership, formed by the
CIRRUS Partner and the IBM Partner pursuant to the Partnership Agreement.
"Partnership Agreement" means the Partnership Agreement dated as of the
Closing Date between the CIRRUS Partner and the IBM Partner, as the same
May be amended from time to time in accordance with the provisions thereof.
"Percentage" means, with respect to the CIRRUS Partner, 48%, and, with
respect to the IBM Partner, 52%; provided, however, that if either Partner
transfers a portion of its ownership interest in the Partnership to any third
party, its Percentage shall decrease accordingly and such third party
transferee shall receive the appropriate Percentage interest.
"Permitted Liens" means (a) the rights and interests of the Partnership,
either Partner, either Parent or any Affiliate of any such Person as provided
in the Operative Documents; (b) Liens for Taxes which are not due and payable
or which May after contest be paid without penalty or which are being
contested in good faith and by appropriate proceedings (provided that an
adequate reserve for the payment of such Taxes has been established by the
appropriate Person) and so long as such proceedings shall not involve any
substantial risk of the sale, forfeiture or loss of any part of any relevant
asset or title thereto or any interest therein; and (c) other imperfections of
title or other encumbrances, if any, which imperfections of title or other
encumbrances are nonconsensual and do not, individually or in the aggregate,
materially impair the use or value of the relevant asset.
"Person" means any individual, firm, company, corporation, unincorporated
association, partnership, trust, joint venture, Governmental Authority or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Product(s)", unless otherwise specified, means the product(s)
manufactured by the Partnership in Semiconductor Wafer form, unless otherwise
specified in Attachment B to the CIRRUS Sales Agreement or the IBM Sales
Agreement, as applicable, and any supplements thereto.
"Product Family" means a group of Products which are produced generally
using the same materials, technical processes and steps.
"Proration of Payments" means payments to be made from either CIRRUS to
IBM, or L0M to CIRRUS, upon the termination of the Partnership prior to
December 31, 2002, under the circumstances referred to in the Partnership
Agreement as permitting or requiring Proration of Payments.
Such payments shall be based on the difference between (a) the cumulative
actual fixed and per wafer payments made by CIRRUS to the Partnership pursuant
to Section 8.4 of the CIRRUS Sales Agreement [*] and (b) the cumulative
average per wafer assessment multiplied by the planned wafer shipments
allocated to CIRRUS over the period from January 1, 1995, to December 31, 2002
as reflected in the Initial Business Plan to the date the last wafer shipment
is made available F.O.B. (including the period of any applicable transition
period).
The average per wafer assessment shall be calculated as follows: (c) the
total payments to be made by CIRRUS to the Partnership including the fixed
payments pursuant to Section 8.4.4 - 8.4.1 of the CIRRUS Sales Agreement [*]
plus the actual per wafer payments made for wafers actually made available
F.O.B. to CIRRUS by the Partnership to the date the last wafer shipment is
made available F.O.B. (including the period of any applicable transition
period), and the planned "to go" per wafer payments for the planned "to go"
wafers allocated to CIRRUS over eight years as reflected in the Initial
Business Plan divided by (d) the total actual and projected "to go" wafer
shipments from the Partnership to CIRRUS for the wafers allocated to CIRRUS
[*] as reflected in the Initial Business Plan.
If the cumulative actual fixed and per wafer payments made by CIRRUS to
the Partnership pursuant to Section 8.4 of the CIRRUS Sales Agreement [*]
exceed the average per wafer assessment multiplied by the wafers actually made
available to CIRRUS by the Partnership to the date the last wafer shipment is
made available F.O.B. (including the period of any applicable transition
period), then IBM shall pay CIRRUS the difference if Proration of Payments is
required under the Partnership Agreement. If the cumulative actual fixed and
per wafer payments made by CIRRUS to the Partnership pursuant to Section 8.4
of the CIRRUS Sales Agreement [*] are less than the average per wafer
assessment multiplied by the wafers actually made available to CIRRUS by the
Partnership to the date the last wafer shipment is made available F.O.B.
(including the period of any applicable transition period), then CIRRUS shall
pay IBM the difference if Proration of Payments is required under the
Partnership Agreement. If Proration of Payments is invoked as a result of an
Event of Default, then such Proration of Payments shall also include the
Start-up Adjustment Payment. An example of the application of Proration of
Payments is attached to the Initial Business Plan.
"Rotating Magnetic Memory Chips" or "RMM Chips" means Semiconductor Chips
primarily designed and developed for incorporation into a RMM Product. RMM
Chips shall include CIRRUS RMM Chips.
"Rotating Magnetic Memory Product" or "RMM Product" means any product
primarily designed to record information on end/or reproduce information from
a rotating cylinder or disk having a magnetizable surface, during rotation of
said cylinder or disk. RMM Products shall not include Magneto-Optical Disk
Drives.
"Seconded Employee" means an employee of a Parent or any of its
Affiliates that is made available to the Partnership or any of its
Subsidiaries while remaining an employee of such Parent or any such Affiliate.
"Section 704(c) Property" means any property contributed to the
Partnership that has a tax basis for Federal income tax purposes on the date
of its contribution that differs from its fair market value on such date and
any Partnership property that is revalued pursuant to Section 7.01(b) of the
Partnership Agreement. For purposes of calculating Net Profits or Net Losses
arising from any Capital Transaction involving Section 704(c) Property, the
basis of such Section 704(c) Property shall be deemed to be its fair market
value on the date of contribution or revaluation less the accumulated
depreciation (calculated in accordance with the provisos to the definition of
Net Profits and Net Losses) arising after that date with respect to such
Section 704(c) Property.
"Semiconductor Chip" means any Integrated Circuit which has been
manufactured using any part or all of the IBM Know-How, as defined in the IBM
Know-How License.
"Semiconductor Material" means any material whose electrical conductivity
is intermediate to that of metals and insulators at room temperature and whose
electrical conductivity, over some temperature range, increases with increases
in temperature. Such materials shall include but not be limited to refined
products, reaction products and reduced products.
"Semiconductor Wafer" means a circular, disk-shaped unit of Semiconductor
Material from which May be created, by applying various lithographic and other
technological processes, Semiconductor Chips.
"Senior Executives" has the meaning set forth in Section 2.15(b) of this
Appendix A.
"Start-up Adjustment Payment" means an adjustment payment from CIRRUS to
IBM, or IBM to CIRRUS, calculated as follows: (a) subtract the planned wafer
shipments allocated to both CIRRUS and IBM over the period from January 1,
1995, to December 31, 2002, as indicated in an Exhibit to the Initial Business
Plan to the date the last wafer shipment is made available by the Partnership
F.O.B. (including the period of any applicable transition period) from (b) the
total planned wafer shipments from the Partnership to both CIRRUS and IBM over
such period as indicated in an Exhibit to the Initial Business Plan; and
divide the result by (c) the total planned wafer shipments from the
Partnership to both CIRRUS and IBM [*] as indicated in an Exhibit to the
Initial Business Plan; and multiply the result by [*].
"Subassembly" means a group of Semiconductor Chips that are physically,
electrically and functionally interconnected on a single substrate wherein the
minimum percentage of CIRRUS Chips and/or CIRRUS RMM Chips in such group of
Semiconductor Chips is at least: (I) [*] for a group of [*] or more of such
Semiconductor Chips; (ii) [*] for a group of [*] or more of such Semiconductor
Chips; and (iii) [*] for a group of [*] such Semiconductor Chips; provided,
however, that any Integrated Circuits acquired by the Customer from a source
other than CIRRUS and added to such substrate shall not be counted in
determining the above percentage requirements.
"Subassembly Chips" means Semiconductor Chips that are to be physically,
electrically and functionally interconnected with CIRRUS Chips or CIRRUS RMM
Chips in a Subassembly.
"Subject Acquirer" means any Person, or any of its Affiliates, who (i) is
an RMM Product disk drive manufacturer; (ii) is a Semiconductor Chip or
Semiconductor Wafer manufacturer; or (iii) has, for the most recent fiscal
year of such Person, together with its Affiliates, ,
(a) gross revenues in excess of [*] from the development, manufacture,
sale, leasing and servicing of information processing hardware; or
(b) gross revenues in excess of [*] from the development, reproduction,
licensing, leasing and sale of information processing software and information
processing related services.
"Subsidiary" of any Person means any other Person
(i) more than 50% of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are, or
(ii) which does not have outstanding shares or securities (as May be the
case in a partnership, joint venture or unincorporated association), but more
than 50% of whose ownership interest representing the right to make decisions
for such other Person is,
now or hereafter owned or controlled, directly or indirectly, by such Person,
but such other Person shall be deemed to be a Subsidiary only so long as such
ownership or control exists; provided, however, that the term Subsidiary as
used in any Operative Document, when used in relation to a Parent or any of
its Affiliates, shall not include the Partnership or any of its Subsidiaries.
"Tax" or "Taxes" means all Federal, state, local and foreign taxes,
assessments and other governmental charges, including (a) taxes based upon or
measured by gross receipts, income, profits, sales, use or occupation and (b)
value added, ad valorem, transfer, franchise, withholding, payroll,
employment, excise or property taxes, together with (c) all interest,
penalties and additions imposed with respect to such amounts and (d) any
obligations under any agreements or arrangements with any other Person with
respect to such amounts.
"Technical Coordinator" means each person effecting or supervising the
transfer of information among the parties. The identity of the initial
Technical Coordinator for each party is set forth in Section 2.16 of this
Appendix A or in a document delivered pursuant thereto.
"Third Party Assets" means the machinery and equipment listed on a
Schedule to the Third Party Lease, to be sold to the Third Party Lessor by IBM
for $150,000,000 at or prior to the Closing and to be leased to the
Partnership pursuant to the Third Party Lease.
"Third Party Lease" means the equipment lease agreement or lease
agreements to be entered into between the Third Party Lessor and the
Partnership at the Closing providing for the leasing of the Third Party
Assets.
"Third Party Lessor" means the lessor or lessors under the Third Party
Lease.
"Transfer" means any transfer, sale, assignment, conveyance, issuance,
license, sublicense or other disposal or delivery, including by merger,
consolidation, dividend or distribution, whether made directly or indirectly,
voluntarily or involuntarily, absolutely or conditionally, or by operation of
law or otherwise.
"Unutilized Capacity" shall have the meaning set forth in Section 7.13 of
the CIRRUS Sales Agreement.
ARTICLE II
Rules of Construction and Documentary Conventions
SECTION 2.01. Assignment. Except as May otherwise be specifically
provided in any agreement or instrument incorporating these Rules of
Construction and Documentary Conventions, a party thereto shall not Transfer,
or grant or permit to exist any Lien (except Permitted Liens) on, such
agreement or instrument or any of its rights thereunder (except for any
Transfer by operation of law in connection with a merger, consolidation or
sale of all or substantially all the assets of such party) without the prior
written consent of each other party thereto (which consent May be withheld in
such other party's sole discretion), and any such purported Transfer or Lien
without such consent shall be void.
SECTION 2.02. Severability. If any provision of any agreement or
instrument incorporating these Rules of Construction and Documentary
Conventions or the application of any such provision is invalid, illegal or
unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of such agreement or
instrument or invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law that renders any provision of such agreement or instrument
invalid, illegal or unenforceable in any respect. The parties shall, to the
extent lawful and practicable, use their reasonable efforts to enter into
arrangements to reinstate the intended benefits, net of the intended burdens,
of any such provision held invalid, illegal or unenforceable. If the intent of
the parties cannot be preserved, the agreement or instrument incorporating
these Rules of Construction and Documentary Conventions shall either be
renegotiated or terminated.
SECTION 2.03. Survival. Except as May otherwise be specifically provided
in any agreement or instrument incorporating these Rules of Construction and
Documentary Conventions, all covenants, agreements, representations and
warranties of the parties made in or pursuant to such agreement or instrument
shall survive the execution and delivery of such agreement or instrument and
of the other Operative Documents and the closing of the transactions
contemplated thereby and the expiration or other termination of such agreement
or instrument or of any other Operative Document, notwithstanding any
investigation by or on behalf of any party.
SECTION 2.04. Amendment and Waiver. No amendment to any agreement or
instrument incorporating these Rules of Construction and Documentary
Conventions shall be effective unless it shall be in writing, identify with
specificity the provisions of the applicable agreement or instrument that are
thereby amended or waived and be signed by each party thereto. Any failure of
a party to comply with any obligation, covenant, agreement or condition
contained in such agreement or instrument May be waived by the party entitled
to the benefits thereof only by a written instrument duly executed and
delivered by the party granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, soy
subsequent or other failure of compliance.
SECTION 2.05. Remedies. (a) In no event will any party to any agreement
or instrument incorporating these Rules of Construction and Documentary
Conventions be liable to another party thereto for special, indirect, punitive
or incidental damages, lost profits, lost savings or any other consequential
damages, even if such party has been advised of the possibility of such
damages, resulting from the breach by it of any of its obligations thereunder
or breach by it or any of its Affiliates of any of their respective
obligations under any other Operative Document or from the use of any
confidential or other information.
(b) Except as May otherwise be specifically provided in any agreement or
instrument incorporating these Rules of Construction and Documentary
Conventions, the rights and remedies of the parties under such agreement or
instrument are cumulative and are not exclusive of any rights or remedies
which the parties would otherwise have. Equitable relief, including the
remedies of specific performance and injunction, shall be available with
respect to any actual or attempted breach of such agreement or instrument.
SECTION 2.06. Table of Contents, Headings. The Table of Contents and
Article and Section headings of any agreement or instrument incorporating
these Rules of Construction and Documentary Conventions are for convenience of
reference only and shall not affect the construction of or be taken into
consideration in interpreting such agreement or instrument.
SECTION 2.07. Parties in Interest; Limitation on Rights of Others. Any
agreement or instrument incorporating these Rules of Construction and
Documentary Conventions shall be binding upon and inure to the benefit of the
parties thereto and their permitted successors and assigns. Nothing in such
agreement or instrument whether express or implied shall give or be construed
to give any Person (other than the parties thereto and their permitted
successors and assigns) any legal or equitable right, remedy or claim under or
in respect of such agreement or instrument unless such Person is expressly
stated in such agreement or instrument to be entitled to any such right remedy
or claim.
SECTION 2.08. Counterparts; Effectiveness.
(a) Any agreement or instrument incorporating these Rules of Construction
and Documentary Conventions May be executed by the parties thereto in separate
counterparts each of which when so executed and delivered shall be an original
but all such counterparts shall together constitute but one and the same
contract.
(b) Any agreement or instrument incorporating these Rules of Construction
and Documentary Conventions shall not become effective until one or more
counterparts have been executed by each party thereto and delivered to the
other parties thereto.
SECTION 2.09. Entire Agreement. Any agreement or instrument
incorporating these Rules of Construction and Documentary Conventions,
together with the other Operative Documents and the Exhibits Schedules
Appendices and Attachments thereto any agreement entered into simultaneously
therewith and the Initial Business Plan constitute the entire agreement of the
parties to the Operative Documents with respect to the subject matter thereof
and supersede all prior written and oral agreements and understandings with
respect to such subject matter.
SECTION 2.10. Construction. References in any agreement or instrument
incorporating these Rules of Construction and Documentary Conventions to any
gender include references to all genders and references in such agreement or
instrument to the singular include references to the plural and vice versa.
Unless the context otherwise requires, the term "party" when used in any such
agreement or instrument means a party to such agreement or instrument.
References in any such agreement or instrument to a party or other Person
include their respective successors and assigns. The words "include",
"includes" and "including" when used in any such agreement or instrument shall
be deemed to be followed by the phrase "without limitation". Unless the
context otherwise requires, references in any such agreement or instrument to
Articles, Sections, Exhibits, Schedules, Appendices and Attachments shall be
deemed references to Articles and Sections of, and Exhibits, Schedules,
Appendices and Attachments to, such agreement or instrument. Unless the
context otherwise requires, the words "hereof", "hereby" and "herein" and
words of similar meaning when used in any such agreement or instrument refer
to such agreement or instrument in its entirety and not to any particular
Article, Section or provision of such agreement or instrument.
SECTION 2.11. Governing Law. Any agreement or instrument incorporating
these Rules of Construction and Documentary Conventions shall in all respects
be governed by and construed in accordance with the internal laws of the State
of New York applicable to agreements made and to be performed entirely within
such State, without regard to the conflict of laws principles of such State.
SECTION 2.12. Waiver of Jury Trial and Certain Damages. Each party to any
agreement or instrument incorporating these Rules of Construction and
Documentary Conventions waives, to the fullest extent permitted by applicable
law, (i) any right it May have to a trial by jury in respect of any action,
suit or proceeding arising out of or relating to any Operative Document and
(ii) any right it May have to receive damages or indemnification from any
other party to any Operative Document in respect of any act, omission or event
relating to such Operative Document or the transactions contemplated by the
Operative Documents based on any theory of liability for any special,
indirect, consequential or punitive damages. Each party to any such agreement
or instrument (x) certifies that no representative, agent or attorney of
another party to any Operative Document has represented, expressly or
otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (y) acknowledges that it has been induced
to enter into such agreement or instrument by, among other things, the mutual
waivers and certifications set forth above in this Section 2.12.
SECTION 2.13. Jurisdiction, Consent to Service of Process.
(a) Each party to any agreement or instrument incorporating these Rules
of Construction and Documentary Conventions hereby irrevocably and
unconditionally submits, for itself and its property, to the jurisdiction of
any Federal court of the United States of America sitting in the Southern
District of New York, and any appellate court from any such court, in any
suit, action or proceeding arising out of or relating to the Operative
Documents, or for recognition or enforcement of any judgment resulting from
any such suit, action or proceeding, and each party hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding May be heard and determined in such Federal court.
(b) It shall be a condition precedent to each party's right to bring any
such suit, action or proceeding (unless such suit, action or proceeding is
brought solely to obtain discovery or to enforce a judgment) that such suit,
action or proceeding, in the first instance, be brought in such Federal court,
and if such Federal court refuses to accept jurisdiction with respect thereto,
such suit, action or proceeding May be brought in any other court with
jurisdiction; provided that the foregoing condition precedent shall not apply
to any suit, action or proceeding by a party seeking indemnification or
contribution pursuant to any Operative Document or otherwise in respect of a
suit, action or proceeding against such party if such suit, action or
proceeding by such party seeking indemnification or contribution is brought in
the same court as the suit, action or proceeding against such party.
(c) No party to any agreement or instrument incorporating these Rules of
Construction and Documentary Conventions May move to (i) transfer any such
suit, action or proceeding from such Federal court to another jurisdiction,
(ii) consolidate any such suit, action or proceeding brought in such Federal
court with a suit, action or proceeding in another jurisdiction or (iii)
dismiss any such suit, action or proceeding brought in such Federal court for
the purpose of bringing the same in another jurisdiction.
(d) Each party to any agreement or instrument incorporating these Rules
of Construction and Documentary Conventions hereby irrevocably and
unconditionally waives, to the fullest extent it May legally and effectively
do so, (i) any objection which it May now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to the
Operative Documents in any Federal court sitting in the Southern District of
New York, (ii) the defense of an inconvenient forum to the maintenance of such
suit, action or proceeding in any such court and (iii) the right to object,
with respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party.
(e) Each party to any agreement or instrument incorporating these Rules
of Construction and Documentary Conventions irrevocably consents to service of
process in the manner provided for the giving of notices pursuant to such
agreement or instrument. Nothing in this Appendix shall affect the right of
any party to such agreement or instrument to serve process in any other manner
permitted by law.
SECTION 2.14. Notices. All notices and other communications to be given
to any party under any agreement or instrument incorporating these Rules of
Construction and Documentary Conventions shall be in writing and any notice
shall be deemed given when delivered by hand, courier or overnight delivery
service or three days after being mailed by certified or registered mail,
return receipt requested, with appropriate postage prepaid, or when received
in the form of a telegram or facsimile, and shall be directed to the address
or facsimile number of such party specified below (or at such other address or
facsimile number as such party shall designate by like notice):
(a) If to IBM:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxx X. Xxxxxx
General Manager
Real Estate and Business Development
With a copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
And a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxxx X. Xxxxxx, Esq.
(b) If to the IBM Partner:
MiCrus Holdings Inc.
In care of International Business Machines Corporation
Xxxxx 00, Xxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Telecopy: 000-000-0000
Attention of Xxxx X. Xxxxxxx
With a copy to:
Xxx X. Xxxxxx
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
And a copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
And a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxxx X. Xxxxxx, Esq.
(c) If to CIRRUS:
CIRRUS Logic, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxxx Xxxxx
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxx X. Xxxxxx, Esq.
(d) If to the CIRRUS Partner:
Cirel, Inc.
In care of
CIRRUS Logic, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxxx Xxxxx
With a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention of Xxxxx X. Xxxxxx, Esq.
(e) If to the Partnership:
MiCrus
0000 Xxxxx 00
Xxxxxxxx Xxxxxxxx, Xxx Xxxx 00000
Attention of Chief Executive Officer
SECTION 2.15. Escalation. Upon the occurrence of any event which,
pursuant to the express provisions of any agreement or instrument
incorporating these Rules of Construction and Documentary Conventions,
entitles a party to invoke the escalation provisions set out in this
Section 2.15, the following procedure shall apply:
(a) The Partners will attempt to resolve the subject of the escalation
promptly by negotiations between the persons designated to receive notices
pursuant to Section 2.14 from time to time of each Partner (the "Designated
Individuals"). The Designated Individuals shall meet at least once in person
to attempt to resolve the matter. Either Designated Individual May request the
other to meet at a time and location to be mutually agreed. If the matter has
not been resolved within [*] of the initiation of the escalation procedure,
either Designated Individual May refer the matter as provided in
Section 2.15(b).
(b) The subject matter of the escalation shall be referred to, in the
case of the IBM Partner, a Vice President of IBM with responsibility for the
IBM Microelectronics Division and, in the case of the CIRRUS Partner, the
Chief Executive Officer of CIRRUS (collectively, the "Senior Executives"), and
the applicable persons shall deliver to the Senior Executives memoranda
stating the subject of the escalation and their positions. The Senior
Executives will meet in person or by telephone within 14 days after (i) the
expiration of the [*] specified in Section 2.15(a) or (ii) in the case of a
direct referral to the Senior Executives in accordance with the Partnership
Agreement, such direct referral, and attempt in good faith to resolve the
subject matter of the escalation.
(c) Efforts to comply with the provisions of Section 2.15(a) (if
applicable) for a period of [*] and with Section 2.15(b) for a period of [*]
from the commencement of such procedure (which time period May be extended by
written agreement of the Senior Executives) shall be a condition precedent to
any further action or proceeding with respect to such matter. Subject to the
foregoing, use of the procedures specified in this Section 2.1S shall be
without prejudice to the exercise of any other remedies permitted by the
Operative Documents.
SECTION 2.16. Technical Coordinators. CIRRUS, IBM and the Partnership
shall each maintain a Technical Coordinator to represent such party in
connection with the routine implementation of procedures described in the
Operative Documents requiring the involvement of such party's Technical
Coordinator. Each Technical Coordinator May be replaced at any time by the
party represented by such Technical Coordinator upon written notice given to
the other parties in accordance with Section 2.14, with copies of such notice
to be given to the other Technical Coordinators. The initial Technical
Coordinators shall be:
(a) For IBM:
That person designated in a document furnished pursuant hereto.
(b) For CIRRUS:
That person designated in a document furnished pursuant hereto.
(c) For the Partnership:
That person designated pursuant to Section 5.02(a)(i) of the Partnership
Agreement.
SECTION 2.17. Definitions. The definitions set forth in Article I of
this Appendix A shall apply to this Article II.
