SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CIRRUS LOGIC, INC.
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(Name of Registrant as Specified in its Charter)
CIRRUS LOGIC, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[x] No Fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 21, 1998
TO THE SHAREHOLDERS OF CIRRUS LOGIC, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Cirrus
Logic, Inc. (the "Company"), a California corporation, will be held on
Tuesday, July 21, at 2:00 p.m., local time, at the offices of the Company,
3100 West Warren Avenue, Fremont, California 94538 for the following purposes:
1. To elect directors to serve during the ensuing year.
2. To approve an amendment to the Company's 1989 Employee Stock Purchase
Plan that will increase the number of shares of Common Stock available
for grant under the plan by 300,000 shares.
3. To approve an amendment to the Company's 1996 Stock Plan that will
increase the number of shares of Common Stock available for grant under
the plan by 2,000,000 shares.
4. To approve amendments to the Company's 1990 Directors' Stock Option Plan
as follows:
. Increase the number of shares of Common Stock available for grant
under the plan by 100,000 shares.
.Extend the termination of the Directors' Plan from January 2000 to
January 2010.
.Increase the Initial Automatic Grant from 20,000 shares to 25,000 shares.
.Extend the term of each grant from five years to ten years.
.Amend the vesting schedule for Annual Automatic Options to be fully
vested on date of grant.
5. To approve the reincorporation of the Company as a Delaware corporation
and the Delaware Form of Indemnification Agreement.
6. To approve the setting of the number of authorized shares of Common
Stock at 280,000,000 shares.
7. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company.
8. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on May 26, 1998, are
entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
For the Board of Directors
Robert F. Donohue, Secretary
Fremont, California
June 12, 1998
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YOUR VOTE IS IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. RETURNING
YOUR PROXY WILL HELP THE COMPANY ASSURE A QUORUM AND AVOID THE ADDITIONAL
EXPENSE OF DUPLICATE PROXY SOLICITATIONS. SHAREHOLDERS HOLDING CIRRUS
LOGIC SHARES WITH A BROKERAGE FIRM OR A BANK MAY VOTE VIA THE INTERNET IF
YOU ELECTED THAT OPTION. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON
EVEN IF YOU HAVE RETURNED THE PROXY OR VOTED ELECTRONICALLY.
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PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
JULY 21, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Cirrus Logic, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held on Tuesday, July 21, at 2:00 p.m., local time (the
"Annual Meeting"), or at any continuation or adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal offices of the
Company, located at 3100 West Warren Avenue, Fremont, California 94538. The
telephone number at this address is (510) 623-8300.
These proxy solicitation materials and the Company's Annual Report to
Shareholders for the fiscal year ended March 28, 1998, including financial
statements, were mailed on or about June 12, 1998 to all shareholders entitled
to vote at the Annual Meeting.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on May 26, 1998 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the Company had 67,109,004 shares of Common
Stock outstanding. For information regarding holders of more than 5% of the
outstanding Common Stock, see "Share Ownership of Directors, Executive
Officers and Certain Beneficial Owners."
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before it is voted. It may be revoked by
filing, with the Secretary of the Company at the Company's principal offices,
3100 West Warren Avenue, Fremont, California 94538, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each share of Common Stock outstanding on the Record Date is entitled to one
vote. In addition, each shareholder voting for the election of directors may
cumulate his or her votes, giving one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares that the
shareholder is entitled to vote, or distributing the shareholder's votes on
the same principle among as many candidates as the shareholder chooses,
provided that votes may not be cast for more than seven candidates. However,
no shareholder shall be entitled to cumulate votes for any candidate unless
the candidate's name has been properly placed in nomination prior to the
voting and the shareholder, or any other shareholder, has given notice at the
meeting prior to the voting of the intention to cumulate votes. On all other
matters, each share has one vote.
The cost of this solicitation will be borne by the Company. The Company has
retained Morrow & Co., Inc. to aid in the solicitation of proxies from
shareholders, banks and other institutional nominees. The Company will pay
Morrow & Co. $25,000 for these services, plus expenses. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Original solicitation of proxies by mail
may be supplemented by additional mailings, telephone, telegram or personal
solicitations by directors, officers or employees of the Company or its
representatives. No additional compensation will be paid for any such
services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" (the "Votes Cast") at
the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting of Shareholders must
be received by the Company no later than February 15, 1999, in order that they
may be considered for possible inclusion in the proxy statement and form of
proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Currently, the Company's Board of Directors is comprised of six members. A
Board of seven directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's nominees named below. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the current Board of Directors to fill the vacancy. It is not expected that
any nominee will be unable or will decline to serve as a director. In the
event that additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner and
in accordance with cumulative voting, if applicable, as will assure the
election of as many of the nominees listed below as possible, and in such
event the specific nominees to be voted for will be determined by the proxy
holders. The term of office of each person elected as a director will continue
until the next Annual Meeting of Shareholders and until a successor has been
duly elected and qualified.
2
NOMINEES FOR DIRECTOR
Set forth below is certain information regarding the nominees:
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
---- --- ------------------------- --------
Michael L. Hack-
worth(1)(4)............ 57 President, Chief Executive Officer, 1985
Chairman of the Board and Director
Suhas S. Patil(1)(4).... 53 Chairman Emeritus and Director 1984
C. Gordon Bell(2)(4).... 63 Director 1990
D. James Guzy(1)(3)(4).. 62 Director 1984
Walden C. Rhines(1)(3).. 51 Director 1995
Robert H. Smith(2)(3)... 61 Director 1990
Alfred S. Teo........... 52 -- --
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(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. Hackworth, a founder of the Company, has served as President, Chief
Executive Officer and a Director of the Company since January 1985. He was
appointed to the position of Chairman of the Board in July 1997. He is also a
director of Read-Rite Corporation.
Dr. Patil, a founder of the Company, was appointed Chairman Emeritus in July
1997. He served as Chairman of the Board and Director since the Company was
founded in 1984. He served as Vice President, Research and Development until
March 1990 and Executive Vice President, Products and Technology thru April
1997. He is also a director of CyberMedia, Inc.
Dr. Bell has been a Senior Researcher with Microsoft Corporation since
August 1995. He was a computer consultant from November 1991 until August 1995
and Chief Scientist for Stardent Computer, a manufacturer of high-performance
graphics super-computers, from November 1987 until November 1991.
Mr. Guzy has been President of Arbor Company, a Nevada limited partnership
engaged in the electronics and computer industry, since 1969. In 1997, he
joined SRC Computers, Inc., a computer manufacturer, as Chairman, President
and Chief Executive Officer. He is also a director of Intel Corporation, Micro
Component Technology, Inc., Novellus Systems, Inc., Davis Selected Advisors
Group of Mutual Funds and Alliance Capital Management Technology Fund.
Dr. Rhines has been President and Chief Executive Officer and a director of
Mentor Graphics Corporation, a maker of electronic design automation products,
since October 1993. Previously, he was Executive Vice President, Semiconductor
Group at Texas Instruments, Inc. from May 1987 to October 1993. He is also a
director of TriQuint Semiconductor, Inc.
Mr. Smith has been Executive Vice President, Finance and Administration,
Chief Financial Officer, Secretary and a director of Novellus Systems, Inc., a
capital equipment manufacturer, since October 1996. From June 1994 to
September 1994, he was Chairman of the Board of Micro Component Technology,
Inc., an equipment manufacturer. He was President of Maxwell Communication
Corporation North America, a printing, publishing, telecommunications and
information management company, from August 1988 to July 1990.
Mr. Teo has been the Chairman and Chief Executive Officer of Alpha
Industries, Inc. of the Sigma Plastics Group since 1979, Chairman and Chief
Executive Officer of Red Line Express since 1984, and of Hillman Eyes since
1992 and Alpha Technologies, Inc. since 1990. He is also a director of Fleet
Bank, N.A., American Banknote Corporation, Navarre Corporation, a Trustee of
St. Joseph's Hospital and of Stevens Institute of Technology.
There are no family relationships between any directors or executive
officers of the Company.
3
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended March 28, 1998 (the "Last Fiscal Year"), the
Board of Directors held six meetings. Each of the incumbent directors attended
at least 75% of the aggregate of all meetings of the Board of Directors and of
the committees, if any, upon which such director served.
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Nominating
Committee.
The Executive Committee, which consists of directors Guzy, Hackworth, Patil
and Rhines, was established to work on special projects as may be designated
from time to time by the Board of Directors. During the Last Fiscal Year, the
Executive Committee met 8 times.
The Audit Committee, which consists of directors Bell and Smith, was
established to review, in consultation with the independent auditors, the
Company's financial statements, accounting and other policies, accounting
systems and system of internal controls. The Audit Committee met twice during
the Last Fiscal Year.
The Compensation Committee, which consists of directors Guzy, Rhines and
Smith, was established to grant stock options under the Company's Option Plans
and to review the Company's programs relating to the recruitment, retention
and motivation of employees, the Variable Compensation Plans and other similar
programs for recommendation to the Board of Directors. The Compensation
Committee met three times during the Last Fiscal Year. In addition, the
Committee approved stock option grants on a monthly basis by means of
Unanimous Written Consents.
The Nominating Committee, which consists of directors Bell, Guzy, Hackworth,
and Patil, was established to seek qualified candidates for nomination to the
Board. The Nominating Committee met once during the Last Fiscal Year. The
Nominating Committee intends to conduct its evaluation of potential candidates
independently and confidentially; therefore, it does not intend to accept
shareholder recommendations of candidates.
Effective April 1, 1998, the Nominating Committee was changed to form the
Governance Committee consisting of directors Bell, Guzy, Rhines and Smith. In
the future, the duties of the Nominating Committee will be performed by the
Governance Committee.
COMPENSATION OF DIRECTORS
Non-employee directors are compensated as follows: a retainer of $4,000 is
paid each quarter; a fee of $2,000 per day is paid for each regular or special
meeting of the Board of Directors or committee meetings attended in person; a
fee of $2,000 per day is paid for consulting services; and travel expenses are
reimbursed for any director who travels more than 50 miles to attend a
meeting. During the Last Fiscal Year, Mr. Guzy received consulting fees of
$15,000 and Mr. Rhines received consulting fees of $1,000 for board related
issues.
On April 1, 1998, the Compensation Policy for Outside Board Members was
amended as follows: the quarterly retainer was increased to $6,250, and $250
per hour (not to exceed $2,000 per day) will be paid for attendance at
telephonic meetings of the Board or Committees.
In January 1990, the Company adopted a Directors' Stock Option Plan (the
"Directors' Plan"), which was approved by the shareholders in July 1990. Under
the terms of the Directors' Plan, each non-employee director is automatically
granted, on the date he or she first becomes a director, an initial option to
purchase 20,000 shares and, on the date of his or her annual reelection to the
Board, an additional option to purchase 5,000 shares. The exercise price of
the automatic options is the fair market value of the Common Stock as
determined by the closing price reported by the Nasdaq National Market on the
date of grant. To date, options granted under the Directors' Plan have a five-
year term and vest over four years: one-quarter of the shares vest one year
from the date of grant and one forty-eighth of the total shares vest each
month thereafter.
4
On July 31, 1997, automatic options were granted to directors Bell, Guzy,
Rhines and Smith to purchase 5,000 shares of Common Stock at an exercise price
of $13.5625 per share, the fair market value on the date of grant.
On April 1, 1998, the Board of Directors approved amendments to the
Directors' Plan to increase the number of shares available for grant by
100,000 shares, to make the term of each option ten years, the initial
automatic grant to 25,000 shares and to provide that the annual automatic
grant will be fully vested on date of grant. Also see Proposal 4.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but have no
other legal effect in the election of directors under California law.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1989 EMPLOYEE
STOCK PURCHASE PLAN
The Company's 1989 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1989 and approved by the
shareholders in May 1989. A total of 200,000 shares of Common Stock were
initially reserved for issuance thereunder. By subsequent amendments to the
Purchase Plan, the shares reserved have been increased to 4,400,000 shares.
PROPOSED AMENDMENT TO THE PURCHASE PLAN
On April 1, 1998, the Board of Directors approved an amendment to the
Purchase Plan to further increase the aggregate number of shares authorized
for issuance thereunder by 300,000 shares, bringing the total number of shares
reserved under the Purchase Plan to 4,700,000 shares. Proposal 2 seeks
shareholder approval of this amendment.
The Board considers the increase in shares necessary to meet the Company's
current needs. The Board further believes that the Purchase Plan is an
integral component of the Company's benefits program that is intended to
provide employees with an incentive to exert maximum effort for the success of
the Company and to participate in that success through the acquisition of the
Company's Common Stock. As of March 28, 1998, approximately 867 or 49% of the
Company's eligible employees were participating in the Purchase Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential provisions of the Purchase Plan are outlined below.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the Board
of Directors.
5
ELIGIBILITY
Only employees may participate in the Purchase Plan. For this purpose, an
"employee" is any person who is regularly employed at least 20 hours per week
and 5 months per calendar year by the Company or any of its majority-owned
subsidiaries. No employee shall be permitted to subscribe for shares under the
Purchase Plan if, immediately after the grant of the option, the employee
would own 5% or more of the total combined voting power or value of all
classes of stock of the Company or its subsidiaries (including stock issuable
upon exercise of options held by him or her), nor shall any employee be
granted an option that would permit him or her to buy more than $25,000 worth
of stock (determined at the fair market value of the shares at the time the
option is granted) under the Purchase Plan in any calendar year. As of
December 28, 1997 (the last enrollment date), there were 1,907 employees
eligible to participate in the Purchase Plan, of whom 913 were participants.
OFFERING PERIOD
There is generally one offering under the Purchase Plan during each six
month period. Since 1994, the offering periods have coincided with the
accounting and payroll schedules and include thirteen pay periods per
offering. The current offering will end on June 27, 1998. The first day of an
offering period is referred to as the "Offering Date." The last day of an
offering period is referred to as the "Exercise Date."
PURCHASE PRICE
The purchase price per share at which shares will be sold in an offering
under the Purchase Plan is the lower of (i) eighty-five percent of the fair
market value of a share of Common Stock on the Offering Date or (ii) eighty-
five percent of the fair market value of a share of Common Stock on the
Exercise Date. The fair market value of the Common Stock on a given date shall
be the closing price as reported in the Wall Street Journal.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. The Purchase Plan provides that the aggregate of such
payroll deductions during the offering period shall not exceed fifteen percent
of total compensation during said offering period. However, beginning with the
offering of July 1, 1990, each participant was limited to ten percent of base
compensation and the right to purchase a maximum of 500 shares in each
offering. Such restrictions will apply until the Compensation Committee takes
further action. During the offering period, a participant may discontinue his
or her participation in the Purchase Plan, and may decrease but not increase
the rate of payroll deductions.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan and are included with the
general funds of the Company. Funds received upon sales of stock under the
Purchase Plan are used for general corporate purposes.
WITHDRAWAL
A participant may terminate his or her interest in a given offering by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan at least fifteen days prior to the Exercise Date of the offering period.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event the payroll deductions credited to the
participant's account will be returned without interest to such participant or
his or her heirs.
6
CAPITAL CHANGES
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as stock splits or stock
dividends, resulting in an increase or decrease in the number of outstanding
shares of Common Stock, proportionate adjustments will be made by the Company
in the shares subject to purchase and in the price per share.
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of liquidation or dissolution of the Company, an employee's
participation in the Purchase Plan will be terminated immediately before
consummation of such event unless otherwise provided by the Board. In the
event of a sale of all or substantially all of the assets of the Company or a
merger of the Company with or into another corporation, the employee's rights
may be satisfied by assumption of the Company's obligations by such acquiring
or successor corporation. If such corporation refuses to assume those
obligations, the Board shall allow the immediate exercise of the employee's
rights for fifteen days, after which the employee's rights under the Purchase
Plan shall terminate.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Purchase Plan, except that
no such termination shall affect options previously granted and no amendment
shall make any change in an option granted prior thereto that adversely
affects the rights of any participant. Under the Purchase Plan, an amendment
to increase the number of shares reserved for issuance requires the approval
of the shareholders of the Company. The Plan will terminate in March 2009,
unless terminated earlier by the Board.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and
423 of the Internal Revenue Code of 1986, as amended (the "Code"). Under these
provisions, no income will be taxable to a participant until the shares
purchased under the Purchase Plan are sold or otherwise disposed of. Upon sale
or other disposition of the shares, the participant will generally be subject
to tax and the amount of the tax will depend upon the holding period. If the
shares are sold or otherwise disposed of more than two years from the Offering
Date, the participant will recognize ordinary income measured as the lesser of
(a) the excess of the fair market value of the shares at the time of such sale
or disposition over the purchase price, or (b) an amount equal to 15% of the
fair market value of the shares as of the Offering Date. Any additional gain
will be treated as long-term capital gain. If the shares are sold or otherwise
disposed of before the expiration of this holding period, the participant will
recognize ordinary income generally measured as the excess of the fair market
value of the shares on the date the shares are purchased over the purchase
price. Any further gain or any loss on such sale or disposition will be
treated as capital gain or loss. The Company generally is not entitled to a
deduction for amounts taxed as ordinary income or capital gain to a
participant, except to the extent of ordinary income recognized by
participants upon a sale or disposition of shares prior to the expiration of
the holding period described above and subject to the limitation on
deductibility set forth in Section 162(m) of the Code.
The foregoing is only a summary of the effect of federal income taxation
laws upon the participant and the Company with respect to the shares purchased
under the Purchase Plan. Reference should be made to the applicable provisions
of the Code. In addition, the summary does not discuss the tax consequences of
a participant's death or the income tax laws of any state or foreign country
in which the participant may reside.
PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her respective
determination as to the level of payroll deductions. Accordingly, future
7
purchases under the Purchase Plan are not determinable. The following table
sets forth information with respect to the shares purchased during the Last
Fiscal Year by (i) the executive officers named in the Summary Compensation
Table below (the "Named Officers"), (ii) all current executive officers as a
group, and (iii) all other employees as a group who participated in the
Purchase Plan.
NUMBER OF
SHARES DOLLAR
NAME (OR GROUP) AND POSITION PURCHASED (#) VALUE(1)
---------------------------- ------------- ----------
Michael L. Hackworth.................................. 1,000 $ 1,731
President, Chief Executive Officer and Chairman
Edward C. Ross........................................ 1,000 $ 1,731
President, Technology and Manufacturing Group
George N. Alexy....................................... 1,000 $ 1,731
Senior Vice President, Corporate Marketing
Eric J. Swanson....................................... -- --
Vice President and Chief Technical Officer
Steven Dines.......................................... -- --
Vice President and General Manager, Mass Storage Prod-
ucts Division
All current participating executive officers as a
group (5 persons)..................................... 5,000 $ 8,656
All other employees as a group (2,003 persons)........ 635,501 $1,096,683
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(1) Market value on the date of purchase, minus the purchase price under the
Purchase Plan.
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE 1996 STOCK PLAN
The 1996 Stock Plan (the "Stock Plan") was adopted by the Board of Directors
in May 1996 and approved by the Shareholders in August 1996. The Stock Plan
replaces the 1987 Stock Option Plan which expired in May 1997. 2,500,000
shares were reserved for issuance under the Stock Plan. By subsequent
amendments to the Stock Plan, the shares reserved have been increased to
4,500,000 shares.
Stock options play a key role in the Company's ability to recruit, reward
and retain executives and key employees. Technology companies have
historically used stock options as an important part of recruitment and
retention packages. The Company competes directly with these technology
companies for experienced executives and engineers and must be able to offer
comparable packages to attract the caliber of individual that the Company
believes is necessary to provide the growth that shareholders desire. The
Stock Plan provides for the grant of options and stock purchase rights to
employees and consultants to provide additional incentive to encourage their
continued service to the Company.
PROPOSED AMENDMENT TO THE STOCK PLAN
On April 1, 1998, the Board of Directors increased the shares reserved for
issuance under the Stock Plan by an additional 2,000,000, bringing the total
shares reserved for issuance under the Stock Plan to 6,500,000 shares.
Proposal 3 seeks shareholder approval of this amendment.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
8
The essential provisions of the Stock Plan are outlined below.
SUMMARY OF THE STOCK PLAN
GENERAL. The purpose of the Stock Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of
the Company and to promote the success of the Company's business. Options and
stock purchase rights may be granted under the Stock Plan. Options granted
under the Stock Plan may be either "incentive stock options," as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonstatutory stock options.
ADMINISTRATION. The Stock Plan may generally be administered by the Board or
the Committee appointed by the Board. However, with respect to grants of
options to employees who are also officers or directors of the Company
("Insiders"), the Stock Plan will be administered by: (i) the Board if the
Board may administer the Stock Plan in a manner complying with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any successor rule thereto ("Rule 16b-3") with respect to a
plan under which discretionary grants and awards of equity securities are to
be made to Insiders; or (ii) a committee designated by the Board to administer
the Stock Plan, which committee shall be constituted to comply with the rules
under Rule 16b-3 governing a plan under which discretionary grants and awards
of equity securities are to be made to Insiders. The administrators of the
Stock Plan are referred to herein as the "Administrator".
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and stock purchase
rights may be granted under the Stock Plan to employees and consultants of the
Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion,
selects the employees and consultants to whom options and stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the number of shares subject to each
such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the Stock Plan
provides that no employee may be granted, in any fiscal year of the Company,
options to purchase more than 400,000 shares of Common Stock. Notwithstanding
this limit, however, in connection with an employee's initial employment, he
or she may be granted options to purchase up to an additional 800,000 shares
of Common Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following additional terms and conditions;
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of
the Common Stock on the date such option is granted. The fair market value of
the Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported) on
the date the option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator determines
when options become exercisable and may in its discretion accelerate the
vesting of any outstanding option. Stock options granted under the Stock Plan
generally vest and become exerciseable over four years. The means of payment
for shares issued upon exercise of an option is specified in each option
agreement. The Stock Plan permits payment to be made by cash, check,
promissory note, other shares of Common Stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of any Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.
(c) TERM OF OPTION. The Administrator determines the terms of each option,
provided that the term of an incentive stock option may be no more than ten
years from the date of grant. No option may be exercised after the expiration
of its term.
9
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability), then
all options held by the optionee under the Stock Plan expire on the earlier of
(i) the date set forth in his or her notice of grant or (ii) the expiration
date of such option. The optionee may exercise all or part of the option
before such expiration. To the extent the option is exercisable at the time of
such termination.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the Stock Plan expire on the earlier of (i) 12
months from the date of such termination or (ii) the expiration date of such
option. The optionee (or the optionee's estate or the person who acquires the
right to exercise the option by bequest or inheritance), may exercise all or
part of the option at any time before such expiration to the extent that the
option was exercisable at the time of such termination.
(f) NONTRANSFERABILITY OF OPTIONS. Options granted under the Stock Plan are
not transferable other than by will or the laws of descent and distribution,
and may be exercisable during the optionee's lifetime only by the optionee.
(g) OTHER PROVISIONS. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Stock Plan as may be
determined by the Administrator.
STOCK PURCHASE RIGHTS. A stock purchase right gives the purchaser a period
of no longer than 90 days from the date of grant to purchase Common Stock. A
stock purchase right is accepted by the execution of a restricted stock
purchase agreement between the Company and the purchaser, accompanied by the
payment of the purchase price of the shares. Unless the Administrator
determines otherwise, the restricted stock purchase agreement shall give the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment or consulting relationship with the
Company for any reason (including death and disability). The purchase price
for any shares repurchased by the Company shall be the original price paid by
the purchaser. The repurchase option lapses at a rate determined by the
Administrator. A stock purchase right is nontransferable other than by will or
the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee. The aggregate number of shares
subject to grants or stock purchase rights may not exceed 10% of the shares
subject to the Stock Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of
stock subject to the Stock Plan, the number and class of shares of stock
subject to any option or stock purchase right outstanding under the Stock
Plan, and the exercise price of any such outstanding option or stock purchase
right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to
exercise the option or stock purchase right as to all the optioned stock,
including shares not otherwise exercisable. In such event, the Administrator
shall notify the optionee that the option or stock purchase right is fully
exercisable for fifteen days from the date of such notice and that the option
or stock purchase right terminates upon expiration of such period.
10
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Stock Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any
amendment to the Stock Plan to the extent necessary and desirable to comply
with Rule 16b-3 and Sections 162(m) and 422 of the Code, or any similar rule
or statute. No such action by the Board or shareholders may alter or impair
any option or stock purchase right previously granted under the Stock Plan
without the written consent of the optionee. Unless terminated earlier, the
Stock Plan shall terminate ten years from the date of its approval by the
shareholders or the Board of the Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain
or loss is treated as long-term capital gain or loss. If these holding periods
are not satisfied, the optionee recognizes ordinary income at the time of
disposition generally measured as the difference between the exercise price
and the lower of (i) the fair market value of the shares at the date of the
option exercise or (ii) the amount realized on the sale of the shares. Any
gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% shareholder of the
Company. The Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price.
Any taxable income recognized in connection with an option exercise by an
employee of the Company is subject to tax withholding by the Company. The
Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to
the extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time
of purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to
the Company's right to repurchase the stock upon the purchaser's termination
of employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding
period by timely filing an election pursuant to Section 83(b) of the Code. In
such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company.
Subject to the limitation on deductibility set forth in Section 162(m) of
the Code, the Company is entitled to a tax deduction in the same amount as the
ordinary income recognized by a purchaser in connection with a purchase of
stock under a stock purchase right.
11
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE STOCK
PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.
PARTICIPATION IN THE STOCK PLAN
The grant of options and stock purchase rights under the Stock Plan to
eligible employees and consultants, including the Named Officers, is subject
to the discretion of the Compensation Committee. As of the date of this proxy
statement, there has been no determination by the Administrator with respect
to future awards under the Stock Plan. Accordingly, future awards are not
determinable. Non-employee directors are not eligible to participate in the
Stock Plan. The following table sets forth information with respect to options
granted under the Stock Plan during the Last Fiscal Year to (i) the Named
Officers, (ii) all current executive officers as a group and (iii) all other
employees as a group. The term of all options outstanding under the Stock Plan
is ten years from date of grant.
SHARES WEIGHTED
SUBJECT AVERAGE
TO OPTIONS EXERCISE PRICE
NAME (OR GROUP) AND POSITION GRANTED (#) PER SHARE ($/SH.)
---------------------------- ----------- -----------------
Michael L. Hackworth............................. -- --
President, Chief Executive Officer and Chairman
of the Board
Edward C. Ross................................... 40,000 $12.125
President, Technology and Manufacturing Group
George N. Alexy.................................. 40,000 12.125
Senior Vice President, Corporate Marketing
Eric J. Swanson.................................. 100,000 14.113
Vice President and Chief Technical Officer
Steven Dines..................................... 87,400 12.898
Vice President and General Manager, Mass Storage
Products Division
All current executive officers as a group (11 700,683 $13.525
persons).........................................
All other employees as a group (598 persons)..... 1,582,350 $ 12.32
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE 1990 DIRECTORS'
STOCK OPTION PLAN
The 1990 Directors' Stock Option Plan (the "Directors' Plan") was adopted by
the Board of Directors in January 1990 and approved by the shareholders in
July 1990. A total of 240,000 shares of Common Stock were initially reserved
for issuance thereunder. Subsequent amendments to the Directors' Plan
increased the shares reserved to a total of 370,000.
PROPOSED AMENDMENTS TO THE DIRECTORS' PLAN
On April 1, 1998, the Board of Directors increased the shares reserved for
issuance under the Directors' Plan by an additional 100,000 shares, bringing
the total number of shares reserved for issuance under the Directors' Plan to
470,000. In addition, Board of Directors approved several amendments to the
Directors' Plan:
The Directors' Plan is due to expire in January 2000. The Board approved an
amendment to extend the expiration date to 2010.
The Directors' Plan states that Automatic Option Grants have a term of five
years. The Board approved an amendment to provide for a term of ten years for
Automatic Options granted in the future.
12
Under the current terms of the Directors' Plan, each new Outside Director
receives an Initial Automatic Grant of 20,000 shares. The Board approved an
amendment to increase the Initial Automatic Grant to 25,000 shares.
Currently, Annual Automatic grants vest over four years. The Board approved
an amendment to state that Annual Automatic Grants will be fully vested on
date of grant.
Proposal 4 seeks shareholder approval of these amendments.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Directors' Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
The essential provisions of the Directors' Plan are outlined below.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors. All options
under the Directors' Plan shall be either Automatic Options or Special
Options. The timing of the grant of Automatic Options is determined by the
Directors' Plan and no discretion is permitted. The grant of Special Options
shall be made at the discretion of the Board (exclusive of the optionee);
provided, however, that no Special Option shall become exercisable unless
approved by the shareholders of the Company. No member of the Board may vote
on the grant of any option that relates to himself or herself.
ELIGIBILITY
Only non-employee Directors ("Outside Directors") may participate in the
Directors' Plan. As of March 28, 1998, there were four Outside Directors
eligible to participate in the Directors' Plan.
AUTOMATIC OPTION GRANTS
Effective April 1, 1998, each Outside Director is automatically granted in
initial option to purchase 25,000 shares of Common Stock upon the date such
person first becomes a Director, whether through election by the shareholders
of the Company or appointment by the Board of Directors to fill a vacancy.
Each Outside Director automatically receives, upon his or her annual
reelection to the Board, an additional option to purchase 5,000 shares of
Common Stock.
SPECIAL OPTION GRANTS
Grants of Special Options shall be made at the discretion of the Board
(exclusive of the optionee); provided, however, that no Special Option shall
become exercisable unless approved by the shareholders of the Company.
TERMS OF OPTIONS
Options granted under the Directors' Plan shall have a term of ten years and
are exercisable only while the Outside Director remains an Outside Director of
the Company or within seven months of the date the Outside Director ceases to
serve as a Director. The exercise price of Automatic Options is 100% of the
fair market value per share on the date of grant of the option. The exercise
price of the Special Options shall be as determined by the Board (subject to
shareholder approval of the grant) and may be less than 100% of fair market
value.
13
Initial Automatic Options are immediately exercisable and subject to
repurchase by the Company as to any unvested shares upon cessation of status
as an Outside Director. The Shares subject to the Initial Automatic Option
vest cumulatively as to one-quarter of the aggregate number of shares on the
first annual anniversary of the date of grant and as to one forty-eighth of
the total shares each month thereafter; provided, however, that if the
optionee ceases to serve as an Outside Director of the Company, vesting ceases
as of the date of termination. Annual Automatic Options are fully vested on
the date of grant and are immediately exercisable. Special Options shall be
subject to vesting as determined by the Board of Directors and approved by the
shareholders.
Options granted under the Directors' Plan are intended to comply with Rule
16b-3 (or any successor rule) and shall contain any such additional conditions
or restrictions as may be required to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to plan transactions.
EXERCISE OF OPTIONS
An option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased, and
tendering payment to the Company of the purchase price. The payment shall
consist entirely of cash, check, other shares of Common Stock having a fair
market value on the date of surrender equal to the aggregate exercise price of
the shares as to which said option shall be exercised (which, if acquired from
the Company, shall have been held for at least six months), or any combination
of such methods of payment.
DISABILITY OF OPTIONEE
If an Outside Director ceases to serve as a Director or is unable to
continue his or her service as a Director with the Company as a result of
total and permanent disability (as defined in Section 22(e)(3) of the Code),
the Outside Director may exercise the option, but only within seven months
after the date he or she ceases to be a Director of the Company, and only to
purchase vested shares. To the extent that he or she was not entitled to
exercise an option at the date of such termination, or if he or she does not
exercise such option (which he or she was entitled to exercise) within the
time specified herein, the option shall terminate.
DEATH OF OPTIONEE
If the optionee dies during the term of the option and the optionee was, at
the time of his or her death, an Outside Director of the Company and who shall
have been in continuous status as a Director since the date of grant of the
option, the option may be exercised, at any time within seven months following
the date of death, by the optionee's estate or by a person who acquired the
right to exercise the option by bequest or inheritance, but only to the extent
of the shares that had vested at the date of death.
If the optionee dies within seven months after the termination of continuous
status as a Director, then the option may be exercised, at any time within
seven months following the termination of the optionee's continuous status as
a Director, or three months after the date of death, whichever is later, by
the optionee's estate or by a person who acquired the right to exercise the
option by bequest or inheritance, but only to the extent of the shares that
had vested at the date of termination.
CAPITAL CHANGES
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as stock splits or stock
dividends, resulting in an increase or decrease in the number of shares of
Common Stock, proportionate adjustments will be made by the Company in the
shares subject to purchase and in the price per share.
14
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of a liquidation or dissolution of the Company, all options
will terminate immediately before consummation of such event. In the event of
a proposed sale of all or substantially all of the assets of the Company, or
merger of the Company with or into another corporation, all options shall be
assumed or equivalent options shall be substituted, by such successor
corporation or a parent or subsidiary of such successor corporation. If such
successor corporation refuses to assume the option or to substitute an
equivalent option, the Board shall, in lieu of such assumption or
substitution, provide that the optionee shall have the right to exercise the
option as to all of the optioned shares, including shares as to which the
option would not otherwise be exercisable, or that the restrictions on
unvested shares shall be removed, as the case may be. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Board shall notify the optionee that the
option shall be fully exercisable for a period of fifteen days from the date
of such notice, and the option will terminate upon the expiration of such
period.
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter, suspend or discontinue the
Directors' Plan; provided, however, that the terms of Automatic Options may
not be amended more than once in any six-month period. The Company shall
obtain shareholder approval of any Directors' Plan amendment that is required
to comply with Rule 16b-3. No action by the Board may affect options already
granted under the Directors' Plan without the consent of the Optionee. The
Directors' Plan will terminate on January 16, 2010, unless terminated earlier
by the Board.
TAX INFORMATION
Options granted under the Directors' Plan are nonstatutory stock options. An
optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. However, upon its exercise, the optionee will
recognize taxable income, generally measured by the excess of the then fair
market value of the shares of Common Stock purchased over the purchase price.
Upon resale of such shares by the optionee, any difference between the sale
price and the optionee's purchase price, to the extent not recognized as
taxable income as provided above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonstatutory option.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF
OPTIONS UNDER THE DIRECTORS' PLAN, DOES NOT PURPORT TO BE COMPLETE, AND DOES
NOT DISCUSS THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY
RESIDE.
15
PARTICIPATION IN THE DIRECTORS' PLAN
The grant of options under the Directors' Plan is determined by the
Directors' Plan with respect to Automatic Options and is subject to the
individual director's election, appointment or reelection to the Board. The
grant of Special Options is at the discretion of the Board of Directors and
the approval of the shareholders of the Company. Only Outside Directors are
eligible to participate in the Directors' Plan. The following table sets forth
information with respect to options granted under the Directors' Plan during
the Last Fiscal Year to the Outside Directors. The term of all options
outstanding under the Option Plan is five years from date of grant.
SHARES WEIGHTED
SUBJECT AVERAGE
TO OPTIONS EXERCISE PRICE
NAME (OR GROUP) AND POSITION GRANTED (#) PER SHARE ($/SH.)
---------------------------- ----------- -----------------
C. Gordon Bell, Director...................... 5,000 $13.5625
D. James Guzy, Director....................... 5,000 13.5625
Walden C. Rhines, Director.................... 5,000 13.5625
Robert H. Smith, Director..................... 5,000 13.5625
All Outside Directors as a group (four per-
sons)........................................ 20,000 13.5625
PROPOSAL 5
APPROVAL OF REINCORPORATION IN DELAWARE AND
THE DELAWARE FORM OF INDEMNIFICATION AGREEMENT
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the state of incorporation of the Company from California to Delaware (the
"Reincorporation Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS
ARE URGED TO READ CAREFULLY THE FOLLOWING SECTIONS OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS REFERENCED BELOW AND ATTACHED HERETO, BEFORE
VOTING ON THE REINCORPORATION PROPOSAL. Throughout the Proxy Statement, the
term "Cirrus Logic California" refers to the existing California corporation
and the term "Cirrus Logic Delaware" refers to the new Delaware corporation, a
wholly owned subsidiary of Cirrus Logic California, which is the proposed
successor to Cirrus Logic California.
As discussed below, the principal reasons for the proposed reincorporation
are the greater flexibility of Delaware corporate law, the substantial body of
case law interpreting that law, and the increased ability of the Company to
attract and retain qualified directors. The Company believes that its
shareholders will benefit from the well established principles of corporate
governance that Delaware law affords. Although Delaware law provides the
opportunity for the Board of Directors to adopt various mechanisms which may
enhance the Board's ability to negotiate favorable terms for the shareholders
in the event of an unsolicited takeover attempt, the proposed Delaware
Certificate of Incorporation and the Reincorporation Proposal is not being
proposed in order to prevent a nonsolicited takeover attempt, nor is it in
response to any present attempt known to the Board of Directors to acquire
control of the Company, obtain representation of the Board of Directors or
take significant action that affects the Company.
The Reincorporation Proposal will be effected by merging Cirrus Logic
California into Cirrus Logic Delaware. Upon completion of the merger, Cirrus
Logic California will cease to exist and Cirrus Logic Delaware will continue
to operate the business of the Company under the name Cirrus Logic, Inc.
Pursuant to the Agreement and Plan of Merger, a copy of which is attached
hereto as Exhibit A (the "Merger Agreement"), each outstanding share of Cirrus
Logic California Common Stock, no par value, will automatically be converted
into one share of Cirrus Logic Delaware Common Stock, $0.001 par value, upon
the
16
effective date of the merger. Each stock certificate representing issued and
outstanding shares of Cirrus Logic California Common Stock will continue to
represent the same number of shares of Common Stock of Cirrus Logic Delaware.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK
CERTIFICATES FOR STOCK CERTIFICATES OF CIRRUS LOGIC DELAWARE. However,
shareholders may exchange their certificates if they so choose. The Common
Stock of Cirrus Logic California is listed for trading on the NASDAQ National
Market, and after the merger Cirrus Logic Delaware's Common Stock will
continue to be traded on the NASDAQ National Market without interruption,
under the same symbol ("CRUS") as the shares of Cirrus Logic California Common
Stock are traded under such system prior to the merger.
Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock of Cirrus Logic California is required for approval of
the Merger Agreement and the other terms of the Proposed Reincorporation. See
"Vote Required for the Reincorporation Proposal". The Proposed Reincorporation
has been approved by Cirrus Logic California's Board of Directors. If approved
by the shareholders, it is anticipated that the merger will become effective
as soon as practicable (the "Effective Date") following the Annual Meeting of
Shareholders. However, pursuant to the Merger Agreement, the merger may be
abandoned or the Merger Agreement may be amended by the Board of Directors
(except that the principal terms may not be amended without shareholder
approval) either before or after shareholder approval has been obtained and
prior to the Effective Date of the Proposed Reincorporation if, in the opinion
of the Board of Directors of either company, circumstances arise which make it
inadvisable to proceed under the original terms of the Merger Agreement.
Shareholders of Cirrus Logic California will have no dissenters' rights of
appraisal with respect to the merger.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of Cirrus Logic
Delaware (the "Certificate of Incorporation"), the Bylaws of Cirrus Logic
Delaware and the Indemnification Agreement, copies of which are attached
hereto as Exhibits A, B, C and D, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION, THE BYLAWS
OF CIRRUS LOGIC DELAWARE, THE INDEMNIFICATION AGREEMENT AND ALL PROVISIONS
THEREOF.
VOTE REQUIRED
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, (ii) the Certificate of Incorporation
and the Bylaws of Cirrus Logic Delaware, (iii) the Indemnification Agreement
and (iv) the assumption of Cirrus Logic California's employee benefit plans,
stock option plans, employee stock purchase plan and the 6% Convertible
Subordinated Notes due December 15, 2003 by Cirrus Logic Delaware, will
require the affirmative vote of the majority of outstanding shares of the
Company on the Record Date entitled to vote on the proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established
principles of corporate governance in making legal and business decisions. The
prominence and predictability of Delaware corporate law provide a reliable
foundation on which the Company's governance decisions can be based and the
Company believes that shareholders will benefit from the responsiveness of
Delaware corporate law to their needs and to those of the corporation they
own.
17
PROMINENCE, PREDICTABILITY AND FLEXIBILITY OF DELAWARE LAW. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Many corporations
have chosen Delaware initially as a state of incorporation or have
subsequently changed corporate domicile to Delaware in a manner similar to
that proposed by the Company. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have
developed considerable expertise in dealing with corporate issues and a
substantial body of case law has developed construing Delaware law and
establishing public policies with respect to corporate legal affairs.
INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS. Both California
and Delaware law permit a corporation to include a provision in its charter
document which reduces or limits the monetary liability of directors for
breaches of fiduciary duty in certain circumstances. The increasing frequency
of claims and litigation directed against directors and officers has greatly
expanded the risks facing directors and officers of corporations in exercising
their respective duties. The amount of time and money required to respond to
such claims and to defend such litigation can be substantial. It is the
Company's desire to reduce these risks to its directors and officers and to
limit situations in which monetary damages can be recovered against directors
so that the Company may continue to attract and retain qualified directors who
otherwise might be unwilling to serve because of the risks involved. The
Company believes that, in general, Delaware law provides greater protection to
directors than California law and that Delaware case law regarding a
corporation's ability to limit director liability is more developed and
provides more guidance than California law.
CALIFORNIA PROPOSITION 211. In November 1996, Proposition 211 was rejected
by the California Electorate. Proposition 211 would have severely limited the
ability of California companies to indemnify their directors and officers.
While Proposition 211 was defeated, similar initiatives or legislation
containing similar provisions may be proposed in California in the future. As
a result, the Company believes that the more favorable corporate environment
afforded by Delaware will enable it to compete more effectively with other
public companies in attracting new directors.
WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There is substantial
judicial precedent in the Delaware courts as to the legal principles
applicable to measures that may be taken by a corporation and as to the
conduct of the Board of Directors under the business judgment rule. The
Company believes that its shareholders will benefit from the well established
principles of corporate governance that Delaware law affords.
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect a change only in the legal domicile
of the Company and certain other changes of a legal nature, certain of which
are described in this Proxy Statement. The Proposed Reincorporation will not
result in any change in the name, business, management, fiscal year, assets or
liabilities (except to the extent of legal and other costs of effecting the
reincorporation) or location of the principal facilities of the Company. The
seven directors who are elected at the Annual Meeting of Shareholders will
become the directors of Cirrus Logic Delaware. All employee benefit, stock
option, employee stock purchase plans and the 6% Convertible Subordinated
Notes due December 15, 2003 of Cirrus Logic California will be assumed and
continued by Cirrus Logic Delaware, and each option or right issued pursuant
to such plans will automatically be converted into an option or right to
purchase the same number of shares of Cirrus Logic Delaware Common Stock, at
the same price per share, upon the same terms, and subject to the same
conditions. Shareholders should note that approval of the Reincorporation
Proposal will also constitute approval of the assumption of these plans by
Cirrus Logic Delaware. Other employee benefit arrangements of Cirrus Logic
California will also be continued by Cirrus Logic Delaware upon the terms and
subject to the conditions currently in effect. As noted above, after the
merger the shares of Common Stock of Cirrus Logic Delaware will continue to be
traded,
18
without interruption, in the same principal market and under the same symbol
("CRUS") as the shares of Common Stock of Cirrus Logic California are traded
under prior to the merger.
Prior to the Effective Date of the merger, the Company will obtain any
requisite consents to such merger from parties with whom it may have
contractual arrangements. As a result, Cirrus Logic California's rights and
obligations under such contractual arrangements will continue and be assumed
by Cirrus Logic Delaware.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures through amendment of the corporate charter or bylaws or otherwise,
which measures are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent such a change in control, nor is it in response
to any present attempt known to the Board of Directors to acquire control of
the Company or to obtain representation on the Board of Directors.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation
Law, from which Cirrus Logic Delaware does NOT intend to opt out, restricts
certain "business combinations" with "interested stockholders" for three years
following the date that a person becomes an interested stockholder, unless the
Board of Directors approves the business combination. See "Significant
Differences Between the Corporation Laws of California and Delaware--
Shareholder Approval of Certain Business Combinations." Likewise, the
elimination of the right of shareholders controlling at least ten percent of
the voting shares to call a special meeting of the shareholders could be seen
as promoting an antitakeover effect by allowing shareholder action only at a
meeting properly called by the Board of Directors or an annual meeting. The
elimination of the ability of a majority of shareholders to act by written
consent also could be viewed as having an antitakeover effect in that it can
make it more difficult for shareholders to coordinate action outside a duly
called annual or special meeting. It should be noted that a classified board
of directors can also be established under California law in certain
circumstances. For a detailed discussion of all of the changes which will be
implemented as part of the Proposed Reincorporation, see "The Charters and
Bylaws of Cirrus Logic California and Cirrus Logic Delaware" and "Restatement
of Indemnification Agreements." For a discussion of these and other
differences between the laws of California and Delaware, see "Significant
Differences Between the Corporation Laws of California and Delaware."
The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because: (i) a
non-negotiated takeover bid may be timed to take advantage of temporarily
depressed stock prices; (ii) a non-negotiated takeover bid may be designed to
foreclose or minimize the possibility of more favorable competing bids or
alternative transactions; (iii) a non-negotiated takeover bid may involve the
acquisition of only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits; and (iv) certain of the Company's contractual arrangements provide
that they may not be assigned pursuant to a transaction which results in a
"change of control" of the Company without the prior written consent of the
licensor or other contracting party.
By contrast, in a transaction in which an acquiror must negotiate with an
independent board of directors, the board can and should take account of the
underlying and long-term values of the Company's business, technology and
other assets, the possibilities for alternative transactions on more favorable
terms, possible advantages from a tax-free reorganization, anticipated
favorable developments in the Company's business not yet reflected in the
stock price and equality of treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which
is not approved by the Board of Directors, but which a majority of the
shareholders may deem to be in their best interests or in which shareholders
may receive a substantial premium for their shares over the then current
market value or over their cost basis in such shares. As a result of such
effects of the Reincorporation Proposal, shareholders who might wish to
participate in a tender offer may not have an opportunity to do so. In
19
addition, to the extent that such provisions enable the Board of Directors to
resist a takeover or a change in control of the Company, they could make it
more difficult to change the existing Board of Directors and management.
THE CHARTERS AND BYLAWS OF CIRRUS LOGIC CALIFORNIA AND CIRRUS LOGIC DELAWARE
The provisions of the Cirrus Logic Delaware Certificate of Incorporation and
Bylaws are similar to those of the Cirrus Logic California Articles of
Incorporation and Bylaws in many respects. However, the Reincorporation
Proposal includes the implementation of certain provisions in the Cirrus Logic
Delaware Certificate of Incorporation and Bylaws which alter the rights of
shareholders and the powers of management. These provisions have antitakeover
implications as described in this Proxy Statement. Approval by shareholders of
the Proposed Reincorporation will constitute an approval of the inclusion in
the Cirrus Logic Delaware Certificate of Incorporation and Bylaws of each of
the provisions described below. In addition, Cirrus Logic Delaware could
implement certain other changes by amendment of its Certificate of
Incorporation or Bylaws. For a discussion of such changes, see "Significant
Differences Between the Corporation Laws of California and Delaware." This
discussion of the Certificate of Incorporation and Bylaws of Cirrus Logic
Delaware is qualified by reference to Exhibits B and C hereto, respectively.
The Articles of Incorporation of Cirrus Logic California currently authorize
the Company to issue up to 140 million shares of Common Stock, no par value,
and 5 million shares of Preferred Stock, no par value. In the event that the
reincorporation merger proposed herein is effected, the Certificate of
Incorporation of Cirrus Logic Delaware will provide that such company will
have 280 million authorized shares of Common Stock, $0.001 par value, and 5
million shares of Preferred Stock, $0.001 par value.
MONETARY LIABILITY OF DIRECTORS AND OFFICERS. The Articles of Incorporation
of Cirrus Logic California and the Certificate of Incorporation of Cirrus
Logic Delaware both provide for the elimination of personal monetary liability
of directors and officers to the fullest extent permissible under law. The
provision eliminating monetary liability of directors and officers set forth
in the Cirrus Logic Delaware Certificate of Incorporation is potentially more
expansive than the corresponding provision in the Cirrus Logic California
Articles of Incorporation, in that (1) the former incorporates future
amendments to Delaware law with respect to the elimination of such liability,
and (2) the former indemnifies employees and other agents of Cirrus Logic
Delaware, in addition to directors and officers. Cirrus Logic Delaware
proposes to enter into new indemnification arrangements with all directors
after the Proposed Reincorporation. For a more detailed explanation of the new
indemnification arrangements after the Proposed Reincorporation, see "Delaware
Form of Indemnification Agreement" and "Significant Differences Between the
Corporation Laws of California and Delaware--Indemnification and Limitation of
Liability."
SIZE OF THE BOARD OF DIRECTORS. The Bylaws of Cirrus Logic Delaware provide
for a Board of Directors consisting of seven members, until changed by a
majority of directors then in office. The Bylaws of Cirrus Logic California
provide for a Board of Directors consisting of not less than five nor more
than nine directors, within which the exact number is set at six members.
Effective July 21, 1998, the exact number of directors will be set at seven.
Under California law, although changes in the number of directors, in general,
must be approved by a majority of the outstanding shares, the Board of
Directors may fix the exact number of directors within a stated range set
forth in the articles of incorporation or bylaws, if the stated ranges have
been approved by the shareholders. Delaware law permits the board of directors
acting alone, to change the authorized number of directors by amendment to the
bylaws, unless the directors are not authorized to amend the bylaws or the
number of directors is fixed in the certificate of incorporation (in which
case a change in the number of directors may be made only by amendment to the
certificate of incorporation following approval of such change by the
stockholders). The Cirrus Logic Delaware Certificate of Incorporation provides
that the number of directors will be as specified in the Bylaws and authorizes
the Board of Directors to adopt, alter, amend or repeal the Bylaws. Following
the Proposed Reincorporation, the Board of Directors of Cirrus Logic Delaware
could amend the Bylaws to change the size of the Board of Directors from seven
directors without further stockholder approval.
20
If the Reincorporation Proposal is approved, the seven directors of Cirrus
Logic California who are elected at the Annual Meeting of Shareholders will
continue as the seven directors of Cirrus Logic Delaware after the Proposed
Reincorporation is consummated and until their successors have been duly
elected and qualified.
CUMULATIVE VOTING FOR DIRECTORS. Under California law, if any shareholder
has given notice of an intention to cumulate votes for the election of
directors, any other shareholder of the corporation is also entitled to
cumulate his or her votes at such election. Cumulative voting provides that
each share of stock normally having one vote is entitled to a number of votes
equal to the number of directors to be elected. A shareholder may then cast
all such votes for a single candidate or may allocate them among as many
candidates as the shareholder may choose. In the absence of cumulative voting,
the holders of the majority of the shares present or represented at a meeting
in which directors are to be elected would have the power to elect all the
directors to be elected at such meeting, and no person could be elected
without the support of holders of the majority of shares present or
represented at such meeting. Elimination of cumulative voting could make it
more difficult for a minority shareholder adverse to a majority of the
shareholders to obtain representation on the Company's Board of Directors.
California corporations whose stock is listed on a national stock exchange can
also eliminate cumulative voting with shareholder approval. The Company
qualifies as such a listed company but has not sought shareholder approval to
eliminate cumulative voting. Under Delaware law, cumulative voting in the
election of directors is not mandatory, but is a permitted option. The Cirrus
Logic Delaware Certificate of Incorporation does NOT provide for cumulative
voting rights on any matter.
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast
not less than ten percent of the votes at such meeting, or such additional
persons as are authorized by the Articles of Incorporation or the Bylaws.
Cirrus Logic California's Bylaws permit a special meeting of shareholders to
be called by the Board of Directors, the President, or one or more
shareholders holding not less than ten percent of the voting power of the
Company. Under Delaware law, a special meeting of stockholders may be called
by the Board of Directors or any other person authorized to do so in the
Certificate of Incorporation or the Bylaws. The Bylaws of Cirrus Logic
Delaware currently authorize the Board of Directors, the Chairman of the
Board, or the President to call a special meeting of stockholders. Therefore,
after the Proposed Reincorporation, no stockholder (regardless of percentage
holding) will be entitled to call special meetings.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by a majority of the Board then remaining, even if less
than a quorum. A vacancy created by removal of a director may be filled by the
board only if so authorized by a corporation's articles of incorporation or by
a bylaw approved by the corporation's shareholders. Cirrus Logic California's
Articles of Incorporation and Bylaws do not permit directors to fill vacancies
created by removal of a director, although vacancies for any other reason may
be filled by a majority of the directors then remaining, even if less than a
quorum. Under Delaware law, vacancies and newly created directorships may be
filled by a majority of the directors then in office (even though less than a
quorum) or by a sole remaining director, unless otherwise provided in the
certificate of incorporation or bylaws (or unless the certificate of
incorporation directs that a particular class of stock is to elect such
director(s), in which case a majority of the directors elected by such class,
or a sole remaining director so elected, shall fill such vacancy or newly
created directorship). The Bylaws of Cirrus Logic Delaware provide that all
vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; provided, that whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority
of the directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
NOMINATIONS OF DIRECTOR CANDIDATES AND INTRODUCTION OF BUSINESS AT
SHAREHOLDER MEETINGS. The Bylaws of Cirrus Logic Delaware establish an advance
notice procedure with regard to the nomination, other
21
than by or at the direction of the Board of Directors, of candidates for
election as directors (the "Nomination Procedure") and with regard to certain
matters to be brought before an annual meeting or special meeting of
stockholders (the "Business Procedure").
The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company prior to the meeting, will be
eligible for election as directors. The Nomination Procedure and Business
Procedure provide that at an annual or special meeting, and subject to any
other applicable requirements, only such business may be conducted and
nominees may be elected as have been brought before the meeting by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company of such stockholder's intention
to bring such business or election of nominee before the meeting. In all
cases, to be timely, such stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than
one hundred twenty calendar days in advance of the date of the Company's proxy
statement released to stockholders in connection with the previous year's
annual meeting of stockholders; provided, however, that in the event that no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than thirty days from the date contemplated at the
time of the previous year's proxy statement, notice by the stockholder to be
timely must be so received a reasonable time before the solicitation is made.
To be in proper form, the Nomination Procedure and Business Procedure
provide that a stockholder's notice to the Secretary of the Company must
contain:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, of the person
or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of record of stock
of the Company entitled to vote at such meeting and, if applicable, intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice;
(iii) if applicable, a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the Company if so elected.
By requiring advance notice of nominations by stockholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications.
By requiring advance notice of proposed business, the Business Procedure
provides the Board with an opportunity to inform stockholders of any business
proposed to be conducted at a meeting and the Board's position on any such
proposal, enabling stockholders to better determine whether they desire to
attend the meeting or grant a proxy to the Board of Directors as to the
disposition of such business. Although the Cirrus Logic Delaware Bylaws do not
give the Board any power to approve or disapprove stockholder nominations for
the election of directors or any other business desired by stockholders to be
conducted at a meeting, the Cirrus Logic Delaware Bylaws may have the effect
of precluding a nomination for the election of directors or of precluding any
other business at a particular meeting if the proper procedures are not
followed. In addition, the procedures may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or otherwise attempting to obtain control of the Company, even if the conduct
of such business or such attempt might be beneficial to the Company and its
stockholders.
22
ACTION BY WRITTEN CONSENT OF THE SHAREHOLDERS. Any action by the
stockholders must be taken at a duly called annual or special meeting,
according to the Bylaws of Cirrus Logic Delaware. Thus, although the Bylaws of
Cirrus Logic California allow shareholder action by written consent, such
action by written consent will no longer be authorized after the Proposed
Reincorporation.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE
The corporation laws of California and Delaware differ in many respects.
Although all the differences are not set forth in this Proxy Statement,
certain provisions, which could materially affect the rights of shareholders,
are discussed below.
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS. In recent years, a
number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a
corporation and one or more of its significant shareholders, more difficult.
Under Section 203 of the Delaware General Corporation Law, certain "business
combinations" with "interested stockholders" of Delaware corporations are
subject to a three-year moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the
date that such person or entity becomes an interested stockholder. With
certain exceptions, an interested stockholder is a person or entity who or
which owns, individually or with or through certain other persons or entities,
fifteen percent or more of the corporation's outstanding voting stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner,
individually or with or through certain other persons or entities, of fifteen
percent or more of such voting stock at any time within the previous three
years, or is an affiliate or associate of any of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately
with the corporation's other stockholders) of assets of the corporation or a
direct or indirect majority-owned subsidiary equal in aggregate market value
to ten percent or more of the aggregate market value of either the
corporation's consolidated assets or all of its outstanding stock; the
issuance or transfer by the corporation or a direct or indirect majority-owned
subsidiary of stock of the corporation or such subsidiary to the interested
stockholder (except for certain transfers in a conversion or exchange or a pro
rata distribution or certain other transactions, none of which increase the
interested stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock or of the corporation's voting
stock); or receipt by the interested stockholder (except proportionately as a
stockholder), directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation or
a subsidiary.
The three-year moratorium imposed on business combinations of Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming
an interested stockholder; (ii) upon consummation of the transaction that made
him or her an interested stockholder, the interested stockholder owns at least
eighty-five percent of the corporation's voting stock outstanding at the time
the transaction commenced (excluding from the eighty-five percent calculation
shares owned by directors who are also officers of the target corporation and
shares held by employee stock plans that do not give employee participants the
right to decide confidentially whether to accept a tender or exchange offer);
or (iii) on or after the date such person or entity becomes an interested
stockholder, the board approves the business combination and it is also
approved at a stockholder meeting by sixty-six and two-thirds percent of the
outstanding voting stock not owned by the interested stockholder.
Section 203 only applies to certain publicly held corporations that have a
class of voting stock that is (i) listed on a national securities exchange,
(ii) quoted on an interdealer quotation system of a registered national
23
securities association or (iii) held of record by more than 2,000
stockholders. Although a Delaware corporation to which Section 203 applies may
elect not to be governed by Section 203, Cirrus Logic Delaware does not intend
to so elect and thus will be governed by Section 203.
Section 203 will encourage any potential acquiror to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of
limiting the ability of a potential acquiror to make a two-tiered bid for
Cirrus Logic Delaware in which all stockholders would not be treated equally.
Shareholders should note, however, that the application of Section 203 to
Cirrus Logic Delaware will confer upon the Board the power to reject a
proposed business combination in certain circumstances, even though a
potential acquiror may be offering a substantial premium for Cirrus Logic
Delaware's shares over the then current market price. Section 203 would also
discourage certain potential acquirors unwilling to comply with its
provisions. See "Shareholder Voting" herein.
REMOVAL OF DIRECTORS. Under California law, any director or the entire board
of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director
under cumulative voting. Under Delaware law, a director of a corporation with
a classified board of directors may be removed only for cause, unless the
certificate of incorporation otherwise provides. Under Delaware law, a
director that does not have a classified board of directors or cumulative
voting may be removed with or without cause with the approval of a majority of
the outstanding shares entitled to vote. The Certificate of Incorporation of
Cirrus Logic Delaware does not provide for cumulative voting or a classified
board of directors. Consequently, a director of Cirrus Logic Delaware may be
removed from office with or without cause, with the approval of a majority of
the outstanding shares entitled to vote.
INDEMNIFICATION AND LIMITATION OF LIABILITY. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their articles of incorporation
eliminating the liability of a director to the corporation or its shareholders
for monetary damages for breach of the director's fiduciary duty of care.
There are nonetheless certain differences between the laws of the two states
respecting indemnification and limitation of liability. In general, Delaware
law is somewhat broader in allowing corporations to indemnify and limit the
liability of corporate agents, which, among other things, support Delaware
corporations in attracting and retaining outside directors.
California law does not permit the elimination of monetary liability where
such liability is based on: (a) intentional misconduct or knowing and culpable
violation of law; (b) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director; (c) receipt of
an improper personal benefit; (d) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders,
where the director in the ordinary course of performing a director's duties
should be aware of a risk of serious injury to the corporation or its
shareholders; (e) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) interested transactions between the
corporation and a director in which a director has a material financial
interest; or (g) liability for improper distributions, loans or guarantees.
Delaware law does not permit the elimination of monetary liability for (a)
breaches of the director's duty of loyalty to the corporation or its
shareholders; (b) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (c) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (d) transactions in which the
director received an improper personal benefit.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its
24
shareholders, unless a court determines such person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent
that such court shall determine, and (b) no indemnification may be made
without court approval in respect of amounts paid or expenses incurred in
settling or otherwise disposing of a threatened or pending action or amounts
incurred in defending a pending action which is settled or otherwise disposed
of without court approval.
Indemnification is permitted by California law only for acts taken in good
faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of
the directors, independent legal counsel (if a quorum of independent directors
is not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits as opposed to Delaware law which requires
indemnification where there has been a successful defense, whether on the
merits or otherwise.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is
a determination by a disinterested quorum of the directors, by independent
legal counsel or by a majority vote of a quorum of the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in, or (in contrast to California law) not opposed to, the best
interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of
his duty to the corporation.
Each of California and Delaware law allow for the entering of
indemnification agreements which may provide for indemnification arrangements
beyond those specifically authorized by applicable statute as long as they are
not contrary to the policies underlying such statute. In this connection, the
Company entered into indemnification agreements with its officers and
directors providing for indemnification in line with California law, including
certain procedures for such indemnification as well as for the advancement of
expenses (other than actual amounts paid in settlement) in connection with the
investigation, defense, settlement or appeal of any proceeding subject to such
indemnification agreement. Such advances are repayable by the officer or
director to the extent the subject conduct is later determined not to be
indemnifiable. Similar indemnification agreements are allowed under Delaware
law and the broader indemnification allowed in Delaware could also result in
the greater allowance of expenses advancement.
After the Proposed Reincorporation, the Company proposes to adopt the
indemnification agreement in the form attached hereto as Exhibit D.
INSPECTION OF SHAREHOLDER LIST. Both California and Delaware law allow any
shareholder to inspect the shareholder list for a purpose reasonably related
to such person's interest as a shareholder. California law provides, in
addition, for an absolute right to inspect and copy the corporation's
shareholder list by persons holding an aggregate of five percent or more of
the corporation's voting shares, or shareholders holding an aggregate of one
percent or more of such shares who have filed a Schedule 14B with the
Securities and Exchange Commission in connection with a contested election of
directors. The latter provision has not been amended in response to the
elimination of Schedule 14B under the revised proxy rules. Under California
law, such absolute inspection rights also apply to a corporation formed under
the laws of any other state if its principal executive offices are in
California or if it customarily holds meetings of its board in California.
Delaware law also provides for inspection rights as to a list of stockholders
entitled to vote at a meeting within a ten-day period preceding a
stockholders' meeting for any purpose germane to the meeting. However,
Delaware law contains no provisions comparable to the absolute right of
inspection provided by California law to certain shareholders.
DIVIDENDS AND REPURCHASES OF SHARES. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus exist
under Delaware law.
25
Under California law, a corporation may not make any distribution (including
dividends, whether in cash or other property, and repurchases of its shares,
other than repurchases of its shares issued under employee stock plans
contemplated by Section 408 of the California Corporations Code) unless either
(i) the corporation's retained earnings immediately prior to the proposed
distribution equal or exceed the amount of the proposed distribution or (ii)
immediately after giving effect to such distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current
liabilities (or 1 1/4 times its current liabilities if the average pre-tax and
pre-interest expense earnings for the preceding two fiscal years were less
than the average interest expense for such years). Such tests are applied to
California corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law
generally provides that a corporation may redeem or repurchase its shares only
if the capital of the corporation is not impaired and such redemption or
repurchase would not impair the capital of the corporation.
To date, the Company has not paid any cash dividends on its outstanding
shares and does not anticipate doing so for the foreseeable future.
SHAREHOLDER VOTING. Both California and Delaware law generally require that
a majority of the shareholders of both acquiring and target corporations
approve statutory mergers. Delaware law does not require a stockholder vote of
the surviving corporation in a merger (unless the corporation provides
otherwise in its certificate of incorporation) if (a) the merger agreement
does not amend the existing certificate of incorporation, (b) each share of
the stock of the surviving corporation outstanding immediately before the
effective date of the merger is an identical outstanding or treasury share
after the merger and (c) either no shares of common stock of the surviving
corporation and no shares, securities or obligations convertible into such
stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed twenty
percent (20%) of the shares of common stock of such constituent corporation
outstanding immediately prior to the effective date of the merger. California
law contains a similar exception to its voting requirements for
reorganizations where shareholders or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved
by a majority vote of each class of shares outstanding. In contrast, Delaware
law generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which
have more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than fifty percent (50%) but less than ninety percent (90%) of
such common stock or its affiliate unless all of the holders of such common
stock consent to the transaction. This provision of California law may have
the effect of making a "cash-out" merger by a majority
26
shareholder more difficult to accomplish. Although Delaware law does not
parallel California law in this respect, under some circumstances Section 203
does provide similar protection against coercive two-tiered bids for a
corporation in which the stockholders are not treated equally. See
"Significant Differences Between the Corporation Laws of California and
Delaware--Shareholder Approval of Certain Business Combinations."
California law provides that, except in certain circumstances, when a tender
offer or a proposal for a reorganization or for a sale of assets is made by an
interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to
shareholders. This fairness opinion requirement does not apply to a
corporation that does not have shares held of record by at least 100 persons,
or to a transaction that has been qualified under California state securities
laws. Furthermore, if a tender of shares or vote is sought pursuant to an
interested party's proposal and a later proposal is made by another party at
least ten days prior to the date of acceptance of the interested party
proposal, the shareholders must be informed of the later offer and be afforded
a reasonable opportunity to withdraw any vote, consent or proxy, or to
withdraw any tendered shares. Delaware law has no comparable provision.
INTERESTED DIRECTOR TRANSACTIONS. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the
board of directors must approve any such contract or transaction after full
disclosure of the material facts, and, in the case of board approval, the
contract or transaction must also be "just and reasonable" (in California) or
"fair" (in Delaware) to the corporation or (b) the contract or transaction
must have been just and reasonable or fair as to the corporation at the time
it was approved. In the latter case, California law explicitly places the
burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to
vote his shares at a shareholder meeting with respect to any action regarding
such contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under
Delaware law, if board approval is sought, the contract or transaction must be
approved by a majority of the disinterested directors (even if the
disinterested directors are less than a quorum). Therefore, certain
transactions that the Board of Directors of Cirrus Logic California might not
be able to approve because of the number of interested directors, could be
approved by a majority of the disinterested directors of Cirrus Logic
Delaware, although less than a majority of a quorum.
SHAREHOLDER DERIVATIVE SUITS. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a stockholder may bring a derivative action
on behalf of the corporation only if the stockholder was a stockholder of the
corporation at the time of the transaction in question or if his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to
furnish a security bond. Delaware does not have a similar bonding requirement.
APPRAISAL RIGHTS. Under both California and Delaware law, a shareholder of a
corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in
the transaction. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, and such appraisal rights are not
available (a) with respect to the sale, lease or exchange of all or
substantially all of the assets of a corporation, (b) with respect to a merger
or consolidation by a corporation the shares of which are either listed on a
national securities exchange or are held of record by more than 2,000 holders
if such stockholders receive only shares of the surviving corporation or
shares of any other
27
corporation that are either listed on a national securities exchange or held
of record by more than 2,000 holders, plus cash in lieu of fractional shares
of such corporations or (c) to stockholders of a corporation surviving a
merger if no vote of the stockholders of the surviving corporation is required
to approve the merger under certain provisions of Delaware law.
The limitations on the availability of appraisal rights under California law
are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System generally do not have such appraisal rights unless the
holders of at least five percent (5%) of the class of outstanding shares claim
the right or the corporation or any law restricts the transfer of such shares.
Appraisal rights are also unavailable if the shareholders of a corporation or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity (as will be the case in the Reincorporation Proposal).
Appraisal or dissenters' rights are, therefore, not available to shareholders
of Cirrus Logic California with respect to the Reincorporation Proposal.
California law generally affords appraisal rights in sale of asset
reorganizations.
DISSOLUTION. Under California law, shareholders holding fifty percent (50%)
or more of the total voting power may authorize a corporation's dissolution,
with or without the approval of the corporation's board of directors, and this
right may not be modified by the Articles of Incorporation. Under Delaware
law, unless the board of directors approves the proposal to dissolve, the
dissolution must be approved by all the stockholders entitled to vote thereon.
Only if the dissolution is initially approved by the board of directors may it
be approved by a simple majority of the outstanding shares of the
corporation's stock entitled to vote. In the event of such a board-initiated
dissolution, Delaware law allows a Delaware corporation to include in its
certificate of incorporation a supermajority (greater than a simple majority)
voting requirement in connection with dissolutions. Cirrus Logic Delaware's
Certificate of Incorporation contains no such supermajority voting
requirement, however, and a majority of the outstanding shares entitled to
vote, voting at a meeting at which a quorum is present, would be sufficient to
approve a dissolution of Cirrus Logic Delaware that had previously been
approved by its Board of Directors.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law)
are placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California.
So long as a Delaware or other foreign corporation is in this special
category, and it does not qualify for one of the statutory exemptions, it is
subject to a number of key provisions of the California General Corporation
Law applicable to corporations incorporated in California.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on a major national securities exchange or are traded in the Nasdaq
National Market and which have 800 or more shareholders as of the record date
of its most recent annual meeting of shareholders. The Common Stock of Cirrus
Logic Delaware will continue to be traded on the Nasdaq National Market and to
be owned by more than 800 holders, and, accordingly, Cirrus Logic Delaware
will be exempt from Section 2115.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Cirrus Logic California Common Stock who
receive Cirrus Logic Delaware Common Stock in exchange for their Cirrus Logic
California Common Stock as a result of the Proposed Reincorporation. The
discussion does not address all of the tax consequences of the Proposed
Reincorporation that may be relevant to particular Cirrus Logic California
shareholders, such as dealers in securities, or those Cirrus Logic California
shareholders who
28
acquired their shares upon the exercise of stock options, nor does it address
the tax consequences to holders of options or warrants to acquire Cirrus Logic
California Common Stock. Furthermore, no foreign, state, or local tax
considerations are addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX
CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING
THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Code, the following tax consequences
generally should result:
(a) No gain or loss should be recognized by holders of Cirrus Logic
California Common Stock upon receipt of Cirrus Logic Delaware Common Stock
pursuant to the Proposed Reincorporation;
(b) The aggregate tax basis of the Cirrus Logic Delaware Common Stock
received by each shareholder in the Proposed Reincorporation should be
equal to the aggregate tax basis of the Cirrus Logic California Common
Stock surrendered in exchange therefor; and
(c) The holding period of the Cirrus Logic Delaware Common Stock received
by each shareholder of Cirrus Logic California should include the period
for which such shareholder held the Cirrus Logic California Common Stock
surrendered in exchange therefor, provided that such Cirrus Logic
California Common Stock was held by the shareholder as a capital asset at
the time of Proposed Reincorporation.
(d) The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Cirrus Logic
Delaware should succeed, without adjustment, to the federal income tax
attributes of Cirrus Logic California.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the
Proposed Reincorporation under the Code. The Company will, however, receive an
opinion from legal counsel substantially to the effect that the Proposed
Reincorporation will qualify as a reorganization within the meaning of Section
368(a) of the Code (the "Tax Opinion"). The Tax Opinion will neither bind the
IRS nor preclude it from asserting a contrary position. In addition, the Tax
Opinion will be subject to certain assumptions and qualifications and will be
based upon the truth and accuracy of representations made by Cirrus Logic
Delaware and Cirrus Logic California.
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of Cirrus Logic California Common Stock exchanged in the
Proposed Reincorporation equal to the difference between the shareholder's
basis in such share and the fair market value, as of the time of the Proposed
Reincorporation, of the Cirrus Logic Delaware Common Stock received in
exchange therefor. In such event, a shareholder's aggregate basis in the
shares of Cirrus Logic Delaware Common Stock received in the exchange would
equal their fair market value on such date, and the shareholder's holding
period for such shares would not include the period during which the
shareholder held Cirrus Logic California Common Stock.
PROPOSAL 6
SETTING NUMBER OF AUTHORIZED SHARES
The Articles of Incorporation of Cirrus Logic California currently authorize
the Company to issue up to 140 million shares of Common Stock and 5 million
shares of Preferred Stock. The Certificate of Incorporation of Cirrus Logic
Delaware authorizes Cirrus Logic Delaware to issue up to 280 million shares of
Common Stock and 5 million shares of Preferred Stock. The Board of Directors
has no immediate plans to issue additional shares of Common Stock for
financing or any other purposes. However, the higher number of authorized
shares of
29
Common Stock will provide the Company the certainty and flexibility to
undertake various types of transactions, financings including stock splits (in
the form of stock dividends), increases in the shares reserved for issuance
pursuant to the stock option plans, or other corporate purposes not yet
determined.
The Board of Directors of Cirrus Logic California approved a 2-for-1 stock
split effective June 19, 1995. The Board of Directors of Cirrus Logic
California has had the flexibility to respond to the growth of the Company's
business in approving the stock split without having to wait for shareholder
approval. In particular, under California law, the Board of Directors'
approval of the stock split automatically and proportionately increased the
Company's authorized stock without requiring shareholder approval. Under
Delaware law, however, the Board of Directors cannot split the Company's stock
without shareholder approval and cannot approve a stock dividend unless
sufficient authorized shares are available.
Although the Company is not currently contemplating any additional stock
split or stock dividend and there can be no assurance that any additional
stock split or stock dividend will happen at any particular time in the future
or at all, the additional authorized shares in Cirrus Logic Delaware will
effectively provide the Board with the same flexibility it had to split the
shares of Cirrus Logic California.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve this proposal. If this proposal is not approved by
the shareholders but the shareholders approve Proposal 5 ("Approval of
Reincorporation in Delaware and the Delaware Form of Indemnification
Agreement"), the Company will reset the authorized shares of Cirrus Logic
Delaware to 140 million shares of Common Stock and 5 million shares of
Preferred Stock, as currently authorized for Cirrus Logic California, and then
complete the Proposed Reincorporation. If Proposal 5 is not approved by the
shareholders but this proposal passes, the Articles of Incorporation for
Cirrus Logic California will be amended to increase the authorized Common
Stock to 240 million shares and the authorized Preferred Stock to 5 million
shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 6.
PROPOSAL 7
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the current fiscal year
ending March 27, 1999. Ernst & Young LLP has audited the Company's financial
statements annually since 1984. In the event that a majority of the Votes Cast
are against the ratification, the Board of Directors will reconsider its
selection.
A representative of Ernst & Young LLP will be present at the meeting to make
a statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF PROPOSAL 7.
30
ADDITIONAL INFORMATION
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of March
28, 1998 by (i) each shareholder known to the Company to be a beneficial owner
of more than 5% of the Company's Common Stock; (ii) each director; (iii) each
of the Named Executive Officers and (iv) all current executive officers and
directors of the Company as a group. Unless otherwise indicated in the
footnotes, the beneficial owner has sole voting and investment power with
respect to the securities beneficially owned, subject only to community
property laws, if applicable.
NUMBER OF
BENEFICIAL OWNER SHARES(1) PERCENT
---------------- --------- -------
Alfred S. Teo and Annie Teo(2)(3).......................... 6,384,700 9.37
PO Box 808
Lyndhurst, NJ 07071
Michael L. Hackworth(4).................................... 1,355,437 1.99
Suhas S. Patil(5).......................................... 1,353,580 1.99
George N. Alexy(6)......................................... 571,162 *
D. James Guzy(7)........................................... 187,782 *
Edward C. Ross(8).......................................... 177,703 *
Eric J. Swanson(9)......................................... 128,076 *
C. Gordon Bell(10)......................................... 55,000 *
Steven Dines(11)........................................... 51,309 *
Walden C. Rhines(12)....................................... 41,000 *
Robert H. Smith(13)........................................ 21,250 *
All current executive officers and directors
as a group (16 Persons)(14)............................... 4,196,466 6.16%
- --------
* Less than 1%
(1) All options granted under the Amended 1987 Stock Option Plan and the
Amended 1990 Directors' Stock Option Plan are immediately exercisable,
but shares issued upon exercise of unvested options are subject to
vesting restrictions. Accordingly, all outstanding options granted under
both Plans are exercisable within 60 days of March 28, 1998. See the
"Option Exercises in Last Fiscal Year and Fiscal Year End Option Values"
table for vested and unvested shares. Options granted under the 1996
Stock Plan are exercisable only when vested. Under the 1996 Stock Plan,
no shares are currently exercisable within 60 days of March 28, 1998.
(2) As reported in the Schedule 13D dated April 14, 1998 filed with the
Securities and Exchange Commission. Mr. Teo disclaims beneficial
ownership of 500,000 shares held by the M.A.A.A. Trust FBO Mark, Andrew,
Alan and Alfred Teo, Jr.
(3) Mr. and Mrs. Teo have agreed to vote their shares in favor of
recommendations by the Board of Directors of the Company.
(4) Includes 1,090,000 shares issuable upon exercise of options held by Mr.
Hackworth exercisable within 60 days of March 28, 1998.
(5) Includes (i) 530,000 shares issuable upon exercise of options held by Dr.
Patil exercisable within 60 days of March 28, 1998 and (ii) 73,400 shares
held by family members and trusts for the benefit of family members, with
respect to which Dr. Patil disclaims beneficial ownership.
(6) Includes 415,750 shares issuable upon exercise of options held by Mr.
Alexy exercisable within 60 days of March 28, 1998.
(7) Includes 25,000 shares issuable upon exercise of options held by Mr. Guzy
exercisable within 60 days of March 28, 1998. Also includes 132,782
shares held by Arbor Company, of which Mr. Guzy is President and may
therefore be deemed to be the beneficial owner.
31
(8) Includes 175,000 shares issuable upon exercise of options held by Mr.
Ross exercisable within 60 days of March 28, 1998.
(9) Includes 123,076 shares issuable upon exercise of options held by Mr.
Swanson exercisable within 60 days of March 28, 1998.
(10) Includes 25,000 shares issuable upon exercise of options held by Dr. Bell
exercisable within 60 days of March 28, 1998.
(11) Includes 49,726 shares issuable upon exercise of options held by Mr.
Dines exercisable within 60 days of March 28, 1998.
(12) Includes (i) 35,000 shares issuable upon exercise of options held by Mr.
Rhines exercisable within 60 days of March 28, 1998 and (ii) 6,000 shares
held by his wife.
(13) Includes 21,250 shares issuable upon exercise of options held by Mr.
Smith exercisable within 60 days of March 28, 1998.
(14) Includes 2,741,802 shares issuable upon exercise of options held by
executive officers and directors exercisable within 60 days of March 28,
1998.
32
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned during the fiscal
years ended March 28, 1998, March 29, 1997, and March 30, 1996 by the
Company's Chief Executive Officer and the other four highest-paid executive
officers.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS(2) (3)
- --------------------------- ---- --------- -------- ------------ ------------
Michael L. Hackworth..... 1998 $397,488 $680,672(4) 850,000 $ 1,000
President, Chief
Executive 1997 397,488 -- 150,000 1,000
Officer and Chairman 1996 397,488 -- -- 313,078
Edward C. Ross........... 1998 275,000 355,440 215,000 51,000(5)
President, Technology and 1997 251,924 -- 75,000 1,000
Manufacturing Group 1996 145,193 -- 100,000 1,000
George N. Alexy.......... 1998 289,406 246,752(4) 190,000 1,000
Senior Vice President, 1997 235,958 -- 50,000 1,000
Corporate Marketing 1996 231,504 -- 50,000 133,093
Eric J. Swanson.......... 1998 198,000 265,710 160,000 26,069(6)
Vice President and 1997 -- -- -- --
Chief Technical Officer 1996 -- -- -- --
Steven Dines............. 1998 195,680 266,524 137,126 1,000
Vice President and
General 1997 -- -- -- --
Manager, Mass Storage
Products Division 1996 -- -- -- --
- --------
(1) Amounts shown are before salary reductions resulting from employee
contributions to the Cirrus Logic, Inc. 401(k) Profit Sharing Plan.
(2) The Company's Board of Directors approved an option exchange program
effective April 30, 1997. Unless the employee elected not to participate
in the exchange, replacement options with an exercise price of $9.1875 per
share were granted to current employees who held options with exercise
prices above $9.1875. The old options were cancelled. All replacement
options were subject to a one-year blackout on exercise. Replacement
options are included in the options granted reported in the table above.
Excluding the replacement options, new options for 40,000 shares each were
granted to Messrs. Ross and Alexy; Mr. Swanson was granted new options to
purchase 100,000 shares and Mr. Dines was granted new options to purchase
87,400 shares.
(3) Included in the "All Other Compensation" column for the Last Fiscal Year
are matching contributions of $1,000 each paid by the Company under the
401(k) Plan to Messrs. Hackworth, Ross, Alexy, and Dines. No Named
Executive Officer received perquisites during fiscal 1998, 1997 or 1996
equal to or in excess of $50,000 or 10% of such Named Executive Officer's
salary plus bonus for such fiscal year.
(4) Bonus amounts reported for Messrs. Hackworth and Alexy are net of amounts
advanced to them in fiscal 1996 under the Senior Executive Variable
Compensation Plan ("SEVCP"). The advances were treated as loans repayable
from future variable compensation bonuses.
(5) Mr. Ross received a Special Performance Bonus of $50,000 in the Last
Fiscal Year.
(6) Mr. Swanson received bonuses related to patents and articles published in
trade publications in the Last Fiscal Year.
33
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to options granted in
the Last Fiscal Year to the Named Executive Officers.
INDIVIDUAL GRANTS
------------------------
POTENTIAL REALIZABLE VALUE
% OF TOTAL OF ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
GRANTED(1) YEAR(2) ($/SH) DATE 5%(3) 10%(3)
---------- ---------- -------- ---------- ------------ -------------
Michael L. Hackworth.... 850,000(4) 8.27% $9.1875 04/30/07 $ 4,911,274 $ 12,446,133
Edward C. Ross.......... 175,000(5) 1.70% 9.1875 04/30/07 1,011,144 2,562,439
40,000(6) 0.39% 12.1250 12/04/07 305,014 772,965
George N. Alexy......... 150,000(7) 1.46% 9.1875 04/30/07 866,695 2,196,376
40,000(8) 0.39% 12.1250 12/04/07 305,014 772,965
Eric J. Swanson......... 60,000(9) 0.11% 9.1875 04/30/07 336,678 878,551
60,000(10) 0.58% 15.4375 09/24/97 582,514 1,476,204
40,000(11) 0.39% 12.1250 12/04/97 305,014 772,965
Steven Dines............ 49,726(12) 0.48% 9.1875 04/30/07 287,315 728,114
20,400(13) 0.20% 15.4375 09/24/07 198,055 501,909
67,000(14) 0.65% 12.1250 12/04/07 510,898 1,294,716
- --------
(1) All options have exercise prices equal to the fair market value of the
Company's Common Stock on the date of grant. The Compensation Committee
has the discretion and authority to amend and reprice the outstanding
options. On April 30, 1997, the Compensation Committee approved an
Exchange Program whereby options were granted with an exercise price of
$9.1875 to current employees who elected to participate in the Exchange
Program and cancelled outstanding options with exercise prices above
$9.1875 per share. All replacement options were subject to a one-year
blackout on exercise.
(2) Based on 10,283,666 shares granted to all employees during the Last
Fiscal Year, which includes 7,092,233 shares granted as replacement
options under the repricing described in Footnote (1) above and 3,191,433
shares granted as new options.
(3) The 5% and 10% assumed compound rates of annual stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of future Common
Stock prices.
(4) As of March 28, 1998, 681,250 shares were vested but subject to a
blackout on exercise until April 30, 1998. 168,750 shares vest
periodically through September 25, 2000.
(5) As of March 28, 1998, 72,499 shares were vested but subject to a blackout
on exercise until April 30, 1998. 102,501 shares vest periodically
through September 25, 2000.
(6) 8,000 shares vest on December 4, 1999, and 32,000 shares vest on December
4, 2001.
(7) 50,000 shares vest on July 1, 1998, July 18, 1999, and September 25,
2000.
(8) 40,000 shares vest on December 4, 2001.
(9) 20,000 shares vest annually through September 25, 2000.
(10) 20,000 shares vest annually through September 24, 2000.
(11) 40,000 shares vest on December 4, 2001.
(12) As of March 28, 1998, 22,726 shares were vested but subject to a blackout
on exercise until April 30, 1998. 27,000 shares vest periodically through
September 25, 2000.
(13) 7,400 shares vest on September 24, 1998, 8,000 shares vest on September
24, 1999, and 5,000 shares vest on September 24, 2000.
(14) 5,000 shares vest on December 4, 1998, 12,000 shares vest on December 4,
1999, 15,000 shares vest on December 4, 2000, and 35,000 shares vest on
December 4, 2001.
34
TEN-YEAR OPTION REPRICING TABLE
On April 30, 1997, the Compensation Committee approved an Exchange Program
whereby options were granted with an exercise price of $9.1875 to current
employees who elected to participate in the Exchange Program and cancelled
outstanding options with exercise prices above $9.1875 per share. The
replacement options had the same vesting schedule as the cancelled options.
All replacement options were subject to a one-year blackout on exercise. The
option exchange was an acknowledgement of the importance of its key employees
to the Company. Stock options which are substantially above the current price
of the Company's stock do not provide retention value to employees who are
recruited by competitors. The Committee included officers in the exchange
because of the importance of their administrative and technical leadership to
the success of the Company.
NUMBER OF LENGTH OF
SECURITIES ORIGINAL
UNDERLYING MARKET PRICE OPTION
OPTIONS OF STOCK AT EXCHANGE NEW REMAINING
REPRICED OR TIME OF PRICE AT TIME EXERCISE AT DATE OF
NAME DATE AMENDED EXERCISE OF EXCHANGE PRICE EXCHANGE
---- -------- ----------- ------------ ------------- -------- ---------------
Michael L. Hackworth.... 07/27/93 400,000 $9.1875 $11.875 $9.1875 6 yrs., 2 mos.
President, Chief
Executive 03/20/95 300,000 9.1875 18.625 9.1875 7 yrs., 10 mos.
Officer and Chairman 09/25/96 150,000 9.1875 19.375 9.1875 9 yrs., 4 mos.
Edward C. Ross.......... 08/29/95 100,000 9.1875 54.625 9.1875 8 yrs., 4 mos.
President, Technology 09/25/96 75,000 9.1875 19.375 9.1875 9 yrs., 4 mos.
and Manufacturing Group
George N. Alexy......... 09/12/94 50,000 9.1875 15.000 9.1875 7 yrs., 4 mos.
Senior Vice President, 07/18/95 50,000 9.1875 35.125 9.1875 8 yrs., 2 mos.
Corporate Marketing 09/25/96 50,000 9.1875 19.375 9.1875 9 yrs., 4 mos.
Eric J. Swanson......... 09/12/94 20,000 9.1875 15.000 9.1875 7 yrs., 4 mos.
Vice President 07/18/95 20,000 9.1875 35.125 9.1875 8 yrs., 3 mos.
and Chief Technical
Officer 09/25/96 20,000 9.1875 19.375 9.1875 9 yrs., 5 mos.
Steven Dines............ 09/24/92 8,000 9.1875 14.500 9.1875 5 yrs., 4 mos.
Vice President and 01/10/95 2,880 9.1875 12.875 9.1875 7 yrs., 8 mos.
General Manager, 07/18/95 12,000 9.1875 35.125 9.1875 8 yrs., 2 mos.
Mass Storage Products 09/25/96 15,000 9.1875 19.375 9.1875 9 yrs., 4 mos.
Division
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information with respect to option exercises in
the Last Fiscal Year by the Named Executive Officers and the value of their
unexercised options at Fiscal Year End.
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS
AT FISCAL YEAR AT FISCAL YEAR
SHARES END END(2)
ACQUIRED ON VALUE ---------------------- -------------------
NAME EXERCISE REALIZED(1) VESTED UNVESTED VESTED UNVESTED
---- ----------- ----------- ---------- ----------- ---------- --------
Michael L. Hackworth.... -- -- 921,250 168,750 $1,163,750 $168,750
Edward C. Ross.......... -- -- 72,499 142,501 72,499 102,501
George N. Alexy......... 19,000 $218,500 265,750 190,000 736,222 150,000
Eric J. Swanson......... -- -- 63,076 60,000 101,825 60,000
Steven Dines............ 8,500 57,906 22,726 114,400 22,726 27,000
- --------
(1) Market value of the shares on date of exercise, less the exercise price.
(2) Value is based on fair market value of the Company's common stock of
$10.1875 per share on March 27, 1998 (the last trading day of the Last
Fiscal Year), less the exercise price.
35
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed only of non-employee directors. The Committee is responsible for
reviewing and recommending the Company's compensation practices, executive pay
levels, and variable compensation programs to the Board of Directors for
approval. The Committee also grants stock options within guidelines approved
by the Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is to pay for performance. As such,
the Committee believes that total cash compensation should vary with the
performance of the Company and long-term incentives should be used to ensure
the alignment of executive and shareholder interests. Consistent with this
philosophy, the Company provides significant annual incentive opportunities
and utilizes stock options as a long-term incentive vehicle.
Cash compensation for the executives in fiscal 1998 consisted of the
following components:
. Base salary
. Variable compensation based on achievement of Company operating income
and revenue targets and personal performance goals and objectives.
The Committee sets compensation levels for executives based on a review of
competitive information. Competitive compensation information is gathered from
published surveys of high technology company compensation levels (the "Survey
Group") and from proxy statements of particular companies that are considered
generally comparable to the Company (the "Proxy Group"). The Proxy Group
includes companies used in the peer performance graph as well as other
semiconductor or high technology companies that are high growth, profitable,
and similar in revenue size to the Company. Recommendations by Company
management are examined in light of this information, with the intention of
establishing and maintaining competitive total cash compensation levels. In
general, the Company has attempted to establish a strong relationship between
total cash compensation and Company and individual performance by maintaining
base salaries at approximately the 50th percentile of the Survey Group and
Proxy Group data, and providing additional incentive opportunity so that total
cash compensation (salary plus bonus) approaches 50th percentile levels when
the Company's performance is near the middle of the semiconductor companies in
the Proxy Group, and has the potential to pay at or near the top of the
semiconductor companies in the Proxy Group for commensurate levels of
performance. In March 1997, the executive officers received salary increases
for fiscal 1998.
Long-term incentives are provided through stock option grants to key
employees, including the Named Executive Officers. The number of shares
subject to each stock option grant is based on the employee's current and
anticipated future performance and ability to affect achievement of strategic
goals and objectives. The Company grants options in order to directly link a
significant portion of each executive's total compensation to the long-term
interests of shareholders and to encourage key employees to remain employed by
the Company during the term of the options.
The Company maintains a qualified employee stock purchase plan subject to
provisions of the Internal Revenue Code, which is generally available to all
employees, and pursuant to which employees can purchase Company stock through
payroll deductions of up to 10% of their base salaries. This plan allows
participants to buy Company common stock at a discount from the market price.
In response to the enactment of Section 162(m) of the Internal Revenue Code
and its related proposed regulations which limit deductibility by a
corporation of certain executive officer compensation in excess of $1 million
per Named Executive Officer per year, the Committee amended the Company's 1987
Stock Option Plan and designed the 1996 Stock Plan to qualify compensation
relating to options granted thereunder as "performance-based", which is not
subject to the $1 million limit. It is the Committee's objective that, so long
36
as it is consistent with it's overall business, compensation and retention
objectives, the Company will, to the extent reasonable, endeavor to keep
executive compensation deductible for federal income tax purposes.
BASE SALARY
In accordance with the Company's compensation philosophy, the base salary
rates of the executive officers are generally below the 50th percentile levels
of the Survey Group and Proxy Group.
INCENTIVE COMPENSATION
The Fiscal 1998 Variable Compensation Plan (the "VCP") was designed to
motivate and reward the executive officers by making a significant portion of
their cash compensation directly dependent upon achieving predetermined
corporate and/or business unit financial goals. The performance measures are
based on the Company's annual business plan, and are established for
quarterly, semi-annual or annual performance periods. In addition, an
executive's variable compensation award may be reduced or increased based on
achievement of key strategic goals and objectives previously agreed-upon for
each executive. Cash payments are made after the end of the annual performance
period for services rendered and performance levels achieved during the
performance period.
For fiscal 1998, the performance measures were based on annual revenue and
operating profit targets. For fiscal 1999, the Company has introduced a new
rolling three-year performance bonus plan.
STOCK OPTIONS
Stock options are granted to align the interests of key employees with those
of the shareholders. Stock options are granted at a price equal to the fair
market value of the Company's Common Stock on the date of grant. Eligible
employees are granted stock options on their date of hire which generally vest
over a four-year period from the date of grant. Certain key employees are
granted stock options on an annual basis that vest four years from the date of
grant. They are granted to key employees, including the Named Executive
Officers, based on current performance, anticipated future contribution based
on that performance, and ability to affect corporate and/or business unit
results. In fiscal 1998, stock options for the executive officers were granted
upon recommendation of management and approval of the Committee within
guidelines approved by the Board of Directors, and were granted at an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant.
CEO COMPENSATION
As described above, the Company's executive pay program is highly leveraged
toward variable compensation plans that reward achievement of pre-determined
corporate goals and objectives.
The Committee reviews Mr. Hackworth's base salary annually, considering
Company performance, individual performance, and external pay practices. For
fiscal year 1996, Mr. Hackworth's base salary was set at $397,488. For Fiscal
Years 1997 and 1998, he did not receive a salary increase. The bonus component
of the program for fiscal 1998 was based on operating profit and revenue
targets. In fiscal 1998, he received a payment of $680,672 under the VCP. The
amount paid for fiscal 1998 reflects the reductions resulting from a bonus
advance paid for fiscal 1996.
During fiscal year 1997, a stock option for 150,000 shares was granted to
Mr. Hackworth. He did not receive any new options during fiscal 1998.
Compensation Committee
Walden C. Rhines, Chairman
D. James Guzy
Robert H. Smith
37
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of directors
Rhines, Guzy and Smith. No executive officer of the Company served on the
compensation committee of another entity or on any other committee of the
board of directors of another entity performing similar functions during the
Last Fiscal Year.
PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative total
shareholder return, calculated on a dividend reinvestment basis, from March
31, 1993 through March 31, 1998 for Cirrus Logic, Inc., the S&P 500 Composite
Index (the "S&P 500") and the Semiconductor Subgroup of the S&P Electronics
Index (the "Semiconductors Index"). The graph assumes that $100 was invested
in each of these three on March 31, 1993. Note that historic stock price
performance is not necessarily indicative of future stock price performance.
LOGO
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CIRRUS LOGIC, INC., THE S&P 500 INDEX
AND THE S&P ELECTRONICS (SEMICONDUCTORS) INDEX
PERFORMANCE GRAPH APPEARS HERE
S&P
Measurement Period CIRRUS S&P ELECTRONICS
(Fiscal Year Covered) LOGIC, INC. 500 INDEX (SEMICONDUCTORS)
- ------------------- ----------- --------- ----------------
CRUS I500 IELS
Measurement Pt-03/93 $100.00 $100.00 $100.00
FYE 03/94 $129.41 $101.47 $134.07
FYE 03/95 $133.33 $117.27 $160.99
FYE 03/96 $141.67 $154.92 $177.44
FYE 03/97 $ 95.10 $185.64 $376.57
FYE 03/98 $ 79.41 $274.74 $411.22
38
SECTION 16(A) BENEFICAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than ten percent of
a registered class of the Company's equity securities to file an initial
report of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Executive officers, directors
and greater than ten percent shareholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that
during the Last Fiscal Year, all filing requirements applicable to its
officers, directors and ten percent shareholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Robert F. Donohue, Secretary
Fremont, California
June 12, 1998
EXHIBIT A MERGER AGREEMENT
EXHIBIT B CERTIFICATE OF INCORPORATION
EXHIBIT C BYLAWS
EXHIBIT D INDEMNIFICATION AGREEMENT
39
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
OF CIRRUS LOGIC, INC.
A DELAWARE CORPORATION
AND
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of , 1998, (the
"Agreement") is between Cirrus Logic, Inc., a Delaware corporation ("Cirrus-
Delaware") and Cirrus Logic, Inc., a California corporation ("Cirrus-
California"). Cirrus-Delaware and Cirrus-California are sometimes referred to
herein as the "Constituent Corporations."
R E C I T A L S
A. Cirrus-Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 285,000,000
shares, 280,000,000 of which are designated "Common Stock," $.001 par value
and 5,000,000 of which are designated "Preferred Stock", $.001 par value. As
of the date of this Agreement of Merger, 1,000 shares of Common Stock were
issued and outstanding, all of which were held by Cirrus-California. No shares
of Preferred were outstanding.
B. Cirrus-California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of 145,000,000
shares, 140,000,000 of which are designated "Common Stock", no par value and
5,000,000 of which are designated "Preferred Stock", no par value. As of the
date of this Agreement of Merger shares of Common Stock were issued and
outstanding. No shares of Preferred Stock were issued and outstanding.
C. The Board of Directors of Cirrus-California has determined that, for the
purpose of effecting the reincorporation of Cirrus-California in the State of
Delaware, it is advisable and in the best interests of Cirrus-California that
Cirrus-California merge with and into Cirrus-Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Cirrus-Delaware and Cirrus-
California have approved this Agreement and have directed that this Agreement
be submitted to a vote of their respective stockholders and executed by the
undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Cirrus-Delaware and Cirrus-California hereby agree, subject to
the terms and conditions hereinafter set forth, as follows:
I. MERGER
I.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Cirrus-California shall be merged with and into Cirrus-Delaware (the
"Merger"), the separate existence of Cirrus-California shall cease and Cirrus-
Delaware shall be, and is herein sometimes referred as, the "Surviving
Corporation", and the name of the Surviving Corporation shall be Cirrus Logic,
Inc.
I.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and Merger shall have been adopted and approved by the
stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
General Corporation Law;
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(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Agreement and Plan of Merger meeting the requirements of
the Delaware General Corporation Law shall have been filed with the
Secretary of State of the State of Delaware; and
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
I.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Cirrus-California shall cease and Cirrus-Delaware, as
the Surviving Corporation, (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior the Effective
Date of the Merger, (ii) shall be subject to all actions previously taken by
its and Cirrus-California's Board of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of Cirrus-
California in the manner more fully set forth in Section 259 of the Delaware
General Corporation Law, (iv) shall continue to be subject to all of the
debts, liabilities and obligations of Cirrus-Delaware as constituted
immediately prior to the Effective Date of the Merger, and (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
Cirrus-California in the same manner as if Cirrus-Delaware had itself incurred
them, all as more fully provided under the applicable provisions of the
Delaware General Corporation Law and the California Corporations Code.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
II.1 Certificate of Incorporation. The Certificate of Incorporation of
Cirrus-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance
with the provisions thereof and applicable law.
II.2 Bylaws. The Bylaws of Cirrus-Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
II.3 Directors and Officers. The directors and officers of Cirrus-California
immediately prior to the Effective Date of the Merger shall be the directors
and officers of the Surviving Corporation until their successors shall have
been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
III.1 Cirrus-California Common Shares. Upon the Effective Date of the
Merger, each share of Cirrus-California Common Stock, no par value, issued and
outstanding immediately prior thereto shall by virtue of the Merger and
without any action by the Constituent Corporations, the holder of such shares
or any other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving
Corporation. No fractional share interests of Surviving Corporation Common
Stock shall be issued. In lieu thereof, any fractional share interests to
which a holder would otherwise be entitled shall be aggregated.
III.2 Cirrus-California Options, Stock Purchase Rights and Convertible
Securities.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume the obligations of Cirrus-California under, and continue, the
option plans (including without limitation the Amended 1987 Stock Option
Plan, the Amended 1989 Employee Stock Purchase Plan, and the Amended 1990
Directors' Stock Option Plan, the Amended 1996 Stock Plan, all other
employee benefit plans, and the 6% Convertible Subordinated Notes due
December 15, 2003. Each outstanding and unexercised option, other right to
purchase, or security convertible into Cirrus-California Common Stock (a
"Right") shall become, subject to the provisions in paragraph (c) hereof,
an option, right to purchase or a security convertible into the
A-2
Surviving Corporation's Common Stock on the basis of one share of the
Surviving Corporation's Common Stock for each one share of Cirrus-
California Common Stock issuable pursuant to any such Right, on the same
terms and conditions and at an exercise price equal to the exercise price
applicable to any such Cirrus-California Right at the Effective Date of the
Merger. This paragraph 3.2(a) shall not apply to Cirrus-California Common
Stock which is subject to paragraph 3.1.
(b) A number of shares of the Surviving Corporation's Common Stock shall
be reserved for issuance upon the exercise of options, stock purchase
rights and convertible securities, including the 6% Convertible
Subordinated Notes due December 15, 2003, equal to the number of shares of
Cirrus-California Common Stock so reserved immediately prior to the
Effective Date of the Merger.
(c) The assumed Rights shall not entitle any holder thereof to a
fractional share upon exercise or conversion. In addition, no "additional
benefits" (within the meaning of Section 424(a)(2) of the Internal Revenue
Code of 1986, as amended) shall be accorded to the optionees pursuant to
the assumption of their options.
III.3 Cirrus-Delaware Common Stock. Upon the Effective Date of the Merger,
each share of Common Stock, $.001 par value, of Cirrus-Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and
without any action by Cirrus-Delaware, the holder of such shares or any other
person, be cancelled and returned to the status of authorized but unissued
shares.
III.4 Exchange of Certificates. After the Effective Date of the merger, each
holder of an outstanding certificate representing shares of Cirrus-California
Common Stock may be asked to surrender the same for cancellation to BankBoston
N.A. (the "Exchange Agent"), and each such holder shall be entitled to receive
in exchange therefor a certificate or certificates representing the number of
shares of the Surviving Corporation's Common Stock, as the case may be, into
which the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
Cirrus-California Common Stock shall be deemed for all purposes to represent
the number of shares of the Surviving Corporation's Common Stock,
respectively, into which such shares of Cirrus-California Common Stock, as the
case may be, were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent,
have and be entitled to exercise any voting and other rights with respect to
and to receive dividends and other distributions upon the shares of Common
Stock of the Surviving Corporation represented by such outstanding certificate
as provided above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Cirrus-California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of the Surviving Corporation's stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer, that such transfer otherwise be proper and comply
with applicable securities laws and that the person requesting such transfer
pay to the Exchange Agent any transfer or other taxes payable by reason of
issuance of such new certificate in a name other than that of the registered
holder of the certificate surrendered or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not payable.
IV. GENERAL
IV.1 Covenants of Cirrus-Delaware. Cirrus-Delaware covenants and agrees that
it will, on or before the Effective Date of the Merger.
A-3
(a) Qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law.
(b) File any and all documents with the California Franchise Tax Board
necessary for the assumption by Cirrus-Delaware of all of the franchise tax
liabilities of Cirrus-California.
(c) Take such other actions as may be required by the California General
Corporation Law.
IV.2 Further Assurances. From time to time, as and when required by Cirrus-
Delaware or by its successors or assigns, there shall be executed an delivered
on behalf of Cirrus-California such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other actions as
shall be appropriate or necessary in order to vest or perfect in or conform of
record or otherwise by Cirrus-Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Cirrus-California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of Cirrus-Delaware
are fully authorized in the name and on behalf of Cirrus-California or
otherwise to take any and all such action and to execute and deliver any and
all such deeds and other instruments.
IV.3 Abandonment. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Cirrus-California or Cirrus-
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of Cirrus-California or by the sole stockholder of Cirrus-
Delaware, or by both.
IV.4 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the States of
California and Delaware, provided that an amendment made subsequent to the
adoption of this Agreement by the stockholders of either Constituent
Corporation shall not: (1) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (2) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or
(3) alter or change any of the terms and conditions of this Agreement if such
alternation or change would adversely affect the holders of any class or
series of capital stock of any Constituent Corporation.
IV.5 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is 1209 Orange Street, Wilmington, County of New
Castle, DE 19801 and The Corporation Trust Company is the registered agent of
the Surviving Corporation at such address.
IV.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 3100 West Warren
Avenue, Fremont, California 94538 and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
IV.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with the governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
IV.8 FIRPTA Notification.
(a) On the Effective Date of the Merger, Cirrus-California Shall Deliver
to Cirrus-Delaware, as agent for the shareholders of Cirrus-California, a
properly executed statement (the "Statement") substantially in the form
attached hereto as Exhibit A. Cirrus-Delaware shall retain the Statement
for a period of not less than seven years and shall, upon request, provide
a copy thereof to any person that was a shareholder of Cirrus-California
immediately prior to the Merger. In consequence of the approval of the
Merger by the shareholders of Cirrus-California, (i) such shareholders
shall be considered to have requested that the
A-4
Statement be delivered to Cirrus-Delaware as their agent and (ii) Cirrus-
Delaware shall be considered to have received a copy of the Statement at
the request of the Cirrus-California shareholders for purposes of
satisfying Cirrus-Delaware's obligations under Treasury Regulation Section
1.1445-2(c)(3).
(b) Cirrus-California shall deliver to the Internal Revenue Service a
notice regarding the Statement in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
IV.9 Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Cirrus-Delaware and Cirrus-California
is hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
Cirrus Logic, Inc.
a Delaware corporation
By:
___________________________________
Michael L. Hackworth
President, Chief Executive
Officer and
Chairman
ATTEST:
_______________________________
Robert F. Donohue, Secretary
Cirrus Logic, Inc.
a California corporation
By:
___________________________________
Michael L. Hackworth
President, Chief Executive
Officer and
Chairman
ATTEST:
_______________________________
Robert F. Donohue, Secretary
A-6
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
CIRRUS LOGIC, INC.
ARTICLE I
The name of the corporation is Cirrus Logic, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred Stock,
$0.001 par value. The total number of shares that the Corporation is
authorized to issue is 285,000,000 shares. The number of shares of Common
Stock authorized is 280,000,000. The number of shares of Preferred authorized
is 5,000,000.
The Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted
by the board of directors (authority to do so being hereby expressly vested in
the board). The board of directors is further authorized to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock and to fix the number of
shares of any series of Preferred Stock and the designation of any such series
of Preferred Stock. The board of directors, within the limits and restrictions
stated in any resolution or resolutions of the board of directors originally
fixing the number of shares constituting any series, may increase or decrease
(but not below the number of shares in any such series then outstanding) the
number of shares of any series subsequent to the issuance of shares of that
series.
The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the number of
shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at
the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or
other dividends in addition to dividends at the rate so determined, and if
so, on what terms;
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(c) the right or obligation, if any, of the corporation to redeem shares
of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(e) the terms and conditions, if any, upon which shares of such class or
series shall be convertible into, or exchangeable for, shares of capital
stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if
any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund
of a similar nature or otherwise, and the terms and conditions of such
obligation;
(g) voting rights, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred
Stock; and
(i) such other restrictions, preferences, powers, qualifications, special
or relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Certificate of Incorporation,
may deem advisable and are not inconsistent with law and the provisions of
this Certificate of Incorporation.
ARTICLE V
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.
2. Indemnification. The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to
the Corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of
this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
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ARTICLE VIII
Holders of stock of any class or series of this corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders.
ARTICLE IX
1. Number of Directors. The number of directors which constitutes the whole
Board of Directors of the corporation shall be designated in the Bylaws of the
corporation.
2. Election of Directors. Elections of directors shall not be by written
ballot unless the Bylaws of the corporation shall so provide.
ARTICLE X
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal the
Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at an
annual or special meeting of the stockholders called in accordance with the
Bylaws of the corporation, and no action shall be taken by the stockholders by
written consent.
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XIII
The name and mailing address of the incorporator are as follows:
Robert F. Donohue
Cirrus Logic, Inc.
Legal Department MS 528
3100 West Warren Avenue
Fremont, CA 94538
The undersigned incorporator hereby acknowledges that the above Certificate of
Incorporation of Cirrus Logic, Inc. is his act and deed and that the facts
stated therein are true.
Dated: , 1998 Robert F. Donohue
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EXHIBIT C
BYLAWS
OF
CIRRUS LOGIC, INC.
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the certificate
of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the 30th of
July in each year at 3:00 p.m. However, if such day falls on a legal holiday,
then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted. The annual meeting of
stockholders shall be held each year on a date and at a time designated
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the board
of directors, or by the chairman of the board, or by the president. No other
person or persons are permitted to call a special meeting.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.6 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but
any proper matter may be presented at the meeting for such action). The notice
of any meeting at which directors are to be elected shall include the name of
any nominee or nominees who, at the time of the notice, the board intends to
present for election.
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2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
(a) nominations for the election of directors, and
(b) business proposed to be brought before any stockholder meeting
may be made by the board of directors or proxy committee appointed by the
board of directors or by any stockholder entitled to vote in the election of
directors generally if such nomination or business proposed is otherwise
proper business before such meeting. However, any such stockholder may
nominate one or more persons for election as directors at a meeting or propose
business to be brought before a meeting, or both, only if such stockholder has
given timely notice to the secretary of the corporation in proper written form
of their intent to make such nomination or nominations or to propose such
business. To be timely, such stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than one hundred twenty (120) calendar days in advance of the date of the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, of the person
or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of record of stock
of the corporation entitled to vote at such meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice;
(iii) if applicable, a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent
by telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman
of the meeting or (ii) the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting in
accordance with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the laws of the State of
Delaware or of the certificate of incorporation or these bylaws, a different
vote is required, in which case such express provision shall govern and
control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation
Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder and stockholders shall not be entitled
to cumulate their votes in the election of directors of with respect to any
matter submitted to a vote of the stockholders.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the board of directors and which shall not be
more than sixty (60) days nor less than ten (10) days before the date of any
such meeting, and in such event only stockholders of record on the date so
fixed are entitled to notice and to vote, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned
meeting, but the board of directors shall fix a new record date if the meeting
is adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1 of
these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized
by a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission,
telefacsimile or otherwise) by the stockholder or the stockholder's attorney-
in-fact. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(e) of the
General Corporation Law of Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, or, in the absence of the president and the chairman of the board, one
of the corporation's vice presidents, shall call the meeting of the
stockholders to order, and shall act as chairman of the meeting. In the
absence of the president, the chairman of the board, and all of the vice
presidents, the stockholders shall appoint a chairman for such meeting. The
chairman of any meeting of stockholders shall determine the order of business
and the procedures at the meeting, including such matters as the regulation of
the manner of voting and the conduct of business. The secretary of the
corporation shall act as secretary of all meetings of the stockholders, but in
the absence of the secretary at any meeting of the stockholders, the chairman
of the meeting may appoint any person to act as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting,
or, if not so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and any
limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of seven members. The board of
directors may increase or decrease the number of directors constituting the
board of directors upon the approval of a majority of the directors then in
office. The number of directors so determined shall be the authorized number
of directors of the corporation. No reduction of the authorized number of
directors shall have the effect of removing any director before that
director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to
fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless
the notice specifies a later time for that resignation to become effective. If
the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective.
All vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; provided, that whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority
of the directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
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3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if the
times of such meetings are fixed by the board of directors. If any regular
meeting day shall fall on a legal holiday, then the meeting shall be held next
succeeding full business day.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
the certificate of incorporation and other applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or (ii) who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice
to such directors. All such waivers, consents, and approvals shall be filed
with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special
meeting of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.7 of these
bylaws, to the directors who were not present at the time of the adjournment.
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3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of
the board of directors. Such written consent and any counterparts thereof
shall be filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of
its subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares
of stock of the corporation. Nothing contained in this section shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the
vote of a majority of the authorized number of directors. Any committee, to
the extent provided in the resolution of the board, shall have and may
exercise all the powers and authority of the board, but no such committee
shall have the power of authority to:
(a) amend the certificate of incorporation (except that a committee may,
to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided
in Section 151(a) of the General Corporation Law of Delaware, fix the
designations and any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation);
(b) adopt an agreement of merger or consolidation under Sections 251 or
252 of the General Corporation Law of Delaware;
(c) recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets;
(d) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution; or
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(e) amend the bylaws of the corporation; and, unless the board resolution
establishing the committee, the bylaws or the certificate of incorporation
expressly so provide, no such committee shall have the power or authority
to declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and
that notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed in
accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer
under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to appoint,
such other officers as the business of the corporation may require, each of
whom shall hold office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the board of directors may from
time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except
in case of an officer chosen by the board of directors, by any officer upon
whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice to
the rights, if any, of the corporation under any contract to which the officer
is a party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed
in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if present,
preside at meetings of the board of directors and exercise and perform such
other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the board of directors, these
bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
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The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually
and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding in which such person was or is a party
or is threatened to be made a party by reason of the fact that such person is
or was a director or officer of the corporation. For purposes of this Section
6.1, a "director" or "officer" of the corporation shall mean any person (i)
who is or was a director or officer of the corporation, (ii) who is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii)
who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an Board of Directors of the corporation. action, suit, or
proceeding (or part thereof) initiated by such director or officer only if the
initiation of such action, suit, or proceeding (or part thereof) by the
director or officer was authorized by the Board of Directors of the
corporation.
The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that
payment of expenses incurred by a director or officer of the corporation in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should ultimately be determined that the director
of officer is not entitled to be indemnified under this Section 6.1 or
otherwise.
The rights conferred on any person by this Article shall not be exclusive of
any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's directors or otherwise. Certificate of
Incorporation, these bylaws, agreement, vote of the stockholders or
disinterested directors or
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otherwise. Any repeal or modification of the foregoing provisions of this
Article shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding, in which such person was or is a party or is threatened to be
made a party by reason of the fact that such person is or was an employee or
agent of the corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the corporation (other than a director or officer) shall mean any
person (i) who is or was an employee or agent of the corporation, (ii) who is
or was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the
General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine (and to make copies of) the
corporation's stock Any director shall have the right to examine (and to make
copies of) the corporation's stock ledger, a list of its stockholders and its
other books and records for a purpose reasonably related to his or her
position as a director.
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7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president, the
chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise
on behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power
of attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except
as otherwise provided in the General Corporation Law of Delaware.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close
of business on the day on which the board adopts the applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
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8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock
shall be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon
request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the name of the corporation by, the chairman or
vice-chairman of the board of directors, or the president or vice-president,
and by the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate has ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such
facts.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly paid
and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation
in the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation
shall declare a dividend upon partly paid shares of the same class, but only
upon the basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations
or restrictions of such preferences and/or rights shall be set forth in full
or summarized on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock; provided, however,
that, except as otherwise provided in Section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements there may be set forth
on the face or back of the certificate that the corporation shall issue to
represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests the powers, the
designations, the preferences and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
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8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares shall
be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated
bank or trust company -- either domestic or foreign, who shall be appointed at
such times and places as the requirements of the corporation may necessitate
and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote or by the board of directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which
the repeal was enacted or the filing of the operative written consent(s) shall
be stated in said book.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
CIRRUS LOGIC, INC.
Adoption by Incorporator
The undersigned person appointed in the Articles of Incorporation to act as
the Incorporator of Cirrus Logic, Inc. hereby adopts the foregoing bylaws,
comprising twenty (20) pages, as the Bylaws of the corporation.
Executed this th day of , 1996.
_______________________________
Robert F. Donohue, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified, and
acting Secretary of Cirrus Logic, Inc. and that the foregoing Bylaws,
comprising twenty (20) pages, were adopted as the Bylaws of the corporation on
, 1998 by the person appointed in the Articles of Incorporation to act as the
Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this th day of , 1998.
_______________________________
Robert F. Donohue, Secretary
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EXHIBIT D
CIRRUS LOGIC, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is effective as of ,
1996 by and between Cirrus Logic, Inc., a Delaware corporation (the
"Company"), and Indemnitee ("Indemnitee").
WHEREAS, effective as of the date hereof, Cirrus Logic, Inc., a California
corporation, is reincorporating into Delaware;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of
such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company and
Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement to provide indemnification and
advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as
set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. CERTAIN DEFINITIONS.
(a) "Change in Control" shall mean, and shall be deemed to have occurred
if, on or after the date of this Agreement, (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) or group acting in concert, other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
acting in such capacity or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing more than 50% of the total voting
power represented by the Company's then outstanding Voting Securities, (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of at
least two thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation
other than a merger or consolidation which would result in the Voting
Securities of the Company outstanding
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immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (iv) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of (in one transaction or a series
of related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any threatened,
pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism,
whether civil, criminal, administrative, investigative or other.
(c) References to the "Company" shall include, in addition to Cirrus
Logic, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which Cirrus Logic,
Inc. (or any of its wholly owned subsidiaries) is a party which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so
that if Indemnitee is or was a director, officer, employee, agent or
fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to
the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had
continued.
(d) "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action or inaction on the
part of Indemnitee while serving in such capacity.
(e) "Expenses" shall mean any and all expenses (including attorneys' fees
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, to be a witness in or to participate
in, any action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and amounts
paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of any Claim
and any federal, state, local or foreign taxes imposed on the Indemnitee as
a result of the actual or deemed receipt of any payments under this
Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in
any action, suit, proceeding or alternative dispute resolution mechanism,
hearing, inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d)
hereof, who shall not have otherwise performed services for the Company or
Indemnitee within the last three years (other than with respect to matters
concerning the rights of Indemnitee under this Agreement, or of other
Indemnitees under similar indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to
"serving at the request of the Company" shall include any service as a
director, officer, employee, agent or fiduciary of the Company which
imposes duties on, or involves services by, such director, officer,
employee, agent or fiduciary with respect to an employee benefit plan, its
participants or its beneficiaries; and if
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Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner
"not opposed to the best interests of the Company" as referred to in this
Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance
with applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body
not a party to the particular Claim for which Indemnitee is seeking
indemnification.
(j) "Section" refers to a section of this Agreement unless otherwise
indicated.
(k) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. INDEMNIFICATION.
(a) Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party
to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, any Claim (whether by reason of or
arising in part out of a Covered Event), including all interest,
assessments and other charges paid or payable in connection with or in
respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the foregoing,
in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing
Party) that Indemnitee is not entitled to be indemnified hereunder under
applicable law, (i) the Company shall have no further obligation under
Section 2(a) to make any payments to Indemnitee not made prior to such
determination by such Reviewing Party, and (ii) the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all Expenses theretofore paid to Indemnitee to which
Indemnitee is not entitled hereunder under applicable law; provided,
however, that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee is entitled to be indemnified hereunder under applicable
law, any determination made by any Reviewing Party that Indemnitee is not
entitled to be indemnified hereunder under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for
any Expenses theretofore paid in indemnifying Indemnitee until a final
judicial determination is made with respect thereto (as to which all rights
of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation
to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect. If
any Reviewing Party determines that Indemnitee substantively is not
entitled to be indemnified hereunder in whole or in part under applicable
law, Indemnitee shall have the right to commence litigation seeking an
initial determination by the court or challenging any such determination by
such Reviewing Party or any aspect thereof, including the legal or factual
bases therefor, and, subject to the provisions of Section 15, the Company
hereby consents to service of process and to appear in any such proceeding.
Absent such litigation, any determination by any Reviewing Party shall be
conclusive and binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not
been a Change in Control, any Reviewing Party shall be selected by the
Board of Directors, and if there has been such a Change in Control (other
than a Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately prior to such
Change in Control), any Reviewing Party with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnification
of Expenses under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or
D-3
Bylaws as now or hereafter in effect, or under any other applicable law, if
desired by Indemnitee, shall be Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what
extent Indemnitee would be entitled to be indemnified hereunder under
applicable law and the Company agrees to abide by such opinion. The Company
agrees to pay the reasonable fees of the Independent Legal Counsel referred
to above and to indemnify fully such counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of
or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding any other provision of this Agreement, the Company shall
not be required to pay Expenses of more than one Independent Legal Counsel
in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or
all other Indemnitees unless (i) the employment of separate counsel by one
or more Indemnitees has been previously authorized by the Company in
writing, or (ii) an Indemnitee shall have provided to the Company a written
statement that such Indemnitee has reasonably concluded that there may be a
conflict of interest between such Indemnitee and the other Indemnitees with
respect to the matters arising under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any other provision of
this Agreement other than Section 10 hereof, to the extent that Indemnitee
has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. EXPENSE ADVANCES.
(a) Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified therefore by the Company hereunder under applicable law, the
Company shall make Expense Advances to Indemnitee.
(b) Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree that
for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all
Expenses included in such Expense Advance that are certified by affidavit
of Indemnitee's counsel as being reasonable shall be presumed conclusively
to be reasonable.
4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.
(a) Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to
this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to
the Company, but in no event later than thirty (30) business days after
such written demand by Indemnitee is presented to the Company, except in
the case of Expense Advances, which shall be made no later than ten (10)
business days after such written demand by Indemnitee is presented to the
Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for
which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the
Company at the address shown on the signature page of this Agreement (or
such other address as the Company shall designate in writing to
Indemnitee). In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be
within Indemnitee's power.
D-4
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere,
or its equivalent, shall not create a presumption that Indemnitee did not
meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any
Reviewing Party to have made a determination as to whether Indemnitee has
met any particular standard of conduct or had any particular belief, nor an
actual determination by any Reviewing Party that Indemnitee has not met
such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under this Agreement
under applicable law, shall be a defense to Indemnitee's claim or create a
presumption that Indemnitee has not met any particular standard of conduct
or did not have any particular belief. In connection with any determination
by any Reviewing Party or otherwise as to whether the Indemnitee is
entitled to be indemnified hereunder under applicable law, the burden of
proof shall be on the Company to establish that Indemnitee is not so
entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company of
a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee (which approval shall not be unreasonably withheld) upon the
delivery to Indemnitee of written notice of the Company's election to do
so. After delivery of such notice, approval of such counsel by Indemnitee
and the retention of such counsel by the Company, the Company will not be
liable to Indemnitee under this Agreement for any fees or expenses of
separate counsel subsequently retained by or on behalf of Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the
right to employ Indemnitee's separate counsel in any such Claim at
Indemnitee's expense and (ii) if (A) the employment of separate counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee
shall have reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of any such defense, or
(C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense
Advances hereunder.
5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement,
the Company's Certificate of Incorporation, the Company's Bylaws or by
statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on
this Agreement or the parties' rights and obligations hereunder except as
set forth in Section 10(a) hereof.
D-5
(b) Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to
which Indemnitee may be entitled under the Company's Certificate of
Incorporation, its Bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of
Delaware, or otherwise. The indemnification and the payment of Expense
Advances provided under this Agreement shall continue as to Indemnitee for
any action taken or not taken while serving in an indemnified capacity even
though subsequent thereto Indemnitee may have ceased to serve in such
capacity.
6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable
hereunder.
7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Expenses to which Indemnitee is entitled.
8. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that
in certain instances, federal law or applicable public policy may prohibit the
Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future
to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if
Indemnitee is not an officer or director but is a key employee, agent or
fiduciary.
10. EXCEPTIONS. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify or make Expense Advances
to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving
indemnification under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, counterclaim or crossclaim, except
(i) with respect to actions or proceedings brought to establish or enforce
a right to indemnification under this Agreement or any other agreement or
insurance policy or under the Company's Certificate of Incorporation or
Bylaws now or hereafter in effect relating to Claims for Covered Events,
(ii) in specific cases if the Board of Directors has approved the
initiation or bringing of such Claim, or (iii) as otherwise required under
Section 145 of the Delaware General Corporation Law, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
Expense Advances, or insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
by the Indemnitee with respect to any action instituted (i) by Indemnitee
to enforce or interpret this Agreement, if a court having jurisdiction over
such action determines as provided in Section 13 that each of the material
assertions made
D-6
by the Indemnitee as a basis for such action was not made in good faith or
was frivolous, or (ii) by or in the name of the Company to enforce or
interpret this Agreement, if a court having jurisdiction over such action
determines as provided in Section 13 that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors, assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs
and personal and legal representatives. The Company shall require and cause
any successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee continues
to serve as a director, officer, employee, agent or fiduciary (as applicable)
of the Company or of any other enterprise at the Company's request.
13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR
INTERPRETATION. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee
with respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action,
unless as a part of such action a court having jurisdiction over such action
makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material assertions
made by Indemnitee as a basis for such action was not made in good faith or
was frivolous; provided, however, that until such final judicial determination
is made, Indemnitee shall be entitled under Section 3 to receive payment of
Expense Advances hereunder with respect to such action. In the event of an
action instituted by or in the name of the Company under this Agreement to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be indemnified for all Expenses incurred by Indemnitee in defense
of such action (including without limitation costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action),
unless as a part of such action a court having jurisdiction over such action
makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against Indemnitee,
Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
D-7
15. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
16. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under
this Agreement shall be commenced, prosecuted and continued only in the Court
of Chancery of the State of Delaware in and for New Castle County, which shall
be the exclusive and only proper forum for adjudicating such a claim.
17. SEVERABILITY. The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. CHOICE OF LAW. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
19. SUBROGATION. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
21. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
22. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
CIRRUS LOGIC, INC.
_______________________________
By: Michael L. Hackworth
Chairman and CEO
AGREED TO AND ACCEPTED
INDEMNITEE:
D-8
1008-PS-98
150008-001
Attachment A
------------
CIRRUS LOGIC, INC.
1990 DIRECTORS' STOCK OPTION PLAN
(as adopted by the Board of Directors on January 16, 1990)
(As amended May 25, 1993, April 17, 1995 and April 1, 1998)
1. Purposes of the Plan. The purposes of this Directors' Stock Option Plan
--------------------
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.
All options granted hereunder shall be "nonstatutory stock options."
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Cirrus Logic, Inc., a California corporation.
-------
(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
--------
(g) "Employee" shall mean any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
------
(j) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(k) "Optionee" shall mean an Outside Director who receives an Option.
--------
(l) "Outside Director" shall mean a Director who is not an Employee.
----------------
(m) "Plan" shall mean this 1990 Directors' Stock Option Plan.
----
(n) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
For purposes of the Plan, the masculine pronoun wherever used shall be read to
include the feminine pronoun.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 470,000 Shares (the "Pool") of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
either Special Option Grants or Automatic Option Grants. Special Option Grants
shall be made a the recommendation of the Board of Directors (exclusive of the
Optionee), in accordance with subsection (d), hereof. Automatic Option Grants
shall be made in accordance with subsection (c), hereof.
(c) Automatic Option Grants. All grants of Options under this
subsection shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 25,000 shares upon the date (on or after the effective date
of this Plan) on which such person first becomes a Director, whether through
election by the shareholders of the Company or appointment by the Board of
Directors to fill a vacancy.
(iii) Each Outside Director shall automatically receive, upon his
annual reelection to the Board, an Option to purchase 5.000 Shares of the
Company's Common Stock.
(iv) The terms of an Option granted hereunder shall be as
follows:
(A) the term of the Option shall be 10 years;
(B) the Option shall be exercisable only while the Outside
Director remains an Outside Director of the Company or within seven months of
the date the Outside Director ceases to serve as a Director, except as set forth
in Section 9;
(C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Option;
(D) any Option granted pursuant to subsections 4 (c) (ii)
or (iii) above shall become immediately exercisable; and
(E) stock subject to any Option granted pursuant to
subsections 4 (c) (ii) above shall vest cumulatively as to 25% of the aggregate
number of Shares subject to the Option on the first annual anniversary of the
date of grant of such Option and as to 1/48 of the total Shares each month
thereafter; provided, however, that if the Optionee ceases to serve as an
Outside Director of the Company for any reason other than death, vesting shall
cease as of date of such termination. In the event that Optonee's service as an
Outside Director shall cease due to death, vesting shall continue in accordance
with the rules set our in subsection 8 (c) hereof.
(F) stock subject to any Option granted pursuant to
subsections 4 (c) (iii) above shall be 100% vested on date of grant.
(d) Special Option Grants. Notwithstanding any limitations set
---------------------
forth elsewhere in this Plan, Special Options Grants shall be made at the
discretion of the Board (exclusive of the Optionee) provided, however, that no
Special Option shall become exercisable unless approved by the shareholders of
the Company in accordance with Section 16 of the Plan. Special Options may
contain such terms as are specified by the Board and approved by the
shareholders, which may vary from the terms set forth in this Plan for Automatic
Options.
(e) Powers of the Board. Subject to the provisions and
-------------------
restrictions of the Plan, the Board shall have the authority, in its discretion:
(I) to determine, upon review of relevant information and in accordance with
Section 7 (b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per share of Options to be granted, which exercise
price with respect to Automatic Option Grants shall be determined in accordance
with Section 7 (a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules and regulations relating to the Plan; (v) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted hereunder; and (vi) to make
all other determinations deemed necessary or advisable of the administrative of
the Plan.
(f) Effect of Board's Decision. All decisions, determinations
--------------------------
and interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. Eligibility. Options may be granted only to Outside Directors. Options
-----------
shall be granted as Automatic Options in accordance with the terms set forth in
Section 4 (c) hereof or as Special Options in accordance with the terms set
forth in Section 4 (d) hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights with the Director or the Company
may have to terminate his directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier of (I)
------------
its adoption by the Board or (ii) its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of twenty years unless sooner terminated under Section 12 of the Plan.
7. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Automatic Option shall be 100% of the fair
market value per Share on
the date of grant of the Option. The per share exercise price for Special
Options may be equal to or less than 100% of such fair market value.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
closing bid price of the Common Stock in the over-the counter market on the date
of grant, as reported in The Wall Street Journal (or, if not so reported, as
-----------------------
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System) or, in the event the Common Stock is traded on the
NASDAQ National Market System or listed on a stock exchange, the fair market
value per Share shall be closing price on such system or exchange on the date of
grant of the Option, as reported in The Wall Street Journal.
-----------------------
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, combination of such methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder.
-----------------------------------------------
Any Option granted hereunder shall be exercisable at such times as are set forth
in Section 4 hereof; provided, however, that no Options shall be exercisable
until shareholder approval of the Plan in accordance with Section 16 hereof has
been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method payment
allowable under Section 7 (c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no rights to vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
-----------------------------------
ceases to serve as a Director or is unable to continue his service as a Director
with the Company as a result of his total and permanent disability (as defined
in Section 22 (e) (3) of the Internal Revenue Code of 1986, as amended), he may
exercise his Option, but only within seven months after the date he ceases to be
a Director of the Company, and only to purchase vested Shares. To the extent
that he was not entitled to exercise an Option at the date of such termination,
or if he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
(c) Death of Optionee. Notwithstanding the provisions of Section 8
-----------------
(b) above, in the event of the death of an Optionee;
(i) during the term of the Option, who is at the time of his
death an Outside Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within seven months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the Shares that had vested
at the date of termination; or
(ii) within seven months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within seven
months following the termination of the Optionee's Continuous Status as a
Director, or three months after the date of death, whichever is later, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the Shares that had vested
at the date of termination.
(d) Rule 16b-3. Any option exercise by an Outside Director under this
----------
Plan shall comply with Section 16 (b) of the Exchange Act and Rule 16b-3 (or any
successor rule) promulgated thereunder ("Rule 16b-3") (or any successor rule)
promulgated thereunder ("Rule 16b-3") and shall contain any such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
9. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
or decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation refuses to
assume the Option or to substitute an equivalent Option, the Board shall, in
lieu of such assumption or substitution,
provided that that Optionee shall have the right to exercise the Option as to
all of the Optional Shares as to which the Option would not otherwise be
exercisable, or that the restrictions on unvested Shares shall be removed, as
the case may be. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen days from the date of such notice, and the Option will
terminate upon the expiration of such period.
11. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof. Notice
of the determination shall be given to each Outside Director to whom an Option
is so granted within a reasonable time after the date of such grant.
12. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend, alter, suspend or
-------------------------
discontinue the Plan, but no amendment, suspension or discontinuation shall be
made which would impair the rights of any Optionee under any grant theretofore
made, without his or her consent. To the extent necessary and desirable to
comply with Rule 16b-3, the Company shall obtain shareholder approval of any
Plan amendment or option grant in such manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the board, which agreement must be in writing and signed by the Optionee and the
Company.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Shareholder Approval.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the First annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If such
shareholder approval is obtained at a duly held shareholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. If
such shareholder approval is obtained by written consent, it may be obtained by
the written consent of the holders of a majority of the outstanding shares of
the Company.
(b) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
17. Information to Optionees. The Company shall provide to each Optionee,
------------------------
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports to shareholders, proxy statements and other
information provided to all shareholders of the Company.
CIRRUS LOGIC, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of CIRRUS LOGIC, INC., a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated June 12, 1998 and the Company's Annual Report for
its fiscal year ended March 28, 1998, and hereby appoints Robert F. Donohue and
Michael L. Hackworth and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1998 Annual Meeting of Shareholders of CIRRUS
LOGIC, INC., to be held on July 21, 1998 at 2:00 p.m. local time at 3100 West
Warren Avenue, Fremont, California 94538 and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote, if then and there personally present, on the matters set forth
on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
IT WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS, AND FOR PROPOSALS 2, 3, 4,
5, 6, 7 AND 8.
1. Election of Directors
Nominees: Michael L. Hackworth, Suhas S. Patil,
C. Gordon Bell, D. James Guzy
Walden C. Rhines, Robert H. Smith
Alfred S. Teo
FOR WITHHELD
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For all nominees except as noted above
- --- --------------------------------------
2. To approve an amendment to the 1989 Employee Stock Purchase Plan to
increase the number of shares of Common Stock available for grant under the
Plan by 300,000 shares.
For Against Abstain
---- -------- --------
3. To approve an amendment to the 1996 Stock Plan to increase the number of
shares of Common Stock available for grant under the Plan by 2,000,000.
For Against Abstain
---- -------- --------
4. To approve amendments to the 1990 Directors' Stock Option Plan to increase
the number of shares of Common Stock available for grant under the Plan by
100,000, set the termination date of the Plan to January 2010 and amend
certain terms of the grants made pursuant to the Plan.
For Against Abstain
---- -------- --------
5. To approve the reincorporation of the Company as a Delaware corporation and
the Delaware Form of Indemnification Agreement.
For Against Abstain
---- -------- --------
6. To approve the setting of the number of authorized shares of Common Stock
at 280,000,000 shares.
For Against Abstain
---- -------- --------
7. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company.
For Against Abstain
---- -------- --------
8. To transact such other business as may properly come before the meeting or
any adjournment thereof.
_____ MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Signature: Date: Signature: Date:
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