<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
REGISTRATION NO. 333--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SILICON LABORATORIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3674 74-2793174
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</TABLE>
4635 BOSTON LANE
AUSTIN, TX 78735
TELEPHONE: (512) 416-8500
FACSIMILE: (512) 464-9404
(Address, including zip code, and telephone number, including area code, of the
registrant's principal executive offices)
NAVDEEP S. SOOCH
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
4635 BOSTON LANE
AUSTIN, TX 78735
TELEPHONE: (512) 416-8500
FACSIMILE: (512) 464-9404
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
S. MICHAEL DUNN, P.C. ALAN DEAN
THOMAS R. NELSON DAVIS POLK & WARDWELL
PHILIP W. RUSSELL 450 LEXINGTON AVENUE
BROBECK, PHLEGER & HARRISON LLP NEW YORK, NEW YORK 10017
301 CONGRESS AVENUE, SUITE 1200 TELEPHONE: (212) 450-4000
AUSTIN, TEXAS 78701 FACSIMILE: (212) 450-4800
TELEPHONE: (512) 477-5495
FACSIMILE: (512) 477-5813
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES TO BE PROPOSED MAXIMUM AGGREGATE OFFERING
REGISTERED PRICE(1) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.0001 par value......... $80,000,000 $21,120
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JANUARY 18, 2000
SHARES
[LOGO]
SILICON LABORATORIES INC.
COMMON STOCK
--------------
SILICON LABORATORIES INC. IS OFFERING SHARES OF ITS COMMON STOCK AND
THE SELLING STOCKHOLDERS ARE SELLING SHARES OF COMMON STOCK. SILICON
LABORATORIES WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF SHARES OF COMMON
STOCK BY THE SELLING STOCKHOLDERS. THIS IS OUR INITIAL PUBLIC OFFERING AND NO
PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL
PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE.
-------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "SLAB."
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
-----------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO PROCEEDS TO
PRICE TO DISCOUNTS AND SILICON SELLING
PUBLIC COMMISSIONS LABORATORIES STOCKHOLDERS
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
PER SHARE...................... $ $ $ $
TOTAL.......................... $ $ $ $
</TABLE>
SILICON LABORATORIES INC. HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP
TO AN ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES OF COMMON STOCK
TO PURCHASERS ON , 2000.
-------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
SALOMON SMITH BARNEY
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Special Note Regarding Forward-Looking
Statements........................... 18
Use of Proceeds........................ 18
Dividend Policy........................ 18
Capitalization......................... 19
Dilution............................... 20
Selected Consolidated Financial
Information.......................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Business............................... 32
Management............................. 44
Certain Transactions................... 53
Principal and Selling Stockholders..... 54
Description of Capital Stock........... 56
Shares Eligible for Future Sale........ 60
Underwriters........................... 62
Legal Matters.......................... 64
Experts................................ 64
Where You Can Find Additional
Information About Silicon
Laboratories......................... 64
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
------------------------
You should rely only on the information contained in this prospectus. We and
the selling stockholders have not authorized anyone to provide you with
information that is different from that contained in this prospectus. We and the
selling stockholders are offering to sell, and seeking offers to buy, shares of
common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.
Until , 2000, all dealers that buy, sell or trade shares,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING SOLD IN THIS
OFFERING, ESPECIALLY THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER
THE CAPTION "RISK FACTORS" AND OUR FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS.
SILICON LABORATORIES
We are a leader in the design and development of proprietary,
analog-intensive, mixed-signal integrated circuits, or ICs, for the rapidly
growing communications industry. Mixed-signal ICs are electronic components that
are capable of processing both digital signals and real-world analog signals,
such as sound and radio waves. Mixed-signal ICs are critical components of
numerous communications products, including cellular telephones, cable and
satellite set-top boxes, modems and fax machines. Our IC solutions can
dramatically reduce the cost, size and system power requirements of these
communications products. To develop our business rapidly, we initially focused
our efforts on developing IC solutions for the personal computer modem market.
We are now applying our mixed-signal and communications expertise to the
development of innovative IC solutions for other communications markets with
high growth potential, such as cellular telephones and network access
applications. Our significant customers include Intel, Lucent, Motorola, PC-Tel,
SmartLink and 3Com.
Within the semiconductor industry, we are known as a "fabless" company,
meaning that we do not fabricate the semiconductors that we design and develop,
but instead rely on third parties to manufacture our products. We design our
solutions to be manufactured using standard complementary metal oxide
semiconductor, or CMOS, technology, which involves less cost and complexity in
the manufacturing process than competing technologies. As a result, our IC
solutions can be reliably manufactured at a reduced cost and in high volume at
semiconductor foundries around the world.
Demand for communications services has increased at a rapid rate in recent
years due to a number of factors, including the growth of Internet usage,
development of new communications technologies, availability of improved
communications services at lower costs and remote access requirements for
corporate networks. This demand has fueled tremendous growth in the number of
wireline and wireless communications devices used to access these services.
Digital communications devices typically require mixed-signal circuits to
access the communications networks to which they are connected. In order to
improve their competitive position, communications device manufacturers need
advanced mixed-signal IC solutions to create smaller products with improved
price/performance characteristics. Manufacturers of communications devices face
accelerating time-to-market demands and must adapt to evolving industry
standards and new technologies. Because analog-intensive, mixed-signal IC design
expertise is difficult to find, these manufacturers increasingly are turning to
third parties, such as Silicon Laboratories with its world-class design talent,
to provide advanced mixed-signal IC solutions. This expertise is even more
important when designing within the limitations of standard CMOS manufacturing
processes rather than alternative semiconductor processes, which are typically
more expensive and not as widely available.
Our mixed-signal IC solutions provide our customers with the following
benefits:
- DRAMATICALLY IMPROVED SIZE AND PRICE/PERFORMANCE CHARACTERISTICS. By
significantly reducing the number of discrete components used in
communications devices, our solutions enable our customers to offer
products with smaller sizes, lower costs, reduced power consumption and
with increased performance and reliability.
- IMPROVED TIME-TO-MARKET. We design our mixed-signal solutions to be
integrated with the products of multiple manufacturers and conduct
extensive research and development to ensure that they conform to our
customers' evolving technical standards. As a result, our customers are
able to quickly integrate our solutions into their designs and reduce the
time-to-market for their products.
- ATTRACTIVE NEW PRODUCT OPPORTUNITIES. Our space-saving and cost-efficient
IC solutions allow our customers to create smaller and more cost-effective
products for use in many evolving markets for communications devices.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by:
Silicon Laboratories..................................... shares
Selling stockholders..................................... shares
Total.................................................. shares
Common stock to be outstanding after this offering......... shares
Use of proceeds............................................ For working capital and other general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol..................... SLAB
</TABLE>
------------------------
The number of shares of common stock to be outstanding after this offering
is based on the pro forma number of shares outstanding as of January 1, 2000 and
reflects the conversion of all shares of our outstanding convertible preferred
stock into common stock. This information excludes:
- 2,380,226 shares subject to outstanding options with a weighted average
exercise price of $2.52 per share; and
- 143,182 shares subject to outstanding warrants with a weighted average
exercise price of $1.17 per share.
In addition, the underwriters have a 30-day option to purchase up to
additional shares from us to cover over-allotments. Some of the disclosures in
this prospectus would be different if the underwriters exercise the
over-allotment option. Unless we tell you otherwise, the information in this
prospectus:
- assumes that the underwriters will not exercise the over-allotment option;
- reflects a 2-for-1 split of our common stock effected as of November 3,
1999; and
- reflects the conversion of each share of our outstanding convertible
preferred stock into two shares of common stock upon the closing of this
offering.
You should note that our fiscal year ends on the Saturday closest to
December 31st. A reference to "fiscal 1997" is to our fiscal year ended
January 3, 1998; a reference to "fiscal 1998" is to our fiscal year ended
January 2, 1999; and a reference to "fiscal 1999" is to our fiscal year ended
January 1, 2000.
------------------------
Our principal executive offices are located at 4635 Boston Lane, Austin,
Texas 78735. Our telephone number is (512) 416-8500. Our Web site address is
WWW.SILABS.COM. THE INFORMATION CONTAINED ON OUR WEB SITE IS NOT INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 19, 1996) FISCAL YEAR
THROUGH ------------------------------
DECEMBER 31, 1996 1997 1998 1999
------------------ -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Sales............................................ $ -- $ -- $ 5,609 $46,911
Cost of goods sold............................... -- -- 2,371 15,770
------- ------- ------- -------
Gross profit..................................... -- -- 3,238 31,141
Operating expenses............................... 20 1,991 6,690 16,480
------- ------- ------- -------
Operating income (loss).......................... (20) (1,991) (3,452) 14,661
------- ------- ------- -------
Net income (loss)................................ $ (20) $(1,835) $(3,397) $11,040
======= ======= ======= =======
Basic net income (loss) per share................ $ -- $ (1.04) $ (.37) $ .73
Diluted net income (loss) per share.............. $ -- $ (1.04) $ (.37) $ .25
Shares used in calculating basic net income
(loss) per share............................... -- 1,760 9,129 15,152
Shares used in calculating diluted net income
(loss) per share............................... -- 1,760 9,129 43,657
Pro forma basic net income per share............. $ .30
Pro forma diluted net income per share........... $ .25
Shares used in calculating pro forma basic net
income per share............................... 36,461
Shares used in calculating pro forma diluted net
income (loss) per share........................ 43,657
</TABLE>
The following table contains a summary of our balance sheet:
- on an actual basis at January 1, 2000;
- on a pro forma basis to reflect the conversion of all outstanding shares
of convertible preferred stock into 13,842,174 shares of common stock; and
- on a pro forma as adjusted basis to additionally reflect the sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
AS OF JANUARY 1, 2000
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $14,706 $14,706 $
Working capital............................................. 14,281 14,281
Total assets................................................ 41,958 41,958
Long-term obligations, net of current maturities............ 6,081 6,081
Redeemable convertible preferred stock...................... 12,750 --
Total stockholders' equity.................................. $ 8,003 $20,753 $
</TABLE>
5
<PAGE>
RISK FACTORS
THIS OFFERING AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE
TO BUY OUR COMMON STOCK.
RISKS RELATED TO OUR BUSINESS
WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR THE VAST MAJORITY OF OUR SALES,
AND THE LOSS OF, OR A SIGNIFICANT REDUCTION IN ORDERS FROM, ANY KEY CUSTOMER
COULD SIGNIFICANTLY REDUCE OUR SALES
In fiscal 1999, our four largest customers, in the aggregate, accounted for
approximately 92% of our sales. Of these customers, PC-Tel accounted for 62%,
SmartLink for 12%, 3Com for 10% and Motorola for 8% of our fiscal 1999 sales.
Our operating results in the foreseeable future will continue to depend on sales
to a relatively small number of customers, as well as the ability of these
customers to sell products that use our integrated circuit, or IC, solutions. In
the future, these customers may decide not to purchase our IC solutions at all,
purchase fewer IC solutions than they did in the past or alter their purchasing
patterns, particularly because:
- we do not have any material long-term purchase arrangements or contracts
with these or any of our other customers;
- substantially all of our sales to date have been made on a purchase order
basis, which permits our customers to cancel, change or delay product
purchase commitments with little or no notice to us and without penalty;
and
- some of our customers have sought or are seeking relationships with
current or potential competitors which may affect our customers'
purchasing decisions.
For example, PC-Tel recently announced that, while Silicon Laboratories is
currently the sole supplier of the direct access arrangement, or DAA, IC
solution used in PC-Tel's products, PC-Tel is in the process of qualifying a
second source for its DAA IC requirements. If PC-Tel qualifies a second source,
we believe that this could have an adverse effect on the prices we are able to
charge PC-Tel and the volume of DAA IC solutions that we sell to PC-Tel, which
would negatively affect our sales and operating results.
On January 12, 2000, we filed a lawsuit against Analog Devices and 3Com
claiming that Analog Devices has infringed, and is continuing to infringe, our
issued U.S. patent with respect to our DAA technology and that Analog Devices
and 3Com have misappropriated our confidential information, know-how and trade
secrets. Analog Devices and 3Com have not yet filed responses to this lawsuit.
Although 3Com, which is one of our key customers, may decide to cease purchasing
direct access arrangement ICs from Analog Devices as a result of this suit, it
is possible that 3Com may respond by ceasing its purchase of our DAA solution.
The loss of sales to 3Com could have a material adverse effect on our sales and
operating results.
The loss of any of our key customers, or a significant reduction in sales to
any one of them, would significantly reduce our sales and adversely affect our
business.
WE HAVE DEPENDED ON OUR DIRECT ACCESS ARRANGEMENT, OR DAA, FAMILY OF SOLUTIONS
FOR SUBSTANTIALLY ALL OF OUR SALES TO DATE, AND SIGNIFICANT REDUCTIONS IN ORDERS
FOR DAA SOLUTIONS, OR THE MODEMS INTO WHICH SUCH SOLUTIONS ARE INCORPORATED,
WOULD SIGNIFICANTLY REDUCE OUR SALES
Substantially all of our sales to date have been derived from sales of our
DAA family of IC solutions. Until we are able to diversify our sales through the
introduction of new products, we will continue to rely on sales of our DAA
solutions. Reduced market acceptance of our DAA solutions or the introduction of
products with superior price/performance characteristics by our competitors
could significantly reduce our sales.
6
<PAGE>
Our DAA solutions are currently used by our customers to produce modems for
the personal computer market. We rely on our customers to provide software and
other technical support for the modems that use our DAA solutions. If our
customers' software does not provide the required functionality or if our
customers do not provide satisfactory support for their modem products, the
demand for modems that incorporate our DAA solutions may diminish. Additionally,
any reduction in the demand for modems would significantly reduce our sales.
IF WE ARE UNABLE TO DEVELOP NEW AND ENHANCED SOLUTIONS THAT ACHIEVE MARKET
ACCEPTANCE IN A TIMELY MANNER, OUR OPERATING RESULTS AND COMPETITIVE POSITION
COULD BE HARMED
We currently sell only our DAA solutions in commercial quantities. Our
future success will depend on our ability to reduce our dependence on our DAA
solutions by developing new IC solutions and product enhancements that achieve
market acceptance in a timely and cost-effective manner. The development of
mixed-signal IC solutions is highly complex, and we occasionally have
experienced delays in completing the development and introduction of new
solutions and product enhancements. Successful product development and market
acceptance of our solutions depend on a number of factors, including:
- changing requirements of customers within the wireline and wireless
communications markets;
- accurate prediction of market requirements;
- timely completion and introduction of new solution designs;
- timely qualification and certification of our IC solutions for use in our
customers' products;
- commercial acceptance and volume production of the products into which our
IC solutions will be incorporated;
- availability of foundry and assembly capacity;
- achievement of high manufacturing yields;
- quality, price, performance, power use and size of our solutions;
- availability, quality, price and performance of competing products and
technologies;
- our customer service and support capabilities and responsiveness;
- successful development of our relationships with existing and potential
customers; and
- changes in technology, industry standards or end-user preferences.
There can be no assurance that new solutions that we develop will achieve
market acceptance. We have recently introduced our RF synthesizer, ISOmodem and
ProSLIC solutions and we are actively developing other IC solutions. If these
solutions fail to achieve market acceptance, our operating results and
competitive position could be adversely affected.
DUE TO OUR LIMITED OPERATING HISTORY, WE MAY HAVE DIFFICULTY BOTH IN ACCURATELY
PREDICTING OUR FUTURE SALES AND APPROPRIATELY BUDGETING FOR OUR EXPENSES
We were incorporated in 1996 and did not begin generating sales until the
second quarter of 1998. As a result, we have only a short history from which to
predict future sales. This limited operating experience combined with the
rapidly evolving nature of the markets in which we sell our solutions, as well
as other factors which are beyond our control, reduce our ability to accurately
forecast quarterly or annual sales. Additionally, because most of our expenses
are fixed in the short term or incurred in advance of anticipated sales, we may
not be able to decrease our expenses in a timely manner to offset any shortfall
of sales. We are currently expanding our staffing and increasing our expense
levels in anticipation of future sales growth. If our sales do not increase as
anticipated, significant losses could result due to our higher expense levels.
7
<PAGE>
THE LOSS OR FAILURE TO QUALIFY OUR SEMICONDUCTOR MANUFACTURERS AND ASSEMBLERS,
OR THE FAILURE TO FORECAST DEMAND ACCURATELY FOR OUR SOLUTIONS, OR TO MANAGE OUR
RELATIONSHIPS WITH OUR MANUFACTURERS AND ASSEMBLERS SUCCESSFULLY, WOULD
NEGATIVELY IMPACT OUR ABILITY TO MANUFACTURE AND SELL OUR SOLUTIONS
We do not have our own manufacturing facilities. Therefore, we must rely on
third-party vendors to manufacture the ICs we design. From inception through
fiscal 1999, all product shipped by us was manufactured by Taiwan Semiconductor
Manufacturing Co. We are in the process of qualifying Vanguard International
Semiconductor, an affiliate of Taiwan Semiconductor Manufacturing Co., as an
additional semiconductor fabricator, but such qualification is not complete. In
anticipation of successfully qualifying Vanguard, Vanguard is currently
producing on our behalf a majority of our current work in progress. If such
qualification does not occur, we may not be able to sell the materials produced
by Vanguard and we might not be able to fulfill demand for our solutions, which
would adversely affect our operating results. Additionally, the resulting
write-off of unusable inventories would contribute to a decline in earnings. We
also currently rely on two third-party assembly contractors, Advanced
Semiconductor Engineering and Amkor, to assemble and package the silicon chips
extracted from the wafers for use in final products. Additionally, we rely on
third-party vendors for a portion of the testing requirements of our solutions
prior to shipping.
There are significant risks associated with relying on these third-party
contractors, including:
- failure by us, our customers or their end customers to qualify a selected
supplier;
- capacity shortages during periods of high demand;
- potentially inadequate manufacturing yields and excessive costs;
- reduced control over delivery schedules and quality;
- limited warranties on wafers or products supplied to us; and
- potential increases in prices.
We currently do not have long-term supply contracts with any of our
third-party vendors, and therefore, they are not obligated to perform services
or supply products to us for any specific period, or in any specific quantities,
except as may be provided in a particular purchase order. Although we believe
that other semiconductor foundries or assembly contractors can adequately
address our needs, we expect that it would take approximately two to six months
to transition performance of these services from our current providers to new
providers. Such a transition may also require a qualification process by our
customers or their customers. We generally place orders for products with some
of our suppliers approximately four months prior to the anticipated delivery
date, with order volumes based on our forecasts of demand from our customers.
Accordingly, if we inaccurately forecast demand for our solutions, we may be
unable to obtain adequate foundry or assembly capacity from our third-party
contractors to meet our customers' delivery requirements, or we may accumulate
excess inventories. On occasion, we have been unable to adequately respond to
unexpected increases in customer purchase orders, and therefore, were unable to
benefit from this incremental demand. None of our third-party foundry or
assembly contractors have provided assurances to us that adequate capacity will
be available to us within the time required to meet additional demand for our
products.
In addition, the manufacture of our products is a highly complex and
technologically demanding process. Although we work closely with our foundries
to minimize the likelihood of reduced manufacturing yields, our foundries have
from time to time experienced lower than anticipated manufacturing yields.
Changes in manufacturing processes or the inadvertent use of defective or
contaminated materials by our foundries could result in lower than anticipated
manufacturing yields or unacceptable performance deficiencies.
8
<PAGE>
OUR CURRENT MANUFACTURERS AND ASSEMBLERS ARE CONCENTRATED IN THE SAME GEOGRAPHIC
REGION WHICH INCREASES THE RISK THAT A NATURAL DISASTER, LABOR STRIKE OR
POLITICAL UNREST COULD DISRUPT OUR OPERATIONS
Our current semiconductor manufacturers are located in the same region
within Taiwan and our assembly contractors are located in the Pacific Rim
region. The risk of earthquakes in Taiwan and the Pacific Rim region is
significant due to the proximity of major earthquake fault lines in the area. In
September 1999, our current semiconductor manufacturers' principal facilities
were affected by a significant earthquake in Taiwan. As a consequence of this
earthquake, these manufacturers suffered power outages and disruption that
impaired their production capacity. We have filed an insurance claim under our
contingent business interruption insurance policy for the business disruption
that we sustained as a result of this earthquake. However, we do not know
whether this claim will be paid in full or at all in order to compensate us for
this disruption. Earthquakes, fire, flooding or other natural disasters in
Taiwan or the Pacific Rim region, or political unrest, labor strikes or work
stoppages in countries where our semiconductor manufacturers' and assemblers'
facilities are located likely would result in the disruption of our foundry or
assembly capacity. Any disruption resulting from such events could cause
significant delays in shipments of our solutions until we are able to shift our
manufacturing or assembling from the affected contractor to another third-party
vendor. There can be no assurance that such alternate capacity could be obtained
on favorable terms, if at all.
WE ARE SUBJECT TO INCREASED INVENTORY RISKS AND COSTS BECAUSE WE BUILD OUR
PRODUCTS BASED ON FORECASTS PROVIDED BY CUSTOMERS BEFORE RECEIVING PURCHASE
ORDERS FOR THE SOLUTIONS
In order to assure availability of our solutions for some of our largest
customers, we start the manufacturing of our solutions in advance of receiving
purchase orders based on forecasts provided by these customers. However, these
forecasts do not represent binding purchase commitments and we do not recognize
sales for such solutions until they are shipped to the customer. As a result, we
incur inventory and manufacturing costs in advance of anticipated sales. Because
demand for our solutions may not materialize, our delivery method subjects us to
increased risks of high inventory carrying costs and increased obsolescence and
may increase our operating costs.
WE MAY EXPERIENCE SIGNIFICANT PERIOD-TO-PERIOD QUARTERLY AND ANNUAL FLUCTUATIONS
IN OUR SALES AND OPERATING RESULTS, WHICH MAY RESULT IN VOLATILITY IN OUR STOCK
PRICE, AND WE MAY NOT BE ABLE TO MAINTAIN OUR EXISTING GROWTH RATE
We may experience significant period-to-period fluctuations in our sales and
operating results in the future due to a number of factors, and any such
variations may cause our stock price to fluctuate. Although we have experienced
sales and earnings growth in prior quarterly and annual periods, we may not be
able to sustain these growth rates. In particular, we may gain significant
market share in a relatively short period of time following the introduction of
a new solution, resulting in sales growth. However, incremental gains in market
share for these newly introduced solutions may not occur. Accordingly, you
should not rely on the results of any prior quarterly or annual periods as an
indication of our future performance. It is likely that in some future period
our operating results will be below the expectations of public market analysts
or investors. If this occurs, our stock price may drop, perhaps significantly.
A number of factors may contribute to fluctuations in our sales and
operating results, including:
- the timing and volume of orders from our customers;
- the rate of acceptance of our solutions by our customers, including the
acceptance of new solutions we may develop for integration in the products
manufactured by such customers, which we refer to as "design wins";
- the demand for and life cycles of the products incorporating our IC
solutions;
- our ability to develop, introduce, ship and support new solutions and
product enhancements;
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- the rate of adoption of mixed-signal ICs in the markets we target;
- deferrals of customer orders in anticipation of new solutions or product
enhancements from us or our competitors or other providers of ICs;
- the loss of one or more of our major customers;
- fluctuations in our manufacturing yields;
- changes in product mix;
- the introduction of competing products;
- the availability of capacity at our semiconductor manufacturers and the
prices they charge us for their services;
- the rate at which new markets emerge for solutions we are currently
developing or for which our design expertise can be utilized to develop
solutions for such markets;
- transition of our markets to new technology or standards; and
- departures of key personnel.
WE ARE A RELATIVELY SMALL COMPANY WITH LIMITED RESOURCES COMPARED TO SOME OF OUR
CURRENT AND POTENTIAL COMPETITORS AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY
AND INCREASE MARKET SHARE
Some of our current and potential competitors have longer operating
histories, significantly greater resources and name recognition and a larger
base of customers than we have. As a result, these competitors may have greater
credibility with our existing and potential customers. They also may be able to
adopt more aggressive pricing policies and devote greater resources to the
development, promotion and sale of their products than we can to ours, which
would allow them to respond more quickly than us to new or emerging technologies
or changes in customer requirements. In addition, some of our current and
potential competitors have already established supplier or joint development
relationships with the decision makers at our current or potential customers.
These competitors may be able to leverage their existing relationships to
discourage their customers from purchasing solutions from us or persuade them to
replace our solutions with their products. Our competitors may also offer
bundled chipset kit arrangements offering a more complete solution despite the
technical merits or advantages of our solutions. These competitors may elect not
to support our solutions which could complicate our sales efforts. Increased
competition could decrease our prices, reduce our sales, lower our margins or
decrease our market share. These and other competitive pressures may prevent us
from competing successfully against current or future competitors, and may
materially harm our business.
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET, AND IF WE ARE UNABLE TO RETAIN OUR CURRENT PERSONNEL AND HIRE
ADDITIONAL PERSONNEL, OUR ABILITY TO DEVELOP AND SUCCESSFULLY MARKET OUR
SOLUTIONS COULD BE HARMED
We believe our future success will depend in large part upon our ability to
attract and retain highly skilled managerial, engineering and sales and
marketing personnel. Specifically, due to the relatively early stage of our
company's business, we believe that our future success is highly dependent on
Navdeep Sooch, our co-founder, Chief Executive Officer and Chairman of the
Board, Jeffrey Scott, our co-founder and Vice President of Engineering, and
David Welland, our co-founder and Vice President of Technology. We do not have
employment contracts with these or any other key personnel. There is currently a
shortage of qualified personnel with significant experience in the design,
development, manufacturing, marketing and sales of analog and mixed-signal
communications ICs. In particular, there is a shortage of engineers who are
familiar with the intricacies of the design and manufacturability of analog
elements, and competition for such personnel is intense. Our key technical
personnel represent a significant asset and serve as the source of our
technological and product innovations. We may not be successful in attracting
and retaining
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<PAGE>
sufficient numbers of technical personnel to support our anticipated growth. The
loss of any of our key employees or the inability to attract or retain qualified
personnel, including engineers and sales and marketing personnel, could delay
the development and introduction of, and negatively impact our ability to sell,
our solutions.
OUR RESEARCH AND DEVELOPMENT EFFORTS ARE FOCUSED ON A LIMITED NUMBER OF NEW
TECHNOLOGIES AND PRODUCTS, AND ANY DELAY IN THE DEVELOPMENT, OR ABANDONMENT, OF
THESE TECHNOLOGIES OR PRODUCTS BY INDUSTRY PARTICIPANTS, OR THEIR FAILURE TO
ACHIEVE MARKET ACCEPTANCE, COULD COMPROMISE OUR COMPETITIVE POSITION
Our solutions are used as components in communications devices in the
wireline and wireless markets. As a result, we have devoted and expect to
continue to devote a large amount of resources to develop solutions based on new
and emerging technologies and standards that will be commercially introduced in
the future. A number of large companies in the wireline and wireless
communications industries are actively involved in the development of these new
technologies and standards. Should any of these companies delay or abandon their
efforts to develop commercially available products based on new technologies and
standards, our research and development efforts with respect to such
technologies and standards likely would have no appreciable value. In addition,
if we do not correctly anticipate new technologies and standards, or if the
solutions that we develop based on these new technologies and standards fail to
achieve market acceptance, our competitors may be better able to address market
demand than would we. Furthermore, if markets for these new technologies and
standards develop later than we anticipate, or do not develop at all, demand for
our solutions that are currently in development would suffer, resulting in lower
sales of these solutions than we currently anticipate. We recently introduced a
RF synthesizer product for use in cellular phones operating on the Global System
for Mobile Communications, or GSM, standard. The RF synthesizer is also
compatible with General Packet Radio Service, which is the emerging data
communications protocol for GSM based cellular phones. We cannot be certain
whether manufacturers of cellular phones using these standards will incorporate
our RF synthesizer or that these standards will not change, thereby making our
solutions unsuitable or impractical.
OUR SOLUTIONS ARE COMPLEX AND MAY REQUIRE MODIFICATIONS TO RESOLVE UNDETECTED
ERRORS WHICH COULD LEAD TO AN INCREASE IN OUR COSTS OR A REDUCTION IN OUR SALES
Our solutions are complex and may contain errors when first introduced or as
new versions are released. We rely primarily on our in-house testing personnel
to design test operations and procedures to detect any errors prior to delivery
of our solutions to our customers. Because our solutions are manufactured by
third parties, should problems occur in the operation or performance of our ICs,
we may experience delays in meeting key introduction dates or scheduled delivery
dates to our customers. These errors also could cause us to incur significant
re-engineering costs, divert the attention of our engineering personnel from our
product development efforts and cause significant customer relations and
business reputation problems.
THE PERFORMANCE OF OUR DIRECT ACCESS ARRANGEMENT SOLUTIONS MAY BE ADVERSELY
AFFECTED BY SEVERE ENVIRONMENTAL CONDITIONS THAT MAY REQUIRE MODIFICATIONS,
WHICH COULD LEAD TO AN INCREASE IN OUR COSTS OR A REDUCTION IN OUR SALES
Although our direct access arrangement solutions are compliant with
published specifications, these established specifications might not adequately
address all conditions that must be satisfied in order to operate in harsh
environments. This includes environments where there are wide variations in
electrical quality, telephone line quality, static electricity and operating
temperatures or that may be affected by lightning or improper handling by
customers and end users. Our solutions have had a limited period of time in the
field under operation, and such environmental factors may result in
unanticipated returns of our solutions. Any necessary modifications could cause
us to incur significant re-engineering costs, divert the attention of our
engineering personnel from our product development efforts and cause significant
customer relations and business reputation problems.
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<PAGE>
A SUBSTANTIAL PORTION OF THE FINAL TESTING OF OUR SOLUTIONS IS PERFORMED
INTERNALLY BY US, WHICH INCREASES OUR FIXED COSTS
In 1999, we performed a substantial portion of our final product test
operations in-house. The balance of the final testing of our solutions is
provided by our contract manufacturers or other third parties. While we believe
performing such testing in-house provides us with certain advantages in terms of
quality control and time-to-market efficiencies, we may encounter difficulties
and delays in maintaining or expanding our internal test capabilities. In
addition, final testing of complex semiconductors requires substantial resources
to acquire state-of-the-art testing equipment and hiring additional qualified
personnel, which has increased our fixed costs. If demand for our solutions does
not support the effective utilization of these employees and additional
equipment, we may not realize any benefit from replacing our outside vendors
with internal final testing. Any decrease in the demand for our solutions could
result in the underutilization of our testing equipment and personnel. If our
internal test operations are underused or mismanaged, we may incur significant
costs that could adversely affect our operating results.
WE PLAN TO INCREASE OUR INTERNATIONAL SALES ACTIVITIES SIGNIFICANTLY, WHICH WILL
SUBJECT US TO ADDITIONAL BUSINESS RISKS INCLUDING INCREASED LOGISTICAL
COMPLEXITY, POLITICAL INSTABILITY AND CURRENCY FLUCTUATIONS
We intend to open sales offices in international markets to expand our
international sales activities in Europe and the Pacific Rim region. Our planned
international sales growth will be limited if we are unable to hire additional
personnel and develop relationships with international distributors. We may not
be able to maintain or increase international market demand for our solutions.
Our international operations are subject to a number of risks, including:
- increased complexity and costs of managing international operations;
- protectionist laws and business practices that favor local competition in
some countries;
- multiple, conflicting and changing laws, regulations and tax schemes;
- longer sales cycles;
- greater difficulty in accounts receivable collection and longer collection
periods; and
- political and economic instability.
To date, all of our sales to international customers and purchases of
components from international suppliers, have been denominated in U.S. dollars.
As a result, an increase in the value of the U.S. dollar relative to foreign
currencies could make our solutions more expensive for our international
customers to purchase, thus rendering them less competitive.
OUR INABILITY TO MANAGE GROWTH COULD MATERIALLY AND ADVERSELY AFFECT OUR
BUSINESS
During the past year, we have significantly increased the scope of our
operations and expanded our workforce from 42 employees at January 2, 1999 to
148 employees at January 1, 2000. This growth has placed, and any future growth
of our operations will continue to place, a significant strain on our management
personnel, systems and resources. We anticipate that we will need to implement a
variety of new and upgraded operational and financial systems, procedures and
controls, including the improvement of our accounting and other internal
management systems. We also expect that we will need to continue to expand,
train, manage and motivate our workforce. All of these endeavors will require
substantial management effort. If we are unable to effectively manage our
expanding operations, our business could be materially and adversely affected.
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<PAGE>
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH WOULD NEGATIVELY
AFFECT OUR ABILITY TO COMPETE
Our solutions rely on our proprietary technology, and we expect that future
technological advances made by us will be critical to sustain market acceptance
of our solutions. Therefore, we believe that the protection of our intellectual
property rights is and will continue to be important to the success of our
business. We rely on a combination of patent, copyright, trademark and trade
secret laws and restrictions on disclosure to protect our intellectual property
rights. We also enter into confidentiality or license agreements with our
employees, consultants and business partners, and control access to and
distribution of our documentation and other proprietary information. Despite
these efforts, unauthorized parties may attempt to copy or otherwise obtain and
use our solutions or proprietary technology. Monitoring unauthorized use of our
technology is difficult, and we cannot be certain that the steps we have taken
will prevent unauthorized use of our technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as in
the United States. We cannot be certain that patents will be issued as a result
of our pending applications nor can we be certain that any issued patents would
protect or benefit us or give us adequate protection from competing products.
For example, issued patents may be circumvented or challenged and declared
invalid or unenforceable. We also cannot be certain that others will not develop
our unpatented proprietary technology or effective competing technologies on
their own.
SIGNIFICANT LITIGATION OVER INTELLECTUAL PROPERTY IN OUR INDUSTRY MAY CAUSE US
TO BECOME INVOLVED IN COSTLY AND LENGTHY LITIGATION WHICH COULD SERIOUSLY HARM
OUR BUSINESS
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. From time to time, we
receive letters from various industry participants alleging infringement of
patents or trade secrets. The exploratory nature of these inquiries has become
relatively common in the semiconductor industry. We typically respond when
appropriate and as advised by legal counsel. We may become involved in
litigation to protect our intellectual property rights or to defend allegations
of infringement asserted by others. Legal proceedings could subject us to
significant liability for damages or invalidate our proprietary rights. Legal
proceedings initiated by us to protect our intellectual property rights could
also result in counterclaims or countersuits against us. Any litigation,
regardless of its outcome, would likely be time consuming and expensive to
resolve and would divert our management's time and attention. Any potential
intellectual property litigation also could force us to take specific actions,
including:
- cease selling solutions that use the challenged intellectual property;
- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or
- redesign those solutions that use infringing intellectual property.
On January 12, 2000, we filed a lawsuit against Analog Devices and 3Com
claiming that Analog Devices has infringed, and is continuing to infringe, our
issued U.S. patent with respect to our DAA technology and that Analog Devices
and 3Com have misappropriated our confidential information, know-how and trade
secrets. Analog Devices and 3Com have not yet filed responses to our lawsuit. As
a result, we do not know what defenses may be raised or whether counterclaims or
countersuits may be brought. Analog Devices may challenge the validity,
enforceability or scope of our patent. In addition, Analog Devices and 3Com may
claim that they have not misappropriated our confidential information, know-how
and trade secrets. Our lawsuit will involve significant expense and divert our
management's time and attention from other aspects of our business. The lawsuit
may also damage our business relationship with 3Com which accounted for 10% of
our sales in fiscal 1999 and 20% of our sales in fiscal 1998. Due to the
inherent uncertainties of litigation, we cannot be certain of the outcome of
this lawsuit.
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ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
CONDITION
As part of our growth strategy, we may consider opportunities to acquire
other businesses or technologies that would complement our current solution
offerings, expand the breadth of our markets or enhance our technical
capabilities. To date, we have not made any acquisitions and we are currently
not subject to any agreement or letter of intent with respect to potential
acquisitions. Acquisitions entail a number of risks that could materially and
adversely affect our business and operating results, including:
- problems integrating the acquired operations, technologies or products
with our existing business and solutions;
- diversion of management's time and attention from our core business;
- difficulties in retaining business relationships with suppliers and
customers of the acquired company;
- risks associated with entering markets in which we lack prior experience;
and
- potential loss of key employees of the acquired company.
FAILURE TO EXPAND OUR DISTRIBUTION CHANNELS AND MANAGE OUR DISTRIBUTION
RELATIONSHIPS COULD IMPEDE OUR FUTURE GROWTH
The future growth of our business will depend in part on our ability to
expand our existing relationships with distributors and sales representatives,
develop additional channels for the distribution and sale of our solutions and
manage these relationships. As part of our channel sales strategy, we intend to
expand our relationships with distributors and sales representatives. As we
develop our indirect sales capabilities, we will need to manage the potential
conflicts that may arise with our direct sales efforts. The inability to
successfully execute or manage a multi-channel sales strategy could impede our
future growth.
RISKS RELATED TO OUR INDUSTRY
COMPETITION WITHIN THE NUMEROUS MARKETS WE TARGET MAY REDUCE SALES OF OUR
SOLUTIONS AND REDUCE MARKET SHARE
The markets for semiconductors in general, and for mixed-signal ICs in
particular, are intensely competitive. We expect that the market for our
solutions will continually evolve and will be subject to rapid technological
change. In addition, as we target and supply products to numerous markets and
applications, including wireline, wireless and other communications markets, we
face competition from a relatively large number of competitors. Across all of
our product areas, we compete with Advanced Micro Devices, Analog Devices,
Conexant, Delta Integration, Fujitsu, Infineon Technologies, Krypton Isolation,
National Semiconductor, Philips and Texas Instruments, among others. We expect
to face competition in the future from our current competitors, other
manufacturers and designers of semiconductors, and innovative start-up
semiconductor design companies. Some of our customers, such as Intel, Lucent and
Motorola, are also large, established semiconductor suppliers. Our sales to and
support of such customers may enable them to become a source of competition to
us, despite our efforts to protect our intellectual property rights. As the
markets for communications products grow, we also may face competition from
traditional communication device companies. These companies may enter the
mixed-signal semiconductor market by introducing their own ICs or by entering
into strategic relationships with or acquiring other existing providers of
semiconductor solutions.
THE AVERAGE SELLING PRICES OF OUR SOLUTIONS COULD DECREASE RAPIDLY WHICH MAY
NEGATIVELY IMPACT OUR GROSS MARGINS AND SALES
We may experience substantial period-to-period fluctuations in future
operating results due to the erosion of our average selling prices. We have
reduced the average unit price of our solutions in anticipation of future
competitive pricing pressures, new product introductions by us or our
competitors and other factors. We expect that we will have to do so again in the
future. If we are unable to offset any such reductions in our average selling
prices by increasing our sales volumes, our gross profits and sales
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<PAGE>
will suffer. To maintain gross margins, we will need to develop and introduce
new solutions and product enhancements on a timely basis and continually reduce
our costs. Our failure to do so would cause our sales and gross margins to
decline.
OUR CUSTOMERS REQUIRE OUR SOLUTIONS TO UNDERGO A LENGTHY AND EXPENSIVE
QUALIFICATION PROCESS WHICH DOES NOT ASSURE PRODUCT SALES
Prior to purchasing our solutions, our customers require that our solutions
undergo an extensive qualification process, which involves testing of the
solution in the customer's system as well as rigorous reliability testing. This
qualification process may continue for six months or longer. However,
qualification of a solution by a customer does not assure any sales of the
solution to that customer. Even after successful qualification and sales of a
product to a customer, a subsequent revision to the IC, changes in its
manufacturing process or the selection of a new supplier by us may require a new
qualification process, which may result in delays and in us holding excess or
obsolete inventory. After our solutions are qualified, it can take an additional
six months or more before the customer commences volume production of products
that incorporate our solutions. Despite these uncertainties, we devote
substantial resources, including identification, design, engineering, sales,
marketing and management efforts, toward qualifying our solutions with customers
in anticipation of sales. If we are unsuccessful or delayed in qualifying any of
our solutions with a customer, such failure or delay would preclude or delay
sales of such solution to the customer, which may impede our growth and cause
our business to suffer.
WE ARE SUBJECT TO THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY
The semiconductor industry is highly cyclical and is characterized by
constant and rapid technological change, rapid product obsolescence and price
erosion, evolving standards, short product life cycles and wide fluctuations in
product supply and demand. The industry has experienced significant downturns,
often connected with, or in anticipation of, maturing product cycles of both
semiconductor companies' and their customers' products and declines in general
economic conditions. These downturns have been characterized by diminished
product demand, production overcapacity, high inventory levels and accelerated
erosion of average selling prices. Any future downturns could have a material
adverse effect on our business and operating results. Furthermore, any upturn in
the semiconductor industry could result in increased competition for access to
third-party foundry and assembly capacity. We are dependent on the availability
of such capacity to manufacture and assemble our IC solutions. None of our
third-party foundry or assembly contractors have provided assurances that
adequate capacity will be available to us.
OUR PRODUCTS MUST CONFORM TO INDUSTRY STANDARDS IN ORDER TO BE ACCEPTED BY END
USERS IN OUR MARKETS
Generally, our solutions comprise only a part of a communications device.
All components of such devices must uniformly comply with industry standards in
order to operate efficiently together. We depend on companies that provide other
components of the devices to support prevailing industry standards. Many of
these companies are significantly larger and more influential in effecting
industry standards than we are. Some industry standards may not be widely
adopted or implemented uniformly, and competing standards may emerge that may be
preferred by our customers or end users. If larger companies do not support the
same industry standards that we do, or if competing standards emerge, market
acceptance of our solutions could be adversely affected which would harm our
business.
Products for communications applications are based on industry standards
that are continually evolving. Our ability to compete in the future will depend
on our ability to identify and ensure compliance with these evolving industry
standards. The emergence of new industry standards could render our solutions
incompatible with products developed by other suppliers. As a result, we could
be required to invest significant time and effort and to incur significant
expense to redesign our solutions to ensure compliance with relevant standards.
If our solutions are not in compliance with prevailing industry standards for a
significant period of time, we could miss opportunities to achieve crucial
design wins. We may not be successful in developing or using new technologies or
in developing new solutions or product
15
<PAGE>
enhancements that achieve market acceptance. Our pursuit of necessary
technological advances may require substantial time and expense.
RISKS RELATED TO THIS OFFERING
OUR MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT OUR
STOCKHOLDERS MAY NOT AGREE WITH AND IN WAYS THAT DO NOT INCREASE OUR PROFITS OR
INCREASE OUR STOCK PRICE
Our management will have considerable discretion in the application of the
net proceeds received by us from this offering, and you will not have the
opportunity, as part of your investment decision, to assess whether the proceeds
are being used appropriately. You must rely on the judgment of our management
regarding the application of the proceeds of this offering. The net proceeds may
be used for corporate purposes that do not increase our profitability or
increase our stock price. Pending application of the net proceeds of this
offering, such proceeds may be placed in investments that fail to produce income
or that could lose value.
INSIDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER OUR COMPANY AFTER THIS
OFFERING AND COULD DELAY OR PREVENT A CHANGE IN CORPORATE CONTROL
Upon completion of this offering, our executive officers and directors, and
their respective affiliates, will beneficially own, in the aggregate,
approximately % of our outstanding common stock. As a result, these
stockholders will be able to exert significant control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. This voting power could delay or prevent
an acquisition of our company on terms that other stockholders may desire.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT, DELAY OR
IMPEDE A CHANGE IN CONTROL OF US AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK
Provisions of our certificate of incorporation and bylaws could have the
effect of discouraging, delaying or preventing a merger or acquisition that a
stockholder may consider favorable. We also are subject to the anti-takeover
laws of Delaware which may discourage, delay or prevent someone from acquiring
or merging with us, which may adversely affect the market price of our common
stock. Please see "Description of Capital Stock-Anti-Takeover Effects" for more
information concerning these anti-takeover provisions.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES
AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE
There has been no public market for our common stock prior to this offering.
The initial public offering price for our common stock will be determined
through negotiations among the underwriters, the selling stockholders and us.
This initial public offering price may vary from the market price of our common
stock after the offering. If you purchase shares of common stock, you may not be
able to resell those shares at or above the initial public offering price. The
market price of our common stock may fluctuate significantly in response to
numerous factors, many of which are beyond our control, including the following:
- actual or anticipated fluctuations in our operating results;
- changes in financial estimates by securities analysts or our failure to
perform in line with such estimates;
- changes in market valuations of other technology companies, particularly
those that design, manufacture and/or sell semiconductors;
- announcements by us or our competitors of significant technical
innovations, acquisitions, strategic partnerships, joint ventures or
capital commitments;
- introduction of technologies or product enhancements that reduce the need
for our solutions;
- the loss of one or more key customers;
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<PAGE>
- departures of key personnel; and
- sales of our common stock in the future.
The stock market has experienced extreme volatility that often has been
unrelated to the performance of particular companies. These market fluctuations
may cause our stock price to fall regardless of our performance.
OF OUR TOTAL OUTSTANDING SHARES AFTER THIS OFFERING, , OR %,
WILL BE RESTRICTED FROM IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE
NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP
SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL
After this offering, we will have outstanding shares of common stock,
based on the number of shares outstanding at January 1, 2000. This includes the
shares we are selling in this offering, which may be resold in the public
market immediately. The remaining shares will become available for resale
in the public market as shown in the chart below:
<TABLE>
<CAPTION>
% OF TOTAL SHARES
NUMBER OF SHARES OUTSTANDING DATE OF AVAILABILITY FOR RESALE INTO THE PUBLIC MARKET
- --------------------- ----------------- ------------------------------------------------------------
<C> <C> <S>
Immediately.
120 days after the date of this prospectus due to a release
of 30% of the shares, and shares underlying the options,
held by each stockholder from lock-up agreements with the
underwriters. This release will occur if the last reported
sale price of our common stock is at least two times the
initial public offering price per share for each of the
20 consecutive trading days preceding the 120th day after
the date of this prospectus. This early release shall occur:
(a) on the 120th day after the date of this prospectus if we
make a public release of our quarterly or annual results
during the period beginning on the eleventh trading day
after the date of this prospectus and ending on the day
prior to the 120th day after the date of this prospectus, or
(b) otherwise, on the second trading day after the first
public release of our quarterly or annual results occurring
on or after the 120th day after the date of this prospectus.
181 days after the date of this prospectus upon the
expiration of the lock-up agreements with the underwriters
(plus any shares not already released from the lock-up
agreements).
At various times after 181 days following the date of this
prospectus, subject to compliance with federal securities
laws and upon the lapse of any applicable vesting
restrictions.
</TABLE>
The underwriters can waive the restrictions of the lock-up agreements at an
earlier time without prior notice or announcement and allow stockholders to sell
their shares. As restrictions on resale end, the market price of our stock could
drop significantly if the holders of restricted shares sell them or are
perceived by the market as intending to sell them. In addition, the sale of
these shares could impair our ability to raise capital through the sale of
additional stock. For more detailed information, see "Shares Eligible for Future
Sale."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK
VALUE OF YOUR SHARES
The initial public offering price is expected to be substantially higher
than the book value per share of our outstanding common stock immediately after
this offering. Accordingly, at the assumed initial public offering price of
$ per share, purchasers of common stock in this offering will incur
immediate dilution of approximately $ the net tangible book value per share
of our common stock from the price you pay for our common stock. Please see
"Dilution" for information regarding the dilution you will experience.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by forward-looking
words such as "may," "will," "expect," "intend," "anticipate," "believe,"
"estimate" and "continue" and other similar words. You should read statements
that contain these words carefully because they discuss our future expectations,
make projections of our future results of operations or of our financial
condition or state other "forward-looking" information. We believe that it is
important to communicate our future expectations to our investors. However,
there may be events in the future that we are not able to accurately predict or
control. The factors listed in the sections captioned "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections and elsewhere in this prospectus could have a material adverse effect
on our business, operating results and financial condition.
USE OF PROCEEDS
Assuming an initial public offering price of $ per share, we will
receive approximately $ million from our sale of shares of common
stock and the selling stockholders in this offering will receive approximately
$ million from their sale of shares of common stock, net of estimated
offering expenses payable by us and estimated underwriting discounts and
commissions. We will not receive any portion of the net proceeds received by the
selling stockholders from the sale of their shares. If the underwriters exercise
their over-allotment option in full, we will receive an additional
$ million in net proceeds. See "Principal and Selling Stockholders."
The principal purposes of this offering are to increase our equity capital,
create a public market for our common stock, facilitate future access by us to
public capital markets and provide us with increased visibility in our markets.
We intend to use the net proceeds for this offering for working capital and
other general corporate purposes, including capital expenditures and research
and development. Although we may use a portion of the net proceeds to acquire
businesses, products or technologies that are complementary to our current or
future business and product lines, we currently have no specific acquisitions
planned. Our management will have significant flexibility in applying the net
proceeds of this offering. Pending such uses, we will invest the net proceeds of
this offering in investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and we
do not intend to pay cash dividends in the foreseeable future. We currently
expect to retain any future earnings to fund the operation and expansion of our
business. In addition, our credit agreements with our bank lender prohibit us
from paying cash dividends on our capital stock without the prior consent of the
lender.
18
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of January 1, 2000:
- On an actual basis;
- On a pro forma basis to reflect the conversion of all shares of our
outstanding convertible preferred stock into 13,842,174 shares of common
stock; and
- On a pro forma as adjusted basis to additionally reflect our sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us.
You should read the following table in conjunction with the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operation" of this prospectus and our consolidated financial
statements and the notes to those statements included at the end of this
prospectus.
<TABLE>
<CAPTION>
AS OF JANUARY 1, 2000
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, net of current maturities........... 6,081 6,081
Redeemable convertible preferred stock:
Series A convertible preferred stock, $0.0001 par value;
5,391,267 shares designated, 5,345,449 shares issued
and outstanding actual; none designated, issued and
outstanding pro forma and pro forma as adjusted........ 5,250 -- --
Series B convertible preferred stock, $0.0001 par value;
1,610,638 shares designated, 1,575,638 shares issued
and outstanding actual; none designated, issued and
outstanding pro forma and pro forma as adjusted........ 7,500 -- --
Stockholders' equity:
Common stock, $0.0001 par value, 52,000,000 shares
authorized, 30,015,944 shares issued and outstanding,
actual; 250,000,000 shares authorized, 43,858,118
shares issued and outstanding, pro forma; 250,000,000
shares authorized, shares issued and
outstanding, pro forma as adjusted................... 3 4
Preferred stock, $0.0001 par value, 8,000,000 shares
authorized, none issued and outstanding actual;
8,000,000 shares authorized, none issued and
outstanding, pro forma; and 10,000,000 shares
authorized, none issued and outstanding pro forma as
adjusted............................................. -- -- --
Additional paid-in capital............................. 19,014 31,763
Notes receivable from stockholders..................... (1,472) (1,472)
Deferred stock compensation............................ (15,330) (15,330)
Retained earnings...................................... 5,788 5,788
------- ------- -------
Total stockholders' equity........................... 8,003 20,753
------- ------- -------
Total capitalization............................... $26,834 $26,834 $
======= ======= =======
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the pro forma number of shares outstanding as of January 1, 2000.
This information excludes:
- 2,380,226 shares subject to outstanding options; and
- 143,182 shares subject to outstanding warrants.
19
<PAGE>
DILUTION
Our pro forma net tangible book value as of January 1, 2000 was
approximately $20.8 million, or $.47 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities, divided by 43,858,118 shares of
common stock outstanding on a pro forma basis as of January 1, 2000. These pro
forma numbers reflect the conversion of all shares of our outstanding
convertible preferred stock into common stock.
Dilution in pro forma net tangible book value per share to new investors
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after the completion of this
offering. After giving effect to our sale of shares of common stock in
this offering at an assumed initial public offering price of $ per share
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our adjusted pro forma net tangible
book value as of January 1, 2000 would have been $ million, or $ per
share. This amount represents an immediate increase in pro forma net tangible
book value to our existing stockholders of $ per share and an immediate
dilution to new investors of $ per share. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at January 1,
2000.................................................... $ .47
Increase in pro forma net tangible book value per share
attributable to new investors...........................
-------
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution per share to new investors.........................
=======
</TABLE>
If the underwriters exercise their over-allotment option in full, our
adjusted pro forma net tangible book value at January 1, 2000 would have been
$ million, or $ per share, representing an immediate increase in pro
forma net tangible book value to our existing stockholders of $ per share
and an immediate dilution to new investors of $ per share.
The following table summarizes, on a pro forma basis as of January 1, 2000,
the differences between the number of shares of common stock purchased from us,
the aggregate cash consideration paid to us and the average price per share paid
by our existing stockholders and by new investors purchasing shares of common
stock in this offering. These pro forma numbers reflect the conversion of all of
our outstanding convertible preferred stock into common stock. The calculation
below is based on an assumed initial public offering price of $ per share,
before deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 43,858,118 100.0% $15,096,695 100.0% $ .34
New investors...............................
---------- ----- ----------- -----
Total............................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
This discussion and table assume no exercise of any stock options or
warrants outstanding as of January 1, 2000. As of January 1, 2000, there were
options outstanding to purchase a total of 2,380,226 shares of common stock with
a weighted average exercise price of $2.52 per share and warrants outstanding to
purchase a total of 143,182 shares of common stock with a weighted average
exercise price of $1.17 per share. To the extent that any of these options or
warrants are exercised, there will be further dilution to new investors. If the
underwriters' over-allotment option is exercised in full, the number of shares
held by new investors will increase to shares, or % of the total number
of shares of common stock outstanding after this offering.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated balance sheet data as of fiscal year end 1998 and
1999 and the selected consolidated statement of operations data for fiscal 1997,
1998 and 1999 have been derived from audited consolidated financial statements
included in this prospectus. The selected consolidated balance sheet data as of
December 31, 1996 and fiscal year end 1997 and the selected consolidated
statement of operations data for the period from inception (August 19, 1996) to
December 31, 1996 have been derived from audited consolidated financial
statements not included in this prospectus. You should read this selected
consolidated financial data in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," our consolidated
financial statements and the notes to those statements included in this
prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 19,
1996)
THROUGH FISCAL YEAR
DECEMBER 31, ------------------------------
1996 1997 1998 1999
------------ -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales....................................................... $ -- $ -- $ 5,609 $46,911
Cost of goods sold.......................................... -- -- 2,371 15,770
------- ------- ------- -------
Gross profit................................................ -- -- 3,238 31,141
Operating expenses:
Research and development.................................. 10 1,364 4,587 8,297
Selling, general and administrative....................... 10 627 2,095 7,207
Amortization of deferred stock compensation............... -- -- 8 976
------- ------- ------- -------
Total operating expenses................................ (20) 1,991 6,690 16,480
------- ------- ------- -------
Operating income (loss)..................................... (20) (1,991) (3,452) 14,661
Interest income............................................. -- (178) (261) (402)
Interest expense............................................ -- 22 206 699
------- ------- ------- -------
Income (loss) before tax expense............................ (20) (1,835) (3,397) 14,364
Income tax expense.......................................... -- -- -- 3,324
------- ------- ------- -------
Net income (loss)........................................... $ (20) $(1,835) $(3,397) $11,040
======= ======= ======= =======
Basic net income (loss) per share........................... $ -- $ (1.04) $ (.37) $ .73
Diluted net income (loss) per share......................... $ -- $ (1.04) $ (.37) $ .25
Shares used in computing basic net income (loss) per
share..................................................... -- 1,760 9,129 15,152
Shares used in computing diluted net income (loss) per
share..................................................... -- 1,760 9,129 43,657
Pro forma basic net income (loss) per share................. $ .30
Pro forma diluted net income per share...................... $ .25
Shares used in computing pro forma basic net income per
share..................................................... 36,461
Shares used in computing pro forma diluted net income per
share..................................................... 43,657
</TABLE>
<TABLE>
<CAPTION>
AS OF FISCAL YEAR END
DECEMBER 31, ------------------------------
1996 1997 1998 1999
------------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $ 132 $ 3,778 $ 5,824 $14,706
Working capital........................................... (62) 2,045 5,209 14,281
Total assets.............................................. 181 6,023 14,014 41,958
Long-term obligations, net of current maturities.......... -- 747 2,153 6,081
Redeemable convertible preferred stock.................... -- 5,250 12,750 12,750
Total stockholders' equity (deficit)...................... $ (19) $(1,776) $(5,149) $ 8,003
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES WHICH APPEAR ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS,
PARTICULARLY UNDER THE HEADING "RISK FACTORS." PLEASE ALSO SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS." OUR FISCAL YEAR-END FINANCIAL REPORTING
PERIODS ARE A 52- OR 53- WEEK YEAR ENDING ON THE SATURDAY CLOSEST TO
DECEMBER 31ST. FISCAL 1997 HAD 53 WEEKS AND ENDED ON JANUARY 3, 1998. FISCAL
1998 HAD 52 WEEKS AND ENDED ON JANUARY 2, 1999. FISCAL 1999 HAD 52 WEEKS AND
ENDED ON JANUARY 1, 2000. ALL OF THE QUARTERLY PERIODS REPORTED IN THIS
PROSPECTUS HAD THIRTEEN WEEKS.
OVERVIEW
We design and develop proprietary, analog-intensive, mixed-signal ICs for
the rapidly growing communications industry. Our innovative IC solutions can
dramatically reduce the cost, size and system power requirements of the products
that our customers sell to their end-user customers. We currently offer
solutions that can be incorporated into communications devices, such as modems
and cellular phones, as well as cable and satellite set-top boxes, credit card
verification machines, automated teller machines, network access equipment and
remote gaming devices. Our significant customers include Intel, Lucent,
Motorola, PC-Tel, SmartLink and 3Com.
Our company was founded in 1996. Our business has grown rapidly since our
inception, as reflected by our employee headcount, which increased to 148 at the
end of fiscal 1999, from 42 at the end of fiscal 1998 and 17 at the end of
fiscal 1997. As a "fabless" semiconductor company, we rely on third-party
semiconductor fabricators to manufacture the silicon wafers that reflect our IC
solution designs. Each wafer contains numerous die, which are cut from the wafer
to create a chip for an IC solution. We also rely on third-party assemblers to
assemble and package these die prior to final product testing and shipping.
Our company is organized into two principal divisions, the Wireline Products
Division and the Wireless Products Division. Our Wireline Products Division
commenced research and development for our first IC solution, the direct access
arrangement, or DAA, in October 1996. We introduced our DAA solution in the
first quarter of fiscal 1998, and first received acceptance of this solution for
inclusion in a customer's device, which we refer to as a "design win", in
March 1998. The first commercial shipment of our DAA solution was made in
April 1998. In September 1998, we introduced an international version of our
first DAA product. Based on the success of our DAA solution, we became
profitable in the fourth quarter of fiscal 1998 and have been profitable in each
succeeding quarter through the quarter ended January 1, 2000. Substantially all
of our sales to date have been derived from sales of our various DAA solutions
and we expect to remain dependent on continued sales of DAA solutions for a
majority of our sales until we are able to diversify sales with new solutions.
In fiscal 1999, our Wireline Products Division introduced two additional IC
solutions, the voice codec and ISOmodem solutions, and our Wireless Products
Division introduced our RF synthesizer solution. In January 2000, our Wireline
Products Division introduced our ProSLIC product. We will be less dependent on
our DAA solution for future sales to the extent that these solutions, or other
solutions that we may introduce, are incorporated into devices sold by our
customers. For a further description of our solutions, please see
"Business--Products."
Since our inception, a few customers have accounted for a substantial
portion of our sales. During fiscal 1999, our three largest customers accounted
for 84% of our sales, including 62% for PC-Tel, 12% for SmartLink and 10% for
3Com. In fiscal 1998, PC-Tel accounted for 78% and 3Com accounted for 20% of our
sales. No other customer accounted for more than 10% of our sales in either of
these years. To date, substantially all of our sales have been generated through
our direct sales force. In fiscal 1998, we began to establish a network of
independent sales representatives and distributors worldwide to support our
sales and marketing activities. We anticipate that sales to these
representatives and distributors will increase as a
22
<PAGE>
percentage of our sales in future periods. However, we expect to continue to
experience significant customer concentration in direct sales to key customer
accounts until we are able to diversify sales with new customers.
The percentage of our sales to customers located outside of the United
States was 7% in fiscal 1999 and insignificant in fiscal 1998. All of our sales
to date have been denominated in U.S. dollars. We believe that a greater
percentage of our sales will be made to customers outside of the United States
as our solutions receive greater acceptance in international markets.
The sales cycle for the test and evaluation of our IC solutions can range
from 1 to 12 months or more. An additional 3 to 6 months or more may be required
before a customer ships a significant volume of devices that incorporate our IC
solution. Due to this lengthy sales cycle, we may experience a significant delay
between incurring expenses for research and development and selling, general and
administrative efforts, and the generation of corresponding sales, if any. We
intend to continue to increase our investment in research and development,
selling, general and administrative functions and inventory as we expand our
operations in the future. Consequently, if sales in any quarter do not occur
when expected, expenses and inventory levels could be disproportionately high,
and our operating results for that quarter and, potentially, future quarters
would be adversely affected.
Our limited operating history and rapid growth makes it difficult for us to
assess the impact of seasonal factors on our business. Because many of our IC
solutions are designed for use in consumer products such as PCs and cellular
telephones, we expect that the demand for our solutions will be subject to
seasonal demand resulting in increased sales in the third and fourth quarters of
each year when customers place orders to meet holiday demand. We expect to
experience seasonal fluctuations in the demand for our solutions as customer
demand increases in greater volume across our solutions offerings.
The following describes the line items set forth in our consolidated
statements of income:
SALES. Sales consists of revenue generated principally by sales of our IC
solutions. Generally, we recognize sales at the time of shipment to our
customers. Sales are deferred on shipments to distributors until they are resold
by such distributors. Our solutions typically carry a one-year warranty. Since
our inception, product returns and warranty costs have been immaterial. Our
sales are subject to variation from period to period due to the volume of
shipments made within a period and the prices we charge for our solutions. As a
product matures, we expect that the average selling price for that product will
decline. Therefore, our ability to increase sales in the future is dependent on
increased demand for our established solutions and our ability to ship larger
volumes of solutions in response to such demand, as well as customer acceptance
of newly introduced solutions.
COST OF GOODS SOLD. Cost of goods sold includes the cost of purchasing
finished silicon wafers processed by independent foundries; costs associated
with assembly, test and shipping of those products; costs of personnel and
equipment associated with manufacturing support, logistics and quality
assurance; an allocated portion of our occupancy costs; and allocable
depreciation of testing equipment. Generally, we depreciate equipment over four
years on a straight line basis. We also depreciate our leasehold improvements
over the applicable lease term. Recently introduced solutions tend to have
higher cost of goods sold per unit due to initially low production volumes
required by our customers and higher costs associated with new package
variations. Generally, as production volumes for a solution increase, unit
production costs tend to decrease as our semiconductor fabricators and
assemblers achieve greater economies of scale for that solution. Additionally,
the cost of wafer procurement, which is a significant component of cost of goods
sold, varies cyclically with overall demand for semiconductors. The
semiconductor industry has recently experienced a period of high demand,
resulting in higher wafer procurement costs.
RESEARCH AND DEVELOPMENT. Research and development expense consists
primarily of compensation and related costs of employees engaged in research and
development activities, as well as an allocated portion of our occupancy costs
for such operations. We depreciate our research and development
23
<PAGE>
equipment over four years and amortize our purchased software from
computer-aided design tool vendors over four years. Development activities
include the creation of test methodologies to assure compliance with required
specifications. We have granted stock options or directly issued stock to patent
attorneys and outside technical consultants for services previously rendered. We
recognize stock-based compensation expense for these non-employees based on the
deemed fair value of the options or stock at the date of grant.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense consists primarily of personnel-related expenses, related allocable
portion of our occupancy costs, sales commissions to independent sales
representatives, professional fees, other promotional and marketing expenses and
reserves for bad debt. Write-offs of bad debt have been insignificant to date.
We awarded non-employee sales persons with stock in connection with a sales
incentive program that ended on January 1, 2000. We recognize stock-based
compensation expense based on the deemed fair value of the stock at the date of
grant.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. In connection with the grant
of stock options and direct issuances of stock to our employees, we recorded
deferred stock compensation of approximately $16.3 million, representing, for
accounting purposes, the difference between the deemed fair value of the common
stock and the respective exercise prices at the date of grant in the case of
stock options and the fair market value of the stock at the date of grant in the
case of direct issuances of stock. The difference is amortized over the vesting
period of the applicable option or share, generally five to eight years,
resulting in amortization expense of $975,000 and $8,000 for fiscal 1999 and
1998, respectively. The amortization of deferred stock compensation is recorded
as an operating expense.
INTEREST INCOME. Interest income reflects interest earned on average cash
and cash equivalents and investment balances.
INTEREST EXPENSE. Interest expense consists of interest on our long-term
debt and capital lease obligations.
INCOME TAX EXPENSE. We accrue a provision for federal and state income tax
at the applicable statutory rates.
24
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth our statement of income data as a percentage
of sales for fiscal 1998 and 1999. We have not presented percentage data for
fiscal 1997 since we had no sales in fiscal 1997.
<TABLE>
<CAPTION>
FISCAL FISCAL
1998 1999
-------- --------
<S> <C> <C>
Sales...................................................... 100.0 % 100.0%
Cost of goods sold......................................... 42.3 33.6
Gross profit............................................... 57.7 66.4
Operating expenses:
Research and development................................. 81.8 17.7
Selling, general and administrative...................... 37.4 15.4
Amortization of deferred stock compensation.............. .1 2.1
----- -----
Total operating expenses............................... 119.3 35.1
----- -----
Operating income (loss).................................... (61.5) 31.3
Interest income............................................ 4.7 .9
Interest expense........................................... 3.7 1.5
Income (loss) before tax expense........................... (60.6) 30.6
Income tax expense......................................... -- 7.1
----- -----
Net income (loss).......................................... (60.6)% 23.5%
===== =====
</TABLE>
COMPARISON OF FISCAL 1999 TO FISCAL 1998
SALES. Sales increased $41.3 million, or 736.4%, to $46.9 million in fiscal
1999 from $5.6 million in fiscal 1998. The increase was attributable to the
strong acceptance of our DAA family of solutions, including our international
DAA and MC-97 DAA. This increase reflected an increase in the number of
customers that purchased our IC solutions and an increase in the volume that
those customers bought.
GROSS PROFIT. Cost of goods sold increased $13.4 million, or 565.1%, to
$15.8 million in fiscal 1999 from $2.4 million in fiscal 1998, and represented
33.6% of sales in fiscal 1999 and 42.3% of sales in fiscal 1998, respectively.
Gross profit increased $27.9 million, or 861.7%, to $31.1 million in fiscal 1999
from $3.2 million in fiscal 1998. Gross margins improved to 66.4% in fiscal 1999
from 57.7% in fiscal 1998. The increase in gross profit was primarily due to the
substantial increase in sales volume. The improvement in gross margin from
fiscal 1998 to 1999 was due to volume discounts on wafer purchases that resulted
from substantial increases in our production and attractive pricing conditions
for silicon wafers due to the availability of capacity within the semiconductor
manufacturing industry during the period. Our gross margins may decline due to
the expected introduction of products competitive to our solutions and increased
demand for silicon wafer capacity within the semiconductor industry generally.
RESEARCH AND DEVELOPMENT. Research and development expense increased
$3.7 million or 80.9%, to $8.3 million in fiscal 1999 from $4.6 million in
fiscal 1998, and represented 17.7% of sales in fiscal 1999 and 81.8% of sales in
fiscal 1998. The increased research and development expense was principally due
to continued product development activities in the Wireline Division, as well as
significant increases in product development activity in the Wireless Division.
Both divisions increased spending to develop test methodologies for new
solutions. The substantial decrease in research and development expense as a
percentage of sales reflected our emergence from the development stage with
modest fiscal 1998 sales compared to substantial sales growth in fiscal 1999. We
expect that research and development expense will increase in absolute dollars
in future periods as we develop new IC solutions, and may fluctuate as a
percentage of sales due to significant changes in our sales volume and new
product development initiatives. During fiscal 1999, we recorded approximately
$196,000 of stock-based compensation expense in
25
<PAGE>
connection with grants of stock options and direct issuances to outside patent
attorneys and technical consultants.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased $5.1 million or 244.0%, to $7.2 million in fiscal 1999 from
$2.1 million in fiscal 1998, and represented 15.4% of sales in fiscal 1999 and
37.4% of sales in fiscal 1998. The increase in the dollar amount of selling,
general and administrative expense was principally attributable to increased
staffing. The decrease in selling, general and administrative expense as a
percentage of sales was due to substantially higher sales levels in fiscal 1999.
We expect that selling, general and administrative expense will increase in
absolute dollars in future periods as we expand our sales channels, marketing
efforts and administrative infrastructure. We also expect our legal expenses to
increase as a result of the infringement lawsuit we filed against Analog Devices
and 3Com in January 2000. This lawsuit may also cause our sales to 3Com to
decline. In addition, we expect selling, general and administrative expenses to
fluctuate as a percentage of sales because of (1) the likelihood that indirect
distribution channels, which entail the payment of commissions, will account for
a larger portion of our sales in future periods; (2) fluctuating usage of
advertising to promote our solutions and, in particular, our newly introduced
solutions; and (3) potential significant variability in our future sales volume.
During fiscal 1999, we recorded approximately $70,000 of stock-based
compensation expense for awards of stock to non-employee sales persons in
connection with a sales incentive program that ended January 1, 2000.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. We have recorded deferred
stock compensation for the difference between the exercise price of certain
option grants, or the issuance price of certain direct issuances of stock, and
the deemed fair value of our common stock at the time of such grants or
issuances. We are amortizing this amount over the vesting periods of the
applicable options or restricted stock, which resulted in amortization expense
of $975,000 for fiscal 1999 and $8,000 for fiscal 1998. Our amortization expense
increased in fiscal 1999 due to an increase in deferred stock compensation
recorded in fiscal 1999 for options and restricted stock issued in fiscal 1999.
INTEREST INCOME. Interest income was $402,000 in fiscal 1999 as compared to
$261,000 in fiscal 1998. The increase in interest income was primarily due to
higher cash balances invested in short-term investments.
INTEREST EXPENSE. Interest expense was $699,000 in fiscal 1999 as compared
to $206,000 in fiscal 1998. The increase in interest expense was primarily due
to higher levels of debt and lease financing used to finance capital
expenditures, relating to the acquisition of IC testing equipment and leasehold
improvements.
INCOME TAX EXPENSE. Our effective tax rate was 23.1% for fiscal 1999. We
had sufficient net operating loss tax carryforwards available from our
development stage operations to offset any tax liability during fiscal 1998. For
fiscal 1999, utilization of the remaining net operating loss carryforward and,
to a lesser extent, full utilization of prior and current year research and
development tax credits reduced our effective tax rates from full corporate
rates. We expect to pay a full corporate income tax rate of approximately 38%
during future periods.
COMPARISON OF FISCAL 1998 TO FISCAL 1997
SALES. Sales were $5.6 million in fiscal 1998. We did not have any sales in
fiscal 1997. Sales in fiscal 1998 were attributable to the introduction of our
first DAA product in March 1998.
GROSS PROFIT. Cost of goods sold was $2.4 million in fiscal 1998 and gross
profit was $3.2 million in 1998. Gross margins were 57.7% in fiscal 1998.
RESEARCH AND DEVELOPMENT. Research and development expense increased
$3.2 million, or 236.3%, to $4.6 million in fiscal 1998 from $1.4 million in
fiscal 1997, and represented 81.8% of sales in fiscal 1998.
26
<PAGE>
The increase in the dollar amount of research and development expense was
primarily due to increased engineering staffing from 10 to 20 people, in
addition to product development expenses related to the release of our first IC
solutions.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased $1.5 million, or 234.1%, to $2.1 million in fiscal 1998 from
$627,000 in fiscal 1997, and represented 37.4% of sales in fiscal 1998. The
increase in the dollar amount of selling, general and administrative expense was
principally attributable to increased staffing, moving and relocation expenses
and provisions for bad debt reserves on initial product shipments.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. Amortization of deferred stock
compensation expense was $8,000 in fiscal 1998. No deferred stock compensation
expense was recorded in fiscal 1997.
INTEREST INCOME. Interest income was $261,000 in fiscal 1998 as compared to
$178,000 in fiscal 1997. The increase in interest income was primarily due to
higher invested cash balances on average during the period.
INTEREST EXPENSE. Interest expense was $206,000 in fiscal 1998, compared to
$22,000 in fiscal 1997. The increase in interest expense was primarily due to
higher levels of debt and lease financing related to the various financing
lines. The proceeds of such lines were used to finance capital expenditures,
consisting principally of acquisitions of IC testing equipment, computer-aided
design software tools and leasehold improvements.
INCOME TAX EXPENSE. We did not incur liabilities for income taxes in fiscal
1997 or fiscal 1998 due primarily to operating losses incurred in each of those
years.
27
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth our unaudited statement of operations data
for each of the eight quarters in the period ended January 1, 2000, as well as
such data expressed as a percentage of our sales for the quarters presented.
This unaudited quarterly information has been prepared on the same basis as our
audited financial statements and, in the opinion of our management, reflects all
normal recurring adjustments that we consider necessary for a fair presentation
of the information for the periods presented. Operating results for any quarter
are not necessarily indicative of results for any future period. Because our
sales during the first and second quarters of fiscal 1998 were immaterial, data
regarding quarterly operations for such periods as a percentage of sales has
been excluded from the table below.
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1999
----------------------------------------- -----------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Sales.............................. $ -- $ 161 $ 1,099 $4,349 $6,320 $7,543 $14,574 $18,474
Cost of goods sold................. -- 127 581 1,663 2,415 2,866 4,582 5,907
------- ------- ------- ------ ------ ------ ------- -------
Gross profit....................... -- 34 518 2,686 3,905 4,677 9,992 12,567
Operating expenses:
Research and development......... 788 1,270 1,276 1,253 1,293 1,597 2,109 3,298
Selling, general and
administrative................. 286 490 551 768 1,132 1,500 2,105 2,470
Amortization of deferred stock
compensation................... -- -- 1 7 33 116 254 573
------- ------- ------- ------ ------ ------ ------- -------
Total operating expenses....... 1,074 1,760 1,828 2,028 2,458 3,213 4,468 6,341
------- ------- ------- ------ ------ ------ ------- -------
Operating income (loss)............ (1,074) (1,726) (1,310) 658 1,447 1,464 5,524 6,226
Interest income.................... (41) (52) (93) (75) (63) (75) (98) (166)
Interest expense................... 33 49 55 69 120 140 217 222
------- ------- ------- ------ ------ ------ ------- -------
Income (loss) before tax expense... (1,066) (1,723) (1,272) 664 1,390 1,399 5,405 6,170
Income tax expense................. -- -- -- -- 322 323 1,251 1,428
------- ------- ------- ------ ------ ------ ------- -------
Net income (loss).................. $(1,066) $(1,723) $(1,272) $ 664 $1,068 $1,076 $ 4,154 $ 4,742
======= ======= ======= ====== ====== ====== ======= =======
</TABLE>
AS A PERCENTAGE OF SALES:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1999
------------------- -----------------------------------------
THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................... 52.9 38.3 38.2 38.0 31.4 32.0
------ ----- ----- ----- ----- -----
Gross profit......................................... 47.1 61.7 61.8 62.0 68.6 68.0
Operating expenses:
Research and development........................... 116.1 28.8 20.5 21.2 14.5 17.9
Selling, general and administrative................ 50.1 17.7 17.9 19.9 14.5 13.4
Amortization of deferred stock compensation........ .1 .1 .5 1.5 1.7 3.1
------ ----- ----- ----- ----- -----
Total operating expenses......................... 166.3 46.7 38.9 42.6 30.7 34.4
------ ----- ----- ----- ----- -----
Operating income (loss).............................. (119.2) 15.1 22.9 19.4 38.0 33.7
Interest income...................................... 8.5 1.7 1.0 1.0 .7 .9
Interest expense..................................... 5.0 1.6 1.9 1.9 1.5 1.2
------ ----- ----- ----- ----- -----
Income (loss) before tax expense..................... (115.7) 15.3 22.0 18.5 37.1 33.4
Income tax expense................................... -- -- 5.1 4.3 8.6 7.7
------ ----- ----- ----- ----- -----
Net income (loss).................................... (115.7)% 15.3% 16.9% 14.3% 28.6% 25.7%
====== ===== ===== ===== ===== =====
</TABLE>
28
<PAGE>
Our quarterly results of operations have varied from quarter-to-quarter in
the past and we expect them to vary from quarter-to-quarter in future periods.
These changes are principally due to (1) the timing and volume of orders from
our customers, (2) the timing of volume production of the products into which
our IC solutions are incorporated and (3) the capacity and cost environment in
the semiconductor industry applicable to our procurement of services from
third-party foundries and assembly contractors. We have experienced declining
average selling prices for our products while the costs of third-party foundries
and assembly contractors have increased or decreased based on relative market
demand for capacity in the semiconductor manufacturing industry.
Beginning in the fourth quarter of fiscal 1998, and continuing through the
first and second quarter of fiscal 1999, our sales have increased due to greater
market acceptance of our DAA IC solutions. In the third quarter of fiscal 1999,
our sales increased significantly due to an increase in demand for our
international DAA IC solution. Additionally, personal computer manufacturers
began to adopt the Modem Codec 97, or MC-97, standard developed by Intel for
connecting modem interface circuitry to microprocessors during this time frame.
We experienced rapid sales increase in our MC-97 modem solution during the third
quarter of fiscal 1999 due to the adoption of this emerging standard. Such
market technical standards rarely are introduced with any quarter-to-quarter
regularity and can contribute to significant changes in operating results.
Research and development expenses increased by $1.2 million, or 56.4%, to
$3.3 million in the fourth quarter of fiscal 1999 from $2.1 million in the third
quarter of fiscal 1999. This increase was principally due to new product
development activity in the Wireless Division, and, to a lesser extent,
continued product development in the Wireline Division. The number of employees
involved in research and development increased from 41 employees at the end of
the third quarter of fiscal 1999 to 62 employees at the end of the fourth
quarter, representing a 51.2% increase in staffing. An active recruiting effort
was underway during the quarter to increase staffing for new product development
activities. This increase in research and development spending also increased as
a percent of sales to 17.9% in the fourth quarter of fiscal 1999 from 14.5% of
sales in the third quarter of fiscal 1999. We believe that this rapid increase
in research and development staffing may not be sustainable in future quarterly
periods due to the limited availability of qualified mixed-signal circuit design
engineers and test development engineers.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity as of January 1, 2000 consisted of
$14.7 million in cash, cash equivalents and short-term investments, our bank
credit facilities and equipment financing facilities with three institutional
lenders.
Our bank credit facilities include a revolving line of credit available for
borrowings and letters of credit of up to the lesser of $3.0 million or 80% of
eligible accounts receivable, a separate letter of credit facility for $454,000
related to a building lease, equipment loans which provided for initial
equipment financing of up to $2.5 million and new loan facilities totaling
$4.0 million for new equipment, leasehold improvements and computer-aided design
software. At January 1, 2000, a letter of credit for $500,000 related to a
building lease was outstanding under the revolving line of credit, with no other
amounts outstanding thereunder, and $1.5 million was outstanding under the
equipment loans.
Borrowings under the revolving line of credit bear interest at the bank's
prime rate, which was 8.5% at January 1, 2000, and are payable at annual renewal
of the line. Borrowings under the equipment loan agreement bear interest at the
bank's prime rate, and are payable through January 2002. The new $4.0 million
loan facilities have no amounts outstanding as of January 1, 2000. We intend to
use these facilities for financing principally during the first quarter of
fiscal 2000. All bank facilities are secured by our accounts receivable,
inventories, capital equipment and all other unsecured assets (excluding
intellectual property). The line of credit, the separate letter of credit
facility and equipment loans contain provisions that prohibit the payment of
cash dividends and require the maintenance of specified levels of
29
<PAGE>
tangible net worth and certain financial ratios measured on a monthly basis. Any
default on one of the bank facilities will cause all of the bank facilities to
be in default under these agreements. The bank has received warrants as
consideration for providing portions of this financing.
We also have entered into agreements with three institutional lenders for
equipment financing. Under these agreements, we may borrow up to an aggregate of
$8.5 million to purchase or lease equipment, leasehold improvements and
software. At January 1, 2000, borrowings under these agreements were
$8.2 million. This indebtedness bears effective interest rates (including end of
term interest payments of $1.1 million) ranging from 12.5% to 14.6% per annum
and is secured by a security interest in specific items, principally comprised
of test equipment, and is repayable over approximately the next four years. See
Note 4 of the notes to our consolidated financial statements.
We have funded our operations to date primarily through sales of preferred
stock which have resulted in gross aggregate proceeds to us of approximately
$12.8 million, and debt financing under the credit and lease obligations
described above and cash from operations. During fiscal 1999, cash provided by
operating activities was $12.3 million, compared to $4.5 million in fiscal 1998
and $219,000 in cash utilized by operating activities in fiscal 1998 and 1997.
Capital expenditures were $9.9 million in fiscal 1999, $3.1 million in
fiscal 1998 and $2.3 million in fiscal 1997. These expenditures were incurred to
purchase semiconductor test equipment, design software and engineering tools,
and other computer equipment and software to support our business expansion. In
addition, we relocated our operations to a new facility in Austin, Texas in 1999
and incurred approximately $1.0 million in capital expenditures and leasehold
improvement expenses in connection with the build-out of this new location. We
anticipate further capital expenditures in fiscal 2000 of approximately
$14.0 million to fund test floor operations and expanded engineering product
development activities.
We believe the net proceeds of this offering, together with our existing
cash balances, credit facilities and cash generated by our operations, will be
sufficient to meet our capital requirements through at least the next
12 months, although we could be required, or could elect, to seek additional
funding prior to that time. Our future capital requirements will depend on many
factors, including the rate of sales growth, market acceptance of our solutions,
the timing and extent of research and development projects and the expansion of
our sales and marketing activities. Although we are currently not a party to any
agreement or letter of intent with respect to a potential acquisition or
strategic arrangement, we may enter into acquisitions or strategic arrangements
in the future which also could require us to seek additional equity or debt
financing. There can be no assurances that additional equity or debt financing,
if required, will be available to us on acceptable terms or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income. We do not expect that the
adoption of SFAS No. 133 will have a material impact on our financial statements
because we do not currently hold any derivative instruments.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements,
which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. The application of SAB No. 101 did not have a
material impact on our financial statements.
On March 31, 1999, the FASB issued an exposure draft entitled "Accounting
for Certain Transactions Involving Stock Compensation," which is a proposed
interpretation of APB Opinion No. 25 which has an effective date for certain
transactions of December 15, 1998. However, the exposure draft has not been
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<PAGE>
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could affect our future earnings.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the nature of our short-term investments, we have
concluded that there is no material market risk exposure.
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<PAGE>
BUSINESS
We are a leader in the design and development of proprietary,
analog-intensive, mixed-signal integrated circuits, or ICs, for the rapidly
growing global communications industry. Mixed-signal ICs are electronic
components that are capable of processing both digital signals and real-world
analog signals, such as sound and radio waves. Therefore, mixed-signal ICs are
critical components of numerous communications products, including cellular
phones, cable and satellite set-top boxes, modems and fax machines. To develop
our business rapidly, we initially focused our efforts on developing IC
solutions for the personal computer modem market. We are now applying our
mixed-signal and communications expertise to the development of IC solutions for
other high growth communications devices such as cellular telephones and network
access applications. Our world-class, mixed-signal design engineers use standard
complementary metal oxide semiconductor, or CMOS, technology to create
innovative IC solutions that can dramatically reduce the cost, size and system
power requirements of devices that our customers sell to their end-user
customers. Our expertise in analog CMOS and mixed-signal IC design allows us to
develop new and innovative products rapidly, which enables our customers to
improve their time-to-market with end products that respond to consumer demand
in the communications industry. Our significant customers include Intel, Lucent,
Motorola, PC-Tel, SmartLink and 3Com.
INDUSTRY BACKGROUND
According to Dataquest, the overall worldwide analog and mixed-signal IC
market, which includes as a subset the mixed-signal communications IC markets
that we target, surpassed $21.2 billion in 1998 and is expected to grow to more
than $39.1 billion by 2003. This growth is being driven in part by the demand
for communications services, which has increased at a rapid rate in recent years
due to a number of factors, including the growth of Internet usage, development
of new communications technologies, availability of improved communications
services at lower costs and remote access requirements for corporate networks.
This demand has fueled tremendous growth in the number of wireless and wireline
communications devices used to access these services. For example, in wireless
markets, the demand for cellular phones and other wireless devices, such as
pagers and personal digital assistants, has grown rapidly as digital wireless
services have become increasingly popular and affordable. In wireline markets,
demand has increased for communications capabilities in a wide range of
products, including personal computers, cable set-top boxes, fax machines,
credit card verification machines, automated teller machines and remote gaming
systems.
Digital communications devices typically require mixed-signal circuits that
provide analog-to-digital functionality to access the communications networks to
which they are connected. Traditional designs for communications devices have
used mixed-signal circuits built with numerous discrete analog and digital
components. While these traditional designs provide the required functionality,
they can be inefficient and inadequate for use in markets where size, price and
performance are increasingly important product differentiators. In order to
improve their competitive position, communications device manufacturers need
advanced mixed-signal IC solutions that reduce the number of discrete components
and required board space to create smaller products with improved
price/performance characteristics. Additionally, these manufacturers require
programmable ICs that can be reconfigured to comply with numerous and constantly
evolving international communications standards without altering the fundamental
design of a product.
Manufacturers of communications devices face accelerating time-to-market
demands and must adapt to evolving industry standards and new technologies.
Because analog-intensive, mixed-signal IC design expertise is difficult to find,
these manufacturers increasingly are turning to third parties to provide
advanced mixed-signal IC solutions. Designing the analog component of a
mixed-signal IC involves great complexity and difficulty, because the
performance of an analog IC depends on the creative analog expertise of
engineers to maximize speed, power, amplitude and resolution within the
constraints of standard manufacturing processes. The development of analog
design expertise typically requires years of
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practical analog design experience under the guidance of a senior engineer, and
engineers with the required level of skill and expertise are in short supply.
Many third-party IC providers lack sufficient analog expertise to develop
compelling mixed-signal IC solutions. As a result, manufacturers of
communications devices are often faced with inadequate mixed-signal solutions
and are challenged to find third-party providers that can supply them with
mixed-signal ICs with greater functionality, smaller size and lower power
requirements all at a reduced cost and time-to-market.
THE SILICON LABORATORIES SOLUTION
Our engineers apply their expertise in analog and mixed-signal IC design to
create analog-intensive, mixed-signal IC solutions that communications device
manufacturers use in numerous leading-edge applications. We combine this analog
and mixed-signal expertise with standard CMOS manufacturing process technology
to develop innovative mixed-signal IC solutions for our customers. We are a
fabless semiconductor company and rely on leading semiconductor foundries to
produce our IC solutions, which allows us to focus our resources on enhancing
and extending our core design capabilities.
Our IC solutions provide our customers with the following benefits:
DRAMATICALLY IMPROVED SIZE AND PRICE/PERFORMANCE CHARACTERISTICS. Our
solutions are highly integrated, typically replacing existing alternatives that
use multiple costly discrete components, and use standard CMOS manufacturing
process technology, which typically is less expensive than other competing
technologies. As a result, we can offer competitively priced solutions that
allow our customers to reduce the number of discrete components used in their
products while offering increased reliability, lower power consumption, and
smaller sizes. Additionally, some of our IC solutions can be programmed to
accommodate emerging and differing global standards.
IMPROVED TIME-TO-MARKET. We enable our customers to rapidly meet the demand
for their end-user communications devices by providing them with outsourced
mixed-signal solutions that incorporate our industry-leading designs. Because we
design our IC solutions to be integrated into the products of multiple
manufacturers and we conduct extensive research and development to ensure that
our products conform to evolving technical standards, our customers are able to
quickly integrate our solutions into their designs. By reducing the number of
discrete components, our customers can also reduce the number of outside
suppliers required for their products. As a result, our customers can reduce the
time-to-market for their end-user communications devices. Furthermore, our IC
solutions are tested prior to customer delivery to ensure their compliance with
applicable specifications of the Federal Communications Commission, or FCC, and
international regulators, minimizing complications and delays for our customers
throughout their internal testing process.
ATTRACTIVE NEW PRODUCT OPPORTUNITIES. Our space-saving and cost-efficient
IC solutions allow our customers to create smaller and more cost-effective
products for use in numerous emerging communications markets. Our IC solutions
provide enhanced communication capabilities at lower costs and with smaller form
factors for numerous evolving applications, including cellular communications,
Internet telephony and remote monitoring systems. For example, due to the
dramatically reduced size and cost of our silicon DAA IC solutions, our
customers are able to cost-effectively incorporate modems into multiple new
applications such as remote gaming systems, smart vending machines and set-top
boxes.
STRATEGY
Our objective is to be a leading supplier of proprietary analog-intensive
mixed-signal IC solutions for the communications industry. To achieve this goal,
we are pursuing the following strategies:
TARGET MULTIPLE HIGH-GROWTH COMMUNICATIONS MARKETS. We intend to continue
to identify large and sustainable opportunities in emerging high-growth
communications markets and develop mixed-signal IC solutions that address the
needs of suppliers of communications devices in those markets. We strive to
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<PAGE>
develop creative IC solutions that require complex analog design in order to
address opportunities with high revenue and profit potential and relatively long
life-cycles. Our core technological capabilities were initially focused on the
PC modem market and we are currently applying these capabilities to expand into
other high growth communications markets such as cellular phones, set-top boxes,
central office lines, interactive gaming systems and personal digital
assistants.
LEVERAGE OUR EXISTING DESIGNS TO OFFER COMPELLING SOLUTIONS. We consider
our ability to leverage our proprietary IC designs a competitive advantage. Many
of our designs are reusable in the development of new mixed-signal solutions. By
leveraging these designs and our extensive experience, we are able to rapidly
introduce new analog-intensive, mixed-signal IC solutions that are smaller in
size and require less power in the final device than traditional solutions. We
enable our customers to reduce production costs, board space and the number of
processes required for the manufacture of their devices while improving yields,
performance and reliability. For example, our silicon direct access arrangement
solution was introduced in 1998, and has already been modified for use in our
ISOmodems and adapted for use with our voice codec solutions. We intend to
continue to use our existing IC designs and methodologies as building blocks for
new IC solutions to rapidly address new and emerging market opportunities.
ATTRACT AND RETAIN TOP MIXED-SIGNAL TECHNICAL TALENT. We are committed to
recruiting and retaining technical personnel who possess the expertise necessary
to identify compelling market opportunities for highly innovative mixed-signal
ICs and to design, develop and market these IC solutions to capitalize on those
opportunities. We believe we have assembled a world-class team of engineers with
the exceptional analog design expertise required to provide our customers with
solutions that offer superior price/ performance characteristics. We believe our
senior engineer expertise, combined with our focus on leading-edge technology
and innovative solutions to complex problems, enhances our attractive and highly
stimulating collaborative work environment. We believe this appealing work
environment provides us with a competitive advantage in recruiting. We intend to
continue to promote this attractive work environment and to offer competitive
compensation to attract and retain the best mixed-signal IC technical talent
available.
CAPITALIZE ON STANDARD MANUFACTURING PROCESSES AND FABLESS SEMICONDUCTOR
MODEL. High volume CMOS manufacturing process technology is widely available at
semiconductor foundries around the world. We intend to continue to utilize
standard CMOS manufacturing process technology to develop advanced mixed-signal
IC solutions that can be reliably manufactured in volume and decrease the
time-to-market of our new products at a significant cost advantage. Our fabless
model allows us to focus our resources on the development of proprietary and
innovative mixed-signal designs, while minimizing capital and operating
infrastructure requirements.
EXTEND TECHNOLOGICAL LEADERSHIP. We believe that we have established a
reputation as a technological leader in the design and development of
analog-intensive mixed-signal ICs. We are actively extending our intellectual
property position by aggressively investing in research and development and
utilizing our mixed-signal expertise to create innovative IC solutions. We
currently hold one U.S. patent, with 56 U.S. patent applications pending, and we
continue to actively pursue the filing of additional patent applications to
cover our intellectual property advancements. We intend to leverage our talent
pool of engineers, and continue to invest significant resources in recruiting
and developing expertise in mixed-signal IC design to extend our proprietary
intellectual property portfolio.
EXPAND GLOBAL SALES EFFORTS. We plan to aggressively pursue a global
multi-channel distribution strategy. We believe there are significant
international opportunities for both our wireline and wireless IC solutions and
we intend to continue to expand our global marketing and distribution efforts to
address the range of markets and applications for our innovative mixed-signal
solutions. While substantially all of our sales in fiscal 1999 were made to
customers based in the United States, we intend to increase our international
sales through our international direct sales office and our network of
independent sales representatives and distributors.
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PRODUCTS
We provide mixed-signal ICs for use in both wireline and wireless
communications devices and applications. Our products integrate the numerous
discrete components required by most existing mixed-signal circuits for
communications devices into single chips or chipsets. By doing so, we are able
to create products that:
- require less board space;
- can offer superior performance;
- provide increased reliability;
- reduce system power requirements; and
- reduce costs.
WIRELINE PRODUCTS
Many of our wireline products are designed for use in analog modems, which
enable the transmission of digital data signals over wireline telephone networks
and are used in the vast majority of Internet connections. Three fundamental
components of the modem provide the requisite functionality: software
algorithms; a direct access arrangement, or DAA; and an analog/digital
converter, or codec. Complex software algorithms mitigate the impairments found
in the telephone network, such as noise interference and echoes. Since the
telephone lines fundamentally transmit analog signals, and computers use digital
transmissions, modems require analog-to-digital and digital-to-analog
converters, or coders/decoders, that are referred to as codecs. A modem
transmits analog signals from a codec to the telephone line through a DAA. We
offer a variety of modem products which include the DAA and codec functions and
which are software programmable to meet international regulatory specifications.
- DAA. Government regulation requires electrical isolation between the
telephone line and the local electrical power system. Isolation is
required for safety, superior sound quality, and to prevent harm to the
telephone network from electrical surges. With the introduction of
telecommunications deregulation, consumers were allowed to connect
directly to the telephone network. However, they were required to use a
device that met FCC part 68 specifications, which govern all electronic
products sold in the United States intended for connection to the
telephone network. Traditional DAA solutions met FCC requirements, but
were designed inefficiently and contained a variety of discrete
components. Our silicon DAA is the first to integrate the bulky
transformer, relays, and opto-isolators traditionally found in a modem's
isolation circuitry, and achieve FCC part 68 compliance. We were able to
design our solution in CMOS, creating a DAA solution with attractive
process characteristics for our customers. Our DAA solution is lower in
cost, uses substantially less board space than alternative solutions, and
is programmable to meet international standards.
- CODEC. Traditionally, analog modems included specialized hardware chips
known as a digital signal processor, or DSP, which contained a modem's
software algorithms. The DSP is typically the most expensive hardware
component in traditional analog modems. In an effort to reduce costs, a
new generation of modems, known as soft modems, has evolved which enable
the main microprocessor in a personal computer to run the software
algorithms, thus eliminating the need for a DSP chip. The software modem's
digital interface between the codec and the personal computer in a soft
modem can take one of two forms. The first and most popular is the PCI
interface standard. Soft modems using a PCI interface typically require an
additional chip to make the digital codec interface compatible with a PCI
interface. Alternatively, the MC-97, a new modem interface standard
promoted by Intel, eliminates the need for this additional chip. With an
MC-97 compliant codec, soft modem hardware can interface directly with a
microprocessor, further reducing costs.
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Our DAA products, which include codecs, can be used with either the PCI or
MC-97 interface standards.
We also design innovative products for network access applications. In
January 2000, we announced the ProSLIC, our first solution targeting this
market.
- SUBSCRIBER LINE INTERFACE CIRCUIT, OR SLIC. SLICs provide the analog
telephone interface on the source end of the telephone line. The primary
functions of a SLIC are to ring and provide power and signaling (such as
caller ID, dial tone and busy tone) to the telephone. Traditionally, SLICs
have been produced with an expensive high voltage IC accompanied by a CMOS
codec IC and requiring as many as five voltage sources. Our ProSLIC has
been designed as one integrated CMOS chip, eliminating the need for a high
voltage IC and requiring only two voltage sources. The result is a
smaller, more reliable and less expensive solution.
The following table summarizes the IC solutions for the wireline market that
we currently offer to customers:
<TABLE>
<CAPTION>
WIRELINE PRODUCTS
(INTRODUCTION
DATE) DESCRIPTION APPLICATIONS
<S> <C> <C>
Direct Access Provides both the functionality of a DAA and - personal computer modems
Arrangement (DAA) a codec. A DAA provides electrical isolation - fax machines
between a wireline device, such as a modem, - host modems
(First Quarter 1998) and the telephone line to guard against - phone-line interface systems
power surges in the telephone line, while a - handheld organizers
codec provides analog-to-digital and - set-top boxes
digital-to-analog conversion. Traditional
DAA products contain as many as 35 discrete
components to provide functionality
comparable to that which we provide in a
single chipset.
International DAA Provides the same functionality as our DAA, - same as DAA
but is programmable for differing
(Third Quarter 1998) international telephone standards, which
enables manufacturers to distribute their
products globally without costly
country-specific design modifications.
MC-97 International Provides the same functionality as our - personal computer modems
DAA International DAA, but features a MC-97 - embedded modems
(Modem Codec 97) interface.
(First Quarter 1999)
Voice Codec Encodes analog signals within the voice - data/fax/voice modems
frequency range into digital signals and - speaker phones
(Second Quarter 1999) decodes digital voice signals back into - fax machines
analog signals. When combined with the DAA - voice recognition systems
chipset, the Voice Codec permits voice - Web telephony products
communications to be digitized and carried - video conferencing systems
simultaneously with data traffic.
</TABLE>
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<TABLE>
<CAPTION>
WIRELINE PRODUCTS
(INTRODUCTION
DESCRIPTIONTE) APPLICATIONS
<S> <C> <C>
ISOmodem The ISOmodem is a miniaturized modem that - credit card verification
uses our DAA technology and operates at a systems
(Third Quarter 1999) speed of up to 2400 bits per second. The - set-top boxes
ISOmodem is designed to provide quick - smart vending machines
network access for devices with limited data - pay-per-view systems
transmission requirements. For such devices, - postage meters
a low access transmission speed of 2400 bits - pay phones
per second is generally sufficient to - industrial power meters
sustain performance while also providing - security systems
more rapid connect times. The ISOmodem
contains a programmable line interface that
meets global telephone line requirements.
ProSLIC The ProSLIC provides the analog telephone - PBX systems
interface on the source end of the telephone - cable telephony
(1st Quarter which provides dial tone, busy tone, caller - wireless local loop
2000) ID and ring signal. It is programmable to applications
meet international telephone standards, - voice over Internet protocol
which enables manufacturers to distribute - digital broadband to analog
their products globally without costly telephone adapters
country-specific design modifications. Our - voice over digital subscriber
ProSLIC solution is currently designed for lines
short-haul applications.
</TABLE>
WIRELESS PRODUCTS
A variety of cellular communications standards are employed around the
world. The most popular standard used today is the Global System for Mobile
Communications, or GSM, standard, which was first deployed in Europe and is now
available in several countries throughout the world. Manufacturers continue to
introduce new cellular phone models that offer smaller form factors and longer
battery life at lower costs. These market dynamics drive a need for new highly
integrated electronics that reduce component count and consume less power. Our
products are designed to serve this need.
37
<PAGE>
The following table summarizes the IC solutions for the wireless market that
we currently offer to customers:
<TABLE>
<CAPTION>
WIRELESS PRODUCTS
(INTRODUCTION
DATE) DESCRIPTION APPLICATIONS
<S> <C> <C>
RF Synthesizer for A frequency synthesizer generates high - wireless local area networking
General Application fidelity frequency signals that are used in - wireless modems
wireless communications systems to select a - wireless meter readers
(Fourth Quarter 1999) particular radio channel. Existing frequency - handheld point-of-sale
synthesizers contain discrete voltage terminals
control modules and as many as 30 discrete
electronic components to provide
functionality comparable to what we provide
in a monolithic IC. Our general purpose
synthesizer can be programmed to address
multiple wireless communications
applications.
RF Synthesizer for GSM Provides the same functionality as the RF - GSM cellular phones
Synthesizer for General Application but has - GPRS data communications
(Fourth Quarter 1999) been optimized for cellular phones operating devices
on the GSM standard. This synthesizer is
capable of providing dual-band synthesis and
very fast settling times, allowing the phone
to quickly lock to a desired channel. This
RF synthesizer is compatible with General
Packet Radio Service, or GPRS standard,
which is the data communications protocol
employed by the GSM standard. GPRS brings
wireless Internet access to GSM users
through data transfer and signaling over GSM
radio networks.
</TABLE>
CUSTOMERS, SALES AND MARKETING
We market our products to original equipment manufacturers and other
solutions providers for applications in both the wireline and wireless
communications markets. The following is a list of customers that have purchased
our solutions and incorporated them into products or devices offered to their
customers:
<TABLE>
<S> <C> <C>
Ambient Motorola 3Com
Intel PC-Tel Topic
Lucent SmartLink Zyxel
</TABLE>
To date, we have sold substantially all of our IC solutions through our
direct sales force. We maintain three sales offices in North America and conduct
European direct sales through our United Kingdom subsidiary. Our direct sales
force includes regional sales managers in the field and area business managers
at our headquarters to further support customer communications. Many of these
managers have engineering degrees. Our password-protected field sales
organization Web site, which includes technical documentation, backlog
information, order status, product availability and new product introduction
information, supports communications with our field sales organization.
Additionally, we provide direct communication to all field sales personnel as
part of a structured sales communications program.
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<PAGE>
We also utilize independent sales representatives and distributors to
generate sales of our products. We have relationships with many independent
sales representatives and distributors worldwide whom we have selected based on
their understanding of the mixed-signal IC marketplace and their ability to
provide effective field sales support for our products. To date, sales to these
representatives and distributors have accounted for a small portion of our
sales.
Our marketing efforts are targeted at both identified industry leaders and
emerging market participants. Marketing activities are supported by a focused
communications effort that targets editorial coverage in leading trade and
business publications. Our external Web site includes data sheets and supporting
product information, press releases and a company overview. These activities, in
conjunction with customer contacts, help prompt requests for evaluation boards
and sample products, which are fulfilled through our corporate headquarters as
an integrated part of our sales efforts.
Due to the complex and innovative nature of our IC solutions, we employ
experienced applications engineers who work closely with each customer to
support the design-win process, and can significantly accelerate the customer's
time-to-market. A design-win occurs when a customer has designed our IC solution
into its product architecture. A considerable amount of effort to assist the
customer in incorporating our IC solutions into its products typically is
required prior to any sale. In many cases, our innovative IC solutions require
significantly different implementations than existing approaches and, therefore,
successful implementations may require extensive communication with potential
customers. The amount of time required to achieve a design-win can vary
substantially depending on a customer's development cycle, which can be
relatively short (such as three months) or very long (such as two years) based
on a wide variety of customer factors. Due to this extensive design-win process,
once a completed design architecture has been implemented and produced in high
volumes, our customers are reluctant to significantly alter their designs. We
believe this promotes relatively long product life cycles for our ICs and high
barriers to entry for competitive products, even at lower price levels for such
competing products. Finally, our close collaboration with our customers provides
us with knowledge of derivative product ideas or completely new product line
offerings that may not otherwise arise in other new product discussions.
RESEARCH AND DEVELOPMENT
Through our research and development efforts, we apply our world-class
analog and mixed-signal engineering talent and expertise to create new IC
solutions that integrate functions typically performed inefficiently by multiple
discrete components. This integration generally results in lower costs, smaller
die sizes, lower power demands and enhanced price/performance characteristics.
We attempt to reuse successful techniques for integration in new applications
where similar benefits can be realized. Reliable and precise analog and
mixed-signal IC solutions can only be developed by teams of engineers under the
direction of senior engineers with significant analog experience who are
familiar with the intricacies of designing these ICs for commercial volume
production. The development of test methodologies is a critical activity in
releasing a new product for commercial success. We believe that we have
attracted some of the best engineers in our industry. As of January 1, 2000, we
had 62 employees involved in research and development.
TECHNOLOGY
Our product development process facilitates the design of highly innovative
mixed-signal IC solutions. Our senior engineers start the product development
process by forming an understanding of our customers' products and then design
alternatives for decreasing power, size and cost requirements. Our engineers'
deep knowledge of existing and emerging communications standards and performance
requirements help us to assess the technical feasibility of a particular IC
solution. We target solutions where Silicon Laboratories can provide compelling
product improvements. Once we have solved the primary challenges, our field
engineers continue to work closely with our customers' design teams to maintain
and develop an understanding of our customers' needs, allowing us to formulate
derivative products and features.
In providing mixed-signal solutions for our customers, we believe our key
competitive advantages are: (1) analog CMOS design expertise; (2) digital signal
processing design expertise; and (3) our broad
39
<PAGE>
understanding of communication systems technology and trends. To fully
capitalize on these advantages, we have assembled a world-class development team
with exceptional analog and mixed-signal design expertise led by accomplished
senior engineers.
ANALOG CMOS DESIGN EXPERTISE
We believe that our most significant core competency is our world-class
analog design capability. Additionally, we strive to design all of our IC
solutions in CMOS processes. There are several modern process technologies for
manufacturing semiconductors including CMOS, Bipolar, BiCMOS, silicon germanium
and gallium arsenide. While it is significantly more difficult to design analog
ICs in CMOS, CMOS provides multiple benefits versus existing alternatives
including significantly reduced cost, reduced technology risk and greater
worldwide foundry capacity. CMOS is the most commonly used process technology
for manufacturing digital ICs and as a result is most likely to be used for the
manufacturing of ICs with finer line geometries, which enable smaller and faster
IC solutions. By designing our ICs in CMOS, we enable our solutions to benefit
from this trend towards finer line geometries, which lowers the cost of the
digital circuitry in our solutions.
Designing analog ICs is significantly more complicated than designing
digital ICs. While advanced software tools exist to help automate digital IC
design, there are far fewer tools for advanced analog IC design. In many cases,
our pioneering efforts in analog circuit design begin at the fundamental
transistor level. We believe that we have a demonstrated ability to design the
most difficult analog and RF circuits using standard CMOS technologies. For
example, our DAA product family replaces expensive, discrete modem components,
such as transformers, relays and opto-isolators, with highly integrated CMOS
mixed-signal IC solutions. Similarly, expensive cellular phone components such
as oscillators are replaced by our integrated CMOS frequency synthesizer
products.
DIGITAL SIGNAL PROCESSING DESIGN EXPERTISE
We consider the partitioning of a circuit's functionality to be a
proprietary and creative design technique. Our digital signal processing design
expertise maximizes the price/performance characteristics of both the analog and
digital functions and allows our ICs to work in an optimized manner to
accomplish particular tasks. Generally, we surround core analog circuitry with
inexpensive digital CMOS transistors, which allows our ICs to perform the
required analog functions with increased digital capabilities. For example, our
ProSLIC product is designed to function more efficiently than traditional
solutions for the source end of the telephone line which involve a two chip
combination requiring more board space and numerous external components. The
ProSLIC product is partitioned by combining a core analog design that provides
analog-to-digital conversion and digital-to-analog conversion with optimized
digital signal processing functions such as data compression, data expansion,
filtering and tone generation. In this manner, we can isolate the higher voltage
required to ring a telephone in low-cost, off-chip high voltage transistors,
thereby enabling us to fulfill the remaining core functions with a single chip.
UNDERSTANDING OF COMMUNICATION SYSTEMS TECHNOLOGY AND TRENDS
Our expertise and focus on communications IC solutions is rooted in our
founders' previous experience at AT&T Bell Labs working in CMOS design for
communications applications. This expertise, which we consider a competitive
advantage, is the foundation of our in-depth understanding of the technology and
trends that impact communications systems and markets. Therefore, we believe we
have a unique ability to predict product evolution and design compelling IC
solutions for communications manufacturers. Our understanding of the role of
analog/digital interfaces within communications systems and the key domestic and
international telecommunications standards that must be supported are particular
areas of expertise.
MANUFACTURING
As a fabless IC manufacturer, we conduct IC design and development in our
facilities in the United States and electronically transfer our proprietary IC
designs to third-party semiconductor fabricators who process silicon wafers to
produce the ICs that we design. Our IC designs use industry-standard
complementary metal oxide semiconductor, or CMOS, manufacturing process
technology to achieve a
40
<PAGE>
level of performance normally associated with more expensive special purpose IC
fabrication technology. We believe the use of CMOS technology facilitates the
rapid production of our IC solutions within a lower cost framework. Our IC
production employs submicron process geometries which are readily available from
leading foundry suppliers worldwide, thus ensuring the availability of
manufacturing capability over our products' life cycles. We currently rely
solely on Taiwan Semiconductor Manufacturing Co. to manufacture all of our
semiconductor wafers. We are in the process of qualifying Vanguard International
Semiconductor, an affiliate of Taiwan Semiconductor Manufacturing Co., as an
additional semiconductor fabricator and such qualification is not complete. In
anticipation of successfully qualifying Vanguard, Vanguard is currently
producing a majority of our current work in progress.
Once the silicon wafers have been produced, they are shipped directly to our
third-party assembly subcontractors. The assembled ICs are then forwarded for
final testing, either at our facilities or through outsourced testing vendors,
prior to shipping to our customers. We believe that our fabless manufacturing
model significantly reduces our capital requirements and allows us to focus our
resources on the design, development and marketing of our IC solutions.
COMPETITION
The markets for semiconductors generally, and for analog and mixed-signal
ICs in particular, are intensely competitive. We believe the principal
competitive factors in our industry are:
<TABLE>
<S> <C>
- - level of integration; - intellectual property;
- - product capabilities; - customer support;
- - reliability; - reputation; and
- - price; - time-to-market.
</TABLE>
We anticipate that the market for our products will continually evolve and
will be subject to rapid technological change. In addition, as we target and
supply products to numerous wireline and wireless communications markets and
applications, we face competition from a relatively large number of competitors.
Across our product offerings, we compete with Advanced Micro Devices, Analog
Devices, Conexant, Delta Integration, Fujitsu, Infineon Technologies, Krypton
Isolation, National Semiconductor, Philips and Texas Instruments, among others.
We expect to face competition in the future from our current competitors, other
manufacturers and designers of semiconductors, and innovative start-up
semiconductor design companies. In addition, our customers could develop
products or technologies internally that would replace their need for our
products and would become a source of competition. As the markets for
communications products grow, we also may face competition from traditional
communication device companies. These companies may enter the mixed-signal
semiconductor market by introducing their own products, including components
within their products that would eliminate the need for our IC solutions, or
entering into strategic relationships with or acquiring other existing IC
providers.
Many of our competitors and potential competitors have longer operating
histories, greater name recognition, access to larger customer bases and
significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than us. Current and potential
competitors have established or may establish financial and strategic
relationships between themselves or with existing or potential customers,
resellers or other third parties. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share.
INTELLECTUAL PROPERTY
Our future success depends in part upon our proprietary technology. We seek
to protect our technology through a combination of patents, copyrights, trade
secrets, trademarks and confidentiality procedures. As of January 1, 2000, we
had been granted one United States patent in the IC field. We have also filed 56
additional U.S. patent applications. There can be no assurance that patents will
ever be issued for these applications. Furthermore, it is possible that any
patents held by us may be invalidated,
41
<PAGE>
circumvented, challenged or licensed to others. In addition, there can be no
assurance that such patents will provide us with competitive advantages or
adequately safeguard our proprietary rights.
In addition, we claim copyright protection for proprietary documentation
used in our products. We register the visual image of each IC that we
manufacture in commercial quantities with the United States Copyright Office. We
have registered the Silicon Laboratories logo as a trademark in the United
States. All other trademarks, service marks or trade names appearing in this
prospectus are the property of their respective owners. We also attempt to
protect our trade secrets and other proprietary information through agreements
with our customers, suppliers, employees and consultants, and through other
security measures. We intend to protect our rights vigorously, but there can be
no assurance that our efforts will be successful. In addition, the laws of
certain countries in which our products are sold may not protect our products
and intellectual property rights to the same extent as the laws of the United
States.
While our ability to effectively compete depends in large part on our
ability to protect our intellectual property, we believe that our technical
expertise and ability to introduce new products in a timely manner will be an
important factor in maintaining our competitive position.
Many participants in the semiconductor and communications industries have a
significant number of patents and have frequently demonstrated a readiness to
commence litigation based on allegations of patent and other intellectual
property infringement. From time to time, third parties may assert infringement
claims against us. We may not prevail in any such litigation or may not be able
to license any valid and infringed patents from third parties on commercially
reasonable terms, if at all. Litigation, regardless of the outcome, is likely to
result in substantial cost and diversion of our resources, including our
management's time. Any such litigation could materially adversely affect us.
EMPLOYEES
As of January 1, 2000, we employed 148 people, including 34 in
manufacturing, 62 in engineering development, 30 in marketing, 12 in sales and
10 in administration. Our success depends on the continued service of our key
technical and senior management personnel and on our ability to continue to
attract, retain and motivate highly skilled analog and mixed-signal engineers.
The competition for such personnel is intense. We have never had a work stoppage
and none of our employees are represented by a labor organization. We consider
our employee relations to be good.
FACILITIES
Our main executive, administrative and technical offices occupy
approximately 37,800 square feet in Austin, Texas under a lease that expires in
April 2006, with one five year renewal option. We have an additional lease
commitment in Austin, Texas for supplemental office space for approximately
34,000 square feet with expected occupancy to commence in February 2000. This
lease's term is for 76 months after initial occupancy with one five year renewal
option. We believe that these facilities are sufficient to meet our needs
through December 2000. We also lease sales offices in Atlanta, Georgia and San
Jose, California.
LEGAL PROCEEDINGS
On January 12, 2000, we filed a lawsuit against Analog Devices and 3Com in
the United States District Court for the Western District of Texas (Austin
Division). The complaint asserts that Analog Devices has infringed, and is
continuing to infringe, our U.S. Patent 5,870,046, entitled "Analog Isolation
System With Digital Communication Across A Capacitive Barrier," by making,
using, selling, offering to sell and/or importing silicon DAAs that embody or
use inventions claimed by our patent. The complaint also asserts, among other
things, that Analog Devices and 3Com have misappropriated our confidential
information, know-how and trade secrets relating to our DAA technology,
tortiously interfered with our business relations with our existing and
prospective customers, and been unjustly enriched by this misappropriation. The
suit seeks unspecified damages from Analog Devices, including damages for
willful infringement of our patent, and an injunction prohibiting Analog Devices
from infringing our patent. In
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<PAGE>
addition, the suit seeks unspecified damages, including punitive damages and
attorneys' fees arising, among other things, out of the misappropriation,
tortious interference and unjust enrichment, and an injunction prohibiting
designing, manufacturing, reproducing, using or selling any ICs, modems or other
products the conception, design or development of which was based on our
confidential information, know-how and trade secrets. Analog Devices and 3Com
have not yet filed responses to this lawsuit. For a description of risks
associated with this pending lawsuit, please see "Risk Factors--We depend on a
limited number of customers for the vast majority of our sales, and the loss of,
or a significant reduction in orders from, any key customer could significantly
reduce our sales" and "--Significant litigation over intellectual property in
our industry may cause us to become involved in costly and lengthy litigation
which could seriously harm our business."
We are not currently involved in any other material legal proceedings.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information regarding the executive officers and
directors of Silicon Laboratories as of January 1, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Navdeep S. Sooch.......................... 37 Chief Executive Officer and Chairman of
the Board
Jeffrey W. Scott.......................... 38 Vice President of Engineering and Director
David R. Welland.......................... 44 Vice President of Technology and Director
John W. McGovern.......................... 44 Vice President and Chief Financial Officer
Bradley J. Fluke.......................... 38 Vice President/General Manager Wireline
Products Division
Edmund G. Healy........................... 45 Vice President/General Manager Wireless
Products Division
Gary R. Gay............................... 49 Vice President of Sales
Jonathan D. Ivester....................... 44 Vice President of Operations
William P. Wood........................... 44 Director
H. Berry Cash............................. 61 Director
</TABLE>
NAVDEEP S. SOOCH co-founded Silicon Laboratories in August 1996 and has
served as our Chief Executive Officer and Chairman of the Board since its
inception. From March 1985 until founding Silicon Laboratories, Mr. Sooch held
various positions at Crystal Semiconductor/Cirrus Logic, a designer and
manufacturer of integrated circuits, including Vice President of Engineering, as
well as Product Planning Manager of Strategic Marketing and Design Engineer.
From May 1982 to March 1985, Mr. Sooch was a Design Engineer with AT&T Bell
Labs, a communications company. Mr. Sooch holds a B.S. in electrical engineering
from the University of Michigan and a M.S. in electrical engineering from
Stanford University.
JEFFREY W. SCOTT co-founded Silicon Laboratories in August 1996 and has
served as our Vice President of Engineering and as a director since its
inception. From October 1989 until founding Silicon Laboratories, Mr. Scott held
various positions at Crystal Semiconductor/Cirrus Logic, including Vice
President of Engineering (Computer Products), Design Manager and Design
Engineer. From 1985 until 1989, Mr. Scott served as a Design Engineer with AT&T
Bell Labs. Mr. Scott holds a B.S. in electrical engineering from Lehigh
University and a M.S. in electrical engineering from the Massachusetts Institute
of Technology.
DAVID R. WELLAND co-founded Silicon Laboratories in August 1996 and has
served as our Vice President of Technology and as a director since its
inception. From November 1991 until founding Silicon Laboratories, Mr. Welland
held various positions at Crystal Semiconductor/Cirrus Logic, including Senior
Design Engineer. Mr. Welland holds a B.S. in electrical engineering from the
Massachusetts Institute of Technology.
JOHN W. MCGOVERN joined Silicon Laboratories in December 1996 as our Vice
President and Chief Financial Officer. From February 1985 to September 1996,
Mr. McGovern held various positions at Crystal Semiconductor/Cirrus Logic
including Vice President of Finance and Division Controller. Mr. McGovern holds
a B.B.A. in accounting from the University of Texas and is a licensed Certified
Public Accountant.
BRADLEY J. FLUKE has served as our Vice President and General Manager of our
Wireline Products Division since January 1999 and as our Vice President of
Marketing from April 1997 to December 1998. Previously, he served as the
Director of Marketing of the Computer Products Division of Crystal
Semiconductor/Cirrus Logic from June 1990 to April 1997. From 1984 to 1990,
Mr. Fluke held various marketing positions in the Data Converter Group for
Analog Devices, a designer and manufacturer of
44
<PAGE>
integrated circuits. Mr. Fluke holds a B.S. in electrical engineering from the
Rochester Institute of Technology.
EDMUND G. HEALY has served as Vice President and General Manager of our
Wireless Products Division since June 1998. From September 1992 to June 1998,
Mr. Healy worked as General Manager of the Magnetic Storage Division at Crystal
Semiconductor/Cirrus Logic. Mr. Healy held various Senior Marketing and Product
Planning positions for Zilog, a designer and manufacturer of application
specific standard products, and GEC Plessey Semiconductor, from 1987 to 1992.
From 1983 to 1987, Mr. Healy was an Assistant Professor of Electrical
Engineering at the United States Military Academy after serving as an Infantry
Officer from 1976 to 1981. Mr. Healy holds a B.S. in electrical engineering from
the United States Military Academy, a M.S. in electrical engineering from
Georgia Institute of Technology and a M.S. in management from Stanford
University.
GARY R. GAY joined Silicon Laboratories in October 1997 as our Vice
President of Sales. Previously, Mr. Gay was with Crystal Semiconductor/Cirrus
Logic from 1985 to September 1997 where he most recently served as Vice
President of North American Sales. From 1979 to 1985, Mr. Gay was International
Sales Manager and Asia Pacific Sales Manager with Burr-Brown Corporation, a
designer and manufacturer of semiconductor components. Mr. Gay holds a B.S. in
electrical engineering from the Rochester Institute of Technology.
JONATHAN D. IVESTER joined Silicon Laboratories in September 1997 as Vice
President of Manufacturing. From March 1992 to September 1997, Mr. Ivester was
with Applied Materials and served as Director of Manufacturing and Director of
U.S. Procurement in addition to various engineering management positions.
Mr. Ivester was a scientist at Bechtel Corporation, an engineering and
construction company, from 1980 to 1982 and at Abcor, Inc., an ultrafiltration
company and subsidiary of Koch Industries, from 1978 to 1980. Mr. Ivester holds
a B.S. in chemistry from the Massachusetts Institute of Technology and a M.B.A.
from Stanford University.
WILLIAM P. WOOD has served as a director of Silicon Laboratories since
March 1997. Since 1984, Mr. Wood has been a general partner, and for funds
created since 1996, a special limited partner, of various funds associated with
Austin Ventures, a venture capital firm located in Austin, Texas. Mr. Wood
serves on the board of directors of Crossroads Systems, a provider of storage
routers for storage area networks, and several private companies. Mr. Wood holds
an A.B. in history from Brown University and a M.B.A. from Harvard University.
H. BERRY CASH has served as a director of Silicon Laboratories since
June 1997. Mr. Cash has served as general partner of InterWest Partners, a
venture capital firm, since 1986. Mr. Cash currently serves on the board of
directors of the following public companies: AMX Corporation, a manufacturer of
remote control systems; Ciena Corporation, a designer and manufacturer of
multiplexing systems for fiber optic networks; and Liberte Investors Inc., an
investment company. In addition, Mr. Cash is a director of several privately
held companies. Mr. Cash holds a B.S. in electrical engineering from Texas A&M
University and a M.B.A. from Western Michigan University.
CLASSIFIED BOARD OF DIRECTORS
At the first annual meeting of stockholders following the closing of our
initial public offering, our board of directors will be divided into three
classes of directors, as nearly equal in size as is practicable, to serve
staggered three-year terms:
- Class I, whose term will expire at the annual meeting of stockholders to
be held in 2002;
- Class II, whose term will expire at the annual meeting of stockholders to
be held in 2003; and
- Class III, whose term will expire at the annual meeting of stockholders to
be held in 2004.
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<PAGE>
Upon expiration of the term of a class of directors, directors for that
class will be elected for three-year terms at the annual meeting of stockholders
in the year in which such term expires. Each director's term is subject to the
election and qualification of his successor, or his earlier death, resignation
or removal.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors established an audit committee in March 1999. The
members of the audit committee are Messrs. Wood and Cash. The audit committee
reports to the board of directors with regard to the selection of our
independent auditors, the scope and methods of our annual audits, the fees to be
paid to the independent auditors, the performance of our independent auditors,
compliance with our accounting and financial policies, and management's
procedures and policies relative to the adequacy of our internal accounting
controls.
Our board of directors established a compensation committee in
December 1998. The members of the compensation committee are Messrs. Sooch, Wood
and Cash. The compensation committee reviews and makes recommendations to the
board regarding our compensation policies and all forms of compensation to be
provided to our executive officers and certain other employees. In addition, the
compensation committee has authority to administer our stock option and stock
purchase plans. Prior to this offering, the entire board of directors
administered our stock option plan.
DIRECTOR COMPENSATION
Non-employee directors will receive option grants at periodic intervals
under the automatic option grant program of our 2000 Stock Incentive Plan, and
non-employee directors will be eligible to receive option grants under the
discretionary option grant program of that plan. We reimburse directors for all
reasonable out-of-pocket expenses incurred in attending meetings of the board of
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more of its executive
officers serving as a member of our board of directors or compensation
committee. Of the members of the compensation committee, Mr. Sooch has served as
our Chief Executive Officer and Chairman of the Board since August 1996 and
neither Mr. Wood nor Mr. Cash serves or has previously served as an officer or
employee of Silicon Laboratories. For a description of investments in our
company made by Mr. Wood and Mr. Cash, and their respective affiliates, see
"Certain Transactions" below.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the personal liability of our board
members for breaches by the directors of their fiduciary duties. Our bylaws
require us to indemnify our directors and executive officers to the fullest
extent permitted by Delaware law. We have entered into indemnification
agreements with all of our directors and executive officers and have purchased
directors' and officers' liability insurance.
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<PAGE>
EXECUTIVE COMPENSATION
The following table provides the total compensation paid to our chief
executive officer and our next four most highly-compensated executive officers
in fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS
- --------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Navdeep S. Sooch................................ $170,000 $43,932 $175 --
Chief Executive Officer and
Chairman of the Board
Jeffrey W. Scott................................ 140,000 29,000 148 --
Vice President of Engineering
David R. Welland................................ 140,000 29,000 148 --
Vice President of Technology
Bradley J. Fluke................................ 140,000 29,000 148 18,000
Vice President/General Manager
Wireline Products Division
Gary R. Gay..................................... 150,000 46,019 157 20,000
Vice President of Sales
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning individual grants of
stock options made during fiscal 1999 to each of our executive officers named in
the Summary Compensation Table. The percentage of total options granted to our
employees in the last fiscal year is based on options granted to purchase an
aggregate of 2,484,200 shares of common stock during fiscal 1999. We have never
granted any stock appreciation rights.
The exercise prices represent our board's estimate of the fair market value
of the common stock on the grant date. In establishing these prices, our board
considered many factors, including our financial condition and operating
results, transactions involving the issuances of shares of our preferred stock,
the senior rights and preferences accorded issued shares of preferred stock, and
the market for comparable stocks.
We granted these options under our 1997 Stock Option/Stock Issuance Plan.
Each option has a maximum term of ten years, subject to earlier termination if
the optionee's services are terminated. Except as otherwise noted, these options
are immediately exercisable, but we have the right to repurchase at the exercise
price any shares that have not vested. If we are acquired in a
stockholder-approved transaction by merger, consolidation or asset sale, the
option shares will accelerate in full unless the option is assumed by the
successor corporation and our repurchase rights with respect to the unvested
option shares are assigned to such corporation. In the event that the option is
so assumed by, and our repurchase rights with respect to unvested shares are
assigned to, the successor corporation and, within 18 months following the
acquisition, the optionee's position is reduced to a lesser position or the
optionee's employment is involuntarily terminated, the option shares will
accelerate and become fully vested.
The amounts shown as potential realizable value represent hypothetical gains
that could be achieved for the respective options if exercised at the end of the
option term. These amounts represent certain assumed rates of appreciation in
the value of our common stock from the fair market value on the date of
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<PAGE>
grant. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission and
do not represent our estimate or projection of the future price of our common
stock. Actual gains, if any, on stock option exercises depend on the future
performance of the trading price of our common stock. The amounts reflected in
the table may not necessarily be achieved.
The following table sets forth information concerning the individual grants
of stock options to each of our named executive officers in fiscal 1999.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------- -----------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
GRANTED(1) FISCAL 1999 PER SHARE DATE 5% 10%
------------ ---------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Navdeep S. Sooch.............. -- --% $ -- -- $ -- $ --
Jeffrey W. Scott.............. -- -- -- -- -- --
David R. Welland.............. -- -- -- -- -- --
Bradley J. Fluke.............. 18,000 0.73 1.75 7/19/09 19,811 50,203
Gary R. Gay................... 20,000 0.81 1.75 7/19/09 22,012 55,781
</TABLE>
- ------------------------
(1) These options are fully exercisable on the date of grant but if the employee
leaves us before he has vested in his option shares, we have the right to
repurchase, at the exercise price, any shares that have not vested. These
options vest as to 20% on the first anniversary of the date of grant and
vest as to the remaining 80% in equal monthly installments over the
following 48 months.
FISCAL YEAR-END OPTION VALUES
The following table provides information about stock options held as of
January 1, 2000 by each of our executive officers named in the Summary
Compensation Table. The value realized by Mr. Gay is based on the difference
between the fair market value of the shares on the date of purchase, as
determined by our board of directors, and the price paid for such shares. There
was no public trading market for our common stock as of January 1, 2000.
Accordingly, we have based the value of unexercised in-the-money options at
January 1, 2000 on an assumed initial public offering price of $ per share,
less the applicable exercise price per share, multiplied by the number of shares
underlying the options. Actual gains on exercise, if any, will depend on the
value of our common stock on the date on which the shares are sold.
FISCAL 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT JANUARY 1, 2000 JANUARY 1, 2000
ON VALUE ---------------------------- -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
-------- -------- ----------- ------------- -------------------------
<S> <C> <C> <C> <C> <C>
Navdeep S. Sooch................... -- $ -- -- -- $ --
Jeffrey W. Scott................... -- -- -- -- --
David R. Welland................... -- -- -- -- --
Bradley J. Fluke................... -- -- 60,000 --
Gary R. Gay........................ 52,000 59,000 28,000 --
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
JANUARY 1, 2000
------------------------
UNEXERCISABLE
------------------------
<S> <C>
Navdeep S. Sooch................... --
Jeffrey W. Scott................... --
David R. Welland................... --
Bradley J. Fluke................... --
Gary R. Gay........................ --
</TABLE>
48
<PAGE>
2000 STOCK INCENTIVE PLAN
The 2000 Stock Incentive Plan is intended to serve as the successor equity
incentive program to our 1997 Stock Option/Stock Issuance Plan. The 2000 Stock
Incentive Plan became effective upon its adoption by the board of directors on
January 5, 2000; it will be approved by the stockholders prior to the date of
this offering.
We have reserved 5,389,498 shares of our common stock for issuance under the
2000 Stock Incentive Plan. This share reserve consists of the shares which were
available for issuance under the predecessor plan on the effective date of the
2000 Stock Incentive Plan plus an additional increase of 2,000,000 shares. The
share reserve will automatically be increased on the first trading day of
January each calendar year, beginning in January 2001, by a number of shares
equal to 2% of the total number of shares of our common stock outstanding on the
last trading day of the immediately preceding calendar year, but no such annual
increase will exceed 1,000,000 shares. The share reserve will also increase by
the number of shares repurchased by the Company, at the original exercise or
issue price, pursuant to its repurchase rights under the predecessor plan but
such increase will not exceed 3,357,204 shares. In no event may any one
participant in the 2000 Stock Incentive Plan receive option grants or direct
stock issuances for more than 1,000,000 shares in the aggregate per calendar
year.
Outstanding options under the predecessor plan will be incorporated into the
2000 Stock Incentive Plan upon the date of this offering, and no further option
grants will be made under that plan. The incorporated options will continue to
be governed by their existing terms, unless the compensation committee extends
one or more features of the 2000 Stock Incentive Plan to those options. However,
except as otherwise noted below, the outstanding options under the predecessor
plan contain substantially the same terms and conditions summarized below for
the discretionary option grant program under the 2000 Stock Incentive Plan.
The 2000 Stock Incentive Plan has four separate programs:
- the discretionary option grant program under which eligible individuals in
our employ or service (including officers, non-employee board members and
consultants) may be granted options to purchase shares of our common
stock;
- the stock issuance program under which such individuals may be issued
shares of common stock directly, through the purchase of such shares or as
a bonus tied to the performance of services;
- the salary investment option grant program under which executive officers
and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special below-market stock option
grants; and
- the automatic option grant program under which option grants will
automatically be made at periodic intervals to eligible non-employee board
members.
The discretionary option grant and stock issuance programs will be
administered by our compensation committee. This committee will determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when such option grants or stock issuances are to be made, the number
of shares subject to each such grant or issuance, the exercise or purchase price
for each such grant or issuance (which may be less than, equal to or greater
than the fair market value of the shares), the status of any granted option as
either an incentive stock option or a non-statutory stock option under the
federal tax laws, the vesting schedule to be in effect for the option grant or
stock issuance and the maximum term for which any granted option is to remain
outstanding. The committee will also select the executive officers and other
highly compensated employees who may participate in the salary investment option
grant program in the event that program is activated for one or more calendar
years. Neither the compensation committee nor the board will exercise any
administrative discretion with respect to option grants made
49
<PAGE>
under the salary investment option grant program or under the automatic option
grant program for the non-employee board members.
The exercise price for the options may be paid in cash or in shares of our
common stock valued at fair market value on the exercise date. The option also
may be exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the compensation committee may allow a participant to pay
the option exercise price or direct issue price (and any associated withholding
taxes incurred in connection with the acquisition of shares) with a
full-recourse, interest-bearing promissory note.
In the event that the company is acquired, whether by merger or asset sale
or board-approved sale by the stockholders of more than 50% of our voting stock,
each outstanding option under the discretionary option grant program which is
not to be assumed by the successor corporation or otherwise continued will
automatically accelerate in full, and all unvested shares under the
discretionary option grant and stock issuance programs will immediately vest,
except to the extent the repurchase rights with respect to those shares are to
be assigned to the successor corporation or otherwise continued in effect. The
compensation committee may grant options and issue shares which will accelerate
(1) in the acquisition even if the options are assumed and repurchase rights
assigned, (2) in connection with a hostile change in control (effected through a
successful tender offer for more than 50% of our outstanding voting stock or by
proxy contest for the election of board members), or (3) upon a termination of
the individual's service following a change in control or hostile take-over.
In the event of an acquisition of the company (by merger or asset sale),
options currently outstanding under the 1997 plan will accelerate unless assumed
by the successor corporation; and all assumed options will accelerate upon the
optionee's involuntary termination (including a forced resignation) within
18 months following the acquisition. Such options are not by their terms subject
to acceleration in connection with any other change in control or hostile
take-over.
Stock appreciation rights may be issued under the discretionary option grant
program which will provide the holders with the election to surrender their
outstanding options for an appreciation distribution from the company equal to
the fair market value of the vested shares subject to the surrendered option
less the aggregate exercise price payable for such shares. Such appreciation
distribution may be made in cash or in shares of common stock. There are
currently no outstanding stock appreciation rights under the predecessor plan.
The compensation committee has the authority to cancel outstanding options
under the discretionary option grant program (including options incorporated
from predecessor plan) in return for the grant of new options for the same or
different number of option shares with an exercise price per share based upon
the fair market value of the common stock on the new grant date.
In the event the compensation committee elects to activate the salary
investment option grant program for one or more calendar years, each executive
officer and each other highly compensated employee selected for participation
may elect to reduce his or her base salary for that calendar year by a specified
dollar amount not less than $5,000 nor more than $50,000. In return, the
individual will automatically be granted, on the first trading day in the
calendar year for which the salary reduction is to be in effect, a non-statutory
option to purchase that number of shares of common stock determined by dividing
the salary reduction amount by two-thirds of the fair market value per share of
our common stock on the grant date. The option exercise price will be equal to
one-third of the fair market value of the option shares on the grant date. As a
result, the fair market value of the option shares on the grant date less the
exercise price payable for those shares will be equal to the salary reduction
amount. The option will become exercisable in a series of 12 equal monthly
installments over the calendar year for which the salary reduction is to be in
effect and will be subject to full and immediate vesting in the event of an
acquisition or change in control of the company.
50
<PAGE>
Under the automatic option grant program, each individual who is serving as
a non-employee member of our board of directors on the date the underwriting
agreement for this offering is executed will receive an option for 30,000 shares
of our common stock with an exercise price equal to the price at which shares
are sold in this offering, provided such individual has not been in our prior
employ. Each individual who first joins the board after the effective date of
this offering as a non-employee board member will automatically be granted an
option for 30,000 shares of our common stock at the time of his or her
commencement of board service; provided such individual has not been in our
prior employ. In addition, on the date of each annual stockholders meeting,
beginning with the 2001 meeting, each individual who has served as a
non-employee board member for at least six months and is to continue to do so
will receive an option grant to purchase 5,000 shares of common stock. Each
automatic grant will have an exercise price equal to the fair market value per
share of our common stock on the grant date and will have a maximum term of
10 years, subject to earlier termination following the optionee's cessation of
board service. Each option will be immediately exercisable, subject to our right
to repurchase any unvested shares, at the original exercise price, at the time
of the board member's cessation of service. Each 30,000-share option grant will
vest, and the repurchase right will lapse, in a series of four equal successive
annual installments upon the optionee's completion of each year of board service
over the four-year period measured from the grant date. Each 5,000-share option
grant will vest, and the repurchase right will lapse, upon the optionee's
completion of one year of board service measured from the grant date. However,
each such outstanding option will immediately vest upon a change in control, a
hostile take-over or the death or disability of the optionee while serving as a
board member.
Limited stock appreciation rights will automatically be included as part of
each grant made under the automatic option grant and salary investment option
grant programs and may be granted to one or more officers as part of their
option grants under the discretionary option grant program. Options with such a
limited stock appreciation right may be surrendered to us upon the successful
completion of a hostile tender offer for more than 50% of our outstanding voting
stock. In return for the surrendered option, the optionee will be entitled to a
cash distribution from us in an amount per surrendered option share equal to the
highest price per share of common stock paid in connection with the tender offer
less the exercise price payable for such share.
The board may amend of modify the 2000 Stock Incentive Plan at any time,
subject to any required stockholder approval. The 2000 Stock Incentive Plan will
terminate no later than January 4, 2010.
EMPLOYEE STOCK PURCHASE PLAN
Our Employee Stock Purchase Plan was adopted by the board on January 5, 2000
and will be approved by the stockholders prior to the date of this offering. The
plan will become effective immediately upon the execution of the underwriting
agreement for this offering. The plan is designed to allow eligible employees to
purchase shares of common stock, at semi-annual intervals, through their
periodic payroll deductions. A total of 400,000 shares of our common stock will
initially be issued under the plan. The share reserve will automatically
increase on the first trading day of January each year beginning in
January 2001, by 0.5% of the total shares of common stock outstanding on the
last trading day of the immediately preceding calendar year, but no such annual
increase will exceed 250,000 shares. In no event, however, may any participant
purchase more than 200 shares, nor may all participants in the aggregate
purchase more than 75,000 shares on any one semi-annual purchase date.
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months. However, the initial offering period will begin
on the day the underwriting agreement is executed in connection with this
offering and will end on the last business day in April 2002. The next offering
period will begin on the first business day in May 2002, and subsequent offering
periods will be set by the compensation committee. Shares will be purchased for
the participants semi-annually (the last business day of April and October each
year) during the offering period. The first purchase date will occur on
October 31, 2000. Should the fair market value of the common stock on any
semi-annual purchase date
51
<PAGE>
be less than the fair market value on the first day of the offering period, then
the current offering period will automatically end and a new offering period
will begin, based on the lower fair market value.
Individuals who are eligible employees on the start date of any offering
period may enter the plan on that start date or on any subsequent semi-annual
entry date (generally May 1 or November 1 each year). Individuals who become
eligible employees after the start date of the offering period may join the plan
on any subsequent semi-annual entry date within that period.
A participant may contribute up to 15% of his or her base salary through
payroll deductions and the accumulated payroll deductions will be applied to the
purchase of shares on the participant's behalf on each semi-annual purchase
date. The purchase price per share will be 85% of the lower of the fair market
value of our common stock on the participant's entry date into the offering
period or the fair market value on the semi-annual purchase date.
The board may at any time amend or modify the plan. The plan will terminate
no later than the last business day in April 2010.
52
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENTS OF EQUITY
5% STOCKHOLDERS. Since our inception in August 1996, we have raised capital
primarily through the sale of our securities, including the following sales to
holders of more than 5% of our outstanding common stock:
- In March 1997, we sold an aggregate of 3,818,177 shares of our Series A
preferred stock to funds affiliated with Austin Ventures and 254,545
shares of our Series A preferred stock to Silverton Partners at a price of
$0.98214425 per share. Concurrently with the closing of the financing,
investment funds affiliated with Austin Ventures became a 5% stockholder
and William P. Wood, a general partner of Silverton Partners and certain
investment funds affiliated with Austin Ventures, and a special limited
partner of other funds associated with Austin Ventures, became a director
on our board of directors. In June 1997, we sold 254,545 shares of our
Series A preferred stock at a price of $0.98214425 per share to H. Berry
Cash at which time Mr. Cash became a member of our board of directors.
Although the number of shares of Series A preferred stock outstanding was
not affected by the 2-for-1 split of our common stock, as a result of this
stock split, each share of Series A preferred stock automatically adjusted
and became convertible into two shares of our common stock.
- In June 1998, we sold an aggregate of 423,451 shares of our Series B
preferred stock to funds affiliated with Austin Ventures, 28,230 shares of
our Series B preferred stock to Silverton Partners, 21,009 shares of our
Series B preferred stock to H. Berry Cash, 42,017 shares of our Series B
preferred stock to the Berry and Dianne Cash Grandchildrens' Trust and
52,522 shares of our Series B preferred stock to Jonathan D. Ivester, our
Vice President of Manufacturing, at a price of $4.76 per share. Although
the number of shares of Series B preferred stock outstanding was not
affected by the 2-for-1 split of our common stock, as a result of this
stock split, each share of Series B preferred stock automatically adjusted
and became convertible into two shares of our common stock.
OTHER TRANSACTIONS
REGISTRATION RIGHTS. For more information on registration rights we have
granted to our 5% stockholders and certain of our other stockholders, please see
"Description of Capital Stock--Registration Rights."
LOANS TO EXECUTIVE OFFICERS. In June 1998, we loaned $56,500 to Edmund G.
Healy, our Vice President/General Manager Wireless Products Division, to allow
him to purchase shares of our common stock. Mr. Healy delivered a full-recourse
promissory note to us with respect to his loan and the promissory note is
secured by the purchased shares and accrues interest at a rate of 5.69% per
annum, compounded semi-annually. As of January 1, 2000, the outstanding
indebtedness on such note was $61,406, which was the largest aggregate amount of
indebtedness outstanding during fiscal 1999. This promissory note becomes due in
June 2003.
STOCK OPTIONS GRANTED TO DIRECTORS AND EXECUTIVE OFFICERS. For more
information regarding the grant of stock options to directors and executive
officers, please see "Management--Director Compensation" and "--Executive
Compensation."
INDEMNIFICATION AND INSURANCE. Our bylaws require us to indemnify our
directors and executive officers to the fullest extent permitted by Delaware
law. We have entered into indemnification agreements with all of our directors
and executive officers and have purchased directors' and officers' liability
insurance. In addition, our certificate of incorporation limits the personal
liability of our board members for breaches by the directors of their fiduciary
duties.
53
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of January 1, 2000, and as adjusted to reflect
the sale of common stock offered by us and by selling stockholders in this
offering, for:
- each person known by us to beneficially own more than 5% of our
outstanding shares of common stock;
- each executive officer named in the Summary Compensation Table;
- each of our directors;
- all of our executive officers and directors as a group; and
- each selling stockholder.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to the securities. Unless otherwise indicated below and except to the
extent authority is shared by spouses under applicable law, to our knowledge,
the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them. The
number of shares of common stock used to calculate the percentage ownership of
each listed person includes the shares of common stock underlying options or
warrants held by such persons that are exercisable within 60 days of this
offering. The percentage of beneficial ownership before the offering is based on
43,858,118 shares, consisting of 30,015,944 shares of common stock outstanding
as of January 1, 2000, and 13,842,174 shares issuable upon the conversion of our
outstanding convertible preferred stock. The percentage of beneficial ownership
after the offering is based on shares, including shares sold by us
in this offering.
Unless otherwise indicated, the address of each person owning more than 5%
of the outstanding shares of common stock is c/o Silicon Laboratories Inc., 4635
Boston Lane, Austin, Texas 78735:
<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING SHARES OFFERING
--------------------- BEING -------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Navdeep S. Sooch(1)............................ 9,013,028 20.6%
Jeffrey W. Scott............................... 5,766,664 13.1
David R. Welland............................... 6,966,664 15.9
Bradley J. Fluke(2)............................ 446,000 1.0
Gary R. Gay(3)................................. 280,000 *
William P. Wood(4)............................. 4,007,878 9.1
H. Berry Cash(5)............................... 903,106 2.1
OTHER 5% STOCKHOLDERS:
Funds affiliated with Austin Ventures(6)....... 10,083,204 23.0
All directors and executive officers as a
group (10 persons)........................... 28,590,790 64.8
</TABLE>
- ------------------------
* Represents beneficial ownership of less than one percent.
(1) Includes 300,000 shares held in trust for the benefit of Mr. Sooch's
children. Mr. Sooch disclaims beneficial ownership of the 300,000 shares
held in trust for the benefit of his children.
(2) Includes 60,000 shares issuable upon exercise of stock options.
54
<PAGE>
(3) Includes 28,000 shares issuable upon exercise of stock options.
(4) Includes 614,576 shares held by Silverton Partners and 3,393,302 shares held
by funds affiliated with Austin Ventures. Mr. Wood is a general partner of
Silverton Partners. Mr. Wood also is a general partner of AV Partners IV,
L.P., and a general partner of Austin Ventures IV-A, L.P. and Austin
Ventures IV-B, L.P. Mr. Wood disclaims beneficial ownership of the shares
held by Austin Ventures IV-A, L.P., and Austin Ventures IV-B, L.P., except
to the extent of his pecuniary interest in such shares arising from his
general partnership interest in AV Partners IV, L.P. Mr. Wood is a special
limited partner of AV Partners V, L.P., which is a general partner of Austin
Ventures V, L.P. and Austin Ventures V Affiliates Fund, LP, and as such
Mr. Wood does not have beneficial ownership of any of the 6,689,902 shares
owned by Austin Ventures V, L.P. and Austin Ventures V Affiliates Fund, L.P.
Mr. Wood's address is c/o Austin Ventures, 114 West Seventh Street, Suite
1300, Austin, Texas 78701.
(5) Includes 99,346 shares held in trust for the benefit of Mr. Cash's
grandchildren. Mr. Cash disclaims beneficial ownership of the 99,346 shares
held in trust for the benefit of his grandchildren.
(6) Includes 1,095,324 shares held by Austin Ventures IV-A, L.P.; 2,297,978
shares held by Austin Ventures IV-B, L.P.; 6,371,334 shares held by Austin
Ventures V, L.P.; and 318,568 shares held by Austin Ventures V Affiliates
Fund, L.P. These partnerships may be deemed to beneficially own each other's
shares because the general partners of each partnership are affiliated. Each
partnership, however, disclaims beneficial ownership of the others' shares.
The address of the investment funds affiliated with Austin Ventures is 114
West Seventh Street, Suite 1300, Austin, Texas 78701.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 250,000,000 shares of common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $0.0001 per share, the rights
and preferences of which may be established from time to time by our board of
directors. The following summary is qualified in its entirety by reference to
our certificate of incorporation and bylaws, copies of which are filed as
exhibits to the registration statement of which this prospectus is a part.
COMMON STOCK
As of January 1, 2000, there were 30,015,944 shares of common stock
outstanding that were held of record by 116 stockholders. As of January 1, 2000,
there were also 2,380,226 shares of common stock subject to outstanding options,
all of which were immediately exercisable, and 143,182 shares subject to
outstanding warrants. Holders of our common stock are entitled to one vote per
share on all matters to be voted upon by the stockholders. The holders of common
stock are not entitled to cumulative voting rights with respect to the election
of directors, and as a result, minority stockholders will not be able to elect
directors on the basis of their votes alone. Subject to limitations under
Delaware law and preferences that may apply to any outstanding shares of
preferred stock, holders of common stock are entitled to receive ratably such
dividends or other distributions, if any, as may be declared by our board of
directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to
the liquidation preference of any outstanding preferred stock. The common stock
has no preemptive, conversion or other rights to subscribe for additional
securities of Silicon Laboratories. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon completion of
the offering will be, validly issued, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
preferred stock that we may designate and issue in the future.
PREFERRED STOCK
As of January 1, 2000, there were 6,921,087 shares of preferred stock
outstanding. Upon the closing of this offering, all outstanding shares of
preferred stock will automatically convert into 13,842,174 shares of common
stock. Our board of directors will have the authority, without further action by
the stockholders, to issue up to 10,000,000 shares of preferred stock in one or
more series and to designate the rights, preferences, privileges and
restrictions of each such series. The issuance of preferred stock could have the
effect of restricting dividends on the common stock, diluting the voting power
of the common stock, impairing the liquidation rights of the common stock or
delaying or preventing our change in control without further action by the
stockholders. At present, we have no plans to issue any shares of preferred
stock.
REGISTRATION RIGHTS
According to the terms of an investors' rights agreement among us and
certain of our stockholders, at any time after March 21, 2002, investors in our
preferred stock holding an aggregate of at least two-thirds of the shares of
common stock issued upon conversion of the preferred stock will be entitled to
demand that we file a registration statement with respect to the registration of
their shares under the Securities Act of 1933, provided that those investors
request that such registration statement register the resale of at least half of
the outstanding shares held by them. We are not required to effect more than two
such registrations or more than one such registration during any 365 day period.
56
<PAGE>
In addition, the holders of up to 38,503,632 shares of common stock,
including Messrs. Sooch, Scott, Welland, McGovern, Cash, Silverton Partners and
entities affiliated with Austin Ventures and certain other stockholders and
warrant holders, have piggyback registration rights with respect to the future
registration of shares of our common stock under the Securities Act. If we
propose to register any shares of common stock under the Securities Act, the
holders of shares having piggyback registration rights are entitled to receive
notice of such registration and are entitled to include their shares in the
registration.
At any time after we become eligible to file a registration statement on
Form S-3, holders of registration rights may require us to file up to three
registration statements on Form S-3 under the Securities Act with respect to
their shares of common stock.
These registration rights are subject to conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares of common stock to be included in the registration. We are generally
required to bear all of the expenses of all registrations under the investors'
rights agreement, except underwriting discounts and commissions. The investors'
rights agreement also contains our commitment to indemnify the holders of
registration rights for certain losses they may incur in connection with
registrations under the agreement. Registration of any of the shares of common
stock held by security holders with registration rights would result in those
shares becoming freely tradeable without restriction under the Securities Act.
ANTI-TAKEOVER EFFECTS
Provisions of Delaware law, our certificate of incorporation, our bylaws and
certain contracts to which we are a party, could have the effect of delaying or
preventing a third party from acquiring us, even if the acquisition would
benefit our stockholders. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of our board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of Silicon Laboratories. These provisions are
designed to reduce our vulnerability to an unsolicited proposal for a takeover
that does not contemplate the acquisition of all of our outstanding shares, or
an unsolicited proposal for the restructuring or sale of all or part of Silicon
Laboratories.
DELAWARE ANTI-TAKEOVER STATUTE. We are subject to the provisions of
Section 203 of the Delaware General Corporation Law, an anti-takeover law.
Subject to certain exceptions, the statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
- Prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- Upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding, those shares owned (1) by persons who are
directors and also officers and (2) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- On or after such date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
57
<PAGE>
For purposes of Section 203, a "business combination" includes a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder, with an "interested stockholder" being defined as a
person who, together with affiliates and associates, owns, or within three years
prior to the date of determination whether the person is an "interested
stockholder," did own, 15% or more of the corporation's voting stock.
In addition, provisions of our certificate of incorporation and bylaws may
have an anti-takeover effect. These provisions may delay, defer or prevent a
tender offer or takeover attempt of our company that a stockholder might
consider in his or her best interest, including those attempts that might result
in a premium over the market price for the shares held by our stockholders. The
following summarizes these provisions.
CLASSIFIED BOARD OF DIRECTORS. Our certificate of incorporation provides
that at the first annual meeting following the closing of our initial public
offering, our board of directors will be divided into three classes of
directors, as nearly equal in size as is practicable, serving staggered
three-year terms. As a result, approximately one-third of the board of directors
will be elected each year. These provisions, when coupled with the provisions of
our certificate of incorporation and bylaws authorizing our board of directors
to fill vacant directorships or increase the size of our board, may deter a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our certificate of
incorporation eliminates the ability of stockholders to act by written consent.
Our bylaws provide that special meetings of our stockholders may be called only
by a majority of our board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDERS PROPOSALS AND DIRECTORS
NOMINATIONS. Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide us with timely
written notice of their proposal. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 120 days before the date in the current year that corresponds to the date
we released the notice of annual meeting to stockholders in connection with the
previous year's annual meeting. If, however, no meeting was held in the prior
year or the date of the annual meeting has been changed by more than 30 days
from the date contemplated in the notice of annual meeting, notice by the
stockholder in order to be timely must be received a reasonable time before we
release the notice of annual meeting to stockholders. Our bylaws also specify
certain requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. Our authorized but unissued shares of
common stock and preferred stock are available for our board to issue without
stockholder approval. We may use these additional shares for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of our
authorized but unissued shares of common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of our company by
means of a proxy context, tender offer, merger or other transaction.
SUPERMAJORITY VOTE PROVISIONS. The Delaware General Corporate Law provides
generally that the affirmative vote of a majority of the shares entitled to vote
on any matter is required to amend a corporation's certificate of incorporation
or bylaws, unless a corporation's certificate of incorporation or bylaws, as the
case may be, requires a greater percentage. Our certificate of incorporation
imposes supermajority vote requirements in connection with the amendment of
certain provisions of our certificate of incorporation, including the provisions
relating to the classified board of directors and action by written consent of
stockholders.
58
<PAGE>
INDEMNIFICATION. Our bylaws require us to indemnify our directors and
officers to the fullest extent permitted by Delaware law. We have entered into
indemnification agreements with all of our directors and executive officers and
have purchased directors' and executive officers' liability insurance. In
addition, our certificate of incorporation limits the personal liability of our
board members for breaches by the directors of their fiduciary duties to the
fullest extent permitted under Delaware law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company and its address is 150 Royall Street, Canton, MA 02021.
NASDAQ NATIONAL MARKET LISTING
We have applied to list our stock on the Nasdaq National Market under the
trading symbol "SLAB."
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the prevailing market price of our common
stock could decline. Furthermore, because we do not expect any shares will be
available for sale for at least 120 days after the date of this prospectus as a
result of certain contractual and legal restrictions on resale described below,
sales of substantial amounts of our common stock in the public market after
these restrictions lapse could adversely affect the prevailing market price and
our ability to raise equity capital in the future.
Upon the closing of this offering, we will have outstanding an aggregate of
shares of our common stock, based upon the number of shares outstanding at
January 1, 2000 and assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options and warrants and no grant of
additional options or warrants. Of these shares, all shares sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act unless they are purchased by our "affiliates," as that
term is defined in Rule 144 under the Securities Act. The remaining shares will
be eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- --------------------------------------------------------
<S> <C>
............................. Immediately.
............................. 120 days after the date of this prospectus due to a
release of 30% of the shares, and shares underlying
options, held by each stockholder from lock-up
agreements with the underwriters. This release will
occur if the last reported sale price of our common
stock is at least two times the initial public offering
price per share for each of the 20 trading days
preceding the 120th day after the date of this
prospectus. This early release shall occur: (a) on the
120th day after the date of this prospectus if we make a
public release of our quarterly or annual results during
the period beginning on the eleventh trading day after
the date of this prospectus and ending on the day prior
to the 120th day after the date of this prospectus, or
(b) otherwise, on the second trading day after the first
public release of our quarterly or annual results
occurring on or after the 120th day after the date of
this prospectus.
............................. 181 days after the date of this prospectus upon the
expiration of the lock-up agreements with the
underwriters (plus any shares not already released from
the lock-up agreements).
............................. At various times after 181 days following the date of
this prospectus, subject to compliance with securities
laws and upon the lapse of any applicable vesting
restrictions.
</TABLE>
LOCK-UP AGREEMENTS. All of our directors, officers, stockholders, option
holders and warrant holders have signed lock-up agreements under which they have
agreed not to transfer or dispose of, directly or indirectly, any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for shares of our common stock for 180 days after the date of this prospectus.
If the last reported sale price of our common stock is at least two times the
initial public offering price per share for each of the 20 trading days
preceding the 120th day after the date of this prospectus, then 30% of the
shares, and shares underlying options, held by each stockholder on the date of
this prospectus shall be released from the 180 day restrictions. This early
release shall occur: (a) on the 120th day after the date of this prospectus if
we make a public release of our quarterly or annual results during the period
beginning on the eleventh trading day after the date of this prospectus and
ending on the day prior to the 120th day
60
<PAGE>
after the date of this prospectus, or (b) otherwise, on the second trading day
after the first public release of our quarterly or annual results occurring on
or after the 120th day after the date of this prospectus. Morgan Stanley & Co.
Incorporated may, in its sole discretion, at any time and without prior notice
or announcement, release all or any portion of shares subject to the lock-up
agreements.
RULE 144. In general, under Rule 144 as currently in effect, beginning
90 days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year, including the holding period
of certain prior owners other than affiliates, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of
(a) 1% of the number of shares of our common stock then outstanding, which will
equal approximately shares immediately after the offering, or (b) the
average weekly trading volume of our common stock on the Nasdaq National Market
during the four calendar weeks preceding the filing of a notice on Form 144 with
respect to that sale. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and the availability of current
public information about us.
RULE 144(K). Under Rule 144(k), a person who is not deemed to have been one
of our affiliates at any time during the three months preceding a sale and who
has beneficially owned shares for at least two years, including the holding
period of certain prior owners other than affiliates, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, Rule 144(k) shares may be sold immediately upon the closing of this
offering.
RULE 701. In general, under Rule 701 of the Securities Act as currently in
effect, each of our directors, officers, employees, consultants or advisors who
purchased shares from us before the date of this prospectus in connection with a
compensatory stock plan or other written compensatory agreement is eligible to
resell such shares 90 days after the effective date of this offering in reliance
on Rule 144, but without compliance with certain restrictions, including the
holding period, contained in Rule 144.
REGISTRATION RIGHTS. After this offering, certain holders of shares of our
common stock will be entitled to certain rights with respect to the registration
of those shares under the Securities Act. See "Description of Capital
Stock--Registration Rights." After any such registration of these shares, such
shares will be freely tradeable without restriction under the Securities Act.
These sales could cause the market price of our common stock to decline.
STOCK PLANS. As of January 1, 2000, options to purchase 2,380,226 shares of
common stock were outstanding under our stock option and incentive plans. After
this offering, we intend to file a registration statement on Form S-8 under the
Securities Act of 1933 covering shares of common stock reserved for issuance
under our stock incentive plan and our employee stock purchase plan. Based on
the number of options outstanding and shares reserved for issuance under our
stock incentive plan and our employee stock purchase plan, the Form S-8
registration statement would cover 5,789,498 shares. The Form S-8 registration
statement will become effective immediately upon filing. At that point, subject
to the satisfaction of applicable exercisability periods, Rule 144 volume
limitations applicable to affiliates and the agreements with the underwriters
referred to above, shares of common stock to be issued upon exercise of
outstanding options granted pursuant to our stock incentive plan and shares of
common stock issued pursuant to our employee stock purchase plan (to the extent
that such shares are not held by affiliates) will be available for immediate
resale in the public market.
61
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc. and Salomon Smith
Barney Inc. are acting as representatives, have severally agreed to purchase,
and we and the selling stockholders have severally agreed to sell to them, the
respective number of shares of our common stock indicated:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Lehman Brothers Inc.........................................
Salomon Smith Barney Inc....................................
------
Total.....................................................
======
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and the selling stockholders and subject to prior sale. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of common stock offered by this
prospectus are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered by this prospectus if any shares
are taken. However, the underwriters are not required to take or pay for the
shares covered by the over-allotment option described below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price.
Any underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain other dealers.
After the initial offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the representatives of
the underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price listed on the cover page of
this prospectus, less underwriting discounts and commissions. The underwriters
may exercise such option solely for the purpose of covering over-allotments, if
any, made in connection with this offering. To the extent such option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of common stock as the number listed next to the underwriter's name in
the preceding table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table. If the
underwriter's over-allotment option is exercised in full, the total price to
public would be $ , the total underwriters' discounts and
commissions would be $ and the total proceeds to us would be
$ before deducting estimated offering expenses of $ .
Silicon Laboratories and our directors, officers and certain other
stockholders have each agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters, during the period
ending 180 days after the date of this prospectus, each of us will not, directly
or indirectly:
- Offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or
62
<PAGE>
- Enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock, whether any such transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise.
If the last reported sale price of our common stock on the Nasdaq National
Market is at least twice the initial public offering per share for the 20
consecutive trading days ending on the last trading day preceding the 120th day
after the date of this prospectus, 30% of the shares of our common stock subject
to the 180-day restriction described above will be released from these
restrictions. This early release shall occur: (a) on the 120th day after the
date of this prospectus if we make a public release of our quarterly or annual
results during the period beginning on the eleventh trading day after the date
of this prospectus and ending on the day prior to the 120th day after the date
of this prospectus, or (b) otherwise, on the second trading day after the first
public release of our quarterly or annual results occurring on or after the
120th day after the date of this prospectus.
The restrictions described in the previous paragraph do not apply to:
- The sale of shares to the underwriters;
- The issuance by Silicon Laboratories of shares of common stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus of which the underwriters have
been advised in writing; or
- Transactions by any person other than Silicon Laboratories relating to
shares of common stock or other securities acquired in open market
transactions after the completion of the offering of the shares of common
stock.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We have submitted an application to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "SLAB."
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering if the syndicate repurchases previously distributed
shares of common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time.
We and the selling stockholders and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
DIRECTED SHARE PROGRAM
At our request, the underwriters have reserved up to shares of common
stock to be sold in this offering, at the public offering price, to our
customers, vendors, business associates and related persons. The number of
shares of common stock available for sale to the general public will be reduced
to the extent such individuals and entities purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares.
63
<PAGE>
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
common stock. Consequently, the public offering price for the shares of common
stock will be determined by negotiations among us, the selling stockholders and
the representatives of the underwriters. Among the factors to be considered in
determining the public offering price are our record of operations, our current
financial position and future prospects, the industry in general, the experience
of our management, our sales, earnings and other financial and operating
information in recent periods, the price-earnings ratios, price-sales ratios,
market prices of securities and financial and operating information of companies
engaged in activities similar to ours. The estimated initial public offering
range listed on the cover page of this prospectus is subject to change as a
result of market conditions and other factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Brobeck, Phleger & Harrison LLP, Austin, Texas. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Davis
Polk & Wardwell, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at January 2, 1999 and January 1, 2000, and for each of the
three years in the period ending January 1, 2000, as set forth in their report.
We've included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT SILICON LABORATORIES
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendments, under the
Securities Act with respect to the shares of common stock to be sold in this
offering. This prospectus does not contain all the information included in the
registration statement. For further information about us and the shares of our
common stock to be sold in this offering, please refer to this registration
statement. Complete exhibits have been filed with our registration statement on
Form S-1.
You may read and copy any contract, agreement or other document that we have
filed as an exhibit to our registration statement or any other portion of our
registration statement or any other information from our filings at the
Securities and Exchange Commission's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information about the public reference room. Our filings with the
Securities and Exchange Commission, including our registration statement, are
also available to you on the Securities and Exchange Commission's Web site,
HTTP://WWW.SEC.GOV.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, and will file and
furnish to our stockholders annual reports containing financial statements
audited by our independent auditors, make available to our stockholders
quarterly reports containing unaudited financial data for the first three
quarters of each fiscal year, proxy statements and other information with the
Securities and Exchange Commission.
You may read and copy any reports, statements or other information on file
at the public reference rooms. You can also request copies of these documents,
for a copying fee, by writing to the Commission.
64
<PAGE>
SILICON LABORATORIES INC.
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of January 2, 1999 and
January 1, 2000........................................... F-3
Consolidated Statements of Operations for the three years
ended January 1, 2000..................................... F-4
Consolidated Statements of Changes in Redeemable Convertible
Preferred Stock and Stockholders' Equity for the three
years ended January 1, 2000............................... F-5
Consolidated Statements of Cash Flows for the three years
ended January 1, 2000..................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Silicon Laboratories Inc.
We have audited the accompanying consolidated balance sheets of Silicon
Laboratories Inc. as of January 2, 1999 and January 1, 2000, and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders' equity, and cash flows for each of the three years in the
period ended January 1, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Silicon
Laboratories Inc. at January 2, 1999 and January 1, 2000, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended January 1, 2000 in conformity with accounting principles
generally accepted in the United States.
Austin, Texas
January 11, 2000
F-2
<PAGE>
SILICON LABORATORIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK
AND
STOCKHOLDERS'
JANUARY 2, JANUARY 1, EQUITY AT
1999 2000 JANUARY 1, 2000
---------- ---------- ----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 2,867 $ 8,197
Short-term investments................................... 2,957 6,509
Accounts receivable, net of allowance for doubtful
accounts of $56 and $569 at January 2, 1999 and
January 1, 2000, respectively.......................... 2,875 10,322
Inventories.............................................. 635 2,837
Deferred income taxes.................................... -- 963
Prepaid expenses and other............................... 135 435
------- ------- --------
Total current assets....................................... 9,469 29,263
Property, equipment and software, net...................... 4,418 12,350
Other assets............................................... 127 345
------- ------- --------
Total assets............................................... $14,014 $41,958
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable......................................... $ 3,142 $ 7,374
Accrued expenses......................................... 229 1,083
Deferred revenue......................................... -- 1,006
Current portion of long-term debt and leases............. 889 2,697
Income taxes payable..................................... -- 2,822
------- ------- --------
Total current liabilities.................................. 4,260 14,982
Long-term debt and leases, less current portion............ 2,153 6,081
Other long-term obligations................................ -- 142
------- ------- --------
Total liabilities.......................................... 6,413 21,205
Redeemable Convertible Preferred Stock..................... 12,750 12,750 --
Stockholders' equity (deficit):
Common Stock--$.0001 par value; 52,000 shares authorized;
28,642 and 30,016 shares issued and outstanding in
fiscal 1998 and 1999 respectively, 43,858 shares on a
pro forma basis........................................ 3 3 4
Additional paid-in capital............................... 721 19,014 31,763
Stockholder notes receivable............................. (215) (1,472) (1,472)
Deferred stock compensation.............................. (406) (15,330) (15,330)
Retained earnings (deficit).............................. (5,252) 5,788 5,788
------- ------- --------
Total stockholders' equity (deficit)....................... (5,149) 8,003 20,753
------- ------- --------
Total liabilities and stockholders' equity (deficit)....... $14,014 $41,958 $ 41,958
======= ======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
SILICON LABORATORIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Sales....................................................... $ -- $ 5,609 $46,911
Cost of goods sold.......................................... -- 2,371 15,770
------- ------- -------
Gross profit................................................ -- 3,238 31,141
Operating expenses:
Research and development.................................. 1,364 4,587 8,297
Selling, general and administrative....................... 627 2,095 7,207
Amortization of deferred stock compensation............... -- 8 976
------- ------- -------
Operating expenses.......................................... 1,991 6,690 16,480
------- ------- -------
Operating income (loss)..................................... (1,991) (3,452) 14,661
Other (income) and expenses:
Interest income........................................... (178) (261) (402)
Interest expense.......................................... 22 206 699
------- ------- -------
Income (loss) before provision for income taxes............. (1,835) (3,397) 14,364
Provision for income taxes.................................. -- -- 3,324
------- ------- -------
Net income (loss)........................................... $(1,835) $(3,397) $11,040
======= ======= =======
Net income (loss) per share:
Basic..................................................... $ (1.04) $ (.37) $ .73
Diluted................................................... $ (1.04) $ (.37) $ .25
Weighted average common shares outstanding:
Basic..................................................... 1,760 9,129 15,152
Diluted................................................... 1,760 9,129 43,657
Pro forma net income per share
Basic $ .30
Diluted $ .25
Pro forma weighted average common shares outstanding:
Basic..................................................... 36,461
Diluted................................................... 43,657
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
SILICON LABORATORIES INC.
STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
REDEEMABLE COMMON STOCK
CONVERTIBLE ----------------------------------
PREFERRED STOCK
-------------------- ADDITIONAL STOCKHOLDER
NUMBER OF NUMBER OF PAID-IN NOTES
SHARES VALUE SHARES PAR VALUE CAPITAL RECEIVABLE
--------- -------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1997.................. -- $ -- 22,600 $ 2 $ -- $ --
Issuance of Series A convertible preferred
stock...................................... 5,345 5,250 -- -- -- --
Exercises of stock options................... -- -- 5,511 1 143 (77)
Payments received on stockholder notes....... -- -- -- -- -- 10
Repurchase and cancellation of common
stock...................................... -- -- (407) -- -- --
Net loss..................................... -- -- -- -- -- --
----- ------- ------ ---- ------- -------
Balance as of January 3, 1998.................. 5,345 5,250 27,704 3 143 (67)
Issuance of Series B convertible preferred
stock...................................... 1,576 7,500 -- -- -- --
Exercises of stock options................... -- -- 938 -- 164 (148)
Deferred stock compensation.................. -- -- -- -- 414 --
Amortization of deferred stock
compensation............................... -- -- -- -- -- --
Net loss..................................... -- -- -- -- -- --
----- ------- ------ ---- ------- -------
Balance as of January 2, 1999.................. 6,921 12,750 28,642 3 721 (215)
Exercises of stock options................... -- -- 1,411 -- 2,047 (1,267)
Income tax benefit from exercise of stock
options.................................... -- -- -- -- 91 --
Repurchase and cancellation of unvested
shares..................................... -- -- (37) -- (10) 10
Compensation expense related to stock options
and direct stock issuances to
non-employees.............................. -- -- -- -- 266 --
Deferred stock compensation.................. -- -- -- -- 15,899 --
Amortization of deferred stock
compensation............................... -- -- -- -- -- --
Net income................................... -- -- -- -- -- --
----- ------- ------ ---- ------- -------
Balance as of January 1, 2000.................. 6,921 $12,750 30,016 $ 3 $19,014 $(1,472)
===== ======= ====== ==== ======= =======
<CAPTION>
TOTAL
REDEEMABLE
CONVERTIBLE
PREFERRED
STOCK AND
DEFERRED RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
COMPENSATION (DEFICIT) (DEFICIT)
------------ --------- -------------
<S> <C> <C> <C>
Balance as of January 1, 1997.................. $ -- $ (20) $ (18)
Issuance of Series A convertible preferred
stock...................................... -- -- 5,250
Exercises of stock options................... -- -- 67
Payments received on stockholder notes....... -- -- 10
Repurchase and cancellation of common
stock...................................... -- -- --
Net loss..................................... -- (1,835) (1,835)
-------- ------- -------
Balance as of January 3, 1998.................. -- (1,855) 3,474
Issuance of Series B convertible preferred
stock...................................... -- -- 7,500
Exercises of stock options................... -- -- 16
Deferred stock compensation.................. (414) -- --
Amortization of deferred stock
compensation............................... 8 -- 8
Net loss..................................... -- (3,397) (3,397)
-------- ------- -------
Balance as of January 2, 1999.................. (406) (5,252) 7,601
Exercises of stock options................... -- -- 780
Income tax benefit from exercise of stock
options.................................... -- -- 91
Repurchase and cancellation of unvested
shares..................................... -- --
Compensation expense related to stock options
and direct stock issuances to
non-employees.............................. -- -- 266
Deferred stock compensation.................. (15,899) -- --
Amortization of deferred stock
compensation............................... 975 -- 975
Net income................................... -- 11,040 11,040
-------- ------- -------
Balance as of January 1, 2000.................. $(15,330) $ 5,788 $20,753
======== ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
SILICON LABORATORIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $(1,835) $(3,397) $11,040
Adjustment to reconcile net income (loss) to cash provided
by (used in) operating activities:
Depreciation and amortization expense..................... 133 816 1,972
Amortization of deferred stock compensation............... -- 8 975
Amortization of note/lease end-of-term interest
payments................................................ -- -- 142
Compensation expense related to stock options and direct
stock issuance to non-employees......................... -- -- 266
Income tax benefit for stock option exercise.............. -- -- 91
Changes in operating assets and liabilities:
Prepaid expenses and other.............................. (64) (65) (300)
Accounts receivable..................................... -- (2,875) (7,447)
Inventories............................................. -- (635) (2,202)
Other assets............................................ (7) (120) (218)
Accounts payable........................................ 1,499 1,643 4,232
Accrued expenses........................................ 55 175 854
Deferred revenue........................................ -- -- 1,006
Deferred income taxes................................... -- -- (963)
Income taxes payable.................................... -- -- 2,822
------- ------- -------
Net cash provided by (used in) operating activities......... (219) (4,450) 12,270
INVESTING ACTIVITIES
Purchases of short-term investments......................... (6,152) (5,616) (9,385)
Maturities of short-term investments........................ 3,083 5,728 5,833
Purchases of property and equipment......................... (2,258) (3,066) (9,904)
------- ------- -------
Net cash used in investing activities....................... (5,327) (2,954) (13,456)
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 996 1,499 6,424
Payments on long-term debt.................................. -- (249) (1,274)
Repayment of note........................................... (200) -- --
Proceeds from equipment lease financing..................... -- 825 976
Payments on capital leases.................................. -- (30) (390)
Net proceeds from issuances of convertible preferred
stock..................................................... 5,250 7,500 --
Net proceeds from exercises of stock options................ 77 17 780
------- ------- -------
Net cash provided by financing activities................... 6,123 9,562 6,516
------- ------- -------
Increase in cash and cash equivalents....................... 577 2,158 5,330
Cash and cash equivalents at beginning of year.............. 132 709 2,867
------- ------- -------
Cash and cash equivalents at end of year.................... $ 709 $ 2,867 $ 8,197
======= ======= =======
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 22 $ 199 $ 593
======= ======= =======
Income taxes paid......................................... -- -- 1,489
======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2000
1. ORGANIZATION
Silicon Laboratories Inc. (the "Company"), a Delaware corporation, develops
and markets mixed-signal analog/intensive integrated circuits or ICs. The
Company's products serve both the wireline and wireless communications markets.
Within the semiconductor industry, the Company is known as a "fabless" company
meaning that the ICs are manufactured by third-party semiconductor companies.
The Company was incorporated in 1996, and emerged from the development stage in
fiscal 1998.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
As of January 1, 1997, the Company prepares financial statements on a 52-53
week year that ends on the Saturday closest to December 31. Fiscal year 1997
ended on January 3, 1998, fiscal year 1998 ended on January 2, 1999, and fiscal
year 1999 ended on January 1, 2000.
PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Silicon Laboratories UK Limited.
All significant intercompany balances and accounts have been eliminated. The
functional currency of the Company's subsidiary is the U.S. dollar, accordingly,
all translation gains and losses resulting from transactions denominated in
currencies other than U.S. dollars are included in net income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash deposits and investments with a
maturity of three months or less when purchased.
SHORT-TERM INVESTMENTS
Cash investments in highly liquid financial instruments with original
maturities greater than three months that mature within one year are classified
as short-term investments. The Company's short-term investments consist of U.S.
Government backed securities, which are classified as held-to-maturity and
reported at amortized cost.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash and cash
equivalents, short-term investments, receivables, accounts payable, and
borrowings. The Company believes all of the financial instruments' recorded
values approximate current market values.
F-7
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost, determined using the first-in,
first-out method, or market. Inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1999 2000
---------- ----------
<S> <C> <C>
Work in progress........................................ $511 $1,902
Finished goods.......................................... 124 935
---- ------
$635 $2,837
==== ======
</TABLE>
PROPERTY, EQUIPMENT, AND SOFTWARE
Property, equipment, and software are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization are computed using
the straight-line method over the useful lives of the assets (generally four to
five years). Amortization of assets recorded under capital leases is computed
using the straight-line method over the shorter of the asset's useful life or
the term of the lease and such amortization is included with depreciation
expense. See also Note 4. Leasehold improvements are depreciated over the
contractual obligation of the lease period or their useful life, whichever is
shorter. Property, equipment and software consist of the following (in
thousands):
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1999 2000
---------- ----------
<S> <C> <C>
Equipment............................................... $3,221 $10,014
Computers and purchased software........................ 1,854 3,779
Furniture and fixtures.................................. 86 326
Leasehold improvements.................................. 209 1,155
------ -------
5,370 15,274
Accumulated depreciation and amortization............... (952) (2,924)
------ -------
$4,418 $12,350
====== =======
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates, and such differences could be material to the financial statements.
RISKS AND UNCERTAINTIES
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents,
short-term investments and accounts receivable. The Company places its cash,
cash equivalents and short-term investments primarily in market rate accounts
and U.S. Treasury bills. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from its
customers. The Company provides an allowance for doubtful
F-8
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accounts receivable based upon the expected collectibility of such receivables.
The following table summarizes the changes in the allowance for doubtful
accounts receivable (in thousands):
<TABLE>
<S> <C>
Balance at January 1, 1997.................................. $
Additions charged to costs and expenses..................... --
Write-off of uncollectible accounts......................... --
----
Balance at January 3, 1998.................................. $ --
Additions charged to costs and expenses..................... 56
Write-off of uncollectible accounts......................... --
----
Balance at January 2, 1999.................................. $ 56
Additions charged to costs and expenses..................... 513
Write-off of uncollectible accounts......................... --
----
Balance at January 1, 2000.................................. $569
</TABLE>
All of the Company's products are currently manufactured by two companies in
Taiwan. A manufacturing disruption experienced by either of the Company's
manufacturing partners could impact the production of the Company's products for
a substantial period of time, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
The following is a detail of customers that accounted for greater than 10%
of gross revenue in the respective fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Customer A.................................... --% 78% 62%
Customer B.................................... -- -- 12
Customer C.................................... -- 20 10
</TABLE>
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. This
statement requires the use of the liability method whereby deferred tax asset
and liability account balances are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
REVENUE RECOGNITION
Revenue from product sales direct to customers is recognized upon shipment.
Certain of the Company's sales are made to distributors under agreements
allowing certain rights of return and price protection on products unsold by
distributors. Accordingly, the Company defers revenue and gross profit on such
sales until the product is sold by the distributors.
ADVERTISING
Advertising costs are expensed as incurred. Advertising expenses were
$4,269, $66,804 and $296,692 in the fiscal years ended January 3, 1998,
January 2, 1999, and January 1, 2000, respectively.
F-9
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Financial Accounting Standards Board's ("FASB") SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, prescribes accounting and reporting standards for all
stock-based compensation plans, including employee stock options. As allowed by
SFAS No. 123, the Company has elected to continue to account for its employee
stock-based compensation in accordance with Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.
OTHER COMPREHENSIVE INCOME (LOSS)
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
which establishes standards for reporting and display of comprehensive income
and its components in the financial statements. There were no differences
between net income (loss) and comprehensive income (loss) during any of the
periods presented.
SEGMENT INFORMATION
Effective April 1, 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. The adoption of SFAS No. 131
did not have a significant effect on the disclosure of segment information as
the Company continues to consider its business activities as a single segment.
The Company has one operating segment with two product divisions (the Wireline
and Wireless Divisions). The chief operating decision maker allocates resources
and assesses performance of the business and other activities at the operating
segment level. The Wireline Division accounted for substantially all of the
sales in all periods.
Approximately $0, $3,994, and $3,371,722 of the Company's revenues were from
export sales for the fiscal years ended January 3, 1998, January 2, 1999, and
January 1, 2000, respectively. The operations and assets of Silicon Laboratories
UK Limited were immaterial in all periods presented.
NET INCOME PER SHARE
The Company computes net income (loss) per share in accordance with SFAS
No. 128, EARNINGS PER SHARE. Under SFAS No. 128, basic net income (loss) per
share is computed by dividing net income (loss) by the weighted average number
of shares outstanding. Diluted net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares and
dilutive common share equivalents outstanding.
F-10
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table sets forth the computation of basic and diluted net
income (loss) per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss)........................................... $ (1,835) $ (3,397) $ 11,040
======== ======== ========
Basic:
Weighted-average shares of common stock outstanding....... 25,730 28,245 29,177
Weighted-average shares of common stock subject to
repurchase.............................................. (23,970) (19,116) (14,025)
-------- -------- --------
Shares used in computing basic net income (loss) per
share................................................... 1,760 9,129 15,152
-------- -------- --------
Effect of dilutive securities:
Weighted-average shares of common stock subject to
repurchase.............................................. -- -- 13,370
Convertible preferred stock and warrants.................. -- -- 13,965
Stock options............................................. -- -- 1,170
-------- -------- --------
Shares used in computing diluted net income (loss) per
share................................................... 1,760 9,129 43,657
======== ======== ========
Basic net income (loss) per share........................... $ (1.04) $ (.37) $ .73
Diluted net income (loss) per share......................... $ (1.04) $ (.37) $ .25
Pro forma:
Basic:
Shares used above......................................... 15,152
Pro forma adjustment to reflect weighted effect of assumed
conversion of convertible preferred stock............... 13,842
Pro forma adjustment to reflect weighted average effect of
shares subject to repurchase which vest upon an initial
public offering......................................... 7,467
--------
Shares used in computing pro forma basic net income per
share................................................... 36,461
========
Pro forma basic net income per share........................ $ .30
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to prior year financial statements
to conform with current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"). SFAS No. 133 is effective
for fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income. The Company does not expect that the
adoption of SFAS No. 133 will have a material impact on its financial statements
because the Company does not believe it currently holds any derivative
instruments.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"), which provides guidance on the
F-11
<PAGE>
SILICON LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognition, presentation and disclosure of revenue in financial statements. The
application of SAB No. 101 did not have a material impact on the financial
statements of the Company.
On March 31, 1999, the FASB issued an exposure draft entitled "Accounting
for Certain Transactions Involving Stock Compensation," which is a proposed
interpretation of APB Opinion No. 25. However, the exposure draft has not been
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could affect the Company's future earnings.
3. SHORT-TERM INVESTMENTS
The Company's short-term investments consist of U.S. Treasury bills with
interest rates ranging from 4.72% to 5.10% which mature at varying dates through
May 25, 2000 and are considered to be held-to-maturity. Securities classified as
held-to-maturity, which consist of securities that management has both the
ability and positive intent to hold to maturity, are carried at amortized cost
which approximates fair value.
4. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1999 2000
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Bank term loans due in monthly installments of $27,669 and
$41,645 plus interest at bank prime (8.5% at January 1,
2000) through March 31, 2001 and January 31, 2002,
respectively.............................................. $2,246 $1,456
Note payable, at 9.08%, payable in monthly installments of
$24,810 through March 1, 2003 with a $200,600 interest
payment due at maturity................................... -- 835
Note payable, at 9.77%, payable in monthly installments of
$4,113 through June 1, 2003............................... -- 146
Note payable, at 9.91%, payable in monthly installments of
$14,050 through September 1, 2003......................... -- 526
Note payable, at 10.22%, payable in monthly installments of
$5,829 through December 1, 2003........................... -- 231
Note payable, at 6.71%, payable in monthly installments of
$30,635 through February 28, 2003 with a $243,000 interest
payment due at maturity................................... -- 1,046
Note payable, at 6.92%, payable in monthly installments of
$19,340 through July 31, 2003 with a $152,900 interest
payment due at maturity................................... -- 719
Note payable, at 7.13%, payable in monthly installments of
$40,017 to $46,005 through April 30, 2004 with a $399,200
interest payment due at maturity.......................... -- 1,956
Note payable, at 7.5%, payable in monthly installments of
$9,912 to $11,399 through April 30, 2004 with a $98,116
interest payment due at maturity.......................... -- 481
Capital lease obligations................................... 796 1,382
------ ------
3,042 8,778
Current portion............................................. (889) (2,697)
------ ------
Long-term portion........................................... $2,153 $6,081
====== ======
</TABLE>
F-12
<PAGE>
SILICON LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM OBLIGATIONS (CONTINUED)
The amounts outstanding under the above term loans are in connection with a
$2.5 million loan facility (see Note 5 for discussion of warrants issued). In
addition, the Company obtained new loan facilities in December 1999 totaling
$4 million, of which no amounts were outstanding as of January 1, 2000. These
additional facilities also bear interest at bank prime (8.5% as of January 1,
2000). The collateral for these loans includes a blanket lien on all otherwise
unsecured tangible property, inventory, and accounts receivable. These loans and
the letter of credit (See Note 6) are cross-collateralized and cross-defaulted.
There are covenants related to net worth and liquidity associated with these
financing lines, with which the company is in compliance as of January 1, 2000.
The Company has a revolving line of credit agreement (the Agreement) with a
bank that is collateralized by certain assets of the company. Under the
provisions of the Agreement, the line of credit allows for borrowings of up to
$3 million or 80% of eligible accounts receivable at bank prime (8.5% as of
January 1, 2000). There were no amounts outstanding under this facility as of
January 2, 1999 and January 1, 2000.
The notes payable and capital lease obligations are borrowings with three
institutional financing providers for equipment financing. The indebtedness is
secured by a security interest in the underlying equipment.
Periodically, the Company will purchase or make advance deposits toward the
purchase of machinery and equipment; and within one to three months enter into
leasing arrangements to finance these assets. These leasing arrangements result
in the reimbursement of the amounts initially paid by the Company and do not
result in any gains or losses. Such reimbursements have been reflected in the
statement of cash flows as proceeds from equipment lease financings.
The Company has financed the acquisition of certain computers and other
equipment under capital lease transactions which are accounted for as financings
and mature through fiscal year 2003. As of January 2, 1999 and January 1, 2000,
equipment under capital lease included in property, equipment and software was
$796,000 and $1,382,000, respectively.
At January 1, 2000, contractual maturities of debt and future minimum annual
payments due under capital lease obligations are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL
FISCAL YEAR DEBT LEASES TOTAL
- ----------- -------- -------- --------
<S> <C> <C> <C>
2000.............................................. $ 2,188 $ 646 $ 2,834
2001.............................................. 2,117 637 2,754
2002.............................................. 1,740 343 2,083
2003.............................................. 1,125 12 1,137
2004.............................................. 226 -- 226
------- ------ -------
7,396 1,638 9,034
Less amount representing interest................. -- (256) (256)
------- ------ -------
7,396 1,382 8,778
Less current portion.............................. (2,188) (509) (2,697)
------- ------ -------
Long-term debt and leases......................... $ 5,208 $ 873 $ 6,081
======= ====== =======
</TABLE>
F-13
<PAGE>
SILICON LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Redeemable Convertible Preferred Stock is as follows:
<TABLE>
<CAPTION>
SHARE ISSUED AND OUTSTANDING
------------------------------------
PAR SHARES JANUARY 3, JANUARY 2, JANUARY 1, LIQUIDATION
SERIES VALUE AUTHORIZED 1998 1999 2000 PREFERENCE
- ------ -------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Undesignated.................. $.0001 998,095 -- -- -- --
A............................. $.0001 5,391,267 5,345,449 5,345,449 5,345,449 $ 5,250,002
B............................. $.0001 1,610,638 -- 1,575,638 1,575,638 7,500,036
--------- --------- --------- --------- -----------
8,000,000 5,345,449 6,921,087 6,921,087 $12,750,038
========= ========= ========= ========= ===========
</TABLE>
The Certificate of Incorporation authorizes the issuance of up to 8,000,000
shares of Convertible Preferred Stock with par value of $0.0001 per share. Each
share is convertible at the option of the stockholder into two shares of common
stock, subject to certain anti-dilution adjustments. The Convertible Preferred
Stockholders are entitled to the number of votes equal to the number of shares
of common stock into which each share of Convertible Preferred Stock could be
converted on the record date. Conversion is automatic upon the closing of an
underwritten public offering of the Company's common stock meeting certain
criteria; or if less than one-third of the Convertible Preferred Stock remain
outstanding for that series. Additional contractual obligations by and between
the holders of Convertible Preferred Stockholders and the holders of common
stock exist with regards to registration rights, indemnification, rights of
first offer, rights of first refusal and voting of shares.
The stockholders of Series A and Series B Convertible Preferred Stock are
entitled to cumulative dividends of $0.0589286 and $0.2856 per share,
respectively, beginning January 1, 2002 and continuing thereafter whether or not
earned or declared. In the event of conversion to common stock, the preferred
stockholders shall receive, when applicable after January 1, 2002, consideration
at conversion for all accrued and unpaid dividends. In the event of a
liquidation or winding up of the Company, stockholders of Series A and Series B
Convertible Preferred Stock shall have a liquidation preference of $0.982144225
and $4.76 per share, respectively, plus declared and unpaid dividends, over
holders of common stock. After distributions pursuant to the liquidation
preference, holders of Series A and Series B Convertible Preferred Stock shall
participate in additional distributions pro rata with other classes of stock
until such holders shall have received $2.946432675 and $14.28 per share,
respectively.
Series A and Series B Convertible Preferred Stock are convertible at the
option of each holder into common stock on a one-for-two basis, subject to
certain anti-dilution adjustments.
A majority of the holders of Series A and Series B Convertible Preferred
Stock, voting as one group, may elect to require the Company, for an amount per
share equal to the liquidation price, to redeem on or after the dates specified
below up to a cumulative total of that percentage of the shares on Series A and
B Convertible Preferred Stock, net of any shares previously redeemed:
<TABLE>
<CAPTION>
CUMULATIVE PERCENTAGE OF SHARES
REDEMPTION DATE WHICH MAY BE REDEEMED
- --------------- -------------------------------
<S> <C>
March 21, 2005.................................... 33 1/3%
March 21, 2006.................................... 66 2/3%
March 21, 2007.................................... 100 %
</TABLE>
F-14
<PAGE>
SILICON LABORATORIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS
A warrant to purchase 45,818 shares of Series A Convertible Preferred Stock
at $0.982144225 per share was outstanding at January 1, 2000. The warrant is
exercisable at any time before November 20, 2002. The warrant was issued in 1997
to a commercial bank in connection with the extension of debt financing (see
Note 4).
A warrant to purchase 21,008 shares of Series B Convertible Preferred Stock
at $4.76 per share was outstanding at January 1, 2000. The warrant is
exercisable at any time before September 22, 2008. The warrant was issued in
1998 to an equipment lessor in connection with the extension of lease and debt
financing (see Notes 4 and 5).
A warrant to purchase 4,765 shares of Series B Convertible Preferred Stock
at $4.76 per share was outstanding at January 1, 2000. The warrant is
exercisable at any time before September 4, 2003. The warrant was issued in 1998
to a commercial bank in connection with the issuance of a letter of credit
facility for leasehold improvements (see Note 5).
No amount was allocated to the value of the above warrants as such amounts
were not significant.
COMMON STOCK
The Company had 30,015,944 shares of common stock outstanding as of
January 1, 2000. Of these shares, 11,910,298 shares were unvested and are
subject to rights of repurchase that lapse according to a time based vesting
schedule. Of the shares unvested and subject to rights of repurchase, 7,467,000
shares vest upon an initial public offering of common stock that meet certain
criteria.
Common stock reserved at January 1, 2000 consists of the following:
<TABLE>
<S> <C>
For exercise of Convertible Preferred Stock................. 13,842,174
For exercise of Convertible Preferred Stock Warrants........ 143,182
For issuance under the Company's 1997 Stock Option/Stock
Issuance Plan............................................. 3,389,498
----------
17,374,854
==========
</TABLE>
STOCK SPLIT
On November 3, 1999, the Company effected a two-for-one stock split through
a stock dividend of common stock. All references to common stock share and per
share amounts including options to purchase common stock have been retroactively
restated to reflect the stock split as if such split had taken place at the
inception of the Company. Also, the conversion ratio of the redeemable
convertible preferred stock has been adjusted from one-for-one to one-for-two.
STOCK OPTION/STOCK ISSUANCE PLAN
The Company has a 1997 Stock Option/Stock Issuance Plan (the "Plan") whereby
employees, members of the Board of Directors and independent advisors may be
granted options to purchase shares of the Company's common stock or may be
issued shares of the Company's common stock ("direct
F-15
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
issuance shares") as a direct purchase or as a bonus for services rendered to
the Company. These direct issuances of common stock are usually subject to
rights of repurchase. At January 1, 2000, 8,561,808 shares were authorized for
issuance under the Plan. The term of each option is no more than ten years from
the date of grant. The options generally vest over a five to eight year period,
and are immediately exercisable subject to a repurchase agreement which
generally lapses in accordance with the vesting schedule. The direct issuance
shares are also subject to repurchase rights which generally lapse over a five
to eight year period. The repurchase rights provide that upon certain defined
events, the Company can repurchase unvested shares at the price paid per share
and gives the Company the right of first refusal for any proposed disposition of
shares issued under the Plan.
The Company recorded deferred stock compensation expense of $414,000 and
$15,899,000 in connection with stock options granted for 355,500 shares and
2,464,200 shares of common stock during fiscal 1998 and 1999, respectively.
These amounts represent the difference between the exercise price of the stock
option and the subsequently deemed fair value of the Company's common stock. The
deferred stock compensation is amortized over the vesting periods of the
applicable options, resulting in amortization of $8,000 and $975,000 for the
year ended January 2, 1999 and the year ended January 1, 2000, respectively.
During fiscal 1997, 1998 and 1999, the Company made full recourse loans to
employees of $77,000, $147,500 and $1,267,500, respectively, in connection with
the employees' purchase of shares through exercises of options. These full
recourse notes are secured by the shares of stock, are interest bearing at rates
ranging from 4.8% to 6.7%, have terms of five years, and must be repaid upon the
sale of the underlying shares of stock.
A summary of the Company's stock option and direct issuance activity and
related information follows:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES OPTIONS AVERAGE
AVAILABLE AND DIRECT EXERCISE EXERCISE
FOR GRANT ISSUANCES PRICES PRICE
---------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
Plan adopted, March 1997...................... 5,294,536
Granted....................................... (3,630,000) 3,630,000 $0.05 $0.05
Exercised..................................... -- (2,860,000) .05 .05
---------- ---------- -------------- -----
Balance at January 3, 1998.................... 1,664,536 770,000 0.05 0.05
Additional shares reserved.................... 1,067,272
Granted....................................... (1,542,500) 1,542,500 0.05 - 1.25 0.35
Exercised..................................... -- (938,168) 0.05 - .25 0.18
Cancelled..................................... 61,832 (61,832) 0.05 0.05
---------- ---------- -------------- -----
Balance at January 2, 1999.................... 1,251,140 1,312,500 0.05 - 1.25 0.31
Additional shares reserved.................... 2,200,000
Granted....................................... (2,484,200) 2,484,200 1.25 - 16.00 3.08
Exercised..................................... -- (1,411,474) 0.05 - 5.00 1.45
Cancelled..................................... 5,000 (5,000) 0.25 - 1.75 .77
Repurchase and cancellation of unvested
shares...................................... 37,332 -- .25 .25
---------- ---------- -------------- -----
Outstanding at January 1, 2000................ 1,009,272 2,380,226 $0.05 - $16.00 $2.52
========== ========== ============== =====
</TABLE>
F-16
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY (CONTINUED)
In addition, the following table summarizes information about stock options
that were outstanding and exercisable at January 1, 2000.
<TABLE>
<CAPTION>
OPTIONS WEIGHTED
OUTSTANDING AVERAGE
AND REMAINING WEIGHTED
RANGE OF EXERCISABLE AT CONTRACTUAL AVERAGE
EXERCISE PRICES JANUARY 1, 2000 LIFE IN YEARS EXERCISE PRICE
- ----------------- --------------- ------------- --------------
<S> <C> <C> <C>
$.050 to $.050 457,000 4.85 $ 0.050
.250 to .375 301,626 8.50 0.253
1.250 to 1.250 422,200 9.12 1.250
1.750 to 1.750 401,100 9.53 1.750
2.000 to 2.500 284,800 9.74 2.207
5.000 to 5.000 243,000 9.89 5.000
10.000 to 10.000 250,500 9.95 10.000
16.000 to 16.000 20,000 9.89 16.000
---------
$0.050 to $16.000 2,380,226 8.54 $ 2.520
</TABLE>
Pro forma information regarding net income (loss) is required by Statement
No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions: risk-free interest rate of
6%; no expected dividends; an expected life of one year; and no volatility.
The weighted-average fair value of options granted during fiscal 1998 and
1999 was $.61 and $9.55, respectively.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Pro forma net income (loss)................... $(1,835) $(3,400) $11,014
Pro forma basic net income (loss) per share... (1.04) (.37) .73
Pro forma diluted net income (loss) per
share....................................... (1.04) (.37) .25
</TABLE>
Option valuation models incorporate highly subjective assumptions. Because
changes in the subjective assumptions can materially affect the fair value
estimate, the existing models do not necessarily provide a reliable single
measure of the fair value of the Company's employee stock options. Because the
determination of fair value of all employee stock options granted after such
time as the Company becomes a public entity will include an expected volatility
factor and because, for pro forma disclosure purposes, the estimated fair value
of the Company's employee stock options is treated as if amortized to expense
over the options' vesting period, the effects of applying SFAS No 123 for pro
forma disclosures are not necessarily indicative of future amounts.
F-17
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
The Company's main executive, administrative and technical offices occupy
approximately 37,800 square feet in Austin, Texas under a lease that expires in
April 2006, with one five year renewal option. Monthly rental payments increase
by $1,575 per month in April 2002 and again in April 2004.
The Company has an additional lease commitment for approximately 34,000
square feet in Austin, Texas for supplemental office space under a 76 month
lease with one five year renewal option. The Company expects occupancy to
commence in February 2000. Monthly rental payment increase from $22,301 to
$48,919 per month at various intervals throughout the term of the lease.
To provide security for the landlord on the main offices, the Company
provided a long-term cash deposit of $113,400 and a letter of credit for
$453,600. At January 1, 2000, there were no outstanding amounts under the letter
of credit. Based on certain financial performance criteria, the letter of credit
requirements could be reduced to $255,600. (see also Note 4).
To provide security to the landlord on the additional lease commitment for
February 2000 occupancy, the Company provided a long-term cash deposit of
$64,800 and a letter of credit for $500,000. At January 1, 2000, no amounts were
outstanding under the letter of credit. The letter of credit requirements could
be reduced in even annual installments based upon satisfactory performance under
the lease or eliminated entirely based on certain financial performance
criteria. This letter of credit is provided under the revolving line of credit
from a commercial bank (see Note 4).
The minimum annual future rentals under the terms of these leases at
January 1, 2000 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
2000........................................................ $ 832
2001........................................................ 988
2002........................................................ 1,033
2003........................................................ 1,042
2004........................................................ 1,071
Thereafter.................................................. 1,487
------
Total minimum lease payments................................ $6,453
======
</TABLE>
Rent expense for operating leases was approximately $45,740, $144,784 and
$373,983 for the years ended January 3, 1998, January 2, 1999, and January 1,
2000, respectively.
The Company is involved in various legal proceedings that have arisen in the
normal course of business. While the ultimate results of these matters cannot be
predicted with certainty, management does not expect them to have a material
adverse effect on the consolidated financial position and results of operations.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying values of assets and liabilities for financial reporting
purposes and the values used for income tax purposes.
F-18
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred taxes as of January 2, 1999 and
January 1, 2000 are as follows:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1999 2000
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Depreciable assets.................................... $ (209) $ --
Deferred tax assets:
Depreciable assets.................................... -- $ 28
Reserves and allowances............................... 113 568
Net operating loss and tax credit carryforwards....... 2,231 --
Deferred revenue...................................... -- 381
Deferred compensation................................. -- 46
Accrued liabilities & other........................... 29 55
------- ------
2,164 1,078
------- ------
Net deferred tax assets before valuation allowance.... 2,164 1,078
------- ------
Valuation allowance for net deferred tax asset........ (2,164) --
------- ------
Net deferred taxes.................................... $ -- $1,078
======= ======
</TABLE>
The Company established a valuation allowance of $2,164,000 for the year
ended January 2, 1999, due to uncertainties regarding the realization of net
deferred tax assets because of the Company's lack of earnings history. The
valuation allowance decreased by $2,164,000 for the year ended January 1, 2000,
as a result of the increased earnings of the Company during the current year.
Significant components of the provision (benefit) for income taxes
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal..................................... $-- $-- $ 4,009
State....................................... -- -- 393
--- --- -------
Total Current............................... -- -- 4,402
Deferred:
Federal..................................... -- -- (993)
State....................................... -- -- (85)
--- --- -------
Total Deferred.............................. -- -- (1,078)
--- --- -------
$ 0 $ 0 $ 3,324
=== === =======
</TABLE>
F-19
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The Company's provision (benefit) for income taxes differs from the expected
tax expense (benefit) amount computed by applying the statutory federal income
tax rate to income (loss) before income taxes as a result of the following:
<TABLE>
<CAPTION>
JANUARY 3, 1998 JANUARY 2, 1999 JANUARY 1, 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
Pre-tax book income (loss) at statutory rate....... (34.0)% (34.0)% 35.0%
State taxes, net of federal benefit................ (2.9) (3.0) 3.0
Permanent items.................................... 1.0 0.3 .1
Deferred compensation expense...................... -- -- 2.6
Tax credits........................................ -- -- (2.4)
Change in valuation allowance...................... 35.9 36.7 (15.2)
----- ----- -----
0.0% 0.0% 23.1%
===== ===== =====
</TABLE>
The exercise of certain stock options which have been granted under the
Company's stock option plan result in compensation which is includable in the
taxable income of the exercising option holder and deductible by the Company for
federal and state income tax purposes. Such compensation results from increases
in the fair market value of the Company's common stock subsequent to the date of
grant of the exercised stock options and, in accordance with APB 25, such
compensation is not recognized as an expense for financial accounting purposes;
however, the related tax benefits are recorded as an addition to Additional
Paid-in-Capital.
8. MINIMUM PURCHASE REQUIREMENT
The Company entered into a wafer and mask tooling agreement whereby it has
an obligation to pay $100,000 over three years starting in July, 1997. This
obligation may be reduced based upon subsequent purchase volume and vendor
negotiations. As of January 1, 2000, the Company had accrued $60,000 related to
this purchase agreement. The Company is also required to pay a nonrefundable
yearly fee of $10,000 through 2000 to such vendor.
9. EMPLOYEE BENEFIT PLAN
During fiscal 1997, the Company established the Silicon Laboratories Inc.
401(k) Plan ("the 401(k) Plan") for the benefit of substantially all employees.
The Company is the administrator of the 401(k) Plan. To be eligible for the
401(k) Plan, employees must have reached the age of 21. Participants may elect
to contribute up to 15% of their compensation to the 401(k) Plan. The Company
may make discretionary matching contributions of up to 10% of a participant's
compensation as well as discretionary profit-sharing contributions to the 401(k)
Plan. The Company's contributions to the 401(k) Plan vest over four years at a
rate of 25% per year. The Company has not contributed to the Plan to date.
10. SUBSEQUENT EVENTS
On January 5, 2000 the Company's Board of Directors authorized management to
file a registration statement with the Securities and Exchange Commission to
permit the Company to sell shares of its common stock to the public. In
connection with this authorization, the Board approved increasing the authorized
shares of common stock to 250,000,000.
F-20
<PAGE>
SILICON LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
On January 5, 2000 the Company's Board of Directors approved The 2000 Stock
Incentive Plan ("Plan"). The Plan requires shareholder approval which is
expected to occur prior to the effective date of the Company's IPO. The Company
has reserved 5,389,498 shares of common stock for issuance under this plan
(consisting of the shares available under the predecessor plan on the effective
date plus an additional 2,000,000 shares).
Also on January 5, 2000 the Board adopted the Employee Stock Purchase Plan.
The plan is expected to be approved prior to the date of the IPO and will become
effective upon the execution of the underwriting agreement for the IPO.
F-21
<PAGE>
[INSIDE BACK COVER GRAPHIC]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $21,120
-------
NASD filing fee............................................. 8,500
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent fees......................................... *
Miscellaneous............................................... *
-------
Total..................................................... $
=======
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of Silicon Laboratories may
and, in certain cases, must be indemnified by Silicon Laboratories against, in
the case of a non-derivative action, judgments, fines, amounts paid in
settlement and reasonable expenses (including attorneys' fees) incurred by him
as a result of such action, and in the case of a derivative action, against
expenses (including attorneys' fees), if in either type of action he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Silicon Laboratories. This indemnification does not apply, in
a derivative action, to matters as to which it is adjudged that the director,
officer, employee or agent is liable to Silicon Laboratories, unless upon court
order it is determined that, despite such adjudication of liability, but in view
of all the circumstances of the case, he is fairly and reasonably entitled to
indemnity for expenses, and, in a non-derivative action, to any criminal
proceeding in which such person had no reasonable cause to believe his conduct
was unlawful.
Our certificate of incorporation, provides that no director shall be liable
to us or our stockholders for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by the DGCL.
Our bylaws require us to indemnify our directors and executive officers to
the fullest extent permitted by Delaware law. We have entered into
indemnification agreements with all of our directors and executive officers and
have purchased directors' and officers' liability insurance.
Reference is made to the underwriting agreement to be filed as Exhibit 1.1
hereto, pursuant to which the underwriters have agreed to indemnify our officers
and directors against certain liabilities under the Securities Act.
Silicon Laboratories has entered into Indemnification Agreements with each
director and executive officer, a form of which is filed as Exhibit 10.1 to this
Registration Statement. Pursuant to such agreements, we will be obligated, to
the extent permitted by applicable law, to indemnify such directors and
executive officers against all expenses, judgments, fines and penalties incurred
in connection with the defense or settlement of any actions brought against them
by reason of the fact that they were directors or executive
II-1
<PAGE>
officers of Silicon Laboratories or assumed certain responsibilities at the
direction of Silicon Laboratories. Silicon Laboratories also intends to purchase
directors and officers liability insurance in order to limit its exposure to
liability for indemnification of directors and executive officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since August 1996, we have issued unregistered securities to a limited
number of people as described below. These issuances were deemed exempt from
registration under the Securities Act in reliance on Rule 701 or Section 4(2)
promulgated under the Securities Act.
1. In March, April and June 1997, Silicon Laboratories issued shares of
Series A Preferred Stock for $0.98214425 per share, for an aggregate purchase
price of $5,250,002. The following stockholders purchased our Series A Preferred
Stock: Austin Ventures IV-A, L.P.; Austin Ventures IV-B, L.P.; Austin Ventures
V, L.P.; Silverton Partners; Donald Brooks; Dietrich R. Erdmann; and H. Berry
Cash. Although the number of shares of Series A preferred stock outstanding was
not affected by the 2-for-1 split of our common stock, as a result of this stock
split, each share of Series A preferred stock automatically adjusted and became
convertible into two shares of our common stock.
2. In June 1998, Silicon Laboratories issued shares of Series B Preferred
Stock for $4.76 per share, for an aggregate purchase price of $7,500,037. The
following stockholders purchased our Series B Preferred Stock: Austin Ventures
IV-A, L.P.; Austin Ventures IV-B, L.P.; Austin Ventures V, L.P.; Austin Ventures
V Affiliates Fund, L.P.; Silverton Partners; Donald W. and Theresa Brooks;
Drutan Investments, Ltd.; Brooks + Brooks Investments, Ltd.; Current Ventures
Group, Ltd.; CenterPoint Venture Partners, L.P.; Thomas M. Brooks; Dietrich R.
Erdmann; Berry and Dianne Cash Grandchildren's Trust; Charles H. Cash; H. Berry
Cash; KLM Capital Partners Fund; L.J. Sevin; and Jonathan D. Ivester. Although
the number of shares of Series B preferred stock outstanding was not affected by
the 2-for-1 split of our common stock, as a result of this stock split, each
share of Series b preferred stock automatically adjusted and became convertible
into two shares of our common stock.
3. Through January 1, 2000, Silicon Laboratories has issued
5,209,642 shares of its common stock to directors, employees and consultants
upon the exercise of options granted or directly issued under its 1997 Stock
Option/Stock Issuance Plan at a weighted average purchase price of $.45 per
share.
4. From time to time Silicon Laboratories has granted stock options to
employees, directors and consultants. The following table sets forth information
regarding these grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
DATE OF GRANT OR ISSUANCE SHARES PER SHARE
- ------------------------- --------- --------------
<S> <C> <C>
May 1997--April 1998................................. 3,946,000 $0.05
June 1998--July 1998................................. 933,000 $0.25
September 1998....................................... 27,500 $0.275
October 1998......................................... 32,000 $0.325
November 1998........................................ 31,000 $0.375
December 1998--April 1999............................ 968,000 $1.25
June 1999--July 1999................................. 526,700 $1.75
September 1999....................................... 348,000 $2.00
October 1999......................................... 274,000 $2.50
November 1999........................................ 288,000 $5.00
November 1999........................................ 20,000 $16.00
December 1999........................................ 262,500 $10.00
</TABLE>
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement by and among Silicon
Laboratories Inc. and the Underwriters
3.1 Form of Fourth Amended and Restated Certificate of
Incorporation of Silicon Laboratories Inc.
3.2 Form of Amended and Restated Bylaws of Silicon Laboratories
Inc.
4.1* Specimen certificate for shares of common stock
5.1* Opinion of Brobeck, Phleger & Harrison LLP
10.1 Form of Indemnification Agreement between Silicon
Laboratories Inc. and each of its directors and executive
officers
10.2 Silicon Laboratories Inc. 2000 Stock Incentive Plan
10.3 Silicon Laboratories Inc. Employee Stock Purchase Plan
10.4 Amended and Restated Investors' Rights Agreement dated June
2, 1998 by and among the Silicon Laboratories Inc. and
certain holders of preferred stock or common stock
10.5 Lease Agreement dated June 26, 1998 by and between Silicon
Laboratories Inc. and S.W. Austin Office Building Ltd.
10.6 Lease Agreement dated October 27, 1999 by and between
Silicon Laboratories Inc. and Stratus 7000 West Joint
Venture
10.7 Master Loan and Security Agreement dated April 22, 1999 by
and between Silicon Laboratories Inc. and FINOVA Capital
Corporation
10.8 Commitment Letter dated April 19, 1999 by and between
Silicon Laboratories and Imperial Bank
10.9 Security and Loan Agreement dated June 25, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.10 Letter of Credit Agreement dated July 30, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.11 Letter of Credit Agreement dated November 19, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.12 Commitment Letter dated December 9, 1999 by and between
Silicon Laboratories and Imperial Bank
10.13 First Amendment to Credit Terms and Conditions and
Attachment Thereto dated December 16, 1999 by and between
Silicon Laboratories Inc. and Imperial Bank
10.14 Promissory Note dated December 16, 1999 by and between
Silicon Laboratories and Imperial Bank
10.15 Promissory Note dated December 16, 1999 by and between
Silicon Laboratories and Imperial Bank
10.16 Preferred Stock Purchase Warrant dated November 20, 1997 by
and between Silicon Laboratories and Imperial Bank
10.17 Preferred Stock Purchase Warrant dated September 4, 1998 by
and between Silicon Laboratories and Imperial Bank
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.18 Volume Purchase Agreement dated June 1, 1998 by and between
Silicon Laboratories Inc. and PC-Tel, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Brobeck, Phleger & Harrison LLP. Reference is
made to Exhibit 5.1
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be included by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the consolidated Financial
Statements or the related Notes.
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the DGCL, our Certificate of Incorporation or our Bylaws, the underwriting
agreement or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered hereunder, we will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
We hereby undertake that:
1. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, we
have duly caused this registration statement to be signed on our behalf by the
undersigned, thereunto duly authorized, in Austin, Texas, on January 18, 2000.
<TABLE>
<S> <C> <C>
SILICON LABORATORIES INC.
By: /s/ NAVDEEP S. SOOCH
-----------------------------------------
Navdeep S. Sooch
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
OF THE BOARD
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Navdeep S. Sooch and John W. McGovern,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Chief Executive Officer and
/s/ NAVDEEP S. SOOCH Chairman of the Board
------------------------------------------- (principal executive January 18, 2000
Navdeep S. Sooch officer)
Vice President and Chief
/s/ JOHN W. MCGOVERN Financial Officer
------------------------------------------- (principal financial and January 18, 2000
John W. McGovern accounting officer)
/s/ JEFFREY W. SCOTT
------------------------------------------- Vice President of January 18, 2000
Jeffrey W. Scott Engineering and Director
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ DAVID R. WELLAND
------------------------------------------- Vice President of January 18, 2000
David R. Welland Technology and Director
/s/ WILLIAM P. WOOD
------------------------------------------- Director January 18, 2000
William P. Wood
/s/ H. BERRY CASH
------------------------------------------- Director January 18, 2000
H. Berry Cash
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement by and among Silicon
Laboratories Inc. and the Underwriters
3.1 Form of Fourth Amended and Restated Certificate of
Incorporation of Silicon Laboratories Inc.
3.2 Form of Amended and Restated Bylaws of Silicon Laboratories
Inc.
4.1* Specimen certificate for shares of common stock
5.1* Opinion of Brobeck, Phleger & Harrison LLP
10.1 Form of Indemnification Agreement between Silicon
Laboratories Inc. and each of its directors and executive
officers
10.2 Silicon Laboratories Inc. 2000 Stock Incentive Plan
10.3 Silicon Laboratories Inc. Employee Stock Purchase Plan
10.4 Amended and Restated Investors' Rights Agreement dated June
2, 1998 by and among the Silicon Laboratories Inc. and
certain holders of preferred stock or common stock
10.5 Lease Agreement dated June 26, 1998 by and between Silicon
Laboratories Inc. and S.W. Austin Office Building Ltd.
10.6 Lease Agreement dated October 27, 1999 by and between
Silicon Laboratories Inc. and Stratus 7000 West Joint
Venture
10.7 Master Loan and Security Agreement dated April 22, 1999 by
and between Silicon Laboratories Inc. and FINOVA Capital
Corporation
10.8 Commitment Letter dated April 19, 1999 by and between
Silicon Laboratories and Imperial Bank
10.9 Security and Loan Agreement dated June 25, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.10 Letter of Credit Agreement dated July 30, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.11 Letter of Credit Agreement dated November 19, 1999 by and
between Silicon Laboratories Inc. and Imperial Bank
10.12 Commitment Letter dated December 9, 1999 by and between
Silicon Laboratories and Imperial Bank
10.13 First Amendment to Credit Terms and Conditions and
Attachment Thereto dated December 16, 1999 by and between
Silicon Laboratories Inc. and Imperial Bank
10.14 Promissory Note dated December 16, 1999 by and between
Silicon Laboratories and Imperial Bank
10.15 Promissory Note dated December 16, 1999 by and between
Silicon Laboratories and Imperial Bank
10.16 Preferred Stock Purchase Warrant dated November 20, 1997 by
and between Silicon Laboratories and Imperial Bank
10.17 Preferred Stock Purchase Warrant dated September 4, 1998 by
and between Silicon Laboratories and Imperial Bank
10.18 Volume Purchase Agreement dated June 1, 1998 by and between
Silicon Laboratories Inc. and PC-Tel, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Brobeck, Phleger & Harrison LLP. Reference is
made to Exhibit 5.1
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be included by amendment.
<PAGE>
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON LABORATORIES INC.
Silicon Laboratories Inc., a corporation organized and existing under
the Delaware General Corporation Law (the "DGCL") DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of this corporation
was filed with the Secretary of State of Delaware on August 19, 1996 under the
name "Silicon Laboratories Inc."
SECOND: The Fourth Amended and Restated Certificate of Incorporation
of Silicon Laboratories Inc. in the form attached hereto as ANNEX A has been
duly adopted in accordance with the provisions of Sections 245 and 242 of the
DGCL by the directors and stockholders of the Corporation.
THIRD: The Fourth Amended and Restated Certificate of Incorporation so
adopted reads in full as set forth in ANNEX A attached hereto and is hereby
incorporated herein by this reference.
IN WITNESS WHEREOF, Silicon Laboratories Inc. has caused this Fourth
Amended and Restated Certificate to be signed by its duly authorized and elected
Chairman and Chief Executive Officer this ___ day of January, 2000.
SILICON LABORATORIES INC.
By:
-------------------------------------
Navdeep S. Sooch
Chairman and Chief Executive Officer
<PAGE>
ANNEX A
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON LABORATORIES INC.
ARTICLE I
The name of this Corporation shall be Silicon Laboratories Inc. (the
"CORPORATION").
ARTICLE II
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
State of Delaware. The name of the registered agent at that 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 Delaware General
Corporation Law.
ARTICLE IV
4.1 Prior to a Qualified Public Offering (as defined in Section B.4(b)
of this Section 4.1 of this Article IV hereof), the Corporation's capital
stock shall be comprised as follows:
A. CLASSES OF STOCK. The Corporation is authorized to issue two
classes of capital stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares of capital stock authorized to
be issued is 60,000,000 shares. 52,000,000 shares shall be Common Stock, par
value $0.0001 per share. 8,000,000 shares shall be Preferred Stock, par
value $0.0001 per share, of which 5,391,267 shares shall be designated as
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock") and
1,610,638 shares shall be designated as "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock").
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK.
Undesignated Preferred Stock may be issued from time to time in one or more
series. The Corporation's Board of Directors (the "Board of Directors") is
hereby authorized to fix or alter the rights, preferences, privileges and
restrictions granted to or imposed upon additional series of Preferred Stock,
and the number of shares constituting any such series and the designation
thereof, or of any of them. Subject to compliance with applicable protective
voting rights which may be granted to the Preferred Stock or series thereof
in Certificates of Designation or the Corporation's Certificate of
Incorporation, as amended and as hereafter may be amended ("Protective
Provisions"), but notwithstanding any other rights of the Preferred Stock or
any series thereof, the rights, privileges, preferences and restrictions of
any such additional series may be subordinated to, pari passu with
(including, without limitation, inclusion in provisions with respect to
liquidation and
1
<PAGE>
acquisition preferences, redemption and/or approval of matters by vote or
written consent), or senior to any of those of any present or future class or
series of Preferred Stock or Common Stock. Subject to compliance with
applicable Protective Provisions, the Board of Directors is also authorized
to increase or decrease the number of shares of any series, prior or
subsequent to the issue of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally
fixing the number of shares of such series. The rights, preferences,
privileges and restrictions granted to and imposed on the Series A Preferred
Stock and the Series B Preferred Stock are as set forth below in this Article
IV(B).
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of Preferred Stock which may
hereafter come into existence, prior to January 1, 2002, the holders of shares
of Series A Preferred Stock and Series B Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, when, as and if
declared by the Board of Directors.
(b) Subject to the rights of Preferred Stock which may
hereafter come into existence, beginning January 1, 2002 and continuing
thereafter, the holders of shares of Series A Preferred Stock shall be entitled
to receive dividends, out of any assets legally available therefor, at the rate
of $0.0589286 (as adjusted to reflect stock dividends, stock splits,
combinations, recapitalizations or the like with respect to such series after
March 21, 1997 (the "Initial Series A Issue Date")) per share of Series A
Preferred Stock per annum, payable when, as and if declared by the Board of
Directors, and such dividends shall be cumulative and shall accrue on each share
from January 1, 2002, from day to day thereafter, whether or not earned or
declared. Subject to the rights of Preferred Stock which may hereafter come
into existence, beginning January 1, 2002 and continuing thereafter, the holders
of shares of Series B Preferred Stock shall be entitled to receive dividends,
out of any assets legally available therefor, at the rate of $0.2856 (as
adjusted to reflect stock dividends, stock splits, combinations,
recapitalizations or the like with respect to such series after the date upon
which shares of Series B Preferred Stock were first issued (the "Initial Series
B Issue Date")) per share of Series B Preferred Stock per annum, payable when,
as and if declared by the Board of Directors, and such dividends shall be
cumulative and shall accrue on each share from January 1, 2002, from day to day
thereafter, whether or not earned or declared. Any accumulation of dividends on
the Series A Preferred Stock or Series B Preferred Stock shall not bear
interest. Cumulative dividends with respect to shares of Series A Preferred
Stock or Series B Preferred Stock which are accrued, payable and/or in arrears
shall, upon conversion of such shares to Common Stock, at the option of the
Corporation either: (i) subject to the rights of series of Preferred Stock which
may from time to time come into existence, be paid in cash to the extent assets
are legally available therefor or (ii) be convertible into such additional
shares of Common Stock determined by dividing the amount of such dividends by
the fair market value of the Common Stock (as determined by the Corporation's
Board of Directors) on the date of such conversion (with any fractional share
rounded to the nearest whole share, with 0.5 being rounded upward).
(c) Each share of Series A Preferred Stock and Series B
Preferred Stock shall rank equally in all respects with respect to dividends;
provided, however, that the
2
<PAGE>
Corporation shall not declare or pay dividends which are insufficient to pay
all accrued dividends on each series of Preferred Stock outstanding unless
such dividends are declared and paid to each series of Preferred Stock pro
rata based on the accrued dividends with respect to such series as a
percentage of accrued dividends for all series of Preferred Stock.
(d) Until such time as neither shares of Series A Preferred
Stock nor Series B Preferred Stock are outstanding, no dividend whatsoever shall
be paid or declared, and no distribution shall be made, on Common Stock (other
than a dividend payable solely in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock).
(e) Any dividend or distribution which is declared by the
Corporation and payable with assets of the Corporation, other than cash, shall
be deemed to have such value as determined by the Board of Directors.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding
up of the Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, (A)
each holder of Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share (the "Series A Liquidation Amount") equal to the sum of: (i) $0.982144225
(the "Original Series A Issue Price") (as adjusted to reflect stock dividends,
stock splits, combinations, recapitalizations or the like with respect to such
series after the Initial Series A Issue Date) for each outstanding share of
Series A Preferred Stock held by such holder and (ii) an amount equal to all
accrued but unpaid dividends on the shares of Series A Preferred Stock held by
such holder and (B) each holder of Series B Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share (the "Series B Liquidation Amount") equal to the sum of: (i)
$4.76 (the "Original Series B Issue Price") (as adjusted to reflect stock
dividends, stock splits, combinations, recapitalizations or the like with
respect to such series after the Initial Series B Issue Date) for each
outstanding share of Series B Preferred Stock held by such holder and (ii) an
amount equal to all accrued but unpaid dividends on the shares of Series B
Preferred Stock held by such holder. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock and Series B Preferred Stock shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amounts, then, subject to the
rights of series of Preferred Stock that may from time to time come into
existence, the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and Series B Preferred Stock in proportion to the relative
liquidation preference of the shares of Series A Preferred Stock and Series B
Preferred Stock then held by them.
(b) After the distribution described in Subsection 2(a)
above and any other distribution that may be required with respect to series of
Preferred Stock that may from time to time come into existence, the remaining
assets of the Corporation available for distribution to stockholders shall be
distributed among the holders of the Series A Preferred
3
<PAGE>
Stock, Series B Preferred Stock and Common Stock pro rata based on the number
of shares of Common Stock held by each (determined on an as-converted basis
with respect to outstanding shares of Series A Preferred Stock and Series B
Preferred Stock); provided that the amount which the holders of Series A
Preferred Stock and Series B Preferred Stock shall be entitled to receive
pursuant to Subsection 2(a) and this Subsection 2(b), if any, in the
aggregate shall not exceed (i) $2.946432675 (as adjusted to reflect stock
dividends, stock splits, combinations, recapitalizations or the like with
respect to such series after the Initial Series A Issue Date) for each
outstanding share of Series A Preferred Stock held by such holder and (ii)
$14.28 (as adjusted to reflect stock dividends, stock splits, combinations,
recapitalizations or the like with respect to such series after the Initial
Series B Issue Date) for each outstanding share of Series B Preferred Stock
held by such holder.
(c) After the distributions described in Subsections (a)
and (b) above have been paid, subject to the rights of series of Preferred Stock
that may from time to time come into existence, the remaining assets of the
Corporation available for distribution to stockholders shall be distributed
among the holders of Common Stock pro rata based on the number of shares of
Common Stock held by each.
(d) (i) For purposes of this Section 2, upon the
affirmative vote of the holders of at least sixty-seven percent (67%) of the
shares of Series A Preferred Stock and Series B Preferred Stock then
outstanding, voting together as a single class, a liquidation, dissolution or
winding up of the Corporation shall be deemed to be occasioned by, or to
include: (A) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) or (B) a sale of all or
substantially all of the assets of the Corporation; unless the Corporation's
stockholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration for the Corporation's acquisition or sale or otherwise)
hold at least fifty percent (50%) of the voting power of the surviving or
acquiring entity; provided, however, that shares of the surviving entity held by
holders of the capital stock of the Corporation acquired by means other than the
exchange or conversion of the capital stock of the Corporation for shares of the
surviving entity shall not be used in determining if the stockholders of the
Corporation own more than fifty percent (50%) of the voting power of the
surviving or acquiring entity, but shall be used for determining the total
outstanding voting power of such entity.
(ii) In any of such events, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities to be delivered to the holders of the Series
A Preferred Stock, Series B Preferred Stock or Common Stock, as the case may be,
shall be valued as follows:
(A) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
4
<PAGE>
(C) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock and Series B Preferred Stock, voting together
as a single class.
(iii) In the event the requirements of this Subsection
2(d) are not complied with, the Corporation shall forthwith either:
(A) cause such closing to be postponed until such time
as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the
respective rights, preferences and privileges of the holders of the Series A
Preferred Stock and Series B Preferred Stock shall revert to and be the same as
such rights, preferences and privileges existing immediately prior to the date
of the first notice referred to in Subsection 2(d)(iv) below.
(iv) The Corporation shall give each holder of record
of Series A Preferred Stock and Series B Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, or twenty (20) days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the Corporation's receipt of written consent of the holders of at least a
majority of the Series A Preferred Stock and Series B Preferred Stock (voting
together as a single class) entitled to such notice rights or similar notice
rights.
3. REDEMPTION.
(a) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, the holders of not less than a
majority of the then outstanding Series A Preferred Stock and Series B Preferred
Stock, voting together as a single class, may elect to require the Corporation
to redeem (a "Redemption Request") on or after the dates specified below up to a
cumulative total of that percentage of the shares of Series A Preferred Stock
and Series B Preferred Stock held by each such requesting holder as set forth
below opposite such Redemption Date, less the number of shares of Series A
Preferred Stock and Series B Preferred Stock redeemed by the Company pursuant to
this Subsection 3(a) from such holder (or its predecessors) prior to the date of
such election:
5
<PAGE>
<TABLE>
<CAPTION>
Cumulative
Percentage of
Shares
Redemption Which May be
Date Redeemed
--------------- -------------
<S> <C>
March 21, 2005 33 1/3%
March 21, 2006 66 2/3%
March 21, 2007 100%.
</TABLE>
In each such event, the Corporation shall, to the extent it may
lawfully do so, redeem the shares specified in such Redemption Request within
thirty (30) days following the later of the date of receipt of such Redemption
Notice or the applicable Redemption Date, upon surrender by the requesting
holders of the certificates representing such shares by paying a sum per share
of Series A Preferred Stock equal to the Series A Liquidation Amount and a sum
per share of Series B Preferred Stock equal to the Series B Liquidation Amount
(such sums being the respective "Redemption Price" for the Series A Preferred
Stock and Series B Preferred Stock). Any redemption effected pursuant to this
Subsection (3)(a) shall be made on a pro rata basis among the requesting holders
of the Series A Preferred Stock and Series B Preferred Stock in proportion to
the number of shares of Series A Preferred Stock and Series B Preferred Stock
then held by such holders. If any date fixed for redemption of shares pursuant
to this Subsection 3(a) is a Saturday, Sunday or legal holiday, then such
redemption shall occur on the first business day thereafter.
(b) As used herein and in Subsections (3)(a) above and
(3)(c) and (3)(d) below, the term "Redemption Date" shall refer to each date on
which shares of Series A Preferred Stock or Series B Preferred Stock are
requested to be redeemed as provided in Subsection 3(a). Subject to the rights
of series of Preferred Stock that may from time to time come into existence, at
least fifteen (15) but no more than thirty (30) days prior to each Redemption
Date, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of the Series A Preferred Stock and Series B
Preferred Stock requested to be redeemed, at the address last shown on the
records of the Corporation for such holder, notifying such holder of the
redemption to be effected, specifying the number of shares to be redeemed from
such holder, the Redemption Date, the applicable Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares of Series A Preferred Stock
and Series B Preferred Stock to be redeemed (the "Redemption Notice"). Except
as provided in Subsection (3)(c), on or after the Redemption Date, each holder
of Series A Preferred Stock and Series B Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Redemption Notice, and
thereupon the applicable Redemption Price of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be canceled. In the
event
6
<PAGE>
less than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
(c) From and after each Redemption Date, unless there shall
have been a default in payment of the applicable Redemption Price, all rights of
the holders of shares of Series A Preferred Stock and Series B Preferred Stock
designated for redemption in the Redemption Notice as holders of such shares of
Series A Preferred Stock and Series B Preferred Stock (except the right to
receive the applicable Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. Subject to the rights of
Preferred Stock that may from time to time come into existence, if the funds of
the Corporation legally available for redemption of shares of Series A Preferred
Stock and Series B Preferred Stock on any Redemption Date are insufficient to
redeem the total number of shares of Series A Preferred Stock and Series B
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed on the basis of the
relative Redemption Prices of the shares of Series A Preferred Stock and Series
B Preferred Stock to be redeemed. The shares of Series A Preferred Stock and
Series B Preferred Stock not redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein. Subject to the rights of
Preferred Stock that may from time to time come into existence, at any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series A Preferred Stock and Series B Preferred
Stock, such funds will immediately be used to redeem the balance of the shares
which the Corporation has become obliged to redeem on any Redemption Date but
which it has not redeemed.
(d) On or prior to each Redemption Date, the Corporation
may deposit the applicable Redemption Price of all shares of Series A Preferred
Stock and Series B Preferred Stock designated for redemption in the Redemption
Notice, and not yet redeemed or converted, with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000 as a trust fund
for the benefit of the respective holders of the shares designated for
redemption and not yet redeemed, with irrevocable instructions and authority to
the bank or trust corporation to publish the notice of redemption thereof and
pay the applicable Redemption Price for such shares to their respective holders
on or after the Redemption Date, upon receipt of notification from the
Corporation that such holder has surrendered his, her or its share certificate
to the Corporation pursuant to Subsection (3)(b) above. As of the date of such
deposit (even if prior to the Redemption Date), the deposit shall constitute
full payment of the shares to their holders. From and after the date of such
deposit the shares so called for redemption shall be redeemed and shall be
deemed to be no longer outstanding, and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with respect
thereto, except the rights to receive from the bank or trust corporation payment
of the applicable Redemption Price of the shares, without interest, upon
surrender of their certificates therefor and the right to convert such shares as
provided in Article IV(B)(4) below. Such instructions shall also provide that
any monies deposited by the Corporation pursuant to this Subsection (3)(d) for
the redemption of shares thereafter converted into shares of Common Stock
pursuant to Article IV(B)(4) below prior to the Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
monies deposited by the Corporation pursuant to this
7
<PAGE>
Subsection (3)(d) remaining unclaimed at the expiration of two (2) years
followingthe final Redemption Date shall thereafter be returned to the
Corporation upon its request expressed in a resolution of its Board of
Directors.
4. CONVERSION. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred
Stock and Series B Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for such stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined, (i)
with respect to each share of Series A Preferred Stock, by dividing the Original
Series A Issue Price plus any accrued but unpaid dividends by the "Series A
Conversion Price" in effect on the date the certificate therefor is surrendered
for conversion and (ii) with respect to each share of Series B Preferred Stock,
by dividing the Original Series B Issue Price plus any accrued but unpaid
dividends by the "Series B Conversion Price" in effect on the date the
certificate therefor is surrendered for conversion. The initial Series A
Conversion Price shall be equal to the Original Series A Issue Price and the
initial Series B Conversion Price shall be equal to the Original Series B Issue
Price; provided, however, that such Series A Conversion Price and Series B
Conversion Price shall be subject to adjustment as set forth in Subsections
4(d), (e) and (f) below.
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the Series
A Conversion Price at the time in effect immediately upon the earlier of: (i)
except as provided below in Subsection 4(c), the sale of Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price per share of which is not less than $9.52 (as adjusted to reflect
stock dividends, stock splits, combinations, recapitalizations or the like with
respect to the Common Stock after the Initial Series A Issue Date) and with
gross proceeds to the Corporation and selling stockholders therein of at least
$10,000,000 in the aggregate (a "Qualified Public Offering") or (ii) the date
that, through the conversion or redemption of the Series A Preferred Stock,
fewer than 1,781,816 shares (as adjusted to reflect stock dividends, stock
splits, combinations, recapitalizations or the like with respect to such series
after the Initial Series A Issue Date) of the Series A Preferred Stock remain
outstanding. Each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the Series B Conversion Price at the
time in effect immediately upon the earlier of: (i) except as provided below in
Subsection 4(c), the sale of Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement under the Securities Act
the public offering price per share of which is not less than $9.52 (as adjusted
to reflect stock dividends, stock splits, combinations, recapitalizations or the
like with respect to the Common Stock after the Initial Series B Issue Date) and
with gross proceeds to the Corporation and selling stockholders therein of at
least $10,000,000 in the aggregate or (ii) the date that, through the conversion
or redemption of the Series B Preferred Stock, fewer than 525,213 shares (as
adjusted to reflect stock dividends, stock splits, combinations,
recapitalizations or the like with respect to such series after the Initial
Series B Issue Date) of Series B Preferred Stock remain outstanding.
8
<PAGE>
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series A Preferred Stock or Series B Preferred Stock, as
the case may be, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series A Preferred
Stock or Series B Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act,
the conversion shall be conditioned upon the closing with the underwriters of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of such Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities.
(d) SERIES A AND SERIES B CONVERSION PRICE ADJUSTMENTS.
The Series A Conversion Price and Series B Conversion Price shall be subject to
adjustment from time to time as follows:
(i) (A) If the Corporation shall issue, after the
Initial Series A Issue Date, any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Series A Conversion
Price in effect immediately prior to the issuance of such Additional Stock, the
Series A Conversion Price in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause (i)) be adjusted to
a price determined by multiplying such Series A Conversion Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
that the aggregate consideration received by the Corporation for such issuance
would purchase at such Series A Conversion Price; and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issuance plus the number of shares of such Additional Stock. If the
Corporation shall issue, after the Initial Series B Issue Date, any Additional
Stock without consideration or for a consideration per share less than the
Series B Conversion Price in effect immediately prior to the issuance of such
Additional Stock, the Series B Conversion Price in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price determined by multiplying such Series B Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the
Corporation for such issuance would purchase at such Series B Conversion Price;
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of such
Additional
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Stock. For the purposes of this subsection, the number of shares of Common
Stock outstanding immediately prior to suh issuance shall be calculated on a
fully diluted basis, as if all shares of Series A Preferred Stock and Series
B Preferred Stock and all Convertible Securities (as defined below) had been
fully converted into shares of Common Stock immediately prior to such
issuance and any outstanding Options (as defined below) had been fully
exercised immediately prior to such issuance (and the resulting securities
fully converted into shares of Common Stock, if so convertible) as of such
date, but not including in such calculation any additional shares of Common
Stock issuable with respect to shares of Series A Preferred Stock, Series B
Preferred Stock and Convertible Securities or Options, solely as a result of
the adjustment of the Series A Conversion Price or Series B Conversion Price
resulting from the issuance of Additional Stock causing such adjustment.
"Options" shall mean rights, options or warrants to subscribe for, purchase
or otherwise acquire either Common Stock or Convertible Securities.
"Convertible Securities" shall mean any evidences of indebtedness, shares
(other than Common Stock, Series A Preferred Stock and Series B Preferred
Stock) or other securities convertible into or exchangeable for Common Stock.
(B) No adjustment of the Series A Conversion Price or
Series B Conversion Price shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
Subsections 4(d)(i)(E)(3) and 4(d)(i)(E)(4) below, no adjustment of such Series
A Conversion Price or Series B Conversion Price pursuant to this Subsection
4(d)(i) shall have the effect of increasing the Series A Conversion Price above
the Series A Conversion Price in effect immediately prior to such adjustment and
no adjustment of such Series B Conversion Price pursuant to this subsection
4(d)(i) shall have the effect of increasing the Series B Conversion Price above
the Series B Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the Initial Series A Issue Date or the Initial Series B Issue Date) of
options to purchase or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock or options to purchase
or rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this Subsection 4(d)(i):
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(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including
without limitation, the passage of time, but without taking into
account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in Subsections 4(d)(i)(C) and
4(d)(i)(D)), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum exercise
price provided in such options or rights (without taking into
account potential antidilution adjustments) for the Common Stock
covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of
time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any
such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the minimum additional consideration, if any, to be received
by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in Subsections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration
payable to the Corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible
or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the
Series A Conversion Price and the Series B Conversion Price, to
the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change,
but no further adjustment shall be made for the actual issuance
of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
(4) Upon the expiration of any such options
or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to
such convertible or
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exchangeable securities, the Series A Conversion Price and the
Series B Conversion Price, to the extent in any way affected
by or computed using such options, rights or securities or
options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the
options or rights related to such securities.
(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant
to Subsections 4(d)(i)(E)(1) and (2) shall be appropriately
adjusted to reflect any change, termination or expiration of the
type described in either Subsection 4(d)(i)(E)(3) or (4).
(F) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Subsection 4(d)(i)(E))
by the Corporation after the Initial Series A Issue Date with respect to the
Series A Conversion Price or after the Initial Series B Issue Date with respect
to the Series B Conversion Price other than:
(1) Common Stock issued pursuant to a
transaction described in Subsection 4(d)(iii) hereof,
(2) Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions
with primarily non-financing purposes) of the Corporation
directly or pursuant to a stock option plan or restricted stock
plan approved by the Board of Directors,
(3) Common Stock issuable in connection with
lease lines, bank financings, acquisitions of companies or
product lines or other similar transactions with a non-cash
raising purpose approved by the Board of Directors (including,
without limitation, the warrants to purchase 45,818 shares of
Series A Preferred Stock issued to Imperial Bancorp in November
1997),
(4) Common Stock issued upon conversion of
the Preferred Stock, and
(5) Common Stock issued or issuable: (i) in
a public offering before or in connection with which all
outstanding shares of Series A Preferred Stock and Series B
Preferred Stock will be converted to Common Stock or (ii) upon
exercise of warrants or rights granted to underwriters in
connection with such a public offering.
(ii) If the Corporation does not attain gross product
revenues (on a full accrual basis) of at least $10,000,000 for its fiscal year
1999 ("1999 Gross Product Revenues") and upon publication by the Corporation of
audited financial statements indicating
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that such minimum 1999 Gross Product Revenues were not attained, the Series A
Conversion Price (but not the Series B Conversion Price) shall forthwith be
adjusted to a price equal to 70.83325% of the Series A Conversion Price in
effect immediately preceding such publication.
(iii) In the event the Corporation should at any time or
from time to time, after the Initial Series B Issue Date, fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Series A Conversion Price and Series B Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of Series A Preferred Stock and Series B Preferred
Stock shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time, after the Initial Series B Issue Date, is decreased by
a reverse split or combination of the outstanding shares of Common Stock, then,
following the record date of such reverse split or combination, the Series A
Conversion Price and Series B Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of each such series shall be decreased in proportion to such decrease in
outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation
shall declare a dividend or distribution payable in securities of other persons,
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or Common Stock Equivalents, then, in each such case,
the holders of the Series A Preferred Stock and Series B Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation into
which their respective shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of the Corporation entitled to receive such dividend or
distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time
after the Initial Series B Issue Date, there shall be a recapitalization of the
Corporation (other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 4 or in Section 2 above),
provision shall be made so that the holders of the Series A Preferred Stock and
Series B Preferred Stock shall thereafter be entitled to receive, upon
conversion of their respective shares of Series A Preferred Stock and Series B
Preferred Stock, the number of shares of stock or other securities or property
of the Corporation or otherwise, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such recapitalization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 4 with respect to the rights of the holders of the Series A
Preferred
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Stock and Series B Preferred Stock after the recapitalization to the end that
the provisions of this Section 4 (including adjustment of the Series A
Conversion Price and Series B Conversion Price then in effect and the number
of shares issuable to such holders upon conversion of the Series A Preferred
Stock and Series B Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment
of its Certificate of Incorporation, as amended, or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock and Series B
Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock or Series B
Preferred Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred Stock and Series B Preferred Stock which
the holder is at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Series A Conversion Price or Series B Conversion Price
pursuant to this Section 4, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock for which
the Conversion Price has been so adjusted a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock or Series B
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth: (A) such adjustment and readjustment, (B) the
Conversion Price for such series at the time in effect and (C) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of such series of
Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock and Series B Preferred
Stock, at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
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(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock and Series B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred Stock and
Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series A Preferred Stock and Series B Preferred
Stock, the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its Certificate of
Incorporation, as amended.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at such holder's
address appearing on the books of the Corporation.
5. VOTING RIGHTS. Each holder of shares of Series A Preferred
Stock and Series B Preferred Stock shall have the right to one (1) vote for each
share of Common Stock into which such holder's respective shares of Series A
Preferred Stock and Series B Preferred Stock could then be converted, with full
voting rights and powers equal to the voting rights and powers of the holders of
Common Stock, except as required by law or as expressly provided herein,
including the Protective Provisions in Section 6 below; shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of the Corporation; and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote, except as expressly provided
herein. Fractional votes shall not, however, be permitted and any fractional
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series A Preferred Stock and Series B Preferred Stock held
by each holder could be converted) shall be rounded to the nearest whole number
(with 0.5 being rounded upward).
6. PROTECTIVE PROVISIONS. So long as any shares of Series A
Preferred Stock or Series B Preferred Stock are outstanding, the Corporation
shall not, without first obtaining the approval (by vote or written consent, as
permitted by law) of the holders of at least sixty-seven percent (67%) of the
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting or acting, as the case may be, as a single class:
(a) sell, convey or otherwise dispose of all or
substantially all of its property or business; liquidate, dissolve or wind up
the Corporation's business; or merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary corporation); or effect any
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Corporation is disposed of (a "Corporate
Transaction"), unless the Corporation's stockholders of record as constituted
immediately prior to such Corporate Transaction will, immediately after such
Corporate Transaction, hold at least fifty percent (50%)
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of the voting power of the surviving or acquiring entity; provided, however,
that shares of the surviving entity held by holders of the capital stock of
the Corporation acquired by means other than the exchange or conversion of
the capital stock of the Corporation for shares of the surviving entity shall
not be used in determining if the stockholders of the Corporation own more
than fifty percent (50%) of the voting power of the surviving or acquiring
entity, but shall be used for determining the total outstanding voting power
of such entity;
(b) purchase, redeem or acquire any shares of Common Stock
or options to purchase Common Stock or pay funds into or set aside or make
available a sinking fund for the purchase, redemption or acquisition of shares
of Common Stock or options to purchase Common Stock; provided, however, the
foregoing restrictions shall not apply to the repurchase of shares of Common
Stock held by employees, officers, directors, consultants or other persons
performing services for the Corporation or any wholly owned subsidiary of the
Corporation (including, but not by way of limitation, distributors and sales
representatives) that are subject to restrictive agreements under which the
Corporation has the option to repurchase such shares upon the occurrence of
certain events, such as the proposed sale of such shares;
(c) amend or modify any provision of the Corporation's
Certificate of Incorporation, as amended, or Bylaws so as to affect adversely
the rights, preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(d) amend the Bylaws of the Corporation to increase, or
otherwise take any action that would have the effect of increasing, the
authorized number of directors of the Corporation to more than five (5);
(e) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock or
Series B Preferred Stock;
(f) authorize or issue, or authorize or effect any
reclassification of, or obligate itself to issue, any equity security (other
than the Series A Preferred Stock or Series B Preferred Stock), including any
other security convertible into or exercisable for any equity security, so as to
cause such security to have a preference over, or be on a parity with, the
Series A Preferred Stock or the Series B Preferred Stock with respect to
dividends or upon liquidation;
(g) authorize or issue, or obligate itself to issue, any
equity security, including any other security convertible into or exercisable
for any equity security, of the Corporation to any employee of the Corporation,
other than up to 10,561,808 shares of Common Stock (as adjusted to reflect stock
dividends, stock splits, combinations, recapitalizations or the like after the
date hereof) that may be reserved for issuance or otherwise issued under any
stock option or other plan or agreement of the Corporation, together with
options granted thereunder to purchase such shares; or
(h) amend any of the provisions set forth in this
Subsection 6.
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any
shares of Series A Preferred Stock or Series B Preferred Stock shall be
converted pursuant to Section 4 above, or in the event any shares of Series A
Preferred Stock or Series B Preferred Stock shall be redeemed pursuant to
Section 3 above, the shares so converted or redeemed shall be canceled
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and shall not be issuable by the Corporation. The Certificate of
Incorporation, as amended, of the Corporation shall be amended at such time
or times as the Corporation deems it reasonably practicable to effect the
corresponding reduction in the Corporation's authorized capital stock.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the provisions of Section 1 of
Division (B) of this Article IV, the holders of the Common Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of any
assets of the Corporation legally available therefor, such dividends as may be
declared from time to time by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable hereunder.
4. VOTING RIGHTS. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
4.2 Effective as of a Qualified Public Offering (as defined in
Section B.8 of Section 4.1 above), the Corporation's capital stock shall be
comprised as follows:
A. AUTHORIZED SHARES. The aggregate number of shares that the
Corporation shall have authority to issue is 260,000,000, (a) 250,000,000 shares
of which shall be Common Stock, par value $0.0001 per share, and (b) 10,000,000
of which shall be Preferred Stock, par value $0.0001 per share.
B. COMMON STOCK. Each share of Common Stock shall have one vote on
each matter submitted to a vote of the stockholders of the Corporation. Subject
to the provisions of applicable law and the rights of the holders of the
outstanding shares of Preferred Stock, if any, the holders of shares of Common
Stock shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of the assets of the Corporation legally
available therefor, dividends or other distributions, whether payable in cash,
property or securities of the Corporation. The holders of shares of Common
Stock shall be entitled to receive, in proportion to the number of shares of
Common Stock held, the net assets of the Corporation upon dissolution after any
preferential amounts required to be paid or distributed to holders of
outstanding shares of Preferred Stock, if any, are so paid or distributed.
C. PREFERRED STOCK.
1. SERIES. The Preferred Stock may be issued from time to time
by the Board of Directors as shares of one or more series. The description of
shares of each additional series of Preferred Stock, including any designations,
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption shall be as set forth in resolutions adopted by the Board of
Directors.
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2. RIGHTS AND PREFERENCES. The Board of Directors is expressly
authorized, at any time, by adopting resolutions providing for the issuance of,
or providing for a change in the number of, shares of any particular series of
Preferred Stock and, if and to the extent from time to time required by law, by
filing certificates of amendment or designation which are effective without
stockholder action, to increase or decrease the number of shares included in
each series of Preferred Stock, but not below the number of shares then issued,
and to set in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms and conditions of redemption relating to the shares of
each such series. The authority of the Board of Directors with respect to each
series of Preferred Stock shall include, but not be limited to, setting or
changing the following:
(a) the dividend rate, if any, on shares of such series,
the times of payment and the date from which dividends shall be accumulated, if
dividends are to be cumulative;
(b) whether the shares of such series shall be redeemable
and, if so, the redemption price and the terms and conditions of such
redemption;
(c) the obligation, if any, of the Corporation to redeem
shares of such series pursuant to a sinking fund;
(d) whether shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class of classes and, if
so, the terms and conditions of such conversion or exchange, including the price
or prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
(e) whether the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and, if so, the extent
of such voting rights;
(f) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation; and
(g) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such series.
ARTICLE V
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, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law
or (d) for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended after approval by
the stockholders of this Article to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law as so amended.
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ARTICLE VI
The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws of the Corporation.
ARTICLE VII
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 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 VIII
Election of directors at an annual or special meeting of stockholders
need not be by written ballot unless the Bylaws of the Corporation shall so
provide.
ARTICLE IX
A. At each annual meeting of stockholders, directors of the
Corporation shall be elected to hold office until the expiration of the term for
which they are elected, and until their successors have been duly elected and
qualified. At the first annual meeting of stockholders following the closing of
the initial public offering (the "FIRST PUBLIC COMPANY ANNUAL MEETING") of the
Corporation's capital stock pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended (the "INITIAL PUBLIC
OFFERING"), the directors of the Corporation shall be divided into three classes
as nearly equal in size as is practicable, hereby designated as Class I, Class
II and Class III. The term of office of the initial Class I directors shall
expire at the next succeeding annual meeting of stockholders, the term of office
of the initial Class II directors shall expire at the second succeeding annual
meeting of stockholders and the term of office of the initial Class III
directors shall expire at the third succeeding annual meeting of stockholders.
For the purposes hereof, the initial Class I, Class II and Class III directors
shall be those directors designated and elected at the First Public Company
Annual Meeting. At each annual meeting after the First Public Company Annual
Meeting, directors to replace those of a Class whose terms expire at such annual
meeting shall be elected to hold office until the third succeeding annual
meeting and until their respective successors shall have been duly elected and
qualified. If the number of directors is hereafter changed, any newly created
directorships or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is practicable.
B. Vacancies occurring on the Board of Directors for any reason may
be filled by vote of a majority of the remaining members of the Board of
Directors, although less than a quorum, at a meeting of the Board of Directors.
A person so elected by the Board of Directors to fill a vacancy shall hold
office until the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly elected and
qualified.
19
<PAGE>
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
Effective upon the closing of the Initial Public Offering,
stockholders of the Corporation may not take action by written consent in lieu
of a meeting but must take any actions at a duly called annual or special
meeting.
ARTICLE XII
Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of the
capital stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of the combined
voting power of all of the then-outstanding shares of the Corporation entitled
to vote shall be required to alter, amend or repeal Articles X, XII or XIII, or
any provisions thereof.
ARTICLE XIII
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 on stockholders
herein are granted subject to this reservation.
* * *
20
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
SILICON LABORATORIES INC.,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Registered Office. . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Offices. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. Stockholders' Meetings. . . . . . . . . . . . . . . . . . . . . 1
Section 3.1 Place of Meetings. . . . . . . . . . . . . . . . . . . . 1
Section 3.2 Annual Meeting.. . . . . . . . . . . . . . . . . . . . . 2
Section 3.3 Special Meetings.. . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Notice of Meetings . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.6 Adjournment and Notice of Adjourned Meetings . . . . . . 5
Section 3.7 Voting Rights. . . . . . . . . . . . . . . . . . . . . . 5
Section 3.8 Joint Owners of Stock. . . . . . . . . . . . . . . . . . 5
Section 3.9 List of Stockholders . . . . . . . . . . . . . . . . . . 5
Section 3.10 No Action Without Meeting. . . . . . . . . . . . . . . . 6
Section 3.11 Organization.. . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV. Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Number and Term of Office; Classification. . . . . . . . 7
Section 4.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4 Resignation. . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.5 Removal. . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.6 Meetings.. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.7 Quorum and Voting. . . . . . . . . . . . . . . . . . . . 9
Section 4.8 Action Without Meeting . . . . . . . . . . . . . . . . . 9
Section 4.9 Fees and Compensation. . . . . . . . . . . . . . . . . .10
Section 4.10 Committees.. . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE V. Officers 11 . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5.1 Officers Designated. . . . . . . . . . . . . . . . . . .11
Section 5.2 Tenure and Duties of Officers. . . . . . . . . . . . . .12
Section 5.3 Delegation of Authority. . . . . . . . . . . . . . . . .14
Section 5.4 Resignations . . . . . . . . . . . . . . . . . . . . . .14
Section 5.5 Removal. . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VI. Execution of Corporate Instruments and Voting of Securities Owned by
the Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 6.1 Execution of Corporate Instruments . . . . . . . . . . .15
Section 6.2 Voting of Securities Owned by the Corporation. . . . . .15
ii
<PAGE>
ARTICLE VII. Shares of Stock . . . . . . . . . . . . . . . . . . . . . . . .16
Section 7.1 Form and Execution of Certificates . . . . . . . . . . .16
Section 7.2 Lost Certificates. . . . . . . . . . . . . . . . . . . .16
Section 7.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . .16
Section 7.4 Fixing Record Dates. . . . . . . . . . . . . . . . . . .17
Section 7.5 Registered Stockholders. . . . . . . . . . . . . . . . .17
ARTICLE VIII. Other Securities of the Corporation. . . . . . . . . . . . . .17
Section 8.1 Execution of Other Securities. . . . . . . . . . . . . .17
ARTICLE IX. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 9.1 Declaration of Dividends . . . . . . . . . . . . . . . .18
Section 9.2 Dividend Reserve . . . . . . . . . . . . . . . . . . . .18
ARTICLE X. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE XI. Indemnification of Directors, Officers, Employees and Other
Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 11.1 Directors and Executive Officers . . . . . . . . . . . .19
Section 11.2 Other Officers, Employees and Other Agents . . . . . . .19
Section 11.3 Good Faith.. . . . . . . . . . . . . . . . . . . . . . .19
Section 11.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . .20
Section 11.5 Enforcement. . . . . . . . . . . . . . . . . . . . . . .20
Section 11.6 Non-Exclusivity of Rights. . . . . . . . . . . . . . . .21
Section 11.7 Survival of Rights . . . . . . . . . . . . . . . . . . .21
Section 11.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . .21
Section 11.9 Amendments . . . . . . . . . . . . . . . . . . . . . . .21
Section 11.10 Savings Clause . . . . . . . . . . . . . . . . . . . . .21
Section 11.11 Certain Definitions. . . . . . . . . . . . . . . . . . .22
ARTICLE XII. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 12.1 Notice to Stockholders . . . . . . . . . . . . . . . . .23
Section 12.2 Notice to Directors. . . . . . . . . . . . . . . . . . .23
Section 12.3 Address Unknown. . . . . . . . . . . . . . . . . . . . .23
Section 12.4 Affidavit of Mailing . . . . . . . . . . . . . . . . . .23
Section 12.5 Time Notices Deemed Given. . . . . . . . . . . . . . . .23
Section 12.6 Failure to Receive Notice. . . . . . . . . . . . . . . .23
Section 12.7 Notice to Person with Whom Communication Is Unlawful . .24
Section 12.8 Notice to Person with Undeliverable Address. . . . . . .24
ARTICLE XIII. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . .24
Section 13.1 Amendments . . . . . . . . . . . . . . . . . . . . . . .24
Section 13.2 Application of Bylaws. . . . . . . . . . . . . . . . . .25
ARTICLE XIV. Loans to Officers . . . . . . . . . . . . . . . . . . . . . . .25
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
SILICON LABORATORIES INC.,
A DELAWARE CORPORATION
- ------------------------------------------------------------------------------
ARTICLE I.
OFFICES
Section 1.1 REGISTERED OFFICE. The registered office of the
corporation shall be the registered office named in the certificate of
incorporation of the corporation, or such other office as may be designated from
time to time by the Board of Directors in the manner provided by law.
Section 1.2 OTHER OFFICES. The corporation may have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require. The books of the corporation may be kept (subject to any provision
contained in the Delaware General Corporation Law) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in these Bylaws.
ARTICLE II.
CORPORATE SEAL
The corporate seal shall consist of a die bearing the name of the
corporation. Said seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed or reproduced.
ARTICLE III.
STOCKHOLDERS' MEETINGS
Section 3.1 PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal executive offices of the
corporation.
<PAGE>
Section 3.2 ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of Directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be:
(A) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors; (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors; or
(C) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received by the Secretary of the corporation not later than the close
of business on the one hundred twentieth (120th) day prior to the first
anniversary of the date of the proxy statement delivered to stockholders in
connection with the preceding year's annual meeting; provided, however, that if
either (i) the date of the annual meeting is advanced more than thirty (30) days
or delayed (other than as a result of adjournment) more than sixty (60) days
from such an anniversary date or (ii) no proxy statement was delivered to
stockholders in connection with the preceding year's annual meeting, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting and not later
than the close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first made by
the corporation. To be in proper form, a stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting:
(i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting;
(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 or introduce the business specified in the notice;
(iii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business;
(iv) the class and number of shares of the corporation
which are beneficially owned by the stockholder;
(v) any material interest of the stockholder in such
business; and
(vi) any other information that is required to be
provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of
2
<PAGE>
1934, as amended (the "Exchange Act"), in such stockholder's
capacity as a proponent of a stockholder proposal.
The chairman of the meeting shall determine whether any business
proposed to be transacted by the stockholders has been properly brought before
the meeting and, if any proposed business has not been properly brought before
the meeting, the chairman shall declare that such proposed business shall not be
presented for stockholder action at the meeting. For purposes of this Section
3.2, "public announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service, Associated Press or comparable national news service
or in a document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
Notwithstanding any provision in this Section 3.2 to the contrary, requests for
inclusion of proposals in the corporation's proxy statement made pursuant to
Rule 14a-8 under the Exchange Act shall be deemed to have been delivered in a
timely manner if delivered in accordance with such Rule. Notwithstanding
compliance with the requirements of this Section 3.2, the chairman presiding at
any meeting of the stockholders may, in his sole discretion, refuse to allow a
stockholder or stockholder representative to present any proposal which the
corporation would not be required to include in a proxy statement under any rule
promulgated by the Securities and Exchange Commission.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 3.2. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person; (B) the principal occupation or
employment of such person; (C) the class and number of shares of the corporation
which are beneficially owned by such person; (D) 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
nominations are to be made by the stockholder; and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a Director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 3.2. At the request of the Board of Directors,
any person nominated by a stockholder for election as a Director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph. The chairman of
the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if the chairman should so determine, the chairman shall so
declare at the meeting, and the defective nomination shall be disregarded.
3
<PAGE>
Section 3.3 SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation
may only be called, for any purpose or purposes, by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized Directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption).
(b) No business may be transacted at such special meeting
otherwise than specified in the resolution calling for the meeting. The
Board of Directors shall determine the time and place of such special
meeting, which shall be held not less than thirty-five (35) nor more than one
hundred twenty (120) days after the date of the receipt of the request other
than any actions effected prior to an Initial Public Offering (as defined
below). Upon determination of the time and place of the meeting, notice
shall be given to the stockholders entitled to vote, in accordance with the
provisions of Section 3.4 of these Bylaws. If the notice is not given within
sixty (60) days after the receipt of the request, the person or persons
requesting the meeting may set the time and place of the meeting and give the
notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing or affecting the time when a meeting of stockholders may be
held.
Section 3.4 NOTICE OF MEETINGS. Except as otherwise provided by law
or the certificate of incorporation of the corporation, as the same may be
amended or restated from time to time and including any certificates of
designation thereunder (hereinafter, the "Certificate of Incorporation"), and
for actions effected prior to an Initial Public Offering (for which no notice
need be given) written notice of each meeting of stockholders shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting, such notice to
specify the place, date, time and purpose or purposes of the meeting. Notice
of any meeting of stockholders may be waived in writing, signed by the person
entitled to notice thereof, either before or after such meeting, and will be
waived by any stockholder by his attendance thereat in person or by proxy,
except when the stockholder 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. Any
stockholder so waiving notice of such meeting shall be bound by the
proceedings of any such meeting in all respects as if due notice thereof had
been given.
Section 3.5 QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by duly authorized proxy, of the
holders of a majority of the outstanding shares of stock entitled to vote
shall constitute a quorum for the transaction of business. In the absence of
a quorum, any meeting of stockholders may be adjourned, from time to time,
either by the chairman of the meeting or by vote of the holders of a majority
of the shares represented thereat, but no other business shall be transacted
at such meeting. The stockholders present at a duly called or convened
meeting, at which a quorum is present, may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, all actions taken by the
holders of a majority of the votes cast, excluding abstentions, at any
meeting at which a quorum is present shall be valid and binding upon the
corporation; provided,
4
<PAGE>
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled
to vote on the election of Directors. Where a separate vote by a class or
classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and the
affirmative vote of the majority (plurality, in the case of the election of
Directors) of shares of such class or classes present in person or
represented by proxy at the meeting shall be the act of such class.
Section 3.6 ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any
meeting of stockholders, whether annual or special, may be adjourned from
time to time either by the chairman of the meeting or by the vote of a
majority of the shares casting votes, excluding abstentions. When a meeting
is adjourned to another time or place, 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 which 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.
Section 3.7 VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, as provided in Section
7.5 of these Bylaws, shall be entitled to vote at any meeting of
stockholders. Every person entitled to vote or execute consents shall have
the right to do so either in person or by an agent or agents authorized by a
written proxy executed by such person or his duly authorized agent, which
proxy shall be filed with the Secretary at or before the meeting at which it
is to be used. An agent so appointed need not be a stockholder. No proxy
shall be voted after three (3) years from its date of creation unless the
proxy provides for a longer period. Elections of Directors need not be by
written ballot, unless otherwise provided in the Certificate of Incorporation.
Section 3.8 JOINT OWNERS OF STOCK. If shares or other securities
having voting power stand of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two (2) or more persons
have the same fiduciary relationship respecting the same shares, unless the
Secretary is given written notice to the contrary and is furnished with a
copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (a) if only one (1) votes, his act binds all; (b) if more
than one (1) votes, the act of the majority so voting binds all; or (c) if
more than one (1) votes, but the vote is evenly split on any particular
matter, each faction may vote the securities in question proportionally, or
may apply to the Delaware Court of Chancery for relief as provided in the
Delaware General Corporation Law, Section 217(b). If the instrument filed
with the Secretary shows that any such tenancy is held in unequal interests,
a majority or even-split for the purpose of clause (c) shall be a majority or
even-split in interest.
Section 3.9 LIST OF STOCKHOLDERS. The Secretary shall prepare and
make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to
5
<PAGE>
vote at said meeting, arranged in alphabetical order, 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 specified, at the place
where the meeting is to be held. The list shall be produced and kept at the
time and place of meeting during the whole time thereof and may be inspected
by any stockholder who is present.
Section 3.10 NO ACTION WITHOUT MEETING. Effective upon the closing
of the corporation's initial public offering of its capital stock pursuant to
an effective registration statement filed under the Securities Act of 1933,
as amended (the "Initial Public Offering"), the stockholders of the
corporation may not take action by written consent without a meeting and must
take any actions at a duly called annual or special meeting.
Section 3.11 ORGANIZATION.
(a) At every meeting of stockholders, unless another officer
of the corporation has been appointed by the Board of Directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed, is
absent, or designates the next senior officer present to so act, the
President, or, if the President is absent, the most senior Vice President
present, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority in interest of the stockholders entitled to vote,
present in person or by proxy, shall act as chairman. The Secretary, or, in
his absence, an Assistant Secretary directed to do so by the President, shall
act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject
to such rules and regulations of the Board of Directors, if any, the chairman
of the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of
such chairman, are necessary, appropriate or convenient for the proper
conduct of the meeting, including, without limitation, establishing an agenda
or order of business for the meeting, rules and procedures for maintaining
order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation
and their duly authorized and constituted proxies and such other persons as
the chairman shall permit, restrictions on entry to the meeting after the
time fixed for the commencement thereof, limitations on the time allotted to
questions or comments by participants and regulation of the opening and
closing of the polls for balloting on matters which are to be voted on by
ballot. Unless and to the extent determined by the Board of Directors or the
chairman of the meeting, meetings of stockholders shall not be required to be
held in accordance with rules of parliamentary procedure.
6
<PAGE>
ARTICLE IV.
DIRECTORS
Section 4.1 NUMBER AND TERM OF OFFICE; CLASSIFICATION.
(a) The number of directors which shall constitute the whole
Board of Directors shall be determined from time to time by the Board of
Directors (provided that no decrease in the number of directors which would
have the effect of shortening the term of an incumbent director may be made
by the Board of Directors), provided that the number of directors shall be
not less than one (1). At each annual meeting of stockholders, Directors of
the corporation shall be elected to hold office until the expiration of the
term for which they are elected, and until their successors have been duly
elected and qualified or until such Director's earlier death, resignation or
due removal; except that if any such election shall not be so held, such
election shall take place at a stockholders' meeting called and held in
accordance with the Delaware General Corporation Law. Directors need not be
stockholders unless so required by the Certificate of Incorporation. If, for
any reason, the Directors shall not have been elected at an annual meeting,
they may be elected as soon thereafter as convenient at a special meeting of
the stockholders called for that purpose in the manner provided in these
Bylaws.
(b) At the first annual meeting of stockholders following the
closing of the Initial Public Offering (the "First Public Company Annual
Meeting"), the Directors of the corporation shall be divided into three
classes as nearly equal in size as is practicable, hereby designated Class I,
Class II and Class III. The initial Class I, Class II and Class III
directors shall be those directors designated and elected at the First Public
Company Annual Meeting. The term of office of the initial Class I directors
shall expire at the next succeeding annual meeting of stockholders, the term
of office of the initial Class II directors shall expire at the second
succeeding annual meeting of stockholders, and the term of office of the
initial Class III directors shall expire at the third succeeding annual
meeting of stockholders. At each annual meeting of stockholders following
the First Public Company Annual Meeting, Directors to replace those of the
Class whose terms expire at such annual meeting shall be elected to hold
office until the third succeeding annual meeting and until their respective
successors shall have been duly elected and qualified. If the number of
directors is hereafter changed, any newly created directorships or decrease
in directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as is practicable.
Section 4.2 POWERS. The powers of the corporation shall be
exercised, its business conducted and its property controlled by the Board of
Directors, except as may be otherwise provided by statute or by the
Certificate of Incorporation.
Section 4.3 VACANCIES. Vacancies occurring on the Board of
Directors may be filled by vote of a majority of the remaining members of the
Board of Directors, although less than a quorum. Each Director so elected
shall hold office for the unexpired portion of the term of the Director or
newly created directorship whose place shall be vacant and until his or her
successor shall have been duly elected and qualified or until such Director's
earlier death, resignation or due removal. A vacancy in the Board of
Directors shall be deemed to exist under this Section 4.3 in the case of (i)
the death, removal or resignation of any Director; (ii) an
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increase in the authorized number of Directors pursuant to Section 4.1(a)
above; or (iii) if the stockholders fail at any meeting of stockholders at
which Directors are to be elected (including any meeting referred to in
Section 4.6 below) to elect the number of Directors then constituting the
whole Board of Directors.
Section 4.4 RESIGNATION. Any Director may resign at any time by
delivering his or her written resignation to the Secretary, such resignation
to specify whether it will be effective at a particular time, upon receipt by
the Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more Directors shall resign from the Board
of Directors, effective at a future date, a majority of the Directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each Director so chosen shall
hold office for the unexpired portion of the term of the Director whose place
shall be vacated and until his successor shall have been duly elected and
qualified.
Section 4.5 REMOVAL. At a special meeting of stockholders called
for such purpose and in the manner provided herein, subject to any
limitations imposed by law or the Certificate of Incorporation, the Board of
Directors, or any individual Director, may only be removed from office for
cause, and a new Director or Directors shall be elected by a vote of
stockholders holding a majority of the outstanding shares entitled to vote at
an election of Directors.
Section 4.6 MEETINGS.
(a) ANNUAL MEETINGS. Unless the Board shall determine
otherwise, the annual meeting of the Board of Directors shall be held
immediately before or after the annual meeting of stockholders and at the
place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may
lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the
principal executive offices of the corporation. Unless otherwise restricted
by the Certificate of Incorporation, regular meetings of the Board of
Directors may also be held at any place within or without the State of
Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, and subject to the notice requirements
contained herein, special meetings of the Board of Directors may be held at
any time and place within or without the State of Delaware whenever called by
the Chairman of the Board, the President or any two of the Directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear
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each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) NOTICE OF MEETINGS. Written notice of the time and place
of all special meetings of the Board of Directors shall be given at least one
(1) day before the date of the meeting. Such notice need not state the
purpose or purposes of such meeting, except as may otherwise be required by
law or provided for in the Certificate of Incorporation or these Bylaws.
Notice of any meeting may be waived in writing at any time before or after
the meeting and will be deemed waived by any Director by attendance thereat,
except when the Director attends the meeting solely 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.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting
duly held after regular call and notice, if a quorum be present and if,
either before or after meeting, each of the Directors not present shall sign
a written waiver of notice, or a consent to holding such meeting, or an
approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of
the meeting.
Section 4.7 QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Article XI hereof, for which a quorum shall be one-third of the exact number
of Directors fixed from time to time in accordance with Section 4.1 hereof,
but not less than one (1), a quorum of the Board of Directors shall consist
of a majority of the exact number of directors fixed from time to time in
accordance with Section 4.1 of these Bylaws, but not less than one (1);
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the Directors present may adjourn from time to time until the
time fixed for the next regular meeting of the Board of Directors, without
notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by a vote
of the majority of the Directors present, unless a different vote is required
by law, the Certificate of Incorporation or these Bylaws.
Section 4.8 ACTION WITHOUT MEETING. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 4.9 FEES AND COMPENSATION. Directors shall be entitled to
such compensation for their services as may be approved by the Board of
Directors, including, if so approved, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, for attendance at
each regular or special meeting of the Board of Directors and at any
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meeting of a committee of the Board of Directors. Nothing herein contained
shall be construed to preclude any Director from serving the corporation in
any other capacity as an officer, agent, employee, or otherwise and receiving
compensation therefor.
Section 4.10 COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
specifically granted by the Board of Directors, shall have, and may exercise
when the Board of Directors is not in session, all powers of the Board of
Directors in the management of the business and affairs of the corporation
except such committee shall not have the power or authority to amend the
Certificate of Incorporation, to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets, to
recommend to the stockholders of the corporation a dissolution of the
corporation or a revocation of a dissolution, or to amend these Bylaws.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or
more members of the Board of Directors and shall have such powers and perform
such duties as may be prescribed by the resolution or resolutions creating
such committees, but in no event shall such committee have the powers denied
to the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of
Directors shall serve a term on the committee coexistent with such member's
term on the Board of Directors. The Board of Directors, subject to the
provisions of paragraphs (a) and (b) of this Section 4.10 may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall
terminate on the date of his or her death or voluntary resignation from the
committee or from the Board of Directors. The Board of Directors may at any
time for any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death, resignation,
removal or increase in the number of members of the committee. The Board of
Directors may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 4.10 shall be held at such times and
places as are determined by the Board of Directors, or by any such committee,
and when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter. Special
meetings
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of any such committee may be held at any place which has been determined from
time to time by such committee, and may be called by any Director who is a
member of such committee, upon written notice to the members of such
committee of the time and place of such special meeting given in the manner
provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends such special
meeting solely 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. A majority of the authorized number of members
of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which
a quorum is present shall be the act of such committee.
(e) ORGANIZATION. The Chairman of the Board shall preside at
every meeting of the Board of Directors, if present. In the case of any
meeting, if there is no Chairman of the Board or if the Chairman is not
present, the Vice Chairman (if there be one) shall preside, or if there be no
Vice Chairman or if the Vice Chairman is not present, a chairman chosen by a
majority of the Directors present shall act as chairman of such meeting. The
Secretary of the corporation or, in the absence of the Secretary, any person
appointed by the Chairman shall act as secretary of the meeting.
ARTICLE V.
OFFICERS
Section 5.1 OFFICERS DESIGNATED. The officers of the corporation
shall include a President and a Secretary, and, if and when designated by the
Board of Directors, Chairman of the Board of Directors, one or more executive
and non-executive Vice Presidents (any one or more of which executive Vice
Presidents may be designated as Executive Vice President or Senior Vice
President or a similar title), and a Treasurer. The Board of Directors also
may, at its discretion, create additional officers and assign such duties to
those offices as it may deem appropriate from time to time, which offices may
include a Vice Chairman of the Board of Directors, a Chief Executive Officer,
a Chief Operating Officer, a Chief Financial Officer, one or more Assistant
Secretaries and Assistant Treasurers, and one or more other officers which
may be created at the discretion of the Board of Directors. Any one person
may hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other
compensation of the officers of the corporation shall be fixed by or in the
manner designated by the Board of Directors.
Section 5.2 TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure
of the Board of Directors and until their successors shall have been duly
elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board
of Directors. If the office of any officer becomes vacant for any reason, the
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vacancy may be filled by the Board of Directors. Except for the Chairman
of the Board and the Vice Chairman of the Board, no officer need be a
director.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors, when present, shall preside at all
meetings of the Board of Directors and, unless the Chairman has designated
the next senior officer to so preside, at all meetings of the stockholders.
The Chairman of the Board of Directors shall perform other duties commonly
incident to such office and shall also perform such other duties and have
such other powers as the Board of Directors shall designate from time to time.
(c) POWERS AND DUTIES OF THE VICE CHAIRMAN OF THE BOARD. The
Board of Directors may but is not required to assign areas of responsibility
to a Vice Chairman of the Board, and, in such event, and subject to the
overall direction of the Chairman of the Board and the Board of Directors,
the Vice Chairman of the Board shall be responsible for supervising the
management of the affairs of the corporation and its subsidiaries within the
area or areas assigned and shall monitor and review on behalf of the Board of
Directors all functions within such corresponding area or areas of the
corporation and each such subsidiary of the corporation. In the absence of
the President, or in the event of the President's inability or refusal to
act, the Vice Chairman of the Board shall perform 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. Further, the Vice Chairman of the
Board shall have such other powers and duties as designated in accordance
with these Bylaws and as from time to time may be assigned to the Vice
Chairman of the Board by the Board of Directors or the Chairman of the Board.
(d) DUTIES OF PRESIDENT. Unless the Board of Directors
otherwise determines (including by election of Chief Executive Officer) and
subject to the provisions of paragraph (e) below, the President shall be the
chief executive and chief operating officer of the corporation. Unless the
Board of Directors otherwise determines, he shall, in the absence of the
Chairman of the Board or Vice Chairman of the Board or if there be no
Chairman of the Board or Vice Chairman of the Board, preside at all meetings
of the stockholders and (should he be a director) of the Board of Directors.
The President shall have such other powers and duties as designated in
accordance with these Bylaws and as from time to time may be assigned to him
by the Board of Directors.
(e) DUTIES OF THE CHIEF EXECUTIVE AND CHIEF OPERATING
OFFICERS. Subject to the control of the Board of Directors, the chief
executive officer shall have general executive charge, management and
control, of the properties, business and operations of the corporation with
all such powers as may be reasonably incident to such responsibilities and
shall perform the duties of the President at such times as a President is not
in office; and subject to the control of the chief executive officer, the
chief operating officer shall have general operating charge, management and
control, of the properties, business and operations of the corporation with
all such powers as may be reasonably incident to such responsibilities.
(f) DUTIES OF VICE PRESIDENTS. Vice Presidents, by virtue of
their appointment as such, shall not necessarily be deemed to be executive
officers of the corporation, such status as an executive officer only being
conferred if and to the extent such Vice President is placed in charge of a
principal business unit, division or function (E.G., sales, administration or
finance) or
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performs a policy-making function for the corporation (within the meaning of
Section 16 of the 1934 Act and the rules and regulations promulgated
thereunder). Each executive Vice President shall at all times possess, and
upon the authority of the President or the chief executive officer any
non-executive Vice President shall from time to time possess, power to sign
all certificates, contracts and other instruments of the corporation, except
as otherwise limited pursuant to Article VI hereof or by the Chairman of the
Board, the President, chief executive officer or the Vice Chairman of the
Board. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time
to time.
(g) DUTIES OF SECRETARY. The Secretary shall keep the minutes
of all meetings of the Board of Directors, committees of the Board of
Directors and the stockholders, in books provided for that purpose; shall
attend to the giving and serving of all notices; may in the name of the
corporation affix the seal of the corporation to all contracts and attest the
affixation of the seal of the corporation thereto; may sign with the other
appointed officers all certificates for shares of capital stock of the
corporation; and shall have charge of the certificate books, transfer books
and stock ledgers, and such other books and papers as the Board of Directors
may direct, all of which shall at all reasonable times be open to inspection
of any director upon application at the office of the corporation during
business hours. The Secretary shall perform all other duties given in these
Bylaws and other duties commonly incident to such office and shall also
perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The chief executive officer may
direct any Assistant Secretary to assume and perform the duties of the
Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to such office and
shall also perform such other duties and have such other powers as the Board
of Directors or the chief executive officer, shall designate from time to
time.
(h) ASSISTANT SECRETARIES. Each Assistant Secretary shall
have the usual powers and duties pertaining to such offices, together with
such other powers and duties as designated in these Bylaws and as from time
to time may be assigned to an Assistant Secretary by the Board of Directors,
the Chairman of the Board, the President, the Vice Chairman of the Board, or
the Secretary. The Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability or refusal to act.
(i) DUTIES OF TREASURER.
(i) The Treasurer shall keep or cause to be kept the books
of account of the corporation in a thorough and proper manner and shall
render statements of the financial affairs of the corporation in such form
and as often as required by the Board of Directors, the Chairman of the
Board, the Vice Chairman of the Board, chief executive officer, if one be
designated, the Chief Financial Officer. The Treasurer, subject to the order
of the Board of Directors, shall have the custody of all funds and securities
of the corporation. The Treasurer shall perform other duties commonly
incident to such office and shall also perform such other duties and have
such other powers as the Board of Directors, the Chairman of the Board, the
Vice Chairman of the Board or the President shall designate from time to time.
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(ii) In absence of a designated Chief Financial Officer,
unless otherwise determined by the Board of Directors or chief executive
officer, the Treasurer shall serve as the chief financial officer subject to
control of the chief executive officer.
(iii) The Chief Financial Officer, if any be designated,
may, but need not serve as the Treasurer.
(j) ASSISTANT TREASURERS. Each Assistant Treasurer shall have
the usual powers and duties pertaining to such office, together with such
other powers and duties as designated in these Bylaws and as from time to
time may be assigned to each Assistant Treasurer by the Board of Directors,
the Chairman of the Board, the President, the Vice Chairman of the Board, or
the Treasurer. The Assistant Treasurers shall exercise the powers of the
Treasurer during that officer's absence or inability or refusal to act.
Section 5.3 DELEGATION OF AUTHORITY. For any reason that the Board
of Directors may deem sufficient, the Board of Directors may, except where
otherwise provided by statute, delegate the powers or duties of any officer
to any other person, and may authorize any officer to delegate specified
duties of such office to any other person. Any such delegation or
authorization by the Board shall be effected from time to time by resolution
of the Board of Directors.
Section 5.4 RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the
person or persons to whom such notice is given, unless a later time is
specified therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the acceptance
of any such resignation shall not be necessary to make it effective. Any
resignation shall be without prejudice to the rights, if any, of the
corporation under any contract with the resigning officer.
Section 5.5 REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the vote or written consent of a
majority of the Directors in office at the time, or by any committee or
superior officers upon whom such power of removal may have been conferred by
the Board of Directors.
ARTICLE VI.
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 6.1 EXECUTION OF CORPORATE INSTRUMENTS. The Board of
Directors may, in its discretion, determine the method and designate the
signatory officer or officers, or other person or persons, to execute on
behalf of the corporation any corporate instrument or document, or to sign on
behalf of the corporation the corporate name without limitation, or to enter
into contracts on behalf of the corporation, except where otherwise provided
by law or these Bylaws, and such execution or signature shall be binding upon
the corporation.
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Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock owned by the corporation, shall be executed, signed or
endorsed by the Chairman of the Board of Directors, the President, Chief
Executive Officer or any executive Vice President and if any be designated,
Chief Financial Officer, Treasurer, Assistant Secretary or Assistant
Treasurer, and upon the authority conferred by the Board of Directors,
President or Chief Executive Officer, any non-executive Vice President, and
by the Secretary. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of
Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall
be signed by such person or persons as the Board of Directors shall authorize
so to do.
Unless 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.
Section 6.2 VOTING OF SECURITIES OWNED BY THE CORPORATION. All
stock and other securities of other corporations owned or held by the
corporation for itself, or for other parties in any capacity, shall be voted,
and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board of Directors, or, in the
absence of such authorization, by the Chairman or Vice Chairman of the Board
of Directors, Chief Executive Officer, the President, or any executive Vice
President.
ARTICLE VII.
SHARES OF STOCK
Section 7.1 FORM AND EXECUTION OF CERTIFICATES. Certificates for
the shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation 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, the Chief Executive Officer, the President or any executive
Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, certifying the number of shares and the
class or series owned by him in the corporation. Where such certificate is
countersigned by a transfer agent other than the corporation or its employee,
or by a registrar other than the corporation or its employee, any other
signature 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 shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may
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be issued with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 7.2 LOST CERTIFICATES. A new certificate or certificates
shall be issued in place of any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen, or destroyed. The corporation may
require, as a condition precedent to the issuance of a new certificate or
certificates, the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require or to give the corporation a surety bond in such
form and amount as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 7.3 TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only on its books by the holders thereof, in person or by
attorney duly authorized and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. Upon surrender to
the corporation or a 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 Board of
Directors shall have the power and authority to make all such other rules and
regulations as they may deem expedient concerning the issue, transfer and
registration or the replacement of certificates for shares of capital stock
of the corporation.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any
manner not prohibited by the Delaware General Corporation Law.
Section 7.4 FIXING RECORD DATES.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix, in advance, a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting. If no record date is fixed by the
Board of Directors, 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 day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the 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; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
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(b) In order that the corporation may determine 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 change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty (60) days prior to such action. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
Section 7.5 REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VIII.
OTHER SECURITIES OF THE CORPORATION
Section 8.1 EXECUTION OF OTHER SECURITIES. All bonds, debentures
and other corporate Securities of the corporation, other than stock
certificates (covered in Section 7.1), may be signed by the Chairman or Vice
Chairman of the Board of Directors, the Chief Executive Officer, the
President or any executive Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed
thereon or a facsimile of such seal imprinted thereon and attested by the
signature of the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture
or other corporate security shall be authenticated by the manual signature of
a trustee under an indenture pursuant to which such bond, debenture or other
corporate security shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate
security may be the imprinted facsimile of the signatures of such persons.
Interest coupons appertaining to any such bond, debenture or other corporate
security, authenticated by a trustee as aforesaid, shall be signed by the
Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have
signed or attested any bond, debenture or other corporate security, or whose
facsimile signature shall appear thereon or on any such interest coupon,
shall have ceased to be such officer before any bond, debenture or other
corporate security so signed or attested shall have been delivered, such
bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased
to be such officer of the corporation.
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ARTICLE IX.
DIVIDENDS
Section 9.1 DECLARATION OF DIVIDENDS. Dividends upon the capital
stock of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to
law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
Section 9.2 DIVIDEND RESERVE. Before payment of any dividend, there
may be set aside out of any funds of the corporation available for dividends
such sum or sums as the Board of Directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for such other purpose as the Board of
Directors shall think conducive to the interests of the corporation, and the
Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE X.
FISCAL YEAR
The fiscal year of the corporation shall end on the closest Saturday
to December 31st, unless otherwise fixed by resolution of the Board of
Directors.
ARTICLE XI.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 11.1 DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its Directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law; PROVIDED, HOWEVER, that
the corporation may limit the extent of such indemnification by individual
contracts with its Directors and executive officers; and, PROVIDED, FURTHER,
that the corporation shall not be required to indemnify any Director or
executive officer in connection with any proceeding (or part thereof)
initiated by such person or any proceeding by such person against the
corporation or its Directors, officers, employees or other agents unless (i)
such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the corporation, or
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law.
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Section 11.2 OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
Section 11.3 GOOD FAITH.
(a) For purposes of any determination under this Article XI, a
Director or executive officer shall be deemed to have acted in good faith and in
a manner such officer reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that such officer's
conduct was unlawful, if such officer's action is based on information,
opinions, reports and statements, including financial statements and other
financial data, in each case prepared or presented by:
(i) one or more officers or employees of the corporation whom
the Director or executive officer believed to be reliable
and competent in the matters presented;
(ii) counsel, independent accountants or other persons as to
matters which the Director or executive officer believed to
be within such person's professional competence; and
(iii) with respect to a Director, a committee of the Board upon
which such Director does not serve, as to matters within
such committee's designated authority, which committee the
Director believes to merit confidence; so long as, in each
case, the Director or executive officer acts without
knowledge that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
proceeding, that such person had reasonable cause to believe that his conduct
was unlawful.
(c) The provisions of this Section 11.3 shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the Delaware
General Corporation Law.
Section 11.4 EXPENSES. The corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or executive officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this Article XI or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 11.5 of this Article XI, no advance shall be made by the corporation if
a determination is reasonably and
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promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to the proceeding, or (ii) if
such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, that the facts known to the decision-making party at the time such
determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in
or not opposed to the best interests of the corporation.
Section 11.5 ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Article XI shall be deemed to be contractual
rights and be effective to the same extent and as if provided for in a contract
between the corporation and the Director or executive officer. Any right to
indemnification or advances granted by this Article XI to a Director or
executive officer shall be enforceable by or on behalf of the person holding
such right in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part, also
shall be entitled to be paid the expense of prosecuting his claim. The
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because such person has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable standard of
conduct.
Section 11.6 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Article XI shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its Directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law.
Section 11.7 SURVIVAL OF RIGHTS. The rights conferred on any person by
this Article XI shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 11.8 INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Article XI.
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Section 11.9 AMENDMENTS. Any repeal or modification of this Article XI
shall only be prospective and shall not affect the rights under this Article XI
in effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
Section 11.10 SAVINGS CLAUSE. If this Article XI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each Director and executive officer
to the full extent not prohibited by any applicable portion of this Article XI
that shall not have been invalidated, or by any other applicable law.
Section 11.11 CERTAIN DEFINITIONS. For the purposes of this Article XI,
the following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(c) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article XI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(d) References to a "director," "officer," "employee," or
"agent" of the corporation shall include without limitation, situations where
such person is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(e) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an
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employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the corporation" as referred to in this Article XI.
ARTICLE XII.
NOTICES
Section 12.1 NOTICE TO STOCKHOLDERS. Unless the Certificate of
Incorporation requires otherwise, whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to such stockholder's last known post office address as shown by
the stock record of the corporation or its transfer agent.
Section 12.2 NOTICE TO DIRECTORS. Any notice required to be given to
any Director may be given by the method stated in Section 12.1, or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director. It shall not be necessary that the same
method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
Section 12.3 ADDRESS UNKNOWN. If no address of a stockholder or
Director be known, notice may be sent to the principal executive officer of the
corporation.
Section 12.4 AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
Section 12.5 TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at the time of transmission.
Section 12.6 FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
such person in the manner above provided, shall not be affected or extended in
any manner by the failure of such stockholder or such Director to receive such
notice.
Section 12.7 NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of
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Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not
be required and there shall be no duty to apply to any governmental authority
or agency for a license or permit to give such notice to such person. Any
action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and
effect as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a certificate
under any provision of the Delaware General Corporation Law, the certificate
shall state, if such is the fact and if notice is required, that notice was
given to all persons entitled to receive notice except such persons with whom
communication is unlawful.
Section 12.8 NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom
(i) notice of two consecutive annual meetings, and all notices of meetings to
such person during the period between such two consecutive annual meetings, or
(ii) all, and at least two, payments (if sent by first class mail) of dividends
or interest on securities during a twelve-month period, have been mailed
addressed to such person at such person's address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. Any action or meeting which shall be taken
or held without notice to such person shall have the same force and effect as if
such notice had been duly given. If any such person shall deliver to the
corporation a written notice setting forth such person's then current address,
the requirement that notice be given to such person shall be reinstated. In the
event that the action taken by the corporation is such as to require the filing
of a certificate under any provision of the Delaware General Corporation Law,
the certificate need not state that notice was not given to persons to whom
notice was not required to be given pursuant to this paragraph.
ARTICLE XIII.
AMENDMENTS
Section 13.1 AMENDMENTS. Except as otherwise provided in the
Certificate of Incorporation, these Bylaws may be altered, amended or repealed,
or new Bylaws may be adopted, by the holders of a majority of the outstanding
voting shares or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws
is conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws.
Section 13.2 APPLICATION OF BYLAWS. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of incorporation of the corporation or of any other governmental body or
power having jurisdiction over this corporation, or over the subject matter to
which such provision of these Bylaws applies, or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the operation
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thereof unavoidably conflicts with such law, and shall in all other respects
be in full force and effect.
ARTICLE XIV.
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 of its
subsidiaries, including any officer or employee who is a Director of the
corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the corporation. The loan, guarantee 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 in this Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the corporation at common law
or under statute.
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INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and
entered into this ____ day of January, 2000 by and between Silicon Laboratories
Inc., a Delaware corporation ("Corporation"), and _________________________
("Indemnitee").
RECITALS
A. Indemnitee, an executive officer and/or a member of the
Board of Directors of Corporation, performs a valuable service in such capacity
for Corporation.
B. The stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors, agents
and employees of Corporation to the maximum extent authorized by Section 145 of
the Delaware General Corporation Law, as amended ("DGCL").
C. The Bylaws and the DGCL, by their non-exclusive nature,
permit contracts between Corporation and its officers and the members of its
Board of Directors with respect to indemnification of such officers and
directors.
D. In order to induce Indemnitee to serve as an executive
officer and/or a member of the Board of Directors of Corporation, Corporation
has determined and agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Director's continued service
as an executive officer or a director after the date hereof, the parties hereto
agree as follows:
1. INDEMNITY OF INDEMNITEE. Corporation hereby agrees to hold
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the provisions of the DGCL, as may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set
forth in Section 3 hereof, Corporation hereby further agrees to hold harmless
and indemnify Indemnitee and any partnership, corporation, trust or other entity
of which Indemnitee is or was a partner, shareholder, trustee, director,
officer, employee or agent (Indemnitee and each such partnership, corporation,
trust or other entity being referred to as an "Indemnitee"):
a. against any and all expenses (including attorneys'
fees), witness fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by
or in the right of Corporation) to which Indemnitee is, was or at any
time becomes a party, or is threatened to be made a party, by reason of
the fact that Indemnitee is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was serving or at any
time serves at the request of Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise; and
<PAGE>
b. otherwise to the fullest extent as may be provided
to Indemnitee by Corporation under the non-exclusivity provisions of the
Bylaws of Corporation and the DGCL.
3. LIMITATIONS ON ADDITIONAL INDEMNITY.
a. No indemnity pursuant to Section 2 hereof shall be
paid by Corporation:
(i) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which
Indemnitee is indemnified pursuant to Section 1 hereof or pursuant to any
director and officer liability insurance purchased and maintained by
Corporation;
(ii) in respect to remuneration paid to Indemnitee if it
shall be determined by a final judgment or other final adjudication that
such remuneration was in violation of law;
(iii) on account of any suit in which judgment is rendered
against Indemnitee for an accounting of profits made from the purchase or
sale by Indemnitee of securities of Corporation pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal, state or local
statutory law;
(iv) on account of Indemnitee's conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest, or
to constitute willful misconduct;
(v) on account of Indemnitee's conduct which is the
subject of an action, suit or proceeding described in Section 7(c)(ii)
hereof;
(vi) on account of any action, claim or proceeding (other
than a proceeding referred to in Section 8(b) hereof) initiated by the
Indemnitee unless such action, claim or proceeding was authorized in the
specific case by action of the Board of Directors; and
(vii) if a final decision by a Court having jurisdiction
in the matter shall determine that such indemnification is not lawful
(and, in this respect, both Corporation and Indemnitee have been advised
that the Securities and Exchange Commission believes that indemnification
for liabilities arising under the federal securities laws is against
public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for
adjudication).
b. No indemnity pursuant to Section 1 or 2 hereof shall
be paid by Corporation if the action, suit or proceeding with respect to
which a claim for indemnity hereunder is made arose from or is based upon
any of the following:
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(i) any solicitation of proxies by Indemnitee, or by a
group of which Indemnitee was or became a member consisting of two or
more persons that had agreed (whether formally or informally and whether
or not in writing) to act together for the purpose of soliciting proxies,
in opposition to any solicitation of proxies approved by the Board of
Directors; or
(ii) any activities by Indemnitee that constitute a
breach of or default under any agreement between Indemnitee and
Corporation.
4. CONTRIBUTION. If the indemnification provided in Sections
1 and 2 hereof is unavailable by reason of a Court decision described in Section
3(a)(vii) hereof based on grounds other than any of those set forth in
subparagraphs (ii) through (vii) of Section 3 hereof, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), Corporation shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by Corporation on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of Corporation on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of Corporation
on the one hand and of Indemnitee on the other shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. Corporation agrees that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and
obligations of Corporation contained herein shall continue during the period
Indemnitee is a director, officer, employee or agent of Corporation (or is or
was serving at the request of Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was a director of Corporation or serving
in any other capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Indemnitee of notice of the commencement of any action,
suit or proceeding, Indemnitee will, if a claim in respect thereof is to be
made against Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Indemnitee otherwise than
under this Agreement. With respect to any such action, suit or proceeding as
to which Indemnitee notifies Corporation of the commencement thereof:
a. Corporation will be entitled to participate therein at
its own expense;
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b. except as otherwise provided below, to the extent that
it may wish, Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Indemnitee. After notice from
Corporation to Indemnitee of its election so as to assume the defense
thereof, Corporation will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall
have the right to employ its counsel in such action, suit or proceeding
but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee
has been authorized by Corporation, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between Corporation
and Indemnitee in the conduct of the defense of such action or (iii)
Corporation shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of
Indemnitee's separate counsel shall be at the expense of Corporation.
Corporation shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of Corporation or as to which
Indemnitee shall have made the conclusion provided for in (ii) above; and
c. Corporation shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
action or claim effected without its written consent. Corporation shall
be permitted to settle any action except that it shall not settle any
action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither
Corporation nor Indemnitee will unreasonably withhold its or his consent
to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
a. In the event that Indemnitee employs its or his own
counsel pursuant to Section 6(b)(i) through (iii) above, Corporation
shall advance to Indemnitee, prior to any final disposition of any
threatened or pending action, suit or proceeding, whether civil,
criminal, administrative or investigative, any and all reasonable
expenses (including legal fees and expenses) incurred in investigating or
defending any such action, suit or proceeding within ten (10) days after
receiving copies of invoices presented to Indemnitee for such expenses.
b. Indemnitee agrees that Indemnitee will reimburse
Corporation for all reasonable expenses paid by Corporation in defending
any civil or criminal action, suit or proceeding against Indemnitee in
the event and only to the extent it shall be ultimately determined by a
final judicial decision (from which there is no right of appeal) that
Indemnitee is not entitled, under the provisions of the DGCL, the Bylaws,
this Agreement or otherwise, to be indemnified by Corporation for such
expenses.
c. Notwithstanding the foregoing, Corporation shall not
be required to advance such expenses to Indemnitee in respect of any
action arising from or based upon any of the matters set forth in
subsection (b) of Section 3 or if Indemnitee (i) commences any action,
suit or proceeding as a plaintiff unless such advance is specifically
approved
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by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by Corporation and approved by a
majority of the Board which alleges willful misappropriation of corporate
assets by Indemnitee, disclosure of confidential information in violation
of Indemnitee's fiduciary or contractual obligations to Corporation, or
any other willful and deliberate breach in bad faith of Indemnitee's duty
to Corporation or its shareholders.
8. ENFORCEMENT.
a. Corporation expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on
Corporation hereby in order to induce Indemnitee to continue as an
executive officer and/or director of Corporation, and acknowledges that
Indemnitee is relying upon this Agreement in continuing in such capacity.
b. In the event Indemnitee is required to bring any
action to enforce rights or to collect moneys due under this Agreement
and is successful in such action, the Corporation shall reimburse
Indemnitee for all Indemnitee's reasonable fees and expenses in bringing
and pursuing such action.
9. SUBROGATION. In the event of payment under this Agreement,
Corporation 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
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on
Indemnitee by this Agreement shall not be exclusive of any other right which
Indemnitee may have or hereafter acquire under any statute, provision of
Corporation's Certificate of Incorporation or Bylaws, agreement, vote of
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Indemnitee by
this Agreement shall continue after Indemnitee has ceased to be a director,
officer, employee or other agent of Corporation and shall inure to the benefit
of Indemnitee's heirs, executors, administrators, successors and assigns.
12. SEPARABILITY. Each of the provisions of this Agreement is
a separate and distinct agreement and independent of the others, so that if any
or all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the
Corporation to indemnify the Indemnitee to the full extent provided by the
Bylaws or the DGCL.
13. GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon
Indemnitee and upon Corporation, its successors and assigns, and shall inure to
the benefit of Indemnitee, its or
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his heirs, personal representatives, successors and assigns and to the
benefit of Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
CORPORATION:
SILICON LABORATORIES INC.
By:
-------------------------------------
Navdeep S. Sooch,
Chairman and Chief Executive Officer
INDEMNITEE:
----------------------------------------
Name:
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SILICON LABORATORIES INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the
interests of Silicon Laboratories Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity
programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program
under which eligible employees may elect to have a portion of their base
salary invested each year in special options,
(iii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the immediate
purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary), and
(iv) the Automatic Option Grant Program under
which eligible non-employee Board members shall automatically receive
options at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the
Discretionary Option Grant and Stock Issuance Programs shall be administered by
the Board unless otherwise determined by
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the Board. Beginning with the Section 12 Registration Date, the following
provisions shall govern the administration of the Plan:
(i) The Board shall have the authority to
administer the Discretionary Option Grant and Stock Issuance Programs
with respect to Section 16 Insiders but may delegate such authority in
whole or in part to the Primary Committee.
(ii) Administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons
eligible to participate in those programs may, at the Board's discretion,
be vested in the Primary Committee or a Secondary Committee, or the Board
may retain the power to administer those programs with respect to all
such persons.
(iii) The Board shall have the authority to
determine which Section 16 Insiders and other highly compensated
Employees shall be eligible to participate in the Salary Investment
Program for one or more calendar years but may delegate such authority to
the Primary Committee. However, all option grants under that program
shall be made in accordance with the terms of that program.
(iv) Administration of the Automatic Option Grant
Program shall be self-executing in accordance with the terms of that
program.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it may deem
appropriate for proper administration of the Plan, to make all factual
determinations, to construe and interpret the provisions of the Plan and
the awards thereunder and to resolve any and all ambiguities thereunder;
(ii) to determine, with respect to awards made
under the Discretionary Option Grant and Stock Issuance Programs, which
eligible persons are to receive such awards, the time or times when such
awards are to be made, the number of shares to be covered by each such
award, the vesting schedule (if any) applicable to the award, the status
of a granted option as either an Incentive Option or a Non-Statutory
Option and the maximum term for which the option is to remain
outstanding;
(iii) to amend, modify or cancel any outstanding
award with the consent of the holder or accelerate the vesting of such
award; and
(iv) to take such other discretionary actions as
permitted pursuant to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at
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any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any options or stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the
board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors
who provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Only non-employee Board members shall be eligible to
participate in the Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
5,389,498 shares. Such authorized share reserve consists of (i) the number of
shares which remain available for issuance, as of the Section 12 Registration
Date, under the Predecessor Plan, including the shares subject to the
outstanding options to be incorporated into the Plan and the additional shares
which would otherwise be available for future grant (collectively estimated to
be 3,389,498 shares), plus (ii) an increase of 2,000,000 shares authorized by
the Board subject to stockholder approval prior to the Section 12 Registration
Date.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 2001 calendar
year, by an amount equal to two percent (2%) of the shares of Common Stock
outstanding on the last trading day of the immediately preceding calendar year,
but in no event shall such annual increase exceed One Million (1,000,000)
shares.
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C. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than One Million (1,000,000) shares of Common Stock in the
aggregate per calendar year, beginning with the 2000 calendar year.
D. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plan) shall
be available for subsequent issuance under the Plan to the extent those options
expire, terminate or are cancelled for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. Unvested shares issued under the
Predecessor Plan and subsequently repurchased by the Corporation, at the
original exercise price or issue price paid per share, pursuant to the
Corporation's repurchase rights under the Predecessor Plan shall also be added
back to the number of shares of Common Stock reserved for issuance under the
Plan but in no event shall such number exceed in the aggregate 3,357,204 shares.
However, should the exercise price of an option under the Plan be paid with
shares of Common Stock or should shares of Common Stock otherwise issuable under
the Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised or which vest under the stock issuance, and not by the
net number of shares of Common Stock issued to the holder of such option or
stock issuance. Shares of Common Stock underlying one or more stock
appreciation rights exercised under the Plan shall NOT be available for
subsequent issuance.
E. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities by which the share
reserve is to increase each calendar year pursuant to the automatic share
increase provisions of the Plan, (iii) the number and/or class of securities for
which any one person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iv) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (v) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the
Plan and (vi) the number and/or class of securities and price per share in
effect under each outstanding option incorporated into this Plan from the
Predecessor Plan. Such adjustments to the outstanding options are to be
effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator at the time of the option grant and may be less than, equal
to or greater than the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section II of
Article Six and the documents evidencing the option, be payable in one or more
of the following forms:
(i) in cash or check made payable to the
Corporation;
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable instructions
to (a) a Corporation-approved brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required
to be withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
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<PAGE>
C. CESSATION OF SERVICE.
1. The following provisions shall govern the exercise
of any options outstanding at the time of the Optionee's cessation of Service
or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part
by the Optionee at the time of death may be subsequently exercised by
his or her Beneficiary.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated
for Misconduct or should the Optionee engage in Misconduct while his or
her options are outstanding, then all such options shall terminate
immediately and cease to be outstanding.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding:
(i) to extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of
Service to such period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) to permit the option to be exercised, during
the applicable post-Service exercise period, for one or more additional
installments in which the Optionee would have vested had the Optionee
continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to
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<PAGE>
repurchase, at the exercise price paid per share, any or all of those
unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. Non-Statutory
Options shall be subject to the same restrictions, except that a
Non-Statutory Option may, to the extent permitted by the Plan Administrator,
be assigned in whole or in part during the Optionee's lifetime (i) as a gift
to one or more members of the Optionee's immediate family, to a trust in
which Optionee and/or one or more such family members hold more than fifty
percent (50%) of the beneficial interest or to an entity in which more than
fifty percent (50%) of the voting interests are owned by one or more such
family members or (ii) pursuant to a domestic relations order. The terms
applicable to the assigned portion shall be the same as those in effect for
the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall NOT be subject to the terms of this Section
II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. EXERCISE PRICE. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share
shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
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<PAGE>
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control
but not otherwise fully-vested shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall
not so accelerate if and to the extent: (i) such option is, in connection
with the Change in Control, assumed or otherwise continued in full force and
effect by the successor corporation (or parent thereof) pursuant to the terms
of the Change in Control, (ii) such option is replaced with a cash incentive
program of the successor corporation which preserves the spread existing at
the time of the Change in Control on the shares of Common Stock for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option
grant. Each option outstanding at the time of the Change in Control shall
terminate as provided in Section III.C. of this Article Two.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control,
except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Change in
Control, all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof)
or otherwise expressly continued in full force and effect pursuant to the
terms of the Change in Control.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control.
Appropriate adjustments to reflect such Change in Control shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall
remain the same, (ii) the maximum number and/or class of securities available
for issuance over the remaining term of the Plan and (iii) the maximum number
and/or class of securities for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Change in Control, the successor
corporation may, in connection with the assumption of the outstanding options
under the Discretionary Option Grant Program, substitute one or more shares
of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control.
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E. The Plan Administrator may at any time provide that one or
more options will automatically accelerate in connection with a Change in
Control, whether or not those options are assumed or otherwise continued in
full force and effect pursuant to the terms of the Change in Control. Any
such option shall accordingly become exercisable, immediately prior to the
effective date of such Change in Control, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all
of those shares as fully-vested shares of Common Stock. In addition, the
Plan Administrator may at any time provide that one or more of the
Corporation's repurchase rights shall not be assignable in connection with
such Change in Control and shall terminate upon the consummation of such
Change in Control.
F. The Plan Administrator may at any time provide that one or
more options will automatically accelerate upon an Involuntary Termination of
the Optionee's Service within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control in which
those options do not otherwise accelerate. Any options so accelerated shall
remain exercisable for fully-vested shares until the EARLIER of (i) the
expiration of the option term or (ii) the expiration of the one (1) year
period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may at any time provide that one or more of
the Corporation's repurchase rights shall immediately terminate upon such
Involuntary Termination.
G. The Plan Administrator may at any time provide that one or
more options will automatically accelerate in connection with a Hostile
Take-Over. Any such option shall become exercisable, immediately prior to
the effective date of such Hostile Take-Over, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all
of those shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall terminate automatically upon the consummation of such
Hostile Take-Over. Alternatively, the Plan Administrator may condition such
automatic acceleration and termination upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of such Hostile Take-Over. Each option
so accelerated shall remain exercisable for fully-vested shares until the
expiration or sooner termination of the option term.
H. The portion of any Incentive Option accelerated in
connection with a Change in Control or Hostile Take Over shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent
such dollar limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Non-Statutory Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it
may determine, grant to selected Optionees stock appreciation rights which
will allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option
in exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which
the option is surrendered over (b) the aggregate exercise price payable for
such shares. The distribution may
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<PAGE>
be made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee may implement the Salary Investment Option
Grant Program for one or more calendar years beginning after the Underwriting
Date and select the Section 16 Insiders and other highly compensated Employees
eligible to participate in the Salary Investment Option Grant Program for each
such calendar year. Each selected individual who elects to participate in the
Salary Investment Option Grant Program must, prior to the start of each calendar
year of participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by an amount not less than Five Thousand Dollars
($5,000.00) nor more than Fifty Thousand Dollars ($50,000.00). The Primary
Committee shall have complete discretion to determine whether to approve the
filed authorization in whole or in part. To the extent the Primary Committee
approves the authorization, the individual who filed that authorization shall be
granted an option under the Salary Investment Grant Program on the first trading
day in January for the calendar year for which the salary reduction is to be in
effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or
more documents in the form approved by the Plan Administrator; PROVIDED,
however, that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year, and
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B is the Fair Market Value per share of Common Stock on the
option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. CESSATION OF SERVICE. Each option outstanding at the time
of the Optionee's cessation of Service shall remain exercisable, for any or all
of the shares for which the option is exercisable at the time of such cessation
of Service, until the EARLIER of (i) the expiration of the option term or (ii)
the expiration of the three (3)-year period following the Optionee's cessation
of Service. To the extent the option is held by the Optionee at the time of his
or her death, the option may be exercised by his or her Beneficiary. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that time exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over
while the Optionee remains in Service, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Change in Control or Hostile Take-Over, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise
price payable per share under each outstanding option, PROVIDED the aggregate
exercise price payable for such securities shall remain the same. To the extent
the actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options under the Salary Investment Option Grant Program, substitute
one or more shares of its own common stock with a fair market value equivalent
to the cash consideration paid per share of Common Stock in such Change in
Control.
C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding options. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an
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amount equal to the excess of (i) the Option Surrender Value of the shares of
Common Stock at the time subject to each surrendered option (whether or not
the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the surrender of the option to
the Corporation.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening options.
Shares of Common Stock may also be issued under the Stock Issuance Program
pursuant to share right awards which entitle the recipients to receive those
shares upon the attainment of designated performance goals or Service
requirements. Each such award shall be evidenced by one or more documents which
comply with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject
to direct issuance shall be fixed by the Plan Administrator and may be less
than, equal to or greater than the Fair Market Value per share of Common Stock
on the issue date.
2. Subject to the provisions of Section II of Article
Six, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of Common
Stock which are fully and immediately vested upon issuance or which are to vest
in one or more installments over the Participant's period of Service or upon
attainment of specified performance objectives. Alternatively, the Plan
Administrator may issue share right awards which shall entitle the recipient to
receive a specified number of vested shares of Common Stock upon the attainment
of one or more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to his or her
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
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3. The Participant shall have full stockholder rights
with respect to the issued shares of Common Stock, whether or not the
Participant's interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock, or should the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered to
the Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant's purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5. The Plan Administrator may waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting
of the Participant's interest in the shares of Common Stock as to which the
waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
6. Outstanding share right awards shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service requirements
established for such awards are not attained. The Plan Administrator, however,
shall have the authority to issue shares of Common Stock in satisfaction of one
or more outstanding share right awards as to which the designated performance
goals or Service requirements are not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights
shall terminate automatically, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Change in Control, except to the extent (i) those repurchase rights are assigned
to the successor corporation (or parent thereof) or otherwise continue in full
force and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
B. The Plan Administrator may at any time provide for the
automatic termination of one or more of those outstanding repurchase rights and
the immediate vesting of the shares of Common Stock subject to those terminated
rights upon (i) a Change in Control or Hostile Take-Over or (ii) an Involuntary
Termination of the Participant's Service within a designated period (not to
exceed eighteen (18) months) following the effective date of any
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Change in Control or Hostile Take-Over in which those repurchase rights are
assigned to the successor corporation (or parent thereof) or otherwise
continue in full force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates specified
below:
1. Each individual who is serving as a non-employee
Board member on the Underwriting Date shall automatically be granted on that
date a Non-Statutory Option to purchase 30,000 shares of Common Stock, provided
that individual has not previously been in the employ of the Corporation (or any
Parent or Subsidiary).
2. Each individual who is first elected or appointed as
a non-employee Board member at any time after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 30,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation (or any
Parent or Subsidiary).
3. On the date of each Annual Stockholders Meeting
beginning with the 2001 Annual Stockholder Meeting, each individual who is to
continue to serve as a non-employee Board member shall automatically be granted
a Non-Statutory Option to purchase Five Thousand (5,000) shares of Common Stock,
provided such individual has served as a non-employee Board member for at least
six (6) months.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10)
years measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. Each initial 30,000-share
option shall vest, and the Corporation's repurchase right shall lapse, in a
series of four (4) successive equal annual installments over the Optionee's
period of continued service as a Board member, with the first such installment
to vest upon the Optionee's completion of one (1) year of Board service measured
from the option grant date. Each annual 5,000-share option shall vest,
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and the Corporation's repurchase right shall lapse, upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
E. CESSATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options outstanding at the time of the Optionee's
cessation of Board service:
(i) Any option outstanding at the time of the
Optionee's cessation of Board service for any reason shall remain
exercisable for a twelve (12)-month period following the date of such
cessation of Board service, but in no event shall such option be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently exercised by his or
her Beneficiary.
(iii) Following the Optionee's cessation of Board
service, the option may not be exercised in the aggregate for more than
the number of shares for which the option was exercisable on the date of
such cessation of Board service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding for any and all shares for which
the option is not otherwise at that time exercisable.
(iv) However, should the Optionee cease to serve
as a Board member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately vest so that
such option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion of
those shares as fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over,
the shares of Common Stock at the time subject to each outstanding option but
not otherwise vested shall automatically vest in full so that each such option
may, immediately prior to the effective date of such Change in Control or
Hostile Take-Over, became fully exercisable for all of the shares of Common
Stock at the time subject to such option and maybe exercised for all or any of
those shares as fully-vested shares of Common Stock. Each such option
accelerated in connection with a Change in Control shall terminate upon the
Change in Control, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect pursuant to the
terms of the Change in Control. Each such option accelerated in connection with
a Hostile Take-Over shall remain exercisable until the expiration or sooner
termination of the option term.
B. All outstanding repurchase rights shall automatically
terminate and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Change in Control or Hostile
Take-Over.
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C. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding options. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Option Surrender Value of the shares of Common Stock at the
time subject to each surrendered option (whether or not the option is otherwise
at the time exercisable for those shares) over (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the Corporation.
D. Each option which is assumed in connection with a Change in
Control shall be appropriately adjusted to apply to the number and class of
securities which would have been issuable to the Optionee in consummation of
such Change in Control had the option been exercised immediately prior to such
Change in Control. Appropriate adjustments shall also be made to the exercise
price payable per share under each outstanding option, PROVIDED the aggregate
exercise price payable for such securities shall remain the same. To the extent
the actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Change in Control,
the successor corporation may, in connection with the assumption of the
outstanding options under the Automatic Option Grant Program, substitute one or
more shares of its own common stock with a fair market value equivalent to the
cash consideration paid per share of Common Stock in such Change in Control.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
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ARTICLE SIX
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum credit
available to the Optionee or Participant exceed the sum of (i) the aggregate
option exercise price or purchase price payable for the purchased shares plus
(ii) any Federal, state and local income and employment tax liability incurred
by the Optionee or the Participant in connection with the option exercise or
share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan with the right to use shares of Common Stock in satisfaction of all or
part of the Withholding Taxes incurred by such holders in connection with the
exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
STOCK DELIVERY: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
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IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. However, the Salary Investment Option Grant Program shall not
be implemented until such time as the Primary Committee may deem appropriate.
Options may be granted under the Discretionary Option Grant Program at any time
on or after the Plan Effective Date. However, no options granted under the Plan
may be exercised, and no shares shall be issued under the Plan, until the Plan
is approved by the Corporation's stockholders. If such stockholder approval is
not obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor
Plan, and no further options or direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date. All options
outstanding under the Predecessor Plan on the Section 12 Registration Date shall
be incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Change in Control, may, in the Plan Administrator's discretion, be extended
to one or more options incorporated from the Predecessor Plan which do not
otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i) January
4, 2010, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Change in Control. Upon such plan
termination, all outstanding options and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess
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shares actually issued under those programs shall be held in escrow until
there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price
paid for any excess shares issued under the Plan and held in escrow, together
with interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic
option grant program in effect under the Plan.
B. BENEFICIARY shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by an
Optionee or Participant, pursuant to such procedure, to succeed to such person's
rights under any outstanding awards held by him or her at the time of death. In
the absence of such designation or procedure, the Beneficiary shall be the
personal representative of the estate of the Optionee or Participant or the
person or persons to whom the award is transferred by will or the laws of
descent and distribution.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization
approved by the Corporation's stockholders, UNLESS securities
representing more than fifty percent (50%) of the total combined voting
power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially owned
the Corporation's outstanding voting securities immediately prior to such
transaction,
(ii) any stockholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board recommends such stockholders accept.
E. CODE shall mean the Internal Revenue Code of 1986, as
amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATION shall mean Silicon Laboratories Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Silicon Laboratories Inc. which shall by
appropriate action adopt the Plan.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
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I. EMPLOYEE shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question,
as such price is reported on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is to be sold in the
initial public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any options made prior to the
Underwriting Date, the Fair Market Value shall be determined by the Plan
Administrator, after taking into account such factors as it deems
appropriate.
L. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members
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ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause
(A) who were still in office at the time the Board approved such
election or nomination.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation or
Parent or Subsidiary employing the individual which materially reduces
his or her duties and responsibilities or the level of management to
which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus
under any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation
without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any intentional wrongdoing by such
person, whether by omission or commission, which adversely affects the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. This shall not limit the grounds for the dismissal or discharge of any
person in the Service of the Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
R. OPTION SURRENDER VALUE shall mean the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
or, in the event of a Hostile Take-Over, effected through a tender offer, the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over, if greater. However, if the surrendered
option is an Incentive Option, the Option Surrender Value shall not exceed the
Fair Market Value per share.
S. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant or
Automatic Option Grant.
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T. PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
U. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
W. PLAN shall mean the Corporation's 2000 Stock Incentive
Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant, Salary Investment
Option Grant and Stock Issuance Programs with respect to one or more classes of
eligible persons, to the extent such entity is carrying out its administrative
functions under those programs with respect to the persons under its
jurisdiction. However, the Primary Committee shall have the plenary authority
to make all factual determinations and to construe and interpret any and all
ambiguities under the Plan to the extent such authority is not otherwise
expressly delegated to any other Plan Administrator.
Y. PLAN EFFECTIVE DATE shall mean January 5, 2000, the date on
which the Plan was adopted by the Board.
Z. PREDECESSOR PLAN shall mean the Corporation's pre-existing
1997 Stock Option/Stock Issuance Plan in effect immediately prior to the Plan
Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the
salary investment grant program in effect under the Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one (1) or
more Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
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DD. SECTION 12 REGISTRATION DATE shall mean the date on which
the Common Stock is first registered under Section 12(g) of the 1934 Act.
EE. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
FF. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
GG. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance
program in effect under the Plan.
II. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
JJ. 10% STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
KK. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
LL. UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with an initial
public offering of the Common Stock.
MM. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding tax liabilities to which the holder of
Non-Statutory Options or unvested shares of Common Stock may become subject in
connection with the exercise of those options or the vesting of those shares.
A-5
<PAGE>
SILICON LABORATORIES INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Silicon Laboratories Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Section 423 of the Code. Decisions of the Plan Administrator
shall be final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The maximum number of shares of Common
Stock which may be issued in the aggregate under the Plan shall not exceed
Four Hundred Thousand (400,000) shares.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 2001 calendar
year, by an amount equal to one-half percent (0.5%) of the shares of Common
Stock outstanding on the last trading day of the immediately preceding calendar
year, but in no event shall such annual increase exceed Two Hundred Fifty
Thousand (250,000) shares.
C. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to the maximum number and class of securities issuable
in the aggregate under the Plan, (ii) the maximum number and class of securities
purchasable per Participant and in the aggregate on any one Purchase Date and
(iii) the number and class of securities and the price per share in effect under
each outstanding purchase right in order to prevent the dilution or enlargement
of benefits thereunder.
<PAGE>
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.
B. Each offering period shall be of such duration (not to
exceed twenty-four (24) months) as determined by the Plan Administrator prior to
the start date of such offering period. However, the initial offering period
shall commence at the Effective Time and terminate on the last business day in
April 2002. Subsequent offering periods shall commence as designated by the
Plan Administrator.
C. Each offering period shall be comprised of a series of one
or more successive Purchase Intervals. Purchase Intervals shall run from the
first business day in May each year to the last business day in October of the
same year and from the first business day in November each year to the last
business day in April of the following year. However, the first Purchase
Interval in effect under the initial offering period shall commence at the
Effective Time and terminate on the last business day in October 2000.
D. Should the Fair Market Value per share of Common Stock on
any Purchase Date within an offering period be less than the Fair Market Value
per share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start
date of an offering period under the Plan may enter that offering period on such
start date or on any subsequent Semi-Annual Entry Date within that offering
period, provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee
after the start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
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<PAGE>
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during an offering period may be
any multiple of one percent (1%) of the Base Salary paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized shall continue in
effect throughout the offering period, except to the extent such rate is changed
in accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to
become effective as soon as possible after filing the appropriate
form with the Plan Administrator. The Participant may not,
however, effect more than one (1) such reduction per Purchase
Interval.
(ii) The Participant may, prior to the
commencement of any new Purchase Interval within the offering
period, increase the rate of his or her payroll deduction by
filing the appropriate form with the Plan Administrator. The new
rate (which may not exceed the fifteen percent (15%) maximum)
shall become effective on the start date of the first Purchase
Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day
following the Participant's Entry Date into the offering period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
3
<PAGE>
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall
be automatically exercised in installments on each successive Purchase Date
within the offering period, and shares of Common Stock shall accordingly be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded pursuant to the Termination of Purchase
Right provisions below) on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. PURCHASE PRICE. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall be equal to eighty-five percent (85%) of the
LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Purchase Interval ending with that Purchase Date by the purchase price in effect
for the Participant for that Purchase Date. However, the maximum number of
shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed Two Hundred (200) shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization. In addition,
the maximum number of shares of Common Stock purchasable in the aggregate by all
Participants on any one Purchase Date under the Plan and the International Plan
shall not exceed Fifty Thousand (50,000) shares (or such other number designated
by the Plan Administrator), subject to periodic adjustments in the event of
certain changes in the corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date because
they are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any
payroll deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable on the Purchase Date
shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the
next scheduled Purchase Date in the offering period, terminate his
or her outstanding purchase right by filing the appropriate form
with the Plan Administrator (or its designate),
4
<PAGE>
and no further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which
such termination occurs shall, at the Participant's election, be
immediately refunded or held for the purchase of shares on the next
Purchase Date. If no such election is made at the time such purchase
right is terminated, then the payroll deductions collected with
respect to the terminated right shall be refunded as soon as possible.
(ii) The termination of such purchase right shall
be irrevocable, and the Participant may not subsequently rejoin
the offering period for which the terminated purchase right was
granted. In order to resume participation in any subsequent
offering period, such individual must re-enroll in the Plan (by
making a timely filing of the prescribed enrollment forms) on or
before his or her scheduled Entry Date into that offering period.
(iii) Should the Participant cease to remain an
Eligible Employee for any reason (including death, disability or
change in status) while his or her purchase right remains
outstanding, then that purchase right shall immediately terminate,
and all of the Participant's payroll deductions for the Purchase
Interval in which the purchase right so terminates shall be
immediately refunded. However, should the Participant cease to
remain in active service by reason of an approved unpaid leave of
absence, then the Participant shall have the right, exercisable up
until the last business day of the Purchase Interval in which such
leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Interval
or (b) have such funds held for the purchase of shares on his or
her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's
return to active service (i) within ninety (90) days following the
commencement of such leave or, (ii) prior to the expiration of any
longer period for which such Participant's right to reemployment
with the Corporation is guaranteed by either statute or contract,
his or her payroll deductions under the Plan shall automatically
resume at the rate in effect at the time the leave began.
However, should the Participant's leave of absence exceed ninety
(90) days and his or her re-employment rights not be guaranteed by
either statute or contract, then the Participant's status as an
Eligible Employee will be deemed to terminate on the ninety-first
(91st) day of that leave, and such Participant's purchase right
for the offering period in which that leave began shall thereupon
terminate. An individual who returns to active employment
following such a leave shall be treated as a new Employee for
purposes of the Plan and must, in order to resume participation in
the Plan, re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled
Entry Date into the offering period.
G. CHANGE OF CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change of Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change of Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to
5
<PAGE>
eighty-five percent (85%) of the LOWER of (i) the Fair Market Value per share
of Common Stock on the Participant's Entry Date into the offering period in
which such Change of Control occurs or (ii) the Fair Market Value per share
of Common Stock immediately prior to the effective date of such Change of
Control. However, the applicable limitation on the number of shares of
Common Stock purchasable by all Participants in the aggregate shall not apply
to any such purchase.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change of Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change of Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable
only by the Participant and shall not be assignable or transferable by the
Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no
stockholder rights with respect to the shares subject to his or her outstanding
purchase right until the shares are purchased on the Participant's behalf in
accordance with the provisions of the Plan and the Participant has become a
holder of record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of
installments on each successive Purchase Date during the offering
period on which such right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the
Participant has already accrued in the
6
<PAGE>
same calendar year the right to acquire Common Stock under one (1) or
more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Purchase Interval, then
the payroll deductions which the Participant made during that Purchase Interval
with respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions
of this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on January 5, 2000 and
shall become effective at the Effective Time, PROVIDED no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial offering period hereunder shall be
refunded.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the EARLIEST of (i) the last business day in April 2010, (ii) the
date on which all shares available for issuance under the Plan shall have been
sold pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Corporate
Transaction. No further purchase rights shall be granted or exercised, and no
further payroll deductions shall be collected, under the Plan following such
termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan
at any time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time
7
<PAGE>
be subsequently revised so as to require the recognition of compensation
expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following
amendments or revisions to the Plan without the approval of the Corporation's
stockholders: (i) increase the number of shares of Common Stock issuable under
the Plan, except for permissible adjustments in the event of certain changes in
the Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify eligibility requirements for participation in the
Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
B. All costs and expenses incurred in the administration of
the Plan shall be paid by the Corporation; however, each Plan Participant shall
bear all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of
the State of Texas without regard to that State's conflict-of-laws rules.
8
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Silicon Laboratories Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan and shall
be calculated before deduction of (i) any income or employment tax withholdings
or (ii) any contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. Base
Salary shall NOT include (i) any overtime payments, bonuses, commissions,
profit-sharing distributions or other incentive-type payments or (ii) any
contributions made by the Corporation or any Corporate Affiliate on the
Participant's behalf to any employee benefit or welfare plan now or hereafter
established (other than Code Section 401(k) or Code Section 125 contributions
deducted from such Base Salary).
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE OF CONTROL shall mean a change of ownership of the
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in
complete liquidation or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly, by a
person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by or
is under common control with the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders.
D. CODE shall mean the Internal Revenue Code of 1986, as
amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
A-1
<PAGE>
G. CORPORATION shall mean Silicon Laboratories Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Silicon Laboratories Inc. which shall by
appropriate action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the
Underwriting Agreement is executed. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by
a Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more than
five (5) months per calendar year for earnings considered wages under Code
Section 3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of the initial offering period
which begins at the Effective Time, the Fair Market Value shall be
deemed to be equal to the price per share at which the Common
Stock is sold in the initial public offering pursuant to the
Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
A-2
<PAGE>
N. PARTICIPATING CORPORATION shall mean the Corporation and
such Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or
more Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each
Purchase Interval. The initial Purchase Date shall be October 31, 2000.
R. PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
May and November each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the Corporation's
initial public offering of its Common Stock.
A-3
<PAGE>
SILICON LABORATORIES INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
June 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <C>
1. Registration Rights...........................................................1
1.1 Definitions..............................................................1
1.2 Request for Registration.................................................2
1.3 Corporation Registration.................................................4
1.4 Obligations of the Corporation...........................................4
1.5 Furnish Information......................................................6
1.6 Expenses of Demand Registration..........................................6
1.7 Expenses of Corporation Registration.....................................6
1.8 Underwriting Requirements................................................7
1.9 Delay of Registration....................................................7
1.10 Indemnification..........................................................7
1.11 Reports Under the 1934 Act...............................................9
1.12 Form S-3 Registration...................................................10
1.13 Assignment of Registration Rights.......................................11
1.14 Limitations on Subsequent Registration Rights...........................12
1.15 "Market Stand-off"Agreement.............................................12
1.16 Termination of Registration Rights......................................13
2. Covenants of the Corporation.................................................13
2.1 Delivery of Financial Statements........................................13
2.2 Inspection..............................................................14
2.3 Termination of Information, Inspection and Board of Directors Covenants.14
2.4 Right of First Offer....................................................14
2.5 Key-Man Insurance.......................................................16
3. Miscellaneous................................................................16
3.1 Successors and Assigns..................................................16
3.2 Governing Law...........................................................16
3.3 Counterparts............................................................16
3.4 Titles and Subtitles....................................................17
3.5 Notices.................................................................17
3.6 Expenses................................................................17
3.7 Amendments and Waivers..................................................17
3.8 Severability............................................................17
3.9 Aggregation of Stock....................................................18
3.10 Entire Agreement; Amendment; Waiver.....................................18
Schedule A Schedule of Investors
Schedule B Schedule of Founders
</TABLE>
<PAGE>
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"AGREEMENT") is entered into as of June ___, 1998, by and among Silicon
Laboratories Inc., a Delaware corporation (the "CORPORATION"), the holders of
the Corporation's Series A Convertible Preferred Stock (the "SERIES A
PREFERRED STOCK") and Series B Convertible Preferred Stock (the "SERIES B
PREFERRED STOCK") listed on SCHEDULE A attached hereto (the "INVESTORS")
(PROVIDED that neither Imperial Bancorp nor any of its assignees shall be
deemed an "INVESTOR" for purposes of Section 2.4 hereof), and the persons
listed on SCHEDULE B attached hereto (the "FOUNDERS").
RECITALS
WHEREAS, the Corporation and certain of the Investors are
parties to a certain Investors' Rights Agreement, dated March 21, 1997, as
amended by a certain Amendment Agreement dated June 20, 1997 (as amended, the
"ORIGINAL INVESTORS' RIGHTS AGREEMENT");
WHEREAS, the Corporation and certain of the Investors are
parties to a certain Series B Preferred Stock Purchase Agreement of even date
herewith (the "PURCHASE AGREEMENT"); and
WHEREAS, in order to induce the Corporation to enter into
the Purchase Agreement and to induce certain Investors to invest funds in the
Corporation pursuant to the Purchase Agreement, the Investors, the Founders
and the Corporation hereby amend and restate the Original Investors' Rights
Agreement and agree that this Agreement shall govern the rights of the
Investors and the Founders to cause the Corporation to register shares of
capital stock issued and issuable to the Investors and the Founders and
certain other matters as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. REGISTRATION RIGHTS. The Corporation covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "ACT" means the Securities Act of 1933, as
amended.
(b) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which
<PAGE>
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Corporation with the SEC.
(c) The term "HOLDER" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.13 hereof.
(d) The term "1934 ACT" shall mean the Securities Exchange
Act of 1934, as amended.
(e) The term "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration
or ordering of effectiveness of such registration statement or document.
(f) The term "REGISTRABLE SECURITIES" means: (i) the Series
A Preferred Stock and Series B Preferred Stock, (ii) the Corporation's Common
Stock (the "COMMON STOCK") issued upon conversion of the Series A Preferred
Stock and Series B Preferred Stock, (iii) the shares of Common Stock issued
to the Holders of Common Stock as set forth on SCHEDULE B attached hereto;
PROVIDED, HOWEVER, that the shares of Common Stock described in this clause
(iii) shall not be deemed Registrable Securities and the aforementioned
individuals shall not be deemed Holders for the purposes of Section 1.2 and
1.14 and (iv) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i), (ii) and (iii) above.
Notwithstanding the preceding sentence, the Registrable Securities shall not
include any securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned.
(g) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If the Corporation shall receive at any time after
March 21, 2002, a written request from the Holders of at least sixty-seven
percent (67%) of the Registrable Securities then outstanding that the
Corporation file a registration statement under the Act covering the
registration of at least fifty percent (50%) of the Registrable Securities
then outstanding, then the Corporation shall:
(i) within ten (10) days of the receipt
hereof, give written notice of such request to all Holders; and
<PAGE>
(ii) effect as soon as practicable, and in
any event within 60 days of the receipt of such request, the registration
under the Act of all Registrable Securities which the Holders request to be
registered, subject to the limitations of subsection 1.2(b), within twenty
(20) days of the mailing of such notice by the Corporation in accordance with
Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("INITIATING HOLDERS") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Corporation as a part of their request made pursuant to
subsection 1.2(a) and the Corporation shall include such information in the
written notice referred to in subsection 1.2(a). The underwriter will be
selected by the Corporation and shall be reasonably acceptable to a majority
in interest of the Initiating Holders. In such event, the right of any Holder
to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Corporation as provided in subsection 1.4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting. Notwithstanding any other provision of this Section 1.2,
if the underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating
Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Corporation owned by each Holder; PROVIDED,
HOWEVER, that the number of shares of Registrable Securities to be included
in such underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Corporation shall
furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the Chief Executive Officer of the
Corporation stating that in the good faith judgment of the Board of Directors
of the Corporation, it would be seriously detrimental to the Corporation and
its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Corporation shall have the right to defer taking action with respect to such
filing for a period of not more than one hundred and eighty (180) days after
receipt of the request of the Initiating Holders.
(d) In addition, the Corporation shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Corporation has effected two
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
<PAGE>
(ii) If the Corporation has effected a
registration pursuant to this Section 1.2 and such registration has been
declared or ordered effective within the previous three hundred and
sixty-five days (365) days;
(iii) During the period starting with the
date ninety (90) days prior to the Corporation's good faith estimate of the
date of filing of, and ending on a date one hundred and eighty (180) days
after the effective date of, a registration subject to Section 1.3 below;
provided that the Corporation is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
or
(iv) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to Section 1.12
below.
1.3 CORPORATION REGISTRATION. If (but without any obligation to do so) the
Corporation proposes to register (including for this purpose a registration
effected by the Corporation for stockholders other than the Holders) any of
its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Corporation
stock plan, a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities or a registration
in which the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the
Corporation shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within
twenty (20) days after mailing of such notice by the Corporation in
accordance with Section 3.5, the Corporation shall, subject to the provisions
of Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 OBLIGATIONS OF THE CORPORATION. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Corporation shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
twenty (120) days or until the distribution contemplated in the registration
statement has been completed; PROVIDED, HOWEVER, that (i) such 120-day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Corporation and (ii) in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such 120-day period shall be extended, if necessary, to keep
the registration statement effective until all such Registrable
<PAGE>
Securities are sold, PROVIDED that Rule 415, or any successor rule under the
Act, permits an offering on a continuous or delayed basis, and PROVIDED
FURTHER that applicable rules under the Act governing the obligation to file
a post-effective amendment permit, in lieu of filing a post-effective
amendment which (A) includes any prospectus required by Section 10(a)(3) of
the Act or (B) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (A) and (B) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders; PROVIDED that the Corporation shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Corporation are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the effective
date of such registration.
<PAGE>
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of
the Corporation to take any action pursuant to this Section 1 with respect to
the Registrable Securities of any selling Holder that such Holder shall
furnish to the Corporation such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(b) The Corporation shall have no obligation with respect
to any registration requested pursuant to Section 1.2 or Section 1.12 if, due
to the operation of subsection 1.5(a), the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Corporation's obligation to initiate such registration as specified in
subsection 1.2(a) or subsection 1.12(b)(2), whichever is applicable.
<PAGE>
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses (other than legal expenses
of the selling Holders, underwriting discounts and commissions) incurred in
connection with registrations, filings or qualifications pursuant to Section
1.2, including (without limitation) all registration, filing and
qualification fees, printer's and accounting fees, shall be borne by the
Corporation; PROVIDED, HOWEVER, that the Corporation shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of
the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration pursuant to Section 1.2; and PROVIDED
FURTHER, HOWEVER, that if at the time of such withdrawal, the Holders shall
have learned of a material adverse change in the condition, business or
prospects of the Corporation as determined by the managing underwriter(s) of
the related offering, if any, or by the Corporation's Board of Directors, if
there shall be no underwriters, from that known to the Holders at the time of
their request and have withdrawn such request promptly following the
disclosure by the Corporation of such material adverse change, then the
Holders shall not be required to pay such expenses and shall retain their
right to request such registration in the future pursuant to Section 1.2.
1.7 EXPENSES OF CORPORATION REGISTRATION. The Corporation shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.13), including (without limitation) all registration,
filing, and qualification fees, fees and disbursements of counsel for the
Corporation, printer's and accounting fees relating or apportionable thereto,
but excluding legal expenses of selling Holders, underwriting discounts and
commissions relating to Registrable Securities.
<PAGE>
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering involving an
underwriting of shares of the Corporation's capital stock, the Corporation
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Corporation and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the
Corporation. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering exceeds
the amount of securities sold other than by the Corporation that the
underwriters determine in their sole discretion is compatible with the
success of the offering, then the Corporation shall be required to include in
the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will
not jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling Holders and other holders of
securities of the Corporation entitled to inclusion in such registration
according to the total amount of securities owned by each selling Holder and
each other holder and entitled to inclusion in such registration). For
purposes of the preceding parenthetical concerning apportionment, for any
selling Holder which is a partnership or corporation, the partners, retired
partners and stockholders of such selling Holder, or the estates and family
members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single
"SELLING HOLDER", and any pro-rata reduction with respect to such "selling
Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling Holder", as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are included in
a registration statement under this Section 1:
(a) To the extent permitted by law, the Corporation will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)
the omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Corporation of
the Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, or the 1934 Act or any state securities law; and
the Corporation will pay to each such Holder, underwriter or controlling
person, as
<PAGE>
incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 1.10(a) shall not apply to: (x) amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Corporation (which consent
shall not be unreasonably withheld), (y) any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by any such Holder, underwriter or controlling person or (z) any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon such Holder's or underwriter's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Corporation, each of its directors, each
of its officers who has signed the registration statement, each person, if
any, who controls the Corporation within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the Act, or the
1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon: (i) any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration or (ii) such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; PROVIDED, that, in no event
shall any indemnity under this subsection 1.10(b) exceed the gross proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; PROVIDED, HOWEVER, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential
<PAGE>
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission to so deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten public offering are
in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall control.
(f) Except as provided in Subsection 1.10(e), the
obligations of the Corporation and the Holders under this Section 1.10 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER THE 1934 ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Act and any other rule
or regulation of the SEC that may at any time permit a Holder to sell
securities of the Corporation to the public without registration or pursuant
to a registration on Form S-3, the Corporation agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed
by the Corporation for the offering of its securities to the general public;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for
<PAGE>
the sale of their Registrable Securities, such action to be taken as soon as
practicable after the end of the fiscal year in which the first registration
statement filed by the Corporation for the offering of its securities to the
general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Corporation under the Act and the 1934 Act;
and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request: (i) a written statement by
the Corporation that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Corporation), the Act and the 1934
Act (at any time after it has become subject to such reporting requirements),
or that it qualifies as a registrant whose securities may be resold pursuant
to Form S-3 (at any time after it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Corporation and such other reports
and documents so filed by the Corporation and (iii) such other information as
may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Corporation shall receive a written
request from the Holder or Holders of at least 25% of the Registrable
Securities then outstanding that the Corporation effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the
Corporation will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice
from the Corporation; PROVIDED, HOWEVER, that the Corporation shall not be
obligated to effect any such registration, qualification or compliance,
pursuant to this section 1.12: (1) if Form S-3 is not available for such
offering by the Holders, (2) if the Holders, together with the Holders of any
other securities of the Corporation entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000, (3) if the
Corporation shall furnish to the Holders a certificate signed by the
President of the Corporation stating that in the good faith judgment of the
Board of Directors of the Corporation, it would be seriously detrimental to
the Corporation and its stockholders for such Form S-3 registration to be
effected at such time, in which event the Corporation shall have the right to
defer the filing of the Form S-3 registration statement for a period of not
more than one hundred and eighty (180) days after receipt of the request of
the
<PAGE>
Holder or Holders under this Section 1.12; PROVIDED, HOWEVER, that the
Corporation shall not utilize this right more than once in any twelve (12)
month period, (4) if the Corporation has already effected three (3)
registrations on Form S-3 for the Holders pursuant to this Section 1.12, or
(5) in any particular jurisdiction in which the Corporation would be required
to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Corporation shall file a
registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses incurred in
connection with a registration requested pursuant to this Section 1.12,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees and disbursements of
one counsel for the selling Holder or Holders and counsel for the
Corporation, but excluding any underwriters' discounts or commissions
associated with Registrable Securities, shall be borne by the Corporation.
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2
or 1.3, respectively.
<PAGE>
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Corporation to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least 500,000
shares of Registrable Securities (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other recapitalizations), provided:
(a) the Corporation is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned, (b) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.15 below and (c) such assignment shall be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Act. For
the purposes of determining the number of shares of Registrable Securities held
by a transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that
all assignees and transferees who would not qualify individually for assignment
of registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under this
Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of
this Agreement, the Corporation shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Corporation which would allow such holder or prospective holder: (a) to include
such securities in any registration filed under Section 1.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the date
set forth in subsection 1.2(a) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that, during
the period of duration specified by the Corporation and any underwriter of
Common Stock or other securities of the Corporation, following the date of
the first sale to the public pursuant to a registration statement of the
Corporation filed under the Act, it shall not, to the extent requested by the
Corporation and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Corporation held by it
at any time during such period except Common Stock or other securities
included in such registration; PROVIDED, HOWEVER, that:
<PAGE>
(a) such agreement shall be applicable only to the first two
such registration statements of the Corporation which covers Common Stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering;
(b) all executive officers and directors of the Corporation
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not exceed one
hundred and eighty (180) days.
In order to enforce the foregoing covenant, the Corporation
may impose stop-transfer instructions with respect to the Registrable Securities
of each Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in
this Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-l or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.16 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 1 after three (3) years following the
consummation of the sale of securities pursuant to a registration statement
filed by the Corporation under the Act in connection with the initial firm
commitment underwritten offering of its securities pursuant to a registration
statement under the Act, in which the initial price to the public is not less
than $9.52 per share (as adjusted to reflect stock dividends, stock splits,
combinations, recapitalizations or the like with respect to the Common Stock
after the date hereof) and the gross proceeds to the Corporation and selling
stockholders are at least $10,000,000 in the aggregate.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration shall terminate if all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period.
2. COVENANTS OF THE CORPORATION.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Corporation shall deliver to each
Investor so long as it holds at least five percent (5%) of the shares of Common
Stock of the Corporation then outstanding (assuming full conversion and exercise
of all convertible or exercisable securities):
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Corporation, an income
statement for such fiscal year, a balance
<PAGE>
sheet of the Corporation and statement of stockholder's equity as of the end
of such year, and a schedule as to the sources and applications of funds for
such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Corporation;
(b) within thirty (30) days of the end of each month: (i) an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month (including an
instrument executed by the Chief Financial Officer or President of the
Corporation certifying that such financials were prepared in accordance with
GAAP consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by GAAP) and fairly present the
financial condition of the Corporation and its results of operation for the
period specified, subject to year-end audit adjustment) and (ii) a summary of
the Corporation's business activities for such month, each in reasonable detail;
and
(c) as soon as practicable prior to each fiscal year of the
Corporation, a budget and business plan (each approved by the Board of Directors
of the Corporation) for such fiscal year, including balance sheets and sources
and applications of funds statements and, as soon as prepared, any other budgets
or revised budgets prepared by the Corporation.
For purposes of this Section 2.1, "INVESTOR" shall include any
general partners of an Investor. The rights set forth in this Section 2.1 shall
be assignable only to Investors holding an aggregate of at least 500,000 shares
of Series A Preferred Stock or Series B Preferred Stock (subject to appropriate
adjustment for stock dividends, stock splits, combinations, recapitalizations or
the like with respect to each series after the date hereof).
<PAGE>
2.2 INSPECTION. The Corporation shall permit each Investor so long as it holds
at least five percent (5%) of the shares of Common Stock of the Corporation then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities), at such Investor's expense, to visit and inspect the
Corporation's properties, to examine its books of account and records and to
discuss the Corporation's affairs, finances and accounts with its officers, all
at such reasonable times as may be requested by the Investor; provided, however,
that the Corporation shall not be obligated pursuant to this Section 2.2 to
provide access to any information which it reasonably considers to be a trade
secret or similar confidential information. For the purposes of the Section 2.2,
"Investor" shall include any general partners of an Investor. The rights set
forth in this Section 2.2 shall be assignable only to Investors holding an
aggregate of at least 500,000 shares of Series A Preferred Stock or Series B
Preferred Stock (subject to appropriate adjustment for stock dividends, stock
splits, combinations, recapitalizations or the like with respect to each series
after the date hereof).
2.3 Termination of Information, Inspection and Board of Directors Covenants.
The covenants set forth in subsections 2.1(b) and (c), Section 2.2, 2.4, 2.5
and Section 2.6 shall terminate as to Investors and be of no further force or
effect when the sale of securities pursuant to a registration statement filed
by the Corporation under the Act in connection with the firm commitment
underwritten offering of its securities to the general public is consummated
or when the Corporation first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event
shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified in
this paragraph 2.4, the Corporation hereby grants to each Investor (other
than Imperial Bancorp and its assigns) a right of first offer with respect to
future sales by the Corporation of its Shares (as hereinafter defined). For
purposes of this Section 2.4, "Investor" includes any general partners and
affiliates of an Investor. An Investor shall be entitled to apportion the
right of first offer hereby granted it among itself and its partners and
affiliates in such proportions as it deems appropriate.
Each time the Corporation proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("SHARES"), the Corporation shall first make an offering of such
Shares to each Investor in accordance with the following provisions:
(a) The Corporation shall deliver a notice by certified mail
("NOTICE") to the Investors stating: (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) By written notification received by the Corporation,
within thirty (30) calendar days after giving of the Notice, the Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares which equals the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion of
the Series A Preferred Stock and Series B Preferred then held, by such Investor
bears to the total number of shares of Common Stock of the Corporation then
outstanding
<PAGE>
(assuming full conversion and exercise of all convertible or exercisable
securities then outstanding). The Corporation shall promptly, in writing,
inform each Investor which purchases all the shares available to it
("FULLY-EXERCISING INVESTOR") of any other Investor's failure to do likewise.
During the ten-day period commencing after such information is given, each
Fully-Exercising Investor shall be entitled to obtain that portion of the
Shares for which Investors were entitled to subscribe but which were not
subscribed for by the Investors which is equal to the proportion that the
number of shares of Common Stock issued and held, or issuable upon conversion
of Series A Preferred Stock and Series B Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of Common Stock
issued and held, or issuable upon conversion of the Series A Preferred Stock
and Series B Preferred Stock then held, by all Fully-Exercising Investors who
wish to purchase some of the unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Corporation may, during the 30-day period
following the expiration of the period provided in subsection 2.4(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Corporation does not enter into an
agreement for the sale of the Shares within such period, or if such agreement is
not consummated within thirty (30) days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not
be applicable: (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, consultants and directors, directly or pursuant to a
stock option plan or a restricted stock plan approved by the Board of Directors
of the Corporation, for the primary purpose of soliciting or retaining their
employment, (ii) to or after consummation of a bona fide, firmly underwritten
public offering of shares of Common Stock (and the issuance of warrants to
underwriters in connection therewith), registered under the Act pursuant to a
registration statement on Form S-1, at an offering price of at least $9.52 per
share (appropriately adjusted for any stock split, dividend, combination or
other recapitalization with respect to the Common Stock) and $10,000,000 in the
aggregate, (iii) the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) the issuance of
securities in connection with a bona fide business acquisition of or by the
Corporation, whether by merger, consolidation, sale of assets, sale or exchange
of stock or otherwise or (v) the issuance of stock, warrants or other securities
or rights to persons or entities with which the Corporation has business
relationships, PROVIDED such issuances are for other than primarily equity
financing purposes.
(e) The right of first refusal set forth in this Section 2.4
may not be assigned or transferred, except that: (i) such right is assignable by
each Investor to any wholly-owned subsidiary or parent of, or to any corporation
or entity that is, within the meaning of the Act, controlling, controlled by or
under common control with, any such Investor, and (ii) such right is assignable
between and among any of the Investors.
<PAGE>
2.5 KEY-MAN INSURANCE. The Corporation has obtained and will continue to
maintain term life insurance policies, in the amount of $3,000,000 per life,
from financially sound and reputable insurers on the lives of each of Navdeep S.
Sooch, Jeffrey W. Scott and David R. Welland. Such policies shall name the
Corporation as loss payee and shall not be cancelable by the Corporation.
2.6 BOARD OF DIRECTORS. Meetings of the Board of Directors
shall be held at least quarterly.
<PAGE>
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed under the
laws of the State of Texas as applied to agreements among Texas residents
entered into and to be performed entirely within Texas.
3.3 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the
parties at the address for such party set forth beneath such party's name on
the signature pages hereof (or at such other address for a party as shall be
specified by like notice). Notice given by personal delivery, courier service
or mail shall be effective upon actual receipt. Notice given by telecopier
shall be confirmed by appropriate answer back and shall be effective upon
actual receipt if received during the recipient's normal business hours, or
at the beginning of the recipient's next business day after receipt if not
received during the recipient's normal business hours. All notices by
telecopier shall be confirmed promptly after transmission in writing by
certified mail or personal delivery. Any party may change any address to
which notice is to be given to it by giving notice as provided above of such
change of address.
3.6 EXPENSES. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
<PAGE>
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Corporation and the holders of a majority of the
Registrable Securities then held by the Investors and a majority of the
Registrable Securities then held by the Founders. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder of
any Registrable Securities then outstanding, each future Holder of all such
Registrable Securities, and the Corporation.
3.8 SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this
Agreement.
3.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including the
Schedules and Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and supersedes all other agreements of the parties relating to the
subject matter hereof, including, without limitation, the Original Investors'
Rights Agreement.
* * *
[Signature Pages Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended
and Restated Investors' Rights Agreement as of the date first above written.
CORPORATION:
SILICON LABORATORIES INC.
Navdeep S. Sooch, President
Address: 2024 E. St. Elmo Road
Austin, Texas 78744-1018
Fax: 512.416.9669
<PAGE>
INVESTORS:
AUSTIN VENTURES IV-A, L.P.
By: AV Partners IV, L.P.,
its general partner
William P. Wood,
its general partner
Address: 114 West 7th Street, Suite 1300
Austin, Texas 78701
Fax: 512.476.3952
AUSTIN VENTURES IV-B, L.P.
By: AV Partners IV, L.P.,
its general partner
William P. Wood,
its general partner
Address: 114 West 7th Street, Suite 1300
Austin, Texas 78701
Fax: 512.476.3952
AUSTIN VENTURES V, L.P.
<PAGE>
By: AV Partners V, L.P.,
its general partner
Blaine F. Wesner,
its general partner
Address: 114 West 7th Street, Suite 1300
Austin, Texas 78701
Fax: 512.476.3952
AUSTIN VENTURES V AFFILIATES
FUND, L.P.
By: AV Partners V, L.P.,
its general partner
Blaine F. Wesner,
its general partner
Address: 114 West 7th Street, Suite 1300
Austin, Texas 78701
Fax: 512.476.3952
SILVERTON PARTNERS
William P. Wood,
its general partner
Address: c/o Austin Ventures
114 West 7th Street, Suite 1300
Austin, Texas 78701
Fax: 512.476.3952
<PAGE>
DONALD W. BROOKS
Address: 420-B Hi Circle South
P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
DONALD W. AND THERESA BROOKS
Donald W. Brooks
Theresa Brooks
Address: 420-B Hi Circle South
P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
DRUTAN INVESTMENTS, LTD.
Donald W. Brooks,
its general partner
Address: P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
BROOKS + BROOKS INVESTMENTS, LTD.
Donald W. Brooks,
<PAGE>
its general partner
Address: P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
CURRENT VENTURES GROUP, LTD.
Name:
---------------------------------
its general partner
Address: P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
DIETRICH R. ERDMANN
Address: c/o Sevin Rosen
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
Fax: 972.702.1103
CENTERPOINT VENTURE PARTNERS, L.P.
By: Paluck Associates, L.P.,
its general partner
Robert J. Paluck,
its general partner
<PAGE>
Address: Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
Fax: 972.702.1103
THOMAS M. BROOKS
Address: 420-B Hi Circle South
P.O. Box 4016
Horseshoe Bay, Texas 78657-4016
Fax: 408.733.8090
KLM CAPITAL PARTNERS
FUND (A BRITISH VIRGIN
ISLANDS INTERNATIONAL
L.P.)
Peter Mok,
its general partner
Address: 2041 Mission College Blvd., Suite
175
Santa Clara, California 95054
Fax: 408.970.8887
JONATHAN D. IVESTER
Address: 1102 Sprague Lane
Austin, Texas 78746
<PAGE>
BERRY AND DIANE CASH GRANDCHILDRENS' TRUST
Harvey B. Cash,
its trustee
Address: c/o Interwest Partners
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
Fax: 972.702.1103
CHARLES H. CASH
Address: c/o Interwest Partners
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
Fax: 972.702.1103
HARVEY B. CASH
Address: c/o Interwest Partners
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
Fax: 972.702.1103
<PAGE>
L.J. SEVIN
Address: c/o Sevin Rosen
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, Texas 75240
<PAGE>
FOUNDERS:
NAVDEEP S. SOOCH
Address: 1105 Sprague Lane
Austin, Texas 78746
DAVID R. WELLAND
Address: 4215 Avenue A
Austin, Texas 78751
JEFFREY W. SCOTT
Address: 10904 Beacham Court
Austin, Texas 78739
JOHN W. MCGOVERN
Address: 701 Westbrook Drive
Austin, Texas 78746
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Shares of Common Stock
Holders of Series A Preferred Stock (assuming full conversion)
- ---------------------------------------------------------------------------------
<S> <C>
Austin Ventures IV-A, L.P................................................492,988
Austin Ventures IV-B, L.P..............................................1,034,283
Austin Ventures V, L.P.................................................2,181,815
Austin Ventures V Affiliates Fund, L.P...................................109,091
Silverton Partners.......................................................254,545
Donald W. Brooks.........................................................361,090
Drutan Investments, Ltd...................................................74,000
Brooks + Brooks Investments, Ltd..........................................74,000
Dietrich R. Erdmann......................................................509,092
Harvey B. Cash...........................................................254,545
<CAPTION>
Holder of Warrants to Purchase Shares of Common Stock
Series A Preferred Stock (assuming full conversion)
- ---------------------------------------------------------------------------------
<S> <C>
Imperial Bancorp..........................................................45,818
<CAPTION>
Shares of Common Stock
Holders of Series B Preferred Stock (assuming full conversion)
- ---------------------------------------------------------------------------------
<S> <C>
Austin Ventures IV-A, L.P.................................................54,674
Austin Ventures IV-B, L.P................................................114,706
Austin Ventures V, L.P...................................................241,972
Austin Ventures V Affiliates Fund, L.P....................................12,099
Silverton Partners........................................................28,230
Donald W. and Theresa Brooks..............................................50,000
Drutan Investments, Ltd....................................................9,000
Brooks + Brooks Investments, Ltd...........................................9,000
Current Ventures Group, Ltd..............................................142,085
Dietrich R. Erdmann......................................................210,085
Harvey B. Cash...........................................................105,043
CenterPoint Venture Partners, L.P........................................378,152
Thomas M. Brooks..........................................................10,505
KLM CAPITAL PARTNERS FUND
<PAGE>
(a British Virgin Islands International L.P.)............................105,043
L.J. Sevin................................................................52,522
Jonathan D. Ivester.......................................................52,522
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Shares of
Founder Common Stock Held
- ------- -----------------
<S> <C>
Navdeep S. Sooch........................4,556,515
David R. Welland........................3,683,333
Jeffrey W. Scott........................3,733,333
John W. McGovern..........................203,636
</TABLE>
<PAGE>
LEASE AGREEMENT
Between
S.W. Austin Office Building Ltd.,
as Landlord,
and
Silicon Laboratories, Inc.
a Delaware corporation,
as Tenant,
Covering approximately 37,800 gross square feet
of the Building known as
Austin Industrial Center
located at
4609 Southwest Parkway
Austin, Texas 78735.
<PAGE>
STANDARD INDUSTRIAL LEASE AGREEMENT
Approximately 37,800 gross square feet
1609 Southwest Parkway Suite 100
Austin, Texas 78735
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between S.W. AUSTIN
OFFICE BUILDING, LTD., A TEXAS LIMITED PARTNERSHIP, hereinafter referred to as
"LANDLORD", and SILICON LABORATORIES, INC., A DELAWARE CORPORATION, hereinafter
referred to as "TENANT".
PREAMBLE
Landlord intends to construct an office/warehouse building containing
approximately 37,800 square feet of space (the "BUILDING") on the tract of land
located at 4609 southwest Parkway, Austin, Texas, legally described on EXHIBIT
"A" attached hereto and incorporated herein by reference for all purposes (the
"PROPERTY"), together with certain exterior and interior amenities and features
(collectively, the "PROJECT"). Landlord intends to construct the Project
substantially in accordance with the Plans for the Project (hereinafter
defined). The term "PROJECT" shall mean the base building, all parking areas,
exterior features and amenities as reflected on the Plans for the Project and
all common area interior finishes, as generally set forth on EXHIBIT "B"
attached hereto. The term "PROJECT" does not include the finish out or
improvements to the tenant spaces in the Building. The completed construction
drawings and plans and specifications for the Project shall be referred to
herein as the "PLANS FOR THE PROJECT". The Plans for the Project shall be based
on the schematic plans and specifications attached hereto as EXHIBIT "B" and by
this reference made a part hereof.
1, PREMISES AND TERM. In consideration of the mutual obligations of Landlord
and Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes
from Landlord, certain leased premises situated within the County of Travis,
State of Texas, as more particularly described on EXHIBIT "A" attached hereto
and incorporated herein by reference (the "PREMISES"), to have and to hold,
subject to the terms, covenants and conditions in this Lease. The term of this
Lease shall commence on the Commencement Date hereinafter set forth and shall
end on the last day of the month that is eighty-four (84) months after the
Commencement Date.
A. EXISTING BUILDING AND IMPROVEMENTS. If no material improvements are
to be constructed to the Premises, the "COMMENCEMENT DATE" shall be October 1,
1998. In such event, Tenant acknowledges that (i) it has inspected and accepts
the Premises in its "as is" condition, (ii) the buildings and improvements
comprising the same are suitable for the purpose for which the Premises are
leased, (iii) the Premises are in good and satisfactory condition, and (iv) no
representations as to the repair of the Premises nor promises to alter, remodel
or improve the Premises have been made by Landlord (unless otherwise expressly
set forth in this Lease).
B. BUILDING OR IMPROVEMENTS TO BE CONSTRUCTED. If the Premises or part
thereof are to be constructed, the Commencement Date shall be deemed to be the
earliest of: (i) the date upon which the Interior Improvements (defined on
EXHIBIT "C" attached hereto) to Premises which are to be erected in accordance
with the Interior Improvements Plans (defined on EXHIBIT "C" attached hereto)
have been substantially completed; (ii) the date on which the Interior
Improvements to the Premises would have been substantially completed but for
delays caused directly or indirectly by Tenant, including Interior Improvements
Plans delays or change orders; or (iii) the date on which Tenant occupies any
part of the Premises. Landlord and Tenant anticipate that the Premises and the
Interior Improvements will be substantially complete by November 18, 1998. As
used herein, the term "SUBSTANTIALLY COMPLETED", "SUBSTANTIALLY COMPLETE" and
"SUBSTANTIAL COMPLETION" shall mean that, in the opinion of the architect or
space planner that prepared the Interior Improvements Plans, such improvements
have been completed in accordance with the Interior Improvements Plans, the City
of Austin has issued a temporary certificate of occupancy for the Premises and
the Premises are in good and satisfactory condition, with the exception of
completion of minor details of construction, mechanical adjustments or
decorations which do not materially interfere with Tenant's use of the Premises
remain to be performed (items normally referred to as "PUNCH LIST" items).
Landlord and Tenant shall complete one punch list inspection and Landlord shall
complete and/or correct such punch list items within a reasonable period of time
after such inspection. As soon as the Interior Improvements have been
substantially completed, Landlord shall notify Tenant in writing that the
Commencement Date has occurred; provided, however, that in no event will the
Commencement Date occur prior to October 1, 1998 (unless Tenant occupies the
Premises prior to October 1, 1998), without the written consent of Tenant.
Initial /s/ [Illegible] [Illegible]
---------------- -----------
Date 6/25/98 6/26/98
------------ -------
1
<PAGE>
C. PARKING. Tenant and its employees, customers and licensees, in
common with Landlord and Landlord's agents, employees, contractors and
subcontractors, shall have the right to use for automobile parking the
entirety of the parking areas constructed for the Project, subject to (i) all
rules and regulations promulgated by Landlord, and (ii) rights of ingress and
egress of others as designated by Landlord. Subject to the foregoing and any
applicable laws and ordinances, Tenant may additionally park on any private
streets which are included in the Project. Landlord shall not be responsible
for enforcing Tenant's parking rights against any third parties and Tenant
expressly does not have the right to tow or obstruct improperly parked
vehicles. Tenant agrees not to park on any public streets adjacent to or in
the vicinity of the Premises.
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. BASE RENT. Tenant agrees to pay Landlord rent for the Premises, in
advance, without demand, deduction or set off, at the rate of thirty-seven
thousand eight hundred dollars ($37,800.00) per month during Year 1 of the
initial term hereof, thirty-seven thousand eight hundred dollars ($37,800.00)
per month during Year 2 of the initial term hereof, thirty-seven thousand
eight hundred dollars ($37,800.00) per month during Year 3 of the initial
term hereof, thirty-nine thousand three hundred seventy-five and No/100
dollars ($39,375.00) per month during Year 4 of the initial term hereof,
thirty-nine thousand three hundred seventy-five and No/100 dollars
($39,375.00) per month during Year 5 of the initial term hereof, forty
thousand nine hundred fifty and No/l00 dollars ($40,950.00) per month during
Year 6 of the initial term hereof and forty thousand nine hundred fifty and
No/100 dollars ($40,950.00) per month during Year 7 of the initial term
hereof. One such monthly installment, plus the other monthly charges set forth
in Paragraph 2C below, shall be due and payable on the date hereof, and a
like monthly installment shall be due and payable on or before the first day
of each calendar month succeeding the Commencement Date, except that all
payments due hereunder for any fractional calendar month shall be prorated.
B. SECURITY DEPOSIT.
(i) CASH PORTION OF SECURITY DEPOSIT. Tenant agrees to deposit
with Landlord on the date of execution hereof the sum of one hundred
thirteen thousand four hundred and no/100 dollars ($113,400.00), which
shall be held by Landlord, without obligation for interest, as partial
security for the performance of Tenant's obligations under this Lease.
(ii) LETTER OF CREDIT PORTION OF SECURITY DEPOSIT. Prior to
the commencement of construction of the Interior Improvements, as an
additional Security Deposit, Tenant shall provide Landlord with an
irrevocable letter of credit (the "LETTER OF CREDIT") in the amount
of $453,600.00 issued by a bank acceptable to Landlord, naming
Landlord as the Beneficiary thereof. The Letter of Credit shall
provide that Landlord may draw the full face amount thereof upon the
presentation of the original of the Letter of Credit together with a
sworn affidavit by Landlord (or an officer of Landlord) stating that
Tenant is in default hereunder and that all cure periods relating to
such default have expired. The Letter of Credit shall also provide
that it may be drawn in full by Landlord in the same manner if at any
time prior to the expiration of this Lease the Letter of Credit is
within thirty (30) days of expiring and a replacement or extension
thereof has not been furnished to Landlord. The Letter of Credit,
including, without limitation, the form thereof, and all extensions
and renewals thereof, shall otherwise be acceptable to Landlord in
all respects. Tenant covenants to continuously keep the Letter of
Credit in full force and effect and failure to do so shall constitute
an Event of Default hereunder. The Letter of Credit shall be
assignable and transferrable to Landlord's mortgage lender. In the
event Landlord ever draws on the Letter of Credit, Landlord may
thereafter retain all proceeds thereof in the form of cash in the
same manner as the funds deposited with Landlord under paragraph
2B(i) hereof and Landlord shall have no obligation to refund such
proceeds in exchange for a replacement Letter of Credit.
(iii) SECURITY DEPOSIT GENERALLY. The term "SECURITY DEPOSIT",
when used in this Lease, shall mean the cash portion of the Security
Deposit as described in paragraph 2B(i), above and/or the Letter of
Credit portion of the Security Deposit as described in paragraph
2B(ii), above. It is expressly understood and agreed that the Security
Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Landlord may commingle the
Security Deposit with Landlord's other funds. Upon occurrence of an
Event of Default, Landlord may use all or any part of the Security
Deposit to pay past due rent or other payments due Landlord under this
Lease or the cost of any other damage, injury, expense or liability
caused by such Event of Default, without prejudice to any other remedy
provided herein or provided by law. On demand after application of any
portion of the Security Deposit, Tenant shall pay Landlord the amount
that will restore the Security Deposit to its original amount. The
Security Deposit shall be deemed the property of Landlord, but any
remaining balance of the Security Deposit shall be returned by
Landlord to Tenant when all of Tenant's present and future obligations
under this Lease have been fulfilled. If Landlord transfers its
interest in the Building during the term of this Lease, Landlord shall
assign any unforfeited portion of the Security Deposit to the
transferee if the transferee executes and delivers a letter to Tenant
acknowledging receipt of the Security Deposit and liability for the
same, and expressly assumes all obligations of Landlord under this
Lease.
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(iv) REDUCTION OF LETTER OF CREDIT. The following shall be the
conditions to a reduction in the amount of the Letter of Credit:
(1) If Tenant achieves four (4) consecutive increasingly
profitable quarters that reach an aggregate minimum net
profit of $2,500,000.00, based on generally accepted
accounting principles, consistently applied (the
"MINIMUM PERFORMANCE CRITERIA"), the Letter of Credit
may be reduced by $66,600.00;
(2) At such time thereafter as Tenant achieves a minimum
aggregate net profit of $2,500,000.00 during four (4)
consecutive quarters (not including any of the four
quarters used in paragraph 2B(iv)(1), above), based on
generally accepted accounting principles, consistently
applied, the Letter of Credit may be reduced by an
additional $66,600.00; and
(3) At such time thereafter as Tenant achieves a minimum
aggregate net profit of $2,500,000.00 during four (4)
consecutive quarters (not including any of the four
quarters used in paragraph 2B(iv)(2), above), based on
generally accepted accounting principles, consistently
applied, the Letter of Credit may be reduced by an
additional $66,600.00.
(4) The remainder of the Letter of Credit shall not be
subject to further reductions.
C. ESCROW DEPOSITS. Without limiting in any way Tenant's other
obligations under this Lease, Tenant agrees to pay to Landlord its Proportionate
Share (as defined in this Paragraph 2C) of (i) Taxes (hereinafter defined)
payable by Landlord pursuant to Paragraph 3A, below, (ii) the cost of utilities
payable by Landlord pursuant to Paragraph 3, below, (iii) Landlord's cost of
maintaining insurance pursuant to Paragraph 9A, below, and (iv) Landlord's cost
of maintaining the Premises pursuant to paragraph 5C, below and any common area
charges payable by Tenant in accordance with Paragraph 4B, below (collectively,
the "TENANT COSTS"). During each month of the term of this Lease, on the same
day that rent is due hereunder, Tenant shall deposit in escrow with Landlord an
amount equal to one-twelfth (1/12) of the estimated amount of Tenant's
Proportionate Share of the Tenant Costs. Tenant authorizes Landlord to use the
funds deposited with Landlord under this Paragraph 2C to pay such Tenant Costs.
The initial monthly escrow payments are based upon the estimated amounts for the
year in question and shall be increased or decreased annually to reflect the
projected actual amounts of all Tenant Costs. If the Tenant's total escrow
deposits for any calendar year are less than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Tenant shall pay the difference to
Landlord within ten (10) days after demand. If the total escrow deposits of
Tenant for any calendar year are more than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Landlord shall retain such excess
and credit it against Tenant's escrow deposits next maturing after such
determination. Tenant's "PROPORTIONATE SHARE" with respect to the Building, as
used in this Lease, shall mean a fraction, the numerator of which is the gross
rentable area contained in the Premises and the denominator of which is the
gross rentable area contained in the entire Building. In the event the Premises
or the Building is part of a project or business park owned, managed or leased
by Landlord or an affiliate of Landlord (the "PROJECT"), Tenant's "PROPORTIONATE
SHARE" with respect to the Project, as used in this Lease, shall mean a
fraction, the numerator of which is the gross rentable area contained in the
Premises and the denominator of which is the gross rentable area contained in
all of the buildings (including the Building) within the Project.
3. TAXES
A. REAL PROPERTY TAXES. Subject to reimbursement under Paragraph 2C
herein, Landlord agrees to pay all taxes, assessments and governmental charges
of any kind and nature (collectively referred to herein as "TAXES") that accrue
against the Premises, the Building and/or the Property. If at any time during
the term of this Lease there shall be levied, assessed or imposed on Landlord a
capital levy or other tax directly on the rents received therefrom and/or a
franchise tax, assessment, levy or charge measured by or based, in whole or in
part, upon such rents from the Premises and/or the Property, the Building or any
other improvements of which the Premises are a part, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based shall
be deemed to be included in the term "Taxes" for the purposes hereof. The
Landlord shall have the right to employ a tax-consulting firm to attempt to
assure a fair tax burden on the real property within the applicable taxing
jurisdiction. Tenant agrees to pay its Proportionate Share of the cost of such
consultant.
B. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes levied
or assessed against any personal property or fixtures placed in or on the
Premises. If any such taxes are levied or assessed against Landlord or
Landlord's property and (i) Landlord pays the same or (ii) the assessed value of
Landlord's property is increased by inclusion of such personal property and
fixtures and Landlord pays the increased taxes, then Tenant shall pay to
Landlord, upon demand, the amount of such taxes.
4. LANDLORD'S REPAIRS AND MAINTENANCE.
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A. STRUCTURAL REPAIRS. Landlord, at its own cost and expense, shall
maintain the roof, foundation and the structural soundness of the exterior
walls of the Building in good repair, reasonable wear and tear excluded. The
term "walls" as used herein shall not include windows, glass or plate glass,
any doors, special store fronts or office entries, and the term "foundation"
as used herein shall not include loading docks. Tenant shall immediately give
Landlord written notice of defect or need for repairs, after which Landlord
shall have reasonable opportunity to effect such repairs or cure such defect.
B. TENANT'S SHARE OF COMMON AREA CHARGES. Tenant agrees to pay its
Proportionate Share of the cost of (i) maintenance and/or landscaping (including
both maintenance and replacement of landscaping) of any property that is a part
of the Building and/or the Project; (ii) operating, maintaining and repairing
any property, facilities or services (including without limitation utilities and
insurance therefor) provided for the use or benefit of Tenant or the common use
or benefit of Tenant and other lessees of the Project or the Building; and (iii)
an administrative fee of fifteen percent (15%) of all common area maintenance
charges.
5. TENANT'S REPAIRS.
A. MAINTENANCE OF PREMISES AND APPURTENANCES. Tenant, at its own
cost and expense, shall (i) maintain all parts of the Premises and promptly
make all necessary repairs and replacements to the Premises (except those for
which Landlord is expressly responsible hereunder), and (ii) keep the parking
areas, driveways and alleys surrounding the Premises in a clean and sanitary
condition. Tenant's obligation to maintain, repair and make replacements to
the Premises shall cover, but not be limited to, pest control, trash removal
and the maintenance, repair and replacement of all HVAC, electrical,
plumbing, sprinkler and other mechanical systems.
B. SYSTEM MAINTENANCE. Tenant, at its own cost and expense, shall enter
into a regularly scheduled preventive maintenance/service contract with a
maintenance contractor approved by Landlord for servicing all hot water, heating
and air conditioning systems and equipment within the Premises. The service
contract must include all services suggested by the equipment manufacturer in
its operations/maintenance manual and must become effective within thirty (30)
days of the date Tenant takes possession of the Premises.
C. OPTION TO MAINTAIN PREMISES. Landlord reserves the right to perform,
in whole or in part and without notice to Tenant, maintenance, repairs and
replacements to the Premises, paving, common area, landscape, exterior painting,
common sewage line plumbing and any other items that are otherwise Tenant's
obligations under this Section 5, in which event, Tenant shall be liable for its
Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.
6. ALTERATIONS.
Tenant shall not make any alterations, additions or improvements to the premises
without the prior written consent of Landlord. Tenant at its own cost and
expense, may erect such shelves, bins, furniture, machinery, liquid nitrogen
piping and associated equipment (including a tank and compressor outside the
Building), alternate fire suppression system and other trade fixtures as it
desires, provided that (i) such items do not alter the basic character of the
Premises or the Building, (ii) such items do not overload or damage the Building
or any Building systems, (iii) such items may be removed without injury to the
Premises, and (iv) the construction, erection or installation thereof complies
with all applicable governmental laws, ordinances, regulations and with
Landlord's specifications and requirements. Tenant shall be responsible for the
compliance of all of its alterations, additions and improvements to the Premises
with the Americans With Disabilities Act of 1990 and the Texas Architectural
Barriers Act. Except for removable furniture, fixtures and equipment, raised
computer floor(s), cubical furniture, liquid nitrogen piping and associated
equipment (including outside tank and compressor), alternate fire suppression
system and de-mountable interior wall panels, all alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Landlord immediately upon installation. All shelves, bins, furniture,
machinery, liquid nitrogen piping and associated equipment (including exterior
tank and compressor), raised computer floor(s), cubical furniture, alternate
fire suppression system(s) and removable trade fixtures installed by Tenant
shall be the Property of Tenant and shall be removed by Tenant on or before the
earlier to occur of the day of termination or expiration of this Lease or
vacating the Premises, at which time Tenant shall restore the Premises to the
condition which existed as of the completion of the Interior Improvements
[specifically excluding liquid nitrogen piping and associated equipment
(including exterior tank and compressor) and alternate fire suppression
system(s)], reasonable wear and tear excepted. All alterations, installations,
removals and restorations shall be performed in a good and workmanlike manner so
as not to damage or alter the primary structure or structural qualities of the
Building or other improvements situated on the Premises or of which the Premises
are a part.
7. SIGNS.
Any signage Tenant desires shall be subject to Landlord's written approval and
shall be submitted to Landlord prior to installation. Tenant shall repair, paint
and/or replace the Building fascia surface to which its signs are attached upon
Tenant's vacating the Premises or the removal or alteration of its signage.
Tenant shall not, without Landlord's
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prior written consent, (i) make any changes to the exterior of the Building or
the Premises, such as painting; (ii) install any exterior lights, decorations,
balloons, flags, pennants or banners; or (iii) erect or install any signs,
windows or door lettering, placards, decorations or advertising media of any
type which can be viewed from the exterior of the Premises. All signs,
decorations, advertising media, blinds, draperies and other window treatment or
bars or other security installations visible from outside the Premises shall
conform in all respects to the criteria established by Landlord or shall be
otherwise subject to Landlord's prior written consent.
8. UTILITIES.
Landlord agrees to provide water, electricity and wastewater service to the
Premises. Electrical service to the Building shall be at least three phase, 480
volt, 1,000 amperes, 20 watts per square foot. Tenant shall pay for all water,
gas, heat, light, power, telephone, sewer, sprinkler charges and other utilities
and services used on or at the Premises, together with any taxes, penalties,
surcharges or the like pertaining to the Tenant's use of the Premises and any
maintenance charges for utilities. Landlord shall have the right to cause any of
said services to be separately metered to Tenant, at Tenant's expense. Tenant
shall pay its prorata share, as reasonably determined by Landlord, of all
charges for jointly metered utilities. Landlord shall not be liable for any
interruption or failure of utility service on the Premises, and Tenant shall
have no rights or claims as a result of any such failure, however, Landlord will
use its diligent good faith efforts to restore any such failure of utility
service as soon as reasonably practicable. In the event water is not separately
metered to Tenant, Tenant agrees that it will not use the water and sewer
capacity for uses other than normal domestic restroom and kitchen usage, and
Tenant further agrees to reimburse Landlord for the entire amount of common
water and sewer costs as additional rental if, in fact, Tenant uses water or
sewer capacity for uses other than normal domestic restroom and kitchen uses
without first obtaining Landlord's written permission, including but not limited
to the cost for acquiring additional sewer capacity to service Tenant's excess
sewer use. Furthermore, Tenant agrees in such event to install its own expense a
submeter to determine Tenant's usage.
9. INSURANCE.
A. LANDLORD'S INSURANCE. Subject to reimbursement under Paragraph 2C
herein, Landlord shall maintain insurance covering the Building in an amount not
less than eighty percent (80%) of the "replacement cost" thereof, insuring
against the perils of fire, lightning, extended coverage, vandalism and
malicious mischief. Landlord, at Landlord's election, may carry insurance in
such additional amounts and coverages as Landlord may deem prudent from time to
time and the cost of such additional insurance shall likewise be reimbursable
under Paragraph 2C hereof.
B. TENANT'S INSURANCE. Tenant, at its own expense, shall maintain during
the term of this lease a policy or policies of worker's compensation and
comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage and One Million
Dollars ($ 1,000,000.00) per occurrence and One Million Dollars ($1,000,000.00)
in the aggregate for personal injuries or deaths of persons occurring in or
about the Premises. Tenant, at its own expense, shall also maintain during the
term of this Lease fire and extended coverage insurance covering the replacement
cost of (i) all alterations, additions, partitions and improvements installed or
placed on the Premises by Tenant or by Landlord on behalf of Tenant; and (ii)
Tenant's personal property contained within the Premises. Said policies shall
(i) name the Landlord as an additional insured and insure Landlord's contingent
liability under or in connection with this Lease (except for worker's
compensation policy, which instead shall include a waiver of subrogation
endorsement in favor of Landlord); (ii) be issued by an insurance company which
is acceptable to Landlord; and (iii) provide that said insurance shall not be
canceled unless thirty (30) days prior written notice has been given to
Landlord. Said policy or policies or certificates thereof shall be delivered to
Landlord by Tenant on or before the Commencement Date and upon each renewal of
said insurance.
C. PROHIBITED USES. Tenant will not permit the Premises to be used for
any purpose or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance of
any sprinkler credits; including without limitation, use of the Premises for the
receipt, storage or handling of any product, material or merchandise that is
explosive or highly inflammable. If any increase in the cost of any insurance on
the Premises or the Building is caused by Tenant's use of the Premises or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord upon demand therefor.
10. FIRE AND CASUALTY DAMAGE.
A. TOTAL OR SUBSTANTIAL DAMAGE AND DESTRUCTION. If the Premises or the
Building should be damaged or destroyed by fire or other peril, Tenant shall
immediately give written notice to Landlord of such damage or destruction. If
the Premises or the Building should be totally destroyed by any peril covered by
the insurance to be provided by Landlord under Paragraph 9A above, or if they
should be so damaged thereby that, in Landlord's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage or after such completion there would not be enough time remaining
under the terms of this Lease to fully
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amortize such rebuilding or repairs, then this Lease shall terminate and the
rent shall be abated during the unexpired portion of this lease, effective upon
the date of the occurrence of such damage.
B. PARTIAL DAMAGE OR DESTRUCTION. If the Premises or the Building should
be damaged by any peril covered by the insurance to be provided by Landlord
under Paragraph 9A above and, in Landlord's estimation, rebuilding or repairs
can be substantially completed within one hundred eighty (180) days after the
date of such damage, then this Lease shall not terminate and Landlord shall
substantially restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of,
by or for Tenant.
C. LIENHOLDERS' RIGHTS IN PROCEEDS. Notwithstanding anything herein to
the contrary, in the event the holder of any indebtedness secured by a mortgage
or deed of trust covering the Premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within fifteen
(15) days after such requirement is made known to Landlord by any such holder,
whereupon all rights and obligations hereunder shall cease and terminate.
D. WAIVER OF SUBROGATION. Notwithstanding anything in this lease to the
contrary, Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claims, actions or causes of action against each
other, or their respective agents, officers and employees, for any loss or
damage that may occur to the Premises, improvements to the Building or personal
property (Building contents) within the Building and/or Premises, for any reason
regardless of cause or origin. Each party to this Lease agrees immediately after
execution of this Lease to give written notice of the terms of the mutual
waivers contained in this subparagraph to each insurance company that has issued
to such party policies of fire and extended coverage insurance and to have the
insurance policies properly endorsed to provide that the carriers of such
policies waive all rights of recovery under subrogation or otherwise against the
other party.
11. LIABILITY AND INDEMNIFICATION.
Except for any claims, rights of recovery and causes of action that Landlord has
released, Tenant shall hold Landlord harmless from and defend Landlord against
any and all claims or liability for any injury or damage (i) to any person or
property whatsoever occurring in, on or about the Premises or any part thereof,
the Building and/or other common areas, the use of which Tenant may have in
accordance with this Lease, if (and only if) such injury or damage shall be
caused in whole or in part by the act, neglect, fault or omission of any duty by
Tenant, its agents, servants, employees or invitees; (ii) arising from the
conduct or management of any work done by the Tenant in or about the Premises;
(iii) arising from transactions of the Tenant; and (iv) all costs, counsel fees,
expenses and liabilities incurred in connection with any such claim or action or
proceeding brought thereon. The provisions of this Paragraph 11 shall survive
the expiration or termination of this Lease. Landlord shall not be liable in any
event for personal injury or loss of Tenant's property caused by fire, flood,
water leaks, rain, hail, ice, snow, smoke, lightning, wind, explosion,
interruption of utilities or other occurrences. LANDLORD STRONGLY RECOMMENDS
THAT TENANT SECURE TENANT'S OWN INSURANCE IN EXCESS OF THE AMOUNTS REQUIRED
ELSEWHERE IN THIS LEASE TO PROTECT AGAINST THE ABOVE OCCURRENCES IF TENANT
DESIRES ADDITIONAL COVERAGE FOR SUCH RISKS. Tenant shall give prompt notice to
Landlord of any significant accidents involving injury to persons or property.
Furthermore, Landlord shall not be responsible for lost or stolen personal
property, equipment, money or jewelry from the Premises or from the public areas
of the Building or the Project, regardless of whether such loss occurs when the
area is locked against entry. Landlord shall not be liable to Tenant or Tenant's
employees, customers or invitees for any damages or losses to persons or
property caused by any lessees in the Building or the Project and/or any
personal injury or property damage caused thereby. Landlord may, but is not
obligated to, enter into agreements with third parties for the provision,
monitoring, maintenance and repair of any courtesy patrols or similar services
or fire protective systems and equipment and, to the extent same is provided at
Landlord's sole discretion, Landlord shall not be liable to Tenant for any
damages, costs or expenses which occur for any reason in the event any such
system or equipment is not properly installed, monitored or maintained or any
such services are not property provided. Landlord shall use reasonable diligence
in the maintenance of lighting furnished by Landlord, if any, in the parking
garage or parking areas servicing the Premises, and Landlord shall not be
responsible for additional lighting or any security measures in the Project, the
Premises, the parking garage or other parking areas.
12. USE.
Subject to the other provisions of this Lease, Tenant may use the Premises
for the purpose of conducting a manufacturing and testing services facility
as permitted under the IP-CO zoning of the Property, together with attendant
office areas and dining amenities, and for such other purposes as are
permitted by the applicable zoning restrictions of the Property. Outside
storage, including without limitation storage of trucks and other vehicles,
is prohibited without Landlord's prior written consent. Tenant shall comply
with all governmental laws, ordinances and regulations applicable to the use
of the Premises and shall promptly comply with all governmental orders and
Initial NSS [ILLEGIBLE]
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<PAGE>
directives for the correction, prevention and abatement of nuisances in, upon
or connected with the Premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action that would
constitute a nuisance or would disturb, unreasonably interfere with or endanger
Landlord or the tenants of other buildings in the vicinity of the Building or
the Project.
13. HAZARDOUS SUBSTANCES.
A. REGULATION OF HAZARDOUS SUBSTANCES AND INDEMNITY. The term "HAZARDOUS
SUBSTANCES", as used in this Lease, shall mean pollutants, contaminants, toxic
or hazardous substances, substances that are reactive, corrosive or ignitable,
radioactive materials, asbestos, polychlorobiphenyls, petroleum and petroleum
distillates and any other substances, the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by any
"Environmental Law", which term shall mean any federal, state or local statute,
ordinance, regulation or other law of a governmental or quasi-governmental
authority relating to pollution or protection of the environment or the
regulation of the storage or handling of Hazardous Substances. Tenant hereby
agrees that: (i) no activity will be conducted on the Premises that will produce
any Hazardous Substances, except for such activities that are part of the
ordinary course of Tenant's business activities (the "PERMITTED ACTIVITIES"),
provided said Permitted Activities are conducted in accordance with all
Environmental laws and have been approved in advance in writing by Landlord and,
in connection therewith, Tenant shall be responsible for obtaining any required
permits or authorizations and paying any fees and providing any testing required
by any governmental agency; (ii) the Premises will not be used in any manner for
the storage of any Hazardous Substances, except for the temporary storage of
such materials that are used in the ordinary course of Tenant's business (the
"PERMITTED MATERIALS"), provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and have been approved in
advance in writing by Landlord, and, in connection therewith, Tenant shall be
responsible for obtaining any required permits or authorizations and paying any
fees and providing any testing required by any governmental agency; (iii) no
portion of the Premises will be used as a landfill or a dump; (iv) Tenant will
not install any underground tanks of any type; (v) Tenant will not allow any
surface or subsurface conditions to exist or come into existence that
constitute, or with the passage of any time may constitute, a public or private
nuisance; and (vi) Tenant will not permit any Hazardous Substances to be brought
onto the Premises, except for the Permitted Materials, and if so brought or
found located thereon, the same shall be immediately removed, with proper
disposal, and all required clean-up procedures shall be diligently undertaken by
Tenant at its sole cost pursuant to all Environmental Laws. Landlord and
Landlord's representatives shall have the right but not the obligation to enter
the Premises for the purpose of inspecting the storage, use and disposal of any
Permitted Materials to ensure compliance with all Environmental Laws. Should it
be determined, in Landlord's sole opinion, that any Permitted Materials are
being improperly stored, used or disposed of, or that any non-Permitted
Materials are present on the Premises, then Tenant shall immediately take such
corrective action as requested be Landlord. Should Tenant fail to take such
corrective action within twenty four (24) hours, Landlord shall have the right
to perform such work and Tenant shall reimburse Landlord, on demand, for any and
all costs associated with said work. Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims, damages, fines, judgments, penalties,
costs, liabilities, or losses (including, without limitation, a decrease in
value of the Project, damages caused by loss or restriction of rentable or
usable space, or any damages caused by adverse impact on marketing of the space,
and any and all sums paid for settlement of claims, attorneys' fees, consultant
and expert fees) arising during or after the Term hereof and arising as a result
of any contamination, Hazardous Substance release or spill by Tenant. This
indemnification includes, without limitation, any and all costs incurred because
of any investigation of the site or any cleanup, removal, or restoration
mandated by a federal, state, or local agency or political subdivision. Without
limitation of the foregoing, if Tenant causes or permits the presence of any
Hazardous Substance on the Project, including, without limitation, any Permitted
Materials, by any of its agents, employees, guests, invitees, contractors,
subcontractors or subtenants which results in contamination, Tenant shall
promptly, at its sole expense, take any and all necessary actions to return the
Project to the condition existing prior to the presence of any such Hazardous
Substance on the Project. Tenant shall first obtain Landlord's approval for any
such remedial action. The foregoing indemnification and the responsibilities of
Tenant shall survive the termination or expiration of this Lease.
B. LANDLORD'S REPRESENTATIONS AND OBLIGATIONS. Landlord hereby
represents and warrants to Tenant that, to Landlord's current actual knowledge,
and based solely upon that certain Environmental Site Assessment Report, dated
June 25, 1998, as of the date hereof there are no Hazardous Substances present
or stored on, in or about the Project and there is no Hazardous Substance
contamination on the Project or any portion thereof. Landlord shall not cause or
permit any Hazardous Substance to be used, stored, generated, or disposed of on
or in the Project by Landlord or Landlord's agents, employees, guests, invitees,
contractors, or subcontractors. If Hazardous Substances are used, stored,
generated or disposed of by Landlord or Landlord's agents, employees, guests,
invitees, contractors, or subcontractors (specifically excluding Tenant and
Tenant's agents, employees, guests, invitees, contractors, or subcontractors) on
or in the Project, or if the Project becomes contaminated in any way by Landlord
or Landlord's agents, employees, guests, invitees, contractors, or
subcontractors (specifically excluding Tenant and Tenant's agents, employees,
guests, invitees, contractors, or subcontractors), Landlord shall indemnify,
defend and hold Tenant harmless from any and all claims, damages, fines,
judgments, penalties, costs, liabilities, or losses (including, without
limitation, and any and all sums paid for settlement of claims, attorneys' fees,
consultant
Initial NSS [ILLEGIBLE]
Date 6/25/98 6/26/98
7
<PAGE>
and expert fees) arising during or after the Term hereof and arising as a result
of Hazardous Substance contamination caused by the use, storage, generation, or
disposal of Hazardous Substances on or in the Project by Landlord or Landlord's
agents, employees, guests, invitees, contractors, or subcontractors
(specifically excluding Tenant and Tenant's agents, guests, invitees,
contractors, or subcontractors). This indemnification includes, without
limitation, any and all costs incurred because of any investigation of the site
or any cleanup, removal, or restoration mandated by a federal, state, or local
agency or political subdivision. The foregoing indemnification and the
responsibilities of Landlord shall survive the termination or expiration of this
Lease.
C. DEFINITION OF "HAZARDOUS SUBSTANCE". As used herein, "Hazardous
Substance" means any substance that is toxic, ignitable, reactive, or
corrosive and that is regulated by any local government, the state of Texas,
or the United States Government. "Hazardous Substance" includes any and all
material or substances that are defined as "hazardous waste," "extremely
hazardous waste," or a "hazardous substance" pursuant to state, federal, or
local government law. "Hazardous Substance" includes but is not restricted to
asbestos, polychlorobiphenyls, petroleum and petroleum distillates.
14. ARCHITECTURAL BARRIERS
A. LANDLORD'S OBLIGATIONS. Landlord hereby agrees to design and
construct the base building and exterior portions of the Project (but
specifically excluding the design or the Interior Improvements and any other
Tenant Alterations) in compliance with the requirements of the Americans with
Disabilities Act (the "ADA") and the Texas Architectural Barriers Act (the
"TABA"). Landlord will indemnify and hold Tenant harmless from any and all
claims, actions, causes of action, liability, loss, cost or expense, including
court costs and attorneys fees, incurred by Tenant as a result of claims by
third parties (including the federal government or the State of Texas but
excluding any claims of Tenant or any subtenants of Tenant) based on the failure
of the failure of the base building and exterior portions of the Project (but
specifically excluding the design or the Premises) to comply with the ADA or the
TABA.
B. TENANT'S OBLIGATIONS. Tenant hereby agrees to design the Interior
Improvements and all other Alterations by or for Tenant in compliance with the
requirements of the ADA and the TABA. Tenant will indemnify and hold Landlord
harmless from any and all claims, actions, causes of action, liability, loss,
cost or expense, including court costs and attorneys fees, incurred by Landlord
as a result of claims by third parties (including the federal government or the
State of Texas) based on the failure of the Premises (but specifically excluding
the base building and exterior portions of the Project designed and constructed
by Landlord) to comply with the ADA or the TABA.
15. INSPECTION.
Landlord's agents and representatives shall have the right to enter the Premises
at any reasonable time during business hours (or at any time in case of
emergency) (i) to inspect the Premises, (ii) to make such repairs as may be
required or permitted pursuant to this Lease, and/or (iii) during the last six
(6) months of the Lease term, for the purpose of showing the Premises. In
addition, Landlord shall have the right to erect a suitable sign on the Premises
stating the Premises are available for lease. Tenant shall notify Landlord in
writing at least thirty (30) days prior to vacating the Premises and shall
arrange to meet with Landlord for a joint inspection of the Premises prior to
vacating. If Tenant fails to give such notice or to arrange for such inspection,
then Landlord's inspection of the Premises shall be deemed correct for the
purpose of determining Tenant's responsibility for repairs and restoration of
the Premises.
16. ASSIGNMENT AND SUBLETTING.
Tenant shall not have the right to sublet, assign or otherwise transfer or
encumber this Lease, or any interest therein, without the prior written consent
of Landlord, which consent will not be unreasonably withheld so long as (i) the
creditworthiness and financial condition of the proposed assignee or sublessee
is satisfactory to Landlord, in Landlord's reasonable discretion, and (ii) the
proposed use of the Premises by such proposed assignee or sublessee would not,
in Landlord's reasonable opinion, be detrimental to the Building, the Project or
the other tenants therein. Any attempted assignment, subletting, transfer or
encumbrance by Tenant in violation of the terms and covenants of this paragraph
shall be void. Any assignee, sublessee or transferee of Tenant's interest in
this Lease (all such assignees, sublessees and transferees being hereinafter
referred to as "TRANSFEREES"), by assuming Tenant's obligations hereunder, shall
assume liability to Landlord for all amounts paid to persons other than Landlord
by such Transferees to which Landlord is entitled or is otherwise in
contravention of this Paragraph 15. No assignment, subletting or other transfer,
whether or not consented to by Landlord or permitted hereunder, shall relieve
Tenant of its liability under this Lease. If an Event of Default occurs while
the Premises or any part thereof are assigned or sublet, then Landlord, in
addition to any other remedies herein provided or provided by law, may collect
directly from such Transferee all rents payable to the Tenant and apply such
rent against any sums due Landlord hereunder. No such collection shall be
construed to constitute a novation or a release of Tenant from the further
performance of Tenant's obligations and liabilities hereunder. If Landlord
consents to any subletting or assignment by Tenant as hereinabove provided and
any category of rent subsequently received by Tenant under any such sublease is
in excess of the same
Initial NSS [ILLEGIBLE]
Date 6/25/98 6/26/98
8
<PAGE>
category of rent payable under this Lease, or any additional consideration is
paid to Tenant by the assignee under any such assignment, then Landlord may, at
its option, declare such excess rents under any sublease or such additional
consideration for any assignment to be due and payable by Tenant to Landlord as
additional rent hereunder. The following shall additionally constitute an
assignment of this Lease by Tenant for the purposes of this Paragraph 15: (i) if
Tenant is a corporation, any merger, consolidation, dissolution or liquidation,
or any change in ownership or owner entitled to vote thirty percent (30%) or
more of Tenant's outstanding voting stock other than pursuant to (A) a
registered public offering of Tenant's stock, (B) a sale of stock or a merger
with another company whose stock is listed on a recognized exchange, or (C) a
joint venture between Tenant and a third party; (ii) if Tenant is a partnership,
joint venture or other entity, any liquidation, dissolution or transfer of
ownership of any interests totaling thirty percent (30%) or more of the total
interests in such entity; (iii) the sale, transfer, exchange, liquidation or
other distribution of more than thirty percent (30%) of Tenant's assets, other
than this Lease; or (iv) the mortgage, pledge, hypothecation or other
encumbrance of or grant of a security interest by Tenant in this Lease, or any
of Tenant's rights hereunder.
17. CONDEMNATION.
If more than eighty percent (80%) of the Premises are taken for any public or
quasi-public use under governmental law, ordinance or regulation, or by right of
eminent domain or private purchase in lieu thereof, and the taking prevents or
materially interferes with the use of the remainder of the Premises for the
purpose for which they were leased to Tenant, then this Lease shall terminate
and the rent shall be abated for the unexpired portion of this Lease, effective
on the date of such taking. If less than eighty percent (80%) of the Premises
are taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain or private purchase in
lieu thereof, or if the taking does not prevent or materially interfere with the
use of the remainder of the Premises for the purpose for which they were leased
to Tenant, then this Lease shall not terminate, but the rent payable hereunder
during the unexpired portion of this Lease shall be reduced to such extent as
may be fair and reasonable under all circumstances. All compensation awarded in
connection with or as a result of any of the foregoing proceedings shall be the
property of Landlord, and Tenant hereby assigns any interest in any such award
to Landlord; provided, however, Landlord shall have no interest in any award
made to Tenant for Tenant's moving expenses or for the taking of Tenant's trade
fixtures and personal property, if a separate award for such items is made to
Tenant. Notwithstanding the foregoing, Tenant may pursue a separate award in
condemnation, at its own expense, so long such award does not operate to reduce
the award paid to Landlord.
18. HOLDING OVER.
At the termination of this Lease by its expiration or otherwise, Tenant shall
immediately deliver possession of the Premises to Landlord with all repairs and
maintenance required herein to be performed by Tenant completed. If for any
reason Tenant retains possession of the Premises after the expiration or
termination of this Lease, unless the parties hereto otherwise agree in writing,
such possession shall be deemed to be a tenancy at will only, and all of the
other terms and provisions of this Lease shall be applicable during such period,
except that Tenant shall pay Landlord from time to time, upon demand, as rental
for the period of such possession, an amount equal to one and one-half (1-1/2)
times the rent in effect on the date of such termination of this lease, computed
on a daily basis for each day of such period. No holding over by Tenant, whether
with or without consent of Landlord, shall operate to extend this Lease except
as otherwise expressly provided. The preceding provisions of this Paragraph 18
shall not be construed as consent for Tenant to retain possession of the
Premises in the absence of written consent thereto by Landlord.
19. QUIET ENJOYMENT.
Landlord represents that it has the authority to enter into this lease and that,
so long as Tenant pays all amounts due hereunder and performs all other
covenants and agreements herein set forth, Tenant shall peaceably and quietly
have, hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord, subject to the terms and provisions of this Lease.
20. EVENTS OF DEFAULT.
The following events (herein individually referred to as an "EVENT OF DEFAULT")
each shall be deemed to be a default in or breach of Tenant's obligations under
this Lease:
A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of ten (10) days from the date
such payment was due. Notwithstanding the foregoing, Tenant shall be entitled to
written notice from Landlord not more than two times during any twelve (12)
consecutive month period that Tenant has failed to timely pay any rent or
additional rent hereunder before such failure shall constitute an Event of
Default. Unless Landlord receives such payment within ten (10) days after such
written notice, Tenant's failure shall constitute an Event of Default.
Initial NSS [ILLEGIBLE]
Date 6/25/98 6/26/98
9
<PAGE>
B. Tenant shall (i) vacate or abandon all or a substantial portion of
the Premises or (ii) fail to continuously operate its business at the Premises
for the permitted use set forth herein, in either event whether or not Tenant is
in default of the rental payments due under this lease.
C. Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 23 hereof within twenty (20) days after such lien or
encumbrance is filed against the Premises.
D. Tenant shall default in the performance of any of its obligations
under any other lease to Tenant from Landlord, or from any person or entity
affiliated with or related to Landlord, including, without limitation, the
Office Building Owner (as defined in EXHIBIT "E" attached hereto) and same shall
remain uncured after the lapsing of any applicable cure periods provided for
under such other lease.
E. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than those listed above in this paragraph) and shall not cure
such failure within thirty (30) days after written notice thereof from Landlord.
21. REMEDIES.
Upon each occurrence of an Event of Default, Landlord shall have the option to
pursue any one or more of the following remedies without any notice or demand:
(a) Terminate this Lease;
(b) Enter upon and take possession of the Premises without terminating
this Lease;
(c) Make such payments and/or take such action and pay and/or perform
whatever Tenant is obligated to pay or perform under the terms of this Lease,
and Tenant agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and/or
(d) Alter all locks and other security devices at the Premises, with or
without terminating this Lease, and pursue, at Landlord's option, one or more
remedies pursuant to this Lease, and Tenant hereby expressly agrees that
Landlord shall not be required to provide to Tenant the new key to the Premises,
regardless of hour, including Tenant's regular business hours;
and in any such event Tenant shall immediately vacate the Premises, and if
Tenant fails to do so, Landlord, without waiving any other remedy it may have,
may enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying such Premises or any part thereof,
without being liable for prosecution or any claim of damages therefore. In the
event of any violation of Section 93.002 of the Texas Property Code by Landlord
or by any agent or employee of Landlord, Tenant hereby expressly waives any and
all rights Tenant may have under Paragraph (g) of such Section 93.002.
A. DAMAGES UPON TERMINATION. If Landlord terminates this Lease at
Landlord's option, Tenant shall be liable for and shall pay to Landlord the sum
of all rental and other payments owed to Landlord hereunder accrued to the date
of such termination, plus, as liquidated damages, an amount equal to (i) the
present value of the total rental and other payments owed hereunder for the
remaining portion of the Lease term, calculated as if such term expired on the
date set forth in Paragraph 1, less (ii) the present value of the then fair
market rental for the Premises for such period, provided that, because of the
difficulty of ascertaining such value and in order to achieve a reasonable
estimate of liquidated damages hereunder, Landlord and Tenant stipulate and
agree, for the purposes hereof, that such fair market rental shall in no event
exceed seventy five percent (75%) of the rental amount for such period set forth
in Paragraph 2A above.
B. DAMAGES UPON REPOSSESSION. If Landlord repossesses the Premises
without terminating this Lease, Tenant at Landlord's option, shall be liable for
and shall pay Landlord on demand all rental and other payments owed to Landlord
hereunder, accrued to the date of such repossession, plus all amounts require to
be paid by Tenant to Landlord until the date of expiration of the term as stated
in Paragraph 1, diminished by all amounts actually received by Landlord through
reletting the premises during such remaining term (but only to the extent of the
rent herein reserved). Actions to collect amounts due by Tenant to Landlord
under this paragraph may be brought from time to time, on one or more occasions,
without the necessity of Landlord's waiting until the expiration of the lease
term.
C. COSTS OF RELETTING, REMOVING, REPAIRS AND ENFORCEMENT. Upon an
Event of Default, in addition to any sum provided to be paid under this
Paragraph 21, Tenant also shall be liable for and shall pay to Landlord (i)
broker's fees and all other costs and expenses incurred by Landlord in
connection with reletting the whole or any part of the Premises; (ii) the
costs of removing, storing or disposing of Tenant's or any other occupant's
property; (iii) the costs of repairing, altering, remodeling or otherwise
putting the Premises into condition acceptable to a new tenant or tenants;
(iv) any and all costs and expenses incurred by Landlord in effecting
compliance with Tenant's
10
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obligations under this Lease; and (v) all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights and/or remedies hereunder,
including without limitation all reasonable attorneys' fees and all court costs
incurred in connection with such enforcement or defense.
D. LATE CHARGE. In the event Tenant fails to make any payment due
hereunder within five (5) days after such payment is due, including without
limitation any rental or escrow payment, in order to help defray the
additional cost to Landlord for processing such late payments and not as
interest, Tenant shall pay to Landlord on demand a late charge in an amount
equal to five percent (5%) of such payment. The provision for such late
charge shall be in addition to all of Landlord's other rights and remedies
hereunder or at law, and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
E. INTEREST ON PAST DUE AMOUNTS. If Tenant fails to pay any sum which
at any time becomes due to Landlord under any provision of this Lease as and
when the same becomes due hereunder, and such failure continues for ten (10)
days after the due date for such payment, then Tenant shall pay to Landlord
interest on such overdue amounts from the date due until paid at an annual
rate which equals the lesser of (i) eighteen percent (18%) or (ii) the
highest rate then permitted by law.
F. NO IMPLIED ACCEPTANCES OR WAIVERS. Exercise by Landlord of any one
or more remedies hereunder granted or otherwise available shall not be deemed
to be an acceptance by Landlord of Tenant's surrender of the Premises, it
being understood that such surrender can be effected only by the written
agreement of Landlord. Tenant and Landlord further agree that forbearance by
Landlord to enforce any of its rights under this lease or at law or in equity
shall not be a waiver of Landlord's right to enforce any one or more of its
rights, including any right previously forborne, in connection with any
existing or subsequent default. No re-entry or taking possession of the
Premises by Landlord shall be construed as an election on its part to
terminate this Lease, unless a written notice of such intention is given to
Tenant, and, notwithstanding any such reletting or re-entry or taking
possession of the Premises, Landlord may at any time thereafter elect to
terminate this lease for a previous default. Pursuit of any remedies
hereunder shall not preclude the pursuit of any other remedy herein provided
or any other remedies provided by law, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Landlord
hereunder or of any damages occurring to Landlord by reason of the violation
of any of the terms, provisions and covenants contained in this Lease.
Landlord's acceptance of any rent following an Event of Default hereunder
shall not be construed as Landlord's waiver of such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms, provisions
and covenants of this lease shall be deemed or construed to constitute a
waiver of any other violation or default.
G. RELETTING OF PREMISES. In the event of any termination of this
Lease and/or repossession of the Premises for an Event of Default, Landlord
shall use reasonable efforts to relet the Premises and to collect rental
after reletting, with no obligation to accept any lessee that Landlord deems
undesirable, to expend any funds in connection with such reletting or
collection of rents therefrom, or to lease the Premises in preference to any
other space that Landlord may have available for lease at the time. Tenant
shall not be entitled to credit for or reimbursement of any proceeds of such
reletting in excess of the rental owed hereunder for the period of such
reletting. Landlord may relet the whole or any portion of the Premises, for
any period, to any tenant and for any use or purpose.
H. LANDLORD'S DEFAULT. If Landlord fails to perform any of its
obligations hereunder within thirty (30) days after written notice from
Tenant specifying such failure, Tenant's exclusive remedy shall be an action
for damages. Unless and until Landlord fails to so cure any default after
such notice, Tenant shall not have any remedy or cause of action by reason
thereof. All obligations of Landlord hereunder will construed as covenants,
not conditions; and all such obligations will be binding upon Landlord only
during the period of its possession of the premises and not thereafter. The
term "LANDLORD" shall mean only the owner, for the time being, of the
Premises and, in the event of the transfer by such owner of its interest in
the Premises, such owner shall thereupon be released and discharged from all
covenants and obligations of the Landlord thereafter accruing, provided that
such covenants and obligations shall be binding during the lease term upon
each new owner for the duration of such owner's ownership. Notwithstanding
any other provision of this Lease, Landlord shall not have any personal
liability hereunder. In the event of any breach or default by Landlord in any
term or provision of this Lease, Tenant agrees to look solely to the equity
or interest then owned by Landlord in the Premises or the Building; however,
in no event shall any deficiency judgment or any money judgment of any kind
be sought or obtained against any Landlord.
I. TENANT'S PERSONAL PROPERTY. If Landlord repossesses the Premises
pursuant to the authority herein granted, or if Tenant vacates or abandons
all or any part of the Premises, then Landlord shall have the right to (i)
keep in place and use, or (ii) remove and store, all of the furniture,
fixtures and equipment at the Premises, including that which is owned by or
leased to Tenant, at all times prior to any foreclosure thereon by Landlord
or repossession thereof by any lessor thereof or third party having a lien
thereon. In addition to the Landlord's other rights hereunder, Landlord may
dispose of the stored property if Tenant does not claim the property within
ten (10) days after the date the property is stored. Landlord shall give
Tenant at least ten (10) days prior written notice of such intended
disposition. Landlord shall also have the right to relinquish possession of
all or any portion of such furniture, fixtures, equipment and other property
to any person ("CLAIMANT") who presents to Landlord a copy of any
11
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instrument represented by Claimant to have been executed by Tenant (or any
predecessor of Tenant) granting Claimant the right under various circumstances
to take possession of such furniture, fixtures, equipment or other property,
without the necessity on the part of Landlord to inquire into the authenticity
or legality of said instrument. The rights of Landlord herein stated shall be in
addition to any and all other rights that Landlord has or may hereafter have at
law or in equity, and tenant stipulates and agrees that the rights granted
Landlord under this paragraph are commercially reasonable.
22. MORTGAGES.
Subject to Tenant receiving a non-disturbance agreement from the mortgagee of
the Property, Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a
lien or charge upon the Premises or the improvements situated thereon or the
Building, provided, however, that if the mortgagee, trustee or holder of any
such mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such
mortgagee, trustee or holder, this Lease shall be deemed superior to such
lien, whether this lease was executed before or after said mortgage or deed
of trust. If any mortgage, deed of trust or security agreement is enforced by
the mortgagee, the trustee, or the secured party, Tenant shall, upon request,
attorn to the mortgagee or purchaser at such foreclosure sale, or any person
or party succeeding to the interest of Landlord as a result of such
enforcement, as the case may be, and execute instrument(s) confirming such
attornment. In the event of such enforcement and upon Tenant's attornment as
aforesaid, Tenant will automatically become the tenant of the successor to
Landlord's interest without change in the terms or provisions of this Lease;
provided, however, that such successor to Landlord's interest shall not be
bound by (a) any payment of Rent for more than one month in advance (except
prepayments for security deposits, if any), or (b) any amendments or
modifications of this Lease made without the prior written consent of such
Lessor or mortgagee. Tenant, at any time hereafter on demand, shall execute
any instruments, releases or other documents that may be required by any
mortgagee, trustee or holder for the purpose of subjecting and subordinating
this Lease to the lien of any such mortgage or to confirm Tenant's agreement
of attornment. In consideration of Tenant's subordination and attornment
agreements set forth above, Landlord shall provide Tenant with a
non-disturbance agreement from its lender. Tenant shall not terminate this
Lease or pursue any other remedy available to Tenant hereunder for any
default on the part of Landlord without first giving written notice by
certified or registered mail, return receipt requested, to any mortgagee,
trustee or holder of any such mortgage or deed of trust, the name and post
office address of which Tenant has received written notice, specifying the
default in reasonable detail and affording such mortgagee, trustee or holder
a reasonable opportunity (but in no event less than thirty (30) days) to make
performance, at its election, for and on behalf of Landlord.
23. MECHANIC'S LIENS.
Tenant has no authority, express or implied to create or place any lien or
encumbrance of any kind or nature whatsoever upon, or in any manner to bind,
the interest of Landlord or Tenant in the Premises. Tenant will save and hold
Landlord harmless from any and all loss, costs expense, including without
limitation attorneys' fees, based on or arising out of asserted claims or
liens against the leasehold estate or against the right, title and interest
of the Landlord in the Premises or under the terms of this Lease.
24. MISCELLANEOUS.
A. INTERPRETATION. The captions inserted in this lease are for
convenience only and in no way define, limit or otherwise describe the scope
or intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease. Any reference in this Lease to rentable area
shall mean the gross rentable area as determined by the roofline of the
building in question.
B. BINDING EFFECT. Except as otherwise herein expressly provided, the
terms, provisions and covenants and conditions in this Lease shall apply to,
inure to the benefit of and be binding upon the parties hereto and upon their
respective heirs, executors, personal representatives, legal representatives,
successors and assigns. Landlord shall have the right to transfer and assign,
in whole or in part, its rights and obligations in the Premises and in the
Building and other property that are the subject of this Lease.
C. EVIDENCE OF AUTHORITY. Tenant agrees to furnish to Landlord,
promptly upon demand, a corporate resolution, proof of due authorization by
partners or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
D. FORCE MAJEURE. Landlord shall not be held responsible for delays
in the performance of its obligations hereunder when caused by material
shortages, acts of God, labor disputes or other events beyond the control of
Landlord.
12
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E. PAYMENTS CONSTITUTE RENT. Notwithstanding anything in this Lease
to the contrary, all amounts payable by Tenant to or on behalf of Landlord
under this Lease, whether or not expressly denominated as rent, shall
constitute rent.
F. ESTOPPEL CERTIFICATES. Tenant agrees from time to time, within
ten (10) days after request of Landlord to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full force
and effect, the date to which rent has been paid, the unexpired term of this
Lease, any defaults existing under this Lease (or the absence thereof) and
such other factual or legal matters pertaining to this Lease as may be
requested by Landlord. It is understood and agreed that Tenant's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of this Lease. Tenant's failure to timely
comply with the requirements of this Paragraph 24F will constitute an Event
of Default under this Lease, notwithstanding the existence of any notice and
opportunity to cure periods which would otherwise apply to extend the time
period within which Tenant may respond.
G. ENTIRE AGREEMENT. This Lease constitutes the entire understanding
and agreement of Landlord and Tenant with respect to the subject matter of
this Lease, and contains all of the covenants and agreements of Landlord and
Tenant with respect thereto. Landlord and Tenant each acknowledge that no
representations, inducements, promises or agreements, oral or written, have
been made by Landlord or Tenant, or anyone acting on behalf of Landlord or
Tenant, which are not contained herein, and any prior agreements, promises,
negotiations or representations not expressly set forth in this Lease are of
no force or effect. EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, TENANT
HEREBY WAIVES THE BENEFIT OF ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PREMISES, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY THAT THE
PREMISES ARE SUITABLE FOR ANY PARTICULAR PURPOSE. Landlord's agents and
employees do not and will not have the authority to make exceptions, changes
or amendments to this Lease, or factual representations not expressly
contained in this Lease. Under no circumstances shall Landlord or Tenant be
considered an agent of the other. This Lease may not be altered, changed or
amended except by an instrument in writing signed by both parties hereto.
H. SURVIVAL OF OBLIGATIONS. All obligations of Tenant hereunder not
fully performed as of the expiration or earlier termination of the term of
this Lease shall survive the expiration or earlier termination of the term
hereof, including without limitation all payment obligations with respect to
taxes and insurance and all obligations concerning the condition and repair
of the Premises. Upon the expiration or earlier termination of the term
hereof, and prior to Tenant vacating the Premises, Tenant shall pay to
Landlord any amount reasonable estimated by Landlord as necessary to put the
Premises in good condition and repair, reasonable wear and tear excluded,
including without limitation the cost of repairs to and replacements of all
heating and air conditioning systems and equipment therein. Tenant shall
also, prior to vacating the Premises, pay to Landlord the amount, as
estimated by Landlord, of Tenant's obligation hereunder for real estate taxes
and insurance premiums for the year in which the Lease expires or terminates.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefore upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any Security Deposit held by Landlord may, at Landlord's option,
be credited against any amounts due from Tenant under this Paragraph 24H.
I. SEVERABILITY OF TERMS. If any clause or provision of this Lease is
illegal, invalid or unenforceable under present or future laws effective
during the term of this Lease, then, in such event, it is the intention of
the parties hereto that the remainder of this Lease shall not be affected
thereby, and it is also the intention of the parties to this Lease that in
lieu of each clause or provision of this lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.
J. EFFECTIVE DATE. All references in this Lease to "the date hereof"
or similar references shall be deemed to refer to the last date, in point of
time, on which all parties hereto have executed this Lease.
K. BROKERS' COMMISSION. Tenant represents and warrants that it has
dealt with Oxford Commercial and Pyramid Properties, Inc. in connection with
this transaction or future related transactions and that no other broker,
agent or other person brought about this transaction, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this
leasing transaction.
L. AMBIGUITY. Landlord and tenant hereby agree and acknowledge that
this Lease has been fully reviewed and negotiated by both Landlord and
Tenant, and that Landlord an Tenant have each had the opportunity to have
this Lease reviewed by their respective legal counsel, and, accordingly, in
the event of any ambiguity herein, Tenant does hereby waive the rule of
construction that such ambiguity shall be resolved against the party who
prepared this Lease.
13
<PAGE>
M. THIRD PARTY RIGHTS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give to any person or
entity, other than the parties hereto, any right or remedy under or by reason
of this Lease.
N. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this lease and made a part hereof for
all intents and purposes as if fully set out herein. All capitalized terms
used in such documents shall, unless otherwise defined therein, have the same
meanings as are set forth herein.
0. APPLICABLE LAW. This Lease has been executed in the State of Texas
and shall be governed in all respects by the laws of the State of Texas. It
is the intent of Landlord and Tenant to conform strictly to all applicable
state and federally usury laws. All agreements between Landlord and Tenant,
whether now existing or hereafter arising and whether written or oral, are
hereby expressly limited so that in no contingency or event whatsoever shall
the amount contracted for, charged or received by Landlord for the use
forbearance or retention of money hereunder or otherwise exceed the maximum
amount which Landlord is legally entitled to contract for, charge or collect
under the applicable state or federal law. If, from any circumstance
whatsoever, fulfillment of any provision hereof at the time performance of
such provision shall be due shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall be automatically
reduced to the limit of such validity, and if from any such circumstance
Landlord shall ever receive as interest or otherwise an amount in excess of
the maximum that can be legally collected, then such amount which would be
excessive interest shall be applied to the reduction of rent hereunder, and
if such amount which would be excessive interest exceeds such rent, then such
additional amount shall be refunded to Tenant.
25. NOTICES.
Each provision of this instrument or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to the sending,
mailing or delivering of notice or the making of any payment by Landlord to
Tenant or with reference to the sending, mailing or delivering of any notice or
the making of any payment by Tenant to Landlord shall be deemed to be complied
with when and if the following steps are taken:
(i) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord set
forth below or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(ii) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(iii) Except as expressly provided herein, any written notice, document
or payment required or permitted to be delivered hereunder shall be deemed to be
delivered when received or, whether actually received or not, when deposited in
the United States Mail, postage prepaid, Certified or Registered Mail, addressed
to the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice delivered in
accordance herewith.
LANDLORD'S ADDRESS:
S.W. Office Building, Ltd.
c/o Pyramid Properties
1717 West Sixth Street, Suite 380
Austin, Texas 78703
TENANT'S ADDRESS:
(Prior to Commencement Date)
Silicon Laboratories, Inc.
-------------------------------
2024 E. St. Elmo Road
-------------------------------
Austin TX 78744-1018
-------------------------------
(After Commencement Date)
Silicon Laboratories, Inc.
4609 Southwest Parkway
Austin, TX 78735
14
<PAGE>
Silicon Laboratories, Inc.
4609 Southwest Parkway
Austin, Texas 78735
26. EXHIBITS.
EXHIBITS "A", "B" "C" and "D" are attached hereto and are hereby incorporated
into this Lease as fully as if herein set forth at length.
27. TENANT'S RIGHT TO OBTAIN FINANCING FOR AND TO LEASE TENANT'S PERSONAL
PROPERTY AND EQUIPMENT.
Tenant shall have the right to grant any security interests in Tenant's
REMOVABLE furniture, fixtures and equipment located in the Premises for the
purpose of securing any indebtedness provided by a third party. Tenant may also
lease any such furniture, fixtures and/or equipment from one or more equipment
lessors and grant security interests in such furniture, fixtures and/or
equipment to such equipment lessors in connection with such leases. Upon request
Landlord will execute one or more consent and/or subordination agreements
subordinating any landlord's lien rights held by Landlord to any such security
interests or leases. Notwithstanding the foregoing, in no event will Tenant
have the right to grant any lien, mortgage or security interest in any portion
of the Building or in this Lease.
28. LANDLORD'S CONDITIONS TO PERFORMANCE
Notwithstanding anything contained in this Lease to the contrary,
Landlord's obligations hereunder are specifically conditioned upon Landlord
achieving substantial completion of the Premises not later than March 31, 1999.
In the event Landlord does not achieve substantial completion of the Premises by
March 31, 1999, Tenant, as Tenant's sole and exclusive remedy, may terminate
this Lease in writing at any time after March 31, 1999 and before Landlord
achieves substantial completion of the Premises. In the event Tenant terminates
this Lease pursuant to this paragraph, Landlord will return all advance payments
of rent and Security Deposits theretofore paid to Landlord by Tenant and all
Letters of Credit theretofore delivered to Landlord by Tenant and will reimburse
and refund Tenant for all moneys theretofore expended by Tenant in connection
with the construction of the Interior Improvements pursuant to paragraph 5b of
EXHIBIT "C" attached hereto, as well as any moneys remaining in the escrow
account for Tenant's Proportionate Share of the cost of the Interior
Improvements.
EXECUTED BY LANDLORD, this 26th day of June, 1998.
S.W. AUSTIN OFFICE BUILDING, LTD., A TEXAS LIMITED
PARTNERSHIP
By: /s/ [ILLEGIBLE]
----------------------------------------------
Name: [ILLEGIBLE]
--------------------------------------------
Title: Partner
-------------------------------------------
EXECUTED BY TENANT, this 25th day of June, 1998.
SILICON LABORATORIES, INC., A DELAWARE CORPORATION
By: /s/ Navdeep Sooch
----------------------------------------------
Name: NAVDEEP SOOCH
--------------------------------------------
Title: PRESIDENT
-------------------------------------------
ATTACH EXHIBITS:
EXHIBIT "A" - Legal Description of the Property and Floor Plan of the Premises
EXHIBIT "B" - Schematic Plans for the Building
EXHIBIT "C" - Work Letter for Interior Improvements
EXHIBIT "D" - Renewal Option
15
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
BUILDING: Tech Center Southwest
ADDRESS: 4609 Southwest Parkway, Suite 100
Austin, Texas 78735
LEGAL
DESCRIPTION: Lot 1, Boston 290 Office Park Section Two-A, a subdivision in
Travis County, Texas, according to the map or plat of record in
Volume 100, Pages 58-59 of the Plat Records of Travis County,
Texas.
<PAGE>
EXHIBIT "A"
FLOOR PLAN OF THE PROMISES
To be attached prior to execution
[FLOOR PLAN]
<PAGE>
EXHIBIT "A"
SITE PLAN OF THE PROJECT
[SITE PLAN]
<PAGE>
EXHIBIT "B"
PLANS FOR THE PROJECT
<PAGE>
[PHOTO]
<PAGE>
EXHIBIT "C"
WORK LETTER
1. INTERIOR IMPROVEMENTS.
Reference herein to "INTERIOR IMPROVEMENTS" shall include all work to
be done in the Premises pursuant to the Interior Improvements Plans (defined
in paragraph 2 below), including, but not limited to, partitioning, doors,
ceilings, floor coverings, wall finishes (including paint, wallpaper, fabric
and all other coverings), electrical (including lighting, switching,
telephones, outlets, etc.), plumbing, heating, ventilating and air
conditioning, fire protection, cabinets, and other millwork, and any other
improvements required by Tenant which are not included in the Plans for the
Project. Landlord and Tenant hereby agree that unless otherwise agreed to,
the design architect for the Interior Improvements will be RTG Partners (the
"INTERIOR DESIGN ARCHITECT") and the general contractor for the construction
of the Interior Improvements will be Marcon Construction Company (the
"CONTRACTOR").
2. INTERIOR IMPROVEMENTS PLANS.
Immediately after execution of the Lease, Tenant shall meet with
representatives of the Interior Design Architect for the purpose of promptly
preparing a space plan and selecting materials and finishes for the layout
and construction of improvements in the Premises. After the preparation of
the space plan and after Tenant's written approval thereof, the Interior
Design Architect shall prepare final working drawings and specifications for
the Interior Improvements based on the space plan and submit the same to
Tenant for Tenant's approval. Such final working drawings and specifications
are referred to herein as the "INTERIOR IMPROVEMENTS PLANS". A copy of the
space plan and the Interior Improvements Plans, and each revised version
thereof, shall also be submitted to Landlord for Landlord's reasonable
approval simultaneously with submission to Tenant. Tenant shall promptly
review each version of the space plan and the Interior Improvements Plans and
deliver any comments to the Interior Design Architect expeditiously, and in
no event later than five (5) days after receipt of the same, so that the
Interior Improvements Plans are finally approved by Tenant within thirty (30)
days after the date of this Lease. After approval of the Interior
Improvements Plans by Landlord and Tenant, the same shall be submitted to the
appropriate governmental body by the Interior Design Architect for plan
checking and issuance of a building permit. The Interior Design Architect,
with Tenant's cooperation, shall cause to be made to the Interior
Improvements Plans any changes necessary to obtain the building permit.
Landlord's approval of the Interior Improvements Plans shall create or impose
no liability or responsibility on Landlord for their completeness, design
sufficiency or compliance with all applicable laws, rules and regulations of
governmental agencies or authorities. Tenant shall work together with the
Interior Design Architect, Landlord and the Contractor diligently to finally
approve the Interior Improvements Plans and the final pricing for the
construction of the Interior Improvements not later than sixty (60) days
after the date of this Lease.
3. FINAL PRICING AND DRAWING SCHEDULE.
After the approval of the Interior Improvements Plans by Landlord and
Tenant, the Interior Improvement Plans shall be submitted to the appropriate
governmental body by the Interior Design Architect for plan checking and the
issuance of a building permit. Landlord, with Tenant's cooperation, shall
cause to be made to Tenant Improvement Plans any changes necessary to obtain
the building permit. Concurrently with the plan checking, Landlord shall have
prepared a final pricing for Tenant's approval, taking into account any
modifications which may be required to reflect changes in Tenant Improvement
Plans required by the city or county in which the Premises are located. After
final approval of the Tenant Improvement Plans, no further changes may be
made thereto without the prior written approval from both Landlord and
Tenant, and then only after agreement by Tenant to pay any excess costs
resulting from the design and/or construction of such changes.
4. CONSTRUCTION OF INTERIOR IMPROVEMENTS.
After the Interior Improvement Plans have been prepared and approved,
the final pricing, based on subcontractors' competitive bids, has been
approved, a building permit for the Interior Improvements has been issued,
and the construction of the Project has progressed to the point that the
Contractor can begin construction of the Interior Improvements, the
Contractor shall begin construction and installation of the Interior
Improvements in accordance with Interior Improvement Plans. Landlord shall
supervise the completion of such work and shall secure substantial completion
of the work in a timely manner. The cost of such work shall be paid as
provided in Section 5 below. Landlord shall not be liable for any direct or
indirect damages as a result of delays in construction beyond Landlord's
reasonable control arising as a result of acts of God or delays by Tenant or
Tenant's agents or employees.
5. PAYMENT FOR THE INTERIOR IMPROVEMENTS.
a. Tenant shall be responsible for the entire cost of the design,
construction and permitting of the Interior Improvements. In order to defray a
portion of the cost of the Interior Improvements, however, Landlord hereby
grants to Tenant an "INTERIOR IMPROVEMENTS ALLOWANCE" in the amount of Six
Hundred Eighty Thousand Four Hundred Dollars ($680,400.00). The Interior
Improvements Allowance shall be used only for:
(1) Payment of the cost of space planning; provided, however,
that not more than $0.10 per rentable square foot) of the Interior
Improvements Allowance may be used for such planning work.
(2) Payment of the cost of preparing the Interior Improvements
Plans, including mechanical, electrical, plumbing and structural
drawings, and of all other aspects necessary to complete the Interior
Improvements Plans; provided, however, that not more than $0.35 per
rentable square foot of the Interior Improvements Allowance may be used
for plan preparation.
(3) Payment of plan check, permit, and license fees relating to
construction of the Interior Improvements.
<PAGE>
(4) Construction of the Interior Improvements including, but not
limited to, the following:
(a) Installation within the Premises of all
partitioning, doors, cabinets, floor coverings, ceiling, wall
coverings and painting, millwork, and similar items;
(b) All electrical wiring, lighting fixtures, outlets
and switches, and other electrical work to be installed within
the Premises;
(c) The furnishing and installation of all duct work,
terminal boxes, diffusers, and accessories required for the
completion of the heating, ventilation and air conditioning
systems within the Premises;
(d) Any additional Tenant requirements, including, but
not limited to, odor control, special heating, ventilation and
air conditioning, noise or vibration control, or other special
systems;
(e) All fire and life safety control systems such as
fire walls, halon, fire alarms, including piping, wiring and
accessories installed within the Premises;
(f) All plumbing, fixtures, pipes and accessories to be
installed within the Premises;
(g) Testing and inspection costs; and
(h) Contractors' fees, including but not limited to any
fees based on general conditions, and supervisory fees.
(5) All other costs to be expended by Landlord in the
construction of the Interior Improvements in accordance with the
Interior Improvements Plans.
b. In the event that the cost of installing the Interior
Improvements, as established by Landlord's final pricing schedule, shall
exceed the Interior Improvements Allowance, or if any of the Interior
Improvements do not qualify for payment out of the Interior Improvement
Allowance as provided in Paragraph 5 a, above, the amount which is in excess
of the Interior Improvements Allowance (the "EXCESS") shall be paid by
Tenant. Not later than sixty (60) days after the date of this Lease, Tenant
shall deposit the Excess in a segregated account (the "ESCROW ACCOUNT") at a
bank or savings institution in Austin, Texas acceptable to Landlord and upon
which Landlord has sole signatory and withdrawal authority. Upon request by
Landlord, Tenant will provide Landlord with evidence of the deposit of the
Excess into the Escrow Account. Landlord shall pay Tenant's Proportionate
Share of the cost of the construction of the Interior Improvements out of
such Escrow Account periodically as such costs are incurred. As the
construction of the Interior Improvements proceeds, Landlord will
periodically provide Tenant with an invoice for Tenant's Proportionate Share
of the cost of the Interior Improvements. "Tenant's Proportionate Share" of
such costs from time to time shall be equal to the total cost of the Interior
Improvements to the date of such invoice, minus the amount previously paid by
Tenant under this paragraph, multiplied by a fraction, the numerator of which
is the original amount of the Excess and the denominator of which is the
total cost of the Interior Improvements. Simultaneously with delivery to
Tenant of the backup invoice for each periodic installment of the cost to
construct the Interior Improvements, Landlord will be authorized to draw
Tenant's Proportionate Share of such costs out of the Escrow Account. Subject
to the foregoing, Landlord will make payment to all suppliers of materials
and labor in connection with the construction of the Interior Improvements.
c. In the event that, after the Interior Improvement Plans have been
prepared and the final pricing therefor has been agreed to between Landlord
and Tenant, Tenant shall require any changes or substitutions to the Interior
Improvements Plans, any additional costs related thereto shall be paid by
Tenant to Landlord prior to the commencement of construction of the Interior
Improvements. Landlord shall have the right to decline Tenant's request for
change to the Interior Improvement Plans if, in Landlord's opinion, such
changes would unreasonably delay construction of the Interior Improvements.
d. No unused portion of the Interior Improvement Allowance shall be
refunded to Tenant or available to Tenant as a credit against any obligations
of Tenant under the Lease.
e. No portion of the Interior Improvements Allowance will be
disbursed by Landlord until such time as the Interior Improvements Plans have
been finalized and agreed to by Landlord and Tenant, the final pricing for
the construction and installation of the Interior Improvements has been
agreed to by Tenant and any Excess (as such term is defined in paragraph 5 b,
above) has been deposited by Tenant into the account referred to in paragraph
5b, above.
6. WARRANTY.
Landlord will provide a one year warranty on the construction and
installation of the Interior Improvements. Landlord will pass any
subcontractors' and manufacturers' warranties on all appliances and equipment
but Landlord will not provide any warranty with respect to appliances or
equipment installed for Tenant.
<PAGE>
EXHIBIT "D"
RENEWAL OPTION
1. OPTION TO RENEW TERM.
Landlord grants to Tenant the right (the "RENEWAL OPTION") to renew
this Lease with respect to all, but not less than all, of the Premises for
one (1) additional term of five (5) years (the "RENEWAL TERM"), such Renewal
Term commencing upon the expiration of the initial Term and continuing for
five (5) years thereafter. The Renewal Option is granted on the same terms,
conditions and covenants set forth in this Lease, except as provided below.
The Renewal Option may be exercised only by written notice (the "NOTICE")
delivered to Landlord no earlier than two hundred forth (240) days before,
and no later than one hundred eighty (180) days before, the expiration of the
initial Lease Term. If Tenant fails to deliver Landlord written Notice of the
exercise of the Renewal Option within the prescribed time period, the Renewal
Option shall lapse, and thereafter shall be null and void and of no further
force or effect and Tenant shall be deemed to have waived its right to renew
or extend the Lease Term under this EXHIBIT "D". The Renewal Option may only
be exercised by Tenant on the express condition that, at the time of the
exercise, Tenant is not in default under any of the provisions of this Lease.
The Renewal Option is personal to Tenant and may not be exercised by any
assignee or subtenant without Landlord's written consent. In addition, Tenant
shall not have the right to exercise the Renewal Option of any portion of the
Premises is subleased or if any portion of the Lease has been assigned by
Tenant.
a. Upon receipt of the Renewal Option Notice, Landlord will deliver
Tenant notice of the Base Rent to be in effect for the Renewal
Term. In no event shall the Base Rent for the Renewal Term be
less than the rate of Base Rent in effect at the expiration of
the initial Term. Such Base Rent shall be equal to market rent
for comparable space as reasonably determined by Landlord, it
being understood that as of the date of this Lease, there is no
space which is comparable to the Premises in the vicinity of the
Premises. Upon receipt of Landlord's determination of the Base
Rent for the Renewal Term, Tenant shall have the right to accept
or reject the same. If Tenant specifically rejects Landlord's
designation of Base Rent for the Renewal Term in writing within
five (5) days after Landlord has notified Tenant of the Base
Rent for the Renewal Term then Tenant, as its sole remedy, will
be deemed to have revoked its election to renew the term of this
Lease, whereupon the Renewal Option will, be deemed to have been
waived by Tenant and the Renewal Option shall lapse, and
thereafter shall be null and void and of no further force or
effect. If Tenant fails to deliver notice of rejection of the
Base Rent within the five (5) day period referred to above,
Tenant shall be deemed to have accepted Landlord's designation
of Base Rent for the Renewal Term and Tenant may not thereafter
revoke its election to Renew.
b. Tenant shall pay Base Rent during the Renewal Term to Landlord
in monthly installments in the amount or amounts determined
pursuant to paragraph a, above, along with all other Rent and
other amounts due under the Lease, including without limitation,
all rental adjustments pursuant to Paragraph 2C of the Lease.
c. Landlord shall not be obligated to make any alterations or
improvements to the Premises during or in connection with the
Renewal Term.
d. Except for the Renewal Option described above, Tenant shall have
no further right to renew or extend this Lease.
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "FIRST AMENDMENT") is
entered into by and between S.W. AUSTIN OFFICE BUILDING, LTD., A TEXAS
LIMITED PARTNERSHIP ("LANDLORD"), and SILICON LABORATORIES, INC., A DELAWARE
CORPORATION ("TENANT") effective as of the 29th day of July, 1998.
RECITALS
A. Landlord and Tenant executed a certain Lease Agreement (the "LEASE")
dated June 25, 1998, covering approximately 37,800 square feet of space in a
building to be built (the "BUILDING") located at 4635 Boston Lane, Austin, Texas
78735.
B. The Lease and the Ancillary Agreements (hereinafter defined)
incorrectly refer to the address of the Building as being 4609 Southwest Parkway
instead of 4635 Boston Lane.
C. Landlord and Tenant desire to amend the Lease and the Ancillary
Agreements to correct the address of the Building stated therein.
NOW, THEREFORE, in consideration of the premises, and for Ten and No/100
Dollars ($10.00) and other good and valuable consideration, Landlord and Tenant
agree as follows:
AGREEMENTS
1. AMENDMENT TO LEASE AND ANCILLARY DOCUMENTS. All references in the
Lease and in all documents and instruments executed in connection therewith,
including, without limitation, that certain Side Letter Agreement (regarding
environmental report), that certain Letter Agreement (regarding approval of the
issuer of the Letter of Credit and zoning), that certain Parking Structure
Agreement, and that certain Right of First Refusal and Option Agreement
(collectively, the "ANCILLARY AGREEMENTS") to the address of the Building as
being 4609 Southwest Parkway are hereby amended to provide that the address of
the Building is 4635 Boston Lane, Austin, Texas 78735.
2. CAPITALIZED TERMS. All capitalized terms used herein shall have the
meaning ascribed to them in the Lease unless specifically defined herein.
3. EFFECT OF AMENDMENT. The Lease and the Ancillary Agreements, as hereby
amended, shall continue in full force and effect. All of the other terms of the
Lease and the Ancillary Agreements shall remain unchanged and shall continue in
full force and effect.
4. COUNTERPARTS. This First Amendment may be executed in several
counterparts and all counterparts so executed shall together be deemed to
constitute one final agreement as if signed by all parties hereto and all
counterparts shall be deemed to be an original.
Page 1 of 2
<PAGE>
5. AMENDMENT CONTROLLING. The provisions of this First Amendment shall
supersede and control over any conflicting provisions in the Lease and the
Ancillary Agreements.
EXECUTED to be effective as of the date first above written.
LANDLORD:
S.W. AUSTIN OFFICE BUILDING, LTD., A
TEXAS LIMITED PARTNERSHIP
By: [ILLEGIBLE]
----------------------------
Name:
--------------------------
Title:
-------------------------
TENANT:
SILICON LABORATORIES, INC., A DELAWARE
CORPORATION
By: /s/ Navdeep Sooch
----------------------------
Name: Navdeep S. Sooch
--------------------------
Title: President
-------------------------
Page 2 of 2
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "SECOND AMENDMENT") is
entered into by and between S.W. AUSTIN OFFICE BUILDING, LTD., A TEXAS
LIMITED PARTNERSHIP ("LANDLORD"), and SILICON LABORATORIES, INC., A DELAWARE
CORPORATION ("TENANT"), effective as of the 20th day of August, 1998.
RECITALS
A. Landlord and Tenant executed a certain Lease Agreement (the "ORIGINAL
LEASE") dated June 25, 1998, covering approximately 37,800 square feet of space
in a building to be built (the "BUILDING") located at 4635 Boston Lane, Austin,
Texas 78735.
B. Landlord and Tenant have heretofore amended the Original Lease
pursuant to that certain First Amendment to Lease Agreement dated July 29,
1998 (the "FIRST AMENDMENT").
C. Tenant desires to delay the construction of the Interior Improvements
and the Commencement Date of the Lease Term and to provide for an option to
terminate the Lease.
D. In order to accommodate the foregoing, Landlord and Tenant now desire
to further amend the Lease as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and for Ten and No/100
Dollars ($10.00) and other good and valuable consideration, Landlord and Tenant
agree as follows:
AGREEMENTS
1. AMENDMENT TO LEASE AND ANCILLARY AGREEMENTS. The Original Lease, as
amended by the First Amendment, is hereinafter referred to as the "Lease".
2. PAYMENT FOR BUILDING SHELL CHANGE ORDERS. Prior to the execution
hereof, Tenant has remitted payment to Landlord for two change orders to the
base building requested by Tenant in the respective amounts of $29,720.00 and
$11,950.00. Landlord and Tenant agree that the amounts stated in the foregoing
sentence constitute reimbursements to Landlord for the cost of changes to the
Building which were requested by Tenant and therefore, such amounts are not
refundable to Tenant under any circumstances.
3. REVISED DUE DATE FOR DELIVERY OF LETTER OF CREDIT. The Letter of
Credit referenced in SECTION 2 of the Lease shall be delivered to Landlord on or
before September 8, 1998.
4. LIMITED RIGHT OF TERMINATION. Landlord hereby grants Tenant a limited
right of termination of the Lease as set forth in this paragraph 4. Tenant may
exercise the option to terminate the Lease by failing to deliver the Letter of
Credit by September 8, 1998, for any
Page 1 of 5
<PAGE>
reason. Tenant's failure to deliver the Letter of Credit in the required form
by September 8, 1998 will constitute an irrevocable election on Tenant's part
to terminate the Lease. In the event the Lease is terminated pursuant to this
paragraph, Landlord, as Landlord's sole and exclusive remedy, will retain the
$151,200.00 lease termination cash security deposit heretofore tendered by
Tenant as a lease termination fee and not as a penalty. It is agreed that the
$151,200 fee is a 2 reasonable fee and constitutes just compensation for the
right to terminate the Lease as set forth above.
5. OXFORD COMMERCIAL, INC. COMMISSION IN THE EVENT OF TERMINATION OF
LEASE. In the event the Lease is terminated pursuant to Paragraph 4, above,
Tenant will assume all responsibility for payment of all leasing commissions, if
any, due or payable to Oxford Commercial, Inc. in connection with the Lease.
Oxford Commercial, Inc. agrees to look only to Tenant for payment of all
compensation due or to become due in connection with the Lease. In the event of
termination of the Lease in accordance with Paragraph 4, above, Oxford
Commercial, Inc. and Tenant will indemnify, defend and hold Landlord harmless
from any cost or claim of Oxford Commercial, Inc., or any agent, broker or
person claiming a right to a leasing commission or fee by, through or under
Oxford Commercial, Inc., by reason of the Lease. The indemnity obligations set
forth herein shall survive any termination or cancellation of the Lease
notwithstanding any contrary provision contained herein or therein. Oxford
Commercial, Inc. hereby joins in the execution of this Second Amendment to
confirm its agreement to be bound by the provisions of this Paragraph 5.
6. DELAY OF COMMENCEMENT OF CONSTRUCTION OF INTERIOR IMPROVEMENTS. At
Tenant's request, Landlord agrees to delay the commencement of construction of
the Interior Improvements until finalization of the Interior Improvements Plans
as set forth in paragraph 7, below. It is acknowledged and agreed that Landlord
may commence construction of the Interior Improvements at any time after the
finalization of the Interior Improvements Plans in order to meet Landlord's
construction schedule. Pursuant to paragraph 10, below, Tenant is not required
to pay the Excess into the Escrow Account until January 4, 1999. Landlord's
election to commence construction of the Interior Improvements prior to January
4, 1999, will not operate to accelerate Tenant's obligation to pay the Excess
into the Escrow Account prior to January 4, 1999.
7. FINALIZATION OF INTERIOR IMPROVEMENTS PLANS. In the event the Lease is
not terminated as aforesaid, Tenant will proceed to finalize the Interior
Improvements Plans not later than November 30, 1998, in order to enable Landlord
to achieve substantial completion of the Interior Improvements in a timely
manner.
8. DELAY OF COMMENCEMENT DATE AND INTERIM RENT PAYMENTS. The Commencement
Date shall be determined as set forth in SECTION 1B of the Lease except that
the period from the Effective Date until January 1, 1999 shall not be includible
as a Tenant Delay for purposes of SECTION 1B(ii) of the Lease. The Base Rent and
other charges provided for in the Lease shall be due and payable in the manner
and in the amounts set forth in the Lease, beginning on the Commencement Date.
As consideration to Landlord (and provided that the Lease is not
Page 2 of 5
<PAGE>
terminated as provided in paragraph 4, above), Tenant will pay Landlord, in
advance, without demand, deduction or set off, the sum of $20,000.00 per
month as interim rent (the "INTERIM RENT") commencing on October 1, 1998 and
continuing through the month of December, 1998, for a total of $60,000.00 in
Interim Rent to be paid in $20,000.00 increments on October 1, 1998, November
1, 1998 and December 1, 1998.
9. SUBLEASING. Tenant does not intend to initially occupy the entirety of
the Building. In order to defray a portion of the costs associated with leasing
the Premises, however, Tenant intends to sublease portions of the Premises to
third party users. Nothing in the foregoing sentence will be deemed to modify
the provisions of SECTION 16 of the Lease or Landlord's obligations with respect
thereto. Specifically, it is hereby confirmed that Landlord has the right to
approve any subtenant of a portion of the Premises in accordance with the
provisions of SECTION 16 of the Lease and Landlord has no obligation to assist
Tenant in locating any acceptable subtenants.
10. CONSTRUCTION OF INTERIOR IMPROVEMENTS. In order to accommodate the
foregoing changes, the following modifications will be made to the procedures
set forth in EXHIBIT "C" of the Lease regarding the Interior Improvements:
a. The entire 37,800 sq. ft. building will be finished out at a
minimum $18.000 per square foot level of finish, or as may be subsequently
agreed to in writing between Landlord and Tenant on or before November 30,
1998.
b. The portion of the Premises to be occupied by Tenant may be
finished out at a level which is higher than the $18.00 per square foot
minimum level provided that the Excess (as such term is defined in SECTION
5b of EXHIBIT "C" attached to the Lease) shall be deposited by Tenant into
the Escrow Account (as such term is defined in SECTION 5b of EXHIBIT "C"
attached to the Lease) on or before January 4, 1999.
c. Any portion of the Premises not to be initially occupied by
Tenant may be finished out on behalf of a subtenant at a level which is
higher than the $18.00 per square foot minimum level provided that the
Excess related to such portion of the Premises shall also be deposited by
Tenant into the Escrow Account on or before January 4, 1999.
11. DELETION OF EXPANSION OPTION. The Expansion Option [as such term is
defined in that certain Right of First Refusal and Option Agreement (the "RIGHT
OF FIRST REFUSAL AND OPTION AGREEMENT") dated of even date with the Lease and
executed by Landlord, Tenant and 290 Office Building, Ltd. regarding space in
the office building located 5613 Highway 290 West, Austin, Texas], is hereby
deleted in its entirety, is null, void and of no further force or effect, as
fully as if the Expansion Option had never been granted in the first place.
12. SUSPENSION OF RIGHT OF FIRST REFUSAL. The Rights of First Refusal
granted to Tenant in the Right of First Refusal and Option Agreement are hereby
suspended until January
Page 3 of 5
<PAGE>
4, 1999. Accordingly, the Office Building Owner is free to lease any and all of
the space in the Office Building to any party whatsoever without the obligation
to offer any part thereof to Tenant through January 3, 1999, at which time
Tenant's rights to the Rights of First Refusal, if any, will be deemed to be
revived, but only to the extent provided in the Right of First Refusal and
Option Agreement and only as to space leased after January 3, 1999.
13. AMENDMENT TO SECTION 28 OF THE LEASE. SECTION 28 of the Lease is
hereby deleted in its entirety and is replaced with the following:
"Notwithstanding anything contained in this Lease to the contrary,
Landlord's obligations hereunder are specifically conditioned upon Landlord
achieving substantial completion of the Premises not later than June 30,
1999, subject to any extensions for force majeure and delays caused by
Tenant (not including the suspension of the commencement of construction of
the Interior Improvements until January 4, 1999). In the event Landlord
does not achieve substantial completion of the Premises by June 30, 1999,
Tenant, as Tenant's sole and exclusive remedy, may terminate this Lease in
writing at any time after June 30, 1999 and before Landlord achieves
substantial completion of the Premises. In the event Tenant terminates this
Lease pursuant to this paragraph, Landlord will return all advance payments
of rent and Security Deposits theretofore paid to Landlord by Tenant and
all Letters of Credit theretofore delivered to Landlord by Tenant and will
reimburse and refund Tenant for all moneys theretofore expended by Tenant
in connection with the construction of the Interior Improvements pursuant
to paragraph 5b of EXHIBIT "C" attached hereto, as well as any moneys
remaining in the escrow account for Tenant's Proportionate Share of the
cost of the Interior Improvements."
14. CAPITALIZED TERMS. All capitalized terms used herein shall have the
meaning ascribed to them in the Lease unless specifically defined herein.
15. EFFECT OF AMENDMENT. The Lease and the Ancillary Agreements (as
defined in the First Amendment), as hereby amended, shall continue in full force
and effect. All of the other terms of the Lease and the Ancillary Agreements
shall remain unchanged and shall continue in full force and effect.
16. COUNTERPARTS. This Second Amendment may be executed in several
counterparts and all counterparts so executed shall together be deemed to
constitute one final agreement as if signed by all parties hereto and all
counterparts shall be deemed to be an original.
17. AMENDMENT CONTROLLING. The provisions of this Second Amendment shall
supersede and control over any conflicting provisions in the Lease and the
Ancillary Agreements.
Page 4 of 5
<PAGE>
EXECUTED to be effective as of the date first above written.
LANDLORD:
S.W. AUSTIN OFFICE BUILDING, LTD., A
TEXAS LIMITED PARTNERSHIP
By: /s/ Manuel Zuniga
---------------------------------
Name: MANUEL ZUNIGA
-------------------------------
Title: PARTNER
------------------------------
TENANT:
SILICON LABORATORIES, INC., A DELAWARE
CORPORATION
By: /s/ Navdeep Sooch
---------------------------------
Name: NAVDEEP SOOCH
-------------------------------
Title: PRESIDENT
------------------------------
EXECUTED by the undersigned for purposes of Paragraph 5, above.
OXFORD COMMERCIAL, INC., A TEXAS
CORPORATION
By: /s/ Michael K. Tipps
---------------------------------
Name: Michael K. Tipps
-------------------------------
Title: Managing Principal
------------------------------
Page 5 of 5
<PAGE>
LEASE AGREEMENT
Between
STRATUS 7000 WEST JOINT VENTURE
as Landlord,
and
SILICON LABORATORIES INC.
as Tenant,
Covering approximately 34,531 rentable square feet
of the Building known (or to be known) as
7000 West at Lantana, Building 1
located at
7000 West William Cannon Drive
Austin, Texas 78735
<PAGE>
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
Lease Date: October 27, 1999
Tenant: Silicon Laboratories Inc.
Tenant's Address: 4635 Boston Lane
---------------------------
Austin Texas 78735
---------------------------
---------------------------
---------------------------
Contact: John McGovern
Telephone: (512) 416-8500
---------------------------
Landlord: Stratus 7000 West Joint Venture
Landlord's
Address: c/o Stratus Management, L.L.C.
98 San Jacinto, Suite 220
Austin, Texas 78701
Contact: Rick Lindley
Telephone: 478-5788
Premises: Suite No. ____ containing approximately 34,531 rentable
square feet on the second floor of the Building. The
Premises are outlined on the plan attached to the Lease
as EXHIBIT A-1. The Premises are measured using 1996
BOMA useable standards multiplied by the Building
Factor of 1.0881.
Building: 7000 West at Lantana Building 1, which contains
66,606 of rentable square feet and is located or to be
located on the land described on EXHIBIT A attached
hereto (the "LAND").
Project: 7000 West at Lantana, which includes the Building,
one (1) other office building known (or if not yet
constructed, to be known) as Building 2 and related
parking facilities and commons areas, as shown on
EXHIBIT A-2 attached hereto.
Development: All improvements within the Project plus all other
improvements owned by Landlord and Landlord's
affiliates in an area in the Lantana Corporate Center
bounded by William Cannon Drive West on the west,
Southwest Parkway on the north, and Vega running on the
southern boundary.
Term: Seventy-six (76) months, commencing the later of: i)
February 1, 2000 or ii) the date upon which the Work
improvements set forth in EXHIBIT D have been
Substantially Completed (the "Commencement Date") and
ending at 5:00 p.m., May 31, 2006, subject to
adjustment based on the date of Substantial Completion
and earlier termination as provided in the Lease.
Substantial Completion: The term "Substantially Completed" or "Substantial
Completion" shall mean that, in the opinion of the
architect and space planner that prepared the Working
Drawings, such Work has been substantially completed in
accordance with the Working Drawings, the Premises are
in good and satisfactory condition, with the exception
of completion of minor details of construction,
mechanical adjustments or decorations which do not
materially interfere with Tenant's use of the Premises
that remain to be performed (items normally referred to
as "punch list" items), and the City of Austin has
issued a certificate of occupancy for the Premises;
provided, however, that if and to the extent
Substantial Completion would have occurred earlier but
for any Tenant Delays (as defined in Exhibit D),
Substantial Completion shall be deemed to have occurred
on the date it would have occurred but for those Tenant
Delays.
i
<PAGE>
Basic Rental: (i) for month 1-6, $22,301.27 per month, which is based
on an Annual Basic Rental of $15.50 per rentable square
foot, but only on 17,265.5 square feet (1/2 of the
Premises) (i.e., the rent on 1/2 of the Premises is
being abated for six months); provided, however, that,
during months 1-6, Tenant shall pay Basic Rent to
Landlord for any space occupied by Tenant for office
use (as contrasted to storage) over and above 17,265.5
square feet on a per diem basis at a rate of $15.50 per
rentable square foot/year; (ii) for months 7-24,
$44,602.54 per month, which is based on an annual Basic
Rental of $15.50 per rentable square foot on the full
34,531 square feet; (iii) for months 25-48, $47,480.12
per month, which is based on an annual Basic Rental of
$16.50 per rentable square foot and (iv) for months
49-76, $48,918.92 per month, which is based on an
annual Basic Rental of $17.00 per rentable square foot.
Security Deposit: $64,745.62 in cash and the Letter of Credit (as defined
in Section 6)
Rent: Basic Rental, Tenant's Proportionate Share of Basic
Costs and all other sums that Tenant may owe to
Landlord under the Lease.
Permitted Use: General office use including ancillary uses related to
general office use, including the operation of vending
machines within the Premises for use by Tenant's
employees and visitors.
Tenant's
Proportionate
Share: 51.84%, which is the percentage obtained by dividing
(a) the 34,531 rentable square feet in the Premises by
(b) the 66,606 rentable square feet in the Building.
Tenant's Estimated
Proportionate Share
of Basic Costs: Costs of $7.00 per rentable square foot ($20,143.08 per
month) beginning on the Commencement Date and on the
first day of each calendar month thereafter through
December 31, 2000; provided, however, that Tenant's
Estimated Proportionate Share of Basic Costs shall be
abated as to 17,265.5 square feet out of the total
34,531 square feet within the Premises for months 1-6
(I.E., the estimated amount of Tenant's Proportionate
Share of Basic Costs for months 1-6 of the Lease is
$10,071.54 per month). Notwithstanding the foregoing,
during months 1-6, Tenant shall pay Tenant's Estimated
Proportionate Share of Basic Costs to Landlord for any
space occupied by Tenant over and above 17,265.5 square
feet on a per diem basis billed monthly in arrears at a
rate of $7.00 per rentable square foot/year.
Furthermore, the abatements provided for in this
paragraph shall apply to utilities, as described in
paragraph 4 of Exhibit C attached hereto, so long as
the HVAC system, lighting (except basic and emergency
lighting) and all office machinery and equipment is
operated during the abatement period only in that
certain approximately 17,265.5 square feet of the
Premises shown on Exhibit A-1 attached hereto as the
"Initial Space". If the HVAC system, lighting (except
basic and emergency lighting) or any office machinery
or equipment is operated in portions of the Premises
other than the Initial Space during months 1-6, Tenant
shall pay Tenant's Estimated Proportionate Share of the
utility portion of Basic Costs to Landlord for all of
the Premises on a per diem basis billed monthly in
arrears. Beginning on January 1, 2001 and thereafter,
the costs shall be paid by Tenant as set forth in
Section 4(c) of the Lease.
Initial
Liability
Insurance Amount: $3,000,000.00
Maximum
Construction
Allowance: $24.00 per rentable square foot
Building's
Proportionate
Share: The percentage obtained by dividing (a) the 66,606
rentable square feet contained within Building by (b)
the number of completed rentable square feet contained
within the Project; provided that Landlord and Tenant
acknowledge that the Building's Proportionate Share be
adjusted as additional completed rentable square feet
are added to or subtracted from the Project. Currently,
the Building's Proportionate Share equals 100%.
</TABLE>
ii
<PAGE>
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
LANDLORD: STRATUS 7000 WEST JOINT VENTURE
a Texas joint venture
By: OLY LANTANA, L.P., a Texas limited
partnership, Joint Venturer
By: OLY LANTANA, GP, L.L.C., a Texas limted
liability company, its General Partner
By: /s/ Hal R. Hall
------------------------------
Name:
---------------------------
Title:
---------------------------
By: STRATUS 7000 WEST, LTD., a Texas limited
partnership, Joint Venturer
By: STRS, L.L.C., a Delaware limited
liability company, its General Partner
By: STRATUS PROPERTIES INC., a Delaware
limited liability company, its
sole member
By: /s/ William H. Armstrong
------------------------------
William H. Armstrong, III
President and CEO
TENANT: SILICON LABORATORIES INC.
By: /s/ Navdeep S. Sooch
-----------------------------
Navdeep S. Sooch
Chairman and CEO
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS AND BASIC PROVISIONS....................................... 1
LEASE GRANT............................................................ 1
TERM................................................................... 1
RENT................................................................... 1
(a) Payment................................................... 1
(b) Consumer Price Index Increases to Basic Rental............ 1
(c) Basic Costs............................................... 1
(d) Annual Cost Statement..................................... 1
(e) Restoration of Services; Abatement........................ 2
DELINQUENT PAYMENT; HANDLING CHARGES................................... 2
SECURITY DEPOSIT....................................................... 2
LANDLORD'S OBLIGATIONS................................................. 3
(a) Services.................................................. 3
(b) Excess Utility Use........................................ 3
(c) Discontinuance............................................ 4
(d) Adjustments to Basic Costs................................ 4
IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE........................ 4
(a) Improvements; Alterations................................. 4
(b) Repairs; Maintenance...................................... 4
(c) Performance of Work....................................... 5
(d) Mechanic's Liens.......................................... 5
USE.................................................................... 5
ASSIGNMENT AND SUBLETTING.............................................. 5
(a) Transfers; Consent........................................ 5
(b) Cancellation.............................................. 6
(c) Additional Compensation................................... 6
INSURANCE; WAIVERS; SUBROGATION; INDEMNITY............................. 6
(a) Tenant's Insurance........................................ 6
(b) Landlord's Insurance...................................... 6
(d) Waiver of Negligence Claims; No Subrogation............... 7
(e) Indemnity................................................. 7
SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE............... 7
(a) Subordination............................................. 7
(b) Attornment................................................ 7
(c) Notice to Landlord's Mortgagee............................ 7
RULES AND REGULATIONS.................................................. 7
CONDEMNATION........................................................... 7
(a) Taking - Landlord's and Tenant's Right.................... 7
(b) Taking - Landlord's Rights................................ 8
(c) Award..................................................... 8
FIRE OR OTHER CASUALTY................................................. 8
(a) Repair Estimate........................................... 8
(b) Landlord's and Tenant's Rights............................ 8
(c) Landlord's Rights......................................... 8
(d) Repair Obligation......................................... 8
TAXES.................................................................. 8
EVENTS OF DEFAULT...................................................... 8
REMEDIES............................................................... 9
iv
<PAGE>
PAYMENT BY TENANT; NON-WAIVER.......................................... 9
(a) Payment by Tenant......................................... 10
(b) No Waiver................................................. 10
SURRENDER OF PREMISES.................................................. 10
HOLDING OVER........................................................... 10
CERTAIN RIGHTS RESERVED BY LANDLORD.................................... 10
SUBSTITUTION SPACE..................................................... 10
MISCELLANEOUS.......................................................... 11
(a) Landlord Transfer......................................... 11
(b) Landlord's Liability...................................... 11
(c) Force Majeure............................................. 11
(d) Brokerage................................................. 11
(e) Estoppel Certificates..................................... 11
(f) Notices................................................... 11
(g) Separability.............................................. 11
(h) Amendments; and Binding Effect............................ 11
(i) Quiet Enjoyment........................................... 11
(j) Joint and Several Liability............................... 11
(k) Captions.................................................. 11
(l) No Merger................................................. 11
(m) No Offer.................................................. 12
(n) Exhibits.................................................. 12
(o) Entire Agreement.......................................... 12
HAZARDOUS SUBSTANCES................................................... 12
LANDLORD'S LIEN........................................................ 13
SPECIAL PROVISIONS..................................................... 13
</TABLE>
v
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
No.
<S> <C>
Affiliate................................................... 6
Annual Cost Statement....................................... 1
Basic Cost.................................................. C-1
Basic Lease Information..................................... 1
Building.................................................... i
Casualty.................................................... 8
Commencement Date........................................... i
Construction Allowance...................................... D-2
Damage Notice............................................... 8
Development................................................. i
Event of Default............................................ 8
Initial Liability Insurance Amount.......................... 6
Land........................................................ i
Landlord.................................................... 1
Landlord's Mortgagee........................................ 7
Lease....................................................... 1
Loss........................................................ 6
Mortgage.................................................... 7
Parking Facilities.......................................... E-1
Primary Lease............................................... 7
Taking...................................................... 7
Taxes....................................................... C-1
Tenant...................................................... 1
Tenant Delay................................................ D-1
Total Construction Costs.................................... D-1
Transfer.................................................... 5
Work........................................................ D-1
Working Drawings............................................ D-1
</TABLE>
vi
<PAGE>
LEASE
THIS LEASE AGREEMENT (this "LEASE") is entered into as of OCTOBER 27 1999,
between Stratus 7000 West Joint Venture, a Texas joint venture ("LANDLORD"),
and Silicon Laboratories, Inc. (TENANT").
DEFINITIONS
AND BASIC
PROVISIONS
1. The definitions and basic provision set forth in the Basic
Lease Information (the "BASIC LEASE INFORMATION") executed by Landlord
and Tenant contemporaneously herewith are incorporated herein by
reference for all purposes.
LEASE
GRANT 2. Subject to the terms of this Lease, Landlord leases to
Tenant, and Tenant leases from Landlord, the Premises.
TERM 3. If the Commencement Date is not the first day of a calendar
month, then the Term shall be extended by the time between the
Commencement Date and the first day of the next month. If this Lease
is executed before the Premises become available and ready for
occupancy by Tenant, then (a) Tenant's obligation to pay Rent
hereunder shall be waived until Landlord tenders possession of the
Premises to Tenant, (b) the Term shall be extended by the time between
the scheduled Commencement Date and the date on which Landlord tenders
possession of the Premises to Tenant (which date will then be defined
as the Commencement Date), (c) Landlord shall not be in default
hereunder or be liable for damages therefor, and (d) Tenant shall
accept possession of the Premises when Landlord tenders possession
thereof to Tenant. By occupying the Premises, Tenant shall be deemed
to have accepted the Premises in their condition as of the date of
such occupancy, subject to the performance of punch-list items that
remain to be performed by Landlord, if any. Tenant shall execute and
deliver to Landlord, within ten days after Landlord has requested
same, a letter confirming (1) the Commencement Date, (2) that Tenant
has accepted the Premises, and (3) that Landlord has performed all of
its obligations with respect to the Premises (except for punch-list
items specified in such letter).
RENT 4. (a) PAYMENT. Tenant shall timely pay to Landlord the Basic
Rental and all additional sums to be paid by Tenant to Landlord under
this Lease, including the amounts set forth in EXHIBIT C, without
deduction or set off except as otherwise expressly provided in Section
7(d), at Landlord's Address (or such other address as Landlord may
from time to time designate in writing to Tenant). Basic Rental,
adjusted as herein provided, shall be payable monthly in advance. The
first monthly installment of Basic Rental shall be payable upon the
Commencement Date of this Lease; thereafter, monthly installments of
Basic Rental shall be due on the first day of the second full calendar
month of the Term and continuing on the first day of each succeeding
calendar month during the Term. Basic Rental for any fractional month
at the beginning of the Term shall be prorated based on 1/365 of the
current annual Basic Rental for each day of the partial month this
Lease is in effect, and shall be due on the Commencement Date.
(b) CONSUMER PRICE INDEX INCREASES TO BASIC RENTAL.
(Intentionally Omitted.)
(c) BASIC COSTS. Beginning on January 1, 2001 and thereafter,
Tenant shall pay to Landlord, on the first day of each calendar month,
an amount equal to the product of (1) 1/12 of the estimated Basic
Costs (as described on EXHIBIT C), multiplied by (2) Tenant's
Proportionate Share. From time to time during any calendar year after
calendar year 2000, Landlord may in good faith estimate and
re-estimate the Proportionate Share of Basic Costs to be due by Tenant
for that calendar year and deliver a copy of the estimate or
re-estimate to Tenant. Thereafter, the monthly installments of
estimated Basic Costs payable by Tenant shall be appropriately
adjusted in accordance with the estimations so that, by the end of the
calendar year in question, Tenant shall have paid all of its
Proportionate Share of Basic Costs as estimated in good faith by
Landlord.
(d) ANNUAL COST STATEMENT. By April 1 of each calendar year, or
as soon thereafter as practicable, Landlord shall furnish to Tenant a
statement of Landlord's actual Basic Costs (the "ANNUAL COST
STATEMENT") for the previous year (including calendar year 2000)
adjusted as provided in Section 4.(e). If the Annual Cost Statement
reveals that Tenant paid more for Basic Costs than
1
<PAGE>
Tenant's Proportionate Share of Basic Costs in the year for which such
statement was prepared, then Landlord shall credit Tenant for such
excess during the following year; likewise, if Tenant paid less than
Tenant's Proportionate Share of Basic Costs, then Tenant shall pay
Landlord such deficiency within 30 days after delivery of the Annual
Cost Statement in question; provided, however, that in no event shall
Tenant's Proportionate Share of Basic Costs in any year (commencing
with calendar year 2001) exceed the immediately preceding year's
Proportionate Share of Basic Costs by more than six percent (6%) of
such preceding year's Proportionate Share of Basic Costs, excluding
Tenant's Proportionate Share of Basic Costs for insurance, taxes and
utilities (none of which shall be subject to such yearly six percent
(6%) maximum increase). Notwithstanding the foregoing, it is hereby
acknowledged that the 6% cap on controllable Basic Costs shall be
calculated on a cumulative basis (i.e., if the increase in costs in
any given year is less than 6% then the difference between the actual
percentage increase and 6% may be carried over to be used in
subsequent years in which the increase exceeds 6%). Further, the
parties acknowledge that for purposes of calculating the cap on Basic
Costs in calendar year 2001, adjustments shall be made (subject to the
limitations in Section 4(e) below) in order to reflect any abatements
of the Basic Costs granted to Tenant for calendar year 2000, as
provided in the Basic Lease Information.
(e) ADJUSTMENTS TO BASIC COSTS. With respect to any calendar
year or partial calendar year in which the Building is not occupied to
the extent of 95% of the rentable area thereof, the Basic Costs for
such period shall, for the purposes hereof, be increased to the amount
which would have been incurred had the Building been occupied to the
extent of 95% of the rentable area thereof.
(f) AUDIT RIGHTS. Tenant and its agents shall have the right,
upon ten (10) days' written notice, to audit, inspect and copy the
books and records relating to the Basic Costs during normal business
hours. If any audit shall accurately reflect a discrepancy between the
actual Basic Costs and the amount shown on any Annual Cost Statement
previously furnished Tenant, the parties shall reconcile the
discrepancy. Tenant shall not be permitted to audit periods earlier
than the immediately preceding two (2) years.
DELINQUENT
PAYMENT;
HANDLING
CHARGES 5. All payments required of Tenant hereunder shall bear
interest from the date due until paid at the maximum lawful rate.
Alternatively, Landlord may charge Tenant a fee equal to 5% of the
delinquent payment to reimburse Landlord for its cost and
inconvenience incurred as a consequence of Tenant's delinquency. In no
event, however, shall the charges permitted under this Section 5 or
elsewhere in this Lease, to the extent the same are considered to be
interest under applicable law, exceed the maximum lawful rate of
interest. The interest and the 5% fee referenced in this Section 5
shall begin to accrue and only be payable by Tenant on the tenth
(10th) day following written notice from Landlord notifying Tenant of
Tenant's delinquency; provided, however, that in the event Landlord
gives to Tenant notice of Tenant's delinquency two (2) times in any
calendar year, the interest and the 5% fee referenced in this Section
5 shall begin to accrue and be payable by Tenant immediately (without
notice) upon Tenant's third (3rd) delinquency (and any subsequent
delinquencies) in such calendar year.
SECURITY
DEPOSIT 6. Contemporaneously with the execution of this Lease, Tenant
shall pay to Landlord, in immediately available funds, the Security
Deposit, which shall be held by Landlord without liability for
interest and as security for the performance by Tenant of its
obligations under this Lease. The Security Deposit is not an advance
payment of Rent or a measure or limit of Landlord's damages upon an
Event of Default (defined below). Landlord may, from time to time and
without prejudice to any other remedy, use all or a part of the
Security Deposit upon and after an Event of Default to perform any
obligation which Tenant was obligated, but failed, to perform
hereunder. Following any such application of the Security Deposit,
Tenant shall pay to Landlord on demand the amount so applied in order
to restore the Security Deposit to its original amount. Within a
reasonable time after the Term ends, provided Tenant has performed all
of its obligations hereunder, Landlord shall return to Tenant the
balance of the Security Deposit not applied to satisfy Tenant's
obligations. If Landlord transfers its interest in the Premises, then
Landlord shall assign the Security Deposit to the transferee and
Landlord thereafter shall have no further liability for the return of
the Security Deposit.
In addition to the cash Security Deposit above, Tenant shall deposit
with Landlord on or before the thirtieth (30th) day after the date
hereof, either additional cash or irrevocable stand-by letter(s) of
credit in the amount of $500,000.00 (whether one or more, the "LETTER
OF CREDIT"), which shall be held and/or applied by Landlord in
accordance with this Section 6; however, the Letter of Credit is not
an advance rental deposit or a measure of Landlord's damages for an
Event of Default (defined below). The Letter of Credit shall be
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issued by a bank reasonably acceptable to Landlord and shall otherwise
be in such form and contain such terms as are reasonably acceptable to
Landlord. The Letter of Credit will be structured as successive one-
year obligations for the entire term with rights to draw on the Letter
of Credit of a substitute letter of credit of the proper amount is not
in place within twenty (20) business days before expiration of the
Letter of Credit. Landlord hereby approves Imperial Bank as the
acceptable provider of the Letter of Credit in such form and terms set
forth in EXHIBIT I "Letter of Credit Pro Form Wording." The amount of
the Letter of Credit shall be decreased by 16.67% on each anniversary
of the Commencement Date, so long as no Event of Default exists. Upon
an Event of Default, Landlord may, in addition to all other rights and
remedies afforded Landlord hereunder or by law, cash the Letter of
Credit (as the same may have been reduced) and notify Tenant of such
action and use and hold the same as a cash security deposit, which
shall include the right to use any portion thereof to satisfy Tenant's
unperformed obligations hereunder, without prejudice to any of
Landlord's other remedies. If so used, Tenant shall pay Landlord an
amount that will restore the Letter of Credit to its then amortized
balance upon request. The Letter of Credit will be returned to Tenant
within 30 days after the end of the Term, provided that Tenant has
fully and timely performed its obligations hereunder throughout the
Term. If Landlord sells its interest in the Building, the Letter of
Credit shall be transferred to such purchaser, and Tenant hereby
agrees to cooperate in effectuating any such transfer. Notwithstanding
the foregoing, the Letter of Credit shall be returned to Tenant, so
long as no Event of Default exists, if either of the following shall
occur: (1) if Tenant is a privately owned company, an audited
financial statement is provided to Landlord showing twelve (12)
consecutive months' aggregate revenues in excess of $80,000,000.00 and
an aggregate net operating income in excess of $8,000,000.00 for such
12 consecutive months; or (2) if Tenant is a publicly owned company,
Securities and Exchange Commission filings containing financial
statements are provided to Landlord showing four quarters' aggregate
revenues in excess of $80,000,000.00 and a net operating income in
excess of $8,000,000.00 (such period may include unaudited quarterly
periods provided that they are filed with the Securities and Exchange
Commission).
LANDLORD'S
OBLIGATIONS
7. (a) SERVICES. Provided no Event of Default exists, Landlord
shall furnish to Tenant (1) water (hot and cold) at those points of
supply provided for general use of tenants of the Building; (2) heated
and refrigerated air conditioning as appropriate, during normal
business hours, and at such temperatures and in such amounts as are
reasonably considered by Landlord to be standard; (3) janitorial
service, in compliance with Tenant's confidential and proprietary
procedures, to the Premises on weekdays other than holidays for
Building-standard installations (Landlord reserves the right to bill
Tenant separately for extra janitorial service required for
non-standard installations) and such window washing as may from time
to time in Landlord's judgment be reasonably required; provided,
however, that Landlord, at its option, may decide to cease providing
janitorial service to the Premises, in which event Tenant will be
responsible for providing its own janitorial service and Tenant's
Proportionate share of Basic Costs shall be equitably reduced to
reflect the same; (4) elevators for ingress and egress to the floor on
which the Premises are located, in common with other tenants, provided
that Landlord may reasonably limit the number of elevators to be in
operation at times other than during customary business hours and on
holidays; (5) replacement of Building-standard light bulbs and
fluorescent tubes; and (6) electrical current during normal business
hours at a power capacity of 4 watts per rentable space foot for
lighting and outlets ("Normal Usage"). Landlord shall maintain the
common areas of the Building in reasonably good order and condition,
except for damage occasioned by Tenant, or its employees, agents or
invitees. If Tenant desires any of the services specified in this
Section 7.(a) at any time other than times herein designated, such
services shall be supplied to Tenant upon the written request of
Tenant delivered to Landlord before 3:00 p.m. on the business day
preceding such extra usage (except for heated and refrigerated air
conditioning, which shall be immediately available to Tenant through
use of an automated "on-demand" system to be installed by Landlord or,
in the event such automated "on-demand" system is not available due to
system failure, immediately provided by Landlord upon verbal request
from Tenant, so long as such request is made during normal business
hours), and Tenant shall pay to Landlord the cost of such services,
which shall be provided at the same rate charged other tenants in the
Building, within ten days after Landlord has delivered to Tenant an
invoice therefor. As used herein, the term "normal business hours"
shall mean from 7:00 a.m. to 7:00 p.m. Monday through Friday and from
8:00 a.m. to 1:00 p.m. on Saturdays, except for legal holidays. Based
on a letter from Southwestern Bell, Landlord has confirmed fiber
optics are to be provided to a point adjacent to the outside of the
Building or at the telecommunications building at the northwest corner
of Rialto and William Cannon. The provider of such fiber optics shall
be Southwestern Bell. Tenant, if it so desires at Tenant's cost, shall
be responsible and Landlord grants all consents for obtaining fiber
optics telecommunications service to the Premises from a point
adjacent to the outside of the building or the telecommunication
building (without additional rent for using risers or feeder space or
otherwise); provided that in doing so Tenant shall not adversely
affect the Building or Building systems or interfere with other
tenants or building operations; and provided further that, Landlord
has or will designate the Building as a multi-tenant building with
Southwestern Bell, thereby making the Premises the point of
demarcation for Tenant's fiber optics service.
(b) EXCESS UTILITY USE. Landlord shall use reasonable efforts
to furnish electrical current for special lighting, computers and
other equipment whose electrical energy consumption exceeds Normal
Usage through the then-existing feeders and risers serving the
Building and the Premises (not to exceed, however, 6.5 watts per
rentable square foot), and Tenant shall pay to Landlord the cost of
such service within ten days after Landlord has delivered to Tenant an
invoice therefor. Landlord may determine the amount of such additional
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consumption and potential consumption by either or both: (1) a survey
of standard or average tenant usage of electricity in the Building
performed by a reputable consultant selected by Landlord and paid for
by Tenant; or (2) a separate meter in the Premises installed,
maintained, and read by Landlord, at Tenant's expense. Tenant shall
not install any electrical equipment requiring special wiring or
requiring electrical current in excess of Normal Usage unless approved
in advance by Landlord. The use of electricity in the Premises shall
not exceed the capacity of existing feeders and risers to or wiring in
the Premises. Any risers or wiring required to meet Tenant's excess
electrical requirements shall, upon Tenant's written request, be
installed by Landlord, at Tenant's cost, if, in Landlord's sole and
absolute judgment, the same are necessary and shall not cause
permanent damage or injury to the Building or the Premises, cause or
create a dangerous or hazardous condition, entail excessive or
unreasonable alterations, repairs, or expenses, or interfere with or
disturb other tenants of the Building. If Tenant uses machines or
equipment (other than general office machines, personal computers and
electronic data processing equipment) in the Premises which affect the
temperature otherwise maintained by the air conditioning system or
otherwise overload any utility, Landlord may install supplemental air
conditioning units or other supplemental equipment in the Premises,
and the cost thereof, including the cost of installation, operation,
use, and maintenance, shall be paid by Tenant to Landlord within ten
days after Landlord has delivered to Tenant an invoice therefor.
(c) DISCONTINUANCE. Landlord's obligation to furnish services
under Section 7.(a) shall be subject to the rules and regulations of
the supplier of such services and governmental rules and regulations.
Landlord may, upon not less than 30-days' prior written notice to
Tenant, discontinue any such service to the Premises, provided
Landlord first arranges for a fully functioning, equivalent capacity
direct connection thereof through the supplier of such service. Tenant
shall, however, be responsible for contracting with the supplier of
such service and for paying all deposits for, and costs relating to,
such service.
(d) RESTORATION OF SERVICES; ABATEMENT. Landlord shall use
reasonable efforts to restore any service that becomes unavailable;
however, such unavailability shall (i) not render Landlord liable for
any damages caused thereby, (ii) be a constructive eviction of Tenant,
(iii) constitute a breach of any implied warranty, or, except as
provided in the next sentence, or (iv) entitle Tenant to any abatement
of Tenant's obligations hereunder. However, if Tenant is prevented
from making reasonable use of the Premises for more than 15
consecutive days (or 5 consecutive days if the reason for such
unavailability is within the reasonable control of Landlord) because
of the unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to a reasonable abatement of
Rent for each consecutive day (after such 15-day or 5-day period, as
applicable) that Tenant is so prevented from making reasonable use of
the Premises. Notwithstanding the foregoing, Tenant has the right to
terminate the Lease effective sixty (60) days after Tenant notifies
Landlord in writing of a material utility service (not including fiber
optics) discontinuance, unless such utility service is restored within
such 60-day period.
8. (a) IMPROVEMENTS: ALTERATIONS. Improvements to the Premises
shall be installed at the expense of Tenant only in accordance with
plans and specifications which have been previously submitted to and
approved in writing by Landlord. After the initial Tenant improvements
are made, no alterations or physical additions in or to the Premises
may be made without Landlord's prior written consent. Tenant shall not
paint or install lighting or decorations, signs, window or door
lettering, or advertising media of any type on or about the Premises
without the prior written consent of Landlord. All alterations,
additions, or improvements (whether temporary or permanent in
character, and including without limitation all air-conditioning
equipment and all other equipment that is in any manner connected to
the Building's plumbing system) made in or upon the Premises, either
by Landlord or Tenant, shall be Landlord's property at the end of the
Term and shall remain on the premises without compensation to Tenant.
Approval by Landlord of any of Tenant's drawings and plans and
specifications prepared in connection with any improvements in the
Premises shall not constitute a representation or warranty of Landlord
as to the adequacy or sufficiency of such drawings, plans and
specifications, or the improvements to which they relate, for any use,
purpose, or condition, but such approval shall merely be the consent
of Landlord as required hereunder. Notwithstanding anything in this
Lease to the contrary, Tenant shall be responsible for the cost of all
work within the Premises required to comply with the retrofit
requirements of the Americans with Disabilities Act of 1990, and all
rules, regulations, and guidelines promulgated thereunder, as the same
may be amended from time to time (the "ADA"), necessitated by any
installations, additions, or alterations made in or to the Premises at
the request of or by Tenant or by Tenant's use of the Premises (other
than retrofit work whose cost has been particularly identified as
being payable by Landlord in an instrument signed by Landlord and
Tenant), and Landlord shall be responsible for the cost of all work
required to comply with the ADA in connection with other areas of the
Building. Notwithstanding the foregoing, all moveable partitions,
cubical furniture and de-mountable wall systems are to be considered
personal property of the Tenant (similar to furniture) and may be
erected, moved, re-configured and removed, including minor electrical
connections, without consent from Landlord provided that the Building
is returned to its original or otherwise satisfactory condition after
such removal.
(b). REPAIRS; MAINTENANCE. Tenant shall maintain the Premises in
a clean, safe, operable, attractive condition, and shall not permit or
allow to remain any waste or damage to any portion of the Premises.
Tenant shall repair or replace, subject to Landlord's direction and
supervision any damage to the Building caused by Tenant or Tenant's
agents, contractors, or invitees. If Tenant fails to make such repairs
or replacements within 15 days after the occurrence of such damage,
then Landlord may make the same at Tenant's cost. In lieu of having
Tenant repair any such damage outside of the Premises, Landlord may
repair
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such damage at Tenant's cost. The cost of any repair or replacement
work performed by Landlord under this Section 8 shall be paid by
Tenant to Landlord within ten days after Landlord has delivered to
Tenant an invoice therefor.
(c). PERFORMANCE OF WORK. All work described in this Section 8
shall be performed only by Landlord or by contractors and
subcontractors approved in writing by Landlord. Tenant shall cause all
contractors and subcontractors to procure and maintain insurance
coverage against risks, in such amounts, and with such companies as
Landlord may reasonably require, and to procure payment and
performance bonds reasonably satisfactory to Landlord covering the
cost of the work. All such work shall be performed in accordance with
all legal requirements and in a good and workmanlike manner so as not
to damage the Premises, the primary structure or structural qualities
of the Building, or plumbing, electrical lines, or other utility
transmission facility. All such work which may affect the HVAC,
electrical system, or plumbing must be approved by the Building's
engineer of record.
(d). MECHANIC'S LIENS. Tenant shall not permit any mechanic's
liens to be filed against the Premises or the Building for any work
performed, materials furnished or obligation incurred by or at the
request of Tenant. If such a lien is filed, then Tenant shall, within
ten days after Landlord has delivered notice of the filing to Tenant,
either pay the amount of the lien or diligently contest such lien and
deliver to Landlord a bond or other security reasonably satisfactory
to Landlord. If Tenant fails to timely take either such action, then
Landlord may pay the lien claim without inquiry as to the validity
thereof, and any amounts so paid, including expenses and interest,
shall be paid by Tenant to Landlord within ten days after Landlord has
delivered to Tenant an invoice therefor.
USE 9. Tenant shall occupy and use the Premises only for the
Permitted Use and shall comply with all laws, orders, rules, and
regulations relating to the use, condition, and occupancy of the
Premises. The Premises shall not be used for any use which is
disreputable or creates extraordinary fire hazards or results in an
increased rate of insurance on the Building or its contents or the
storage of any hazardous materials or substances. If, because of
Tenant's acts, the rate of insurance on the Building or its contents
increases, Tenant shall pay to Landlord the amount of such increase on
demand, and acceptance of such payment shall not constitute a waiver
of any of Landlord's other rights. Tenant shall conduct its business
and control its agents, employees, and invitees in such a manner as
not to create any nuisance or interfere with other tenants or Landlord
in its management of the Building.
ASSIGNMENT
AND
SUBLETTING 10. (a) TRANSFERS; CONSENT. Tenant shall not, without the prior
written consent of Landlord (which shall not be unreasonably withheld,
conditioned or delayed), (1) assign, transfer, or encumber this Lease
or any estate or interest herein, whether directly or by operation of
law, (2) permit any other entity to become Tenant hereunder by merger,
consolidation, or other reorganization, (3) if Tenant is an entity
other than a corporation whose stock is publicly traded, permit the
transfer of an ownership interest in Tenant so as to result in a
change in the current control of Tenant, (4) sublet any portion of the
Premises, (5) grant any license, concession, or other right of
occupancy of any portion of the Premises, or (6) permit the use of the
Premises by any parties other than Tenant (any of the events listed in
Sections 10.(a)(1) through 10.(a)(6) being a "TRANSFER"). If Tenant
requests Landlord's consent to a Transfer, then Tenant shall provide
Landlord with a written description of all terms and conditions of the
proposed Transfer, copies of the proposed documentation, and the
following information about the proposed transferee: name and address;
reasonably satisfactory information about its business and business
history; its proposed use of the Premises; banking, financial, and
other credit information; and general references sufficient to enable
landlord to determine the proposed transferee's creditworthiness and
character. Tenant shall reimburse Landlord for its reasonable
attorneys' fees and other expenses incurred in connection with
considering any request for its consent to a Transfer. If Landlord
consents to a proposed Transfer, then the proposed transferee shall
deliver to Landlord a written agreement whereby it expressly assumes
the Tenant's obligations hereunder; however, any transferee of less
than all of the space in the Premises shall be liable only for
obligations under this Lease that are properly allocable to the space
subject to the Transfer, and only to the extent of the rent it has
agreed to pay Tenant therefor. Landlord's consent to a Transfer shall
not release Tenant from performing its obligations under this Lease,
but rather Tenant and its transferee shall be jointly and severally
liable therefor. Landlord's consent to any Transfer shall not waive
Landlord's rights as to any subsequent Transfers. If an Event of
Default occurs while the Premises or any part thereof are subject to a
Transfer, then Landlord, in addition to its other remedies, may
collect directly from such transferee all rents becoming due to Tenant
and apply such rents against Rent. Tenant authorizes its transferees
to make payments of rent directly to Landlord upon receipt of notice
from Landlord to do so provided such notice states that an Event of
Default has occurred and is continuing. Notwithstanding the foregoing,
Tenant may assign the Lease or sublease all or any portion of the
Premises without Landlord's consent to any of the following (a
"Permitted Transferee"), provided that the Permitted Transferee's
financial condition, creditworthiness and business reputation
following the transfer are equal to or exceed those of Tenant: (i) any
successor corporation or other entity resulting from a merger or
consolidation of Tenant; (ii) any purchaser of all or substantially
all of Tenant's assets; or (iii) any entity which controls, is
controlled by, or is under common control with Tenant; provided
further, however, that a Permitted Transferee shall also include a
sublessee that is an entity in which Tenant owns or controls greater
than fifty percent (50%) of the ownership interests [or the right to
vote such
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ownership interest] and is in the same or similar business as Tenant
without regard to such sublessee's financial condition or
creditworthiness. Tenant shall give Landlord thirty (30) days prior
written notice of such assignment or sublease. Any Permitted
Transferee (other than a sublessee) shall assume in writing all of
Tenant's obligations under this Lease. Tenant shall nevertheless at
all times remain fully responsible and liable for the payment of rent
and the performance and observance of all of Tenant's other
obligations under this Lease. Nothing in this paragraph is intended to
nor shall permit Tenant to transfer its interest under this Lease as
part of a fraud or subterfuge to intentionally avoid its obligations
under this Lease (for example, transferring its interest to a shell
corporation that subsequently files a bankruptcy), and any such
transfer shall constitute a Default hereunder.
(b) CANCELLATION. Landlord may, within ten (10) days after
submission of Tenant's written request for Landlord's consent to a
Transfer (except to a Permitted Transfer), cancel this Lease (or, as
to a subletting or assignment, cancel as to the portion of the
Premises proposed to be sublet or assigned) as of the date the
proposed Transfer was to be effective. Notwithstanding the foregoing,
Landlord shall not have a cancellation right with respect to a
sublease that covers less than fifty percent (50%) of the Premises
and is for less than three (3) years. If Landlord cancels this Lease
as to any portion of the Premises, then this Lease shall cease for
such portion of the Premises and Tenant shall pay to Landlord all
Rent accrued through the cancellation date relating to the portion
of the Premises covered by the proposed Transfer. Thereafter,
Landlord may lease such portion of the Premises to the prospective
transferee (or to any other person) without liability to Tenant.
(c) ADDITIONAL COMPENSATION. Tenant shall pay to Landlord,
immediately upon receipt thereof, one-half (1/2) of all compensation
received by Tenant for a Transfer that exceeds the sum of the Basic
Rental and Tenant's share of Basic Costs allocable to the portion of
the Premises covered thereby; provided, however, that Tenant shall be
allowed to recoup its reasonable out of pocket expenses incurred in
such Transfer (attorney's fees, brokerage commissions and costs of
retrofitting the Premises) from such excess compensation before paying
one-half (1/2) of such excess compensation to Landlord.
Notwithstanding the foregoing, Tenant shall not be required to pay to
Landlord additional compensation received by Tenant for a Transfer if
(i) such Transfer is to a Permitted Transferee or (ii) such additional
compensation is in the form of non-monetary compensation such as
assignment of intellectual properties or warrants for shares of stock.
INSURANCE;
WAIVERS;
SUBROGATION;
INDEMNITY 11. (a) TENANT'S INSURANCE. Tenant shall at its expense procure
and maintain throughout the Term the following insurance policies: (1)
comprehensive general liability insurance in amounts of not less than
a combined single limit of $3,000,000 (the "INITIAL LIABILITY
INSURANCE AMOUNT") or such other amounts as Landlord may from time to
time reasonably require, insuring Tenant, Landlord, Landlord's agents
and their respective affiliates against all liability for injury to or
death of a person or persons or damage to property arising from the
use and occupancy of the Premises by Tenant, (2) contractual liability
insurance coverage sufficient to cover Tenant's indemnity obligations
hereunder, (3) insurance covering the full value of Tenant's property
and improvements, and other property (including property of others),
in the Premises, (4) workman's compensation insurance, containing a
waiver of subrogation endorsement reasonably acceptable to Landlord,
and (5) business interruption insurance. Tenant's insurance shall
provide primary coverage to Landlord when any policy issued to
Landlord provides duplicate or similar coverage, and in such
circumstance Landlord's policy will be excess over Tenant's policy.
Tenant shall furnish certificates of such insurance and such other
evidence satisfactory to Landlord of the maintenance of all insurance
coverages required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at
least 30 days before cancellation or a material change of any such
insurance. All such insurance policies shall be in form, and issued by
companies, reasonably satisfactory to Landlord, The term "AFFILIATE "
shall mean any person or entity which, directly or indirectly,
controls, is controlled by, or is under common control with the party
in question.
(b) LANDLORD'S INSURANCE. Landlord shall, during the term,
maintain in full force the following insurance: (i) commercial general
liability insurance insuring against any liability due to injury or
death to any person or loss of or damage to property arising out of
the operations of Landlord at the Building and/or arising out of the
common areas, with coverage limits at least three million dollars
($3,000,000.00) per occurrence (which coverage may be through blanket
or umbrella policies), and (ii) All-Risk Property insurance, issued by
one or more insurance carriers covering the Building to the extent of
its full replacement value (exclusive of improvements above building
standard and foundation and excavation costs and other uninsurable
parts).
(c) WAIVER OF NEGLIGENCE CLAIMS; NO SUBROGATION. Landlord shall
not be liable to Tenant or those claiming by, through, or under Tenant
for any injury to or death of any person or persons or the damage to
or theft, destruction, loss, or loss of use of any property or
inconvenience (a "LOSS") caused by casualty, theft, fire, third
parties, or any other matter (including Losses arising through repair
or alteration of any part of the Building, or failure to make repairs,
or from any other cause), REGARDLESS OF WHETHER THE NEGLIGENCE OF ANY
PARTY CAUSED SUCH LOSS IN WHOLE OR IN PART EXCEPT FOR GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF LANDLORD OR ITS AGENTS. Landlord and Tenant
each waives any claim it might have against the other for any
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damage to or theft, destruction, loss, or loss of use of any property,
to the extent the same is insured against under any insurance policy
that covers the Building, the Premises, Landlord's or Tenant's
fixtures, personal property, leasehold improvements, or business, or,
in the case of Tenant's waiver, is required to be insured against
under the terms hereof, REGARDLESS OF WHETHER THE NEGLIGENCE OR FAULT
OF THE OTHER PARTY CAUSED SUCH LOSS; HOWEVER, LANDLORD'S WAIVER SHALL
NOT INCLUDE ANY DEDUCTIBLE AMOUNTS ON INSURANCE POLICIES CARRIED BY
LANDLORD OR APPLY TO ANY COINSURANCE PENALTY WHICH LANDLORD MIGHT
SUSTAIN. Each party shall cause its insurance carrier to endorse all
applicable policies waiving the carrier's rights of recovery under
subrogation or otherwise against the other party.
(d) INDEMNITY. Subject to Section 11.(b), Tenant shall defend,
indemnify, and hold harmless Landlord and its agents from and against
all claims, demands, liabilities, causes of action, suits, judgments,
and expenses (including reasonable attorneys' fees) for any Loss
arising from any occurrence on the Premises or from Tenant's failure
to perform its obligations under this Lease (other than a Loss arising
from the sole or gross negligence or willful acts of Landlord or its
agents), even though caused or alleged to be caused by the joint,
comparative, or concurrent negligence or fault of Landlord or its
agents. THIS INDEMNITY PROVISION IS INTENDED TO INDEMNIFY LANDLORD AND
ITS AGENTS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE OR FAULT
AS PROVIDED ABOVE WHEN LANDLORD OR ITS AGENTS ARE JOINTLY,
COMPARATIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT. This indemnity
provision shall survive termination or expiration of this Lease.
SUBORDINATION
ATTORNMENT;
NOTICE TO
LANDLORD'S
MORTGAGEE
12. (a) SUBORDINATION. This Lease is subordinate to any deed
of trust, mortgage, or other security instrument (a "MORTGAGE"),
or any ground lease, master lease, or primary lease (a "PRIMARY
LEASE"), that now or hereafter covers all or any part of the
Premises (the mortgagee under any Mortgage or the lessor under any
Primary Lease is referred to herein as "LANDLORD'S MORTGAGEE"). The
provisions of this Section 12(a) shall be self-operative, and no
further instrument shall be required to effect such subordination;
however, Landlord shall deliver to Tenant, and Tenant shall execute
from time to time within ten days after delivery to Tenant, an
instrument from each Landlord's Mortgagee evidencing the
subordination of this Lease to any such Mortgage or Primary Lease
(which instrument shall include a non-disturbance provision in
favor of Tenant and shall be on Landlord's Mortgagee's standard
form). Notwithstanding the foregoing, Landlord, Tenant and
Landlord's Mortgagee shall execute and deliver a Subordination,
Non-disturbance and Attornment Agreement in the form attached as
Exhibit "H" hereto within ten (10) days after the date hereof.
(b) ATTORNMENT. Tenant shall attorn to any party succeeding to
Landlord's interest in the Premises, whether by purchase, foreclosure,
deed in lieu of foreclosure, power of sale, termination of lease, or
otherwise, upon such party's request, and shall execute such
agreements confirming such attornment as such party may reasonably
request.
(c) NOTICE TO LANDLORD'S MORTGAGEE. Tenant shall not seek to
enforce any remedy it may have for any default on the part of the
Landlord without first giving written notice by certified mail, return
receipt requested, specifying the default in reasonable detail, to any
Landlord's Mortgagee whose address has been given to Tenant, and
affording such Landlord's Mortgagee the same opportunity as given to
Landlord to perform Landlord's obligations hereunder, except as
otherwise may be provided in any applicable subordination,
non-disturbance and attornment agreement executed by Landlord, Tenant
and Landlord's Mortgagee.
RULES
AND
REGULATIONS
13. Tenant shall comply with the rules and regulations of the
Building which are attached hereto as EXHIBIT B. Landlord may, from
time to time, change such rules and regulations for the safety, care,
or cleanliness of the Building and related facilities, provided that
such changes are reasonable, applicable to all tenants of the Building
evenly enforced and will not unreasonably interfere with Tenant's use
of the Premises. Tenant shall be responsible for the compliance with
such rules and regulations by its employees, agents, and invitees.
CONDEMNATION
14. (a) TAKING - LANDLORD'S AND TENANT'S RIGHTS. If any part of
the Building is taken by right of eminent domain or conveyed in lieu
thereof (a "TAKING"), and such Taking prevents Tenant from conducting
its business in the Premises in a manner reasonably comparable to that
conducted immediately before such Taking, then Landlord may, at its
expense, relocate Tenant to office space reasonably comparable to the
Premises within five miles of Premises, provided that Landlord
notifies Tenant of its intention to do so prior to the effective date
of the Taking. Such relocation may be for a portion of the remaining
Term or the entire Term. Landlord shall complete any such relocation
within 180 days after Landlord has notified Tenant of its intention to
relocate Tenant. If Landlord does not elect to relocate Tenant
following such Taking, then Tenant may terminate this Lease as of the
date of such Taking by giving written notice to Landlord within
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60 days after the Taking, and Rent shall be apportioned as of the date
of such Taking. If Landlord does not relocate Tenant and Tenant does
not terminate this Lease, then Rent shall be adjusted on a reasonable
basis as to that portion of the Premises rendered untenantable by the
Taking. Correspondingly, the Letter of Credit obligation will be
adjusted on a reasonable basis in the event of partial Taking or
eliminated entirely in the event of Lease termination.
(b) TAKING - LANDLORD'S RIGHTS. If any material portion, but
less than all, of the Building becomes subject to a Taking, or if
Landlord is required to pay any of the proceeds received for a Taking
to Landlord's Mortgagee, then this Lease, at the option of Landlord,
exercised by written notice to Tenant within 30 days after such
Taking, shall terminate and Rent shall be apportioned as of the date
of such Taking. If Landlord does not so terminate this Lease and does
not elect to relocate Tenant, then, subject to Tenant's rights under
14(a), this Lease will continue, but if any portion of the Premises
has been taken, Basic Rental shall adjust as provided in the last
sentence of Section 14.(a).
(c) AWARD. If any Taking occurs, then Landlord shall receive the
entire award or other compensation for the Land, the Building, and
other improvements taken, and Tenant may separately pursue a claim
against the condemner for the value of Tenant's personal property
which Tenant is entitled to remove under this Lease, moving costs,
loss of business, and other claims it may have.
FIRE OR
OTHER
CASUALTY 15. (a) REPAIR ESTIMATE. If the Premises or the Building are
damaged by fire or other casualty (a "CASUALTY"), Landlord shall,
within 60 days after such Casualty, deliver to Tenant a good faith
estimate (the "DAMAGE NOTICE") of the time needed to repair the damage
caused by such Casualty.
(b) LANDLORD'S AND TENANT'S RIGHTS. If a material portion of the
Premises or the Building is damaged by Casualty such that Tenant is
prevented from conducting its business in the Premises in a manner
reasonably comparable to that conducted immediately before such
Casualty and Landlord estimates in good faith that the damage caused
thereby cannot be repaired within 270 days after the date of casualty,
then Tenant may terminate this Lease by delivering written notice to
Landlord of its election to terminate within 30 days after the Damage
Notice has been delivered to Tenant. If Tenant does not terminate this
Lease, then (subject to Landlord's rights under Section 15.(c))
Landlord shall repair the Building or the Premises, as the case may
be, as provided below, and Rent for the portion of the Premises
rendered untenantable by the damage shall be adjusted on a reasonable
basis from the date of damage until the completion of the repair.
(c) LANDLORD'S RIGHTS. If a Casualty damages a material portion
of the Building, and Landlord makes a good faith determination that
restoring the Premises would be uneconomical, or if Landlord is
required to pay any insurance proceeds arising out of the Casualty to
Landlord's Mortgagee (such that Landlord would be required to pay
$100,000.00 or more of its own funds to restore the Building), then
Landlord may, terminate this Lease by giving written notice of its
election to terminate within 30 days after the Damage Notice has been
delivered to Tenant, and Basic Rental hereunder shall be abated as of
the date of the Casualty.
(d) REPAIR OBLIGATION. If neither party elects to
terminate this Lease following a Casualty, then Landlord shall, within
a reasonable time after such Casualty, commence to repair the Building
and the Premises and shall proceed with reasonable diligence to
restore the Building and Premises to substantially the same condition
as they existed immediately before such Casualty; however, Landlord
shall not be required to repair or replace any part of the furniture,
equipment, fixtures, and other improvements which may have been placed
by, or at the request of, Tenant or other occupants in the Building or
the Premises, except for initial improvements pursuant to Exhibit D,
and Landlord's obligation to repair or restore the Building or
Premises shall be limited to the extent of the insurance proceeds
actually received by Landlord for the Casualty in question. If
Landlord fails to substantially complete the rebuilding and repair of
the Premises within one (1) year after the date of the casualty, then
this Lease shall terminate thirty (30) days after Landlord receives
written notice, if any, from Tenant that Tenant has elected to
terminate this Lease pursuant to this paragraph; provided that, if
Landlord substantially completes such rebuilding and repairs prior to
the expiration of thirty (30) days following Landlord's receipt of
Tenant's termination notice, this Lease shall not so terminate and
shall continue in full force and effect.
TAXES 16. Tenant shall be liable for all taxes levied or assessed
against personal property, furniture, or fixtures placed by Tenant in
the Premises. If any taxes for which Tenant is liable are levied or
assessed against Landlord or Landlord's property and Landlord elects
to pay the same, or if the assessed value of Landlord's property is
increased by inclusion of such personal property, furniture or
fixtures and Landlord elects to pay the taxes based on such increase,
then Tenant shall pay to Landlord, upon demand, that part of such
taxes for which Tenant is primarily liable hereunder.
EVENTS OF
DEFAULT 17. Each of the following occurrences shall constitute an "EVENT
OF DEFAULT":
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(a) Tenant's failure to pay Rent, or any other sums due from
Tenant to Landlord under the Lease when due and such failure continues
for ten (10) days following written notice from Landlord notifying
Tenant of Tenant's failure to pay when due; provided, however, that in
the event Landlord gives to Tenant notice of Tenant's failure to pay
when due two (2) times in any calendar year, Tenant's failure to pay
when due the third (3rd) time in such calendar year shall constitute
an Event of Default immediately without any notice thereof required
from Landlord;
(b) Tenant's failure to perform, comply with, or observe any
agreement or obligation of Tenant under this Lease (other than a
payment obligation) on or before the thirtieth (30th) day following
written notice of such failure or longer time if not curable within
thirty (30) days provided Tenant is in diligent pursuit to cure such
failure and in any event such cure is commenced within thirty (30),
and completed within ninety (90) days, after written notice;
(c) the filing of a petition by or against Tenant in any
bankruptcy or other insolvency proceeding; (2) seeking any relief
under any state or federal debtor relief law; (3) for the appointment
of a liquidator or receiver for all or substantially all of Tenant's
property or for Tenant's interest in this Lease; or (4) for the
reorganization or modification of Tenant's capital structure; provided
that Tenant shall have sixty (60) days following the commencement of
an involuntary proceeding to have such proceeding dismissed before
such proceeding shall constitute an Event of Default; and
(d) the admission by Tenant that it cannot meet its obligations
as they become due or the making by Tenant of an assignment for the
benefit of its creditors.
REMEDIES 18. Upon any Event of Default, Landlord may, in addition to all
other rights and remedies afforded Landlord hereunder or by law or
equity, take any of the following actions:
(a) Terminate this Lease by giving Tenant written notice
thereof, in which event, Tenant shall pay to Landlord the sum of (1)
all Rent accrued hereunder through the date of termination, (2) all
amounts due under Section 19.(a), and (3) an amount equal to (A) the
total Rent that Tenant would have been required to pay for the
remainder of the Term discounted to present value at a per annum rate
equal to the "Prime Rate" as published on the date this Lease is
terminated by The Wall Street Journal, Southwest Edition, in its
listing of "Money Rates", minus (B) the then present fair rental value
of the Premises for such period, similarly discounted; or
(b) Terminate Tenant's right to possession of the Premises
without terminating this Lease by giving written notice thereof to
Tenant, in which event Tenant shall pay to Landlord (1) all Rent and
other amounts accrued hereunder to the date of termination of
possession, (2) all amounts due from time to time under Section
19.(a), and (3) all Rent and other sums required hereunder to be paid
by Tenant during the remainder of the Term, diminished by any net sums
thereafter received by Landlord through reletting the Premises during
such period. Landlord shall use reasonable efforts to relet the
Premises on such terms and conditions as Landlord in its sole
discretion may determine (including a term different from the Term,
rental concessions, and alterations to, and improvement of, the
Premises); however, Landlord shall not be obligated to relet the
Premises before leasing other portions of the Building. Landlord shall
not be liable for, nor shall Tenant's obligations hereunder be
diminished because of, Landlord's failure to relet the Premises or to
collect rent due for such reletting provided Landlord shall use
reasonable efforts as set forth herein. Tenant shall not be entitled
to the excess of any consideration obtained by reletting over the Rent
due hereunder. Reentry by Landlord in the Premises shall not affect
Tenant's obligations hereunder for the unexpired Term; rather,
Landlord may, from time to time, bring action against Tenant to
collect amounts due by Tenant, without the necessity of Landlord's
waiting until the expiration of the Term. Unless Landlord delivers
written notice to Tenant expressly stating that it has elected to
terminate this Lease, all actions taken by Landlord to exclude or
dispossess Tenant of the Premises shall be deemed to be taken under
this Section 18.(b). If Landlord elects to proceed under this Section
18.(b), it may at any time elect to terminate this Lease under Section
18.(a).
Additionally, without notice, Landlord may alter locks or other
security devices at the Premises to deprive Tenant of access thereto,
and Landlord shall not be required to provide a new key or right of
access to Tenant. Notwithstanding the foregoing, Tenant will be
granted access to the premises for the sole purpose of removal of all
materials, including documentation, electronic media, computers,
computers containing electronic media, diagrams, pictures or any other
property that is confidential or proprietary information of the Tenant
or of third parties with such access granted to Tenant prior to
Landlord re-entering the premises; provided that a representative of
Landlord may be present to insure that Tenant does not remove any
unauthorized materials. Either party may request such removal within
three (3) business days or earlier based on compelling business
reasons by either party for more immediate access.
PAYMENT BY
TENANT;
NON-WAIVER 19. (a) PAYMENT BY TENANT. Upon any Event of Default, Tenant
shall pay to Landlord all costs incurred by Landlord (including court
costs and reasonable attorneys' fees and expenses) in (1) obtaining
possession of the Premises, (2) removing and storing Tenant's or any
other occupant's property, (3) repairing, restoring, altering,
remodeling, or otherwise putting the Premises into condition
acceptable to a new tenant, (4) if
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Tenant is dispossessed of the Premises and this Lease is not
terminated, reletting all or any part of the Premises (including
brokerage commissions, cost of tenant finish work, and other costs
incidental to such reletting), (5) performing Tenant's obligations
which Tenant failed to perform, and (6) enforcing, or advising
Landlord of, its rights, remedies, and recourses arising out of the
Event of Default.
(b) NO WAIVER. Landlord's acceptance of Rent following an
Event of Default shall not waive Landlord's rights regarding such
Event of Default. No waiver by Landlord of any violation or breach
of any of the terms contained herein shall waive Landlord's rights
regarding any future violation of such term or violation of any
other term.
SURRENDER OF
PREMISES 20. No act by Landlord shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept a surrender
of the Premises shall be valid unless the same is made in writing
and signed by Landlord. At the expiration or termination of this
Lease, Tenant shall deliver to Landlord the Premises with all
improvements located thereon in good repair and condition,
reasonable wear and tear (and condemnation and fire or other
casualty damage, as to which Sections 14 and 15 shall control)
excepted, and shall deliver to Landlord all keys to the Premises.
Provided that Tenant has performed all of its obligations
hereunder, Tenant may remove all unattached trade fixtures,
furniture, and personal property placed in the Premises by Tenant
(but Tenant shall not remove any such item which was paid for, in
whole or in part, by Landlord). Additionally, Tenant shall remove
such alterations, additions, improvements, trade fixtures,
equipment, wiring, and furniture that is installed or placed in the
Premises by Tenant as Landlord may request, except for initial
improvements pursuant to Exhibit D. Tenant shall repair all damage
caused by such removal. All items not so removed shall be deemed to
have been abandoned by Tenant and may be appropriated, sold,
stored, destroyed, or otherwise disposed of by Landlord without
notice to Tenant and without any obligation to account for such
items. The provisions of this Section 20 shall survive the end of
the Term.
HOLDING
OVER 21. If Tenant fails to vacate the Premises at the end of the
Term, then Tenant shall be a tenant at will and, in addition to all
other damages and remedies to which Landlord may be entitled for
such holding over, Tenant shall pay, in addition to the other Rent,
a daily Basic Rental equal to the greater of (a) 150% of the daily
Basic Rental payable during the last month of the Term, or (b) the
prevailing rental rate in the Building for similar space.
CERTAIN RIGHTS
RESERVED BY
LANDLORD 22. Provided that the exercise of such rights does not
unreasonably interfere with Tenant's occupancy of the Premises,
Landlord shall have the following rights:
(a) to decorate and to make inspections, repairs,
alterations, additions, changes, or improvements, whether
structural or otherwise, in and about the Building, or any part
thereof; for such purposes, to enter upon the Premises and, during
the continuance of any such work, to temporarily close doors,
entryways, public space, and corridors in the Building; to
interrupt or temporarily suspend Building services and facilities;
and to change the arrangement and location of entrances or
passageways, doors, and doorways, corridors, elevators, stairs,
restrooms, or other public parts of the Building;
(b) to take such reasonable measures as Landlord deems
advisable for the security of the Building and its occupants,
including without limitation searching all persons entering or
leaving the Building; evacuating the Building for cause, suspected
cause, or for drill purposes; temporarily denying access to the
Building; and closing the Building after normal business hours and
on Saturdays, Sundays, and holidays, subject, however, to Tenant's
right to enter when the Building is closed after normal business
hours under such reasonable regulations as Landlord may prescribe
from time to time which may include by way of example, but not of
limitation, that persons entering or leaving the Building, whether
or not during normal business hours, identify themselves to a
security officer by registration or otherwise and that such persons
establish their right to enter or leave the Building;
(c) to change the name by which the Building is designated; and
(d) to enter the Premises accompanied by Tenant at all
reasonable hours and upon giving Tenant reasonable notice (except
in the case of any emergency) to show the Premises to prospective
purchasers, lenders, or tenants (provided the space shall only be
shown to prospective tenants in conjunction with reletting the
Premises), subject to reasonable Tenant security and
confidentiality procedures.
MISCELLANEOUS 24. (a) LANDLORD TRANSFER. Landlord may transfer, in whole
or in part, the Building and any of its rights under this Lease. If
Landlord assigns its rights under this lease, and the assignee
assumes all Landlord's obligation under this Lease, then Landlord
shall thereby be released from any further obligations hereunder
arising after the date of such transfer.
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(b) LANDLORD'S LIABILITY. The liability of Landlord to Tenant
for any default by Landlord under the terms of this Lease shall be
limited to Tenant's actual direct, but not consequential, damages
therefor and shall be recoverable from the interest of Landlord in
the Building and the Land, and Landlord shall not be personally
liable for any deficiency. This section shall not be deemed to
limit or deny any remedies which Tenant may have in the event of
default by Landlord hereunder which do not involve the personal
liability of Landlord.
(c) FORCE MAJEURE. Other than for Tenant's monetary
obligations under this Lease and obligations which can be cured by
the payment of money (e.g., maintaining insurance), whenever a
period of time is herein prescribed for action to be taken by
either party hereto, such party shall not be liable or responsible
for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, war, governmental laws,
regulations (including inability to obtain necessary permits due to
no fault of Landlord or its contractors or agents), or
restrictions, or any other causes of any kind whatsoever which are
beyond the control of such party.
(d) BROKERAGE. Landlord and Tenant each warrant to the other
that it has not dealt with any broker or agent in connection with
the negotiation or execution of this Lease, except for Insignia/ESG
of Texas, Inc. (Landlord's exclusive agent) and Colliers Oxford
Commercial (Tenant's exclusive agent). Tenant and Landlord shall
each indemnify the other against all costs, expenses, reasonable
attorneys' fees, and other liability for commissions or other
compensation claimed by any broker or agent claiming the same by,
through, or under the indemnifying party.
(e) ESTOPPEL CERTIFICATES AND FINANCIAL INFORMATION. From
time to time, Tenant shall furnish to any party designated by
Landlord, within ten days after Landlord has made a request
therefor, a certificate signed by Tenant confirming and containing
such factual certifications and representations as to this Lease as
Landlord may reasonably request. From time to time, Landlord shall
furnish to any party designated by Tenant, within ten days after
Tenant has made a request therefor, a certificate signed by
Landlord confirming and containing such factual certifications and
representations as to this Lease as Tenant may reasonably request.
Further, from time to time (but not more often than once in any
given six (6) month period), within ten days after Landlord's
request therefor, Tenant shall furnish to Landlord or Landlord's
Mortgagee the most recent annual financial statements for Tenant.
(f) NOTICES. All notices and other communications given
pursuant to this Lease shall be in writing and shall be (1) mailed
by first class, United States Mail, postage prepaid, certified,
with return receipt requested, and addressed to the parties hereto
at the address specified in the Basic Lease Information, (2) hand
delivered or delivered by overnight delivery service to the
intended address, or (3) sent by prepaid telegram, cable, facsimile
transmission, or telex followed by a confirmatory letter. Notice
sent by certified mail, postage prepaid, shall be effective three
business days after being deposited in the United States Mail; all
other notices shall be effective upon delivery to the address of
the addressee. The parties hereto may change their addresses by
giving notice thereof to the other in conformity with this
provision.
(g) SEPARABILITY. If any clause or provision of this Lease is
illegal, invalid, or unenforceable under present or future laws,
then the remainder of this Lease shall not be affected thereby and
in lieu of such clause or provision, there shall be added as a part
of this Lease a clause or provision as similar in terms to such
illegal, invalid, or unenforceable clause or provision as may be
possible and be legal, valid, and enforceable.
(h) AMENDMENTS; AND BINDING EFFECT. This Lease may not be
amended except by instrument in writing signed by Landlord and
Tenant. No provision of this Lease shall be deemed to have been
waived by Landlord unless such waiver is in writing signed by
Landlord, and no custom or practice which may evolve between the
parties in the administration of the terms hereof shall waive or
diminish the right of Landlord to insist upon the performance by
Tenant in strict accordance with the terms hereof. The terms and
conditions contained in this Lease shall inure to the benefit of
and be binding upon the parties hereto, and upon their respective
successors in interest and legal representatives, except as
otherwise herein expressly provided. This Lease is for the sole
benefit of Landlord and Tenant, and, other than Landlord's
Mortgagee, no third party shall be deemed a third party beneficiary
hereof.
(i) QUIET ENJOYMENT. Provided Tenant has performed all of the
terms and conditions of this Lease to be performed by Tenant,
Tenant shall peaceably and quietly hold and enjoy the Premises for
the Term, without hindrance from Landlord or any party claiming by,
through, or under Landlord, subject to the terms and conditions of
this Lease.
(j) JOINT AND SEVERAL LIABILITY. If there is more than one
Tenant, then the obligations hereunder imposed upon Tenant shall be
joint and several.
(k) CAPTIONS. The captions contained in this Lease are for
convenience of reference only, and do not limit or enlarge the
terms and conditions of this Lease.
(l) NO MERGER. There shall be no merger of the leasehold
estate hereby created with the fee
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estate in the Premises or any part thereof if the same person
acquires or holds, directly or indirectly, this Lease or any
interest in this Lease and the fee estate in the leasehold Premises
or any interest in such estate.
(m) NO OFFER. The submission of this Lease to Tenant shall
not be construed as an offer, nor shall Tenant have any right under
this Lease unless Landlord executes a copy of this Lease and
delivers it to Tenant.
(n) EXHIBITS. All exhibits and attachments hereto are
incorporated herein by this reference.
Exhibit A - Land
Exhibit A-1 - Outline of Premises
Exhibit A-2 - Project
Exhibit B - Building Rules and Regulation
Exhibit C - Basic Costs
Exhibit D - Tenant Finish-Work
Exhibit E - Parking
Exhibit F - Extension Option
Exhibit G - Right of First Refusal
Exhibit H - Subordination, Non-disturbance and
Attornment Agreement
Exhibit I - Pro Forma Letter of Credit
Exhibit J - Confidentiality Agreement
(o) ENTIRE AGREEMENT. This Lease constitutes the entire
agreement between Landlord and Tenant regarding the subject matter
hereof and supersedes all oral statements and prior writings
relating thereto. Except for those set forth in this Lease, no
representations, warranties, or agreements have been made by
Landlord or Tenant to the other with respect to this Lease or the
obligations of Landlord or Tenant in connection therewith.
HAZARDOUS
SUBSTANCES 25. The term "HAZARDOUS SUBSTANCES," as used in this Lease
shall mean pollutants, contaminants, toxic or hazardous wastes, or
any other substances, the removal of which is required or the use
of which is restricted, prohibited or penalized by any
"ENVIRONMENTAL LAW," which term shall mean any Law relating to
health, pollution, or protection of the environment. Tenant hereby
agrees that a). no activity will be conducted on the Premises that
will produce any Hazardous Substances, except for such activities
that are part of the ordinary course of Tenant's business
activities (the "PERMITTED ACTIVITIES") provided such Permitted
Activities are conducted in accordance with all Environmental Laws
and have been approved in advance in writing by Landlord; b). the
Premises will not be used in any manner for the storage of any
Hazardous Substances except for any temporary storage of such
materials that are used in the ordinary course of Tenant's business
(the "PERMITTED MATERIALS") provided such Permitted Materials are
properly stored in a manner and location satisfying all
Environmental Laws and approved in advance in writing by Landlord;
c). no portion of the Premises will be used as a landfill or a
dump; d). Tenant will not install any underground tanks of any
type; e). Tenant will not cause any surface or subsurface
conditions to exist or come into existence that constitute, or with
the passage of time may constitute a public or private nuisance;
f). Tenant will not permit any Hazardous Substances to be brought
onto the Premises, except for the Permitted Materials, and if so
brought or found located thereon, the same shall be immediately
removed by Tenant, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all
Environmental Laws; g). Tenant will maintain on the Premises a list
of all materials stored at the Premises for which a material safety
data sheet (an "MSDS") was issued by the producers or manufacturers
thereof, together with copies of the MSDS's for such materials, and
shall deliver such list and MSDS copies to Landlord upon Landlord's
request therefor; and h). Tenant shall remove all Permitted
Materials from the Premises in a manner acceptable to Landlord
before Tenant's right to possess the Premises is terminated. If at
any time during or after the Term, the Premises are found to be so
contaminated or subject to such conditions, Tenant shall defend,
indemnify and hold Landlord harmless from all claims, demands,
actions, liabilities, costs, expenses, damages and obligations of
any nature arising from or as a result of the use of the Premises
by Tenant, except for any conditions or contamination caused by
Landlord. The foregoing indemnity shall survive termination or
expiration of this Lease. Unless expressly identified on an
addendum to this Lease, as of the date hereof there are no
"Permitted Activities" or "Permitted Materials" for purposes of the
foregoing provision and none shall exist unless and until approved
in writing by the Landlord. Landlord may enter the Premises and
conduct environmental inspections and tests therein as it may
reasonably require from time to time, provided that Landlord shall
use reasonable efforts to minimize the interference with Tenant's
business. Such inspections and tests shall be conducted at
Landlord's expense, unless they reveal the presence of Hazardous
Substances brought by Tenant or its employees, representatives or
agents to the Premises (other than Permitted Materials or those
placed in the Premises by Landlord) or that Tenant has not complied
with the requirements set forth in this Section 25, in which case
Tenant shall reimburse Landlord for the cost thereof within ten
days after Landlord's request therefor. In no event shall Tenant be
liable for Hazardous Substances on the Premises prior to the
Commencement Date, unless brought to the Premises by Tenant or its
employees, representatives or agents.
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LANDLORD'S
LIEN 26. Tenant shall have the right to grant any security
interests in Tenant's removable furniture, fixtures and equipment
located in the Premises for the purpose of securing any
indebtedness provided by a third party. Tenant may also lease such
furniture, fixtures and / or equipment from one or more equipment
lessors and grant security interests in such furniture, fixtures
and/or equipment to such equipment lessors in connection with such
leases. Upon request Landlord will execute one or more consent
and/or subordination agreements subordinating any landlord's lien
rights held by Landlord to any such security interests or leases.
Notwithstanding the foregoing, in no event will Tenant have the
right to grant any lien, mortgage or security interest in any
portion of the Building or in this Lease.
SPECIAL PROVISIONS
27. Landlord agrees that Tenant may, at Tenant's expense,
erect and maintain lettering bearing Tenant's name at the top position of the
monument sign associated with the Building, such lettering to represent fifty
percent (50%) of the graphical portion of such monument sign which is
designated for use by tenants (subject to Landlord's reasonable approval of
the size, design, form, content and location of such sign). If any other
tenant in the Building which leases less space than the Premises is permitted
to place signage on the Building, Tenant shall also be permitted to install
and maintain a sign bearing Tenant's name on the exterior of the Building
[such sign to be (i) larger than such other tenant's sign in proportion to the
amount by which the square footage of the Premises exceeds the square footage
of such other tenant's premises and (ii) mutually agreed to by Landlord and
Tenant as to design, form, content and location]. Tenant shall be solely
responsible for all costs of designing, installing and repairing such
signage, diligently construct such building signage to completion in a good
and workmanlike manner and maintain such signage in an attractive condition,
and comply with all governmental codes and regulations. Upon termination or
expiration of this Lease, Tenant shall remove such signage and repair any
damage to the Building caused thereby at its sole cost and expense.
Notwithstanding anything to the contrary contained in this Lease, Tenant
hereby indemnifies and holds Landlord harmless against any claims, costs or
expenses (including reasonable attorneys fees) in connection with any damages
to property or injuries to persons arising out of the installation, removal
or maintenance of such building signage.
28. Notwithstanding any thing contained in this Lease to the
contrary, Landlord's obligations hereunder are specifically conditioned upon
Landlord achieving Substantial Completion of the Premises not later than
August 1, 2000, which date shall be extended day-for-day for each day of
Tenant Delay (the "Outside Date"). In the event Landlord does not achieve
Substantial Completion of the Premises by the Outside Date, Tenant, as
Tenant's sole and exclusive remedy, may terminate this Lease in writing at
any time after the Outside Date and before Landlord achieves Substantial
Completion of the Premises. In the event Tenant terminates this Lease
pursuant to this paragraph, Landlord will return all advance payments of rent
and Security Deposits theretofore paid to Landlord by Tenant and all Letters
of Credit theretofore delivered to Landlord by Tenant and will reimburse and
refund Tenant all monies theretofore paid by Tenant to Landlord as part of
Total Construction Costs (in accordance with Exhibit D); provided, however,
in no event shall such reimbursement of amounts paid for Total Construction
Costs exceed an amount equal to the product of $6.00 multiplied by the number
of rentable square feet within the Premises.
29. Notwithstanding anything contained in this Lease to the
contrary, if Landlord fails to deliver the nondisturbance agreement to Tenant
contemplated by Section 12(a) hereof executed by Landlord and Landlords'
Mortgagee within thirty (30) days after the date this Lease is signed by
Landlord and Tenant, Tenant shall have the right to terminate this Lease upon
written notice to Landlord at any time prior to delivery of such agreement.
30. Contemporaneously herewith, Landlord shall execute and deliver
to Tenant a Confidentiality Agreement in the form of Exhibit "J" attached
hereto.
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
ARE SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S
OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE
PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED HEREIN, AND, EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT,
SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR
OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
13
<PAGE>
DATED as of the date first written above.
LANDLORD:
STRATUS 7000 WEST JOINT VENTURE
a Texas joint venture
By: OLY LANTANA, L.P., a Texas limited
partnership, Joint Venturer
By: OLY LANTANA, GP, L.L.C., a Texas
limited liability company, its General Partner
By: /s/ Hal R. Hall
-------------------------
Name:
-----------------------
Title:
----------------------
By: STRATUS 7000 WEST, LTD., a Texas limited
partnership, Joint Venturer
By: STRS, L.L.C., a Delaware limited liability
company, General Partner
By STRATUS PROPERTIES INC., a Delaware
limited liability company, its sole member
By: /s/ William H. Armstrong, III
---------------------------------------
William H. Armstrong, III
President and CEO
TENANT:
SILICON LABORATORIES, INC.
By: /s/ Navdeep S. Sooch
---------------------------------------
Navdeep S. Sooch
Chairman and CEO
14
<PAGE>
EXHIBIT A
LAND
PROPERTY DESCRIPTION
Lot 6, Block A, LANTANA LOT 6, BLOCK A, a subdivision in Travis County, Texas,
according to the map or plat thereof, recorded in Volume 100, Page(s) 1-2 of the
Plat Records of Travis County, Texas, as corrected by instrument recorded in
Volume 13064, Page 278 of the Real Property Records of Travis County, Texas.
A-1
<PAGE>
EXHIBIT A-1
OUTLINE OF PREMISES
[FLOOR PLAN]
LEVEL 2
[FLOOR PLAN]
LEVEL 1
A-1-1
<PAGE>
EXHIBIT A-1
PROJECT
[FLOOR PLAN]
LANTANA CORPORATE CENTER
STRATUS PROPERTIES, INC.
A-2-1
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply to the Premises, the
Building, the parking garage associated therewith, the Land and the
appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for
purposes other than ingress and egress to and from their respective
leased premises and for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or deposited therein. Damage resulting to any
such fixtures or appliances from misuse by a tenant or its agents,
employees or invitees, shall be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on or to
any windows or doors or other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws shall be driven
or inserted in any part of the Building except by Building maintenance
personnel. No curtains or other window treatments shall be placed
between the glass and the Building standard window treatments.
4. Landlord shall provide and maintain an alphabetical directory for all
tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in each tenant's leased premises,
at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written
consent. Landlord shall furnish to each tenant a reasonable number of
keys and card keys to such tenant's leased premises, at such tenant's
cost, and no tenant shall make a duplicate thereof.
6. Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement
through the Building entrances or lobby shall be conducted under
Landlord's supervision at such times and in such a manner as Landlord
may reasonably require. Each tenant assumes all risks of and shall be
liable for all damage to articles moved and injury to persons or public
engaged or not engaged in such movement, including equipment, property
and personnel of Landlord if damaged or injured as a result of acts in
connection with carrying out this service for such tenant.
7. Landlord may prescribe weight limitations and determine the locations
for safes and other heavy equipment or items, which shall in all cases
be placed in the Building so as to distribute weight in a manner
acceptable to Landlord which may include the use of such supporting
devices as Landlord may require. All damages to the Building caused by
the installation or removal of any property of a tenant, or done by a
tenant's property while in the Building, shall be repaired at the
expense of such tenant.
8. Corridor doors, when not in use, shall be kept closed. Nothing shall be
swept or thrown into the corridors, halls, elevator shafts or stairways.
No birds or animals shall be brought into or kept in, on or about any
tenant's leased premises. No portion of any tenant's leased premises
shall at any time be used or occupied as sleeping or lodging quarters.
9. Tenant shall cooperate with Landlord's employees in keeping its leased
premises neat and clean. Tenants shall not employ any person for the
purpose of such cleaning other than the Building's cleaning and
maintenance personnel.
10. Tenant shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any
way with other tenants or persons having business with them.
11. No machinery of any kind (other than normal office equipment) shall be
operated by any tenant on its leased area without Landlord's prior
written consent, nor shall any tenant use or keep in the Building any
flammable or explosive fluid or substance.
12. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against
entry or not.
13. All mail chutes located in the Building shall be available for use by
Landlord and all tenants of the Building according to the rules of the
United States Postal Service.
B-1
<PAGE>
EXHIBIT C
BASIC COSTS
The term "BASIC COST" shall mean all expenses and disbursements of every kind
(subject to the limitations set forth below) which Landlord incurs, pays or
becomes obligated to pay in connection with the ownership, operation, and
maintenance of the Building (including the associated parking facilities),
determined in accordance with generally accepted federal income tax basis
accounting principles consistently applied, including but not limited to the
following:
1. Wages and salaries (including reasonable management fees) of all
employees engaged in the operation, repair, replacement, maintenance,
and security of the Building, including taxes, insurance and benefits
relating thereto;
2. All supplies and materials used in the operation, maintenance, repair,
replacement, and security of the Building;
3. Annual cost of all capital improvements made to the Building which
although capital in nature can reasonably be expected to reduce the
normal operating costs of the Building, as well as all capital
improvements made in order to comply with any law hereafter promulgated
by any governmental authority, as amortized over the useful economic
life of such improvements as determined by Landlord in its reasonable
discretion (without regard to the period over which such improvements
may be depreciated or amortized for federal income tax purposes);
4. Cost of all utilities, other than the cost of utilities actually
reimbursed to Landlord by the Building's tenants (including Tenant under
Section 7.(b) of this Lease);
5. Cost of any insurance applicable to the Building and Landlord's personal
property used in connection therewith;
6. Cost of repairs, replacements, and general maintenance of the Building;
and
7. Cost of service or maintenance contracts with independent contractors
for the operation, maintenance, repair, replacement, or security of the
Building (including, without limitation, alarm service, window cleaning,
and elevator maintenance).
The term "Basic Cost" shall also mean the Building's Proportionate Share of
Taxes (described below) and all expenses and disbursements of every kind
(subject to the limitations set forth below) which Landlord incurs, pays or
becomes obligated to pay in connection with the ownership, operation and
maintenance of the common areas of the Project (including the associated
parking facilities, driveways and landscaped areas), determined in accordance
with generally accepted federal income tax basis accounting principles
consistently applied, including but not limited to the following:
(1) Annual cost of all capital improvements made to the common areas
which although capital in nature can reasonably be expected to
reduce the normal operating costs of the Project, as well as all
capital improvements made in order to comply with any law hereafter
promulgated by any governmental authority, as amortized over the
useful economic life of such improvements as determined by Landlord
in its reasonable discretion (without regard to the period over
which such improvements may be depreciated or amortized for federal
income tax purposes);
(2) Cost of all utilities for the common areas of the Project
(including, without limitation, landscape irrigation and parking
lot lighting), other than the costs of utilities actually
reimbursed to Landlord by the tenants of the Project;
(3) Cost of any insurance applicable to the common areas of the Project
and Landlord's personal property used in connection therewith;
(4) Cost of repairs, replacements and general maintenance of the common
areas of the Project; and
(5) Cost of service or maintenance contracts with independent
contractors for the operation, maintenance, repair and replacement
of the common area improvements.
As used herein the term "TAXES" shall mean all taxes and assessments and
governmental charges whether federal, state, county or municipal and whether
they be by taxing or management districts or authorities presently taxing or
by others, subsequently created or otherwise, and any other taxes and
assessments attributable to the Project (or its operation), including the
buildings and the grounds, parking areas, driveways and alleys around the
buildings, excluding, however, federal and state taxes on income and Texas
State Franchise Tax. If the present method of taxation changes so that in
lieu of the whole or any part of any Taxes levied on the Project, there is
levied on Landlord a capital tax directly on the rents received therefrom or
a franchise tax, assessment, or charge based, in whole or in part, upon such
rents, then all such taxes, assessments, or charges, or the part thereof so
based, shall
C-1
<PAGE>
be deemed to be included within the term "Taxes" for the purposes hereof.
There are specifically excluded from the definition of the term "Basic
Cost" (a) costs for capital improvements made to the Building, other than
capital improvements described in subparagraphs 3 and (1) above of this
Exhibit and except for items which, though capital for accounting purposes,
are properly considered maintenance and repair items, such as painting of
common areas, replacement of carpet in elevator lobbies, and the like; for
repair, replacements and general maintenance paid by proceeds of insurance or
by Tenant or other third parties, and alterations attributable solely to
tenants of the Building other than Tenant; for interest, amortization or
other payments on loans to Landlord; for depreciation of the Building; for
leasing commissions; for legal expenses, other than those incurred for the
general benefit of the Building's tenants (e.g., tax disputes); for
renovating or otherwise improving space for occupants of the Building or
vacant space in the Building; for overtime or other expenses of Landlord in
curing defaults or performing work expressly provided in this Lease to be
borne at Landlord's expense; for federal income taxes imposed on or measured
by the income of Landlord from the operation of the Building for state income
taxes, net profits taxes, Texas Franchise taxes, estate and inheritance
taxes, any utilities charged directly to and paid by Tenant or any other
tenant of the Building or the Project; any amortization costs or rental
expenses incurred with respect to machinery, equipment or improvements
installed for the exclusive benefit of another tenant in the Project;
improvements installed for the exclusive benefit of another tenant of the
Project; management fees that exceed customary and standard management fees
paid in arms length transactions and leasing and brokerage commissions and
legal fees incurred in connection with Landlord's leasing of the Building or
the Project or involving disputes with other tenants of the Project; personal
property taxes owed by other tenants of any building of the Project;
penalties and interest for late payment of taxes due by Landlord and timely
paid by Tenant, or due to violation of laws or governmental regulations;
costs of work or services furnished or performed on behalf of other tenants
at such tenant's costs; fees payable to affiliates of Landlord outside the
range of fees payable for similar services in the Austin area in an arms
length transaction; capital repairs or improvements made to the Building
which are covered by Landlord's warranties under the Lease or which are
performed to correct design or structural defects or to bring the Building
into conformity with applicable building codes in effect at the time of the
construction of the Building; expenses in connection with special services
for the exclusive benefit of another tenant in the Project.
C-2
<PAGE>
EXHIBIT D
TENANT FINISH-WORK
1. Landlord, at its sole cost and expense, shall complete
construction of the following components of the Premises: a) 14 VAV tenant
boxes installed on each floor (diffusers and duct work not installed), b)
perimeter fan-powered boxes installed along with related duct work and
diffusers c). mechanically suspended lay-in acoustical tile ceiling grid with
acoustical tile inventory stored on the floor of the Premises, d). recessed
fluorescent light fixtures, up to a maximum of one fixture per 120 rentable
square feet contained within the Premises, stored on the floor of the
Premises, and e). sprinkler heads installed pursuant to FBA 13 standards in
the Premises and other improvements set forth in Annex 1 to Exhibit D not
otherwise set forth in this work letter. All such construction shall be
completed by Landlord in a good and workmanlike manner and in accordance with
all applicable laws and regulations (including all handicap accessibility
laws).
2. On or before November 5, 1999, Tenant, at its sole cost and
expense, shall provide to Landlord for its approval final working drawings,
prepared by STG Partners, Inc., of all improvements that Tenant proposes to
install in the Premises; such working drawings shall include the partition
layout, ceiling plan, electrical outlets and switches, telephone outlets,
drawings for any modifications to the mechanical and plumbing systems of the
Building, and detailed plans and specifications for the construction of the
improvements called for under this Exhibit in accordance with all applicable
governmental laws, codes, rules, and regulations. Further, if any of Tenant's
proposed construction work will affect the Building's HVAC, electrical,
mechanical, or plumbing systems, then the working drawings pertaining thereto
shall be prepared by or reviewed by the Building's engineer of record, whom
Tenant shall at its cost engage for such purpose. As used herein, "WORKING
DRAWINGS" shall mean the final working drawings approved by Landlord, as
amended from time to time by any approved changes thereto, and "WORK" shall
mean all improvements to be constructed in accordance with and as indicated
on the Working Drawings. Approval by Landlord of the Working Drawings shall
not be a representation or warranty of Landlord that such drawings are
adequate for any use, purpose, or condition, or that such drawings comply
with any applicable law or code, but shall merely be the consent of Landlord
to the performance of the Work. Tenant shall, at Landlord's request, sign the
Working Drawings to evidence its review and approval thereof. All changes in
the Work must receive the prior written approval of Landlord, and in the
event of any such approved change Tenant shall, upon completion of the Work,
furnish Landlord with an accurate, reproducible "as-built" plan (e.g., sepia)
of the improvements as constructed, which plan shall be incorporated into
this Lease by this reference for all purposes. Landlord shall promptly review
and approve all such drawings and Landlord's approvals shall not be
unreasonably withheld, conditioned or delayed.
3. After the Working Drawings have been approved, Landlord
shall cause the Work to be performed in accordance with the Working Drawings
and all applicable laws, rules, regulations, permits, required governmental
consents and entitlements. The contractor, Tenant and the interior design
architect may inspect the Work as it progresses. Landlord shall be available,
and cause its subcontractors and architect to be reasonably available, to
Tenant or the interior design architect from time to time, on reasonable
prior notice, as necessary or desirable to review the Work. Landlord shall
submit to Tenant the proposed construction schedule for the Work. Landlord
shall promptly inform Tenant of any material delays encountered in completing
the Work and shall promptly deliver to Tenant, and consult with Tenant with
respect to, all revisions of the construction schedules therefor.
4. Tenant Delays means any delay by Tenant in providing, or
change by Tenant to, the Working Drawings, any delay because of any
specification by Tenant of materials or installations in addition to or other
than Landlord's standard finish-out materials, or any other delays caused by
Tenant in completion of the Work. No Tenant Delays pursuant to the
immediately preceding sentence shall be deemed to have occurred unless
Landlord notifies Tenant in writing within ten (10) days after the initial
cause of the delay of the specific delay; provided that the date the Tenant
Delay is deemed to commence shall be the date of the initial cause of the
delay, not the date of the notice. There shall further be excluded from the
number of days of Tenant Delays any days of delay which are caused by any act
or omission of Landlord, its agents or contractors, including the failure to
timely provide to Tenant and/or its agents and representatives complete
information regarding the Building necessary for the preparation of the
Working Drawings. Subject to Section 28 of the Lease, if the Premises are not
ready for occupancy and the Work is not Substantially Completed on the
scheduled Commencement Date for any reason other than Tenant Delays, then the
obligations of Landlord and Tenant shall continue in full force and Basic
Rental and Tenant's Proportionate Share of Basic Costs shall be abated until
the date the Work is Substantially Completed, which date shall be the
Commencement Date.
5. Tenant shall bear the entire cost of performing the Work
(including, without limitation, costs of design, construction, labor and
materials, additional janitorial services, related taxes and insurance costs,
all of which costs are herein collectively called the "TOTAL CONSTRUCTION
COSTS") in excess of the Construction Allowance (hereinafter defined). Upon
approval of the Working Drawings, Landlord shall obtain bids for the Work
from at least three (3) contractors (all of whom shall be approved by Tenant,
which approval shall not unreasonably withheld). Tenant hereby acknowledges
that Landlord's construction contract with the general contractor for the
Work will include a liquidated damages provision whereby the General
Contractor will be liable to Landlord for liquidated damages if the Work is
not Substantially Complete by February 1, 2000. Such liquidated damages shall
be in the
D-1
<PAGE>
amount of One Thousand and 00/100 Dollars ($1,000.00) per day for each day after
February 1, 2000 until the Work is Substantially Complete; provided, however,
that the contract may provide that the general contractor shall not be required
to pay any such liquidated damages if the reason for the delay is caused by
Tenant Delays or inability to obtain necessary governmental permits or
approvals. Following selection of a contractor, Tenant shall promptly execute a
work order agreement prepared by Landlord which identifies such drawings,
itemizes the Total Construction Costs and sets forth the Construction Allowance,
and pay to an escrow account in an acceptable financial institution to Landlord
50% of the amount by which the estimated Total Construction Costs exceed the
Construction Allowance. Payments from both the escrow account and directly from
Tenant will be paid at times and within proportion of construction draws on the
Total Construction Costs. Upon Substantial Completion of the Work and before
Tenant occupies the Premises to conduct business therein, Tenant shall pay to
Landlord an amount equal to the the Total Construction Costs (as adjusted for
any approved changes to the Work), less 1). the amount of the payments already
made by Tenant, 2). the amount of the Construction Allowance, and 3). the cost
reasonably estimated by Landlord for completing all "punch list" items; finally,
upon completion of the punch list items, Tenant shall pay to Landlord any
additional costs incurred in completing the same.
6. Landlord shall provide to Tenant a construction allowance (the
"CONSTRUCTION ALLOWANCE") equal to the lesser of a). $24.00 per rentable square
foot in the Premises or b). the Total Construction Costs, as adjusted for any
approved changes to the Work.
7. Landlord or its affiliate shall manage the Work, make
disbursements required to be made to the contractor, and act as a liaison
between the contractor and Tenant and coordinate the relationship between the
Work, the Building, and the Building's systems. In consideration for Landlord's
construction management services, Tenant shall pay to Landlord a construction
management fee equal to three and one-half percent (3-1/2%) of the Total
Construction Costs.
8. Except as set forth in this Exhibit, Tenant accepts the
Premises in their newly constructed condition on the date that this Lease is
entered into.
9. Landlord shall ensure that the right to require work under
warranties of all subcontractors, manufacturers and suppliers relating to items
for which Tenant is responsible for the maintenance and repair thereof be
enforceable by Tenant and, upon Tenant's written request, Landlord shall provide
a copy of any such warranty to Tenant.
10. Landlord shall require that the contractor provide a final
cleaning of the Premises immediately before Tenant's acceptance of Substantial
Completion, consisting of cleaning to a condition expected for a good building
cleaning and maintenance program.
D-2
<PAGE>
ANNEX 1 TO EXHIBIT D
- Finished entrance, elevators and elevator lobbies
- Finished restrooms
- Perimeter walls insulated
- Perimeter walls and column enclosures installed and ready for paint
- Ceiling grid installed
- 2 ft. X 2 ft. Tegular ceiling tile stacked on the floor
- Finished stairways
- Public/common area lighting installed
- Tenant space light fixtures stocked on floor, 1:120 RSF
- 14 VAV tenant boxes installed on each floor (diffusers and ductwork
are not installed)
- Perimeter fan-powered boxes installed along with related ductwork and
diffusers
- Automated "on-demand" systems for after-hours HVAC
- Electrical capacity: (1) 4 watts per RSF available for tenant' use at
electrical closet; (2) upgrade capability to 6.5 watts per RSF,
provided by City of Austin Power and Light
- Water and Wastewater service provided by City of Austin
- Telephone services provided by Southwestern Bell
- Conduit providing access to fiber optic network at front of property
along street right-of-way as well as between buildings.
D-3
<PAGE>
EXHIBIT E
PARKING
Tenant shall be permitted to use one hundred thirty (130) undesignated
vehicular parking spaces (including visitor and handicap) and twenty (20)
reserved covered parking spaces in the surface parking lot (the "PARKING
FACILITIES") associated with the Building during the Term at no charge and
subject to such terms, conditions and regulations as are from time to time
applicable to patrons of the Parking Facilities.
E-1
<PAGE>
EXHIBIT F
EXTENSION OPTION
Provided no Event of Default exists and Tenant is occupying not less than
50% of the Premises at the time of such election, Tenant may renew this Lease
for one (1) additional period of five (5) years on the same terms provided in
this Lease (except as set forth below), by delivering written notice of the
exercise thereof to Landlord not later than two hundred seventy (270) days
before the expiration of the Term. On or before the commencement date of the
extended Term, Landlord and Tenant shall execute an amendment to this Lease
extending the Term on the same terms provided in this Lease, except as follows:
1. The Basic Rental payable for each month during such extended Term shall be
the prevailing market rental rate in Austin's suburban office market, at
the commencement of such extended Term, for space of equivalent quality,
size, utility and location; rental concessions, tenant improvements and
refurbishment allowances, moving allowances, architectural allowances,
parking rental concessions, brokerage commissions, other inducements, and
all other relevant factors, provided each of the foregoing applies to
renewals or is adjusted to reflect the fact that the determination of
market rent is for a renewal, with the length of the extended Term and the
credit standing of Tenant to be taken into account;
2. Tenant shall have no further renewal options unless expressly granted by
Landlord in writing; and
3. Landlord shall lease to Tenant the Premises in their then-current
condition, and Landlord shall not provide to Tenant any allowances (e.g.,
moving allowance, construction allowance, and the like) or other tenant
inducements.
4. If Landlord and Tenant fail to agree on the fair market rental value of the
Leased Premises on or before one hundred eighty (180) days prior to the
expiration of the term of this Lease, Landlord and Tenant shall cooperate
to appoint an independent appraiser or broker to determine the fair market
rental value. If Landlord and Tenant cannot agree upon such an appraiser or
broker within one hundred sixty-five (165) days prior to the expiration of
the term of the Lease, Landlord and Tenant, respectively, shall, within
five (5) days, each appoint an independent appraiser or broker to determine
the fair market rental value. If such independent appraisers or brokers
cannot agree on upon the fair market rental value within fifteen (15) days
after the expiration of such five (5) day period, such independent
appraisers or brokers shall appoint a third independent appraiser or
broker, whose determination shall be conclusively binding on Landlord and
Tenant so long as it is not less than the lower or more than the higher of
the determinations of the two other appraisers or brokers.
Tenant's rights under this Exhibit shall terminate if (a) this Lease or
Tenant's right to possession of the Premises is terminated, (b) Tenant assigns
any of its interest in the Lease or sublets any portion of the Premises (except
to a Permitted Transferee) or sublets more than 50% of the Premises (other than
to a Permitted Transferee) for the remaining term of the Lease or (c) Tenant
fails to timely exercise its option under this Exhibit, time being of the
essence with respect to Tenant's exercise thereof.
F-1
<PAGE>
EXHIBIT G
FIRST RIGHT OF REFUSAL
BUILDING 1
Subject to Subsection B below, Landlord hereby grants to Tenant for the term of
the Lease a right of first refusal for certain space in Building 1, Building 2
and Building 3 as described below, to be exercised in accordance with
Subsections A-1, A-2 and A-3 below, as applicable.
A-1. At such time as Landlord receives any bona fide offers from a third
party to lease all or any one or more of the portions of the Building
depicted as "Space A-1," "Space A-2" and "Space A-3" on EXHIBIT A-1
(collectively, the "BUILDING 1 ROFR SPACE"), Landlord shall give Tenant
written notice of such offer and such notice shall: (i) specify all material
terms and conditions of such third party offer and (ii) contain an offer to
Tenant under the same terms and conditions as the third party offer and give
Tenant five (5) days (excluding holidays) to accept such offer. Should Tenant
fail to exercise its right to lease such available Building 1 ROFR Space
within such five (5) day (excluding holidays) period, Landlord shall have the
right to lease such Building 1 ROFR Space to such third party. If Landlord
shall then fail to lease such Building 1 ROFR Space to such third party or
its affiliates on substantially the same terms as contained in the offer
within six (6) months, this right of first refusal shall remain in effect
with respect to such space. If Tenant exercises its right of first refusal
with respect to the Building 1 ROFR Space, such space shall be added to the
Premises for all purposes of this Lease, except as provided in C below.
Notwithstanding the foregoing, Tenant's right of first refusal for the
portions of the Building depicted as "Space A-2" on EXHIBIT A-1 is subordinate
and subject to that right of first refusal for such space granted under that
certain Lease Agreement dated September 15, 1999 between Landlord and
AtOutcome, Inc. and Tenant's rights of first refusal for the portions of the
building depicted as "Space A-3" on Exhibit A-1 is subordinate and subject to
that renewal option for such space granted under said AtOutcome, Inc. Lease.
This right of first refusal contained in this Subsection A-1 is contingent on
there being no material adverse changes in Tenant's financial condition at
the time of exercise from Tenant's financial condition on August 31, 1999.
This First Right of Refusal shall be applicable to any space that becomes
available during the term and is intended to be a continuous first right of
refusal.
A-2. At such time as Landlord receives any bona fide offers from a third
party to lease any portion of Building 2 which would result (either initially or
through the exercise of any expansion rights or rights of first refusal
contained in such offer) in twenty-five percent (25%) or less of Building 2
remaining unleased (the "BUILDING 2 ROFR SPACE"), Landlord shall give Tenant
written notice of such offer and such notice shall (i) specify all material
terms and conditions of such third party offer and (ii) contain an offer to
Tenant under the same terms and conditions as the third party offer and give
Tenant five (5) days (excluding holidays) to accept such offer. Should Tenant
fail to exercise its right to lease such available Building 2 ROFR Space within
such five (5) day (excluding holidays) period, Landlord shall have the right to
lease such Building 2 ROFR Space to such third party and Tenant's right of first
refusal under this subsection A-2 shall be subject and subordinate to any right
of first refusal, expansion right and/or renewal granted under such lease to
such third party (provided such rights were contained in the offer presented to
Tenant). If Landlord shall fail to lease such Building 2 ROFR Space to such
third party or its affiliates on substantially the same terms as contained in
the offer within six (6) months then Tenant's right of first refusal with
respect to that Building 2 ROFR Space shall remain in effect with respect to
such space. The right of first refusal contained in this Subsection A-2 (i) is
contingent on there being no material adverse changes in Tenant's financial
condition at the time of exercise from Tenant's financial condition on August
31, 1999 and (ii) shall apply only to the initial lease up of Building 2 (i.e.,
once a space has been leased, the right of first refusal granted to Tenant shall
no longer apply to it).
A-3. At such time as Landlord receives any bona fide offers from a third
party to lease any portion (the "BUILDING 3 ROFR SPACE") of the next speculative
building for office use built by Landlord in the Development ("BUILDING 3"),
Landlord shall give Tenant written notice of such offer and such notice shall
(i) specify all material terms and conditions of such third party offer and (ii)
contain an offer to Tenant under the same terms and conditions as the third
party offer and give Tenant five (5) days (excluding holidays) to accept such
offer. Determination of the speculative building status will be as follows:
within thirty (30) days after a building permit for shell construction is
granted, Landlord shall declare if the building is a build to suit. Should
Tenant fail to exercise its right to lease such available Building 3 ROFR Space
within such five (5) day (excluding holidays) period, Landlord shall have the
right to lease the Building 3 ROFR Space to such third party and Tenant's right
of first refusal under this Subsection A-3 shall be subordinate and subject to
any right of first refusal, expansion right and/or renewal right granted under
such lease to such third party (provided such right was contained in the offer
presented to Tenant). If Landlord shall fail to lease such Building 3 ROFR Space
to such third party or its affiliates on substantially the same terms as
contained in the offer within six (6) months, this right of first refusal shall
remain in effect with respect to such space. Notwithstanding the foregoing,
Tenant's right of first refusal under this Subsection A-3 shall (x) only be
applicable to space in a speculative building built by Landlord for office use
(i.e. shall not apply to any space in a build-to-suit building or building used
for non-office uses) (y) be effective only if prior to the date Landlord
receives the third party offer in question Tenant provides audited financial
statements (if available, and if not, unaudited statements certified by Tenant's
chief financial officer) to Landlord showing either total revenues in excess of
$40,000,000.00 for the previous two quarters or total revenues in excess of
$80,000,000.00 for the previous four quarters, and (z) apply only to the initial
lease up of Building 3 (i.e., once a space has been leased, the right of first
refusal granted to Tenant shall no longer apply to it).
G-1
<PAGE>
B. Tenant's rights of first refusal as set forth in Subsections A-1, A-2
and A-3 above are subject to the conditions that: (i) on the date that Tenant
delivers its notice exercising its right of first refusal, no Event of Default
exists, (ii) Tenant shall not have assigned the Lease, or sublet any portion of
the Premises (except to a Permitted Transferee) and (iii) at the time that the
third party offer is received by Landlord, Tenant must have provided Landlord
with the financial information necessary to meet the respective financial
requirements in Subsection A-1, A-2 or A-3 as applicable. Tenant shall be deemed
to have met the requirement in (iii) above as it relates to Subsection A-1 or
A-2, so long as Tenant delivers to Landlord quarterly financial statements
showing no material adverse change in Tenant's financial condition since August
31, 1999.
C. Promptly after Tenant's exercise of any right of first refusal with
respect to the Building as provided herein, Landlord shall execute and deliver
to Tenant an amendment to the Lease to reflect changes in the Premises, Basic
Rental, Tenant's Proportionate Share and any other appropriate terms changed by
the addition of the ROFR Space. Within 10 days thereafter, Tenant shall execute
and return the amendment; provided that the term for any such Building 1 ROFR
Space shall be the same as contained in the offer (i.e., it will not be
coterminous with the Lease).
D. Notwithstanding anything to the contrary contained herein, if Tenant
exercises its right of first refusal as to space in Building 2 or 3, then within
fifteen (15) days after such exercise, Landlord and Tenant shall enter into a
new lease for such space on the same form as this Lease except for any changes
necessary to reflect the business terms contained in the accepted third party
offer and to reflect differences in the Buildings. Each such lease will contain
a signage provision similar to Section 27 of this Lease, except that Tenant's
rights to monument signage (like building signage) shall only be triggered if
another tenant in the building in question (which tenant leases less space than
Tenant) is permitted to have monument signage, in which case the size of the
respective sign panels shall be based proportionately on the relative square
footage of each tenant's space.
E. If any individual employed by Tenant's broker is working on a
competing project in southwest Austin (including the Terrace), Tenant agrees to
not disclose any terms and conditions of any offer received from Landlord under
this Exhibit to that individual for a period of six (6) months after such offer.
F. Tenant shall not disclose the provisions and conditions of this right
of first refusal to any person or entity except to persons or entities providing
counsel or assistance to Tenant in connection with this Lease, including,
without limitation, attorneys, engineers, architects, and brokers, and as
required by valid court order or subpoena and disclosures required by the
Securities and Exchange Commission, federal securities law, current and future
lenders, and current and future investors.
G-2
<PAGE>
EXHIBIT H
WHEN RECORDED, RETURN TO:
Lynda Zimmerman, Esq.
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT
This SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT ("AGREEMENT")
is made and entered into as of October 29, 1999 by and between COMERICA
BANK-TEXAS, a state banking association ("BENEFICIARY"); STRATUS 7000 WEST JOINT
VENTURE, a Texas joint venture ("LESSOR"); and SILICON LABORATORIES, INC., a
Delaware Corporation, ("LESSEE").
WITNESSETH:
WHEREAS, Beneficiary is the owner and holder of that certain Promissory
Note ("NOTE") dated April 9, 1999, in the principal sum of SIX MILLION SIX
HUNDRED THOUSAND AND NO/100 DOLLARS ($6,600,000.00), secured by that certain
Deed of Trust ("DEED OF TRUST"), dated of even date with the Note, executed
by Lessor to a trustee in favor of Beneficiary, recorded on April 16, 1999,
as Document No. 1999009453 in the Offical Public Records of Travis County,
Texas, which Deed of Trust constitutes a lien on the land described in
EXHIBIT A attached hereto and incorporated herein by reference for all
purposes and the improvements now or hereafter located thereon ("PROPERTY");
and
WHEREAS, Lessee is the holder of a leasehold estate in and to all or a
portion of the Property (the property which is the subject of such leasehold
estate being referred to as the "DEMISED PREMISES") pursuant to the terms of
that certain lease agreement ("LEASE") dated October 27, 1999, and executed by
and between Lessee, as the tenant, and Lessor, as the landlord; and
WHEREAS, Lessor, Lessee and Beneficiary desire to confirm their
understandings with respect to the Lease and the Deed of Trust.
NOW, THEREFORE, in consideration of the mutual and dependent covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, the
parties hereto agree and covenant as follows:
1. SUBORDINATION. Subject to the terms of this Agreement, the Lease now
is, and shall at all times continue to be, subject, inferior and subordinate in
each and every respect to the lien of the Deed of Trust and to any and all
renewals, amendments, modifications, extensions, substitutions, replacements,
increases and/or consolidations of the Deed of Trust and/or Note, and the lien
of the Deed of Trust, and any and all renewals, amendments, modifications,
extensions, substitutions, replacements, increases and/or consolidations of the
Deed of Trust and/or the Note, shall be and remain, in each and every respect,
prior and superior to the Lease. This Agreement shall be the whole and only
agreement with regard to the subordination of the Lease to the lien of the Deed
of Trust and shall supersede and cancel, insofar as same may affect the priority
between the Deed of Trust and the Lease, any prior agreements or provisions
relating to the subordination of the Lease to the lien of the Deed of Trust,
including, without limitation, those provisions, if any, contained in the Lease
which provide for the subordination thereof to the lien of any deed of trust,
mortgage or other security agreement. Nothing herein contained shall be deemed
or construed as limiting or restricting the enforcement by Beneficiary of any of
the terms, covenants, provisions or remedies specified in the Deed of Trust,
whether or not consistent with the Lease, including (without
<PAGE>
limitation) any rights, remedies, privileges and recourses of Beneficiary with
respect to insurance proceeds and condemnation awards with respect to the
Demised Premises or the Property. The Lease is herein made subordinate to the
aforementioned instruments only and not to any other encumbrances placed upon or
against the Demised Premises. This provision is declared by Beneficiary and
Lessee to be effective and self-operative, without the execution of any further
instruments on the part of any of the parties hereto.
2. PURCHASER. As used herein, the term "PURCHASER" shall be deemed to
include Beneficiary and any of its successors and assigns, including anyone who
shall have succeeded to Lessor's interest in the Demised Premises by, through or
under judicial foreclosure sale, non-judicial foreclosure sale or other similar
proceedings brought pursuant to the Deed of Trust, deed in lieu of such
foreclosure, other proceedings brought by Beneficiary under or with respect to
the Note or Deed of Trust, or otherwise.
3. ATTORNMENT. If the interests of Lessor in and to the Demised Premises
become owned by Beneficiary or another Purchaser by reason of judicial
foreclosure, non-judicial foreclosure by the trustee under the Deed of Trust,
other proceedings brought by Beneficiary or Purchaser or by any other manner,
including, but not limited to, Beneficiary's exercise of its rights under any
collateral assignment(s) of leases and rents, whereby Purchaser succeeds to the
interest of the Lessor under the Lease, Lessee shall be bound to Purchaser in
accordance with all of the terms, covenants and conditions of the Lease for the
balance of the term thereof and any extension thereof duly exercised by Lessee
with the same force and effect as if Purchaser were the lessor under the Lease.
Lessee does hereby attorn to Purchaser, as its lessor, which attornment shall be
effective and self-operative, without the execution of any further instruments
on the part of any of the parties hereto, immediately upon Purchaser's
succeeding to the interest of the Lessor under the Lease; provided, however,
that Lessee shall be under no obligation to pay rent to Purchaser until Lessee
receives written notice from Purchaser that it has succeeded to the interest of
the Lessor under the Lease, and upon receipt of such notice, Lessee shall pay to
Purchaser all rental and other payments required under the Lease for the
duration of the term of the Lease and any extensions thereof duly exercised by
Lessee and lessor hereby consents to such payments. The respective rights and
obligations of Lessee and Purchaser upon such attornment, to the extent of the
then remaining balance of the term of the Lease and any extension thereof duly
exercised, shall be and are the same as now set forth therein, it being the
intention of the parties hereto for this purpose to incorporate the Lease in
this Agreement by reference, with the same force and effect as if expressly set
forth herein.
4. NON-DISTURBANCE. In the event of a foreclosure of the lien of the
Deed of Trust, so long as Lessee is not in default (beyond any period given
in the Lease to Lessee to cure such default) in the payment of rent or in the
performance of any of the terms, covenants or conditions of the Lease on
Lessee's part to be performed, Lessee's possession, use and occupancy of the
Demised Premises pursuant to the Lease shall not be extinguished or
terminated by such foreclosure nor interfered with or disturbed by Purchaser
during the term of the Lease and any extension thereof duly exercised by
Lessee. If at, or subsequent to, the time that Purchaser shall acquire, in
whatever manner, title to the Property or Lessor's title or interest in the
Demised Premises (subject to the Lease), or from time to time thereafter, any
default exists or occurs under the Lease, then Purchaser shall be entitled to
exercise or enforce any and all rights, privileges, remedies and recourses
which it may have against Lessee under or pursuant to the Lease or other
applicable law (including, without limitation, the termination of the Lease,
the dispossession of Lessee from the Demised Premises, or the prosecution of
an action for breach of the Lease), notwithstanding the provisions of this
Agreement.
5. PURCHASER'S OBLIGATIONS. If Purchaser shall succeed to the interest of
Lessor under the Lease, Purchaser shall be bound to Lessee under all of the
terms, covenants and conditions of the Lease and shall recognize and observe all
of Lessee's rights and privileges under this Lease; provided, however, that
Purchaser shall not be:
(a) liable for any act or omission of any prior lessor (including
Lessor) under the Lease; or
(b) subject to any offsets or defenses which Lessee might have
against any prior lessor (including Lessor) under the Lease; or
page 2
<PAGE>
(c) bound by any rent, additional rent, advance rent or other
monetary obligations which Lessee might have paid for more than the current
month to any prior lessor (including Lessor) under the Lease and which is
not delivered or paid to Purchaser at the time of Purchaser's succession to
title to the Demised Premises, and all such rent or other monetary
obligations shall remain due and owing, notwithstanding such advance
payment, and with respect to which Lessee agrees to look solely to Lessor
for refund or reimbursement; or
(d) bound by any security deposit of any type or advance rental
deposit made by Lessee under the Lease which is not delivered or paid to
Purchaser at the time of Purchaser's succession to title to the Demised
Premises, and with respect to which Lessee agrees to look solely to Lessor
for refund or reimbursement; or
(e) bound by any amendment, modification, supplementation,
termination or cancellation of the Lease made without Beneficiary's or
Purchaser's prior written consent and approval; or
(f) required to complete the construction of any improvements or
otherwise perform the obligations of Lessor under the Lease in the event
that Purchaser acquires title to the Property prior to full completion and
acceptance by Lessee of improvements required under the Lease; or
(g) liable or responsible under or pursuant to the terms of the Lease
after it ceases to own an interest in or to the Demised Premises.
6. REPRESENTATIONS. Lessor and Lessee represent, warrant and certify to
Beneficiary (and Purchaser), as of the date hereof, as follows:
(a) the Lease is presently in full force and effect;
(b) the Lease has not been cancelled, terminated, modified, amended,
supplemented, replaced, restated or otherwise changed, either orally or in
writing, except as herein expressly provided;
(c) all conditions or requirements specified in the Lease that could
have been satisfied as of the date hereof have been fully satisfied;
(d) no rent under the Lease has been paid for more than the current
rental period established in the Lease;
(e) no default (or any event, condition or circumstance, which with
notice, grace or lapse of time could constitute a default) exists under
said Lease;
(f) Lessee, as of this date, has no charge, lien or claim of offset
under said Lease or otherwise against rents or other charges due or to
become due under the Lease;
(g) the Lease constitutes the entire agreement between the Lessee and
Lessor and that Purchaser shall have no liability or responsibility with
respect to any security deposit or advance rental deposit made by the
Lessee except to the extent actually delivered and paid to Purchaser
concurrently with Purchaser's succession in interest to the Demised
Premises;
(h) the only persons or entities in possession of the Demised
Premises or having any right to the possession, use or occupancy of the
Demises Premises (other than the record owner or holders of recorded
easements) is Lessee; and
(i) Lessee has no right or interest in or under any contract, option
or agreement (other than as shown in the Lease) involving the sale or
transfer of the Demised Premises or the expansion of the Demised Premises
or extension of the term of the Lease.
Lessor and Lessee further agree to execute and deliver to Beneficiary, promptly
upon request of Beneficiary and without charge, a written updated certification
of the representations, warranties and
page 3
<PAGE>
certifications provided in this SECTION 6 to the extent then accurate (or if any
are not accurate, an explanation of the circumstances of any inaccuracy).
7. NEGATIVE COVENANTS. In the absence of the prior written consent of
Beneficiary (or Purchaser), Lessee agrees not to do any of the following: (a)
prepay the rent or other monetary obligations under the Lease for more than one
(1) month in advance, (b) enter into any agreement, whether oral or written,
with the Lessor to amend, modify, supplement, replace, restate or otherwise
change the Lease, (c) voluntarily surrender the Demised Premises or terminate
the Lease except as expressly provided for in the Lease to the contrary, and (d)
sublease or assign all or any portion of the Demised Premises or the Lease
except as expressly provided for in the Lease to the contrary.
8. DEFAULT. In the event Lessor shall fail to perform or observe any of
the terms, conditions or agreements in the Lease, Lessee shall, as a condition
precedent to any action with respect to such default under the Lease, give
written notice thereof to Beneficiary and Beneficiary shall have the right (but
not the obligation) to cure such default. Lessee shall not take any action with
respect to such default under the Lease, including without limitation any action
in order to terminate, rescind or avoid the Lease or to withhold any rent or
other monetary obligations thereunder except as expressly provided for in the
Lease to the contrary, for a period of thirty (3 0) days after receipt of such
written notice by Beneficiary; provided, however, that in the case of any
default which cannot with diligence be cured within said thirty (30) day period,
if Beneficiary shall proceed promptly to cure such default and thereafter
prosecute the curing of such default with diligence and continuity, the time
within which such default may be cured shall be extended for such period as may
be necessary to complete the curing of such default with diligence and
continuity.
9. NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as properly given if (i) mailed by first class United States mail, postage
prepaid, registered or certified with return receipt requested; (ii) by
delivering same in person to the intended addressee; or (iii) by delivery to an
independent third party commercial delivery service for same day or next day
delivery and providing for evidence of receipt at the address of the intended
addressee. Notice so mailed shall be effective upon its deposit with the United
States Postal Service or any successor thereto; notice sent by a commercial
delivery service shall be effective upon delivery to such commercial delivery
service; notice given by personal delivery shall be effective only if and when
received by the addressee; and notice given by other means shall be effective
only if and when received at the office or designated address of the intended
addressee. For purposes of notice, the addresses of the parties shall be as set
forth below; provided, however, that either party shall have the right to change
its address for notice hereunder to any other location within the continental
United States by the giving of thirty (30) days notice to the other party in the
manner set forth herein.
Beneficiary: Comerica Bank-Texas
1601 Elm Street, 2nd Floor
Dallas, Texas 75201
Attention: National Real Estate Services
Lessor: Stratus 7000 West Joint Venture
98 San Jacinto Boulevard
Suite 220
Austin, Texas 78701
Attn: William H. Armstrong, III
Lessee: Silicon Laboratories, Inc.
4635 Boston Lane
Austin, Texas 78735
10. COUNTERPARTS. To facilitate execution, this instrument may be
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature or acknowledgment of, or on behalf of, each
party, or that the signature of all persons required to bind any party, or the
acknowledgment of such party, appear on each counterpart. All counterparts
shall collectively constitute a single instrument. It shall not be necessary in
making proof of this instrument to produce or account for more than a single
counterpart containing the respective
page 4
<PAGE>
signatures of, or on behalf of, and the respective acknowledgments of, each of
the parties hereto. Any signature or acknowledgment page to any counterpart may
be detached from such counterpart without impairing the legal effect of the
signatures or acknowledgments thereon and thereafter attached to another
counterpart identical thereto except having attached to it additional signature
or acknowledgment pages.
11. AMENDMENT. This Agreement may not be modified orally or in any manner
other than by an agreement, in writing, signed by the parties hereto or their
respective successors in interest.
12. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their successors and assigns.
13. REMEDIES CUMULATIVE. All remedies provided for herein are cumulative
and shall be in addition to, but not in lieu of, any and all other rights and
remedies provided by law and by any and all other agreements between Beneficiary
and either Lessor or Lessee.
14. FURTHER ASSURANCES. At the request of Beneficiary, Lessor and Lessee
shall execute, acknowledge, and deliver such other documents and/or instruments
as may be reasonably required by Beneficiary in order to effectuate the intent
and purpose of this Agreement; provided, however, that no such document or
instrument shall modify the rights and obligations of Lessor and Lessee as
provided herein.
15. ATTORNEYS' FEE. The prevailing party in any action brought against
the other parties hereto to enforce any rights, obligations or duties under this
Agreement shall be entitled to recover from the nonperforming party the
prevailing party's reasonable costs and expenses (including attorneys' fees)
incurred in connection with the enforcement hereof
16. TERMINATION. This Agreement shall be of no further force and effect
and shall become null and void upon the recording in the applicable records of
Beneficiary's written release of the lien of the Deed of Trust.
17. NO ORAL AGREEMENTS. THIS AGREEMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT OF THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT IS INTENDED BY THE PARTIES
HERETO AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THIS AGREEMENT AND NO
COURSE OF DEALING BETWEEN THE PARTIES HERETO, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS AGREEMENT. THERE
ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BENEFICIARY:
COMERICA BANK-TEXAS,
a state banking association
By: /s/ Sherry R. Layne
Name: Sherry R. Layne
Title: Vice President
page 5
<PAGE>
LESSOR:
STRATUS 7000 WEST JOINT VENTURE,
a Texas joint venture
By: Stratus 7000 West, Ltd.,
a Texas limited partnership,
Joint Venturer
By: STRS L.L.C.,
a Delaware limited liability company,
Its General Partner
By: Stratus Properties, Inc.,
a Delaware corporation,
Its Sole Member
By: /s/ William H. Armstrong, III
Name: William H. Armstrong, III
Title: President and Chief Executive
Officer
By: OLY LANTANA, L.P., a Texas limited
partnership, Joint Venturer
By: OLY LANTANA, L.P., a Texas limited
liability company, its General Partner
By: /s/ Hal R. Hall
Name: Hal R. Hall
Title:______________________________
LESSEE:
SILICON LABORATORIES, INC.
a Delaware corporation
By: /s/ Navdeep S. Sooch
Name: Navdeep S. Sooch
Title: Chairman & CEO
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was ACKNOWLEDGED before me on the 4th day of November 1999
by Shery R. Layne, the Vice President of COMERICA BANK-TEXAS, a state banking
association, on behalf of said association.
[SEAL] /s/ Kristine K. Finn
-------------------------------
Notary Public, State of Texas
My Commission Expires:
_______________________________
______________________ Printed Name of Notary Public
Page 6
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF TRAVIS Section
--------
The foregoing instrument was ACKNOWLEDGED before me this 29th day of
October, 1999, by William H. Armstrong, III, the President and Chief Executive
Officer of STRATUS PROPERTIES, INC., a Delaware corporation and the Sole Member
of STRS L.L.C., a Delaware limited liability company and the General Partner of
STRATUS 7000 WEST, LTD., a Texas limited partnership and Operating Partner of
STRATUS 7000 WEST JOINT VENTURE, a Texas joint venture, on behalf of each of
said entities.
[SEAL] /s/ Mary Bradley
----------------------------------------
Notary Public, State of Texas
My Commission Expires:
MARY BRADLEY
----------------------------------------
Jan. 16, 2002 (Printed Name of Notary Public)
- -----------------
STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
--------
The foregoing instrument was ACKNOWLEDGED before me this 2 day of
November, 1999, by Hal Hall, the Vice President of OLY Lantana, G.P., L.L.C.,
general partner of OLY Lantana, L.P, a Texas limited partnership, Joint
Venturer, of STRATUS 7000 WEST JOINT VENTURE, on behalf of said entities.
[SEAL] /s/ Kerry A. Nunn
----------------------------------------
Notary Public, State of Texas
My Commission Expires:
Kerry A. Nunn
----------------------------------------
October 6, 2002 (Printed Name of Notary Public)
- -----------------
Page 7
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF TRAVIS Section
--------
This instrument was ACKNOWLEDGED before me on the 29th day of October,
1999, by NAVDEEP S. SOOCH, the Chairman and CEO of SILICON LABORATORIES, INC.,
a DELAWARE Corporation on behalf of corporation.
[SEAL] /s/ Lynette L. Herr
----------------------------------------
Notary Public, State of Texas
My Commission Expires:
Lynette L. Herr
----------------------------------------
April 27, 2002 Printed Name of Notary Public
- -----------------
EXHIBIT LIST
Exhibit A - Legal Description
Page 8
<PAGE>
EXHIBIT I
LETTER OF CREDIT PRO FORMA WORDING
PAGE ONE OF TWO
(FOR LETTER OF CREDIT ISSUED BY IMPERIAL BANK)
APPLICANT:
BENEFICIARY:
AMOUNT:
EXPIRY DATE AND PLACE FOR PRESENTATION OF DOCUMENTS: [need date] IMPERIAL BANK
INTERNATIONAL DIVISION, 2015 MANHATTAN BEACH BLVD., 2ND FLR., REDONDO BEACH,
CA 90278
CREDIT IS AVAILABLE WITH IMPERIAL BANK INTERNATIONAL DIVISION AGAINST PAYMENT
OF DRAFTS DRAWN AT SIGHT ON IMPERIAL BANK INTERNATIONAL DIVISION, 2015 MANHATTAN
BEACH BLVD., 2ND FLR., REDONDO BEACH, CA 90278
DOCUMENTS REQUIRED:
1. THE ORIGINAL OF THIS STANDBY LETTER OF CREDIT AND AMENDMENT(S) IF ANY.
2. BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER
CERTIFYING THAT [APPLICANT' NAME] IS IN DEFAULT OR THAT AN EVENT OF DEFAULT HAS
OCCURRED UNDER ONE OR MORE OF THE TERMS OF THAT CERTAIN LEASE AGREEMENT DATED
[GIVE DATE] THAT EXISTS BETWEEN [APPLICANT'S NAME] AND [BENEFICIARY'S NAME] AND
THAT ANY APPLICABLE CURE PERIOD HAS LAPSED WITHOUT REMEDY.
SPECIAL CONDITIONS:
ALL INFORMATION REQUIRED UNDER DOCUMENT REQUIREMENT NO. 2 WHETHER INDICATED BY
BLANKS, BRACKETS OR OTHERWISE, MUST BE COMPLETED AT THE TIME OF DRAWING.
ALL SIGNATURES MUST BE MANUALLY EXECUTED IN ORIGINALS.
PARTIAL DRAWINGS MAY BE MADE UNDER THIS LETTER OF CREDIT, PROVIDED, HOWEVER,
THAT EACH SUCH DEMAND THAT IS PAID BY US SHALL REDUCE THE AMOUNT AVAILABLE UNDER
THIS LETTER OF CREDIT.
IT IS A CONDITION OF THIS STANDBY LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR PERIODS FROM THE PRESENT
EXPIRATION DATE HEREOF, UNLESS THIRTY (30) DAYS PRIOR TO ANY SUCH DATE, WE SHALL
NOTIFY YOU IN WRITING BY CERTIFIED MAIL OR COURIER SERVICE AT THE ABOVE LISTED
ADDRESS THAT WE ELECT NOT TO CONSIDER THIS IRREVOCABLE LETTER OF CREDIT RENEWED
FOR ANY SUCH ADDITIONAL PERIOD. UPON RECEIPT BY YOU OF SUCH NOTICE, YOU MAY DRAW
HEREUNDER BY MEANS OF YOUR DRAFT(S) ON US AT SIGHT ACCOMPANIED BY YOUR ORIGINAL
SIGNED STATEMENT WORDED AS FOLLOWS: [beneficiary] HAS RECEIVED NOTICE FROM
IMPERIAL BANK THAT THE EXPIRATION DATE OF LETTER OF CREDIT NO. [INSERT L/C NO.]
WILL NOT BE EXTENDED FOR AN ADDITIONAL PERIOD. AS OF THE DATE OF THIS DRAWING,
[beneficiary] HAS NOT RECEIVED A SUBSTITUTE LETTER OF CREDIT OR OTHER INSTRUMENT
ACCEPTABLE TO [beneficiary] AS SUBSTITUTE FOR IMPERIAL BANK LETTER OF CREDIT NO.
[INSERT L/C NO.].
NOTWITHSTANDING THE ABOVE, THE FINAL EXPIRATION DATE SHALL BE MMDDYY.
ALL DRAFTS AND DOCUMENTS REQUIRED UNDER THIS LETTER OF CREDIT MUST BE MARKED:
"DRAWN UNDER IMPERIAL BANK LETTER OF CREDIT NO. [INSERT L/C NO.]"
ALL DOCUMENTS ARE TO BE DISPATCHED IN ONE LOT BY COURIER SERVICE TO IMPERIAL
BANK INTERNATIONAL DIVISION, 2015 MANHATTAN BEACH BLVD., 2ND FLR., REDONDO
BEACH, CA 90278
G-4
<PAGE>
EXHIBIT I
LETTER OF CREDIT PRO FORMA WORDING
PAGE TWO OF TWO
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH
UNDERTAKING SHALL NOT BE IN ANY WAY MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE
TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN WHICH THIS
LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES, AND
ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY
DOCUMENT, INSTRUMENT OR AGREEMENT.
WE HEREBY ENGAGE WITH YOU THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED IF DRAWN AND PRESENTED FOR PAYMENT AT
THIS OFFICE ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS CREDIT IS SUBJECT TO THE
"UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS" (1993 REVISION)
INTERNATIONAL CHAMBER OF COMMERCE (PUBLICATION NO. 500).
G-4
<PAGE>
EXHIBIT J
CONFIDENTIAL AGREEMENT
DISCLOSURE OF CONFIDENTIAL INFORMATION
This agreement, effective this 27th day of October 1999 by and between Silicon
Laboratories Inc., a corporation organized under the laws of the State of
Delaware, and having its principal place of business at 4635 Boston Lane,
Austin, TX 78735, and Stratus 7000 West Joint Venture, a joint venture organized
under the laws of Texas and having its principal place of business at Stratus
Properties Inc. 98 San Jacinto, Suite 220 Austin, Texas 78701 hereinafter
referred to as the "party" or the "parties." Whereas, the parties desire to
discuss with each other information relating to historical financial
information, financial forecasts, business plans, staffing levels and future
product development activities.
Now, therefore, in consideration of the aforesaid disclosures and further in
consideration of the rights and obligations hereinafter set forth, it is hereby
agreed as follows:
I. Each party shall hold in confidence any and all confidential information
disclosed by the other, with regard to the above part numbers and shall
exercise the same degree of diligence with respect to the dissemination of
such information as that exercised with respect to their own confidential
information which they do not want disclosed.
II. Each party agrees not to disclose to any third party confidential
information disclosed by the other or to offer for sale or otherwise
dispose of to any third party devices (or information relating to the
subject matter) utilizing any of the confidential information (unless
otherwise authorized in writing).
Information disclosed hereunder shall not be deemed to be confidential if:
A. The information was generally available to the public at the time
of disclosure to the receiving party; or
B. The information hereafter becomes generally available to the
public, except as the result of unauthorized disclosure by the
receiving party; or
C. The party disclosing the information agrees, in writing, that it
can be disclosed, by the receiving party to a third party; or
D. The information is known to the receiving party and documented in
writing prior to its receipt, is not subject to a non-disclosure
commitment on the part of the receiving party, and the receiving
party informs the disclosing party of such facts at the time of
the disclosure; or
E. The information is or becomes available on an unrestricted basis
to a third party from the disclosing party or from someone acting
under its control (except that a corporate subsidiary of either
party shall not be deemed a "third party" hereunder).
In the event the receiving party is obligated to produce such information, as a
result of court order or pursuant to governmental action and the transmitting
party shall have been given notice and an opportunity to appear and object to
such disclosure but is unsuccessful, then the receiving party may produce such
information as is required by the court order or governmental action to such
third party.
III. The disclosing party's confidential information shall be made available
only to those employees of the receiving party who have a reasonable need
for such information.
IV. The parties agree not to utilize any such confidential information received
under this Agreement in the manufacture of articles sold or offered for
sale to anyone other than the disclosing party without prior written
consent of the disclosing party, subject to the same exceptions set forth
in Paragraph II above.
V. Any confidential disclosure, if made orally, shall be identified as
confidential prior to disclosure and shall be promptly confirmed in writing
by the disclosing party, within 30 days, if the disclosing party wishes to
keep such information proprietary under this Agreement.
<PAGE>
EXHIBIT J
VI. Nothing in this Agreement shall be construed to grant to either party any
right or license under any patent of the other party.
VII. The obligations under paragraphs I, II, III, and IV shall continue for a
period of one (1) year after the end of term of a Lease Agreement Between
Stratus 7000 West Joint Venture as Landlord and Silicon Laboratories Inc.
as Tenant dated OCTOBER 27, 1999.
VIII. It is understood by both parties that such information may relate to
products that are under development or planned for development. BOTH
PARTIES UNDERSTAND THAT NO WARRANTIES ARE MADE OR IMPLIED REGARDING THE
ACCURACY OF THIS INFORMATION. Neither party accepts responsibility for any
expense, losses, or action incurred or undertaken by the other as a result
of the receipt of this information. It is further understood by both
parties that neither party warrants or represents that it will introduce
any product to which the information is disclosed herein is related.
IX The adjudication of this agreement shall be governed by the laws of the
State of Texas.
X. The existence of this agreement and, the fact that confidential information
exists and has been disclosed constitutes confidential information and
shall be treated as such under the terms of this agreement.
By /s/ Navdeep S. Sooch By /s/ William H. Armstrong, III
------------------------- -----------------------------
Signature Signature
------------------------- -----------------------------
Navdeep S. Sooch William H. Armstrong, III
------------------------- -----------------------
Chairman and Chief Executive Officer President and CEO
Silicon Laboratories Inc. Stratus Properties Inc.,
a Delaware limited
liability company
<PAGE>
FINOVA-Registered Trademark-
FINANCIAL INNOVATORS
FINOVA Capital Corporation
Technology Finance
10 Waterside Drive
Farmington, CT 06032-3065
(860)676-1818
MASTER LOAN AND SECURITY AGREEMENT
Master Loan and Security Agreement No. S7270 Dated April 22, 1999
FINOVA CAPITAL CORPORATION, with its principal place of business located at
1850 N. Central Avenue, Phoenix, AZ 85004 ("we," "us" or "FINOVA") is willing
to make a loan (the "Loan") to SILICON LABORATORIES INC. ("you" or
"Borrower") under the terms and conditions contained in this Master Loan and
Security Agreement (this "Master Agreement"). The Loan will be secured by the
Collateral described in any schedule to this Master Agreement (a "Schedule").
The Collateral also includes any replacement parts, additions and accessories
that you may add to the Collateral, as well as any proceeds (including
without limitation to Insurance proceeds) of sale of the Collateral. We may
treat any Schedule as a separate loan and security agreement containing all
of the provisions of this Master Agreement.
1. THE CREDIT
We may make the Loan in more than one advance (an "Advance", each of which
shall be evidenced by a "Schedule"). All of the Schedules, taken together,
will make up the Loan. We will only make the Loan to you if all the
conditions in this Master Agreement have been met to our reasonable
satisfaction. We will rely on your representations and warranties, contained
in this Master Agreement, in making the Loan. The terms of this Agreement
will each apply to the Loan.
- - USE OF PROCEEDS. You will use the proceeds of the Loan to pay for the
Collateral. We may pay the Supplier (whom you have chosen) of the
Collateral directly from the Loan proceeds. The Supplier will deliver the
Collateral to you at your expense. You will properly install the Collateral
at your expense at the location(s) indicated in the Schedule. If you have
already paid for the Collateral, we will pay the Loan proceeds to you or to
another person that you may designate in writing.
- - NOTES. Your obligation to repay the Loan and to pay interest on the Loan
will be evidenced by Notes. Each Note will be dated the date of the
Schedule to which the Advance evidenced by the Note is related.
- - TERM. The Term of each Schedule (and the related Advance) begins upon the
date that we make payment for the Collateral covered under each Schedule
(the "Closing Date"). The Term continues until you fully perform all of
your obligations under this Agreement and each Schedule and the related
Note(s). If the Collateral is not delivered, installed and accepted by you
by the date indicated in the Schedule, we may terminate this Agreement and
the Schedule as to the Collateral that was not delivered, installed and
accepted by giving you 10 days written notice of termination. Any advance
Loan payment you may have paid us is nonrefundable, even if the Term never
starts or if we rightfully terminate this Master Agreement or the Schedule.
<PAGE>
- - LOAN ACCOUNT. We will keep a loan account on our books and records (which
are computerized) for the Loan. We will record all payments of principal
and interest in the loan account. Unless the entries in the loan account
are clearly in error, the loan account will definitively indicate the
outstanding principal balance and accrued interest on the Loan. We may send
you loan account statements from time to time or upon your request.
- - PAYMENTS. The scheduled loan payments (the "Payments") are indicated on the
Schedule. The Payments are payable periodically as specified on the
Schedule from time to time (for example, monthly). The Schedule also
indicates whether the Payments are payable "in advance" or "in arrears."
You agree that you owe us the total of all of these Payments over the Term
of the Schedule.
- - FIRST PAYMENT. The first Payment is due at the beginning of the Term or at
a later date that we agree to in writing. Subsequent Payments are due on
the thirtieth day of each successive period (except the next following
period if Payments are payable in arrears) until you pay us in full all of
the Payments and any other charges or expenses you owe us.
- - INTEREST. Prior to maturity of a Schedule, you will pay us interest on each
Schedule at the Interest Rate indicated in the Schedule. "Maturity" means
the scheduled maturity or any earlier date on which we accelerate the Loan.
The Payment amount indicated in the Schedule includes interest at this
Interest Rate. Interest is calculated in advance using a year of 360 days
with twelve months of 30 days.
- - DEFAULT INTEREST RATE. After Maturity of the Loan you will pay us interest
at a rate of four (4%) percent per year above the Interest Rate. This is
referred to as the "Default Rate."
- - INTERIM PAYMENT. If an Advance is made on a day other than the thirtieth or
thirty-first day of a period, you will also pay us an interim Payment on
the first Payment date. The interim Payment will be for the period from the
beginning of the Term until the twenty-ninth day of the period in which the
Advance is made, unless the Advance is made on the thirty-first day of a
period. If the Advance is made on the thirty-first day of a period, the
interim Payment will be for the period from the beginning of the Term
through and including the twenty-ninth day of the next following period.
The Interim Payment will be calculated on an interest only daily basis for
the number of days for which the interim Payment is due.
- - USURY. You and we intend to obey the law. If the Interest Rate charged
would exceed the maximum legal rate, you will only have to pay the maximum
legal rate. You do not have to pay any excess interest over and above the
maximum legal rate of interest. However, if it later becomes legal for you
to pay all or part of any excess interest, you will then pay it to us upon
our request.
- - PAYMENT DETAILS. You will make all payments due under this Master Agreement
by 12:00 P.M., Connecticut time, on the day they are due. You will make all
payments in US Dollars (US$) in immediately available funds. We do not have
to make or give "presentment, demand, protest or notice" to get paid. You
waive "presentment, demand and protest."
- - APPLICATION OF PAYMENTS. Each payment under this Master Agreement is to be
applied in the following order: first, to any fees, costs, expenses and
charges you may owe us; second, to any interest due; and third to the
principal balance.
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<PAGE>
- - PREPAYMENT. You may not prepay the Loan, in whole or in part, unless this
is specifically permitted by Exhibit A to this Agreement. If prepayment is
permitted by Exhibit A to this Master Agreement, you will give us at least
30 days advance written notice of prepayment. You will pay us the
prepayment premium indicated in the Schedule(s). You will also pay us all
accrued and unpaid interest through the date of prepayment, as well as all
outstanding fees, costs, expenses and charges then due. Of course, you will
also pay the entire outstanding principal balance of the Loan. Once you
give us a notice of prepayment, that notice is final and irrevocable. If we
accelerate the Loan following an Event of Default, you will also owe us a
prepayment premium calculated as if the Loan were prepaid on the date of
acceleration. If no prepayment is permitted, the premium due upon
acceleration will be five (5%) percent of the outstanding principal balance.
- - YOUR OBLIGATION TO PAY US ALL PAYMENTS IS ABSOLUTE AND UNCONDITIONAL. YOU
ARE NOT EXCUSED FROM MAKING THE PAYMENTS, IN FULL, FOR ANY REASON. YOU AGREE
THAT YOU HAVE NO DEFENSE FOR FAILURE TO MAKE THE PAYMENTS AND YOU WILL NOT
MAKE ANY COUNTERCLAIMS OR SETOFFS TO AVOID MAKING THE PAYMENTS.
2. SECURITY INTEREST
- - You grant us a security interest in the Collateral. The Collateral secures
the full and timely payment and performance of all of your obligations to
us under this Master Agreement and any other agreement, loan or lease that
you may have with us (the "Obligations").
- - If we request, you will put labels supplied by us stating "PROPERTY SUBJECT
TO A SECURITY INTEREST HELD BY FINOVA" on the Collateral where they are
clearly visible.
- - You give us permission to add to this Master Agreement or any Schedule the
serial numbers and other information about the Collateral.
- - You give us permission to file this Master Agreement or a Uniform
Commercial Code financing statement, at your expense, in order to perfect
our security interest in the Collateral. You also give us permission to
sign your name on the Uniform Commercial Code financing statements where
this is permitted by law.
- - You will pay our reasonable cost to do searches for other filings or
judgments against you or your affiliates. You will also pay any filing,
recording or stamp fees or taxes resulting from filing this Agreement or a
Uniform Commercial Code financing statement. You will also pay our
reasonable fees in effect from time to time for documentation,
administration and Termination of this Master Agreement.
- - At your expense, you will defend our first priority security interest in
the Collateral against, and keep the Collateral free of, any legal process,
liens, other security interests, attachments, levies and executions. You
will give us three (3) business days written notice of any legal process,
liens, attachments, levies or executions, and you will indemnify us against
any loss that results to us from these causes.
- - You will notify us at least 15 days before you change the address of your
principal executive office.
- - You will promptly sign and return additional documents that we may
reasonably request in order to protect our first priority security interest
in the Collateral.
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<PAGE>
- - Except for the 20% soft cost (which will be allocated as follows: $300,000
for shipping, tax, software and installation and $100,000 for tenant
improvements) portion of this Master Agreement the Collateral is personal
property and will remain personal property. You will not incorporate it
into real estate and will not do anything that will cause the Collateral to
become part of real estate or a fixture.
3. CONDITIONS OF LENDING
- - See our Commitment Letter to you dated April 14, 1999, which you and we
consider to be a part of this Master Agreement. The terms and conditions of
the Commitment Letter continue following the making of the first Advance.
However, if there is a conflict between the terms and conditions of this
Master Agreement, any Schedule or any Note and the terms and conditions of
the Commitment Letter, then you and we agree that the terms and conditions
of this Master Agreement, the Schedules and the Notes control over the
Commitment Letter terms and conditions.
- - Before we disburse any proceeds of any Advance, we also require the
following:
- - That no payment is past due to us under any other agreement, loan or lease
that you have with us.
- - That you are complying with all terms of this Master Agreement.
- - That we have received all the documents we requested, including the signed
Schedule, Note and Delivery and Acceptance Certificate.
- - That there has been no material adverse change in your financial condition,
business, operations or prospects, from the financial condition that you
disclosed to us in your application for credit.
4. REPRESENTATIONS AND WARRANTIES
You represent and warrant to us as follows:
- - All financial information and other information that you have given us is
true and complete. You have not failed to tell us anything that would make
the financial information not misleading. There has been no material
adverse change in your financial condition, business, operations or
prospects, from the financial condition that you disclosed to us in your
application for credit.
- - You have supplied us with information about the Collateral. You promise to
us that the amount of our Advance as to each item of Collateral is no more
than the fair and usual price for this kind of Collateral, taking into
account any discounts, rebates and allowances that you or any affiliate of
yours may have been given for the Collateral.
- - You have complied with all "environmental laws" and will continue to comply
with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored or disposed of by you or at your properties
except in compliance with all environmental laws. "Environmental laws" mean
all federal, state or local environmental laws and regulations, including
the following laws: CERCLA, RCRA. Hazardous Material Transport Act and The
Federal Water Pollution Control Act. "Hazardous substances" means all
hazardous or toxic wastes, materials or substances, as defined in the
environmental laws, as well as oil, flammable substances, asbestos that is
or could become friable, urea formaldehyde insulation, polychlorinated
biphenyls and radon gas.
5. COVENANTS
4
<PAGE>
You agree to do the following things (or not to do the following things if so
stated) until full payment of all amounts due to us under this Master
Agreement, the Schedules and the Notes:
CARE, USE, LOCATION AND ALTERATION OF THE COLLATERAL
- - You will make sure that the Collateral is maintained in good operating
condition, and that it is serviced, repaired and overhauled when this is
necessary to keep the Collateral in good operating condition. All
maintenance must be done according to the Supplier's or Manufacturer's
requirements or recommendations. All maintenance must also comply with any
legal or regulatory requirements.
- - You will maintain service logs for the Collateral and permit us to inspect
the Collateral, the service logs and service reports. You give us
permission to make copies of the service logs and service reports.
- - We will give you prior notice if we, or our agent, want to inspect the
Collateral or the service logs or service reports. We may inspect it during
regular business hours. You will pay our travel, meals and lodging costs to
inspect the Collateral, but only for one inspection per year. If we find
during an inspection that you are not complying with this Master Agreement,
you will pay our travel, meals and lodging costs, our salary costs, and the
costs and fees of our agents for reinspection. You will promptly cure any
problems with the Collateral that are discovered during our inspection.
- - You will use the Collateral only for business purposes. You will obey all
legal and regulatory requirements in your material use of the Collateral.
- - You will make all additions, modifications and improvements to the
Collateral that are required by law or government regulation.
Except for alterations in accordance with industry practices, you will not
alter the Collateral without our written permission. You will replace all
worn, lost, stolen or destroyed parts of the Collateral with replacement
parts that are as good or better than the original parts. The new parts
will become subject to our security interest upon replacement.
- - You will not remove the Collateral from the location indicated in the
Schedule without our written permission.
- - If the Collateral is removed from the location indicated in the Schedule A,
you will give us (a) 30 days prior written notice of the actual move (b) if
premises is leased, prior to such move, Lender shall have received a
Landlord Waiver executed by the Landlord (c) Lender shall have been granted
a first perfected Lien on such moved collateral and there shall be no other
liens covering such collateral (d) Borrower shall have executed and
delivered to lender all such agreements and instruments in connection
therewith.
YEAR 2000 COMPLIANT
You represent, warrant and agree to take all action necessary including, but
not limited to due inquiry and due diligence with critical business partners
to assure that there will be no material adverse change to your business by
reason of the advent of the year 2000, including without limitation that all
computer-based systems, embedded microchips and other processing capabilities
effectively recognize and process all dates before and after December 31,
1999 ("Y2K Compliant"). At our request, you shall provide to us assurance
reasonably acceptable to us that your computer-based systems, embedded
microchips and other processing capabilities are Y2K Compliant.
RISK OF LOSS
5
<PAGE>
- - You have the complete risk of loss or damage to the Collateral. Loss or
damage to the Collateral will not relieve you of your obligation to make
the Payments.
- - If any Collateral is lost or damaged, you have two choice (although if you
are in default under this Master Agreement, we and not you will have the
two choices). The choices are:
(1) Repair or replace the damaged or lost Collateral so that, once again,
the Collateral is in good operating condition and we have a perfected
first priority security interest in it.
(2) Pay us the present value (as of the date of payment) of the remaining
Payments. We will calculate the present value using a discount rate of
five (5%) percent per year. Once you have paid us this amount and any
other amount that you may owe us, we will release our security interest
in the damaged or lost Collateral and you (or your insurer) may keep
the Collateral and you (or your insurer) may keep the Collateral for
salvage purposes, on an "AS IS, WHERE IS" basis.
INSURANCE
- - Until you have made all Payments to us under this Master Agreement, the
Schedules and the Notes, you will keep the Collateral insured. The amount
of insurance, the coverage, and the insurance company must be acceptable to
us.
- - If you do not provide us with written evidence of insurance that is
acceptable to us, we may buy the insurance ourselves, at your expense. You
will promptly pay us the cost of this insurance. We have no obligation to
purchase any insurance. Any insurance that we purchase will be our
insurance, and not yours.
- - Insurance proceeds may be used to repair or replace damaged or lost
Collateral or to pay us the present value of the Payments, as provided
above.
- - You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and
to endorse your name on all documents, checks or drafts relating to
insurance claims for Collateral.
TAXES
- - You will pay all sales, use, excise, stamp, documentary and ad valorum
taxes, license, recording and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession, use,
lease or rental of the equipment or on the Loan.
- - You will pay all taxes (other than our federal, state net income taxes or
Texas Franchise Tax imposed on you or on us regarding the Payments.
- - You will reimburse us for any of these taxes that we pay or advance.
- - You will file and pay for any personal property taxes on the Collateral.
FINANCIAL STATEMENTS
- - During the Term you will promptly give copies of any filings you make with
the Securities and Exchange Commission (SEC). You will also provide us with
the following financial statements:
* Quarterly balance sheet and statements of earnings and cash flow - within
45 days after the ed of your first three fiscal quarters in each fiscal
year. These will be certified by your chief financial officer and
accompanied by a certificate of your chief financial officer stating that
no default exists, or, if he or she cannot certify this because a default
does exist, he or she must
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<PAGE>
specify in reasonable detail the nature of the default.
- - Annual balance sheet and statements of earnings and cash flow - within 90
days after the end of each fiscal year. These will be audited by
independent auditors acceptable to us and will be accompanied by a
certificate executed by such independent auditors stating that you have
complied with all covenants contained in the Master Agreement and that
there are no events of default thereunder (the "Compliance Certificate").
Their audit report must be unqualified.
These financial statements will be prepared according to generally accepted
accounting principles, consistently applied.
All financial statements and SEC filings that you provide us will be true and
complete. They will not fail to tell us anything that would make them not
misleading.
In the event you become a public company, your reporting responsibilities
will be no greater than that required by the Securities and Exchange
Commission (the "SEC") and related securities disclosure laws other than the
accompanying certificates set forth herein, provided that the disclosure
dates of such certificates correspond to the then existing SEC reporting
dates requirements.
6. DEFAULTS
You are in default if any of the following happens:
- - You do not pay us within 5 business days after written notice, any Payment
or other payment that you owe us under this Master Agreement, any Schedule,
Note or that you owe under any other agreement, loan or lease that you have
with us.
- - Any of the financial information that you give us is not true and complete,
or you fail to tell us anything that would make the financial information
not misleading.
- - You do something you are not permitted to do, or you fail to do anything
that is required of you, under this Master Agreement, any Schedule or any
other lease, loan or other financial arrangement that you have with us and
it remains uncured after written notice, provided, that you shall not be
entitled to any notice or cure period in the case of a breach of any of
your obligations with respect to maintenance of insurance and delivery of
documents related thereto, as provided herein or in any other documents
executed in connection herewith.
- - An event of default occurs for any other lease, loan or obligation of yours
(or any guarantor) that exceeds $50,000 in the aggregate.
You file bankruptcy and such involuntary bankruptcy is not dismissed within
sixty (60) days.
- - You are subject to involuntary bankruptcy or any other insolvency
proceeding other than bankruptcy (for example, a receivership action or
an assignment for the benefit of creditors) and such proceeding that is
involuntary is not dismissed within sixty (60) days.
- -
- - Without our permission, you sell all or a substantial part of its assets,
merge or consolidate, or a majority of your voting stock or interests is
transferred.
REMEDIES, DEFAULT INTEREST, LATE FEES
If you are in default we may exercise one or more of our "remedies." Each of
our remedies is independent. We may exercise any of our remedies, all of our
remedies or none of our remedies. We may exercise them in any order we
choose. Our exercise of any remedy will not
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<PAGE>
prevent us from exercising any other remedy or be an "election of remedies."
If we do not exercise a remedy, or if we delay in exercising a remedy, this
does not mean that we are forgiving your default or that we are giving up our
right to exercise the remedy. Our remedies allow us to do one or more of the
following:
- - "Accelerate" the Loan balance under any or all Notes. This means that we
may require you to immediately pay us all Payments for the entire Term for
any or all Schedules.
- - Require you to immediately pay us all amounts that you are required to pay
us for the entire Term of any other agreements, loans or leases that you
have with us.
- - Sue you for all Payments and other amounts you owe us plus the Prepayment
Premium (see Section 1 above).
- - Require you at your expense to assemble the Collateral at a location we
request in the Continental United States of America.
- - Remove and repossess the Collateral from where it is located, without
demand or notice, or make the Collateral inoperable. We have your
permission to remove any physical obstructions to removal of the
Collateral. We may also disconnect and separate all Collateral from other
property. No court order, court hearing or "legal process" will be required
for us to repossess the Collateral. You will not be entitled to any damages
resulting from removal or repossession of the Collateral. Except for gross
negligence or willful misconduct by FINOVA or FINOVA's agents we may use,
ship, store, repair or lease any Collateral that we repossess. We may sell
any repossessed Collateral at private or public sale. You give us
permission to show the Collateral to buyers at your location free of charge
during normal business hours. If we do this, we do not have to remove the
Collateral from your location. If we repossess the Collateral and sell it,
we will give you credit for the net sale price, after subtracting our costs
of repossessing and selling the Collateral. If we rent the Collateral to
somebody else, we will give you credit for the net rent received, after
subtracting our costs of repossessing and renting the Collateral, but the
credit will be discounted to present value using a discount rate equal
to the Default Rate. The credit will be applied against what you owe us
under this Master Agreement, the Schedules, the Notes and any other
agreements, loans or leases that you have with us. If the credit exceeds
the amount you owe under this Master Agreement, the Schedule, the Notes
and any other agreements, loans or leases that you have with us, we will
refund the amount of the excess to you.
- - Return conditions: Following an Event of Default, at our request you will
return the Collateral, freight and insurance prepaid by you, to us at a
location we request in the Continental United States of America. It will be
returned in good operating condition, as required by Section 5 above. The
Collateral will not be subject to any liens when it is returned. All
advertising insignia will be removed and the finish will be painted or
blended so that nobody can see that advertising insignia used to be there.
* You will pack or crate the Collateral for shipping in the original
containers, or comparable ones. You will do this carefully and follow all
recommendations of the Supplier and the Manufacturer as to packing or
crating.
* You will also return to us the plans, specifications, operating manuals,
software documentation, discs, warranties and other documents furnished by
the Manufacturer or Supplier. You will also return to us all service logs
and service reports, as well as all written materials that you may have
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concerning the maintenance and operation of the Collateral.
* At our request, you will provide us with up to 60 days free storage of the
Collateral at your location provided that Borrower is still in possession
or control of the space, and will let us (or our agent) have access to the
Collateral in order to inspect it and sell it.
* You will pay us what it costs us to repair the Collateral if you do not
return it in the required condition.
You will also pay us for the following:
- - All our expenses of enforcing our remedies. This includes all our expenses
to repossess, store, ship, repair and sell the Collateral.
- - Our reasonable attorney's fees and expenses.
- - Default interest on everything you owe us from the date of your default to
the date on which we are paid in full at the Default Rate.
You realize that the damages we could suffer as a result of your default are
very uncertain. This is why we have agreed with you in advance on the Default
Rate to be used in calculating the payments you will owe us if you default.
You agree that, for these reasons, the payments you will owe us if you
default are "agreed" or "liquidated" damages. You understand that these
payments are not "penalties" or "forfeitures."
LATE FEES. You will pay us a late fee whenever you pay any amount that you
owe us more than ten (10) days after it is due. You will pay the late fee
within one month after the late Payment was originally due. The late fee will
be ten (10%) percent of the late Payment. If this exceeds the highest legal
amount we can charge you, you will only be required to pay the highest legal
amount. The late fee is intended to reimburse us for our collection costs
that are caused by late Payment. It is charged in addition to all other
amounts you are required to pay us, including Default Interest.
7. EXPENSES AND INDEMNITIES
PERFORMING YOUR OBLIGATIONS IF YOU DO NOT
If you do not perform one or more of your obligations under this Master
Agreement or a Schedule or Note, we may perform it for you. We will notify
you in writing at least ten (10) days before we do this. We do not have to
perform any of your obligations for you. If we do choose to perform them, you
will pay us all of our expenses to perform the obligations. You will also
reimburse us for any money that we advance to perform your obligations,
together with interest at the Default Rate on that amount. These will be
additional "Payments" that you will owe us and you will pay them at the same
time that your next Payment is due.
- - You will indemnify us, defend us and hold us harmless for any and all
claims, expenses and attorney's fees concerning or arising from the
Collateral, this Master Agreement, or any Schedule or Note, or your breach
of any representation or warranty. It includes any claims concerning the
manufacture, selection, delivery, possession, use, operation or return of
the Collateral.
- - This obligation of yours to indemnify us continues even after the Term is
over.
8. MISCELLANEOUS
WE MAY ASSIGN OR GRANT A SECURITY INTEREST IN THIS AGREEMENT, ANY SCHEDULE,
ANY NOTE OR ANY PAYMENTS WITHOUT YOUR PERMISSION. THE PERSON TO WHOM WE
ASSIGN IS CALLED THE "ASSIGNEE." THE ASSIGNEE WILL NOT HAVE ANY OF OUR
OBLIGATIONS UNDER THIS MASTER AGREEMENT. YOU WILL NOT BE ABLE TO RAISE ANY
DEFENSE,
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<PAGE>
COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE. NOTWITHSTANDING ANY SUCH
ASSIGNMENT OR GRANTING OF A SECURITY INTEREST, WE WILL CONTINUE TO BE
LIABLE FOR ALL OF OUR OBLIGATIONS UNDER THIS MASTER AGREEMENT.
AFTER ASSIGNMENT YOU MAY "QUIETLY ENJOY" THE USE OF THE COLLATERAL SO LONG AS
YOU ARE NOT IN DEFAULT.
UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER
YOUR RIGHTS UNDER THIS MASTER AGREEMENT OR ANY SCHEDULE. YOU ALSO ARE NOT
ALLOWED TO LEASE OR RENT THE COLLATERAL OR LET ANYBODY ELSE USE IT UNLESS WE
GIVE YOU OUR WRITTEN PERMISSION, PROVIDED, HOWEVER, SO LONG AS YOU ARE NOT IN
DEFAULT HEREUNDER OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT
EXECUTED IN CONNECTION HEREWITH OR BETWEEN US, YOU MAY LEASE, RENT AND PERMIT
OTHERS TO USE THE COLLATERAL, PROVIDED THAT (i) YOU SHALL HAVE GIVEN US NOT
LESS THAN THIRTY (30) DAYS PRIOR WRITTEN NOTICE THEREOF, WHICH NOTICE SHALL
INCLUDE THE NAME AND ADDRESS OF THE USER AND THE AMOUNT YOU WILL BE PAID FOR
THE USE AND SUCH OTHER INFORMATION AS WE SHALL DEEM NECESSARY, (ii) THE
COLLATERAL SHALL ONLY BE USED AT THE PREMISES SET FORTH ON THE SCHEDULE AND
SHALL NOT BE REMOVED THEREFROM, (iii) THE EQUIPMENT SHALL BE USED BY
EMPLOYEES OF THE USER PROPERLY TRAINED IN THE OPERATION OF THE EQUIPMENT,
(iv) YOU SHALL HAVE DELIVERED TO US EVIDENCE THAT YOUR INSURANCE CONTINUES IN
FORCE AND COVERAGE, NOTWITHSTANDING THAT SUCH USER IS OPERATING THE
EQUIPMENT, AND (v) YOU SHALL HAVE DELIVERED TO US EVIDENCE THAT SUCH USER HAS
OBTAINED SUCH INSURANCE OF SUCH TYPES, AMOUNTS AND ISSUED BY SUCH INSURANCE
COMPANIES COVERING ITS USE AND OPERATION OF THE EQUIPMENT, AS WE SHALL
REQUIRE, IN OUR SOLE DISCRETION, INCLUDING, WITHOUT LIMITATION, CASUALTY,
LIABILITY AND WORKERS' COMPENSATION, AND WE SHALL BE NAMED AS LENDERS LOSS
PAYABLE AND ADDITIONAL INSURED WITH RESPECT TO SUCH INSURANCE.
WE DID NOT MANUFACTURE OR SUPPLY THE COLLATERAL. WE ARE NOT A DEALER IN THE
COLLATERAL. INSTEAD, YOU CHOSE THE COLLATERAL.
WE DO NOT MAKE ANY WARRANTY AS TO THE COLLATERAL. WE DO NOT MAKE ANY WARRANTY
AS TO "MERCHANTABILITY" OR "SUITABILITY" OR "FITNESS FOR A PARTICULAR
PURPOSE" OR "NONINFRINGEMENT" OF ANY PATENT, COPYRIGHT OR OTHER INTELLECTUAL
PROPERTY RIGHT.
WE WILL NOT BE RESPONSIBLE FOR ANY LOSS, DAMAGE, OR INJURY TO YOU OR ANYBODY
ELSE AS A RESULT OF ANY DEFECTS, HIDDEN OR OTHERWISE, IN THE COLLATERAL UNDER
"STRICT LIABILITY" LAWS OR ANY OTHER LAWS.
WE WILL NOT BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, LOSS OF PROFITS OR GOODWILL.
If the Collateral is unsatisfactory, you will continue to pay us all Payments
and other amounts you are required to pay us. You must seek repair or
replacement of the equipment solely from the Manufacturer or Supplier and not
from us. Neither the Manufacturer nor the Supplier is our "agent," so they
cannot speak for us and they are not allowed to make any changes in this
Master Agreement or any Schedule or Note, or give up any of our rights.
10
<PAGE>
ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE OF PROCESS,
WAIVER OF JURY TRIAL.
THIS MASTER AGREEMENT WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN
WRITING.
THIS MASTER AGREEMENT IS GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF
ARIZONA (NOT INCLUDING THE "CHOICE OF LAW" DOCTRINE), THE STATE IN WHICH OUR
OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS OR CONDITIONS OF THIS
MASTER AGREEMENT OCCURRED AND FROM WHICH DISBURSEMENT OF THE LOAN PROCEEDS
WILL BE ORDERED. HOWEVER, IF THIS MASTER AGREEMENT IS UNENFORCEABLE UNDER
ARIZONA LAW, IT WILL INSTEAD BE GOVERNED BY THE LAWS OF THE STATE IN WHICH
THE COLLATERAL IS LOCATED.
YOU MAY ONLY SUE US IN A FEDERAL OR STATE COURT THAT IS LOCATED IN MARICOPA
COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES,
INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL
JURISDICTION OF THESE ARIZONA COURTS. YOU WILL NOT CLAIM THAT MARICOPA
COUNTY, ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A PROPER "VENUE".
WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH
PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO YOUR
ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.
YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.
NOTICES. We may give you written notice in person, by mail, by overnight
delivery service, or by fax. Notice will be sent to your address below your
signature. Mail notice will be effective three (3) days after we mail it with
prepaid postage to the address stated. Overnight delivery notice requires a
receipt and tracking number. Fax notice requires a receipt from the sending
machine showing that it has been sent to your fax number and received.
You may give us notice the same way the we may give you notice.
The Master Agreement benefits our successors and assigns. This Master
Agreement benefits only those successors and assigns of yours that we have
approved in writing.
This Master Agreement binds you successors and assigns. This Master Agreement
binds only those successors and assigns of ours that clearly assume our
obligations in writing.
TIME IS OF THE ESSENCE OF THIS MASTER AGREEMENT
This Master Agreement, all of the Schedules and the Notes and the Commitment
Letter are together the entire agreement between you and us concerning the
Collateral.
Only an employee of FINOVA who is authorized by corporate resolution or policy
may modify or amend this Loan or any Schedule or Note on our behalf, and this
must be in writing. Only he or she may give up any of our rights, and this
must be in writing. If more than one person is the Borrower under this Master
Agreement, then each of you is jointly and severally liable for your
obligations under this Master Agreement.
This Master Agreement is only for your benefit and for our benefit, as well
as our successors
-11-
<PAGE>
and assigns. It is not intended to benefit any other person.
If any provision in this Master Agreement is unenforceable, then that
provision must be deleted. Only unenforceable provisions are to be deleted.
The rest of this Master Agreement will remain as written.
PUBLICITY. We may make press releases and publish a tombstone announcing this
transaction and its total amount with your prior written consent which shall
not be unreasonably withheld. You may publicize this transaction without
prior written consent.
LENDER: BORROWER:
FINOVA CAPITAL CORPORATION SILICON LABORATORIES INC.
10 WATERSIDE DRIVE 4635 BOSTON LANE
FARMINGTON, CT 06032-3065 AUSTIN, TX 78735
BY: /s/ Linda A. Moschitto BY: /s/ Navdeep S. Sooch
PRINTED NAME: LINDA A. MOSCHITTO PRINTED NAME: NAVDEEP S. SOOCH
TITLE: DIRECTOR - CONTRACT ADMINISTRATION TITLE: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
Taxpayer ID# 74-2793174
FAX NUMBER: (860) 676-1814 FAX NUMBER: (512) 464-9404
DATE ACCEPTED: June 10, 1999 DATED: JUNE 8, 1999
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<PAGE>
STATE OF TEXAS
COUNTY OF TRAVIS
I acknowledge that NAVDEEP S. SOOCH, who stated that he/she is CHAIRMAN AND
CHIEF EXECUTIVE OFFICER of the Borrower named above, signed this Master Loan
and Security Agreement in my presence today: June 8, 1999. He/She acknowledged
to me that his/her signature on this Master Loan and Security Agreement was
authorized by a valid resolution or other valid authorization from Borrower's
board of directors or other governing body.
[SEAL] Lynette L. Herr
----------------------------
Notary Public
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<PAGE>
EXHIBIT A
PREPAYMENT PREMIUM
The Prepayment Premium shall be determined by multiplying the outstanding
principal balance by the percentage amount shown below which corresponds with
the month during the Term in which the prepayment occurs:
MONTH OF THE TERM PERCENTAGE AMOUNT
1 THROUGH 22 No Prepayment Allowed
23 THROUGH 36 4%
37 THROUGH 45 2%
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<PAGE>
LANDLORD'S WAIVER
This Landlord's waiver is made by the person identified below ("you" or
"Landlord") for FINOVA Capital Corporation ("we," "us" or "FINOVA").
You are the owner of real property located at 4635 Boston Lane, Austin, Texas
78735. You have entered into a lease for all or part of this property (the
"Premises") with Silicon Laboratories Inc. (the "Tenant").
We will be financing to Tenant personal property, which may be machinery,
equipment, furniture or fixtures. This personal property may be financed now
or in the future. We may be filing Uniform Commercial Code financing
statements to protect our interest in this personal property, as well as in
any proceeds from the property. This personal property and its proceeds are
referred to as the "Equipment." The Equipment will be located at the Premises.
We would not finance the Equipment to Tenant without this Landlord's Waiver.
You are benefiting from our leasing the Equipment to Tenant because the
Equipment will be used in Tenant's business. Revenues from Tenant's business
can be used by Tenant to pay you rent for the Premises. You intend to be
legally bound by this Landlord's Waiver.
1. WAIVER.
You acknowledge that you do not own the Equipment. You have no right or
interest in the Equipment. You waive any right under law to any lien on the
Equipment. You waive any right you may have under law or under your lease
with Tenant to levy on the Equipment or distrain the Equipment. You waive any
right to make any claim with respect to the Equipment.
2. PERSONAL PROPERTY.
The Equipment will remain personal property, even if it is attached to your
real estate.
3. REMOVAL OR SALE BY FINOVA
We may remove the Equipment from the Premises. You will not prevent or hinder
us from doing this. We will have no liability to you for this except for the
cost to repair damage actually caused by us to the Premises by removal. If
you have not re-let the Premises to somebody other than Tenant, we may sell
the Equipment from the Premises without having to pay rent.
4. SUCCESSORS AND ASSIGNS.
This Landlord's Waiver is binding upon and benefits your successors and
assigns (including any of your heirs or personal representatives) and our
successors and assigns.
LANDLORD: /s/ S. W. Austin Office Ltd.
By: /s/ G. H. Kronenberg Jr.
Name: G. H. Kronenberg Jr.
Title: Partner
Date: June 8, 1999
ACCEPTED AND AGREED TO:
FINOVA CAPITAL CORPORATION
By: /s/ Linda A. Moschitto
Name: LINDA A. MOSCHITTO
Title: DIRECTOR - CONTRACT ADMINISTRATION
Date: 6/10/99
<PAGE>
TECHNOLOGY FINANCE (logo)
November 5, 1999 FINOVA CAPITAL CORPORATION
TECHNOLOGY FINANCE
Mr. John McGovern
Chief Financial Officer 10 WATERSIDE DRIVE
Silicon Laboratories, Inc. FARMINGTON, CT 06032
4635 Boston Lane TEL 860 676 1818
Austin, TX 78735 FAX 860 676 1814
RE: Commitment Letter dated April 14, 1999
Dear Mr. McGovern:
Silicon Laboratories, Inc. ("Borrower") and FINOVA Capital Corporation
("Lender") hereby amend the above referenced Commitment Letter. The language
below replaces the language in the Commitment Letter specific to the sections
listed below.
ANTICIPATED DELIVERY: June 30, 1999 through November 30, 1999.
CLOSING DATE: The date on which all conditions to the Loan
are satisfied by the Borrower and the Loan
proceeds are disbursed to the Borrower or to
other Persons at the Borrower's direction. Each
Loan shall have a principal amount of not less
than $200,000 secured by delivered and accepted
Collateral, but no later than three months
after in-service date. No Closing Dates shall
occur after November 30, 1999.
All other terms and conditions of the Commitment Letter dated April 14, 1999
shall remain in full force and effect.
Sincerely,
Agreed to by:
FINOVA CAPITAL CORPORATION SILICON LABORATORIES INC.
By /s/ Dannion C. McGary By /s/ John McGovern
Dannion C. McGary John McGovern
Vice President--Credit Chief Financial Officer
<PAGE>
[LOGO]
FINANCIAL INNOVATORS
TECHNOLOGY FINANCE
FINOVA CAPITAL CORPORATION
TECHNOLOGY FINANCE
November 5, 1999
10 WATERSIDE DRIVE
FARMINGTON, CT 06032
Mr. John McGovern
Chief Financial Officer TEL 860 676 1818
Silicon Laboratories, Inc. FAX 860 676 1814
4635 Boston Lane
Austin, TX 78735
Dear Mr. McGovern:
FINOVA Capital Corporation ("we" or "Lender") is pleased to enter into the
following transaction with Silicon Laboratories, Inc. ("you" or "Borrower")
on the terms and conditions hereinafter set forth.
The outline of this Commitment is as follows:
BORROWER: Silicon Laboratories, Inc.
LENDER: FINOVA Capital Corporation
TERM OF LOANS: Each Loan shall have a term until payment in
full of fifty-three (53) consecutive months from
the thirtieth day of the month coincident with
or (as the case may be) the month next following
the making of the Loan.
FACILITY: A $2,500,000 line of credit. Subject to the
terms of the Loan Documents (as hereinafter
defined), we will from time to time make loans
to you under the Facility (each, a "Loan" and
collectively, the "Loans"). Once a Loan is made,
it cannot be reborrowed. Each Loan shall be
evidenced by a separate promissory note in form
and substance satisfactory to Lender.
PURPOSE OF LOANS: For the acquisition of one (1) new 100LC Analog
Teradyne mixed signal tester with bolt-on
handlers, two multitest quad site handlers, one
ATM lead conditioner, two tape and reel
inspection systems, CAD software and leasehold
improvements. Lender will finance soft costs in
amounts not in excess of twenty (20%) percent of
the aggregate principal amount of the Loans
outstanding at any time. Such soft costs to
include, but not be limited to leasehold
improvements (up to maximum of $125,000),
delivery, installation, sales tax and software.
All items financed with the proceeds of the Loan
are subject to final review and acceptance by
the Lender.
COLLATERAL: The due payment and performance of all of
Borrower's present and future obligations to
Lender, with the exception of CAD software and
leasehold improvements, shall be secured by a
first and only perfected lien on and security
interest in and to all items financed with the
proceeds of a Loan, and all replacements,
substitutions, accessions and additions thereto,
and all proceeds thereof
1
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[LOGO]
FINANCIAL INNOVATORS
(including, without limitation, proceeds of
insurance). Each Loan shall be cross
collateralized.
COLLATERAL LOCATION: 4635 Boston Lane, Austin, TX 78735
ANTICIPATED DELIVERY: November 1999 through December 31, 1999
CLOSING DATE: The date on which all conditions to a Loan are
satisfied by the Borrower and the Loan proceeds
are disbursed to the Borrower or to other
Persons at the borrower's direction, but no
later than 3 months after delivery of
Collateral. Each Loan shall have a principal
amount of not less than $200,000 secured by all
Collateral. No Closing Dates shall occur after
December 31, 1999.
MONTHLY PAYMENTS: Each Loan shall be paid in fifty-three (53)
consecutive installments of principal and
interest. Each of the first eighteen (18)
Monthly Payments shall be in an amount equal to
2.0% of the principal amount of the Loan. Each
of the next thirty-four (34) Monthly Payments
shall be in an amount equal to 2.3% of the
principal amount of the Loan and the final
fifty-third (53rd) Monthly Payment shall be in
an amount equal to twenty (20%) percent of the
principal amount of the Loan. All payments are
payable in advance and the first Monthly Payment
applicable to a Loan shall be payable on the
Closing Date of such Loan and shall be withheld
by the Lender from the Loan proceeds disbursed
by the Lender.
ADJUSTMENT TO
MONTHLY PAYMENTS: If, on the second business day preceding the
Closing Date for each Loan the highest yield for
four-year U.S. Treasury Notes as published in
THE WALL STREET JOURNAL on such date is greater
or less than the yield as published on October
4, 1999, the Monthly Payments shall be increased
or decreased (point for point) to reflect such
change in the yield. The yield as of October 4,
1999 was 6.05%. As of the Closing Date, the
Monthly Payments with respect to the applicable
Loan being made shall be fixed for the entire
Term.
INTERIM PAYMENTS: If the date we make the Loan to you is not the
thirtieth (30th) or the thirty-first (31st) day
of the month, you will pay, on the thirtieth
(30th) day of the month in which we make the
Loan to you, interest only, at the applicable
adjusted interest rate, from the date we make
the Loan to you to the twenty-ninth (29th) day
of the same month. If the date we make the Loan
to you is the thirty-first (31st), you will pay
interest at the applicable adjusted interest
rate, from the date we make the Loan to you to
the twenty-ninth (29th) day of the next
following month. The interim payment (as well as
the first Monthly Payment) shall be payable on
the Closing Date and shall be withheld by the
Lender from the Loan proceeds disbursed by the
Lender.
INSURANCE: Borrower shall, at its own expense, maintain and
deliver evidence to Lender of such insurance
required by Lender, written by insurers and in
amounts satisfactory to Lender.
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<PAGE>
[LOGO]
FINANCIAL INNOVATORS
LOAN PROVISIONS
AND COVENANTS: All documentation shall be prepared and reviewed
by us or our counsel and shall be in form and
substance satisfactory to us and our counsel in
our and our counsel's sole and absolute
discretion, and shall include, without
limitation, a promissory note (and related
schedule) for each Loan, a master loan and
security agreement, environmental certificate
and indemnity agreement, opinion of outside
counsel, financing statements, releases, waivers
and consents (including, but not limited to,
landlord's and mortgagee's waivers), corporate
resolutions and incumbencies, insurance letter,
insurance certificates and copies of insurance
policies, and such other documents as we and our
counsel deem appropriate in our or their sole
discretion (collectively, the "Loan Documents").
The Loan Documents contemplated hereby shall
contain such conditions, representations,
warranties, covenants, events of default
(including, without limitation, cross default
provisions), remedies, and other terms and
provisions as are customarily required by
lenders in transactions of this type or as the
parties shall agree.
ADDITIONAL COVENANTS: There shall be no actual or threatened conflict
with, or violation of, any regulatory statute,
standard or rule relating to the Borrower, its
present or future operations, or the Collateral.
All information supplied by the Borrower shall
be correct and shall not omit any statement
necessary to make the information supplied not
be misleading. There shall be no material breach
of the representations and warranties of the
Borrower in the Loan Agreement. The
representations shall include that the Cost of
each item of the Collateral does not exceed the
fair and usual price for like quantity
purchases of such item. The master loan and
security agreement shall also contain the
following covenant.
FINANCIAL REPORTING. During the period of the
Commitment and while any Loan is outstanding,
Borrower shall deliver to Lender or cause to be
delivered to Lender the Borrower's quarterly
financial statements within 45 days following
the end of each respective fiscal quarter and
annual financial statements within 90 days
following the end of each respective fiscal
year. All annual financial statements shall be
prepared in accordance with generally accepted
accounting principles ("GAAP") and be audited by
a reputable firm of certified public accountants
acceptable to Lender, and shall be accompanied
by a certificate executed by such certified
public accountants to the effect that the
Borrower has complied with all covenants
contained in the Loan Documents and there are no
events of default thereunder ("Compliance
Certificate"). All quarterly financial
statements may be internally prepared in
accordance with GAAP, and accompanied by a
Compliance Certificate executed by the Borrower's
Chief Financial Officer.
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<PAGE>
[LOGO]
FEES AND EXPENSES: The Borrower shall be responsible for the
Lender's reasonable fees and out-of-pocket
expenses in connection with the transaction,
including the expenses of counsel to prepare
and review the documentation. Fees and
expenses related to the closing of this
transaction will be limited to $1,500 with
Lender providing notice to Borrower when $500
in costs have been incurred.
This Commitment and the Closing of each Loan contemplated herein are subject,
amongst other things, to receipt by us, in form and substance satisfactory to
us and our counsel, at or prior to Closing, of:
(i) all documentation and other requirements set forth herein
including but not limited to the Loan Documents and other
requirements set forth herein and as may be required by our
counsel; and
(ii) our receipt, in form and substance satisfactory to us, of all
financial and credit information requested by us, which reflects
no material adverse change in your condition, business,
financial or otherwise; and
(iii) evidence that the Collateral is owned by you, free and clear of
all liens and encumbrances; and
(iv) evidence of such insurance required by us, written by insurers
and in amounts satisfactory to us; and
(v) such opinions of your outside counsel, certificates, waivers,
releases, Uniform Commercial Code Financing Statements, due
diligence searches, and further documents as may be required by
us or our counsel; and
(vi) evidence that no payment is past due to the Lender from the
Borrower, whether as a borrower, a lessee, a guarantor or in
some other capacity and that there be no default under any
agreement, instrument or document between the Lender and the
Borrower (including, without limitation, the Loan Documents); and
(vii) evidence that the Borrower is in compliance with the provisions
of this Commitment; and
(viii) our receipt of evidence satisfactory to us, in our sole
discretion that the subject transaction is environmentally
acceptable. We shall have the right to require you to retain the
services of a firm acceptable to us and knowledgeable in
environmental matters to perform environmental investigations
of the Collateral and real property owned, operated or occupied
by you (including, without limitation, the Collateral Location)
and the surrounding areas. Such investigation may include, but
not be limited to, soil and ground water testing to fully
identify the scope of any environmental issues impacting the
transaction (including Phase I and/or Phase II environmental
reports). The scope and results of such investigations must be
satisfactory to us, in our sole discretion.
4
<PAGE>
[LOGO]
In addition to all other conditions and requirements set forth herein, this
Commitment and the closing of each Loan contemplated hereunder shall be
subject, in our sole judgment, that there be no material adverse change in
your financial, business or other condition. This Commitment is not
assignable without our prior written consent. We reserve the right to cancel
this Commitment in the event you or any of your officers, employees, agents
or representatives has made any misrepresentation to us or has withheld any
information from us with regard to the transaction contemplated hereby.
As used in this Commitment the terms "satisfactory to us" or "acceptable to
us" or "satisfactory to our counsel" or "acceptable to our counsel" or terms
of similar import mean satisfactory or acceptable to us or our counsel in our
or its sole judgment and discretion.
This Commitment and the Loan Documents shall be governed by the laws of the
State of Arizona. Any dispute arising under this Commitment shall be
litigated by you only in any federal or state court located in the State of
Arizona, or any state court located in Maricopa County, Arizona; and you
hereby irrevocably submit to the personal jurisdiction of such courts and
waive any objection that may exist as to venue or convenience of such forums.
Nothing contained herein shall preclude us from commencing any action in
any court having jurisdiction thereof.
In the event that the Loans do not close prior to January 1, 2000 because of
your failure to satisfy the conditions for the closing, or because of a
material adverse change in your financial, business or other condition, this
Commitment shall terminate and we shall have no liability to you and we shall
retain, as earned, the Commitment Fee.
In the event we fail to complete this transaction and such failure is not
because of your inability to satisfy all the conditions for closing or a
material adverse change in your financial, business or other condition, our
liability shall be limited to a return of the Commitment Fee, less Fees and
Expenses due hereunder.
Please execute the copy of this letter acknowledging your acceptance of the
terms hereof and return it to us. If a copy of this Commitment is not
executed and returned by you on or before November 19, 1999, this Commitment
shall be deemed withdrawn.
Sincerely,
FINOVA CAPITAL CORPORATION
By: /s/ Dannion C. McGary
-------------------------
Dannion C. McGary
Vice President
Accepted this 18th day of November, 1999
SILICON LABORATORIES, INC.
By: /s/ John McGovern
-------------------------
John McGovern
Chief Financial Officer
5
<PAGE>
SCHEDULE NO. S7270001 TO
MASTER LOAN AND SECURITY AGREEMENT
Schedule No. 1, dated June 9, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of April 22, 1999 (the "Master Agreement")
between SILICON LABORATORIES INC, a Delaware corporation with its executive
office and principal place of business at 4635 Boston Lane, Austin, TX 78735
("you"), and FINOVA CAPITAL CORPORATION, a Delaware corporation with a place
of business at 10 Waterside Drive, Farmington, Connecticut 06032-3065 ("we,"
"us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing of One-Million Two
Hundred Fifteen Thousand, Seven Hundred Ninety-Six and 61/00 Dollars
($1,215,796.61) from us. This borrowing is evidenced by your promissory note
dated the same date as this Schedule in the amount of $1,215,796.61 (the
"Note") to which this Schedule is attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-six (46) consecutive
monthly payments of principal and interest as follows: forty-five (45) monthly
payments each in the amount of $30,151.75, followed by one (1) final monthly
payment in the amount of $243,159.32 (the "Final Payment"). These payments
will be adjusted two business days prior to the date we make the Loan to you
as set forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the
thirtieth (30th) day of the month that we make the Loan to you. The remaining
payments will continue on the same day in each and every month thereafter
through and including the date upon which the Final Payment is scheduled to
be due (the "Maturity Date"). Any remaining amount that you owe us is due on
the "Maturity Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th)
day of the month in which we make the Loan to you (in the case of making the
Loan the 30th), interest only, at the interest rate, from the date we make
the Loan to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. RATE FACTOR: INTEREST: INDEXING. The Loan Rate Factor for the first 45
consecutive monthly payments of principal and interest is equal to 2.48% of
the principal amount of the Loan, subject to an increase or decrease in the
interest rate. The interest rate in your payments shown above is calculated
at your regular rate of 8.51% per annum plus an "Index Rate," of 5.13%. The
Index Rate means the highest yield, as published in THE WALL STREET JOURNAL
of four-year United States Treasury Notes. Two-business days prior to the
date we make the Loan to you, we
<PAGE>
will read THE WALL STREET JOURNAL to determine the final Index Rate. If the
Index Rate is not published in THE WALL STREET JOURNAL, we will determine it
from another reliable source. We will increase or decrease the payments set
forth above in Paragraph 2 to reflect any increase or decrease in the Index
Rate. We will give you notice of any increase or decrease as soon as we can.
You will pay the increased payments unless we have made an obvious mistake in
our calculations. Interest is calculated in advance using a 360-day year of
twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the
attached Schedule A to this Schedule, which you and we refer to as the
"Collateral." You grant us a security interest in the Collateral, as well as
any additions, omissions, substitutions and proceeds of the Collateral. This
security interest secures the Note. It also secures the full and timely
payment and performance of all of your other obligations to us under the
Master Agreement and any other agreement, loan or lease that you may have
with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than October 30, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and
permits us to exercise all remedies provided by the Master Agreement.
SILICON LABORATORIES INC. ATTEST:
[SEAL]
By /s/ Navdeep S. Sooch /s/ John W. McGovern
-------------------- ---------------------
Name NAVDEEP S. SOOCH Secretary
----------------
Title CHAIRMAN AND CHIEF EXECUTIVE OFFICER
------------------------------------
Date JUNE 9, 1999
------------
<PAGE>
PROMISSORY NOTE
NO. S7270001
$1,215,796.61 June 9, 1999
SILICON LABORATORIES INC. ("you") promise to pay to the order of FINOVA
CAPITAL CORPORATION ("we," "us" or "FINOVA") the principal amount of
One-Million Two Hundred Fifteen Thousand, Seven Hundred Ninety-Six and 61/00
Dollars ($1,215,796.61), together with interest on the unpaid principal
balance at the interest rate per annum and on the dates and as otherwise
provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will
only have to pay the maximum legal rate. You do not have to pay any excess
interest over and above the maximum legal rate of interest. However, if it
later becomes legal for you to pay all or part of any excess interest, you
will then pay it to us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside
Drive, Farmington, Connecticut 06032-3065, or to another address that we
request in writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated April 22,
1999 (the "Master Agreement"), between you and FINOVA, and by the Collateral
and other collateral listed in the attached Schedule (the "Schedule"), dated
the same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment within ten (10) days of when it is due, you will
also pay us a late charge of ten (10%) of the amount past due. Your interest
rate will be increased by 4% per annum, over and above your regular interest
rate if payment is not made at the scheduled or accelerated Maturity of this
Note. You will also pay all of our costs of collection, including our
reasonable attorney's fees and expenses. If we accelerate this Note, you will
also owe a prepayment premium, as set forth in Exhibit A to the Master
Agreement.
You waive diligence, presentment, formalities of demand, protest or dishonor
as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED
IN WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND
FROM WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE
JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA.
YOU WAIVE TRIAL BY JURY.
<PAGE>
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral
described in the Schedule, and that the Collateral will only be used for
business purposes.
SILICON LABORATORIES INC. ATTEST:
[SEAL]
By /s/ Navdeep S. Sooch
--------------------
Name Navdeep S. Sooch
----------------
Title Chairman and Chief Executive Officer
------------------------------------
Date June 9, 1999 /s/ John W. McGovern
------------ --------------------
Secretary
FTF PROMISSORY NOTE & SCHEDULE
<PAGE>
SCHEDULE NO. S7270002 TO
MASTER LOAN AND SECURITY AGREEMENT
Schedule No. 2, dated November 8, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of April 22, 1999 (the "Master Agreement")
between SILICON LABORATORIES INC, a Delaware corporation with its executive
office and principal place of business at 4635 Boston Lane, Austin, TX 78735
("you"), and FINOVA CAPITAL CORPORATION, a Delaware corporation with a place
of business at 10 Waterside Drive, Farmington, Connecticut 06032-3065 ("we,"
"us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing of Seven Hundred
Sixty-Four Thousand Five Hundred Sixty-One and 60/00 Dollars ($764,561.60)
from us. This borrowing is evidenced by your promissory note dated the same
date as this Schedule in the amount of $764,561.60 (the "Note") to which this
Schedule is attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest rate, in forty-six (46) consecutive monthly payments
of principal and interest as follows: forty-five (45) monthly payments each
in the amount of $18,961.13, followed monthly payment in the amount of
$152,912.32 (the "Final Payment"). These payments will be adjusted two
business days prior to the date we make the Loan to you as set forth in
Paragraph 3.
The first monthly payment of principal and interest will be due on the
thirtieth (30th) day of the month that we make the Loan to you. The remaining
payments will continue on the same day in each and every month thereafter
through and including the date upon which the Final Payment is scheduled to
be due (the "Maturity Date"). Any remaining amount that you owe us is due on
the "Maturity Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th)
day of the month in which we make the Loan to you (in the case of making the
Loan the 30th), interest only, at the interest rate, from the date we make
the Loan to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. RATE FACTOR; INTEREST; INDEXING. The Loan Rate Factor for the first 45
consecutive monthly payments of principal and interest is equal to 2.48% of
the principal amount of the Loan, subject to any increase or decrease in the
interest rate. The interest rate in your payments shown above is calculated
at your regular rate of 8.51% per annum plus an "Index Rate," of 5.13%. The
Index Rate means the highest yield, as published in THE WALL STREET JOURNAL
of four
<PAGE>
- - year United States Treasury Notes. Two-business days prior to the
date we make the Loan to you, we will read THE WALL STREET JOURNAL to
determine the final Index Rate. If the Index Rate is not published in THE
WALL STREET JOURNAL, we will determine it from another reliable source. We
will increase or decrease the payments set forth above in Paragraph 2 to
reflect any increase or decrease in the Index Rate. We will give you notice
of any increase or decrease as soon as we can. You will pay the increased
payments unless we have made an obvious mistake in our calculations. Interest
is calculated in advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN; SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the
attached Schedule A to this Schedule, which you and we refer to as the
"Collateral." You grant us a security interest in the Collateral, as well as
any additions, omissions, substitutions and proceeds of the Collateral. This
security interest secures the Note. It also secures the full and timely
payment and performance of all of your other obligations to us under the
Master Agreement and any other agreement, loan or lease that you may have
with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than November 30, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and
permits us to exercise all remedies provided by the Master Agreement.
SILICON LABORATORIES INC. ATTEST:
[SEAL]
By /s/ Navdeep S. Sooch
--------------------
Name Navdeep S. Sooch
----------------
Title Chairman and Chief Executive Officer
------------------------------------
Date November 8, 1999 /s/ John W. McGovern
---------------- --------------------
Secretary
<PAGE>
PROMISSORY NOTE
NO. S7270002
$764,561.60 November 8, 1999
SILICON LABORATORIES INC. ("you") promise to pay to the order of FINOVA
CAPITAL CORPORATION ("we," "us" or "FINOVA") the principal amount of Seven
Hundred Sixty-Four Thousand Five Hundred Sixty-One and 60/00 Dollars
($764,561.60), together with interest on the unpaid principal balance at the
interest rate per annum and on the dates and as otherwise provided in the
"Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will
only have to pay the maximum legal rate. You do not have to pay any excess
interest over and above the maximum legal rate of interest. However, if it
later becomes legal for you to pay all or part of any excess interest, you
will then pay it to us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside
Drive, Farmington, Connecticut 06032-3065, or to another address that we
request in writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated April 22,
1999 (the "Master Agreement"), between you and FINOVA, and by the Collateral
and other collateral listed in the attached Schedule (the "Schedule"), dated
the same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment within ten (10) days of when it is due, you will
also pay us a late charge of ten (10%) of the amount past due. Your interest
rate will be increased by 4% per annum, over and above your regular interest
rate if payment is not made at the scheduled or accelerated Maturity of this
Note. You will also pay all of our costs of collection, including our
reasonable attorney's fees and expenses. If we accelerate this Note, you will
also owe a prepayment premium, as set forth in Exhibit A to the Master
Agreement.
You waive diligence, presentment, formalities of demand, protest or dishonor
as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED
IN WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND
FROM WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE
JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA.
YOU WAIVE TRIAL BY JURY.
<PAGE>
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral
described in the Schedule, and that the Collateral will only be used for
business purposes.
SILICON LABORATORIES INC. ATTEST:
By /s/ Navdeep S. Sooch
--------------------
Name Navdeep S. Sooch
----------------
Title Chairman and Chief Executive Officer
------------------------------------
Date November 8, 1999 /s/ John W. McGovern
---------------- --------------------
Secretary
FTF PROMISSORY NOTE & SCHEDULE
<PAGE>
IMPERIAL BANK
- --------------------------------------------------------------------------------
Emerging Growth Industries, Southwest Regional Office
8911 Capital Texas Highway, Suite 2310 - Austin, Texas 78759 - Tel:
(512) 349-2333 - Fax: (512) 349-2888
April 19, 1999
Mr. John McGovern
Silicon Laboratories, Inc.
2024 East St. Elmo Road
Austin, Texas 78744-1018
Dear John,
We are pleased to provide this commitment letter for the proposed bank
financing that Imperial Bank ("Bank") is willing to extend to Silicon
Laboratories, Inc. ("Borrower"). This commitment to lend is subject to
execution of a definitive written agreement and documentation for the
transaction described in this letter. The terms of the financing are as
follows:
CREDIT FACILITY
1) Existing $1,500,000 equipment term loan.
2) Existing $1,000,000 Equipment term loan.
3) Existing $453,600 letter of credit.
4) New $3,000,000 revolving line of credit to fund working capital needs.
TERMS
1) Currently being amortized.
2) Currently being amortized.
3) Facility in place.
4) Interest payable monthly with principal plus any unpaid and/or accrued
interest due at maturity.
MATURITY
1) 1/29/02
2) 3/28/01
3) 9/7/99
4) 364 days from close of documents.
PRICING
1) Imperial Bank's Prime Rate.
2) Imperial Bank's Prime Rate.
3) Imperial Bank's Prime Rate.
4) Imperial Bank's Prime Rate.
<PAGE>
Silicon Laboratories, Inc.
April 19, 1999
Page 2 of 5
FACILITY FEE
None
DOCUMENTATION FEES
$250
WARRANT
None
ADVANCE RATE
1) Up to the total limit, 80% against eligible domestic accounts
receivable. Eligible accounts to exclude:
- Accounts aged over 90 days past invoice date.
- Contra accounts,
- Government accounts will be eligible with Assignment of Claims,
- Foreign accounts will be eligible with credit insurance acceptable
to Bank. Advance rate on credit insured foreign A/R will be 90%,
- Accounts with over 25% of the balance aged more than 90 days past
invoice date.
- If any one account exceeds 25% of the total A/R balance, the amount
in that account in excess of 25% of the total A/R balance is also
ineligible. Bank will allow a 50% concentration limit for PC Tel
and 75% for 3Com.
COLLATERAL
A UCC-1 FILING ON ALL ASSETS OF Borrower except Intellectual Property with
the Bank in first position. Negative pledge on intellectual property.
FINANCIAL COVENANTS
1) Borrower to maintain a monthly minimum Quick Ratio(1) of at least
1.50:1.00.
2) Borrower to maintain a minimum Debt Service Coverage Ratio(2) of
1.50:1.00.
(1) Quick Ratio defined as: Cash plus A/R divided by Current
Liabilities.
(2) Debt service coverage ratio defined as EBIT plus depreciation
and amortization (MOST RECENT THREE MONTH PERIOD ANNUALIZED)
divided by current maturities of long term debt.
REPORTING REQUIREMENTS
1) Monthly internal prepared financial statements prepared according to
generally accepted accounting principals within 25 days after month-end
with signed compliance certificate.
2) Monthly accounts receivable and accounts payable agings with borrowing
base certificate due within 25 days of month-end.
3) Borrower will perform satisfactory collateral records audit prior to
the 1st draw; with annual collateral records audit satisfactory to Bank
thereafter, provided that as long as Borrower has any outstanding
indebtedness to Bank it will perform collateral audits twice a year
with the results satisfactory to Bank.
4) Unqualified audit of annual financial statements within 90 days after
fiscal year end.
<PAGE>
Silicon Laboratories, Inc.
April 19, 1999
Page 3 of 5
OTHER
1. Borrower to maintain primary operating and depository accounts with
Bank.
2. Purchase money security interest and leases are allowed with
notification to Bank.
3. Borrower to provide property and casualty insurance with the Bank as
"Lenders Loss Payable"
4. Borrower to pay for all other costs associated with the closing of the
transaction (i.e. UCC Search fees, filing fees, etc.).
EXPIRATION
Unless Borrower accepts this commitment letter on or before April 30, 1999,
this commitment letter will expire and be of no further effect.
This letter is provided solely for your information and is delivered to you with
the understanding that neither it nor its substance shall be disclosed to any
third person, except those who are in confidential relationship with you, or
where the same is required by law.
IF THE PROPOSED TERMS SET FORTH ABOVE ARE ACCEPTABLE TO YOU, PLEASE SO INDICATE
BY SIGNING AND RETURNING THE ORIGINAL OF THIS LETTER TO US, ALONG WITH THE $250
IN FEES REFERRED TO ABOVE. Upon return of this letter and receipt of payment,
the Bank will prepare drafts of definitive loan documents for your review. If
you and the Bank do not enter into definitive loan documents, the Bank will
refund to you the amount of the loan fee payment less the amount of the Bank's
expenses for the foregoing.
This letter is intended to set forth the proposed terms of the credit facility
currently under discussion between us. Except for your obligation to pay the
Bank's expenses described above, this letter and our other communications and
negotiations regarding the proposed loan do not constitute an agreement or an
offer and do not create any legal rights benefiting, or obligations binding on,
either of us. It is intended that all legal rights and obligations of the Bank
and you would be set forth in the signed definitive loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to Silicon Laboratories, Inc. and look
forward to a long and mutually rewarding relationship. Please don't hesitate
to call if you have any questions, we can be reached at (512) 349-2333.
Sincerely,
/s/ Tommy Deavenport
Tommy Deavenport
Senior Vice President
Emerging Growth Industries
Southwest Regional Office
<PAGE>
Silicon Laboratories, Inc.
April 19, 1999
Page 4 of 5
ACCEPTED AND AGREED TO:
SILICON LABORATORIES, INC.
By: /s/ John McGovern
-------------------------
Title: Chief Financial Officer
-----------------------
Date: April 22, 1999
--------------
<PAGE>
Silicon Laboratories, Inc.
April 19, 1999
Page 5 of 5
With return of this letter, please provide us with the following information:
Tax I.D. #: 74-2793174
Names and Title of Authorized Corporate Signers:
Navdeep S. Sooch John W. McGovern
----------------------------- ---------------------------
Name Name
Chairman & CEO Chief Financial Officer
----------------------------- ---------------------------
Title Title
Jeffrey W. Scott David R. Welland
----------------------------- ---------------------------
Name Name
Vice President - Engineering Vice President - Technology
----------------------------- ---------------------------
Title Title
Number needed to sign: 2
Who will execute docs: Navdeep S. Sooch
----------------
John W. McGovern
----------------
Name of Corporate Secretary: John W. McGovern
----------------
Is Secretary an Authorized signer? Yes /X/ No _____
Are all of the Company's assets located in the state of Texas?
Yes _____ No /X/
If not, where else are assets located? Inventory in Production flow
worldwide. Incidence Office
Equipment in remote Sales Offices.
Automatically Debit Account # 21-001-430 for interest payments each month.
Disburse loan advances to Account # 21-001-430 when advances are requested.
<PAGE>
[LOGO]
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between SILICON LABORATORIES INC., a DELAWARE
CORPORATION (herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts as
may be determined by Bank up to, but not exceeding in the aggregate
unpaid principal balance, the following Borrowing Base:
80% of Eligible Accounts
and in no event more than $ 3,000,000.00
2. The amount of each loan made by Bank to Borrower hereunder shall be
debited to the loan ledger account of Borrower maintained by Bank (herein
called "Loan Account") and Bank shall credit the Loan Account with all
loan repayments made by Borrower. Borrower promises to pay Bank (a) the
unpaid balance of Borrower's Loan Account earlier of event of default or
maturity date and (b) on or before the tenth day of each month, interest
on the average daily unpaid balance of the Loan Account during the
immediately preceding month at the rate of ZERO percent (0%) per annum in
excess of the rate of interest which Bank has announced as its prime
lending rate ("Prime Rate") which shall vary concurrently with any change
in such Prime Rate. Interest shall be computed at the above rate on the
basis of the actual number of days during which the principal balance of
the loan account is outstanding divided by 360, which shall for interest
computation purposes be considered one year. Bank at its option may demand
payment of any or all of the amount due under the Loan Account including
accrued but unpaid interest at any time. Such notice may be given verbally
or in writing and should be effective upon receipt by Borrower. The amount
of interest payable each first of the month by Borrower shall not be less
than a minimum monthly charge of $250.00. Bank is hereby authorized to
charge Borrower's deposit account(s) with Bank for all sums due Bank under
this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by
Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which
shall disclose that Borrower is entitled to the amount of loan being
requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "Accounts" means any right to payment for goods sold or leased, or
to be sold or to be leased, or for services rendered or to be
rendered no matter how evidenced, including accounts receivable,
contract rights, chattel paper, instruments, purchase orders,
notes, drafts, acceptances, and other forms of obligations and
receivables.
B. "Collateral" means any and all personal property of Borrower which
is assigned or hereafter is assigned to Bank as security or in which
Bank now has or hereafter acquires a security interest.
C. "Eligible Accounts" means all of Borrower's Accounts excluding,
however, (1) all Accounts under which payment is not received within
90 days from any invoice date, (2) all Accounts against which the
account debtor or any other person obligated to make payment thereon
asserts any defense, offset, counterclaim or other right to avoid or
reduce the liability represented by the Account in excess of 2.5% of
the total Account and (3) any Accounts if the account debtor or any
other person liable in connection therewith is insolvent, subject to
bankruptcy or receivership proceedings or has made an assignment for
the benefit of creditors or whose credit standing is unacceptable to
Bank and Bank has so notified Borrower.
5. Borrower hereby assigns to Bank all Borrower's present and future
Accounts, including all proceeds due thereunder, all guaranties and
security therefor, and hereby grants to Bank a continuing security
interest in all moneys in the Collateral Account referred to in Section 6
hereof, as security for any and all obligations of Borrower to Bank,
whether now owing or hereafter incurred and whether direct, indirect,
absolute or contingent. So long as Borrower is indebted to Bank or Bank
is committed to extend credit to Borrower, Borrower will execute and
deliver to Bank such assignments, including Bank's standard forms of
Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require
in order to affirm, effectuate or further assure the assignment to Bank
of the Collateral or to give any third party, including the account
debtors obligated on the Accounts, notice of Bank's interest in the
Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect in accordance with Borrower's
customary practices all Borrower's Accounts, provided that no legal
action shall be maintained thereon or in connection therewith without
Bank's prior written consent. Any collection of Accounts by Borrower,
whether in the form of cash, checks, notes, or other instruments for the
payment of money (properly endorsed or assigned where required to enable
Bank to collect same), shall be in trust for Bank, and (A) and upon event
of default Borrower shall keep all such collections separate and apart
from all other funds and property so as to be capable of identification
as the property of Bank and deliver said collections daily to Bank in the
identical form received. The proceeds of such collections when received by
Bank may be applied by Bank directly to the payment of Borrower's Loan
Account or any other obligation secured hereby. Any credit given by Bank
upon receipt of said proceeds shall be conditional credit subject to
collection. Returned items at Bank's option may be charged to Borrower's
general account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount of
each payment and such other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases greater of $50,000 or 20% per account, involving
returns, repossessions, and loss or damage of or to merchandise
represented by the Accounts and of any credits, adjustments or disputes
arising in connection with the goods or services represented by the
Accounts and, in any of such events, if borrower is out of compliance with
borrowing base Borrower will immediately pay to Bank from its own funds
(and not from the proceeds of Accounts or Inventory) for application to
Borrower's Loan Account or any other obligation secured hereby the amount
of any credit for such returned or repossessed merchandise and adjustments
made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a corporation,
that Borrower is duly incorporated and existing in the State of its
incorporation and the execution, delivery and performance hereof are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with law or the terms of any charter, by-law or other
incorporation papers, or of any material indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is found or
affected; (ii) Borrower is, or at the time the collateral becomes subject
to Bank's security interest will be, the true and lawful owner of and has,
or at the time the Collateral becomes subject to Bank's security interest
will have, good and clear title to the Collateral, subject only to Bank's
rights therein; (iii) Each Account is, or at the time the Account comes
into existence will be, a true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the
Account for either merchandise sold or delivered (or being held subject to
Borrower's delivery instructions) to, or services rendered, performed and
accepted by, the account debtor; (iv) That there are or will be no
defenses, counterclaims, or setoffs which may be asserted against the
Accounts; and (v) any and all financial information, including information
relating to the Collateral, submitted by Borrower to Bank, whether
previously or in the future, is or will be materially correct.
Page 1 of 3
<PAGE>
9. Borrower will: (i) Furnish Bank from time to time such financial statements
and information as Bank may reasonably request and inform Bank immediately
upon the occurrence of a material adverse change therein; (ii) Furnish Bank
periodically, in such form and detail and at such times as Bank may
require, statements showing aging and reconciliation of the Accounts and
collections thereon; (iii) Permit representatives of Bank to inspect the
Borrower's books and records relating to the Collateral and make extracts
therefrom at any reasonable time and to arrange for verification of the
Accounts, under reasonable procedures, acceptable to Bank, directly with
the account debtors or otherwise at Borrower's expense; (iv) Promptly
notify Bank of any attachment or other legal process levied against any of
the Collateral and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other persons
obligated in connection therewith, which may in the reasonable judgement of
bank affect the value of the Collateral or the rights and remedies of Bank
in respect thereto; (v) Reimburse Bank upon demand for any and all legal
costs, including reasonable attorneys' fees, and other expense incurred in
collecting any sums payable by Borrower under Borrower's Loan Account or
any other obligation secured hereby, enforcing any term or provision of
this Security Agreement or otherwise or in the checking, handling and
collection of the Collateral and the preparation and enforcement of any
agreement relating thereto; (vi) Notify Bank of each location and of each
office of Borrower at which records of Borrower relating to the Accounts
are kept; (vii) Provide, maintain and deliver to Bank policies insuring
the Collateral against loss or damage by such risks and in such amounts,
forms and companies as Bank may require and with loss payable solely to
Bank, and, in the event Bank takes possession of the Collateral, the
insurance policy or policies and any unearned or returned premium thereon
shall at the option of Bank become the sole property of Bank, such policies
and the proceeds of any other insurance covering or in any way relating to
the Collateral, whether now in existence or hereafter obtained, being
hereby assigned to Bank; (viii) In the event the unpaid balance of
Borrower's Loan Account shall exceed the maximum amount of outstanding
loans to which Borrower is entitled under Section 1 hereof, Borrower shall
immediately pay to Bank.
10. After the occurrence and continuation of an Event of Default, Bank may
collect the Accounts and may give notice of assignment to any and all
account debtors, and Borrower does hereby make, constitute and appoint Bank
its irrevocable, true and lawful attorney with power to receive, open and
dispose of all mail addressed to Borrower, to endorse the name of Borrower
upon any checks or other evidences of payment that may come into the
possession of Bank upon the Accounts to endorse the name of the undersigned
upon any document or instrument relating to the Collateral; in its name or
otherwise, to demand, sue for, collect and give acquittances for any and
all moneys due or to become due upon the Accounts; to compromise, prosecute
or defend any action, claim or proceeding with respect thereto; and to do
any and all things necessary and proper to carry out the purpose herein
contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than to Bank, or
execute any financing statements covering the Collateral in favor of any
secured party or person other than Bank.
12. Should: (i) Default which is not cured by Borrower within fifteen (15) days
of receipt of notice thereof be made in the payment of any obligation, or
breach be made in any warranty, statement, promise, term or condition,
contained herein or hereby secured; (ii) Any material statement or
representation made for the purpose of obtaining credit hereunder prove
false; (iii) (iv) Borrower become insolvent or make an assignment for the
benefit of creditors; or (v) Any proceeding be commenced by or against
Borrower and if against Borrower, is not cured within 60 days of action
under any bankruptcy, reorganization, arrangement, readjustment of debt or
moratorium law or statute; then in any such event, Bank may, at its option
and without demand first made and without additional notice to Borrower, do
any one or more of the following: (a) Terminate its obligation to make
loans to Borrower as provided in Section 1 hereof; (b) Declare all sums
secured hereby immediately due and payable; (c) Immediately take possession
of the Collateral wherever it may be found, using all necessary force so to
do, or require Borrower to assemble the Collateral and make it available to
Bank at a place designated by Bank which is reasonably convenient to
Borrower and Bank, and Borrower waives all claims for damages due to or
arising from or connected with any such taking; (d) Proceed in the
foreclosure of Bank's security interest and sale of the Collateral in any
manner permitted by law, or provided for herein; (e) Sell, lease or
otherwise dispose of the Collateral at public or private sale, with or
without having the Collateral at the place of sale, and upon terms and in
such manner as Bank may determine, and Bank may purchase same at any such
sale; (f) Retain the Collateral in full satisfaction of the obligations
secured thereby; (g) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at as
option, cause any of the Collateral to be repaired or reconditioned in such
manner and to such extent as Bank may deem advisable, and any sums expended
therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
have the right to enforce one or more remedies hereunder successively or
concurrently, and any such action shall not estop or prevent Bank from
pursuing any further remedy which it may have hereunder or by law. If a
sufficient sum is not realized from any such disposition of Collateral to
pay all obligations secured by this Security Agreement, Borrower hereby
promises and agrees to pay Bank any deficiency.
13. If any writ of attachment, garnishment, execution or other legal process be
issued against any property of Borrower, or if any assessment for taxes
against Borrower, other than real property, is made by the Federal or State
government or any department thereof, the obligation of Bank to make loans
to Borrower as provided in Section 1 hereof shall immediately terminate and
the unpaid balance of the Loan Account, all other obligations secured
hereby and all other sums due hereunder shall immediately become due and
payable without demand, presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transactions contemplated herein at any time subsequent
to four months from the time such items are delivered to Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower, but
each and every condition hereof shall be in addition thereto.
16. Should default be made in the payment of principal or interest which is not
cured by Borrower within fifteen (15) days of receipt of notice thereof, or
in the performance or observance, which is not cured by Borrower within
fifteen (15) days of receipt of notice thereof, of any item, covenant or
condition of this Agreement, any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or
pertaining to this Agreement, at the option of the holder hereof and
without notice or demand, the entire balance of principal and accrued
interest then remaining unpaid shall (a) become immediately due and
payable, and (b) thereafter bear interest, until paid in full, at the
increased rate of 5% per year in excess of the rate provided for above, as
it may vary from time to time.
17. If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent twenty (20) or more
days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
payment so due and unpaid, in addition to the payment; but nothing in this
paragraph is to be construed as any obligation on the part of the Bank to
accept payment of any payment past due or less than the total unpaid
principal balance after maturity.
All payments shall be applied first to any late charges owing, then to
interest and the remainder, if any, to principal.
18. Reference Provision.
A. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant
to applicable law), each controversy, dispute or claim between the
parties arising out of or relating to this document ("Agreement"),
which controversy, dispute or claim is not settled in writing within
thirty (30) days after the "Claim Date" (defined as the date on which
a party subject to the Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled
by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil
Procedure, or their successor section ("CCP"), which shall constitute
the exclusive remedy for the settlement of any controversy, dispute or
claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as
set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall
be a retired Judge of the Court selected by mutual agreement of the
parties, and if they cannot so agree within forty-five (45) days after
the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee
shall be appointed to sit as a temporary judge, with all of the powers
of a temporary judge, as authorized by law, and upon selection should
take and subscribe to the oath of office as provided for in Rule 244
of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (a) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any
and all issues of law or fact and report a statement of decision upon
them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive
and judgment shall be entered pursuant to CCP Section 644 in any court
in the State of California having jurisdiction. Any party may apply
for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later
than fifteen (15) days before the first hearing date established by
the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or
illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be
Page 2 of 3
<PAGE>
taken by either party upon seven (7) days written notice, and request
for production or inspection of documents shall be responded to within
ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee
whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as
appropriate.
B. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and
hearings conducted before the referee, except for trial, shall be
conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of
the court reporter at the trial shall be borne equally by the parties.
C. The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in
the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the
reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto
expressly reserve the right to contest or appeal from the final
judgment or any appealable order or appealable judgment entered by the
referee. The parties hereto expressly reserve the right to findings of
fact, conclusions of law, a written statement of decision, and the
right to move for a new trial or a different judgment, which new
trial, if granted, is also to be a reference proceeding under this
provision.
D. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be
determined by the reference procedure herein described will be
resolved and determined by arbitration. The arbitration will be
conducted by a retired judge of the Court, in accordance with the
California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
19. Additional Provisions: SUBJECT TO THE PROVISIONS OF THE CREDIT TERMS AND
CONDITIONS AGREEMENT DATED JUNE 25, 1999, AND ALL AMENDMENTS THERETO AND
REPLACEMENTS THEREFOR.
/ / If checked, the Addendum or Exhibit "A" attached (and all amendments
thereto and replacements therefor) is incorporated herein by this
reference.
Executed this 25TH day of JUNE, 1999
SILICON LABORATORIES INC., A DELAWARE CORPORATION
-------------------------------------------------
(Name of Borrower)
Chief
IMPERIAL BANK BY: /s/ John W. McGovern Financial Officer
--------------------------------------------
(Authorized Signature and Title)
SVP & VP-
BY: /s/ Tommy Davenport, Manager BY: /s/ Jeffery W. Scott Engineering
----------------------------- --------------------------------------------
Title (Authorized Signature and Title)
Page 3 of 3
<PAGE>
IMPERIAL BANK
Member FDIC
226 Airport Parkway
San Jose, CA 95110
Subject: Credit Terms and Conditions ("Agreement")
June 25, 1999
Gentlemen:
Borrower: Silicon Laboratories Inc.
To induce Imperial Bank (herein sometimes referred to as "you" and sometimes
as "Bank") to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make
to Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. EXISTENCE AND RIGHTS.
Borrower is a Delaware corporation.
Borrower is duly organized and existing and in good standing under the laws
of the State of Delaware and is authorized and in good standing to do
business in the State of Texas. Borrower has powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each State in which
the character of the properties owned by it therein or the conduct of its
business makes such qualification necessary, and Borrower has the power and
adequate authority to make and carry out this Agreement. Borrower has no
investment in any other business entity, except as previously disclosed to
Bank.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of
any governmental body or other regulatory authority; are not in contravention
of or in conflict with any law or regulation or any term or provision of
Borrower's articles of incorporation, by-laws, or Articles of Association, as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any
of its property may be bound or affected, and do not cause any lien, charge
or other encumbrance to be created or imposed upon any such property by
reason thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, received in writing or known by
Borrower, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority, except as previously disclosed in writing to bank.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of May 1,
1999, and the related profit and loss statement for the 4 months ended on
that date, a copy of which has heretofore been delivered to you by Borrower,
and all other statements and data submitted in writing by Borrower to you in
connection with this request for credit are true and correct, and said
balance sheet and profit and loss statement truly present the financial
condition of Borrower as of the date thereof and the results of the
operations of Borrower for the period covered thereby, and have been prepared
in accordance with generally accepted accounting principles on a basis
consistently maintained, except for the two million dollar equipment
financing transaction with Finova Capital Corporation previously disclosed to
bank and subordinated in form and substance respective of a specific lien
satisfactory to Bank. Since such date there have been no materially adverse
changes in the financial condition or business of Borrower. Borrower has no
knowledge of any material liabilities, contingent or otherwise, at such date
not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
6. TITLE TO ASSETS. Except for transactions with COMDISCO, Third Coast
Capital and Finova Capital Corporation, leasehold improvement affixed to
landlord owned real estate and software in the form of software licenses
rather than ownership of source code, borrower has good title to its assets,
and the same are not subject to any liens or encumbrances other than those
permitted by Section C.3 hereof.
7. TAX STATUS. Borrower has no known liability for any delinquent
state, local or federal taxes, and if Borrower has contracted with any
government agency, Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. To the best of it's knowledge, Borrower, as of
the date hereof, possesses all necessary trademarks, trade names, copyrights,
patents, patent rights, and licenses to conduct its business as now operated,
without any known material conflict with the valid trademarks, trade names,
copyrights, patents and license rights of others. Notwithstanding the
foregoing, there is no pending intellectual property litigation against the
Company. The Company has no reason to believe it has infringed on any
intellectual property rights. The semiconductor industry is characterized by
vigorous protection and pursuit of intellectual property rights or positions,
which have resulted in significant and often protracted, expensive
litigation. The Company or its foundries may from time to time in the future
receive notice of claims that the Company has infringed patents or other
intellectual property rights owned by others. The Company may seek licenses
under such patents or other intellectual property rights. However, these can
be no assurance that licenses will be offered or that the terms of any
offered licenses will be acceptable to the Company.
9. REGULATION U. The proceeds of this loan shall not be used to
purchase or carry margin stock (as defined with Regulation U of the Board of
Governors of the Federal Reserve system).
10. YEAR 2000 COMPLIANCE. Borrower has reviewed the areas within their
operations and business which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the Year
2000 Problem and have made related appropriate inquiry of material suppliers
and vendors, and based on such review and program, the Year 2000 Problem will
not have a material adverse effect upon its financial condition, operations
or business as now conducted. "Year 2000 Problem" means the risk that any
computer applications used by Borrower may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to
and any dates one or after December 31, 1999.
B. Borrower agrees that so long as it is indebted to you, it will, unless
you shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long
as:
(a) The same are being contested in good faith and by appropriate proceedings
in such manners as not to cause any materially adverse effect upon its
financial condition or the loss of any right of redemption from any sale
thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate
with respect thereto.
4. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit your representatives to have access to,
<PAGE>
and to examine its properties, books and records at all reasonable times; and
furnish you:
(a) As soon as available, and in any event within 25 days after the close
of each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day
of such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a
basis consistently maintained by Borrower and certified by an appropriate
officer of Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the close of
each fiscal year of Borrower, a report of audit of Company as of the close
of and for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the close of and for the previous fiscal
year, with the unqualified opinion of accountants satisfactory to you.
(c) Within 25 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no
event has occurred and no condition then exists which constitutes an event of
default hereunder or would constitute such an event of default upon the lapse
of time or upon the giving of notice and the lapse of time specified herein,
or, if any such event has occurred or any such condition exists, specifying
the nature thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any detailed
audit reports submitted to Borrower by independent accountants in connection
with each annual or interim audit of the accounts of Borrower made by such
accountants;
(e) Promptly after the same are available, copies of all such proxy
statements, financial statements and reports as Borrower shall send to its
stockholders, if any, and copies of all reports which Borrower may file with
the Securities and Exchange Commission or any governmental authority at any
time substituted therefor; and
(f) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence
of any event of default hereunder or any event which upon notice and lapse of
time would be an event of default.
5. INTELLECTUAL PROPERTY. Borrower shall (i) protect, defend and
maintain the validity and enforceability of the Trademarks, Patents and
Copyrights, (ii) use its best efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected.
6. YEAR 2000 COMPLIANCE. Borrower shall perform all acts reasonably
necessary to ensure that Borrower and any business in which Borrower holds a
substantial interest become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
Borrower shall also take reasonably necessary steps to ensure that it will
not be materially adversely affected as a result of any customer, supplier or
vendor's failure to become Year 2000 compliant. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to
the business operations or financial condition of such entity, will properly
perform date sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Bank such certifications
or other evidence of Borrower's compliance with the terms of this paragraph
as Bank may from time to time require.
C. Borrower agrees that so long as it is indebted to you, it will not,
without your written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business; or make any change in its executive management
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except obligations
now existing as shown in financial statement dated May 1, 1999, excluding
those being refinanced by your bank; or sell or transfer, either with or
without recourse, any accounts or notes receivable or any moneys due to
become due and except for transactions with COMDISCO. Third Coast Capital and
Finova Capital Corporation, including follow-on equipment schedules to
existing permitted financing lines.
3. LIENS AND ENCUMBRANCES. Except for transactions with COMDISCO, Third
Coast Capital and Finova Capital Corporation, including follow-on equipment
schedules to existing permitted financing lines, create, incur, or assume any
mortgage, pledge encumbrance, lien or charge of any kind (including the
charge upon property at any time purchased or acquired under conditional sale
or other title retention agreement) upon any asset (including Borrower's
intellectual property to a financial institution), now owned or hereafter
acquired by it, other than liens for taxes not delinquent, materialmen and
mechanics liens, provided they are discharged within sixty days, and liens in
your favor. Purchase money security interests are allowed.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in securities
other than United States Government Treasuries or Agencies, Imperial Bank
sponsored paper, or the Monarch Money Market Funds; or guarantee or otherwise
become liable upon the obligation of any person or other entity, except by
endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire all or substantially all of the assets or business of
any person or other entity; or liquidate, dissolve, merge or consolidate, or
commence any proceedings therefor; or sell any assets except in the ordinary
and normal course of its business as now conducted; or sell, lease, assign,
or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business as now
conducted including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower) or make
any other distribution on any of its capital stock now outstanding or
hereafter issued or purchase (other than the routine repurchase of common
stock shares issued to employees under the 1997 Stock Option/Stock Issuance
Plan and any successor plans), redeem or retire any of such stock.
D. The occurrence of any one of the following events of default shall, at
your option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived;
1. FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to you, provided such failure is not
cured by Borrower within fifteen (15) days of receipt of notice thereof.
2. BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Agreement binding upon Borrower. Provided such failure
is not cured by Borrower within fifteen (15) days of receipt of notice
thereof.
3. BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
material respect.
4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process in excess of two hundred fifty thousand dollars
($250,000), shall be entered or filed against Borrower or any of its assets
and shall remain unvacated unbonded or unstayed for a period of 10 days or in
any event later than five days prior to the date of any proposed sale
thereunder
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower and,
if instituted against it, shall be consented to.
E. Miscellaneous Provisions.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of your Bank or any holder of Notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this agreement or any note
issued in connection with a loan that your Bank may make hereunder, are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
<PAGE>
2. LEASE OF PERSONAL PROPERTY. Notwithstanding anything contained
herein or in any security agreement or any other document executed by
Borrower in favor of Bank ("Loan Documents"), the Borrower is hereby
permitted to rent and or lease personal property and to execute such
documents as necessary to effect such transactions, including the granting of
a purchase money security interest if the property being rented or leased.
Any such rental or lease will not be a violation of any of the Loan Documents.
3. APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the
jurisdiction of whose courts the parties hereby agree to submit.
4. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, THE BANK AND THE BORROWER EACH HEREBY WAIVES AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF
OR ANY OBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE BANK OR THE BORROWER IN CONNECTION WITH ANY OF THE ABOVE,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT OR TORT OR OTHERWISE.
5. JUDICIAL REFERENCE (a) Other than (i) non-judicial foreclosure and
all matters in connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the exercise of
other provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this document ("Agreement"), which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or
claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 ET SEQ. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is located
or Los Angeles County if none (the "Court"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section
644 in any court in the State of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute
or claim, by filing a petition for a hearing and/or trial. All discovery
permitted by this Agreement shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days
written notice, and request for production or inspection of documents shall
be responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall
have the obligation to arrange for and pay for the court reporter. The costs
of the court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable
orders that will be binding upon the parties. The referee shall issue a
single judgment at the close of the reference proceeding which shall dispose
of all of the claims of the parties that are the subject of the reference.
The parties hereto expressly reserve the right to contest or appeal from the
final judgment or any appealable order or appealable judgment entered by the
referee. The parties hereto expressly reserve the right to findings of fact,
conclusions of law, a written statement of decision, and the right to move
for a new trial or a different judgment, which new trial, if granted, is also
to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the
Court, in accordance with the California Arbitration Act, Section 1280
through Section 1294.2 of the CCP as amended from time to time. The
limitations with respect to discovery as set forth hereinabove shall apply to
any such arbitration proceeding.
6. RIDER TO STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT. Borrower
hereby agrees that the Rider to Standby Letter of Credit and Security
Agreement dated September 4, 1998 remain in full force and effect and the
reference therein to Credit Agreement shall mean this Agreement as may be
amended or replaced.
The Commitment Letter dated April 19, 1999, attached hereto and all
amendments and replacements thereto, is incorporated herein by this reference
for additional terms. In the event of a conflict between this Agreement and
the Letter, the terms in the Letter shall take precedence.
SILICON LABORATORIES INC.
By /s/ JOHN W. MCGOVERN
------------------------
Authorized Signature
Name: JOHN W. MCGOVERN
--------------------
Title: CHIEF FINANCIAL OFFICER
-----------------------
By /s/ JEFFREY W. SCOTT
------------------------
Authorized Signature
Name: JEFFREY W. SCOTT
----------------
Title: VP ENGINEERING
---------------
<PAGE>
[LETTERHEAD]
TO: S.W. AUSTIN OFFICE BUILDING LTD
C/O KNOX DEVELOPMENT
5316 HWY 290 W. #360
AUSTIN, TEXAS 78735
DATE: 07/30/99
AMOUNT: USD453,600.00
REF: CSF98000506
AMENDMENT NO. 1
AT THE REQUEST OF THE ACCOUNT PARTY, WE ENCLOSE HEREWITH ORIGINAL
AMENDMENT TO SUBJECT LETTER OF CREDIT.
PLEASE EXAMINE THE TERMS AND CONDITIONS OF THE AMENDMENT TO ENSURE THAT
ALL THE TERMS AND CONDITIONS CAN BE STRICTLY COMPLIED WITH.
IF THE BENEFICIARY IS UNABLE TO COMPLY, WE SUGGEST THAT THEY CONTACT THE
ACCOUNT PARTY OF THE LETTER OF CREDIT TO MAKE CHANGES AS REQUIRED.
SINCERELY,
/s/ [ILLEGIBLE]
-------------------------
AUTHORIZED SIGNATURE
ILCAMBBK
NNNN
Page 1
<PAGE>
[LETTERHEAD]
DATE: FRIDAY, JULY 30, 1999
FROM: IMPERIAL BANK
INTERNATIONAL DIVISION
2015 MANHATTAN BEACH BLVD
REDONDO BEACH, CA 90278
U.S.A.
TELEX: 3730628 (IMPERIAL INW)
APPLICANT: SILICON LABORATORIES, INC.
2024 E. ST. ELMO RD.
AUSTIN, TX 78744-1018
IN FAVOR OF: S.W. AUSTIN OFFICE BUILDING LTD.
C/O KNOX DEVELOPMENT
5316 HWY 290 W. SUITE 360
AUSTIN, TEXAS 78735
++++++AMENDMENT NO.1++++++
WE HEREBY AMEND OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. OSF98000506
ISSUED 09/03/98 AS FOLLOWS:
NEW DATE OF EXPIRY: 09/08/00
DUE TO SYSTEM CONVERSION, SB20011682 IS NOW OSF98000506. PLEASE MARK ALL
RECORDS ACCORDINGLY.
BENEFICIARY'S ADDRESS IS NOW:
5316 HWY 290 WEST, SUITE 360
AUSTIN, TX 78735
+ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. THIS AMENDMENT IS AN
INTEGRAL PART OF THE ABOVE MENTIONED CREDIT AND MUST BE ATTACHED THERETO.
+THIS CREDIT IS SUBJECT TO UCP 500.
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
--------------------------- ----------------------------
Page 1
<PAGE>
[LETTERHEAD]
IMPERIAL BANK
INTERNATIONAL BANKING DIVISION
2015 MANHATTAN BEACH BLVD., 2ND. FLOOR
REDONDO BEACH, CA 90278
TEL: 310 725-4488 FAX: 310 649-3407
DATE: 07/30/99
Silicon Laboratories, Inc.
2024 E. St. Elmo Rd.
Austin, TX 78744-1018
DEAR CUSTOMER:
AT YOUR REQUEST, WE HEREBY TODAY AMEND OUR STANDBY LETTER OF CREDIT NO.
OSF98000506, A COPY OF WHICH IS ATTACHED FOR YOUR INFORMATION. SHOULD YOU
HAVE ANY QUESTIONS REGARDING THIS L/C, PLEASE CONTACT OUR INTERNATIONAL
BANKING DIVISION AT 310-725-4488.
PLEASE REVIEW THE DETAILS OF THE AMENDMENT.
ANY INCONGRUITY MUST BE REPORTED AS SOON AS POSSIBLE OR THE TERMS AND
CONDITIONS OF THE LETTER OF CREDIT SHALL BE DEEMED CONCLUSIVELY TO COMPLY
WITH THE APPLICATION. THIS L/C IS SUBJECT TO THE U.C.P. 1993 ICC
PUBLICATION NO. 500.
THIS IS A COMPUTER GENERATED ADVICE WHICH DOES NOT REQUIRE AN AUTHORIZED
SIGNATURE.
L/C NO. OSF98000506
AMENDMENT NO.: 1
AMOUNT: USD .00
EXPIRY DATE: 09/08/00
TYPE: IRREVOCABLE
IN FAVOR OF: S.W. AUSTIN OFFICE BUILDING LTD
C/O KNOX DEVELOPMENT
5316 HWY 290 W. #360
AUSTIN, TEXAS 78735
OSFAMAPP
Page 1
<PAGE>
[LETTERHEAD]
DATE: FRIDAY, JULY 30, 1999
FROM: IMPERIAL BANK
INTERNATIONAL DIVISION
2015 MANHATTAN BEACH BLVD
REDONDO BEACH, CA 90278
U.S.A.
TELEX: 3730628(IMPERIAL INW)
APPLICANT: SILICON LABORATORIES
2024 E. ST. ELMO RD.
AUSTIN, TX 78744-1018
IN FAVOR OF: S.W. AUSTIN OFFICE BUILDING LTD
C/O KNOX DEVELOPMENT
5316 HWY 290 W. SUITE 360
AUSTIN, TEXAS 78735
+++++++AMENDMENT NO.1+++++++
WE HEREBY AMEND OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 0SF98000506
ISSUED 09/03/98 AS FOLLOWS:
NEW DATE OF EXPIRY: 09/08/00
DUE TO SYSTEM CONVERSION, SB20011682 IS NOW OSF98000506. PLEASE MARK ALL
RECORDS ACCORDINGLY.
BENEFICIARY'S ADDRESS IS NOW:
5316 HWY 290 WEST, SUITE 360
AUSTIN, TX 78735
+ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. THIS AMENDMENT IS AN
INTEGRAL PART OF THE ABOVE MENTIONED CREDIT AND MUST BE ATTACHED THERETO.
+THIS CREDIT IS SUBJECT TO UCP 500.
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
-------------------------- ---------------------------
Page 1
<PAGE>
[LETTERHEAD]
INTERNATIONAL BANKING OFFICE, 275 BATTERY STREET, SUITE 1100, SAN FRANCISCO,
CA 94111
IRREVOCABLE STANDBY LETTER OF CREDIT NO. SB20011682 DATED: SEP 03, 98
BENEFICIARY***************************APPLICANT**********************
S.W. AUSTIN OFFICE BUILDING, LTD. * SILICON LABORATORIES
C/O KNOX DEVELOPMENT * 2024 E. ST. ELMO ROAD
5316 HWY 290 WEST, SUITE 410 * AUSTIN, TX 78744-1018
AUSTIN, TEXAS 78735 *
*
EXPIRY DATE AND PLACE*****************AMOUNT*************************
08 SEP, 99 * USD453,600.00
AT OUR COUNTERS * U.S. DOLLAR CURRENCY
275 BATTERY STREET, SUITE 1100 * FOUR HUNDRED FIFTY THREE
SAN FRANCISCO, CA 94111 * THOUSAND SIX HUNDRED ONLY
*
*********************************************************************
GENTLEMEN:
WE HEREBY AUTHORIZE YOU TO VALUE ON IMPERIAL BANK FOR THE ACCOUNT OF SILICON
LABORATORIES FOR A SUM OR SUMS NOT EXCEEDING AT TOTAL OF FOUR HUNDRED FIFTY
THREE THOUSAND SIX HUNDRED DOLLARS (USD $453,600.00) AVAILABLE BY YOUR DRAFT OR
DRAFTS AT SIGHT. DRAFTS MUST BE DRAWN AND PRESENTED AT OUR OFFICE AT 275
BATTERY STREET, SUITE 1100, SAN FRANCISCO, CA 94111 ATTN: INTERNATIONAL
DEPARTMENT NO LATER THAN SEPTEMBER 8, 1999.
ALL DRAFTS MUST BE MARKED "DRAWN ON IMPERIAL BANK STANDBY LETTER OF CREDIT NO.
SB20011682" AND ALL DRAWINGS NEGOTIATED UNDER THIS CREDIT MUST BE ENDORSED ON
THE REVERSE HEREOF.
WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS, AND BONA FIDE HOLDERS OF ALL
DRAFTS DRAWN ON AND IN COMPLIANCE WITH THE TERMS OF THIS CREDIT THAT SUCH
DRAFTS WILL BE DULY HONORED ON THE DAY OF PRESENTATION TO THE DRAWEE AND THAT
ANY STATUTORY, UCP, OR OTHER RIGHTS TO DELAY HONOR OF SIGHT DRAFTS, INCLUDING
SUCH RIGHTS UNDER ARTICLE 5, SECTION 5-122 (1) (A) AND (B) OF THE UNIFORM
COMMERCIAL CODE, ARE HEREBY SPECIFICALLY WAIVED. WE FURTHER AGREE, UPON THE
PRESENTATION OF SUCH DRAFT TO THE DRAWEE, TO HONOR SUCH DRAFT BY DELIVERING ON
THE DAY OF SUCH PRESENTATION THE AMOUNT OF THE DRAFT, BY OFFICIAL BANK OR
CERTIFIED FUNDS CHECK, TO THE S.W. AUSTIN OFFICE BUILDING, LTD. OR, AT S.W.
AUSTIN OFFICE BUILDING, LTD.'S SOLE OPTION, BY WIRING ON THE DAY OF SUCH
PRESENTATION FEDERAL FUNDS IN THE AMOUNT OF THE DRAFT INTO SUCH ACCOUNT(S) AS
S.W. AUSTIN OFFICE BUILDING, LTD. MAY SPECIFICALLY DIRECT, IN WRITING.
<PAGE>
[LETTERHEAD]
ALL NOTICES AND OTHER WRITINGS DIRECTED TO THE S.W. AUSTIN OFFICE BUILDING,
LTD. SHALL BE SENT TO S.W. AUSTIN OFFICE BUILDING, LTD. C/O KNOW DEVELOPMENT
5316 HWY 290 WEST, SUITE 410, AUSTIN, TEXAS 78735.
THIS LETTER OF CREDIT IS SUBJECT TO THE 1993 REVISION OF THE UNIFORM CUSTOMS
AND PRACTICE FOR DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE
(PUBLICATION NO. 500).
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
_____________________________ _______________________________
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
<PAGE>
[LETTERHEAD]
TO: IMPERIAL BANK
INTERNATIONAL BANKING DIVISION
2015 MANHATTAN BEACH BOULEVARD DATE: SEPTEMBER 4, 1998
REDONDO BEACH, CALIFORNIA 90278
TELEX 3730628 SWIFT IMPBUS66
PLEASE ESTABLISH AN IRREVOCABLE LETTER OF CREDIT ON THE FOLLOWING TERMS AND
CONDITIONS BY:
/ / FULL TEXT CABLE / / AIRMAIL / / AIRMAIL WITH BRIEF PRELIMINARY CABLE
ADVICE /X/ OTHER: COURIER
------------------------------------------------------------------------------
ADVISING BANK FOR ACCOUNT OF
(IF BLANK, CORRESPONDENT BANK)
SILICON LABORATORIES, INC.
2024 E. ST. ELMO ROAD
AUSTIN, TEXAS 78744-1018
------------------------------------------------------------------------------
IN FAVOR OF (BENEFICIARY) AMOUNT
S.W. AUSTIN OFFICE BUILDING LTD. USD $453,600.00
C/O KNOX DEVELOPMENT --------------------------------------
5316 HWY. 290 WEST, STE 410 EXPIRATION DATE
AUSTIN, TEXAS 78735 DRAFTS TO BE DRAWN AND PRESENTED TO
PAYING BANK ON OR BEFORE
SEPTEMBER 8, 1999
------------------------------------------------------------------------------
AVAILABLE BY DRAFTS AT SIGHT *********************************** DRAWN ON YOU.
REFERENCE: _____________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
DOCUMENTS REQUIRED: PLEASE SEE ATTACHED EXHIBIT "A" ________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SPECIAL INSTRUCTIONS: PLEASE SEE ATTACHED EXHIBIT "A" _______________________
________________________________________________________________________________
________________________________________________________________________________
ALL DOCUMENTS TO BE FORWARDED IN ONE COVER, BY AIRMAIL, UNLESS OTHERWISE STATED
UNDER SPECIAL INSTRUCTIONS.
- --------------------------------------------------------------------------------
THE OPENING OF THIS CREDIT IS SUBJECT TO THE TERMS AND CONDITIONS AS SET
FORTH IN THE STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT APPEARING ON THE
REVERSE HEREOF WHICH ARE AGREED TO.
APPLICANT NAME SILICON LABORATORIES, INC.
SIGNATURE AND TITLE X /s/ NAVDEEP S. SOOCH, PRESIDENT
----------------------------------------------
X /s/ JOHN W. MCGOVERN CHIEF FINANCIAL OFFICER
----------------------------------------------
<PAGE>
STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT
The undersigned ("Customer") applies to Imperial Bank ("Bank") for a loan
(the "Loan") in the principal amount of U.S. DOLLARS FOUR HUNDRED FIFTY THREE
THOUSAND SIX HUNDRED AND 00/100 *****************************DOLLARS
($453,600.00) subject to the following terms and conditions: (If the standby
letter of credit is issued in a foreign currency, the principal of the Loan
will be the U.S. Dollar equivalent of the foreign currency amount, converted
at the rate of exchange on the date of drawing.)
1. The Loan shall be disbursed only by means of drawings under the
Letter of Credit, for which application appears on the reverse hereof.
2. If Customer has not executed and delivered a promissory note to Bank
for said Loan, each advance which is disbursed as provided in Paragraph 1 shall
be payable on demand and bear interest payable monthly at a rate per year (based
on a three hundred sixty (360) day year and actual days elapsed) zero percent
(0.00%) in excess of the rate that Bank has announced to be its prime rate
("Prime Rate") and shall vary concurrently with any change in the Prime Rate.
3. Customer shall pay to Bank its commission, payable in advance,
computed from the date hereof at the rate of ONE & QUARTER percent (1.25%) per
year (based on a three hundred sixty (360) day year and actual days elapsed) for
the entire life of the Letter of Credit. There shall be no refund of any portion
of the commission in the event the Letter of Credit commitment expires, is
reduced, terminated or otherwise modified.
4. Customer agrees to pay to Bank, on demand, its commissions and fees
in such amounts as Bank determines to be proper and all charges and expenses
paid or incurred by Bank in connection with the Letter of Credit or the Loan,
and interest at the rate set forth herein or, if no rate is set forth, 5% over
Bank's Prime Rate as it may vary from time to time.
5. Customer hereby reaffirms that security interest granted to the Bank
by the Borrower pursuant to that General Security Agreement (Tangible and
Intangible Personal Property) dated March 28, 1997, as may be amended or
replaced ("Security Agreement"), and agrees that the Customer's obligations
under this Agreement and the Loan are secured pursuant to the terms and
conditions of the Security Agreement.
6. Upon default, at Bank's option without formal demand or notice,
all or any part of the Loan shall immediately become due. Default is hereby
defined as the occurrence of any event of default contained in that Credit
Terms and Conditions ("Credit Agreement") executed by Customer, dated March
28, 1997, as such shall be amended or replaced, and upon such a default the
Bank shall have all the rights and remedies available to it under the Credit
Agreement. Amounts due under this Agreement shall be deemed to be
indebtedness for the provisions of Section D.1. of the Credit Agreement. If
at the time of any such event there remains any portion of the Loan
undisbursed (that is, if the Letter of Credit is still in effect and has not
been completely drawn against) Customer shall, upon Bank's demand, pay to
Bank for application to drawings under the Letter of Credit the entire
principal amount which has not been drawn. Any amount so paid which has not
been drawn on the expiry date of the Letter of Credit shall be repaid to
Customer without interest. Except as provided above, the Agreement remains
unchanged.
SILICON LABORATORIES, INC.
By: /s/ Navdeep S. Sooch /s/ John W. McGovern
---------------------------------- -------------------------------
Name: Navdeep S. Sooch John W. McGovern
-------------------------------- -------------------------------
Title: President Chief Financial Officer
-------------------------------- -------------------------------
IMPERIAL BANK
By: /s/ Tommy Deavenport
----------------------------------
Name: Tommy Deavenport
--------------------------------
Title: Senior Vice President
--------------------------------
7. Neither Bank nor its correspondents shall be in any way responsible
for performance by any beneficiary of its obligations to Customer, nor for the
form, sufficiency, correctness, genuineness, authority of person signing,
falsification or legal effect of any documents called for under the Letter of
Credit if such documents on their face appear to be in order.
8. Subject to the law and customs and practice of the trade, existing
in the area where the beneficiary is located, said Letter of Credit shall be
subject to, and performance by Bank, its correspondent and the beneficiary
thereunder shall be governed by the "Uniform Customs and Practice for
Documentary Credits" fixed by The International Chamber of Commerce, in effect
on the date of issuance of the Letter of Credit.
9. It is agreed that all directions and correspondence relating to said
Letter of Credit are to be sent at Customer's risk and that Bank does not assume
any responsibility for any inaccuracy, interruption, error or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation.
10. If this Agreement is signed by two or more parties, it shall be
the joint and several agreement of such parties.
- ----------------------------------- -------------------------------------------
INTERNATIONAL USE ONLY BANKING OFFICE USE ONLY
- ----------------------------------- -------------------------------------------
Approved By Date Banking Office/Department Name Number
X SW-EGIG 2105
- ----------------------------------- -------------------------------------------
Lending Officer Date
X /s/ Tommy Deavenport 9-3-98
-------------------------------------------
<PAGE>
[Letterhead]
- ------------------------------------------------------------------------------
DATE: 11/19/99
FROM: IMPERIAL BANK
INTERNATIONAL DIVISION
2015 MANHATTAN BEACH BLVD
REDONDO BEACH, CA 90278
U.S.A.
TELEX: 3730628 (IMPERIAL INW)
SWIFT: IMPBOS66
APPLICANT: SILICON LABORATORIES INC.
4635 BOSTON LANE
AUSTIN, TX 78735
IN FAVOR OF: STRATUS 7000 WEST JOINT VENTURE
C/O STRATUS MANAGEMENT, LLC
98 SAN JACINTO, STE. 220
AUSTIN, TX 78701
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT
NO.OSF99000863 EXPIRING 11/22/00 AT OUR COUNTERS FOR AMOUNT:
USD500,000.00 (FIVE HUNDRED THOUSAND EXACTLY).
CREDIT IS AVAILABLE WITH IMPERIAL BANK
INTERNATIONAL DIVISION
2015 MANHATTAN BEACH BLVD
REDONDO BEACH, CA 90278 U.S.A.
BY PAYMENT OF DRAFTS AT SIGHT.
DRAFTS DRAWN ON: IMPERIAL BANK
INTERNATIONAL DIVISION
2015 MANHATTAN BEACH BLVD
REDONDO BEACH, CA 90278 U.S.A.
REQUIRED DOCUMENTS:
1. THE ORIGINAL OF THIS STANDBY LETTER OF CREDIT AND AMENDMENT(S) IF
ANY.
2. BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED
OFFICER CERTIFYING THAT SILICON LABORATORIES, INC. IS IN DEFAULT OR THAT
AN EVENT OF DEFAULT HAS OCCURRED UNDER ONE OR MORE OF THE TERMS OF THAT
CERTAIN LEASE AGREEMENT DATED (GIVE DATE) THAT EXISTS BETWEEN SILICON
LABORATORIES, INC. AND STRATUS 7000 WEST JOINT VENTURE AND THAT ANY
APPLICABLE CURE PERIOD HAS LAPSED WITHOUT REMEDY.
ADDITIONAL CONDITIONS:
ALL INFORMATION REQUIRED UNDER DOCUMENT REQUIREMENT NO. 2 WHETHER
INDICATED BY BLANKS, BRACKETS OR OTHERWISE, MUST BE COMPLETED AT THE
TIME OF DRAWING.
ALL SIGNATURES MUST BE MANUALLY EXECUTED IN ORIGINALS.
PAGE 1 OF 2 TO IRREVOCABLE STANDBY LETTER OF CREDIT NO. OSF99000863
<PAGE>
[Letterhead]
PAGE 2 OF 2 TO IRREVOCABLE STANDBY LETTER OF CREDIT NO. OSF99000863
PARTIAL DRAWINGS MAY BE MADE UNDER THIS LETTER OF CREDIT, PROVIDED, HOWEVER,
THAT EACH SUCH DEMAND THAT IS PAID BY US SHALL REDUCE THE AMOUNT AVAILABLE
UNDER THIS LETTER OF CREDIT.
IT IS A CONDITION OF THIS STANDBY LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR PERIODS FROM THE
PRESENT EXPIRATION DATE HEREOF, UNLESS THIRTY (30) DAYS PRIOR TO ANY SUCH
DATE, WE SHALL NOTIFY YOU IN WRITING BY CERTIFIED MAIL OR COURIER SERVICE AT
THE ABOVE LISTED ADDRESS THAT WE ELECT NOT TO CONSIDER THIS IRREVOCABLE LETTER
OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD. UPON RECEIPT BY YOU OF SUCH
NOTICE, YOU MAY DRAW HEREUNDER BY MEANS OF YOUR DRAFT(S) ON US AT SIGHT
ACCOMPANIED BY YOUR ORIGINAL SIGNED STATEMENT WORDED AS FOLLOWS: STRATUS 7000
WEST JOINT VENTURE HAS RECEIVED NOTICE FROM IMPERIAL BANK THAT THE EXPIRATION
DATE OF LETTER OF CREDIT NO. OSF99000863 WILL NOT BE EXTENDED FOR AN
ADDITIONAL PERIOD. AS OF THE DATE OF THIS DRAWING, STRATUS 7000 WEST JOINT
VENTURE HAS NOT RECEIVED A SUBSTITUTE LETTER OF CREDIT OR OTHER INSTRUMENT
ACCEPTABLE TO STRATUS 7000 WEST JOINT VENTURE AS SUBSTITUTE FOR IMPERIAL BANK
LETTER OF CREDIT NO. OSF99000863.
NOTWITHSTANDING THE ABOVE, THE FINAL EXPIRATION DATE SHALL BE NOVEMBER 22,
2006.
ALL DRAFTS AND DOCUMENTS REQUIRED UNDER THIS LETTER OF CREDIT MUST BE MARKED:
"DRAWN UNDER IMPERIAL BANK LETTER OF CREDIT NO. OSF99000863."
ALL DOCUMENTS ARE TO BE DISPATCHED IN ONE LOT BY COURIER SERVICE TO IMPERIAL
BANK INTERNATIONAL DIVISION, 2105 MANHATTAN BEACH BLVD., 2ND FLR., REDONDO
BEACH, CA 90278.
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND
SUCH UNDERTAKING SHALL NOT BE IN ANY WAY MODIFIED, AMENDED OR AMPLIFIED BY
REFERENCE TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN
WHICH THIS LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT
RELATES, AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY
REFERENCE ANY DOCUMENT, INSTRUMENT OR AGREEMENT.
WE HEREBY ENGAGE WITH YOU THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH
THE TERMS OF THIS CREDIT WILL BE DULY HONORED IF DRAWN AND PRESENTED FOR
PAYMENT AT THIS OFFICE ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS CREDIT IS SUBJECT TO THE
"UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS" (1993 REVISION)
INTERNATIONAL CHAMBER OF COMMERCE (PUBLICATION NO. 500).
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
/s/ [Illegible] /s/ [Illegible]
- -------------------------------- --------------------------------
<PAGE>
[Letterhead]
To: IMPERIAL BANK
International Banking Division
2015 Manhattan Beach Boulevard Date: November 10, 1999
Redondo Beach, California 90278 ---------------------
Telex 3730628 SWIFT IMPBUS66
Please establish an Irrevocable Letter of Credit on the following terms and
conditions by:
[ ] Full Text [x] Airmail [ ] Airmail with brief [ ] Other:
Cable preliminary cable --------
advice
- ------------------------------------------------------------------------------
ADVISING BANK FOR ACCOUNT OF
(If Blank, Correspondent Bank)
Silicon Laboratories
4635 Boston Lane
Austin, TX 78735
- ------------------------------------------------------------------------------
IN FAVOR OF (BENEFICIARY) AMOUNT
Five Hundred Thousand ($500,000)
Stratus 7000 West Joint Venture --------------------------------------
c/o Stratus Management, LLC EXPIRATION DATE
98 San Jacinto, Suite 220 Drafts to be drawn and presented to
Austin, TX 78701 paying Bank on or before
November 22, 2000
----------------------------------
- ------------------------------------------------------------------------------
Available by drafts at sight see attached drawn on you.
----------------------------------
Reference: see attached
--------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Documents Required: see attached
-----------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Special Instructions: see attached
---------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
All Documents to be forwarded in one cover, by airmail, unless otherwise
stated under Special Instructions.
- ------------------------------------------------------------------------------
The opening of this credit is subject to the terms and conditions as set
forth in the Standby Letter of Credit and Security Agreement appearing on the
reverse hereof which are agreed to.
SILICON LABORATORIES INC.
Applicant Name: John McGovern Navdeep S. Sooch
--------------------------------------
Signature and Title: John McGovern Navdeep S. Sooch
--------------------------------------
CHIEF FINANCIAL CHAIRMAN AND
OFFICER CHIEF EXECUTIVE
OFFICER
- ------------------------------------------------------------------------------
Continued on Reverse
<PAGE>
STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT
The undersigned ("Customer") applies to Imperial Bank ("Bank") for a loan
(the "Loan") in the principal amount of Five Hundred Thousand DOLLARS
($500,000) subject to the following terms and conditions: (If the standby
letter of credit is issued in a foreign currency, the principal of the Loan
will be the U.S. Dollar equivalent of the foreign currency amount, converted
at the rate of exchange on the date of drawing.)
1. The Loan shall be disbursed only by means of drawings under the
Letter of Credit, for which application appears on the reverse hereof.
2. If Customer has not executed and delivered a promissory note to
Bank for said Loan, each advance which is disbursed as provided in Paragraph
1 shall be payable on demand and bear interest payable monthly at a rate per
year (based on a three hundred sixty (360) day year and actual days elapsed)
two percent (2%) in excess of the rate that Bank has announced to be its
prime rate ("Prime Rate") and shall vary concurrently with any change in the
Prime Rate.
3. Customer shall pay to Bank its commission, payable in advance,
computed from the date hereof at the rate of one percent (1%) per year (based
on a three hundred sixty (360) day year and actual days elapsed) for the entire
life of the Letter of Credit. There shall be no refund of any portion of the
commission in the event the Letter of Credit commitment expires, is reduced,
terminated or otherwise modified.
4. Customer agrees to pay to Bank, on demand, its commissions and fees
in such amounts as Bank determines to be proper and all charges and expenses
paid or incurred by Bank in connection with the Letter of Credit or the Loan,
and interest at the rate set forth herein or, if no rate is set forth, 5%
over Bank's Prime Rate as it may vary from time to time.
5. Bank is hereby granted a security interest in (a) all property
including, without limitation, deposit accounts (i) delivered to Bank by
Customer, (ii) which shall be in Bank's possession or control in any matter
or for any purpose, (iii) now owned or hereafter acquired by Customer of the
type or class described in any financing statement filed by Bank and executed
by or on behalf of Customer; (b) the proceeds, increase and products of such
property, all accessions thereto, and all property which Customer may receive
on account of such collateral which Customer will immediately deliver to
Bank, to secure the performance of all of Customer's present or future debts
or obligations to Bank, whether absolute or contingent. Unless otherwise
defined, words used herein have the meanings given them in the California
Uniform Commercial Code.
6. Upon default, at Bank's option without formal demand or notice, all
or any part of the Loan shall immediately become due. Bank shall have all
rights given by law, and may sell, in one or more sales, collateral in any
county where Bank has an office (or any place Bank deems appropriate). Bank
may purchase at such sale. Sales for cash or on credit to a wholesaler,
retailer or user of the collateral, or at public or private auction, are all
to be considered commercially reasonable. Bank may require Customer to
assemble the collateral and make it available to Bank at the entrance to the
location of the collateral, or a place designated by Bank. Defaults shall
include: (a) Customer's failure to pay or perform this or any agreement with
Bank or breach of any warranty herein, or Customer's failure to pay or
perform any agreement with Bank; (b) Any change in Customer's financial
condition which in Bank's judgment impairs the prospect of payment or
performance; (c) Any actual or reasonable anticipated deterioration of the
collateral or in the market price thereof which causes it in Bank's judgment
to become unsatisfactory as security; (d) Any levy or seizure against
Customer or any of the collateral; (e) Death, termination of business,
assignment for creditors, insolvency, appointment of receiver or the filing
of any petition under bankruptcy or debtor's relief laws of, by or against
Customer or any of the collateral; and (f) Any warranty or representation is
false or is believed in good faith by Bank to be false. If at the time of any
such event there remains any portion of the Loan undisbursed (that is, if the
Letter of Credit is still in effect and has not been completely drawn
against) Customer shall, upon Bank's demand, pay to Bank for application to
drawings under the Letter of Credit the entire principal amount which has not
been drawn. Any amount so paid which has not been drawn on the expiry date of
the Letter of Credit shall be repaid to Customer without interest.
7. Neither Bank nor its correspondents shall be in any way responsible
for performance by any beneficiary of its obligations to Customer, nor for the
form, sufficiency, correctness, genuineness, authority of person signing,
falsification or legal effect of any documents called for under the Letter of
Credit if such documents on their face appear to be in order.
8. Subject to the law and customs and practice of the trade, existing
in the area where the beneficiary is located, said Letter of Credit shall be
subject to, and performance by Bank, its correspondent and the beneficiary
thereunder shall be governed by the "Uniform Customs and Practice for
Documentary Credits" fixed by The International Chamber of Commerce, in
effect on the date of issuance of the Letter of Credit.
9. It is agreed that all directions and correspondence relating to
said Letter of Credit are to be sent at Customer's risk and that Bank does
not assume any responsibility for any inaccuracy, interruption, error or
delay in transmission or delivery by post, telegraph or cable, or for any
inaccuracy of translation.
10. If this Agreement is signed by two or more parties, it shall be the
joint and several agreement of such parties.
- ------------------------------ -----------------------------------------------
INTERNATIONAL USE ONLY BANKING OFFICE USE ONLY
- ------------------------------ -----------------------------------------------
Approved By Date Banking Office/Department Name Number
X #2105 Austin EGD 2105
- ------------------------------ -----------------------------------------------
Lending Officer Date
X
-----------------------------------------------
<PAGE>
EXHIBIT I
LETTER OF CREDIT PRO FORMA WORDING
PAGE ONE OF TWO
(FOR LETTER OF CREDIT ISSUED BY IMPERIAL BANK)
APPLICANT:
BENEFICIARY:
AMOUNT:
EXPIRY DATE AND PLACE FOR PRESENTATION OF DOCUMENTS: [need date] IMPERIAL BANK
INTERNATIONAL DIVISION, 2015 MANHATTAN BEACH BLVD., 2ND FLR., REDONDO BEACH, CA
90278
CREDIT IS AVAILABLE WITH IMPERIAL BANK INTERNATIONAL DIVISION AGAINST PAYMENT OF
DRAFTS DRAWN AT SIGHT ON IMPERIAL BANK INTERNATIONAL DIVISION, 2015 MANHATTAN
BEACH BLVD., 2ND FLR., REDONDO BEACH, CA 90278
DOCUMENTS REQUIRED:
1. THE ORIGINAL OF THIS STANDBY LETTER OF CREDIT AND AMENDMENT(S) IF ANY.
2. BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER
CERTIFYING THAT [APPLICANT NAME] IS IN DEFAULT OR THAT AN EVENT OF DEFAULT HAS
OCCURRED UNDER ONE OR MORE OF THE TERMS OF THAT CERTAIN LEASE AGREEMENT DATED
[GIVE DATE] THAT EXISTS BETWEEN [APPLICANT'S NAME] AND [BENEFICIARY'S NAME] AND
THAT ANY APPLICABLE CURE PERIOD HAS LAPSED WITHOUT REMEDY.
SPECIAL CONDITIONS:
ALL INFORMATION REQUIRED UNDER DOCUMENT REQUIREMENT NO. 2 WHETHER INDICATED BY
BLANKS, BRACKETS OR OTHERWISE, MUST BE COMPLETED AT THE TIME OF DRAWING.
ALL SIGNATURES MUST BE MANUALLY EXECUTED IN ORIGINALS.
PARTIAL DRAWINGS MAY BE MADE UNDER THIS LETTER OF CREDIT, PROVIDED, HOWEVER,
THAT EACH SUCH DEMAND THAT IS PAID BY US SHALL REDUCE THE AMOUNT AVAILABLE
UNDER THIS LETTER OF CREDIT.
IT IS A CONDITION OF THIS STANDBY LETTER OF CREDIT THAT IT SHALL BE DEEMED
AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR PERIODS FROM THE PRESENT
EXPIRATION DATE HEREOF, UNLESS THIRTY (30) DAYS PRIOR TO ANY SUCH DATE. WE SHALL
NOTIFY YOU IN WRITING BY CERTIFIED MAIL OR COURIER SERVICE AT THE ABOVE LISTED
ADDRESS THAT WE ELECT NOT TO CONSIDER THIS IRREVOCABLE LETTER OF CREDIT RENEWED
FOR ANY SUCH ADDITIONAL PERIOD, UPON RECEIPT BY YOU OF SUCH NOTICE, YOU MAY DRAW
HEREUNDER BY MEANS OF YOUR DRAFT(S) ON US AT SIGHT ACCOMPANIED BY YOUR ORIGINAL
SIGNED STATEMENT WORDED AS FOLLOWS: [beneficiary] HAS RECEIVED NOTICE FROM
IMPERIAL BANK THAT THE EXPIRATION DATE OF LETTER OF CREDIT NO. [INSERT L/C NO.]
WILL NOT BE EXTENDED FOR AN ADDITIONAL PERIOD. AS OF THE DATE OF THIS DRAWING,
[beneficiary] HAS NOT RECEIVED A SUBSTITUTE LETTER OF CREDIT OR OTHER INSTRUMENT
ACCEPTABLE TO [beneficiary] AS SUBSTITUTE FOR IMPERIAL BANK LETTER OF CREDIT NO.
[INSERT L/C NO.].
NOTWITHSTANDING THE ABOVE, THE FINAL EXPIRATION DATE SHALL BE MMDDYY.
ALL DRAFTS AND DOCUMENTS REQUIRED UNDER THIS LETTER OF CREDIT MUST BE MARKED:
"DRAWN UNDER IMPERIAL BANK LETTER OF CREDIT NO. [INSERT L/C NO.]"
ALL DOCUMENTS ARE TO BE DISPATCHED IN ONE LOT BY COURIER SERVICE TO IMPERIAL
BANK INTERNATIONAL DIVISION, 2015 MANHATTAN BEACH BLVD., 2ND FLR., REDONDO
BEACH, CA 90278
/s/ John McGovern 11/10/99
-------------------- ----------
<PAGE>
EXHIBIT I
LETTER OF CREDIT PRO FORMA WORDING
PAGE TWO OF TWO
THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH
UNDERTAKING SHALL NOT BE IN ANY WAY MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE
TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN WHICH THIS
LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES, AND
ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY
DOCUMENT, INSTRUMENT OR AGREEMENT.
WE HEREBY ENGAGE WITH YOU THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS CREDIT WILL BE DULY HONORED IF DRAWN AND PRESENTED FOR PAYMENT AT
THIS OFFICE ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATE, THIS CREDIT IS SUBJECT TO THE
"UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS"(1993 REVISION)
INTERNATIONAL CHAMBER OF COMMERCE (PUBLICATION NO. 500).
/s/ John McGovern 11/10/99
-------------------- ----------
<PAGE>
IMPERIAL BANK
- --------------------------------------------------------------------------------
Emerging Growth Industries, Southwest Regional Office
8911 Capital Texas Highway, Suite 2310 - Austin, Texas 78759 -
Tel: (512) 349-2333 - Fax: (512) 349-2888
December 9, 1999
Mr. John McGovern
Silicon Laboratories
4635 Boston Lane
Austin, TX 78735
Dear John,
We are pleased to provide this commitment letter for the proposed bank
financing that Imperial Bank ("Bank") is willing to extend to Silicon
Laboratories, Inc. ("Borrower"). This commitment to lend is subject to
execution of a definitive written agreement and documentation for the
transaction described in this letter. The terms of the financing are as
follows:
A. CREDIT FACILITY
1) Existing $1,000,000 equipment term loan.
2) Existing $1,500,000 equipment term loan.
3) Existing $453,600 letter of credit.
4) Existing $3,000,000 revolving line of credit, with a $500,000
sub-limit for letters of credit.
5) A New $2,000,000 term loan, with a $1,000,000 sub-limit for
documented software and a $1,000,000 sub-limit for documented
leasehold improvements.
6) A New $2,000,000 term loan for capital equipment purchases.
B. TERMS
1) Currently being amortized.
2) Currently being amortized.
3) Facility in place.
4) Interest payable monthly with principal and accrued interest due
at maturity.
5) 6 month interest-only period, thereafter, the outstanding balance
of the facility to be amortized over 36 months.
6) 9 month interest-only period, thereafter, the outstanding balance
of the facility to be amortized over 36 months.
C. MATURITY
1) 3/28/01
2) 1/29/02
3) 9/7/99
4) 6/24/00
5) 42 months from the date of documents.
6) 45 months from the date of documents.
<PAGE>
D. PRICING
1) Imperial Bank's Prime Rate.
2) Imperial Bank's Prime Rate.
3) Imperial Bank's Prime Rate.
4) Imperial Bank's Prime Rate.
5) Imperial Bank's Prime Rate.
6) Imperial Bank's Prime Rate.
E. FACILITY FEES
5) $2,500
6) $1,250
F. LEGAL FEES
$500
G. WARRANT (EXISTING)
2) 3.0% of the commitment
3) 5.0% of the commitment
H. ADVANCE RATE
5) SOFTWARE: 100% advance rate against all approved software invoices
less than 90 days old, excluding sales tax and freight charges,
up to $1,000,000. LEASEHOLD IMPROVEMENTS: 100% advance rate
against all documented leasehold improvements, up to $1,000,000.
6) EQUIPMENT: 100% advance rate against all approved equipment invoices,
for new equipment purchased within 90 days or less of the advance
request, excluding sales tax and freight charges.
I. COLLATERAL:
A UCC-1 filing on all assets of Borrower, excluding Intellectual
Property, with the Bank in first position. A negative pledge on
intellectual property will be required.
J. FINANCIAL COVENANTS
(i) Borrower to maintain a monthly minimum Quick Ratio(1) of at least
1.50:1.00.
(ii) Borrower to maintain a minimum Debt Service Coverage Ratio(2) of
1.50:1.00.
(1) Quick Ratio defined as: Cash plus A/R divided by Current
Liabilities.
(2) Debt service coverage ratio defined as EBIT plus
depreciation and amortization (MOST RECENT THREE MONTH PERIOD
ANNUALIZED) divided by current maturities of long term debt.
K. REPORTING REQUIREMENTS
(i) Monthly internal prepared financial statements prepared
according to generally accepted accounting principles within 25
days after month end with signed compliance certificate.
(ii) Monthly accounts receivable and accounts payable agings with
borrowing base certificate due within 25 days of month-end.
(iii) Unqualified audit of annual financial statements within 90 days
after fiscal year end.
(iv) Bank will have the right to conduct annual collateral records
audit, with results satisfactory to Bank.
<PAGE>
L. OTHER
(i) Borrower to maintain primary operating and depository accounts
with Bank.
(ii) Purchase money security interest and leases are allowed with
notification to Bank.
(iii) Borrower to provide property and casualty insurance with the
Bank as "Lenders Loss Payable"
(iv) Borrower to pay for all other costs associated with the closing
of the transaction (UCC search fees, filing fees, etc.)
M. EXPIRATION
Unless Borrower accepts this commitment letter on or before December 17,
1999 this commitment letter will expire and be of no further effect.
This letter is provided solely for your information and is delivered to you
with the understanding that neither it nor its substance shall be disclosed
to any third person, except those who are in confidential relationship with
you, or where the same is required by law.
IF THE PROPOSED TERMS SET FORTH ABOVE ARE ACCEPTABLE TO YOU, PLEASE SO
INDICATE BY SIGNING AND RETURNING THE ORIGINAL OF THIS LETTER TO US, ALONG
WITH THE $4,250 IN FEES REFERRED TO ABOVE. Upon return of this letter and
receipt of payment, the Bank will prepare drafts of definitive loan documents
for your review. If you and the Bank do not enter into definitive loan
documents, the Bank will refund to you the amount of the loan fee payment
less the amount of the Bank's expenses for the foregoing.
This letter is intended to set forth the proposed terms of the credit
facility currently under discussion between us. Except for your obligation to
pay the Bank's expenses described above, this letter and our other
communications and negotiations regarding the proposed loan do not constitute
an agreement or an offer and do not create any legal rights benefiting, or
obligations binding on, either of us. It is intended that all legal rights
and obligations of the Bank and you would be set forth in the signed
definitive loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to Silicon Laboratories, Inc. and look
forward to a long and mutually rewarding relationship. Please don't hesitate
to call if you have any questions, we can be reached at (512) 349-2333.
Sincerely,
/s/ Chris Jacomino /s/ Tony Schell
Chris Jacomino Tony Schell
Commercial Loan Officer Senior Vice President
Emerging Growth Division Emerging Growth Division
Southwest Regional Office Southwest Regional Office
ACCEPTED AND AGREED TO:
SILICON LABORATORIES, INC.
By: /s/ John McGovern
-------------------------------
Title: Chief Financial Officer
-------------------------------
Date: December 10, 1999
-------------------------------
<PAGE>
With return of this letter, please provide us with the following information:
Tax I.D. #: 74-2793174
----------
Names and Title of Authorized Corporate Signers:
John McGovern Navdeep Sooch
---------------------------------- ------------------------------------
Name Name
Chief Financial Officer Chairman and Chief Executive Officer
---------------------------------- ------------------------------------
Title Title
---------------------------------- ------------------------------------
Name Name
---------------------------------- ------------------------------------
Title Title
Number needed to sign: 2
---
Who will execute docs: John McGovern
--------------------------------
Navdeep S. Sooch
--------------------------------
Name of Corporate Secretary: John McGovern
--------------------------------
Is Secretary an Authorized signer? Yes X No
--- ---
Are substantially [Illegible] all of the Company's assets located in the
state of Texas?
Yes X No
--- ---
Automatically Debit Account # 21-001-430 for interest payments each month.
-----------
Disburse loan advances to Account # 21-001-430 when advances are requested.
----------
<PAGE>
Ex. 10.13
First Amendment to Credit Terms and Conditions
and Attachment Thereto
This First Amendment ("Amendment") amends that certain Credit Terms and
Conditions, ("Credit Terms and Conditions") dated June 25, 1999, by and
between Imperial Bank ("Bank") and Silicon Laboratories, Inc. ("Borrower")
and the Commitment Letter attached thereto dated April 19, 1999 (the
"Commitment Letter"), (collectively herein the Credit Terms and Conditions
and the Commitment Letter are referred to as the "Agreement") as follows:
1. The last paragraph of the Credit Terms and Conditions is hereby
amended in full to read as follows:
"The Commitment Letter dated, December 9, 1999 as may be amended or
replaced, (the "Letter") is attached hereto and incorporated herein by this
reference for additional terms. In the event of a conflict between this
Agreement and the term of the Letter shall take precedence."
2. Except as provided above, the Agreement remains unchanged.
3. This Amendment is effective as of December 16, 1999, and the parties
hereby confirm that the Agreement as amended is in full force and effect.
SILICON LABORATORIES, INC.
By: /s/ Navdeep S. Sooch
----------------------------------------
Name: Navdeep S. Sooch
--------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
By: /s/ John McGovern
----------------------------------------
Name: John McGovern
--------------------------------------
Title: Chief Financial Officer
-------------------------------------
IMPERIAL BANK
By: /s/ Chris Jacomino
----------------------------------------
Name: Chris Jacomino
--------------------------------------
Commercial Loan Officer
1
<PAGE>
[LOGO]
IMPERIAL BANK
MEMBER FDIC
<TABLE>
<CAPTION>
PROMISSORY NOTE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$2,000,000.00 12-16-1999 09-16-2003 721000049 622074 619 CJ
- ----------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------
BORROWER: SILICON LABORATORIES INC., A DELAWARE LENDER: IMPERIAL BANK
CORPORATION EMERGING GROWTH INDUSTRIES GROUP -
4635 BOSTON LANE SOUTHWEST REGIONAL OFFICE
AUSTIN, TX 78735 226 AIRPORT PARKWAY
SAN JOSE, CA 95110-1024
==============================================================================================
PRINCIPAL AMOUNT: $2,000,000.00 INITIAL RATE: 8.500% DATE OF NOTE: DECEMBER 16, 1999
</TABLE>
PROMISE TO PAY. SILICON LABORATORIES INC., A DELAWARE CORPORATION
("BORROWER") PROMISES TO PAY TO IMPERIAL BANK ("LENDER"), OR ORDER, IN LAWFUL
MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF TWO MILLION &
00/100 DOLLARS ($2,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER
WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE.
INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF
EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT
SCHEDULE:
ADVANCES UNDER THE NOTE SHALL BE AVAILABLE THROUGH SEPTEMBER 16,
2000 ("NON-REVOLVING DRAW PERIOD"). DURING THE NON-REVOLVING DRAW
PERIOD, INTEREST ONLY SHALL BE DUE MONTHLY BEGINNING JANUARY 16,
2000. ON SEPTEMBER 16, 2000, THE OUTSTANDING PRINCIPAL BALANCE OF
THE ADVANCES UNDER THE NOTE SHALL BE PAYABLE MONTHLY IN 36 EQUAL
PAYMENTS OF PRINCIPAL PLUS ACCRUED INTEREST BEGINNING OCTOBER 16,
2000. ALL PRINCIPAL AND ACCRUED BUT UNPAID INTEREST SHALL IN ANY
EVENT BE DUE AND PAYABLE ON OR BEFORE SEPTEMBER 16, 2003.
The annual interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank
Prime Rate (the "Index"). The Prime Rate is the rate announced by Lender as
its Prime Rate of interest from time to time. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. THE INDEX CURRENTLY IS 8.500%. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL
BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.500%.
NOTICE: Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $250.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
"Borrower fails to make any payment when due which is not cured by Borrower
within ten (10) days of receipt of notice thereof". (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained
in this Note or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any meterial respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within ten (10)
days; or (b) if the cure requires more than ten (10) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES
COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT
TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE JMcG, NSS) THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender
all Borrower's right, title and interest in and to, Borrower's accounts with
Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further
loan advances. Advances under this Note may be requested orally by Borrower
or by an authorized person. All oral requests shall be confirmed in writing
on the day of the request. All communications, instructions, or directions
by telephone or otherwise to Lender are to be directed to Lender's office
shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
JOHN MCGOVERN, CFO/SECRETARY; AND NAVDEEP S. SOOCH, CHAIRMAN/CEO. Borrower
agrees to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower is in default under the
terms of this Note or any agreement that Borrower has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower
ceases doing business or is insolvent; (c) (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender; or (e)
<PAGE>
12-16-1999 PROMISSORY NOTE Page 2
(CONTINUED)
================================================================================
JMcG NSS CJ
----- ----- ----
REFERENCE PROVISION. 1. Other than (i) non-judicial foreclosure and all
matters in connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the exercise of
other provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this document ("Agreement"), which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or
claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is located
or Los Angeles County if none (the "Court"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP 170.6
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP 644 in
any court in the State of California having jurisdiction. Any party may apply
for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim,
by filing a petition for a hearing and/or trial. All discovery permitted by
this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised
to such discovery or unavailability of a witness due to absence or illness.
No party shall be entitled to "priority" in conducting discovery. Depositions
may be taken by either party upon seven (7) days written notice, and request
for production or inspection of documents shall be responded to within ten
(10) days after service. All disputes relating to discovery which cannot be
resolved by the parties shall be submitted to the referee whose decision
shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall
have the obligation to arrange for and pay for the court reporter. The costs
of the court reporter at the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will
be applicable to the reference proceeding. The referee shall be empowered to
enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon
the parties. The referee shall issue a single judgment at the close of the
reference proceeding which shall dispose of all of the claims of the parties
that are the subject of the reference. The parties hereto expressly reserve
the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of law, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
4. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration.
The arbitration will be conducted by a retired judge of the Court, in
accordance with the California Arbitration Act, 1280 through 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery
as set forth hereinabove shall apply to any such arbitration proceeding.
CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions
of the Credit Terms and Conditions Agreement dated March 28, 1997 and all
amendments thereto and replacements therefor.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether
as maker, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for
any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
SILICON LABORATORIES INC., A DELAWARE CORPORATION
BY: /s/ John W. McGovern BY: /s/ Navdeep S. Sooch
------------------------------- -------------------------------
JOHN MCGOVERN, CFO/SECRETARY NAVDEEP S. SOOCH, CHAIRMAN/CEO
================================================================================
<PAGE>
[LOGO]
IMPERIAL BANK
MEMBER FDIC
<TABLE>
<CAPTION>
PROMISSORY NOTE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$2,000,000.00 12-16-1999 06-16-2003 721000049 622074 619 CJ
- ----------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- ----------------------------------------------------------------------------------------------
BORROWER: SILICON LABORATORIES INC., A DELAWARE LENDER: IMPERIAL BANK
CORPORATION EMERGING GROWTH INDUSTRIES GROUP -
4635 BOSTON LANE SOUTHWEST REGIONAL OFFICE
AUSTIN, TX 78735 226 AIRPORT PARKWAY
SAN JOSE, CA 95110-1024
==============================================================================================
PRINCIPAL AMOUNT: $2,000,000.00 INITIAL RATE: 8.500% DATE OF NOTE: DECEMBER 16, 1999
</TABLE>
PROMISE TO PAY. SILICON LABORATORIES INC., A DELAWARE CORPORATION
("BORROWER") PROMISES TO PAY TO IMPERIAL BANK ("LENDER"), OR ORDER, IN LAWFUL
MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF TWO MILLION &
00/100 DOLLARS ($2,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER
WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE.
INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF
EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT
SCHEDULE:
ADVANCES UNDER THE NOTE SHALL BE AVAILABLE THROUGH JUNE 16, 2000
("NON-REVOLVING DRAW PERIOD"). DURING THE NON-REVOLVING DRAW PERIOD,
INTEREST ONLY SHALL BE DUE MONTHLY BEGINNING JANUARY 16, 2000. ON
JUNE 16, 2000, THE OUTSTANDING PRINCIPAL BALANCE OF THE ADVANCES UNDER
THE NOTE SHALL BE PAYABLE MONTHLY IN 36 EQUAL PAYMENTS OF PRINCIPAL
PLUS ACCRUED INTEREST BEGINNING JULY 16, 2000. ALL PRINCIPAL AND
ACCRUED BUT UNPAID INTEREST SHALL IN ANY EVENT BE DUE AND PAYABLE ON
OR BEFORE JUNE 16, 2003.
The annual interest rate for this Note is computed on a 365/360 basis; that
is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank
Prime Rate (the "Index"). The Prime Rate is the rate announced by Lender as
its Prime Rate of interest from time to time. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. THE INDEX CURRENTLY IS 8.500%. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL
BE AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 8.500%.
NOTICE: Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Note, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $250.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
"Borrower fails to make any payment when due which is not cured by Borrower
within ten (10) days of receipt of notice thereof". (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained
in this Note or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any meterial respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within ten (10)
days; or (b) if the cure requires more than ten (10) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 5.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES
COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT
TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE NSS JMcG) THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender
all Borrower's right, title and interest in and to, Borrower's accounts with
Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further
loan advances. Advances under this Note may be requested orally by Borrower
or by an authorized person. All oral requests shall be confirmed in writing
on the day of the request. All communications, instructions, or directions
by telephone or otherwise to Lender are to be directed to Lender's office
shown above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from Borrower at
Lender's address shown above written notice of revocation of their authority:
JOHN MCGOVERN, CFO/SECRETARY; AND NAVDEEP S. SOOCH, CHAIRMAN/CEO. Borrower
agrees to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower is in default under the
terms of this Note or any agreement that Borrower has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower
ceases doing business or is insolvent; (c) (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender; or (e)
<PAGE>
12-16-1999 PROMISSORY NOTE Page 2
(CONTINUED)
================================================================================
JMcG NSS CJ
----- ----- ----
REFERENCE PROVISION. 1. Other than (i) non-judicial foreclosure and all
matters in connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the exercise of
other provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this document ("Agreement"), which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or
claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is located
or Los Angeles County if none (the "Court"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP 170.6
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP 644 in
any court in the State of California having jurisdiction. Any party may apply
for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim,
by filing a petition for a hearing and/or trial. All discovery permitted by
this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised
to such discovery or unavailability of a witness due to absence or illness.
No party shall be entitled to "priority" in conducting discovery. Depositions
may be taken by either party upon seven (7) days written notice, and request
for production or inspection of documents shall be responded to within ten
(10) days after service. All disputes relating to discovery which cannot be
resolved by the parties shall be submitted to the referee whose decision
shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall
have the obligation to arrange for and pay for the court reporter. The costs
of the court reporter at the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will
be applicable to the reference proceeding. The referee shall be empowered to
enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon
the parties. The referee shall issue a single judgment at the close of the
reference proceeding which shall dispose of all of the claims of the parties
that are the subject of the reference. The parties hereto expressly reserve
the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of law, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
4. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration.
The arbitration will be conducted by a retired judge of the Court, in
accordance with the California Arbitration Act, 1280 through 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery
as set forth hereinabove shall apply to any such arbitration proceeding.
CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions
of the Credit Terms and Conditions Agreement dated March 28, 1997 and all
amendments thereto and replacements therefor.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether
as maker, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for
any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
SILICON LABORATORIES INC., A DELAWARE CORPORATION
BY: /s/ John W. McGovern BY: /s/ Navdeep S. Sooch
------------------------------- -------------------------------
JOHN MCGOVERN, CFO/SECRETARY NAVDEEP S. SOOCH, CHAIRMAN/CEO
===============================================================================
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THIS WARRANT OR
OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY
APPLICABLE STATE SECURITIES LAW.
Warrant No. A-001 November 20, 1997
SILICON LABORATORIES INC.
PREFERRED STOCK PURCHASE WARRANT
Silicon Laboratories Inc., a Delaware corporation (the "COMPANY"),
hereby grants to Imperial Bancorp ("PURCHASER"), or its registered assigns or
transferees (Purchaser and each such assign or transferee being referred to
herein as a "HOLDER" and collectively as the "HOLDERS") the right to purchase,
at any time and from time to time on and after the date hereof until November
20, 2002 (the "EXPIRATION DATE"), up to 45,818 fully paid and nonassessable
shares of Series A Convertible Preferred Stock of the Company, par value $0.0001
per share (the "SERIES A PREFERRED STOCK"), on the terms and subject to the
conditions set forth below.
1. EXERCISE AND VESTING OF WARRANT.
1.1. EXERCISE PRICE. Subject to adjustment as hereinafter
provided, the rights represented by this Preferred Stock Purchase Warrant (this
"WARRANT") are exercisable on and after November 20, 1997 (the "EXERCISE DATE")
until the Expiration Date, at a price (the "EXERCISE PRICE") of $0.982144225 per
share of the Series A Preferred Stock issuable hereunder (hereinafter, the
"WARRANT SHARES"). The Exercise Price shall be payable in cash, or by certified
or official bank check. This Warrant shall be fully vested upon the initial
advance to the Company by Purchaser of funds pursuant to that certain Note
issued by the Company in favor of Purchaser dated November __, 1997 in the
maximum principal amount of $1,500,000.00.
1.2. METHOD OF EXERCISE. Upon surrender of this Warrant with a
duly executed Notice of Exercise in the form of ANNEX A attached hereto,
together with payment of the
<PAGE>
Exercise Price for the Warrant Shares purchased (except to the extent of
conversion pursuant to Section 1.3 herein), at the Company's principal executive
offices (presently located at 2024 East St. Elmo Road, Austin, Texas 78744-1018)
or at such other address as the Company shall have advised the Holder in writing
(the "DESIGNATED OFFICE"), the Holder shall be entitled to receive a certificate
or certificates for the Warrant Shares so purchased. The Company agrees that the
Warrant Shares shall be deemed to have been issued to the Holder as of the close
of business on the date on which this Warrant shall have been surrendered
together with the Notice of Exercise and payment for such Warrant Shares.
1.3. CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.2, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Warrant Shares determined by dividing (a) the
aggregate fair market value of the Warrant Shares or other securities otherwise
issuable upon exercise of this Warrant minus the aggregate Exercise Price of
such Warrant Shares by (b) the fair market value of one Warrant Share. The fair
market value of the Warrant Shares shall be determined pursuant to Section 1.4.
1.4. If the Warrant Shares are traded regularly in a public
market, the fair market value of the Warrant Shares shall be the closing price
of the Warrant Shares (or the closing price of the Company's stock into which
the Warrant Shares are convertible) reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company. If the Warrant
Shares are not regularly traded in a public market, the Board of Directors of
the Company shall determine fair market value in its reasonable good faith
judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors of the Company in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors of the Company, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
2. TRANSFER; ISSUANCE OF STOCK CERTIFICATES; RESTRICTIVE LEGENDS.
2.1. TRANSFER. Subject to compliance with the restrictions on
transfer set forth in this Section 2, each transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
Designated Office, together with a written assignment of this Warrant in the
form of ANNEX B attached hereto duly executed by the Holder or its agent or
attorney. Upon such surrender and delivery, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, if any. A Warrant, if properly assigned in compliance with the
provisions hereof, may be exercised by the new Holder for the purchase of
Warrant Shares without having a new Warrant issued. Prior to due presentment for
registration of transfer thereof, the Company may deem and treat the registered
Holder of this Warrant as the
2
<PAGE>
absolute owner hereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company) for
all purposes and shall not be affected by any notice to the contrary. All
Warrants issued upon any assignment of Warrants shall be the valid obligations
of the Company, evidencing the same rights, and entitled to the same benefits as
the Warrants surrendered upon such registration of transfer or exchange.
2.2. STOCK CERTIFICATES. Certificates for the Warrant Shares
shall be delivered to the Holder within a reasonable time after the rights
represented by this Warrant shall have been exercised pursuant to Section 1, and
a new Warrant representing the shares of Series A Preferred Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such time. The issuance of certificates for Warrant
Shares upon the exercise of this Warrant shall be made without charge to the
Holder hereof including, without limitation, any documentary, stamp or similar
tax that may be payable in respect thereof, PROVIDED, HOWEVER, that the Company
shall not be required to pay any income tax to which the Holder hereof may be
subject in connection with the issuance of this Warrant or the Warrant Shares;
AND PROVIDED FURTHER, that if Warrant Shares are to be delivered in a name other
than the name of the Holder hereof representing any Warrant being exercised,
then no such delivery shall be made unless the person requiring the same has
paid to the Company the amount of transfer taxes or charges incident thereto, if
any.
2.3. RESTRICTIVE LEGENDS. (a) Except as otherwise provided in
this Section 2, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES
ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Except as otherwise provided in this Section 2, each
Warrant shall be stamped or other-wise imprinted with a legend in substantially
the following form:
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, NO TRANSFER OF THIS WARRANT OR
OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF
3
<PAGE>
COUNSEL IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OF ANY APPLICABLE STATE SECURITIES LAW.
Notwithstanding the foregoing, the legend requirements of this Section 2.3 shall
terminate as to any particular Warrant or Warrant Share when the Company shall
have received from the Holder thereof an opinion of counsel in form and
substance reasonably acceptable to the Company that such legend is not required
in order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section 2.3 shall terminate, the Holder hereof or of Warrant
Shares, as the case may be, shall be entitled to receive from the Company
without cost to such Holder a new Warrant or certificate for Warrant Shares of
like tenor, as the case may be, without such restrictive legend.
3. ADJUSTMENT OF NUMBER OF SHARES; EXERCISE PRICE; NATURE OF
SECURITIES ISSUABLE UPON EXERCISE OF WARRANTS.
3.1. EXERCISE PRICE; ADJUSTMENT OF NUMBER OF SHARES. The
Exercise Price set forth in Section 1 hereof and the number of shares
purchasable hereunder shall be subject to adjustment from time to time as
hereinafter provided.
3.2. CONVERSION OF SERIES A SHARES. If all of the Company's
Series A Preferred Stock shall be, or if outstanding would be, at any time prior
to the Expiration Date, converted into shares of the Company's Common Stock,
then the unexercised portion of this Warrant shall immediately become
exercisable for that number of shares of the Company's Common Stock equal to the
number of shares of the Common Stock that would have been received if this
Warrant had been exercised in full and the Series A Preferred Stock received
thereupon had been simultaneously converted immediately prior to such event, and
the Exercise Price shall be immediately adjusted to equal the quotient obtained
by dividing (x) the aggregate Exercise Price of the maximum number of shares of
Series A Preferred Stock for which this Warrant was exercisable immediately
prior to such conversion, by (y) the number of shares of Common Stock for which
this Warrant is exercisable immediately after such conversion; provided,
however, that in no event shall the Exercise Price as so adjusted be less than
the par value of the Common Stock.
3.3. MERGER, SALE OF ASSETS, ETC. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be a
reorganization (other than a combination, reclassification, exchange, or
subdivision of shares as provided in Sections 3.4 and 3.5), merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or a sale or
transfer of the Company's properties and assets as, or substantially
4
<PAGE>
as, an entirety to any other person, then, as a part of such reorganization,
merger, consolidation, sale or transfer, lawful provision shall be made so that
the Holder of this Warrant shall thereafter be entitled to receive upon exercise
of this Warrant, during the period specified herein and upon payment of the
Exercise Price then in effect, the number of shares of stock or other securities
or cash or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a Holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization,
consolidation, merger, sale or transfer, all subject to further adjustment as
provided in this Section 3. The foregoing provisions of this Section 3.3 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock and securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or securities, then the value of
such consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder hereof after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
3.4. RECLASSIFICATION, ETC. If the Company, at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired, shall,
by the reclassification or exchange of securities or otherwise, change any of
the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification, exchange or other change and the
Exercise Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 3. No adjustment shall be made pursuant
to this Section 3.4, upon any conversion of the Series A Preferred Stock which
is the subject of Section 3.2.
3.5. STOCK SPLITS, STOCK DIVIDENDS AND REVERSE STOCK SPLITS.
In case at any time the Company shall split or subdivide the outstanding shares
of Series A Preferred Stock into a greater number of shares, or shall declare
and pay any stock dividend with respect to its outstanding stock that has the
effect of increasing the number of outstanding shares of Series A Preferred
Stock, the Exercise Price in effect immediately prior to such subdivision or
stock dividend shall be proportionately reduced (but not below the par value of
the Series A Preferred Stock) and the number of Warrant Shares purchasable
pursuant to this Warrant immediately prior to such subdivision or stock dividend
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Series A Preferred Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination
5
<PAGE>
shall be proportionately increased and the number of Warrant Shares purchasable
upon the exercise of this Warrant immediately prior to such combination shall be
proportionately reduced.
4. REGISTRATION; EXCHANGE AND REPLACEMENT OF WARRANT; RESERVATION OF
SHARES.
The Company shall keep at the Designated Office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result in
preventing or delaying the exercise or transfer of this Warrant.
The Company may deem and treat the person in whose name this Warrant is
registered as the Holder and owner hereof for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration or transfer as provided in this Section 4.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant and (in case of
loss, theft or destruction) of indemnity satisfactory to it, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
(in the absence of notice to the Company that the Warrant has been acquired by a
BONA FIDE purchaser) make and deliver a new Warrant of like tenor, in lieu of
this Warrant without requiring the posting of any bond or the giving of any
security.
The Company shall at all times reserve and keep available out of its
authorized shares of Series A Preferred Stock, solely for the purpose of
issuance upon the exercise of this Warrant, such number of shares of Series A
Preferred Stock as shall be issuable upon the exercise hereof. The Company
covenants and agrees that, upon exercise of this Warrant and payment of the
Exercise Price therefor, all Warrant Shares issuable upon such exercise shall be
duly and validly issued, fully paid and non-assessable.
5. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
If the number of Warrant Shares purchasable upon the exercise of this
Warrant is adjusted pursuant to Section 3 hereof, the Company shall nevertheless
not be required to issue fractions of shares, upon exercise of this Warrant or
otherwise, or to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share as may be
prescribed by the Board of Directors of the Company.
6
<PAGE>
6. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS.
No Holder of this Warrant shall, as such, be entitled to vote or to
receive dividends or be deemed the Holder of Warrant Shares that may at any time
be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder of this
Warrant, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or for the election of directors or upon
any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Holder shall have exercised this Warrant and been issued Warrant Shares in
accordance with the provisions hereof.
7. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered
personally, or mailed by registered or certified mail, return receipt requested,
or telecopied or telexed and confirmed in writing and delivered personally or
mailed by registered or certified mail, return receipt requested (a) if to the
Holder of this Warrant, to the address of such Holder as shown on the books of
the Company, or (b) if to the Company, to the address set forth in Section 1.2
of this Warrant; or at such other address as the Holder or the Company may
hereafter have advised the other.
8. SUCCESSORS.
All the covenants, agreements, representations and warranties contained
in this Warrant shall bind the parties hereto and their respective heirs,
executors, administrators, distributees, successors, assigns and transferees.
9. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Texas (not including the choice of law
rules thereof) regardless of the jurisdiction of creation or domicile of the
Company or its successors or of the Holder at any time hereof.
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<PAGE>
10. ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS.
This Warrant sets forth the entire understanding of the parties with
respect to the transactions contemplated hereby. The failure of any party to
seek redress for the violation or to insist upon the strict performance of any
term of this Warrant shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Warrant may be amended, and any breach of or compliance with any covenant,
agreement, warranty or representation may be waived, only if the Company has
obtained the written consent or written waiver of the Holder, and then such
consent or waiver shall be effective only in the specific instance and for the
specific purpose for which given.
11. SEVERABILITY; HEADINGS.
If any term of this Warrant as applied to any person or to any
circumstance is prohibited, void, invalid or unenforceable in any jurisdiction,
such term shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or invalidity without in any way affecting any other term of this
Warrant or affecting the validity or enforceability of this Warrant or of such
provision in any other jurisdiction. The Section headings in this Warrant have
been inserted for purposes of convenience only and shall have no substantive
effect.
[The balance of this page intentionally left blank]
8
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first written above.
SILICON LABORATORIES INC.
By: /s/ Navdeep S. Sooch
----------------------------------
Navdeep S. Sooch
President
By: /s/ John W. McGovern
----------------------------------
John W. McGovern
Chief Financial Officer
Accepted and agreed:
IMPERIAL BANCORP
By: /s/ Stephen Obermeyer
---------------------------
Name: STEPHEN OBERMEYER
Title: VICE PRESIDENT
9
<PAGE>
ANNEX A
NOTICE OF EXERCISE
(TO BE EXECUTED UPON PARTIAL OR FULL
EXERCISE OF THE WITHIN WARRANT)
1. The undersigned hereby elects to purchase _______ shares of
Series A Convertible Preferred Stock of Silicon Laboratories Inc. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Warrant Shares in the manner specified in the Warrant. This conversion is
exercised with respect to _____________________ of the Warrant Shares covered by
the Warrant.
[STRIKE THE PARAGRAPH NUMBERED 1 ABOVE THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
Ms. Christine M. McCarthy
Chief Financial Officer
Controllers Department
Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
IMPERIAL BANCORP
----------------------------------
(Signature)
----------------------------------
(Date)
A-1
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Series A Convertible Preferred Stock set forth below:
- --------------------------------------------------------------------------------
No. of Shares of
Name and Address of Assignee Series A Convertible Preferred Stock
- ---------------------------- ------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and does hereby irrevocably constitute and appoint _________________________
attorney-in-fact to register such transfer onto the books of Silicon
Laboratories Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated: _________________ Print Name:____________________
Signature:_____________________
Witness:_______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
B-1
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THIS WARRANT OR
OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OF ANY
APPLICABLE STATE SECURITIES LAW.
Warrant No. B-001 September 4, 1998
SILICON LABORATORIES INC.
PREFERRED STOCK PURCHASE WARRANT
Silicon Laboratories Inc., a Delaware corporation (the "COMPANY"),
hereby grants to Imperial Bank ("PURCHASER"), or its registered assigns or
transferees (Purchaser and each such assign or transferee being referred to
herein as a "HOLDER" and collectively as the "HOLDERS") the right to purchase,
at any time and from time to time on and after the date hereof until the fifth
(5th) anniversary of the date hereof (the "EXPIRATION DATE"), up to 4,765 fully
paid and nonassessable shares of Series B Convertible Preferred Stock of the
Company, par value $0.0001 per share (the "SERIES B PREFERRED STOCK"), on the
terms and subject to the conditions set forth below.
1. EXERCISE AND VESTING OF WARRANT.
1.1. EXERCISE PRICE. Subject to adjustment as hereinafter
provided, the rights represented by this Preferred Stock Purchase Warrant (this
"WARRANT") are exercisable on and after the date hereof (the "EXERCISE DATE")
until the Expiration Date, at a price (the "EXERCISE PRICE") of $4.76 per share
of the Series B Preferred Stock issuable hereunder (hereinafter, the "WARRANT
SHARES"). The Exercise Price shall be payable in cash, or by certified or
official bank check.
1.2. METHOD OF EXERCISE. Upon surrender of this Warrant with a
duly executed Notice of Exercise in the form of ANNEX A attached hereto,
together with payment of the Exercise Price for the Warrant Shares purchased
(except to the extent of conversion pursuant to Section 1.3 herein), at the
Company's principal executive offices (presently located at 2024 East St. Elmo
Road, Austin, Texas 78744-1018) or at such other address as the Company shall
<PAGE>
have advised the Holder in writing (the "DESIGNATED OFFICE"), the Holder shall
be entitled to receive a certificate or certificates for the Warrant Shares so
purchased. The Company agrees that the Warrant Shares shall be deemed to have
been issued to the Holder as of the close of business on the date on which this
Warrant shall have been surrendered together with the Notice of Exercise and
payment for such Warrant Shares.
1.3. CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.2, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Warrant Shares determined by dividing (a) the
aggregate fair market value of the Warrant Shares or other securities otherwise
issuable upon exercise of this Warrant minus the aggregate Exercise Price
of such Warrant Shares by (b) the fair market value of one Warrant Share. The
fair market value of the Warrant Shares shall be determined pursuant to Section
1.4.
1.4. VALUATION. If the Warrant Shares are traded regularly in
a public market, the fair market value of the Warrant Shares shall be the
closing price of the Warrant Shares (or the closing price of the Company's stock
into which the Warrant Shares are convertible) reported for the business day
immediately before Holder delivers its Notice of Exercise to the Company. If the
Warrant Shares are not regularly traded in a public market, the Board of
Directors of the Company shall determine fair market value in its reasonable
good faith judgment. The foregoing notwithstanding, if Holder advises the Board
of Directors of the Company in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors of the Company, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
2. TRANSFER; ISSUANCE OF STOCK CERTIFICATES; RESTRICTIVE
LEGENDS.
2.1. TRANSFER. Subject to compliance with the restrictions
on transfer set forth in this Section 2, each transfer of this Warrant and
all rights hereunder, in whole or in part, shall be registered on the books
of the Company to be maintained for such purpose, upon surrender of this
Warrant at the Designated Office, together with a written assignment of this
Warrant in the form of ANNEX B attached hereto duly executed by the Holder or
its agent or attorney. Upon such surrender and delivery, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, if any. A Warrant, if properly
assigned in compliance with the provisions hereof, may be exercised by the
new Holder for the purchase of Warrant Shares without having a new Warrant
issued. Prior to due presentment for registration of transfer thereof, the
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company)
for all purposes and shall not be affected by any notice to the contrary. All
Warrants issued upon any assignment of Warrants
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<PAGE>
shall be the valid obligations of the Company, evidencing the same rights,
and entitled to the same benefits as the Warrants surrendered upon such
registration of transfer or exchange.
2.2. STOCK CERTIFICATES. Certificates for the Warrant Shares
shall be delivered to the Holder within a reasonable time after the rights
represented by this Warrant shall have been exercised pursuant to Section 1, and
a new Warrant representing the shares of Series B Preferred Stock, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such time. The issuance of certificates for Warrant
Shares upon the exercise of this Warrant shall be made without charge to the
Holder hereof including, without limitation, any documentary, stamp or similar
tax that may be payable in respect thereof, PROVIDED, HOWEVER, that the Company
shall not be required to pay any income tax to which the Holder hereof may be
subject in connection with the issuance of this Warrant or the Warrant Shares;
AND PROVIDED FURTHER, that if Warrant Shares are to be delivered in a name other
than the name of the Holder hereof representing any Warrant being exercised,
then no such delivery shall be made unless the person requiring the same has
paid to the Company the amount of transfer taxes or charges incident thereto, if
any.
2.3. RESTRICTIVE LEGENDS. (a) Except as otherwise provided in
this Section 2, each certificate for Warrant Shares initially issued upon the
exercise of this Warrant, and each certificate for Warrant Shares issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES
ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Except as otherwise provided in this Section 2, each
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form;
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, NO TRANSFER OF THIS WARRANT OR
OF THE SECURITIES ISSUABLE UPON EXERCISE HEREOF SHALL BE VALID OR EFFECTIVE
UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR (B) THE HOLDER SHALL DELIVER TO THE COMPANY AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS
EXEMPT FROM THE REGISTRATION
3
<PAGE>
REQUIREMENTS OF THE SECURITIES ACT AND OF ANY APPLICABLE STATE SECURITIES LAW.
Notwithstanding the foregoing, the legend requirements of this Section 2.3 shall
terminate as to any particular Warrant or Warrant Share when the Company shall
have received from the Holder thereof an opinion of counsel in form and
substance reasonably acceptable to the Company that such legend is not required
in order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by this Section 2.3 shall terminate, the Holder hereof or of Warrant
Shares, as the case may be, shall be entitled to receive from the Company
without cost to such Holder a new Warrant or certificate for Warrant Shares of
like tenor, as the case may be, without such restrictive legend.
3. ADJUSTMENT OF NUMBER OF SHARES: EXERCISE PRICE: NATURE
OF SECURITIES ISSUABLE UPON EXERCISE OF WARRANTS.
3.1. EXERCISE PRICE; ADJUSTMENT OF NUMBER OF SHARES. The
Exercise Price set forth in Section 1 hereof and the number of shares
purchasable hereunder shall be subject to adjustment from time to time as
hereinafter provided.
3.2. CONVERSION OF SERIES B SHARES. If all of the Company's
Series B Preferred Stock shall be, or if outstanding would be, at any time prior
to the Expiration Date, converted into shares of the Company's Common Stock,
then the unexercised portion of this Warrant shall be converted into the right
to purchase that number of shares of the Company's Common Stock equal to the
number of shares of the Common Stock that would have been received if this
Warrant had been exercised in full and the Series B Preferred Stock received
thereupon had been simultaneously converted immediately prior to such event, and
the Exercise Price shall be immediately adjusted to equal the quotient obtained
by dividing (x) the aggregate Exercise Price of the maximum number of shares of
Series B Preferred Stock for which this Warrant was exercisable immediately
prior to such conversion, by (y) the number of shares of Common Stock for which
this Warrant is exercisable immediately after such conversion; provided,
however, that in no event shall the Exercise Price as so adjusted be less than
the par value of the Common Stock.
3.3. MERGER, SALE OF ASSETS, ETC. If at any time while
this Warrant, or any portion thereof, is outstanding and unexpired there shall
be a reorganization (other than a combination, reclassification, exchange, or
subdivision of shares as provided in Sections 3.4 and 3.5), merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or a sale or
transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
Holder of this Warrant shall
4
<PAGE>
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or cash or property
of the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a Holder of the shares deliverable upon
exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had
been exercised immediately before such reorganization, consolidation, merger,
sale or transfer, all subject to further adjustment as provided in this
Section 3. The foregoing provisions of this Section 3.3 shall similarly apply
to successive reorganizations, consolidations, mergers, sales and transfers
and to the stock and securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. If the per-share consideration
payable to the Holder hereof for shares in connection with any such
transaction is in a form other than cash or securities, then the value of
such consideration shall be determined in good faith by the Company's Board
of Directors. In all events, appropriate adjustment shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Holder hereof after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable
after that event upon exercise of this Warrant.
3.4. RECLASSIFICATION, ETC. If the Company, at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired, shall,
by the reclassification or exchange of securities or otherwise, change any of
the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification, exchange or other change and the
Exercise Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 3. No adjustment shall be made pursuant
to this Section 3.4, upon any conversion of the Series B Preferred Stock which
is the subject of Section 3.2
3.5. STOCK SPLITS, STOCK DIVIDENDS AND REVERSE STOCK SPLITS.
In case at any time the Company shall split or subdivide the outstanding shares
of Series B Preferred Stock into a greater number of shares, or shall declare
and pay any stock dividend with respect to its outstanding stock that has the
effect of increasing the number of outstanding shares of Series B Preferred
Stock, the Exercise Price in effect immediately prior to such subdivision or
stock dividend shall be proportionately reduced (but not below the par value of
the Series B Preferred Stock) and the number of Warrant Shares purchasable
pursuant to this Warrant immediately prior to such subdivision or stock dividend
shall be proportionately increased, and conversely, in case at any time the
Company shall combine its outstanding shares of Series B Preferred Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
5
<PAGE>
4. REGISTRATION; EXCHANGE AND REPLACEMENT OF WARRANT;
RESERVATION OF SHARES.
The Company shall keep at the Designated Office a register in which the
Company shall provide for the registration, transfer and exchange of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result in
preventing or delaying the exercise or transfer of this Warrant.
The Company may deem and treat the person in whose name this Warrant is
registered as the Holder and owner hereof for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration or transfer as provided in this Section 4.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant and (in case of
loss, theft or destruction) of indemnity satisfactory to it, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
(in the absence of notice to the Company that the Warrant has been acquired by a
BONA FIDE purchaser) make and deliver a new Warrant of like tenor, in lieu of
this Warrant without requiring the posting of any bond or the giving of any
security.
The Company shall at all times reserve and keep available out of its
authorized shares of Series B Preferred Stock, solely for the purpose of
issuance upon the exercise of this Warrant, such number of shares of Series B
Preferred Stock as shall be issuable upon the exercise hereof. The Company
covenants and agrees that, upon exercise of this Warrant and payment of the
Exercise Price therefor, all Warrant Shares issuable upon such exercise shall be
duly and validly issued, fully paid and non-assessable.
5. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
If the number of Warrant Shares purchasable upon the exercise of this
Warrant is adjusted pursuant to Section 3 hereof, the Company shall nevertheless
not be required to issue fractions of shares, upon exercise of this Warrant or
otherwise, or to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share as may be
prescribed by the Board of Directors of the Company.
6. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS.
No Holder of this Warrant shall, as such, be entitled to vote or to
receive dividends or be deemed the Holder of Warrant Shares that may at any time
be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder of this
Warrant, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at
6
<PAGE>
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock,
change of par value or change of stock to no par value, consolidation, merger
or conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such Holder shall have exercised this
Warrant and been issued Warrant Shares in accordance with the provisions
hereof.
7. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered
personally, or mailed by registered or certified mail, return receipt requested,
or telecopied or telexed and confirmed in writing and delivered personally or
mailed by registered or certified mail, return receipt requested (a) if to the
Holder of this Warrant, to the address of such Holder as shown on the books of
the Company, or (b) if to the Company, to the address set forth in Section 1.2
of this Warrant; or at such other address as the Holder or the Company may
hereafter have advised the other.
8. SUCCESSORS.
All the covenants, agreements, representations and warranties contained
in this Warrant shall bind the parties hereto and their respective heirs,
executors, administrators, distributees, successors, assigns and transferees.
9. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Texas (not including the choice of law
rules thereof) regardless of the jurisdiction of creation or domicile of the
Company or its successors or of the Holder at any time hereof.
10. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.
This Warrant sets forth the entire understanding of the parties with
respect to the transactions contemplated hereby. The failure of any party to
seek redress for the violation or to insist upon the strict performance of any
term of this Warrant shall not constitute a waiver of such term and such party
shall be entitled to enforce such term without regard to such forbearance. This
Warrant may be amended, and any breach of or compliance with any covenant,
agreement, warranty or representation may be waived, only if the Company has
obtained the written consent or written waiver of the Holder, and then such
consent or waiver shall be effective only in the specific instance and for the
specific purpose for which given.
7
<PAGE>
11. SEVERABILITY; HEADINGS.
If any term of this Warrant as applied to any person or to any
circumstance is prohibited, void, invalid or unenforceable in any jurisdiction,
such term shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or invalidity without in any way affecting any other term of this
Warrant or affecting the validity or enforceability of this Warrant or of such
provision in any other jurisdiction. The Section headings in this Warrant have
been inserted for purposes of convenience only and shall have no substantive
effect.
[The balance of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first written above.
SILICON LABORATORIES INC.
By: /s/ Navdeep S. Sooch
-----------------------
Navdeep S. Sooch
President
By: /s/ John W. McGovern
-----------------------
John W. McGovern
Chief Financial Officer
Accepted and agreed:
IMPERIAL BANK
By: /s/ Tommy Deavenport
----------------------------
Name: Tommy Deavenport
Title: Senior Vice President
9
<PAGE>
ANNEX A
NOTICE OF EXERCISE
(TO BE EXECUTED UPON PARTIAL OR FULL
EXERCISE OF THE WITHIN WARRANT)
1. The undersigned hereby elects to purchase _______ shares of
Series B Convertible Preferred Stock of Silicon Laboratories Inc. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant
into Warrant Shares in the manner specified in the Warrant. This conversion
is exercised with respect to ________ of the Warrant Shares covered by the
Warrant.
[STRIKE THE PARAGRAPH NUMBERED 1 ABOVE THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below and deliver such certificate(s) to:
Ms. Christine M. McCarthy
Chief Financial Officer
Controllers Department
Imperial Bank
P.O. Box 92991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with
applicable securities laws.
IMPERIAL BANK
------------------------------
(Signature)
------------------------------
(Date)
A-1
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Series B Convertible Preferred Stock set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
No. of Shares of
Name and Address of Assignee Series B Convertible Preferred Stock
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer onto the books of Silicon Laboratories Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
-------------------- --------------------
Signature:
---------------------
Witness:
-----------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of this Warrant in every particular,
without alteration or enlargement or any change whatsoever.
B-1
<PAGE>
EXHIBIT B
Form of Amendment No.1 to Amended and Restated Investors' Rights Agreement
(Attached)
6
<PAGE>
PCTEL, INC/ SILICON LABS
VOLUME PURCHASE AGREEMENT
1. ACCEPTANCE: EXCEPT AS SET FORTH ON THE ATTACHED ADDENDUM WHICH SHALL TAKE
PRECEDENCE IN THE EVENT OF ANY CONFLICT, THE TERMS OF SALE CONTAINED HEREIN
STATE THE EXCLUSIVE TERMS APPLICABLE TO SALES BY SILICON LABORATORIES INC. (THE
"SELLER") TO PC-TEL Global, INC. ("THE BUYER") HEREUNDER, NOTWITHSTANDING ANY
DIFFERENT OR ADDITIONAL TERMS IN BUYER'S PURCHASE ORDER, TO WHICH SELLER HEREBY
OBJECTS. SELLER'S FAILURE TO OBJECT TO PROVISIONS CONTAINED IN ANY
COMMUNICATION FROM BUYER SHALL NOT BE DEEMED A WAIVER OF THE CONDITIONS OF THIS
ACCEPTANCE. ANY CHANGES IN THE TERMS CONTAINED HEREIN MUST SPECIFICALLY BE
AGREED TO IN WRITING BY AN OFFICER OF THE SELLER BEFORE BECOMING BINDING ON
EITHER THE SELLER OR THE BUYER. All orders or contracts must be approved and
accepted by the Seller at its home office. These terms shall be applicable
whether or not they are attached to or enclosed with the products to be sold or
sold hereunder. No Seller prices shall be subject to audit.
2. DURATION:
This Agreement shall become effective On June 1st, 1998 ("Effective Date")
and continue in effect for a term of two (2) years.
3. PAYMENT:
(a) Unless otherwise agreed by Seller in writing, all invoices are due and
payable thirty (30) days from date of invoice. No discounts are authorized.
Shipments, deliveries, and performance of work shall at all times be subject to
the approval of the Seller's credit department and the Seller may at any time
decline to make any shipments or deliveries or perform any work except upon
receipt of payment or upon terms and conditions or security satisfactory to
such department.
(b) If, in the sole judgment of the Seller, the financial condition or
payment history of the Buyer at any time does not justify continuation of
production or shipment on the terms of payment originally specified, the Seller
may require full or partial payment in advance and, in the event of the
bankruptcy or insolvency of the Buyer under the bankruptcy or insolvency laws,
the Seller shall be entitled to cancel any order then outstanding and shall
receive reimbursements for its cancellation charges.
(c) Each shipment shall be considered a separate and independent
transaction, and payment therefor shall be made accordingly. If shipments are
delayed by the Buyer, payments shall become due on the date when the Seller is
prepared to make shipment. If the work covered by the purchase order is delayed
by the Buyer, payments shall be made based on the purchase price and the
percentage of completion. Products held for the Buyer shall be at the risk and
expense of the Buyer.
4. TAXES: Unless otherwise provided herein, the amount of any present or future
sales, use, revenue, excise or other taxes, fees, or other charges of any
nature, imposed by any public authority (national, state, local or other)
applicable to the products covered by any order, or the manufacture or sales
thereof shall be added to the purchase price and shall be paid by the Buyer, or
in lieu thereof, prior to shipment the Buyer shall provide the Seller with a
tax exemption certificate acceptable to the taxing authority.
5. PRICES AND RELEASES:
(a) All prices are quoted in U.S. dollars.
(b) SI Labs agrees to provide pricing for all similar products to PCtel on
a most favored customer basis to PCtel within market segments limited
to soft modem chipset or board level suppliers and controllerless
modem chipset or board level suppliers PCtel shall always have a price
lower than any other customer for similar products. In the event that
a price is quoted by SILABS or products are shipped by SILABS to other
customers for any similar products which is equal to or lower than
that price offered to PCtel, a retroactive price protection shall be
granted to PCtel for all products shipped by SILABS to PCtel ninety
(90) days prior to the infringing quotation or shipment. In addition
any backlog PCtel orders shall be reset to the new price. The
foregoing shall be the exclusive remedy given by SILabs to PCtel.
(c) Prices and associated volumes shall be decribed in the adjunct
"addendum A" to this agreement.
<PAGE>
6. PRICE ADJUSTMENTS: Seller's unit prices are based on certain material costs.
These materials include, but are not limited to, gold, packages and silicon.
Adjustments shall be as follows:
(a) Gold. If Seller has a Gold Price Adjustment List, the price at the time
of shipment shall be adjusted for increases in the cost of gold in accordance
with that list. This adjustment will be shown as a separate line item on each
invoice.
(b) Other Materials. In the event of significant increases in the price of
other materials, Seller reserves the right to renegotiate the unit prices..
7. SPECIAL PRODUCTS: The following provisions are to be considered a part of
all Special Product quotations and orders. "Special Products" are those calling
for products not contained in Seller's current catalog or price list, or those
requiring modifications to catalog products (including semi-custom, custom, or
application specific products), or those requiring sample, environmental,
mechanical or life testing, 100% reliability screening, quality conformance
qualification, or any combination thereof. These provisions supersede any other
terms or conditions which are inconsistent herewith.
(a) Delivery dates are best estimates only and are subject to (1) Seller's
receipt of order and negotiable specifications containing where applicable, all
quoted waivers or exceptions; (2) successful first-time passage of products
submitted to electrical performance test, to environmental or life test
processing required by applicable specifications.
(b) Seller assumes no responsibility for refund or replacement of products
shipped at Buyer's request prior to successful completion of acceptance or
qualification tests performed by Seller, whether such tests are at Buyer's
request or otherwise.
(c) Buyer may not make changes in the drawings, designs or specifications
for the items to be sold hereunder without Seller's prior consent.
(d) Unless otherwise agreed in a writing signed by both Buyer and Seller,
Seller shall retain title to and possession of all tooling of any kind
(including but not limited to masks and pattern generator tapes) used in
production of products furnished hereunder.
(e) All proprietary designs, concepts, drawings, data, processes, pattern
generator tapes, masks and any other information which shall be disclosed by
Seller in making a quotation or in the performance of a contract to sell the
goods covered hereby, shall not be disclosed to third parties by Buyer. If
Seller and Buyer have executed a "Non-Disclosure Agreement," all applicable
provisions shall hereby be incorporated by reference.
(f) As between Seller and Buyer, Seller shall own all patents, copyrights
and mask work rights in or relating to each product developed by Seller whether
or not such product is developed to specifications furnished by Buyer.
8. MINIMUM ORDER: Unless otherwise agreed by Seller in writing, Seller's
minimum order amount shall be one hundred dollars ($100.00) for individual
production orders.
9. TITLE: Unless otherwise agreed in writing by Seller, delivery of the
products hereunder shall be made F.O.B. Texas, Seller's plant, and title and
liability for loss or damage thereto shall pass to Buyer upon Seller's tender
of delivery of the goods to a carrier for shipment to Buyer, and any loss or
damage thereafter shall not relieve Buyer from obligation hereunder.
Transportation expenses and insurance shall be paid by the Buyer.
10. DELIVERY: Shipping dates are approximate and are based upon prompt receipt
from Buyer of all necessary information. In no event will Seller be liable for
any re-procurement costs, nor for delay or non-delivery, due to causes beyond
its reasonable control including, but not limited to, acts of God, acts of
civil or military authority, priorities, fires, strikes, lockouts, slow-downs,
shortages, factory or poor conditions, yield problems, or inability to obtain
necessary labor, materials, or manufacturing facilities. In the event of any
such delay, the date of delivery shall, at the request of the Seller, be
deferred for a period equal to the time lost by reason of the delay.
11. SUBSTITUTIONS AND MODIFICATIONS OF GOODS: Seller may modify the
specifications of goods designed by Seller and substitute goods manufactured to
such modified specifications for those specified herein provided such goods
substantially conform to this contract., provided Seller receives Buyer's
written approval.
12. SOFTWARE: All software provided by Seller shall be subject to the license
agreement and/or terms and conditions accompanying the software. Without
limitation, a license agreement and/or terms and conditions may be printed or
may be provided electronically. ALL SOFTWARE IS PROVIDED "AS IS" WITH NO
WARRANTY WHATSOEVER.
-2-
<PAGE>
13. ACCESS TO TECHNOLOGY: in the event that SILABS becomes the subject of
voluntary or involuntary petition in bankruptcy or any proceeding related to
insolvency, or composition for the benefit of creditors, SILABS agrees to
grant access to the Product Technology through means of a standard form of
third party technology escrow which would release and license (at no charge)
the Product technology. Furthermore, SILABS agrees to enter into and execute
the before mentioned escrow agreement within (90) ninety days following the
execution of this agreement. In the event SILABS emerges from any such
bankruptcy or insolvency proceeding, the Product Technology will be returned
to SILABS and SILABS will resume supply of Products to PC-TEL.
14. CAPACITY AND FORECAST FLEXIBILITY: Based upon a six month rolling
forecast from PC-TEL, SILABS guarantees 50% upside quantities for the first
two months of the 6 month rolling forecast and 100% upside quantities for
months three through six. The six month rolling forecast will be provided by
PC-TEL to SILABS on a monthly basis on or before the first Tuesday of each
month. The SILABS upside guarantee shall become effective 60 days after
receiving the first six month rolling forecast from PC-TEL. PC-TEL will make
best efforts to provide timely and accurate forecasts.
15. LIMITED WARRANTY:
(a) General. Seller warrants that its packaged products furnished hereunder
will at the time of delivery be free from defects in material and workmanship
and will conform on the basis of form, fit and function to Seller's applicable
specifications or, if appropriate, to specifications accepted by Seller
therefor. Seller's obligation or liability hereunder shall be limited to, at
Seller's option, either refunding the purchase price of, repairing, or
replacing, any products for which written notice of nonconformance hereunder is
received by Seller within two years following the date of shipment, provided,
such nonconforming products are, with Seller's prior written authorization,
returned to Seller, FOB Seller's plant, within thirty (30) days after the two
year period. This warranty shall not apply to unpackaged semiconductor device
die or wafers or to any products in other than their original condition, or to
any products which Seller determines have, by Buyer or otherwise, been subjected
to operating or environmental conditions in excess of the maximum value
established therefor in the applicable specifications or otherwise have been the
subject of mishandling, misuse, neglect, improper testing, repair, alteration or
damage.
(b) Die. Seller warrants that its device die or wafers furnished hereunder
will at the time of delivery be free of defects in material and workmanship and
will conform to specifications established therefor, or if applicable, to
specifications accepted by Seller. Seller's obligation hereunder shall be
limited to, at Seller's option, replacing or refunding the purchase price for
any products for which written notice of nonconformance hereunder is received by
Seller within sixty (60) days following the date of shipment, provided such
nonconforming products are, with Seller's prior written authorization, returned
to Seller, F.O.B. Seller's plant, within thirty (30) days after the sixty (60)
day period. This warranty shall not apply to any die or wafers which Seller
determines have, by Buyer or otherwise, been subjected to operating or
environmental conditions in excess of the maximum value established therefor in
the applicable specifications or otherwise have been the subject of mishandling,
misuse, neglect, improper testing, repair, alteration or damage.
(c) Technical Assistance. Seller's warranty as herein above set forth shall
not be enlarged, diminished or affected by, and no obligation or liability shall
arise or grow out of, Seller's rendering of technical advice, facilities or
service in connection with Buyer's order of the goods furnished hereunder.
(d) Moisture/Static Sensitive. Seller ships all products in vacuum sealed
antistatic packages. Seller's warranty as hereinabove set forth shall not cover
warranty repair, replacement, or refund on product or devices damaged by static
due to Buyer's failure to properly ground.
(e) Software. Software delivered hereunder is furnished "AS IS". SELLER
MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, WITH
RESPECT TO SUCH SOFTWARE AND DOCUMENTATION DESCRIBING SUCH SOFTWARE, ITS
QUALITY, ITS PERFORMANCE, ITS MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE. The entire risk as to the quality and performance of software and
documentation describing such software is with Buyer.
(f) Disclaimer. THE ABOVE WARRANTIES EXTEND TO BUYER ONLY AND NOT TO
BUYER'S CUSTOMERS OR USERS OF BUYER'S PRODUCTS AND ARE IN LIEU OF ALL OTHER
WARRANTIES WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT
SHALL SELLER OR BUYER BE LIABLE FOR SPECIAL OR CONSEQUENTIAL DAMAGES REGARDLESS
OF WHETHER IT HAS BEEN NOTIFIED IN ADVANCE OF THE POSSIBILITY THEREOF
-3-
<PAGE>
16. REMEDIES: If Seller breaches its warranties as contained in paragraph 13
herein, Seller's sole and exclusive liability shall be (at Seller's option)
to refund the purchase price of, repair or replace any such goods which are
returned by Buyer during the applicable warranty period set forth above,
provided that (a) Seller is promptly notified in writing upon discovery by
Buyer that such goods failed to conform to this contract with detailed
explanation of any alleged deficiencies, (b) such goods are returned to
Seller, F.O.B. Seller's plant from which goods were shipped and (c) Seller's
examination of such goods shall disclose that such alleged deficiencies
actually exist and were not caused by accident, misuse, neglect, alteration,
improper installation, unauthorized repair, or improper testing. If such
goods fail to perform as warranted, Seller shall reimburse Buyer for the
transportation charges paid by Buyer for such goods. If Seller elects to
repair or replace such goods, Seller shall have a reasonable time to make
such repairs or replace such goods.
17. LIMITATION OF LIABILITY: EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS
ARISING OUT OF THE OPERATION OF SECTION 22 OR A BREACH OF SECTION 23, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, COLLATERAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS CONTRACT,
INCLUDING, WITHOUT LIMITATION, PROVISIONS REGARDING WARRANTIES, GUARANTEES,
INDEMNITIES, AND PATENT INFRINGEMENT, SUCH DAMAGES TO INCLUDE BUT NOT BE
LIMITED TO, COSTS OF REMOVAL AND REINSTALLATION OF ITEMS, LOSS OF GOODWILL,
LOSS OF PROFITS, OR LOSS OF USE, REGARDLESS OF WHETHER SELLER HAS BEEN
NOTIFIED IN ADVANCE OF THE POSSIBILITY THEREOF. EXCEPT WITH RESPECT TO THIRD
PARTY CLAIMS ARISING OUT OF THE OPERATION OF SECTION 22 OR A BREACH OF
SECTION 23 OR IN THE CASE OF GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT.
THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
18. INSPECTION: Unless otherwise specified and agreed upon, the material to
be furnished under this contract shall be subject to the Seller's standard
inspection at the place of manufacture. If it has been agreed upon and
specified in this order that Buyer is to inspect or provide for inspection at
place of manufacture such inspection shall be so conducted as to not
interfere unreasonably with Seller's instructions and consequent approval or
rejection by the Buyer shall be made before shipment of the material.
Notwithstanding the foregoing, if, upon receipt of such material by Buyer,
the same shall appear not to conform to this contract, the Buyer shall
immediately notify the Seller of such conditions and afford the Seller a
reasonable opportunity to inspect the material. No material shall be returned
without Seller's consent. Seller's Return Material Authorization Control
Number must accompany such returned material.
19. ACCEPTANCE: Within twenty (20) days after shipment by Seller, Buyer may,
by prompt written notice to Seller, reject any product furnished hereunder
which, as delivered by Seller, has a defect in material or workmanship or (i)
with respect to packaged products, does not conform to Seller's applicable
specifications or, if appropriate, to specifications accepted by Seller
therefor, or (ii) with respect to die or wafers, does not conform to
specifications established therefor or, if applicable to specifications
accepted by Seller. Buyer's rights, and Seller's obligation or liability,
with respect to rejected products shall be limited to, at Seller's option,
either refunding the purchase price of, repairing, or replacing any products
for which written notice of nonconformance hereunder is received by Seller as
set forth herein within thirty (30) days after shipment by Seller. Any
product which is not so rejected by Buyer shall be deemed irrevocably
accepted. Notwithstanding the foregoing, any product which has been the
subject of mishandling, misuse, neglect, improper testing, repair,
alteration, extreme environmental conditions, or damage shall be deemed
accepted. Product returns shall be in accordance with the procedures
specified in paragraph 16.
20. RESCHEDULING: Buyer may reschedule orders for standard products under
this contract on written notice to Seller at least thirty (30) days prior to
Seller's scheduled delivery date. Buyer may reschedule orders for application
specific versions of standard products, semi-custom products, or custom
products on written notice to Seller at least thirty (30) days prior to
Seller's scheduled delivery date. All quantities must be rescheduled for
delivery within twelve (12) months of Seller's original scheduled delivery
dates; otherwise this contract may be cancelled by Seller, and Buyer shall be
liable for termination charges as provided herein.
-4-
<PAGE>
21. TERMINATION AND CANCELLATION: Except to the extent noted below orders
are not subject to cancellation or termination for convenience.
(a) Buyer may terminate this contract upon sixty (60) days advance
written notice to Seller. Buyer may terminate orders, or portions of
orders, upon written notice to Seller at least sixty (60) days prior to
the scheduled delivery date. In each such event Buyer shall be liable for
termination charges which shall include a price adjustment based on the
quantity of goods actually delivered, and all costs, direct or indirect,
incurred and committed for this contract together with a reasonable
allowance for prorated expenses and anticipated profits.
(b) Unless otherwise specified on the face hereof, all quantities must be
released no more than twelve (12) months and shipments scheduled no more
than twelve (12) months from the date of Seller's receipt of Buyer's
initial purchase order, otherwise this contract may be terminated by
Seller and Buyer shall be liable for termination charges as provided
herein.
(c) If either party defaults in performance of any material obligation
hereunder and if any such default is not corrected within (60) sixty days
after the defaulting party receive written notice thereof from the
non-defaulting party, then the non defaulting party, at its option, may
in addition to any other remedies it may have, terminate this agreement.
(d) Either party may terminate this agreement effective upon written
notice to the other party in the event that the other part becomes the
subject of voluntary or involuntary petition in bankruptcy or any
proceeding related to insolvency, or composition for the benefit of
creditors, if that petition or proceeding is not dismissed within (60)
sixty days after filing.
22. INDEMNITY: Seller shall defend Buyer against any suit or proceeding
brought against Buyer insofar as such suit or proceeding is based on a claim
that any goods manufactured and supplied by Seller to Buyer constitute direct
infringement of any copyright, mask work right, or duly issued United States
patent and Seller shall pay all damages and costs finally awarded therein
against Buyer, provided that Seller is promptly informed and furnished a copy of
each communication, notice or other action relating to the alleged infringement
and is given complete authority, information and assistance (at Seller's
expense) necessary to defend or settle said suit or proceeding; provided, that
Seller shall not be obligated to defend or be liable for costs and damages if
the infringement arises out of compliance with Buyer's specifications, or from a
combination with, and addition to, or modification of the goods after delivery
by Seller, or from use of the goods, or any part thereof, in the practice of a
process, or from any settlement or compromise incurred or made by Buyer without
Seller's prior written consent. Seller's obligations hereunder shall not apply
to any infringement occurring after Buyer has received notice of such suit or
proceeding alleging infringement unless Seller has given written permission for
the continued use of goods after notice of such infringement. If any goods
manufactured and supplied by Seller to Buyer shall be held to infringe any
copyright, mask work right, or United States patent and Buyer shall be enjoined
from using same, Seller at its option and its expense, will use good faith
efforts to, (a) procure for Buyer the right to use such goods free of any
liability for infringement, or (b) replace such goods with a non-infringing
substitute otherwise complying substantially with all requirements of this
contract, or (c) refund the purchase price and the transportation costs of such
goods. If the infringement by Buyer is alleged prior to completion of delivery
of the goods under this contract, Seller may decline to make further shipments
without being in breach of this contract, and, provided Seller has not been
enjoined from selling said goods to Buyer, Seller agrees to supply said goods to
Buyer if Buyer furnishes to Seller the written agreement of Buyer that the
indemnity obligations herein stated with respect to Seller shall reciprocally
apply with respect to Buyer.
Seller's liability and obligations arising out of this section with respect
to any units shall not exceed the amount received by Seller from Buyer for such
units.
If any such suit or proceeding is brought against Seller based on a claim
that the goods manufactured by Seller in compliance with Buyer's specifications
and supplied to Buyer directly infringe any copyright, mask work right or United
States patent, then the indemnity obligations herein stated with respect to
Seller shall reciprocally apply with respect to Buyer. The sale by Seller of the
items ordered hereunder does not grant to, convey, or confer upon Buyer or
Buyer's customers, or upon anyone claiming under Buyer, a license, express or
implied, under any copyrights, mask work rights, or patent rights of Seller
covering or relating to any combinations, machines or processes in which said
items might be or are used.
THE FOREGOING STATE THE SOLE AND EXCLUSIVE LIABILITY OF THE PARTIES HERETO
FOR INFRINGEMENT AND IS IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY,
OR OTHERWISE IN REGARD THERETO.
-5-
<PAGE>
23. CONFIDENTIALITY: Each party agrees that it will keep in confidence, and
prevent the use (other than for the purposes of this contract) or disclosure
to any person, all technical information and data (hereinafter referred to as
"data") which is designated in writing, or by appropriate stamps, or legend
by the disclosing party, to be of a proprietary or confidential nature, and
is received from the other under this Agreement and which pertains to
proprietary or confidential data regarding its technological techniques,
inventions, or research and development, provided; however, that neither
party shall be liable for the of any data if the same: (A) was generally
available to the public at the time of disclosure to the receiving party; or
(B) becomes generally available to the public, except as the result of
unauthorized disclosure by the receiving party; or (C) was known, without
confidentiality restriction, to the receiving party and documented in writing
prior to its receipt, and so informs the disclosing party of such facts at
the time of disclosure; or (D) is disclosed inadvertently, despite the
exercise of the same degree of care as each party takes to preserve and
safeguard its own proprietary information; or (E) if the disclosing party
agrees in writing that it can be disclosed by the receiving party to a third
party; or (F) becomes known to the receiving party, without confidentiality
restriction, from a source other than the disclosing party without breach of
this Agreement by the receiving party; or (G) is independently developed by
the receiving party without use of the disclosing party's data; or (H) is
required by law to be released; or (I) is disclosed after three (3) years
from the date of this contract.
SILABS WILL HONOR ALL ACTIVE NON DISCLOSURE AGREEMENTS IN PLACE
BETWEEN SILABS AND PC-TEL, AND USE EXTREME CARE IN HANDLING ALL
INFORMATION RELATED TO PRODUCTS NOT YET RELEASED TO THE MARKETPLACE.
FURTHERMORE, SILABS WILL WORK CLOSELY WITH PC-TEL ON THE APPROPRIATE
LANGUAGE AND MARKETING MESSAGES RELATED TO THE PC-TEL - SILABS
RELATIONSHIP. SILABS AGREES TO ONLY COMMUNICATE INFORMATION TO THIRD
PARTIES (RELATED TO THE PC-TEL RELATIONSHIP, TECHNOLOGY, AND PRODUCTS)
THAT HAS BEEN APPROVED BY PC-TEL
24. NONWAIVER OF DEFAULT: In the event of any default by Buyer, Seller may
decline to make further shipments without being in breach hereof. If Seller
elects to continue to make shipments, Seller's action shall not constitute a
waiver of any default by Buyer or in any way affect Seller's legal remedies
for any default hereunder.
25. ASSIGNMENT: This contract shall be binding upon and inure to the benefit
of the parties and the successors and assigns of the entire business and
goodwill of either Seller or Buyer, or of that part of the business of either
used in the performance of this contract, but shall not be otherwise
assignable.
26. LEGAL COMPLIANCE: Buyer at all times shall comply with all applicable
federal, state, and local laws and regulations.
THE PRODUCTS COVERED BY THIS CONTRACT MAY FALL WITHIN THE GROUP OF "STRATEGIC"
ELECTRONIC PRODUCTS THAT ARE WHOLLY OR PARTLY OF U.S. ORIGIN OR TECHNOLOGY, THE
EXPORT OF WHICH IS SUBJECT TO EXPORT LICENSE CONTROL BY THE U.S. GOVERNMENT.
BUYER, BY ACCEPTING THESE PRODUCTS, CERTIFIES THAT HE WILL NOT EXPORT OR
RE-EXPORT THE PRODUCTS FURNISHED HEREUNDER UNLESS HE COMPLIES FULLY WITH ALL
LAWS AND REGULATIONS OF THE UNITED STATES RELATING TO SUCH EXPORT OR RE-EXPORT,
INCLUDING BUT NOT LIMITED TO THE EXPORT ADMINISTRATION ACT OF 1979, AS AMENDED
AND THE EXPORT ADMINISTRATION REGULATIONS OF THE U.S. DEPARTMENT OF COMMERCE.
27. APPLICABLE LAW: The validity, performance, and construction of this
contract shall be governed by the internal laws of the State of California,
without reference to conflict of laws principles.
28. U.S. GOVERNMENT CONTRACTS: In the event the goods furnished hereunder
are used in the performance of a U.S. Government contract or subcontract, the
Government procurement regulation clauses required to be passed on to
subcontractors are excluded from this agreement unless separately agreed to
in writing by Seller. In no event shall Government clauses regarding "Rights
in Data" or "Subcontractor Cost and Pricing Data" be incorporated herein.
29. ATTORNEYS FEES: In the event that any action is brought to enforce any
provision of this contract, the prevailing party shall be entitled to recover
from the other party, in addition to any judgment, its attorneys fees and
expenses.
30. LIFE SUPPORT AND NUCLEAR POLICY: Seller's products are not designed,
intended, authorized, or warranted to be suitable for use in life support or
nuclear applications, devices or systems. Examples of nuclear applications
are applications in nuclear reactors or any device designed or used in
connection with the handling, processing, packaging, preparation,
utilization, fabricating, alloying, storing, or disposal of fissionable
material or waste products thereof. Inclusion by Buyer of Seller's products
in such applications is fully at Buyer's risk, and Buyer shall indemnify and
hold Seller and its suppliers harmless from all costs, loss, liability, and
expense (including without limitation
-6-
<PAGE>
court costs and attorneys fees) arising out of such inclusion by Buyer or its
direct or indirect customers.
31. MODIFICATION: THIS CONTRACT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES RELATING TO THE SALE OF THE GOODS DESCRIBED ON THE FACE HEREOF AND
SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS COMMUNICATIONS, REPRESENTATIONS, OR
AGREEMENTS, EITHER ORAL OR WRITTEN, WITH RESPECT TO THE SUBJECT MATTER
HEREOF, AND ANY REPRESENTATIONS OR STATEMENTS OF ANY KIND MADE BY ANY
REPRESENTATIVE OF SELLER, WHICH ARE NOT STATED HEREIN, SHALL NOT BE BINDING
ON SELLER. NO MODIFICATION OF ANY PROVISION UPON THE FACE OR REVERSE OF
THIS CONTRACT SHALL BE BINDING UPON SELLER UNLESS MADE IN WRITING AND
SIGNED BY A DULY AUTHORIZED REPRESENTATIVE OF SELLER LOCATED IN AUSTIN, TEXAS.
PC-TEL INC. Silicon Labs, Inc.
By: /s/ [ILLEGIBLE] By: /s/ Gary R. Gay
------------------------ -------------------------------
Title: V.P. Marketing Title: VP of Sales
------------------------ -------------------------------
Date: 12/28/98 Date: 10/16/98
------------------------ -------------------------------
-7-
<PAGE>
ADDENDUM "A"
PRICING AND VOLUMES
1. PRICES: SiLabs shall honor a price point $2.33 per unit for Products
shipped to PCT in calendar year 1998, commencing on August 27, 1998. No later
than sixty (60) days prior to the conclusion of calendar year 1998, and each
annual period thereafter, the parties will negotiate the unit prices
applicable to succeeding calendar year. In the event that the parties are
unable to agree on such unit price for the upcoming annual period, the prices
shall be set at no greater than the existing unit price.
2. MINIMUM VOLUME COMMITMENT. PCtel shall purchase a minimum annual
quantity of 600,000 units of SiLab's DAA chipset in calendar year 1998. This
volume may consist of the the current SI3033/PCtel 301 or future versions of
chips containing Silicon Labs integrated Codec/DAA technology. No later than
sixty (60) days prior to the conclusion of calendar year 1998, and each
annual period thereafter, the parties will negotiate the annual minimum
quantity, if any, applicable to succeeding calendar year.
-8-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 11, 2000, in the Registration Statement
(Form S-1 No. 33-00000) and related Prospectus of Silicon Laboratories Inc.
filed with the Securities and Exchange Commission on or about January 18, 2000.
/s/ ERNST & YOUNG LLP
Austin, Texas
January 13, 2000
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 8,197
<SECURITIES> 6,509
<RECEIVABLES> 10,891
<ALLOWANCES> 569
<INVENTORY> 2,837
<CURRENT-ASSETS> 29,263
<PP&E> 15,274
<DEPRECIATION> 2,924
<TOTAL-ASSETS> 41,958
<CURRENT-LIABILITIES> 14,982
<BONDS> 0
12,750
0
<COMMON> 3
<OTHER-SE> 8,000
<TOTAL-LIABILITY-AND-EQUITY> 41,958
<SALES> 46,911
<TOTAL-REVENUES> 46,911
<CGS> 15,770
<TOTAL-COSTS> 15,770
<OTHER-EXPENSES> 16,480
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<INTEREST-EXPENSE> 699
<INCOME-PRETAX> 14,364
<INCOME-TAX> 3,324
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