<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CIRRUS LOGIC, INC.
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(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO OF CIRRUS LOGIC APPEARS HERE]
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 1, 1995
TO THE SHAREHOLDERS OF CIRRUS LOGIC, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Cirrus
Logic, Inc. (the "Company"), a California corporation, will be held on Tuesday,
August 1, 1995, at 3:30 p.m., local time, at the offices of the Company, 3100
West Warren Avenue, Fremont, California 94538 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected.
2. To approve an amendment to the Company's 1989 Employee Stock
Purchase Plan that will increase the number of shares of Common
Stock available for grant under the plan by 400,000 shares.
3. To approve an amendment to the Company's 1987 Stock Option Plan that
will increase the number of shares of Common Stock available for
grant under the plan by 900,000 shares.
4. To approve an amendment to the Company's 1990 Directors' Stock
Option Plan that will increase the number of shares of Common Stock
available for grant under the plan by 40,000 shares.
5. To approve the Company's Executive Variable Compensation Plan.
6. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company.
7. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on June 2, 1995, are
entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
For the Board of Directors
Sam S. Srinivasan, Secretary
Fremont, California
June 15, 1995
YOUR VOTE IS IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. RETURNING
YOUR PROXY WILL HELP THE COMPANY ASSURE A QUORUM AND AVOID THE ADDITIONAL
EXPENSE OF DUPLICATE PROXY SOLICITATIONS. ANY SHAREHOLDER ATTENDING THE
MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED THE PROXY.
<PAGE>
[LOGO OF CIRRUS LOGIC APPEARS HERE]
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PROXY STATEMENT
1995 ANNUAL MEETING OF SHAREHOLDERS
AUGUST 1, 1995
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Cirrus
Logic, Inc. (the "Company") for use at the Annual Meeting of Shareholders to be
held on Tuesday, August 1, 1995, at 3:30 p.m., local time (the "Annual
Meeting"), or at any continuation or adjournment thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting will be held at the principal executive offices of the
Company, located at 3100 West Warren Avenue, Fremont, California 94538. The
telephone number at this address is (510) 623-8300.
These proxy solicitation materials and the Company's Annual Report to
Shareholders for the fiscal year ended April 1, 1995, including financial
statements, were mailed on or about June 15, 1995 to all shareholders entitled
to vote at the Annual Meeting.
ON JUNE 1, 1995, THE COMPANY'S BOARD OF DIRECTORS APPROVED A TWO-FOR-ONE
SPLIT OF THE COMPANY'S COMMON STOCK. THE RECORD DATE FOR SUCH SPLIT IS JUNE 19,
1995 AND THE PAYMENT DATE IS JULY 17, 1995. THE NUMBERS IN THIS PROXY STATEMENT
DO NOT REFLECT THE STOCK SPLIT, WHICH IS TO BE EFFECTED AFTER THE MAILING DATE
OF THIS PROXY STATEMENT, AND THE NUMBERS HEREIN WILL BE ADJUSTED AS A RESULT OF
THE SPLIT.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on June 2, 1995 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the Company had 30,744,983 shares of Common
Stock outstanding. For information regarding holders of more than 5% of the
outstanding Common Stock, see "Share Ownership of Directors, Officers and
Certain Beneficial Owners." The closing price of the Company's Common Stock on
the Record Date was $53.875 per share, as reported by the Nasdaq National
Market.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before it is voted. It may be revoked by
filing, with the Secretary of the Company at the Company's principal executive
office, 3100 West Warren Avenue, Fremont, California 94538, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder voting for the election of directors may cumulate his or her
votes, giving one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of shares that the shareholder is
entitled to vote, or distributing the shareholder's votes on the same principle
among as many
<PAGE>
candidates as the shareholder chooses, provided that votes may not be cast for
more than eight (8) candidates. However, no shareholder shall be entitled to
cumulate votes for any candidate unless the candidate's name has been properly
placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate votes. On all other matters, each share has one vote.
The cost of this solicitation will be borne by the Company. The Company has
retained Skinner & Co. to aid in the solicitation of proxies from shareholders,
banks and other institutional nominees. The fees and expenses of this
solicitation are not expected to exceed $6,000. In addition, the Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram or personal solicitations by directors, officers or
employees of the Company. No additional compensation will be paid for any such
services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" OR "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" (the "Votes Cast") at
the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's 1996 Annual Meeting of Shareholders must be
received by the Company no later than February 15, 1996, in order that they may
be considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
A board of eight (8) directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nominees named below. All nominees are currently directors of
the Company. In the event that any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the current Board of Directors
to fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner and in accordance with cumulative
voting as will assure the election of as many of the nominees listed below as
possible, and in such event the specific nominees to be voted for will be
determined by the proxy holders. The term of office of each person elected as a
director will continue until the next Annual Meeting of Shareholders or until a
successor has been duly elected and qualified.
NOMINEES FOR DIRECTOR
Set forth below is certain information regarding the nominees:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
---- --- ------------------------- --------
<C> <C> <S> <C>
Michael L. Hackworth(1)(4)..... 54 President, Chief Executive 1985
Officer and Director
Suhas S. Patil(1)(4)........... 50 Chairman of the Board, 1984
Executive Vice President,
Products and Technology, and
Director
C. Gordon Bell(1)(3)........... 60 Director 1990
D. James Guzy(1)(4)............ 59 Director 1984
David L. Lyon.................. 46 President, Pacific 1993
Communication Sciences, Inc.
(a subsidiary of the
Company), and Director
C. Woodrow Rea, Jr.(2)(3)(4)... 47 Director 1985
Walden C. Rhines............... 48 Director 1995
Robert H. Smith(2)(3).......... 58 Director 1990
</TABLE>
- --------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. Hackworth, a founder of the Company, has served as President, Chief
Executive Officer and a Director of the Company since January 1985.
Dr. Patil, a founder of the Company, has served as Chairman of the Board and
Director since the Company was founded in 1984. He served as Vice President,
Research and Development until March 1990, when he became Executive Vice
President, Products and Technology.
Dr. Bell has been a computer consultant since November 1991. Previously, he
was Chief Scientist for Stardent Computer, a manufacturer of high-performance
graphics super-computers, from November 1987 until November 1991.
Mr. Guzy has been President of Arbor Company, a limited partnership engaged
in the electronics and computer industry, since 1969. He is also a director of
Intel Corporation, Frame Technology Corp., Micro Component Technology, Inc.,
Novellus Systems, Inc., Selected/Venture Advisors Group of Mutual Funds and
Alliance Capital Management Technology Fund.
3
<PAGE>
Dr. Lyon has been President of Pacific Communication Sciences, Inc. ("PCSI"),
a digital communication product company, since March 1987. PCSI was acquired by
Cirrus Logic, Inc. in February 1993.
Mr. Rea has been President and Chief Executive Officer and a director of
Spectrian, a communications electronics company, since January 1992. From April
1984 to January 1992, he was a general partner of the New Enterprise Associates
group of venture capital partnerships. He is also a director of Molecular
Dynamics, Inc.
Dr. Rhines has been President and Chief Executive Officer and a director of
Mentor Graphics Corporation, a maker of electronic design automation products,
since October 1993. Previously, he was Executive Vice President, Semiconductor
Group at Texas Instruments Inc. from May 1987 to October 1993. He is also a
director of TriQuint Semiconductor.
Mr. Smith is currently retired. From June 1994 to September 1994, he was
Chairman of the Board of Micro-Component Technology, an equipment manufacturer.
He was President of Maxwell Communication Corporation North America, a
printing, publishing, telecommunications and information management company,
from August 1988 to July 1990. He is also a director of Frame Technology Corp.
and Novellus Systems, Inc.
There are no family relationships between any directors or executive officers
of the Company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended April 1, 1995 (the "Last Fiscal Year"), the
Board of Directors held seven (7) meetings. Each of the incumbent directors
attended at least 75% of the aggregate of all meetings of the Board of
Directors and of the committees, if any, upon which such director served,
except Mr. Cash who attended 43% of such meetings. Mr. Cash is not standing for
reelection at this Annual Meeting.
The Board of Directors has four (4) standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Nominating
Committee.
The Executive Committee, which consists of directors Bell, Guzy, Hackworth
and Patil, was established in July 1992 to work on special projects as may be
designated from time to time by the Board of Directors. During the Last Fiscal
Year, the Executive Committee met five (5) times.
The Audit Committee, which consists of directors Rea and Smith, was
established to review, in consultation with the independent auditors, the
Company's financial statements, accounting and other policies, accounting
systems and system of internal controls. The Audit Committee met four (4) times
during the Last Fiscal Year.
The Compensation Committee, which consists of directors Bell, Rea and Smith,
was established to grant stock options under the Company's Option Plans and to
review the Company's programs relating to the recruitment, retention and
motivation of employees, the Variable Compensation Plans and other similar
programs for recommendation to the Board of Directors. The Compensation
Committee met eighteen (18) times during the Last Fiscal Year, twelve (12) of
which were regularly scheduled monthly telephonic meetings to approve stock
option grants.
The Nominating Committee, which consists of directors Hackworth, Guzy, Patil
and Rea, was established in July 1994 to seek qualified candidates for
nomination to the Board. During the Last Fiscal Year, the Nominating Committee
met two (2) times. The Nominating Committee intends to conduct its evaluation
of potential candidates independently and confidentially; therefore, it does
not intend to accept shareholder recommendations of candidates.
4
<PAGE>
COMPENSATION OF DIRECTORS
Non-employee directors are compensated as follows: a retainer of $4,000 shall
be paid each quarter; a fee of $2,000 per day shall be paid for each regular or
special meeting of the Board of Directors or committee meetings attended in
person; a fee of $2,000 per day shall be paid for consulting services; and
travel expenses will be reimbursed for any director who travels more than 50
miles to attend a meeting. During the Last Fiscal Year, consulting fees in the
amounts of $4,125, $1,500, and $1,500 were paid to Mr. Guzy, Mr. Rea and Mr.
Smith, respectively, for Board of Directors related services performed at the
request of the Board or the President.
In addition, in January 1990 the Company adopted a Directors' Stock Option
Plan (the "Directors' Plan"), which was approved by the shareholders in July
1990. Under the terms of the Directors' Plan, each non-employee director is
automatically granted, on the date he or she first becomes a director, an
initial option to purchase 10,000 shares and, on the date of his or her annual
reelection to the Board, an additional option to purchase 2,500 shares. The
exercise price of the automatic options is the fair market value of the Common
Stock as determined by the closing price reported by the Nasdaq National Market
on the date of grant. Options granted under the Directors' Plan have a five-
year term and vest over four years: one-quarter (1/4) of the shares vest one
year from the date of grant and one forty-eighth (1/48th) of the total shares
vest each month thereafter.
On July 26, 1994, automatic options were granted to C. Gordon Bell, Harvey B.
Cash, D. James Guzy, C. Woodrow Rea and Robert H. Smith to purchase 2,500
shares of Common Stock at an exercise price of $27.875 per share, the fair
market value on the date of grant. On March 21, 1995, upon his appointment to
the Board of Directors, an initial option was granted to Walden C. Rhines to
purchase 10,000 shares of Common Stock at an exercise price of $36.00 per
share.
The Directors' Plan is discussed in more detail under Proposal 4.
VOTE REQUIRED
The eight nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1989 EMPLOYEE
STOCK PURCHASE PLAN
The Company's 1989 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1989 and approved by the
shareholders in May 1989. A total of 100,000 shares of Common Stock were
initially reserved for issuance thereunder. By subsequent amendments to the
Purchase Plan, the shares reserved have been increased to 1,000,000 shares.
PROPOSED AMENDMENT TO THE PURCHASE PLAN
On April 17, 1995, the Board of Directors approved an amendment to the
Purchase Plan to further increase the aggregate number of shares authorized for
issuance thereunder by 400,000 shares, bringing the total number of shares
reserved under the Purchase Plan to 1,400,000 shares. Proposal 2 seeks
shareholder approval of this amendment.
5
<PAGE>
The Board considers the increase in shares necessary to meet the Company's
current needs. The Board further believes that the Purchase Plan is an integral
component of the Company's benefits program that is intended to provide
employees with an incentive to exert maximum effort for the success of the
Company and to participate in that success through the acquisition of the
Company's Common Stock. As of April 1, 1995, approximately 60% of the Company's
eligible employees were participating in the Purchase Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential provisions of the Purchase Plan are outlined below.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the Board
of Directors.
ELIGIBILITY
Only employees may participate in the Purchase Plan. For this purpose, an
"employee" is any person who is regularly employed at least twenty (20) hours
per week and five (5) months per calendar year by the Company or any of its
majority-owned subsidiaries. No employee shall be permitted to subscribe for
shares under the Purchase Plan if, immediately after the grant of the option,
the employee would own five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or its subsidiaries
(including stock issuable upon exercise of options held by him or her), nor
shall any employee be granted an option that would permit him or her to buy
more than $25,000 worth of stock (determined at the fair market value of the
shares at the time the option is granted) under the Purchase Plan in any
calendar year. As of January 1, 1995 (the last enrollment date), there were
approximately 2,258 employees eligible to participate in the Purchase Plan, of
whom approximately 1,350 were participants.
OFFERING PERIOD
There is generally one offering under the Purchase Plan during each six (6)
month period. The first offering period commenced on June 8, 1989, and
terminated on December 31, 1989. Subsequent offering periods were January 1
through June 30 and July 1 through December 31. Since the Compensation
Committee has the power to change the duration of future offering periods, on
May 24, 1994, the offering periods were amended to coincide with the accounting
and payroll schedules and include thirteen pay periods per offering.
Accordingly, the current offering will end on July 1, 1995. The offering
periods shall continue until the Purchase Plan is terminated. The first day of
an offering period is referred to as the "Offering Date." The last day of an
offering period is referred to as the "Exercise Date."
PURCHASE PRICE
The purchase price per share at which shares will be sold in an offering
under the Purchase Plan is the lower of (i) eighty-five percent (85%) of the
fair market value of a share of Common Stock on the Offering Date or (ii)
eighty-five percent (85%) of the fair market value of a share of Common Stock
on the Exercise Date. The fair market value of the Common Stock on a given date
shall be the closing price as reported in the Wall Street Journal.
6
<PAGE>
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. The Purchase Plan provides that the aggregate of such
payroll deductions during the offering period shall not exceed fifteen percent
(15%) of total compensation during said offering period. However, beginning
with the offering of July 1, 1990, each participant was limited to ten percent
(10%) of base compensation and the right to purchase a maximum of 500 shares in
each offering. Such restrictions will apply until the Compensation Committee
takes further action. During the offering period, a participant may discontinue
his or her participation in the Purchase Plan, and may decrease but not
increase the rate of payroll deductions.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan and are included with the general
funds of the Company. Funds received upon sales of stock under the Purchase
Plan are used for general corporate purposes.
WITHDRAWAL
A participant may terminate his or her interest in a given offering by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan at least fifteen (15) days prior to the Exercise Date of the offering
period.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event the payroll deductions credited to the participant's
account will be returned without interest to such participant or his or her
heirs.
CAPITAL CHANGES
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as stock splits or stock
dividends, resulting in an increase or decrease in the number of outstanding
shares of Common Stock, proportionate adjustments will be made by the Company
in the shares subject to purchase and in the price per share.
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of liquidation or dissolution of the Company, an employee's
participation in the Purchase Plan will be terminated immediately before
consummation of such event unless otherwise provided by the Board. In the event
of a sale of all or substantially all of the assets of the Company or a merger
of the Company with or into another corporation, the employee's rights may be
satisfied by assumption of the Company's obligations by such acquiring or
successor corporation. If such corporation refuses to assume those obligations,
the Board shall allow the immediate exercise of the employee's rights for
fifteen (15) days, after which the employee's rights under the Purchase Plan
shall terminate.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Purchase Plan, except that
no such termination shall affect options previously granted and no amendment
shall make any change in an option granted prior thereto that adversely affects
the rights of any participant. Under the Purchase Plan, an amendment to
increase the number of shares reserved for issuance requires the approval of
the shareholders of the Company. The Plan will terminate in March 2009, unless
terminated earlier by the Board.
7
<PAGE>
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Internal Revenue Code of 1986, as amended (the "Code"). Under these
provisions, no income will be taxable to a participant until the shares
purchased under the Purchase Plan are sold or otherwise disposed of. Upon sale
or other disposition of the shares, the participant will generally be subject
to tax and the amount of the tax will depend upon the holding period. If the
shares are sold or otherwise disposed of more than two (2) years from the
Offering Date, the participant will recognize ordinary income measured as the
lesser of (a) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (b) an amount equal to 15%
of the fair market value of the shares as of the Offering Date. Any additional
gain will be treated as long-term capital gain. If the shares are sold or
otherwise disposed of before the expiration of this holding period, the
participant will recognize ordinary income generally measured as the excess of
the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition
will be long-term or short-term capital gain or loss, depending on the holding
period. The Company generally is not entitled to a deduction for amounts taxed
as ordinary income or capital gain to a participant, except to the extent of
ordinary income recognized by participants upon a sale or disposition of shares
prior to the expiration of the holding period(s) described above and subject to
the limitation on deductibility set forth in Section 162(m) of the Code.
The foregoing is only a summary of the effect of federal income taxation laws
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
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<PAGE>
PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her respective
determination as to the level of payroll deductions. Accordingly, future
purchases under the Purchase Plan are not determinable. The following table
sets forth information with respect to the shares purchased during the Last
Fiscal Year by (i) the executive officers named in the Summary Compensation
Table below (the "Named Officers"), (ii) all current executive officers as a
group, and (iii) all other employees as a group who participated in the
Purchase Plan.
<TABLE>
<CAPTION>
NUMBER OF
SHARES DOLLAR
NAME (OR GROUP) AND POSITION PURCHASED(#) VALUE($)(1)
---------------------------- ------------ -----------
<S> <C> <C>
Michael L. Hackworth............................... 742 $ 2,937
Chief Executive Officer
and President
Suhas S. Patil..................................... 871 $ 3,532
Chairman of the Board and
Executive Vice President,
Products and Technology
Douglas J. Bartek.................................. 861 $ 3,485
President, Visual and
Systems Interface Products
Michael L. Canning................................. 841 $ 3,391
President, Mass Storage Products
Sam S. Srinivasan.................................. 831 $ 3,344
Senior Vice President, Finance
and Administration, Chief Financial Officer,
Treasurer and Secretary
All current executive officers as a group (10
persons).......................................... 7,510 $ 30,066
All other employees as a group (1,237 persons)..... 223,116 $876,338
</TABLE>
- --------
(1) Market value on the date of purchase, minus the purchase price under the
Purchase Plan.
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE
1987 STOCK OPTION PLAN
The 1987 Stock Option Plan (the "Option Plan") was adopted by the Board of
Directors and approved by the shareholders in 1987. By subsequent amendments to
the Option Plan approved by the Board and the shareholders, the shares reserved
have been increased to 8,222,444 shares.
Stock options play a key role in the Company's ability to recruit, reward and
retain executives and key employees. Technology companies have historically
used stock options as an important part of recruitment and retention packages.
The Company competes directly with these technology companies for experienced
executives and engineers and must be able to offer comparable packages to
attract the caliber of individual that the Company believes is necessary to
provide the growth that shareholders desire. THE COMPANY'S GROWTH IS LARGELY
RESPONSIBLE FOR THE NEED TO INCREASE SHARES ISSUABLE UNDER THE OPTION PLAN. THE
ABILITY TO RETAIN KEY EMPLOYEES OF THE COMPANY BY PROVIDING ONGOING INCENTIVES
AND TO MAINTAIN AN OPTION POOL FOR USE IN FUTURE ACQUISITIONS IS VITAL TO THE
COMPANY'S GROWTH.
PROPOSED AMENDMENT TO THE OPTION PLAN
On April 17, 1995, the Board of Directors increased the shares reserved for
issuance under the Option Plan by an additional 900,000 shares, bringing the
total shares reserved for issuance under the Option Plan to 9,122,444 shares.
Proposal 3 seeks shareholder approval of this amendment.
9
<PAGE>
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The essential provisions of the Option Plan are outlined below.
ADMINISTRATION
The Option Plan is administered by the Compensation Committee of the Board of
Directors.
ELIGIBILITY
The Option Plan provides that options and stock purchase rights may be
granted to any person, including officers and directors, employed by the
Company or its majority-owned subsidiaries and to consultants to the Company.
Incentive stock options may be granted only to employees, including officers.
The Compensation Committee of the Board of Directors approves the participants,
the time or times at which options and stock purchase rights shall be granted
and the number of shares to be subject to each. In making such determination,
there is taken into account the duties and responsibilities of the employee,
the value of the employee's services, his or her present and potential
contributions to the success of the Company and other relevant factors. As of
April 1, 1995, there were approximately 2,331 employees currently eligible to
participate in the Option Plan, and 1,206 employees holding outstanding options
under the Option Plan. Currently, there are no consultants eligible to
participate in the Option Plan.
TERMS OF OPTIONS
The terms of options granted under the Option Plan are determined by the
Compensation Committee. Each option is evidenced by a stock option agreement
between the Company and the employee or consultant to whom such option is
granted and is normally subject to the following additional terms and
conditions:
(a) EXERCISE OF THE OPTION: The Compensation Committee may determine when
options may be exercisable. The current form of option agreement provides
that options are immediately exercisable in full but that the shares
covered by the option are subject to vesting over time. The Company may
repurchase unvested shares if the optionee's status as an employee or
consultant terminates. Shares subject to an option normally vest over four
(4) years at the rate of one-quarter (1/4) of the shares on the first
anniversary of the option grant, or for new employees on the anniversary of
their date of hire, and one forty-eighth (1/48th) of the total shares each
month thereafter. The Compensation Committee may at any time or from time
to time accelerate the vesting of any outstanding option. The purchase
price of the shares purchased upon exercise of any option shall be paid in
cash, check or other shares of Common Stock.
(b) EXERCISE PRICE: The exercise price under the Option Plan is
determined by the Compensation Committee. In the case of an incentive stock
option granted to an employee, the exercise price shall not be less than
100% of the fair market value of the Common Stock on the date the option is
granted. For a nonstatutory option or a stock purchase right, the price
shall not be less than eighty-five percent (85%) of the fair market value
on the date of grant. In the case of an option or stock purchase right
granted to a shareholder who, immediately prior to such grant, owns stock
representing more than ten percent (10%) of the voting power or value of
all classes of stock of the Company, the exercise price must not be less
than 110% of such fair market value. The Compensation Committee has the
discretion and authority to amend and reprice the outstanding options. To
date, the Company has not repriced any options.
10
<PAGE>
(c) TERMINATION OF EMPLOYMENT: If the optionee's status as an employee or
consultant terminates for any reason other than death or disability,
options under the Option Plan may be exercised not later than two (2)
months after such termination and may be exercised only to the extent such
option was exercisable and vested on the date of termination.
(d) DISABILITY OF OPTIONEE: If an optionee should become totally and
permanently disabled while employed by the Company, options may be
exercised within six (6) months after termination of employment due to such
disability, but only to the extent such options were exercisable and vested
on the date of termination.
(e) DEATH OF OPTIONEE: If an optionee should die while employed by the
Company, options may be exercised at any time within twelve (12) months
after death, but only to the extent the options would have been exercisable
and vested had the optionee continued living and terminated employment
twelve (12) months after the date of death. If an optionee should die
within two (2) months after termination of continuous status as an employee
or a consultant, options may be exercised within ten (10) months after
death, but only to the extent the options were exercisable and vested on
the date of termination of employment.
(f) TERMINATION OF OPTIONS: Incentive stock options granted under the
Option Plan expire ten (10) years from the date of grant and nonstatutory
stock options granted under the Option Plan expire ten (10) years and one
(1) day from the date of grant, unless otherwise provided in the option
agreement. However, in the case of an option granted to an employee who, at
the time the option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any parent or subsidiary, the term of the option shall not be greater than
five (5) years. Under the form of option agreement currently used by the
Company, options expire ten (10) years from date of grant.
(g) NON-TRANSFERABILITY OF OPTIONS: An option is non-transferable by the
optionee other than by will or the laws of descent and distribution and is
exercisable during the optionee's lifetime only by the optionee.
(h) OTHER PROVISIONS: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board of Directors or its committee.
PERFORMANCE-BASED COMPENSATION LIMITATIONS
No employee shall be granted, in any fiscal year of the Company, options to
purchase more than 400,000 shares. The Company may, however, upon an employee's
initial employment, grant an option to purchase up to an additional 800,000
shares. The foregoing limitations, which shall be adjusted proportionately in
connection with any change in the Company's capitalization (such as a stock
split), are intended to satisfy the requirements applicable to options intended
to qualify as "performance-based compensation" within the meaning of Section
162(m) of the Code. In the event that the Compensation Committee determines
that such limitations are not required to qualify options as performance-based
compensation, the Compensation Committee may modify or eliminate such
limitations.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization that results
from a stock split or payment of a stock dividend (but only on Common Stock) or
any other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration, appropriate adjustment shall be made in the
exercise price and in the number of shares subject to the option.
In the event of a proposed dissolution or liquidation of the Company, each
option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board.
11
<PAGE>
In the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation, the
options shall be assumed or an equivalent option shall be substituted by the
successor corporation, unless the Board makes the option fully vested and
exercisable prior to the sale of assets or merger. If the Board makes an option
vested and exercisable prior to the merger or sale of assets, the Board shall
notify the participant that the option shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such notice and the option
will terminate upon the expiration of such period.
The same rules apply to stock purchase rights, if any are outstanding, in the
event of any change in capitalization.
AMENDMENT AND TERMINATION
The Board may amend or terminate the Option Plan from time to time in such
respects as the Board may deem advisable; provided that any increase in the
number of shares subject to the Option Plan shall require shareholder approval.
The Plan will terminate on May 1, 1997, unless terminated earlier by the Board.
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option generally will not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. A different rule for measuring ordinary
income on such a premature disposition may apply if the optionee is also an
officer, director, or 10% shareholder of the Company. In such event, the
Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income will be characterized as long-term or short-term capital gain or loss,
depending on the holding period.
All options that do not qualify as incentive stock options are referred to as
nonstatutory options. An optionee will not recognize any taxable income at the
time he or she is granted a nonstatutory option. However, upon its exercise,
the optionee will recognize taxable income generally measured by the excess of
the then fair market value of the shares purchased over the purchase price. Any
taxable income recognized in connection with an option exercise by an optionee
who is also an employee of the Company will be subject to tax withholding by
the Company. Upon resale of such shares by the optionee, any difference between
the sale price and the optionee's purchase price, to the extent not recognized
as taxable income as described above, will be treated as long-term or short-
term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation upon
the optionee and the Company with respect to the grant and exercise of options
under the Option Plan, does not purport to be complete, and does not discuss
the tax consequences of the optionee's death or the income tax laws of any
municipality, state or foreign country in which an optionee may reside.
12
<PAGE>
PARTICIPATION IN THE OPTION PLAN
The grant of options and stock purchase rights under the Option Plan to
eligible employees and consultants, including the Named Officers, is subject to
the discretion of the Compensation Committee. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards under the Option Plan. Accordingly, future awards are not
determinable. Non-employee directors are not eligible to participate in the
Option Plan. The following table sets forth information with respect to options
granted under the Option Plan during the Last Fiscal Year to (i) the Named
Officers, (ii) all current executive officers as a group and (iii) to all other
employees as a group. The term of all options outstanding under the Option Plan
is ten years from date of grant.
<TABLE>
<CAPTION>
SHARES WEIGHTED
SUBJECT AVERAGE
TO OPTIONS EXERCISE PRICE
NAME (OR GROUP) AND POSITION GRANTED(#) PER SHARE($/SH.)
---------------------------- ---------- ----------------
<S> <C> <C>
Michael L. Hackworth............................ 150,000 $37.25
Chief Executive Officer
and President
Suhas S. Patil.................................. 35,000 $30.00
Chairman of the Board and
Executive Vice President,
Products and Technology
Douglas J. Bartek............................... 25,000 $30.00
President, Visual and
Systems Interface Products
Michael L. Canning.............................. 25,000 $30.00
President, Mass Storage Products
Sam S. Srinivasan............................... 54,000 $30.00
Senior Vice President, Finance
and Administration, Chief Financial Officer,
Treasurer and Secretary
All current executive officers as a group (13
persons)....................................... 416,000 $32.61
All other employees as a group (1,206 persons).. 1,527,978 $28.22
</TABLE>
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE
1990 DIRECTORS' STOCK OPTION PLAN
The 1990 Directors' Stock Option Plan (the "Directors' Plan") was adopted by
the Board of Directors in January 1990 and approved by the shareholders in July
1990. A total of 120,000 shares of Common Stock were initially reserved for
issuance thereunder. A subsequent amendment to the Directors' Plan increased
the shares reserved to a total of 145,000.
PROPOSED AMENDMENT TO THE DIRECTORS' PLAN
On April 17, 1995, the Board of Directors' increased the shares reserved for
issuance under the Directors' Plan by an additional 40,000 shares, bringing the
total number of shares reserved for issuance under the Directors' Plan to
185,000. Proposal 4 seeks shareholder approval of this amendment.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Directors' Plan.
13
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
The essential provisions of the Directors' Plan are outlined below.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors. All options
under the Directors' Plan shall be either Automatic Options or Special Options.
The timing of the grant of Automatic Options is determined by the Directors'
Plan and no discretion is permitted. The grant of Special Options shall be made
at the discretion of the Board (exclusive of the optionee); provided, however,
that no Special Option shall become exercisable unless approved by the
shareholders of the Company. No member of the Board may vote on the grant of
any option that relates to himself or herself.
ELIGIBILITY
Only non-employee Directors ("Outside Directors") may participate in the
Directors' Plan. As of April 1, 1995, there were six (6) Outside Directors
eligible to participate in the Directors' Plan.
AUTOMATIC OPTION GRANTS
Each Outside Director is automatically granted in initial option to purchase
10,000 shares of Common Stock upon the date such person first becomes a
Director, whether through election by the shareholders of the Company or
appointment by the Board of Directors to fill a vacancy. Each Outside Director
automatically receives, upon his or her annual reelection to the Board, an
additional option to purchase 2,500 shares of Common Stock.
SPECIAL OPTION GRANTS
Grants of Special Options shall be made at the discretion of the Board
(exclusive of the optionee); provided, however, that no Special Option shall
become exercisable unless approved by the shareholders of the Company.
TERMS OF OPTIONS
Options granted under the Directors' Plan shall have a term of five years and
are exercisable only while the Outside Director remains an Outside Director of
the Company or within seven (7) months of the date the Outside Director ceases
to serve as a Director. The exercise price of Automatic Options is 100% of the
fair market value per share on the date of grant of the option. The exercise
price of the Special Options shall be as determined by the Board (subject to
shareholder approval of the grant) and may be less than 100% of fair market
value.
Automatic Options are immediately exercisable and subject to repurchase by
the Company as to any unvested shares upon cessation of status as an Outside
Director. The Shares subject to the Automatic Option vest cumulatively as to
one-quarter (1/4) of the aggregate number of shares on the first annual
anniversary of the date of grant and as to one forty-eighth (1/48th) of the
total shares each month thereafter; provided however, that if the optionee
ceases to serve as an Outside Director of the Company, vesting ceases as of the
date of termination. Special Options shall be subject to vesting as determined
by the Board of Directors and approved by the shareholders.
Options granted under the Directors' Plan are intended to comply with Rule
16b-3 (or any successor rule) and shall contain any such additional conditions
or restrictions as may be required to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to plan transactions.
14
<PAGE>
EXERCISE OF OPTIONS
An option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased, and
tendering payment to the Company of the purchase price. The payment shall
consist entirely of cash, check, other shares of Common Stock having a fair
market value on the date of surrender equal to the aggregate exercise price of
the shares as to which said option shall be exercised (which, if acquired from
the Company, shall have been held for at least six (6) months), or any
combination of such methods of payment.
DISABILITY OF OPTIONEE
If an Outside Director ceases to serve as a Director or is unable to continue
his or her service as a Director with the Company as a result of total and
permanent disability (as defined in Section 22(e)(3) of the Code), the Outside
Director may exercise the option, but only within seven (7) months after the
date he or she ceases to be a Director of the Company, and only to purchase
vested shares. To the extent that he or she was not entitled to exercise an
option at the date of such termination, or if he or she does not exercise such
option (which he or she was entitled to exercise) within the time specified
herein, the option shall terminate.
DEATH OF OPTIONEE
If the optionee dies during the term of the option and the optionee was, at
the time of his or her death, an Outside Director of the Company and who shall
have been in continuous status as a Director since the date of grant of the
option, the option may be exercised, at any time within seven (7) months
following the date of death, by the optionee's estate or by a person who
acquired the right to exercise the option by bequest or inheritance, but only
to the extent of the shares that had vested at the date of death.
If the optionee dies within seven (7) months after the termination of
continuous status as a Director, then the option may be exercised, at any time
within seven (7) months following the termination of the optionee's continuous
status as a Director, or three (3) months after the date of death, whichever is
later, by the optionee's estate or by a person who acquired the right to
exercise the option by bequest or inheritance, but only to the extent of the
shares that had vested at the date of termination.
CAPITAL CHANGES
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as stock splits or stock
dividends, resulting in an increase or decrease in the number of shares of
Common Stock, proportionate adjustments will be made by the Company in the
shares subject to purchase and in the price per share.
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of a liquidation or dissolution of the Company, all options will
terminate immediately before consummation of such event. In the event of a
proposed sale of all or substantially all of the assets of the Company, or
merger of the Company with or into another corporation, all options shall be
assumed or equivalent options shall be substituted, by such successor
corporation or a parent or subsidiary of such successor corporation. If such
successor corporation refuses to assume the option or to substitute an
equivalent option, the Board shall, in lieu of such assumption or substitution,
provide that the optionee shall have the right to exercise the option as to all
of the optioned shares, including shares as to which the option would not
otherwise be exercisable, or that the restrictions on unvested shares shall be
removed, as the case may be. If the Board makes an option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the optionee that the option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the option
will terminate upon the expiration of such period.
15
<PAGE>
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter, suspend or discontinue the
Directors' Plan; provided, however, that the terms of Automatic Options may not
be amended more than once in any six-month period. The Company shall obtain
shareholder approval of any Directors' Plan amendment that is required to
comply with Rule 16b-3. No action by the Board may affect options already
granted under the Directors' Plan without the consent of the Optionee. The
Directors' Plan will terminate on January 16, 2000, unless terminated earlier
by the Board.
TAX INFORMATION
Options granted under the Directors' Plan are nonstatutory stock options. An
optionee will not recognize any taxable income at the time he or she is granted
a nonstatutory option. However, upon its exercise, the optionee will recognize
taxable income, generally measured by the excess of the then fair market value
of the shares of Common Stock purchased over the purchase price. Upon resale of
such shares by the optionee, any difference between the sale price and the
optionee's purchase price, to the extent not recognized as taxable income as
provided above, will be treated as long-term or short-term capital gain or
loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation upon
the optionee and the Company with respect to the grant and exercise of options
under the Directors' Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
PARTICIPATION IN THE DIRECTORS' PLAN
The grant of options under the Directors' Plan is determined by the
Directors' Plan with respect to Automatic Options and is subject to the
individual director's election, appointment or reelection to the Board. The
grant of Special Options is at the discretion of the Board of Directors and the
approval of the shareholders of the Company. Only Outside Directors are
eligible to participate in the Directors' Plan. The following table sets forth
information with respect to options granted under the Directors' Plan during
the Last Fiscal Year to the Outside Directors. The term of all options
outstanding under the Option Plan is five (5) years from date of grant.
<TABLE>
<CAPTION>
SHARES WEIGHTED
SUBJECT AVERAGE
TO OPTIONS EXERCISE PRICE
GRANTED(#) PER SHARE($/SH.)
---------- ----------------
<S> <C> <C>
C. Gordon Bell, Director......................... 2,500 $27.875
Harvey B. Cash, Director......................... 2,500 $27.875
D. James Guzy, Director.......................... 2,500 $27.875
C. Woodrow Rea, Director......................... 2,500 $27.875
Walden C. Rhines, Director....................... 10,000 $36.000
Robert H. Smith, Director........................ 2,500 $27.875
All Outside Directors as a group (six persons)... 22,500 $31.486
</TABLE>
16
<PAGE>
PROPOSAL 5
APPROVAL OF THE EXECUTIVE VARIABLE COMPENSATION PLAN
In 1993, Section 162(m) was added to the Internal Revenue Code of 1986, as
amended. Under Section 162(m) of the Code, the Company generally may not deduct
in any tax year more than $1 million of compensation paid to the executive
officers named in the summary compensation table in the proxy statement (the
"Covered Employees"). However, certain performance-based compensation that is
approved by shareholders is not subject to the deduction limit. The Company
currently maintains the Executive Variable Compensation Plan (the "EVCP"),
which was adopted in 1990. The Company is requesting that shareholders approve
the EVCP in order to qualify payments under the terms of the plan as
performance-based compensation under Section 162(m) of the Code.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the EVCP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5.
The essential provisions of the EVCP are outlined below.
PURPOSE
The purpose of the EVCP is to motivate and reward executives by making a
significant portion of their cash compensation directly dependent upon
achieving key strategic objectives. The plan provides the opportunity for the
executive officers to earn substantial incentive compensation for attaining
financial and operational objectives that are critical to the Company's ongoing
growth and profitability and are expected to result in high long-term returns
to shareholders.
ADMINISTRATION
The plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee") consisting of no fewer than two members of the
Board of Directors, all of whom qualify as "outside directors" within the
meaning of Section 162(m) of the Code. The decisions of the Compensation
Committee are subject to ratification by the Board of Directors.
ELIGIBILITY
The individuals who are eligible to participate in the EVCP are the executive
officers and other key employees of Cirrus Logic who are or who may become
Covered Employees, as determined by the Committee. EVCP participants are chosen
solely at the discretion of the Committee. No person is automatically entitled
to participate in the EVCP in any given plan year.
MAXIMUM BONUS AND PAYOUT CRITERIA
Under the EVCP, participants are eligible to receive bonus payments based
upon the attainment and certification of performance measures pre-established
by the Committee. Performance measures are established for quarterly, semi-
annual or annual performance periods.
EVCP payments are made in cash as soon as is practicable following
determination of the amount of the bonus payment, provided that, at the
discretion of the Committee, a participant may, subject to such terms and
conditions as the Committee may determine, elect to defer all or any part of
any bonus by complying with such procedures as the Committee may prescribe.
17
<PAGE>
The primary performance measures for the plan are corporate profitability and
growth as measured by: income before income tax, and/or operating income,
income before income tax and/or operating income as a percent of revenue,
revenue growth, gross margin as a percent of revenue, and/or measures related
to profitability above a cost of capital. The impact of any acquisitions or
mergers during the plan year will be excluded from the performance measures.
Participants who have primary responsibility for a business unit of the Company
may be measured on business unit operating profit, business unit operating
profit as a percent of revenue, and/or measures related to business unit
profitability above its cost of capital, in place of some or all of the
corporate performance measures. A participant's bonus payment is determined
based on Cirrus Logic's and/or a business unit's achievement of the above
performance measures for the performance period, and may be adjusted based on
the achievement of secondary pre-established financial and/or operational
objectives. The maximum positive adjustment possible is plus 10%, and the
maximum negative adjustment possible results in no incentive payment to the
participant.
The payment to each participant is directly related to objective performance
of Cirrus Logic and/or its business units with respect to each of the relevant
performance measures. The Committee has determined that the specific
performance goals equating to achievement of Cirrus Logic's financial and
operational objectives that make up the basis of the EVCP are confidential
information, which, if specifically disclosed, would adversely affect Cirrus
Logic.
Each participant's payment under the EVCP is calculated using the following
steps:
<TABLE>
<C> <S>
PRIMARY Actual performance on each primary performance measure
PERFORMANCE determines a nominal bonus percentage according to schedules
PERCENTAGE built around the objective for each measure. The sum of the
nominal bonus percentages is the Primary Performance
Percentage.
KEY RESULTS The Key Results Multiplier is determined according to the
MULTIPLIER participant's performance on the secondary financial and
operational objectives versus schedules.
The Committee adopts the performance measures and objectives with respect to a
particular performance period in advance of such date as is permitted by IRC
Section 162(m).
EVCP The EVCP incentive earned for a performance period by a
INCENTIVE participant is equal to the Primary Performance Percentage
EARNED times the Key Results Multiplier times the participant's
annual base salary rate as of the payment date.
</TABLE>
The Committee will certify in writing that all of the performance criteria
have been met prior to any payments under the EVCP.
The maximum bonus that any one individual may receive under the EVCP in any
one fiscal year is $2,000,000. The Committee cannot increase a Covered
Employee's bonus; however, in its sole discretion, the Committee may decrease a
Covered Employee's bonus. Generally, an executive must be actively employed by
Cirrus Logic or a subsidiary company and on the payroll at such time as the
payment is made following the performance period to receive the award.
NEW PLAN BENEFITS
The amounts that will be paid pursuant to the EVCP are not currently
determinable.
18
<PAGE>
AMENDMENT AND TERMINATION
The Committee may terminate, suspend or amend the EVCP, in whole or in part
from time to time, including the adoption of amendments deemed necessary or
desirable to correct any defect or supply omitted data or reconcile any
inconsistency in the EVCP or in any award granted thereunder so long as
shareholder approval has been obtained if required in order for awards to
qualify as "performance-based compensation" under Section 162(m) of the Code.
No amendment, termination, or modification of the EVCP may in any manner affect
awards theretofore granted and approved by the shareholders without the consent
of the participant unless the Committee has made a determination that an
amendment or modification is in the best interests of all persons to whom
awards have theretofore been granted, but in no event may such amendment or
modification result in an increase in the amount of compensation payable
pursuant to such award.
TAX CONSEQUENCES
Under present federal income tax law, participants will realize ordinary
income equal to the amount of the award received in the year of receipt. Cirrus
Logic will receive a corresponding deduction for the amount constituting
ordinary income to the participant at the same time the participant recognizes
that ordinary income, provided that the EVCP satisfies the requirements of
Section 162(m) of the Code. It is Cirrus Logic's intention that the EVCP be
adopted and administered in a manner which maximizes the deductibility of
compensation for Cirrus Logic under Section 162(m) of the Code to the extent
practicable and consistent with Cirrus Logic's business considerations.
PROPOSAL 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the current fiscal year
ending March 30, 1996. Ernst & Young LLP has audited the Company's financial
statements annually since 1984. In the event that a majority of the Votes Cast
are against the ratification, the Board of Directors will reconsider its
selection.
A representative of Ernst & Young LLP will be present at the meeting to make
a statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 6.
19
<PAGE>
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of the
Record Date by (i) each shareholder known to the Company to be a beneficial
owner of more than 5% of the Company's Common Stock; (ii) each director; (iii)
each of the Named Officers and (iv) all current executive officers and
directors of the Company as a group. Unless otherwise indicated in the
footnotes, the beneficial owner has sole voting and investment power with
respect to the securities beneficially owned, subject only to community
property laws, if applicable.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNER SHARES(1) PERCENT
---------------- --------- -------
<S> <C> <C>
Merrill Lynch Asset Management, L. P.(2)(3)................ 3,000,000 9.76%
P.O. Box 9011
Princeton, NJ 08543
FMR Corp.(2)(4)............................................ 2,924,100 9.51
82 Devonshire Street
Boston, MA 02109
T. Rowe Price Associates, Inc.(2).......................... 1,691,600 5.50
100 East Pratt Street
Baltimore, MD 21202
Michael L. Hackworth(5).................................... 628,040 2.04
Suhas S. Patil(6).......................................... 625,164 2.03
Douglas J. Bartek(7)....................................... 180,179 *
David L. Lyon(8)........................................... 155,284 *
Michael L. Canning(9)...................................... 149,649 *
Sam S. Srinivasan(10)...................................... 140,504 *
D. James Guzy(11).......................................... 88,889 *
C. Gordon Bell(12)......................................... 25,000 *
Harvey B. Cash(13)......................................... 17,708 *
C. Woodrow Rea, Jr.(14).................................... 10,500 *
Walden C. Rhines(15)....................................... 10,000 *
Robert H. Smith(16)........................................ 4,846 *
All current executive officers and directors
as a Group (19 Persons) (17).............................. 2,883,337 9.38%
</TABLE>
- --------
* Less than 1%
(1) All options are immediately exercisable, but shares issued upon exercise of
unvested options are subject to vesting restrictions. Accordingly, all
outstanding options are exercisable within sixty (60) days of the Record
Date. See "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values" table for vested and unvested shares. Mr. Cash is not
standing for reelection; therefore, his options have been adjusted to
reflect only vested shares as of August 1, 1995.
(2) As reported in the most recent filings with the Securities and Exchange
Commission.
(3) Merrill Lynch & Co., Inc. shares voting and dispositive power with respect
to 3,000,000 shares with Merrill Lynch Group, Inc., Princeton Services,
Inc., Merrill Lynch Asset Management, L.P. and Merrill Lynch Growth Fund
for Investment and Retirement.
(4) Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp. is the beneficial owner of 2,924,100 shares. Edward C. Johnson 3d,
FMR Corp., through its control of Fidelity Management & Research Company,
and the Funds each has sole power to dispose of the shares. Edward C.
Johnson 3d, Chairman of FMR Corp. and various other Johnson family members
and trusts for the benefit of Johnson family members together form a
controlling group with respect to FMR Corp.
(5) Includes 470,000 shares issuable upon exercise of options held by Mr.
Hackworth exercisable within sixty (60) days of the Record Date.
(6) Includes (i) 205,000 shares issuable upon exercise of options held by Dr.
Patil exercisable within sixty (60) days of the Record Date and (ii) 36,700
shares held by family members and trusts for the benefit of family members,
with respect to which Dr. Patil disclaims beneficial ownership.
20
<PAGE>
(7) Includes 99,000 shares issuable upon exercise of options held by Mr. Bartek
exercisable within sixty (60) days of the Record Date.
(8) Includes 80,686 shares issuable upon exercise of options held by Dr. Lyon
exercisable within sixty (60) days of the Record Date.
(9) Includes 87,674 shares issuable upon exercise of options held by Dr.
Canning exercisable within sixty (60) days of Record Date.
(10) Includes 132,835 shares issuable upon exercise of options held by Mr.
Srinivasan exercisable within sixty (60) days of the Record Date.
(11) Includes 12,500 shares issuable upon exercise of options held by Mr. Guzy
exercisable within sixty (60) days of the Record Date. Also includes
66,390 shares held by Arbor Company, of which Mr. Guzy is President and
may therefore be deemed to be the beneficial owner.
(12) Includes 10,000 shares issuable upon exercise of options held by Dr. Bell
exercisable within sixty (60) days of the Record Date.
(13) Includes 12,708 shares issuable upon exercise of options held by Mr. Cash
exercisable within sixty (60) days of the Record Date. Mr. Cash is not
standing for reelection and, under the terms of the Directors' Plan, he
will have seven (7) months to exercise his vested options.
(14) Includes 10,000 shares issuable upon exercise of options held by Mr. Rea
exercisable within sixty (60) days of the Record Date.
(15) Includes 10,000 shares issuable upon exercise of options held by Mr.
Rhines exercisable within sixty (60) days of the Record Date.
(16) Includes 4,846 shares issuable upon exercise of options held by Mr. Smith
exercisable within sixty (60) days of the Record Date.
(17) Includes 1,722,151 shares issuable upon exercise of options held by
executive officers and directors exercisable within sixty (60) days of the
Record Date.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed only of non-employee directors. The Committee is responsible for
reviewing and recommending the Company's compensation practices, executive pay
levels, and variable compensation programs to the Board of Directors for
approval. The Committee also grants stock options within guidelines approved by
the Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is to pay for performance. As such,
total cash compensation should vary with the performance of the Company and
long-term incentives should be used to ensure the alignment of executive and
shareholder interests. Consistent with this philosophy, the Company provides
significant annual incentive opportunities and utilizes stock options as a
long-term incentive vehicle.
Cash compensation for the executives in fiscal 1995 consisted of the
following components:
. Base salary
. Variable compensation based on achievement of Company or business-unit
income before income tax, and/or operating income, income before income
tax and/or operating income as a percent of revenue, revenue growth,
gross margin as a percent of revenue, and/or measures related to
profitability above the cost of capital, and the achievement of
strategic objectives appropriate to each executive (e.g., development of
new products, inventory turns, and manufacturing yield improvements).
Cash compensation for the executives in fiscal 1996 will consist of base
salary plus variable compensation described in detail under Proposal 5 to
approve the Company's Executive Variable Compensation Plan (the "EVCP").
The Committee sets compensation levels for executives based on a review of
competitive information. Competitive compensation information is gathered from
published surveys of high technology company
21
<PAGE>
compensation levels (the "Survey Group") and from proxy statements of
particular companies that are considered generally comparable to the Company
(the "Proxy Group"). The Proxy Group includes companies used in the peer
performance graph as well as other semiconductor or high technology companies
that are high growth, profitable, and similar in revenue size to the Company.
Recommendations by Company management are examined in light of this
information, with the intention of establishing and maintaining competitive
total cash compensation levels. In general, the Company has attempted to
establish a strong relationship between total cash compensation and Company and
individual performance by maintaining base salaries at approximately the 50th
percentile of the Survey Group and Proxy Group data, and providing additional
incentive opportunity so that total cash compensation (salary plus bonus)
approaches 50th percentile levels when the Company's performance is near the
middle of the semiconductor companies in the Proxy Group, and has the potential
to pay at or near the top of the semiconductor companies in the Proxy Group for
commensurate levels of performance.
Long-term incentives are provided through stock option grants to key
employees, including the named executive officers. The number of shares subject
to each stock option grant is based on the employee's current and anticipated
future performance and ability to affect achievement of strategic goals and
objectives. The Company grants options in order to directly link a significant
portion of each executive's total compensation to the long-term interests of
shareholders. Since options are granted at the Company's stock fair market
value and vest over a multi-year period, executives will only receive value
from the options to the extent that they remain employed by the Company and the
Company's stock price increases during the term of the options, thus generating
returns for both shareholders and the executives.
The Company maintains a qualified employee stock purchase plan subject to
provisions of the Internal Revenue Code, which is generally available to all
employees, and pursuant to which employees can purchase Company stock through
payroll deductions of up to 10% of their base salaries. This plan allows
participants to buy Company stock at a discount from the market price.
In response to the enactment of Section 162(m) of the Internal Revenue Code
and its related proposed regulations that limit deductibility by a corporation
of certain executive officer compensation in excess of $1 million per named
executive officer per year, the Committee amended the Company's 1987 Stock
Option Plan in order to qualify compensation relating to options granted
thereunder as "performance-based compensation", which is not subject to the $1
million limit. The amended 1987 Stock Option Plan was approved by shareholders
in July 1994. Since that time, the Committee has evaluated the EVCP in light of
the $1 million limit, and has determined that it would be advantageous to also
qualify that plan as "performance-based compensation" under Section 162(m) of
the Code. Thus, the Committee has placed Proposal 5 of this proxy statement
before the shareholders for approval of the EVCP.
BASE SALARY
In accordance with the Company's compensation philosophy, the base salary
rates of the executive officers are generally at approximately the 50th
percentile levels of the Survey Group and Proxy Group. For fiscal 1995, the
executive officers received salary increases ranging from 4.0% to 19.5% of
their fiscal year end 1994 base salary rates, which included adjustments to
reflect changes in competitive data and certain promotions. The average salary
rate increase for the named executive officers was 15.2%.
INCENTIVE COMPENSATION
The EVCP is designed to motivate and reward the executive officers by making
a significant portion of their cash compensation directly dependent upon
achieving predetermined corporate and/or business unit financial goals. The
performance measures are based on the Company's annual business plan, and are
established for quarterly, semi-annual or annual performance periods. In
addition, an executive's variable compensation award may be reduced or
increased based on achievement of key strategic goals and objectives previously
agreed-upon for each executive. Cash payments are made after the end of the
performance period for services rendered and performance levels achieved during
the performance period.
22
<PAGE>
The Company's financial performance during fiscal year 1995 was at
approximately the 80th percentile of the semiconductor companies in the Proxy
Group as measured by the EVCP goals (i.e., revenue, gross margin, and pre-tax
profit). Because of this level of performance, variable compensation payments
for fiscal 1995 were substantially higher than those earned in fiscal 1994.
The incentive earnings for the executive officers ranged from 44% to 74% of
total cash compensation, with the named executive officers averaging 70%.
STOCK OPTIONS
Stock options are granted to align the interests of key employees with those
of the shareholders. Stock options are granted at a price at least equal to
the fair market value of the Company's Common Stock on the date of grant.
Eligible employees are granted stock options on their date of hire which
generally vest over a four-year period from the date of grant. Certain key
employees are granted stock options on an annual basis that vest four years
from the date of grant. They are granted to key employees, including the named
executive officers, based on current performance, anticipated future
contribution based on that performance, and ability to affect corporate and/or
business unit results. In fiscal 1995, stock options for the executive
officers were granted upon recommendation of management and approval of the
Committee within guidelines approved by the Board of Directors, and were
granted at an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant.
CEO COMPENSATION
As described above, the Company's executive pay program is highly leveraged
toward variable compensation plans that reward achievement of pre-determined
corporate goals and objectives. This principle of pay-for-performance is
exemplified by the pay package of the Company's Chief Executive Officer.
The Committee reviews Mr. Hackworth's base salary annually, considering
Company performance, individual performance, and external pay practices. For
fiscal year 1995, Mr. Hackworth's base salary was set at $375,000. For fiscal
year 1996, his salary increase will be at the same percentage rate used to
establish the fund for all employee salary increases. According to projected
competitive pay information available to the Committee, Mr. Hackworth's base
salary rate for fiscal 1996 will fall below the 50th percentile levels of the
Proxy Group and Survey Group.
Mr. Hackworth's variable compensation for fiscal year 1995 performance was
$1,073,980. This amount reflects the performance of the Company versus the
semiconductor companies in the Proxy Group. His total cash compensation for
fiscal 1995 was $1,448,980, of which 74% was variable compensation. Mr.
Hackworth's total cash compensation was significantly above the 50th
percentile levels of the Survey Group and Proxy Group, and was commensurate
with the financial performance of the Company versus the semiconductor
companies in the Proxy Group during fiscal year 1995.
During fiscal year 1995, Mr. Hackworth was granted stock options to purchase
150,000 shares of the Company's Common Stock, which vest ratably over a four-
year period from the date of grant. This award was based on his past
performance and anticipated future contribution to the Company's continued
revenue and profit growth.
Compensation Committee
C. Woodrow Rea, Jr., Chairman
C. Gordon Bell
Robert H. Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of directors
Rea, Bell and Smith. No executive officer of the Company served on the
compensation committee of another entity or on any other committee of the
board of directors of another entity performing similar functions during the
Last Fiscal Year.
23
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by the Company's Chief
Executive Officer and the four other most highly paid executive officers during
the fiscal years ended April 1, 1995, April 2, 1994 and March 31, 1993.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
----------------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) OPTIONS(#) ($)(3)
- --------------------------- ---- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Michael L. Hackworth..... 1995 375,000 1,073,980 150,000 1,000
President and Chief..... 1994 313,721 570,604 200,000 1,000
Executive Officer....... 1993 287,502 231,242 100,000 0
Suhas S. Patil........... 1995 255,200 713,186 35,000 1,000
Chairman, Executive
Vice................... 1994 213,885 390,532 100,000 1,000
President, Products and
Technology............. 1993 190,000 180,369 50,000 0
Douglas J. Bartek (4).... 1995 249,400 494,771 25,000 1,000
President, Visual and
Systems................ 1994 210,132 388,612(4) 74,000 1,000
Interface Products...... 1993 182,710 163,892(4) 0 0
Michael L. Canning....... 1995 227,900 502,601 25,000 1,000
President, Mass Storage. 1994 211,300 161,542 36,437 1,000
Products................ 1993 193,750 105,000 60,000 0
Sam S. Srinivasan........ 1995 222,600 461,496 54,000 1,000
Senior Vice President,.. 1994 201,048 278,959 48,625 1,000
Finance and
Administration,........ 1993 168,000 107,028 50,000 0
Chief Financial Officer,
Treasurer and Secretary
</TABLE>
- --------
(1) Amounts shown are before salary reductions resulting from employee
contributions to the Cirrus Logic, Inc. 401(k) Profit Sharing Plan.
(2) Includes Executive Variable Compensation bonus earned in the fiscal year.
(3) The amounts disclosed in the "All Other Compensation" column for the Last
Fiscal Year are matching contributions by the Company of $1,000 with
respect to each Named Executive Officer under the 401(k) plan. No Named
Executive Officer received perquisites during fiscal 1995, 1994 or 1993
equal to or in excess of the lesser of $50,000 or 10% of such Named
Executive Officer's salary plus bonus for such fiscal year.
(4) Includes $50,000 Retention Bonus pursuant to the Acumos Incorporated merger
agreement. See "Executive Compensation--Employment Agreements and Certain
Transactions."
24
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to options granted in
the Last Fiscal Year to the Named Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED#(1) FISCAL YEAR(2) PRICE($/SH) DATE 5%($)(3) 10%($)(3)
---- ----------- -------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hackworth.... 150,000 7.17% $37.25 03/20/05 $ 3,513,949 $ 8,905,036
Suhas S. Patil.......... 35,000 1.67% $30.00 09/12/04 $ 660,339 $ 1,673,430
Douglas J. Bartek....... 25,000 1.20% $30.00 09/12/04 $ 471,671 $ 1,195,307
Michael L. Canning...... 25,000 1.20% $30.00 09/12/04 $ 471,671 $ 1,195,307
Sam S. Srinivasan....... 54,000 2.58% $30.00 09/12/04 $ 1,018,809 $ 2,581,863
</TABLE>
- --------
(1) All options were granted under the 1987 Stock Option Plan and have exercise
prices equal to the fair market value of the Company's Common Stock on the
date of grant. Mr. Hackworth's options vest over a four-year period and
expire ten years from the date of grant. Mr. Srinivasan's options also vest
over a four-year period; however, 30,000 shares vest on July 1, 1998. The
options granted to Messrs. Patil, Bartek and Canning all vest on July 1,
1998. The Compensation Committee has the discretion and authority to amend
and reprice the outstanding options. To date, the Company has not repriced
any options.
(2) Based on 2,091,195 options granted under all option plans to employees
during the Last Fiscal Year.
(3) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the 10-year term of the option. These values
are calculated based on requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate or projection
of future stock price. Actual gains, if any, on stock option exercises will
be dependent on the future performance of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information with respect to option exercises in
the Last Fiscal Year by the Named Officers and the value of their unexercised
options at Fiscal Year End.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED OPTIONS UNEXERCISED
AT FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END(#)(2) AT FISCAL YEAR END($)(2)(3)
ACQUIRED VALUE ---------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($)(1) VESTED UNVESTED VESTED UNVESTED
---- -------------- -------------- ---------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Hackworth.... 60,000 $1,461,000 172,088 147,912 $ 2,452,215 $ 1,715,285
Suhas S. Patil.......... -- -- 73,437 131,563 $ 1,192,877 $ 1,308,685
Douglas J. Bartek....... -- -- 15,000 84,000 $ 180,000 $ 881,500
Michael L. Canning...... -- -- 23,353 79,751 $ 406,383 $ 1,032,735
Sam S. Srinivasan....... 3,608 $ 46,904 22,209 110,626 $ 373,990 $ 1,183,032
</TABLE>
- --------
(1) Market value of the shares on date of exercise, less the exercise price.
(2) All options are immediately exercisable, but shares issued upon exercise
are subject to vesting restrictions. Accordingly, there were no
unexercisable options outstanding at fiscal year end. See "PROPOSAL 3--
APPROVAL OF AMENDMENTS TO THE 1987 STOCK OPTION PLAN."
(3) Value is based on fair market value of the Company's stock of $34.00 per
share on March 31, 1995 (the last trading day of the Last Fiscal Year),
less the exercise price.
25
<PAGE>
EMPLOYMENT AGREEMENTS AND CERTAIN TRANSACTIONS
In connection with the Acumos Incorporated merger, Douglas J. Bartek joined
the Company on April 9, 1992. He has an Employment Agreement with the Company
that provides for a minimum annual base salary of $175,000, which amount is to
be reviewed annually, and a retention bonus of $100,000, of which $50,000 was
paid one year after the merger and $50,000 was paid two years after the merger.
Under the Employment Agreement, the Company may terminate Mr. Bartek's
employment at any time, subject to payment of certain severance amounts if he
is terminated without cause prior to the fifth anniversary of the merger (April
9, 1997). Mr. Bartek may only voluntarily terminate his employment with the
Company prior to June 15, 1995 if his compensation is materially reduced, he is
demoted or he is asked to relocate more than 50 miles away from Fremont,
California ("Certain Reasons"). If Mr. Bartek voluntarily terminates prior to
June 15, 1995 in violation of the Employment Agreement, he is obligated to pay
liquidated damages to the Company. In the event that he is terminated by the
Company, other than for cause, or he voluntarily terminates due to demotion or
similar reasons during the three-year period from April 9, 1994 to April 9,
1997, severance benefits shall be paid equal to one year of base salary. Based
on Mr. Bartek's salary as of 1995 fiscal year end, the amount of severance that
would be payable is $249,400. During the severance payment period, Mr. Bartek's
options (if any) would continue to vest and he would continue to be covered by
medical, disability and life insurance in effect on the date of termination. No
severance payments or benefits are made if Mr. Bartek is terminated for cause
or if he voluntarily terminates for reasons other than Certain Reasons. The
Employment Agreement also contains a covenant not to compete with the Company
until April 9, 1996, unless he is terminated other than for cause or resigns
after a demotion or similar event. In addition, in connection with a stock
purchase agreement with Acumos Incorporated, Mr. Bartek executed a promissory
note on September 4, 1991 in the principal amount of $93,426 bearing interest
at a rate of 8% per annum. That note was assumed by Cirrus Logic in the merger
and was paid by Mr. Bartek during fiscal year 1993.
In August 1994, the Company provided Sam S. Srinivasan, Senior Vice
President, Finance and Administration, Chief Financial Officer, Treasurer and
Secretary, a personal loan of $500,000 at an interest rate of 7.25% per annum
for a term of three (3) years. As of this date, $300,000 plus interest has been
repaid, leaving a principal balance of $200,000.
26
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative total
shareholder return, calculated on a dividend reinvestment basis, from March 31,
1990 (the last day of the Company's 1990 fiscal year) through March 31, 1995
(the last trading day of fiscal 1995) for Cirrus Logic, Inc., the S&P 500
Composite Index (the "S&P 500") and the Semiconductor Subgroup of the S&P
Electronics Index (the "Semiconductor Index"). The graph assumes that $100 was
invested in each of these three on March 31, 1990. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG CIRRUS LOGIC INC., S&P 500 AND S&P ELEC (SEMI/COMPNTS)
<CAPTION>
Measurement period Cirrus S&P S&P ELEC
(Fiscal Year Covered) Logic Inc 500 (SEMI/COMPNTS)
- --------------------- -------- -------- -------------
<S> <C> <C> <C>
Measurement PT -
3/90 $ 100 $ 100 $ 100
FYE 3/91 $ 165 $ 114 $ 102
FYE 3/92 $ 161 $ 127 $ 123
FYE 3/93 $ 215 $ 146 $ 231
FYE 3/94 $ 278 $ 149 $ 309
FYE 3/95 $ 286 $ 172 $ 372
</TABLE>
27
<PAGE>
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act of 1934 requires the Company's executive
officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file an initial report
of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Executive officers, directors
and greater than ten percent shareholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that
during the Last Fiscal Year, all filing requirements applicable to its
officers, directors and ten percent shareholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Sam S. Srinivasan, Secretary
Fremont, California
June 15, 1995
28
<PAGE>
[x] Please mark
votes as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
IT WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS, AND FOR PROPOSALS 2, 3, 4,
5, AND 6.
1. Election of Directors
NOMINEES: Michael L. Hackworth, Suhas S. Patil, C. Gordon Bell, D. James Guzy,
David L. Lyon, C. Woodrow Rea, Jr., Walden C. Rhines, Robert H. Smith.
FOR WITHHELD
[_] [_]
MARK HERE
FOR ADDRESS [_]
______________________________________ CHANGE AND
For all nominees except as noted above NOTE BELOW
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's [_] [_] [_]
1989 Employee Stock Purchase Plan to
increase the number of shares of Common
Stock available for grant under the Plan
by 400,000 shares.
3. To approve an amendment to the Company's [_] [_] [_]
1987 Stock Option Plan to increase the
number of shares of Common Stock available
for grant under the Plan by 900,000 shares.
4. To approve an amendment to the Company's [_] [_] [_]
1990 Directors' Stock Option Plan to
increase the number of shares of Common
Stock available for grant under the Plan
by 40,000 shares.
5. To approve the Company's Executive Variable [_] [_] [_]
Compensation Plan.
6. To ratify the appointment of Ernst & Young [_] [_] [_]
LLP as independent auditors of the Company.
7. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Signature:________________________________Date____________________________
Signature:________________________________Date____________________________
<PAGE>
PROXY
CIRRUS LOGIC, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of CIRRUS LOGIC, INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated June 15, 1995, and the Company's
Annual Report for its fiscal year ended April 1, 1995, and hereby appoints, Sam
S. Srinivasan and Michael L. Hackworth and each of them, proxies and attorneys-
in-fact, with full power to each of substitution, on behalf and in the name of
the undersigned, to represent the undersigned at the 1995 Annual Meeting of
Shareholders of CIRRUS LOGIC, INC., to be held on August 1, 1995, at 3:30 p.m.,
local time at 3100 West Warren Avenue, Fremont, California 94538 and at any
adjournment or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote, if then and there personally
present, on the matters set forth on the reverse side.
-----------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------------
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No.
- -----------
2 Amended 1989 Employee Stock Purchase Plan
3 Amended 1987 Stock Option Plan
4 Amended 1990 Directors' Stock Option Plan
<PAGE>
CIRRUS LOGIC, INC.
AMENDED 1989 EMPLOYEE STOCK PURCHASE PLAN
-----------------------------------------
(As amended March 22, 1990, March 21, 1991,
April 7, 1992, May 25, 1993, May 5, 1994 and
April 17, 1995)
The following constitute the provisions of the 1989 Employee Stock Purchase
Plan of Cirrus Logic, Inc., as amended March 22, 1990, March 21, 1991, April 7,
1992, May 25, 1993 , May 5, 1994 and April 17, 1995.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock, no par value, of the
------------
Company.
(d) "Company" shall mean Cirrus Logic, Inc., a California corporation.
-------
(e) "Compensation" shall mean gross earnings, including payments for
------------
overtime, incentive payments, bonuses and commissions.
(f) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than ninety (90) days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(h) "Employee" shall mean any person, including an officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
-1-
<PAGE>
(i) "Exercise Date" shall mean the last day of each offering period of
-------------
the Plan.
(j) "Offering Date" shall mean the first day of each offering period
-------------
of the Plan.
(k) "Plan" shall mean this Amended 1989 Employee Stock Purchase Plan.
----
(l) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than fifty percent (50%) of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of the first
offering period shall be eligible to participate in such offering period under
the Plan; thereafter, any person who is an Employee fifteen (15) days prior to
the Offering Date of a given offering period shall be eligible to participate in
such offering period under the Plan. The eligibility criteria set forth in this
Paragraph 3(a) is subject to the requirements of the paragraph 5(a) and the
limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 425(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) which permits his rights to
purchase stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by one offering during
----------------
each six month period of the Plan. The first offering period shall commence on
the effective date of the Company's initial public offering pursuant to a
Registration Statement filed with the Securities and Exchange Commission and
shall terminate on December 31, 1989. Subsequent offering periods shall
continue until the Plan is terminated in accordance with paragraph 19 hereof.
The Board of Directors of the Company shall have the power to change the
duration of offering periods with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first offering period to be affected.
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction on the form
provided by the Company and filing it with the Company's payroll office fifteen
(15) days prior to the applicable Offering Date, unless a later time for filing
the subscription agreement is set by the Board for all eligible Employees with
respect to a given offering.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of the
offering to which such authorization is applicable, unless sooner terminated by
the participant as provided in paragraph 10.
6. Payroll Deductions.
------------------
(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the offering
period in an amount not exceeding fifteen percent (15%) of the Compensation
which he received on the payday immediately preceding the Offering Date, and the
aggregate of such payroll deductions during the offering period shall not exceed
fifteen percent (15%) of his aggregate Compensation during said offering period.
(b) All payroll deductions made by a participant shall be credited to
his account under the Plan. A participant may not make any additional payments
into such account.
(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10, or may lower, but not increase, the rate of his
payroll deductions during the offering period by completing or filing with the
Company a new authorization for payroll deduction. The change in rate shall be
effective fifteen (15) days following the Company's receipt of the new
authorization.
7. Grant of Option.
---------------
(a) On the Offering Date of each offering period, each eligible
Employee participating in the Plan shall be granted an option to purchase (at
the per share option price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions to be
accumulated during such offering period (not to exceed an amount equal to
fifteen percent (15%) of his Compensation as of the date of the commencement of
the applicable offering period) by eighty-five percent (85%) of the fair market
value of a share of the Company's Common Stock on the Offering Date, subject to
the limitations set forth in Section 3(b) and 12 hereof. Fair market value of a
share of the Company's Common Stock shall be determined as provided in Section
7(b) herein.
(b) The option price per share of the shares offered in a given
offering period shall be the lower of: (i) eighty-five percent (85%) of the fair
market value of a share of the Common Stock of the Company on the Offering Date;
or (ii) eighty-five percent (85%) of the fair market value of a share of the
Common Stock of the Company on the Exercise Date. The fair market value of the
Company's Common Stock on a given date shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock for such date, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in
the event the Common Stock is listed on a stock exchange, the fair market value
per Share shall be the closing price on such exchange on such date, as reported
<PAGE>
in the Wall Street Journal.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
9. Delivery. Within 30 days after the Exercise Date of each offering
--------
period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his option. Any cash remaining to the credit of a participant's account under
the Plan after a purchase by him of shares at the termination of each offering
period, or which is insufficient to purchase a full share of Common Stock of the
Company, shall be carried forward to the subsequent offering period.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his account under the Plan fifteen (15) days prior to the
Exercise Date of the offering period by giving written notice to the Company.
All of the participant's payroll deductions credited to his account will be paid
to him within thirty (30) days after receipt of his notice of withdrawal and his
option for the current period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the offering
period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his account
will be returned to him or, in the case of his death, to the person or persons
entitled thereto under paragraph 14, and his option will be automatically
terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
offering period in which the employee is a participant, he will be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
his account will be returned to him and his option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
<PAGE>
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 1,400,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in paragraph 18. If the total number of shares which would otherwise be subject
to options granted pursuant to Section 7(a) hereof on the Offering Date of an
offering period exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his spouse.
13. Administration. The Plan shall be administered by the Board of the
--------------
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the grant
of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no member of
the Board who is eligible to participate in the Plan may be a member of the
Committee.
<PAGE>
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of the
offering period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of the offering period.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with paragraph 10.
<PAGE>
16. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance carried forward to the
subsequent offering period, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination. The Board of Directors of the Company may
------------------------
at any time terminate or amend the Plan. Except as provided in paragraph 18, no
such termination can affect options previously granted, nor may an amendment
make any change in any option theretofore granted which adversely affects the
rights of any participant, nor may an amendment be made without prior approval
of the shareholders of the Company (obtained in the manner described in
paragraph 21) if such amendment would increase the number of shares that may be
issued under the Plan.
20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
<PAGE>
21. Shareholder Approval.
--------------------
(a) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(b) If any required approval by the shareholders of the Plan itself or
of any amendment to increase the number of shares reserved for issuance under
the Plan is solicited at any time other than in the manner described in
paragraph 21(a) hereof, then the Company shall, at or prior to the first annual
meeting of shareholders held subsequent to the granting of an option hereunder
to an officer or director do the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection (ii)
hereof not later than the date on which such information is first sent or given
to shareholders.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur of
------------
its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in paragraph 21. It shall continue in effect for a
term of twenty (20) years unless sooner terminated under paragraph 19.
8
<PAGE>
CIRRUS LOGIC, INC.
AMENDED 1987 STOCK OPTION PLAN
(as amended March 22, 1990, March 21, 1991,
April 7, 1992, February 23, 1993, May 25, 1993, May 5, 1994 and April 17, 1995)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement. The Board may also grant Stock
Purchase Rights under this Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee, if one has been appointed, or
-----
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code
----
of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 5 of the Plan, if one is
appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
------------
(e) "Company" shall mean Cirrus Logic, Inc., a California corporation.
-------
(f) "Consultant" shall mean any person who is engaged by the Company
----------
or any subsidiary to render consulting services and is compensated for such
consulting services, and any director of the Company whether compensated for
such services or not; provided that if and in the event the Company registers
any class of any equity security pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended ( the "Exchange Act"), the term Consultant
shall thereafter not include directors who are not compensated for their
services or are paid only a director's fee by the Company.
(g) "Continuous Status as an Employee or Consultant" shall mean the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board;
-1-
<PAGE>
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Incentive Stock Option" shall mean an Option intended to qualify
----------------------
an an incentive stock option within the meaning of Section 422A of the Code.
(j) "Nonstatutory Stock Option" shall mean an Option not intended to
-------------------------
qualify an an Incentive Stock Option.
(k) "Stock Purchase Right" shall mean a right to purchase Common
--------------------
Stock pursuant to Section 10 of the Plan.
(l) "Option" shall mean a stock option granted pursuant to the Plan.
------
(m) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(n) "Optionee" shall mean an Employee or Consultant who received an
--------
Option.
(o) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 425(e) of the Code.
(p) "Plan" shall mean this 1987 Stock Option Plan.
----
(q) "Share" shall mean a share of the Common Stock, as adjusted in
----
accordance with Section 13 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 425(f) of the Code.
3. Grant Limitations. The following limitations shall apply to grants
-----------------
of Options to Employees:
(a) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 400,000 shares.
(b) In connection with his or her initial employment, an Employee may
be granted Options to purchase up to an additional 800,000 shares, which shall
not count against the limit set forth in subsection (a) above.
-2-
<PAGE>
(c) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(d) If an Option is canceled (other than in connection with a
transaction described in Section 13), the canceled Option will be counted
against the limit set forth in Section 3. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
4. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 9,122,444 shares of Common Stock. The Shares may be
authorized, but unissued, or reaquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.
5. Administration of the Plan.
---------------------------
(a) Procedure. The Plan shall be administered by the Board of
---------
Directors of the Company.
(i) Subject to subparagraph (ii), the Board of Directors
may appoint a Committee consisting of not less than two members of the Board of
Directors to administer the Plan on behalf of the Board of Directors, subject to
such terms and conditions as the Board of Directors may prescribe. Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board of Directors. Members of the Board who are either eligible for Options or
have been granted Options or Stock Purchase Rights may vote on any matters
affecting the administration of the Plan or the grant of any Options or Stock
Purchase Rights pursuant to the Plan, except that no such member shall act upon
the granting of an Option or Stock Purchase Right to himself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting of Options
or Stock Purchase Rights to him.
(ii) Notwithstanding the foregoing subparagraph (i), if and
in any event the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, from the effective date of such registration
until six months after the termination of such registration, any grants of
Options or Stock Purchase Rights to officers or directors shall only be made by
the Board of Directors; provided, however, that if a majority of the Board of
Directors is eligible to participate in this Plan or any other stock
-3-
<PAGE>
option or other stock plan of the Company or any of its affiliates, or has been
eligible at any time within the preceding year, any grants of Options or Stock
Purchase Rights to directors must be made by, or only in accordance with the
recommendation of, a Committee consisting of three or more persons, who may but
need not be directors or employees of the Company, appointed by the Board of
Directors and having full authority to act in the matter, none of whom is
eligible to participate in this Plan or any other stock option or other stock
plan of the Company or any of its affiliates, or has been eligible at any time
within the preceding year. Any Committee administering the Plan with respect to
grants to officers who are not also directors shall conform to the requirements
of the preceding sentence. Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors.
(iii) Subject to the foregoing subparagraphs (i) and (ii),
from time to time the Board of Directors may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
(b) Powers of the Board. Subject to the provisions of the Plan,
-------------------
the Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, Nonstatutory Stock Options or Stock Purchase Rights; (ii) to
determine, upon review of relevant information and in accordance with Section
9(b) of the Plan, the fair market value of the Common Stock; (iii) to determine
the exercise price per share of Options and Stock Purchase Rights to be granted,
which exercise price shall be determined in accordance with Section 9(a) of the
Plan; (iv) to determine the Employees or Consultants to whom and the time or
times at which, Options or Stock Purchase Rights shall be granted and the number
of shares to be represented by each Option or Stock Purchase Right; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Option
or Stock Purchase Right granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option or Stock Purchase
Right; (viii) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option, consistent with the provisions of Section 6 of the
Plan; (ix) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board; and (x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of Board's Decision. All Decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and
Stock Purchase Rights holders and any other holders of any Options or Stock
Purchase Rights granted under the Plan.
-4-
<PAGE>
6. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted only to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee or Consultant who has been granted an
Option or Stock Purchase Right may, if he is otherwise eligible, be granted one
or more additional Options or Stock Purchase Rights.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more incentive stock options
during any calendar year.
(c) Section 6(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
incentive stock option. Section 6(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonstatutory Stock Option.
(d) The Plan shall not confer upon any Optionee, Purchaser or
holder of a Stock Purchase Right any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with his right or the Company's right to terminate his employment or
consulting relationship at any time.
7. Term of Plan. The Plan shall become effective upon the earlier to occur
------------
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 19 of the Plan. It shall continue in effect
for a term of 10 years unless sooner terminated under Section 15 of the Plan.
8. Term of Option or Stock Purchase Right. The term of each Incentive
--------------------------------------
Stock Option shall be 10 years from the date of grant thereof or such
shorter term as may be provided in the Incentive Stock Option Agreement. The
term of each Nonstatutory Stock Option shall be 10 years and 1 day from the date
of grant thereof or such shorter term as may be provided in the Nonstatutory
Stock Option Agreement. However, in the case of an Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than 10% of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, (a) if the Option is an Incentive Stick Option, the term
of the Option shall be 5 years from the date of grant thereof or such shorter
term as may be provided in the Incentive Stock Option Agreement, or (b) if the
Option is a Nonstatutory Stock Option, the term of the Option shall be 5 years
and 1 day from the date of grant thereof or such shorter term as may be provided
in the Nonstatutory Stock Option
-5-
<PAGE>
Agreement. The term of each Stock Purchase Right shall be as provided in
Section 11 of the Plan.
9. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option or Stock Purchase Right shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 100% of the fair market value per
Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the fair market value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option or Stock Purchase
Right
(A) granted to a person who, at the time of the grant of such
Option or Stock Purchase Right, owns stock representing more than 10% of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 100% of the fair market value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall
be no less than 85% of the fair market value per Share on the date of grant.
(iii) In the case of an Option or Stock Purchase Right granted on or
after the effective date of registration of any class of equity security of the
Company pursuant to Section 12 of the Exchange Act and prior to six months after
the termination of such registration, the per Share exercise price shall be no
less than 100% of the fair market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on
-6-
<PAGE>
a stock exchange, the fair market value per Share shall be the closing price on
such exchange on the date of grant of the Option or Stock Purchase Right, as
reported in the Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check,
promissory note, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option or Stock Purchase Right shall be exercised, or any combination
of such methods of payment, or such other consideration and method of payment
for the issuance of Shares to the extent permitted under Sections 408 and 409 of
the California General Corporation Law. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company (Section 315(b)
of the California General Corporation Law).
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan; provided, however, that an Incentive Stock Option granted prior to January
1, 1987 (the "Sequential Option") shall not be exercisable while there is
outstanding any Incentive Stock Option which was granted, before the granting of
the Sequential Option, the the same Optionee to purchase stock of the Company,
any Parent or Subsidiary, or any predecessor corporation of such corporations.
For purposes of this provision, an Incentive Stock Option shall be treated as
outstanding until such option is exercised in full or expires by reason of lapse
of time.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee or Consultant
(as the case may be), such Optionee may, but only within 30 days (or such other
period of time, not exceeding 3 months in the case of an Incentive Stock Option
or 6 months in the case of a Nonstatutory Stock Option, as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option) after the date of such termination (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of such termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
10(b) above, in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within 3 months (or
such other period of time not exceeding 12 months as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option) from the date of such termination (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of termination, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) during the term of the Option who is at the time of his death
an Employee or Consultant of the Company and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within 12 months following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an Employee or
Consultant twelve (12) months after the date of death, subject to the limitation
set forth in Section 5(b); or
(ii) within 30 days (or such other period of time not exceeding 3
months as determined by the Board, with such determination in the case of an
Incentive
-8-
<PAGE>
Stock Option being made at the time of grant of the Option) after the
termination of Continuous Status as an Employee or Consultant,, the Option may
be exercised, at any time within 10 months following the date of death (but in
no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. After the Board of Directors determines that
------------------
it will offer an Employee or Consultant the right to purchase Shares under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions relating to the offer, including the number of Shares that such
person shall be entitled to purchase, and the time within which such person must
accept such offer, which shall in no event exceed 90 days from the date upon
which the Board of Directors or its Committee made the determination to grant
the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Board of
Directors.
(b) Issuance of Shares. Forthwith after payment therefor, the Shares
------------------
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State
withholding obligations of the Company as a condition to such purchase.
(c) Repurchase Option. Unless the Board of Directors or its
-----------------
Committee determines otherwise, the Restricted Stock Purchase Agreement shall
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the Purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the Purchaser and may be paid by cancellation of any
indebtedness of the Purchaser to the Company. The repurchase option shall lapse
at such a rate as the Board of Directors may determine.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Board of Directors.
(e) Rights as a Shareholder. Until the issuance (as evidenced by the
-----------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the shares as to which
a Stock Purchase right has been exercised, no right to vote or to receive
dividends or any other rights as a stockholder shall exist with respect to
shares of Common Stock subject to a Stock Purchase Right, notwithstanding the
exercise of a Stock Purchase Right. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 13 of the Plan.
-9-
<PAGE>
(f) Shares Available Under the Plan. Exercise of a Stock Purchase
-------------------------------
Right in any manner shall result in a decrease in the number of Shares that the
reafter shall be available for reissuance under the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Options
--------------------------------------------------------
and Stock Purchase rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee or holder of a Stock Purchase Right, only by the Optionee or holder of
a Stock Purchase Right.
13. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each outstanding Option and Stock
Purchase Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase right, as well as
the price per share of Common Stock covered by each such outstanding Option or
Stock Purchase right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible Securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the
Company, the Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such instances,
declare that any Option or Stock Purchase right shall terminate as of a date
fixed by the Board and give each Optionee or holder of a Stock Purchase Right
the right to exercise his Option or Stock Purchase Right as to all or any part
of the Common Stock subject to such Option or Stock Purchase Right, including
Shares as to which the Option or Stock Purchase Right would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, the Options and Stock Purchase Rights shall be assumed or an
equivalent Option or Stock Purchase Right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sold discretion and in lieu of such
assumption or substitution, that the Optionee or holder of Stock Purchase Right
shall
-10-
<PAGE>
have the right to exercise the Option or Stock Purchase Right as to all of
the Common Stock, including Shares as to which the Option or Stock Purchase
Right would not otherwise be exercisable. If the Board makes an Option or Stock
Purchase Right fully exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board shall notify the Optionee or
holder of a Stock Purchase Right that the Option shall be fully exercisable for
a period of 15 days from the date of such notice, and the Option or Stock
Purchase Right will terminate upon the expiration of such period.
14. Time of Granting Options and Stock Purchase Rights. The date of
--------------------------------------------------
grant of an Option or Stock Purchase right shall, for all purposes, be the date
on which the Board makes the determination granting such Option or Stock
Purchase Right. Notice of the determination shall be given to each Employee or
Consultant to whom an Option or Stock Purchase Right is so granted within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 13 of the Plan, shall
require shareholder approval in the manner described in Section 19 of the Plan.
(b) Shareholder Approval. If any amendment requiring shareholder
--------------------
approval under Section 15(a) of the Plan is made then shareholder approval
shall be solicited as described in Section 19 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options and Stock Purchase Rights
already granted and such Options and Stock Purchase rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee, Purchaser or holder of the Stock
Purchase right, and the Board, which agreement must be in writing and signed by
the Optionee, Purchaser or holder of the Stock Purchase Right and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to
-11-
<PAGE>
represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
18. Option Agreement and Stock Purchase Agreement. Options shall be
---------------------------------------------
evidenced by written option agreements in such form as the Board shall approve.
Upon exercise of Stock Purchase Rights, a Purchaser shall execute a Restricted
Stock Purchase Agreement in such form as the Board of Directors shall approve.
19. Shareholder Approval.
--------------------
(a) If shareholder approval is obtained at a duly held shareholders'
meeting, it must be obtained by the affirmative vote of the holders of a
majority of the outstanding shares of the Company, or if such shareholder
approval is obtained by written consent, it must be obtained by the unanimous
written consent of all shareholders of the Company; provided, however, that
approval at a meeting or by written consent may be obtained by a lesser degree
of shareholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 422A of the Code.
(b) Shareholder approval shall be solicited substantially in
accordance with Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time other than in the manner
described in Section 19(b) hereof, then the Company shall, at or prior to the
first annual meeting of shareholders held subsequent to the granting of an
Option hereunder to an officer or director, do the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to be
voted with respect to approval of disapproval of the Plan or amendment were then
begin solicited) by
-12-
<PAGE>
the rules and regulations in effect under Section 14(a) of the Exchange Act at
the time such information is furnished; and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection (i)
hereof not later than the date on which such information is first sent or given
to shareholders.
20. Information to Optionees and Holders of Stock Purchase Rights. The
-------------------------------------------------------------
Company shall provide to each Optionee and each holder of a Stock Purchase
Right, during the period for which such Optionee or holder has one or more
Options or Stock Purchase Rights outstanding, copies of all annual reports and
other information which are required by applicable law or regulation to be
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options and Stock Purchase Rights
under the Plan is limited to key employees whose duties in connection with the
Company assure their access to equivalent information.
-13-
<PAGE>
CIRRUS LOGIC, INC.
1990 DIRECTORS' STOCK OPTION PLAN
(As adopted by the Board of Directors
on January 16, 1990)
(As amended May 25, 1993 and April 17, 1995)
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock options."
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Cirrus Logic, Inc., a California
-------
corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
--------
(g) "Employee" shall mean any person, including officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
------
(j) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
<PAGE>
(k) "Optionee" shall mean an Outside Director who receives an Option.
--------
(l) "Outside Director" shall mean a Director who is not an Employee.
----------------
(m) "Plan" shall mean this 1990 Directors' Stock Option Plan.
----
(n) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
For purposes of the Plan, the masculine pronoun wherever used shall be read to
include the feminine pronoun.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
-------------------------
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 185,000 Shares (the "Pool") of Common Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
either Special Option Grants or Automatic Option Grants. Special Option Grants
shall be made at the recommendation of the Board of Directors (exclusive of the
Optionee), in accordance with subsection (d) , hereof. Automatic Option Grants
shall be made in accordance with subsection (c) , hereof.
(c) Automatic Option Grants. All grants of Options under this
-----------------------
subsection shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
2
<PAGE>
(ii) Each Outside Director shall be automatically granted an Option
to purchase 10,000 shares upon the date (on or after the effective date of this
Plan) on which such person first becomes a Director, whether through election by
the shareholders of the Company or appointment by the Board of Directors to fill
a vacancy.
(iii) Each Outside Director shall automatically receive, upon his
annual reelection to the Board, an Option to purchase 2,500 Shares of the
Company's Common Stock.
(iv) The terms of an Option granted hereunder shall be as follows:
(A) the term of the Option shall be five (5) years;
(B) the Option shall be exercisable only while the Outside
Director remains an Outside Director of the Company or within seven (7) months
of the date the Outside Director ceases to serve as a Director, except as set
forth in Section 9;
(C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Option;
(D) any Option granted pursuant to subsections 4 (c) (ii) or
(iii) above shall become immediately exercisable; and
(E) stock subject to any Option granted pursuant to subsections
4 (c)(ii) or (iii) above shall vest cumulatively as to 25% of the aggregate
number of Shares subject to the Option on the first annual anniversary of the
date of grant of such Option and as to 1/48 of the total Shares each month
thereafter; provided, however, that if the Optionee ceases to serve as an
Outside Director of the Company for any reason other than death, vesting shall
cease as of date of such termination. In the event that Optionee's service as
an Outside Director shall cease due to death, vesting shall continue in
accordance with the rules set out in subsection 8 (c) hereof.
(d) Special Option Grants. Notwithstanding any limitations set forth
---------------------
elsewhere in this Plan, Special Option Grants shall be made at the discretion of
the Board (exclusive of the Optionee) provided, however, that no Special Option
shall become exercisable unless approved by the shareholders of the Company in
accordance with Section 16 of the Plan. Special Options may contain such terms
as are specified by the Board and approved by the shareholders, which may vary
from the terms set forth in this Plan for Automatic Options.
(e) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section 7
(b) of the Plan, the fair
3
<PAGE>
market value of the Common Stock; (ii) to determine the exercise price per share
of Options to be granted, which exercise price with respect to Automatic Option
Grants shall be determined in accordance with Section 7 (a) of the Plan; (iii)
to interpret the Plan; (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted hereunder; and (vi) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(f) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. Eligibility. Options may by granted only to Outside Directors.
-----------
Options shall be granted as Automatic Options in accordance with the terms set
forth in Section 4 (c) hereof or as Special Options in accordance with the terms
set forth in Section 4 (d) hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier of (i)
------------
its adoption by the Board or (ii) its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 12 of the Plan.
7. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Automatic Option shall be 100% of the fair
market value per Share on the date of grant of the Option. The per share
exercise price for Special Options may be equal to or less than 100% of such
fair market value.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
closing bid price of the Common Stock in the over-the-counter market on the date
of grant, as reported in The Wall Street Journal (or, if not so reported, as
-----------------------
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System) or, in the event the Common Stock is traded on the
NASDAQ National Market System or listed on a stock exchange, the fair market
value per Share shall be the closing price on such system or exchange on the
date of grant of the Option, as reported in The Wall Street Journal.
-----------------------
4
<PAGE>
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months) , or any combination of such methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder.
------------------------------------------------
Any Option granted hereunder shall be exercisable at such times as are set forth
in Section 4 hereof; provided, however, that no Options shall be exercisable
until shareholder approval of the Plan in accordance with Section 16 hereof has
been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 (c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
-----------------------------------
ceases to serve as a Director or is unable to continue his service as a Director
with the Company as a result of his total and permanent disability (as defined
in Section 22 (e) (3) of the Internal Revenue Code of 1986, as amended) , he may
exercise his Option, but only within seven (7) months after the date he ceases
to be a Director of the Company, and only to purchase vested Shares. To the
extent that he was not entitled to exercise an Option at the date of such
termination, or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Death of Optionee. Notwithstanding the provisions of Section 8
-----------------
(b) above, in the event of the death of an Optionee;
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(i) during the term of the Option, who is at the time of his death an
Outside Director of the Company and who shall have been in Continuous Status as
a Director since the date of grant of the Option, the Option may be exercised,
at any time within seven (7) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the Shares that had vested
at the date of termination; or
(ii) within seven (7) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within seven (7)
months following the termination of the Optionee's Continuous Status as a
Director, or three (3) months after the date of death, whichever is later, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the Shares that had
vested at the date of termination.
(d) Rule 16b-3. Any option exercise by an Outside Director under
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this Plan shall comply with Section 16 (b) of the Exchange Act and Rule 16b-3
(or any successor rule) promulgated thereunder ("Rule 16b-3") (or any successor
rule) promulgated thereunder ("Rule 16b-3") and shall contain any such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
9. Non-Transferability of Options. The Option may not be sold, pledged,
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assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
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<PAGE>
In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation refuses to
assume the Option or to substitute an equivalent Option, the Board shall, in
lieu of such assumption or substitution, provide that the Optionee shall have
the right to exercise the Option as to all of the Optioned Shares, including
Shares as to which the Option would not otherwise be exercisable, or that the
restrictions on unvested Shares shall be removed, as the case may be. If the
Board makes an Option fully exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify the Optionee
that the Option shall be fully exercisable for a period of fifteen (15) days
from the date of such notice, and the Option will terminate upon the expiration
of such period.
11. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
12. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend, alter, suspend
-------------------------
or discontinue the Plan, but no amendment, suspension or discontinuation shall
be made which would impair the rights of any Optionee under any grant
theretofore made, without his or her consent. To the extent necessary and
desirable to comply with Rule 16b-3, the Company shall obtain shareholder
approval of any Plan amendment or option grant in such manner and to such a
degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
7
<PAGE>
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Shareholder Approval.
--------------------
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the first annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If such
shareholder approval is obtained at a duly held shareholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. If
such shareholder approval is obtained by written consent, it may be obtained by
the written consent of the holders of a majority of the outstanding shares of
the Company.
(b) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14 (a) of the Exchange Act
and the rules and regulations promulgated thereunder.
17. Information to Optionees. The Company shall provide to each
------------------------
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports to shareholders, proxy statements and
other information provided to all shareholders of the Company.
8
