<PAGE>
As filed with the Securities and Exchange Commission on September 3, 1999
1999 Registration No. 333-
================================================================================
<TABLE>
<CAPTION>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------------
CIRRUS LOGIC, INC.
(Exact name of Registrant as specified in its charter)
<S> <C> <C>
Delaware 77-0024818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3100 W. Warren Ave.
Fremont, California 94538
(510) 623-8300
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
----------------------
DAVID D. FRENCH
Chief Executive Officer
Cirrus Logic, Inc.
3100 W. Warren Ave.
Fremont, California 94538
(510) 623-8300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
----------------------
Copies to:
Michael J. Danaher, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
----------------------
</TABLE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are offered pursuant to
dividend or interest reinvestment plans, check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to to be Price Offering Registration
be Registered Registered Per Security (1) Price (1) Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value.............. 1,210,228 $9.9375 $12,026,641 $3,344
=========================================================================================================
</TABLE>
(1) The price of $9.9375 per share, which was the average of the high and low
prices of the Registrant's Common Stock on the Nasdaq National Market on
August 27, 1999 is set forth solely for the purposes of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
================================================================================
<PAGE>
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY AN
OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
1,210,228 SHARES
CIRRUS LOGIC, INC.
COMMON STOCK
-------------------
This Prospectus relates to the public offering, which is not being
Registered underwritten, of 1,210,228 shares (the "Shares") of Common Stock,
$0.001 par value (the "Common Stock") of Cirrus Logic, Inc. (the "Company"). The
Shares are outstanding shares of Company Common Stock that may be sold from time
to time by or on behalf of certain stockholders of the Company or by pledges,
donees, transferees or other successors in interest that receive such Shares as
a gift, distribution or other non-sale related transfer (the "Selling
Stockholders"). The Selling Stockholders acquired the Shares in a private
transaction in which the Company acquired AudioLogic, Inc., a corporation duly
organized and existing under the laws of Colorado ("AudioLogic").
The Shares may be offered by the Selling Stockholders from time to time in
transactions on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular broker-
dealer might be in excess of customary commissions). See "Selling Stockholders"
and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. In addition, the Company has agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
On August 27, 1999, the closing bid price of the Company's Common Stock on
the Nasdaq National Market was $10.0625 per share. The Common Stock is traded
under the Nasdaq symbol "CRUS."
<PAGE>
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September _, 1999
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files or filed, as the case may be, reports,
proxy statements and other information with the Securities & Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
with the Commission by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at 500
West Madison Street, Room 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, Washington, D.C. 20549, at prescribed rates, or on the World Wide Web at
http://www.sec.gov. Copies of other materials concerning the Company can be
inspected at the offices of the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20006.
-------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
000-17795) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended March 27,
1999;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended June
26, 1999;
3. The Company's Current Reports on Form 8-K filed on August 3, 1999
and September 3, 1999; and
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed on May 1, 1989, including any
amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus but prior to
the termination of the offering to which this Prospectus relates shall be deemed
to be incorporated by reference in this Prospectus and to be part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, in its unmodified form, to constitute a part of this
Prospectus.
Upon written or oral request, the Company will provide without charge to
each person to whom a copy of this Prospectus is delivered a copy of any of the
documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Requests for such documents should be submitted to Glenn Jones,
Secretary, at the principal executive offices of the Company in writing at
Cirrus Logic, Inc., 3100 W. Warren Ave., Fremont, California 94538 or by
telephone at (510) 623-8300.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements that involve risks and uncertainties. The
statements contained in this Prospectus or incorporated by reference herein that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document or incorporated by reference herein are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth in
"Risk Factors" and elsewhere in this Prospectus.
-4-
<PAGE>
THE COMPANY
The Company designs and manufactures integrated circuits that employ
precision linear and advanced mixed-signal processing technologies. The
Company's products, sold under its own name and the Crystal product brand,
enable system-level applications in mass storage (magnetic and optical), audio
(consumer, professional and personal computer) and precision data conversion
(industrial and communications).
The Company serves a broad customer base in the markets of mass storage,
industrial, and audio markets. Key customers among these markets include Acer,
Analogic, Apple, Chesapeake Sciences, Dell, ECI Telecom, Fujitsu, Hewlett
Packard, Hitachi, IBM, Intel, JVC, Nokia, Scientific Atlanta, Seagate, Sony and
Western Digital.
The Company targets large existing markets, as well as emerging markets
that derive value from the Company's expertise in advanced mixed-signal
processing, embedded processors and application-specific algorithms. The
Company applies its analog, digital, and mixed-signal design capabilities,
systems-level engineering and software expertise to create highly integrated
solutions that enable its customers to differentiate their products and reduce
their time to market. These solutions are implemented primarily in Integrated
Circuits (ICs) and related software, but may also include subsystem modules or
system equipment designs and related software.
Within the major markets currently served, represented by mass storage,
audio and industrial electronics, the Company's products address key system-
level applications including magnetic and optical mass storage, consumer audio
and industrial measurement and control, and to a lesser extent product areas
addressing multimedia (graphic, video, and audio), wide area and local area
networking, handheld and portable computing and communication devices.
In the second quarter of fiscal 1999, the Company launched a major
initiative to refine its business strategy and revitalize growth through
concentration on its leadership positions in embedded applications for mass
storage, audio and precision data conversion markets. This initiative included
the phasing out of certain non-profitable and non-strategic businesses along
with reducing the Company's total fixed wafer fabrication capacity by
approximately 70%. The Company has since divested its Communications and PC
Modems businesses in addition to outsourcing its PC graphics support. Further,
the Company's future direction is to de-emphasize new product developments
targeted primarily for the PC motherboard and emphasize non-PC motherboard
market opportunities in mass storage, audio and precision data conversion.
However, sales of many of the Company's products will continue to depend
largely on the sales of PCs.
-5-
<PAGE>
During the first quarter of fiscal 2000, the Company substantially
completed the remaining restructuring activities previously announced in the
second quarter of fiscal 1999. The Company finalized negotiations with
International Business Machines Corporation ("IBM") to restructure the Company's
interest in the MiCRUS joint venture and also finalized negotiations with Lucent
Technologies, Inc. ("Lucent") to terminate the Company's interest in the Cirent
joint venture.
The Company was reincorporated in the state of Delaware on February 17,
1999. Prior to this date, the Company had been incorporated in California since
February 3, 1984, as the successor to a research corporation which had been
incorporated in Utah in 1981. The Company's principal executive offices are
located at 3100 W. Warren Ave., Fremont, California 94538. Its telephone number
at that address is (510) 623-8300.
-6-
<PAGE>
RISK FACTORS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements that involve risks and uncertainties. The
statements contained in this Prospectus or incorporated by reference herein that
are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document or incorporated by reference herein are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. The Company's
actual results could differ materially from those anticipated in these forward-
looking statements as a result of certain factors, including those set forth in
"Risk Factors" and elsewhere in this Prospectus.
Variability of Quarterly Operating Results. The Company's quarterly
revenues and operating results have varied significantly in the past and are
likely to vary substantially from quarter to quarter in the future. The
Company's operating results are affected by a wide variety of factors, many of
which are outside of the Company's control, including but not limited to,
economic conditions and overall market demand in the United States and
worldwide, the Company's ability to introduce new products and technologies on a
timely basis, changes in product mix, fluctuations in manufacturing costs which
affect the Company's gross margins, declines in market demand for the Company's
and its customers' products, sales timing, the level of orders which are
received and can be shipped in a quarter, the cyclical nature of both the
semiconductor industry and the markets addressed by the Company's products,
product obsolescence, price erosion, and competitive factors. The Company's
operating results in the rest of fiscal 2000 are likely to be affected by these
factors as well as others.
The Company must order wafers and build inventory well in advance of
product shipments. Because the Company's markets are volatile and subject to
rapid technology and price changes, there is a risk that the Company will
forecast inaccurately and produce excess or insufficient inventories of
particular products. This inventory risk is heightened because many of the
Company's customers place orders with short lead times. Such inventory
imbalances have occurred in the past and in fact contributed significantly to
the Company's operating losses in fiscal 1997 and 1996. These factors increase
not only the inventory risk but also the difficulty of forecasting quarterly
operating results. Moreover, as is common in the semiconductor industry, the
Company frequently ships more products in the third month of each quarter than
in either of the first two months of the quarter, and shipments in the third
month are higher at the end of that month. The concentration of sales in the
last month of the quarter contributes to difficulty in predicting the Company's
quarterly revenues and results of operations. The Company's success is highly
dependent upon its ability to develop complex new products, to introduce them to
the marketplace ahead of the competition, and to have them selected for design
into products of leading system manufacturers. Both revenues and margins may be
affected significantly if new product introductions are delayed or if the
Company's products are not designed into successive generations of products of
the Company's customers. These factors have become increasingly important to the
Company's results of operations because the rate of change in the markets served
by the Company continues to accelerate.
Risks Related to Manufacturing and Raw Materials Procurement. During fiscal
1998 and fiscal 1999, excess production capacity in the industry led to
significant price competition between merchant semiconductor foundries and the
Company believes that in some cases this resulted in pricing from certain
foundries that was lower than the Company's cost of production from its
manufacturing joint ventures. The Company experienced pressures on its selling
prices during fiscal 1998 and fiscal 1999, which had a negative impact on its
-7-
<PAGE>
results of operations and it believes that this was partially due to the fact
that certain of its competitors were able to obtain more favorable pricing from
such foundries.
The Company's current strategy is to fulfill its wafer requirements using
outside merchant wafer suppliers, including the Company's former joint venture
partners. The Company also uses other outside vendors to package the wafer die
into integrated circuits and to perform the majority of the Company's product
testing.
The Company's results of operations could be adversely affected in the
future, as they have been so affected in the past, if particular suppliers are
unable to provide a sufficient and timely supply of product, whether because of
raw material shortages, capacity constraints, unexpected disruptions at the
plants, delays in qualifying new suppliers or other reasons, or if the Company
is forced to purchase wafers or packaging from higher cost suppliers or to pay
expediting charges to obtain additional supply, or if the Company's test
facilities are disrupted for an extended period of time. Because of the
concentration of sales at the end of each quarter, a disruption in the Company's
production or shipping near the end of a quarter could materially reduce the
Company's revenues for that quarter. Production may be constrained even though
capacity is available at one or more wafer manufacturing facilities because of
the difficulty of moving production from one facility to another. Any supply
shortage could adversely affect sales and operating profits. The Company's
reliance upon outside vendors for assembly and test could also adversely impact
sales and operating profits if the Company was unable to secure sufficient
access to the services of these outside vendors.
In connection with the financing of its operations, the Company has
borrowed money and entered into substantial equipment lease obligations. The
Company's ability to meet its debt service and other obligations will be
dependent upon the Company's future performance, which will be subject to
financial, business, and other factors affecting the operations of the Company,
many of which are beyond its control.
Product development in the Company's markets is becoming more focused on
the integration of functionality on individual devices and there is a general
trend towards increasingly complex products. The greater integration of
functions and complexity of operations of the Company's products increase the
risk that latent defects or subtle faults could be discovered by customers or
end users after volumes of product have been shipped. If such defects were
significant, the Company could incur material recall and replacement costs for
product warranty. The Company's relationship with customers could also be
adversely impacted by the recurrence of significant defects.
Dependence on PC Market. Sales of many of the Company's products will
continue to depend largely on sales of personal computers (PCs). Reduced growth
in the PC market could affect the financial health of the Company as well as its
customers. Moreover, as a component supplier to PC OEMs and to peripheral
device manufacturers, the Company is likely to experience a greater magnitude of
fluctuations in demand than the Company's customers themselves experience. In
addition, many of the Company's products are used in PCs for the consumer
market, and the consumer PC market is more volatile than other segments of the
PC market.
Other integrated circuit (IC) makers, including Intel Corporation, have
expressed their interest in integrating through hardware functions, adding
through special software functions, or kitting components to provide some
multimedia or communications features into or with their microprocessor
products. Successful integration of these functions could substantially reduce
the Company's opportunities for IC sales in these areas. In addition, the
Company's de-emphasis of PC products and its focus on non-PC markets could have
an adverse affect on the Company's PC product sales as customers seek other
supply sources with greater commitments to the PC market.
-8-
<PAGE>
A number of PC OEMs buy products directly from the Company and also buy
motherboards, add-in boards or modules from suppliers who in turn buy products
from the Company. Accordingly, a significant portion of the Company's sales may
depend directly or indirectly on the sales to a particular PC OEM. Since the
Company cannot track sales by motherboard, add-in board or module manufacturer,
the Company may not be fully informed as to the extent or even the fact of its
indirect dependence on any particular PC OEM, and, therefore, may be unable to
assess the risks of such indirect dependence.
Risks Related to Mass Storage Market. The mass storage market has
historically been characterized by a relatively small number of magnetic disk
drive manufacturers and by periods of rapid growth followed by periods of
oversupply and contraction. Growth in the mass storage market is directly
affected by growth in the PC market. Furthermore, the price competitive nature
of the disk drive industry continues to put pressure on the price of all disk
drive components. Recent market demands for sub-$1,000 PCs puts further
pressure on the price of disk drives and disk drive components.
Revenues from mass storage products in fiscal 2000 are likely to depend
heavily on the success of certain 3.5 inch magnetic disk drive products selected
for use by various customers, which in turn depends upon obtaining timely
customer qualification of the new products and bringing the products into volume
production timely and cost effectively.
The Company's revenues from mass storage products are dependent on the
successful introduction by its customers of new disk drive products and can be
impacted by the timing of customers' transition to new disk drive products.
Recent efforts by certain of the Company's customers to develop their own ICs
for mass storage products could in the future reduce demand for the Company's
mass storage products, which could have an adverse effect on the Company's
revenues and gross margins from such products. In addition, in response to the
current market trend towards integrating hard disk controllers with
microcontrollers, the Company's revenues and gross margins from its mass storage
products will be dependent on the Company's ability to introduce such integrated
products in a commercially competitive manner. Finally, while the Company
believes it is well positioned for the trend toward integration of HDD
electronic components with the first product on the market to combine the three
primary electronic components, some of the Company's competitors have also
announced plans to introduce integrated drive electronics components. Some of
these competitors have substantially greater resources to accomplish the
technical obstacles of integration and greater access to the advanced
technologies necessary to provide integrated HDD electronic components.
Risks Related to Audio Products. Most of the Company's revenues in the
audio market derive from the sales of audio codecs and integrated 16-bit codec-
plus-controller solutions for the PC market and consumer electronics equipment.
In the PC market, the transition to the AC-link codecs attached to core logic
using the multimedia features of the processor and single chip solutions are
lowering the average selling price in the audio IC market. The Company's
revenues from the sale of PC audio products in fiscal 2000 are likely to be
significantly affected by this transition to core logic connected audio and by
the introduction of cost reduced, fully-integrated, single- chip audio ICs.
Moreover, aggressive competitive pricing pressures have adversely affected and
may continue to adversely affect the Company's revenues and gross margins from
the sale of audio ICs.
Three-dimensional, spatial-effects audio became an important feature in
fiscal 1999, primarily in products for the consumer electronics marketplace. If
the Company's spatial-effects audio products do not meet the cost or performance
requirements of the market, revenues from the sale of audio products could be
adversely affected.
-9-
<PAGE>
Risks Related to Precision Mixed-Signal Products. Precision Data Converter
Products is a very broad market with many well established competitors. The
Company's ability to compete in this market will be adversely affected if it
cannot establish broad sales channels or if it does not develop and maintain a
broad enough product line to compete effectively. In addition, the customer
product design in time is long. Customer delays in product development and
introductions creates risk relative to the Company's revenue plans. Further,
the Company's products in this market are technically very complex. The
complexity of the products contributes to risks in getting products to market on
a timely basis, which could impact the Company's revenue plans. The scarcity of
analog engineering talent also contributes to risks related to product
development timing in this market.
Intellectual Property Matters. The semiconductor industry is characterized
by frequent litigation regarding patent and other intellectual property rights.
The Company and certain of its customers from time to time have been notified
that they may be infringing certain patents and other intellectual property
rights of others. In addition, customers have been named in suits alleging
infringement of patents or other intellectual property rights by customer
products. Certain components of these products have been purchased from the
Company and may be subject to indemnification provisions made by the Company to
its customers. Although licenses are generally offered in situations where the
Company or its customers are named in suits alleging infringement of patents or
other intellectual property rights, there can be no assurance that any licenses
or other rights can be obtained on acceptable terms. An unfavorable outcome
occurring in any such suit could have an adverse effect on the Company's future
operations and/or liquidity.
Foreign Operations and Markets. Because many of the Company's
subcontractors and several of the Company's key customers which collectively
account for a significant percentage of the Company's revenues are located in
Japan and other Asian countries, the Company's business is subject to risks
associated with many factors beyond its control. International operations and
sales may be subject to political and economic risks, including political
instability, currency controls, exchange rate fluctuations, and changes in
import/export regulations, tariff and freight rates. Although the Company buys
hedging instruments to reduce its exposure to currency exchange rate
fluctuations, the Company's competitive position can be affected by the exchange
rate of the U.S. dollar against other currencies, particularly the Japanese yen.
Further, to the extent that volatility in foreign financial markets was to have
an adverse impact on economic conditions in a country or geographic region in
which the Company does business, demand for and supply of the Company's products
could be adversely impacted, which would have a negative impact on the Company's
revenues and earnings.
A significant number of the Company's customers and suppliers are in Asia.
The recent turmoil in the Asian financial markets does not appear to have had a
material impact on the Company's sales orders or bookings. However, the
financial instability in these regions may have an adverse impact on the
financial position of end users in the region which could impact future orders
and/or the ability of such users to pay the Company or the Company's customers,
which could also impact the ability of such customers to pay the Company. The
Company performs extensive financial due diligence on customers and potential
customers and generally requires material sales to Asia to either be secured by
letters of credit or transacted on a cash on demand basis. Given the prior
situation in Asia, the Company now requires that the letters of credit be
established through American banking institutions. During this volatile period,
the Company expects to carefully evaluate the collection risk related to the
financial position of customers and potential customers. The results of such
evaluations will be considered in structuring the terms of sale, in determining
whether to accept sales orders, in evaluating the recognition of revenue on
sales in the area and in evaluating the collectability of outstanding accounts
receivable from the region. In situations where significant collection risk
exists, the Company will either not accept the sales order, defer the
recognition of related revenues, or, in the case of previously transacted sales,
establish appropriate bad debt reserves. Despite these precautions, should the
volatility in Asia have a material adverse impact on the financial position of
end users of the
-10-
<PAGE>
customers products in Asia, the Company could experience a material adverse
impact on its results of operations.
Competition. The Company's business is intensely competitive and is
characterized by new product cycles, price erosion, and rapid technological
change and new companies entering the markets. Competition typically occurs at
the design stage, where the customer evaluates alternative design approaches
that require integrated circuits. Because of shortened product life cycles and
even shorter design-in cycles, the Company's competitors have increasingly
frequent opportunities to achieve design wins in next generation systems. In
the event that competitors succeed in supplanting the Company's products, the
Company's market share may not be sustainable and net sales, gross margin, and
results of operations would be adversely affected. Competitors include major
domestic and international companies, many of which have substantially greater
financial and other resources than the Company with which to pursue engineering,
manufacturing, marketing and distribution of their products. Emerging companies
are also increasing their participation in the market, as well as customers who
develop their own integrated circuit products. Competitors include manufacturers
of standard semiconductors, application-specific integrated circuits and fully
customized integrated circuits, including both chip and board-level products.
The ability of the Company to compete successfully in the rapidly evolving area
of high- performance integrated circuit technology depends significantly on
factors both within and outside of its control, including, but not limited to,
success in designing, manufacturing and marketing new products, wafer supply,
protection of Company products by effective utilization of intellectual property
laws, product quality, reliability, ease of use, price, diversity of product
line, efficiency of production, the pace at which customers incorporate the
Company's integrated circuits into their products, success of the customers'
products, and general economic conditions. Also the Company's future success
depends, in part, upon the continued service of its key engineering, marketing,
sales, manufacturing, support, and executive personnel, and on its ability to
continue to attract, retain, and motivate qualified personnel. The competition
for such employees is intense, and the loss of the services of one or more of
these key personnel could adversely affect the Company. Because of these and
other factors, past results may not be a useful predictor of future results.
Impact of Year 2000. The "Year 2000 Issue" is the result of computer
programs being written using two digits rather than four to define the
applicable year. If the Company's computer programs with date-sensitive
functions are not Year 2000 compliant, they may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing incorrect reporting and disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The issue spans
both information technology and non-information technology systems that use date
data. In addition to the Company's own systems, the Company relies, directly
and indirectly, on external systems of its customers, suppliers, creditors,
financial organizations, utilities providers and government entities, both
domestic and international ("Third Parties").
The Company currently has a project plan in place to address the Year 2000
Issue with its internal systems and Third Parties which is designed to deal with
its most critical systems and processes first. Those identified as "mission
critical" are systems and/or processes whose failure would cause a material
impact on the Company's operations and financial statements. The project plan
includes the identification, assessment, testing, remediation/validation and the
development of contingency plans of the Company's Year 2000 issues primarily
through the use of internal personnel. In addition, the Company has engaged the
services of external consultants to provide Year 2000 progress assessment of the
Company's efforts. The external consultants review the Company's activities
regarding Year 2000 readiness and provide recommendations designed to improve
the Company's Year 2000 readiness.
In the third quarter of calendar year 1996, the Company began a program to
replace mission-critical internal business systems. The decision to purchase
software to replace these systems was made primarily in
-11-
<PAGE>
order to meet the Company's future business requirements, which included
consideration of Year 2000 Issues. The Company is currently in the process of
installing software licensed from SAP America, Inc. The first phase of this
project was completed in June 1998 and included finance, sales and logistics.
The second phase of the project includes a human resource system completed in
June of this year and manufacturing, estimated to complete in October of this
year. This multi-phased implementation is expected to cover all major internal
business systems used by the Company. While Year 2000 compliance is an important
software feature the Company considered when purchasing the software
replacement, the Company's decision to replace mission critical business systems
was primarily to make important functional improvements necessary to remain
competitive in the current business environment. Therefore, the Company has not
allocated a portion of the total project cost as a Year 2000 Issue. The Company
does not believe that any incremental project costs associated with Year 2000
compliance to be material, as this feature was included with the software
purchased by the Company to satisfy its business needs. The Company presently
believes that with the installation of this software into its internal business
systems, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company. Therefore, the Company has completed a
plan to remediate the existing manufacturing system as part of a company wide
contingency plan.
To date, 99.5% of the Company's products have been tested and found to be
Year 2000 compliant. A list of compliant products is available on the Company's
web site (www.cirrus.com). The Company considers a product or system to be Year
2000 compliant if the date/time data is accurately processed (included, but not
limited to, calculating, comparing, and sequencing) from, into and between the
twentieth and twenty-first centuries, and the years 1999 and 2000 along with
leap year calculations. To date, the Company has not identified any non-
compliant products and therefore, no material costs have been incurred with
respect to remediation. The Company believes that it is unlikely to experience
a material adverse impact on its financial condition or results of operations
due to product related Year 2000 compliance issues. However, since the
assessment process is ongoing, Year 2000 implications are not fully known, and
potential liability issues are not clear. Therefore, the full potential impact
of the Year 2000 on the Company is not known at this time.
Another consequence related to the Company's products is the impact upon
the Company's ability to ship to or collect payment from customers who
themselves have business operational problems as a result of the Year 2000
Issue. Although the Company believes that it is unlikely to experience a
material adverse impact on its financial conditions or results of operations due
to customer-related problems, the Company could experience such an impact if any
of its major customers or a large number of its other customers suffer a
material disruption in their ability to accept or pay for the Company's product
shipments.
The Company's project plan also includes a comprehensive program to assess
the Year 2000 compliance of its key suppliers. The Company has initiated formal
communications with its significant suppliers and financial institutions to
determine the extent to which the Company is vulnerable to those Third Parties
who fail to remedy their own Year 2000 Issues. As of June 1999, the Company has
contacted its significant suppliers and financial institutions and has received
assurances of Year 2000 compliance from a number of those contacted. To date
the Company has received responses to its initial inquiries from 100% of its
mission critical suppliers. However, some of these suppliers are still in the
process of completing their work on the Year 2000 Issues and failure of these
mission critical suppliers to be compliant would result in manufacturing
shutdowns for a certain period of time. The Company is currently taking steps
to assess whether these suppliers are taking all the appropriate actions to fix
any Year 2000 Issues they might have and to be prepared to continue functioning
effectively as a supplier to the Company. However, as there can be no guarantee
that the Company's suppliers will be Year 2000 compliant prior to the
millennium, many significant suppliers have been second sourced and most
contingency plans have been developed during the first calendar quarter of 1999.
This process was completed in the second calendar quarter of 1999. Contingency
plans
-12-
<PAGE>
related to mission critical suppliers that are not considered to be making
adequate steps to ensure Year 2000 compliance consist of the identification of
substitutes and second-source suppliers, and in certain situations includes a
planned increase in the level of inventory carried. No material cost related to
Year 2000 compliance of Third Parties has been incurred to date. The Company
believes that its reasonably most likely worst case Year 2000 scenario would
involve problems with the systems of its Third Parties rather than with the
Company's internal systems or its products. However, based upon information
communicated to the Company from Third Parties, management believes that it is
unlikely to experience a material adverse impact due to problems related to
Third Parties and expects that the cost of these projects over the next two
years will not have a material effect on the Company's financial position or
overall trends in results of operations.
-13-
<PAGE>
SELLING STOCKHOLDERS
The following table lists the Selling Stockholders, the number of shares of
the Company's Common Stock which each owned or had the right to acquire as of
July 27, 1999. Because the Selling Stockholders may offer all or some of the
Shares which they hold pursuant to the offering contemplated by this Prospectus,
and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the Shares, no estimate can be given as to
the amount of Shares that will be held by the Selling Stockholders after
completion of this offering. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders may offer the
Shares for resale from time to time. See "Plan of Distribution."
The Shares being offered by the Selling Stockholders were acquired from the
Company in connection with the Company's acquisition of 100% of the issued share
capital of AudioLogic, Inc. (the "AudioLogic Acquisition"). The AudioLogic
Acquisition was accomplished pursuant to the terms of an Agreement and Plan of
Reorganization, dated as of June 29, 1999 (the "Reorganization Agreement"),
whereby the Company acquired all of the issued and outstanding share capital of
AudioLogic in exchange for cash and the issuance of the number of shares of the
Company Common Stock equal to $25,000,000. Pursuant to the Reorganization
Agreement, each AudioLogic shareholder has the right to receive a per share pro
rata amount of 1,250,000 shares of Company Common Stock on the Closing Date (as
defined in the Reorganization Agreement) and a per share pro rata amount of up
to an additional 1,750,000 shares of Company Common Stock on the one-year
anniversary of the Closing Date.
The Company has filed with the Commission, under the Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time on the Nasdaq National Market or in
privately-negotiated transactions. Pursuant to the terms of a Registration
Rights Agreement dated July 27, 1999, the Company has agreed to use commercially
reasonable efforts to keep such Registration Statement effective from the date
of effectiveness of the Registration Statement on Form S-3, of which this
Prospectus forms a part, until the first anniversary of the Closing Date,
subject to certain restrictions, or, if earlier, until the distribution
contemplated in this Prospectus has been completed.
The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholders named below.
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Beneficially Owned
Name of Selling Stockholder Prior to the Offering Percentage of Outstanding Shares.
- ----------------------------------- ---------------------------------- -------------------------------------
<S> <C> <C>
John L. Melanson 185,934 *
Leonard Koch 36,640 *
Junsheng Wang 601 *
Jeff Dinapoli 5,953 *
Jason Carlson 79,413 *
Tim B. Trueblood 676 *
Richard Kim 300 *
The Hill Partnership III 428,817 *
Gilde Investment Fund B.V. 4,053 *
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C> <C>
James Forest 7,071 *
Robert Anderson 9,395 *
Morgan Holland Fund II 401,276 *
Eric Lindemann 19,446 *
Thomas Worrall 6,591 *
Caleb Roberts 8,004 *
Kathleen Adams 659 *
Joel C. McKee Cooper 5,178 *
David Klein 10,221 *
</TABLE>
- ------------------------
* Less than 1%
-15-
<PAGE>
PLAN OF DISTRIBUTION
All or a portion of the Shares offered hereby by the Selling Stockholders
may be delivered and/or sold from time to time in transactions on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. After the effectiveness of the Registration
Statement of which this Prospectus is a part, the Selling Stockholders may make
short sales of the Company's Common Stock and may use the Shares to cover the
resulting short positions. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such broker-
dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). There is no assurance that any of the Selling
Stockholders will sell any or all of the Shares offered by them. In addition,
certain of the Selling Stockholders have entered into Stock Transfer Restriction
Agreements with the Company that would prevent them from selling more than 25%
of their shares of Company Common Stock in each calendar quarter from July 1,
1999 to June 30, 2000.
Any Selling Stockholder and any broker-dealers that participate in the
distribution may under certain circumstances be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions received by such
broker-dealers and any profits realized on the resale of Shares may be deemed to
be underwriting discounts and commissions under the Securities Act. Each Selling
Stockholder may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify in certain circumstances Selling Stockholders
against certain liabilities, including liabilities arising under the Securities
Act and Exchange Act. Selling Stockholders have agreed to indemnify in certain
circumstances the Company and certain related persons against certain
liabilities, including liabilities arising under the Securities Act and Exchange
Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Stockholder (and, if it acts as agent for the
purchase of such Shares, from such purchaser). Broker-dealers may agree with
such Selling Stockholder to sell a specified number of Shares at a stipulated
price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for such Selling Stockholder, to purchase as principal any
unsold Shares. Broker-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other broker-
dealers, including transactions of the nature described above) on the Nasdaq
National Market, in privately negotiated transactions, or by a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices, and in connection with such resales may pay to
or receive from the purchasers of such Shares commissions computed as described
above.
Each Selling Stockholder will be subject to applicable provisions of the
Exchange Act, and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the time of bids for and
purchases of shares of the Company's Common Stock by such Selling Stockholder.
Each Selling Stockholder will pay all commissions and other expenses
associated with the sale of the Shares by such Selling Stockholder. The Shares
offered hereby are being registered pursuant to contractual obligations of the
Company pursuant to a Registration Rights Agreement dated July 27, 1999, and the
Company has agreed to bear certain expenses in connection with the registration
and sale of the Shares being offered by every such Selling Stockholder. The
Company has not made any underwriting arrangements with respect to the sale of
Shares offered hereby.
-16-
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The Company's
Bylaws, as amended, provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements require the
Company, among other things to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
-17-
<PAGE>
EXPERTS
The consolidated financial statements of Cirrus Logic, Inc. appearing in
the Cirrus Logic, Inc. Annual Report (Form 10-K) for the year ended March 27,
1999, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THE PROSPECTUS.
-18-
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information 3
Incorporation of Certain Documents by Reference 3
Forward-Looking Statements 4
The Company 5
Risk Factors 7
Selling Stockholders 14
Plan of Distribution 16
Use of Proceeds 17
Indemnification of Directors and Officers 17
Legal Matters 17
Experts 18
1,210,228 SHARES
CIRRUS LOGIC, INC.
Common Stock
__________________
September , 1999
____________________
-19-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The fees and expenses incurred by the Company in connection with the
offering are payable by the Company and, other than filing fees, are estimated
as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 3,344
NASDAQ Filing Fee................................................. $ 17,500
Legal Fees and Expenses........................................... $ 15,000
Accounting Fees................................................... $ 12,000
Miscellaneous..................................................... $ 1,156
Total............................................................. $ 49,000
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation law ("DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interest, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation
in the performance of his duty. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with the DGCL, the Company's Certificate of Incorporation
(the "Certificate"), contains a provision to limit the personal liability of the
directors of the Registrant for violations of their fiduciary duty. This
provision eliminates each director's liability to the Registrant or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
II-1
<PAGE>
Article VII of the Company's Certificate of Incorporation and Section 6.1
of the Company's Bylaws provide for indemnification of the officers and
directors of the Registrant to the fullest extent permitted by applicable law.
The Registrant has entered into indemnification agreements with each
director and executive officer which provide indemnification to such directors
and executive officers under certain circumstances for acts or omissions which
may not be covered by directors' and officers' liability insurance.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
Exhibit
Number Description
- -----------------------
2.1 Agreement and Plan of Reorganization, dated as of June 29, 1999, by and
among Cirrus Logic, Inc., AL Acquisition Corp., a Colorado corporation
and wholly-owned subsidiary of Cirrus Logic, Inc., and AudioLogic, Inc.,
a Colorado corporation.
3.1 Certificate of Incorporation of Cirrus Logic, Inc., incorporated by
reference to the Registrant's Definitive Proxy Statement on Schedule
14A, filed with the Commission on June 19, 1998.
3.2 Bylaws of Cirrus Logic, Inc., incorporated by reference to the
Registrant's Definitive Proxy Statement on Schedule 14A, filed with the
Commission on June 19, 1998.
3.3 Certificate of Designation of Series A Preferred Stock of Cirrus Logic,
Inc., incorporated by reference to Exhibit 1 of the Registrant's Report
on Form 8-A, as amended, filed with the Commission on March 3, 1999.
4.1 Registration Rights Agreement, dated as of July 27, 1999, by and among
Cirrus Logic, Inc. and certain shareholders of AudioLogic, Inc.
4.2 Stock Transfer Restriction Agreement, dated as of July 27, 1999, by and
among Cirrus Logic, Inc. and certain shareholders of AudioLogic, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
24.1 Power of Attorney (included on pg. II-4 of this Registration Statement
under the caption "Signatures").
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that (i) and
(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective amendment
by (i) and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment of the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California on this 3rd day of
September, 1999.
CIRRUS LOGIC, INC.
By: /s/ Glenn C. Jones
-------------------
Glenn C. Jones
Vice President, Chief Financial Officer,
Treasurer and Secretary
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Glenn C. Jones his attorney-in-fact,
with the power of substitution, for him in any and all capacities, to sign any
amendment to this Registration Statement on Form S-3, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 3, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Michael L. Hackworth Chairman of the Board and Director
------------------------
Michael L. Hackworth
--------------------
/s/ Suhas S. Patil Chairman Emeritus and Director
------------------
Suhas S. Patil
--------------
/s/ David D. French President, Chief Executive Officer and Director
-------------------
David D. French
---------------
/s/ Glenn C. Jones Vice President, Chief Financial Officer, Treasurer and
------------------ Secretary
Glenn C. Jones
--------------
/s/ Walden C. Rhines Director
--------------------
Walden C. Rhines
----------------
/s/ Robert H. Smith Director
-------------------
Robert H. Smith
---------------
/s/ Alfred S. Teo Director
-----------------
Alfred S. Teo
-------------
/s/ D. James Guzy Director
-----------------
D. James Guzy
---------------
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- -----------------------
2.1 Agreement and Plan of Reorganization, dated as of June 29, 1999, by and
among Cirrus Logic, Inc., AL Acquisition Corp., a Colorado corporation
and wholly-owned subsidiary of Cirrus Logic, Inc., and AudioLogic, Inc.,
a Colorado corporation.
3.1 Certificate of Incorporation of Cirrus Logic, Inc., incorporated by
reference to the Registrant's Definitive Proxy Statement on Schedule
14A, filed with the Commission on June 19, 1998.
3.2 Bylaws of Cirrus Logic, Inc., incorporated by reference to the
Registrant's Definitive Proxy Statement on Schedule 14A, filed with the
Commission on June 19, 1998.
3.3 Certificate of Designation of Series A Preferred Stock of Cirrus Logic,
Inc., incorporated by reference to Exhibit 1 of the Registrant's Report
on Form 8-A, as amended, filed with the Commission on March 3, 1999.
4.1 Registration Rights Agreement, dated as of July 27, 1999, by and among
Cirrus Logic, Inc. and certain shareholders of AudioLogic, Inc.
4.2 Stock Transfer Restriction Agreement, dated as of July 27, 1999, by and
among Cirrus Logic, Inc. and certain shareholders of AudioLogic, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
24.1 Power of Attorney (included on pg. II-4 of this Registration Statement
under the caption "Signatures").
II-5
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CIRRUS LOGIC, INC.
AL ACQUISITION CORP.
AND
AUDIOLOGIC, INC.
Dated as of June 29, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I THE MERGER 1
1.1 The Merger............................................. 1
1.2 Effective Time......................................... 1
1.3 Effect of the Merger................................... 2
1.4 Articles of Incorporation; Bylaws...................... 2
1.5 Directors and Officers................................. 2
1.6 Maximum Shares to Be Issued at Closing; Effect on
Capital Stock.......................................... 2
1.7 Dissenting Shares...................................... 4
1.8 Surrender of Certificates.............................. 5
1.9 No Liability........................................... 6
1.10 No Further Ownership Rights in Company Capital Stock... 6
1.11 Lost, Stolen or Destroyed Certificates................. 6
1.12 Tax and Accounting Consequences........................ 6
1.13 Taking of Necessary Action; Further Action............. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... 7
2.1 Organization of the Company............................ 7
2.2 Company Capital Structure.............................. 7
2.3 Subsidiaries........................................... 7
2.4 Authority.............................................. 8
2.5 Company Financial Statements........................... 8
2.6 No Undisclosed Liabilities............................. 8
2.7 No Changes............................................. 9
2.8 Tax and Other Returns and Reports...................... 10
2.9 Restrictions on Business Activities.................... 11
2.10 Title to Properties; Absence of Liens and Encumbrances. 12
2.11 Intellectual Property.................................. 12
2.12 Agreements, Contracts and Commitments.................. 14
2.13 Interested Party Transactions.......................... 16
2.14 Compliance with Laws................................... 16
2.15 Litigation............................................. 16
2.16 Insurance.............................................. 16
2.17 Minute Books........................................... 16
2.18 Environmental Matters.................................. 16
2.19 Brokers' and Finders' Fees; Third Party Expenses....... 17
2.20 Employee Matters and Benefit Plans..................... 17
2.21 Representations Complete............................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB............................................. 20
3.1 Organization, Standing and Power....................... 20
3.2 Authority.............................................. 21
3.3 Capital Structure...................................... 21
3.4 SEC Documents; Parent Financial Statements............. 21
3.5 No Material Adverse Change............................. 21
3.6 Litigation............................................. 22
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ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................... 22
4.1 Conduct of Business of the Company..................... 22
4.2 No Solicitation........................................ 24
ARTICLE V ADDITIONAL AGREEMENTS................................... 25
5.1 Company Shareholder Approval........................... 25
5.2 Access to Information.................................. 25
5.3 Confidentiality........................................ 25
5.4 Bonus Retention Plan................................... 25
5.5 Restrictions on Transfer of Parent Common Stock........ 25
5.6 Registration Rights Agreement.......................... 26
5.7 Expenses............................................... 26
5.8 Public Disclosure...................................... 26
5.9 Consents............................................... 26
5.10 FIRPTA Compliance...................................... 26
5.11 Reasonable Efforts..................................... 26
5.12 Notification of Certain Matters........................ 26
5.13 Certain Benefit Plans.................................. 27
5.14 Additional Documents and Further Assurances............ 27
5.15 Form S-8............................................... 27
ARTICLE VI CONDITIONS TO THE MERGER............................... 27
6.1 Conditions to Obligations of Each Party to Effect the
Merger................................................. 27
6.2 Additional Conditions to Obligations of the Company.... 27
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub............................................. 28
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION....................................... 29
7.1 Survival of Representations and Warranties............. 29
7.2 Indemnification........................................ 29
7.3 Third-Party Claims..................................... 32
7.4 Securityholder Agent of the Shareholders; Power of
Attorney............................................... 32
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.................... 33
8.1 Termination............................................ 33
8.2 Effect of Termination.................................. 34
8.3 Amendment.............................................. 34
8.4 Extension; Waiver...................................... 34
ARTICLE IX GENERAL PROVISIONS..................................... 34
9.1 Notices 34
9.2 Interpretation......................................... 35
9.3 Entire Agreement; Assignment........................... 36
9.4 Severability........................................... 36
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9.5 Other Remedies......................................... 36
9.6 Governing Law.......................................... 36
9.7 Rules of Construction.................................. 36
9.8 Specific Performance................................... 36
9.9 Counterparts........................................... 36
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INDEX OF EXHIBITS
Exhibit Description
- ------- -----------
Exhibit A Form of Voting Agreement
Exhibit B Form of Legal Opinion of Counsel to Parent
Exhibit C Form of Legal Opinion of Counsel to the Company
Exhibit D Form of Non-Competition, Non-Solicitation and Non-Hire Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Stock Transfer Restriction Agreement
Exhibit G Form of Amendment Agreement
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INDEX OF SCHEDULES
Schedule Description
- -------- -----------
2.2(a) Shareholder List
2.2(b) Option List
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8(b) Tax Returns and Audits
2.9 Restrictions on Business Activity
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(b) Registered Intellectual Property
2.11(f) Intellectual Property Licenses
2.11(k) Intellectual Property Infringement
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.19 Brokers/Finders Fees; Expenses of Transaction
2.20(b) Employee Benefit Plans and Employee Agreements
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(h)(i) Effect of Transaction
2.20(h)(ii) Excess Parachute Payments
2.20(j) Labor
4.1(a)(xii) Severance Agreements
6.2(c) Third Party Consents Required of Parent
6.3(c) Third Party Consents Required of the Company
6.3(c) Third Party Consents Required of Employees
6.3(e) Employees
6.3(f) Employees Signing Non-Competition Agreements
6.3(g) Employees and Entities Signing Stock Transfer Restriction
Agreements
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<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
---------
entered into as of June 29, 1999, among Cirrus Logic, Inc., a Delaware
corporation ("Parent"), AL Acquisition Corp., a Colorado corporation and a
------
wholly-owned subsidiary of Parent ("Merger Sub"), and AudioLogic, Inc., a
----------
Colorado corporation (the "Company").
-------
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each Company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
------
have approved the Merger.
B. Pursuant to the Merger, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
---------------------
options, warrants or other rights to acquire or receive shares of Company
Capital Stock shall be converted into the right to receive shares of voting
Common Stock of Parent ("Parent Common Stock").
-------------------
C. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. Certain of the stockholders of the Company have entered into a Voting
Agreement in substantially the form attached hereto as Exhibit A with respect to
---------
their consent to the Merger;
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Colorado Business Corporation Act ("Colorado Law"),
------------
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. The Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
---------------------
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
--------------
to Section 8.1, the closing of the Merger (the "Closing") will take place as
-------
promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
------------
to be consummated by
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filing a Certificate of Merger (or like instrument) with the Secretary of
State of the State of Colorado (the "Certificate of Merger"), in accordance with
---------------------
the relevant provisions of applicable law (the time of acceptance by the
Secretary of State of Colorado of such filing being referred to herein as the
"Effective Time"). The parties currently intend that the Closing Date will
- ---------------
occur on or prior to July 31, 1999.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in the applicable provisions of Colorado Law. Without
limiting the generality of the fore-going, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws
---------------------------------
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is AudioLogic, Inc."
(b) Unless otherwise determined by Parent, the Bylaws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
----------------------
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. Unless otherwise
determined by Parent, the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Bylaws of the Surviving Corporation.
1.6 Maximum Shares to Be Issued at Closing; Effect on Capital Stock.
---------------------------------------------------------------
Subject to the terms and conditions of this Agreement, as of the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holder of any shares of the Company Capital Stock, the following
shall occur:
(a) Conversion of Company Capital Stock. Each share of the Company
-----------------------------------
Capital Stock issued and outstanding immediately prior to the Effective Time
will be canceled and be converted automatically into the right to receive the
per share pro rata amount of the Closing Stock and the per share pro rata amount
of the Contingent Stock. The Closing Stock shall be issued to each Company
shareholder after the Closing upon surrender, as provided in Section 1.8, of the
certificate(s) representing such shareholder's shares of Company Capital Stock.
The amount of Contingent Stock will be determined on the one year anniversary of
the Closing Date, as described below. The Closing Stock and the Contingent Stock
represent the total number of shares of Parent Common Stock to be issued (up to
a maximum of 3,000,000 shares) upon conversion of all outstanding Company
Capital Stock and exercise of all outstanding options to acquire Company Capital
Stock (the "Company Options").
---------------
(b) Closing Stock. The "Closing Stock" shall be 1,250,000 shares of
------------- -------------
Parent Common Stock (as appropriately adjusted to reflect the effect of any
stock split, stock dividend, reorganization, recapitalization or the like with
respect to the Parent Common Stock occurring after the date hereof and prior
2
<PAGE>
to the Effective Time). A portion of the shares of Closing Stock shall be placed
into an Escrow Fund pursuant to Article VII of this Agreement.
(c) Contingent Stock. Parent will issue additional shares of Parent
----------------
Common Stock (the "Contingent Stock") if the market value of the Closing Stock
----------------
at of the one-year anniversary of the Closing Date is less than twenty-five
million dollars ($25,000,000). For this purpose, the Parent Common Stock will be
valued at the average closing price over the ten (10) trading days ending on the
one-year anniversary of the Closing (or, if such date is not a business date,
the ten trading days ending on the trading day preceding the one-year
anniversary), as reported on The Nasdaq National Market (the
"Anniversary Stock Price"). The Contingent Stock will be a number of shares of
-----------------------
Parent Common Stock having a value, at the Anniversary Stock Price, equal to
twenty-five million dollars ($25,000,000) minus the value of the Closing Stock
at the Anniversary Stock Price, (as appropriately adjusted for any stock split,
stock dividend, reorganization, recapitalization or the like occurring after the
date hereof and prior to the determination of the Contingent Stock); provided,
however, if such value of the Closing Stock and 1,250,000 shares of Contingent
Stock is less than $25,000,000, Parent may, in its sole discretion, deliver cash
rather than shares of Contingent Stock above such 1,250,000 shares and provided
further, that if such value of the Closing Stock and the Contingent Stock is
less than $25,000,000, Parent shall pay the difference in cash. The number of
shares of Contingent Stock to be issued, if any, is subject to offset as
provided in Article VII of this Agreement.
(d) Per Share Pro Rata Amounts. The number of shares of Closing
--------------------------
Stock and Contingent Stock to be issued in exchange for each share of Company
Common Stock will be determined in accordance pro-rata holdings of Common Stock
of the Company at Closing, taking into account conversion of all shares of
Company Preferred Stock to Common Stock at or prior to Closing. The calculation
of per share pro rata amounts shall assume that all of the Company's outstanding
options are exercised, shall value the Closing Stock at the average closing
price of the Parent Common Stock over the ten (10) trading days ending one
trading day prior to the Closing Date, as reported on The Nasdaq National Market
(the "Closing Stock Price"), and shall value the Contingent Stock at the
-------------------
Anniversary Stock Price.
(e) Cancellation of Parent-Owned and Company-Owned Stock. Each share
----------------------------------------------------
of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or the Company immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(f) Stock Options. At the Effective Time, all options to purchase
-------------
Company Common Stock then outstanding under the Company's 1992 Stock Option Plan
(the "Option Plan") or otherwise shall be assumed by Parent in accordance
-----------
with provisions described below.
(i) At the Effective Time, each Company Option, whether vested or
unvested, shall be assumed by Parent. Each Company Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except as follows:
(A) each Company Option shall be exercisable for that number of
whole shares of Parent Common Stock equal to the product of (x) the number of
shares of Closing Stock and Contingent Stock issuable in the Merger in exchange
for one share of Company Common Stock (the "Exchange Ratio"), and (y) the number
--------------
of shares of Company Common Stock that were issuable upon
3
<PAGE>
exercise of such Company Option immediately prior to the Effective Time, rounded
down to the nearest whole number of shares of Parent Common Stock.
(B) The per share exercise price for the shares of Parent Common
Stock issuable upon exercise of each such assumed Company Option shall be equal
to the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(C) For option exercises occurring prior to the determination of
the number of shares of Contingent Stock, calculations of the Exchange Ratio and
the exercise price will assume that no shares of Contingent Stock will be
issued, but such optionee will subsequently be entitled to receive his or her
per share pro rata amount of the Contingent Stock for no additional
consideration when the number of shares of Contingent Stock is determined.
(ii) It is the intention of the parties that the Company Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") to the extent the Company Options qualified as incentive
stock options immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, Parent will issue to each
holder of an outstanding Company Option a document evidencing the foregoing
assumption of such Company Option by Parent.
(g) Capital Stock of Merger Sub. Each share of Common Stock of Merger Sub
---------------------------
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(h) Fractional Shares. No fraction of a share of Parent Common Stock will
-----------------
be issued, but in lieu thereof, each holder of shares of Company Capital Stock
who would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall be entitled to receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of such fraction,
multiplied by the Closing Stock Price.
1.7 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock held by a holder who has demanded and perfected
appraisal or dissenters' rights for such shares in accordance with Colorado Law
and who, as of the Effective Time, has not effectively with-drawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall not be converted
-----------------
into or represent a right to receive Parent Common Stock pursuant to Section
1.6, but the holder thereof shall only be entitled to such rights as are granted
by Colorado Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Capital Stock who demands appraisal of such shares under
Colorado Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
4
<PAGE>
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock and
fractional shares as provided in Section 1.6, without interest thereon, upon
surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written demands
for appraisal of any shares of Company Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to Colorado Law and received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Colorado Law. The
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
-------------------------
(a) Exchange Agent. Boston EquiServe shall act as exchange agent (the
--------------
"Exchange Agent") in the Merger.
--------------
(b) Parent to Provide Common Stock. Subject to Article VII, promptly after
------------------------------
the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, the Closing Stock, and subject to
Article VII, promptly after the first anniversary of the Closing Date, Parent
shall make available to the Exchange Agent for exchange in accordance with this
Article I, the Contingent Stock. Parent shall take all reasonable steps to have
the Exchange Agent promptly provide the holder with certificates for Parent
Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the Surviving
-------------------
Corporation shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
------------
Time represented outstanding shares of Company Capital Stock (including
certificates for Company Preferred Stock for which the Company has receive a
notice for conversion) and which shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to promptly receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock, plus
cash in lieu of fractional shares in accordance with Section 1.6, to which such
holder is entitled pursuant to Section 1.6, and the Certificate so surrendered
shall forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital Stock
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends, to evidence the ownership of the number of
full shares of Parent Common Stock into which such shares of Company Capital
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
------------------------------------------------
distributions with respect to Parent Common Stock declared or made after the
Effective Time and with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall
5
<PAGE>
surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock .
(e) Transfers of Ownership. If any certificate for shares of Parent Common
----------------------
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
(but without the need for signature guarantee) and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Parent
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a certificate for shares of Parent Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
1.9 No Liability. Notwithstanding anything to the contrary in this Section
------------
1.8, none of the Exchange Agent, the Surviving Corporation or any party hereto
shall be liable to a holder of shares of Parent Common Stock or Company Capital
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.10 No Further Ownership Rights in Company Capital Stock. All shares of Parent
----------------------------------------------------
Common Stock issued or issuable upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.11 Lost, Stolen or Destroyed Certificates. In the event any Certificates
--------------------------------------
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit, including
indemnification, of that fact by the holder thereof, such shares of Parent
Common Stock and cash for fractional shares, if any, as may be required pursuant
to Section 1.6.
1.12 Tax and Accounting Consequences. It is intended by the parties hereto that
-------------------------------
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code.
1.13 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
6
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate Section number) supplied by the Company to
Parent (the "Company Schedules") and dated as of the date hereof, as follows:
-----------------
2.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Colorado. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition, results of
operations or prospects of the Company (hereinafter referred to as a, "Material
--------
Adverse Effect"). The Company has delivered a true and correct copy of its
- --------------
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure. The authorized capital stock of the Company
-------------------------
consists of 15,000,000 shares of authorized Common Stock, of which 351,970
shares are issued and outstanding, and 2,829,326 shares of authorized Series A
Preferred Stock, of which 2,829,326 shares are issued and outstanding. The
Company Capital Stock is held of record by the persons, with the addresses of
record and in the amounts set forth on Schedule 2.2(a). All outstanding shares
of Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any agreement to which the
Company is a party or by which it is bound.
The Company has reserved shares of Common Stock for issuance to
employees and consultants pursuant to the Option Plan, of which 976,476 shares
are subject to outstanding, unexercised options and no shares remain available
for future grant. The Company has reserved 976,476 shares of Common Stock for
issuance upon exercise of outstanding Company Options granted pursuant to
Schedule 2.2(b) sets forth for each outstanding Company Option the name of the
holder of such Company Option, the domicile address of such holder, the number
of shares of Common Stock subject to such Company Option, the exercise price of
such Company Option and the vesting schedule for such Company Option, including
the extent vested to date and whether the exercisability of such Company Option
will be accelerated and become exercisable by reason of the transactions
contemplated by this Agreement. Except for the Company Options described in
Schedule 2.2(b), there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The
holders of Company Options have been or will be given, or shall have properly
waived, any required notice prior to the Merger, and all such rights will be
terminated at or prior to the Effective Time. As a result of the Merger, Parent
will be the record and sole beneficial owner of all capital stock of the Company
and rights to acquire or receive such capital stock.
2.3 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any
7
<PAGE>
interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity, except for its
partnership interest in AudioLogic Hearing Systems, L.P.
2.4 Authority. Subject only to the requisite approval of the Merger and
---------
this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
shareholders to duly approve the Merger and this Agreement is a majority of the
outstanding Common Stock (assuming conversion of all outstanding shares of
Preferred Stock into Common Stock). The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval of the Merger by the Company's shareholders. The Company's
Board of Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms. Except as set forth on Schedule 2.4, subject only to the approval of
the Merger and this Agreement by the Company's shareholders, the execution and
delivery of this Agreement by the Company does not, and, as of the Effective
Time, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation or
--------
Bylaws of the Company or (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchisee, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict)
- ---------------------
is required by or with respect to the Company in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Agreement of Merger with
the Colorado Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iii) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 2.4.
2.5 Company Financial Statements.
----------------------------
(a) Schedule 2.5 sets forth the Company's consolidated balance sheet
at December 31, 1998 together with the related consolidated statements of
income, shareholders' equity and cash flows for the year then ended, including
all notes, thereto, together with the report thereon of Arthur Andersen LLP,
independent auditors, and copies of its audited consolidated balance sheets at
December 31, 1997 and December 31, 1996, together with copies of its unaudited
income statements at April 30, 1999 (collectively, the "Company Financials").
------------------
(The balance sheet at April 30, 1999 is referred to as the "Balance Sheet"). The
-------------
Company Financials are correct in all material respects and have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
----
a basis consistent throughout the periods indicated and consistent with each
other. The Company Financials present fairly the financial condition and
operating results of the Company as of the dates and during the periods
indicated therein, subject, in the case of the unaudited financial statements,
to normal year-end adjustments, which such adjustments will not be material in
amount or significance.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6, the
--------------------------
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type,
8
<PAGE>
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), which individually or in the
aggregate, (i) has not been reflected in the Balance Sheet, or (ii) has not
arisen in the ordinary course of the Company's business since the date of the
Balance Sheet, consistent with past practices.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of the
----------
Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws of
the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $25,000;
(d) destruction of, damage to or loss of any material assets, business
or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(i) increase in the salary or other compensation payable or to become
payable to any of its officers, directors, employees or advisors, or the
declaration, payment or commitment or obligation of any kind for the payment of
a bonus or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
9
<PAGE>
(m) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company;
(n) commencement or notice or threat of commencement of any lawsuit or
proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.11 below) or of infringement by
the Company of any third party's Intellectual Property rights;
(p) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(q) change in pricing or royalties set or charged by the Company to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property to the Company;
(r) event or condition of any character that has or could be reasonably
expected to have a Material Adverse Effect on the Company; or
(s) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or,
------------------- ---
collectively, "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8(b):
----------------------
(i) The Company as of the Effective Time will have prepared and
filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
-------
concerning or attributable to the Company or its operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
10
<PAGE>
(iv) No audit or other examination of any Return of the Company
is currently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company does not have any liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved against
in accordance with GAAP on the Balance Sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has no knowledge of any basis for the
assertion of any such liability attributable to the Company, its assets or
operations.
(vi) The Company has provided to Parent copies of all federal and
state income and all state sales and use Tax Returns for all periods since the
date of Company's incorporation.
(vii) There are (and as of immediately following the Effective
Date there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company relating
-----
to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt use
--------------
property" within the meaning of Section 168(h) of the Code.
- --------
(x) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business Activities. Except as set forth on Schedule
-----------------------------------
2.9, there is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products or transferring any of its
Intellectual Property to
11
<PAGE>
any class of customers or third parties, in any geographic area, during any
period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company owns no real property, nor has it ever owned any real
property. Schedule 2.10(a) sets forth a list of all real property currently, or
at any time in the past, leased by the Company, the name of the lessor, the date
of the lease and each amendment thereto and, with respect to any current lease,
the aggregate annual rental and/or other fees payable under any such lease. All
such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default).
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.10(b) and except
for liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.11 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
---------------------
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and continuations-
in-part thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout the
world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world, and (viii) any similar or equivalent rights to any of the foregoing
anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property
-----------------------------
that is owned by, or exclusively licensed to, the Company.
"Registered Intellectual Property" means all United States,
--------------------------------
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
12
<PAGE>
"Company Registered Intellectual Property" means all of the Registered
----------------------------------------
Intellectual Property owned by, or filed in the name of, the Company.
(a) No material Company Intellectual Property or product or service of
the Company is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by the Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(b) Schedule 2.11(b) of the Company Schedules is a complete and
accurate list of all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers. Each material item of Company
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
Registered Intellectual Property have been made and all necessary documents,
recordations and certificates in connection with such Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Registered Intellectual Property.
(c) The Company owns and has good and exclusive title to, or has
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to, each item of Company Intellectual Property or
other Intellectual Property used by the Company free and clear of any lien or
encumbrance (excluding licenses and related restrictions); and the Company is
the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of the Company, including the sale of
any products or the provision of any services by the Company.
(d) The Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which the Company otherwise
expressly purports to own.
(e) To the extent that any Intellectual Property has been developed or
created by a third party for the Company, the Company has a written agreement
with such third party with respect thereto and the Company thereby either (i)
has obtained ownership of, and is the exclusive owner of; or (ii) has obtained a
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to all such third party's Intellectual Property in
such work, material or invention by operation of law or by valid assignment, to
the fullest extent it is legally possible to do so.
(f) Except as set forth on Schedule 2.11(f), the Company has not
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was material to the Company Intellectual
Property, to any third party.
(g) The Company Schedules list all material contracts, licenses and
agreements to which the Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party (other than
end-user licenses in the ordinary course); or (ii) pursuant to which a third
party has licensed or transferred any material Intellectual Property to the
Company.
(h) All material contracts, licenses and agreements relating to the
Company Intellectual Property are in full force and effect. The consummation of
the transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination, or suspension of such
13
<PAGE>
contracts, licenses and agreements. The Company is in material compliance with,
and has not materially breached any term any of such contracts, licenses and
agreements and, to the knowledge of the Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of the Company's rights under such contracts, licenses and
agreements to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
(i) The operation of the business of the Company as such business
currently is conducted, including the Company's design, development,
manufacture, marketing and sale of the products or services of the Company
(including with respect to products currently under development) has not, does
not and will not infringe or misappropriate the Intellectual Property of any
third party or constitute unfair competition or trade practices under the laws
of any jurisdiction.
(j) The Company has not received notice from any third party that the
operation of the business of the Company or any act, product or service of the
Company, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(k) Except as set forth in Schedule 2.11(k) of the Company Schedules
and to the knowledge of the Company, no person has infringed or misappropriated
or is infringing or misappropriating any Company Intellectual Property.
(l) The Company has taken reasonable steps to protect the Company's
rights in the Company's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information of third
parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces, or prior to the Closing will have and will enforce, a
policy requiring each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Parent and all current and former employees and contractors of the Company have
executed such an agreement, except where the failure to do so is not reasonably
expected to be material to the Company.
(m) Neither this Agreement nor the transactions contemplated by this
Agreement, including the transfer to Surviving Corporation by operation of law
or otherwise of any contracts or agreements to which the Company is a party,
will result in the Company's granting to any third party any right to or with
respect to any material Intellectual Property right owned by, or licensed to,
either of them.
2.12 Agreements, Contracts and Commitments. Except as set forth on Schedule
-------------------------------------
2.12(a), the Company does not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay
or post-employmen t liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
14
<PAGE>
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of $25,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $25,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $25,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
(xvi) any agreement pursuant to which the Company has granted or
may grant in the future, to any party, a source-code license or option or other
right to use or acquire source-code, or
(xvii) any other agreement, contract or commitment that involves
$25,000 or more or is not cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that would
constitute a breach, violation or default with the lapse of time, giving of
notice, or both, as are all noted in Schedule 2.12(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.12(a) or Schedule
2.11(b) (any such agreement, contract or commitment, a "Contract"). Each
--------
15
<PAGE>
Contract is in full force and effect and, except as otherwise disclosed in
Schedule 2.12(b), is not subject to any default thereunder of which the Company
has knowledge by any party obligated to the Company pursuant thereto.
2.13 Interested Party Transactions. Except as set forth on Schedule 2.13,
-----------------------------
no officer, director or employee listed on Schedule 6.3(e) of the Company (nor
any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partner-ship or corporation in which any of such persons has or has had
an interest), has or has had, directly or indirectly, (i) an economic interest
in any entity which furnished or sold, or furnishes or sells, services or
products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11(b);
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no action,
----------
suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its proper-ties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
schedule 2.15, to the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors by or before any governmental entity. Schedule 2.15 sets forth, with
respect to any pending or threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. No governmental entity has at any
time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
is otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
------------
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and shareholders or actions by written consent since the time of incorporation
of the Company.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not operated any underground
------------------
storage tanks, and has no knowledge of the existence, at any time, of any
underground storage tank (or related piping or pumps), at any property that the
Company has at any time owned, operated, occupied or leased. The
16
<PAGE>
Company has not released any amount of any substance that has been designated by
any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any law, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
and the regulations promulgated pursuant to said laws, (a "Hazardous Material").
------------------
No Hazardous Materials are present as a result of the actions or omissions of
the Company, or, to the Company's knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Effective Time, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials
-------------------
Activities") in violation of any rule, regulation, treaty or statute
- ----------
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except as set forth
------------------------------------------------
on Schedule 2.19, the Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby. Schedule 2.19 sets forth the principal terms and conditions
of any agreement, written or oral, with respect to such fees. Schedule 2.19 also
sets forth the Company's current reasonable estimate of all Third Party Expenses
(as defined in Section 5.4) expected to be incurred by the Company in connection
with the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
----------- ---------
set forth in Section 2.20(a)(i) below (which definition shall apply only to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
17
<PAGE>
(i) "Affiliate" shall mean any other person or entity under
---------
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income Security
-----
Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
---------------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether formal or informal, funded or unfunded and whether or not
legally binding, including without limitation, each "employee benefit plan",
---------------------
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any "Employee" (as defined below), and pursuant to
--------
which the Company or any Affiliate has or may have any material liability
contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
------------------ ------------
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
------------------
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee Plan
------------
which is an "employee pension benefit plan", within the meaning of Section 3(2)
------------------------------
of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete list
--------
of each Company Employee Plan and each Employee Agreement, together with a
schedule of all liabilities, whether or not accrued, under each such Company
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment, whether legally binding or not, to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
18
<PAGE>
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
---
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; and (viii) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule 2.20(d),
------------------------
(i) the Company has to its knowledge performed in all material respects all
obligations required to be performed by it under each Company Employee Plan, and
each Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction", within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (v) there are no inquiries or proceedings pending or,
to the knowledge of the Company or any affiliates, threatened by the IRS or DOL
with respect to any Company Employee Plan; and (vi) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or
-------------------
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.20(g), no Company Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee benefits to any Employee upon his or
her retirement or termination of employment for any reason, except as may be
required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
---------------------
(i) Except as set forth on Schedule 2.20(h)(i), the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
other-wise),
19
<PAGE>
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(h)(ii), no payment or
benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee will be characterized as an
"excess parachute payment", within the meaning of Section 280G(b)(1) of the
Code.
(i) Employment Matters. The Company (i) is in compliance in all
------------------
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company
-----
is pending or, to the best knowledge of the Company, threatened. Except as set
forth in Schedule 2.20(j), the Company is not involved in or, to the knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a liability to the Company. Except
as set forth in Schedule 2.20(j), the Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
2.21 Representations Complete. None of the representations or warranties
------------------------
made by the Company (as modified by the Company Schedules), nor any statement
made in any schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the shareholders of the Company in connection with soliciting their consent
to this Agreement and the Merger, contains or will contain at the Effective
Time, any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly
20
<PAGE>
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on Parent
and Merger Sub as a whole.
3.2 Authority. Parent and Merger Sub have all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms.
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 280,000,000 shares of
Common Stock, of which 60,171,185 shares were issued and outstanding as of April
24, 1999, and 5,000,000 shares of Preferred Stock, none of which is issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of Common Stock, 1,000 shares of which, as of the date hereof, are issued and
outstanding and are held by Parent. All such shares have been duly authorized,
and all such issued and outstanding shares have been validly issued, are fully
paid and nonassessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid, non-
assessable and issued in compliance with applicable federal and Colorado
securities laws.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
------------------------------------------
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") since December 31, 1998, all in the form so filed (all of the
---
foregoing being collectively referred to as the "SEC Documents"). As of their
---
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange Act") as
- --------------- ------------
the case may be, and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a document subsequently filed with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") comply as to form in all material respects
---------------------------
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
may be indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) and present fairly the consolidated
financial position of Parent at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal audit adjustments). There has been no
change in Parent accounting policies except as described in the notes to the
Parent Financial Statements; provided, however, the Parent may have restated or
may restate one or more of the Parent Financial Statements to reflect
acquisitions entered into subsequent to the respective dates thereof.
3.5 No Material Adverse Change. Since the date of the balance sheet
--------------------------
included in the Parent's most recently filed report on Form 10-Q or Form 10-K,
Parent has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial condition,
liabilities,
21
<PAGE>
assets or business of Parent; (b) any amendment or change in the Certificate of
Incorporation or Bylaws of Parent (other than restatements of the Certificate or
Incorporation which did not require stockholders' approval); or (c) any damage
to, destruction or loss of any assets of the Parent, (whether or not covered by
insurance) that materially and adversely affects the financial condition or
business of Parent. Parent expects to conclude an agreement to transfer to IBM
all of Parent's minority interest in its MiCRUS joint venture with IBM and to
incur substantial costs in connection with such transaction.
3.6 Litigation. There is no action, suit, proceeding, claim, arbitration or
----------
investigation pending, or as to which Parent has received any notice of
assertion against Parent, which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company.
----------------------------------
(a) Company Conduct. During the period from the date of this Agreement
---------------
and continuing until the earlier of the termination of this Agreement and the
Effective Time, the Company agrees (except to the extent that Parent shall
otherwise consent in writing) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
its debts and Taxes when due, to pay or perform other obligations when due, and,
to the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
all with the goal of preserving unimpaired its goodwill and ongoing businesses
at the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of its business, and any
material event involving or adversely affecting the Company or its business.
Except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent:
(i) Enter into any commitment, activity or transaction not in the
ordinary course of business.
(ii) Transfer or license to any person or entity any rights to any
Company Intellectual Property Rights or negotiate to enter into any joint
development agreement with any person or entity regarding any rights to any
Company Intellectual Property Rights;
(iii) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company;
(iv) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(v) Commence any litigation;
22
<PAGE>
(vi) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor);
(vii) Except for the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Company Options, issue,
grant, deliver or sell or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any shares of its capital stock
or securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
(viii) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(ix) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(x) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practice;
(xi) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;
(xii) Grant any severance or termination pay to any director,
officer employee or consultant, except payments made pursuant to standard
written agreements outstanding on the date hereof (which such agreements are
disclosed on Schedule 4.1(a)(xii));
(xiii) Adopt or amend any employee benefit plan, program, policy
or arrangement, or enter into any employment contract, extend any employment
offer, pay or agree to pay any special bonus or special remuneration to any
director, employee or consultant, or increase the salaries or wage rates of its
employees;
(xiv) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business and consistent with past practice;
(xv) Pay, discharge or satisfy, in an amount in excess of $10,000,
in any one case, or $25,000, in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financial
Statements;
(xvi) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
23
<PAGE>
(xvii) Enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(xviii) Fail to pay or otherwise satisfy its monetary obligations
as they become due, except such as are being contested in good faith;
(xix) Waive or commit to waive any rights with a value in excess
of $10,000, in any one case, or $25,000, in the aggregate;
(xx) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(xxi) Alter, or enter into any commitment to alter, its interest
in any corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any interest on the date
hereof; or
(xxii) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(i) through (xxii) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
(b) Parent Conduct. Parent shall promptly notify the Company of any
--------------
event or occurrence which is not in the ordinary course of business of Parent
and which is material and adverse to the business of Parent. Parent agrees to
disclose to the Company prior to the Effective Time any material change in its
capitalization as set forth in Section 3.3 hereto,
4.2 No Solicitation. Until the earlier of the Effective Time and July 31,
---------------
1999, the Company will not (nor will the Company permit any of the Company's
officers, directors, shareholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any person relating to any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company or any of
its subsidiaries, (b) provide information with respect to it to any person,
other than Parent, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its or their capital
stock or assets or any equity interest in the Company or any of its
subsidiaries, (c) enter into an agreement with any person, other than Parent,
providing for the acquisition of the Company (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise), any material portion of its
or their capital stock or assets or any equity interest in the Company or any of
its subsidiaries, or (d) make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of the Company or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its or their capital stock or
assets or any equity interest in the Company or any of its subsidiaries by any
person, other than by Parent. The Company shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. In addition to the foregoing, if
the Company receives prior to the Effective Time or July 31, 1999, any offer or
proposal relating to any of the above, the Company shall immediately notify
Parent thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and
24
<PAGE>
such other information related thereto as Parent may reasonably request. Except
as contemplated by this Agreement, disclosure by the Company of the terms hereof
(other than the prohibition of this section) shall be deemed to be a violation
of this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Company Shareholder Approval. As promptly as practicable after the
----------------------------
execution of this Agreement and at such time as is permitted by applicable law,
the Company shall submit this Agreement and the transactions contemplated hereby
to its shareholders for approval and adoption as provided by Colorado Law and
its Articles of Incorporation and Bylaws. The Company shall use its best efforts
to solicit and obtain the consent of its shareholders sufficient to approve the
Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. The materials submitted to the Company's shareholders shall be
subject to review and approval by Parent and include information regarding the
Company and Parents, the terms of the Merger and this Agreement and the
unanimous recommendation of the Board of Directors of the Company in favor of
the Merger and this Agreement.
5.2 Access to Information. Each party shall afford the others and its
---------------------
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of its
properties, books, contracts, commitments and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as the others may reasonably
request, subject, in the case of Parent, to reasonable limits on access to its
technical and other nonpublic information. No information or knowledge obtained
in any investigation pursuant to this Section 5.2 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep the
---------------
terms of this Agreement (except to the extent contemplated hereby, including to
gain Company shareholder approval) and such information or knowledge obtained in
any investigation pursuant to Section 5.2, or pursuant to the negotiation and
execution of this Agreement or the effectuation of the transactions contemplated
hereby, confidential; provided, however, that the foregoing shall not apply to
information or knowledge which (a) a party can demonstrate was already lawfully
in its possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any violation
of law, (c) became known to the public through no fault of such party, (d) is
later lawfully acquired by such party without confidentiality restrictions from
other sources, (e) is required to be disclosed by order of court or government
agency with subpoena powers (provided that such party shall have provided the
other party with prior notice of such subpoena and an opportunity to object or
take other available action) or (f) which is disclosed in the course of any
litigation between any of the parties hereto.
5.4 Bonus Retention Plan. Parent shall establish and maintain a Bonus
--------------------
Retention Plan in the form agreed to by the parties.
5.5 Restrictions on Transfer of Parent Common Stock. Each person or entity
-----------------------------------------------
listed on Schedule 6.3(g) hereto agrees to enter into a Stock Transfer
Restriction Agreement substantially in the form attached hereto as Exhibit F not
---------
to sell or transfer more than 25% of the Parent Common Stock acquired hereunder
per calendar quarter until the first anniversary of the Closing Date.
25
<PAGE>
5.6 Registration Rights Agreement. Parent shall enter into a Registration
-----------------------------
Rights Agreement with the shareholders of the Company in substantially the form
attached hereto as Exhibit E.
--------
5.7 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
--------------------
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses; provided, however,
that expenses and the aggregate of all Third Party Expenses payable by the
Company shall not exceed $75,000.
5.8 Public Disclosure. Unless otherwise required by law (including, without
-----------------
limitation, federal and state securities laws, and Colorado corporate law) or,
as to Parent, by the rules and regulations of the National Association of
Securities Dealers, Inc., prior to the Effective Time, no disclosure (whether or
not in response to an inquiry) of the subject matter of this Agreement shall be
made by any party hereto unless approved by Parent and the Company prior to
release, provided that such approval shall not be unreasonably withheld.
5.9 Consents. The Company shall use its best efforts to obtain the
--------
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of and benefits to the
Company thereunder.
5.10 FIRPTA Compliance. On or prior to the Closing Date, the Company shall
-----------------
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.11 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable efforts to
ensure that its representations and warranties remain true and correct in all
material respects, and to take promptly, or cause to be taken, all actions, and
to do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or the Company or its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.12 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery
26
<PAGE>
of any notice pursuant to this Section 5.13 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
5.13 Certain Benefit Plans. Parent shall take such reasonable actions as
---------------------
are necessary to allow eligible employees of the Company to participate in the
benefit programs of Parent, or alternative benefits programs substantially
comparable to those applicable to employees of Parent on similar terms, as soon
as practicable after the Effective Time (provided, however, that the foregoing
shall not require any new options granted by Parent to employees of the Company
to be Incentive Stock Option).
5.14 Additional Documents and Further Assurances. Each party hereto, at the
-------------------------------------------
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.15 Form S-8. Parent shall file a registration statement on Form S-8 for
--------
the shares of Parent Common Stock issuable with respect to assumed Company
Options within thirty (30) days following the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have been
--------------------
approved and adopted by the shareholders of the Company by the requisite vote
under applicable law and the Company's Articles of Incorporation.
(b) Securities Law Compliance. The issuance of the Parent Common Stock
-------------------------
in the Merger shall be exempt from the registration requirement of the federal
securities laws and shall have been qualified or shall be exempt under all
applicable state securities laws.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect.
(d) Closing. The Merger and the Transactions contemplated by this
-------
Agreement, shall have been consummated by July 31, 1999.
6.2 Additional Conditions to Obligations of the Company. The obligations of
---------------------------------------------------
the Company to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
27
<PAGE>
(a) Representations and Warranties. The representations and warranties
------------------------------
of Parent and Merger Sub contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a Material Adverse
Effect on Parent; and the Company shall have received a certificate to such
effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) Third Party Consents. The Company shall have been furnished with
--------------------
evidence satisfactory to it that Parent has obtained the consents, approvals and
waivers set forth in Schedule 6.2(c).
(d) Legal Opinion. The Company shall have received a legal opinion from
-------------
Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to Parent,
in substantially the form attached hereto as Exhibit C.
---------
(e) Material Adverse Change. There shall not have occurred any material
-----------------------
adverse change in the business, assets (including intangible assets),
liabilities, financial condition or results of operations of Parent since the
date of the Balance Sheet. For purposes of this condition, a decline in the
trading price of Parent's Common Stock, whether occurring at any time or from
time to time, as reported by Nasdaq or any other automated quotation system or
exchange shall not constitute a material adverse change.
(f) Registration Rights Agreement. The Registration Rights Agreement
-----------------------------
shall have been executed and delivered.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
-----------------------------------------------------------------
obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for changes contemplated
by this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date, except, in all such cases, for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a Material Adverse Effect on the Company or
Parent; and Parent and Merger Sub shall have received a certificate to such
effect signed on behalf of the Company by the chief executive officer and chief
financial officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time except, in all such cases, for such non-performance or non-
28
<PAGE>
compliance that would not result in a Material Adverse Effect,, and Parent and
Merger Sub shall have received a certificate to such effect signed by a duly
authorized officer of the Company;
(c) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) Legal Opinion. Parent shall have received a legal opinion from
-------------
Ireland Stapleton Pryor & Pascoe, P.C., legal counsel to the Company, in
substantially the form attached hereto as Exhibit D.
---------
(e) Employees. The Company's employees listed on Schedule 6.3(e) shall
---------
have accepted an offer of employment from Parent.
(f) Noncompetition Agreements. Each of the persons listed on Schedule
-------------------------
6.3(f) shall have executed and delivered to Parent a Non-Competition, Non-
Solicitation and Non-Hire Agreement (the "Noncompetition Agreement") in
------------------------
substantially the form of Exhibit E, and all of the Noncompetition Agreements
---------
shall be in full force and effect.
(g) Stock Transfer Restriction Agreement. Each of the persons or
------------------------------------
entities listed on Schedule 6.3(g) shall have executed a Stock Transfer
Restriction Agreement.
(h) No Dissenters. Holders of no more than five percent (5%) of the
-------------
outstanding shares of Company Capital Stock have exercised, nor shall they have
any continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(i) Material Adverse Change. There shall not have occurred any material
-----------------------
adverse change in the business, assets (including intangible assets) financial
condition or results of operations of the Company since the date of the Balance
Sheet.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. All of the Company's
------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., Colorado time, on the date with
is one year following the Closing (the "Expiration Date").
----------------
7.2 Indemnification Claims. Parent and its affiliates shall be compensated
----------------------
for any claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of investigation
and defense ("Damages") incurred by Parent, its officers, directors, or
---------
affiliates (including the Surviving Corporation) directly or indirectly as a
result of (i) any inaccuracy or breach of a representation or warranty of the
Company (as modified by the Company Schedules), or any failure by the Company to
perform or comply with any covenant contained herein, up to a total aggregate
amount of $2,500,000 (an "Indemnification Claim"). In addition, Parent and it
---------------------
affiliates shall be compensated for the failure of the Company to obtain,
perform and deliver to Parent an Amendment Agreement (the "Amendment") executed
---------
by all of the parties thereto substantially in the form attached hereto as
Exhibit G (an "IP Claim").
---------
29
<PAGE>
(a) Closing Stock; Escrow. Parent shall be entitled to deduct from the
---------------------
Closing Stock shares of its Parent Common Stock as set forth herein. As soon as
practicable after the Closing Date, the number of shares of Parent Common Stock
listed opposite the shareholders (the Indemnification Shares and IP Shares
together, the "Escrow Shares"), without any act of any of the below-
-------------
named shareholders (the "Escrow Shareholders"), will be deposited, along
-------------------
with undated executed Assignments Separate from Certificates, with an
institution to be designated by Parent (and if none so designated, to Parent) as
Escrow Agent (the "Escrow Agent"). Such deposit shall constitute an escrow fund
------------
(the "Escrow Fund") to be governed by the terms set forth herein and at Parent's
-----------
cost and expense. Parent may not receive any Indemnification Shares from the
Escrow Fund unless and until an Officer's Certificate (as defined in paragraph
(e) below) identifying Damages, the aggregate amount of which exceed $75,000,
have been delivered to the Escrow Agent, Parent may recover from the Escrow Fund
the total of its Damages, including the first $75,000. Parent may not receive
any IP Shares from the Escrow Fund unless and until an Officer's Certificate is
delivered to Escrow Agent setting forth that an Amendment had not been duly
delivered to Parent by the Expiration Date.
<TABLE>
<CAPTION>
Indemnification Percentage of
Name of Escrow Shareholder Shares IP Shares Escrow Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jason Carlson 6,438 13,800 7.36%
- ------------------------------------------------------------------------------------------------------------------
John Melanson 15,306 32,794 17.49%
- ------------------------------------------------------------------------------------------------------------------
Hill Partnership III 33,804 72,431 38.63%
(an affiliate of Hill Carman Ventures)
- ------------------------------------------------------------------------------------------------------------------
Morgan Holland Fund II 31,952 68,475 36.52%
(an affiliate of One Liberty Ventures)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Contingent Stock. Parent shall also be entitled to offset from the
----------------
Contingent Stock the aggregate cash value of Damages incurred due to an
Indemnification Claim and/or the failure of the Company to deliver the Amendment
as set forth herein.
(i) In the event that the Contingent Stock valued at the
Anniversary Stock Price exceeds $2,500,000, any offset amount due to the Damages
shall be applied among all of the Company's shareholders, including the Escrow
Shareholders (the "Company Shareholders") on a Pro Rata Basis.
--------------------
(ii) In the event that the Contingent Stock valued at the
Anniversary Stock Price is less than $2,500,000, any offset amount due to the
Damages shall be applied (A) proportionately among the Company Shareholders on a
Pro Rata Basis and then (B) Parent shall be entitled to deduct the cash value of
any shortfall against the Indemnification Shares proportionately among the
Escrow Shareholders according to their percentage contribution to the Escrow
Fund.
(iii) In the event that the Amendment has not been delivered to
Parent prior to the Expiration Date, any obligation by Parent to deliver
Contingent Stock and/or cash each shall be reduced by fifteen percent on a Pro
Rata Basis.
(iv) "Pro Rata Basis" means the number of shares of Company Common
--------------
Stock (assuming conversion of all outstanding Preferred Stock into Common Stock)
owned by an individual shareholder as of the Effective Time bears to all shares
of Company Common Stock and Company Preferred Stock outstanding as of the
Effective Time which were held by the Company Shareholders (except for those
30
<PAGE>
shareholders who exercise dissenters' rights). Pro Rata Basis also includes the
Escrow Shares held by an Escrow Shareholder.
(c) Escrow Period; Distribution upon Termination of Escrow Periods.
--------------------------------------------------------------
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate on the Expiration
Date (the "Escrow Period"); provided that the Escrow Period shall not terminate
-------------
with respect to such amount (or some portion thereof), that together with the
aggregate amount remaining in the Escrow Fund is necessary in the reasonable
judgment of Parent to satisfy any unsatisfied claims concerning facts and
circumstances existing prior to the termination of such Escrow Period specified
in any Officer's Certificate delivered to the Escrow Agent prior to termination
of such Escrow Period. As soon as all such claims have been resolved, the Escrow
Agent shall deliver to the Escrow Shareholders the remaining portion of the
Escrow Fund and not required to satisfy such claims. Deliveries of Escrow Shares
to such shareholders of the Company pursuant to this Section 7.2(c) shall be
made in proportion to their respective original contributions to the Escrow
Fund.
(d) Protection of Escrow Fund.
--------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock split)
("New Shares") in respect of Parent Common Stock in the Escrow Fund which have
----------
not been released from the Escrow Fund shall be added to the Escrow Fund and
become a part thereof. New Shares issued in respect of shares of Parent Common
Stock which have been released from the Escrow Fund shall not be added to the
Escrow Fund but shall be distributed to the recordholders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the recordholders thereof.
(iii) Each shareholder shall have voting rights with respect to
the shares of Parent Common Stock contributed to the Escrow Fund by such
shareholder (and on any voting securities added to the Escrow Fund in respect of
such shares of Parent Common Stock).
(e) Claims Upon Escrow Fund.
-----------------------
(i) Upon receipt by the Escrow Agent at any time on or before the
last day of the Escrow Period of a certificate signed by any officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid or properly
----------------------
accrued or reasonably anticipates that it will have to pay or accrue Damages,
and (B) specifying in reasonable detail the individual items of Damages included
in the amount so stated, the date each such item was paid or properly accrued,
or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 7.2(f) hereof,
deliver to Parent out of the Escrow Fund, as promptly as practicable, the
Indemnification Shares held in the Escrow Fund in an amount equal to such
Damages.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(e)(i) hereof, the Indemnification Shares and the Contingent Stock
shall be valued at the Anniversary Stock Price.
31
<PAGE>
(iii) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of an Officer's Certificate that Parent has
not received from the Company an Amendment duly executed by all of the parties
thereto, the Escrow Agent shall, subject to Section 7.2(f) hereof, deliver to
Parent out of the Escrow Fund, as promptly as practicable, all of the IP Shares.
(f) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent. If the Securityholder Agent shall, in
good faith, notify the Escrow Agent and Parent within twenty (20) business days
following receipt of notice of a claim for Damages of his objections to such
claim, or objection to the due delivery of the Amendment, the Escrow Agent shall
hold the Indemnification Shares and/or IP Shares, as the case may be, until the
Securityholder Agent and Parent have agreed upon the rights of Parent and the
Escrow Holders with respect thereto or until such rights are determined by a
binding nonappealable decision or order by a state or federal court or arbitral
authority.
7.3 Third-Party Claims. In the event Parent becomes aware of a third-party
------------------
claim which Parent believes may result in a claim against the Escrow Fund and/or
an offset against the Contingent Stock, Parent shall notify the Securityholder
Agent of such claim, and the Securityholder Agent, as representative for the
Escrow Shareholders, shall be entitled, at the expense of the Escrow
Shareholders, to participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any such claim; provided, however, that
except with the consent of the Securityholder Agent, no settlement of any such
claim with third-party claimants shall alone be determinative of the amount of
any Damages. In the event that the Securityholder Agent has consented to any
such settlement, the Securityholder Agent shall have no power or authority to
object under any provision of this Article VII to the amount of any Damages with
respect to such settlement.
7.4 Securityholder Agent of the Shareholders; Power of Attorney.
-----------------------------------------------------------
(a) In the event that the Merger is approved, effective upon such
vote, and without further act of any shareholder, Carl D. Carman shall be
appointed as agent and attorney-in-fact (the "Securityholder Agent") for each
--------------------
shareholder of the Company (except such shareholders, if any, as shall have
perfected their appraisal or dissenters' rights under Colorado Law), for and on
behalf of shareholders of the Company, to give and receive notices and
communications, to authorize a claim against the Escrow Fund, an offset from
delivery by Parent of additional shares of Parent Common Stock in satisfaction
of claims by Parent, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of Securityholder
Agent for the accomplishment of the foregoing. Such agency may be changed by the
shareholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Parent; provided that the Securityholder Agent may
not be removed unless holders of a two-thirds interest of the Company agree to
such removal and to the identity of the substituted agent. Any vacancy in the
position of Securityholder Agent may be filled by approval of the holders of a
majority in interest of the Company. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the shareholders
of the Company.
(b) The Securityholder Agent shall not be liable for any act done or
omitted hereunder as Securityholder Agent while acting in good faith and in the
exercise of reasonable judgment. The shareholders of the Company shall severally
indemnify the Securityholder Agent and hold the Securityholder Agent
32
<PAGE>
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the Securityholder Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Securityholder Agent.
(c) Actions of the Securityholder Agent. A decision, act, consent or
-----------------------------------
instruction of the Securityholder Agent shall constitute a decision of all the
shareholders and shall be final, binding and conclusive upon each of such
shareholders, and Parent may rely upon any such decision, act, consent or
instruction of the Securityholder Agent as being the decision, act, consent or
instruction of each every such shareholder of the Company. Parent is hereby
relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Securityholder
Agent.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on July 31, 1999 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); (ii) there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Merger by any governmental entity that
would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger, by any Governmental Entity, which would: (i) prohibit Parent's or the
Company's ownership or operation of all or any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate all
or a portion of the business or assets of the Company or Parent as a result of
the Merger;
(d) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company that would result in a Material Adverse Effect and (i) such breach has
not been cured within five (5) business days after written notice to the Company
(provided that, no cure period shall be required for a breach which by its
nature cannot be cured), and (ii) as a result of such breach the conditions set
forth in Section 6.3(a) or 6.3(b), as the case may be, would not then be
satisfied; or
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub that would result in a Material Adverse Effect and (i) such
breach has not been cured within five (5) business days after written notice to
Parent (provided that, no cure
33
<PAGE>
period shall be required for a breach which by its nature cannot be cured), and
(ii) as a result of such breach the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, would not then be satisfied.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or the
Company, or their respective officers, directors or shareholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of Sections 5.3 and
Article VII of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after the
---------
shareholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent and
-----------------
Merger Sub, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered person-ally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Cirrus Logic, Inc.
3100 West Warren Avenue
Fremont, CA 94538
Attention: Steve Howarth
Telephone No.: (408) 988-2229
Facsimile No.: (510)
34
<PAGE>
Cirrus Logic, Inc.
4210 S. Industrial Drive
Austin, TX 78744
Attention: Craig Ensley
Telephone No.: (512) 445-7222
Facsimile No.: (512) 445-7582
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael J. Danaher, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
if to the Company, to:
AudioLogic, Inc.
4870 Sterling Drive
Boulder, CO 80301
Attention: Jason Carlson
Telephone No.: (303) 444-8445
Facsimile No.: (303) 444-8498
with a copy to:
Ireland Stapleton Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, CO 80202
Attention: Jack Lewis, Esq.
Telephone No.: (303) 623-2700
Facsimile No.: (303) 623 2062
if to the Securityholder Agent:
Hill Carman Ventures
885 Arapahoe Avenue
Boulder, CO 80302
Attention: Carl D. Carman
Telephone No.: (303) 444-5151
Facsimile No.: (303) 442-8525
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
35
<PAGE>
9.3 Entire Agreement; Assignment. This Agreement, the Schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent and Merger Sub may assign their respective rights and delegate their
respective obligations hereunder to their respective affiliates.
9.4 Severability. In the event that any provision of this Agreement or the
------------
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.5 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.7 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.8 Specific Performance. The parties hereto agree that irreparable damage
--------------------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counter-parts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
36
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Securityholder
Agent (as to Article VII only) and have caused this Agreement to be signed by
their duly authorized respective officers, all as of the date first written
above.
AUDIOLOGIC, INC. CIRRUS LOGIC, INC.
By: By:
----------------------- -----------------------
Name: Jason Carlson Name: Craig Ensley
Title: President Title:
SECURITYHOLDER AGENT: AL ACQUISITION CORP.
By:: By:
----------------------- -----------------------
Carl D. Carman Name: Craig Ensley
Title: Vice-President
- ------------------------------- ------------------------------
JOHN MELANSON JASON CARLSON
(with respect to Article VII) (with respect to Article VII)
HILL PARTNERSHIP III MORGAN HOLLAND FUND II
(with respect to Article VII) (with respect to Article VII)
By:: By:
----------------------- -----------------------
Name: Name:
Title: Title:
37
<PAGE>
Exhibit 4.1
CIRRUS LOGIC, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made effective as
of July ____, 1999 (the "Effective Date"), by and among Cirrus Logic, Inc., a
Delaware corporation (the "Company"), and the individuals and entities who are
shareholders of AudioLogic, Inc. ("AudioLogic") set forth on Schedule A hereto
(the "Shareholders").
RECITALS
--------
A. The Company and AudioLogic are parties to the Agreement and Plan of
Reorganization dated as of June 29, 1999 (together with the exhibits and
schedules thereto, the "Merger Agreement"). The Company will acquire AudioLogic
through a statutory merger of AL Acquisition Corporation, a wholly-owned
subsidiary of the Company, into AudioLogic.
B. As partial consideration for such acquisition, the Shareholders will
receive shares of Common Stock, $.001 par value, of the Company after the
Closing Date (the "Closing Stock") and, subject to certain conditions, shares of
Common Stock, $0.001 par value, following the first anniversary of the Closing
Date (the "Contingent Stock") (collectively, the "Shares").
All capitalized terms not defined herein shall have the meanings set forth
in the Merger Agreement, unless otherwise referred to another agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, all parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
-------------------
have the following respective meanings:
"Black-Out Period" means any period during which executive officers
----------------
and directors of the Company are generally prohibited from engaging in trades in
the Company's securities pursuant to the Company's Insider Trading Policy,
including, without limitation, black-out periods for management related to
quarterly reports of financial results of the Company.
"Commission" means the Securities and Exchange Commission or any other
----------
Federal agency at the time administering the Securities Act.
"Effective Time" shall mean the date on which the Merger becomes
--------------
effective under the laws of Colorado.
-1-
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal rule or statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Family Transfer" means a transfer to a spouse, lineal descendent, or
---------------
a trust for the benefit of transferor, spouse or lineal descendent, provided
that in the case of each such transfer, the transfer is made in compliance with
applicable federal and state securities law and the transferee agrees to be
bound by the terms of this Agreement.
"Holder" means the Shareholders, for so long as the Shareholders hold
------
any Registrable Securities, or any person holding Registrable Securities to whom
the rights under this Agreement have been transferred in accordance with Section
11 hereof.
"Insider Trading Policy" means the policy adopted by the Company's
----------------------
Board of Directors, as such may be amended from time to time, relating to
transactions in the Company's securities by the Company's executive officers and
directors.
"Permitted Window" means the period during which a Holder entitled to
----------------
sell Registrable Securities pursuant to a registration statement under Section
4(a) of this Agreement shall be permitted to sell Registrable Securities
pursuant to such a registration. Except as otherwise set forth in this
Agreement, a Permitted Window shall (i) commence upon the tenth business day
following receipt by the Company of a written notice from a Holder to the
Company that such Holder intends to sell Shares pursuant to such registration
statement, or such earlier date as the Company may agree to (or, if such date
falls within a Black-Out Period and the Holder is subject to such Black-Out
Period, then upon the termination of such Black-Out Period), and shall (ii)
terminate upon the commencement of the next occurring Black-Out Period, if the
Holder is subject to such Black-Out Period. A Holder shall not be subject to a
Black-Out Period unless such Holder is an executive officer or director of the
Company. Except as stated herein, without the Company's written consent, a
Permitted Window shall not commence prior to the first anniversary of the
Effective Date.
"Registrable Securities" means the Shares and any Common Stock of the
----------------------
Company issued or issuable in respect thereof upon any conversion, stock split,
stock dividend, recapitalization, merger or other reorganization; provided,
--------
however, that securities shall only be treated as Registrable Securities if and
- -------
so long as they have not been registered or sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction.
"Register," "registered" and "registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" means all expenses, except as otherwise stated
---------------------
below, incurred by the Company in complying with Section 4 and Section 5 hereof,
including without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company).
"Restricted Securities" means the securities of the Company required
---------------------
to bear a legend as described in Section 2 hereof.
-2-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar Federal rule or statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for any Holder.
2. Restrictive Legend. Each certificate representing the Shares or any
------------------
other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger or other reorganization shall be
stamped or otherwise imprinted with legends restricting the transferability
thereof, in substantially the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. SUCH SHARES GENERALLY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
In addition, each certificate representing the Shares held by Holders
who are parties to that certain Stock Transfer Restriction Agreement shall be
stamped or otherwise imprinted with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER PURSUANT TO AN AGREEMENT BETWEEN THE HOLDER AND THE
COMPANY.
Each Holder consents to the Company making a notation on its records and
giving instructions to any transfer agent of its capital stock in order to
implement the restrictions on transfer established in this Agreement and the
Merger Agreement.
3. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 3. Without in any way
limiting the immediately preceding sentence or the provisions of Section 2, no
sale, assignment, transfer or pledge (other than (i) a sale made pursuant to a
registration statement filed under the Securities Act and declared effective
by the Commission or (ii) a sale made in accordance with the applicable
provisions of Rule 144 and Rule 145) of Restricted Securities shall be made by
any holder thereof to any person unless such person shall first agree in
writing to be bound by the restrictions of this Agreement, including without
limitation this Section 3. Prior to any proposed sale, assignment, transfer or
pledge of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such Holder's intention to
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and, if requested by the Company,
the holder shall also provide, at such Holder's expense, a written opinion of
legal counsel (who shall be, and whose legal opinion shall be, reasonably
satisfactory to the Company) addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
-3-
<PAGE>
registration under the Securities Act and under applicable state securities
laws and regulations. Upon delivery to the Company of such notice and, if
required, such opinion, the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms
of such notice. The Company agrees that it shall not request such an opinion
of counsel with respect to (i) a transfer not involving a change in beneficial
ownership, (ii) a transaction involving the distribution without consideration
of Restricted Securities by the holder to its constituent equity holders in
proportion to their equity holdings in the holder or (iii) a transaction
involving the transfer without consideration of Restricted Securities by an
individual holder during such Holder's lifetime by way of gift or on death by
will or intestacy. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section
2 above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for such holder and counsel for the Company,
such legend is not required in order to establish or ensure compliance with
any provision of the Securities Act.
4. Registration on Form S-3.
------------------------
(a) Registration. The Company shall use commercially reasonable to
------------
efforts cause a registration statement on Form S-3 covering all Registrable
Securities to be filed and declared effective no later than 30 days following
the Closing Date, and the initial Permitted Window (the "Initial Permitted
Window") for trading the Shares shall commence as of the effective date of
such registration (or, if such date falls within a Blackout Period and the
Holder is subject to such Black-Out Period, then upon the termination of such
Blackout Period) and continue until the commencement of the next occurring
Black-Out Period. The Company shall use commercially reasonable efforts to
keep such registration statement effective, in the case of the Closing Stock,
until the first anniversary of the Closing Date, and in the case of the
Contingent Stock, if any, until the second anniversary of the Closing Date, or
such earlier date upon which no Holder holds any Registrable Securities. After
the Initial Permitted Window, upon receipt of a notice from any Holder that
such Holder intends to sell Registrable Securities during a Permitted Window,
the Company shall, prior to the commencement of the Permitted Window, inform
the other Holders of the commencement of the Permitted Window. The Company
shall notify each of the Holders of the termination of a Permitted Window no
later than the time the Company notifies its executive officers and directors
of the corresponding Black-Out Period; provided, however, that the Company
-------- -------
need not notify the Holders who are subject to Black-Out Periods of regularly
scheduled Black-Out Periods relating to the closing of the Company's fiscal
quarters, which Black-Out Periods begin thirty days prior to the end of each
fiscal quarter and continue until 48 hours after the announcement of results
of operations for such period.
(b) Limitations on Registration and Sale of Registrable Securities.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, the Company's
obligations and the Holders' rights under this Section 4 are subject to the
limitations and qualifications set forth below, which may be waived in writing
by the Company.
(i) The Holders will sell Registrable Securities pursuant to a
registration effected hereunder only during a Permitted Window; provided that
no Permitted Window restrictions shall apply to Registrable Securities
saleable under Rule 144 or any other applicable public resale registration
exemption.
(ii) If the Company furnishes to the Holders a certificate signed by
the President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for a Form S-3 registration to be effected, or a Permitted Window to
be in effect, due to (A) the existence of a material development or potential
material development involving the Company which the Company would be
obligated to disclose in the prospectus contained in the Form S-3 registration
statement, which disclosure would in the good faith judgment of the Board of
Directors be
-4-
<PAGE>
premature or otherwise inadvisable, (B) the existence of other facts or
circumstances as a result of which the prospectus contained or to be contained
in the Form S-3 registration statement includes or would include an untrue
statement of a material fact or omits or would omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made or then
existing or (C) the Company's bona fide intention to effect the filing of a
registration statement with the Commission within sixty (60) days of the
receipt of a notice from a Holder that it intends to sell Registrable
Securities during a Permitted Window, the Company may defer the filing of the
Form S-3 registration statement or delay the commencement of a Permitted
Window or may effect an early termination of a Permitted Window that has
commenced, as the case may be.
(iii) The obligations of the Company hereunder are conditioned upon its
being eligible to register its securities on Form S-3 at the time any such
registration is otherwise required hereunder; provided, however, that if the
-------- -------
Company ceases to be eligible to register its securities on Form S-3 at any
time during which any Holder would otherwise be entitled to sell Registrable
Securities pursuant to a registration in accordance with the terms of this
Agreement, the Company shall use its commercially reasonable efforts to become
eligible to register its securities on Form S-3 as soon as practicable.
(iv) At any time that the Company is obligated under this Agreement to
permit the Holders to sell Registrable Securities pursuant to a registration
statement on Form S-3, the Company may, instead of maintaining an effective
registration statement on Form S-3 for the benefit of the Holders, include
such Registrable Securities in a registration effected for the benefit of the
Company and/or other selling stockholders. In the event that such registration
is in connection with an underwritten offering, the Holders participating in
such registration shall enter into an underwriting agreement in customary form
with the managing underwriter selected by the Company, notwithstanding the
provisions of Section 4(c).
(v) Notwithstanding anything to the contrary in this Agreement, the
Company shall have no obligation to effect a registration hereunder, and no
Permitted Window will exist, with respect to any Registrable Securities during
the time that such Registrable Securities are subject to the escrow provisions
of the Merger Agreement (including any agreement which is an exhibit thereto),
and no Holder shall sell any such Registrable Securities pursuant to a
registration hereunder, or pursuant to Rule 144 or Rule 145, during any such
period.
(c) Underwriting. At the election of the Holders representing a
------------
majority of the Registrable Securities that are proposed to be sold during a
Permitted Window (the "Deciding Holders"), all sales of Registrable Securities
under this Section 4 during such Permitted Window shall be made through an
underwriting managed by an underwriter selected by the Deciding Holders and
acceptable to the Company (the "Managing Underwriter"). The Company shall,
together with all Holders proposing to distribute their Registrable Securities
though such underwriting, enter into an underwriting agreement in customary
form with the Managing Underwriter. If any Holder of Registrable Securities
disapproves of the terms of the underwriting, such person may elect to
withdraw therefrom by written notice to the Company. Any Holder so withdrawing
shall not sell any Registrable Securities pursuant to a registration effected
under this Agreement until after the completion of such underwritten
distribution.
(d) Registration Procedures. In connection with any registration required
-----------------------
under this Agreement, the Company shall take the actions set forth below.
(i) Prior to filing any registration statement, prospectus, amendment
or supplement with the Commission in connection with any registration
hereunder, the Company shall furnish to one counsel selected by the Holders of
a majority of the Registrable Securities copies of such documents.
-5-
<PAGE>
(ii) The Company shall notify each Holder of any stop order issued or
threatened by the Commission and will take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(iii) The Company shall comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by a
registration statement filed pursuant to this Agreement with respect to the
disposition of all Registrable Securities covered by such registration
statement in accordance with the intended methods of disposition by the
Holders as set forth in such registration statement.
(iv) The Company shall furnish to each Holder and each underwriter,
if any, of Registrable Securities covered by a registration statement filed
pursuant to this Agreement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), and the prospectus included in such registration statement
(including each preliminary prospectus), in conformity with the requirements
of the Securities Act, and such other documents as a selling Holder may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holder.
(v) The Company shall use its best efforts to register or qualify
the Registrable Securities under the securities or "blue sky" laws of each
State of the United States of America as any of the Holders or underwriters,
if any, of the Registrable Securities covered by a registration statement
filed hereunder reasonably requests, and shall do any and all other acts and
things which may be reasonably necessary or advisable to enable each selling
Holder and each underwriter, if any, to consummate the disposition in such
States of the Registrable Securities owned by such selling Holders; provided
--------
that the Company shall not be required to (A) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but
for this subsection (v), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(vi) The Company shall immediately notify each Holder entitled to
sell Registrable Securities during a Permitted Window of the happening of any
event which comes to the Company's attention if, as a result of such event,
the prospectus included in the registration statement filed under this
Agreement contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Company
shall promptly prepare and furnish to each Holder and file with the Commission
a supplement or amendment to such prospectus so that such prospectus will no
longer contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(vii) The Company shall take all such other reasonable and customary
actions as each Holder or the underwriters, if any, may reasonably request in
order to expedite or facilitate the disposition of the Registrable Securities
in accordance with the terms of this Agreement.
(viii) The Company shall make available for inspection by the
Holders, any underwriter participating in any disposition pursuant to a
registration statement filed under this Agreement, and any attorney,
accountant or other agent retained by such Holders or underwriters, all
financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries, as such person may reasonably request for
the purpose of confirming that such registration statement does not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that the Company obtains
reasonably satisfactory assurances that such information will be used solely
for such purpose and will be held in confidence (except to the extent that it
is included in the registration statement). The Company shall cause
-6-
<PAGE>
the officers, directors and employees of the Company and each of its
subsidiaries to supply such information and respond to such inquiries as any
Holder or underwriter may reasonably request or make for the purpose of
confirming that such registration statement does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that the Company obtains reasonably
satisfactory assurances that such information will be used solely for such
purpose and will be held in confidence (except to the extent that it is
included in the registration statement).
(ix) The Company shall use its commercially reasonable efforts to
obtain a "cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as the Holders or the
underwriters reasonably request.
(x) The Company shall otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period (which may begin with the
first fiscal quarter ending after the effective date of the registration
statement) of at least twelve months after the effective date of the
registration statement (as the term "effective date" is defined in Rule 158(c)
under the Securities Act), which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
5. Company Registration.
--------------------
(a) Notice of Registration. If at any time or from time to time,
----------------------
the Company shall determine to register any of its securities for its own
account (including, without limitation, all registrations in which other
selling shareholders are permitted to participate), other than (i) in
connection with the Company's registration on Form S-4, (ii) a registration
relating solely to employee benefit plans, or (iii) a registration relating
solely to a Commission Rule 145 transaction, (the "Company Registration"), the
Company will:
(A) promptly give to each Holder written notice thereof; and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, the Registrable Securities specified in a written request or
requests, made within 20 days after receipt of such written notice from the
Company, by any Holder.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders. In such event the right of any Holder to
registration pursuant to Section 6(a) shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company. If any
Holder, or other holder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after the effective date
of the registration statement relating thereto, or such other shorter period
of time as the underwriters may require. The provisions of Section 4(d)(i)-(v)
hereof shall also apply to registrations pursuant to this Section 5.
-7-
<PAGE>
(c) Right to Terminate Registration. The Company shall have the
-------------------------------
right to terminate or withdraw any registration initiated by it under this
Section 5 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
6. Other Registration Rights. The Holders acknowledge that certain other
-------------------------
stockholders of the Company may now or hereafter have registration rights, and
that such other stockholders may be entitled to sell their securities at the
same time, or pursuant to the same registration and underwriting, as the Holders
hereunder.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with the Company's obligations hereunder shall be borne by the
Company. All Selling Expenses relating to securities proposed to be registered
hereunder and all other registration expenses shall be borne by the Holders of
such securities pro rata on the basis of the number of shares proposed to be
sold by each of them during the applicable Permitted Window; provided however
-------- -------
that if the Company pays the Selling Expenses or Registration Expenses of
other shareholders of the Company in any registration in which the Holders
participate, then the Company shall pay the Selling Expenses and Registration
Expenses of Holders to the same extent and in pro rata proportion to the
Selling Expenses and Registration Expenses paid by the Company with respect to
the other shareholders.
8. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which
registration has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or
any amendment or supplement thereto, incident to any such registration, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act, the Exchange Act, state
securities law or any rule or regulation promulgated under the such laws
applicable to the Company in connection with any such registration, and the
Company will reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred, as such expenses are incurred; in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
-------- ----
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder or controlling person, and stated to be specifically for use
therein; and provided further, that the foregoing indemnity Agreement is
-------- -------
subject to the condition that, insofar as it relates to any such untrue
statement, alleged untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity agreement shall not inure to the
benefit of any person, if a copy of the final prospectus or an amended or
supplemented prospectus, as applicable, was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act, and if the final prospectus or the
amended or supplemented prospectus, as applicable, would have cured the defect
giving rise to the loss, liability, claim or damage. In no event, however,
shall the Company have any indemnification obligation to the extent that the
expenses, claims, losses, damages or liabilities as to which indemnification
is sought are in connection with an offer or sale made by a person other than
the Company in violation of the terms of this Agreement (a "Violation").
-8-
<PAGE>
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which a registration hereunder is
effected, indemnify the Company, each of its directors and officers, each
person who controls the Company within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (i) a Violation by such
Holder or (ii) any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Company,
such Holders, such directors, officers or control persons for any legal or any
other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating or defending any such claim, loss, damage,
liability or action, but, in the case of clause (ii) above, only to the extent
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with information
furnished to the Company by such Holder. Notwithstanding the foregoing, the
liability of each Holder under this subsection 8(b) shall be limited in an
amount equal to the initial public offering price of the shares sold by such
Holder, unless such liability arises out of or is based on a Violation or
willful misconduct by such Holder.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action and provided further, that the Indemnifying
Party shall not assume the defense for matters as to which there is a conflict
of interest or there are separate and different defenses. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party (whose consent shall not be unreasonably
withheld), consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
9. Information by Holder. The Holder or Holders of Registrable Securities
---------------------
included in any registration hereunder shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration
referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration the Company agrees to
use all reasonable efforts, at any time after the second anniversary of the
Effective Date, to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
-9-
<PAGE>
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) So long as a Holder owns any Restricted Securities, to furnish to
the Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing the Holder to sell any such
securities without registration.
11. Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted to Holders under Section 4 (but not Section 5) may
be assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by the
Holder, provided that (i) such transfer is otherwise effected in accordance with
applicable securities laws and the terms of this Agreement, (ii) such assignee
or transferee acquires at least 100,000 shares of Registrable Securities (as
adjusted for stock splits, stock dividends, stock combinations and the like),
(iii) written notice is promptly given to the Company and (iv) such transferee
agrees to be bound by the provisions of this Agreement. Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned without compliance with item (ii) above to (x) any constituent equity
holder of a Holder which is a partnership, limited liability company, or a
corporation or (y) a family member or trust for the benefit of a Holder who is
an individual, or a trust for the benefit of a family member of such a Holder.
12. Amendment. Except as otherwise provided above, any provision of this
---------
Agreement may be amended or the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and each of the
Holders.
13. Governing Law. This Agreement shall be governed in all respects by the
-------------
laws of the State of Delaware, without regard to conflict of laws provisions.
14. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and Agreement among the parties regarding the matters set forth
herein. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon the successors, assigns,
heirs, executors and administrators of the parties hereto.
15. Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by facsimile
transmission, by hand or by messenger, addressed:
(a) if to a Holder, at such Holder's address as set forth below such
Holder's signature on this Agreement, or at such other address as such Holder
shall have furnished to the Company.
(b) if to the Company, to:
Cirrus Logic, Inc.
4210 S. Industrial Dr.
Austin, TX 78744
Fax: (512) 445-7581
Attn: Craig Ensley
-10-
<PAGE>
Cirrus Logic, Inc.
3100 West Warren Ave.
Fremont, CA 94538
Fax: 510-624-7220
Attn: Steve Howarth
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Michael J. Danaher, Esq.
Fax: (415) 493-6811
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally or by facsimile transmission, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
"THE COMPANY"
Cirrus Logic, Inc.,
a Delaware corporation
By:
--------------------------------------
Title:
-----------------------------------
"THE SHAREHOLDERS"
------------------------------------------
Signature
Print Name: Carl Carman, on behalf of each
of following stockholders of AudioLogic,
Inc.,
John L. Melanson
Leonard Koch
Junsheng Wang
Jeff Dinapoli
Jason Carlson
Tim B. Trueblood
Richard Kim
The Hill Partnership III
Gilde Investment Fund B. V.
James Forest
Robert Anderson
Morgan Holland Fund II
Eric Lindemann
-12-
<PAGE>
Thomas Worrall
Caleb Roberts
Kathleen Adams
Joel C. McKee Cooper
David Klein
-13-
<PAGE>
Exhibit 4.2
June 28, 1999
Cirrus Logic, Inc.
3100 West Warren Avenue
Fremont, CA 94538
Dear Sirs and Mesdames:
The undersigned understands that AudioLogic, Inc. (the "Company") will be
party to an Agreement and Plan of Reorganization by and among Cirrus Logic, Inc.
("Cirrus"), AL Acquisition Corp ("Merger Sub") and the Company (the "Merger
Agreement") whereby Cirrus will acquire the Company through a statutory merger
of Merger Sub with and into the Company (the "Merger"). The undersigned
acknowledges that he/she or it will be entitled to receive shares of Cirrus's
Common Stock in connection with the Merger (the "Shares").
As an inducement for Cirrus to consummate the Merger, the undersigned
hereby agrees that, without the prior written consent of Cirrus, he/she or it
(along with any affiliate entities) will not, during the period commencing at
the Effective Time and ending on the one year anniversary of the Closing Date,
(1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of, directly or
indirectly, more than 25% of the Shares then beneficially held by the
undersigned in each calendar quarter from July 1, 1999 to June 30, 2000 or (2)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of Shares greater than
the limitation in clause (1) above, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of the Shares in cash or
otherwise.
<PAGE>
The undersigned hereby acknowledges that this Stock Transfer Restriction
Agreement is valid and binding notwithstanding any prior agreements relating to
this matter and further agrees and consents to the entry of stop-transfer
instructions with the Company's transfer agent against the transfer of shares of
Common Stock held by the undersigned except in compliance with the terms and
conditions of this Stock Transfer Restriction Agreement. The undersigned also
understands that Cirrus, Merger Sub and the Company will proceed with the Merger
in reliance on this Stock Transfer Restriction Agreement.
Very truly yours,
__________________________________
Name of Securityholder
__________________________________
Signature of Authorized Signatory
__________________________________
Print Name and Title, if applicable
__________________________________
Additional Signatures, if stock jointly held
[Signature Page to Stock Transfer Restriction Agreement]
<PAGE>
Exhibit 5.1
September 3, 1999
Cirrus Logic, Inc.
3100 W. Warren Ave.
Fremont, CA 94538
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 filed by you with
the Securities and Exchange Commission on or about September 3, 1999 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of a total of 1,210,228 shares of your
Common Stock (the "Shares"). We understand that the Shares are to be sold from
time to time on the NASDAQ National Market at prevailing prices or as otherwise
described in the Registration Statement. As legal counsel for Cirrus Logic,
Inc., we have examined the proceedings taken by you in connection with the sale
of the Shares.
It is our opinion that the Shares are legally and validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments to it.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Cirrus Logic, Inc.
for the registration of 1,210,228 shares of its common stock and to the
incorporation by reference therein of our report dated April 21, 1999, with
respect to the consolidated financial statements and schedule of Cirrus Logic,
Inc. included in its Annual Report (Form 10-K) for the year ended March 27,
1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
September 3, 1999
