Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On July 8, 2021, Cirrus Logic, Inc. a Delaware corporation (“Cirrus Logic”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and
among Cirrus Logic, Inc., Lion Semiconductor Inc., a Delaware corporation (“Lion”), Leo Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of Cirrus Logic (“Merger Sub”), and Fortis Advisors LLC, solely in its capacity as agent
for Lion’s securityholders (“Company Holders’ Agent”), pursuant to which Cirrus Logic has agreed to acquire all of the outstanding shares of capital stock of Lion, with Lion continuing as the surviving corporation and a wholly-owned subsidiary of
Cirrus Logic (the “Merger”).
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, holders of Lion’s outstanding stock, options, warrants,
and notes will be entitled to receive a portion of the merger consideration of $335 million in cash, which amount will be adjusted for cash, debt, net working capital, transaction expenses, and holdback amounts.
The closing of the Merger is subject to the satisfaction of certain conditions, including, among others: (1) the accuracy of representations and warranties
of, and performance of covenants by, the other party (in each case, subject to certain qualifications, if applicable), (2) the absence of a continuing material adverse effect, and (3) the absence of any order, injunction or order limiting or
restricting the Merger. The closing is also subject to the adoption of the Merger Agreement by Lion's stockholders. Cirrus Logic expects the Merger to close in its fiscal second quarter.
Cirrus Logic, Lion, and Merger Sub have made customary representations, warranties, and covenants in the Merger Agreement, including, among other things,
covenants with respect to the conduct of Lion's business during the period between the execution of the Merger Agreement and consummation of the Merger.
The Merger Agreement contains certain termination rights for both Cirrus Logic and Lion including, but not limited to, (1) in the event that the Merger has
not been consummated on or prior to August 19, 2021, (2) the parties’ mutual written agreement to terminate the Merger Agreement, or (3) a material breach by one party, which breach cannot be cured within 10 business days, entitling the
non-breaching party to not consummate its closing conditions under the Merger Agreement.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a
copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference. It is not intended to provide any financial or other factual information about Cirrus Logic, Lion, or Merger Sub. There are representations, warranties, and
covenants contained in the Merger Agreement which were made by the parties to each other as of specific dates. The representations, warranties, and covenants (1) were made only for purposes of the Merger Agreement and were solely for the benefit of
the parties to the Merger Agreement and the parties expressly identified as third-party beneficiaries thereto, as applicable, (2) may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its
terms, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing matters as facts, and (3) may be subject to a contractual standard
of materiality that is different from certain standards generally applicable to investors. Investors should not rely on the representations, warranties, and covenants as characterizations of the actual state of facts regarding or condition of the
parties or their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement or earlier dates specified therein, which subsequent
information may or may not be fully reflected in public disclosures by Cirrus Logic. Accordingly, investors should read the Merger Agreement not in isolation but in conjunction with other information about Cirrus Logic, Lion, and Merger Sub that is
included in reports, statements and other filings made with the SEC by Cirrus Logic.
Second Amended and Restated Credit Agreement
On July 8, 2021, Cirrus Logic, Inc., a Delaware corporation (“Cirrus Logic”), entered into a second amended and restated credit agreement (the “Second
Amended Credit Agreement”) with Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto. Capitalized terms used and not defined in this section of Item 1.01 have the meanings given to such terms in the Second
Amended Credit Agreement. The Second Amended Credit Agreement provides for a $300 million senior secured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility matures on July 8, 2026 (the “Maturity Date”).
Cirrus Logic must repay any outstanding principal amount of all borrowings, together with all accrued but unpaid interest thereon, on the Maturity Date.
The Revolving Credit Facility is required to be guaranteed by all of Cirrus Logic’s material domestic subsidiaries (the “Subsidiary Guarantors”). The
Revolving Credit Facility is secured by substantially all the assets of Cirrus Logic and any Subsidiary Guarantors, except for certain excluded assets.
Borrowings under the Revolving Credit Facility may, at Cirrus Logic’s election, bear interest at either (a) a Base Rate plus the Applicable Margin (“Base
Rate Loans”) or (b) a LIBOR Rate plus the Applicable Margin (“LIBOR Rate Loans”). The Applicable Margin ranges from 0% to.75% per annum for Base Rate Loans and 1.00% to 1.75% per annum for LIBOR Rate Loans based on the ratio of consolidated funded
indebtedness to consolidated EBITDA for the most recently ended period of four consecutive fiscal quarters (the “Consolidated Leverage Ratio”). The Second Amended Credit Agreement further provides a method for determining an alternative rate of
interest if the LIBOR Rate is no longer available or upon the occurrence of certain other events.
A Commitment Fee accrues at a rate per annum ranging from 0.175% to 0.275% (based on the Consolidated Leverage Ratio) on the average daily unused portion of
the Commitment of the Lenders.
The Second Amended Credit Agreement contains customary affirmative covenants, including, among others, covenants regarding the payment of taxes and other
obligations, maintenance of insurance, reporting requirements, and compliance with applicable laws and regulations. Further, the Second Amended Credit Agreement contains customary negative covenants limiting the ability of Cirrus Logic or any
Subsidiary to, among other things, incur debt, grant liens, make investments, effect certain fundamental changes, make certain asset dispositions, and make certain restricted payments. The Revolving Credit Facility also contains certain financial
covenants providing that (a) the ratio of consolidated funded indebtedness (minus up to $200,000,000 of unrestricted cash and cash equivalents available on such date) to consolidated EBITDA for the prior four consecutive quarters must not be
greater than 3.00 to 1.00 (the “Consolidated Net Leverage Ratio”) and (b) the ratio of consolidated EBITDA for the prior four consecutive quarters to consolidated interest expense paid or payable in cash for the prior four consecutive quarters must
not be less than 3.00 to 1.00 (the “Consolidated Interest Coverage Ratio”).
The foregoing summary of the Second Amended Credit Agreement and the transactions contemplated thereby does not purport to be complete and is subject to,
and qualified in its entirety by, the full text of the Second Amended Credit Agreement, which is attached as Exhibit 10.2 to this Current Report on Form 8-K, and such exhibit is incorporated herein by reference.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains statements (including certain projections, guidance, and business trends) that are “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995. Words such as “believe”, “estimate”, “project”, “plan”, “expect”, “anticipate”, “will”, “intend” and other similar expressions may identify forward-looking statements. Actual results
may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to: the ability to successfully complete the Merger on anticipated terms and timetable; the
ability to successfully integrate and achieve expected benefits of the Merger; risk relating to any unforeseen liabilities of Lion; and other risks and uncertainties, including but not limited to those detailed from time to time in our Securities
and Exchange Commission (SEC) filings.
These forward-looking statements reflect our beliefs as of the date of filing this report. We undertake no obligation to update or revise any
forward-looking statement, whether as a result of new information, future events or otherwise. See Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021, for more information.