SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted
by Rule 14a-6(c)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Amdahl Corporation
(Name of Registrant as Specified in Its Charter)
Patricia A. Boepple
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[x] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(l), 14a-6(i)(2)or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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<PAGE>
AMDAHL [logo]
CORPORATION
1250 East Arques Avenue
Sunnyvale, California 94088-3470
March 20, 1997
Notice of Annual Meeting of Stockholders
To Be Held May 1, 1997
The annual meeting of stockholders of Amdahl Corporation, will be held
at the Red Lion Hotel, 2050 Gateway Place, San Jose, California at 10:00 a.m. on
May 1, 1997. The purpose of the meeting is to:
1. elect ten directors to serve until the next annual meeting of stockholders;
2. vote on amendments to the Amdahl Corporation 1994 Stock Incentive Plan,
including an amendment to modify the formula which increases annually the
number of shares of stock that can be issued under the plan;
3. approve the selection of Arthur Andersen LLP as the independent public
accountants for 1997; and
4. consider and vote on other business that is properly brought before the
meeting.
Items 1 through 3 are described in the proxy statement. Only
stockholders of record at the close of business on March 3, 1997 may vote at the
meeting.
We urge you to complete, date and sign the enclosed proxy/voting
instruction card and return it in the enclosed envelope. Signing and returning
the proxy card does not affect your right to vote in person if you attend the
annual meeting. Stockholders who hold their stock in "street name" or with a
broker will need to bring a copy of a brokerage statement showing their stock
ownership as of the record date in order to vote their stock at the annual
meeting.
By Order of the Board of Directors
/s/Bruce J. Ryan
BRUCE J. RYAN
Executive Vice President,
Chief Financial Officer
and Corporate Secretary
<PAGE>
Amdahl Corporation
("Amdahl" or the "Company")
1250 East Arques Avenue
Sunnyvale, California 94088-3470
-----------------
PROXY STATEMENT
-----------------
This proxy statement contains information related to the solicitation
of proxies by the Board of Directors of Amdahl for use at the Company's annual
meeting of stockholders. The meeting is to be held at 10:00 a.m. on May 1, 1997
at the Red Lion Hotel, 2050 Gateway Place, San Jose, California, for the purpose
stated in the accompanying Notice of the meeting. These proxy materials were
first mailed to stockholders on or about March 20, 1997.
Amdahl will bear the entire cost of soliciting proxies. Brokerage
houses and other custodians, nominees and fiduciaries who send proxies and proxy
materials to the beneficial owners of stock may be reimbursed for their
expenses. Directors, officers or other employees of Amdahl may solicit proxies,
but they will not receive any compensation for doing so.
Securities and Exchange Commission ("SEC") rules require that an annual
report precede or be included with proxy materials. However, stockholders with
multiple accounts may be receiving more than one annual report, which is costly
to Amdahl and may be inconvenient to these stockholders. Stockholders may
discontinue receiving extra reports by marking the appropriate box on the proxy
card for the accounts selected. At least one account must continue to receive an
annual report. Eliminating these duplicate mailings will not affect receipt of
future proxy statements and proxy cards. To resume the mailing of an annual
report to an account please call 800-524-4458, the stockholder services number
at Bank of New York.
VOTING
If the enclosed proxy/voting instruction card is properly signed,
returned to the Company and not revoked, it will be voted as directed by the
stockholder. If the stockholder does not instruct on how to vote, the proxy
holder will vote: for item 1: the nominees to the Board of Directors listed on
the proxy card; for item 2: the amendments to the 1994 Stock Incentive Plan; for
item 3: the selection of Arthur Andersen LLP as the Company's independent
accountants for 1997; and in the discretion of the proxy holder on other matters
that are properly brought before the meeting. As of the date of this proxy
statement, the Board of Directors knows of no other business that will be
presented at the annual meeting.
A stockholder may revoke a proxy any time before it is voted at the
meeting by filing with the Corporate Secretary a notice of revocation or a
properly executed proxy card with a later date. A stockholder who holds stock in
"street name" or with a broker will need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date in order to vote the
stock at the annual meeting.
It is Company policy that proxies, ballots and voting tabulations be
kept confidential except: (i) when disclosure is necessary to meet applicable
legal requirements; (ii) to assert or defend claims for or against the Company;
(iii) when disclosure is expressly requested by a stockholder; (iv) when the
stockholder has made written comments on a proxy card; or (v) during a contested
election for the Board of Directors. It is also Company policy that the
tabulators and inspectors of election be independent. Bank of New York is the
Company's independent tabulators and inspectors of election.
<PAGE>
The close of business on March 3, 1997 was the record date for
stockholders entitled to vote at the annual meeting. Each share of stock
outstanding on the record date is entitled to one vote. A majority of the
Company's stock must be represented at the meeting in person or by proxy in
order to conduct the meeting. Abstentions and broker non-votes are counted for
this purpose.
Stockholders may cumulate their votes for the election of directors.
This means that a stockholder can give one nominee a number of votes equal to
the number of directors to be elected (i.e. ten) multiplied by the number of
votes to which the stockholder is entitled. Or, the stockholder may distribute
these votes among as many nominees as he or she chooses. Proxies which withhold
authority to vote as to specific directors shall not be considered votes for any
other directors. Proxy holders may (if authority to vote for the election of all
directors is not withheld) vote cumulatively and allocate votes as they choose
among the nominees for whom the stockholder has instructed the proxy holders to
vote. The ten candidates receiving the highest number of votes will be elected.
An abstention has the same effect as a vote against a matter, because
abstentions are counted in determining the number of shares voted on a matter.
Broker non-votes are not counted when determining the number of shares voted on
a matter. The affirmative vote of a majority of the shares voted on a matter is
required to approve items 2 and 3.
As of the record date, March 3, 1997, there were 122,280,788 shares of
stock outstanding.
PRINCIPAL STOCKHOLDERS
The beneficial ownership for each person or entity known by Amdahl to
beneficially own 5% or more of the outstanding shares of Amdahl stock as of
March 3, 1997 is shown below:
<TABLE>
<CAPTION>
Number Approximate
Name and Address of Shares % Owned
---------------- --------- -------
<S> <C> <C>
The Prudential Insurance Company of America 1 10,352,218 8.47%
751 Broad Street
Newark, New Jersey 07102-3777
Fujitsu Limited 2 51,811,664 42.37%
6-1 Marunouchi 1-chome
Chiyoda-ku
Tokyo, 100 Japan
<FN>
1 According to a Schedule 13G filed with the SEC on February 10, 1997, as of
December 31, 1996, The Prudential Insurance Company of America
("Prudential") held 2,000 shares for the benefit of its general account. In
addition, Prudential may have had direct or indirect voting and/or
investment discretion over 10,350,218 shares, which were held for the
benefit of its clients in separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates.
Prudential reported the combined holdings of these entities for the purpose
of administrative convenience. Prudential acquired these shares in the
ordinary course of business, and not with the purpose or effect of changing
or influencing control of Amdahl.
2 Fujitsu Limited ("Fujitsu") has sole dispositive and voting power over
these shares. In addition to its share ownership, Fujitsu has extensive
business relationships with Amdahl. See "Compensation Committee Interlocks
and Insider Participation" later in this proxy statement.
</FN>
</TABLE>
<PAGE>
CERTAIN INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
At the annual meeting stockholders will elect ten directors to hold
office until the next annual meeting. The ten individuals listed below were
nominated by the current Board of Directors. The proxy holders intend to vote
all proxies received by them for the ten nominees. If any nominee is unable or
declines to serve as a director at the time of the annual meeting, the proxies
will be voted for any nominee that the present Board of Directors designates to
fill the vacancy. The Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director. If additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them cumulatively to assure the election of as many of the
nominees listed below as possible.
<TABLE>
<CAPTION>
Nominees to the Board of Directors
Director Age as of
of Amdahl February 1,
Name Principal Occupation Since 1997
- ---- -------------------- -------- ---------
<S> <C> <C> <C>
John C. Lewis Chairman of the Board, President and Chief 1977 61
Executive Officer, Amdahl Corporation
Michael R. Hallman President and Founder, 1995 51
The Hallman Group
E. F. Heizer, Jr. Private Investor and Business Consultant 1972 67
Kazuto Kojima Member of the Board, Group President of 1993 54
International Computer Business Group
and Marketing Group,
Fujitsu Limited
Burton G. Malkiel, Ph.D. Chemical Bank Chairman's Professor of 1981 64
Economics, Princeton University
Takeshi Maruyama Member of the Board and 1996 57
Executive Vice President of
Information Processing,
Fujitsu Limited
George R. Packard, Ph.D. Professor and Director, 1987 64
Reischauer Center for East Asian Studies,
School of Advanced International
Studies, Johns Hopkins University
Walter B. Reinhold Chairman of the Board, 1981 72
Varco International, Inc.
Takashi Takaya Member of the Board, General Manager of 1996 54
Finance and Administration Division
and General Manager of Corporate
Marketing and Strategy,
Fujitsu Limited
J. Sidney Webb Chairman of the Board, 1984 77
The Titan Corporation
</TABLE>
<PAGE>
Mr. Lewis was elected Chairman of the Board in 1987 and was reelected
President and Chief Executive Officer on March 15, 1996. He was President of
Amdahl from 1977, when he joined the Company, until 1987. He was the Company's
Chief Executive Officer from 1983 until 1992. He is a director of Cypress
Semiconductor Corporation; Vitesse Semiconductor Corporation; Infinity Financial
Technology, Inc.; and Pinnacle Systems, Inc.
Mr. Hallman is the founder and President of The Hallman Group, a
management consulting firm which focuses on marketing, sales, business
development and strategic planning for the information systems industry. Mr.
Hallman was President and Chief Operating Officer of Microsoft Corporation from
1990 until 1992, and Vice President of the Boeing Company and President of
Boeing Computer Services from 1987 until 1990. From 1967 until 1987, he worked
for IBM Corporation in various sales and marketing executive positions. Mr.
Hallman is currently a director of In Focus Systems, Inc.; Intuit, Inc.;
Timeline Inc.; Keytronics Corporation; and Network Appliance, Inc., as well as a
number of private hardware and software technology startups. He provided
consulting services to Amdahl in 1994 and 1995, prior to becoming a Board
Member.
Mr. Heizer is engaged in the formation and development of businesses
from both a management and investment standpoint. He has been Chairman of the
Heizer Center for Entrepreneurship at Kellog Graduate School of Management at
Northwestern University since 1992. He has also been Vice President since 1995,
and a member of the Executive Committee since 1992, of the Yale Law School. He
was Chairman of the Board of Directors and Chief Executive Officer of Heizer
Corporation, a business development firm, from 1969 until 1985. Mr. Heizer is
currently a director of Chesapeake Energy Corporation and Material Sciences
Corporation. He is also a director of a number of private companies. He has been
Chairman of Amdahl's Audit Committee since 1974.
Mr. Kojima has been with Fujitsu since 1965. He has held managerial
positions in various departments and divisions. In 1993 he was appointed General
Manager of Corporate Marketing and Strategy and in 1994 he was appointed as a
Member of the Board of Fujitsu and General Manager of the Digital Media Group.
In 1996 he was appointed Group President of the International Computer Business
Group and the Marketing Group.
Dr. Malkiel has been Chemical Bank Chairman's Professor of Economics at
Princeton University since 1988. Dr. Malkiel was Dean of the Yale School of
Organization and Management from 1981 through 1987. Dr. Malkiel served on
President Ford's Council of Economic Advisors. He is currently a director of
Baker Fentress Inc.; the Jeffrey Co.; The Prudential Insurance Company of
America; Southern New England Telecommunications Co.; and the Vanguard Group of
Investment Companies.
Mr. Maruyama has been with Fujitsu since 1965. He has held managerial
positions in a variety of departments and divisions. In 1990 he was appointed as
a Member of the Board of Fujitsu. In 1994 he was appointed Senior Vice President
and in 1995 Executive Vice President. Since 1996 he has been the Executive Vice
President of Information Processing.
Dr. Packard is a member of The Advisory Council to the Fujitsu Research
Institute in Tokyo. He is also Professor and Director of the Reischauer Center
for East Asian Studies of the School of Advanced International Studies at John
Hopkins University. He was Dean of the School from 1979 through 1993. Since 1994
he has concurrently served as Professor and Director of the Reischauer Center
and Visiting President of the International University of Japan. From 1976 to
1979 he was Deputy Director of the Woodrow Wilson International Center in
Washington, D.C. He is currently a director of the Mercantile-Safe Deposit and
Trust Funds; OFFITBANK; and GRC International Corp.
Mr. Reinhold has been Chairman of the Board since 1976, and was Chief
Executive Officer from 1976 to 1991, of Varco International, Inc. He currently
is a director of Revco D.S., Inc. and The Petroleum Equipment Suppliers
Association. Mr. Reinhold was Chairman of Amdahl's Benefit Plan Administration
Committee from 1983 through 1992 and has been Chairman of the Compensation
Committee since 1983. He was appointed Chairman of the Nominating Committee in
February 1996 and Chairman of the Stock Plan Administration Committee in
November 1996.
<PAGE>
Mr. Takaya has been with Fujitsu since 1965. He has held managerial
positions in a variety of departments and divisions. In 1990 he was appointed
Group President, Administration and Business Group, Electronic Devices. In 1995
he became a Member of the Board of Fujitsu and General Manager of the Finance
and Administrative Division. He was also appointed to the position of General
Manager of Corporate Marketing and Strategy in 1996.
Mr. Webb has been Chairman of the Board since 1984 of The Titan
Corporation, and an independent consultant since his retirement in 1982 from
TRW-Fujitsu Co., a joint venture between Fujitsu and TRW, Inc. From 1980 to
1982, Mr. Webb was President of TRW-Fujitsu Co. In addition, he was a director
of TRW from 1966 until 1981. Mr. Webb is a director of EIP Microwave, Inc.;
Plantronics, Inc.; and Visigenics.
On March 14, 1996 E. Joseph Zemke resigned as President, Chief
Executive Officer and Director of the Company. On March 15, 1996 Chairman of the
Board, John C. Lewis was elected as President and Chief Executive Officer of the
Company.
See "Principal Stockholders" and "Compensation Committee Interlocks and
Insider Participation" for additional information regarding Fujitsu.
Security Ownership
The following table lists the beneficial ownership of Amdahl's stock as
of March 3, 1997 by each director and nominee, the chief executive officer, the
four other most highly compensated executive officers, the former chief
executive officer, Mr. Zemke, and all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Approximate
Name Shares1 % Owned
---- ------- -------
<S> <C> <C>
John C. Lewis ............................................... 585,490 *
Michael R. Hallman............................................ 15,000 *
E. F. Heizer, Jr. ............................................ 37,000 *
Kazuto Kojima 2............................................... 20,000 *
Burton G. Malkiel, Ph. D..................................... 31,052 3 *
Takeshi Maruyama 2............................................ 5,000 *
George R. Packard, Ph. D..................................... 29,000 *
Walter B. Reinhold............................................ 107,605 *
Takashi Takaya 2.............................................. 5,000 *
J. Sidney Webb................................................ 33,000 *
William F. Ferone............................................. 119,800 *
Michael J. Poehner............................................ 36,550 4 *
Bruce J. Ryan................................................. 93,022 *
David B. Wright............................................... 154,012 *
E. Joseph Zemke............................................... 422,589 *
All directors and executive officers as a group
(25 persons)................................................ 2,434,422 1.99%
* Less than 1%
<FN>
1 These shares are subject to the sole voting and investment power of the
indicated person(s). The figures include shares that could be purchased by
exercise of options within 60 days of March 3, 1997 as held by: Mr. Lewis,
361,600 shares; Mr. Hallman, 15,000 shares; Mr. Heizer, 29,000 shares; Mr.
Kojima, 20,000 shares; Dr. Malkiel, 29,000 shares; Mr. Maruyama, 5,000
shares; Dr. Packard, 28,000 shares; Mr. Reinhold, 29,000 shares; Mr. Takaya,
5,000 shares; Mr. Webb, 29,000 shares; Mr. Ferone, 98,150 shares; Mr.
Poehner, 23,400 shares; Mr. Ryan, 28,250 shares; Mr. Wright, 82,150 shares;
Mr. Zemke, 364,000 shares (includes 162,000 shares whose beneficial
ownership will transfer to Ms. Julia Berry upon exercise); and all directors
and executive officers as a group, 1,714,190 shares.
<PAGE>
2 See "Principal Stockholders" for information regarding securities held by
Fujitsu.
3 Includes 1,000 shares held by the Jonathan P. Malkiel Trust of which Dr.
Malkiel is a trustee with shared voting, but sole investment power.
4 Includes 900 shares (450 each) held by Mr. Poehner as custodian for his two
children. Mr. Poehner has sole voting and investment power over these
shares.
</FN>
</TABLE>
Board Meetings and Committees
The Board of Directors held six meetings during 1996.
The Board has an Acquisition Committee, an Audit Committee, a
Compensation Committee, a Nominating Committee and a Stock Plan Administration
Committee.
The Audit Committee is responsible for approving the services performed
by the Company's independent public accountants and for reviewing and evaluating
the Company's accounting principles and reporting practices and its system of
internal accounting controls. This committee, currently consisting of Messrs.
Hallman, Heizer and Takaya and Dr. Malkiel, held six meetings during 1996.
The Compensation Committee is responsible for reviewing and approving
the Company's compensation policies and administering the Company's employee
benefit programs, excluding the Company's stock plans. The committee held five
meetings during 1996, and currently consists of Messrs. Kojima, Reinhold and
Webb and Dr. Packard.
The Nominating Committee, established by the Board of Directors on
February 8, 1996, is responsible for determining and recommending to the Board
of Directors candidates to stand for election to the Board of Directors. This
committee has not yet held a meeting and currently consists of Messrs. Kojima,
Reinhold and Webb and Dr. Packard.
The Stock Plan Administration Committee, established by the Board of
Directors on November 1, 1996, has exclusive authority to make all stock option
grants and other awards under the Company's stock plans and to otherwise
administer all the terms and provisions of the plans. The committee held one
meeting in 1996 and currently consists of Messrs. Reinhold and Webb and Dr.
Packard.
Director Compensation
Non-employee directors receive an annual fee of $20,000 and are paid
$1,000 for each Board meeting and $500 for each teleconference and committee
meeting they attend. The non-employee directors are reimbursed for expenses
related to these meetings. In 1996 Messrs. Fukagawa, Kojima, Maruyama, Takaya
and Tsuchimoto earned $79,000 in fees, which were paid to Fujitsu. Messrs.
Fukagawa and Tsuchimoto were directors for part of 1996. These amounts are not
included in the payments to Fujitsu discussed under "Compensation Committee
Interlocks and Insider Participation." Directors may defer all or part of their
compensation under the Director Fee Deferral Plan. The deferred compensation
will be paid to the director at a selected time with interest, at a specified
formula rate, either in a lump sum or on an annual installment basis. In 1996
Dr. Malkiel deferred three-fourths of his annual fee and all of his meeting fees
under this plan.
<PAGE>
Under the Automatic Option Grant Program of the Company's 1994 Stock
Incentive Plan each non-employee director receives a stock option grant for
5,000 shares at the time he or she first becomes a director. Mr. Maruyama
received his grant on July 31, 1996 at an exercise price of $9.84375. Mr. Takaya
received his grant on November 1, 1996 at an exercise price of $10.15625.
Non-employee directors who are reelected to the Board also receive an option
grant for 5,000 shares at each annual meeting. At the annual meeting held on May
2, 1996, an automatic option grant for 5,000 shares, with an exercise price of
$12.1875 per share, was made to each of the following directors: Messrs.
Fukagawa, Hallman, Heizer, Kojima, Reinhold, Tsuchimoto and Webb and Drs.
Malkiel and Packard. Each grant made under this program has an exercise price
equal to the fair market value on the grant date and a maximum term of fifteen
years. Each option is immediately exercisable for all of the option shares. Any
shares purchased under the option will be repurchased by the Company at the
original exercise price if the director ceases Board service before the shares
vest or before completing four years of Board service. If the director
terminates Board service for any reason (other than removal for cause) after
four years, the option shares immediately vest and the option remains
exercisable until the expiration of the option term. Otherwise, the option
shares will vest in two equal annual installments, with the first installment
vesting one year after the automatic grant date. The option shares will
automatically vest in full if there are certain changes in control or ownership
of the Company or upon the death or disability of the director.
The 1994 Stock Incentive Plan also contains a special stock acquisition
program for the non-employee directors. They may elect to apply all or a portion
of their annual retainer fee to purchase unvested shares. In 1996 Dr. Malkiel
applied $5,000 of his annual retainer fee to acquire 601 shares at $8.3125 per
share under this program. On the last day of each month throughout 1996,
one-twelfth of these shares vested to Dr. Malkiel.
Compensation Committee Interlocks and Insider Participation
Messrs. Kojima, Reinhold and Webb and Dr. Packard, all non-employee
directors, comprise the Compensation Committee. Messrs. Reinhold and Webb and
Dr. Packard, all non-employee directors, comprise the Stock Plan Administration
Committee.
Mr. Kojima is a Member of the Board and Group President of the
International Computer Business Group and the Marketing Group of Fujitsu.
Amdahl purchases certain finished products, certain subassemblies and
substantially all of its large-scale integrated semiconductor components and
high-density printed circuit boards from Fujitsu. The aggregate amount of these
purchases during 1996 was approximately $160 million. The Company has been
advised by Fujitsu that because of the difficulty of allocating expenditures for
research and development, creation of new manufacturing facilities, and general
and administrative costs for the production of the computer subassemblies and
other equipment sold by Fujitsu to the Company, it is difficult to determine the
relative profitability of such sales. However, subject to the foregoing
uncertainties, Fujitsu believes that the profitability of these sales is
approximately equivalent to the profitability of sales by Fujitsu of computer
products to customers in which it has no ownership interest. Although some of
the materials and other equipment are custom manufactured by Fujitsu for Amdahl
and are not available from third parties, Amdahl believes that the prices it
pays Fujitsu for these products are comparable to those it would pay to an
unaffiliated supplier.
Amdahl has committed to purchase a minimum number of certain finished
products, certain subassemblies and other equipment from Fujitsu. On December
27, 1996 the aggregate remaining commitment for these materials and equipment
was approximately $34 million. Delivery of these materials and other equipment,
and the related payments, is generally expected to occur during 1997. Fujitsu
supplies Amdahl with services and material related to the Company's development
of current and future products, including the Millennium series of processors.
This resulted in a charge to engineering and development expense of
approximately $7 million in 1996.
<PAGE>
Amdahl has also entered into agreements with Fujitsu or certain of its
subsidiaries for the distribution of Amdahl computer systems in Brazil, Japan,
Malaysia and Spain. In 1996 Amdahl recognized approximately $23 million in
revenue and $5 million in gross margin from equipment sales to Fujitsu.
In 1996 Fujitsu entered into an agreement to reimburse Amdahl for
certain specific engineering development activities performed by Amdahl from
time to time related to products which are being jointly developed by Amdahl and
Fujitsu. In connection with these development efforts, Amdahl recorded $24
million as an offset to engineering and development expense in 1996.
Amdahl and Fujitsu have agreed to participate in the joint development
of the Company's current and next generation of IBM compatible systems. Under
the agreement, Fujitsu has primary responsibility for the design and manufacture
of these systems.
On December 27, 1996 Amdahl owed Fujitsu $80 million in principal and
approximately $1 million in interest under a loan agreement with Fujitsu. In
1996 the interest expense associated with the loan was approximately $6 million.
The loan is payable in January 1998.
In 1995 the Company entered into a contract manufacturing agreement
with HaL Computer Systems, Inc. ("HaL"), a wholly-owned subsidiary of Fujitsu,
whereby Amdahl agreed to manufacture high end open system workstations for HaL.
In 1996 Amdahl also performed circuit board assembly for Ross Technology, Inc.,
a majority owned subsidiary of Fujitsu. These agreements contributed
approximately $6 million to equipment sales and a negative $2 million to gross
margin in 1996. Both of these agreements were completed in 1996.
In 1996 Fujitsu paid Amdahl $2 million for the right to market
Millennium processors in Japan. This amount was recognized in the third quarter
of 1996 as equipment sales revenue.
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation" for
information regarding Fujitsu.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
The directors and executive officers of the Company, and holders of
more than 10% of the Company's outstanding stock, are required under Section
16(a) of the Securities Exchange Act of 1934 to file forms which report their
ownership of and transactions in the Company's securities with the SEC. They are
also required to furnish copies of all reports they file to the Company.
Based upon copies of the reports received by the Company, and written
representations that no other reports were required to be filed, the Company
believes that all reporting requirements for the fiscal year ended December 27,
1996 were met in a timely manner by its directors, executive officers and
holders of more than 10% of the Company's stock, with the exception that Mr.
Poehner's initial statement of ownership on Form 3 did not include a restricted
stock award for 10,000 shares made to him the day prior to his appointment as an
executive officer. He subsequently reported the award on a timely filed Form 5.
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table provides summary information covering compensation
paid or accrued to both of the individuals who served as the Company's Chief
Executive Officers in 1996 and each of the four other most highly compensated
executive officers of the Company in 1996 (hereafter referred to as the "named
executive officers") for services rendered during the last three fiscal years
ended December 30, 1994, December 29, 1995 and December 27, 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------------- ----------------------------------------
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ Compen-
Position Year Salary($) Bonus($) sation($) Awards($)1 SARS(#) sation($)2
- --------- ---- -------- ------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Lewis
Chairman of
the Board and 1996 $660,036 $0 $952,365 100,000 $2,250
Chief Executive 1995 $660,036 $120,000 $0 -0- $171,325
Officer 1994 $660,036 $250,000 $0 -0- $210,635
William F. Ferone
Vice President 1996 $280,020 $62,700 $98,183 27,000 $2,250
1995 $250,016 $142,000 $0 -0- $77,590
1994 $238,056 $132,000 $0 -0- $74,849
Michael J. Poehner
President & Chief 1996 $248,688 $93,500 $0 $79,500 20,000 $2,250
Executive Officer, 1995 $200,044 $100,000 $0 $0 -0- $2,250
DMR Consulting 1994 $165,175 $103,544 $27,733 $0 10,000 $2,250
Group Inc.
Bruce J. Ryan3
Executive Vice President,
Chief Financial Officer &
Corporate Secretary 1996 $365,040 $0 $143,321 4 $217,830 33,000 $2,250
1995 $325,000 $74,800 $114,459 $0 10,000 $87,076
1994 $151,250 $130,000 $41,422 $55,750 40,000 $50,221
David B. Wright
Executive Vice President
1996 $365,040 $0 $0 $217,830 33,000 $2,250
1995 $325,000 $74,800 $44,760 $0 15,000 $84,826
1994 $301,823 $280,000 $238,472 $0 -0- $100,969
E. Joseph Zemke
former 1996 $172,313 $0 $38,100 5 $440,430 40,000 $4,776,800
Chief Executive 1995 $700,024 $202,000 $0 $0 -0- $212,168
Officer 1994 $644,361 $900,000 $0 $695,000 -0- $265,107
<FN>
1 Restricted shares, subject to the Company's repurchase rights, were held by
the following named executive officers with an aggregate value (closing
price less consideration paid) as of December 27, 1996: Mr. Lewis, 79,700
shares, $1,012,190; Mr. Ferone, 12,350 shares, $156,845; Mr. Poehner,
10,000 shares, $127,000; Mr. Ryan, 33,400 shares, $424,180; and Mr. Wright,
28,400 shares, $360,680. Mr. Wright was awarded 5,000 shares in 1992 and
Mr. Ryan was awarded 10,000 shares in 1994, on which the Company's
repurchase rights will lapse in 20% increments over five years from the
award date. In 1996 the following named executive officers were awarded
restricted shares, on which the Company's repurchase rights will lapse in
25% increments over four years from the award date: Mr. Lewis, 79,700
shares; Mr. Ferone, 12,350 shares; Mr. Poehner, 10,000 shares; Mr. Ryan,
27,400 shares; and Mr. Wright, 27,400 shares. In 1996 Mr. Zemke was awarded
55,400 restricted shares, on which the Company's repurchase rights lapsed
on November 1, 1996 pursuant to Mr. Zemke's separation agreement with the
Company.
<PAGE>
Repurchase rights become exercisable by the Company upon an officer's
termination of employment and allow the Company to repurchase, at the
original purchase price paid by the officer, any restricted shares on which
the repurchase rights have not yet lapsed. Shares subject to the Company's
repurchase rights have the same dividend rights as all other Company stock.
2 Amounts reported as All Other Compensation for 1996 include Company
matching contributions to the Employee Savings Plan in the amount of $2,250
for each of the named executive officers. In 1996 no awards were allocated
to the Short-Term Executive Incentive Performance Plan and the Long-Term
Executive Incentive Performance Plan accounts maintained for each officer.
For further information concerning the vesting and payout of accounts under
both the Short-Term Plan and the Long-Term Plan, see "Employment Contracts
and Termination of Employment Agreements."
Amounts reported for Mr. Zemke are in accordance with his separation
agreement with the Company and include the following: 1996 Company matching
contributions to the Employee Savings Plan: $2,250; accrued vacation:
$17,618; executive health insurance costs paid in 1996: $8,644; estimated
executive health insurance costs through age 65: $69,382; consulting fees
paid in 1996: $39,236; aggregate consulting fees to be paid in 1997 and
1998: $80,780; separation pay for 1996: $916,154; separation pay for 1997
and 1998: $1,465,846; and Short-Term Plan and Long-Term Plan account
balances paid in 1996: $2,176,890. For further information on Mr. Zemke's
separation agreement with the Company see "Employment Contracts and
Termination of Employment."
3 Mr. Ryan joined the Company as an executive officer on July 1, 1994.
4 Other Annual Compensation reported for Mr. Ryan includes: (i) the principal
amount of $50,000, which was forgiven in accordance with the terms of the
note for his mortgage loan with the Company described in the section "Loans
to Executive Officers;" (ii) the amount of $81,726 which was paid to Mr.
Ryan to reimburse him for the loss on the sale of his home in
Massachusetts; and (iii) other fringe benefits in the aggregate amount of
$11,595.
5 Other Annual Compensation reported for Mr. Zemke includes: (i) dental
insurance coverage: $29,868; and (ii) other fringe benefits in the
aggregate amount of $8,232.
</FN>
</TABLE>
<PAGE>
Stock Options
The following table contains information on stock option grants in 1996
to the named executive officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR1
----------------------------------
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
-------------------------------------------------------- ------------------------
% of
Number of Total
Securities Options
Under- Granted to Exercise
lying Employees or Base
Options In Fiscal Price Expiration
Name Granted2 Year ($/Sh)3 Date 5% ($)4 10% ($)4
- ---- -------- -------- ------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C>
John C. Lewis 100,000 2.83% $12.1875 05/01/11 $1,314,944 $3,872,271
William F. Ferone 27,000 .76% $7.9375 02/06/11 $231,228 $680,924
Michael J. Poehner 20,000 .57% $7.9375 02/06/11 $171,280 $504,388
Bruce J. Ryan 33,000 .93% $7.9375 02/06/11 $282,612 $832,240
David B. Wright 33,000 .93% $7.9375 02/06/11 $282,612 $832,240
E. Joseph Zemke 40,000 1.13% $7.9375 03/13/98 $32,544 $66,675
<FN>
1 No stock appreciation rights have been granted to date.
2 The options are exercisable in four equal annual installments over the
optionee's period of service with the Company, measured from the grant
date. Upon an acquisition of the Company by a merger or asset sale, each
option becomes immediately and fully exercisable. Each option has a maximum
term of 15 years, subject to earlier termination in the event of the
optionee's cessation of service with the Company. The Stock Plan
Administration Committee has the discretion to accelerate any option in
whole or in part in connection with the optionee's cessation of service.
The committee may also grant stock appreciation rights with respect to one
or more outstanding options. These rights will allow the holders to elect
to exercise the option or to surrender it in exchange for cash or stock
equal to the fair market value of the shares subject to the surrendered
option less the option exercise price payable for those shares. To date no
stock appreciation rights have been granted.
3 The exercise price may be paid in cash, in shares of the Company's stock
valued at fair market value on the exercise date or through a cashless
exercise involving a same-day sale of the purchased shares. The Company may
also finance an option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income tax liability incurred in connection with the exercise. The optionee
may apply a portion of the shares purchased under the option (or deliver
existing shares of stock) in satisfaction of the tax liability.
4 These columns reflect the potential realizable value of each grant assuming
the market value of the Company's stock appreciates at 5% and 10% annually
from the date of grant over the term of the option. There is no assurance
that the actual stock price appreciation over the 15-year option term will
be at the assumed 5% or 10% levels or at any other level. Unless the market
price of the stock does in fact appreciate over the option term, no value
will be realized from the option grants.
</FN>
</TABLE>
<PAGE>
Option Exercises and Holdings
The following table provides information on the exercise of options by
the named executive officers during 1996 and unexercised options held by them at
the end of the fiscal year:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES1
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End FY-End ($)2
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)3 Unexercisable Unexercisable
- ---- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
John C. Lewis 48,000 $207,000 327,000/ $1,179,138/
156,000 $405,050
William F. Ferone N/A N/A 91,400/ $711,050/
61,850 $396,763
Michael J. Poehner N/A N/A 18,400/ $117,100/
33,000 $167,750
Bruce J. Ryan N/A N/A 18,000/ $116,125/
65,000 $334,625
David B. Wright N/A N/A 70,900/ $534,063/
67,400 $347,075
E. Joseph Zemke 52,800 $94,950 364,000/ $1,656,125/
-0- $0
<FN>
1 No stock appreciation rights have been granted to date.
2 Fair market value at fiscal year end ($12.5625) less exercise price.
3 Fair market value at time of exercise less exercise price.
</FN>
</TABLE>
Employment Contracts and Termination of Employment Agreements
The Company currently has no employment contracts with any of its named
executive officers. However, the Company has implemented the Short-Term
Executive Incentive Performance Plan (approved by the stockholders in May 1995)
and the Long-Term Executive Incentive Performance Plan, which provide benefits
some of which are not payable until termination of employment. Under these plans
executive officers and other key employees may receive incentive awards each
year based upon the Company's progress in achieving long-term business
objectives. The combined total aggregate annual award for the participants under
these plans may not exceed 2% of the Company's consolidated pre-tax earnings for
the year. Allocations to the Short-Term Plan are based upon each participant's
compensation (salary and bonus) for the year, with vesting and payout to occur
generally over four years beginning one year after the award date.
The Long-Term Plan is a long-term income accumulation program designed
to create a source of retirement income for each participant in the plan. The
Compensation Committee determines the dollar amount of the retirement income
target applicable to each participant and periodically adjusts that target as
circumstances change. The annual award to the Long-Term Plan is allocated to
each participant's long-term account in proportion to his or her share of the
aggregate retirement income targets in effect for all participants at that time.
Vesting in this account (including the individual retirement income target) will
begin upon the latest to occur of (i) the participant's completion of ten years
of service with the Company, (ii) the attainment of age 55 or (iii) the
attainment of combined age and years of service totalling 70. At that time, the
participant will initially vest in the portion of the long-term account equal to
his or her years of service multiplied by 5% and will vest in an additional 5%
upon completion of each additional year of service thereafter. The committee
modified Mr. Ryan's account at the time he was hired so that it vests at the
rate of 7.5% per year. No payments will be made from the participant's account
until termination of service, and the payment at that time may be made either in
a lump sum or in annual installments in accordance with the participant's prior
election. Special vesting provisions will apply in the event the participant's
service with the Company terminates by reason of death or disability. In
addition, the participant may receive the entire balance credited to his or her
long-term account upon termination of service in the event that such balance is
less than the portion of the retirement income target in which the participant
is vested at that time.
<PAGE>
No trust fund or other segregated account has been established as an
actual funding vehicle for the payment of the participant's long-term account,
and the account is simply a record entry upon the Company's books. Accordingly,
each participant is a general creditor of the Company with respect to his or her
unpaid account balance.
When Mr. Ryan left his former employer to join Amdahl, he forfeited the
right to substantial future retirement benefits from that employer. To
compensate Mr. Ryan for the loss of those benefits, Amdahl committed to pay him
$45,000 per year, for 20 years, commencing at age 65.
On May 4, 1994 the Compensation Committee adopted Corporate Officer
Severance Guidelines ("Severance Guidelines") which apply to the executive
officers and corporate vice presidents of the Company (collectively, "Corporate
Officers") in the event of a termination resulting from a change in control or
an involuntary termination for reasons other than cause. A change in control
would include: (i) a merger or consolidation in which the Company is not the
surviving entity; (ii) a sale, transfer or other disposition of all Company
assets; (iii) a reverse merger in which the Company becomes a subsidiary of
another corporation; (iv) an acquisition of 25% of the voting power of the
Company's outstanding securities; (v) an acquisition of sufficient shares which
increases the total holdings of a person or group to more than 50% of the
outstanding securities; (vi) an acquisition of sufficient stock to elect an
absolute majority of the Board of Directors; or (vii) a hostile take-over. Under
the Severance Guidelines, severance benefits will be provided for a terminated
Corporate Officer for a period ranging from a minimum of one year, in the event
of an involuntary termination in the absence of any change in control, to a
maximum of two years should the involuntary termination occur in connection with
such a change. No severance benefits will be paid if the Corporate Officer's
employment is terminated for cause. During the applicable severance period, the
Corporate Officer will receive the following severance benefits: (i)
continuation of base salary; (ii) the average bonus that would have been paid to
an officer in a comparable position on the basis of the Company's attainment of
the performance goals established for the fiscal year or years coincident with
the severance period; (iii) continued health care and life insurance coverage;
(iv) vesting of outstanding stock options and restricted stock awards; (v)
vesting and pay-out of installments from the Corporate Officer's accounts under
the Short-Term Executive Incentive Performance Plan; and (vi) continued vesting
in the Corporate Officer's account under the Long-Term Executive Incentive
Performance Plan, with subsequent payout of the vested benefit upon the
individual's eligibility for benefit distribution under the plan.
Mr. Zemke resigned as President, Chief Executive Officer and Director
of the Company on March 14, 1996. The Company entered into a formal severance
agreement with Mr. Zemke in connection with his resignation. Mr. Zemke is to
receive an aggregate of $2,382,000 of salary and bonus continuation payments
over the two-year period beginning March 15, 1996. He is also to receive $5,000
per month in consulting fees over that two-year period. The Company waived its
repurchase rights on 139,400 shares of restricted stock held by Mr. Zemke, which
were released on November 1, 1996. The Company vested 138,000 unvested stock
option shares and the 392,800 stock option shares held by Mr. Zemke at the time
of his resignation will be exercisable through March 13, 1998. Mr. Zemke was
fully vested in his Long-Term Executive Incentive Performance Plan account
balance at the time of resignation and immediately vested in his outstanding
Short-Term Executive Incentive Performance Plan account. The entire balance of
both accounts, $2,176,890.29, was paid to Mr. Zemke on November 1, 1996.
$453,300.64 was repaid to the Company in settlement of Mr. Zemke's outstanding
loans with the Company. The Company also agreed to provide Mr. Zemke with
continued health coverage under the Company's officer medical/dental plan until
he reaches age 65 or until he is covered by another employer's health plan which
provides substantially the same coverage. In return for these benefits, Mr.
Zemke has agreed to provide 10 hours of consulting services each month and not
to engage in any competitive activity with the Company through March 13, 1998.
The severance agreement also contains mutual releases where the Company and Mr.
Zemke released each other from all claims relating to Mr. Zemke's employment
with the Company or the termination of that employment relationship. Mr. Zemke
will be entitled to continued indemnification from the Company with respect to
any liability arising in connection with the performance of his duties as an
officer or director of the Company prior to his March 14, 1996 termination date.
<PAGE>
COMPENSATION COMMITTEE AND STOCK PLAN ADMINISTRATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board of Directors, which met 5 times
in 1996, is responsible for the administration of the non-stock based
compensation programs for the Company's executive officers. Until the
appointment of the Stock Plan Administration Committee, the Compensation
Committee also administered the Company's stock plans. The Stock Plan
Administration Committee, which was appointed on November 1, 1996 and met once
in 1996, assumed responsibility for the administration of the Company's stock
plans. The compensation programs have been designed to ensure that compensation
paid to executive officers is linked to both Company and individual performance.
Accordingly, a substantial portion of the compensation paid to each executive
officer is comprised of various components based upon individual achievement and
Company performance, such as pre-tax profit, attainment of predetermined goals
and the improvement in the market price of the Company's stock.
The committees determined that the Compensation Principles adopted in
1994, as stated below, were still appropriate.
Compensation Principles
The design and implementation of all executive compensation programs
are based on a series of guiding principles derived from Company values,
business strategy and management requirements. These principles may be
summarized as follows:
o Attract and retain key executives essential to the long-term success
of the Company.
o Reward executives for long-term corporate success by facilitating
their ability to acquire an ownership interest in the Company.
o Provide direct linkage between the compensation payable to executives
and the Company's attainment of annual and long-term financial goals
and targets.
o Emphasize reward for performance at the individual, team and corporate
level.
Consistent with these principles, executive compensation consists of
two components - fixed compensation and variable compensation. Base salary, the
fixed component, is set at a level which is competitive in the marketplace.
Variable compensation consists of annual bonus and long-term incentives.
<PAGE>
Base Salary
Company performance plays a limited role in the determination of base
salary. The base salary for each executive officer is based on several factors,
including, importance of the function performed, the scope of responsibility and
the salary levels in effect for comparable positions with the Company's
principal competitors. The weight given to each of these factors may vary from
individual to individual. In general, base salary is determined to be
competitive with the base salary levels paid by a peer group of companies within
the Company's industry which the Compensation Committee has identified for
comparative compensation purposes. The base salary levels in effect for the
Company's executive officers for the 1996 fiscal year ranged from the 50th
percentile to the 75th percentile of the surveyed salaries for the peer group
companies. Ten of the peer group companies are included in the Standard & Poor's
Computer (Hardware) Index (the "S & P Index") which has been chosen as the
Company's industry index for purposes of the Company stock price performance
graph which follows this report. In selecting the peer group companies to survey
for comparative compensation purposes, the Compensation Committee focused
primarily on whether those companies were actually competitive with the Company
in seeking executive talent, whether those companies had a management style and
corporate culture similar to the Company's and whether similar positions existed
within their corporate structure. For this reason, the number of companies
surveyed for compensation data was less than the number of companies included in
the S & P Index.
Annual Bonus
Annual bonuses for the 1996 fiscal year were calculated by the use of a
structured formula that used the following components:
o Company Financial Performance
Each year the Board approves the pre-tax profit goals for the
Company, and operating income and revenue goals for each line of
business. The Company's performance against these goals is assessed by
the Compensation Committee at the close of the year. The financial
performance component of the annual bonus is based on the percent of
the pre-tax profit goal achieved (or, for some executives, percent of
the operating income or revenue goal achieved for a line of business).
The award scale is nonlinear and provides the maximum award for above
target performance while reducing the award for below target
performance. The financial performance component is not paid if less
than 75% of the goal is achieved, and the maximum bonus will be paid
only if 125% or higher of the goal is achieved.
The financial performance component of the CEO's bonus
measures both Company pre-tax profit goal achievement and line of
business revenue goal achievement. Pre-tax profit bonus may be equal to
2.6% of salary if 76% of the goal is achieved, 65% of salary at 100%
goal achievement, and 97.5% of salary at 125% or higher goal
achievement. Line of business revenue goal bonus may equal .8% of
salary at 76% goal achievement, 20% of salary at 100% goal achievement,
and 30% of salary at 125% or higher goal achievement. For other
executive officers, the financial performance component of bonus
(Company pre-tax profit goals for some executives, line of business
revenue goals for others) may be equal to 10% of salary at 75% goal
achievement, 30% of salary at 100% goal achievement, and 60% of salary
at 125% goal achievement.
o Individual Performance
Each executive officer's individual performance is measured
against goals established for that individual in various areas,
including leadership, planning, management and innovation. The weight
assigned to each of these factors varies from individual to individual.
The individual performance component of the CEO's annual bonus may be
equal to 35% of salary at 100% goal achievement and may go up to a
maximum of 52.5% of salary at higher than 100% goal achievement. This
component for Executive Vice Presidents may be equal to 12% of salary
at 100% goal achievement and may go up to a maximum of 24% of salary at
higher than 100% goal achievement. For other executive officers this
component may be equal to 10% of salary at 100% goal achievement, up to
a maximum of 20% of salary at higher than 100% goal achievement.
<PAGE>
o Corporate Teamwork
This component applies to executives other than the CEO. An
assessment is made of the individual's contribution to the corporate
team and contribution to future positioning of the Company. This
component for Executive Vice Presidents may be equal to 12% of salary
at 100% goal achievement and may go up to a maximum of 24% of salary at
higher than 100% goal achievement. For other executive officers this
component may range from 10% of salary at 100% goal achievement up to a
maximum of 20% of salary at higher than 100% goal achievement.
Long-Term Incentives
Long-term incentives are provided primarily through annual option
grants, as well as by supplemental option grants, restricted stock awards, and
participation in an income accumulation program funded out of the Company's
pre-tax profits. These incentives are intended to motivate the executive officer
to improve long-term Company performance. All options currently outstanding were
granted with an exercise price equal to the market price on the grant date and
will be of no value unless the market price of the Company's common stock
appreciates, thereby aligning a part of the executive officer's compensation
with the return realized by stockholders.
o Stock Options
Stock option grants are designed to create meaningful stock
ownership for key employees of the Company. The Stock Plan
Administration Committee has general guidelines for granting options to
executive officers, which target a fixed number of unvested option
shares based on an individual's current position with the Company,
comparability with grants made to other Company executives and an
individual's potential for growth within the Company, i.e., future
responsibilities and possible promotions over the option term. These
general guidelines determine a multiple of the individual's salary
level which may be represented by the value of unvested options. To
maintain the targeted unvested position, regular grants of options will
normally be made. The guidelines and the granting of options within
these guidelines are not normally based on Company performance. The
committee does not always strictly adhere to these guidelines and will
occasionally vary the size of the option grant as circumstances
warrant.
Each grant allows the executive officer to acquire shares of
the Company's common stock at a fixed price per share (traditionally
the fair market value on the grant date) over a specified period of
time (up to fifteen years). The option generally vests in equal
installments over a period of four years, contingent upon the executive
officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she
remains employed by the Company through the vesting period and the
market price of the underlying securities appreciates over the option
term.
o Restricted Stock
Awards of restricted stock are not made by reference to formulas
or guidelines but are provided solely at the Stock Plan Administration
Committee's discretion. Restricted stock is awarded under limited
circumstances, such as, to recognize a significant contribution to the
Company's performance, to provide an incentive to achieve performance
objectives or in connection with a significant promotion. The vesting
schedules for restricted stock awards are tailored to meet the
particular purposes of the awards, unlike the more uniform vesting
schedules utilized for stock option grants.
<PAGE>
Executive Incentive Performance Plan
The Short-Term and the Long-Term Executive Incentive Performance Plans,
administered by the Compensation Committee, are designed to retain key
executives and to provide retirement income for them through their participation
in an income accumulation program determined in reference to the Company's
pre-tax profits each year. The Short-Term Plan allows each executive officer to
share in a portion of such pre-tax profits on the basis of his or her
compensation for the year and provides for vesting and payout of the award in
four equal annual installments beginning one year after the award. The Long-Term
Plan serves as the vehicle to meet the specific retirement income target which
the committee has established for each participant, and vesting in this benefit
will occur as the age and years of service requirements of the plan are met.
Actual allocations to the two plans will occur only if the Company's
operations are profitable. No awards were made under these plans to any named
executive officer for the 1996 fiscal year. See "Employment Contracts and
Termination of Employment Agreements" for additional information about the
plans.
CEO Compensation
In connection with his resignation as the Company's President and Chief
Executive Officer and member of the Board of Directors on March 14, 1996, the
Compensation Committee deemed it appropriate and in the best interests of the
Company to enter into a formal severance agreement with Mr. Zemke that was
consistent with his prior understanding. Accordingly, Mr. Zemke is to receive
continuation payments totalling $2,382,000 at bi-weekly intervals over the
two-year period beginning March 15, 1996 and is to receive an additional $5,000
per month of consulting fees over that two-year period. The Compensation
Committee authorized the accelerated release of 139,400 shares of restricted
stock held by Mr. Zemke at the time of his resignation, together with the
immediate vesting of 138,000 unvested stock option shares, also held by Mr.
Zemke at the time of his resignation. All outstanding vested stock option
shares, totalling 392,800 shares, held by Mr. Zemke at the time of his
resignation will be exercisable through March 13, 1998. Mr. Zemke was fully
vested in his account balance under the Long-Term Executive Incentive
Performance Plan at the time of his resignation, and the Compensation Committee
decided to immediately vest Mr. Zemke in all his outstanding accounts under the
Short-Term Incentive Performance Plan, and the entire balance under both of
these plans ($2,176,890) was paid to Mr. Zemke in a lump sum on November 1,
1996. In addition, Mr. Zemke is to be provided with continued health coverage
under the Company's executive officer medical/dental plan until his attainment
of age 65 or (if earlier) his participation under another employer's health plan
which provides substantially the same coverage. In return for these benefits,
Mr. Zemke has agreed not to engage in any competitive activity with the Company
for the two-year period coincidental with his salary and bonus continuation
period and to render up to 10 hours of consulting services per month during that
period. The severance agreement also contains mutual releases pursuant to which
the Company and Mr. Zemke have released each other from any and all claims
relating to Mr. Zemke's employment with the Company or the termination of that
employment relationship. In summary, the Compensation Committee believes that
the severance package resulted in a fair and amicable separation between the
Company and Mr. Zemke and assured an orderly transition to Mr. Lewis' resumption
of the office of President and Chief Executive Officer.
In setting the compensation payable to Mr. Lewis in 1996, the
Compensation Committee's goal was to provide a package which was competitive
with other companies in the industry and which at the same time tied a
significant percentage of his compensation to positive Company performance and
stock price appreciation. In general, the factors utilized in determining Mr.
Lewis's compensation were similar to those applied to the other executive
officers in the manner described in the preceding paragraphs, although
achievement of Company financial performance goals had a greater impact on his
total compensation.
<PAGE>
In establishing Mr. Lewis's base salary, it was the committee's intent to
provide him with a level of stability and certainty each year, and not to have
this particular component of compensation affected to a significant degree by
Company performance. His base salary for the 1996 fiscal year approximates the
50th percentile of reported base salaries for chief executive officers from the
peer group.
Based on Company results, Mr. Lewis was not paid an annual bonus for 1996.
The long-term incentive component of Mr. Lewis's compensation consisted of
a restricted stock award of 79,400 shares and a stock option grant of 100,000
shares, both of which will vest in 25% increments over four years from the date
of grant. The award and the grant were made in connection with Mr. Lewis's
resumption of the Chief Executive Officer position.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held companies for compensation exceeding $1 million paid
to certain executive officers of such companies. The limitation applies only to
compensation which is not considered to be performance-based. Stock options
granted under the 1994 Stock Incentive Plan, which are not discounted, and
compensation paid under the Short-Term Executive Incentive Performance Plan will
qualify as performance-based compensation not subject to the $1 million
limitation. For the present, the Compensation Committee has decided not to take
any other action to limit or restructure the other elements of the compensation
package payable to the Company's executive officers. The Compensation Committee
will reconsider this decision in the future should the non-performance-based
compensation of any executive officer significantly exceed $1 million.
Members of the Compensation Members of the Stock Plan Administration
Committee Committee
Walter B. Reinhold, Chairman Walter B. Reinhold, Chairman
Kazuto Kojima George R. Packard
George R. Packard J. Sidney Webb
J. Sidney Webb
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 Stock Index and
the Standard & Poor's Computer (Hardware) Index from December 31, 1991 through
December 31, 1996:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG AMDAHL CORP., S&P 500 INDEX & S&P COMPUTER (HARDWARE) INDEX
{GRAPH HERE}
* $100invested on December 31, 1991 in stock or index, including reinvestment
of dividends
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Amdahl Corporation $100 $46 $39 $71 $55 $78
S&P 500 Index $100 $108 $118 $120 $165 $203
S&P Computer (Hardware) Index $100 $73 $76 $98 $131 $175
</TABLE>
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, or the Securities
Exchange Act of 1934 that might incorporate future filings made by the Company
under those statutes, including this proxy statement, the preceding Compensation
Committee and Stock Plan Administration Committee Report on Executive
Compensation and Company Stock Price Performance graph shall not be incorporated
by reference into any such filings; nor shall such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
<PAGE>
LOANS TO EXECUTIVE OFFICERS
Amdahl makes loans to executive officers through the Officer Loan
Program for the acquisition of stock under the Company's stock plans or for the
payment of tax obligations in connection with the acquisition of stock. These
loans may not be outstanding for more than 120 months and bear interest at the
applicable federal rate. Loans are secured by stock valued at 150% of the
principal balance.
In 1995 the Company extended a mortgage loan to Mr. Carabetta, secured
by a second deed of trust on his primary residence, in the amount of $150,000.
The loan bears interest at 6.83%, compounded annually, and the principal balance
plus the accrued interest is due and payable on June 7, 2001, except to the
extent previously forgiven or paid. Under the terms of the note (i) $25,000 of
principal and the then accrued interest is forgiven on June 7 of each year,
beginning in 1996, if Mr. Carabetta is not in default and the note has not been
accelerated; (ii) the note may be accelerated if Mr. Carabetta's employment is
terminated for any reason other than by agreement with the Company, if he fails
to make a payment under the note, if he breaches the terms of the second deed of
trust or if the property securing the loan is sold; (iii) the note will be
accelerated in the event of Mr. Carabetta's bankruptcy; and (iv) the note will
be forgiven in the event Mr. Carabetta's employment is terminated by agreement
between Mr. Carabetta and Amdahl.
In 1993 the Company extended to Mr. Cavalier a loan for $400,000, for
the purpose of assisting him with his relocation to Dallas, Texas, the
headquarters of Antares Alliance Group ("Antares"), of which Mr. Cavalier was
President and Chief Executive Officer. The note had an interest rate of 5.32%,
compounded annually, and the principal balance plus accrued interest was payable
on January 31, 2002, except to the extent previously forgiven or paid. Under the
terms of the note (i) Mr. Cavalier was required to maintain a life insurance
policy on his life naming Amdahl as a beneficiary and in an amount equal to the
unpaid principal amount of the note; (ii) $25,000 plus one-half of the then
accrued interest was forgiven on January 31 of each year, beginning in 1995, if
Mr. Cavalier was not in default and the note had not been accelerated; (iii)
$25,000 plus one-half of the then accrued interest was payable on January 31 of
each year, beginning in 1995, with up to one-half of Mr. Cavalier's bonus to be
applied toward such payment; (iv) the note could have been accelerated if Mr.
Cavalier was terminated for cause or for other reasons not involving a change in
control of Antares or a change in the policies of Amdahl or Antares; and (v) the
note would have been accelerated in the event of Mr. Cavalier's bankruptcy. On
November 1, 1996 Mr. Cavalier terminated his employment with the Company at
which time $156,190.21 of this loan was forgiven. The remaining $199,685.66 was
forgiven on January 1, 1997.
In 1995 the Company extended to Mr. Grodhaus a mortgage loan, secured
by a second deed of trust on his primary residence, in the amount of $300,000.
The loan bears interest at 6.31%, compounded annually, and the principal balance
plus accrued interest is due and payable on October 9, 2003, except to the
extent previously forgiven or paid. Under the terms of the note (i) one-half of
the principal, plus the accrued interest thereon, will be paid in seven annual
installments by Mr. Grodhaus on October 9 of each year beginning in 1997; (ii)
one-half of the principal, plus the accrued interest thereon, will be forgiven
in five annual installments on October 9 of each year beginning in 1997, if Mr.
Grodhaus is not in default and the note has not been accelerated; (iii) the note
may be accelerated if Mr. Grodhaus's employment is terminated for any reason, if
he fails to make a payment under the note, if he breaches the terms of the
second deed of trust or if the property securing the loan is sold; and (iv) the
note will be accelerated in the event of Mr. Grodhaus's bankruptcy.
<PAGE>
In 1994 the Company extended to Mr. Ryan a mortgage loan, secured by a
second deed of trust on his primary residence, in the amount of $300,000. The
loan bears interest at 7.05%, compounded annually, and the principal balance
plus accrued interest is due and payable on September 26, 2000, except to the
extent previously forgiven or paid. Under the terms of the note (i) accrued
interest is payable each quarter, commencing January 15, 1995; (ii) $50,000 of
principal is forgiven on September 26 of each year, beginning in 1995, if Mr.
Ryan is not in default and the note has not been accelerated; (iii) the note may
be accelerated if Mr. Ryan's employment is terminated for any reason, if he
fails to make a payment under the note, if he breaches the terms of the second
deed of trust or if the property securing the loan is sold; and (iv) the note
will be accelerated in the event of Mr. Ryan's bankruptcy.
The Company has extended loans of more than $60,000 to the following
individuals who were executive officers during the last fiscal year. Except for
the loans to Messrs. Carabetta, Cavalier, Grodhaus and Ryan described above, the
loans on the table below were extended under the Officer Loan Program:
<TABLE>
<CAPTION>
Maximum Amount Amount
Outstanding Since Outstanding on
Name December 30, 1995 March 3, 1997
- ---- ----------------- -------------
<S> <C> <C>
Michael R. Carabetta.................................................. $160,415.75 $131,403.13
John C. Cavalier...................................................... $380,283.84 $0
William F. Ferone..................................................... $60,013.45 $60,013.45
Charles E. Fonner..................................................... $67,276.33 $67,276.33
Gregory R. Grodhaus................................................... $327,359.21 $327,359.21
Anthony M. Pozos...................................................... $216,365.39 $216,365.39
Bruce J. Ryan......................................................... $218,733.17 $218,733.17
David B. Wright....................................................... $86,047.53 $86,047.53
E. Joseph Zemke....................................................... $453,300.64 $0
</TABLE>
APPROVAL OF AMENDMENTS TO THE
AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN
Stockholders are being asked to approve amendments to the Company's
1994 Stock Incentive Plan (the "1994 Plan") which include the following changes:
(i) allow non-employee directors to receive discretionary grants
and stock issuances under the Discretionary Option Grant and Stock
Issuance Programs of the 1994 Plan;
(ii) eliminate the restriction that the individuals who serve as
Plan Administrator may not receive any option grants or direct stock
issuances from the Company while serving as Plan Administrator or
during the twelve month period preceding appointment as Plan
Administrator;
(iii) require stockholder approval of future amendments to
the 1994 Plan only to the extent necessary to satisfy applicable laws
or regulations;
(iv) eliminate both the six month holding period requirement and
the ten business day "window" period requirement for the exercise of
any stock appreciation rights granted under the 1994 Plan;
(v) allow the shares issued under the 1994 Plan which are
subsequently reacquired by the Company due to the Company's exercise of
its repurchase rights to be added back to the share reserve available
for future issuance under the 1994 Plan;
(vi) allow the stock options granted under the 1994 Plan to be
assignable or transferable;
(vii) increase the number of shares available for issuance under
the 1994 Plan effective on the date of the 1997 annual meeting by 2% of
the total number of outstanding shares at the close of business on the
immediately preceding trading day; and
(viii) modify the annual automatic share increase provisions of the
1994 Plan so that the number of shares available for issuance under the
1994 Plan is automatically increased on the first trading day of each
calendar year, beginning in 1998, by an amount equal to 3% of the total
number of shares outstanding at the close of business on December 31 of
the immediately preceding calendar year, subject to the limitation that
the maximum number of shares available for future option grants and
direct stock issuances immediately after the automatic increase will
not exceed 6,000,000 shares.
<PAGE>
The purpose of items (i) through (vi) is to provide the Plan
Administrator with more flexibility as is permitted under recent changes to the
regulations governing these types of plans. The purpose of items (vii) and
(viii) is to make enough shares available to the Plan Administrator for stock
option grants to key employees so that a certain aspect of their compensation is
tied to positive Company performance and stock price appreciation.
The Board approved the amendments to the 1994 Plan on November 1, 1996,
subject to approval by the stockholders at the 1997 annual meeting.
The following is a summary of the principal features of the 1994 Plan,
as amended. The summary, however, does not purport to be a complete description
of all the provisions of the 1994 Plan. Any stockholder who wishes to obtain a
copy of the actual plan document may do so by written request to the Corporate
Secretary at the Company's principal executive office in Sunnyvale, California.
Equity Incentive Programs
The 1994 Plan contains five separate equity incentive programs: (i) a
Discretionary Grant Program, under which key employees, non-employee directors
and consultants may be granted either stock options to purchase shares of stock
or stock appreciation rights exercisable for cash or shares of stock, (ii) an
Automatic Grant Program, under which option grants are made at specified
intervals to the non-employee directors, (iii) a Salary Reduction Grant Program,
under which key employees may elect to have a portion of their base salary
reduced each year in return for options to purchase shares of stock at a
discount from current fair market value equal to the amount of their salary
reduction, (iv) a Stock Fee Program, under which the non-employee directors may
elect to apply all or a portion of their annual retainer fee to the acquisition
of shares of stock, and (v) a Stock Issuance Program, under which eligible
individuals may be issued shares of stock directly, through the immediate
purchase of the shares, or as a bonus tied to the performance of services or the
Company's attainment of financial milestones, or pursuant to the individual's
election to receive such shares in lieu of base salary.
Options granted under the Discretionary Grant Program may be either
incentive stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code or non-statutory options not intended to satisfy such
requirements. All grants under the Automatic Grant and the Salary Reduction
Grant Programs will be non-statutory options.
Share Reserve
As of March 3, 1997, 10,993,987 shares of stock were reserved for issuance
over the remainder of the fifteen year term of the 1994 Plan, including the
additional 1,217,535 shares which became issuable on the first trading day of
1997 pursuant to the annual automatic share increase provisions of the 1994
Plan. The number of shares available for issuance under the 1994 Plan will
automatically increase on the date of the 1997 annual meeting of stockholders by
2% of the shares outstanding at the close of business on the immediately
preceding trading day and the number of shares available for issuance under the
1994 Plan will automatically increase on the first trading day of each
subsequent calendar year by an amount equal to 3% of the shares of stock
outstanding on December 31 of the immediately preceding calendar year. However,
each 3% annual increase will be subject to the limitation that the maximum
number of shares available for future option grants and direct stock issuances
immediately after the automatic increase will not exceed 6,000,000 shares,
subject to periodic adjustment for certain changes in the Company's capital
structure.
<PAGE>
The shares issuable under the 1994 Plan may be drawn from either
authorized but previously unissued shares of stock or from reacquired shares of
stock, including shares purchased by the Company on the open market and held as
treasury shares.
Should an option expire or terminate for any reason prior to exercise
in full (including options cancelled in accordance with the cancellation-regrant
provisions of the 1994 Plan), the shares subject to the portion of the option
not so exercised will be available for subsequent issuance under the 1994 Plan.
Unvested shares issued and subsequently reacquired by the Company pursuant to
its repurchase rights will also be available for subsequent issuance under the
1994 Plan. However, shares subject to an option surrendered in accordance with
the stock appreciation right provisions will not be available for subsequent
issuance under the 1994 Plan.
In no event will any one individual participating in the 1994 Plan be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances exceeding 2,000,000 shares in the aggregate over the term
of the 1994 Plan, subject to periodic adjustment for certain changes in the
Company's capital structure.
Plan Administration
The 1994 Plan (other than the Automatic Option Grant and the Stock Fee
Programs) is administered by the Stock Plan Administration Committee of the
Board. The committee is comprised of two or more non-employee directors. Each of
the directors currently serving on the committee qualifies as a "Non-Employee
Director" within the meaning of Rule 16b-3(i) under the Securities Exchange Act
of 1934 and each member qualifies as an "outside director" pursuant to the
applicable requirements of Internal Revenue Code Section 162(m).
The Stock Plan Administration Committee, acting as Plan Administrator,
has complete discretion (subject to the express provisions of the 1994 Plan) to
authorize stock option grants and direct stock issuances under the 1994 Plan.
However, all grants under the Automatic Grant and the Stock Fee Programs will be
made in strict compliance with the express provisions of those programs, and no
administrative discretion will be exercised by the Plan Administrator with
respect to the grants made under such programs.
Eligibility
Non-employee directors, officers and other key employees of the Company
and its subsidiaries (whether now existing or subsequently established) and
independent consultants and advisors to the Company and its subsidiaries are
eligible to participate in the Discretionary Grant and Stock Issuance Programs.
Officers and other key employees are also eligible to participate in the Salary
Reduction Grant Program. Only non-employee directors are eligible to participate
in the Automatic Grant and the Stock Fee Programs.
For purposes of all non-statutory option grants and direct stock
issuances under the 1994 Plan, the Company's subsidiaries include not only the
corporations of which the Company owns, directly or indirectly, at least 50% of
the outstanding capital stock but also any partnership, joint venture or other
entity of which the Company owns, directly or through one or more other
subsidiaries, at least 50% of the outstanding capital or profits interests.
As of March 3, 1997, nine non-employee directors, 15 executive officers
and approximately 2,000 other key employees were eligible to participate in the
1994 Plan. The nine non-employee directors were also eligible to participate in
the Automatic Grant and the Stock Fee Programs.
Valuation
The fair market value per share of stock on any relevant date under the
1994 Plan is the mean between the lowest and highest selling prices per share on
that date on the principal exchange on which the stock is then listed or
admitted to trading, as the prices are officially quoted by the composite tape
of transactions on the exchange. If there are no reported sales for such date,
then the mean of the lowest and highest selling prices for the last previous
date for which such quotations exist will determine the fair market value. On
March 3, 1997 the fair market value per share of stock was $10.28125.
<PAGE>
DISCRETIONARY GRANT PROGRAM
The principal features of the Discretionary Option Grant Program may be
summarized as follows:
The exercise price per share for incentive stock options will not be
less than 100% of the fair market value per share of stock on the grant date.
For non-statutory options, the exercise price per share may be less than, equal
to or greater than such fair market value, as the Plan Administrator deems
appropriate. No incentive stock option will have a maximum term in excess of ten
years measured from the grant date, and no non-statutory stock option will have
a maximum term in excess of fifteen years. The Plan Administrator has complete
discretion to grant options (i) which are immediately exercisable for vested
shares, (ii) which are immediately exercisable for unvested shares subject to
the Company's repurchase rights (sometimes referred to in this document as
restricted stock) or (iii) which become exercisable in installments for vested
shares over the optionee's period of service.
The exercise price may be paid in cash or in shares of stock valued at
fair market value on the exercise date. The option may also be exercised for
vested shares through a same-day sale program pursuant to which the purchased
shares are to be sold immediately and a portion of the sale proceeds applied to
the payment of the exercise price for those shares on the settlement date.
Any option held by the optionee at the time of cessation of service
will normally not remain exercisable beyond the limited period designated by the
Plan Administrator (not to exceed 36 months) at the time of the option grant.
During that period, the option will generally be exercisable only for the number
of shares of stock in which the optionee is vested at the time of cessation of
service. For purposes of the 1994 Plan, an individual will be deemed to continue
in service for so long as that person performs services for the Company or any
parent or subsidiary corporation, whether as an employee, non-employee director
or independent consultant or advisor. If an optionee retires from the Company,
meaning he or she has completed ten years of service with the Company, is at
least 55 years old and his or her age and years of service total at least 70,
then the optionee's option(s) will remain outstanding and continue to vest and
be exercisable over the term of the option.
The Plan Administrator has complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding.
Any unvested shares which have been exercised are subject to repurchase
by the Company, at the original exercise price, upon the optionee's cessation of
service. The Plan Administrator has complete discretion in establishing the
vesting schedule for any such unvested shares and has full authority to cancel
the Company's outstanding repurchase rights with respect to those shares in
whole or in part at any time.
The optionee does not have any stockholder rights with respect to the
option shares until the option is exercised and the exercise price is paid for
the purchased shares. Options may be assignable or transferable in accordance
with the terms of the stock option agreement.
<PAGE>
The Plan Administrator is authorized to issue four types of stock
appreciation rights:
- Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the
Company equal in amount to the excess of (a) the fair market value of
the vested shares of stock subject to the surrendered option over (b)
the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of stock.
- Concurrent stock appreciation rights will automatically be exercised
for an appreciation distribution at the same time the underlying stock
option is exercised for the shares of stock subject to such rights.
Accordingly, the option holder will, upon the option exercise, receive
both the purchased shares of stock and the appreciation distribution
payable on the covered shares. The amount of the distribution payable
per purchased option share will not exceed the fair market value of
that share on the exercise date, less the option exercise price paid
for such share. The distribution may, in the discretion of the Plan
Administrator, be made in cash or in shares of stock.
- Independent stock appreciation rights will be free-standing rights not
tied to any underlying stock option and will entitle the holder upon
exercise to an appreciation distribution from the Company equal to the
fair market value of the shares of stock subject to the exercised
rights, less the base price in effect for those shares. The base price
will be determined by the Plan Administrator at the time the rights
are granted and may be less than, equal to or greater than the fair
market value of the underlying shares of stock on the grant date. The
appreciation distribution payable on the exercised rights may, in the
discretion of the Plan Administrator, be made in cash or in shares of
stock.
- Limited stock appreciation rights may be granted to officers of the
Company subject to the short-swing profit restrictions of the federal
securities laws in connection with their option grants. Any option
with such a limited stock appreciation right may be surrendered to the
Company upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the combined voting power of
the Company's outstanding securities. In return for the surrendered
option, the officer will be entitled to a cash distribution from the
Company in an amount per surrendered option share equal to the excess
of (i) the price per share of stock paid in such hostile tender offer
over (ii) the exercise price payable for such share.
The Plan Administrator has the authority to effect, on one or more
separate occasions, the cancellation of outstanding options under the
Discretionary Grant Program which have exercise prices in excess of the then
current market price of stock and to issue replacement options with an exercise
price based on the market price of stock at the time of the new grant.
AUTOMATIC GRANT PROGRAM
Under the Automatic Grant Program, a 5,000 share option grant is made
to each individual who first becomes a non-employee director, whether through
election by the stockholders or appointment by the Board. In addition, on the
date of each annual meeting, beginning with the 1994 annual meeting, each
individual reelected to serve as a non-employee director will automatically be
granted a stock option to purchase 5,000 shares of stock, provided such
individual has served as a non-employee director for at least twelve months.
There is no limit on the number of such additional 5,000 share option grants any
one non-employee director may receive over his or her period of Board service.
Each option granted under the Automatic Grant Program is subject to the
following terms and conditions:
- The exercise price per share will be equal to 100% of the fair market
value per share of stock on the automatic grant date.
<PAGE>
- Each option granted up until the 1995 annual meeting has a maximum
term of ten years measured from the grant date. Each option granted on
or after the date of the 1995 annual meeting has a maximum term of
fifteen years from the grant date.
- The options granted on and after the 1997 annual meeting may be
transferred to an immediate family member or to a trust established
for one or more immediate family members.
- Each option will be immediately exercisable for all the option shares,
but any purchased shares will be subject to repurchase by the Company
at the exercise price paid per share.
- Each option will vest (and the Company's repurchase rights will lapse)
in two equal annual installments over the optionee's period of Board
service, with the first such installment to vest upon the completion
of one year of Board service measured from the automatic grant date.
- Should the optionee cease to serve as a director for any reason (other
than removal for cause) following completion of four or more years of
service on the Board, then the shares of stock at the time subject to
each automatic option grant held by the optionee shall immediately
vest in full (and the Corporation's repurchase right with respect to
those shares shall terminate), and the optionee (or the representative
of the optionee's estate or the person or persons to whom the option
is transferred upon the optionee's death) shall have until the
expiration date of the option term in which to exercise the option for
any or all of those vested shares of stock.
- Should the optionee cease to be a director for any reason (other than
death or permanent disability) prior to completion of four years of
Board service, then each option held by that individual under the
Automatic Grant Program will remain exercisable for a six-month period
following such cessation of Board service. Upon the optionee's death
within such six-month period, the option will remain exercisable for a
twelve-month period and may be exercised by the personal
representative of the optionee's estate or the person to whom the
grant is transferred by the optionee's will or the laws of
inheritance. In no event, however, may the option be exercised after
the expiration date of the option term. During the applicable exercise
period, the option may not be exercised for more than the number of
shares (if any) in which the optionee is vested at the time of
cessation of Board service.
- Should the optionee die or become permanently disabled while serving
as a director, then the shares of stock at the time subject to each
automatic option grant held by the optionee shall immediately vest in
full (and the Company's repurchase right with respect to those shares
shall terminate), and the optionee (or the representative of the
optionee's estate or the person or persons to whom the option is
transferred upon the optionee's death) shall have until the expiration
date of the option term in which to exercise such option for any or
all of those vested shares of stock.
- The shares subject to each automatic option grant will immediately
vest upon certain changes in control or ownership of the Company, as
discussed in more detail below.
- Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the combined voting power of
the Company's outstanding securities, each automatic option grant may
be surrendered to the Company for a cash distribution per surrendered
option share in an amount equal to the excess of (i) the highest price
per share of stock paid in such hostile tender offer over (ii) the
exercise price payable for such share.
- The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
<PAGE>
SALARY REDUCTION GRANT PROGRAM
The Plan Administrator has complete discretion in selecting the
individuals who are to participate in the Salary Reduction Grant Program. As a
condition to such participation, each selected individual must, prior to the
start of the calendar year of participation, file with the Plan Administrator an
irrevocable authorization for the Company to reduce, by a designated multiple of
1%, his or her base salary for the upcoming calendar year. To the extent the
Plan Administrator approves one or more salary reduction authorizations, the
individuals who filed those authorizations will be granted options under the
Salary Reduction Grant Program.
Each option will be subject to substantially the same terms and
conditions applicable to option grants made under the Discretionary Grant
Program, except for the following differences:
- The exercise price per share will be equal to one-third of the fair
market value per share of stock on the grant date.
- The number of option shares will be determined by dividing the total
dollar amount of the approved reduction in the participant's base
salary by two-thirds of the fair market value per share of stock on
the grant date. As a result, the total spread on the option (the fair
market value of the option shares on the grant date less the aggregate
exercise price payable for those shares) will equal the dollar amount
of the reduction to the optionee's base salary to be in effect for the
calendar year for which the grant is made.
- Provided the optionee continues in service, the option will become
exercisable for 50% of the option shares on the last day of June in
the calendar year for which the grant is made and will become
exercisable for the balance of the option shares in a series of six
successive monthly installments on the last day of each of the next
six calendar months.
- Should the optionee die or become disabled while in service, the
option will immediately become exercisable for that number of option
shares equal to (i) one-twelfth of the total number of option shares
multiplied by (ii) the number of full calendar months which have
elapsed from the first day of the calendar year for which the option
is granted and the last day of the calendar month during which the
optionee ceases service.
- Each option will have a term of ten years measured from the grant
date, whether or not the individual continues in service.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price per
share less than, equal to or greater than the fair market value, payable in cash
or through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services or pursuant to an irrevocable election by
the individual to receive such shares in lieu of a portion of his or her salary.
<PAGE>
Shares awarded under the Stock Issuance Program may either be (i)
immediately vested upon issuance, (ii) subject to a vesting schedule tied to the
participant's period of service or (iii) subject to issuance or vesting tied to
the attainment of one or more specified objectives. The objectives upon which
the issuance or vesting of the stock award may be based will be limited to
measures that relate to aspects of performance at the Company, a Company
subdivision and/or an individual level as set forth below. The Plan
Administrator will have complete discretion to base the issuance or vesting of
the award upon the attainment of (i) one particular objective, (ii) one of a
series of alternative objectives or (iii) any combination of two or more
designated objectives, as the Plan Administrator deems appropriate for each
performance-based issuance. The specific target for each selected objective will
be established by the Plan Administrator at the time the awards are made. The
objectives which may be utilized under the Stock Issuance Program are as
follows:
- earnings per share - return on assets
- revenue - market share
- stock price - customer satisfaction
- operating income - time to market
- consolidated pre-tax profit - employee development
- operating profit margin - quality
- return on equity - cash
- inventory - employee satisfaction
- gross margin - market perception
Unvested shares, or restricted stock, will be subject to certain
transfer restrictions and to repurchase or cancellation by the Company upon
either the participant's cessation of service prior to vesting in those shares
or the non-attainment of the applicable performance goals. The Plan
Administrator will, however, have the discretionary authority to accelerate the
vesting of one or more issued shares, other than shares which are to vest solely
upon the Company's attainment of pre-established performance goals. Individuals
holding shares under the Stock Issuance Program will have full stockholder
rights with respect to those shares, whether the shares are vested or unvested.
The issuance of shares of stock pursuant to the participant's election
to receive such shares in lieu of base salary will be subject to the following
guidelines:
- On the first trading day in January of the calendar year for which the
election is effective, the portion of base salary subject to such
election will automatically be applied to the acquisition of stock by
dividing the elected dollar amount by the fair market value per share
on that trading day. The issued shares will be held in escrow by the
Company until the participant vests in those shares.
- Upon completion of each calendar month of service during the year for
which the election is in effect, the participant will vest in
one-twelfth of the issued shares, and the stock certificate for those
shares will be released from escrow.
STOCK FEE PROGRAM
Under the Stock Fee Program, each individual serving as a non-employee
director is eligible to elect to apply all or any portion of the annual retainer
fee otherwise payable in cash to such individual to the acquisition of unvested
shares of stock. The non-employee director must make the stock election prior to
the start of the calendar year for which the election is to be in effect. On the
first trading day in January of the calendar year for which the election is in
effect, the portion of the retainer fee subject to such election is applied to
the acquisition of stock by dividing the elected dollar amount by the fair
market value per share of stock on that trading day. The issued shares are held
in escrow by the Company until the individual vests in those shares. The
non-employee director has full stockholder rights, including voting and dividend
rights, with respect to all issued shares held in escrow on his or her behalf.
Upon completion of each month of Board service during the year for
which the election is in effect, the non-employee director will vest in
one-twelfth of the issued shares, and the stock certificate for those shares
will be released from escrow. Immediate vesting in all the issued shares will
occur in the event the individual dies or becomes disabled during his or her
period of Board service or certain changes in control or ownership of the
Company are effected during such period. Should the director cease service prior
to vesting in one or more monthly installments of the issued shares, then those
installments will be forfeited, and the individual will not be entitled to any
cash payment from the Company with respect to the forfeited shares.
<PAGE>
GENERAL PROVISIONS
Option/Vesting Acceleration
Outstanding options under the 1994 Plan may become exercisable on an
accelerated basis, and unvested shares issued or issuable under the 1994 Plan
will be subject to accelerated vesting, in the event of certain changes in the
ownership or control of the Company. The transactions which may trigger such
option/vesting acceleration are as follows:
Corporate Transaction: any one of the following stockholder-approved
transactions:
- a merger or consolidation in which the Company is not the
surviving entity,
- the sale, transfer or other disposition of substantially all of
the Company's assets in liquidation or dissolution of the
Company, or
- any reverse merger in which the Company is the surviving entity
but in which securities possessing more than 50% of the total
combined voting power of the Company's outstanding securities are
transferred to persons other than those who held such securities
immediately prior to the merger.
Change in Control: any of the following events:
- a direct acquisition by any person (or related group of persons)
of securities possessing more than 10% of the total combined
voting power of the Company's outstanding securities,
- the acquisition by any person (or related group of persons),
whether by tender or exchange offer made directly to the
Company's stockholders, private purchases from one or more of the
Company's stockholders, open market purchases or any other
transaction, of additional securities of the Company which
increase the total holdings of such person (or group) to a level
of securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities, or
- the acquisition by any person (or related group of persons),
whether by tender or exchange offer made directly to the
Company's stockholders, private purchases from one or more of the
Company's stockholders, open market purchases or any other
transaction, of securities of the Company possessing sufficient
voting power in the aggregate to elect an absolute majority of
the directors (rounded up to the nearest whole number).
In the event of a Corporate Transaction, each option at the time
outstanding under the Discretionary Grant Program or Salary Reduction Program
will automatically become exercisable for all of the shares of stock at the time
subject to that option and may be exercised for any or all of such shares as
fully-vested shares. However, an outstanding option under the Discretionary
Grant Program will not so accelerate if and to the extent: (i) such option is
either to be assumed by the successor corporation (or parent thereof) or is
otherwise to be replaced by a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof) or (ii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of grant. Upon the consummation of the Corporate
Transaction, all outstanding options under the 1994 Plan will, to the extent not
previously exercised by the optionees or assumed by the successor corporation
(or its parent company), terminate and cease to be exercisable. The Plan
Administrator will have the discretion to provide for the subsequent
acceleration of any option which does not accelerate at the time of the
Corporate Transaction, in the event the optionee's service terminates within a
designated period following such Corporate Transaction.
<PAGE>
The Company's outstanding repurchase rights under the Discretionary
Option Grant and Stock Issuance Programs will also terminate, and the shares
subject to those terminated rights will become fully vested, upon the Corporate
Transaction, except to the extent (i) one or more of such repurchase rights are
expressly assigned to the successor corporation (or its parent company) or (ii)
such accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the unvested shares are issued. The Plan Administrator
will have the discretion to provide for the subsequent termination of any
repurchase rights which remain in existence after the Corporate Transaction, in
the event the optionee's service terminates within a designated period following
such Corporate Transaction.
The Plan Administrator will also have full power and authority to
provide for the acceleration of one or more outstanding options under the
Discretionary Grant Program or Salary Reduction Program so that each such option
will, immediately prior to a Change in Control, become exercisable for the total
number of shares of stock at the time subject to such option and may be
exercised for any or all of such shares as fully-vested shares. The Plan
Administrator may also provide for the automatic termination of all of the
outstanding repurchase rights held by the Company under the Discretionary Option
Grant and Stock Issuance Programs (with the concurrent vesting of the shares
subject to those terminated rights) in the event of such Change in Control.
Alternatively, the Plan Administrator may condition such accelerated option
vesting and termination of the repurchase rights upon the optionee's cessation
of service under certain prescribed circumstances following the Change in
Control.
Upon either a Corporate Transaction or a Change in Control, the shares
of stock subject to each outstanding option under the Automatic Grant Program
will immediately vest, and the options will accordingly become exercisable for
all of the shares of stock at the time subject to such option as fully-vested
shares. In addition, all unvested shares issued under the Stock Fee Program or
issued under the Stock Issuance Program in lieu of base salary will immediately
vest.
The acceleration of options or vesting in the event of a Corporate
Transaction or Change in Control may be seen as an anti-takeover provision and
may have the effect of discouraging a merger proposal, a takeover attempt or
other efforts to gain control of the Company.
Changes in Capitalization
In the event any change is made to the outstanding shares of stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
1994 Plan and the maximum number and/or class of securities which may remain
available for future option grant or direct stock issuance in connection with
each automatic 3% increase to the share reserve to be effected each year under
the 1994 Plan, (ii) the maximum number and/or class of securities for which any
one individual may be granted stock options, separately exercisable stock
appreciation rights and direct share issuances over the term of the 1994 Plan,
(iii) the number and/or class of securities and price per share in effect under
each outstanding option and (iv) the number and/or class of securities for which
option grants will subsequently be made under the Automatic Grant Program per
each newly-elected or continuing non-employee director.
Financial Assistance
The Plan Administrator may institute a loan program in order to assist
one or more optionees in financing their exercise of outstanding options under
the Discretionary Grant or Salary Reduction Grant Program or the purchase of
shares under the Stock Issuance Program. The form in which such assistance is to
be made available (including loans or installment payments) and the terms upon
which such assistance is to be provided is determined by the Plan Administrator.
However, the maximum amount of financing provided to any participant may not
exceed the amount of cash consideration payable for the issued shares plus all
applicable federal, state and local taxes incurred in connection with the
acquisition of the shares. Any such financing may be subject to forgiveness in
whole or in part, at the discretion of the Plan Administrator, over the
participant's period of service.
<PAGE>
Special Tax Election
The Plan Administrator may provide one or more holders of non-statutory
options or unvested shares under the Discretionary Grant, Salary Reduction Grant
or Stock Issuance Programs with the right to have the Company withhold a portion
of the shares of stock otherwise issuable to such individuals in satisfaction of
the federal and state income and employment tax liability incurred by such
individuals in connection with the exercise of those options or the vesting of
the shares. Alternatively, the Plan Administrator may allow such individuals to
deliver previously acquired shares of stock in payment of such tax liability.
Amendment and Termination
The Board may amend or modify the 1994 Plan in any or all respects
whatsoever. However, no such amendment may adversely affect the rights of
existing optionees or holders of unvested shares without their consent. In
addition, certain amendments may require stockholder approval under applicable
law or regulation. The Board may terminate the 1994 Plan at any time, and the
1994 Plan will in all events terminate on December 31, 2008. Each stock option
or unvested share issuance outstanding at the time of such termination will
remain in force in accordance with the provisions of the instruments evidencing
such grant or issuance.
Stock Awards
The tables below show, as to each of the Company's named executive
officers and the various indicated individuals and groups, the following
information with respect to stock option transactions and direct stock issuances
under the 1994 Plan from December 30, 1995 to March 3, 1997: (i) the number of
shares of stock subject to options granted during that period, (ii) the weighted
average option price payable per share, (iii) the number of shares of stock
directly issued without an intervening option grant, and (iv) the dollar amount
paid per issued share.
<TABLE>
<CAPTION>
OPTION TRANSACTIONS
Weighted Average
Options Granted Exercise Price
Name (Number of Shares) of Options Granted
- ---- ------------------ ------------------
<S> <C> <C>
John C. Lewis................................................ 100,000 $12.1875
William F. Ferone............................................ 57,000 $9.6809
Michael J. Poehner........................................... 50,000 $9.9250
Bruce J. Ryan................................................ 108,000 $10.2379
David B. Wright.............................................. 108,000 $12.2379
E. Joseph Zemke.............................................. 40,000 $7.9375
All current executive officers as a group who
received option grants (15 persons)........................ 894,000 $10.0617
Michael R. Hallman........................................... 5,000 $12.1875
E. F. Heizer, Jr............................................. 5,000 $12.1875
Kazuto Kojima................................................ 5,000 $12.1875
Burton G. Malkiel, Ph.D...................................... 5,000 $12.1875
Takeshi Maruyama............................................. 5,000 $9.8438
George R. Packard, Ph.D...................................... 5,000 $12.1875
Walter B. Reinhold........................................... 5,000 $12.1875
Takashi Takaya............................................... 5,000 $10.1563
J. Sidney Webb............................................... 5,000 $12.1875
All current non-employee directors as a group who
received option grants (9 persons)......................... 45,000 $11.7014
All employees, including current officers who are
not executive officers, as a group who received option
grants (approximately 1,057 persons)...................... 2,856,200 $8.3300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIRECT SHARE ISSUANCES
Number of Purchase Price
Name Issued Shares 1 Per Share
- ---- --------------- ---------
<S> <C> <C>
John C. Lewis...................... 79,700 $.05
William F. Ferone................. 12,350 $.05
Michael J. Poehner................ 10,000 $.05
Bruce J. Ryan..................... 52,400 $.05
David B. Wright................... 52,400 $.05
E. Joseph Zemke................... 55,400 $.05
All current executive officers as
a group who received direct share
issuances (15 persons)........... 295,700 $.05
All employees, including current
officers who are not executive
officers, as a group (25 persons). 158,250 $.05
<FN>
1 These shares, held by the named executive officers, are subject to the
Company's repurchase rights which will lapse in 25% increments over four
years from the award date: Mr. Lewis, 79,700 shares; Mr. Ferone, 12,350
shares; Mr. Poehner, 10,000 shares; Mr. Ryan, 27,400 shares; and Mr.
Wright, 27,400 shares. The Company's repurchase rights will lapse in 33%
increments over three years from the award date on 25,000 shares held by
each Mr. Ryan and Mr. Wright. The Company's repurchase rights lapsed on
November 1, 1996 on Mr. Zemke's 55,400 restricted shares pursuant to Mr.
Zemke's separation agreement with the Company.
</FN>
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the 1994 Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The federal income tax treatment for the two types of options differs as
described below:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of disposition. For federal tax purposes, dispositions are divided into
two categories: (i) qualifying and (ii) disqualifying. The optionee will make a
qualifying disposition of the purchased shares if the sale or other disposition
of such shares is made after the optionee has held the shares for more than two
years after the grant date of the option and more than one year after the
exercise date. If the optionee fails to satisfy either of these two minimum
holding periods prior to the sale or other disposition of the purchased shares,
then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will
recognize long-term capital gain in an amount equal to the excess of (i) the
amount realized upon the sale or other disposition of the purchased shares over
(ii) the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the option exercise date over (ii) the exercise price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares. The Company anticipates that the compensation deemed paid in connection
with most disqualifying dispositions of incentive stock option shares under the
1994 Plan will be deductible by it and will not be subject to the annual $1
million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company.
<PAGE>
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the
acquisition of unvested shares of stock under a non-statutory option. These
special provisions may be summarized as follows:
- If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of service prior to vesting in
those shares, then the optionee will not recognize any taxable income
at the time of exercise but will have to report as ordinary income, as
and when the Company's repurchase right lapses, an amount equal to the
excess of (i) the fair market value of the shares on the date the
repurchase right lapses with respect to those shares over (ii) the
exercise price paid for the shares.
- The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of
the non-statutory option an amount equal to the excess of (i) the fair
market value of the purchased shares on the exercise date over (ii)
the exercise price paid for such shares. If the Section 83(b) election
is made, the optionee will not recognize any additional income as and
when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the compensation deemed paid upon the
exercise of non-statutory options granted under the 1994 Plan with an exercise
price equal to the fair market value of the stock on the grant date will be
deductible and will not be subject to the annual $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.
Direct Stock Issuance
The tax principles applicable to direct stock issuances under the 1994
Plan are substantially the same as those summarized above for the exercise of
non-statutory option grants.
<PAGE>
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances with exercise or issue prices equal to the fair market value of
the shares at the time of issuance or grant will not result in any direct charge
to the Company's earnings. However, the number of outstanding options, whether
or not granted at a discount, may be a factor in determining the Company's
earnings per share on a fully-diluted basis. The Company must also disclose
certain pro-forma financial information showing the impact which the option
grants made under the 1994 Plan would have upon the Company's reported earnings
were the value of those options treated as compensation expense.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation earning to the
Company's earnings.
STOCKHOLDER APPROVAL
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendments to the 1994 Plan. The Board believes that it is in
the best interests of the Company to maintain an equity incentive program for
the Company which will provide a meaningful opportunity for officers, key
employees and non-employee directors to acquire a substantial proprietary
interest in the enterprise and thereby encourage such individuals to remain in
the Company's service and more closely align their interests with those of the
stockholders.
If the stockholders do not approve the amendments to the 1994 Plan,
then none of the changes to the automatic share increase provisions will be
implemented, and the number of shares by which the share reserve will increase
on the first trading day of each calendar year will remain at 1% of the total
number of shares outstanding at the close of business on December 31 of the
immediately preceding calendar year, provided that the maximum number of shares
available for future option grants and direct stock issuances immediately after
each automatic increase will be limited to 5,000,000 shares. In addition, the
non-employee directors will not be eligible to participate in the Discretionary
Option Grant or Stock Issuance Programs, and any unvested shares, which have
been exercised, that are repurchased by the Company will not be added back to
the share reserve for reissuance. The options granted to non-employee directors
under the Automatic Grant Program will not be assignable or transferable. The
1994 Plan will continue to remain in effect, and option grants, stock
appreciation rights and direct stock issuances may continue to be awarded
pursuant to the provisions of the 1994 Plan in effect prior to the amendments
which are included in the preceding 1994 Plan summary.
APPROVAL OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Arthur Andersen LLP as the Company's independent public accountants
for 1997. Arthur Andersen has served as the Company's independent public
accountants since 1976. Representatives of Arthur Andersen LLP are expected to
be present at the annual meeting to make a statement if they desire and to
respond to appropriate questions.
The Board of Directors recommends a vote FOR approval of the selection
of Arthur Andersen LLP as the Company's independent public accountants for 1997.
FUTURE STOCKHOLDER PROPOSALS
Amdahl must receive stockholder proposals for consideration at the 1998
annual meeting no later than November 20, 1997. These proposals may be included
in next year's proxy statement if they comply with the regulations under the
Securities Exchange Act of 1934.
<PAGE>
INCORPORATION BY REFERENCE
According to the provisions of Schedule 14A under the Securities
Exchange Act of 1934, the following document or portion thereof is incorporated
by reference:
"Executive Officers of Amdahl" from Part 1 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 27, 1996.
The Board of Directors knows of no other matters that may be presented for
stockholder action at the meeting. However, if other matters are properly
brought before the meeting, the proxy holders will vote them according to their
best judgment.
By Order of the Board of Directors
/s/Bruce J. Ryan
Bruce J. Ryan
Executive Vice President, Chief Financial
Officer and Corporate Secretary
March 20, 1997
<PAGE>
AMDAHL CORPORATION
1994 STOCK INCENTIVE PLAN
(As Amended through November 1, 1996)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1994 Stock Incentive Plan (the "Plan") is intended to promote the
interests of Amdahl Corporation, a Delaware corporation (the "Corporation"), by
providing (i) key employees (including officers) of the Corporation (or its
subsidiary corporations) who are responsible for the management, growth and
financial success of the Corporation (or its subsidiary corporations); (ii) the
non-employee members of the Corporation's Board of Directors or the board of
directors of any subsidiary corporation; and (iii) those consultants and other
independent contractors who provide valuable services to the Corporation (or its
subsidiary corporations) with the opportunity to acquire a proprietary interest,
or otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or its
subsidiary corporations).
B. The Plan became effective upon its approval by the Corporation's
stockholders at the 1994 Annual Meeting held on May 5, 1994. Such date is hereby
designated as the Effective Date of the Plan.
C. This Plan shall serve as the successor to the Corporation's four
previous stock programs - the Stock Option Plan (1971), the Stock Option Plan
(1974), the Non-Qualified Stock Option Plan (1982) and the Restricted Stock Plan
(collectively, the "Predecessor Plans"), and no further option grants or stock
issuances shall be made under the Predecessor Plans after the Effective Date.
All options outstanding under the Predecessor Plans and all unvested shares
issued thereunder as of such Effective Date shall immediately be incorporated
into this Plan and treated as outstanding options and share issuances under this
Plan. However, each outstanding option and share issuance so incorporated shall
continue to be governed solely by the express terms and conditions of the
instrument evidencing such option grant or share issuance, and no provision of
this Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such incorporated options or share issuances with
respect to their acquisition of shares of the Corporation's common stock, par
value of $.05 per share, thereunder.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be in effect:
1934 Act: the Securities and Exchange Act of 1934, as amended.
Award: the written notification provided by the Plan Administrator to a
Participant in
March 20, 1997
1
<PAGE>
the Stock Issuance Program that shares of common stock are to be issued to such
individual upon the attainment of one or more of the performance objectives
specified in Article Six.
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the Corporation
effected through any of the following transactions:
- a direct acquisition by any person (or related group of
persons) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than ten percent (10%) of
the total combined voting power of the Corporation's outstanding
securities;
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of additional securities of the Corporation which
increases the beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of the total securities holdings of such person (or
related group of persons) to a level of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities; or
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities of the Corporation possessing sufficient
voting power in the aggregate to elect an absolute majority of the
Board (rounded up to the next whole number).
Code: the Internal Revenue Code of 1986, as amended.
Committee: a committee of two (2) or more non-employee Directors appointed
by the Board.
Corporate Transaction: any of the following stockholder-approved
transactions to which the Corporation is a party:
- a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Corporation is incorporated;
- the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation; or
March 20, 1997
2
<PAGE>
- any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger.
Director: a member of the Board of Directors of Amdahl Corporation.
Employee: an individual who performs services while in the employ of the
Corporation or one or more Subsidiaries, subject to the control and direction of
the employer entity not only as to the work to be performed but also as to the
manner and method of performance.
Exercise Date: the date on which the Corporation shall have received notice
of the option exercise.
Fair Market Value: the mean between the highest and lowest selling prices
per share of common stock on the date in question on the principal exchange on
which the common stock is then listed or admitted to trading, as the prices are
officially quoted by the composite tape of transactions on such exchange. If
there are no reported sales of the common stock on the date in question, then
the Fair Market Value shall be the mean between the highest and lowest selling
prices on the last previous date for which quotations exist.
Hostile Take-Over: the direct or indirect acquisition by any person or
related group of persons of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.
Incentive Option: a stock option which satisfies the requirements of Code
Section 422.
Involuntary Termination: the termination of the Service of any Optionee or
Participant which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct; or
- such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or bonus
award) by more than five percent (5%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
Misconduct: the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
individual of confidential
March 20, 1997
3
<PAGE>
information or trade secrets of the Corporation or its Subsidiaries, or any
other intentional misconduct by such individual adversely affecting the business
or affairs of the Corporation in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation or any Subsidiary may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other individual in the Service of the
Corporation.
Newly Issued Shares: shares of common stock drawn from the Corporation's
authorized but unissued shares of common stock.
Non-Statutory Option: a stock option not intended to meet the requirements
of Code Section 422.
Optionee: any person to whom an option is granted under the Discretionary
Option Grant, Automatic Option Grant or Salary Reduction Grant Program in effect
under the Plan.
Participant: any person who receives a direct issuance of common stock
under the Stock Issuance Program in effect under the Plan.
Permanent Disability or Permanently Disabled: the inability of the Optionee
or the Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more. However,
solely for purposes of the Automatic Option Grant Program in effect under
Article Three and the Stock Fee Program in effect under Article Four, Permanent
Disability or Permanently Disabled shall mean the inability of the Optionee to
perform his or her normal duties as a Director by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
Plan Administrator: the committee of two (2) or more non-employee Directors
appointed by the Board to administer the Discretionary Option Grant, the Salary
Reduction and the Stock Issuance Programs.
Service: the provision of services on a periodic basis to the Corporation
or any Subsidiary in the capacity of an Employee, a non-employee director of the
Board or an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option or stock issuance
agreement.
Subsidiary: each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in any other corporation in
such chain. For purposes of the grant of Non-Statutory Options and stock
appreciation rights under the Discretionary Option Grant Program, the grant of
Non-Statutory Options under the Salary Reduction Grant Program and direct stock
issuances under the Stock Issuance Program, the term Subsidiary shall also
include any partnership, joint venture or other
March 20, 1997
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business entity in which the Corporation owns, directly or indirectly through
one or more Subsidiaries, a fifty percent (50%) or greater capital or profit
interest.
Take-Over Price: the greater of: (i) the Fair Market Value per share of
common stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over; or (ii) the highest reported price per
share of common stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.
Treasury Shares: shares of common stock reacquired by the Corporation and
held as treasury shares.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into five separate components:
- The Discretionary Option Grant Program, under which eligible
individuals may, at the discretion of the Plan Administrator, be
granted options to purchase shares of common stock in accordance with
the provisions of Article Two;
- The Automatic Option Grant Program, under which non-employee
Directors shall automatically receive special option grants at periodic
intervals to purchase shares of common stock in accordance with the
provisions of Article Three;
- The Stock Fee Program, under which the non-employee
Directors may elect to apply all or a portion of their annual retainer
fee to the acquisition of shares of common stock in accordance with the
provisions of Article Four;
- The Salary Reduction Grant Program, under which eligible
individuals may, pursuant to the provisions of Article Five, elect to
have a portion of their base salary reduced each year in return for
options to purchase shares of common stock at an aggregate discount
from the Fair Market Value of the option shares on the grant date equal
to the salary reduction amount; and
- The Stock Issuance Program, under which eligible individuals
may, pursuant to the provisions of Article Six, be issued shares of
common stock directly: (i) through the immediate purchase of such
shares at a price less than, equal to or greater than their Fair Market
Value at the time of issuance; (ii) as a bonus tied to the performance
of services or the attainment of financial or other objectives; or
(iii) pursuant to the individual's election to receive such shares in
lieu of base salary.
B. General Provisions. Unless the context clearly indicates otherwise, the
provisions of Articles One and Seven shall apply to the Discretionary Option
Grant, Automatic Option Grant, Salary Reduction Grant, Stock Issuance and Stock
Fee Programs and shall accordingly govern the
March 20, 1997
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interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Committee shall have sole and exclusive authority to administer
the Discretionary Option Grant, Salary Reduction Grant and Stock Issuance
Programs. Members of the Committee shall serve for such period as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Plan Administrator shall have full power and discretion (subject
to the express provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for the proper administration of the Discretionary
Option Grant, Salary Reduction Grant and Stock Issuance Programs and to make
such determinations under, and issue such interpretations of, the provisions of
each such program and any outstanding option grants or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program
or any outstanding option or stock issuance thereunder.
C. Service on the Committee shall constitute service as a Director, and
members of the Committee shall accordingly be entitled to full indemnification
and reimbursement as Directors for their service on the Committee. No member of
the Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option granted or shares issued under the Plan.
D. Administration of the Automatic Option Grant and the Stock Fee
Programs shall be self-executing in accordance with the express terms and
conditions of Articles Three and Four, respectively, and the Plan Administrator
shall not exercise any discretionary functions with respect to the option grants
or stock issuances made pursuant to such programs.
V. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two, the Salary Reduction Grant Program under Article Five
and the Stock Issuance Program under Article Six are as follows:
- officers and other key employees of the Corporation (or its
Subsidiaries) who render services which contribute to the management,
growth and financial success of the Corporation (or its Subsidiaries);
- non-employee Directors; and
- those consultants or other independent contractors who provide
valuable services to the Corporation (or its Subsidiaries).
B. Non-employee Directors shall also be eligible to participate in the
Automatic Option
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Grant Program under Article Three and the Stock Fee Program under Article Four.
C. The Plan Administrator shall have full authority to determine: (i)
with respect to grants made under the Discretionary Option Grant and Salary
Reduction Grant Programs, which eligible individuals are to receive such grants,
the number of shares to be covered by each such grant, the status of any granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each granted option is to become exercisable and the maximum term
for which the option may remain outstanding; and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible individuals are to be
selected for participation, the number of shares to be issued to each selected
individual, the vesting schedule (if any) to be applicable to the issued shares
and the consideration to be paid for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of common stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of common stock or from reacquired shares of common stock, including
shares repurchased by the Corporation on the open market. The number of shares
of common stock reserved for issuance over the term of the Plan shall initially
be fixed at 14,300,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such authorized share reserve
shall be comprised of: (i) the number of shares which remain available for
issuance under the Predecessor Plans as of the Effective Date, including the
shares subject to the outstanding options incorporated into this Plan and any
other shares which would have been available for future option grants under the
Predecessor Plans (estimated to be 12,900,000 shares in the aggregate); plus
(ii) an additional increase of 1,400,000 shares of common stock. To the extent
one or more outstanding options under the Predecessor Plans which have been
incorporated into this Plan are subsequently exercised, the number of shares
issued with respect to each such option shall reduce, on a share-for-share
basis, the number of shares available for issuance under this Plan.
B. The number of shares of common stock available for issuance under the
Plan shall be subject to a series of automatic increases effected in accordance
with the following provisions:
- The number of shares of common stock available for
issuance under the Plan shall automatically increase on the first
trading day of each of the 1995, 1996 and 1997 calendar year, by an
amount equal to one percent (1%) of the shares of common stock
outstanding on December 31 of the immediately preceding calendar year;
provided, however that each such one percent (1%) annual increase shall
be subject to reduction to the extent necessary so that the maximum
number of shares of common stock available immediately thereafter for
future option grants and direct stock issuances under the Plan shall
not exceed 5,000,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. None of the
additional shares resulting from such annual increases may be made the
subject of Incentive Options granted under the Plan;
- The number of shares available for issuance
under the Plan shall
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automatically increase on the date of the 1997 Annual Stockholders
Meeting by an amount equal to two percent (2%) of the total number of
shares of common stock outstanding on the immediately preceding trading
day; and
- The number of shares available for issuance under
the Plan shall automatically increase on the first trading day of each
calendar year during the remaining term of the Plan, beginning with the
1998 calendar year, by an amount equal to three percent (3%) of the
shares of common stock outstanding on December 31 of the immediately
preceding calendar year. Each such automatic increase to the share
reserve under the Plan shall, however, be subject to reduction to the
extent necessary to assure that the maximum number of shares of common
stock available for future option grants and direct stock issuances
under the Plan immediately after each such increase shall not exceed
6,000,000 shares, subject to adjustment from time to time in accordance
with the provisions of this Section VI. None of the additional shares
resulting from such annual increases may be made the subject of
Incentive Options granted under the Plan.
C. From and after the Effective Date, the total number of shares of
common stock for which any one individual participating in the Plan may be
granted stock options or concurrently or independently exercisable stock
appreciation rights and may receive direct stock issuances shall be limited to
2,000,000 shares in the aggregate over the term of the Plan, subject to periodic
adjustment for certain changes in the Company's capital structure in accordance
with the provisions of this Section VI.
D. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plans incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two), then the shares subject to the portion of each
option not so exercised shall be available for subsequent issuance under the
Plan. Shares issued under the Plan which are subject to the Corporation's
repurchase rights, or restricted, that are subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of common stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. Shares subject to any stock
appreciation rights exercised under the Plan shall not be available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan (including any option incorporated from the
Predecessor Plans) be paid with shares of common stock or should shares of
common stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan or the vesting of a share issuance under
the Plan, then the number of shares of common stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the share issuance, and not by the net number of
shares of common stock actually issued to the holder of such option or share
issuance.
E. Should any change be made to the common stock issuable under the Plan by
reason
March 20, 1997
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of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding common stock as a
class without the Corporation's receipt of consideration, then appropriate
adjustments shall be made to: (i) the maximum number and/or class of securities
issuable under the Plan; (ii) the limit on the number and/or class of securities
which are allowed to remain available for future option grants and direct stock
issuances in connection with each automatic three percent (3%) increase to the
share reserve effected annually under the Plan; (iii) the maximum number and/or
class of securities for which any one individual participating in the Plan may
be granted stock options, concurrently or independently exercisable stock
appreciation rights and direct stock issuances in the aggregate over the term of
the Plan; (iv) the number and/or class of securities for which automatic option
grants are to be subsequently made to each newly elected or continuing
non-employee Director under the Automatic Option Grant Program; and (v) the
number and/or class of securities and price per share in effect under each
option and stock appreciation right outstanding under the Plan (including each
option incorporated into this Plan from the Predecessor Plans). Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
March 20, 1997
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees may only be granted Non- Statutory
Options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.
A. Exercise Price.
1. The exercise price per share under this Article Two shall
be fixed by the Plan Administrator in accordance with the following provisions:
(i) The exercise price per share of common stock
subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such common stock on
the grant date; and
(ii) The exercise price per share of common stock
subject to a Non- Statutory Option shall be the amount determined by
the Plan Administrator at the time of grant and may be less than, equal
to or greater than the Fair Market Value of such common stock on the
grant date.
2. The exercise price shall become immediately due upon
exercise of the option and, subject to the provisions of Section I of Article
Seven and the instrument evidencing the grant, shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check made payable
to the Corporation's order;
(ii) full payment in shares of common stock held for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date;
(iii) full payment in a combination of shares of
common stock held for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date and cash or check made
payable to the Corporation's order; or
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(iv) to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee shall provide irrevocable
instructions: (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable federal, state and local income
and employment taxes required to be withheld by the Corporation in
connection with such purchase; and (b) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction (the "Immediate Sale
Program").
B. Term and Exercise of Options. Each option granted under this Article
Two shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the instrument evidencing such option. No Incentive Option shall, however,
have a maximum term in excess of ten (10) years, and no Non- Statutory Option
shall have a maximum term in excess of fifteen (15) years. An Incentive Option
shall be exercisable only by the Optionee during his or her lifetime and shall
not be assignable or transferable except for a transfer of the option effected
by will or by the laws of descent and distribution following the Optionee's
death. Non-Statutory Options may be granted under the Plan which are assignable
or transferable in whole or in part by the Optionee during his or her lifetime,
subject to such restrictions or limitations as the Plan Administrator may impose
at the time of grant.
C. Termination of Service.
1. Should an Optionee cease Service for any reason (including
death or Permanent Disability) while holding one or more outstanding options
under this Article Two, then none of those options shall (except to the extent
otherwise provided pursuant to subparagraph I.C.7 below) remain exercisable for
more than a thirty-six (36)-month period (or such shorter period determined by
the Plan Administrator and set forth in the instrument evidencing the grant)
measured from the date of such cessation of Service.
2. Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
However, the right to exercise such option shall lapse upon the earlier of: (i)
the third anniversary of the date of the Optionee's death (or such shorter
period determined by the Plan Administrator and set forth in the instrument
evidencing the grant); or (ii) the specified expiration date of the option term.
Accordingly, upon the occurrence of the earlier event, the option shall
terminate and cease to remain outstanding.
3. Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
4. During the applicable post-Service exercise period,
the option may not be
March 20, 1997
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exercised in the aggregate for more than the number of shares (if any) in which
the Optionee is vested at the time of his or her cessation of Service. Upon the
expiration of the limited post-Service exercise period or (if earlier) upon the
specified expiration date of the option term, each such option shall terminate
and cease to remain outstanding with respect to any vested shares for which the
option has not otherwise been exercised. However, each outstanding option shall,
immediately upon the Optionee's cessation of Service, terminate and cease to
remain outstanding with respect to any shares for which the option is not
otherwise at that time exercisable or in which the Optionee is not otherwise at
that time vested.
5. Should the Optionee's Service be terminated for Misconduct,
all outstanding options held by the Optionee under this Article Two shall
terminate immediately and cease to remain outstanding.
6. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post- Service
exercise period applicable under this Section I.C, not only with respect to the
number of vested shares of common stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments for which the option would
otherwise have become exercisable or in which the Optionee would otherwise have
vested had such cessation of Service not occurred.
7. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under subparagraphs I.C.1 and I.C.2 above to
such greater period of time as the Plan Administrator shall deem appropriate. In
no event, however, shall such option be exercisable after the specified
expiration date of the option term.
D. Stockholder Rights. An Optionee shall have none of the rights of a
stockholder with respect to any option shares until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
E. Repurchase Rights. The shares of common stock acquired under this
Article Two may be subject to repurchase by the Corporation in accordance with
the following provisions:
1. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of common stock under this
Article Two. Should the Optionee cease Service while holding any unvested shares
purchased under such options, then the Corporation shall have the right to
repurchase any or all of those unvested shares at the exercise price paid per
share. The terms and conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the instrument evidencing such repurchase right;
March 20, 1997
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2. All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares subject to
such terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction; or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued; and
3. The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the Optionee under this
Article Two and thereby accelerate the vesting of such shares in whole or in
part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the common stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its Subsidiaries) may for the first time become exercisable as
incentive stock options under the federal tax laws during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as incentive stock options under the federal tax
laws shall be applied on the basis of the order in which such options are
granted. Should the number of shares of common stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then the option may nevertheless
be exercised in that calendar year for the excess number of shares as a
Non-Statutory Option under the federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its Subsidiaries, then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the Fair Market Value per share of common stock on the grant date and the
option term shall not exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Seven shall apply to all Incentive
Options granted hereunder.
March 20, 1997
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III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for such Corporate Transaction, become fully exercisable with respect to the
total number of shares of common stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall not so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof; (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option;
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed or
replaced in the Corporate Transaction, or alternatively to provide for the
subsequent acceleration of any outstanding options under this Article Two which
do not otherwise accelerate at the time of the Corporate Transaction, should the
Optionee's Service terminate through an Involuntary Termination effected within
a designated period following the effective date of such Corporate Transaction.
The Plan Administrator shall also have the authority to provide for the
immediate termination of any of the Corporation's outstanding repurchase rights
under this Article Two which do not otherwise terminate at the time of the
Corporate Transaction, upon the subsequent termination of the Optionee's Service
through an Involuntary Termination effected within a designated period following
the effective date of such Corporate Transaction.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.
D. Each outstanding option under this Article Two that is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and per
individual basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.
March 20, 1997
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E. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control or Hostile Take-Over. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service through an Involuntary
Termination effected within a specified period following the Change in Control
or Hostile Take-Over.
F. Any options accelerated in connection with the Change in Control or
Hostile Take- Over shall remain fully exercisable until the expiration or sooner
termination of the option term or the surrender of such option in accordance
with Section V of this Article Two.
G. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
H. The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction, Change in Control or Hostile
Take-Over shall remain exercisable as an incentive stock option under the
federal tax laws only to the extent the dollar limitation of Section II of
Article Two is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a non-statutory
option under the federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the sole and exclusive authority to
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under this Article
Two (including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering the
same or different numbers of shares of common stock but with an exercise price
per share based upon the Fair Market Value of the common stock on the new grant
date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Option
Grant Program stock appreciation rights.
B. Four types of stock appreciation rights shall be authorized for issuance
under the Plan: (i) Tandem Stock Appreciation Rights ("Tandem Rights"),
Concurrent Stock Appreciation Rights ("Concurrent Rights"), Independent Stock
Appreciation Rights ("Independent Rights") and Limited Stock Appreciation Rights
("Limited Rights").
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C. The following terms and conditions shall govern the grant and exercise
of Tandem Rights under this Article Two.
1. One or more Optionees may be granted the Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to elect between the exercise of the underlying Article Two stock
option for shares of common stock and the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the excess of:
(i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over; (ii) the aggregate exercise price payable
for such vested shares;
2. No such option surrender shall be effective unless it
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in shares of common stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate; and
3. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of:
(i) five (5) business days after the receipt of the rejection notice; or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option grant.
D. The following terms and conditions shall govern the grant and exercise
of Concurrent Rights under this Article Two:
1. One or more Optionees may be granted, upon such terms and
conditions as the Plan Administrator may establish, the Concurrent Right to
automatically receive an appreciation distribution from the Corporation at the
same time the underlying stock option under this Article Two is exercised for
the shares of common stock subject to such right. Accordingly, the Optionee
shall, upon exercise of the option, receive both the purchased shares of common
stock and the appreciation distribution payable on the covered shares;
2. The amount of the distribution payable upon exercise
of the Concurrent Right shall not exceed an amount equal to the excess of: (i)
the Fair Market Value (on the option exercise date) of the number of shares
for which the option is exercised over; (ii) the aggregate exercise price
payable for such shares under that option; and
3. The distribution to which the Optionee shall become
entitled under this Section V may be made in shares of common stock valued at
Fair Market Value on the option exercise date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
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E. The following terms and conditions shall govern the grant and exercise
of Independent Rights under this Article Two:
1. One or more individuals eligible to participate in the
Discretionary Option Grant Program may be granted an Independent Right not tied
to any underlying Article Two stock option. The Independent Right shall be
exercisable upon such terms and conditions as the Plan Administrator may
establish and shall entitle the holder to receive a distribution from the
Corporation in an amount equal to the excess of: (i) the aggregate Fair Market
Value (on the exercise date of such right) of the shares of common stock subject
to the exercised right over; (ii) the aggregate base price in effect for those
shares;
2. The number of shares subject to the Independent Right
and the base price in effect for those shares shall be determined by the Plan
Administrator in its sole discretion at the time the Independent Right is
granted. The base price may be less than, equal to or greater than the Fair
Market Value (on the grant date of the right) of the shares subject to that
right; and
3. The distribution to which the holder of the
Independent Right shall become entitled under this Section V may be made in
shares of common stock valued at Fair Market Value on the exercise date of
such right, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
F. The following terms and conditions shall govern the grant and exercise
of Limited Rights under this Article Two:
1. One or more officers of the Corporation subject to the
short-swing profit restrictions of the federal securities laws may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to their
outstanding options under this Article Two;
2. Upon the occurrence of a Hostile Take-Over, each such
officer holding one or more options with such a Limited Right shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for fully vested shares of common
stock. The officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of: (i) the Take-Over Price of the
vested shares of common stock at the time subject to each surrendered option (or
surrendered portion of such option) over; (ii) the aggregate exercise price
payable for such vested shares. Such cash distribution shall be made within five
(5) days following the option surrender date; and
3. The Plan Administrator shall pre-approve, at the time
the Limited Right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.F
of Article Two. No additional approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution. Any unsurrendered portion of the option shall continue to remain
outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
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G. The shares of common stock subject to any stock appreciation right
exercised under this Section V shall not be available for subsequent issuance
under the Plan.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive automatic
option grants pursuant to the provisions of this Article Three shall be limited
to: (i) those individuals who are first elected as non-employee Directors at the
1994 Annual Meeting of Stockholders; (ii) those individuals who are first
elected or appointed as non-employee Directors after the date of such Annual
Meeting, whether through appointment by the Board or election by the
Corporation's stockholders; and (iii) those individuals who are re-elected to
serve as non-employee Directors at one or more Annual Stockholder Meetings
beginning with the 1994 Annual Meeting. Any non-employee Director eligible to
participate in the Automatic Option Grant Program pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of this Article
Three.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Options shall be granted under this Article Three as
follows:
1. Each individual who is first elected as an Eligible
Director at the 1994 Annual Meeting of Stockholders shall automatically be
granted on the date of such Annual Meeting a Non- Statutory Option to purchase
5,000 shares of common stock upon the terms and conditions of this Article
Three;
2. Each individual who first becomes an Eligible Director
after the date of the 1994 Annual Meeting of Stockholders, whether through
election by the Corporation's stockholders or appointment by the Board, shall
automatically be granted, at the time of such initial election or appointment, a
Non-Statutory Option to purchase 5,000 shares of common stock upon the terms and
conditions of this Article Three; and
3. On the date of each Annual Meeting of Stockholders,
beginning with the 1994 Annual Meeting, each individual who is at that time
re-elected as a non-employee Director shall automatically be granted a
Non-Statutory Option to purchase an additional 5,000 shares of common stock upon
the terms and conditions of this Article Three, provided such individual has
served as a Director for at least twelve (12) months.
B. No Limitation. There shall be no limit on the number of such 5,000-share
annual option grants any one Eligible Director may receive over his or her
period of Board service. The number of shares for which the automatic option
grants are to be made to newly elected or continuing Eligible Directors shall be
subject to periodic adjustment pursuant to the applicable provisions of Section
VI.E. of Article One.
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C. Exercise Price. The exercise price per share of common stock of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of common stock on the
automatic grant date.
D. Payment. The exercise price shall be payable in any of the
alternative forms authorized under Section I.A.2 of Article Two. To the extent
the option is exercised for any unvested shares, the Optionee must execute and
deliver to the Corporation a stock purchase agreement for those unvested shares
which provides the Corporation with the right to repurchase, at the exercise
price paid per share, any unvested shares held by the Optionee at the time of
cessation of Board service and which precludes the sale, transfer or other
disposition of the purchased shares at any time while those shares remain
subject to the Corporation's repurchase right.
E. Option Term. Each automatic grant made under this Article Three
prior to the 1995 Annual Stockholders Meeting shall have a maximum term of ten
(10) years measured from the automatic grant date. Each automatic grant made at
the 1995 Annual Stockholders Meeting or at any time after the date of that
Annual Meeting shall have a maximum term of fifteen (15) years measured from the
automatic grant date.
F. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. The shares subject to the initial automatic
grant made to each non-employee Director upon his or her initial appointment or
election to the Board shall vest, and the Corporation's repurchase right shall
lapse, in two (2) equal and successive annual installments over the Optionee's
period of continued service as a Director, with the first such installment to
vest upon Optionee's completion of one (1) year of Board service measured from
the automatic grant date. The shares subject to each additional automatic grant
made to the non-employee Director upon his or her re-election to the Board at
one or more Annual Stockholder Meetings shall vest, and the Corporation's
repurchase right shall lapse, in two (2) successive equal installments over the
Optionee's period of continued service as a Director, with the first such
installment to vest upon Optionee's continuation in Board service through the
day immediately preceding the date of the first Annual Stockholders Meeting
following the grant date of the option and with the second such installment to
vest upon Optionee's continuation in Board service through the day immediately
preceding the date of the second Annual Stockholders Meeting following the grant
date of the option.
Vesting of the option shares shall be subject to acceleration
as provided in Section II.H.3, Section II.H.4 and Section III of this Article
Three. In no event shall any additional option shares vest after the Optionee's
cessation of Board service, except as otherwise provided pursuant to Section
II.H.3 or Section II.H.4 of this Article Three.
G. Transferability. During the lifetime of the Optionee, the automatic
option grant, together with the limited stock appreciation right pertaining to
such option, shall be exercisable only by the Optionee and shall not be
assignable or transferable except for:
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(i) a transfer of the option effected by will
or by the laws of descent and distribution following the Optionee's
death; or
(ii) a transfer of the option (granted on or after the
1997 Annual Meeting of Stockholders) effected during Optionee's
lifetime for estate planning purposes to a member of his or her
immediate family or to a trust established for one or more such family
members.
H. Termination of Board Service.
1. Except as otherwise provided in subparagraph 2, 3 or 4
below, should the Optionee cease to serve as a Director for any reason while
holding one or more automatic option grants under this Article Three, then such
individual shall have a six (6)-month period following the date of such
cessation of Board service in which to exercise each such option for any or all
of the option shares in which the Optionee is vested at the time of such
cessation of Board service. However, each such option shall, immediately upon
the Optionee's cessation of Board service, terminate and cease to remain
outstanding with respect to any option shares in which the Optionee is not
otherwise at that time vested under such option.
2. Should an Optionee with less than four (4) years of service
on the Board die within the six (6)-month period following the date of his or
her cessation of Board service, then any automatic option grant held by the
Optionee at the time of his or her death may subsequently be exercised, for any
or all of the option shares in which the Optionee is vested at the time of his
or her cessation of Board service (less any option shares subsequently purchased
by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. The right to exercise each such option shall lapse upon the
expiration of the twelve (12)- month period measured from the date of the
Optionee's death.
3. If the Optionee ceases to serve as a Director for any
reason (other than removal for cause) after completion of four (4) or more years
of Board service, then the shares of common stock at the time subject to each
automatic option grant held by the Optionee shall immediately vest in full (and
the Corporation's repurchase right with respect to those shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the Optionee's
death) shall have until the expiration date of the option term in which to
exercise such option for any or all of those vested shares of common stock.
4. Should the Optionee die or become Permanently Disabled
while serving as a Director, then the shares of common stock at the time subject
to each automatic option grant held by the Optionee shall immediately vest in
full (and the Corporation's repurchase right with respect to those shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the Optionee's
death) shall have until the expiration date of the option term in which to
exercise such option for any or all of those vested shares of common stock.
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<PAGE>
5. In no event shall any automatic grant under this Article
Three remain exercisable after the expiration date of the option term. Upon the
expiration of the applicable post- service exercise period under subparagraphs 1
through 4 above or (if earlier) upon the expiration of the option term, the
automatic grant shall terminate and cease to be outstanding for any option
shares in which the Optionee is vested at the time of his or her cessation of
Board service but for which such option is not otherwise exercised.
I. Stockholder Rights. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares subject to that option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
J. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form Automatic Stock Option Agreement
attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of common
stock at the time subject to each outstanding option under this Article Three
but not otherwise vested shall automatically vest in full and the Corporation's
repurchase right with respect to those shares shall terminate, so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of common
stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully vested shares of common stock. Immediately
following the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to remain outstanding,
except to the extent one or more such grants are assumed by the successor entity
or its parent corporation.
B. In connection with any Change in Control or Hostile Take-Over of the
Corporation, the shares of common stock at the time subject to each outstanding
option under this Article Three but not otherwise vested shall automatically
vest in full and the Corporation's repurchase right with respect to those shares
shall terminate, so that each such option shall, immediately prior to the
specified effective date for the Change in Control or Hostile Take-Over, become
fully exercisable for all of the shares of common stock at the time subject to
that option and may be exercised for all or any portion of such shares as fully
vested shares of common stock. Each option shall remain so exercisable for all
the option shares following the Change in Control or Hostile Take-Over until the
expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall also
have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her under this Article Three. The Optionee shall in return
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of: (i) the Take-Over Price of the shares of common stock at the time
subject to the surrendered option over; (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the
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Corporation. Stockholder approval of the November 1, 1996 amendments to the Plan
shall constitute pre-approval of the subsequent grant of each such option
surrender right under this Automatic Option Grant Program and the subsequent
exercise of that right in accordance with the terms and provisions of this
Section II.C. No additional approval of the Board or any Plan Administrator
shall be required at the time of the actual option surrender and cash
distribution. The shares of common stock subject to each option surrendered in
connection with the Hostile Take-Over shall not be available for subsequent
issuance under the Plan.
D. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
March 20, 1997
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ARTICLE FOUR
STOCK FEE PROGRAM
I. ELIGIBILITY
Each individual serving as a non-employee Director shall be eligible to
elect to apply all or any portion of the annual retainer fee otherwise payable
to such individual in cash to the acquisition of unvested shares of common stock
upon the terms and conditions of this Article Four.
II. ELECTION PROCEDURE
A. Filing. The non-employee Director must make the stock-in-lieu-of-fee
election prior to the start of the calendar year for which the election is to be
effective. The first calendar year for which any such election may be filed
shall be the 1995 calendar year. The election, once filed, shall be irrevocable.
The election for any upcoming calendar year may be filed at any time prior to
the start of that year, but in no event later than December 31 of the
immediately preceding calendar year. The non-employee Director may file a
standing election to be in effect for two (2) or more consecutive calendar years
or to remain in effect indefinitely until revoked by written instrument filed
with the Plan Administrator prior to the start of the first calendar year for
which such standing election is no longer to remain in effect.
B. Election Form. The election must be filed with the Plan Administrator on
the appropriate form provided for this purpose. On the election form, the
non-employee Director must indicate the percentage or dollar amount of his or
her annual retainer fee to be applied to the acquisition of unvested restricted
shares under this Article Six Program.
III. SHARE ISSUANCE
A. Issue Date. On the first trading day in January of the calendar year
for which the election is effective, the portion of the retainer fee subject to
such election shall automatically be applied to the acquisition of shares of
common stock by dividing the elected dollar amount by the Fair Market Value per
share of common stock on that trading day. The number of issuable shares shall
be rounded down to the next whole share, and the issued shares shall be held in
escrow by the Secretary of the Corporation as partly-paid shares until the
non-employee Director vests in those shares. The non-employee Director shall
have full shareholder rights, including voting, dividend and liquidation rights,
with respect to all issued shares held in escrow on his or her behalf, but such
shares shall not be assignable or transferable while they remain unvested.
B. Vesting. Upon completion of each calendar month of Board service during
the year for which the election is in effect, the non-employee Director shall
vest in one-twelfth (1/12) of the issued shares, and the stock certificate for
those shares shall be released from escrow. Immediate vesting in all the issued
shares shall occur in the event: (i) the non-employee Director should die or
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<PAGE>
become Permanently Disabled during his or her period of Board service; or (ii)
there should occur a Corporate Transaction, Change in Control or Hostile
Take-Over occur while such individual remains in Board service. Should such
individual cease Board service prior to vesting in one or more monthly
installments of the issued shares, then those unvested shares shall be cancelled
by the Corporation, and the non-employee Director shall not be entitled to any
cash payment or other consideration from the Corporation with respect to the
cancelled shares and shall have no further shareholder rights with respect to
such shares.
March 20, 1997
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ARTICLE FIVE
SALARY REDUCTION GRANT PROGRAM
I. ELIGIBILITY
The Plan Administrator shall have plenary authority to select, prior to
the start of each calendar year, the particular key employees who shall be
eligible for participation in the Salary Reduction Grant Program for that
calendar year. In order to participate for a particular calendar year, each
selected individual must, prior to the start of that calendar year, file with
the Plan Administrator (or its designate) an irrevocable authorization directing
the Corporation to reduce his or her base salary for that calendar year by a
designated multiple of one percent (1%), but in no event less than five percent
(5%).
The Plan Administrator shall review the filed authorizations and
determine whether to approve, in whole or in part, one or more of those
authorizations. To the extent the Plan Administrator approves one or more
authorizations, the individuals who filed those authorizations shall be granted
options under this Salary Reduction Grant Program. To the extent one or more
authorizations are not approved by the Primary Committee, those authorizations
shall have no force or effect and no options shall be granted under this Article
Five to the individuals who filed those authorizations.
To the extent options are granted under the Salary Reduction Grant
Program, such options shall be Non-Statutory Options evidenced by instruments in
such form as the Primary Committee shall from time to time approve; provided,
however, that each such instrument shall comply with and incorporate the terms
and conditions specified below.
II. TERMS AND CONDITIONS OF OPTION
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33- 1/3%) of the Fair Market Value per share of common stock
on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in any of the alternative forms
authorized under Section I.A.2 of Article Two.
B. Number of Option Shares. The number of shares of common stock for which
each grant under this Article Five is to be made to a selected Optionee shall be
determined pursuant to the following formula (rounded down to the nearest whole
number):
X = A / (B x 66-2/3%), where
X is the number of option shares;
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A is the dollar amount of the approved reduction in the Optionee's
base salary for the calendar year; and
B is the Fair Market Value per share of common stock on the date
of the grant.
C. Term and Exercise of Options.
1. Each option shall have a maximum term of ten (10) years
measured from the grant date. Provided the Optionee continues in Service, the
option shall become exercisable for: (i) fifty percent (50%) of the option
shares on the last day of June in the calendar year for which the option is
granted; and for (ii) the balance of the option shares in a series of six (6)
successive equal monthly installments on the last day of each of the next six
(6) calendar months.
2. One or more options granted under this Salary Reduction
Grant Program may be structured so as to be assignable or transferable in whole
or in part by the Optionee during his or her lifetime, subject to such
restrictions or limitations as the Plan Administrator may impose at the time of
grant. Otherwise, the options shall be exercisable only by the Optionee during
his or her lifetime and shall not be assignable or transferable other than by
transfer of the option effected by will or by the laws of descent and
distribution following the Optionee's death.
D. Effect of Termination of Service.
1. Should an Optionee cease Service for any reason after his
or her outstanding option under this Article Five has become exercisable in
whole or in part, then that option shall remain exercisable, for any or all of
the shares for which the option is exercisable on the date of such cessation of
Service, until the expiration of the ten (10)-year option term or its sooner
termination under Section III.A. of this Article Five. Following the Optionee's
death, such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's death, by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Such right of exercise shall lapse, and the
option shall terminate, upon the expiration of the ten (10)-year option term or
its sooner termination under Section III.A. of this Article Five.
2. Should the Optionee die before his or her outstanding
option under this Article Five becomes exercisable for any of the option shares,
then the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution shall nevertheless have the
right to exercise such option for up to that number of option shares equal to:
(i) one-twelfth (1/12) of the total number of option shares multiplied by; (ii)
the number of full calendar months which have elapsed between the first day of
the calendar year for which the option was granted and the last day of the
calendar month during which the Optionee ceases Service. Such right of exercise
shall lapse, and the option shall terminate, upon the earliest to occur of: (i)
the specified expiration date of the option term; (ii) the termination of the
option under Section III.A. of this Article Five; or (iii) the third
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<PAGE>
anniversary of the date of the Optionee's death. However, the option shall, with
respect to any and all option shares for which it is not exercisable at the time
of the Optionee's cessation of Service, terminate immediately upon such
cessation of Service and shall cease to remain outstanding with respect to those
option shares.
3. Should the Optionee become Permanently Disabled and cease
by reason thereof to remain in Service before his or her outstanding option
under this Article Five becomes exercisable for any of the option shares, then
the Optionee shall nevertheless have the right to exercise such option for up to
that number of option shares equal to: (i) one-twelfth (1/12) of the total
number of option shares multiplied by; (ii) the number of full calendar months
which have elapsed between the first day of the calendar year for which the
option was granted and the last day of the calendar month during which the
Optionee ceases Service. Such right of exercise shall lapse, and the option
shall terminate, upon the expiration of the ten (10)-year option term or its
sooner termination under Section III.A. of this Article Five. However, the
option shall, with respect to any and all option shares for which it is not
exercisable at the time of the Optionee's cessation of Service, terminate
immediately upon such cessation of Service and shall cease to remain outstanding
with respect to those option shares.
4. Except to the limited extent specifically provided in
subparagraphs 2 and 3 above, should the Optionee cease for any reason to remain
in Service before his or her outstanding option under this Article Five first
become exercisable for one or more option shares, then that option shall
immediately terminate upon such cessation of Service and shall cease to remain
outstanding.
E. Stockholder Rights. The Optionee shall have none of the rights of a
stockholder with respect to any option shares until such individual shall have
exercised the option and paid the exercise price for those shares.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Should any Corporate Transaction occur while the Optionee remains in
Service, then each outstanding option held by such Optionee under this Article
Five shall become exercisable, immediately prior to the specified effective date
of such Corporate Transaction, for all of the shares at the time subject to such
option and may be exercised for any or all of such shares as fully-vested shares
of common stock. Immediately following the consummation of the Corporate
Transaction, each such option shall terminate unless assumed by the successor
entity or its parent corporation.
B. Upon the occurrence of: (i) a Hostile Take-Over while the Optionee
remains in Service; or (ii) the Involuntary Termination of the Optionee's
Service following a Change in Control, each outstanding option held by such
Optionee under this Article Five shall immediately become exercisable for all of
the shares at the time subject to such option and may be exercised for any or
all of such shares as fully-vested shares of common stock. The option shall
remain so exercisable until the expiration of the ten (10)-year option term.
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C. Option grants under this Article Five shall not affect the
Corporation's right to adjust, reclassify, reorganize or change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer any or all of its assets.
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ARTICLE SIX
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of common stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Six.
A. Consideration
1. Newly Issued Shares shall be issued under the Stock
Issuance Program for one or more of the following items of consideration that
the Plan Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable
to the Corporation's order;
(ii) a promissory note payable to the Corporation's
order in one or more installments, which may be subject to cancellation
in whole or in part upon terms and conditions established by the Plan
Administrator; or
(iii) past services rendered to the Corporation or
any Subsidiary.
2. Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than, equal to
or greater than the Fair Market Value of such shares at the time of issuance,
but in no event less than the par value per issued share of common stock.
3. Treasury Shares may be issued under the Stock Issuance
Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1 above) as the Plan Administrator may
deem appropriate, whether such consideration is in an amount less than, equal to
or greater than the Fair Market Value of the Treasury Shares at the time of
issuance. Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service.
4. Treasury Shares may also, in the Plan Administrator's
absolute discretion, be issued pursuant to an irrevocable election by the
Participant to receive a portion of his or her base salary in shares of common
stock in lieu of such base salary. Any such issuance shall be effected in
accordance with the following guidelines:
- On the first trading day in January of the calendar
year for which the election
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is effective, the portion of base salary subject to such election shall
automatically be applied to the acquisition of common stock by dividing
the elected dollar amount by the Fair Market Value per share of the
common stock on that trading day. The number of issuable shares shall
be rounded down to the next whole share, and the issued shares shall be
held in escrow by the Secretary of the Corporation until the
Participant vests in those shares. The Participant shall have full
stockholder rights, including voting, dividend and liquidation rights,
with respect to all issued shares held in escrow on his or her behalf,
but such shares shall not be assignable or transferable while they
remain unvested; and
- Upon completion of each calendar month of Service during the
year for which the election is in effect, the Participant shall vest in
one-twelfth (1/12) of the issued shares, and the stock certificate for
those shares shall be released from escrow. All the issued shares shall
immediately vest upon: (i) the occurrence of a Corporate Transaction or
Hostile Take-Over while such individual remains in Service; or (ii) the
Involuntary Termination of the Participant's Service following a Change
in Control. Should the Participant otherwise cease Service prior to
vesting in one or more monthly installments of the issued shares, then
those unvested shares shall immediately be surrendered to the
Corporation for cancellation, and the Participant shall not be entitled
to any cash payment or other consideration from the Corporation with
respect to the cancelled shares and shall have no further stockholder
rights with respect to such shares.
5. In lieu of the immediate issuance of shares of common stock
under the Stock Issuance Program, the Plan Administrator may condition the
actual issuance of those shares upon the attainment by the Corporation, any
designated Subsidiary or division of the Corporation or the individual
Participant of one or more performance objectives established by the Plan
Administrator at the time the Participant is provided with the notice of such
contingent Award.
B. Vesting Provisions
1. The shares of common stock issued under the Stock Issuance
Program (other than shares issued in lieu of salary) may, in the absolute
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in installments over the Participant's period of Service.
The Plan Administrator shall have the authority to condition either the actual
issuance of the shares of common stock subject to an Award made under the Stock
Issuance Program or the subsequent vesting of any unvested shares of common
stock issued under the Stock Issuance Program upon the attainment by the
Corporation, any designated Subsidiary or division of the Corporation or the
individual Participant of one or more following performance objectives:
- - earnings per share - return on assets
- - revenue - market share
- - stock price - customer satisfaction
- - operating income - time to market
- - consolidated pre-tax profit - employee development
- - operating profit margin - quality
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- - return on equity - cash
- - inventory - employee satisfaction
- - gross margin - market perception
The Plan Administrator shall have complete discretion to
condition either the actual issuance of the shares of common stock subject to
the Award or the subsequent vesting of the issued shares upon the attainment of:
(i) one particular performance objective; (ii) one of a series of alternative
performance objectives; or (iii) any combination of two or more performance
objectives, as the Plan Administrator deems appropriate in each instance. The
specific target for each selected performance objective shall be established by
the Plan Administrator either: (i) at the time the Award is made, if the shares
subject to that Award are not to be issued unless the target or targets are
achieved; or (ii) at the time the shares of common stock are issued, if the
subsequent vesting of those shares is subject to the attainment of the specified
target or targets.
2. The remaining elements of the vesting schedule applicable
to any unvested shares of common stock issued under the Stock Issuance Program,
namely:
(i) any Service period to be completed by the
Participant;
(ii) the number of installments in which the shares are
to vest;
(iii) the interval or intervals (if any) which are to
lapse between installments; and
(iv) the effect which death, Permanent Disability or
oher event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into either: (i)
the Award, if the shares subject to that Award are not to be issued until the
applicable vesting requirements are satisfied; or (ii) the Issuance Agreement
executed by the Corporation and the Participant, if the shares are to be issued
initially as unvested shares.
3. The Participant shall have full stockholder rights with
respect to any shares of common stock issued to him or her under the Stock
Issuance Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. Any new, additional or
different shares of stock or other property (including money paid other than as
a regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding common stock as a class without the
Corporation's receipt of consideration shall be issued, subject to: (i) the same
vesting requirements applicable to the Participant's unvested shares; and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.
4. Should the Participant cease to remain in Service
while holding one or more
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unvested shares of common stock under the Stock Issuance Program, then those
shares shall be immediately cancelled by the Corporation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the cancelled shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase- money promissory note), the Corporation shall repay to the Participant
the cash consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase- money note of the
Participant attributable to such cancelled shares. The cancelled shares may, at
the Plan Administrator's discretion, be retained by the Corporation as Treasury
Shares or may be retired to authorized but unissued share status.
5. The Plan Administrator may in its discretion elect to waive
the cancellation of one or more unvested shares of common stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of any
Service requirement incorporated into the vesting schedule applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares of common stock as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service. However, the Plan Administrator shall not waive any
performance objectives specified in Section I.B.1 above which serve as a
condition to either the issuance of shares of common stock under the Stock
Issuance Program or the subsequent vesting of any unvested shares actually
issued under such Program.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of common stock at the time outstanding under this Stock Issuance Program
(other than shares issued in lieu of base salary) shall immediately vest in full
and the Corporation's repurchase rights shall terminate, except to the extent:
(i) any such repurchase right is expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction; or (ii) such
termination is precluded by other limitations imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable at any time while unvested shares remain outstanding under this
Stock Issuance Program, to provide for the immediate and automatic vesting of
those unvested shares in whole or in part, and the termination of the
Corporation's repurchase rights with respect to those shares, upon the
occurrence of a Change in Control or Hostile Take-Over. The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service through an
Involuntary Termination effected within a specified period following the Change
in Control or Hostile Take-Over.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent
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33
<PAGE>
an escrow arrangement is utilized, the unvested shares and any securities or
other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE SUBJECT TO: (i) CERTAIN TRANSFER RESTRICTIONS; AND (ii)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF
SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED
, A COPY OF WHICH IS ON FILE AT
AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested shares
of common stock issued to him or her under the Stock Issuance Program. For
purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled in
accordance with substantially the same procedures in effect under Section I.B.3
of this Article Six, and neither the Participant nor the proposed transferee
shall have any rights with respect to such cancelled shares. However, the
Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to the Participant's spouse or issue, including
adopted children, or to a trust established for such spouse or issue, provided
the transferee of such shares delivers to the Corporation a written agreement to
be bound by all the provisions of the Stock Issuance Program and the Issuance
Agreement applicable to the transferred shares.
March 20, 1997
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<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee
or Participant (including an Optionee or Participant who is an officer of the
Corporation), in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the Salary Reduction Grant
Program or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any federal, state and
local income and employment tax obligations arising therefrom, by: (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant; or (ii) permitting the Optionee or Participant to pay the exercise
price or purchase price for the acquired shares in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances. Loans or installment
payments may be authorized with or without security or collateral. However, the
maximum credit available to the Optionee or Participant may not exceed the
exercise or purchase price of the acquired shares (less the par value of such
shares) plus any federal, state and local income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to stock options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan, unless the Optionee or
Participant consents to such amendment. In addition, certain amendments may
require stockholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of common stock may be granted under the
Discretionary Option Grant Program and the Salary Reduction Grant Program and
shares of common stock may be issued under the Stock Issuance Program, which are
in excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program, the Salary Reduction Grant Program or the Stock Issuance Program are
held in escrow until stockholder approval is obtained for a sufficient increase
in the number of shares available for issuance under the Plan. If such
stockholder approval is not obtained
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35
<PAGE>
within twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then: (i) any unexercised excess options shall
terminate and cease to be exercisable; and (ii) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable short term
federal rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of common stock upon
the exercise of stock options or stock appreciation rights or the direct
issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income tax and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of Non-Statutory Options (other than the automatic option grants made
pursuant to Article Three) or unvested shares under the Stock Issuance Program
with the right to use shares of common stock in satisfaction of all or part of
the federal, state and local income and employment tax liabilities (the "Taxes")
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such holder in either
or both of the following formats:
- Stock Withholding: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the
Corporation withhold, from the shares of common stock otherwise
issuable upon the exercise of such Non-Statutory Option or the vesting
of such shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Taxes (up to one hundred percent
(100%)) specified by such holder.
- Stock Delivery: The holder of the Non-Statutory Option or
the unvested shares may be provided with the election to deliver to the
Corporation, at the time the Non- Statutory Option is exercised or the
shares vest, one or more shares of common stock previously acquired by
such individual (other than in connection with the option exercise or
share vesting triggering the Taxes) with an aggregate Fair Market Value
equal to the percentage of the Taxes (up to one hundred percent (100%))
specified by such holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective upon approval by the Corporation's
stockholders at the 1994 Annual Meeting held on May 5, 1994. The Plan shall
serve as the successor to the Predecessor Plans, and no further option grants or
stock issuances shall be made under the Predecessor Plans from and after the
date of 1994 Annual Meeting.
B. On January 25, 1995, the Board approved an amendment to the Plan to:
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<PAGE>
(i) extend the term for which options granted under the
Automatic Option Grant Program may be exercised from ten (10) years to
fifteen (15) years from the date of grant;
(ii) provide for the immediate vesting of all shares
purchased or purchasable by a non-employee Director under the Automatic
Option Grant Program in the event such individual's service on the
Board terminates for any reason (other than removal for cause) after
his or her completion of at least four (4) years of Board service, and
allow any outstanding options held by such non-employee Director under
the Automatic Option Grant Program to remain exercisable for
fully-vested shares until the expiration of the option term; and
(iii) identify a series of performance goals upon which
the Plan Administrator may condition either the issuance of shares of
common stock under the Stock Issuance Program or the subsequent vesting
of any unvested shares actually issued under such Program. The
amendment was approved by the stockholders at the 1995 Annual Meeting.
The item (ii) change is to be in effect for all outstanding options
under the Automatic Option Grant Program, whether made before or after
the date of the amendment. The item (i) change is to apply only to
options granted on or after the date of the 1995 Annual Meeting.
C. On November 1, 1996, the Board approved an amendment to the Plan,
subject to stockholder approval at the 1997 Annual Meeting, to effect the
following changes:
- The number of shares available for issuance under
the Plan is to increase automatically on the date of the 1997 Annual
Stockholders Meeting by an amount equal to 2% of the total number of
shares of common stock outstanding on the immediately preceding trading
day;
- The number of shares of common stock available for
issuance under the Plan is to automatically increase on the first
trading day of each calendar year, beginning with the 1998 calendar
year, by an amount equal to 3% of the total number of shares of common
stock outstanding on December 31 of the immediately preceding calendar
year;
- Each such automatic increase to the share reserve
will, however, be subject to reduction to the extent necessary to
assure that the maximum number of shares of common stock available
immediately thereafter for future option grants and direct stock
issuances under the Plan (net of all options then outstanding) will not
exceed 6,000,000 shares;
- allow one or more Non-Statutory Options, whether
currently outstanding or subsequently granted, to be assignable or
transferable by the Optionee during his or her lifetime, subject to
such restrictions and limitations as the Plan Administrator may impose;
March 20, 1997
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<PAGE>
- allow the option grants made on or after the 1997
Annual Meeting of Stockholders to non-employee Directors under the
Automatic Option Grant Program to be transferable during Optionee's
lifetime for estate planning purposes to a member of his or her
immediate family or to a trust established for one or more such family
members;
- allow non-employee Directors to receive
discretionary grants and stock issuances under the Discretionary Option
Grant and Stock Issuance Programs;
- eliminate the restriction that the individuals who
serve as the Plan Administrator may not receive any option grants or
direct stock issuances from the Corporation during their period of
service as such or during the twelve (12)-month period preceding their
appointment as Plan Administrator;
- liberalize the requirements for the withholding of
shares of common stock in satisfaction of tax withholding obligations
incurred in connection with the exercise of Non-Statutory Options or
the vesting of unvested stock issuances so that the only condition to
the exercise of those withholding rights is the approval of the Plan
Administrator, either at the time those rights are exercised or at any
earlier time;
- require stockholder approval of future
amendments to the Plan only to the extent necessary to satisfy
applicable laws or regulations;
- eliminate both the six (6)-month holding period
requirement and the ten (10) business day "window" period requirement
for the exercise of any stock appreciation rights granted under the
Plan; and
- allow unvested shares reacquired by the Corporation
upon the Optionee's or Participant's cessation of Service prior to
vesting in those shares to be added back to the share reserve available
for future issuance under the Plan.
D. Each option issued and outstanding under the Predecessor Plans and
each unvested share issued thereunder immediately prior to the Effective Date of
this Plan shall be incorporated into this Plan and treated as an outstanding
option or share issuance under this Plan, but each such option and share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or share issuances with respect to their acquisition of shares of
common stock thereunder.
E. One or more provisions or features of this Plan may, in the Plan
Administrator's discretion, be extended to any or all stock options or share
issuances outstanding under the Predecessor Plans on the Effective Date and
incorporated into this Plan.
F. The Plan shall terminate upon the earlier of: (i) December 31, 2008; or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant
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<PAGE>
to the exercise of options or stock appreciation rights or the issuance of
shares (whether vested or unvested) under the Plan. If the date of termination
is determined under clause (i) above, then all option grants and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuances.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or stock issuances under the Plan shall be used for
general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan, the issuance of any shares under the Stock
Issuance Program, and the issuance of common stock upon the exercise of the
stock options and stock appreciation rights granted hereunder shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options and
stock appreciation rights granted under it and the common stock issued pursuant
to it.
B. No shares of common stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of common stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the common stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or Subsidiary) for any period of specific duration,
and the Corporation (or any Subsidiary retaining the services of such
individual) may terminate such individual's Service at any time and for any
reason, with or without cause.
March 20, 1997
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ADDENDUM I
AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN
UNITED KINGDOM STOCK OPTION SCHEME
March 20, 1997
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<PAGE>
ADDENDUM I
AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN
UNITED KINGDOM STOCK OPTION SCHEME
Preamble
This scheme (the "Scheme") is for the benefit of those employees of Amdahl
Corporation and its subsidiary corporations who are subject to taxation in the
United Kingdom. The terms and conditions of the Scheme are established in order
to render the Scheme capable of approval as an approved share option scheme
under Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988
("Taxes Act") ("Schedule 9"). Accordingly, the terms and conditions of the
Scheme shall be interpreted in a manner consistent with Schedule 9. All options
subject to the provisions of the Scheme shall be specifically designated as
"Approved UK Stock Options."
The Scheme is an addendum to the 1994 Stock Incentive Plan (the "Plan") and
should be read in conjunction with the Plan. Accordingly, any options
specifically designated as Approved UK Stock Options will be subject to the
terms and conditions of the Plan except to the extent that such terms and
conditions differ from (or are otherwise in conflict with) the express
provisions of the Scheme in which event, the rules of the Scheme shall prevail.
Any term not otherwise defined in the Scheme shall have the meaning set forth in
Section II, Article One of the Plan.
For the avoidance of doubt only Articles One, Two Section IC and Seven shall
apply to the Scheme except to the extent that its terms and conditions differ or
are otherwise in conflict with the Scheme.
(a) Eligibility
The individuals eligible to receive Approved UK Stock Options shall be limited
to:
i) any Director except for a non-employee Director of the Corporation or
one or more of its Subsidiaries who normally devotes not less than an
aggregate of 25 hours per week (excluding meal breaks) to the duties
of such directorships; and
ii) any non-director employee of the Corporation or its Subsidiaries who
is required under his terms of employment to provide not less than an
aggregate of 20 hours per week of service (excluding meal breaks) to
the Corporation or its subsidiaries.
An individual may not be granted, nor may an individual exercise, an Approved UK
Stock Option if such individual has at the time (or had at any time during the
preceding twelve (12) months) a material interest (as defined in Section 187(3)
Taxes Act 1988) in a close company (as defined under Chapter I of Part XI of the
Taxes Act disregarding section 414(1)(a) and 415) whose shares may be acquired
on the exercise of rights obtained under the Scheme or which has control
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<PAGE>
of such a company or is a member of a consortium (as defined in Section 187(7)
of the Taxes Act 1988) which owns such a company.
(b) Grant of Options
Approved UK Stock Options granted under the Scheme by the Plan Administrator
shall be granted by deed and the exercise price per share of stock subject to an
Approved UK Stock Option ("the Option Shares") shall in no event be less than
one hundred per cent. (100%) of the Fair Market Value of such Option Shares on
the grant date or such earlier date as is agreed with the Inland Revenue.
Each Approved UK Stock Option shall be exercisable at such time or times, during
such period and for such number of Option Shares as shall be determined by the
Plan Administrator and set forth in the instrument evidencing such option. No
Approved UK Stock Option shall, however, have a maximum term in excess of ten
(10) years. No Approved UK Stock Option may be transferred, assigned, or charged
and any purported transfer, assignment or charge shall be void ab initio.
(c) Stock issued pursuant to exercise of approved UK stock options
The Option Shares issued pursuant to the exercise of Approved UK Stock Options
shall not be subject to any restrictions (as such term is defined in Schedule 9)
other than restrictions which apply to all outstanding Option Shares. The
issuance of such Option Shares must be effected within thirty (30) days after
the date of exercise of the Approved UK Stock Options.
(d) Loans or guarantee of loans
Notwithstanding the provisions of Section I, Article Seven of the Plan:
i) no financing shall be provided directly or indirectly by the
Corporation or any of its Subsidiaries to the holder of Approved UK
Stock Options for the purposes of assisting such individuals in the
exercise of their Approved UK Stock Options; and
ii) no holder of an Approved UK Stock Option shall be permitted to pay in
instalments the purchase price of Option Shares acquired pursuant to
the exercise of such option.
(e) Termination of Service
Should an Optionee cease service for any reason (excluding death and Misconduct)
while holding one or more outstanding Approved UK Stock Options then those
Approved UK Stock Options shall terminate upon the earlier of:
(i) the expiration of ten (10) years after the grant date of this option;
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(ii) the expiration of thirty-six (36) months after the cessation of
service; or
(iii)the expiration of such period following cessation of service as
determined by the Plan Administrator at the date of grant.
If Optionee's employment is terminated by reason of Misconduct within the
specified term of the Approved UK Stock Option, then the option shall lapse
immediately.
(f) Limitation of rights
Except as may subsequently be permitted by amendment to Schedule 9, the grant of
an Approved UK Stock Option under the Plan shall be limited and take effect so
that the grant of such option would not, at the time of grant, cause the Fair
Market Value (as of the date of grant) of the Option Shares purchasable under
all Approved UK Stock Options granted to such Optionee by:
i) the Corporation;
ii) any company which controls (or at any time within the preceding twelve
(12) months controlled) the Corporation;
iii) any company which is controlled by (or within the twelve (12) months
was controlled by) the Corporation; or
iv) any company which is (or within the preceding twelve (12) months was)
under the control of the same person or persons as control the
Corporation;
to exceed in the aggregate for Approved UK Stock Options granted on or after 17
July 1995 Li.30,000 taking into account the Fair Market Value (as at the date of
grant) of the Option Shares purchasable under all Approved UK Stock Options
granted to the Optionee before 17 July 1995.
For the purposes of the Scheme "Control" shall mean:
(i) a person shall be taken to have control of a company if he exercises,
or is able to exercise, or is entitled to acquire, direct or indirect
control over the company's affairs, and in particular, but without
prejudice to the generality of the preceding words, if he possesses or
is entitled to acquire-
(a) the greater part of the share capital or issued share capital
of the company or of the voting power in the company;
(b) such part of the issued share capital of the company as
would, if the whole of the income of the company were in fact
distributed among the participators (without regard to any rights
which he or any other person has as a loan creditor), entitle him
to receive the greater part of the amount so distributed; or
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(c) such rights as would, in the event of the winding-up of the
company or in any other circumstances, entitle him to receive the
greater part of the assets of the company which would then be
available for distribution among the participators.
For the purposes of calculating the limits in this rule (f) the exchange rate
for the conversion of US dollars to pounds sterling shall be the Financial Times
pound spot rate forward as of the date of grant of the Approved UK Stock Option
to which the Option Shares are subject or on the last previous date for which
such rate exists.
(g) Changes in Capitalisation
No change or adjustment shall be effected pursuant to Section VI, Article One of
the Plan to:
i) the number of Option Shares or other securities covered by an
outstanding Approved UK Stock Option; or
ii) the exercise price payable per Option Share under an outstanding
Approved UK Stock Option;
unless any adjustment has been confirmed in writing by the Corporation's
auditors to be fair and reasonable, the aggregate exercise price payable by each
Optionee is not increased and any adjustment, whilst the Scheme is intended to
remain approved, has been approved by the Board of Inland Revenue.
(h) Amendment of the Scheme
Whilst it is intended to remain approved by the Inland Revenue, the Scheme may
not be amended without prior Inland Revenue approval. Accordingly, unless Board
of Inland Revenue approval shall have been obtained for any amendment to the
Plan, the terms and conditions of the Scheme shall be determined by reference to
the provisions of the Plan as in existence prior to such amendment.
(i) Surrender of Approved UK Stock Options
Notwithstanding Sections III and V, Article Two and Section III, Article Three
of the Plan, no Approved UK Stock Option may be surrendered for cash or stock
payment from the Corporation. However, Approved UK Stock Options may be
surrendered, cancelled or renounced by their holders at any time prior to
exercise.
(j) Exercise upon death
Notwithstanding Section IC of Article Two and Section II H of Article Three of
the Plan, upon the Optionee's death an Approved UK Stock Option may;
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i) in no event remain outstanding for more than one (1) year; and
ii) be exercised only by the deceased Optionee's personal representatives.
(k) Share limitations
Notwithstanding Section II B, Article Seven of the Plan, no Approved UK Stock
Option may be granted pursuant to the provisions of the Scheme to purchase
Option Shares in excess of the number of shares then available for issuance
under the Scheme.
(l) Stock subject to the scheme
No Approved UK Stock Option may be granted pursuant to the provisions of the
Scheme to purchase stock which does not satisfy the requirements of paragraphs
10 to 14 of Schedule 9.
(m) Manner of exercise
An Optionee may exercise an Approved UK Stock Option by sending his option
certificate together with the exercise price in cash or by cheque to the
Corporation. Notwithstanding any rights determined by reference to a record date
preceding the date of issue, stock issued on the exercise of an Approved UK
Stock Option shall rank pari passu with the other shares as the same class in
issue at the date of issue. If any shares are listed or quoted on any recognised
stock exchange, no approved UK Stock Option may be granted or exercised in
contravention of the terms of such rules of such body as may be in force from
time to time.
(n) Service Rights
Rights and obligations of any Optionee under the terms of his office or
employment with the Corporation and its subsidiaries shall not be affected by
participation in the Scheme or any right to participate therein. Any Optionee
who participates therein shall waive any and all rights to compensation or
damages and consequence of the termination of his office or employment for any
reason whatsoever in so far as those rights arise or may arise from his ceasing
to have rights under or be entitled to exercise any Approved UK Stock Option
under the Scheme as the result of such termination.
(o) Takeovers
If any person obtains Control of the Corporation as a result of making;
(i) a general offer to acquire the whole of the issued share
capital of the Corporation (other than that which is already
owned by him) which is unconditional or which is made on a
condition such that if it is satisfied the person making the
offer will have Control of the Corporation; or
March 20, 1997
45
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(ii) a general offer to acquire all of the shares (other than
shares which are already owned by him) in the Corporation
which are of the same class as the shares
Then the Plan Administrator shall notify all Optionees of the offer and shall
use its best efforts to have the options assumed by the acquiring entity, and
any Approved UK Stock Option so assumed may be exercised upon receipt of this
notice up to the expiry of a period ending 6 months from the time when the
person making the offer has obtained Control of the Corporation and any
conditions subject to which the offer has been made has been satisfied.
If as a result of the events specified above, a company has obtained Control of
the Corporation, the Optionee may, if that other company ("the Acquiring
Company") so agrees release any Approved UK Stock Options he holds in
consideration of the grant of a new option over shares in the Acquiring Company
or some other company falling within paragraph 10(b) or 10(c) of Schedule 9,
providing such new option meets the requirements of paragraph 15 (3)(a) to (d)
of Schedule 9 and that such release and grant occur within the "appropriate
period" as defined by paragraph 15 (2) Schedule 9.
A new option issued in consideration of the release of an Approved UK Stock
Option shall be evidenced by an option certificate which shall import the
relevant provisions of the Plan subject to the consequent amendments (including,
without prejudice to the generality of the foregoing, the amendment of the terms
"Corporation", "share" and "Approved UK Stock Option") necessary to accommodate
the new options and to comply with paragraph 15(3) Schedule 9. A new option
shall, for all other purposes of the Scheme, be treated as having been acquired
at the same time as the corresponding released options.
For the purpose of this paragraph a person shall be deemed to have obtained
Control of the Corporation if he, and other acting in concert with him have
obtained Control of it.
(p) Corporate Transactions, Hostile Takeovers and Changes in Control
In the event of a Corporate Transaction or an Involuntary Termination as a
result of the Corporate Transaction any option shall be exercisable for the
period specified by the Plan Administrator, and on expiry of such period the
option shall lapse.
March 20, 1997
46
<PAGE>
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
March 20, 1997
47
<PAGE>
NOTICE OF
AUTOMATIC STOCK OPTION GRANT
Notice is hereby given of the following stock option (the
"Option") to purchase shares of the common stock of Amdahl Corporation (the
"Corporation") which has been granted pursuant to the Automatic Option Grant
Program in effect under the Corporation's 1994 Stock Incentive Plan ( the
"Plan"):
Optionee:
Grant Date:
Type of Option: Non-Statutory Stock Option
Exercise Price: $______ (100% of Fair Market Value on Grant Date)
- --------------
Shares Granted: 5,000
Expiration Date:
Exercise Schedule: The Option is immediately exercisable for all the Option
Shares.
Vesting Schedule: The Option Shares shall initially be unvested and subject to
repurchase by the Corporation, at the Exercise Price paid per share, upon
Optionee's cessation of service as a member of the Corporation's Board of
Directors (the "Board") prior to vesting in the Option Shares. Optionee shall
acquire a vested interest in the Option Shares, and the Corporation's repurchase
right with respect to the Option Shares shall lapse, in two (2) equal and
successive annual installments over Optionee's continued period of Board
service, with the first such installment to vest upon Optionee's completion of
one (1) year of Board service measured from the Grant Date.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the Plan
governing automatic option grants to Board members. Optionee further agrees to
be bound by the terms and conditions of the Plan and the terms and conditions of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
Plan Summary and Prospectus. A copy of the Plan is also available upon request
made to the Corporate Secretary at the Corporate Offices at 1250 East Arques
Avenue, P.O. Box 3470, Sunnyvale, California 94088-3470.
March 20, 1997
48
<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE
AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS ASSIGNS, AT THE
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S CESSATION OF SERVICE AS A MEMBER
OF THE CORPORATION'S BOARD OF DIRECTORS. THE TERMS AND CONDITIONS OF SUCH
REPURCHASE RIGHT SHALL BE SET FORTH IN A STOCK ISSUANCE AGREEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.
No provision of this Notice of Automatic Stock Option Grant or
the attached Automatic Stock Option Agreement shall in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
DATED: , 199__
AMDAHL CORPORATION
By:
OPTIONEE
Attachments:
Exhibit A: Automatic Stock Option Grant Agreement
March 20, 1997
49
<PAGE>
EXHIBIT A
AMDAHL CORPORATION
AUTOMATIC STOCK OPTION GRANT AGREEMENT
RECITALS
A. The Corporation has approved an Automatic Option Grant Program under
the 1994 Stock Incentive Plan (the "Plan"), pursuant to which special option
grants are to be made to non-employee Directors of the Corporation's Board of
Directors (the "Board") at periodic intervals over their period of Board service
in order to encourage such individuals to remain in the Corporation's service.
B. Optionee is an Eligible Director in accordance with Article Three of
the Plan, and this Agreement is executed pursuant to, and is intended to carry
out the purposes of, the Plan in connection with the automatic grant of a stock
option to purchase shares of the Corporation's common stock, par value of $.05
per share ("common stock") under the Plan.
C. The granted option is intended to be a non-statutory option which
does not meet the requirements of Section 422 of the Internal Revenue Code and
is designed to provide Optionee with a meaningful incentive to continue to serve
as a member of the Board.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and
conditions set forth in this Agreement, there is hereby granted to Optionee, as
of the date of grant (the "Grant Date") specified in the accompanying Notice of
Automatic Stock Option Grant (the "Grant Notice"), a stock option to purchase up
to the number of shares of common stock (the "Option Shares") as is specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term at the price per share (the "Exercise Price") specified
in the Grant Notice.
2. Option Term. This option shall have a maximum term of
fifteen (15) years measured from the Grant Date and shall expire at the close of
business on the Expiration Date specified in the Grant Notice, unless terminated
earlier pursuant to Paragraph 5, 7 or 8.
3. Limited Transferability. This option, together with the
special stock appreciation right provided under Paragraph 8.b, shall be
transferable or assignable by Optionee: (i) during Optionee's lifetime for
estate planning purposes to a member of his or her immediate family or to a
trust established for one or more such family members; and (ii) by will or by
the laws of descent and distribution following Optionee's death.
March 20, 1997
50
<PAGE>
4. Exercisability/Vesting. This option shall be immediately
exercisable for any or all of the Option Shares, whether or not the Option
Shares are at the time vested in accordance with the Vesting Schedule set forth
in the Grant Notice. However, any shares purchased under this option shall be
subject to repurchase by the Corporation, at the exercise price paid per share,
upon the Optionee's termination of Board service prior to vesting in those
shares. This option shall remain exercisable until the Expiration Date unless it
is fully exercised or terminated earlier pursuant to Paragraphs 5, 7 or 8. In no
event shall this option be exercisable after the Expiration Date.
The Option Shares will vest in accordance with the Vesting
Schedule set forth in the Grant Notice. Vesting of the Option Shares shall be
subject to acceleration as provided in Paragraphs 5, 7 or 8. In no event,
however, shall any additional Option Shares vest following Optionee's
termination of service as a Director, except as otherwise provided pursuant to
Paragraph 5, 7 or 8 of this Agreement.
5. Termination of Board Service.
a. Should Optionee cease to serve as a Director for
any reason (other than death or permanent disability) prior to
completing at least four (4) years of Board service while holding this
option, then Optionee shall have a six (6) month period commencing with
the date of such termination of Board service in which to exercise any
outstanding Option Shares under this option which are vested at the
time of Optionee's termination of Board service, but in no event shall
this option be exercisable at any time after the Expiration Date.
b. Should Optionee, with less than four (4) years of
service on the Board, die within the six (6)-month period following the
date of his or her termination of Board service, then the personal
representative of Optionee's estate, or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution, shall have a twelve (12)
month period to exercise any outstanding Option Shares under this
option which are vested at the time of Optionee's termination of Board
service, but in no event shall this option be exercisable at any time
after the Expiration Date.
c. Should Optionee cease to serve as a Director for
any reason (other than removal for cause) following his or her
completion of four (4) or more years of Board service, then any
outstanding Option Shares under this option at the time of such
termination of Board service shall immediately vest in full (and the
Corporation's repurchase right with respect to such Option Shares shall
terminate), and Optionee or the personal representative of Optionee's
estate or the person or persons to whom this option is transferred
pursuant to Optionee's will or in accordance with the laws of descent
and distribution shall have the right to exercise any outstanding
Option Shares prior to the Expiration Date.
d. Should Optionee die or become permanently disabled
while serving as a Director, then any outstanding Option Shares at the
time of such termination of Board service shall immediately vest in
full (and the Corporation's repurchase rights with respect to
March 20, 1997
51
<PAGE>
the Option Shares shall terminate), and Optionee or the personal
representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution shall have until the
expiration date of the option term in which to exercise any outstanding
Option Shares.
e. Optionee shall be deemed to be permanently
disabled if Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration
of twelve (12) months or more.
6. Adjustment in Option Shares.
a. Should any change be made to the common stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting such common stock as a class without the Corporation's
receipt of consideration, then the number and class of securities
purchasable under this option and the Exercise Price payable per share
shall be appropriately adjusted to prevent the dilution or enlargement
of Optionee's rights hereunder; provided, however, the aggregate
Exercise Price shall remain the same.
b. To the extent this option is assumed in connection
with any Corporate Transaction under Paragraph 7 or is otherwise to
continue in effect, this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issued to
Optionee, in consummation of such Corporate Transaction, had this
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price
payable per share, provided the aggregate Exercise Price payable for
such securities shall remain the same.
7. Corporate Transaction. In the event of any of the
following stockholder-approved transactions to which the Corporation is a party
(a "Corporate Transaction"):
a. a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Corporation is
incorporated;
b. the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation; or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from those who held such securities immediately prior to such merger;
March 20, 1997
52
<PAGE>
all outstanding Option Shares under this option shall automatically vest in full
(and the Corporation's repurchase right with respect to those shares shall
immediately terminate) immediately prior to the specified effective date for the
Corporate Transaction, and this option may be exercised for any outstanding
Option Shares. Immediately following the consummation of the Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
8. Change in Control/Hostile Takeover.
Any outstanding Option Shares under this option at the time of
a Change in Control or Hostile Take-Over (as such terms are defined below) shall
automatically vest in full (and the Corporation's repurchase right with respect
to such Option Shares shall terminate). This option shall remain exercisable
until the earliest to occur of (i) the Expiration Date, (ii) the early
termination of this option in accordance with Paragraph 5 or 7, or (iii) the
surrender of this option under Paragraph 8.b.
Optionee shall also have the unconditional right (exercisable
during the thirty (30)-day period immediately following the consummation of such
Hostile Take-Over) to surrender this option to the Corporation in exchange for a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the Option Shares at the time subject to the surrendered
option over (ii) the aggregate Exercise Price payable for such shares ("limited
stock appreciation right").
To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) days following such
delivery date, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with the option surrender
and cash distribution. Upon receipt of such cash distribution, this option shall
be cancelled with respect to the shares subject to the surrendered option (or
the surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. However, should this option be
surrendered for only a portion of the Option Shares at the time subject to the
option, a new stock option agreement (substantially in the form of this
Agreement) shall be issued by the Corporation for the balance of the Option
Shares for which this option is not surrendered.
This limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term.
Definitions: For purposes of this Agreement, the following definitions
shall be in effect:
March 20, 1997
53
<PAGE>
Change in Control: a change in ownership or control of the Corporation
effected through either of the following transactions:
- a direct acquisition by any person (or related group of
persons) of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Act of 1934, as amended (the "1934 Act")),
of securities possessing more than ten percent (10%) of the total
combined voting power of the Corporation's outstanding securities,
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of additional securities of the Corporation which
increases the beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of the total securities holdings of such person (or
related group of persons) to a level of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities, or
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities of the Corporation possessing sufficient
voting power in the aggregate to elect an absolute majority of the
Board (rounded up to the next whole number).
Hostile Take-Over: a change in ownership of the Corporation effected
through the following transaction:
- the direct or indirect acquisition by any person or related
group of persons of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, and
- more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the short-swing profit restrictions of Section
16 of the 1934 Act.
March 20, 1997
54
<PAGE>
Take-Over Price: the greater of: (i) the Fair Market Value (as defined in
subparagraph 9.b. below) per share of common stock on the date the option is
surrendered to the Corporation in connection with the Hostile Take-Over; or (ii)
the highest reported price per share of common stock paid by the tender offeror
in effecting such Hostile Take-Over.
9. Manner of Exercising Option.
a. In order to exercise this option for all or any part of the Option
Shares for which the option is at the time exercisable, Optionee (or in the case
of exercise after Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(i) To the extent the option is exercised for vested Option Shares,
the Secretary of the Corporation shall be provided with written notice of
the option exercise (the "Exercise Notice"), in substantially the form of
Exhibit I attached hereto, in which there is specified the number of vested
Option Shares which are to be purchased under the exercised option. To the
extent the option is exercised for one or more unvested Option Shares,
Optionee (or other person exercising the option) shall deliver to the
Secretary of the Corporation a stock issuance agreement (in form and
substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option
Shares held by Optionee at the time of his or her cessation of Board
service and which precludes the sale, transfer or other disposition of any
purchased Option Shares subject to such repurchase right (the "Issuance
Agreement");
(ii) The aggregate Exercise Price for the purchased shares shall be
paid in one of the following alternative forms:
(a) full payment in cash or check made payable to the
Corporation's order;
(b) full payment in shares of common stock held by Optionee for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date (as defined below);
(c) full payment in a combination of shares of common stock held
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date and cash or check made payable
to the Corporation's order; or
(d) to the extent the option is exercised for vested Option
Shares, full payment effected through the Immediate Sale Program: a
broker-dealer sale and remittance procedure pursuant to which Optionee
shall provide irrevocable instructions (i) to a Corporation-designated
brokerage firm to effect the immediate sale of the vested shares
purchased under the option and remit to the Corporation, out of the
sale proceeds available
March 20, 1997
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<PAGE>
on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for those shares; and (ii) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale; and
(iii) Appropriate documentation evidencing the right to exercise this
option shall be furnished to the Corporation if the person or persons
exercising the option is other than Optionee.
b. For purposes of subparagraph 9.a. above and for all other valuation
purposes under this Agreement, the Fair Market Value per share of common stock
on any relevant date shall be the mean between the highest and lowest selling
prices per share on the date in question on the principal exchange on which the
common stock is then listed or admitted to trading, as such prices are reported
on the composite tape of transactions on such exchange. If there are no reported
sales of the common stock on the date in question, then the Fair Market Value
shall be the mean between the highest and lowest selling prices on the last
preceding date for which such quotations exist.
c. The Exercise Date shall be the date on which the Exercise Notice is
delivered to the Secretary of the Corporation, together with the appropriate
Issuance Agreement for any unvested shares acquired under the option. Except to
the extent the Immediate Sale Program specified above is utilized in connection
with the exercise of the option for vested Option Shares, payment of the
Exercise Price for the purchased shares must accompany such notice.
d. As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of Optionee (or other person or persons exercising this
option) a certificate or certificates representing the purchased Option Shares.
To the extent any such Option Shares are unvested, the certificates for those
Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.
e. In no event may this option be exercised for any fractional share.
10. Stockholder Rights. The holder of this option
shall not have any of the rights of a stockholder with respect to the Option
Shares until such individual shall have exercised this option and paid the
Exercise Price for the purchased shares.
11. No Impairment of Rights. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
March 20, 1997
56
<PAGE>
12. Compliance with Laws and Regulations. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any securities
exchange on which shares of the common stock may be listed for trading at the
time of such exercise and issuance.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the Corporation's successors
and assigns.
14. Discharge of Liability. The inability of the Corporation
to obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any common stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the common stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Corporate Secretary at the Corporate
Offices at 1250 East Arques Avenue, P.O. Box 3470, Sunnyvale, California
94088-3470. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
16. Construction/Governing Law. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the Automatic Option Grant Program provisions of Article Three of the
Plan. The interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws provisions.
March 20, 1997
57
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE OF
AUTOMATIC STOCK OPTION
I hereby notify Amdahl Corporation (the "Corporation") that I elect to
purchase ____________ shares of the Corporation's common stock par value of
$0.05 per share (the "Purchased Shares") at the option exercise price of $______
per share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1994 Stock Incentive Plan on ___________,
199_ to purchase up to 5,000 shares of the Corporation's common stock.
Concurrently with the delivery of this Exercise Notice to the Secretary of
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with the
Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special Immediate Sale procedure specified in
my agreement to effect payment of the Exercise Price for any Purchased Shares in
which I am vested at the time of exercise.
Date Optionee
Address:
Print name in exact manner
it is to appear on the
stock certificate:
Address to which certificate
is to be sent, if different
from address above:
Social Security Number:
March 20, 1997
58
<PAGE>
AMDAHL CORPORATION
PROXY
Stockholder's Proxy Requested by Amdahl's Board of Directors
The Stockholder signing this card appoints John C. Lewis and Bruce J.
Ryan, together or individually, as proxy to vote all of its shares of Amdahl
Corporation common stock at the Annual Meeting of Stockholders and at any
postponement of the meeting. The meeting is to be held at the Red Lion Hotel,
2050 Gateway Place, San Jose, California, on Thursday, May 1, 1997 at 10:00 a.m.
This Proxy, when properly executed, will be voted as instructed on the
reverse side of this card. If no instruction is given, this Proxy will be voted
FOR items 1 through 3 and in the discretion of the proxy holder on other matters
that are properly brought before the meeting. You are encouraged to specify your
choices by marking the appropriate boxes on the REVERSE SIDE. Your shares cannot
be voted unless you sign and return this card.
AMDAHL CORPORATION
P.O. BOX 11180
New York, N.Y. 10203-0180
SEE REVERSE SIDE
Please ensure address appears in window of return envelope.
<PAGE>
AMDAHL[logo]
Amdahl Corporation
1250 East Arques Avenue
P.O. Box 3470
Sunnyvale, California 94088-3470
March 20, 1997
Dear Amdahl Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
to be held at 10:00 a.m. on Thursday, May 1, 1997, at the Red Lion Hotel, 2050
Gateway Place, San Jose, California.
Details about the meeting are included in the Notice of Annual Meeting
and Proxy Statement.
We urge you to complete, date and sign the proxy/voting instruction
card below to have your vote counted. Detach the card from this letter and
return it in the envelope enclosed in this package. Signing and returning the
proxy card does not affect your right to vote in person if you attend the
meeting.
Very truly yours,
/s/John C. Lewis
John C. Lewis
Chairman of the Board
and Chief Executive Officer
Detach Proxy Card Here
The Board of Directors recommends a vote FOR items 1 through 3.
1. Election of Directors
FOR all nominees listed below. [ ]
WITHHOLD AUTHORITY to vote for all nominees listed below. [ ]
*EXCEPTIONS [ ]
Nominees: John C. Lewis; Michael R. Hallman; E. F. Heizer, Jr.;
Kazuto Kojima; Burton G. Malkiel, Ph.D.; Takeshi Maruyama;
George R. Packard, Ph.D.; Walter B. Reinhold; Takashi Takaya;
J. Sidney Webb.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions:__________________________________________
2. 1994 Stock Incentive Plan Amendments.
For [ ] Against [ ] Abstain [ ]
3. Approve the selection of Arthur Andersen LLP as the independent public
accountants for 1997.
For [ ] Against [ ] Abstain [ ]
Mark this box to withhold your authority for the proxies to act on other
business at the meeting. [ ]
Mark this box if you receive Amdahl's Annual Report from another source and do
not want to receive one with your Proxy Statement in 1998. [ ]
Please sign name exactly as it appears on this card. Joint owners should each
sign. Attorneys, trustees, executors, administrators, custodians, guardians or
corporate officers should give full title.
Date: , 1997
Signature(s)
Signature(s)
Please mark boxes in blue or black ink as in the example.
Please sign, date and return this card promptly using the enclosed envelope.
