Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ X / Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Material
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
LSI LOGIC CORPORATION
David E. Sanders
Vice President,
General Counsel, Secretary
LSI Logic Corporation
Payment of Filing Fee:
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed per table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class securities to which transaction
applies:
____________________________________________________
(2) Aggregate number of securities to which transaction
applies:
____________________________________________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Rule 0-11:
____________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________
Set forth the amount on which the filing fee is
calculated and state how it was determined.
/ / Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting
fee was paid previously. Identify the
previous filing by registration statement
number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
___________________________________________
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Statement No.:
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(4) Date Filed:
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LSI LOGIC CORPORATION
Notice of Annual Meeting of Stockholders
May 12, 1995
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of LSI Logic Corporation (the "Company"), a Delaware
corporation, will be held on May 12, 1995 at 11:30 a.m., local
time, at the Company's offices located at 1655 McCarthy
Boulevard, Milpitas, California 95035, for the following
purposes:
1. To elect directors to serve for the ensuing year and
until their successors are elected.
2. To approve an amendment to the Employee Stock Purchase
Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 750,000 shares.
3. To approve an amendment to the 1991 Equity Incentive
Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 3,000,000 shares.
4. To approve limits on option grants to employees under
the 1991 Equity Incentive Plan.
5. To approve the 1995 Director Option Plan and to reserve
250,000 shares of Common Stock for issuance thereunder.
6. To amend the Restated Certificate of Incorporation of
the Company to increase the number of authorized shares
of Common Stock to 250,000,000.
7. To ratify the appointment of Price Waterhouse as
independent accountants of the Company for its 1995
fiscal year.
8. To transact such other business as may properly come
before the meeting and any adjournments thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on
March 14, 1995 are entitled to notice of and to vote at the
meeting.
All stockholders are cordially invited to attend the meeting
in person. However, to assure your representation at the
meeting, you are urged to mark, sign and return the enclosed
proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she returned a
proxy.
Sincerely,
David E. Sanders
Secretary
Milpitas, California
March __, 1995
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you
are requested to complete, sign and date the enclosed proxy card
as promptly as possible and return it in the enclosed envelope
(to which no postage need be affixed if mailed in the United
States).
LSI LOGIC CORPORATION
_________________
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of LSI Logic
Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on May 12, 1995 at 11:30 a.m., local
time, or at any adjournment(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Company's
offices at 1655 McCarthy Boulevard, Milpitas, California. The
Company's principal executive offices are located at
1551 McCarthy Boulevard, Milpitas, California 95035 and its
telephone number is (408) 433-8000.
These proxy solicitation materials were mailed on or about
March __, 1995 to all stockholders entitled to vote at the
meeting.
Record Date
Stockholders of record at the close of business on March 14,
1995 are entitled to notice of and to vote at the meeting. As of
the record date [57,198,427] shares of the Company's Common
Stock, $0.01 par value, were issued and outstanding.
Revocability of Proxies
Any Proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before its use by delivering
to the Company a written notice of revocation or a duly executed
proxy bearing a later date or by attending the meeting and voting
in person.
Voting and Solicitation
On all matters other than the election of directors, each
share has one vote. See "ELECTION OF DIRECTORS - REQUIRED VOTE."
The cost of soliciting proxies will be borne by the Company.
The Company has retained the services of Skinner & Co. to aid in
the solicitation of proxies from brokers, bank nominees and other
institutional owners. The Company estimates that it will pay
Skinner & Co. a fee not to exceed $4,000 for its services and
will reimburse it for certain out of pocket expenses estimated to
be $10,000. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares
for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company which are intended
to be presented by such stockholders at the Company's 1996 Annual
Meeting must be received by the Company no later than November
27, 1995, and be otherwise in compliance with applicable laws and
regulations in order that such proposals may be included in the
proxy statement and form of proxy relating to that meeting.
SECURITY OWNERSHIP
Principal Stockholders
As of December 31, 1994, the following persons were known to
the Company to be beneficial owners of more than 5% of the
Company's Common Stock:
<TABLE>
<CAPTION>
Name and Address Number of Shares Owned Percentage
of Total
<S> <C> <C>
The Prudential 3,889,916 6.8%
Insurance Company
of America <F1>
Prudential Plaza
Newark, New Jersey
07102-3777
Jennison Associates 3,782,000 6.6%
Capital Corp. <F2>
466 Lexington Avenue
New York, NY 10017
FMR Corp. <F3> 8,542,300 15.0%
82 Devonshire Street
Boston, MA 02109-3614
Wilfred J. Corrigan <F4> 3,343,726 5.8%
1551 McCarthy Blvd.
Milpitas, CA 95035
_______________
<FN>
<F1> Information obtained from a Schedule 13G filed with the
Securities and Exchange Commission and dated February 7,
1995. The Prudential Insurance Company of America
("Prudential") may have direct or indirect voting and/or
investment discretion over shares of the Company's Common
Stock which are held for the benefit of Prudential's clients
in separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other
affiliates of Prudential.
<F2> Information obtained from a Schedule 13G filed with the
Securities and Exchange Commission and dated February 1,
1995. Jennison Associates Capital Corp. is an institutional
investor and is considered the beneficial owner only as a
result of its position as manager of the funds which own the
shares of Common Stock of the Company.
<F3> Information obtained from a Schedule 13G filed with the
Securities and Exchange Commission and dated February 13,
1995. FMR Corp. is considered the beneficial owner of
shares of Common Stock of the Company as a result of its
control of Fidelity Management & Research Company.
Fidelity Management & Research Company is a wholly owned
subsidiary of FMR Corp. and files a joint statement with FMR
Corp. on Schedule 13G. Fidelity Management & Research
Company acts as an investment adviser to several companies
which own shares of Common Stock of the Company.
<F4> Includes 31,250 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
</TABLE>
Security Ownership of Management
The following table sets forth the beneficial ownership of
Common Stock of the Company as of December 31, 1994 (the most
recent practicable date) by all directors and nominees (naming
them), each of the named executive officers set forth in the
Summary Compensation Table and by all directors and current
executive officers as a group:
<TABLE>
<CAPTION>
Approximate
Amount Percentage
Name Owned Owned
<S> <C> <C>
Wilfred J. Corrigan <F1>........... 3,343,726 5.8%
T.Z. Chu <F2>...................... 9,750 *
Malcolm R. Currie <F3>.............. 39,350 *
James H. Keyes <F4>................ 27,250 *
R. Douglas Norby <F5>............... 14,750 *
Brian L. Halla <F6>................. 116,909 *
Cyril F. Hannon <F7>................ 125,585 *
Albert A. Pimentel <F8>............. 40,880 *
David R. LaRock <F9>................ 10,995 *
All directors and executive
officers as a group
(11 persons) <F10>................ 3,750,930 6.6%
__________________
* Less than 1%.
<FN>
<F1> Includes 31,250 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F2> Includes 8,750 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F3> Includes 8,750 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F4> Includes 12,500 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F5> Includes 3,750 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F6> Includes 106,250 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995. Excludes options to purchase 25,000 shares
of the common stock of LSI Logic Corporation of Canada,
Inc., a 56% owned affiliate of the Company. Excludes
options to purchase 25,000 shares of the common stock of LSI
Logic Europe plc, a 98% owned affiliate of the Company.
<F7> Includes 102,500 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995. Excludes ownership by Mr. Hannon of 20,000
shares of the common stock of LSI Logic K.K., a 78% owned
affiliate of the Company. Excludes options to purchase
75,000 shares of the common stock of LSI Logic Europe plc, a
98% owned affiliate of the Company.
<F8> Includes 35,000 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995.
<F9> Includes 3,570 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995. Excludes options to purchase 30,000 shares
of the common stock of LSI Logic Europe plc, a 98% owned
affiliate of the Company.
<F10>Includes 439,250 shares, options for which are presently
exercisable or will become exercisable within 60 days of
March 14, 1995. Excludes options to purchase 45,000 shares
of the common stock of LSI Logic Corporation of Canada,
Inc., a 56% owned affiliate of the Company. Excludes
ownership of 20,000 shares of the common stock of LSI Logic
K.K., a 78% owned affiliate of the Company. Excludes
options to purchase 100,000 shares of the common stock of
LSI Logic Europe plc, a 98% owned affiliate of the Company.
</TABLE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of five directors is to be elected at the meeting.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five nominees named
below, all of whom are presently directors of the Company. If
any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be
voted for such nominee as shall be designated by the present
Board of Directors to fill the vacancy. If additional persons
are nominated for election as directors, the proxy holders intend
to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of
as many of the nominees listed below as possible and, in such
event, the specific nominees to be voted for will be determined
by the proxy holders. The term of office of each person elected
as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and
qualified.
The names of the nominees for election to the Board of
Directors, and certain information about them, are set forth
below.
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
<S> <C> <C> <C>
Wilfred J. Corrigan 56 Chairman of the Board 1981
of Directors and Chief
Executive Officer of
the Company
James H. Keyes 54 Chairman and Chief 1983
Executive Officer of
Johnson Controls, Inc.
T.Z. Chu 60 President and Chief 1992
Executive Officer of
Hoefer Scientific
Instruments
Malcolm R. Currie 67 Chairman Emeritus, Hughes 1992
Aircraft Company
R. Douglas Norby 59 Senior Vice President 1993
and Chief Financial
Officer of Mentor
Graphics Corporation
</TABLE>
Except as set forth below, each of the nominees has been
engaged in his principal occupation set forth above during the
past five years. There are no family relationships between or
among any directors or executive officers of the Company.
Mr. Corrigan, a founder of the Company, has served as Chief
Executive Officer and a director of the Company since its
organization in January 1981. He served as President of the
Company from its incorporation until April 1985. He presently
serves on the board of directors of Brooktree Corporation.
Mr. Keyes has served as Chairman and Chief Executive Officer
of Johnson Controls, Inc., a manufacturer of automated building
controls, batteries, automotive seating and plastics, since
January 1993. From January 1988 until January 1993 Mr. Keyes
served as President and Chief Executive Officer of Johnson
Controls, Inc. From January 1986 to January 1988, Mr. Keyes
served as President, Chief Operating Officer and a director of
Johnson Controls, Inc.; from April 1985 to January 1986,
Mr. Keyes served as Executive Vice President, Chief Operating
Officer and a director of Johnson Controls, Inc.; from January
1985 to April 1985, he served as Executive Vice President of
Johnson Controls, Inc.
Mr. Chu has served as President and Chief Executive Officer
of Hoefer Scientific Instruments since August 1993. From January
1992 until August 1993 Mr. Chu acted as a consultant to Hambrecht
& Quist and to Thermo Instrument Systems, Inc. From 1990 until
December 31, 1991 Mr. Chu served as the President of Finnigan
Corporation. From 1969 until 1990, he served as the Principal
Executive Officer and Director of Finnigan Corporation at which
time it was acquired by Thermo Instrument Systems, Inc.
Mr. Currie served as Chairman and Chief Executive Officer of
Hughes Aircraft Company from March 1988 until his retirement in
July 1992. From January 1976 until March 1988 Mr. Currie served
as President and Chief Executive Officer of Delco Electronics.
He presently serves on the boards of directors of Unocal
Corporation, Investment Company of America and U.S. Electricar.
Mr. Norby has served as Senior Vice President and Chief
Financial Officer of Mentor Graphics Corporation since September
1993. From July 1992 until September 1993 Mr. Norby served as
President and Chief Executive Officer of Pharmetrix Corporation,
a health care company located in Menlo Park, California. Mr.
Norby served as President and Chief Operating Officer of
Lucasfilm, Ltd. from February 1985 until May 1992. Additionally,
from 1989 until May 1992 Mr. Norby served as Chairman, President
and Chief Executive Officer of LucasArts Entertainment Company, a
subsidiary of Lucasfilm, Ltd. Mr. Norby serves on the board of
directors of Epitope, Inc.
Board Meetings and Committees
The Board of Directors of the Company held a total of five
meetings during the fiscal year ended January 1, 1995. The Board
of Directors has an Audit Committee and a Compensation Committee.
The Board of Directors does not have a separate nominating
committee.
The Audit Committee, which consists of Mr. Currie (who
serves as its chairman), Mr. Keyes and Mr. Norby, held two
meetings during the last fiscal year. The Audit Committee
recommends engagement of the Company's independent accountants,
and is primarily responsible for approving the services performed
by the Company's independent accountants and for reviewing and
evaluating the Company's accounting principles and its system of
internal accounting controls. The Compensation Committee, which
consists of Mr. Keyes (who serves as its chairman), Mr. Chu, Mr.
Currie and Mr. Norby, held two meetings during the last fiscal
year. The Compensation Committee reviews and approves the
Company's executive compensation policy and makes recommendations
concerning the Company's employee benefit plans.
During the fiscal year ended January 1, 1995, all incumbent
directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees
of the Board on which they served.
Compensation of Directors
Members of the Board of Directors who were not employees of
the Company receive an annual fee of $20,000 paid on a prorated
basis and $1,250 for each meeting they attend, plus expenses.
The Company's 1986 Directors' Stock Option Plan (the "1986
Directors Plan") as adopted by the Board of Directors and
approved by the stockholders, provides for the grant of a
nonstatutory stock option to purchase 15,000 shares of Common
Stock of the Company to each of the Company's non-employee
directors on the later of the effective date of the 1986
Directors Plan (which date was October 21, 1986) or the date on
which such person becomes a director. Thereafter, each
non-employee director will be automatically granted a
nonstatutory stock option to purchase 5,000 shares of Common
Stock of the Company on the date of and immediately following
each Annual Meeting of Stockholders at which such non-employee
director is re-elected to serve on the Board of Directors,
provided, on such date, he or she has served on the Board of
Directors for at least six months. The 1986 Directors Plan
provides that the exercise price shall be equal to the fair
market value of the Common Stock on the date of grant of the
option. Options granted pursuant to the 1986 Directors Plan have
a term of five years and are exercisable cumulatively to the
extent of 25% of the shares subject to the option on each of the
first four anniversaries of the date of grant. Options granted
pursuant to the 1986 Directors Plan may be exercised only while
the optionee is a director of the Company or within six months
after death or within ninety days after the optionee ceases to
serve as a director of the Company.
REQUIRED VOTE
Directors shall be elected by a plurality of the votes of
the shares of the Company's Common Stock entitled to vote and
represented in person or by proxy at the Annual Meeting. Every
stockholder voting for the election of directors may cumulate
such stockholder's votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the
number of votes to which the stockholder's shares are entitled,
or may distribute the stockholder's votes on the same principle
among as many candidates as the stockholder thinks fit, provided
that votes cannot be cast for more than five candidates.
However, no stockholder shall be entitled to cumulate votes
unless the candidate's name has been placed in nomination prior
to the voting and the stockholder, or any other stockholder, has
given notice at the meeting prior to the voting of the intention
to cumulate the stockholder's votes. The Company will exercise
discretionary authority to cumulate votes in the event that
additional persons are nominated at the Annual Meeting for
election of directors
While there is no definitive statutory or case law in
Delaware as to the proper treatment of abstentions in the
election of directors, the Company believes that abstentions
should be counted for purposes of determining whether a quorum is
present at the annual meeting for the transaction of business.
In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions with respect to the election
of directors in this manner. In a 1988 Delaware case, Berlin v.
Emerald Partners, the Delaware Supreme Court held that broker
non-votes may be counted as present or represented for purposes
of determining the presence or absence of a quorum for the
transaction of business. Accordingly, the Company intends to
treat broker non-votes with respect to the election of directors
in this manner. Votes against, votes withheld and broker
non-votes have no legal effect on the election of directors due
to the fact that such elections are by a plurality.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and approved by the
stockholders in April 1983 and a total of 225,000 shares of
Common Stock were initially reserved for issuance thereunder.
From time to time since April 1983, the Board of Directors and
stockholders have approved amendments to the Purchase Plan to
increase the number of shares reserved for issuance thereunder to
an aggregate of 6,975,000 shares, and to make certain additional
amendments to the Purchase Plan.
AMENDMENT TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
UNDER THE PURCHASE PLAN
On February 13, 1995, the Board of Directors approved an
amendment to the Purchase Plan to increase the number of shares
reserved for issuance thereunder by 750,000 shares to an
aggregate of 7,725,000 shares. The stockholders are being asked
to approve this amendment at the Annual Meeting.
As of March 14, 1995, of the 6,975,000 shares reserved for
issuance under the Purchase Plan (without giving effect to the
February 1995 amendment), 6,300,217 shares had been issued. The
Company estimates that it will utilize a substantial portion of
the 674,783 remaining available shares in the exercise period
ending September 30, 1995, leaving an inadequate number of shares
available for issuance in the exercise period ending March 31,
1996.
The Board of Directors believes that it is in the best
interests of the Company to provide employees with an opportunity
to purchase Common Stock of the Company through payroll
deductions. The Board of Directors believes that the shares
remaining available for issuance pursuant to the Purchase Plan
are insufficient for such purpose. Accordingly, at the Annual
Meeting the stockholders are being requested to consider and to
approve the amendment of the Purchase Plan to increase the number
of shares reserved for issuance thereunder by 750,000 shares.
SUMMARY OF THE PURCHASE PLAN
The essential features of the Purchase Plan are outlined
below.
Purpose
The purpose of the Purchase Plan is to provide employees of
the Company and its majority-owned subsidiaries designated by the
Board of Directors who participate in the Purchase Plan with an
opportunity to purchase Common Stock of the Company through
payroll deductions.
Administration
The Purchase Plan is administered by the Board of Directors
or a committee appointed by the Board, and is currently being
administered by the Board of Directors. All questions of
interpretation or application of the Purchase Plan are determined
in the sole discretion of the Board of Directors or its
committee, and its decisions are final and binding upon all
participants. Members of the Board of Directors who are eligible
employees are permitted to participate in the Purchase Plan but
may not vote on any matter affecting the administration of the
Purchase Plan or the grant of any option pursuant to the Purchase
Plan. No member of the Board of Directors who is eligible to
participate in the Purchase Plan may be a member of the committee
appointed to administer the Purchase Plan. No charges for
administrative or other costs may be made against the payroll
deductions of a participant in the Purchase Plan. Members of the
Board of Directors receive no additional compensation for their
services in connection with the administration of the Purchase
Plan.
Eligibility
Any person who is employed by the Company (or by any of its
majority-owned subsidiaries designated by the Board of Directors)
for at least 20 hours per week and more than five months in a
calendar year is eligible to participate in the Purchase Plan.
As of January 1, 1995, approximately 3,510 employees were
eligible to participate in the Purchase Plan and approximately
1,350 of such eligible employees were participating.
Offering Dates
The Purchase Plan is implemented by consecutive 24-month
offering periods. The offering periods commence April 1 and
October 1 of each year. Each offering period is composed of four
six-month exercise periods. The Board of Directors has the power
to alter the duration of the offering periods without stockholder
approval if such change is announced 15 days prior to the
scheduled beginning of the first offering period to be affected.
Eligible employees become participants in the Purchase Plan
by delivering to the Company's personnel office a subscription
agreement authorizing payroll deductions. An eligible employee
may participate in an offering period only if, as of the
enrollment date of such offering period, such employee is not
participating in any prior offering period which is continuing at
the time of such proposed enrollment. An employee who becomes
eligible to participate in the Purchase Plan after the
commencement of an offering may not participate in the Purchase
Plan until the commencement of the next offering period.
Purchase Price
The purchase price per share at which shares are sold under
the Purchase Plan is the lower of 85% of the fair market value of
a share of Common Stock on the date of commencement of the
offering period or 85% of the fair market value of a share of
Common Stock on the applicable exercise date within such offering
period. The fair market value of the Common Stock on a given
date shall be determined by the Board of Directors based upon the
closing sales price as reported by the New York Stock Exchange on
such date.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll
deductions during the offering period. The deductions may not
exceed 10% of a participant's eligible compensation, which is
defined in the Purchase Plan to include the regular straight time
salary as of each payday during the offering period, exclusive of
any payments for overtime, bonuses, commissions or incentive
compensation. A participant may institute decreases in the rate
of payroll deductions at any time and such decreases are
immediately effective. Increases in the rate of payroll
deductions are effective as of the commencement of any exercise
period within the offering period.
All payroll deductions are credited to the participant's
account under the Purchase Plan; no interest accrues on the
payroll deductions. All payroll deductions received or held by
the Company may be used by the Company for any corporate purpose
and such payroll deductions need not be segregated.
Purchase of Stock; Exercise of Option
At the beginning of each offering period, by executing a
subscription agreement to participate in the Purchase Plan, each
employee is in effect granted an option to purchase shares of
Common Stock. The maximum number of shares placed under option
to a participant in an offering period is determined by dividing
the compensation which such participant has elected to have
withheld during the exercise period by 85% of the fair market
value of the Common Stock at the beginning of the offering period
or on the applicable exercise date, whichever is lower; provided
that such number shall not exceed 200% of the number of shares
determined by dividing 10% of the employee's compensation to be
accumulated over the offering period (determined as of the
enrollment date) by 85% of the fair market value of a share of
the Company's Common Stock on the enrollment date.
Notwithstanding the foregoing, no employee may make aggregate
purchases of stock of the Company and its majority-owned
subsidiaries under the Purchase Plan and any other employee stock
purchase plans qualified as such under Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code") in excess
of $25,000 (determined using the fair market value of the shares
at the time the option is granted) during any calendar year.
Withdrawal
While each participant in the Purchase Plan is required to
sign a subscription agreement authorizing payroll deductions, a
participant may terminate his or her participation in the
Purchase Plan at any time by signing and delivering to the
Company a notice of withdrawal from the Purchase Plan. All of
the participant's accumulated payroll deductions will be paid to
the participant promptly after receipt of his or her notice of
withdrawal and his or her participation in the current offering
period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the
offering period. No resumption of payroll deductions will occur
on behalf of such participant unless such participant re-enrolls
in the Purchase Plan by delivering a new subscription agreement
to the Company during the applicable open enrollment period
preceding the commencement of a subsequent offering period. A
participant's withdrawal from the Purchase Plan during an
offering period does not have any effect upon such participant's
eligibility to participate in subsequent offering periods under
the Purchase Plan.
Termination of Employment
Termination of a participant's employment for any reason,
including retirement or death, cancels his or her participation
in the Purchase Plan immediately. In such event, the payroll
deductions credited to the participant's account will be returned
to such participant or, in the case of death, to the person or
persons entitled thereto as specified by the employee in the
subscription agreement.
Capital Changes
If any change is made in the capitalization of the Company,
such as stock splits or stock dividends, which results in an
increase or decrease in the number of shares of Common Stock
outstanding without receipt of consideration by the Company,
appropriate adjustments will be made by the Company in the number
of shares subject to purchase and in the purchase price per
share, subject to any required action by the stockholders of the
Company. In the event of the proposed dissolution or liquidation
of the Company, the offering period then in progress will
terminate immediately unless otherwise provided by the Board of
Directors. In the event of the proposed sale of all or
substantially all of the assets of the Company or the merger of
the Company with or into another corporation, each outstanding
option shall be assumed or an equivalent option shall be
substituted by the successor corporation, unless the Board of
Directors determines, in its discretion, to accelerate the
exercisability of all outstanding options under the Purchase
Plan. The Board of Directors may also make provisions for
adjusting the number of shares subject to the Purchase Plan and
the purchase price per share if the Company effects one or more
reorganizations, recapitalizations, rights offerings or other
increases or reductions of shares of the Company's outstanding
Common Stock.
Amendment and Termination of the Purchase Plan
The Board of Directors may at any time amend or terminate
the Purchase Plan, except that such termination shall not affect
options previously granted nor may any amendment make any change
in an option granted prior thereto which adversely affects the
rights of any participant. No amendment may be made to the
Purchase Plan without prior approval of the stockholders of the
Company if such amendment would increase the number of shares
reserved under the Purchase Plan, permit payroll deductions at a
rate in excess of 10% of a participant's compensation, modify the
eligibility requirements or materially increase the benefits
which may accrue to participants under the Purchase Plan.
Certain United States Federal Income Tax Information
The Purchase Plan, and the right of participants to make
purchases thereunder, is intended to qualify under the provisions
of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant at the time of grant of
the option or purchase of shares. Upon disposition of the
shares, the participant will generally be subject to tax and the
amount of the tax will depend upon the holding period. If the
shares have been held by the participant for more than two years
after the offering date and more than one year after the exercise
date, the lesser of: (a) the excess of the fair market value of
the shares at the time of such disposition over the option price,
or (b) the excess of the fair market value of the shares at the
time the option was granted over the option price (which option
price will be computed as of the grant date) will be treated as
ordinary income, and any further gain will be treated as
long-term capital gain. If the shares are disposed of before the
expiration of these holding periods, the excess of the fair
market value of the shares on the exercise date over the option
price will be treated as ordinary income, and any further gain or
any loss on such disposition will be long-term or short-term
capital gain or loss, depending on the holding period. Different
rules may apply with respect to participants subject to Section
16(b) of the Securities Exchange Act of 1934, as amended. The
Company is not entitled to a deduction for amounts taxed as
ordinary income or capital gain to a participant except to the
extent of ordinary income reported by participants upon
disposition of shares prior to the expiration of the two holding
periods described above.
The foregoing is only a summary of the effect of federal
income taxation upon the participant and the Company with respect
to the grant and exercise of options under the Purchase Plan,
does not purport to be complete, and does not discuss the income
tax laws of any municipality, state or foreign country in which a
participant may reside. It is advisable that a participant
contact his or her own tax advisor concerning the application of
these tax laws.
STOCK PRICE
The closing price of a share of the Common Stock on the New
York Stock Exchange on March 14, 1995 was $_______.
PLAN BENEFITS
The Company cannot now determine the number of shares to be
purchased in the future by the named executive officers, all
current executive officers as a group or all employees (including
current officers who are not executive officers) as a group. In
1994 however, the following shares of Common Stock were purchased
by such persons pursuant to the Purchase Plan:
<TABLE>
<CAPTION>
Name or Group Number of Shares
<S> <C>
Wilfred J. Corrigan....................... -0-
Brian L. Halla............................ 5,659
Cyril F. Hannon........................... 5,327
Albert A. Pimentel........................ 4,484
David R. LaRock........................... 4,454
All Current Executive Officers
(as a group)............................. 21,619
All employees (including current
officers who are not executive officers). 1,095,631
</TABLE>
REQUIRED VOTE
Approval of the amendment to the Purchase Plan requires the
affirmative vote of the holders of a majority of the shares of
the Company's Common Stock represented and voting, in person or
by proxy, and entitled to vote at the Annual Meeting. Votes
against are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Votes
against are also counted for purposes of determining the total
number of votes required to pass the proposal and whether such
number of votes has been obtained.
While there is no definitive statutory or case law in
Delaware as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the
amendment to the Purchase Plan, the Company believes that
abstentions should be counted for purposes of determining both
the presence or absence of a quorum for the transaction of
business and the total number of shares present or represented
and entitled to vote on the proposal. In the absence of
controlling precedent to the contrary, the Company intends to
treat abstentions on this proposal in this manner. In a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes may be counted as present
or represented for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-
votes may not be counted for purposes of determining the number
of shares entitled to vote with respect to the particular
proposal for which authorization to vote was withheld.
Accordingly, broker non-votes with respect to this proposal will
not be considered shares entitled to vote and will not be counted
in determining whether this proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE PURCHASE PLAN. THE EFFECT OF AN ABSTENTION IS THE SAME AS
THAT OF A VOTE AGAINST THE AMENDMENT OF THE PURCHASE PLAN.
PROPOSAL THREE
AMENDMENT TO THE 1991 EQUITY INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
GENERAL
The 1991 Equity Incentive Plan (the "1991 Incentive Plan")
was adopted by the Board of Directors and approved by the
stockholders in May of 1991 and a total of 2,000,000 shares of
Common Stock were initially reserved for issuance thereunder.
From time to time since May 1991, the Board of Directors and
stockholders have approved amendments to the 1991 Incentive Plan
to increase the number of shares reserved for issuance thereunder
to an aggregate of 4,500,000 shares and to make certain
additional amendments to the 1991 Incentive Plan.
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE UNDER THE 1991 INCENTIVE PLAN
On February 13, 1995, the Board of Directors approved an
amendment to the 1991 Incentive Plan to increase the number of
shares reserved for issuance thereunder by 3,000,000 shares to an
aggregate of 7,500,000 shares. The stockholders are being asked
to approve this amendment at the Annual Meeting.
As of March 14, 1995, options to purchase 4,469,713 shares
had been granted and only 30,287 of the 4,500,000 shares reserved
for issuance under the 1991 Incentive Plan (without giving effect
to the February 1995 amendment) remain available for grant.
Option grants in February 1995 totaled 1,365,175, including a
grant of 700,000 shares by the Compensation Committee of the
Board of Directors to Wilfred J. Corrigan, the Company's Chairman
and Chief Executive Officer. The Board of Directors believes
that it is in the best interest of the Company to be able to
continue to create equity incentives to assist in attracting,
retaining and motivating employees. The Board of Directors
believes that the shares remaining available for granting of
options pursuant to the 1991 Incentive Plan are insufficient for
such purposes. Accordingly, at the Annual Meeting the
stockholders are being requested to consider and to approve the
amendment of the 1991 Incentive Plan to increase the number of
shares reserved for issuance thereunder by 3,000,000 shares. See
SUMMARY OF THE 1991 INCENTIVE PLAN, following PROPOSAL FOUR,
below.
STOCK PRICE
The closing price of a share of the Common Stock on the New
York Stock Exchange on March 14, 1995 was $____.
PLAN BENEFITS
The Company cannot now determine the number of options to be
received in the future by the named executive officers, all
current executive officers as a group or all employees (including
current officers who are not executive officers) as a group. See
"EXECUTIVE COMPENSATION - Stock Option Grants and Exercises" for
the number of stock options granted to the named executive
officers in 1994. In 1994, options to purchase 78,000 shares of
the Common Stock of the Company were granted to all current
executive officers as a group, and options to purchase 962,125
shares of the Common Stock of the Company were granted to all
employees (including current officers who are not executive
officers).
REQUIRED VOTE
Approval of this amendment to the 1991 Incentive Plan
requires the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock represented and voting, in
person or by proxy, and entitled to vote at the Annual Meeting.
Votes against are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
Votes against are also counted for purposes of determining the
total number of votes required to pass the proposal and whether
such votes have been obtained.
While there is no definitive statutory or case law in
Delaware as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the
amendment to the 1991 Incentive Plan, the Company believes that
abstentions should be counted for purposes of determining both
the presence or absence of a quorum for the transaction of
business and the total number of shares present or represented
and entitled to vote on the proposal. In the absence of
controlling precedent to the contrary, the Company intends to
treat abstentions on this proposal in this manner. In a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes may be counted as present
or represented for purposes of determining the presence or
absence of a quorum for the transaction of business, broker
non-votes may not be counted for purposes of determining the
number of shares entitled to vote with respect to the particular
proposal for which authorization to vote was withheld.
Accordingly, broker non-votes with respect to this proposal will
not be considered shares entitled to vote and therefore will not
be counted in determining whether this proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE 1991 INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS GRANTED
THEREUNDER. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A
VOTE AGAINST THE AMENDMENT OF THE 1991 INCENTIVE PLAN.
PROPOSAL FOUR
AMENDMENT TO THE 1991 EQUITY INCENTIVE PLAN TO APPROVE LIMITS
ON OPTION GRANTS TO EMPLOYEES THEREUNDER
Effective as of February 17, 1995, the Board of Directors,
acting by unanimous written consent, approved an amendment to the
1991 Equity Incentive Plan (the "1991 Incentive Plan") to limit
the aggregate number of shares of Common Stock as to which
options could be granted to any one employee in any fiscal year
of the Company to 750,000. The text of the amendment adds a new
Section 7(l) as follows:
"(l) Limits. The following limitations shall apply to
grants of Options to employees:
(i) No employee shall be granted, in any fiscal
year of the Company, Options to purchase more than
750,000 Shares.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the
Company's capitalization or organization as described
in Sections 12 and 13.
(iii) If an Option or other Right or grant made
under the Plan is canceled in the same fiscal year of
the Company in which it was granted (other than in
connection with a transaction described in Section 12
or Section 13), the canceled Option, Right or other
grant will be counted against the limit set forth in
Section 7(l)(i), above. For this purpose, if the
exercise price of an Option, Right or other grant is
reduced, the transaction will be treated as a
cancellation of the Option, Right or other grant and
the grant of a new Option, Right or other grant."
PURPOSE OF THE PROPOSED AMENDMENT
In 1993, the Internal Revenue Code of 1986 (the "Code") was
amended to limit the deductibility of compensation paid to
certain executive officers of publicly traded companies to
$1,000,000 (Section 162(m)). Compensation that qualifies as
"performance-based" is not included in calculating the $1,000,000
limitation. Performance-based compensation is compensation that,
among other things, is based upon objective performance goals.
Compensation from the exercise of stock options meets the
requirements if, among other things, the grant is made by a
compensation committee comprised solely of two or more outside
directors and the plan states the maximum number of shares during
a specified period that may be granted to any employee.
The above-described amendment is necessary in order to meet
the requirements of Section 162(m) of the Code. The Board of
Directors believes that it is in the best interests of the
Company to be able to continue to create equity incentives to
assist in attracting, retaining and motivating employees, but the
Board also believes that it is in the best interests of the
stockholders for stock option based compensation to be a tax
deductible item for the Company. See SUMMARY OF THE 1991
INCENTIVE PLAN, following this PROPOSAL FOUR.
STOCK PRICE
The closing price of a share of the Common Stock on the New
York Stock Exchange on March 14, 1995 was $____.
PLAN BENEFITS
The Company cannot now determine the number of options to be
received in the future by the named executive officers, all
current executive officers as a group or all employees (including
current officers who are not executive officers) as a group. See
"EXECUTIVE COMPENSATION - Stock Option Grants and Exercises" for
the number of stock options granted to the named executive
officers in 1994. In 1994, options to purchase 78,000 shares of
the Common Stock of the Company were granted to all current
executive officers as a group, and options to purchase 962,125
shares of the Common Stock of the Company were granted to all
employees (including current officers who are not executive
officers).
REQUIRED VOTE
Approval of this amendment to the 1991 Incentive Plan
requires the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock represented and voting, in
person or by proxy, and entitled to vote at the Annual Meeting.
Votes against are counted for purposes of determining the
presence or absence of a quorum for the transaction of business.
Votes against are also counted for purposes of determining the
total number of votes required to pass the proposal and whether
such votes have been obtained.
While there is no definitive statutory or case law in
Delaware as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the
amendment to the 1991 Incentive Plan, the Company believes that
abstentions should be counted for purposes of determining both
the presence or absence of a quorum for the transaction of
business and the total number of shares present or represented
and entitled to vote on the proposal. In the absence of
controlling precedent to the contrary, the Company intends to
treat abstentions on this proposal in this manner. In a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes may be counted as present
or represented for purposes of determining the presence or
absence of a quorum for the transaction of business, broker
non-votes may not be counted for purposes of determining the
number of shares entitled to vote with respect to the particular
proposal for which authorization to vote was withheld.
Accordingly, broker non-votes with respect to this proposal will
not be considered shares entitled to vote and therefore will not
be counted in determining whether this proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE 1991 INCENTIVE PLAN TO LIMIT THE NUMBER OF OPTIONS THAT
MAY BE GRANTED TO ANY EMPLOYEE IN A PARTICULAR FISCAL YEAR. THE
EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
AMENDMENT OF THE 1991 INCENTIVE PLAN.
SUMMARY OF THE 1991 INCENTIVE PLAN
The essential features of the 1991 Incentive Plan are
outlined below.
Purpose
The purpose of the 1991 Incentive Plan is to enable the
Company to provide an incentive to eligible employees, including
officers, and consultants whose present and potential
contributions are important to the continued success of the
Company, to afford them an opportunity to acquire a proprietary
interest in the Company and to enable the Company to enlist and
retain in its employ the best available talent for the successful
conduct of its business.
Eligibility
Employees, including officers, and consultants of the
Company and its majority-owned subsidiaries (as well as
majority-owned subsidiaries of the Company's majority-owned
subsidiaries) whom the Board deems to have the potential to
contribute to the future success of the Company are eligible to
receive awards under the 1991 Incentive Plan.
Administration
The 1991 Incentive Plan shall be administered by (i) the
Board of Directors if the Board may administer the 1991 Incentive
Plan in compliance with Rule 16b-3 ("Rule 16b-3") promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") or
(ii) a committee appointed by the Board and constituted so as to
permit the 1991 Incentive Plan to comply with the provisions of
Rule 16b-3. If permitted by Rule 16b-3, the 1991 Incentive Plan
may be administered by different bodies with respect to employees
who are directors, non-director officers, employees who are
neither directors nor officers and consultants. For the purposes
of this plan description, the term "Committee" shall mean either
the committee appointed by the Board or the Board, whichever is
administering the 1991 Incentive Plan. All questions of
interpretation or application of the 1991 Incentive Plan are
determined in the sole discretion of the Committee, and its
decisions are final and binding upon all participants. Members
of the Board who are eligible employees are permitted to
participate in the 1991 Incentive Plan but may not be a member of
a committee appointed to administer the 1991 Incentive Plan.
Members of the Board receive no additional compensation for their
services in connection with the administration of the 1991
Incentive Plan.
Stock Options
The 1991 Incentive Plan permits the granting of stock
options that either are intended to qualify as Incentive Stock
Options ("ISOs") or are not intended to so qualify ("Nonstatutory
Stock Options" or "NSOs").
The option exercise price for each share covered by an
option may be less than the fair market value of a share of
Common Stock on the date of grant of such option. However, in
the case of an ISO, the option exercise price shall be no less
than 100% of the fair market value of a share of Common Stock on
the date such option is granted, subject to certain additional
conditions set forth in the 1991 Incentive Plan with respect to
grants to 10% stockholders. In the case of an NSO, the option
exercise price shall be no less than 50% of the fair market value
of the Common Stock on the date the option is granted. The
number of shares of Common Stock for which options or rights may
be granted at less than the fair market value on the date of
grant shall not exceed three percent of the total number of
shares authorized under the 1991 Incentive Plan; provided,
however, that the price shall not be less than 50% of the fair
market value on the date of grant.
The term of each option will be fixed by the Board but may
not exceed ten years from the date of grant in the case of ISOs
(five years in the case of ISOs granted to an optionee who, at
the time of grant, owns Common Stock possessing more than 10% of
the total combined voting power of the Company or of any
subsidiary). The Committee will determine the time or times each
option may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be
accelerated by the Committee.
The exercise price of options granted under the 1991
Incentive Plan, including applicable withholding, must be paid in
full on the exercise date. The method of payment shall be
determined by the Committee and may consist of cash, check,
promissory note, other shares of Common Stock having a fair
market value on the date of exercise equal to the aggregate
exercise price of the option, delivery of a properly executed
exercise notice and irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan
proceeds required to pay the exercise price, delivery of an
irrevocable subscription agreement for the shares which obligates
the optionee to take and pay for the shares not more than 12
months after the date of delivery of the subscription agreement,
any combination of the foregoing methods of payment or such other
consideration and method of payment for the issuance of shares to
the extent permitted under the Delaware General Corporation Law.
Under the 1991 Incentive Plan, if an employee's employment
terminates for any reason, including retirement, an option may
thereafter be exercised (to the extent it was then exercisable)
within such time period as is determined by the Committee (which
shall be no more than 90 days in the case of an ISO), subject to
the stated term of the option. If the Committee has determined
that an employee was discharged for just cause (as defined in the
1991 Incentive Plan), such employee shall have no further rights
under the 1991 Incentive Plan or under any option granted to him
or her under the plan. If an optionee's employment is terminated
by reason of the optionee's death, the option will be exercisable
for six months following the date of death or such period as is
determined by the Committee, subject to the stated term of the
option. Options granted to consultants shall have such terms and
conditions with respect to the effect of termination of the
consulting relationship (including upon the death of the
consultant) as the Committee shall determine in each case.
To qualify as ISOs, options must meet additional federal tax
requirements under the Internal Revenue Code of 1986, as amended
(the "Code"). Under current law, these requirements include
limits on the value of ISOs that may become first exercisable
annually with respect to any optionee, and a shorter exercise
period and a higher minimum exercise price in the case of
stockholders having a 10% equity interest in the Company.
Stock Appreciation Rights
Although no stock appreciation rights ("SARs") have ever
been granted under the 1991 Incentive Plan, the Committee may
also grant SARs, either in connection with the grant of options
or independent of the grant of options. Upon exercise of an SAR
granted in connection with an option, the holder is entitled to
receive an amount of cash, Common Stock of the Company or any
combination thereof (as determined by the Committee) equal in
value to the excess of the fair market value of the shares
covered by the surrendered portion of the related option on the
date of exercise over the aggregate exercise price of the shares
covered by the surrendered portion of the related option.
Notwithstanding the foregoing, the Committee may limit the amount
that may be paid to the optionee upon exercise of an SAR;
provided, however, that such limit shall not restrict the
exercisability of the related option. The exercise of an SAR will
result in cancellation of the related option, to the extent
surrendered on exercise of the SAR. An SAR granted in connection
with an option shall be exercisable only when and to the extent
that the related option is exercisable and shall expire no later
than the date on which the related option expires.
SARs granted without related options entitle the holder,
upon exercise of the SAR, to receive an amount of cash, Common
Stock of the Company or any combination thereof (as determined by
the Committee) equal in value to the excess of the fair market
value of the shares covered by the exercised portion of the SAR
on the date of exercise over the fair market value of the shares
covered by the exercised portion of the SAR as of the date of
grant of the SAR; provided, however, that the Committee may limit
the amount that may be paid to the holder upon exercise of such
SAR. An SAR granted independent of options shall be exercisable,
in whole or in part, at such times as the Committee shall
determine.
Stock Purchase Rights
The 1991 Incentive Plan provides for the grant of stock
purchase rights to purchase Common Stock of the Company either
alone, in addition to, or in tandem with other awards under the
1991 Incentive Plan and/or cash awards made outside of the 1991
Incentive Plan. The Committee shall determine the terms of each
stock purchase right, including the number of shares of Common
Stock that the purchaser shall be entitled to purchase, the price
to be paid for the shares (which price in the case of persons
subject to Section 16 of the Exchange Act shall not exceed the
par value of the Company's Common Stock) and the time within
which the right must be exercised, which shall in no event exceed
60 days from the date the stock purchase right was granted. At
the time of exercise of a stock purchase right, the purchaser and
the Company will enter into a Restricted Stock Purchase Agreement
pursuant to which the Company shall have a right to repurchase,
at the original purchase price, any unvested shares in the event
of the purchaser's voluntary or involuntary termination of
employment or consulting relationship, including by reason of
death or disability.
Stock Bonuses
The 1991 Incentive Plan also provides for the award of stock
bonuses to employees and consultants. Stock bonuses may be
granted either alone or in addition to other awards under the
1991 Incentive Plan. Stock bonuses are generally granted in
consideration of past services rendered to the Company or its
subsidiaries. The Committee shall determine, in its sole
discretion, the terms of each stock bonus, and shall determine
the performance or employment-related factors to be considered in
granting stock bonuses and the extent to which such stock bonuses
have been earned.
Adjustments for Recapitalizations and Reorganizations
In the event of a stock dividend, stock split combination or
similar event, the number of shares of Common Stock available for
issuance under the 1991 Incentive Plan shall be increased or
decreased proportionately, as the case may be, and the number of
shares of Common Stock deliverable in connection with any
outstanding option, SAR, stock purchase right or stock bonus,
and, where applicable, the exercise price thereof, shall be
proportionately adjusted.
In the event of a merger, reorganization, liquidation or
similar event, the Board of Directors shall, with respect to
outstanding options, SARs, stock purchase rights or stock bonuses
either provide for the assumption or substitution of such awards
or provide that the options or rights must be exercised within 30
days. In either case, the Board or the Committee may, in its
discretion, provide for accelerated vesting of such awards.
Amendment and Termination
The Board may amend, alter, suspend or discontinue the 1991
Incentive Plan at any time, but such amendment, alteration,
suspension or discontinuation shall not impair the rights of any
participant in the 1991 Incentive Plan, without the participant's
consent. Subject to the specific terms of the 1991 Incentive
Plan, the Committee may accelerate any award or option or waive
any conditions or restrictions pertaining to such award or option
at any time.
In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act or under Section 422A of
the Internal Revenue Code of 1986, as amended (the "Code") (or
any other applicable law or regulation), the Company shall obtain
stockholder approval of any 1991 Incentive Plan amendment, in
such a manner and to such a degree as required to comply with
such laws or regulations.
Certain United States Federal Income Tax Information
The following is only a brief summary of the effect of
federal income taxation upon the participant and the Company
under the 1991 Incentive Plan based upon the Code. This summary
does not purport to be complete and does not discuss the income
tax laws of any municipality, state or country outside of the
United States in which a participant may reside.
Stock Options. If an option granted under the 1991
Incentive Plan is an ISO, the optionee will recognize no income
upon grant of the ISO and will incur no tax liability due to the
exercise unless the optionee is subject to the alterative minimum
tax. The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an ISO
regardless of the applicability of the alterative minimum tax.
Upon the sale or exchange of the shares at least two years after
grant of the ISO and one year after exercise by the optionee, any
gain (or loss) will be treated as capital gain (or loss). If
these holding periods are not satisfied, the optionee will
recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the
stock at the date of the option exercise or the sale price of the
stock. A different rule for measuring ordinary income upon such
premature disposition may apply if the optionee is subject to
Section 16 of the Exchange Act. The Company will be entitled to
a deduction in the same amount as the ordinary income recognized
by the optionee. Any gain (or loss) recognized on such a
premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as capital gain
(or loss).
All other options which do not qualify as ISOs are taxed as
NSOs. An optionee will not recognize any taxable income at the
time he or she is granted an NSO. However, upon the exercise of
an NSO, the optionee will recognize ordinary income measured by
the excess of the then fair market value of the shares over the
option price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or
where the optionee is subject to Section 16 of the Exchange Act,
the date of taxation may be deferred unless the optionee files an
election with the Internal Revenue Service under Section 83(b) of
the Code. The income recognized by an optionee who is also an
employee of the Company will be subject to tax withholding by the
Company by payment in cash or out of the current earnings paid to
the optionee. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will
be treated as capital gain (or loss). The Company will be
entitled to a tax deduction in the same amount as the ordinary
income recognized by the optionee with respect to shares acquired
upon exercise of an NSO.
Stock Appreciation Rights. A recipient will not recognize
any taxable income in connection with the grant of an SAR. On
exercise of an SAR for cash, the recipient will generally
recognize ordinary income in the year of exercise in an amount
equal to the difference between the exercise price (if any) of
the SAR and the fair market value of the SAR (computed with
reference to the Common Stock of the Company) at the time of
exercise. If the recipient is an employee, such amount will be
subject to withholding by the Company. As a general rule, the
Company will be entitled to a tax deduction in the amount and at
the time the recipient recognizes ordinary income with respect to
the SAR.
If the recipient receives shares of Common Stock of the
Company upon exercise of an SAR, the tax consequences on purchase
and sale of such shares will be the same as those discussed above
for NSOs. See "Special Rules Applicable to Corporate Insiders."
Stock Purchase Rights. Stock purchase rights will generally
be subject to the tax consequences discussed above for NSOs.
Stock Bonus Awards. A recipient who receives fully vested
shares of Common Stock pursuant to a stock bonus award will
generally recognize ordinary income in the year of receipt equal
to the fair market value of the stock on the date of grant. If
the recipient receives stock subject to vesting pursuant to a
stock bonus award, the recipient will recognize ordinary income
equal to the fair market value of the stock at the time the award
vests (unless a Section 83(b) election is timely filed at the
time of grant). Different timing rules may apply if the
recipient is subject to Section 16(b) of the Exchange Act.
If the recipient is an employee, any amount included in
income will be subject to withholding by the Company. As a
general rule, the Company will be entitled to a tax deduction in
the amount and at the time the recipient recognizes ordinary
income with respect to the stock bonus award.
Special Rules Applicable to Corporate Insiders. In the case
of an individual who could be subject to suit under Section 16(b)
of the Exchange Act in the event he or she disposes of the shares
acquired upon exercise of a stock option, an SAR, or any other
incentive right granted under the 1991 Incentive Plan
("Insider"), such Insider will not recognize ordinary income at
the time of exercise of the option or right. Instead, the time
of taxation and withholding requirements will be generally
deferred until the date that the insider would no longer be
subject to suit upon disposition of such shares. The Insider
will recognize ordinary income at that time in an amount equal to
the excess of the then fair market value of the shares over the
purchase price (if any).
If the recipient is an employee, any amount included in
income will be subject to withholding by the Company. An Insider
can avoid this deferral provision by filing a Section 83(b)
election within 30 days after exercise of the option or right.
Capital Gains. Under current law the tax on long-term
capital gains is capped at 28%. Short-term capital gain is fully
included in gross income and taxed at the same rates as ordinary
income. Capital losses are allowed in full against capital gains
plus $3,000 of other income.
PROPOSAL FIVE
APPROVAL OF 1995 DIRECTOR OPTION PLAN AND
RESERVATION OF 250,000 SHARES FOR ISSUANCE THEREUNDER
GENERAL
The 1995 Director Option Plan (the "1995 Director Plan"),
was adopted by the Board of Directors on February 17, 1995, and
250,000 shares of Common Stock were reserved for issuance
thereunder. The terms of the 1995 Director Plan provide that it
shall become effective on June 1, 1995.
Upon approval by the stockholders, the 1995 Director Plan
will replace the 1986 Directors Plan. On the effective date of
the 1995 Director Plan, the 1986 Directors Plan will terminate
and no new options shall be granted thereunder. The shares
remaining for grant under the 1986 Directors Plan will be de-
listed and will remain authorized but unissued and unreserved
shares of the Common Stock of the Company.
Under the 1986 Directors Plan, non-employee Directors are
granted stock options to purchase up to 5,000 shares of Common
Stock if they are re-elected at an Annual Meeting of
Stockholders. After the 1995 Annual Meeting there will be
reserved and available for new option grants under the 1986
Directors Plan less than the 15,000 shares needed should a new
director be appointed or elected before the next Annual Meeting.
Because of the limited number of remaining shares available for
option grants under the 1986 Directors Plan and because of its
impending termination in 1996, the Company believes that approval
of the 1995 Director Plan is necessary for the Company to attract
and retain the best available personnel for service as directors,
to provide additional incentive to non-employee directors and to
encourage their continued service.
SUMMARY OF 1995 DIRECTOR PLAN
The essential features of the 1995 Director Plan are
outlined below.
Purpose
The purposes of the 1995 Director Plan are to attract and
retain the best available personnel for service as directors of
the Company, to provide additional incentive to the non-employee
directors and to encourage their continued service on the Board.
Administration
The 1995 Director Plan is designed to work automatically and
not to require administration. However, to the extent
administration is necessary, it will be provided by the Board of
Directors of the Company. Members of the Board of Directors
receive no additional compensation for their services in
connection with the administration of the 1995 Director Plan.
Eligibility
The 1995 Director Plan provides for the grant of
nonstatutory stock options to non-employee directors of the
Company ("Outside Director"). Each outside director shall be
granted an option to purchase 15,000 shares of Common Stock (the
"First Option") on the date on which he or she first becomes an
Outside Director; provided, however, that no Outside Director who
was an Outside Director immediately prior to the effective date
of the 1995 Director Plan (June 1, 1995) will receive a First
Option. In addition, on April 1 of each year, each Outside
Director shall automatically be granted an option to purchase
7,500 shares of Common Stock of the Company (a "Subsequent
Option"), if on such date he or she shall have served on the
Board of Directors for at least six months. The 1995 Director
Plan provides for neither a maximum nor a minimum number of
option shares that may be granted to any one non-employee
director but does provide for the number of shares which may be
included in any grant and the method of making a grant.
Currently there are five seats on the Board of Directors of
the Company, four of which are occupied by non-employee
directors, each of whom will be eligible to participate in the
Plan, subject to the terms and conditions stated below.
Terms of Options
Options granted under the 1995 Director Plan have a term of
ten years. Each option is evidenced by a stock option agreement
between the Company and the director to whom such option is
granted and is subject to the following additional terms and
conditions.
(a) Exercise of the Option. Options become
exercisable cumulatively to the extent of 25% of the shares
subject to the option on each of the first four
anniversaries of the date of grant. An option is exercised
by giving written notice of exercise to the Company
specifying the number of full shares of Common Stock to be
purchased and tendering payment to the Company of the
purchase price. Payment for shares issued upon exercise of
an option may consist of any of the following, or any
combination of them: (i) cash, (ii) check, (iii) other
shares (which, in the case of shares acquired upon exercise
of an option granted under the 1995 Director Plan, shall
have been owned by the optionee for more than six months on
the date of surrender).
(b) Option Price. The Board of Directors determines
such fair market value based upon the closing price of the
Common Stock on the New York Stock Exchange on the date of
grant. If the date of grant is not a trading day, the price
shall be determined as of the next trading day immediately
following the date of grant.
(c) Termination of Status as a Director. The 1995
Director Plan provides that if there is any break in
continuous service of an optionee as a director (other than
as a result of death or total and permanent disability), the
optionee may exercise his or her options to the extent
otherwise exercisable under the 1995 Director Plan as of the
date of such cessation, but only within three months
following the date of such cessation. Notwithstanding the
foregoing, in no event may an option be exercised after its
ten year term has expired.
(d) Death. If an optionee should die while serving as
a director of the Company, the optionee's estate or a person
who acquired the right to exercise the option by bequest or
inheritance may exercise his or her options to the extent
otherwise exercisable under the 1995 Director Plan as of the
date of such cessation, but only within twelve months
following the date of the optionee's death. Notwithstanding
the foregoing, in no event may an option be exercised after
its ten year term has expired.
(e) Disability. If an Optionee's continuous service
as a director terminates as a result of total and permanent
disability, the optionee may exercise his or her options to
the extent otherwise exercisable under the 1995 Director
Plan as of the date of such cessation, but only within 12
months following the date of such cessation.
Notwithstanding the foregoing, in no event may an option be
exercised after its ten year term has expired.
(f) Non-transferability of Options. An option may not
be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or the laws of
descent or distribution and may be exercised during the
lifetime of the optionee only by the optionee.
Adjustment Upon Changes in Capitalization and Other Events
Subject to any required action by the stockholders of the
Company, the number of shares covered by each outstanding option,
the number of shares which have been authorized for issuance
under the 1995 Director Plan but as to which no options have yet
been granted, as well as the price per share covered by each such
outstanding option, and the number of shares issuable on exercise
of options granted pursuant to the automatic grant provisions of
the 1995 Director Plan shall be proportionately adjusted for any
increase or decrease in the number of issued shares resulting
from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares effected
without receipt of consideration by the Company (excluding
conversion of any convertible securities). In the event of the
proposed dissolution or liquidation of the Company, to the extent
that an option has not been previously exercised, it shall
terminate immediately prior to the consummation of such proposed
action.
Amendment and Termination
The Board of Directors may at any time amend, alter, suspend
or discontinue the 1995 Director Plan; provided, however, that
the 1995 Director Plan may not be amended more than once every
six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. In addition, the Company shall obtain
stockholder approval of any amendment to the 1995 Director Plan
to the extent necessary and desirable to comply with Rule 16b-3
under the Securities Exchange Act of 1934. No action by the
Board of Directors or stockholders, however, may alter or impair
any option previously granted under the 1995 Director Plan
without the consent of the optionee. In any event, the 1995
Director Plan will terminate in 2005. Finally, continuance of
the 1995 Director Plan is subject to approval by the stockholders
at or prior to the 1995 Annual Stockholders Meeting.
Certain United States Federal Income Tax Information
The following is only a summary of the effect of federal
income taxation upon the optionee and the Company with respect to
the grant and exercise of options under the 1995 Director
Plan, does not purport to be complete, and does not discuss the
income tax laws of any municipality, state or foreign country in
which an optionee may reside.
Options granted under the 1995 Director Plan are
nonstatutory options ("NSO"). An optionee will not recognize any
taxable income at the time he or she is granted an NSO. However,
upon the exercise of an NSO, the optionee will recognize ordinary
income measured by the excess of the then fair market value of
the shares over the option price. In certain circumstances,
where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is subject to Section 16 of
the Exchange Act, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service
under the Section 83(b) of the Code. Upon resale of such shares
by the optionee, any difference between the sales price and the
exercise price, to the extent not recognized as ordinary income
as provided above, will be treated as capital gain (or loss).
The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with
respect to shares acquired upon exercise of an NSO.
As each of the directors eligible to participate in the 1995
Director Plan could be subject to suit under Section 16(b) of the
Exchange Act in the event he or she disposes of the shares
acquired upon exercise of a stock option granted under the 1995
Director Plan, such directors will not recognize ordinary income
at the time of exercise of the option or right. Instead, the
time of taxation generally will be deferred until the date that
the director would no longer be subject to suit upon disposition
of such shares. The directors will recognize ordinary income at
that time in an amount equal to the excess of the then fair
market value of the shares over the purchase price (if any). A
director can avoid this deferral by filing a Section 83(b)
election within 30 days after exercise of the option or right.
STOCK PRICE
The closing price of a share of the Common Stock on the New
York Stock Exchange on March 14, 1995 was $______.
PLAN BENEFITS
Non-employee directors are the only eligible participants in
the 1995 Director Plan. Directors are eligible to receive an
option to purchase 7,500 shares of the Common Stock of the
Company on April 1 of each year beginning April 1, 1996. In
addition, new directors are eligible to receive an initial grant
of 15,000 shares on the date on which he or she first becomes a
director. See SUMMARY OF 1995 DIRECTOR PLAN, above.
REQUIRED VOTE
Approval of the amendment to the 1995 Director Plan requires
the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock represented and voting, in person
or by proxy, and entitled to vote at the Annual Meeting. Votes
against are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Votes
against are also counted for purposes of determining the total
number of votes required to pass the proposal and whether such
number of votes has been obtained.
While there is no definitive statutory or case law in
Delaware as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the
amendment to the 1995 Director Plan, the Company believes that
abstentions should be counted for purposes of determining both
the presence or absence of a quorum for the transaction of
business and the total number of shares present or represented
and entitled to vote on the proposal. In the absence of
controlling precedent to the contrary, the Company intends to
treat abstentions on this proposal in this manner. In a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes may be counted as present
or represented for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-
votes may not be counted for purposes of determining the number
of shares entitled to vote with respect to the particular
proposal for which authorization to vote was withheld.
Accordingly, broker non-votes with respect to this proposal will
not be considered shares entitled to vote and will not be counted
in determining whether this proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
1995 DIRECTOR PLAN. THE EFFECT OF AN ABSTENTION IS THE SAME AS
THAT OF A VOTE AGAINST APPROVAL OF THE 1995 DIRECTOR PLAN.
PROPOSAL SIX
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Restated Certificate of Incorporation of the Company, as
currently in effect, provides that authorized capital stock shall
consist of 73,500,000 shares of Common Stock, $0.01 par value,
and 2,000,000 shares of Preferred Stock. The proposed amendment
would increase the number of shares of Common Stock authorized
for issuance by 176,500,000 to a total of 250,000,000 shares. As
more fully described below, the proposed amendment is intended to
provide the Company flexibility to meet its future needs for
unreserved Common Stock. As more fully described below, the
proposed amendment is intended to provide the Company flexibility
to meet its future needs for unreserved Common Stock.
REASONS FOR THE PROPOSED AMENDMENT
The Company's number of authorized shares of Common Stock
has remained at 73,500,000 since 1986. Since that time, the
Company's market capitalization has increased to approximately
$2,188,655,275 as of February 2, 1995.
As of February 2, 1995, 57,183,177 shares of the Common
Stock were issued and outstanding; 5,867,350 shares were reserved
for issuance upon conversion of certain convertible notes;
3,162,500 shares were reserved for the recently completed equity
offering; and 5,921,419 shares were reserved for issuance under
the Company's employee stock benefit plans, leaving only
1,365,554 shares of Common Stock available for future issuance.
This number is not sufficient to even cover the number of shares
proposed herein to be added to the Company's Purchase Plan, 1991
Incentive Plan and the 1995 Director Plan.
The Company's Board of Directors believes that it is
necessary to increase the current number of authorized shares of
Common Stock not only to provide shares for issuance under such
employee benefit plans, but also to give the Company flexibility
in connection with possible future actions, such as stock splits,
stock dividends, financings, corporate mergers, acquisitions of
property, use for employee benefit plans and for other general
corporate purposes. The semiconductor industry is capital
intensive. In order to remain competitive, the Company must
continue to make significant investments in new facilities and
capital equipment. The Company may need to seek additional
equity or debt financings to fund further expansion. Having such
additional authorized Common Shares available for issuance in the
future would allow the Board of Directors to issue shares of
Common Stock the delay and expense associated with seeking
shareholder approval. Elimination of such delays and expense
occasioned by the necessity of obtaining stockholder approval
will better enable the Company, among other things, to engage in
financing transactions and acquisitions as well as to take
advantage of changing market and financial conditions.
POSSIBLE EFFECTS OF THE AMENDMENT
If the proposed amendment is approved, the Board of
Directors may cause the issuance of additional shares of Common
Stock without further vote of stockholders of the Company, except
as provided under Delaware corporate law or under the rules of
any national securities exchange on which shares of Common Stock
of the Company are then listed. Current holders of Common Stock
have no pre-emptive or like rights, which means that current
stockholders do not have a prior right to purchase any new issue
of capital stock of the Company in order to maintain their
proportionate ownership thereof. The effects of the
authorization of additional shares of Common Stock may also
include dilution of the voting power of currently outstanding
shares and reduction of the portion of dividends and of
liquidation proceeds payable to the holders of currently
outstanding Common Stock.
In addition, the Board of Directors could use authorized but
unissued shares to create impediments to a takeover or a transfer
of control of the Company. Accordingly, an effect of the
increase in the number of authorized shares of Common Stock may
be to deter a future takeover attempt which holders of Common
Stock may deem to be in their best interest or in which holders
of Common Stock may be offered a premium for their shares over
the market price.
In November 1988, the Board of Directors established a
Shareholder Rights Plan ("Rights Plan") and issued under the
Rights Plan as a dividend to the holders of Common Stock, rights
to purchase Series A Participating Preferred Stock. In the event
the rights become exercisable, the Company might have to issue a
substantial number of new shares of Common Stock in order to
effectuate to Rights Plan. Although under the Rights Plan the
Company is not now obligated to reserve shares of Common Stock
for issuance thereunder, a failure to have sufficient authorized
shares available could result in a delay or failure of
implementation of all aspects of the Rights Plan. A copy of the
Rights Agreement was filed with the Securities and Exchange
Commission on November 21, 1988 as an exhibit to the Registration
Statement on Form 8-A pursuant to Section 12(a) of the Securities
Exchange Act of 1934. The foregoing brief description of the
Rights Plan is qualified in its entirety by reference to the text
of the Rights Agreement.
The Board of Directors is not currently aware of any attempt
to take over or acquire the Company. While it may be deemed to
have potential anti-takeover effects, the proposed amendment to
increase the authorized Common Stock is not prompted by any
specific effort or takeover threat currently perceived by
management. Moreover, management does not currently intend to
propose additional anti-takeover measures in the foreseeable
future.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares
of Common Stock will be required to approve PROPOSAL SIX. If the
proposed amendment to the Restated Certificate of Incorporation
is approved by the stockholders, such amendment will become
effective upon filing an amendment to the Restated Certificate of
Incorporation with the Delaware Secretary of State. If the
amendment is authorized, the text of the first paragraph of
Article 4 of the Company's Restated Certificate of Incorporation
will be as follows:
"This corporation is authorized to issue two classes of
shares designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which
this corporation shall have authority to issue is Two
Hundred Fifty-Two Million (252,000,000) of which Two
Hundred Fifty Million (250,000,000) shall be Common
Stock with a par value of $0.01 per share and Two
Million (2,000,000) shall be Preferred Stock with a par
value of $0.01 per share."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST
THE AMENDMENT OF THE CERTIFICATE.
PROPOSAL SEVEN
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse,
independent accountants, to audit the consolidated financial
statements of the Company for its 1995 fiscal year and recommends
that the stockholders vote for ratification of such appointment.
If there is a negative vote on such ratification, the Board of
Directors will reconsider its selection. Price Waterhouse has
audited the Company's consolidated financial statements since the
fiscal year ended December 31, 1981. Representatives of Price
Waterhouse are expected to be present at the Annual Meeting with
the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE AS THE
INDEPENDENT ACCOUNTANTS FOR THE 1995 FISCAL YEAR. THE EFFECT OF
AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS.
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer
and each of the four other most highly compensated executive
officers whose salary plus bonus exceeded $100,000, information
concerning all reportable compensation awarded to, earned by or
paid to each for services to the Company in all capacities during
the fiscal year ended January 1, 1995, as well as such
compensation for each such individual for the Company's previous
two fiscal years (if such person was the Chief Executive Officer
or an executive officer, as the case may be, during any part of
such fiscal year).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Annual
Name and Compensation
Principal Position Year Salary Bonus ($) <F1>
<S> <C> <C> <C> <C>
Wilfred J. Corrigan 1994 $563,846 $575,000 $ 9,600
Chief Executive 1993 $530,077 $400,000 $16,600
Officer 1992 $500,000 None $ 9,600
Brian L. Halla 1994 $299,231 $250,000 $12,274
Executive Vice 1993 $280,481 $200,000 $ 8,500
President, LSI Logic 1992 $236,250 None $17,104
Products
Cyril F. Hannon 1994 $279,615 $175,000 $ 8,400
Executive Vice 1993 $261,538 $170,000 $ 8,400
President, Worldwide 1992 $235,385 None $ 8,400
Operations
Albert A. Pimentel 1994 $236,923 $160,000 $ 9,295
Senior Vice President 1993 $222,923 $150,000 $ 9,400
Finance and Chief 1992 $ 78,558 None $ 3,613
Financial Officer
David R. La Rock 1994 $233,692 $125,000 $ 9,092
Senior Vice President 1993 $222,373 $ 90,000 $ 8,850
U.S. Marketing 1992 $182,255 $ 27,957 $13,530
& Sales
<FN>
<F1> Includes amounts paid for car allowances and tax planning.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Awards Payouts
All
Restricted Other
Stock Options/ LTIP Compen-
Year Awards SARs Payouts sation
($)<F2> (#)<F3> ($)<F4> ($)<F5>
<S> <C> <C> <C> <C> <C>
Wilfred J. Corrigan 1994 0 0 0 $41,351
1993 0 125,000 0 $28,483
1992 0 0 0 $ 4,032
Brian L. Halla 1994 0 15,000 0 $20,636
1993 0 50,000 0 $14,321
1992 0 75,000 0 $ 2,436
Cyril F. Hannon 1994 0 15,000 0 $23,313
1993 0 50,000 0 $17,391
1992 0 30,000 0 $ 4,032
Albert A. Pimentel 1994 0 10,000 0 $15,336
1993 0 15,000 0 $10,316
1992 0 125,000 0 $ 385
Darvid R. LaRock 1994 0 10,000 0 $18,251
1993 0 10,000 0 $13,424
1992 0 50,000 0 $ 2,081
<FN>
<F2> The Company has not granted any restricted stock rights.
<F3> The Company has not granted any stock appreciation rights.
<F4> The Company does not have any Long Term Incentive Plans as
that term is defined in the regulations.
<F5> "All Other Compensation" is itemized as follows:
- In 1994, Mr. Corrigan received $34,301 for profit
sharing , $750 for a patent award, and $6,300 for group
term life insurance. In 1993, Mr. Corrigan received
$22,183 for profit sharing and $6,300 for group term
life insurance. In 1992, Mr. Corrigan received $4,032
for group term life insurance.
- In 1994, Mr. Halla received $18,200 for profit sharing
and $2,436 for group term life insurance. In 1993, Mr.
Halla received $11,886 for profit sharing and $2,436
for group term life insurance. In 1992, Mr. Halla
received $2,436 for group term life insurance.
- In 1994, Mr. Hannon received $17,013 for profit sharing
and $6,300 for group term life insurance. In 1993, Mr.
Hannon received $11,091 for profit sharing and $6,300
for group term life insurance. In 1992, Mr. Hannon
received $4,032 for group term life insurance.
- In 1994, Mr. Pimentel received $14,412 for profit
sharing and $924 for group term life insurance. In
1993, Mr. Pimentel received $9,392 for profit sharing
and $924 for group term life insurance. In 1992, Mr.
Pimentel received $385 for group term life insurance.
- In 1994, Mr. LaRock received $14,219 for profit sharing
and $4,032 for group term life insurance. In 1993,
Mr. LaRock received $9,392.31 for profit sharing and
$4,032 for group term life insurance. In 1992, Mr.
LaRock received $4,032 for group term life insurance.
</TABLE>
Stock Option Grants and Exercises
The following tables set forth the stock options granted to
the named executive officers under the Company's stock option
plans and the options exercised by such named executive officers
during the fiscal year ended January 1, 1995.
The Option/SAR Grant Table sets forth hypothetical gains or
"option spreads" for the options at the end of their respective
ten-year terms, as calculated in accordance with the rules of the
Securities and Exchange Commission. Each gain is based on an
arbitrarily assumed annualized rate of compound appreciation of
the market price at the date of grant of 5% and 10% from the date
the option was granted to the end of the option term. Actual
gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market
conditions.
<TABLE>
OPTION/SAR<F1> GRANTS IN LAST FISCAL YEAR
LSI Logic Corporation 1991 Equity Incentive Plan <F2>
<CAPTION>
Individual Grants
Name Percent of
Total Options/ Exercise
Options/ SARs granted or Base
SARs to Employees Price Expiration
Granted(#) in Fiscal Year ($/share) Date
<S> <C> <C> <C> <C>
Wilfred J. Corrigan 0 0% N/A N/A
Brian L. Halla 15,000 1.4% $21.50 05/06/04
Cyril F. Hannon 15,000 1.4% $21.50 05/06/04
Albert A. Pimentel 10,000 1.0% $21.50 05/06/04
David R. LaRock 10,000 1.0% $21.50 05/06/04
<FN>
<F1> The Company has not granted any stock appreciation rights.
<F2> The material terms of the grants (other than those set forth
in the table) are: (a) The exercise price of the options is the
fair market value of Common Stock as of the date of grant; (b)
The options vest cumulatively in equal 25% increments on each of
the first four anniversaries of the date of grant; (c) To the
extent unexercised, the options lapse after ten years; (d) The
options are non-transferrable and are only exercisable during the
period of employment of the optionee, subject to limited
exceptions in the cases of certain terminations, death or
permanent disability of the optionee.
Potential Realizable Value
Assumed Annual Rates of Stock Price Appreciation for Option Term
Name 5% 10%
<S> <C> <C>
Wilfred J. Corrigan $0 $0
Brian L Halla $202,819 $513,982
Cyril F. Hannon $202,819 $513,982
Albert A. Pimentel $135,212 $342,655
David R. LaRock $135,212 $342,655
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END VALUES<F1>
LSI Logic Corporation 1991 Equity Incentive Plan
<CAPTION>
Name Number of Shares
Acquired on Exercise Value Realized
<S> <C> <C>
Wilfred J. Corrigan 131,250 $2,173,375
Brian L. Halla 50,000 $1,087,663
Cyril F. Hannon 102,500 $3,071,875
Albert A. Pimentel 12,900 $ 295,425
David R. LaRock 16,250 $ 255,313
__________________
<FN>
<F1> The Company has not granted any stock appreciation rights.
Name Total Number of Unexercised Option
Held at Fiscal Year End
Exercisable Unexercisable
<S> <C> <C>
Wilfred J. Corrigan 0 93,750
Brian L. Halla 85,000 95,000
Cyril F. Hannon 81,250 73,750
Albert A. Pimentel 31,250 83,750
David R. LaRock 0 42,500
Name Total Value<F2> of Unexercised
In-the-Money Options Held at
Fiscal Year End
Exercisable Unexercisable
<S> <C> <C>
Wilfred J. Corrigan $0 $2,753,906
Brian L. Halla $2,762,188 $2,772,188
Cyril F. Hannon $2,615,938 $2,060,313
Albert A. Pimentel $1,089,844 $2,698,906
David R. LaRock $0 $1,234,688
<FN>
<F2> Total value of vested options based on fair market value of
Company's Common Stock of $40.375 per share as of December
31, 1994.
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee (the "Committee") of the Board of
Directors establishes the overall executive compensation
strategies of the Company and approves compensation elements for
the chief executive officer and other executive officers. The
Committee periodically reviews its approach to executive
compensation.
The Committee is comprised of all of the independent, non-
employee members of the Board of Directors (four), none of whom
have interlocking relationships as defined by the Securities and
Exchange Commission. The Committee has available to it such
external compensation advice and data as the Committee deems
appropriate to obtain.
The compensation philosophy of the Committee is to provide a
comprehensive compensation package for each executive officer
that is well suited to support accomplishment of the Company's
business strategies, objectives and initiatives. For incentive-
based compensation, the Committee considers the desirability of
structuring such compensation arrangements so as to qualify for
deductibility under Section 162(m) of the Internal Revenue Code.
As the Committee applies this compensation philosophy in
determining appropriate executive compensation levels and other
compensation factors, the Committee reaches its decisions with a
view towards the Company's overall financial performance.
Executive Officer Compensation
The Committee's approach is based upon a belief that a
substantial portion of aggregate annual compensation for
executive officers should be contingent upon the Company's
performance and an individual's contribution to the Company's
success. In addition, the Committee strives to align the
interests of the Company's executive officers with the long-term
interests of shareholders through stock option grants that can
result in ownership of the Company's Common Stock. The Committee
endeavors to structure each executive officer's overall
compensation package to be consistent with this approach and to
enable the Company to attract, retain and reward personnel who
contribute to the success of the Company.
The Company's compensation program for executive officers is
based on the following guidelines:
* Establishment of salary levels and participation in
generally available employee benefit programs based on
competitive compensation package practices.
* Utilization of a performance-based, cash incentive plan.
* Inclusion of equity opportunities that create long term
incentives based upon increases in shareholder return.
For 1994 the Committee approved and made awards pursuant to
a cash incentive plan that provided for bonus awards to be made
to the executive officers and other members of senior management.
The plan established a minimum level of operating income to be
achieved by the Company for the year before any payments would be
made under the plan. The plan also allowed upward adjustments in
awards to be made if the minimum operating income target was
exceeded. In addition, per the plan's provisions, except as to
his own eligibility for an award under the plan, the CEO was
authorized to determine individual bonus award amounts pursuant
to his judgment of each participant's relative personal
contributions to the Company's performance, subject to the
approval of the Committee of awards to executive officers. The
Company also established and applied an aggregate budget for all
awards to be made under the plan.
The Company's operating income exceeded the target
established under the plan. As a result, the bonus awards to
executive officers under the plan were increased over plan
targets, as permitted by the plan, and upon the recommendation of
the CEO were approved by the Committee. The total of all
payments under the plan were within the budget approved
previously by the Committee.
Based upon the guidelines set forth above, during 1994 the
Committee approved a budget for increases in executive officers'
base salary levels. Increases in base salary amounts for
individual executive officers were then made pursuant to the
CEO's judgment and discretion in satisfying the Company's
compensation philosophy set forth above, which increases, in the
aggregate, were within the budget that had been approved by the
Committee. The general level of compensation of the Company's
executive officers is in median of ranges of compensation
information sources against which the Company makes competitive
comparisons.
The Company maintains a set of guidelines for use in making
recommendations to the Committee on individual grants of stock
options, including the size of such grants, to executive
officers. Options to purchase the Common Stock of the Company
were granted to the executive officers by reference to the
guidelines. These guidelines are developed by reference to
external published surveys and other information that are
believed to fairly reflect the competitive environment in which
the Company operates and which are consistent with the
compensation principles set forth above.
Chief Executive Officer Compensation
Mr. Corrigan has been CEO of the Company since its founding
in 1980. His base salary prior to the beginning of fiscal 1994
was $550,000, which was increased to $580,000 during 1994, based
upon reference to external competitive pay practices, the above
described compensation approach to executive officers and an
independent assessment by this Committee of Mr. Corrigan's
performance.
The Committee also awarded Mr. Corrigan a cash bonus in the
amount of $575,000, based upon its evaluation of Mr. Corrigan's
performance under the provisions of the incentive plan applicable
to the other executive officers. Competitive pay practice data
evaluated by the Committee was derived from an information base
comprising a group of other technology companies, many of which
are included in the Hambrecht & Quist Technology Index, as
compiled by an externally generated information source. The base
salary established by the Committee for the CEO falls in the
median of the range of such information used for competitive
comparisons.
During 1994 the Committee did not make any grants of stock
options to Mr. Corrigan. The Committee believes Mr. Corrigan has
managed the Company well, and has achieved distinguished results,
including in terms of revenue, gross margin, operating income and
net income growth.
MEMBERS OF THE COMPENSATION COMMITTEE
February 13, 1995 James H. Keyes
T.Z. Chu
Malcolm R. Currie
R. Douglas Norby
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are set forth in
the preceding section as well as in Proposal One. There are no
members of the Compensation Committee who were: officers or
employees of the Company or any of its subsidiaries during the
fiscal year, formerly officers of the Company, or had any
relationship otherwise requiring disclosure hereunder.
PERFORMANCE GRAPH
The stock price performance shown on the graph following is
not necessarily indicative of future price performance.
<TABLE>
Comparison of Five Year Cumulative Total Return
Among LSI Logic Corporation<F1>, S&P 500 Index
and Hambrecht & Quist Technology Index
<CAPTION>
Year LSI Logic Standard & Hambrecht &
(12/31) Corporation Poors 500 Quist
<S> <C> <C> <C>
1989 $100 $100 $100
1990 $88 $97 $91
1991 $114 $126 $135
1992 $151 $136 $155
1993 $223 $150 $170
1994 $567 $152 $197
<FN>
<F1> The Company operates on a 52/53 week fiscal year which ends
on the Sunday closest to the December 31. Accordingly, the
Company's last trading day of its fiscal year may vary. For
consistent presentation and comparison to the industry
indices shown herein, the Company has calculated its stock
performance graph assuming a December 31 year end.
</TABLE>
CERTAIN TRANSACTIONS
In January 1992, the Company loaned to James S. Koford, a
former executive officer of the Company, the amount of $350,000
pursuant to an unsecured promissory note, with an annual interest
rate of 8% in order for Mr. Koford to meet personal financial
commitments. In April 1992, the Company loaned to Mr. Koford
$14,900 for personal financial commitments with interest at 8%
per year. The loan was due and payable May 11, 1992. The note
was not repaid and interest on that note accrued through August
31, 1992. On September 1, 1992, additional funds of $60,000 were
loaned to Mr. Koford and such amount plus all indebtedness under
the two promissory notes, including accrued interest, was
consolidated into a new promissory note in the amount of $435,850
with interest at 8% per year. In November, 1993 Mr. Koford
repaid principal in the amount of $50,000 and, in December 1993,
all indebtedness plus accrued interest was consolidated into a
new promissory note in the amount of approximately $394,567 with
interest at 8% per year. As of December 1, 1994, Mr. Koford had
repaid principal and interest of $280,058. The remaining balance
was consolidated into a new promissory note with interest at 8%
per year and is due and payable February 28, 1995. On February
28, 1995, Mr. Koford repaid the loan in full. The largest
aggregate amount outstanding at any time during 1994 attributable
to loans to Mr. Koford was $402,458.38.
The Company, through its European affiliate, LSI Logic
Europe plc, maintained a salary continuation arrangement for
Horst G. Sandfort, a former executive officer of the Company.
The arrangement provided that if, prior to May 7, 1995, Mr.
Sandfort were dismissed or asked to resign from employment with
the Company or any of its affiliated companies (for any reason
other than misconduct), Mr. Sandfort would be entitled to receive
a payment equivalent to one year's salary (at date of
termination), up to a maximum of DM 570,000. Further, in May
1991, LSI Logic GmbH, a wholly-owned subsidiary of LSI Logic
Europe plc, a 98% owned affiliate of the Company, loaned to Mr.
Sandfort DM 600,000. The loan bore interest at the applicable
Lombard rate in the Federal Republic of Germany which has
averaged approximately 8% since 1991. As of July 25, 1994, the
date of Mr. Sandfort's termination, the aggregate amount
outstanding was approximately DM 762,116 or $494,232.
Additionally, in April 1993, Mr. Sandfort was loaned $150,000
pursuant to an unsecured promissory note to cover all costs
associated with his relocation from Germany to the United States.
The note bore interest at 8% per year. In April 1994, principal
and interest of $62,000 was forgiven. The loan became due and
payable upon the termination of Mr. Sandfort's employment with
the Company. At July 25, 1994, the aggregate amount outstanding
was $102,000. The circumstances surrounding Mr. Sandfort's
termination of employment are the subject of certain pending
legal actions, the outcome of which is expected to have an impact
on the above-described matters.
Section 16(a) of the Exchange Act requires the Company's
executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC") and the New York
Stock Exchange. Executive officers, directors and greater than
ten percent stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they
file.
Horst G. Sandfort, a former executive officer of the
Company, has not filed the required Form 4 upon his termination
of employment on July 25, 1994. Based solely on its review of
the copies of such forms received by it and written
representations received from those reporting persons recognized
by the Company as being subject to filing requirements that they
have complied with the relevant filing requirements, the Company
believes that all other filing requirements applicable to its
executive officers and directors were complied with as of January
1, 1995, subject to the exception stated above with respect to
Mr. Sandfort.
OTHER MATTERS
The Company knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting,
it is the intention of the persons named in the enclosed form of
Proxy to vote the shares they represent as the Board of Directors
may recommend.
THE BOARD OF DIRECTORS
March __, 1995
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
LSI LOGIC CORPORATION
1995 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of LSI Logic Corporation, a
Delaware corporation, hereby acknowledges receipt of the Notice
of Annual Meeting of Stockholders and Proxy Statement, each dated
March __, 1995, and hereby appoints Wilfred J. Corrigan and David
E. Sanders, or either of them, proxies and attorneys-in-fact,
with full power to eachof substitution, on behalf and in the name
of the undersigned, to represent the undersigned at the 1995
Annual Meeting of Stockholders of LSI Logic Corporation to be
held on May 12, 1995, at 11:30 a.m. local time, at the Company's
offices located at 1655 McCarthy Boulevard, Milpitas, California,
and at any adjournment(s) thereof and to vote all shares of
Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth
below:
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK
PURCHASE PLAN TO RESERVE ADDITIONAL SHARES, FOR APPROVAL OF THE
AMENDMENT TO THE 1991 EQUITY INCENTIVE PLAN TO RESERVE ADDITIONAL
SHARES, FOR APPROVAL OF LIMITS ON OPTION GRANTS UNDER THE 1991
EQUITY INCENTIVE PLAN, FOR APPROVAL OF THE 1995 DIRECTORS' OPTION
PLAN AND FOR RESERVATION OF SHARES, FOR AMENDMENT OF THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES, FOR RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S INDEPENDENT ACCOUNTANTS, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING AND ANY ADJOURNMENT(S) THEREOF.
1. ELECTION OF DIRECTORS:
Nominees: Wilfred J. Corrigan; Malcolm R. Currie; T.Z. Chu;
James L. Keyes; R. Douglas Norby.
FOR WITHHOLD
/ / / /
/ /_________________________________
For all nominees except as noted above
/ / Mark here for address change and note below.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE EMPLOYEE STOCK
PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCES THEREUNDER BY 750,000 SHARES:
/ / For / / Against / / Abstain
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1991 EQUITY
INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCES THEREUNDER BY 3,000,000 SHARES:
/ / For / / Against / / Abstain
4. PROPOSAL TO APPROVE LIMITS ON OPTION GRANTS TO EMPLOYEES
UNDER THE 1991 EQUITY INCENTIVE PLAN:
/ / For / / Against / / Abstain
5. PROPOSAL TO APPROVE THE 1995 DIRECTORS' OPTION PLAN AND TO
RESERVE 250,000 SHARES FOR ISSUANCES THEREUNDER:
/ / For / / Against / / Abstain
6. PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
OF THE COMPANY TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK FROM 73,500,000 TO 250,000,000 SHARES:
/ / For / / Against / / Abstain
7. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE AS
THE INDEPENDENT ACCOUNTANTS OF THE COMPANY:
/ / For / / Against / / Abstain
and, in their discretion, upon such other matter or matters which
may properly come before the meeting and any adjournment(s)
thereof.
Signature:__________________________Date:___________________
Signature:__________________________Date:___________________
(This Proxy should be marked, dated, signed by the stockholder(s)
exactly as his or her name appears hereon, and returned promptly
in the enclosed envelope. Persons signing in a fiduciary
capacity should so indicate. If shares are held by joint tenants
or as community property, both should sign.)
APPENDIX TO PROXY STATEMENT
LSI LOGIC CORPORATION
1995 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1995
Director Option Plan are to attract and retain the best available
personnel for service as Outside Directors (as defined herein) of
the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory
stock options.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Board" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the
Company.
(d) "Company" means LSI Logic Corporation, a Delaware
corporation.
(e) "Continuous Status as a Director" means the
absence of any interruption or termination of service as a
Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers
and Directors, employed by the Company or any Parent or
Subsidiary of the Company. The payment of a Director's fee by
the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Effective Date" means June 1, 1995, with
stockholder approval.
(i) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(j) "Fair Market Value" means, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including
without limitation the New York Stock Exchange, the Fair Market
Value of a Share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in Common Stock) on the day
of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market thereof) or regularly
quoted by a recognized securities dealer but selling prices are
not reported, the Fair Market Value of a Share of Common Stock
shall be the mean between the high bid and low asked prices for
the Common Stock on the day of determination, as reported in The
Wall Street Journal or such other source as the Board deems
reliable, or;
(iii) In the absence of an established market
for the Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Board.
(k) "Option" means a stock option granted pursuant to
the Plan.
(l) "Optioned Stock" means the Common Stock subject to
an Option.
(m) "Optionee" means an Outside Director who receives
an Option.
(n) "Outside Director" means a Director who is not an
Employee.
(o) "Parent" means a "parent corporation," whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1995 Director Option Plan.
(q) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f)
of the Internal Revenue Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions
of Section 10 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 250,000 Shares
of Common Stock (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without
having been exercised in full, the unpurchased Shares which were
subject thereto shall become available for future grant or sale
under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the
Plan shall not be returned to the Plan and shall not become
available for future distribution under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in
this Section 4(a) shall not be amended more than once every six
months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall
be made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine
the number of Shares to be covered by Options granted to Outside
Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 15,000 Shares (the "First Option")
on the date on which he or she first becomes an Outside Director,
whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy. However, no First
Option shall be granted to an Outside Director who was an Outside
Director immediately prior to the effective date of this Plan or
who, immediately prior to becoming an Outside Director, was a
Director.
(iii) Each Outside Director shall
automatically be granted an Option to purchase 7,500 Shares (a
"Subsequent Option") on April 1 of each year, if on such date he
or she shall have served on the Board for at least six (6)
months.
(iv) Notwithstanding the provisions of
subsections (ii) and (iii) hereof, any exercise of an Option made
before the Company has obtained stockholder approval of the Plan
in accordance with Section 16 hereof shall be conditioned upon
obtaining such stockholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted
hereunder shall be as follows:
(A) the term of the First Option shall be
ten (10) years.
(B) the First Option shall be exercisable
only while the Outside Director remains a Director of the
Company, except as set forth in Section 8 hereof.
(C) the exercise price per Share shall be
the Fair Market Value per Share on the date of grant of the First
Option. In the event that the date of grant of the First Option
is not a trading day, the exercise price per Share shall be the
Fair Market Value on the next trading day immediately following
the date of grant of the First Option.
(D) the First Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject
to the First Option on each anniversary of its date of grant,
provided that the Optionee continues to serve as a Director on
such dates.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option shall
be ten (10) years.
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of
the Company, except as set forth in Section 8 hereof.
(C) the exercise price per Share shall be
the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the
Subsequent Option is not a trading day, the exercise price per
Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the Subsequent Option.
(D) the Subsequent Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject
to the Subsequent Option on each anniversary of its date of
grant, provided that the Optionee continues to serve as a
Director on such dates.
(vii) In the event that any Option granted
under the Plan would cause the number of Shares subject to
outstanding Options plus the number of Shares previously
purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options
to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares
become available for grant under the Plan through action of the
Board or the stockholders to increase the number of Shares which
may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in
accordance with the terms set forth in Section 4 hereof.
An Outside Director who has been granted an Option may, if he or
she is otherwise eligible, be granted an additional Option or
Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right
with respect to continuation of service as a Director or
nomination to serve as a Director, nor shall it interfere in any
way with any rights which the Director or the Company may have to
terminate his or her directorship at any time.
6. Term of Plan. Upon approval by the stockholders of the
Company, the Plan shall become effective upon the Effective Date.
It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including
the method of payment, shall consist of (i) cash, (ii) check,
(iii) other shares which (x) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised, (iv) delivery of a properly executed exercise notice
together with such other documentation as the Company and the
broker, if applicable, shall require to effect an exercise of the
Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, or (v) any combination of the
foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such times
as are set forth in Section 4 hereof; provided, however, that no
Options shall be exercisable until stockholder approval of the
Plan in accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect
to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and
method of payment allowable under Section 7 of the Plan. Until
the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no
right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate
for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No
adjustment shall be made for a dividend or other right for which
the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.
(b) Rule 16b-3. Options granted to Outside Directors
must comply with the applicable provisions of Rule 16b-3
promulgated under the Exchange Act or any successor thereto and
shall contain such additional conditions or restrictions as may
be required thereunder to qualify Plan transactions, and other
transactions by Outside Directors that otherwise could be matched
with Plan transactions, for the maximum exemption from Section 16
of the Exchange Act.
(c) Termination of Continuous Status as a Director.
In the event an Optionee's Continuous Status as a Director
terminates (other than upon the Optionee's death or total and
permanent disability (as defined in Section 22(e)(3) of the
Code)), the Optionee may exercise his or her Option, but only
within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than
the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option on the date
of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within
the time specified herein, the Option shall terminate.
(d) Disability of Optionee. In the event Optionee's
Continuous Status as a Director terminates as a result of total
and permanent disability (as defined in Section 22(e)(3) of the
Code), the Optionee may exercise his or her Option, but only
within twelve (12) months following the date of such termination,
and only to the extent that the Optionee is entitled to exercise
it on the date of such termination (but in no event later than
the expiration of its ten (10) year term). To the extent that
the Optionee is not entitled to exercise an Option on the date of
termination, or if he or she does not exercise such Option (to
the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right
to exercise the Option by bequest or inheritance may exercise the
Option, but only within twelve (12) months following the date of
death, and only to the extent that the Optionee is entitled to
exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the
Optionee is not entitled to exercise an Option on the date of
death, and to the extent that the Optionee's estate or a person
who acquired the right to exercise such Option does not exercise
such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be
sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization,
Dissolution, Merger, Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the number of
Shares covered by each outstanding Option, the number of Shares
which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such
outstanding Option, and the number of Shares issuable pursuant to
the automatic grant provisions of Section 4 hereof shall be
proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Except as expressly
provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to an
Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent
that an Option has not been previously exercised, it shall
terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option shall be assumed or an equivalent option may be
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the
successor corporation does not agree to assume such Options or to
substitute equivalent options, each outstanding Option shall
terminate as of the closing date of the transaction. For the
purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the Option
confers the right to receive or purchase, for each Share of
Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale
of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in
Section 4, the Board may at any time amend, alter, suspend, or
discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to
comply with Rule 16b-3 under the Exchange Act (or any other
applicable law or regulation), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and
to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and
effect as if this Plan had not been amended or terminated.
12. Time of Granting Options. The date of grant of an
Option shall, for all purposes, be the date determined in
accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not
be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the
requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the
Company may require the person exercising such Option to
represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares,
if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant
provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been
obtained.
14. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
15. Option Agreement. Options shall be evidenced by
written option agreements in such form as the Board shall
approve.
16. Stockholder Approval. Continuance of the Plan shall be
subject to approval by the stockholders of the Company at or
prior to the first annual meeting of stockholders held subsequent
to the granting of an Option hereunder. Such stockholder
approval shall be obtained in the degree and manner required
under applicable state and federal law.
