<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ X / Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
VLSI Technology, Inc.
(Name of Registrant as specified in its charter)
Registrant
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
/ 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 on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: (A)
---------------
(4) Proposed maximum aggregate value of transaction:
-------------------------
__________________
(A) 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:
--------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
VLSI TECHNOLOGY, INC.
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1995
9:00 A.M.
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VLSI
Technology, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, April 27, 1995, at 9:00 a.m., local time, at the Company's offices
located at 1151 McKay Drive, San Jose, California 95131, for the following
purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected.
2. To ratify and approve amendments to the Company's 1992 Stock
Plan and to increase the number of shares reserved for
issuance thereunder from 2,000,000 to 4,500,000.
3. To approve an amendment to the Employee Stock Purchase Plan to
increase the number of shares reserved for issuance thereunder
from 6,600,000 to 9,000,000.
4. To approve an amendment to the Company's Certificate of
Incorporation for the purpose of increasing the authorized
number of shares of the Company's Common Shares and Common
Stock by 45,000,000 shares.
5. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December
29, 1995.
6. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 28,
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 ensure your representation at the meeting, you are urged
to vote, date, sign and return the enclosed proxy 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,
THOMAS F. MULVANEY, Secretary
San Jose, California
March ___, 1995
<PAGE> 3
VLSI TECHNOLOGY, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of VLSI Technology, Inc.
(the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Thursday, April 27, 1995, at 9:00 a.m., local time, or
at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The meeting will be
held at the Company's offices located at 1151 McKay Drive, San Jose, California
95131. The Company's principal executive office is located at 1109 McKay
Drive, San Jose, California 95131 and its telephone number at that address is
(408) 434-3100.
These proxy solicitation materials were mailed on or about March_____,
1995 to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on February 28, 1995
(the "Record Date") are entitled to notice of and to vote at the meeting. The
Company has only one series of Common Shares ("Common Shares") outstanding,
which is designated Common Stock, $.01 par value per share ("Common Stock").
At the Record Date, 37,XXX,XXX shares of the Company's Common Stock were issued
and outstanding, representing the total number of votes that may be cast at the
meeting. See "Voting and Solicitation" below. The closing price of the
Company's Common Stock on the Record Date, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation National Market
System ("NASDAQ/NMS") was $______________ per share.
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 Secretary of
the Company or the transfer agent 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
Except as provided below with respect to cumulative voting, each share
of Common Stock has one vote on all matters.
Subject to the procedural requirements described below, every
stockholder voting in 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 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 the number of directors to be elected. If
cumulative voting for directors is properly invoked by any stockholder, all
stockholders may cumulate their votes. Stockholders may only cast votes for
candidates whose names have been properly placed in nomination in accordance
1
<PAGE> 4
with the Company's Bylaws. Any stockholder who desires to cumulate votes in
the election of directors must give advance notice to the Company, in
accordance with its Bylaws, of such stockholder's intention to cumulate his or
her votes and must give notice to the other stockholders at the meeting prior
to voting for directors. The required advance notice to the Company must be
received at the principal executive office of the Company not less than 20 days
nor more than 60 days prior to the meeting and must include the stockholder's
name and address, the number of shares of Common Stock beneficially owned and
the stockholder's request for cumulative voting.
The cost of soliciting proxies will be borne by the Company. The
Company is retaining Corporate Investor Communications, Inc. to solicit proxies
at a cost of approximately $4,000, plus out of pocket expenses. In addition,
the Company will reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. Shares that are voted
"FOR", "AGAINST" or "WITHHELD FROM" a matter are treated as being present at
the meeting for purposes of establishing a quorum and are also treated as
shares entitled to vote at the Annual Meeting (the "Votes Cast") with respect
to such matter.
While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total
number of Votes Cast with respect to a proposal (other than the election of
directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, the Company intends to treat
broker non-votes in this manner. Thus, a broker non-vote will not affect the
outcome of the voting on a proposal (other than the amendment to the
Certificate of Incorporation).
2
<PAGE> 5
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock of the Company as of the Record Date: (i) by each director; (ii) by each
executive officer or former executive officer listed in the Summary
Compensation Table under the heading "EXECUTIVE OFFICER COMPENSATION" (the
"Named Officers"); (iii) by all current directors and executive officers as a
group; and (iv) by all persons known by the Company to be the beneficial owners
of more than five percent (5%) of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
NAME OF PERSON OR IDENTITY OF GROUP SHARES PERCENTAGE
----------------------------------- ------ ----------
<S> <C> <C>
FMR Corp. (1) 3,019,900 %
82 Devonshire Street
Boston, Massachusetts 02109
Intel Corporation (2) 2,677,604 %
2200 Mission College Boulevard
Santa Clara, California 95052
Pierre S. Bonelli (3) *
Donald L. Ciffone (4) *
Robert P. Dilworth (5) *
Gregory K. Hinckley (6) *
James J. Kim (7) *
L. Don Maulsby (8) *
Dieter J. Mezger (9) *
Alfred J. Stein (10) %
Horace H. Tsiang (11) *
All directors and executive officers as a group %
(12 persons) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
</TABLE>
__________________________
* Less than 1%.
(1) As reported in Schedule 13G Amendment No. 2, dated February 10, 1995,
filed by FMR Corp. FMR Corp. is deemed to have sole power to dispose
or direct the disposition of all of the 3,019,900 shares.
3
<PAGE> 6
(2) According to Amendment No. 6 to Schedule 13D dated February 10, 1995,
filed by Intel Corporation ("Intel"), Intel does not hold any shares
of Common Stock. 2,677,604 shares represent shares issuable to
Intel upon exercise of a warrant that expires August 25, 1995.
See "ELECTION OF DIRECTORS - Certain Transactions".
(3) These shares are exercisable within 60 days of the Record Date
--
under options held by Mr. Bonelli.
(4) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Ciffone.
(5) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Dilworth.
(6) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Hinckley.
(7) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Kim.
(8) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Maulsby.
(9) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Mezger.
(10) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Stein.
(11) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by Mr. Tsiang.
(12) Includes shares exercisable within 60 days of the Record
-------------
Date under options held by four directors and eight executive
officers.
COMPLIANCE WITH SECTION 16(A) FILING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and beneficial
owners of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Based solely on its review of the copies of such reports received
by it, or written representations from reporting persons, the Company believes
that during the fiscal year ended December 30, 1994, its officers, directors
and holders of more than 10% of the Company's Common Stock complied with all
Section 16(a) filing requirements.
4
<PAGE> 7
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's next annual meeting of
stockholders must be received by the Company no later than November 22, 1995 in
order that they may be considered for possible inclusion in the proxy statement
and form of proxy relating to that meeting.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
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 currently
directors of the Company. In the event that any Company nominee is unable or
declines to serve as a director at the time of the meeting, the proxies will be
voted for any nominee who shall be designated by the current Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as directors and cumulative voting has been properly invoked, the
proxy holders intend to cumulate their votes and to vote all proxies received
by them in accordance with cumulative voting procedures in such a manner as
they believe will ensure the election of as many of the nominees listed below
as possible. In such event, the specific nominees for whom such votes will be
cast will be determined by the proxy holders. It is not expected that any
nominee will be unable or will decline to serve as a director. 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, their ages as of the Record Date and
certain information about them are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEES AGE PRINCIPAL OCCUPATION SINCE
-------- --- -------------------- --------
<S> <C> <C> <C>
Pierre S. Bonelli (1)(2)...... 55 Chief Executive Officer, Sema Group, a 1983
software, consulting and market research firm
Robert P. Dilworth (1)(2)..... 53 President and Chief Executive Officer, 1991
Metricom Inc., an electronic metering
and communications systems company
James J. Kim (1)(2)........... 59 Chairman of the Board and Chief Executive 1982
Officer, AMKOR Electronics, Inc., a
semiconductor assembly and test company
Alfred J. Stein............... 62 Chairman of the Board, Chief Executive Officer 1982
and President of the Company
Horace H. Tsiang.............. 53 Chief Executive Officer, First International 1992
Computer, Inc., a computer manufacturing company
</TABLE>
__________________________
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
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 any directors or executive officers of the
Company.
5
<PAGE> 8
Mr. Bonelli is also a director of Sema Group and Consultronic, Inc.
Mr. Dilworth is also a director of Metricom Inc., Qume Corporation and
Vadem.
Mr. Stein joined the Company in March 1982 as Chairman of the Board
and Chief Executive Officer and also served as President from January 1983 to
August 1983 and from August 1993 to the present. Mr. Stein was initially
appointed as a director of the Company in April 1982 pursuant to the terms of
his employment offer agreement with the Company. Pursuant to such agreement,
the Company has agreed to use its best efforts while he is employed as Chief
Executive Officer to cause the nomination of Mr. Stein to the Board of
Directors, to recommend his election as a director and to continue his
appointment as Chairman of the Board so long as he serves as a director. Mr.
Stein is also a director of Applied Materials, Inc., Qume Corporation and Tandy
Corporation.
Prior to joining First International Computer, Inc., a Taiwanese
manufacturer of products for the computer industry, in November 1991, Mr.
Tsiang was employed by Wang Laboratories, Inc., a computer manufacturer, from
1969 through July 1991 in various positions, including Executive Vice President
from 1985 to 1991.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business, but have no other legal effect under Delaware law.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held four meetings during the
fiscal year ended December 30, 1994. During such year, no director attended
fewer than 75% of the aggregate of all meetings of the Board of Directors and
any committees upon which he served.
The Board of Directors has a Compensation Committee and an Audit
Committee. The current members of the Compensation and Audit Committees are
identified in the list of directors under "Nominees for Director" above.
The Compensation Committee is authorized to review and approve the
Company's executive compensation policy and to administer the Company's
employee stock option and stock purchase plans. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION".
The Compensation Committee held three meetings in fiscal 1994. The
Compensation Committee is composed solely of non-employee directors.
The Audit Committee selects and recommends to the Board a firm of
independent auditors (whose duty it is to audit the financial statements of the
Company for the fiscal year with respect to which they are appointed) and
monitors the effectiveness of the audit effort and the Company's internal
financial and accounting controls and financial reporting. The Audit Committee
held one meeting in fiscal 1994. The Audit Committee is composed solely of
non-employee directors.
There is no nominating committee nor is there any committee performing
the duties of a nominating committee.
DIRECTOR COMPENSATION
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<PAGE> 9
Non-employee members of the Board of Directors ("Outside Directors")
receive an annual retainer of $10,000, a fee of $2,000 per Board meeting
attended and $500 per Board Committee meeting attended (if such meeting is not
held within one day of a Board meeting). The Company also reimburses its
directors for certain expenses incurred by them in their capacity as directors
or in connection with attendance at Board or Committee meetings.
In addition, Outside Directors participate in the 1986 Directors'
Stock Option Plan (the "Directors' Plan"). Certain amendments to the
Directors' Plan (the "Directors' Plan Amendments") were approved by the
stockholders in May 1994 at the 1994 Annual Meeting. The Directors' Plan
provides for the automatic grant of non-statutory options to Outside Directors
on an annual basis in order to motivate them to continue to serve as directors.
A total of 300,000 shares of the Company's Common Stock is reserved for
issuance during the 10-year term of the Plan, which expires in August 2001.
The exercise price of options granted under the Directors' Plan is the fair
market value of the Company's Common Stock on the date of the automatic grant,
as determined in accordance with the Directors' Plan. Options granted prior to
stockholder approval of the Directors' Plan Amendments have a term of five
years, and options granted after such approval have a term of ten years.
Each Outside Director who was serving as such on the date of adoption
of the Directors' Plan received an automatic grant on such date of an option to
purchase 20,000 shares of Common Stock (an "Initial Option"). An Initial
Option becomes exercisable cumulatively with respect to 5,000 shares on the
first day of each fiscal year following the date of grant. Each person who
becomes an Outside Director subsequent to the date of adoption of the
Directors' Plan receives an automatic grant of an Initial Option on the date of
his or her initial appointment or election to the Board.
After receiving an Initial Option, an Outside Director is
automatically granted an additional option to purchase 5,000 shares under the
Directors' Plan (a "Subsequent Option") on the first day of each fiscal year of
the Company. Each Subsequent Option becomes exercisable in full on the first
day of the fourth fiscal year beginning after the date of grant of such option.
The Directors' Plan Amendments eliminated the previously existing 40,000 -
share limit on the number of shares subject to options granted under the
Directors' Plan to any director and also provided for the grant of an
immediately exercisable replenishment option to purchase up to 20,000 shares to
any director whose Initial Option had expired, or in the future expires,
unexercised.
During the last fiscal year, a replenishment option to purchase 20,000
shares at an exercise price of $14.25 per share was granted under the
Directors' Plan to each of directors Bonelli and Kim. Subsequent Options to
purchase 5,000 shares at an exercise price of $9.75 per share were granted
under the Directors' Plan to directors Dilworth and Tsiang. As of December 30,
1994, options to purchase 15,000 shares had been exercised under the Directors'
Plan at a net realized value of $65,000 and 175,000 shares remained available
for future grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of directors Bonelli, Dilworth and
Kim.
The Company paid AMKOR (a corporation of which Mr. Kim is an officer,
director and the majority stockholder) or accrued for payment approximately
$27,600,000 in fiscal 1994 for assembly and test services performed for the
Company by ANAM Semiconductor Technology Co. Ltd. (a Korean corporation with
which Mr. Kim is affiliated) under contract with AMKOR.
7
<PAGE> 10
CERTAIN TRANSACTIONS
INTEL. On August 25, 1992, Intel Corporation ("Intel") invested $50
million (prior to deduction of issuance costs) in the Company to acquire
5,355,207 shares of the Company's Common Stock (the "Intel Shares") plus a
warrant (the "Warrant") to purchase an additional 2,677,604 of the Company's
Common Stock (the "Warrant Shares") at $11.69 per share pursuant to the
Intel/VLSI Stock and Warrant Purchase Agreement (the "Equity Agreement"). In
addition, on July 8, 1992, the Company and Intel entered into a Technology and
Manufacturing Agreement (the "Technology Agreement"). Pursuant to the
Technology Agreement, Intel licensed its 386SL(TM) core to the Company and the
parties were to develop, market and sell integrated circuits into the handheld
personal computer market. During 1994, the Company and Intel completed the
joint development of integrated circuits for the handheld personal computer
market.
During 1994, it became apparent that the market for handheld personal
computers was developing much more slowly than originally anticipated,
resulting in significant uncertainty as to the near-term revenue potential of
the handheld personal computer market. As a result, in August 1994 the Company
and Intel agreed in principal to terminate the Technology Agreement and Intel
announced its intention to liquidate all or a portion of its ownership in VLSI.
The parties mutually terminated the Technology Agreement in November 1994. In
January and February 1995, Intel sold all of the Intel Shares.
The Equity Agreement currently provides Intel with demand registration
rights with respect to the Warrant Shares. The Equity Agreement also imposes
certain restrictions on Intel, including a limitation on Intel's ability to
acquire additional shares of VLSI voting stock (referred to as a standstill)
and a requirement that Intel vote its VLSI stock in the same proportion as
other stockholders on matters submitted to the VLSI stockholders for approval
(unless it would be materially adverse to Intel's interest). All other
significant rights of, and restrictions on, Intel under the Equity Agreement
have terminated.
Terminated rights included a right of first refusal upon a proposed
sale of corporate control of the Company, a right to initiate a tender offer
for the Company's stock under certain circumstances, a right to respond to a
third-party tender offer by making its own tender offer for the Company's
stock, a right to maintain its ownership interest in the Company, a right to
appoint a director or have an Intel observer attend Company Board of Directors
meetings, restrictions on transfer of the Intel Shares, the Warrant and the
Warrant Shares and a limited right of first refusal by the Company upon a
proposed transfer of the Company's securities by Intel in certain circumstances
following a hostile tender offer.
The Warrant, which expires in August 1995, contains certain
antidilution provisions, including adjustments for future stock issuances at
prices below fair market value. In the event that the Company is acquired (by
merger, sale of assets or otherwise) for consideration other than common stock
of the acquiring corporation during the three-year term of the Warrant, the
warrantholder is entitled to receive minimum consideration from the acquiring
corporation. Such minimum amount, which was equal to $3.25 per Warrant Share
as of August 25, 1992, decreases on a straight-line daily basis over the
three-year term of the Warrant to zero ($0.72 at December 30, 1994). The
Warrant does not give the holder thereof any voting rights prior to exercise of
the Warrant and issuance of the Warrant Shares.
RELOCATION ASSISTANCE. In 1992, to facilitate his relocation, the
Company loaned Dieter J. Mezger $100,000 on an interest- free basis with
principal due three years from the date of the promissory note and an
additional $280,000 with interest payable at the rate of 7% over the one-year
term of the promissory note. The due date on that loan has been extended
several times by the Board and it is now due on March 31, 1995. In 1994, Mr.
Mezger reduced the $280,000 principal amount by $80,000. Both loans are
secured by trust deeds on Mr. Mezger's residence. The largest principal amount
outstanding during the last fiscal year was $380,000 and the
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<PAGE> 11
principal amount outstanding at fiscal year end was $300,000. In January 1995,
Mr. Mezger paid off, in full, the $100,000 loan and promissory note.
In 1994, to facilitate his relocation, the Company loaned L. Don
Maulsby $89,000 on an interest-free basis with principal due one year from the
date of the promissory note. The note is secured by a trust deed on Mr.
Maulsby's residence. The full amount remained outstanding at 1994 fiscal year
end. During 1994, the Company also reimbursed Mr. Maulsby $73,655 for costs
associated with his relocation.
See also the footnotes to the Summary Compensation Table under the
heading "EXECUTIVE OFFICER COMPENSATION" and the information under the heading
"ELECTION OF DIRECTORS - Compensation Committee Interlocks and Insider
Participation".
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table, together with the footnotes thereto, summarizes
the total compensation for fiscal year 1994 of the Chief Executive Officer and
the four other most highly compensated executive officers of the Company
(collectively, the "Named Officers"), as well as the total compensation paid to
each Named Officer for the Company's two previous fiscal years, if applicable.
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPEN-
------------------------------------------- AWARDS SATION
OTHER -------------------- ---------
ANNUAL SECURITIES
NAME AND SALARY BONUS COMPEN- UNDERLYING
PRINCIPAL POSITION YEAR ($) (1) ($) (2) SATION($) (3) OPTIONS(#) (4) ($) (5)
- ----------------------- ---- -------- ------- --------- -------------------- ---------
COMPANY SUBSIDIARY
-------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred J. Stein 1994 $520,445 $ -- 75,000 0 $57,950
Chairman of the Board, 1993 485,009 300,000 -- 75,000 0 41,222
Chief Executive Officer 1992 484,144 0 -- 150,000 70,000 39,667
and President
- --------------------------------------------------------------------------------------------------------------------
Dieter J. Mezger 1994 $298,096 $ $ 40,138 0 0 $13,741
Senior Vice President 1993 296,441 30,000 51,699 0 0 16,156
of the Company and 1992 300,625 0 39,607 0 100,000 15,668
President of COMPASS
Design Automation, Inc.
- --------------------------------------------------------------------------------------------------------------------
Gregory K. Hinckley (1)(b) 1994 $243,269 $ 0 30,000 0 $ 1,923
Vice President, Finance and 1993 225,000 75,000 $121,809 0 25,000 1,792
Chief Financial Officer 1992 60,577 0 15,361 100,000 0 448
- --------------------------------------------------------------------------------------------------------------------
L. Don Maulsby (1)(c) 1994 $204,615 $ $ 75,171 50,000 0 $ 934
Vice President and 1993 185,000 71,000 0 20,000 0 853
General Manager, 1992 183,268 20,000 0 30,000 10,000 809
Personal Computer
Division
- --------------------------------------------------------------------------------------------------------------------
Donald L. Ciffone (1)(b) 1994 $206,400 $ 0 30,000 0 $ 780
Vice President and 1993 184,385 76,000 0 35,000 0 714
General Manager, 1992 155,961 0 0 50,000 10,000 743
VLSI Product Divisions
</TABLE>
9
<PAGE> 12
(1) (a) The amounts disclosed in this column include amounts deferred by
the Named Officers pursuant to the Company's 401(k)
Investment/Retirement Plan (the "401(k) Plan").
(b) Messrs. Ciffone and Hinckley became executive officers in August
1992.
(c) Mr. Maulsby became an executive officer in November 1992.
(2) The amounts disclosed in this column represent:
(a) Payments made by the Company under its Executive Performance
Incentive Plan. See "REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION".
(b) Commissions earned by Mr. Maulsby in 1992 under the Company's
sales incentive program.
(3) Amounts exclude perquisites if the aggregate amount of the Named
Officer's perquisites was less than the lesser of $50,000 or 10% of
such Named Officer's salary plus bonus. The amounts in the "Other
Annual Compensation" column include:
(a) Payment by the Company of certain 1992, 1993 and 1994 relocation
costs to Mr. Mezger in the amount of $26,016, $39,226 and
$30,384, respectively.
(b) Payment by the Company of certain 1992 and 1993 relocation costs
to Mr. Hinckley in the amount of $15,361 and $121,809,
respectively.
(c) Payment by the Company of certain 1994 relocation costs to Mr.
Maulsby in the amount of $73,655.
(d) The differential between the rate of interest, if any, charged by
the Company on loans to Mr. Mezger and the average rate earned by
the Company on its cash (2.68%). The differential between the
rate of interest charged by the Company on its loan to Mr.
Maulsby and the average rate earned by the Company on its cash
(4.32%).
(4) (a) The stock option grants listed in the table include options to
purchase Common Stock of the Company and options to purchase
Common Stock of a subsidiary, COMPASS Design Automation, Inc.
("COMPASS"). The Company's subsidiary, COMPASS, granted stock
options to purchase COMPASS common stock to virtually all of the
COMPASS employees and certain VLSI employees, including the Named
Officers, pursuant to the COMPASS 1992 Stock Option Plan (the
"COMPASS Stock Plan"). See "EXECUTIVE OFFICER COMPENSATION -
Stock Options" below for additional information regarding options
to purchase stock of COMPASS granted in fiscal 1992, 1993 and
1994.
(5) The amounts in the "All Other Compensation" column for fiscal year
1994 include:
(a) Company contributions in fiscal 1994 under VLSI's 401(k)
Investment/Retirement Plan, in the following amounts: Alfred J.
Stein - $300; Gregory K. Hinckley - $400; L. Don Maulsby - $200;
Donald L. Ciffone - $300.
(b) Payment by the Company of 1994 premiums for term life insurance
for the Named Officers in the following amounts: Alfred J. Stein
- $13,942; Dieter J. Mezger - $1,786; Gregory K. Hinckley -
$1,523; L. Don Maulsby - $734; Donald L. Ciffone - $480.
10
<PAGE> 13
(c) Payment by the Company of 1994 premiums for a split dollar life
insurance policy for Mr. Stein in the amount of $43,708.
(d) Payment by the Company of 1994 premiums for disability insurance
policies for Mr. Mezger in the amount of $11,955.
MANAGEMENT CONTINUITY AGREEMENTS
The Company is a party to management continuity agreements with certain
of its officers, including all of the Named Officers, which agreements are
designed to ensure the officers' continued services to the Company in the event
of a "change-in- control". Benefits are payable only if the officer's
employment is terminated by the Company or the officer is constructively
discharged within two years following a "change-in-control". For purposes of
the agreement, a "change-in-control" is deemed to have occurred in the event of
(1) Company stockholder approval of (i) a merger or consolidation of the Company
with any other corporation or (ii) a plan of liquidation or dissolution; (2) the
sale, lease or exchange of more than 50% of the Company's assets; (3)
acquisition by any person of beneficial ownership of more than 50% of the
combined voting power of the Company's then outstanding securities; or (4) a
change of the majority of the Board of Directors within a three-year period.
If, within two years after a "change-in-control", an officer's
employment is terminated by the Company or the officer is constructively
discharged, the officer will receive: (1) a severance benefit equal to two
times his or her current annual base salary; (2) full and immediate vesting of
all unvested stock options; and (3) twenty-four months continuation of other
incidental benefits.
STOCK OPTIONS
The following table presents information with respect to options to
purchase the Company's Common Stock during fiscal 1994. No options to purchase
COMPASS Common Stock were granted during fiscal 1994 to the Named Officers. No
stock appreciation rights ("SARs") have been granted by the Company or COMPASS.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
(1) RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (2)
---------------------------------------------------------------- ----------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME OR GROUP GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alfred J. Stein 75,000 8.22% $12.125 4/14/2004 $ 571,901 $ 1,449,310
Dieter J. Mezger 0 -- -- -- -- --
Gregory K. Hinckley 30,000 3.29% 12.125 4/14/2004 228,760 579,724
L. Don Maulsby 50,000 5.48% 12.125 4/14/2004 381,267 966,206
Donald L. Ciffone 30,000 3.29% 12.125 4/14/2004 228,760 579,724
All Stockholders N/A N/A N/A N/A 276,849,132 701,590,057
</TABLE>
- ---------------
(1) All options to purchase the Company's Common Stock granted in 1994 to
the Named Officers have ten-year terms and become exercisable in
annual 25% increments
11
<PAGE> 14
commencing on the first anniversary of the original grant date, with
full exercisability occurring on the fourth anniversary date. The per
share exercise price is the closing price for the Company's Common
Stock on NASDAQ/NMS on the date of the grant. The options were granted
under the Company's 1992 Stock Plan (the "Stock Plan"), which is
currently administered by the Compensation Committee. Such committee
has broad discretion and authority to amend outstanding options and to
reprice options, whether through an exchange of options or an amendment
thereto. The Stock Plan provides for the automatic acceleration of
vesting of all outstanding options (such that they become exercisable
in full) in the event of a "change-in-control", as defined in the Stock
Plan.
(2) For the Named Officers, the potential realizable value is calculated
based on the fair market value on the date of grant, which is equal to
the exercise price of options granted in fiscal 1994, assuming that
the Company's Common Stock appreciates in value from the date of grant
until the end of the option term at the annual rate specified (5% and
10%). For "All Stockholders", the potential value is calculated based
on $12.00 per share, the closing price of the Company's Common Stock
on the last trading day of the Company's 1994 fiscal year, December
30, 1994, assuming the same annual rates of appreciation for ten
years, multiplied by the outstanding shares of Common Stock at fiscal
year end. Potential realizable value listed for the Named Officers
and "All Stockholders" is net of the option exercise price or fiscal
year end price, respectively. The assumed rates of appreciation are
specified in SEC rules and do not represent the Company's estimate or
projection of future stock prices. Actual gains, if any, resulting
from stock option exercises and Common Stock holdings are dependent on
the future performance of the Common Stock and the option holders'
continued employment through the vesting period. There can be no
assurance that the amounts reflected in this table will be achieved.
The number of shares of Company and COMPASS stock issued upon exercise
of options and the value realized from any such exercise during the year ended
December 30, 1994 and the number of exercisable and unexercisable options held
and their value at December 30, 1994 for the Named Officers of the Company are
set forth in the following table.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
---------------------------------------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)(2)
----------------------- ---------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) (1) EXERCISABLE/ EXERCISABLE/ EXERCISABLE/ EXERCISABLE/
---- --------------- ---------------- UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE UNEXERCISABLE
VLSI COMPASS(3) VLSI COMPASS(3) VLSI COMPASS VLSI COMPASS
---- ---------- ---- ---------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alfred J. Stein 0 23,334 0 0 403,750/ 0/ $2,657,344/ $0/
216,250 46,666 $692,031 $0
Dieter J. Mezger 0 0 0 0 116,700/ 33,334/ 805,875/ 0/
5,000 66,666 14,375 0
Gregory K. Hinckley 0 0 0 0 50,000/ 0/ 250,000/ 0/
80,000 25,000 250,000 0
L. Don Maulsby 12,500 0 $90,630 0 15,937/ 3,334/ 86,590/ 0/
78,000 6,666 140,813 0
Donald L. Ciffone 10,000 0 60,943 0 31,250/ 3,334/ 125,781/ 0/
73,750 6,666 207,031 0
</TABLE>
- ---------------
(1) Market value of underlying securities on the date of exercise, minus
the exercise price.
12
<PAGE> 15
(2) Market value of underlying securities at fiscal year end (for
in-the-money options only) minus the exercise price. All COMPASS stock
options described in footnote (3) to this table were not in-the-money
at 1994 fiscal year end.
(3) In 1992 and 1993, the Company's subsidiary, COMPASS, granted stock
options to purchase COMPASS common stock to certain of the Named
Officers pursuant to the COMPASS Stock Plan (the "COMPASS Plan"). All
optionees under the COMPASS Plan, including such Named Officers,
received option grants having an exercise price of $.10 per share,
which represented the estimated fair value of COMPASS common stock on
the date of grant as determined by the COMPASS Board of Directors.
Subject to certain conditions, these options become exercisable
cumulatively as follows: second anniversary of date of the grant -
33-1/3%; third anniversary of the date of the grant - additional
33-1/3%; fourth anniversary of the date of the grant - remaining
33-1/3%. Subject to certain conditions, most of these options,
including all those granted to the Named Officers, contain additional
rights and obligations, including the right of a COMPASS Plan
participant to put shares of COMPASS common stock acquired through the
COMPASS Plan back to COMPASS or the Company in certain events; the
Company's right to buy back COMPASS common stock issued under the
COMPASS Plan; and a right of first refusal by COMPASS or VLSI to
purchase COMPASS common stock issued under the COMPASS Plan that is
being offered for sale to any third party.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION PRINCIPLES
The Compensation Committee firmly believes that the compensation of
its employees, including its executive officers, should be designed to:
- Attract, retain and motivate well-qualified employees who
contribute to the long-term success of the Company.
- Strongly encourage the development and achievement of strategic
objectives that enhance long-term stockholder value.
- Relate compensation levels to the overall success of the Company,
which includes sound financial results for its stockholders,
providing quality products and services useful to its customers and
fostering an environment based on teamwork, enabling its employees
to achieve both strategic and tactical objectives.
Regarding Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") (which limits the deductibility by corporations of certain
executive compensation in excess of $1 million for any covered individual), the
Compensation Committee has elected to qualify compensation under the Company's
1992 Stock Plan for an exemption from the deductibility limitations of Section
162(m). See "RATIFICATION OF AMENDMENTS TO THE 1992 STOCK PLAN". In addition,
the non-equity-based compensation paid to the Named Officers in fiscal 1994
does not exceed $1 million for any individual, nor is it currently anticipated
to exceed such amount in fiscal 1995.
EXECUTIVE COMPENSATION PRACTICES
The Company's executive compensation program consists primarily of
cash and equity-based components. Salary and, if warranted, annual awards
under the Executive Performance Incentive Plan (the "Incentive Plan"), comprise
the cash components. Grants of options under the Company's stock option plans
and the COMPASS Stock Plan and participation in the Company's employee stock
purchase plan comprise the equity-based components. The Company
13
<PAGE> 16
also provides health and welfare benefits to the Named Officers through programs
that are available to all employees in general.
CASH COMPONENTS
Salary levels are reviewed periodically and Incentive Plan target
levels are established annually for executive officers by the Compensation
Committee after a review of compensation surveys for electronic manufacturing
companies, including integrated circuit manufacturers. For 1994, the survey
group consisted of 19 companies in the semiconductor industry, including U.S.
semiconductor companies having annual revenues of up to approximately $2
billion and semiconductor operations of foreign multi- national corporations.
Of these companies, 6 are included in the Hambrecht & Quist Technology index
(See "STOCK PRICE PERFORMANCE GRAPH"). In years that the Company exhibits
superior financial performance, cash compensation is designed to be above
average competitive levels. When financial performance is below plan, cash
compensation is designed to be below average competitive levels. It is the
Company's intent to maintain a total compensation program that can attract,
motivate and retain high-performance executives who are critical to the
long-term success of the Company.
Employees, including executive officers, who participate in the 401(k)
Plan may receive a Company matching contribution into their respective 401(k)
Plan accounts of up to $800 per year.
The Incentive Plan provides for annual awards, which are paid after
the end of the fiscal year, based upon achievement of pre-established annual
goals (the "Goals"), including revenue and operating profit goals for the
Company's financial performance, department or business unit goals and
individual performance goals. Each element is weighted by percentage, but the
weighting can be varied at the discretion of the Compensation Committee. The
Compensation Committee establishes targets for revenue, gross margin and
operating profit on a Company-wide and business unit basis at the beginning of
each fiscal year, and also sets individual objectives, such as new product
development milestones and key product launch dates. During 1994, no awards
were to be paid if the Company's performance fell below a specified operating
profit target. Once the Company's operating profit targets were met,
individual Incentive Plan payouts were awarded based on achievement of the
Goals. Awards are prorated for participation for less than one year, but
awards are not generally paid for less than six months of participation, except
at the discretion of the Compensation Committee. Employees with other bonus
arrangements or contracts (including commission arrangements) are generally
excluded from participation in the Incentive Plan, unless otherwise directed by
the Compensation Committee. The Incentive Plan may be modified from time to
time, or discontinued, at the discretion of the Compensation Committee.
EQUITY-BASED COMPONENTS
The Company utilizes equity-based compensation in the form of stock
options and discount stock purchases under the employee stock purchase plan for
its employees (including the Named Officers) because it provides a close tie
between management and the stockholder by focusing employees and management on
creating and enhancing long-term stockholder value. The actual value of such
equity-based compensation correlates directly to the Company's stock price
performance.
Stock options are an essential element of the Company's compensation
package. This component is intended to retain all employees receiving options,
including the Named Officers, and to motivate them to improve long-term stock
market performance. Some 1,193 employees (or approximately 44% of all
employees at December 30, 1994) hold options under the various stock option
plans. Stock options are currently outstanding under the 1982 Incentive Stock
Option Plan (the "1982 Plan"), which expired in May 1992, the 1992 Stock Plan
(the "1992 Plan") and the COMPASS Stock Plan.
14
<PAGE> 17
In determining the number of shares subject to options to be granted
to executive officers, the Compensation Committee considers survey data on
options granted to executives with comparable positions at other companies, the
number of shares subject to options previously granted to the executive, the
number of unvested shares subject to outstanding options held by the executive
(which is an indicator of the retention value of the outstanding options) and
an evaluation of the executive's prior year individual performance. In 1994,
the Compensation Committee continued to focus on retention and individual
performance as the critical factors in determining the number of options to
grant to executives.
The options granted in 1994 under the 1992 Plan had exercise prices of
not less than the fair market value (the NASDAQ/NMS closing price) of the
Common Stock on the grant date and will only have value if the stock price
increases subsequent to the date of grant. These options become exercisable
cumulatively at an annual rate of 25% of the total shares granted commencing
one year from the date of grant. Both the 1982 Plan and the 1992 Plan provide
for full vesting of options in the event there is a change of control of the
Company.
Options to purchase common stock of COMPASS granted under the COMPASS
Stock Plan in 1994 had exercise prices of not less than the estimated fair
value, as determined by the COMPASS and Company Board of Directors, on the
grant date. Subject to certain conditions, these options become exercisable
cumulatively as follows: second anniversary of the grant date -
33-1/3%; third anniversary of the grant date - additional 33-1/3%; fourth
anniversary of the grant date - remaining 33-1/3%. No option under the COMPASS
Stock Plan may be exercised after 10 years and one month from the date of the
grant. No options to purchase common stock of COMPASS were granted to any of
the Named Officers in 1994.
The Company has not issued any stock appreciation rights (SARs), stock
purchase rights, long-term performance awards in stock or stock bonus awards to
any Named Officer or any other person under the 1982 Plan, the 1992 Plan or the
COMPASS Stock Plan.
1994 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stein, in his capacity as the Chairman of the Board, Chief
Executive Officer and President, participates in the same compensation programs
as the other Named Officers. The Compensation Committee has targeted Mr.
Stein's total compensation, including compensation derived from the Incentive
Plan and the stock option plan, at a level it believes is competitive with the
average amount paid by other electronics companies based on survey data.
After a review of compensation survey data indicating that Mr. Stein's
salary was no longer competitive and a review of his performance, Mr. Stein's
annual base salary was increased from $485,000 to $533,500 in April 1994. Mr.
Stein's Incentive Plan award for 1994 was based on the Company achieving
certain operating profit target levels set by the Compensation Committee. The
1994 stock option grant to Mr. Stein was primarily made as a retention vehicle
in view of the relatively small number of unvested options held by Mr. Stein
and the growing competition for top executive talent in the semiconductor
industry. Mr. Stein also receives additional life insurance benefits and
income tax preparation services.
15
<PAGE> 18
This report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement (or any portion hereof) into any filing under the
Securities Act of 1933 or under the Exchange Act (collectively, the "Acts"),
except to the extent that the Company specifically incorporates this report by
reference, and shall not otherwise be deemed filed under such Acts.
SUBMITTED BY THE
COMPENSATION COMMITTEE:
James J. Kim, Chairman
Pierre S. Bonelli
Robert P. Dilworth
16
<PAGE> 19
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 index (the "S&P
500") and the Hambrecht & Quist Technology index ("H&Q Technology"). The H&Q
Technology index is composed of approximately 200 companies in the electronics
and technology industry, including semiconductors, health care and related
service industries. Historic stock price performance is not necessarily
indicative of future stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
[CAMERA READY CHART]
Assumes $100 invested on December 30, 1989
*Total return assumes reinvestment of dividends
Note: Total returns for the S&P 500 index and for the H&Q
Technology index are weighted based on market
capitalization.
<TABLE>
<CAPTION>
12/31/89 12/29/90 12/28/91 12/26/92 12/25/93 12/30/94
<S> <C> <C> <C> <C> <C> <C>
VLSI $100.00 $61.02 $103.39 $110.17 $145.76 $162.71
S & P 500 $100.00 $96.89 $126.42 $136.05 $149.76 $151.74
H & Q TECHNOLOGY $100.00 $91.42 $135.14 $155.45 $169.64 $196.90
</TABLE>
The Stock Price Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement (or any portion hereof) into any filing under the Acts, except to the
extent that the Company specifically incorporates this performance graph by
reference, and shall not otherwise be deemed filed under such Acts.
17
<PAGE> 20
RATIFICATION OF AMENDMENTS TO THE 1992 STOCK PLAN
Since 1982, the Company has provided stock options as an incentive to
its key employees and executives as a means to promote increased stockholder
value. Management believes stock options are one of the prime ways to attract
and retain key personnel responsible for the continued development and growth
of VLSI's business. In addition, stock options are considered a competitive
necessity in the semiconductor/high technology industries.
In November 1994, the Company's Board of Directors, subject to
stockholder approval, adopted amendments to the 1992 Stock Plan (the "1992
Plan"). The amendments approved by the Board of Directors (i) increase the
number of shares reserved for issuance under the 1992 Plan from 2,000,000
shares to 4,500,000 shares; and (ii) set the maximum number of shares that can
be granted to any individual during any one fiscal year at 500,000 shares. At
the Annual Meeting, stockholders are being asked to approve the amendments to
the 1992 Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required
to ratify the amendments to the 1992 Plan, including the increase in the number
of shares reserved for issuance thereunder from 2,000,000 shares to 4,500,000
shares.
RECOMMENDATION
The Board of Directors unanimously recommends that stockholders vote
"FOR" ratification of the amendments to the 1992 Plan. The essential features
of the 1992 Plan, as amended, are outlined below.
GENERAL
The 1992 Plan provides an incentive to eligible employees and
consultants whose present and potential contributions are important to the
continued success of the Company, affords them an opportunity to acquire a
proprietary interest in the Company, and enables the Company to enlist and
retain the best available talent for the conduct of its business. The 1992
Plan permits the granting of incentive stock options ("ISOs"), nonstatutory
stock options ("NSOs"), stock appreciation rights ("SARs"), stock purchase
rights ("Purchase Rights"), long-term performance awards ("Long-Term Awards")
and stock bonus awards ("Stock Bonuses"). SARs, Purchase Rights, Long-Term
Awards and Stock Bonuses are referred to collectively as "Rights". The Company
does not currently have any specific plans to grant any awards under the 1992
Plan other than options.
ELIGIBILITY
Awards may be granted under the 1992 Plan to employees (including
officers and directors) and consultants of the Company, its parent (if any) and
its subsidiaries. The 1992 Plan provides that NSOs, SARs, Purchase Rights,
Stock Bonuses and Long-Term Awards may be granted to employees and consultants
of the Company or any parent or majority-owned subsidiary of the Company.
Incentive stock options may be granted only to employees of the Company or any
parent or subsidiary of the Company. As of December 30, 1994, the Company's
2,728 employees and its consultants would have been eligible to participate in
the 1992 Plan.
18
<PAGE> 21
ADMINISTRATION
The 1992 Plan may be administered by the Board of Directors or by a
committee of the Board (the "Administrator"), and is currently administered by
the Compensation Committee, which is composed solely of non-employee directors.
The Administrator has full power to select, from among the employees and
consultants eligible for awards, the individuals to whom awards will be
granted, to make any combination of awards to any participant and to determine
the specific terms of each grant, subject to the provisions of the 1992 Plan.
The interpretation and construction of any provision of the 1992 Plan by the
Administrator shall be final and conclusive.
STOCK OPTIONS
The term of each option will be fixed by the Administrator and may not
exceed 10 years from the date of grant in the case of ISOs, or five years from
the date of grant in the case of ISOs granted to 10% stockholders. The
Administrator determines the time or times that each option may be exercised.
Options may become exercisable in installments, and the exercisability of
options may be accelerated either automatically upon the occurrence of certain
events described in the 1992 Plan or the option agreement or on a discretionary
basis by the Administrator.
The Administrator sets the option exercise price, which may be less
than 100% of the fair market value on the date of grant of the option. The
method of payment of consideration with respect to shares issued upon exercise
of options granted under the 1992 Plan shall be determined by the Administrator
(and, in the case of ISOs, determined at the time of grant) and may be any
legal form of consideration permitted by applicable laws.
The Administrator of the 1992 Plan may at any time offer to buy out,
for a payment in cash or shares of Common Stock of the Company, any option
previously granted, based on such terms and conditions as the Administrator
shall establish and communicate to the optionee at the time that such offer is
made. Buy-out offers made to persons who are subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), referred to
herein as "Insiders", may only be payable in cash.
STOCK APPRECIATION RIGHTS
The 1992 Plan also permits the granting of nontransferable stock
appreciation rights. SARs may be granted in connection with all or any part of
an option, either concurrently with the grant of such option or at any time
thereafter during the term of the option, or may be granted independently of
options.
The Administrator of the 1992 Plan may place limits on the aggregate
amount that may be paid upon exercise of an SAR, provided, however, that with
respect to SARs granted in connection with options, such limits shall not
restrict the exercisability of the related option. The Company's obligation
arising upon the exercise of an SAR may be paid in Common Stock or in cash, or
any combination thereof, as the Administrator may determine.
TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP
Under the 1992 Plan, the period of time during which an option or SAR
may be exercised following an optionee's termination of employment or
consulting relationship for any reason is such period as is determined by the
Administrator, up to a maximum of 10 years in the case of death or permanent
disability and five years in the case of termination for any other reason.
After termination of employment or consulting, an option or SAR may thereafter
be exercised during the specified period but in no event after the expiration
of the original term of the option or SAR. After termination, an option or SAR
is generally only exercisable to the extent it was
19
<PAGE> 22
exercisable at the date of such termination, unless otherwise determined by the
Administrator. The employment or consulting relationship is not considered to
be terminated in the event of certain leaves of absence or transfers between the
Company, its parent (if any), its majority-owned subsidiaries or its affiliated
companies (defined to be companies with respect to which the Company owns,
directly or indirectly, at least 20% of the voting power).
STOCK PURCHASE RIGHTS
The 1992 Plan permits the Company to grant stock purchase rights, which
allow the offeree the opportunity to purchase, during a specified period of time
not exceeding 60 days, Common Stock of the Company on the terms specified by the
Administrator. The Administrator notifies the offeree in writing of the terms,
conditions and restrictions related to the offer, including the number of shares
of Common Stock that the offeree shall be entitled to purchase, the price to be
paid and the time within which the offeree must accept such offer (which shall
in no event exceed 60 days from the date upon which the Administrator made the
determination to grant the Purchase Right). Offers may be accepted by execution
of a restricted stock purchase agreement between the Company and the offeree and
payment of the purchase price.
Unless the Administrator determines otherwise, the restricted stock
purchase agreement shall grant the Company a repurchase option at the original
price paid by the purchaser, exercisable upon the termination of the purchaser's
employment or consulting relationship for any reason. The purchase price for
shares repurchased by the Company pursuant to the restricted stock purchase
agreement may be paid by cancellation of any indebtedness of the purchaser to
the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
LONG-TERM PERFORMANCE AWARDS
The 1992 Plan also permits the granting of Long-Term Awards payable in
cash or Common Stock. The range of values subject to a Long-Term Award may be
specified in dollar amounts and/or numbers of shares. Such awards shall be
based upon Company, parent, subsidiary, affiliated company and/or individual
performance over designated periods, measured by such factors or other criteria
as the Administrator deems appropriate. Performance objectives may vary from
participant to participant, group to group and period to period. Such awards
shall not require payment by the award recipient of any consideration. The
Administrator may adjust Long-Term Awards as it deems necessary or appropriate,
based on changes in the law or in accounting or tax rules, in order to avoid
windfalls or hardships.
STOCK BONUS AWARDS
The 1992 Plan also permits the granting of Stock Bonuses based on such
performance or employment-related factors as the Administrator shall determine.
Stock Bonus awards may vary from participant to participant and group to group.
Such awards shall not require payment by the recipient of any consideration but
may, in the discretion of the Administrator, be subject to vesting or
forfeiture restrictions.
WRITTEN AGREEMENTS; RULE 16B-3
All awards granted under the 1992 Plan shall be evidenced by a written
agreement between the Company and the employee or consultant to whom such award
is granted. Awards granted to Insiders are subject to any additional
applicable restrictions under Rule 16b-3.
RIGHTS NONTRANSFERABLE
Options and Rights granted pursuant to the 1992 Plan are
nontransferable by the participant, other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order.
Options or Rights may be exercised, during the lifetime of the participant,
only by the participant or by a permitted transferee.
20
<PAGE> 23
USE OF STOCK FOR TAX WITHHOLDING
The 1992 Plan permits participants to satisfy tax withholding
obligations arising from the grant, vesting or exercise of options or Rights by
surrendering shares of Common Stock already owned, or by directing the Company
to withhold from the shares of Common Stock issued or issuable pursuant to the
award in question that number of shares, having a fair market value equal to
the tax withholding liability as of the applicable tax date. All elections to
utilize stock for tax withholding are subject to the approval of the
Administrator.
CHANGE-IN-CONTROL PROVISIONS
The 1992 Plan provides that in the event of a "change-in-control" of
the Company (as defined below), except as otherwise determined by the
Administrator in its discretion prior to the change-in-control, all stock
options and Rights granted under the 1992 Plan that are outstanding as of the
date such change-in-control is determined to have occurred and that are not yet
exercisable and vested on such date will become immediately vested and fully
exercisable. A "change-in-control" means the occurrence of (i) the acquisition
by a person or entity (other than the Company, one of its subsidiaries, or a
Company employee benefit plan or trustee thereof) of securities representing
50% or more of the combined voting power of the Company, (ii) a transaction
requiring the approval of the stockholders and involving the sale of all or
substantially all of the assets of the Company or a merger of the Company with
or into another corporation, or (iii) a change in the composition of the Board
of Directors after which less than a majority of the directors in office are
incumbent directors.
In the event of a proposed sale of all or substantially all of the
assets of the Company or the merger of the Company with or into another
corporation, each outstanding option and Right shall be assumed or substituted
by such successor corporation or a parent or subsidiary of the successor
corporation, unless the Administrator determines, in lieu of such assumption or
substitution, that the participant shall have the right to exercise the option
or Right as to all or a portion of the shares subject to such option or Right
that would not otherwise be exercisable, for a period of time determined by the
Administrator, after which the options and Rights shall terminate.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in
the Company's capitalization, which change results in an increase or decrease
in the number of outstanding shares of Common Stock without receipt of
consideration by the Company, an appropriate adjustment shall be made in the
number of shares that have been reserved for issuance under the 1992 Plan and
the price per share covered by each outstanding option, SAR, Purchase Right and
Long-Term Award. In the event of the proposed dissolution or liquidation of
the Company, all outstanding options and Rights will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Administrator. The Administrator may, in its discretion, make provision
for accelerating the exercisability of shares subject to options or Rights
under the 1992 Plan in such event.
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend or discontinue the 1992 Plan at
any time, but any such amendment, alteration, suspension or discontinuation
shall not adversely affect any outstanding option or Right under the 1992 Plan
without the consent of the holder thereof. To the extent necessary and
desirable to comply with Rule 16b-3 or Section 422 of the Code (or any other
applicable law or regulation), the Company shall obtain stockholder approval of
any amendment to the 1992 Plan in such a manner and to such a degree as is
required. The 1992 Plan will terminate by its terms on April 30, 2002.
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<PAGE> 24
Subject to applicable laws and the specific terms of the 1992 Plan,
the Administrator may accelerate any option or Right or waive any condition or
restriction pertaining to such option or Right at any time. The Administrator
may also substitute new options or Rights for previously granted options or
Rights, including previously granted options or Rights having higher prices,
and may reduce the exercise price of any option or Right to the then current
fair market value if the fair market value of the Common Stock covered by such
option or Right shall have declined since the date the option or right was
granted.
FEDERAL INCOME TAX INFORMATION
The following is only a brief summary of the federal income tax
consequences of transactions under the 1992 Plan based on federal income tax
laws in effect on January 1, 1995. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
STOCK OPTIONS
An optionee will recognize no income upon grant or exercise of
incentive stock options under the 1992 Plan, unless the alternative minimum tax
rules apply. The Company will not be allowed a deduction for federal tax
purposes in connection with the grant or exercise of an ISO. Upon an
optionee's resale of the underlying shares (assuming that the sale occurs no
sooner than two years after grant of the option and one year after exercise of
the option (the "statutory holding periods")), any gain will be taxed to the
optionee as long-term capital gain. If the statutory holding periods are not
satisfied (i.e., the optionee makes a "disqualifying disposition"), the
optionee will recognize compensation income equal to the difference between the
exercise price and the lower of (i) the fair market value of the stock at the
date of the option exercise or (ii) the sale price of the stock, and the
Company will be entitled to a deduction in the same amount. Any additional
gain or loss recognized on a disqualifying disposition of the shares will be
characterized as capital gain or loss.
An optionee will not recognize any taxable income at the time he or
she is granted a nonstatutory stock option ("NSO") under the 1992 Plan.
However, upon exercise of the NSO, the optionee will generally recognize
compensation income for federal tax purposes measured by the excess, if any, of
the then fair market value of the shares over the exercise price. The Company
will be entitled to a tax deduction in the same amount. Upon an optionee's
resale of such shares, any difference between the sale price and fair market
value of such shares on the date of exercise will be treated as capital gain or
loss and will qualify for long-term capital gain or loss treatment if the
shares have been held for more than one year.
The ordinary income recognized upon exercise of an NSO by an optionee
who is also an employee will be treated as wages for tax purposes and will be
subject to tax withholding by the Company out of the current compensation paid
to such person, if any. If such current compensation is insufficient to
satisfy the tax withholding obligation, such person will be required to make
direct payment to the Company for the tax liability. Any required withholding
in connection with the exercise of an NSO may, with the consent of the
Administrator, be satisfied by an optionee, in whole or in part, by
surrendering to the Company shares of Common Stock previously owned by such
person or shares issued upon exercise of the option. For such purpose, the
surrendered shares are valued at their fair market value at the time of
surrender.
STOCK APPRECIATION RIGHTS
No income will be recognized by a recipient in connection with the
grant of an SAR. When the SAR is exercised, the recipient will generally be
required to include as taxable ordinary income in the year of exercise an
amount equal to the amount of cash and the fair market value of any Common
Stock received upon the exercise. In the case of a recipient who is also an
employee, any income recognized upon exercise of an SAR will constitute wages
for
22
<PAGE> 25
which withholding will be required. The Company will be entitled to a tax
deduction in the same amount. Any gain or loss on the resale of Common Stock
acquired upon exercise of an SAR will be treated as capital gain.
STOCK PURCHASE RIGHTS
Purchase Rights will generally be taxed in the same manner as NSOs.
LONG-TERM PERFORMANCE AWARDS
Generally, no income will be recognized by a recipient in connection
with the grant of a Long-Term Award of stock that is subject to vesting
restrictions (referred to as "restricted stock"), unless an election under
Section 83(b) of the Code is filed with the Internal Revenue Service within 30
days of the date of grant. Otherwise, at the time the Long-Term Award vests,
the recipient will generally recognize compensation income in an amount equal
to the fair market value of the award at the time of vesting. Generally, the
recipient will be subject to the same tax consequences as for NSOs. In the
case of a recipient who is also an employee, any amount included in income will
be subject to withholding by the Company. The Company will be entitled to a
tax deduction in the amount and at the time the recipient recognizes ordinary
income with respect to a Long-Term Award.
STOCK BONUSES
A recipient who receives fully vested shares of Common Stock pursuant
to a Stock Bonus 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 restricted stock pursuant to a Stock Bonus Award, the
recipient will recognize ordinary income equal to the fair market value of the
stock at the time or times the restrictions lapse (unless a Section 83(b)
election is timely filed within 30 days of the date of grant). 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.
SPECIAL RULES APPLICABLE TO INSIDERS AND RESTRICTED STOCK PURCHASERS
Generally, Insiders and individuals who purchase restricted stock may
have their recognition of compensation income and the beginning of their
capital gains holding period deferred until a date (the "Deferral Date") that
is up to six months after option exercise (in the case of Insiders) or the date
on which the restrictions lapse (in the case of restricted stock purchasers),
with the excess of the fair market value of the stock on the Deferral Date over
the purchase price being taxed as ordinary income, and the tax holding period
for any subsequent gain (or loss) beginning at the end of such period.
However, an Insider or restricted stock purchaser who files a timely election
under Section 83(b) may instead be taxed on the difference between the excess
of the fair market value on the date of transfer by the Company to the optionee
over the purchase price, with the tax holding period beginning on such date.
Similar rules apply for alternative minimum tax purposes with respect to the
exercise of an ISO by an Insider.
In order for compensation in excess of $1 million realized by any of
the Named Officers to be deductible by the Company, IRS regulations require any
option plan to state the maximum number of shares subject to options that can
be granted during a fiscal year to any one individual. The amended 1992 Plan
now has a limit of 500,000 shares subject to options per fiscal year. While
the Company does not expect to grant this number of options on a regular basis,
the Company does expect that this would be the maximum number of options that
would be necessary to recruit any outstanding top executive.
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<PAGE> 26
PARTICIPATION IN 1992 PLAN
The grant of options, stock appreciation rights, stock purchase
rights, stock bonus awards and long-term performance awards under the 1992 Plan
to employees, including the Named Officers, is subject to the discretion of the
Administrator. As of the date of this proxy statement, there has been no
determination by the Administrator with respect to future awards under the 1992
Plan. Accordingly, future awards are not determinable. Non-employee directors
are not eligible to participate in the 1992 Plan. The following table sets
forth information with respect to the grant of options to the Named Officers,
to all current executive officers as a group and to all other employees as a
group during the last fiscal year:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL NUMBER OF
OR IDENTITY OF GROUP OPTIONS GRANTED (#) GRANT PRICE ($/SH)
- -------------------- ------------------- ------------------
<S> <C> <C>
Alfred J. Stein ...................... 75,000 12.125
Dieter J. Mezger ..................... 0 0
Gregory K. Hinckley .................. 30,000 12.125
L. Don Maulsby ....................... 50,000 12.125
Donald L. Ciffone .................... 30,000 12.125
All current executive officers as a
group (8 persons) ................... 202,000 12.125
All other employees as a group 710,050 12.415(1)
</TABLE>
- ----------
(1) Represents weighted average per share grant price.
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors of the Company in August 1983 and has been amended
numerous times since then. Initially, 600,000 shares were reserved for
issuance under the Purchase Plan. In 1988, 1989, 1991 and 1993, the
stockholders approved increases of 1,000,000, 1,000,000, 2,000,000 and
2,000,000 shares, respectively, bringing the number of shares issuable under
the Purchase Plan to a total of 6,600,000. The Purchase Plan provides an
opportunity and incentive for all employees to become stockholders of their
Company.
In February 1995, the Board of Directors authorized an amendment to
the Purchase Plan (the "Amendment") to increase the shares reserved for
issuance thereunder by 2,400,000 shares, bringing the total number of shares
issuable under the Purchase Plan to 9,000,000 shares.
At the Annual Meeting, the stockholders are being requested to approve
the amendment to the Purchase Plan increasing the shares reserved for issuance
thereunder.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendment of the Purchase Plan. Management recommends voting
"FOR" approval of the amendment to the Purchase Plan.
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<PAGE> 27
GENERAL
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. See "--Tax Information" below. The purpose of the Purchase Plan
is to provide employees of the Company and its majority-owned subsidiaries that
participate in the Purchase Plan with an opportunity to purchase Common Stock
of the Company at discounted prices through payroll deductions.
As of December 30, 1994, 6,076,162 shares had been purchased under the
Purchase Plan at a weighted average purchase price of $5.43 per share, and
523,838 shares remained available for future purchase under the Purchase Plan.
Giving effect to the increase in shares approved by the Board of Directors in
February 1995, which is subject to stockholder approval at the Annual Meeting,
there will be 2,923,838 shares available for purchase under the Purchase Plan.
As of December 30, 1994, approximately 2,728 employees were eligible for the
Purchase Plan, of whom 1,691 were participants.
ADMINISTRATION
The Purchase Plan is to be administered by the Compensation Committee
or, if no such committee has been appointed by the Board of Directors, then by
the Board of Directors itself. The Purchase Plan also requires that the body
administering it meet the requirements of Rule 16b-3, promulgated under the
Exchange Act, for plans of this type.
ELIGIBILITY AND PARTICIPATION
Any person who is customarily employed for at least 20 hours per week
and at least five months per calendar year by the Company or its majority-owned
subsidiaries is eligible to participate in offerings under the Purchase Plan.
Eligible employees become participants in the Purchase Plan by delivering to
the Company's legal department a subscription agreement authorizing payroll
deductions at least 15 days prior to the applicable offering period, as defined
below, unless a later time for filing the subscription agreement has been set
by the Board of Directors for all eligible employees with respect to a given
offering period. An employee who becomes eligible to participate in the
Purchase Plan after the commencement of an offering period may not participate
in the Purchase Plan until the commencement of the next offering period.
Participation in the Purchase Plan is voluntary and is dependent on
each eligible employee's election to participate and his or her respective
determination as to the level of payroll deductions. Accordingly, future
purchases under the Purchase Plan are not determinable. No purchases have been
made under the Purchase Plan since the adoption of the Amendment by the Board.
The following table sets forth, as to the Named Officers, all current executive
officers as a group and all other employees who participated in the Purchase
Plan: (i) the number of shares of the Company's Common Stock purchased under
the Purchase Plan
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<PAGE> 28
during the last fiscal year; (ii) the dollar value of the benefit; and (iii)
the amount of payroll deductions for future purchases accumulated through
December 30, 1994 for the current purchase period under the Purchase Plan,
which purchase period commenced November 1, 1994:
AMENDED PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
LAST FISCAL YEAR
<TABLE>
<CAPTION>
PAYROLL
NUMBER OF DOLLAR DEDUCTIONS
SHARES VALUE AS OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP PURCHASED(#) ($)(1) FISCAL YEAR END
--------------------------------------- ------------ ------ ---------------
<S> <C> <C> <C>
Alfred J. Stein .............................. 1,000 $ 7,598 $ 1,642
Gregory K. Hinckley .......................... 1,000 7,598 1,538
Dieter J. Mezger ............................. 0 0 0
L. Don Maulsby ............................... 1,000 7,598 2,920
Donald L. Ciffone ............................ 1,000 7,598 2,592
All current executive officers as a group
(8 persons) ............................. 7,000 53,183 14,326
All other employees as a group .............. 952,718 6,632,110 1,273,174
</TABLE>
- ----------------------
(1) Market value of shares on date of purchase, minus the purchase price
under the Purchase Plan.
OFFERING DATES
The Purchase Plan is currently implemented by overlapping 24-month
offering periods that commence May 1 and November 1 of each year. Each such
offering period is divided into four six-month purchase periods. The Board of
Directors has the power to alter the duration of the offering periods or
purchase periods without stockholder approval, if such change is announced at
least 15 days prior to the scheduled beginning of the first offering period or
purchase period, as the case may be, to be affected.
PURCHASE PRICE
Shares are purchased on the last business day of each purchase period
(a "purchase date") during an offering period unless a participant withdraws
from the offering period prior to such purchase date. The purchase price per
share at which shares are sold in an offering 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 24-month offering period (the "Entry Price"), or 85% of
the fair market value of a share of Common Stock on the purchase date.
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<PAGE> 29
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
over the offering period. The deductions may not exceed 10% of a participant's
compensation. A participant may discontinue his or her participation in the
Purchase Plan at any time during an offering period and may decrease, but not
increase, the rate of payroll deductions at any time during a six-month
purchase period, but only once in the six-month period. A participant may not
make additional contributions to his or her account.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase
Plan, the employee is entitled to have shares placed under option to him or her
that are exercisable cumulatively in installments on each purchase date during
the offering period. The maximum number of shares subject to each installment
placed under option to a participant at the beginning of the offering period is
the lesser of: (a) that number determined by dividing the amount accumulated
in such participant's account during the purchase period with respect to which
such installment applies by the lower of: (i) the Entry Price or (ii) 85% of
the fair market value of the Common Stock on the last day of such purchase
period; (b) 8,400 shares, less any shares purchased by the participant on prior
purchase dates within the same offering period; (c) a maximum number of shares
set in respect of each purchase period by the Compensation Committee (the
"Maximum Share Amount"); and (d) the limit imposed on yearly purchases under
qualified employee stock purchase plans by Section 423 of the Code and the
regulations thereunder. See also "Payment of Purchase Price; Payroll
Deductions" above. Employees must be notified of the Maximum Share Amount, if
any, not less than 15 days prior to the beginning of the first affected
purchase period. Once set, such Maximum Share Amount remains in effect for all
succeeding purchase periods until re-set or eliminated by the Board of
Directors. In September 1990, the Board of Directors established a Maximum
Share Amount of 500 shares per purchase period.
Unless the employee's participation is discontinued prior to a
purchase date, his or her option for the purchase of shares will be exercised
automatically at the end of the purchase period at the applicable price.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participant's interest in a given offering period may be terminated
in whole, but not in part, by signing and delivering to the Company a notice of
withdrawal from the Purchase Plan. Such withdrawal may be made at any time
prior to the end of the applicable 24-month offering period. Participants may
also withdraw as to future purchase periods by reducing their payroll
deductions to 0% during the current purchase period. A participant's
withdrawal from one offering period does not have any effect upon such
participant's eligibility to participate in subsequent offerings under the
Purchase Plan (except that certain restrictions may be imposed on officers and
directors pursuant to Rule 16b-3). Upon withdrawal from an offering period,
all payroll deductions that have been credited to the participant's account and
that have not been applied toward the purchase of shares of Common Stock on
purchase dates within such offering period occurring prior to the notice of
withdrawal will be returned to the participant without interest.
Termination of a participant's employment for any reason, including
retirement or death, cancels the participant's 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 to his or her
beneficiaries without interest.
27
<PAGE> 30
CAPITAL CHANGES
In the event any change is made in the Company's capitalization, such
as a stock split or payment of a stock dividend, which change results in an
increase or decrease in the number of shares of Common Stock outstanding
without receipt of consideration by the Company, appropriate adjustment shall
be made in the exercise price and in the number of shares subject to options
outstanding under the Purchase Plan, as well as in the number of shares
reserved for issuance under the Purchase Plan.
In the event of the proposed dissolution or liquidation of the
Company, all options will terminate immediately prior to the consummation of
such proposed actions, unless otherwise provided by the Board. In the event of
a proposed sale of all or substantially all of the assets of the Company or the
merger of the Company with or into another corporation, all options shall be
assumed by such successor corporation or, in the Board's sole discretion, the
Board may, in lieu of such assumption, give all participants the right to
exercise their options as to all of the shares subject to option.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend, suspend or terminate the
Purchase Plan. Termination or suspension of the Purchase Plan automatically
terminates all outstanding options. Amendments to the Purchase Plan or to
options thereunder that would adversely affect the rights of any participant
under an option theretofore granted shall only be effective as to such options
if the participant's consent is obtained. No amendment may be made to the
Purchase Plan without approval of the stockholders of the Company if
stockholder approval of such amendment is necessary and desirable to comply
with Section 423 of the Code or with Rule 16b-3, or any successor rule.
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 date of option grant and for more than one year after the date
of purchase, the lesser of (a) the excess of the fair market value of the
shares at the time of such disposition over the purchase price or (b) 15% of
the fair market value of the shares at the date of commencement of the offering
period, will be treated as ordinary income. If the shares are sold and the
sale price is less than the purchase price, there is no ordinary income and the
participant has a capital loss for the difference. 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 purchase date over the purchase price will be
treated as ordinary income, and any further gain or 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 of the Exchange Act.
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 recognized by participants upon dispositions of shares prior to
the expiration of the holding periods described above.
28
<PAGE> 31
The foregoing is only a brief summary of the effect of federal income
taxation upon the participant and the Company with respect to the shares
purchased under the Purchase Plan, does not purport to be complete, and does
not discuss the tax consequences of a participant's death or the income tax
laws of any municipality, state or foreign country in which a participant may
reside.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES
GENERAL
The Company's Restated Certificate of Incorporation, as amended, as
currently in effect (the "Certificate"), provides that the Company is
authorized to issue two classes of stock, consisting of 55,000,000 shares
designated as Common Shares, $.01 par value per share, and 2,000,000 shares
designated as Preferred Shares, $.01 par value per share. The Common Shares
are issuable in series and currently consist of 54,000,000 authorized shares of
Common Stock, 600,000 authorized shares of Series B Common Stock and 400,000
shares of authorized but undesignated Junior Common Stock.
On February 28, 1995, the Board of Directors of the Company authorized
an amendment to the Certificate (the "Certificate Amendment"), subject to
stockholder approval, to increase the authorized number of shares of Common
Shares by 45,000,000 shares to a total of 100,000,000 shares, with a
corresponding increase in the authorized Common Stock by 45,000,000 shares to a
total of 99,000,000 shares. Under the proposed amendment, subparagraphs (a)
and (b) of paragraph 4 of the Certificate would be amended to read as follows:
"(a) Classes of Stock. This Corporation is authorized to issue two
classes of shares designated respectively "Common Shares" and
"Preferred Shares". The total number of shares which this
Corporation shall have the authority to issue is One Hundred
Two Million (102,000,000), of which One Hundred Million
(100,000,000) shall be Common Shares and Two Million
(2,000,000) shall be Preferred Shares. Each Common Share and
each Preferred Share shall have a par value per share of $.01,
and the aggregate par value of the Common Shares and the
Preferred Shares shall be $1,000,000 and $20,000,
respectively, for an aggregate par value of $1,020,000.
(b) Common Shares. The Common Shares authorized by this
Certificate of Incorporation shall be issued in series. The
first series of Common Shares shall be designated "Common
Stock" and shall consist of Ninety-Nine Million (99,000,000)
shares. All other series of Common Shares (other than Common
Stock) shall be designated, as a group, "Junior Common Stock",
and shall consist in the aggregate of One Million (1,000,000)
shares. The first series of Junior Common Stock shall be
designated "Series B Common Stock" and shall have the rights,
preferences, privileges and restrictions set forth in
subparagraph (e) of this paragraph 4."
The stockholders are being asked to approve such Certificate Amendment. The
proposed Certificate Amendment would give the Board the authority to issue
additional shares of Common Stock without requiring future stockholder approval
of such issuances, except as may otherwise be required by applicable law.
Of the 54,000,000 currently authorized shares of Common Stock,
36,684,621 shares of Common Stock were issued and outstanding as of December
30, 1994. In addition, as of such date, approximately 3,788,384 shares were
reserved for issuance upon exercise of outstanding options, additionally the
Board has authorized immediate granting of options totaling 52,000 shares,
subject to stockholder approval; approximately 2,496,703 shares were reserved
for future grant under the 1992 Plan, subject to stockholder approval;
285,000 shares were reserved for issuance upon exercise of outstanding options
and for
29
<PAGE> 32
future grants under the Directors' Plan; approximately 523,838 shares were
reserved for future issuance under the Purchase Plan (subsequent to fiscal year
end, an additional 2,400,000 shares were reserved for issuance under the
Purchase Plan, subject to stockholder approval); 2,677,604 shares were reserved
for issuance upon Intel's exercise of its warrant; and approximately 2,613,636
shares were reserved for issuance upon conversion of the Company's outstanding
7% Convertible Subordinated Debentures due 2012. Accordingly, as of December
30, 1994, and giving effect to the adoption of the amended 1992 Stock Plan and
the reservation of an additional 2,500,000 shares of Common Stock for issuance
thereunder (as described in this Proxy Statement) and the amendment to the
Purchase Plan to increase the number of shares reserved for issuance for
2,400,000 shares, the Company has only 2,478,214 shares of authorized but
unissued and unreserved Common Stock available for issuance.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of this proposed amendment to the Company's
Certificate of Incorporation to increase the authorized shares of Common Stock
is to make such shares available for use by the Board of Directors as it deems
appropriate or necessary. For example, such shares may be needed in connection
with raising additional capital through the sale of the Company's securities,
acquisition of another company or its business or assets, establishing a
strategic relationship with a corporate partner, or providing options or other
stock incentives to the Company's employees, consultants or others.
The Board of Directors has no present agreement or arrangement, plan
or understanding with respect to the issuance of any such shares. If the
Certificate Amendment is approved by the stockholders, the Board of Directors
does not intend to solicit further stockholder approval prior to the issuance
of any additional shares of Common Stock, except as may be required by
applicable law. Holders of the Company's securities as such have no statutory
preemptive rights with respect to issuances of Common Stock.
The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. To the extent that the
additional authorized shares are issued in the future, they will decrease the
existing stockholders' percentage equity ownership and, depending on the price
at which they are issued, could be dilutive to the existing stockholders.
POTENTIAL ANTI-TAKEOVER EFFECT
The increase in the authorized number of shares of Common Stock and
the subsequent issuance of such shares could have the effect of delaying or
preventing a change-in-control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions that
would make a change-in-control of the Company more difficult, and therefore
less likely. Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of outstanding shares
of Common Stock, and such additional shares could be used to dilute the stock
ownership or voting rights of a person seeking to obtain control of the
Company. VLSI has previously adopted certain measures that may have the effect
of helping to resist an unsolicited takeover attempt, including (i) the First
Amended and Restated Rights Agreement dated as of August 12, 1992, providing
for the distribution of rights to purchase additional shares of the Company's
Preferred Stock in the event of certain attempts to acquire control of the
Company; (ii) provisions in the 1992 Plan and the Directors' Plan providing for
the acceleration of exercisability of outstanding options in the event of a
sale of assets or merger, unless otherwise determined by the Administrator;
(iii) provisions of the Certificate authorizing the Board to issue up to
2,000,000 shares of Preferred Shares with terms, provisions and rights fixed by
the Board; and (iv) provisions in the Company's bylaws regarding certain
procedural matters relating to stockholder proposals, cumulative voting and
nomination of directors.
30
<PAGE> 33
REQUIRED VOTE
The adoption of the amendment to the Certificate of Incorporation
requires the affirmative vote of not less than a majority of the votes entitled
to be cast by all shares of Common Stock issued and outstanding on the Record
Date. The effect of an abstention is the same as that of a vote against the
proposal. If the Certificate Amendment is not so approved, the Company's
authorized capital stock will not change.
RECOMMENDATION
The Board of Directors recommends that the stockholders vote "FOR" the
amendment to the Certificate of Incorporation to increase the authorized number
of shares of Common Stock and Common Shares.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 29, 1995 and recommends that stockholders vote
"FOR" ratification of such appointment. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements since
1980. Representatives of Ernst & Young LLP are expected to be present at the
meeting, will have the opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
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 proxy card to vote the shares they represent
as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas F. Mulvaney, Secretary
Date: March __, 1995
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<PAGE> 34
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VLSI TECHNOLOGY, INC.
Proxy for Annual Meeting of Stockholders
The undersigned stockholder of VLSI Technology, Inc., a Delaware
corporation, hereby acknowledges receipt of the 1994 Annual Report to
Stockholders and the Notice of Annual Meeting of Stockholders and Proxy
Statement for the Annual Meeting of Stockholders of VLSI Technology, Inc. to be
held on Thursday, April 27, 1995 at 9:00 a.m. local time, at the Company's
offices located at 1151 McKay Drive, San Jose, California 95131, and hereby
appoints Alfred J. Stein and Thomas F. Mulvaney, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at such meeting, and
at any adjournment or adjournments thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present on the matters set forth below:
1. ELECTION OF DIRECTORS.
/ / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below). nominees below.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in
the list below.)
Pierre S. Bonelli, Robert P. Dilworth, James J. Kim,
Alfred J. Stein and Horace H. Tsiang.
2. PROPOSAL TO RATIFY AND APPROVE AMENDMENTS TO THE 1992 STOCK
PLAN AND TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER FROM 2,000,000 TO 4,500,000.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER FROM 6,600,000 TO 9,000,000.
/ / FOR / / AGAINST / / ABSTAIN
(Continued on back)
<PAGE> 35
(Continued from front)
4. PROPOSAL TO APPROVE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES BY
45,000,000.
/ / FOR / / AGAINST / / ABSTAIN
5. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS FOR 1995.
/ / FOR / / AGAINST / / ABSTAIN
6. IN THEIR DISCRETION, THE PROXIES AND ATTORNEYS-IN-FACT ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING, AND ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF.
Either of such proxies and attorneys-in-fact, or their substitutes, as shall be
present and shall act at said meeting or any adjournment or adjournments
thereof shall have and may exercise all the powers of said proxies and
attorneys-in-fact hereunder.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s).
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND
5.
Signature ________________________ Date __________________
Signature ________________________ Date __________________
(This Proxy should be dated, signed by the stockholder(s) exactly as
his or her name(s) appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate.)
I do / / do not / / plan to attend the Annual Meeting in person.
<PAGE> 36
APPENDIX I
VLSI TECHNOLOGY, INC.
1992 STOCK PLAN
(As adopted by the Board of Directors on May 1, 1992 and approved by
the stockholders on August 20, 1992, and as amended by the Board of Directors
on November 17, 1994 and subject to stockholder approval at the 1995 Annual
Meeting of Stockholders)
1. PURPOSES OF THE PLAN. The purpose of this 1992 Stock Plan is
to enable the Company to provide an incentive to Employees and Consultants
whose present and potential contributions are important to the continued
success of the Company, to afford these individuals the opportunity to acquire
a proprietary interest in the Company, and to enable the Company to enlist and
retain the best available talent for positions of substantial responsibility.
It is intended that this purpose will be effected through the granting of
Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights,
Stock Purchase Rights, Stock Bonus Awards and Long-Term Performance Awards.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.
(b) "Affiliated Company" means a corporation, whether now
or hereafter existing, which is not a Subsidiary but with respect to which the
Company owns, directly or indirectly through one or more Subsidiaries, at least
20% of the total voting power of all classes of stock.
(c) "Applicable Laws" means the legal requirements
relating to the administration of stock option and equity incentive plans under
applicable state corporate and securities laws and under the Code.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means a Committee appointed by the Board
in accordance with Section 4 of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means VLSI Technology, Inc., a Delaware
corporation.
(i) "Consultant" means (i) any person, including an
advisor, who is engaged by the Company or by a Parent or Subsidiary of the
Company to render consulting services to it and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are compensated, through a director's fee or other standard director
compensation, only for their services as Directors of the Company, (ii) any
currently authorized manufacturer's representative or sales representative firm
which
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sells products of the Company or of a Parent or Subsidiary of the Company, as
designated by the Company in its sole discretion (which designation shall be
subject to withdrawal at any time for any or no reason), whether compensated by
the Company for service as such or not, or (iii) any individual who is employed
by such a manufacturer's representative or sales representative firm to perform
services which include the sale of products of the Company or of a Parent or
Subsidiary of the Company, whether compensated by the Company for such services
or not.
(j) "Continuous Status as an Employee or Consultant"
means the absence of any interruption or termination of service as an Employee
or Consultant, provided, however, that Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave
of absence approved by the Administrator, including sick leave, military leave,
or any other personal leave; provided, however, that for purposes of Incentive
Stock Options, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute; or (ii) transfers between
locations of the Company or between the Company, its Parent, its Subsidiaries,
its Affiliated Companies or its successor. In the case of a leave of absence
which extends for more than ninety (90) days and after which there is no
contractual or statutory guaranty of reemployment, the Employee's employment
or Consultant's service as such shall be deemed to have terminated on the
ninety-first (91st) day of such leave of absence.
(k) "Director" means a member of the Board.
(l) "Disability" means total and permanent disability, as
defined in Section 22(e)(3) of the Code.
(m) "Employee" means any person, including Officers and
Directors, employed by the Company or by any Parent or Subsidiary of the
Company, as such term is defined under common law and interpreted by the rules
and regulations under the Code. Neither service as a Director nor the payment
of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Fair Market Value" means, as of a specified date,
the value of Common Stock determined by the Administrator as follows:
(i) If the Common Stock is listed on any
established stock exchange or quoted on a national market system, including
without limitation the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, 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
exchange (or, if listed on more than one exchange, the exchange with the
greatest volume of trading in Common Stock) or system on the last market
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator deems reliable; or
(ii) If the Common Stock is quoted on the NASDAQ
System (but is not included on the National Market System thereof) or is
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 closing bid and closing asked prices for the Common Stock on the
last market
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<PAGE> 38
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator 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 Administrator.
(p) "Incentive Stock Option" means an Option that
satisfies the provisions of Section 422 of the Code.
(q) "Insider" means an Officer or Director.
(r) "Long-Term Performance Award" means an award granted
pursuant to Section 10 of the Plan.
(s) "Nonstatutory Stock Option" means an Option that is
not an Incentive Stock Option.
(t) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option, Stock Purchase Right,
SAR, Long-Term Performance Award or Stock Bonus Award grant. The Notice of
Grant is part of the Option Agreement, the Restricted Stock Purchase Agreement,
the SAR Agreement, the Long-Term Performance Award agreement or the Stock Bonus
Award agreement, as the case may be.
(u) "Officer" means an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "Option" means a stock option granted pursuant to the
Plan.
(w) "Option Agreement" means a written agreement between
the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan and the Notice of Grant.
(x) "Optioned Stock" means the Common Stock subject to an
Option or Right.
(y) "Optionee" means an Employee or Consultant who holds
an outstanding Option or Right.
(z) "Option Exchange Program" means a program whereby
outstanding options (whether originally granted under this Plan or under other
plans of the Company) are surrendered in exchange for Options with a lower
exercise price.
(aa) "Outside Director" shall mean a Director who is not
an Employee.
(bb) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(cc) "Plan" means this 1992 Stock Plan.
(dd) "Restricted Stock" means shares of Common Stock
purchased pursuant to Stock Purchase Rights granted under Section 8 of the
Plan.
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(ee) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(ff) "Right" means and includes SARs, Long-Term
Performance Awards, Stock Purchase Rights and Stock Bonus Awards granted
pursuant to the Plan.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act (or any successor to Rule 16b-3), as in effect when discretion is
being exercised with respect to the Plan.
(hh) "SAR" means a stock appreciation right granted
pursuant to Section 7 of the Plan.
(ii) "SAR Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The SAR Agreement is subject to the terms and conditions of the
Plan and the Notice of Grant.
(jj) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.
(kk) "Stock Bonus Award" means an award granted pursuant
to Section 9 of the Plan.
(ll) "Stock Purchase Right" means a right to purchase
Common Stock granted pursuant to Section 8 of the Plan.
(mm) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
In addition, the term "waiting period", the term "Performance Period",
the terms "Change in Control" and "Incumbent Directors" and the term "Tax Date"
shall have the meanings set forth in Sections 7, 10, 12 and 13 of the Plan,
respectively.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 12 of the Plan, the total number of Shares reserved and available for
distribution pursuant to awards made under the Plan shall be 4,500,000, of
which 2,500,000 shares are subject to stockholder approval at the 1995 Annual
Meeting of Stockholders. The Shares may be authorized but unissued or
reacquired stock.
If an Option or Right should expire or become unexercisable
for any reason without having been exercised in full, the unpurchased Shares
which were subject thereto shall, unless the Plan shall have been terminated,
become available for other Options or Rights granted under the Plan.
Notwithstanding any other provision of the Plan, Shares issued
upon exercise of Options or Rights under the Plan and later repurchased by the
Company shall not become available for future grant or sale under the Plan.
4. ADMINISTRATION OF THE PLAN.
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<PAGE> 40
(a) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to Outside
Directors, Directors who are Employees, Officers who are not Directors, and
Employees and Consultants who are neither Directors nor Officers.
(b) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options or Rights to Employees or
Consultants who are also Officers or Directors, the Plan shall be administered
by (A) the Board, if the Board may administer the Plan in compliance with the
rules governing a plan intended to qualify as a discretionary grant or award
plan under Rule 16b-3, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted (I) in such a manner as to
permit the Plan to comply with the rules governing a plan intended to qualify
as a discretionary grant or award plan under Rule 16b-3 and (II) in such a
manner as to satisfy the Applicable Laws.
(c) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to grants of Options or Rights or to Employees or Consultants who are
neither Directors nor Officers, the Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(d) COMMITTEE COMPOSITION. Once a Committee has been
appointed pursuant to subsection (b) or (c) of this Section 4, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of any Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies (however
caused) or remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws and, in
the case of a Committee appointed under subsection (b), to the extent permitted
by Rule 16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary grant or award plan.
(e) POWERS OF THE ADMINISTRATOR. Subject to the
provisions of the Plan and, in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to grant Incentive Stock Options,
Nonstatutory Stock Options, SARs, Stock Purchase Rights, Stock Bonus Awards and
Long-Term Performance Awards;
(ii) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(o) of the Plan;
(iii) to select the Employees and Consultants to
whom Options and Rights may from time to time be granted hereunder;
(iv) to determine whether and to what extent
Options and Rights, or any combination thereof, are granted hereunder;
(v) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(vi) to approve forms of agreements for use under
the Plan;
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<PAGE> 41
(vii) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder and of
the Options or Rights so awarded (including, but not limited to, the exercise
or purchase price and any restriction or limitation regarding any Option or
Right and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);
(viii) to determine whether and under what
circumstances an Option or Right may be settled in cash instead of Common
Stock;
(ix) to reduce the exercise price of any Option or
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Right shall have declined since the date
the Option was granted;
(x) to modify or amend the terms and conditions
of any Option or Right, subject to Section 15 of the Plan (including, but not
limited to, accelerating vesting or waiving forfeiture restrictions);
(xi) to institute an Option Exchange Program;
(xii) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option or
Right previously granted by the Administrator;
(xiii) to interpret the Plan and to prescribe, amend
and rescind rules and regulations relating to the Plan; and
(xiv) to make all other determinations deemed
necessary or advisable for administering the Plan.
(f) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding.
(g) SUSPENSION OR TERMINATION OF OPTION OR RIGHT. If the
Chief Executive Officer or his or her designee reasonably believes that an
Optionee has committed an act of misconduct, the Chief Executive Officer may
suspend the Optionee's right to exercise any Option or Right or to receive any
benefits relating thereto pending a determination by the Administrator. If the
Administrator determines that an Optionee has committed an act of embezzlement,
fraud, dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company's rules resulting in
loss, damage or injury to the Company, or if an Optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company or induces any principal for whom the
Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option or
Right or to receive any benefits relating to Options or Rights whatsoever. In
making such determination, the Administrator shall act fairly and shall give
the Optionee an opportunity to appear and present evidence on Optionee's behalf
at a hearing before the Administrator.
5. ELIGIBILITY. Nonstatutory Stock Options and Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Right
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may, if he or she is otherwise eligible, be granted additional Options or
Rights.
6. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan
shall become effective upon the earlier to occur of its adoption by the Board
or its approval by the stockholders of the Company as described in Section 19.
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 15 of the Plan.
7. OPTIONS AND SARS.
(a) OPTIONS. The Administrator, in its discretion, may
grant Options to eligible participants and shall determine whether such Options
shall be Incentive Stock Options or Nonstatutory Stock Options. Each Option
shall be evidenced by a Notice of Grant, which shall expressly identify the
Options as either Incentive Stock Options or as Nonstatutory Stock Options and
which shall be in such form and contain such provisions as the Administrator
shall from time to time deem appropriate. Without limiting the foregoing, the
Administrator may, at any time, or from time to time, authorize the Company,
with the consent of the respective holders of outstanding options or rights, to
issue Options or Rights in exchange for the surrender and cancellation of any
or all outstanding options or rights held by such person. Option agreements
shall contain the following terms and conditions:
(i) EXERCISE PRICE; NUMBER OF SHARES. The Notice
of Grant shall specify the per Share exercise price for the Shares issuable
pursuant to an Option, which shall be such price as is determined by the
Administrator. The Notice of Grant shall also specify the number of Shares
which are subject to the Option.
(ii) WAITING PERIOD, EXERCISE DATES AND TERM. At
the time an Option is granted, the Administrator will determine the terms and
conditions to be satisfied before Shares may be purchased upon exercise of the
Option, including the date or dates on which Shares subject to the Option first
become available for purchase. The Administrator may specify that an Option
may not be exercised until the completion of a specified service period or
until certain Company, Subsidiary, Affiliated Company or individual performance
objectives are met. Any such period is referred to herein as the "waiting
period". At the time an Option is granted, the Administrator shall fix the
period within which the Option may be exercised, which shall not be earlier
than the end of the waiting period, if any, nor, in the case of an Incentive
Stock Option, later than ten (10) years, from the date of grant. The Notice of
Grant shall specify the term of the Option.
(iii) FORM OF PAYMENT. The form of payment
acceptable to the Company in payment by an Optionee of the exercise price of
Shares to be issued upon exercise of an Option shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and, subject to compliance with the Delaware
General Corporation Law, may consist entirely of:
(A) cash;
(B) check (personal, cashier's or
certified) or money order;
(C) promissory note;
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(D) other Shares which (I) in the case
of Shares acquired upon exercise of an option, have been owned by the Optionee
for more than six months on the date of surrender and (II) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which the Option is being exercised;
(E) delivery to the Company of (I) a
properly executed exercise notice, (II) irrevocable instructions to a broker to
sell a sufficient number of the Shares being exercised to cover the exercise
price and to promptly deliver to the Company the amount of sale proceeds
required to pay the exercise price and any required tax withholding relating to
the exercise, and (III) such other documentation as the Administrator and the
broker shall require to effect a same-day exercise and sale;
(F) delivery to the Company of (I) a
properly executed exercise notice, (II) irrevocable instructions to a broker or
other third party acceptable to the Company to hold the Shares being exercised
as collateral for a loan to the Optionee of an amount sufficient to cover the
exercise price and to promptly deliver to the Company the amount of loan
proceeds required to pay the exercise price and any required tax withholding
relating to the exercise and (III) such other documentation as the
Administrator and the broker or other third party shall require to effect the
transaction;
(G) delivery of an irrevocable
subscription agreement for the Shares which irrevocably obligates the Optionee
to take and pay for the Shares not more than twelve months after the date of
delivery of such subscription agreement;
(H) any combination of the foregoing
methods of payment; or
(I) such other method of payment for the
issuance of Shares as is permitted by the Applicable Laws.
(iv) SPECIAL INCENTIVE STOCK OPTION PROVISIONS.
In addition to the foregoing, Options granted under the Plan which are intended
to be Incentive Stock Options under Section 422 of the Code shall be subject to
the following terms and conditions:
(A) Exercise Price. The per share
exercise price of an Incentive Stock Option shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
(B) Dollar Limitation. If an Option
granted hereunder to an Optionee is intended to be an Incentive Stock Option,
then to the extent that such Option, when considered together with all other
incentive stock options held by Optionee (whether granted hereunder or under
other plans of the Company or its Parent or Subsidiaries), would cause the Fair
Market Value of all shares of stock of the Company, its Parent and Subsidiaries
first becoming exercisable by the Optionee during any calendar year to exceed
$100,000, such Option shall be treated as a Nonstatutory Stock Option. For
purposes of the preceding sentence, (1) options shall be taken into account in
the order in which they were granted, and (2) the Fair Market Value of the
shares subject to the option shall be determined as of the time the Option or
other incentive stock option is granted.
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(C) 10% Stockholder. If any Optionee to
whom an Incentive Stock Option is to be granted pursuant to the provisions of
the Plan is, on the date of grant, the owner (as determined under Section
424(d) of the Code) of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of a Parent or
Subsidiary of the Company, then the following special provisions shall be
applicable to the Incentive Stock Option granted to such individual:
(I) The per Share Option price of
Shares subject to such Incentive Stock Option shall not be less than 110% of
the Fair Market Value of Common Stock on the date of grant; and
(II) The Option shall not have a
term in excess of five (5) years from the date of grant.
Except as modified by the preceding provisions of this subsection 7(a)(iv) and
except as otherwise limited by Section 422 of the Code, all of the provisions
of the Plan shall be applicable to the Incentive Stock Options granted
hereunder.
(v) OTHER PROVISIONS. Each Option granted under
the Plan may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator.
(vi) BUY-OUT PROVISIONS. The Administrator may at
any time offer on behalf of the Company to buy out, for a payment in cash or
Shares, an Option previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at the time that
such offer is made, provided, however, that buy-out offers made to Insiders may
only be payable in cash. Any such cash offer made to an Officer or Director
shall comply with the applicable provisions of Rule 16b-3, if any.
(b) SARS.
(i) IN CONNECTION WITH OPTIONS. At the sole
discretion of the Administrator, SARs may be granted in connection with all or
any part of an Option, either concurrently with the grant of the Option or at
any time thereafter during the term of the Option. The following provisions
apply to SARs that are granted in connection with Options:
(A) The SAR shall entitle the Optionee
to exercise the SAR by surrendering to the Company unexercised a portion of the
related Option. The Optionee shall receive in exchange from the Company an
amount equal to the excess of (1) the Fair Market Value, on the date of
exercise of the SAR, of the Common Stock covered by the surrendered portion of
the related Option over (2) the exercise price of the Common Stock covered by
the surrendered portion of the related Option. Notwithstanding the foregoing,
the Administrator may place limits on the amount that may be paid upon exercise
of an SAR; provided, however, that such limit shall not restrict the
exercisability of the related Option.
(B) When an SAR is exercised, the
related Option, to the extent surrendered, shall be cancelled and shall cease
to be exercisable.
(C) An SAR 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.
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(D) An SAR may only be exercised at a
time when the Fair Market Value of the Common Stock covered by the related
Option exceeds the exercise price of the Common Stock covered by the related
Option.
(ii) INDEPENDENT OF OPTIONS. At the sole
discretion of the Administrator, SARs may be granted independently without
related Options. The following provisions apply to SARs that are not granted
in connection with Options:
(A) The SAR shall entitle the Optionee,
by exercising the SAR, to receive from the Company an amount equal to the
excess of (1) the Fair Market Value of the Common Stock covered by the
exercised portion of the SAR, as of the date of such exercise, over (2) the
Fair Market Value of the Common Stock covered by the exercised portion of the
SAR, as of the date on which the SAR was granted; provided, however, that the
Administrator may place limits on the aggregate amount that may be paid upon
exercise of an SAR.
(B) To the extent that an SAR is
exercised, it shall be cancelled and shall cease to be exercisable.
(C) SARs shall be exercisable, in whole
or in part, at such times as the Administrator shall specify in the Optionee's
SAR Agreement.
(D) An SAR may only be exercised at a
time when the Fair Market Value of the Common Stock on the exercise date
exceeds the Fair Market Value of the Common Stock on the date of grant of the
SAR.
(iii) FORM OF PAYMENT. Unless otherwise specified
in the SAR Agreement, the Company's obligation arising upon the exercise of an
SAR may be paid in Common Stock or in cash, or in any combination of Common
Stock and cash, as the Administrator, in its sole discretion, may determine.
Shares issued upon the exercise of an SAR shall be valued at their Fair Market
Value as of the date of exercise.
(iv) RULE 16b-3. SARs granted to Insiders shall
be subject to any additional restrictions of Rule 16b- 3 applicable to SARs
granted to such persons. An Insider may only exercise an SAR during such time
or times as are permitted by Rule 16b-3.
(c) EXERCISE OF OPTIONS AND SARS.
(i) RIGHT TO EXERCISE. Any Option or SAR granted
hereunder shall be exercisable at such times and under such conditions as are
determined by the Administrator and as shall be permissible under the terms of
the Plan.
(ii) NO FRACTIONAL SHARES. An Option or SAR may
not be exercised for a fraction of a Share.
(iii) PROCEDURE FOR EXERCISE. An Option or SAR
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 or SAR by the
person entitled to exercise the Option or SAR and full payment for the Shares
with respect to which the Option or SAR is being exercised has been received by
the Company. Full payment may, as authorized by the Administrator (and, in the
case of an Incentive Stock Option, determined at the time of grant) and
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permitted by the Option Agreement, consist of any consideration and method of
payment allowable under the Plan.
(iv) RIGHTS AS A STOCKHOLDER. 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. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 12 of the Plan.
(v) EFFECT OF EXERCISE. Exercise of an Option in
any manner shall result in a decrease in the number of Shares which thereafter
shall 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. Exercise
of an SAR in any manner shall, to the extent the SAR is exercised, result in a
decrease in the number of Shares which thereafter shall be available for
purposes of the Plan, and the SAR (and the related Option, if any) shall cease
to be exercisable to the extent it has been exercised.
(vi) LEAVE OF ABSENCE. Options and SARs held by
an Optionee shall not be exercisable during the Optionee's leave of absence
from his or her employment or consulting relationship with the Company, any
Parent or Subsidiary or any Affiliated Company, regardless of the length of
such leave, except as otherwise required by law. With respect to an Optionee's
leave of absence which is ninety (90) days or less in duration, vesting of all
Options and SARs held by the Optionee shall continue uninterrupted during such
leave unless otherwise provided in the Option or SAR Agreement. With respect
to an Optionee's leave of absence which is more than ninety (90) days in
duration, vesting of any or all Options and SARs held by such Optionee shall be
suspended until the end of such leave unless (i) otherwise expressly provided
in the Option or SAR Agreement or (ii) prohibited by an applicable law or
regulation. The employment of an Optionee who takes a leave of absence of more
than 90 days after which such Optionee is not guaranteed re-employment by
contract or statute shall be deemed to have terminated for purposes of the Plan
on the ninety-first (91st) day of such leave of absence.
(d) RULE 16b-3. Options and SARs granted to Insiders
must comply with the applicable provisions of Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(e) EFFECT OF TERMINATION.
(i) TERMINATION OF EMPLOYMENT OR CONSULTING
RELATIONSHIP. In the event an Optionee's Continuous Status as an Employee or
Consultant terminates (other than upon the Optionee's death or Disability),
such Optionee may exercise his or her Option or SAR, but (A) only to the extent
that the Optionee was entitled to exercise it at the date of such termination,
unless otherwise permitted by the Administrator, and (B) only within such
period of time following the date of such termination not exceeding five (5)
years as is determined by the Administrator (with such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option
and not exceeding three (3) months) and in no event later than the expiration
of the term of such Option or SAR as set forth in the Option or SAR Agreement.
To the extent that Optionee was not entitled to exercise an Option or SAR at
the
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date of such termination, and to the extent that the Optionee does not exercise
such Option or SAR (to the extent otherwise so entitled) within the time
specified herein, the Option or SAR shall terminate.
(ii) DISABILITY OF OPTIONEE. In the event an
Optionee's Continuous Status as an Employee or Consultant terminates as a
result of the Optionee's Disability, the Optionee may exercise his or her
Option or SAR, but (A) only to the extent that the Optionee was entitled to
exercise it at the date of such termination, unless otherwise permitted by the
Administrator, and (B) only within such period of time following the date of
termination due to Disability not exceeding ten (10) years as is determined by
the Administrator (with such determination being made at the time of grant of
the Option in the case of an Incentive Stock Option and not exceeding one (1)
year) and in no event later than the expiration of the term of such Option or
SAR as set forth in the Option or SAR Agreement. To the extent that Optionee
was not entitled to exercise an Option or SAR at the date of such termination,
and to the extent that the Optionee does not exercise such Option or SAR (to
the extent otherwise so entitled) within the time specified herein, the Option
or SAR shall terminate.
(iii) DEATH OF OPTIONEE. In the event of an
Optionee's death during the term of an Option or SAR, the Optionee's estate or
a person who acquired the right to exercise the deceased Optionee's Option or
SAR by bequest or inheritance may exercise the Option or SAR, but (A) only to
the extent that the Optionee was entitled to exercise it at the date of death,
unless otherwise permitted by the Administrator and (B) only within such period
of time following the date of death not exceeding ten (10) years as is
determined by the Administrator, and in no event later than the expiration of
the term of such Option or SAR as set forth in the Option or SAR Agreement. To
the extent that Optionee was not entitled to exercise an Option or SAR at 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 or SAR
(to the extent otherwise so entitled) within the time specified herein, the
Option or SAR shall terminate.
8. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be
issued either alone, in addition to or in tandem with other awards granted
under the Plan and/or awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in a written Notice of Grant of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, the form of
payment that is acceptable (which may, in the discretion of the Administrator,
include any form of payment enumerated in Section 7(a)(iii) hereof), and the
time within which the offeree must accept such offer, which shall in no event
exceed sixty (60) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted
by execution of a Restricted Stock Purchase Agreement in the form determined by
the Administrator and payment of the purchase price. Shares purchased pursuant
to a Stock Purchase Right shall be referred to herein as "Restricted Stock".
(b) REPURCHASE OPTION. Unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's Continuous Status as an Employee or Consultant
for any reason
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(including death or Disability). The purchase price for Shares repurchased by
the Company pursuant to the provisions of the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company, whether or
not such indebtedness is related to the original purchase of the Shares being
repurchased by the Company. The repurchase option shall lapse at such rate as
the Administrator may determine.
(c) OTHER PROVISIONS. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion. The provisions of Restricted Stock Purchase Agreements need
not be the same with respect to each purchaser.
(d) RULE 16b-3. Stock Purchase Rights granted to
Insiders, and Shares purchased by Insiders pursuant to Stock Purchase Rights,
shall be subject to such additional conditions or restrictions of Rule 16b-3 as
may be applicable thereto in order to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
(e) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent to those of
a stockholder and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 12 of the Plan.
9. STOCK BONUS AWARDS. Stock Bonus Awards may be granted either
alone, in addition to or in tandem with other awards granted under the Plan
and/or awards made outside of the Plan. Stock Bonus Awards shall not require
payment by the Optionee of any consideration for the Shares covered by the
Stock Bonus Award. The Administrator shall determine, in its sole discretion,
the terms, conditions and restrictions relating to each Stock Bonus Award and
shall determine any performance or employment-related factors to be considered
in the granting of Stock Bonus Awards and the extent to which such Stock Bonus
Awards have been earned. Shares issued pursuant to a Stock Bonus Award may be
made subject to various conditions, including vesting or forfeiture provisions.
Stock Bonus Awards may vary from participant to participant and between groups
of participants. Each Stock Bonus Award shall be confirmed by, and be subject
to the terms of, a Stock Bonus Award agreement.
10. LONG-TERM PERFORMANCE AWARDS.
(a) AWARDS. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone, in addition to or in
tandem with other awards granted under the Plan and/or awards made outside of
the Plan. Long-Term Performance Awards shall not require payment by the
Optionee of any consideration for the Long-Term Performance Award or for the
Shares covered by such award. The Administrator shall determine the nature,
length and starting date of any performance period (the "Performance Period")
for each Long-Term Performance Award and shall determine the performance or
employment factors, if any, to be used in the determination of the value of
Long-Term Performance Awards and the extent to which such Long-Term Performance
Awards have been earned. Shares issued pursuant to a Long-Term Performance
Award may be made subject to various conditions, including vesting or
forfeiture provisions. Long-Term Performance Awards may vary from participant
to participant and between groups of participants and shall be
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based upon the achievement of Company, Subsidiary, Parent, Affiliated Company
and/or individual performance factors or upon such other criteria as the
Administrator may deem appropriate. Performance Periods may overlap and
participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different Performance Periods and
different performance factors and criteria. Long-Term Performance Awards shall
be confirmed by, and be subject to the terms of, a Long-Term Performance Award
agreement.
(b) VALUE OF AWARDS. At the beginning of each
Performance Period, the Administrator may determine for each Long-Term
Performance Award subject to such Performance Period the range of dollar values
and/or numbers of shares of Common Stock to be awarded to the participant at
the end of the Performance Period if and to the extent that the relevant
measures of performance for such Long-Term Performance Award are met. Such
dollar values or numbers of shares of Common Stock may be fixed or may vary in
accordance with such performance or other criteria as may be determined by the
Administrator.
(c) ADJUSTMENT OF AWARDS. Notwithstanding the provisions
of Section 15 hereof, the Administrator may, after the grant of Long-Term
Performance Awards, adjust the performance factors applicable to such Long-Term
Performance Awards to take into account changes in the law or in accounting or
tax rules and to make such adjustments as the Administrator deems necessary or
appropriate to reflect the inclusion or exclusion of the impact of
extraordinary or unusual items, events or circumstances in order to avoid
windfalls or hardships.
11. NON-TRANSFERABILITY OF OPTIONS. Options and Rights may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option or Right may be exercised, during the lifetime of the Optionee, only by
the Optionee or by a transferee permitted by this Section 11.
12. 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 of Common Stock
covered by each outstanding Option and Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Rights have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or Right, as well as the
price per share of Common Stock covered by each such outstanding Option or
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive.
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(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an
Option or Right has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action. The
Administrator may, in the exercise of its sole discretion in such instances,
declare that all Options and Rights shall terminate as of a date fixed by the
Administrator and give each Optionee the right to exercise his or her Option or
Right as to all or any part of the Optioned Stock, including Shares as to which
the Option or Right would not otherwise be exercisable.
(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 and Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. However,
the Administrator may, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option or Right in full,
including Shares as to which such Options or Rights would not otherwise be
exercisable. If the Administrator makes an Option or Right fully exercisable
in lieu of assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee that the Option or Right
shall be fully exercisable for a period of time determined by the Administrator
from the date of such notice, and the Option or Right will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Right shall be considered assumed if, immediately following the merger or sale
of assets, the option or right confers the right to purchase, for each Share of
Optioned Stock subject to the Option or Right 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
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets
was not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option or Right, for each Share of Optioned Stock subject to the Option or
Right, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders
of Common Stock in the merger or sale of assets.
(d) CHANGE IN CONTROL. In the event of a "Change in
Control" of the Company, as defined in paragraph (e) below, unless otherwise
determined by the Administrator prior to the occurrence of such Change in
Control, any Options and Rights outstanding on the date such Change in Control
is determined to have occurred that are not yet exercisable and vested on such
date shall become fully exercisable and vested.
(e) DEFINITION OF "CHANGE IN CONTROL". For purposes of
this Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities; or
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(ii) The stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets; or
(iii) A change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors in office are Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of the date the Plan
is approved by the stockholders, or (B) are elected, or nominated for election,
to the Board of Directors of the Company with the affirmative votes of at least
a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
(f) NO OTHER ADJUSTMENTS. Except as expressly provided
or authorized herein, no issuance by the Company of shares of stock of any
class, or securities convertible into or exercisable for shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option
or Right.
13. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS.
(a) ABILITY TO USE STOCK TO SATISFY WITHHOLDING. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 13. When an Optionee incurs tax liability in
connection with the award, vesting or exercise of an Option or Right, which tax
liability is subject to tax withholding under applicable tax laws (including
federal, state and local laws), and the Optionee is obligated to pay the
Company an amount required to be withheld under such applicable tax laws, the
Optionee may satisfy the withholding tax obligation (up to an amount calculated
by applying such Optionee's maximum marginal tax rate) by electing to have the
Company withhold from the Shares to be issued upon award, vesting or exercise
of the Option or Right that number of Shares, or by delivering to the Company
that number of previously owned Shares, having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld or delivered, as the case may be, shall be determined on the date that
the amount of tax to be withheld is determined (the "Tax Date").
(b) ELECTION TO HAVE STOCK WITHHELD. All elections by an
Optionee to have Shares withheld or to deliver previously owned Shares pursuant
to this Section 13 shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the
applicable Tax Date;
(ii) all elections shall be subject to the consent
or disapproval of the Administrator; and
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(iii) if the Optionee is an Insider, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject
to such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(c) SECTION 83(b) ELECTIONS. In the event that an
election to have Shares withheld is made by an Optionee, no election is filed
under Section 83(b) of the Code by such Optionee and the Tax Date is deferred
under Section 83 of the Code, the Optionee shall receive the full number of
Shares with respect to which the Option or Right has been awarded, has vested
or has been exercised, as the case may be, but such Optionee shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
14. TIME OF GRANTING OPTIONS AND RIGHTS. The date of grant of an
Option or Right shall, for all purposes, be the date on which the Administrator
makes the determination granting such Option or Right or such future date as is
specified in the resolutions of the Administrator grating such Option or Right.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Right is so granted within a reasonable time after the date
of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan, but no amendment, alteration,
suspension or termination shall be made which would impair the rights of any
Optionee under any Option or Right theretofore granted without his or her
consent.
(b) STOCKHOLDER APPROVAL. The Company shall obtain
stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Rule 16b-3 or with Section 422 of the Code (or any
successor statute or rule or other applicable law, rule or regulation,
including the requirements of any exchange or quotation system on which the
Common Stock is listed or quoted). Such stockholder approval, if required,
shall be obtained in such a manner and to such a degree as is required by the
applicable law, rule or regulation.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such
amendment, alteration, suspension or termination of the Plan shall not
adversely affect Options or Rights already granted and such Options and Rights
shall remain in full force and effect as if this Plan had not been amended,
altered, suspended or terminated, unless mutually agreed otherwise between the
Optionee and the Administrator, which agreement must be in writing and signed
by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued
pursuant to the award, vesting or exercise of an Option or Right unless the
award, vesting or exercise of such Option or Right, as the case may be, 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, applicable state securities laws and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or
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quoted, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) INVESTMENT REPRESENTATION. As a condition to the
receipt of Shares upon the award, vesting or exercise of an Option or Right,
the Company may require the person receiving such Shares to represent and
warrant at the time of any such award, vesting or exercise that the Shares are
being acquired 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.
(c) REGULATORY AUTHORITY. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
(d) GRANTS EXCEEDING ALLOTTED SHARES. If the Optioned
Stock covered by an Option or Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
stockholder approval, such Option or Right shall be void with respect to such
excess Optioned Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 15(b) of the Plan.
17. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
18. AGREEMENTS. Options and Rights shall be evidenced by written
agreements in such form as the Administrator shall approve from time to time.
19. STOCKHOLDER APPROVAL. Continuance of the Plan shall be
subject to approval by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted as provided in Section 6.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
20. NO EMPLOYMENT OR CONSULTING AGREEMENT. Neither the Plan nor
any Option or Right nor any agreement evidencing such awards nor the vesting
thereof shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.
21. PERFORMANCE-BASED PLAN LIMITATION. 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 500,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 500,000 Shares,
which shall not count against the limit set forth in subsection (i) above.
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(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 12.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a
transaction described in Section 12), the cancelled Option will be counted
against the limit set forth in this Section 21. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
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APPENDIX II
VLSI TECHNOLOGY, INC
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
(Amended and Restated Plan adopted by the Board of Directors on January 15,
1987, amended by the Board on April 22, 1987, February 17, 1989, March 6, 1991,
February 11, 1992, February 10, 1993 and February __, 1995 and subject to
stockholder approval at the 1995 Annual Meeting of Stockholders; first approved
by the stockholders on April 22, 1987).
1. ESTABLISHMENT OF PLAN. VLSI Technology, Inc. (the "Company")
proposes to grant options for purchase of the Company's Common Stock to
eligible employees of the Company and Subsidiaries (as hereinafter defined)
pursuant to this Amended and Restated Employee Stock Purchase Plan (the
"Plan"). For purposes of this Plan, "parent corporation" and "Subsidiary"
(collectively, "Subsidiaries") shall have the same meanings as "parent
corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
The Company intends that the Plan shall qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments or replacements
of such section), and the Plan shall be so construed. Any term not expressly
defined in the Plan but defined for purposes of such Section 423 shall have the
same definition herein. A total of 9,000,000 shares of Common Stock are
reserved for issuance under the Plan, of which 2,400,000 shares shall be
subject to stockholder approval at the 1995 Annual Meeting of Stockholders.
Such number shall be subject to adjustments effected in accordance with Section
14 of the Plan. All shares purchased under the Plan since its initial adoption
on August 1, 1983 shall be counted against the 9,000,000 shares reserved under
the Plan.
2. PURPOSES. The purpose of the Plan is to provide employees of
the Company and Subsidiaries with a convenient means to acquire an equity
interest in the Company through payroll deductions, to enhance such employees'
sense of participation in the affairs of the Company and Subsidiaries, and to
provide an incentive for continued employment.
3. ADMINISTRATION.
(a) ADMINISTRATIVE BODY. The Plan is administered by the
Compensation Committee appointed by the Board of Directors of the Company or,
if no such Committee has been appointed, then by the Board of Directors of the
Company (in which event all references herein to the Compensation Committee
shall be to the Board of Directors). Subject to the provisions of the Plan,
the limitations of Section 423 of the Code or any successor provision in the
Code and the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor provision ("Rule 16b-3"),
all questions of interpretation or application of the Plan shall be determined
by the Compensation Committee, and its decisions shall be final and binding
upon all participants. Members of the Compensation Committee shall receive no
compensation for their services in connection with the administration of the
Plan, other than standard fees as established from time to time by the Board of
Directors of the Company for services rendered by Board members serving on
Board committees. All expenses incurred in connection with the administration
of the Plan shall be paid by the Company.
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(b) Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 3, in the event that Rule 16b-3
provides specific requirements for the administrators of plans of this type,
the Plan shall only be administered by such a body and in such a manner as
shall comply with the applicable requirements of Rule 16b-3. Unless permitted
by Rule 16b-3, no discretion concerning decisions regarding the Plan shall be
afforded to any committee or person that is not "disinterested" as that term is
used in Rule 16b-3.
4. ELIGIBILITY. Any employee of the Company or the Subsidiaries
is eligible to participate in an Offering Period (as hereinafter defined) under
the Plan except the following:
(a) employees who are not employed by the Company or
Subsidiaries on the fifteenth (15th) day of the month before the beginning of
such Offering Period;
(b) employees who are customarily employed for less than
twenty (20) hours per week;
(c) employees who are customarily employed for less than
five (5) months in a calendar year;
(d) employees who, together with any other person whose
stock would be attributed to such employee pursuant to Section 424(d) of the
Code, own stock and/or hold options to purchase stock or who, as a result of
being granted an option under the Plan with respect to such Offering Period,
would own stock and/or hold options to purchase stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of
stock of the Company or any of its Subsidiaries; and
(e) employees who would, by virtue of their participation
in such Offering Period, be participating simultaneously in more than one
Offering Period under the Plan.
5. OFFERING DATES. The Plan is implemented by overlapping
offering periods of twenty-four (24) months duration (the "Offering Period").
The first Offering Period with a 24-month duration shall commence on May 1,
1987. Subsequent Offering Periods shall commence May 1 and November 1 of each
year and end on the second April 30 and October 31, respectively, thereafter.
The first day of each Offering Period is referred to as the "Offering Date."
Each Offering Period shall consist of four six-month purchase periods
(individually, a "Purchase Period") during which payroll deductions of the
participant are accumulated under this Plan. Each such six-month Purchase
Period shall commence on each May 1 and November 1 of an Offering Period and
shall end on the next October 31 and April 30, respectively. The last business
day of each Purchase Period is hereinafter referred to as the "Purchase Date."
The Board of Directors of the Company shall have the power to change the
duration of Offering Periods or Purchase Periods with respect to future
offerings without stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
or Purchase Period, as the case may be, to be affected.
6. PARTICIPATION IN THE PLAN. Eligible employees may become
participants in an Offering Period under the Plan on the first Offering Date
after satisfying the eligibility requirements by delivering to the Company's or
Subsidiary's (whichever employs such employee) payroll office (the
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"payroll office") not later than the fifteenth (15th) day of the month before
such Offering Date (unless a later time for filing the subscription agreement
is set by the Board for all eligible Employees with respect to a given Offering
Period) a subscription agreement authorizing payroll deductions. An eligible
employee who does not deliver a subscription agreement to the payroll office by
such date after becoming eligible to participate in such Offering Period under
the Plan shall not participate in that Offering Period or any subsequent
Offering Period unless such employee subsequently enrolls in the Plan by filing
the subscription agreement with the payroll office not later than the fifteenth
(15th) day of the month preceding a subsequent Offering Date. Once an employee
becomes a participant in the Plan, such employee will automatically participate
in each successive Offering Period until such time as such employee withdraws
from the Plan or terminates further participation in a given Offering Period as
set forth below, and is not required to file any additional subscription
agreements for subsequent Offering Periods in order to continue participation
in the Plan. A participant in the Plan may participate in only one Offering
Period at any time.
7. GRANT OF OPTION ON ENROLLMENT.
(a) ENROLLMENT; MAXIMUM SHARES SUBJECT TO OPTION.
Enrollment by an eligible employee in the Plan with respect to an Offering
Period will constitute the grant (as of the Offering Date) by the Company to
such employee of an option to purchase on each Purchase Date up to that number
of shares of Common Stock of the Company determined by dividing the amount
accumulated in such employee's payroll deduction account during such Purchase
Period by the lower of (i) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Offering Date (the "Entry
Price") or (ii) eighty-five percent (85%) of the fair market value of a share
of the Company's Common Stock on the Purchase Date; provided, however, that the
number of shares of the Company's Common Stock subject to any option granted
pursuant to this Plan shall not exceed the lesser of (A) the aggregate of the
maximum number of shares set by the Compensation Committee pursuant to Section
10(c) below with respect to each Purchase Period within the applicable Offering
Period, or (B) 8,400 shares. The number of shares of Common Stock which are
exercisable on a given Purchase Date within an Offering Period shall be
determined by dividing the employee's payroll deductions accumulated during the
Purchase Period ending on such Purchase Date by the lower of the Entry Price
for such Offering Period or eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on such Purchase Date; provided,
however, that the number of shares exercisable on any Purchase Date shall not
exceed the lesser of (x) the maximum number of shares set by the Compensation
Committee pursuant to Section 10(c) below with respect to such Purchase Period,
or (y) 8,400 shares less any shares purchased by such employee on prior
Purchase Dates within the same Offering Period. Fair market value of a share
of the Company's Common Stock shall be determined as provided in Section 8
hereof.
(b) RE-ENROLLMENT. Re-enrollment by a participant in the
Plan (but not merely a change in the level of payroll deductions other than a
reduction of payroll deductions to 0%) will constitute the grant by the Company
to the participant of a new option on the first day of the next Offering Period
that commences on or after the date that such re-enrollment occurs. Any
participant whose option expires and who has not withdrawn from the Plan will
automatically be re-enrolled in the Plan and granted a new option on the
Offering Date of the next Offering Period.
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8. PURCHASE PRICE.
(a) PURCHASE PRICE DETERMINATION. The purchase price per
share at which a share of Common Stock will be sold in any Offering Period
shall be eighty-five percent (85%) of the lesser of:
(i) The fair market value on the Offering Date; or
(ii) The fair market value on the Purchase Date.
(b) FAIR MARKET VALUE. For purposes of the Plan, the
term "fair market value" on a particular date shall mean the following amount
for such date (or, if no prices are reported for such date, then for the last
date prior thereto for which prices were reported): (i) the closing price of a
share of the Company's Common Stock, as reported on the NASDAQ National Market
System or as reported on such other stock exchange or market system as the
Common Stock is traded on, or (ii) if no closing price for the Common Stock is
so quoted, then the average of the closing bid and asked prices, or (iii) if
neither of the foregoing is reported, then as determined by the Compensation
Committee.
9. PAYROLL DEDUCTIONS; ISSUANCE OF SHARES.
(a) PAYROLL DEDUCTION PERCENTAGE; ELIGIBLE COMPENSATION.
The purchase price of the shares is accumulated by regular payroll deductions
made during each Purchase Period, which deductions are to be made as a
percentage of the employee's regular compensation. Upon initial subscription
to an Offering Period under the Plan, a participant must authorize a deduction
of not less than one-tenth of one percent (0.1%) and not more than ten percent
(10%) of the participant's regular compensation (the "Initial Deduction Rate").
All deduction percentages of less than one percent (1%) may only be made in
increments of one-tenth of one percent (0.1%). All deduction percentages of
one percent (1%) or more (up to the maximum of ten percent (10%)) may only be
made in increments of one percent (1%). Regular compensation shall mean all
gross earnings, including regular straight time pay, payments for overtime,
shift premium, incentive compensation, incentive payments, bonuses, and
commissions, but excluding profit sharing and any other income (such as
relocation expenses, automobile reimbursement, severance payments or other
employee benefits). For purposes of determining a participant's compensation,
any election by such participant to reduce his/her regular cash remuneration
under Code Section 125 or 401(k) shall be treated as if the participant did not
make such election. Payroll deductions shall commence on the first payday
following the Offering Date and shall continue to be made on each payday during
the Offering Period unless altered or terminated as provided in the Plan.
(b) CHANGE IN RATE OF PAYROLL DEDUCTIONS. A participant
may decrease (but not increase) the rate of payroll deductions during a
Purchase Period by filing with the payroll office a new authorization for
payroll deductions, in which case the new rate shall become effective for the
next payroll period commencing more than fifteen (15) days after the payroll
office's receipt of the authorization. Such change in the rate of payroll
deductions may be made at any time during an Offering Period, but not more than
one change may be made effective during any Purchase Period. Notwithstanding
subsection (a) of this Section 9, a participant may decrease the rate of
payroll deductions during a Purchase Period to a rate of zero
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percent (0%) after the Initial Deduction Rate has been chosen and at least one
deduction has been made in accordance therewith during the Purchase Period. In
such a case, the participant will continue to participate in the current
Purchase Period to the extent of payroll deductions that have been made during
such Purchase Period and prior to the reduction of the rate to 0%, but such
participant will be considered to have withdrawn from any future Purchase
Periods during such Offering Period and from the Plan effective immediately
following the Purchase Date relating to the Purchase Period during which such
reduction in payroll deductions to 0% was made such that the total amount of
payroll deductions made during such Purchase Period are used to purchase shares
of Common Stock in accordance with Section 7(a) hereof; PROVIDED, HOWEVER, that
a participant who so withdraws from the Plan may re-enroll in the Plan for the
next or any subsequent Offering Period following such withdrawal pursuant to
Section 6 hereof. A participant may increase (subject to the limitations
contained herein) or decrease the rate of payroll deductions for any subsequent
Purchase Period by filing with the payroll office a new authorization for
payroll deductions not later than the fifteenth (15th) day of the month before
the beginning of such Purchase Period. Such changed rate of payroll deductions
shall be subject to the limitations described in Subsection (a) of this Section
9.
(c) NO SEGREGATION OF PAYROLL DEDUCTIONS REQUIRED; NO
INTEREST. All payroll deductions made for a participant are credited to
his/her account under the Plan and are deposited with the general funds of the
Company; 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 the Company shall not be obligated to segregate such payroll
deductions.
(d) PURCHASE OF SHARES. On each Purchase Date, so long
as the Plan remains in effect and provided that the participant has not
submitted a signed and completed withdrawal form before that date which
notifies the Company that the participant wishes to withdraw from that Offering
Period under the Plan and have all payroll deductions accumulated in the
participant's account on that date returned to him/her, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of the Plan. Any amount remaining in such participant's account after a
purchase of shares on a Purchase Date shall, to the extent that such amount is
less than the amount necessary to purchase a full share of Common Stock of the
Company, be retained in such participant's payroll deduction account and
treated as an amount contributed to such account in the next succeeding
Purchase Period or, if the Purchase Date is the last Purchase Date in an
Offering Period, in the next succeeding Offering Period. Any additional cash
remaining to the credit of a participant's account after such purchase of
shares shall be refunded to such participant in cash. In the event that the
Plan has been oversubscribed, all funds not used to purchase shares on the
Purchase Date shall be returned to the participant. No Common Stock shall be
purchased on a Purchase Date on behalf of any employee whose participation in
the Plan has terminated prior to such Purchase Date.
(e) DELIVERY OF STOCK CERTIFICATES. Subject to the
provisions of this Plan, as promptly as practicable after the Purchase Date,
the Company shall cause to be delivered to the participant certificates
representing the shares purchased by the participant. Delivery shall be
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deemed effective for all purposes when the Company's stock transfer agent
deposits the stock certificates in the United States mail addressed to the
participant at the address specified by the participant on the subscription
agreement.
(f) EXERCISE OF OPTION ONLY BY PARTICIPANT. During a
participant's lifetime, such participant's option to purchase shares hereunder
is exercisable only by him/her. The participant will have no interest or
voting right in shares covered by his/her option until such option has been
exercised. Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his/her spouse.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) $25,000 LIMITATION. No employee shall be entitled to
purchase stock under the Plan at a rate which, when aggregated with his/her
rights to purchase stock under all other employee stock purchase plans of the
Company or any Subsidiary, exceeds $25,000 in fair market value, determined as
of the Offering Date (or such other limit as may be imposed by the Code) for
each calendar year in which the employee participates in the Plan.
(b) MAXIMUM NUMBER OF SHARES. No more than 8,400 shares
may be purchased by a participant on any single Purchase Date or during any
single Offering Period.
(c) DECREASE IN MAXIMUM SHARES BY COMMITTEE. No employee
shall be entitled to purchase more than the Maximum Share Amount (as defined
below) on any single Purchase Date. Not less than thirty days prior to the
commencement of any Purchase Period, the Compensation Committee may, in its
sole discretion, set a maximum number of shares which may be purchased by any
employee on any single Purchase Date (hereinafter the "Maximum Share Amount").
In no event shall the Maximum Share Amount exceed the amounts permitted under
Section 10(b) above. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount not less than
fifteen days prior to the commencement of the next Purchase Period. Once the
Maximum Share Amount is set, it shall continue to apply in respect of all
succeeding Purchase Dates and Purchase Periods unless revised or rescinded by
the Compensation Committee as set forth above.
(d) EQUITABLE ALLOCATION OF REMAINING SHARES. If the
number of shares to be purchased on a Purchase Date by all employees
participating in the Plan exceeds the number of shares then available for
issuance under the Plan, the Company will make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the
Compensation Committee shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each employee affected thereby.
(e) RETURN OF EXCESS PAYROLL DEDUCTIONS. Any payroll
deductions accumulated in a participant's account which are not used to
purchase stock due to the limitations in this Section 10 shall be returned to
the participant as soon as practicable after the end of the Offering Period.
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11. WITHDRAWAL.
(a) METHODS OF WITHDRAWAL. Each participant may withdraw
from a Purchase Period and an Offering Period under the Plan by signing and
delivering to the payroll office notice on a form provided for such purpose.
Such withdrawal may be elected at any time prior to the end of an Offering
Period. In addition, a participant's reduction of his or her payroll deduction
rate to zero percent (0%) pursuant to Section 9(b) constitutes a withdrawal
from the Plan immediately following the Purchase Date relating to the Purchase
Period during which such reduction was made.
(b) EFFECT OF WITHDRAWAL. Upon withdrawal from the Plan,
the accumulated payroll deductions shall be returned to the withdrawn employee
and his/her interest in the Plan shall terminate. In the event an employee
voluntarily elects to withdraw from the Plan, he/she may not resume his/her
participation in the Plan during the same Offering Period, but he/she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
the Plan.
(c) EXERCISE, WITHDRAWAL AND ENROLLMENT IN NEXT OFFERING
PERIOD. A participant may participate in the current Purchase Period (the
"Current Purchase Period") under an Offering Period (the "Current Offering
Period") and enroll in the Offering Period commencing immediately after the
Current Purchase Period (the "New Offering Period") by (i) withdrawing from
participation in the Current Offering Period effective as of immediately
following the purchase of shares on the Purchase Date of the Current Purchase
Period within the Current Offering Period and (ii) enrolling in the New
Offering Period. Such withdrawal and enrollment shall be effected by filing
with the payroll office such form or forms as are provided for such purposes.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement or death or the failure of a
participant to remain an eligible employee, terminates his/her participation in
the Plan immediately. In such event, the payroll deductions credited to the
participant's account will be returned to him/her or, in the case of his/her
death, to his/her legal representative. For this purpose, an employee will not
be deemed to have terminated employment or failed to remain in the continuous
employ of the Company in the case of sick leave, military leave, or any other
leave of absence approved by the Board of Directors of the Company; provided
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event an employee's
interest in the Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event the Plan is terminated or suspended by the Board of
Directors of the Company, the Company shall promptly deliver to the employee
all payroll deductions credited to his/her account. No interest shall accrue
on the payroll deductions of a participant in the Plan.
14. CAPITAL CHANGES.
(a) STOCK SPLITS. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the
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Plan but have not yet been placed under option (collectively, the "Reserves"),
as well as the price per share of Common Stock covered by each option under the
Plan which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend (but only on
the Common Stock) or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, in the exercise of its sole
discretion in such instances, declare that the options under the Plan shall
terminate as of a date fixed by the Board and give each participant the right
to exercise his/her option as to all of the optioned stock, including shares
which would not otherwise be exercisable.
(c) SALE OF ASSETS OR MERGER. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by the successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Board shall notify the participant that the
option shall be fully exercisable for a period of twenty (20) days from the
date of such notice, and the option will terminate upon the expiration of such
period.
(d) ADJUSTMENT OF RESERVES. The Board may, if it so
determines in the exercise of its sole discretion, also make provision for
adjusting the Reserves, as well as the price per share of Common Stock covered
by each outstanding option, in the event that the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock, and in the event of the
Company being consolidated with or merged into any other corporation.
(e) NO OTHER ADJUSTMENTS. Except as expressly provided
or authorized herein, no issuance by the Company of shares of stock of any
class, or securities convertible into or exercisable for shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
15. NONASSIGNABILITY. No rights or accumulated payroll deductions
of an employee under the Plan may be pledged, assigned or transferred for any
reason and any such attempt may be treated by the Company as an election by
such employee to withdraw from the Plan.
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16. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his/her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the
Company if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two
years from the Offering Date or within six months from the Purchase Date on
which such shares were purchased (the "Notice Period"). Unless such
participant is disposing of any of such shares during the Notice Period, such
participant shall keep the certificates representing such shares in his/her
name (and not in the name of a nominee) during the Notice Period. The Company
may, at any time during the Notice Period, place a legend or legends on any
certificate representing shares acquired pursuant to the Plan requesting the
Company's transfer agent to notify the Company of any transfer of the shares.
The obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on certificates.
18. NO OBLIGATION OF EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. DURATION, AMENDMENT AND TERMINATION OF THE PLAN.
(a) DURATION OF THE PLAN. This Plan shall continue until
the earlier to occur of termination by the Board of Directors of the Company or
issuance of all of the shares of Common Stock reserved for issuance under the
Plan.
(b) ABILITY TO AMEND OR TERMINATE THE PLAN. The Board
may at any time amend, alter, suspend or discontinue the Plan.
(c) EFFECT OF AMENDMENT. Except for limitations
expressly permitted by this Plan, amendments or alterations to the Plan or to
options under the Plan which would impair the rights of any participant in the
Plan shall not be effective with respect to any option theretofore granted
unless the consent of the participant holding such option is obtained.
Amendments which do not impair the rights of participants shall be effective
with respect to all options under the Plan, whether theretofore or thereafter
granted; provided, however, that no such amendment shall be effective with
respect to previously granted options if such amendment would constitute a
modification to such options (as defined in Section 424 of the Code) and such
modification would disqualify such options from treatment as qualified options
under Section 421 of the Code.
(d) EFFECT OF TERMINATION. Any suspension,
discontinuation or termination of the Plan shall automatically terminate all
options outstanding hereunder and any payroll deductions held in participants'
accounts under the Plan at the time of such termination shall be returned to
such participants without interest.
(e) STOCKHOLDER APPROVAL OF AMENDMENTS. The Company
shall obtain stockholder approval of any Plan amendment to the extent necessary
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and desirable to comply with Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or with Section 423 of
the Code (or any successor statute or rule or other applicable law, rule or
regulation), such stockholder approval to be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
20. DEATH OF PARTICIPANT.
(a) FILING OF DESIGNATION OF BENEFICIARY. A participant
may file a written designation of a beneficiary who is to receive any shares
and cash, if any, from the participant's account under the Plan in the event of
such participant's death subsequent to the end of a Purchase Period but prior
to delivery to him/her of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to a Purchase Date. Such designation of beneficiary may be changed by
the participant at any time by written notice.
(b) DEATH WITHOUT EFFECTIVE DESIGNATION OF BENEFICIARY.
In the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
21. CONDITIONS UPON ISSUANCE OF SHARES.
(a) GENERAL. Shares shall not be issued with respect to
an option unless the exercise of such option and the issuance and delivery of
such shares pursuant thereto shall comply with all applicable provisions of
law, domestic or foreign, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATION. As a condition to the
exercise of an option, the Company may require the person exercising such
option to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.
22. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and
conditions of options granted hereunder to, and the terms and conditions the
purchase of shares by, persons subject to Section 16 of the Exchange Act shall
comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed
to contain, and such options shall contain, and the shares issued upon exercise
thereof shall be subject to, such additional conditions and restrictions as may
be required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
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