<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. [ ])
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] 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, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(l) 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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.
(l) Amount Previously Paid:
N/A
------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
------------------------------------------------------------------
(3) Filing Party:
N/A
------------------------------------------------------------------
(4) Date Filed:
N/A
------------------------------------------------------------------
<PAGE> 2
VLSI TECHNOLOGY, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1998
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, May 14, 1998, 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 seven directors to serve for the ensuing year and until their
successors are elected.
2. 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 100,000,000 shares and
eliminating Junior Stock.
3. To approve an amendment to the Employee Stock Purchase Plan to increase
the number of shares reserved for issuance thereunder by 2,000,000
shares.
4. To approve an amendment to the 1992 Stock Plan to increase the number of
shares reserved for issuance thereunder by 2,000,000 shares.
5. To approve amendments to the 1986 Directors' Stock Option Plan,
including an increase in the number of shares reserved for issuance
thereunder by 300,000 shares.
6. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 25, 1998.
7. 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 March 18, 1998 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,
LARRY L. GRANT, Secretary
San Jose, California
April 6, 1998
<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. ("VLSI"
or the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Thursday, May 14, 1998, 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 April 6, 1998 to
all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on March 18, 1998 (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, 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.
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.
If cumulative voting for directors is properly invoked by any stockholder,
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.
<PAGE> 4
Stockholders may only cast votes for candidates whose names have been properly
placed in nomination in accordance with the Company's Bylaws.
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 $5,000, 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 with respect to such matter (the "Votes
Cast").
Abstentions will 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). Accordingly, abstentions will have the same effect as a vote
against the proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but broker non-votes
will 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.
Thus, a broker non-vote will not affect the outcome of the voting on a proposal
that requires a majority of the Votes Cast (such as the approval of the proposed
amendment to the Employee Stock Purchase Plan). However, with respect to a
proposal that requires a majority of the outstanding shares (such as the
proposed amendment to the Certificate of Incorporation), a broker non-vote has
the same effect as a vote against the proposal.
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 and by each nominee for
director, (ii) by each executive officer listed in the Summary Compensation
Table under the heading "EXECUTIVE OFFICER COMPENSATION", (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)................................................ 3,569,750 %
82 Devonshire Street
Boston, Massachusetts 02109
J. & W. Seligman & Co. Incorporated, William C. Morris and
Seligman Communications & Information Fund, Inc.(2)....... 2,979,000 %
100 Park Avenue
New York, New York 10017
Barclays Trust and Banking Company (Japan) Ltd.(3).......... 2,718,497 %
2-2 Otemachi 2-Chome
Tokyo, Japan 100
Richard M. Beyer(4)......................................... 111,831 *
Pierre S. Bonelli(5)........................................ 20,000 *
Robert P. Dilworth(6)....................................... 25,000 *
John S. Hodgson(7).......................................... 31,250 *
William G. Howard, Jr.(8)................................... 5,000 *
Balakrishnan S. Iyer(9)..................................... 48,923 *
Thierry M. Laurent(10)...................................... 127,350 *
Paul R. Low(11)............................................. 5,000 *
Alfred J. Stein(12)......................................... 1,264,920 %
Horace H. Tsiang(13)........................................ 10,000 *
All current directors and executive officers as a group..... 1,681,096 %
(14 persons)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)
</TABLE>
- ---------------
* Less than 1%.
(1) As reported in Schedule 13G, dated January 10, 1998, Fidelity Management &
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp. and
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, is the beneficial owner of 3,386,750 shares, as a
result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940. Edward C.
Johnson 3d, FMR Corp., through its control of Fidelity, and the funds each
has sole power to dispose of the 3,386,750 shares owned by the Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Funds' Board of Trustees.
Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Board of Trustees. Fidelity Management Trust
Company, a wholly-owned subsidiary of FMR Corp. and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial
owner of 183,000 shares as a result of its serving as investment manager of
the institutional account(s). Edward C. Johnson 3d and FMR Corp., through
its control of Fidelity Management Trust Company, each has sole dispositive
power over 183,000 shares and sole power to vote or to direct the voting of
33,000 shares, and no power to vote or to direct the voting of 150,000
shares owned by the institutional account(s) as reported above. Members of
the Edward C. Johnson 3d family and trusts for their benefit are the
predominant owners of Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr. Johnson
3d owns 12% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group and
all other Class B
3
<PAGE> 6
shareholders have entered into a shareholders' voting agreement under which
all Class B shares will be voted in accordance with the majority vote of
Class B shares. Accordingly, through their ownership of voting common stock
and the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed under the Investment Company Act of 1940, to
form a controlling group with respect to FMR Corp.
(2) As reported in Schedule 13G, dated February 13, 1998, filed by J. & W.
Seligman & Co. Incorporated ("JWS"), William C. Morris ("Morris") and
Seligman Communications & Information Fund, Inc. ("SCIF"). JWS, Morris and
SCIF share dispositive and voting power of the 2,979,000 shares.
(3) As reported in Schedule 13G, dated February 12, 1997, filed by Barclays
Trust and Banking Company (Japan) Ltd., Barclays Global Investors, N.A. and
Barclays Global Fund Advisors (collectively "Barclays"). Barclays has sole
power to vote or to direct the vote of 2,656,297 and sole power to dispose
or to direct the disposition with respect to all 2,718,497 shares.
(4) Includes 110,416 shares exercisable within 60 days of the Record Date under
options held by Mr. Beyer.
(5) These 20,000 shares are exercisable within 60 days of the Record Date under
options held by Mr. Bonelli.
(6) These 25,000 shares are exercisable within 60 days of the Record Date under
options held by Mr. Dilworth.
(7) These 31,250 shares are exercisable within 60 days of the Record Date under
options held by Mr. Hodgson.
(8) These 5,000 shares are exercisable within 60 days of the Record Date under
options held by Mr. Howard.
(9) Includes 43,751 shares exercisable within 60 days of the Record Date under
options held by Mr. Iyer.
(10) Includes 119,250 shares exercisable within 60 days of the Record Date under
options held by Mr. Laurent.
(11) These 5,000 shares are exercisable within 60 days of the Record Date under
options held by Mr. Low.
(12) Includes 802,501 shares exercisable within 60 days of the Record Date under
options held by Mr. Stein.
(13) Includes 5,000 shares exercisable within 60 days of the Record Date under
options held by Mr. Tsiang.
(14) Includes 1,190,918 shares exercisable within 60 days of the Record Date
under options held by five non-employee directors and nine current
executive officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 26, 1997, its officers, directors and
holders of more than 10% of the Company's Common Stock complied with all Section
16(a) filing requirements, except a Form 4 for director Robert P. Dilworth,
involving one transaction, was filed late and one transaction for director
Horace H. Tsiang that should have been reported on a Form 4 was filed on Form 5,
constituting a late filing.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at an annual meeting of the Company must be properly
presented in accordance with the Company's Bylaws. In addition, stockholder
proposals that such stockholders desire to have included in the Company's proxy
statement for its 1999 annual meeting must be received by the Company no later
than December 7, 1998 in order to be considered for possible inclusion in the
proxy statement and form of proxy relating to that meeting.
4
<PAGE> 7
Under the Bylaws, for business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less than fifty
(50) days notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business, (iii) the class and number of shares of the Company
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business, and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the Exchange
Act, in his or her capacity as a proponent of a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the Exchange Act.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
A Board of seven 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 seven 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.
Stockholders who intend to make nominations for director from the floor of
the Annual Meeting must comply with the advance notice provisions of the
Company's Bylaws. Under the Bylaws, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Company not
less than twenty (20) days nor more than sixty (60) days prior to the meeting;
provided, however, that in the event less than thirty (30) days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a director: (i)
the name, age, business address and residence address or such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of the Company which are beneficially owned by such person, and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to be named in the proxy statement, if
any, as a nominee and to serving as a director if elected); and (b) as to the
stockholder giving the notice: (i) the name and address, as they appear on the
Company's books, of such stockholder, (ii) the class and number of shares of the
Company which are beneficially owned by such stockholder, and (iii) whether such
stockholder intends
5
<PAGE> 8
to request cumulative voting in the election of directors at the meeting. The
presiding officer of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
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>
Richard M. Beyer.................. 49 President and Chief Operating Officer of the 1996
Company
Pierre S. Bonelli(1)(2)........... 58 Chief Executive Officer and Director, Sema Group, a 1983
software, consulting and market research firm
Robert P. Dilworth(1)(2).......... 56 Chairman of the Board, Chief Executive Officer and 1991
Director, Metricom Inc., an electronic wireless
data communications company
William G. Howard, Jr.(1)......... 56 Independent Consulting Engineer in microelectronics 1996
and technology-based business planning
Paul R. Low....................... 65 President and Chief Executive Officer, P.R.L. 1996
Associates, a technology consulting company
Alfred J. Stein................... 65 Chairman of the Board and Chief Executive Officer 1982
of the Company
Horace H. Tsiang.................. 56 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.
Mr. Beyer joined the Company in September 1996 as President and Chief
Operating Officer and was appointed a Director in November 1996. From 1993 to
1996, Mr. Beyer was employed by National Semiconductor Corporation, a
semiconductor manufacturer ("National"). While at National, he was Executive
Vice President and Chief Operating Officer from 1995 to 1996 and
President-Communications and Computing Group from 1993 to 1995. Prior to that
time, from 1989 to 1993, he was Vice President and General Manager of the
Switching Systems Division of Rockwell International ("Rockwell"), a division of
Rockwell involved in communications.
Mr. Bonelli is also a director of Poliet S.A.
Mr. Dilworth is also a director of Photonics Corporation.
Dr. Howard has been an independent consulting engineer since 1989. He is a
member of the National Academy of Engineering and a fellow of the Institute of
Electrical and Electronics Engineers and of the American Association for the
Advancement of Science. Dr. Howard is also a director of BEI Electronics, Inc.,
Credence Systems Corporation, Ramtron International Corporation and Xilinx, Inc.
In addition, he serves as a director of Sandia Corporation, Lockheed Martin
Energy Research and Lockheed Martin Idaho Technologies (wholly-owned
subsidiaries of Lockheed Martin Corporation).
Dr. Low has been Chief Executive Officer of P.R.L. Associates, a consulting
firm, since July 1992. Dr. Low is also a director of Applied Materials, Inc.,
Integrated Packaging Assembly Corp., Network Computing Devices, Inc., Solectron
Corporation, Veeco Instruments Inc. and several privately-held companies.
Mr. Stein joined the Company in March 1982 as Chief Executive Officer and
also served as President from January 1983 to August 1983 and from August 1993
to September 1996. Mr. Stein was initially appointed as Chairman of the Board
and a director of the Company in April 1982, pursuant to an employment
6
<PAGE> 9
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. and Tandy Corporation.
VOTE REQUIRED
The seven 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 26, 1997. During such year, each director attended at least
75% of the aggregate of all meetings held while such director served as a member
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 1997. 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 two meetings in fiscal 1997. The Audit Committee is composed solely of
non-employee directors.
The Board performs the duties of a nominating committee.
DIRECTOR COMPENSATION
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"). The Directors' Plan provides for the
automatic grant of non-statutory options to Outside Directors upon first joining
the Board and on an annual basis thereafter 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 current 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 under the Directors' Plan 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 (a "First Option"). A First Option
becomes exercisable cumulatively with respect to 5,000 shares on the first day
of each fiscal year
7
<PAGE> 10
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 a First Option on the date of his or her initial appointment or
election to the Board.
After receiving a First 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 provides for the grant of an immediately exercisable
replenishment option (a "Replenishment Option") to purchase up to 20,000 shares
to any Outside Director whose First Option expires unexercised. As of December
26, 1997, options to purchase 55,000 shares had been exercised under the
Directors' Plan at a net realized value of $831,525.00, 145,000 shares were
subject to outstanding options, and 100,000 shares remained available for future
grant.
During fiscal 1997, Subsequent Options to purchase 5,000 shares at an
exercise price of $24.125 per share were granted to each of directors Bonelli,
Dilworth, Howard, Low and Tsiang. In addition, a Replenishment Option to
purchase 10,000 shares was granted to Mr. Dilworth at an exercise price of
$18.00 per share.
CERTAIN TRANSACTIONS
Intel. Pursuant to the Intel/VLSI Stock and Warrant Purchase Agreement
(Equity Agreement) entered into on July 8, 1992, Intel invested $50 million in
VLSI to acquire 5,355,207 shares of the Company's Common Stock (Intel Shares)
plus a warrant (Warrant) to purchase an additional 2,677,604 shares of the
Company's Common Stock (Warrant Shares) at $11.69 per share. In January and
February 1995, Intel sold all of the Intel Shares. In August 1995, Intel
exercised its Warrant, resulting in net proceeds to the Company of approximately
$31 million. In 1997, Intel sold all of the Intel Warrant Shares. Therefore, all
rights of, and restrictions on, Intel under the Equity Agreement have
terminated.
Relocation Assistance. In 1996, to facilitate his relocation, the Company
loaned Bernd U. Braune, then the Sr. Vice President of Global Business
Operations, a total of $779,000, represented by three separate promissory notes,
on an interest-free basis. The first note in the amount of $379,000 was due in
full on December 16, 1996 and has been fully repaid to the Company; the second
note in the amount of $200,000 is to be forgiven each year in the amount of
$50,000 until fully satisfied; the third and final note, in the amount of
$200,000, is due in full on September 1, 1999. Each loan is secured by trust
deeds on Mr. Braune's residence. The largest aggregate principal amount
outstanding during fiscal 1997 was $512,200 and the total principal amount
outstanding under all loans at fiscal 1997 year end was $350,000. Mr. Braune
resigned from his position as an executive officer in January 1997.
8
<PAGE> 11
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table, together with the footnotes thereto, summarizes the
total compensation for fiscal year 1997 of (i) the Chief Executive Officer, and
(ii) the four other most highly compensated executive officers of the Company
who were serving as such at 1997 fiscal year end (collectively, the "Named
Officers"), as well as the total compensation paid to each Named Officer for the
Company's two previous fiscal years, if applicable.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------
---------------------------------------- SECURITIES
SALARY BONUS OTHER ANNUAL UNDERLYING OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) COMPENSATION($)(3) (#) COMPENSATION($)(4)
- --------------------------- ---- -------- -------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Alfred J. Stein 1997 $693,232 $ $100,331 150,000 $381,434
Chairman of the Board and
Chief Executive 1996 643,849 452,000 0 950,000 424,989
Officer 1995 582,096 675,000 0 500,000 418,468
Richard M. Beyer(5) 1997 $358,089 25,000 $ 6,972
President and Chief
Operating Officer 1996 106,350 $150,000 $ 0 375,000 2,019
Balakrishnan S. Iyer 1997 $214,435 175,000 $ 5,503
Sr. Vice President 1996 176,591 $ 50,000 20,000 4,695
and Chief Financial
Officer 1995 167,358 50,200 10,000 1,178
John S. Hodgson(6) 1997 $186,032 $ 29,594 125,000 $ 1,925
Sr. Vice President,
Worldwide Sales and
Technology Centers
Thierry M. Laurent(7) 1997.. $252,665 20,000 $ 0
Sr. Vice President and
General Manager,
Communications Products
Group
</TABLE>
- ---------------
(1) The amounts disclosed in this column include amounts earned in the fiscal
year indicated but deferred by the Named Officers pursuant to the Company's
401(k) Investment/Retirement Plan (the "401(k) Plan"), and, beginning in
1997, the Company' s Non-Qualified Deferred Compensation Plan.
(2) The amounts disclosed in this column represent bonus awards made by the
Company under its Executive Performance Incentive Plan. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION."
(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 an amount received by Mr. Stein for stock held in a former
subsidiary of the Company, COMPASS Design Automation, Inc., upon the sale of
the subsidiary.
(4) The amounts in the "All Other Compensation" column for fiscal year 1997
include:
(a) Company contributions in fiscal 1997 under VLSI's 401(k) Plan, in
the following amounts: Alfred J. Stein $4,750; Richard M. Beyer $4,750; and
Balakrishnan S. Iyer $4,477.
(b) Company contribution in fiscal 1997 under VLSI's Non-Qualified
Deferred Compensation Plan to Balakrishnan S. Iyer in the amount of $273.
(c) Payment by the Company of 1997 premiums for term life insurance
for the Named Officers in the following amounts: Alfred J. Stein $4,174;
Richard M. Beyer $2,222; Balakrishnan S. Iyer $753; and John S. Hodgson
$1,925.
9
<PAGE> 12
(d) Payment by the Company of 1997 premiums for a split dollar life
insurance policy in the amount of $14,208 for Mr. Stein and payment by the
Company of the 1997 installment of a series of ten annual payments under a
management and consulting agreement between Mr. Stein and the Company in
the amount of $358,302.
(5) Mr. Beyer joined the Company in September 1996.
(6) Mr. Hodgson joined the Company in May 1997.
(7) Mr. Laurent became an executive officer in August 1997.
CHANGE-IN-CONTROL AGREEMENTS
The Company is a party to agreements with certain of its officers to help
ensure management continuity, which agreements are designed to ensure the
officers' continued services to the Company in the event of a change in control.
Under the agreements, benefits are payable only if the officer's employment is
terminated by the Company, within two years following a change in control, or
the officer is constructively discharged during that period. For purposes of the
agreements, 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 25% of the
combined voting power of the Company's then outstanding securities; or (4) a
change of the majority of the incumbent 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) severance benefit based on a multiple of his or her
current annual base salary; (2) full and immediate vesting of all unvested stock
options; and (3) continuation of other incidental benefits. As of the Record
Date, change-in-control agreements had been entered into with Alfred J. Stein,
Richard M. Beyer, Balakrishnan S. Iyer, Thierry M. Laurent, John S. Hodgson,
Douglas M. McBurnie and two other employees who are not executive officers.
Under their respective agreements, Mr. Stein is to receive a multiple of three
times his annual salary, Mr. Beyer is to receive two and one-half times his
salary and Messrs. Iyer, Laurent, Hodgson and McBurnie two times their annual
salaries.
STOCK OPTIONS
The following table presents information with respect to options to
purchase the Company's Common Stock during fiscal 1997. No stock appreciation
rights ("SARs") have been granted by the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-----------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------------
NAME ($)(3) YEAR(4) ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred J. Stein 150,000 4.9% $ 18.00 4/14/07 $1,698,015 $4,303,105
Richard M. Beyer 25,000 0.8% 18.00 4/14/07 283,003 717,184
Balakrishnan S. Iyer 75,000 2.5% 15.625 1/29/07 736,986 1,867,667
10,000 0.3% 18.00 4/14/07 113,201 286,874
15,000 0.5% 24.188 7/07/07 228,176 578,242
75,000 2.5% 31.625 8/22/07 1,491,659 3,780,158
175,000 5.7%
John S. Hodgson 125,000 4.1% 18.50 4/21/07 1,454,319 3,685,529
Thierry M. Laurent 20,000 0.7% 18.00 4/14/07 226,402 573,747
</TABLE>
10
<PAGE> 13
- ---------------
(1) All options to purchase the Company's Common Stock granted in 1997 to the
Named Officers have ten-year terms and become exercisable in annual 25%
increments, commencing on the first anniversary of the original grant date,
with full exercisability occurring on the fourth anniversary date, except
options granted under the Company's Long Term Incentive Program (see
footnote (3) below). The per share exercise price is equal to the fair
market value of the Common Stock on Nasdaq/NMS on the date of the grant. The
options were granted under the Company's 1992 Stock Plan (the "1992 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 1992 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 1992 Plan.
(2) For the Named Officers, the potential realizable value is calculated
starting with the fair market value on the date of grant and 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%).
Potential realizable value listed for the Named Officers is net of the
option exercise price or fiscal year end price. 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.
(3) Includes options issued to the following officer under the Company's Long
Term Incentive Program: Balakrishnan S. Iyer -- 75,000 shares. See "Long
Term Incentive Program" below.
(4) Based on options to purchase a total of 3,054,550 shares granted to all
employees during fiscal 1997.
The number of shares of Company's stock issued upon exercise of options and
the value realized from any such exercise during the fiscal year ended December
26, 1997 and the number of exercisable and unexercisable options held and their
value at December 26, 1997 for the Named Officers of the Company are set forth
in the following table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(2)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- --------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Alfred J. Stein...... 130,000 $3,224,350 583,751/856,249 $6,692,448/$7,164,552
Richard M. Beyer..... 0 0 104,166/295,834 802,183/2,234,067
Balakrishnan S.
Iyer............... 0 0 16,251/191,249 212,511/ 657,489
John S. Hodgson...... 0 0 0/125,000 0/ 390,625
Thierry M. Laurent... 7,500 188,750 99,250/127,750 1,151,344/1,000,156
</TABLE>
- ---------------
(1) Market value of underlying securities on the date of exercise, minus the
exercise price.
(2) Market value of underlying securities at fiscal year end (for in-the-money
options only) minus the exercise price.
LONG TERM INCENTIVE PROGRAM
On October 8, 1996, the Company adopted a Long Term Incentive Program (the
"Program") for key employees. Under the Program, the employees are granted stock
options under the Company's 1992 Stock Plan at fair market value. Options
granted vest 50% on the fifth anniversary of the date of the grant and 50% on
the sixth anniversary of the date of the grant. Early vesting occurs if the
stock price reaches certain price levels and remains at that level for at least
twenty consecutive trading days. Upon meeting each price level, 1/6
11
<PAGE> 14
of the granted options vest immediately and 1/6 vest 120 days later. Options to
purchase 75,000 shares were granted under the Program in fiscal 1997 to
Balakrishnan S. Iyer at the following price levels: $12.00 over grant price,
$24.00 over grant price and $36.00 over grant price. Options were granted under
the Program to the following Named Officers in previous years at a price level
of $10.00 over grant price, $20.00 over grant price and $30.00 over grant price:
Alfred J. Stein -- 300,000 shares, Richard M. Beyer -- 125,000 and Thierry M.
Laurent -- 75,000.
EXECUTIVE SALARY CONTINUATION AGREEMENT
In December 1996, the Company entered into an Executive Salary Continuation
Agreement (the "Agreement") with Alfred J. Stein, now age 65, the Company's
Chairman of the Board and Chief Executive Officer. Under the Agreement, upon any
future voluntary termination or any involuntary termination, including death or
disability, mental or physical, other than for cause (conviction of a felony
involving fraud or dishonesty against the Company; gross unfitness to serve; or
an intentional, material violation of a statutory or fiduciary duty not
corrected after notice), the executive will receive a lump sum payment equal to
three years' compensation, defined as annual base pay plus an amount equal to
the average of the executive's highest two annual bonuses, if any, payable with
respect to the three fiscal years prior to the termination. In addition, the
executive will receive health insurance and other standard Company welfare
benefits, as in effect at the date of termination, for the life of the executive
and his spouse, or the survivor of them, cost to the Company not to exceed, by
premium or otherwise, $10,000 per year. In addition, upon death or disability,
mental or physical, all outstanding stock options previously granted to the
executive shall vest and executive's estate or successors shall have twelve
months within which to exercise them.
NON-QUALIFIED DEFERRED COMPENSATION PLAN
In June 1997, the Company established a supplemental retirement plan for
the benefit of a select group of management or highly compensated employees of
the Company. Under the Non-Qualified Deferred Compensation Plan, eligible
employees, including officers and directors, may elect to defer up to 100% of
their salary, commissions or bonuses. Participants who terminate with less than
five years of service or $20,000, for reasons other than disability or death,
receive a single lump payment on termination. In all other cases, a participant
may elect various methods of payment, including lump sum, quarterly, annual or
percentage installments over up to 20 years provided the election is made more
than one year prior to termination. Subject to Internal Revenue Service limits,
the Company may, at its discretion, elect to match the deferred amount to the
lesser of fifty percent (50%) of the compensation deferred or three percent (3%)
of a participant's compensation for a Plan Year. During 1997, one matching
payment was made in the amount of $273 to Balakrishnan S. Iyer.
ADDITIONAL COMPENSATION ARRANGEMENTS
Douglas M. McBurnie joined the Company in August 1997 as Senior Vice
President, Consumer and Computer Products Group. At that time, it was agreed
that the Company will credit into a deferred compensation account for the
benefit of Mr. McBurnie the sum of $500,000 each year on the date of completion
of each of his first three years of service.
John S. Hodgson joined the Company in May 1997 as Senior Vice President,
Worldwide Sales and Technology Centers. At that time, it was agreed that Mr.
Hodgson will be paid a bonus in the amount of $100,000 on the date of completion
of his first year of service. If Mr. Hodgson leaves after one year of service
but before completing two years of service, he must repay the Company $50,000.
12
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION PRINCIPLES
The Compensation Committee firmly believes that the compensation of the
Company's employees, including 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). The non-equity-based compensation paid to the Named Officers in fiscal
1997 did not exceed $1 million, with the exception of Mr. Stein. The
Compensation Committee will continue to consider the effects of Section 162(m)
but does not currently intend to take any action to preserve the deductibility
of cash compensation.
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
participation in the Company's employee stock purchase plan comprise the
equity-based components. The Company 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.
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 50% of contributions up to 6% of their base wages per year,
not to exceed the annual maximum as set by the Internal Revenue Service.
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 1997, awards were made based on revenue, gross
margin or operating profit goals and upon individual
13
<PAGE> 16
performance goals and considerations. 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.
Occasionally, in order to attract high-level executives it is necessary to
enter into special arrangements concerning additional compensation. In 1997, the
Company agreed to pay John S. Hodgson, who joined the Company as Senior Vice
President, Worldwide Sales and Technology Centers, a bonus of $100,000 payable
after one year of service. If Mr. Hodgson leaves after one year of service but
before completing two years of service, he must repay the Company $50,000. Also,
under an arrangement entered into with Douglas M. McBurnie, who joined the
Company as Senior Vice President, Consumer and Computer Products Group, the
Company will credit into a deferred compensation account for the benefit of Mr.
McBurnie the sum of $500,000 each year on the date of completion of each of his
first three years of service.
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 stockholders 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 917 employees (or approximately 37% of all employees at
December 26, 1997) hold options under the various stock option plans. At
December 26, 1997, 7,410,904 stock options were outstanding under the 1982
Incentive Stock Option Plan (the "1982 Plan"), which expired in May 1992, and
the 1992 Plan.
In determining the number of shares subject to options to be granted to
executive officers, the Compensation Committee considers 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 1997, 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 1997 under the 1992 Plan had exercise prices equal
to the fair market value (the Nasdaq/NMS closing price) of the Common Stock on
the grant date, or such other date as specified by the Compensation Committee,
and will only have value if the stock price increases subsequent to such date.
Generally, these options become exercisable cumulatively at an annual rate of
25% of the total shares granted commencing one year from such date. In 1997, as
part of his initial compensation package, the Company granted Douglas M.
McBurnie options to purchase 150,000 shares, which vest one-third per year over
three years. Both the 1982 Plan and the 1992 Plan provide for full vesting of
options in the event there is a change in control of the Company.
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 under the 1982 Plan or the 1992 Plan.
CHANGE-IN-CONTROL AGREEMENTS
The Company is a party to change-in-control agreements with certain of its
officers and key employees. In the competitive environment of attracting and
retaining high-level executives, change-in-control agree-
14
<PAGE> 17
ments have become an important element of executive officers' compensation
packages. The Company may enter into such agreements with additional officers
and key employees from time to time. See "EXECUTIVE OFFICER
COMPENSATION -- Change-In-Control Agreements" above.
1997 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stein, in his capacity as the Chairman of the Board and Chief Executive
Officer, 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.
Mr. Stein's annual base salary was increased from $660,000 to $700,000 in
June 1997, primarily based on personal accomplishments and Company performance
in 1996 and 1997. Mr. Stein's Incentive Plan award for 1997, as discussed above
under "Executive Officer Compensation," was based on individual performance
considerations. Major factors taken into account included the continued
recruitment of top management, the successful closing of the San Jose
fabrication facility, the sale of the Company's subsidiary, COMPASS Design
Automation, Inc., and the strategic relationship entered into with Wafer
Technology Malaysia. The 1997 stock option grant to Mr. Stein is believed to be
competitive in the industry. Mr. Stein also receives additional life insurance
and income tax preparation services. In addition, Mr. Stein has an Executive
Salary Continuation Agreement entered into with the Company in 1996. See
"EXECUTIVE OFFICER COMPENSATION -- Executive Salary Continuation Agreement"
above.
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:
Pierre S. Bonelli
Robert P. Dilworth, Chairman
15
<PAGE> 18
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 (the "S&P 500")
index and the Hambrecht & Quist Technology ("H&Q Technology") index. 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*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD VLSI H & Q
(FISCAL YEAR COVERED) TECHNOLOGY S & P 500 TECHNOLOGY
<S> <C> <C> <C>
12/26/92 100.00 100.00 100.00
12/28/93 132.31 110.08 117.41
12/30/94 147.69 111.53 141.04
12/29/95 223.08 153.45 210.89
12/27/96 293.85 188.68 262.10
12/26/97 290.77 251.63 207.29
</TABLE>
Assumes $100 invested on December 26, 1992
*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>
12/26/92 12/28/93 12/30/94 12/29/95 12/27/96 12/26/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
VLSI TECHNOLOGY.......................... $100.00 $132.31 $147.69 $223.08 $293.85 $290.77
S & P 500................................ 100.00 110.08 111.53 153.45 188.68 251.63
H & Q TECHNOLOGY......................... 100.00 117.41 141.04 210.89 262.10 207.29
</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.
16
<PAGE> 19
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES AND ELIMINATE JUNIOR STOCK
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 100,000,000 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 99,000,000 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.
PROPOSED AMENDMENT
In March 1998, 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 and Common Stock by 100,000,000 shares and to eliminate the Series B and
Junior Common Stock, non of which is outstanding. Under the proposed amendment,
subparagraphs (c) and (e) of paragraph 4 of the Certificate relating to the
rights, preferences, privileges and restrictions for Junior Common Stock and
Series B Common Stock would be deleted in their entirety and 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 Two Hundred Two Million (202,000,000), of which Two
Hundred Million (200,000,000) 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 $2,000,000 and
$20,000, respectively, for an aggregate par value of $2,020,000.
(b) Common Shares. The Common Shares authorized by this Certificate of
Incorporation shall be designated "Common Stock" and shall consist of Two
Hundred Million (200,000,000) shares."
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.
SHARES RESERVED
Of the 99,000,000 currently authorized shares of Common Stock, 45,805,566
shares of Common Stock were issued and outstanding as of December 26, 1997. In
addition, as of such date, approximately 8,577,923 shares were reserved for
issuance under the Company's option plans, approximately 2,987,186 shares were
reserved for issuance under the Purchase Plan and approximately 3,147,810 shares
are reserved for issuance under the terms of the Company's Convertible
Subordinated Notes. Accordingly, as of December 26, 1997, the Company has
38,481,515 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 a stock split, 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.
17
<PAGE> 20
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.
The purpose of eliminating Junior Common Stock is that the Company has no
intention of ever using Junior Common Stock in the future.
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, as amended,
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, merger or change in control; (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. The Named Officers are
also party to Change-In-Control Agreements. (See "EXECUTIVE OFFICER
COMPENSATION -- Change-In-Control Agreements").
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.
Management recommends voting "FOR" approval of the proposed Certificate
Amendment. If the Certificate Amendment is not so approved, the Company's
authorized capital stock will not change.
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, 1993 and 1995, the stockholders approved
increases of 1,000,000, 1,000,000, 2,000,000, 2,000,000 and 2,400,000 shares,
respectively, bringing the number of shares issuable under the Purchase Plan to
a total of 9,000,000. The Purchase Plan provides an opportunity and incentive
for all employees to become stockholders of their Company.
18
<PAGE> 21
PROPOSED AMENDMENT
In November 1997, the Board of Directors authorized an amendment to the
Purchase Plan (the "Amendment") to increase the shares reserved for issuance
thereunder by 2,000,000 shares, bringing the total number of shares issuable
under the Purchase Plan to 11,000,000 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.
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment of the Purchase Plan. The Board of Directors recommends
voting "FOR" approval of the amendment to the Purchase Plan.
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. 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 26, 1997, 8,012,814 shares had been purchased under the
Purchase Plan at a weighted average purchase price of $7.2056 per share, and
987,186 shares remained available for future purchase under the Purchase Plan.
Giving effect to the increase in shares approved by the Board of Directors in
November 1997, which is subject to stockholder approval at the Annual Meeting,
there will be 2,987,186 shares available for purchase under the Purchase Plan.
As of December 26, 1997, approximately 2,483 employees were eligible for the
Purchase Plan, of whom 1,613 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, if any, 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 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. 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 during
the last fiscal year; (ii) the dollar value of the benefit; and (iii) the amount
of payroll deductions for future
19
<PAGE> 22
purchases accumulated through December 26, 1997 for the current purchase period
under the Purchase Plan, which purchase period commenced November 1, 1997:
AMENDED PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PAYROLL
SHARES DOLLAR DEDUCTIONS
NAME OF INDIVIDUAL OR PURCHASED VALUE AS OF FISCAL
IDENTITY OF GROUP AND POSITION (#) ($)(1) YEAR END(2)
------------------------------ ------------ --------- ------------
<S> <C> <C> <C>
Alfred J. Stein........................................ 1,423 $ 37,281 $ 9,693
Chairman of the Board and Chief Executive Officer
Richard M. Beyer....................................... 1,415 37,044 4,955
President and Chief Operating Officer
Balakrishnan S. Iyer................................... 1,702 45,547 4,629
Senior Vice President and Chief Financial Officer
John S. Hodgson........................................ 0 0 0
Senior Vice President, Worldwide Sales and Technology
Centers
Thierry M. Laurent..................................... 0 0 0
Senior Vice President and General Manager,
Communications Products Group
All current executive officers as a group.............. 6,112 161,568 23,623
(9 persons)
All other employees as a group......................... 562,174 8,614,185 2,635,524
</TABLE>
- ---------------
(1) Market value on the date of purchase, minus the purchase price under the
Purchase Plan.
(2) Represents payroll deduction amounts since last purchase date.
OFFERING DATES
The Purchase Plan is currently implemented by two 6-month offering periods
per year that commence on May 1 and November 1 of each year. 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 offering period (a
"purchase date") unless a participant withdraws from the offering period prior
to such purchase date. The purchase price per share is the lower of: 85% of the
fair market value of a share of Common Stock on the date of commencement of the
offering period (the "Entry Price"), or 85% of the fair market value of a share
of Common Stock on the purchase date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may choose any percentage of their
compensation, which is deducted from his or her compensation through payroll
deductions. 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 once during an offering period.
20
<PAGE> 23
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 on each purchase date. The maximum number of shares placed under
option to a participant is the lesser of: (a) that number determined by dividing
the amount accumulated in such participant's account during the purchase period
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 offering period; (b) 8,400 shares; (c) a
maximum number of shares set in respect of each purchase period by the
Compensation Committee, if any (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. Employees must be
notified of the Maximum Share Amount, if any, not less than 15 days prior to the
beginning of the first affected offering period. Once set, such Maximum Share
Amount remains in effect for all succeeding offering periods until re-set or
eliminated by the Board of Directors. Currently, the Board of Directors has
implemented a restriction that shares purchased in excess of 500 shares during
any offering period must be held for a period of at least one year.
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 offering 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 offering 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. 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 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.
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 PURCHASE 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
21
<PAGE> 24
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. Any additional gain will be treated as
capital gain. 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.
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. Any such deduction may be limited in the
case of the Company's Chief Executive Officer and each of the other four most
highly compensated executive officers under Internal Revenue Code Section
162(m).
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 AN AMENDMENT 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 the
Company's business. In addition, stock options are considered a competitive
necessity in the semiconductor/high technology industries.
PROPOSED AMENDMENT
In March 1998, the Company's Board of Directors, subject to stockholder
approval, adopted an amendment to the 1992 Stock Plan (the "1992 Plan") to
increase the number of shares reserved for issuance under the 1992 Plan from
9,500,000 shares to 11,500,000 shares. At the Annual Meeting, stockholders are
being asked to approve the increase in shares reserved under the 1992 Plan.
PURPOSE OF THE AMENDMENT
In January 1998, the Board of Directors adopted the 1998 Nonstatutory Stock
Option Plan (the "1998 Plan") and reserved 6,000,000 shares of Common stock for
issuance thereunder. The Company currently intends to use the 1992 Plan
primarily for options granted to officers (as defined in the rules under Section
16 of the Exchange Act) and the 1998 Plan for options granted to non-officers,
since by its terms, such officers are excluded from participating in the 1998
Plan. Purposes for which options are intended to be granted to officers under
the 1992 Plan include recruitment of new officers and the retention, promotion
or retirement of existing officers. It is anticipated that substantially all of
the shares the stockholders are being asked to approve will be used for such
purposes over the next one to three years.
22
<PAGE> 25
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1992 Plan. The Board of Directors recommends that
stockholders vote "FOR" ratification of the increase in shares reserved under
the 1992 Plan.
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." In 1997, the Company granted stock bonuses
to various employees in connection with patent bonus programs. The Company does
not currently have any specific plans to grant any awards under the 1992 Plan
other than options or stock bonuses.
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 26, 1997, the Company's 2,483
employees and its consultants would have been eligible to participate in the
1992 Plan.
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
23
<PAGE> 26
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 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 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 with respect to unvested shares, 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
24
<PAGE> 27
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.
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, 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
25
<PAGE> 28
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 LongTerm 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.
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, 1998. 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 taxable 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 income tax
purposes in connection with the grant or exercise of an ISO. Upon an optionee's
resale of the underlying shares, any gain will be taxed to the optionee as
ordinary income or capital gain, depending on how long the optionee has held the
stock.
An optionee will not recognize any taxable income at the time he or she is
granted an NSO under the 1992 Plan. However, upon exercise of the NSO, the
optionee will generally recognize ordinary income for federal tax purposes
measured by the excess, if any, of the then fair market value of the shares over
the exercise price. 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.
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.
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 fair market value of any Common Stock (or cash, as the case may be) received
upon the exercise. In the case of a recipient who is also an employee, any
taxable income recognized upon exercise
26
<PAGE> 29
of an SAR will constitute wages for which withholding will be required. Any gain
or loss on the resale of Common Stock acquired, upon exercise of an SAR, will be
treated as capital gain or loss.
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.
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.
DEDUCTIBILITY BY THE COMPANY
Ordinarily, the Company will receive a tax deduction for federal income tax
purposes in connection with awards under the 1992 Plan in the same amount as the
compensaton income recognized by the participant. However, Internal Revenue Code
Section 162(m) contains special rules limiting the federal income tax
deductibility of compensation paid to the Company's Chief Executive Officer and
each of the other four most highly compensated executive officers. The general
rule is that annual compensation paid to any of these specified executives will
be deductible only to the extent that it does not exceed $1,000,000.
Compensation that qualified as "performance-based compensation" is excluded from
the $1,000,000 deductibility cap, and therefore remains fully deductible by the
Company. To qualify as "performance-based" within the meaning of Section 162(m),
options and stock appreciation rights must be granted with an exercise price of
not less than 100% of the Common Stock on the date of grant, among other things.
To the extent these requirements are met, compensation attributable to options
and stock appreciation rights granted to executive officers under the 1992 Plan
will qualify as performance-based compensation for purposes of Section 162(m),
and the Company will generally be entitled to a tax deduction in the amount
recognized by such officers in connection with such awards. Compensation
attributable to stock purchase rights, long-term performance awards and stock
bonuses will not generally qualify as "performance-based" within the meaning of
Section 162(m). As a result, income recognized by executive officers in
connection with such awards will be subject to the limitations on deductibility
under such Section.
27
<PAGE> 30
PARTICIPATION IN 1992 PLAN
The grant of options, stock appreciation rights, stock purchase rights,
stock bonus awards and long-term performance awards under the 1992 Plan to
employees, including the Named Officers, is subject to the discretion of the
Administrator. Accordingly, future awards are not determinable. Non-employee
directors are not eligible to participate in the 1992 Plan. The following table
sets forth information with respect to the grant of options to the Named
Officers, to all current executive officers as a group and to all other
employees as a group during the last fiscal year.
AMENDED PLAN BENEFITS
1992 STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME OF INDIVIDUAL OR UNDERLYING
IDENTITY OF GROUP AND POSITION OPTIONS GRANTED(#) EXERCISE PRICE ($/SH)
------------------------------ -------------------- ---------------------
<S> <C> <C>
Alfred J. Stein.......................................... 150,000 $18.000
Chairman of the Board and Chief Executive Officer
Richard M. Beyer......................................... 25,000 18.000
President and Chief Operating Officer
Balakrishnan S. Iyer..................................... 75,000 15.625
Senior Vice President and Chief Financial Officer 10,000 18.000
15,000 24.188
75,000 31.625
John S. Hodgson.......................................... 125,000 18.500
Senior Vice President, Worldwide Sales and Technology
Centers
Thierry M. Laurent....................................... 20,000 18.000
Senior Vice President and General Manager,
Communications Products Group
All current executive officers as a group................ 715,000 23.094(1)
(9 persons)
All other employees as a group........................... 2,343,950 20.857(1)
</TABLE>
- ---------------
(1) Represents weighted average per share exercise price.
APPROVAL OF AMENDMENTS TO THE 1986 DIRECTORS' STOCK OPTION PLAN
The 1986 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by the Board of Directors of the Company in August 1986 and has been amended
several times since then. Currently, a total of 300,000 shares of the Company's
Common Stock are reserved for issuance under the Directors' Plan. The Directors'
Plan provides an opportunity for all non-employee members of the Board of
Directors to become stockholders of the Company.
PROPOSED AMENDMENTS
In March 1998, the Board approved amendments to the Directors' Plan
(collectively, the "Amendments"), subject to stockholder approval, to: (1)
increase the number of shares reserved for issuance thereunder by 300,000; (2)
extend the term of the Plan until August, 2006; (3) increase the Directors'
annual option to purchase shares from 5,000 to 6,000 shares; (4) allow the
Directors to elect to receive their annual retainer and future Board fees in
either cash or the Company's Common Stock; if a Director elects to receive his
retainer and fees in Common Stock and holds such stock for three years, he will
receive an additional stock award in the amount of 25% of the shares held; (5)
permit the directors to elect to convert their retainer and Board fees into
Common Stock equivalents on a tax-deferred basis, which will be issued when
their services on the Board ceases; if a Director elects to defer his retainer
and Board fees into Common Stock equivalents and the deferral continues for the
three years, the Director will receive an additional award of Common Stock
28
<PAGE> 31
equivalents in the amount of 25% of the amount originally deferred. The
Amendments are subject to stockholder approval. Accordingly, no action will be
taken under the Amendments until the approval by the stockholders.
At the Annual Meeting, the stockholders are being requested to ratify and
approve the Amendments to the Directors' Plan. The Board believes that the
continued service of its outside directors is extremely valuable to the Company
and recommends approval of the Amendments, which are intended both to recognize
past service and to provide additional incentive for non-employee directors to
continue serving on the Company's Board of Directors.
REQUIRED VOTE
Affirmative votes constituting a majority of the Votes Cast will be
required to approve the proposed Amendments to the Directors' Plan. The Board of
Directors recommends voting "FOR" approval of the Amendments to the Directors'
Plan.
GENERAL
Options granted under the Directors' Plan are nonstatutory options. The
purposes of the Directors' Plan are to attract and retain the best available
personnel for service as directors of the Company, to provide additional
incentive to the non-employee directors of the Company (the "Outside Directors")
and to encourage their continued service on the Board.
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors. The
interpretation and construction of any provisions of the Directors' Plan shall
be within the sole discretion of the Board, whose determination shall be final
and conclusive.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to Outside
Directors. There are currently five eligible Outside Directors. All grants are
automatic and are not subject to the discretion of any person. No option is
granted under the Directors' Plan to an Outside Director who holds other options
or warrants not granted under the Directors' Plan that have not yet become
exercisable.
AUTOMATIC GRANT OF OPTIONS
Each Outside Director who was serving as such on the date of adoption of
the Directors' Plan (August 6, 1986) received an automatic grant on such date of
an option to purchase 20,000 shares of Common Stock (the "First Option"). Each
Outside Director who becomes a director subsequent to the date of adoption of
the Directors' Plan receives an automatic grant of a First Option on the date of
his or her appointment or election to the Board. A First Option becomes
exercisable cumulatively with respect to 5,000 shares on the first day of each
fiscal year following the date of grant.
After receiving a First Option, an Outside Director is automatically
granted an additional option to purchase 5,000 (6,000 shares if the Amendments
are approved) under the Directors' Plan (the "Subsequent Option") on the first
day of each fiscal year of the Company. The Subsequent Option becomes
exercisable in full on the first day of the fourth fiscal year beginning after
the date of grant of such option.
After an Outside Director is granted a First Option and upon the date on
which such Outside Director's First Option or a Replenishment Option (as defined
below) expires unexercised, such Outside Director shall be automatically granted
an option (a "Replenishment Option") to purchase a number of shares equal to
20,000 minus the aggregate number of shares, if any, that were issued to such
Outside Director upon exercise of his or her First Option and any previously
granted Subsequent Options and Replenishment Options. A Replenishment Option is
exercisable in full on the date of grant.
29
<PAGE> 32
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Directors' Plan have a ten-year term from the
date of grant. The options become exercisable as described above under
"Automatic Grant of Options". Payment for shares issued upon exercise of an
option may consist of cash or other shares of Common Stock having a fair market
value on the date of surrender equal to the aggregate exercise price, or any
combination thereof. 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
grant. The Directors' Plan provides that, if the Outside Director ceases to
serve as a director due to death or permanent disability, options may be
exercised at any time within six months after termination of service. Following
termination of service as a director for any other reason, options may be
exercised within 30 days after such termination. An option is nontransferable by
the optionee, other than by will or 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 ("ERISA"), or the rules
thereunder, and may be exercised, during the lifetime of the optionee, only by
the optionee or by a permitted transferee.
CAPITAL CHANGES
In the event any change, such as a stock split or payment of a stock
dividend, is made in the Company's capitalization that results in an exchange of
Common Stock for a greater or lesser number of shares 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 Directors' Plan, as well as in the number of shares reserved for issuance
under the Directors' 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 action. 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.
AMENDMENT, TERMINATION AND TERM OF THE DIRECTORS' PLAN
The Board of Directors may amend the Directors' Plan from time to time or
may terminate it without approval of the stockholders of the Company. However,
the provisions of the Directors' Plan that relate to the amount, price and
timing of options granted under the Directors' Plan may not be amended more than
once every six months, other than to comport with changes in the Code, ERISA or
the rules thereunder. Furthermore, stockholder approval is required for any
amendment that increases the number of shares subject to the Directors' Plan,
changes the designation of persons eligible for grants under the Directors'
Plan, materially increases the benefits that may accrue to participants under
the Directors' Plan or changes the number of shares subject to options granted
under the Directors' Plan or the terms thereof. However, no such action by the
Board of Directors or stockholders may unilaterally alter or impair any option
previously granted under the Directors' Plan without the consent of the
optionee. In any event, the Directors' Plan will expire by its terms in August
2001 (August 2006 if the Amendments are approved by the stockholders).
30
<PAGE> 33
PARTICIPATION IN THE DIRECTORS' PLAN
The grant of options under the Directors' Plan is automatic, as described
above. Only non-employee directors are eligible to receive options under the
Directors' Plan; executive officers (including the Named Officers) are not
eligible. The following table sets forth information with respect to the grant
of options under the Directors' Plan during the last fiscal year:
AMENDED PLAN BENEFITS
1986 DIRECTORS' STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING
NAME OF INDIVIDUAL OR IDENTITY OF GROUP AND POSITION OPTIONS GRANTED EXERCISE PRICE ($/SH)
---------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Pierre S. Bonelli, Outside Director....................... 5,000 $24.125
Robert P. Dilworth, Outside Director...................... 5,000 24.125
10,000 18.000
------
15,000
William G. Howard, Jr., Outside Director.................. 5,000 24.125
Paul R. Low, Outside Director............................. 5,000 24.125
Horace H. Tsiang, Outside Director........................ 5,000 24.125
</TABLE>
TAX INFORMATION
An optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option under the Directors' Plan. However, upon exercise
of the option, the optionee will recognize compensation income for federal tax
purposes generally measured by the excess, if any, of the fair market value of
the shares over the exercise price. Upon a resale of such shares by the
optionee, any difference between the sale price and the fair market value of the
shares on the date of exercise of the nonstatutory option will be treated as
capital gain or loss. The Company will be entitled to a tax deduction in the
amount that an optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option granted under the Directors'
Plan. The foregoing summary of the effect of federal income taxation upon the
optionee and the Company with respect to the grant of options and purchase of
shares under the Directors' Plan does not purport to be complete. In addition,
this summary does not discuss the consequences of an optionee's death or the
provisions of the income tax laws of any municipality, state or foreign country
in which the participant may reside.
31
<PAGE> 34
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 25, 1998 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
Larry L. Grant, Secretary
Date: April 6, 1998
32
<PAGE> 35
VLSI TECHNOLOGY, INC.
1992 STOCK PLAN
(As adopted by the Board of Directors on May 1, 1992
and as amended on November 17, 1994, March 12, 1996,
March 21, 1997 and May 4, 1998,
and approved by the stockholders
on August 20, 1992, April 27, 1995,
May 31, 1996, May 7, 1997 and
________________, 1998)
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.
1
<PAGE> 36
(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 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:
2
<PAGE> 37
(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 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.
3
<PAGE> 38
(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.
(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.
4
<PAGE> 39
(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 11,500,000,
subject to stockholder approval at the 1998 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.
(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
5
<PAGE> 40
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;
(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
6
<PAGE> 41
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
7
<PAGE> 42
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 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.
8
<PAGE> 43
(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;
(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
9
<PAGE> 44
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.
(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:
(1) 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
(2) 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
10
<PAGE> 45
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.
(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.
11
<PAGE> 46
(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
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
12
<PAGE> 47
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
13
<PAGE> 48
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.
(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
14
<PAGE> 49
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 (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.
15
<PAGE> 50
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 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
16
<PAGE> 51
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.
(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,
17
<PAGE> 52
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
(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
18
<PAGE> 53
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
(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.
19
<PAGE> 54
(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
20
<PAGE> 55
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 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
<PAGE> 56
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 1,500,000 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.
(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.
22
<PAGE> 57
VLSI TECHNOLOGY, INC.
1986 DIRECTORS' STOCK PLAN
(As adopted by the Board of
Directors on August 6, 1986 and amended
January 15, 1987, August 5, 1993, March 11, 1994, March 4, 1998
and approved by the stockholders on
April 22, 1987, May 5, 1994, and _______________, 1998)
1. Purposes of the Plan. The purposes of this Directors' Stock
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, to promote Directors' ownership
of Common Stock and to encourage their continued service on the Board.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Common Stock" shall mean the Common Stock of the
Company.
(c) "Common Stock Equivalent" shall mean the right to
receive Common Stock in the future that may be granted to a Director pursuant
to Section 5 in lieu of a current issuance of Common Stock, subject to certain
conditions and limitations imposed in accordance with such Section.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "Company" shall mean VLSI Technology, Inc., a
Delaware corporation.
(f) "Continuous Status as a Director" shall mean the
absence of any interruption or termination of service as a Director.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers
and Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
-1-
<PAGE> 58
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined by the Board in its discretion; provided,
however, that where there is a public market for the Common Stock, the Fair
Market Value per Share shall be the closing bid price of the Common Stock in
the over-the-counter market on the date of determination, as reported in The
Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation (NASDAQ)
System) or, in the event the Common Stock is traded on the NASDAQ National
Market System or listed on a stock exchange, the Fair Market Value per Share
shall be the closing price on such system or exchange on the date of
determination, as reported in The Wall Street Journal.
(k) "Option" shall mean a non-statutory stock option
granted pursuant to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(m) "Optionee" shall mean an Outside Director who
receives an Option.
(n) "Outside Director" shall mean a Director who is not
an Employee.
(o) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1986 Directors' Stock Option
Plan.
(q) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 300,000 Shares (the "Pool") of Common
Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option 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 future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such Shares
shall not in any event be returned to the Plan and shall not become available
for future grant under the Plan.
-2-
<PAGE> 59
4. Administration of the Plan.
(a) Administrator. Except as otherwise required herein,
the Plan shall be administered by the Board.
(b) Procedure for Option Grants. All grants of Options
hereunder shall be automatic and non-discretionary and shall be made strictly
in accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 20,000 Shares (the "First Option") upon the date
on which such person first becomes a Director, whether through election by the
shareholders of the Company or appointment by the Board of Directors to fill a
vacancy; provided, however, that no such Option shall be granted to any Outside
Director prior to surrender by such Outside Director for cancellation that
portion of any outstanding option or warrant held by such Outside Director to
purchase shares of the Company's stock that relates to shares with respect to
which such option or warrant has not yet become exercisable.
(iii) After the First Option has been granted to an
Outside Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on the first
day of each fiscal year of the Company occurring after the grant date of such
Outside Director's First Option; provided, however, that in no event shall an
Outside Director be granted Options prior to the Amendment Date (as herein
defined) to purchase in the aggregate more than 40,000 shares.
(iv) In addition, after the First Option has been
granted to an Outside Director, upon the later to occur of (A) the date of
approval by the stockholders (the "Amendment Date") of the Amendments to the
Plan that were approved by the Board on August 5, 1993 and March 11, 1994 (the
"Amendments") or (B) the date on which the First Option or a Replenishment
Option (as herein defined) granted to an Outside Director expires unexercised
in whole or in part, such Outside Director shall be automatically granted an
option (a "Replenishment Option") to purchase a number of Shares that is equal
to 20,000 minus the aggregate number of Shares, if any, that were issued to
such Outside Director upon exercise of his First Option and any previously
granted Replenishment Options.
(v) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, in the event that a grant would cause the number of
Shares subject to outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then each such automatic
grant shall be for that number of Shares determined by dividing the total
number of Shares remaining available for grant by the number of Outside
Directors on the automatic grant date. Any
-3-
<PAGE> 60
further grants shall then be deferred until such time, if any, as additional
Shares become available for grant under the Plan through action of the
stockholders to increase the number of Shares which may be issued under the
Plan or through cancellation or expiration of Options previously granted
hereunder.
(vi) The terms of an Option granted hereunder
shall be as follows:
(A) the term of the Option shall be (I)
five (5) years for Options granted prior to the
Amendment Date and (II) ten (10) years for Options
granted on or after the Amendment Date.
(B) the Option shall be exercisable only
while the Outside Director remains a Director of the
Company, except as set forth in Section 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the
date of grant of the Option.
(D) the Option shall become exercisable
as follows:
(I) If it is a First Option, it
shall become exercisable in
installments cumulatively
with respect to 6,000 Shares
on the first day of the
first, second, third and
fourth fiscal years beginning
after the date of grant of
such First Option;
(II) If it is a Subsequent Option,
it shall become exercisable
in full on the first day of
the fourth fiscal year
beginning after the date of
grant of such Subsequent
Option; and
(III) If it is a Replenishment
Option, it shall be
exercisable in full on the
date of grant of such
Replenishment Option;
provided, however, that in no event shall (x) any
Replenishment Option or (y) any Subsequent Option
granted to an Outside Director who had previously
been granted Options to purchase in the aggregate
more than 40,000 Shares prior to the Amendment Date
be exercisable prior to obtaining stockholder
approval in accordance with Section 18 hereof of the
Amendments.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in
accordance with Section 2(j) of the Plan, the Fair Market Value of the Common
Stock; (ii) to determine the exercise price per share of Options to be granted,
which exercise price shall be determined in accordance with Section 9(a) of the
Plan; (iii) to interpret the Plan; (iv) to prescribe,
-4-
<PAGE> 61
amend and rescind rules and regulations relating to the Plan; (v) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option, the purchase of Common Stock or the
crediting of Common Stock Equivalents hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(d) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Plan participants and any other holders of any Options, Common Stock or
Common Stock Equivalents issued under the Plan.
5. Stock Purchase for Director Retainer Fees.
(a) Stock and Stock Equivalents. Each Outside Director
may receive all or a portion of his or her annual retainer and any meeting fees
(which shall include any additional annual retainer or fees paid to a committee
chair) in Shares of Common Stock or, if elected by the Director, in Common
Stock Equivalents. An election pursuant to this Section 5 must be made in
writing on or before the first day of the beginning of the Outside Director's
annual retainer period in the case of an election to receive Common Stock
Equivalents and on or before the first day of the beginning of an Outside
Director's quarterly retainer period in the case of an election to receive
Common Stock. Any such election shall entitle the Outside Director to a number
of Shares of Common Stock or Common Stock Equivalents determined by dividing
(i) the dollar amount of the portion of the retainer for the fiscal period that
is to be paid in shares of Common Stock or Common Stock Equivalents by (ii) the
Fair Market Value of one Share of Common Stock as of the last day of each such
fiscal period, rounded up to the next full number of Shares. In the event any
person becomes an Outside Director other than at the beginning of an annual
retainer period, such person may elect, within thirty (30) days of the date on
which such person becomes an Outside Director, to receive his or her retainer
and any meeting fees in Shares of Common Stock or Common Stock Equivalents as
described above for the balance of such retainer period in accordance with the
formula set forth in the preceding sentence.
For purposes of this Section 5, an annual retainer period shall begin
on the date of an Annual Meeting of the Stockholders of the Company and shall
end on the day immediately preceding the next following Annual Meeting.
(b) Stock Equivalents. The number of Common Stock
Equivalents determined under Section 5(a) for each Outside Director shall be
credited to a bookkeeping account established in the name of that Director
subject to the following terms and conditions:
(i) If the Company pays a cash dividend with
respect to the Common Stock at any time while Common Stock Equivalents are
credited to an Outside Director's account, there shall be credited to the
Outside Director's account additional Common Stock Equivalents equal to (a) the
dollar amount of the cash dividend the Director would have received had he or
she been the actual owner of the Common Stock to which the Common Stock
Equivalents then credited to the Director's account relate, divided by (b) the
Fair Market Value of one Share of the Company's
-5-
<PAGE> 62
Common Stock on the dividend payment date. The Company will pay the Director a
cash payment in lieu of fractional stock equivalents on the date of such
dividend payment.
(ii) Upon the death or other termination of the
Outside Director's service on the Board, or, if authorized by the Board, such
other time or times as specified by the Outside Director at the time of his or
her annual election(s), the Company shall deliver to the Outside Director (or
his or her designated beneficiary or estate) a number of Shares of Common Stock
equal to the whole number of Common Stock Equivalents then credited to the
Director's account, together with a cash payment equal to the Fair Market Value
of any fractional Common Stock Equivalent.
(iii) The Company's obligation with respect to
Common Stock Equivalents shall not be funded or secured in any manner, nor
shall an Outside Director's right to receive Common Stock Equivalents be
assigned or transferable, voluntarily or involuntarily, except as expressly
provided herein.
(iv) An Outside Director shall not be entitled to
any voting or other stockholder rights as a result of the credit of Common
Stock Equivalents to the Director's account until certificates representing
Shares of Common Stock are delivered to the Director (or his or her designated
beneficiary or estate) hereunder.
(c) Stock Grants. Each Outside Director who converts all
or a portion of his or her fees into Shares of Common Stock or Common Stock
Equivalents pursuant to this Section shall be eligible to receive an additional
stock grant provided the Director maintains Continuous Status as a Director for
a period of three years after the Shares of Common Stock or Common Stock
Equivalents are paid or credited, respectively, pursuant to this Section 5.
The number of additional Shares of Common Stock or Common Stock Equivalents to
be paid or credited, respectively, to Outside Directors under this Section 5(c)
shall equal the product of (i) the number of Shares of Common Stock or Common
Stock Equivalents acquired by the Director pursuant to this Section 5 and
beneficially owned by the Director at the end of such three-year period,
multiplied by (ii) .25, provided that a maximum of one such additional grant
shall be made with respect to a Director's acquisition of Common Stock or
Common Stock Equivalents pursuant to this Section 5. (For purposes of the
preceding sentence, beneficial ownership shall be determined in accordance with
Rule 13d-3 of the Exchange Act including, for this purpose, Common Stock
Equivalents credited to a Director's account.) The Company will pay the
Director a cash payment in lieu of fractional stock equivalents on the date of
such grant. Notwithstanding the foregoing, in the event of a termination of
the Plan or an event described in Section 12, the Board may adjust or terminate
the Company's obligations pursuant to this Section 5(c) as the Board, in its
sole discretion, determines to be necessary or appropriate under the
circumstances.
(d) Distribution. Shares of Common Stock shall be
distributed to Outside Directors as soon as practicable after such distribution
is otherwise required under this Section 5. No fractional shares will be
issued to any Outside Director. Any amount not used for the acquisition of a
Share of Common Stock will be paid to the Outside Director in cash.
Distribution of Shares pursuant
-6-
<PAGE> 63
to this Section 5 shall result in a decrease in the number of Shares that
thereafter may be available for purposes of the Plan by the number of Shares so
issued.
(e) Elections. The Board shall determine the form of
Outside Director's elections pursuant to this Section 5, which form shall
evidence the particular provisions, terms, conditions, rights and duties of the
Company and the Outside Directors with respect to Common Stock and Common Stock
Equivalents paid with respect to the Director's annual retainer and any meeting
fees.
6. Eligibility. Plan participation is limited to Outside
Directors.
The Plan shall not confer upon any Director any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his directorship at any time.
7. Term of 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 18 of the Plan. It shall
continue in effect until August 6, 2006, unless sooner terminated under Section
14 of the Plan.
8. Term of Option. The term of each Option shall be as set forth
in Section 4(b)(vi)(A) of the Plan.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
(b) Form of Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option shall consist entirely
of cash, check, other Shares of Common Stock having a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, or any combination of such methods of
payment.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 18 hereof has
been obtained.
An Option may not be exercised for a fraction of a Share.
-7-
<PAGE> 64
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of
payment allowable under Section 9(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option. No adjustment 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.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside
Director ceases to serve as a Director, he may, but only within thirty (30)
days after the date he ceases to be a Director of the Company, exercise his
Option to the extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise an Option at
the date of such termination, or if he does not exercise such Option (which he
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 10(b) above, in the event a Director is unable to
continue his service as a Director with the Company as a result of his total
and permanent disability (as defined in Section 22(e)(3) of the Code), he may,
but only within six (6) months from the date of termination, exercise his
Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) during the term of the Option who is at the
time of his death a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following the date
of death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as a Director for six (6) months after the date
of death.
-8-
<PAGE> 65
(ii) within thirty (30) days after the termination
of Continuous Status as a Director, the Option may be exercised, at any time
within six (6) months following the date of death, by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued
at the date of termination.
11. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner,
other than by will or by the laws of descent or distribution 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, and 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 or Merger. Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Option or Common Stock Equivalent,
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Common Stock Equivalents
have yet been granted or credited, respectively, or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, 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 Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Common Stock Equivalent.
In the event of the proposed dissolution or liquidation of the
Company, Options will terminate and Common Stock Equivalents will convert into
Shares of Common Stock immediately prior to the consummation of such proposed
action. 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, Options and Common Stock Equivalents shall be assumed or
equivalent options and Common Stock Equivalents shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
13. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4(b)
hereof. Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.
-9-
<PAGE> 66
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that any such Plan revisions or amendments shall be
approved by the stockholders of the Company to the extent and in the manner
required by applicable law or regulation.
(b) Stockholder Approval. Stockholder approval of any
amendment requiring stockholder approval under Section 14(a) of the Plan shall
be solicited as described in Section 18 of the Plan.
(c) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options or Common Stock
Equivalents already granted or credited, respectively, and such Options or
Common Stock Equivalents shall remain in full force and effect as if this Plan
had not been amended or terminated, unless mutually agreed otherwise between
the Director and the Board, which agreement must be in writing and signed by
the Director and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the Plan unless such issuance and delivery of Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the issuance of Shares pursuant to the Plan,
the Company may require the person receiving such Shares to represent and
warrant at the time of any such issuance that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares, if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
16. 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.
17. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
-10-
<PAGE> 67
18. Stockholder Approval.
(a) The Plan (and any amendments thereto requiring
stockholder approval pursuant to Section 13(a) hereof) shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option under the
Plan (or subsequent to the amendment, as the case may be). If such stockholder
approval is obtained at a duly held stockholders' meeting, it may be obtained
by the affirmative vote of the holders of a majority of the outstanding shares
of the Company present or represented and entitled to vote thereon. If such
stockholder approval is obtained by written consent, it may be obtained by the
written consent of the holders of a majority of the outstanding shares of the
Company.
(b) Any required approval of the stockholders of the
Company shall be solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder.
-11-
<PAGE> 68
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, February 28, 1995 and November 12, 1997
and subject to stockholder approval at the 1998 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 11,000,000 shares of Common Stock are reserved for issuance under the
Plan, of which 2,000,000 shares shall be subject to stockholder approval at the
1998 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 11,000,000 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.
<PAGE> 69
(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
<PAGE> 70
Subsidiary's (whichever employs such employee) payroll office (the "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
<PAGE> 71
Offering Date of the next Offering Period.
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%) 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 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
<PAGE> 72
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
1
<PAGE> 73
representing the shares purchased by the participant. Delivery shall be 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.
<PAGE> 74
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
<PAGE> 75
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 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.
<PAGE> 76
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.
<PAGE> 77
(e) STOCKHOLDER APPROVAL OF AMENDMENTS. The Company shall obtain
stockholder approval of any Plan amendment to the extent necessary 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
<PAGE> 78
be required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
<PAGE> 79
[VLSI LOGO]
April 6, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at 9:00 a.m., local time, on Thursday, May 14, 1998, at the Company's
offices located at 1151 McKay Drive, San Jose, California. Detailed
information as to the business to be transacted at the meeting is contained in
the accompanying Notice of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you mark, sign, date and return your
proxy as soon as possible in the envelope provided. If you do plan to attend
the meeting, please mark the appropriate box on the proxy.
Sincerely,
Alfred J. Stein
Chairman of the Board and
Chief Executive Officer
<PAGE> 80
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VLSI TECHNOLOGY, INC.
Proxy for 1998 Annual Meeting of Stockholders
The undersigned stockholder of VLSI Technology, Inc., a Delaware
corporation, hereby acknowledges receipt of the 1997 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, May 14, 1998 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 Larry L. Grant, 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 nominees
to the contrary below). below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
RICHARD M. BEYER, PIERRE S. BONELLI, ROBERT P. DILWORTH, WILLIAM G.
HOWARD, JR., PAUL R. LOW, ALFRED J. STEIN AND HORACE H. TSIANG.
2. 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 100,000,000 SHARES AND
ELIMINATING JUNIOR STOCK.
/ / FOR / / AGAINST / / ABSTAIN
3. TO APPROVE AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 2,000,000.
/ / FOR / / AGAINST / / ABSTAIN
4. TO APPROVE AN AMENDMENT TO THE 1992 STOCK PLAN TO INCREASE THE NUMBER
OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 2,000,000.
/ / FOR / / AGAINST / / ABSTAIN
5. TO APPROVE AMENDMENTS TO THE 1986 DIRECTORS' STOCK OPTION PLAN,
INCLUDING AN INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER BY 300,000.
/ / FOR / / AGAINST / / ABSTAIN
6. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR 1998.
/ / FOR / / AGAINST / / ABSTAIN
(Continued on back)
-13-
<PAGE> 81
(Continued from front)
7. 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, 5
AND 6.
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.
