<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
NATIONAL SEMICONDUCTOR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
NATIONAL SEMICONDUCTOR CORPORATION
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090
SANTA CLARA, CALIFORNIA 95052-8090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 27, 1996
NOTICE is hereby given that the Annual Meeting of Stockholders of NATIONAL
SEMICONDUCTOR CORPORATION, a Delaware corporation (the "Company"), will be held
at 10:00 A.M., California time, on September 27, 1996, in the Champagne 1, 2,
and 3 Ballrooms of the Sofitel Hotel, 223 Twin Dolphin Drive, Redwood City,
California, for the following purposes:
1.To elect a Board of eight Directors;
2.To approve the addition of 6,600,000 shares of Common Stock to the Stock
Option Plan, as amended; and
3.To transact such other business as may properly come before such meeting
or any adjournments thereof.
The record date for the meeting is the close of business on August 9, 1996
and only the holders of Common Stock of the Company on that date will be
entitled to vote at such meeting or any adjournment thereof.
By Order of the Board of Directors
JOHN M. CLARK III
SECRETARY
August 15, 1996
PLEASE RETURN YOUR SIGNED PROXY
PLEASE COMPLETE AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. THIS
WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING. IT WILL, HOWEVER,
HELP ASSURE A QUORUM AND AVOID ADDED PROXY SOLICITATION COSTS.
<PAGE>
[LOGO]
NATIONAL SEMICONDUCTOR CORPORATION
2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090
SANTA CLARA, CALIFORNIA 95052-8090
PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 27, 1996
SOLICITATION OF PROXY AND REVOCABILITY
This Proxy Statement is furnished to stockholders of NATIONAL SEMICONDUCTOR
CORPORATION (the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies to be used at the 1996 Annual Meeting of
Stockholders of the Company to be held on September 27, 1996 or any adjournments
thereof. Proxies in the form enclosed, which are properly executed by
stockholders, returned to management, and not revoked, will be voted at such
meeting and, where specification is made on the ballot, will be so voted.
Proxies received without specification, unless revoked, will be voted for
management's proposals.
Any person giving a proxy in the form accompanying this statement has the
power to revoke it at any time prior to its exercise. A proxy may be revoked by
filing with the Secretary of the Company an instrument of revocation or a duly
executed proxy bearing a later date. It may also be revoked by attendance at the
meeting and the election to vote in person.
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the
proxies, and any additional material which may be furnished to stockholders.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians to forward to beneficial owners of stock held in
their names. Proxies may be solicited by directors, officers, or regular
employees of the Company in person or by telephone or telegraph. The Company has
retained Corporate Investor Communications, Inc., 111 Commerce Rd., Carlstadt,
New Jersey 07072-2586 to assist in the solicitation of proxies from brokers and
nominees for a fee of approximately $6,500 plus out-of-pocket expenses, and
Boston EquiServe, L.P., P.O. Box 1628, Boston, Massachusetts 02105-9903 to
assist in the counting of proxies for a fee of approximately $3,750 plus
out-of-pocket expenses. August 15, 1996 is the approximate date this Proxy
Statement and accompanying proxy first will be sent to stockholders of the
Company.
<PAGE>
ELECTION OF DIRECTORS
It is recommended that the Board of Directors for the ensuing year consist
of the eight directors who presently constitute the Board. Directors elected at
the meeting will be elected to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified. If any nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
proxies will be voted for any nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or unwilling to serve as a director.
The following table indicates the age, principal occupation or employment of
each nominee and the year in which each nominee became a director of the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS AGE(1) SINCE
- ------------------------------ -------------------------------------------------- ------ ---------
<S> <C> <C> <C>
Brian L. Halla................ Chairman of the Board, President and Chief 49 1996
Executive Officer of the Company(2)
Gary P. Arnold................ Chairman, President and Chief Executive Officer of 55 1989
Analogy, Inc.(3)
Robert Beshar................. Attorney -- self-employed 68 1972
Modesto A. Maidique........... President, Florida International University(4) 56 1993
Edward R. McCracken........... Chairman and Chief Executive Officer of Silicon 52 1995
Graphics, Inc.(5)
J. Tracy O'Rourke............. Chairman and Chief Executive Officer of Varian 61 1992
Associates, Inc.(6)
Charles E. Sporck............. Retired(7) 68 1967
Donald E. Weeden.............. Chairman, Weeden Securities Corporation(8) 65 1962
</TABLE>
- --------------
(1) Age is at May 26, 1996, the last day of the Company's fiscal year.
(2) Mr. Halla joined the Company in May 1996. Prior to joining the Company, he
was Executive Vice President of LSI Logic Products at LSI Logic Corporation
and had held positions at LSI Logic Corporation as Senior Vice President and
General Manager, Microprocessor/DSP Products Group and Vice President and
General Manager, Microprocessor Products Group.
(3) Mr. Arnold was Vice President and Chief Financial Officer of Tektronix, Inc.
until October, 1992. Mr. Arnold is a director of Analogy, Inc.
(4) Dr. Maidique is a director of Carnival Corporation.
(5) Mr. McCracken is a director of Silicon Graphics, Inc.
(6) Mr. O'Rourke is a director of Varian Associates, Inc. and General Instrument
Corporation.
(7) Mr. Sporck was the President and Chief Executive and Operating Officer of
the Company until retirement in June 1991. Mr. Sporck is a director of
Analogy, Inc.
(8) Mr. Weeden retired as Chief Executive of Weeden & Co., L.P., security
dealers in April 1995. Mr. Weeden is a director of UAS Automation Systems,
Inc., JMC Group Inc., and Combined Metals Reduction Corporation.
2
<PAGE>
COMMITTEES AND MEETINGS OF BOARD OF DIRECTORS
During fiscal year 1996, the Board of Directors held ten meetings. All
nominees for director attended more than 75% of the aggregate number of meetings
of the Board and committees of the Board on which they served during the year.
During fiscal 1996, the Audit Committee of the Board met three times. This
committee has the responsibility to review and approve the scope of the annual
audit; to recommend to the Board the appointment of the independent public
accountants; to interview the independent public accountants for review and
analysis of the Company's financial staff, systems, and adequacy of controls;
and to review any non-audit services of the independent public accountants.
Current members of the Audit Committee are Messrs. Arnold, Beshar, McCracken and
Weeden.
The Stock Option and Compensation Committee of the Board, which held six
meetings during fiscal 1996, has the responsibility for administering the
Company's various stock option plans, reviewing and evaluating the Company's
compensation programs and plans, and establishing and administering the
compensation policy and executive pay programs of the Company for the Company's
executive officers, including setting compensation, base salary, bonuses and
other incentive awards. This committee also has the responsibility to make
recommendations to the Board concerning amendments to the stock option plan and
certain other compensation plans and, in certain instances, to make amendments
to such plans. The current members of this committee are Messrs. Arnold, Beshar,
Maidique and O'Rourke.
The Director Affairs Committee (formerly called the Nominating Committee) of
the Board, which held five meetings during fiscal 1996, has the responsibility
to make recommendations to the Board with respect to nominees to be designated
by the Board for election as directors, and to review and make recommendations
to the Board concerning corporate governance policies and procedures. The
members of this committee are Messrs. Maidique, McCracken, O'Rourke and Sporck.
Any stockholder who wishes to recommend a prospective nominee for the Board for
the Director Affairs Committee's consideration may write: Brian L. Halla,
Chairman, President and CEO, National Semiconductor Corporation, 1090 Kifer
Road, M/S 16-100, Sunnyvale, California 94086-3737.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Stock Option and Compensation Committee are
Messrs. Arnold, Beshar, Maidique and O'Rourke. Mr. Arnold was formerly Vice
President, Finance and Chief Financial Officer of the Company until his
resignation from the Company in April 1990. Mr. Beshar served as Secretary to
the Board of Directors from 1965 to 1971.
CERTAIN TRANSACTIONS AND RELATIONS
Gilbert F. Amelio, formerly Chairman of the Board, President and CEO of the
Company, owns an airplane which was used for Company business travel while Mr.
Amelio was still employed by the Company. Under the terms of an agreement
entered into with Mr. Amelio in fiscal 1994, Mr. Amelio's airplane was used on
Company business by Mr. Amelio and other employees and the Company was
responsible for all direct costs associated with the operation of the airplane
and paid an hourly rental fee to Mr. Amelio when the airplane was used on
authorized Company business, whether by Mr. Amelio or others. The Company also
employed pilots for the airplane which it owned, and these pilots devoted a
portion of their time to Mr. Amelio's airplane. Mr. Amelio reimbursed the
Company for costs and expenses paid by the Company that were allocable to his
personal use of the airplane. Payments by the Company to Mr. Amelio totalled
$196,263 in 1995 and $127,040 in 1996 and payments by Mr. Amelio to the Company
totalled $36,900 in 1995
3
<PAGE>
and $46,946 in 1996. Although the Company no longers own an airplane and the
agreement with Mr. Amelio was terminated upon his departure from the Company,
the Company considered the arrangements to be economically beneficial to it.
During the 1996 fiscal year, Mr. Amelio was indebted to the Company as a
result of advances made to Mr. Amelio on February 15, 1991 and April 11, 1991 to
facilitate the purchase of his personal residence in California. The highest
amount outstanding during the fiscal year was $416,263.01 (including interest).
Until sale of his prior Texas residence in April 1992, the advances were
evidenced by an interest free note and deed of trust executed in favor of the
Company on his prior residence. Upon sale of the residence, the prior note was
replaced with a promissory note in the principal amount of $450,000 bearing
simple interest at the rate of seven percent (7%). The total amount of
$201,265.75 (including interest) outstanding at the time of Mr. Amelio's
departure from the Company has been repaid.
DIRECTOR COMPENSATION
Each non-employee director receives an annual fee of $20,000, $1,000 for
each Board meeting attended, and $1,000 for each committee meeting attended.
Committee chairmen receive an additional annual chairman's fee of $5,000. In
addition, each director is reimbursed for expenses incurred in connection with
these meetings. During fiscal 1996, Mr. Beshar also received an additional fee
of $12,000 for legal services provided to the Board.
Under the Director Stock Plan, non-employee directors automatically receive
1,000 shares of the Company's Common Stock (i) upon their date of appointment to
the Board; and (ii) on the date of each subsequent reelection to the Board by
the stockholders. During fiscal 1996, non-employee directors each were issued
1,000 shares of the Company's Common Stock on September 29, 1995. In addition,
Mr. McCracken received 1,000 shares of the Company's Common Stock upon his
initial appointment to the Board on July 20, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, the executive officers of the Company
and persons who hold more than 10 percent of the Company's Common Stock are
subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, which require them to file reports with respect to their
ownership of and transactions in the Company's securities, and furnish the
Company copies of all such reports they file. Based upon the copies of those
reports furnished to the Company, and written representations that no other
reports were required to be filed, the Company believes that all reporting
requirements under Section 16(a) for the fiscal year ended May 26, 1996 were met
in a timely manner by its executive officers, Board members and greater than 10
percent stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF
THE NOMINEES NAMED HEREIN. UNLESS INDICATED OTHERWISE ON THE PROXY, THE SHARES
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF SUCH NOMINEES. IN ORDER TO BE
ELECTED, A NOMINEE FOR DIRECTOR MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF THE SHARES PRESENT AND ENTITLED TO VOTE.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock (its only class of equity securities outstanding) as of June 23,
1996 by each director and nominee, the two individuals who served as chief
executive officer during fiscal 1996 and the four other most highly compensated
executive officers, and all directors and executive officers as a group:
COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Brian L. Halla........................................................ 200,000(1) *
Gilbert F. Amelio..................................................... 251,857(2) *
Gary P. Arnold........................................................ 4,000 *
Robert Beshar......................................................... 140,260(3) *
Modesto A. Maidique................................................... 3,000 *
Edward R. McCracken................................................... 37,000 *
J. Tracy O'Rourke..................................................... 4,500 *
Charles E. Sporck..................................................... 192,350 *
Donald E. Weeden...................................................... 7,000(4) *
Richard M. Beyer...................................................... 30,469(5) *
Patrick J. Brockett................................................... 55,190(6) *
Donald Macleod........................................................ 83,880(7) *
Kirk P. Pond.......................................................... 97,301(8) *
All directors and executive officers as a group....................... 1,234,772(9) *
</TABLE>
- ------------------------
* Less than 1 percent
(1) Includes 200,000 shares of restricted stock held by Mr. Halla.
(2) Includes 256 shares owned by a trust of which Mr. Amelio is a beneficiary.
(3) Includes 24,510 shares owned by Mr. Beshar's adult children in respect of
which Mr. Beshar disclaims beneficial ownership.
(4) Includes 3,000 shares held by a trust of which Mr. Weeden is a beneficiary.
(5) Includes 278 shares held by a trust of which Mr. Beyer is a beneficiary and
26,250 shares which Mr. Beyer has the right to acquire within 60 days
through the exercise of stock options.
(6) Includes 258 shares owned by a trust of which Mr. Brockett is a beneficiary
and 50,875 shares which Mr. Brockett has the right to acquire within 60 days
through the exercise of stock options.
(7) Includes 890 shares owned by a trust of which Mr. Macleod is a beneficiary
and 71,550 shares which Mr. Macleod has the right to acquire within 60 days
through the exercise of stock options.
(8) Includes 3,000 shares owned by the estate of Mr. Pond's wife, 459 shares
held by a trust of which Mr. Pond is a beneficiary and 82,250 shares which
Mr. Pond has the right to acquire within 60 days through the exercise of
stock options.
(9) Includes 434 shares owned by spouses, 3,000 shares owned by the estates of
deceased spouses, 24,510 shares owned by adult children in respect of which
beneficial ownership is disclaimed, 9,008 shares owned by trusts of which
the officer and/or director is a beneficiary and 324,650 shares which can be
acquired within 60 days through the exercise of stock options.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries, to or on
behalf of the two individuals who served as the Company's Chief Executive
Officer during fiscal 1996 and the Company's four other most highly compensated
executive officers during fiscal 1996 (collectively hereinafter referred to as
the named executive officers) for the last three fiscal years ended May 29,
1994, May 28, 1995 and May 26, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------
NAME AND SALARY BONUS OTHER ANNUAL
PRINCIPAL POSITION(1) YEAR ($) ($) COMPENSATION(7)
- ------------------------------ ---- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
Brian L. Halla 1996 $ 40,000
Chairman, President and 1995
CEO(2) 1994
Gilbert F. Amelio 1996 585,934 $ 726,014
Chairman, President and 1995 694,249 792,015
CEO(3) 1994 649,847
Richard M. Beyer 1996 340,397 122,505 $ 211,793
Executive Vice President and 1995 300,926 225,005
Chief Operating Officer(4) 1994 280,292 337,505(12)
Patrick J. Brockett 1996 299,241 99,128 96,252
President, International 1995 270,217 206,256
Business Group(5) 1994 252,455 250,013
Donald Macleod 1996 289,419 97,502 93,992
Executive Vice President, 1995 267,236 206,256
Finance and Chief Financial 1994 242,155 251,009
Officer
Kirk P. Pond 1996 414,521 146,300
Executive Vice President(6) 1995 400,009 350,000
1994 310,199 400,000
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------------
AWARDS
---------------------------- PAYOUTS
RESTRICTED -------------
NAME AND STOCK AWARDS OPTIONS LTIP PAYOUTS ALL OTHER
PRINCIPAL POSITION(1) ($)(8) (#)(9) ($)(10) COMPENSATION(11)
- ------------------------------ ------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Brian L. Halla $ 3,250,000 500,000
Chairman, President and
CEO(2)
Gilbert F. Amelio 43,000 $ 1,774,304 $ 29,355
Chairman, President and 44,000 61,297
CEO(3) 40,000 49,704
Richard M. Beyer 38,000 295,630 24,045
Executive Vice President and 13,000 23,950
Chief Operating Officer(4) 10,000 19,671
Patrick J. Brockett 27,000 248,951 21,442
President, International 13,000 311,702 21,733
Business Group(5) 6,500 16,966
Donald Macleod 13,000 248,951 20,708
Executive Vice President, 13,000 302,111 21,349
Finance and Chief Financial 6,500 18,274
Officer
Kirk P. Pond 18,000 311,190 34,292
Executive Vice President(6) 20,000 407,610 35,081
10,000 26,302
</TABLE>
- --------------
(1) Position is at the end of fiscal 1996.
(2) Mr. Halla joined the Company in May 1996.
(3) Mr. Amelio left the Company in February 1996, and is not eligible to receive
a bonus or LTIP Payout for fiscal 1996.
(4) Mr. Beyer left the Company in June 1996 after the end of the Company's
fiscal year.
(5) Mr. Brockett is now Executive Vice President, Worldwide Sales and Marketing.
(6) Mr. Pond is now President and CEO of the Company's Fairchild Semiconductor
organization.
6
<PAGE>
(7) In 1994, for Mr. Beyer includes $86,291 reimbursed for the payment of taxes
and $125,502 paid in connection with relocation; for Mr. Brockett, includes
$10,574 reimbursed for the payment of taxes and $85,678 paid in connection
with relocation; for Mr. Macleod, includes $18,762 reimbursed for the
payment of taxes and $75,230 paid in connection with relocation. Where no
amount is given, the dollar value of prerequisites paid to the named
executive officer does not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for the named executive officer.
(8) Value shown is based on the closing market price on date of grant. The total
number of shares of restricted stock held by Mr. Halla at the 1996 fiscal
year end was 200,000, valued at $3,250,000, based on the closing market
price on the last trading day of the fiscal year. The total number of shares
awarded as restricted stock in fiscal 1996 to Mr. Halla was 200,000 and the
restrictions on the restricted stock will lapse in equal amounts of 50,000
shares over a period of four years on each anniversary of the grant date,
commencing May 3, 1997. Although the Company has never paid dividends on its
common stock, if any dividends are paid, they will be paid on the restricted
stock.
(9) Options granted under the Stock Option Plan. Excludes options and purchase
rights granted under the Employees Stock Purchase Plan.
(10) LTIP Payouts are made under the Performance Award Plan, which had its first
payout at the end of fiscal 1995. Mr. Beyer was not a participant in the
Performance Award Plan cycle that paid out in fiscal 1995. Awards are paid
partly in cash and partly in stock and the payout amount shown is a total of
the fair market value of the stock on the payout date plus the cash portion
of the award.
(11) Consists of the following:
(a) contributions and allocations to the Company's defined contribution
retirement plans:
<TABLE>
<CAPTION>
MR. HALLA MR. AMELIO MR. BEYER MR. BROCKETT MR. MACLEOD MR. POND
--------------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1996......................... $ 0 $ 5,763 $ 19,395 $ 16,312 $ 15,554 $ 24,560
1995......................... 39,973 19,768 17,113 16,707 26,190
1994......................... 29,973 16,879 14,969 14,572 18,550
</TABLE>
(b) value of life insurance premiums paid by the Company for term life
insurance:
<TABLE>
<CAPTION>
MR. HALLA MR. AMELIO MR. BEYER MR. BROCKETT MR. MACLEOD MR. POND
--------------- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1996......................... $ 0 $ 23,592 $ 4,650 $ 5,130 $ 5,154 $ 9,732
1995......................... 21,324 4,182 4,620 4,642 8,891
1994......................... 19,731 2,792 1,997 3,702 7,752
</TABLE>
(12) For 1994, includes $50,000 bonus paid to Mr. Beyer on relocation.
7
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options in fiscal 1996 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE OR GRANT DATE
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR(2) ($/SH)(3) DATE ($)(4)
- --------------------------------------------- --------- ----------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Brian L. Halla............................... 500,000 12.73 $ 16.25 5-4-06 $ 5,175,625
Gilbert F. Amelio............................ 43,000 1.10 28.25 9-29-05 737,353
Richard M. Beyer............................. 18,000 .46 28.25 9-29-05 308,660
20,000 .51 22.50 12-20-05 273,150
Patrick J. Brockett.......................... 12,000 .31 28.25 9-29-05 205,773
15,000 .38 22.50 12-20-05 204,863
Donald Macleod............................... 13,000 .33 28.25 9-29-05 222,921
Kirk P. Pond................................. 18,000 .46 28.25 9-29-05 308,660
</TABLE>
- --------------
(1) Options granted under the Stock Option Plan during fiscal 1996. Options are
granted at fair market value at date of grant exercisable over the
optionee's period of service with the Company, measured from the grant date,
from six months to four years after the date of grant. Each option has a
maximum term of ten years and one day, subject to earlier termination in the
event of the optionee's termination of employment with the Company.
(2) A total of 3,926,300 options were granted to employees, including executive
officers, during fiscal 1996.
(3) The exercise price may be paid in cash, in shares of common stock valued at
fair market value on the exercise date or in a combination of cash and
stock. The Stock Option and Compensation Committee (the "Committee") permits
payment of all or part of applicable withholding taxes due upon exercise of
the option by withholding of shares, valued at the fair market value of the
Company's Common Stock on the date of exercise, otherwise issuable upon
exercise of the option.
(4) Represents grant date valuation computed under the Black-Scholes option
pricing model adapted for use in valuing stock options. The actual value, if
any, that may be realized will depend on the excess of the stock price over
the exercise price on the date the option is exercised, so there can be no
assurance that the value realized will be at or near the value estimated by
the Black-Scholes model. Grant date values were determined based in part on
the following assumptions: risk free rate of return of 7.5%, no dividend
yield, time of exercise of ten years, discount for vesting restrictions of
0%-3% per year, and annualized volatility of 39.7% (based on historical
stock prices for five years preceding the grant date).
8
<PAGE>
OPTION EXERCISES
The following table provides information with respect to the named executive
officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FY-END (#) AT FY-END ($)(3)
VALUE ----------------- ----------------------
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($)(2) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ --------------- ------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Brian L. Halla...................... 0 $ 0 0/500,000 $0/0
Gilbert F. Amelio................... 361,250 2,862,531 0/0 0/0
Richard M. Beyer.................... 0 0 26,250/58,750 90,188/36,563
Patrick J. Brockett................. 0 0 50,875/42,875 463,391/19,891
Donald Macleod...................... 0 0 71,550/28,750 699,906/19,344
Kirk P. Pond........................ 25,000 593,750 82,250/41,750 728,594/27,656
</TABLE>
- ------------------------
(1) Excludes any shares that can be acquired under the Company's Employees Stock
Purchase Plan.
(2) Market value of the underlying shares based on the opening price of the
Company's Common Stock on the date of exercise less the exercise price.
(3) Represents the difference between $16.25, the market price of the Company's
Common Stock at fiscal year end, and the exercise price.
9
<PAGE>
LONG TERM INCENTIVE PLANS
The following table provides information with respect to the named executive
officers concerning awards made under the Company's Performance Award Plan, the
Company's only plan for long term incentive compensation, during fiscal 1996.
The Performance Award Plan was adopted during fiscal 1993 and the payouts made
under the Performance Award Plan at the end of fiscal 1995 and 1996 are shown in
the Summary Compensation Table.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
PERIOD UNDER NON-STOCK
NUMBER OF UNTIL PRICE-BASED PLANS(3)
SHARES, UNITS MATURATION -----------------------------------
OR OTHER RIGHTS OR THRESHOLD TARGET MAXIMUM
NAME (#)(1) PAYOUT(2) (#) (#) (#)
- ----------------------------------- --------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Brian L. Halla..................... 0 -- -- -- --
Gilbert F. Amelio.................. 37,000 3-5 years 3,700 37,000 74,000
Richard M. Beyer................... 15,000 3-5 years 1,500 15,000 30,000
Patrick J. Brockett................ 11,000 3-5 years 1,100 11,000 22,000
Donald Macleod..................... 11,000 3-5 years 1,100 11,000 22,000
Kirk P. Pond....................... 18,000 3-5 years 1,800 18,000 36,000
</TABLE>
- ------------------------
(1) Denominated in Performance Award Plan units.
(2) The Performance Award Plan cycle runs from three to five fiscal years
depending on achievement of target goals. If the target goals are achieved
in either the third or fourth fiscal year of the cycle, payout of the award
is made at that time. If the target goals are not achieved in either the
third or fourth fiscal year, payout of the award will be made at the end of
the fifth fiscal year, provided at least the threshold level of performance
has been achieved.
(3) Payouts of awards are tied to achieving specified levels on both average
normalized return on equity (ANROE) and cumulative average growth rate
(CAGR). The target amount will be earned if the mix of ANROE and CAGR
achieves a certain level. Other amounts, ranging from threshold to maximum,
will be earned depending on the matrix composed of a mix of ANROE and CAGR.
Estimated future payouts are shown in number of Performance Award Plan units
that would be awarded if the threshold, target or maximum levels were
achieved; the cash value of the Performance Award Plan units will be based
on the average fair market value of the Company's Common Stock at the time
awards are actually determined.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has traditionally not used employment contracts for its
executive officers or entered into special compensatory plans or arrangements
for compensation of executive officers upon termination of employment or change
in control of the Company. Upon termination of employment, executive officers
are entitled to receive the same benefits as any other terminating employee,
including payment of accrued vacation. Executive officers whose employment is
terminated by the Company by reason of reduction-in-force have received under
Company practice salary and benefits for six months to one year after the date
of termination. In addition, directors and certain other officers at the vice
president or higher level appointed by the Board who retire from the Company may
continue to participate in the Company's group
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medical and dental plans after retirement. As of the fiscal year ended May 26,
1996, eight retired officers and directors were participants. Amounts paid by
the Company under this program during fiscal 1996 totalled $48,990.
The Board has adopted a retirement policy for members of the Board of
Directors providing for the payment of the annual director's fee for a period of
one half of the number of years the director served on the Board. One retired
director is currently receiving payments under this policy. The Company also has
entered into a ten year consulting agreement with its retired former chairman
providing for the payment of $250,000 per year.
After the end of fiscal 1996, the Company entered into a negotiated
agreement with Richard M. Beyer, who left the Company in June 1996. The
agreement provides for payment of Mr. Beyer's salary at a rate of $350,000 per
annum and continuation of benefits until the earlier of June 30, 1997 or the
date Mr. Beyer becomes employed on a full-time basis, payment of an incentive
award under the Executive Officer Incentive Plan for fiscal 1997 calculated at a
target incentive of 70% of salary prorated through the date salary ends,
crediting of service through the date salary ends towards any payment of Cycles
III and IV of the Performance Award Plan (payment amounts not determined until
the Cycle awards are calculated), and payment of vacation accrued through the
date salary ends.
The Company has also entered into a Retention Agreement dated July 1996 with
Kirk P. Pond, which assigns to Mr. Pond full management responsibility for the
Company's Logic and Memory product lines (which now comprise the Fairchild
Semiconductor organization), including the manufacturing operations related
thereto. Compensation for this assignment is Mr. Pond's salary at the rate of
$418,000 per annum, a stock option for 100,000 shares, vesting of which will be
accelerated if Mr. Pond's employment is terminated at the end of his assignment,
an incentive reflecting returns to the Company of the businesses run by Mr.
Pond, and an incentive based on the value received by the Company upon any sale
or other disposal of the businesses. In addition, Mr. Pond has agreed to enter
into a negotiated agreement with the Company providing for benefits upon
termination of employment as follows: payment of salary and benefits for twelve
months, payment of an incentive at 70% of base salary, crediting of one
additional year's service towards any payment of Cycles III and IV of the
Performance Award Plan (payment amounts not determined until Cycle Awards are
calculated), and payment of vacation accrued through the date salary ends.
STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee (the "Committee") of the Board
of Directors has furnished the following report on executive compensation:
COMPENSATION PHILOSOPHY
Under the supervision of the Stock Option and Compensation Committee of the
Board of Directors, the Company has implemented compensation policies, plans and
programs designed to enhance the profitability of the Company and stockholder
value by trying to align the financial interests of the Company's senior
managers with those of its stockholders. As a general rule, base salaries are
set at levels competitive to the electronics industry as a whole. Annual and
longer term incentive compensation programs are used in an effort to attract and
retain executive officers and other key employees and to motivate them to
perform to the full extent of their ability. Both types of incentive
compensation are variable and closely related to performance goals intended to
encourage a continuing focus on profitability and stockholder value.
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Compensation for each of the officers identified in the proxy statement
("Named Officers"), as well as other individuals designated by the Board as
officers subject to Section 16 of the Securities and Exchange Act of 1934
("Executive Officers"), consists of a base salary and annual and long-term
incentive compensation. Base salaries are fixed to be competitive in the
electronics industry. Annual and longer-term incentive compensation is more
variable and closely tied to the Company's success in achieving significant
performance goals for the fiscal years in question. With the exception of stock
options, incentives paid in the past are not considered in setting current
incentive targets. More specific information on each of these compensation
elements follows.
SALARIES
It is the Committee's objective to fix base salaries at levels that are
competitive (what is perceived to be the middle of the range) to those paid to
senior executives with comparable qualifications, experience and
responsibilities at other companies in the electronics industry, including those
companies making up the semiconductor manufacturers in the peer group line of
the stock performance graph. The Committee believes that this is necessary to
attract and retain the executive talent required to lead the Company as the
Company competes with a large number of companies in the electronics industry,
including semiconductor manufacturers, for executive talent. At the end of each
fiscal year, each Executive Officer (excluding the President and CEO) is
reviewed by the President and CEO and, where applicable, his or her manager,
using the same review standards applied to all employees in the Company. The
review made in fiscal 1996 for performance in fiscal year 1995 covered results
achieved on specific performance objectives and evaluation of position
performance characteristics and peer, subordinate and internal customer
feedback. Specific performance objectives vary depending on the Executive
Officer's position and responsibilities (i.e., an operations manager may be
given an objective of achieving a certain profit target for the manager's
business unit operation while the chief financial officer may be given an
objective of implementing certain financial control systems). Position
performance characteristics reviewed in fiscal 1996 included
technical/functional skills; execution/productivity; customer focus/quality;
communications/ interpersonal skills; team participation; innovation/problem
solving; leadership/employee development; and other position-specific
characteristics identified by the appropriate manager, with each position
performance characteristic weighted equally. Peer, subordinate and internal
customer feedback was also considered in the review process. The Executive
Officer's manager then made a recommendation as to salary, including salary
increases, based on the manager's performance judgment. The Committee reviewed
independently these recommendations and approved, with any modifications it
deemed appropriate, the annual salary, including salary increases, for the
Executive Officers (other than the President and CEO). Industry, peer group and
national survey results were also considered in making salary determinations to
maintain parity of the Company's pay practices within the electronics industry.
With respect to the salary for the President and CEO during fiscal year
1996, the Committee reviewed and fixed the base salary of Mr. Amelio, who was
President and CEO of the Company until February 1996, separately based on the
Committee's assessment of his performance at that time and its expectations as
to his future contributions. Competitive compensation data was considered a
primary factor in setting Mr. Amelio's salary. During fiscal 1996, Mr. Amelio
was given a salary increase of 4.5% which kept his total cash compensation
(based on salary and incentives at the 100% performance level) to what was
perceived to be the middle of the range for chief executive officer compensation
for a broad range of electronics manufacturers (a group that is considerably
larger than the semiconductor manufacturers included in the peer group line in
the stock performance graph). The base salary for Mr. Halla, who joined the
Company as President and CEO in May 1996 shortly before the end of the fiscal
year, was set at a competitive level for the
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<PAGE>
electronics industry. Mr. Halla was also given significant additional
stock-based compensation. (See "New CEO Compensation," infra). Mr. Halla will
not be given a salary increase in fiscal 1997 at the time other Executive
Officers receive increases after the end of fiscal 1996.
INCENTIVE COMPENSATION
EXECUTIVE OFFICER INCENTIVE PLAN
Annual incentive compensation for fiscal 1996 was awarded under the
Executive Officer Incentive Plan ("EOIP"). The EOIP, in which only Executive
Officers may participate, is modeled on the Company's Key Employee Incentive
Plan which has been in effect for several years and is still available for key
employees who are not Executive Officers of the Company. Under the EOIP,
incentive awards are calculated at the end of the fiscal year, with the amount
of the award based upon achievement of financial and other performance measures
(or goals) based on business criteria specified in the EOIP. At the beginning of
the fiscal year, the Committee reviewed and approved, making such modifications
as it deemed necessary, the recommendations of Mr. Amelio and the Company's
finance department for the financial and strategic performance goals and the
specific weights assigned to the performance goals. To foster teamwork, all EOIP
participants were given the same performance goals and the same goal weighing.
Financial goals for fiscal 1996 were based on profit before income tax and
increases in bookings and billings with performance measured against targets set
for the end of each fiscal half and the end of the fiscal year and the weight
assigned to the financial goals was 40% of the total weight. Other goals (and
their weightings) were as follows: improvements in cost as a percentage of sales
(12.5%), scrap reductions (12.5%), milestone achievements in new product
development (10%), increases in employee satisfaction as measured by employee
surveys (10%), and market share growth in certain markets (10%). All goals had
numerical measurements specified for defining levels of achievement.
At the start of the fiscal year, the Committee also set target incentive
levels, which established the expected value, as a percentage of base salary, of
an EOIP award at a performance rating of 100%. Those target incentive levels
were set for all Executive Officers, including the President and CEO, at levels
that would be expected to bring total annual cash compensation (salary and EOIP
award paid out at a 150% performance rating) to the level that is perceived to
be the top quarter of the range for senior executives at electronics
manufacturers in general (again, a group that is considerably larger than the
semiconductor manufacturers included in the peer group line in the stock
performance graph). Actual awards can range from 0% to 200% of the target
incentive. At the end of the fiscal year, the Committee reviewed the performance
of the Executive Officers against the collective goals, and the results of this
review process were used by the Committee to determine the total performance
score, which was the same for each Executive Officer.
The EOIP does not permit the Committee to make discretionary increases in
the incentive that would otherwise be paid once performance is measured. The
goals set for fiscal 1996 were extremely aggressive and with the downturn in the
semiconductor industry, particularly in the second half of the fiscal year, the
overall performance achieved on the goals was at approximately 50% of target. As
a result, the EOIP awards for fiscal 1996 (which appear as "Bonus" in the
Summary Compensation Table) were paid out at achievement levels considerably
lower than those reached in the prior two fiscal years. All Executive Officers
received the same performance rating on the EOIP goals, which was then applied
to the target incentive level to determine the final dollar amount of the
incentive award. This approach of setting the same goals and
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<PAGE>
awarding the same performance ratings for all Executive Officers was
specifically designed to encourage teamwork among the Executive Officers by
cutting across functional lines to focus on overall corporate performance.
Neither Mr. Amelio nor Mr. Halla were given an EOIP award for fiscal 1996.
Mr. Amelio left the Company during the middle of the fiscal year and the terms
of the EOIP require EOIP participants to be employed by the Company at the end
of the fiscal year in order to be eligible for an award. Mr. Halla only joined
the Company shortly before the end of the fiscal year and thus did not qualify
for EOIP participation for fiscal 1996.
PERFORMANCE AWARD PLAN
The Performance Award Plan ("Performance Plan"), which was first adopted
during fiscal 1993, provides for the award of stock and/or cash based on
performance units assigned to participants at the start of Performance Plan
cycles running from three to five fiscal years and the achievement of
performance goals during that cycle. The Committee is responsible for the
administration of the Performance Plan. For fiscal 1996 and based on the
recommendations of the Company's senior human resources executive management,
the Committee selected the Company's Executive Officers and certain members of
the Company's Management Committee for participation in the Performance Plan.
Target awards, expressed as a number of performance units, were assigned by the
Committee to the participants and are shown for the Named Officers in the Long
Term Incentive Plans table. Although Mr. Amelio is shown as having been given a
target award during fiscal 1996, he is not eligible to receive a payout since he
is no longer with the Company. Mr. Halla was not given a target award during
fiscal 1996 because he joined the Company near the end of the fiscal year. The
number of performance units assigned to each Executive Officer was based on a
calculation of salary multiples and a desired stock price, with the intention
that a certain portion of the compensation package should be paid in stock. The
Committee also approved performance goals and triggering performance goals for
the Performance Plan cycle commencing in fiscal 1996, with both set in terms of
the Company's return on equity and cumulative average growth rate, goals which
the Committee believes will focus Executive Officers on achieving shareholder
value. The triggering performance goal "triggers" the payout of the award if it
is met in either the third or fourth year of the five year Performance Plan
cycle. At the time awards are determined, the number of performance units
actually received, as a percentage of the target award, is determined by the
Company's actual performance against the stated goals. No participant can
receive more than 200% of the number of target award performance units.
The Committee has the sole power and discretion to pay Performance Plan
awards in Company Common Stock, or as a combination of stock and cash, with the
cash portion not to exceed 50% of the total award unless the Committee
determines, due to extenuating circumstances, that it is more appropriate to pay
awards entirely in cash. It is intended however that Performance Plan awards
will be paid in Company stock to the greatest extent possible. The Committee
intends that participants who receive awards under the Performance Plan will
receive a reduced number of stock options under the Company's stock option
programs, while keeping the percentage of compensation paid based on the
Company's stock value roughly equal to that used in the past.
At the end of fiscal 1996, the performance goals based on annual returns on
equity set in fiscal 1994 for Cycle II of the Performance Award Plan had been
exceeded and payout of awards under Cycle II was triggered. The goals as
originally set in fiscal 1994 were considered extremely aggressive and the three
year performance of the Company, notwithstanding the recent downturn in the
semiconductor industry, was well above the triggering performance level. The
amounts paid under the Performance Award Plan are shown
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<PAGE>
under "LTIP Payouts" in the Summary Compensation Table. The award was paid in a
combination of cash and stock; the cash value of each performance unit was
$15.3689167, the average price of the Company's stock over the last forty-five
trading days of the fiscal year, and for purposes of payment in stock each
performance unit was equal to one share of Common Stock. The dollar value of the
stock portion of the award shown in the table was calculated at a stock price of
$15.75, representing the stock price on July 8, 1996, the date award payouts
were approved. Mr. Amelio did not receive a payout under Cycle II because he
left the Company in the middle of the Cycle II and the terms of the Performance
Plan do not permit participants who voluntarily leave the Company during a cycle
to receive an award.
STOCK OPTIONS
For many years, the Company has provided stock options as an incentive to
its executives and key employees to promote the growth and profitability of the
Company. Stock options have always been viewed as a major means to attract and
retain highly qualified executives and key personnel and have always been a
major component of the compensation package, consistent with practices
throughout the electronics and semiconductor industries.
The Committee is responsible for the administration of the Company's stock
option programs. Option grants are made under the Stock Option Plan, as amended,
at the fair market price on date of grant and expire up to ten years and one day
after the date of the grant. The Committee believes stock options are a
competitive necessity in the electronics industry, particularly in the
semiconductor portion thereof.
Options are viewed as long term incentive compensation. As a general rule,
the Committee believes that a certain portion of the compensation package for
all Executive Officers, including the President and CEO, should be based on long
term incentives with the goal again to bring total compensation (salary plus
annual and long term incentives) to a level that is at the middle of the range
for senior executives at electronics manufacturers in general. Options are
valued at the date of grant using a variation of the Black-Scholes valuation
method; this method determines the number of options to be granted to bring the
total compensation package to this competitive level.
In fixing the grants of stock options to Executive Officers, including the
Named Officers other than the President and CEO, the Committee reviewed with the
President and CEO the recommended individual awards, taking into account prior
option grants still outstanding, and, more importantly, the respective scope of
accountability, strategic and operational goals, anticipated performance
requirements and contributions of each Executive Officer, as well as formulae
for salary multiples and option valuation under the Black-Scholes valuation
method that are designed to value the total compensation package. The award to
Mr. Amelio when he was President and CEO was fixed separately and was based,
among other things, on prior option grants still outstanding, and, more
importantly, on a review of his total compensation package and the Committee's
perception of his past and expected future contributions to the Company's
achievement of its long-term performance goals. As part of the compensation
package made available to Mr. Halla, the Committee granted Mr. Halla an option
for 500,000 shares, which is the maximum number of shares that may be granted
during a fiscal year to any one individual under the Company's Stock Option
Plan.
NEW CEO COMPENSATION
As noted above, Mr. Halla joined the Company near the end of fiscal 1996.
The compensation package made available to Mr. Halla was heavily weighted in
stock and stock options in an effort to align his interests with those of the
Company's stockholders and to compensate him for the significant value in
unvested stock options granted by his prior employer forfeited by him in order
to join the Company. In addition to a base salary viewed as competitive by the
Committee, Mr. Halla was guaranteed an EOIP award for fiscal 1997 at a
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<PAGE>
100% incentive level, granted an option for 500,000 shares, and awarded a
special one-time grant of 200,000 shares of restricted stock. The restrictions
on the restricted stock expire in four equal annual installments, and the award
to Mr. Halla is shown in the Summary Compensation table.
LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION FOR FEDERAL INCOME TAX
PURPOSES
The Omnibus Budget Reconciliation Act of 1993 (the "1993 Act") precludes the
Company from taking a deduction for compensation in excess of $1 million for the
chief executive officer or any of its four other highest-paid officers. Certain
performance-based compensation, however, is specifically exempt from the
deduction limit. The Committee believes that the EOIP, the Stock Option Plan and
the Performance Plan all qualify as performance-based compensation under the
regulations issued under the 1993 Act, allowing the Company to deduct
compensation paid to Executive Officers under these plans. However, the
restricted stock issued to Mr. Halla, and to the extent that Mr. Halla's
performance under the EOIP is not at the 100% level, EOIP compensation to Mr.
Halla for fiscal 1997, will not be considered performance based, and, as such,
compensation amounts in excess of $1,000,000 will not be deductible. The
Committee believes that this is justified because it was essential to include
these items in Mr. Halla's compensation package in order to attract him to the
Company.
Submitted by members of the Stock Option and Compensation Committee:
Gary P. Arnold -- Chairman
Robert Beshar Modesto A. Maidique J. Tracy O'Rourke
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AMENDMENT OF THE STOCK OPTION PLAN
For several years, the Company has provided stock options as an incentive to
its executives and key employees to promote the growth and profitability of the
Company. Management views stock options as a major means to attract and retain
highly qualified executives and key personnel upon whose judgment, skill, and
initiative the Company's success is largely dependent. In addition, stock
options are considered a competitive necessity in the semiconductor industry.
The Company's Board of Directors, subject to stockholder approval, has
amended the Stock Option Plan ("Plan") to increase the number of shares subject
to the Plan from 32,754,929 shares to 39,354,929 shares. Options granted under
the Plan may be incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1986 (the "Code") or may be options which are not
incentive stock options ("non-qualified stock options.")
DESCRIPTION OF THE PLAN
The Plan as amended authorizes the grant of options to purchase up to
39,354,929 shares of the Company's $.50 par value Common Stock to eligible
employees of the Company and its subsidiaries. As of May 26, 1996, 17,507,111
shares had been issued under the Plan, 12,320,729 shares were subject to options
outstanding held by 3,396 employees, and 2,927,089 shares were available for
additional option grants (excluding the 6,600,000 shares subject to approval by
stockholders). As of such date, the outstanding options under the Plan had an
average exercise price of $15.537, expiration dates ranging from July 22, 1996
to May 3, 2006, and the market value per share of stock was $16.25 per share.
The reservation of the additional shares is contingent upon approval by
stockholders holding a majority of the Company's shares present and voting at
the Annual Meeting, although options may be granted, but not exercised, prior to
and subject to such stockholder approval. The shares issued upon the exercise of
options granted may be previously unissued shares, reacquired shares or shares
bought on the market.
The Plan was initially adopted by the Company's stockholders on September
23, 1977 with an original termination date no later than March 14, 1987. The
Plan was amended and readopted by the Board on April 13, 1985 and the readopted
Plan was approved by the Company's stockholders on October 25, 1985. The Plan
was restated by the Board on April 22, 1994 and the restated Plan was approved
by the Company's stockholders on September 30, 1994.
The Plan is administered by a committee of the Board appointed by a majority
of the Board. The committee consists of not less than three members of the
Board, none of whom are eligible to participate in the Plan and have not been
eligible for at least one year prior to serving on the committee. The committee
currently administering the Plan is the Stock Option and Compensation Committee
("Committee") and the present members of the Committee are Messrs. Arnold,
Beshar, Maidique and O'Rourke. The Committee has sole authority and discretion,
subject to the provisions of the Plan, to determine the individuals to whom and
the dates on which options will be granted, the dates on which options will
become exercisable, the dates on which options will expire, the type of options
to be granted, whether the option will be transferable, the number of shares to
be subject to each option, and the purchase price of such shares. The purchase
price under each option granted shall in no instance be less than 100% of fair
market value on the date of grant. Options may be granted only to key employees
(including executive officers) of the Company and its subsidiaries, as selected
by the Committee. A director of the Company is not eligible to be granted an
option under the Plan unless the director is also an employee of the Company
and/or of any subsidiary. Subject to
17
<PAGE>
Committee approval, options can be transferable to family members or trusts for
the benefit of family members, but terms of the option remain in effect once an
option has been transferred. Under the Plan, no person may be granted more than
500,000 options during any one fiscal year of the Company.
The purchase price for all shares purchased pursuant to options exercised
must be either paid in full in cash, or paid in full, with the consent of the
Committee, in Common Stock of the Company valued at fair market value on the
date of exercise or a combination of cash and Common Stock. The Committee may
permit the payment of all or part of applicable withholding taxes due upon
exercise of an option by withholding of shares, valued at the fair market value
of the Company's Common Stock on the date of exercise, otherwise issuable upon
exercise of the option. Options may not be granted in exchange for the
cancellation of options previously granted under the Plan or under any other
stock option plan of the Company.
Subject to the Plan provisions, all options granted are exercisable on such
terms and conditions as the Committee prescribes, except that the term of an
option may not exceed ten years and one day and an option may not be exercised
under any circumstance, including death, unless the employee has remained in the
continuous employment of the Company (or a subsidiary) for six months following
the option grant date. The Committee can prescribe, for example, that an option
be exercisable in full six months following the grant date, or it can prescribe
that an option be exercised in installments over some longer period of time.
Each option granted under the Plan is to be evidenced by a stock option
agreement between the Company and the employee. In the event of any change in
the shares of the Company through the declaration of a stock dividend or a stock
split-up or through recapitalization resulting in share split-ups, or
combinations or exchanges of shares, or otherwise, the number of shares
available for grant of options, as well as the shares subject to any outstanding
option and the exercise price thereof, shall be appropriately adjusted by the
Committee.
Under the Plan, an employee may, upon termination of employment for any
reason other than retirement, permanent disability, or death, exercise an option
at any time within three months after such termination to the extent such
employee was entitled to exercise the option at the date of termination, but not
after expiration of the option term. In the event of termination of employment
by retirement or permanent disability, the option may be exercised in accordance
with its terms at any time within five years after the termination, but not
after expiration of the option term. In the event an employee dies while
employed by the Company, the employee's legal representative may exercise the
option in accordance with its terms and conditions at any time within five years
after the employee's death, but not after expiration of the option term. If the
employee dies during the three months following termination for any reason other
than retirement or permanent disability, the employee's legal representative may
exercise the option at any time within a period of one year after the employee's
death to the extent that the employee was entitled to exercise the option at
date of death, but not after expiration of the option term. The Committee may
reinstate any portion of any option previously granted if within 90 days
following termination the employee is recalled to the active payroll.
In the event the Company is merged into or acquired by another entity in a
transaction involving a change in control, the Committee has the authority, but
not the obligation, to accelerate vesting of any outstanding options. The
Committee may also ask the Board to negotiate, as part of any agreement
involving a sale or merger of the Company or any similar transaction, terms
providing protection for employees holding options under the Plan.
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The Board may amend, modify or terminate the Plan for the purpose of meeting
or addressing any changes in legal requirements or any other purpose permitted
by law. Stockholder approval will be sought for Plan amendments if it is
determined to be required or advisable under Securities and Exchange Commission
or Internal Revenue Service Regulations, applicable stock exchange rules, or
other applicable laws or regulations.
An employee will not be deemed to have received any compensation for Federal
income tax purposes upon the grant of a non-qualified stock option but will
realize taxable ordinary income at the time of exercise in the amount of excess,
if any, of the fair market value of the Common Stock on the date of exercise
over the exercise price. The basis for determination of gain or loss upon any
subsequent disposition of shares acquired upon the exercise of a non-qualified
stock option will be the amount paid for such shares, plus any ordinary income
recognized as a result of the exercise of such option. If the employee holds
such shares for more than one year following the date taxable income is realized
as a result of the exercise of the option, any gain realized upon disposition
will be taxed to the employee as long-term capital gain. If an employee
exercises a non-qualified stock option and makes payment with shares of the
Company's Common Stock, neither the employee nor the Company will recognize gain
or loss for the number of shares equally exchanged at the time of exericse.
However, the additional shares transferred to the employee will cause him to
realize, at the time of exercise, taxable ordinary income in an amount equal to
the fair market value of the additional shares transferred to the employee less
any cash paid by the employee. The exchange of shares acquired by an employee
through a prior exercise of a qualified stock option, an incentive stock option,
or under the Company's Stock Purchase Plan does not constitute a premature
disposition of such shares. The Company will be entitled to a deduction for
Federal income tax purposes in an amount equal to the ordinary income, if any,
recognized by the employee upon the exercise of the option.
An employee will not be deemed to have received any compensation for Federal
income tax purposes either at the time of grant or at the time of exercise of an
incentive stock option. If an employee exercises an incentive stock option and
does not dispose of such shares within two years from the date of the granting
of such option nor within one year after the transfer of the shares to the
employee, any gain realized upon disposition will be taxed to the employee as
long-term capital gain. In such case the Company will not be entitled to a
deduction for Federal income tax purposes in connection with either the grant or
the exercise of the option. However, if the employee disposes of the shares
other than as described above, any gain realized will be taxed as ordinary
income in an amount equal to the difference between the exercise price and
either the value of the shares at the time of exercise or the sales price,
whichever is less; and the excess, if any, of the sales price over the value of
the shares at the time of exercise will be treated as long-term capital gain if
the employee held such shares for more than one year following exercise of the
option. If an employee exercises an incentive stock option and makes payment
with shares of the Company's Common Stock, generally neither the employee nor
the Company will recognize gain or loss at the time of exercise. However, if an
employee exercises an incentive stock option and makes payment with shares
acquired through a prior exercise of a qualified stock option, an incentive
stock option, or under the Company's Stock Purchase Plan, that exchange will
constitute a premature disposition of such shares unless the shares tendered
have been held for the period required by the Code. The Company will be entitled
to a deduction for Federal income tax purposes in an amount equal to the
ordinary income, if any, recognized by the employee upon disposition of the
shares.
An employee will not be in receipt of an item of "tax preference" for
purposes of the minimum tax imposed by Section 55 of the Code upon the grant or
exercise of a non-qualified stock option. Although the
19
<PAGE>
Tax Reform Act of 1986 eliminated the special long-term capital gain deduction
so that the entire gain on disposition of stock acquired under the Restated Plan
is taxed at ordinary income tax rates, 1990 amendments to the Code have made 28%
the maximum tax rate applicable to net long term capital gains.
In order for compensation realized by any of the executive officers named in
the Summary Compensation Table ("Named Executive Officers") to be deductible by
the Company, IRS regulations require any option plan to state the maximum number
of options that can be granted to any one individual during a fiscal year. The
maximum number under the Plan is 500,000 options.
SUMMARY OF BENEFITS UNDER THE PLAN
It is not possible to state the number of options that might be granted in
the future to any particular individual. The following table sets forth the
number of options and option prices for options granted during the last fiscal
year:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTIONS GRANTED GRANT PRICE
- --------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Brian L. Halla....................................................... 500,000 $ 16.25
Chairman, President and CEO
Gilbert F. Amelio.................................................... 43,000 28.25
Chairman, President and CEO
Richard M. Beyer..................................................... 18,000 28.25
Executive Vice President and Chief Operating Officer 20,000 22.50
Patrick J. Brockett.................................................. 12,000 28.25
President, International Business Group 15,000 22.50
Donald Macleod....................................................... 13,000 28.25
Executive Vice President, Finance and Chief Financial Officer
Kirk P. Pond......................................................... 18,000 28.25
Executive Vice President
All current Executive Officers as a group(1)......................... 500,000 16.25
83,000 28.25
35,000 22.50
All other employees including current officers who are not Executive
Officers............................................................ 3,233,800 14.625-32.50
Outside directors are not eligible for participation in the Plan.
</TABLE>
- ------------------------
(1) Further information on options granted to the Named Executive Officers in
the last fiscal year also appears in the section on Executive Compensation.
Information is as of fiscal year end.
20
<PAGE>
The following table sets forth certain information as of the end of the
Company's fiscal year concerning the number of options that have been granted
since the Plan was first adopted in 1977:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME AND POSITION GRANTED(1)
- ------------------------------------------------------------------------------------ ------------------
<S> <C>
Brian L. Halla...................................................................... 500,000
Chairman, President and CEO
Gilbert F. Amelio................................................................... 561,250
Chairman, President and CEO
Richard M. Beyer.................................................................... 85,000
Executive President and Chief Operating Officer
Patrick J. Brockett................................................................. 130,200
President, International Business Group
Donald Macleod...................................................................... 106,000
Executive Vice President, Finance and Chief Financial Officer
Kirk P. Pond........................................................................ 199,000
Executive Vice President
All current Executive Officers as a group........................................... 1,243,950
All current Directors who are not Executive Officers as a group..................... 643,750
Gary P. Arnold...................................................................... 43,750
Nominee for Director
Charles E. Sporck................................................................... 600,000
Nominee for Director
All employees, including current officers who are not Executive Officers as a
group.............................................................................. 28,583,890
</TABLE>
- --------------
No one person has ever received 5% or more of the total options granted.
(1) Excludes options cancelled subsequent to grant.
The Board believes that stock options are a competitive necessity in the
semiconductor industry to attract and retain employees with the skill,
intelligence, education and experience upon which the Company's success is
largely dependent. Stock options are used by the Company as a major element of
the compensation package for many different levels of employees because options
foster a proprietary identification with the Company and encourage employees to
exert maximum efforts for the Company's success.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT TO THE OPTION
PLAN. AN AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE SHARES PRESENT AND
ENTITLED TO VOTE IS NECESSARY FOR APPROVAL.
21
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Standard & Poor's 500 Stock Index and
Standard & Poor's Electronics (Semiconductors) Industry Index for the five years
ending May, 1996. A three year comparison of the Company to these indices
beginning the three fiscal years ending May, 1996 is also included to correspond
to the three years of data included in the Summary Compensation Table. The total
stockholder return assumes $100 invested at the beginning of the period in the
Company's Common Stock, the Standard & Poor's 500 Stock Index and Standard &
Poor's Electronics (Semiconductors) Industry Index. It also assumes reinvestment
of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG NSC,
S&P 500 INDEX AND S&P ELECTRONICS (SEMICONDUCTORS) INDUSTRY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NSC PEER GROUP S&P 500
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 150.00 102.30 109.85
1993 208.93 208.80 122.61
1994 276.79 240.83 127.83
1995 357.14 378.87 153.64
1996 232.14 363.63 197.33
</TABLE>
- --------------
* $100 invested on 5/31/91 in stock or index, including reinvestment of
dividends.
22
<PAGE>
COMPARISON OF THREE YEAR CUMULATIVE TOTAL RETURN* AMONG NSC,
S&P 500 INDEX AND S&P ELECTRONICS (SEMICONDUCTORS) INDUSTRY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NSC S&P 500 PEER GROUP
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 132.48 104.26 115.34
1995 170.94 125.31 181.45
1996 111.11 160.94 174.15
</TABLE>
- --------------
* $100 invested on 5/31/93 in stock or index, including reinvestment of
dividends.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding Stock Option and Compensation Committee
Report on Executive Compensation and the preceding Company Stock Price
Performance Graphs shall not be incorporated by reference into any such filings;
nor shall such Report or Graphs be incorporated by reference into any future
filings.
23
<PAGE>
OUTSTANDING CAPITAL STOCK, QUORUM AND VOTING
The Common Stock of the Company is its only class of voting Capital Stock.
The Company's Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange. The record date for stockholders entitled to vote at the
meeting is the close of business on August 9, 1996. At the close of business on
that date, the Company had issued and outstanding 138,308,441 shares of Common
Stock, $.50 par value and the closing price of the Company's Common Stock as
reported in the Wall Street Journal composite transactions was $15.50.
The following table sets forth the known ownership of more than 5% of the
Company's outstanding Common Stock as of June 23, 1996.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
- -------------------------------------------------- --------------- -----------
<S> <C> <C>
The Equitable Companies Incorporated............ 14,362,394(1) 10.43
787 Seventh Avenue
New York, NY 10019
Miller Anderson & Sherrerd LLP.................. 9,910,000(2) 7.20
One Tower Bridge
West Conshohocken, PA 19428
Neuberger & Berman LP........................... 7,849,093(3) 5.70
605 Third Avenue
New York, NY 10158
The Capital Group Companies, Inc................ 7,694,400(4) 5.59
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- --------------
(1) Includes 13,104,894 shares of which The Equitable Companies Incorporated has
sole voting power, 219,300 shares of which The Equitables Companies
Incorporated has shared voting power, 14,348,094 shares of which The
Equitable Companies Incorporated has sole dispositive power, and 14,300
shares of which The Equitable Companies Incorporated has shared dispositive
power. The information concerning shares owned is from a Schedule 13-G dated
February 9, 1996 filed jointly by The Equitable Companies Incorporated on
behalf of itself, AXA, a French company owning a majority interest in The
Equitable Companies Incorporated, and five French mutual insurance companies
collectively known as Mutuelles AXA, the owners of a majority interest in
AXA.
(2) Includes 6,005,500 shares of which Miller Anderson & Sherrerd has sole
voting power and 9,910,000 shares of which Miller Anderson & Shepperd has
sole dispositive power. The information concerning the shares owned is from
a Schedule 13-G dated February 12, 1996.
(3) Includes 1,751,916 shares of which Neuberger & Berman has sole voting power,
4,076,300 shares of which Neuberger & Berman has shared voting power and
7,849,093 shares of which Neuberger & Berman has shared dispositive power.
The information concerning the shares owned is from a Schedule 13-G dated
February 12, 1996.
24
<PAGE>
(4) The Capital Group Companies, Inc. disclaim beneficial ownership pursuant to
Rule 13d-4 of the Securities and Exchange Act of 1934. Includes 7,694,400
shares of which The Capital Group Companies, Inc. has sole voting and
dispositive power. The information concerning the shares owned is from a
Schedule 13-G dated February 9, 1996.
-------------------
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of the Common Stock of the Company is necessary to
constitute a quorum at the 1996 Annual Meeting of Stockholders. Each holder of
Common Stock is entitled to one vote for each share held. Unless authority to
vote for any director is withheld in the proxy, votes will be cast in favor of
election of all nominees. Proxies which withhold authority to vote as to
specific directors shall be deemed to cast votes for those directors not so
specified. If no vote is marked with respect to any matter, the shares will be
voted in accordance with the Board of Directors' recommendations. Abstentions
and broker non-votes are included in the determination of a quorum but neither
abstentions nor broker non-votes are counted in determining the number of shares
voted on proposals presented to stockholders.
INDEPENDENT AUDITORS
The Board has selected the accounting firm of KPMG Peat Marwick to continue
to serve as the Company's independent auditors for the fiscal year ending May
25, 1997. Management has not followed the practice of presenting the selection
of auditors to the stockholders for approval. A representative of KPMG Peat
Marwick is expected to attend this meeting and will be available to respond to
stockholders' questions or make a statement if he or she desires to do so.
Audit services provided by KPMG Peat Marwick in fiscal 1996 included the
examination of the Company's consolidated financial statements for the year
ended May 26, 1996, the review of various filings with the Securities and
Exchange Commission, and statutory audits of certain foreign subsidiaries.
The audit services provided to the Company by KPMG Peat Marwick were
approved by the Audit Committee of the Board prior to being rendered. Other
specific services were approved by officers of the Company after a determination
that none of such services would affect KPMG Peat Marwick's independence as
auditors of the Company's financial statements based upon guidelines previously
approved by the Audit Committee.
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the proxy statement and
form of proxy to be used in connection with the 1997 Annual Meeting of
Stockholders of the Company, provided that such proposals are received in
writing by the Company no later than April 15, 1997, and provided that such
proposals are otherwise in compliance with applicable law and regulations.
ANNUAL REPORT
This Proxy Statement has been preceded or accompanied by the Annual Report
for the fiscal year ended May 26, 1996. Stockholders are referred to such report
for financial and other information about the activities of the Company, but
except for those pages specifically incorporated in this Proxy Statement, such
report is not to be deemed a part of the proxy soliciting material.
25
<PAGE>
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROXY STATEMENT IS DELIVERED, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (NOT INCLUDING EXHIBITS TO THE FORM 10-K). WRITTEN REQUESTS
FOR SUCH COPIES SHOULD BE DIRECTED TO INVESTOR RELATIONS, MAIL STOP 10-397,
NATIONAL SEMICONDUCTOR CORPORATION, 2900 SEMICONDUCTOR DRIVE, P.O. BOX 58090,
SANTA CLARA, CALIFORNIA 95052-8090.
INCORPORATION BY REFERENCE
According to the provisions of Schedule 14A under the Securities Exchange
Act of 1934, the following document or portion thereof is incorporated by
reference: "Executive Officers of the Registrant" from Part I of the Company's
Annual Report on Form 10-K for the fiscal year ended May 26, 1996.
OTHER MATTERS
Management knows of no other matters which will be brought before the
meeting. If any such matters are properly brought before the meeting, however,
the persons named in the enclosed form of proxy will vote in accordance with
their best judgment.
Whether or not you plan to attend the meeting, please date, sign and return
the enclosed proxy at your earliest convenience in the enclosed postpaid
envelope.
JOHN M. CLARK III
SECRETARY
August 15, 1996
26
<PAGE>
NATIONAL SEMICONDUCTOR CORPORATION
STOCK OPTION PLAN
(as amended through July 9, 1996)
1. TITLE OF PLAN
The title of this Plan is the National Semiconductor
Corporation Stock Option Plan, hereinafter referred to as the
"Plan", and formerly known as the National Semiconductor
Corporation 1977 Stock Option Plan.
2. PURPOSE
The Plan is intended to align the interests of eligible key
employees of National Semiconductor Corporation (hereinafter
called the "Corporation") and its subsidiaries (as hereinafter
defined) with the interests of the stockholders of the Corporation
and to provide incentives for such employees to exert maximum
efforts for the success of the Corporation. By extending to key
employees the opportunity to acquire proprietary interests in the
Corporation and to participate in its success, the Plan may be
expected to benefit the Corporation and its stockholders by making
it possible for the Corporation to attract and retain the best
available talent and by rewarding key management and technical
personnel for their part in increasing the value of the
Corporation's shares. It is further intended that options granted
pursuant to this Plan may be incentive stock options under Section
422A of the Internal Revenue Code of 1986, as amended (the
"Code"), or may be options which are not incentive stock options
(hereinafter called "non-qualified stock options").
3. STOCK SUBJECT TO THE PLAN
There will be reserved for issue upon the exercise of options
granted under the Plan 39,354,929 shares of the Corporation's $.50
par value Common Stock, subject to adjustment as provided in
Paragraph 8, which may be unissued shares, reacquired shares, or
shares bought on the market. If any option which shall have been
granted shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares shall again become
available for the purposes of the Plan (unless the Plan shall have
been terminated).
<PAGE>
4. ADMINISTRATION
(a) The Plan shall be administered by a committee of the
Board of Directors of the Corporation (the "Committee") which
shall be appointed by a majority of the whole Board. The
Committee shall be constituted to permit the Plan to comply with
(i) Rule 16b-3 promulgated under the Securities Exchange Act of
1934 ("Exchange Act") and any successor rule and (ii) IRS
regulations issued under Section 162(m) of the Code, and shall
initially consist of not less than three members of the Board, all
of whom are ineligible for benefits under the Plan and none of
whom has been so eligible for at least one year prior to serving
on such Committee.
(b) The Committee shall have the plenary power, subject to
and within the limits of the express provisions of the Plan:
(i) To determine from time to time which of the
eligible persons shall be granted options under the Plan; the time
or times (during the term of the option) within which all or
portions of each option may be exercised and the number of shares
for which an option or options shall be granted to each of them.
Notwithstanding the foregoing, no person may be granted more than
500,000 options during any one fiscal year of the Corporation.
(ii) To construe and interpret the Plan and options
granted under it, and to establish, amend, and revoke rules and
regulations for its administration. The Committee, in the
exercise of this power, shall generally determine all questions of
policy and expediency that may arise, may correct any defect, or
supply any omission or reconcile any inconsistency in the Plan or
in any option agreement in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(iii) To prescribe the terms and provisions of each
option granted (which need not be identical).
(iv) To determine whether options granted shall be
incentive stock options or non-qualified stock options.
(v) To determine whether options granted shall be
transferable without consideration to immediate family members or
family trusts for the benefit of optionee's immediate family
members. As used herein, "immediate family" means parents,
spouses and children.
(c) The Committee shall not have the authority to grant
new options in exchange for the cancellation of stock options
previously granted under the Plan or under any other stock option
plan of the Corporation.
2
<PAGE>
5. ELIGIBILITY
Options may be granted only to regular salaried officers and
key employees of the Corporation and its subsidiaries. The term
"subsidiary" corporation shall mean any corporation in which the
Corporation controls, directly or indirectly, fifty percent (50%)
or more of the combined voting power of all classes of stock. A
director of the Corporation shall not be eligible for the benefits
of the Plan unless such person also is a regular salaried employee
of the Corporation and/or of any subsidiary.
6. TERMS OF OPTION AND OPTION AGREEMENTS
Each option shall be evidenced by a written Stock Option
Agreement which may expressly identify the options as incentive
stock options or as non-qualified stock options, and be in such
form and contain such provisions as the Committee shall from time
to time deem appropriate; provided, however, that the grant of a
non-qualified option pursuant to this Plan shall in no way be
construed to be an alternative to the right of an employee to
purchase stock pursuant to any incentive stock option heretofore
or hereafter granted to an employee pursuant to any stock option
plans now in existence or hereafter adopted by the Corporation.
The terms of the option agreements need not be identical, but each
option agreement shall include, by appropriate language, or be
subject to, the substance of all of the applicable following
provisions:
(a) The purchase price under each option granted shall be
as determined by the Committee but shall in no instance be less
than 100% of fair market value on the date of grant. The fair
market value on the date of grant shall be the opening price of
the Common Stock on the New York Stock Exchange on such date (or
if there shall be no trading on such date, then on the first
previous date on which there is such trading).
(b) The maximum term of any incentive stock option shall
be ten years from the date it was granted.
(c) The maximum term of any non-qualified stock option
shall be ten years and one day from the date it was granted.
(d) An option may not be exercised to any extent, either
by the person to whom it was granted or by the grantee's
transferee, or by any person after the grantee's death, unless the
person to whom the option was granted has remained in the
continuous employ of the Corporation, or of a subsidiary, for not
less than six months from the date when the option was granted.
Otherwise, each option shall be exercisable as determined by the
Committee.
3
<PAGE>
(e) The Corporation, during the terms of options granted
under the Plan, at all times will keep available the number of
shares of stock required to satisfy such options.
(f) The Corporation will seek to obtain from each
regulatory commission or agency having jurisdiction such authority
as may be required to issue and sell shares of stock to satisfy
such options. Inability of the Corporation to obtain from any
such regulatory commission or agency authority which counsel for
the Corporation deems necessary for the lawful issuance and sale
of its stock to satisfy such options shall relieve the Corporation
from any liability for failure to issue and sell stock to satisfy
such options pending the time when such authority is obtained or
is obtainable.
(g) Neither a person to whom an option is granted nor his
or her transferee, legal representative, heir, legatee, or
distributee, shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to
such option unless and until he or she has exercised his or her
option pursuant to the terms thereof.
(h) In order to be exempt under Section 16 of the Exchange
Act, the option may not be transferable except by will or by the
laws of descent or distribution, and during the lifetime of the
person to whom the option is granted he or she alone may exercise
it.
(i) An option shall terminate and may not be exercised if
the person to whom it is granted ceases to be continuously
employed by the Corporation, or by a subsidiary of the
Corporation, except (subject nevertheless to the last sentence of
this subparagraph (h)): (1) if the grantee's continuous
employment is terminated for any reason other than (i) retirement,
(ii) permanent disability, or (iii) death, the grantee or the
grantee's transferee may exercise the option to the extent that
the grantee was entitled to exercise such option at the date of
such termination at any time within a period of three (3) months
following the date of such termination, or if the grantee shall
die within the period of three (3) months following the date of
such termination without having exercised such option, the option
may be exercised within a period of one year following the
grantee's death by the grantee's transferee or the person or
persons to whom the grantee's rights under the option pass by will
or by the laws of descent or distribution but only to the extent
exercisable at the date of such termination; (2) if the grantee's
continuous employment is terminated by (i) retirement, (ii)
permanent disability, or (iii) death, the option may be exercised
in accordance with its terms and conditions at any time within a
period of five (5) years following the date of such termination by
the grantee or the grantee's transferee, or in the event of the
grantee's death, by the persons to whom the grantee's rights under
the option shall pass by will or by the laws of descent or
distribution; (3) if the grantee's continuous employment
4
<PAGE>
is terminated and within a period of ninety (90) days thereafter
the grantee is recalled to the active payroll, the Committee may
reinstate any portion of the option previously granted but not
exercised. Nothing contained in this subparagraph (h) is intended
to extend the stated term of the option and in no event may an
option be exercised by anyone after the expiration of its stated
term.
(j) Option agreements evidencing incentive stock options
shall contain such terms and provisions as may be necessary to
render them incentive stock options pursuant to Section 422A of
the Code and the Income Tax Regulation thereunder, as the same or
any successor statute or regulations may at the time be in effect.
(k) Nothing in this Plan or in any option granted
hereunder shall confer on any optionee any right to continue in
the employ of the Corporation or any of its subsidiaries, or to
interfere in any way with the right of the Corporation or any of
its subsidiaries to terminate his or her employment at any time.
7. TIME OF GRANTING OPTION
The Committee shall determine the date on which options are
granted under the Plan. All options granted must be approved at a
meeting of the Committee by a majority of the members of the
Committee. If an option agreement is not executed by an employee
and returned to the Corporation on or prior to ninety (90) days
after the date the option is granted (or such earlier date as the
Committee may specify), such option shall terminate.
8. ADJUSTMENT IN NUMBER OF SHARES AND IN OPTION PRICE
In the event there is any change in the shares of the
Corporation through the declaration of stock dividends or a stock
split-up, or through recapitalization resulting in share split-
ups, or combinations or exchanges of shares, or otherwise, the
number of shares available for option, as well as the shares
subject to any option and the option price thereof, shall be
appropriately adjusted by the Committee.
9. PAYMENT OF PURCHASE PRICE AND WITHHOLDING TAXES
(a) The purchase price for all shares purchased pursuant
to options exercised must be either paid in full in cash, or paid
in full, with the consent of the Committee, in Common Stock of the
Corporation valued at fair market value on the date of exercise or
a combination of cash and Common Stock. Fair market value on the
date of exercise is the opening price of the Common Stock on the
5
<PAGE>
New York Stock Exchange on such date, or if there shall be no
trading on such date, then on the first previous date on which
there was such trading.
(b) The Committee may permit the payment of all or part of
the applicable withholding taxes due upon exercise of an option,
up to the highest marginal rates then in effect, by the
withholding of shares otherwise issuable upon exercise of the
option. Option shares withheld in payment of such taxes shall be
valued at the fair market value of the Corporation's Common Stock
on the date of exercise as defined herein.
10. CHANGE IN CONTROL
In the event the Corporation is merged into or acquired by
another entity in a transaction involving a change in control, the
Committee shall have the complete authority and discretion, but
not the obligation, to accelerate the vesting of any outstanding
options granted hereunder. The Committee may also ask the Board
of Directors to negotiate, as part of any agreement involving a
sale or merger of the Corporation, a sale of substantially all the
Corporation's assets or similar transaction, terms providing
protection for employees holding options under the Plan.
11. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN
(a) The Board may amend, modify, suspend or terminate the
Plan for the purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law. The Board
will seek stockholder approval of an amendment if determined to be
required by or advisable under regulations of the Securities and
Exchange Commission or the Internal Revenue Service, the rules of
any stock exchange on which the Corporation's stock is listed, or
other applicable law or regulation.
(b) The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued. An option
may not be granted while the Plan is suspended or after it is
terminated.
(c) The rights and obligations under any options granted
while the Plan is in effect shall not be altered or impaired by
amendment, suspension or termination of the Plan, except with the
consent of the person to whom the option was granted or the
grantee's transferee or to whom rights under an option shall have
passed by will or by the laws of descent and distribution.
12. EFFECTIVE DATE
The Plan, as amended and restated, shall become effective on
April 22, 1994, subject to approval by the stockholders of the
Corporation within twelve (12) months after said date.
6
<PAGE>
PROXY NATIONAL SEMICONDUCTOR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1996 ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 27, 1996
The undersigned acknowledges receipt of (a) Notice of 1996 Annual Meeting
of the Stockholders of the Company to be held on September 27, 1996, (b)
accompanying Proxy Statement, and (c) Annual Report of the Company for its
fiscal year ended May 26, 1996. Brian L. Halla and John M. Clark III, or
either of them, with power of substitution and revocation, are hereby
appointed Proxies of the undersigned to vote all stock of National
Semiconductor Corporation (the "Company") which the undersigned is entitled
to vote at the 1996 Annual Meeting of Stockholders to be held in the Champagne
1, 2 and 3 Ballrooms of the Sofitel Hotel, 223 Twin Dolphin Drive, Redwood
City, California on September 27, 1996 or any adjournment thereof, with all
powers which the undersigned would possess if personally present, upon such
business as may properly come before the meeting or any adjournment thereof.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A FOR VOTE ON EACH ITEM AND
SHARES WILL BE SO VOTED UNLESS OTHERWISE DIRECTED.
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF EACH PROPOSAL.
1. ELECTION OF DIRECTORS NOMINEES:
Brian L. Halla, Gary P. Arnold,
Robert Beshar, Modesto A. Maidique,
Edward R. McCracken, J. Tracy
O'Rourke, Charles E. Sporck, Donald
E. Weeden.
FOR WITHHELD
/ / / /
- ------------------------------------------------------------
Instruction: to withhold authority to vote for any individual
nominee, write that nominee's name in the space provided above.
2. To approve the addition of 6,600,000 shares of Common Stock
to the Stock Option Plan as amended.
FOR AGAINST ABSTAIN
/ / / / / /
IN THEIR DISCRETION THE PROXIES ARE MARK HERE
AUTHORIZED TO VOTE ON SUCH OTHER FOR ADDRESS / /
MATTERS AS MAY PROPERLY COME BEFORE CHANGE AND
THE MEETING OR ANY ADJOURNMENT NOTE AT LEFT
THEREOF.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS
ATTORNEY, EXECUTOR, TRUSTEE OR IN REPRESENTATIVE
CAPACITY, SIGN NAME AND TITLE.
Signature: Date
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Signature: Date
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