UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended August 30, 1998
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 1-6453
NATIONAL SEMICONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2095071
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(State of incorporation) (I.R.S. Employer Identification Number)
2900 Semiconductor Drive, P.O. Box 58090
Santa Clara, California 95052-8090
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 721-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding at August 30, 1998.
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Common stock, par value $0.50 per share 166,173,456
NATIONAL SEMICONDUCTOR CORPORATION
INDEX
Part I. Financial Information Page No.
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations
(Unaudited) for the Three Months Ended
August 30, 1998 and August 24, 1997 3
Condensed Consolidated Statements of Other
Comprehensive Income(Loss) (Unaudited) for the
Three Months Ended August 30, 1998 and
August 24, 1997 4
Condensed Consolidated Balance Sheets (Unaudited)
as of August 30, 1998 and May 31, 1998 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended
August 30, 1998 and August 24, 1997 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Result of Operations 10-13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14-15
Signature 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in millions, except per share amounts)
Three Months Ended
------------------
Aug. 30, Aug. 24,
1998 1997*
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Net sales $469.6 $656.7
Operating costs and expenses:
Cost of sales 414.6 396.3
Research and development 122.1 112.0
Selling, general and administrative 73.0 86.0
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Total operating costs and expenses 609.7 594.3
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Operating income(loss) (140.1) 62.4
Interest income, net 0.1 11.7
Other income, net 0.3 7.4
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Income(loss) before income taxes (139.7) 81.5
Income tax provision(benefit) (34.9) 18.9
------ ------
Net income(loss) $(104.8) $ 62.6
====== ======
Earnings(loss) per share:
Basic $ (0.63) $ 0.39
Diluted $ (0.63) $ 0.38
Weighted average common shares:
Basic 165.8 162.3
Diluted 165.8 165.9
Income(loss) used in basic and diluted earnings
per common share calculation $(104.8) $ 62.6
*Note: Financial information for the three months ended August 24,
1997 has been restated to include Cyrix Corporation, which was acquired
on November 17, 1997 and accounted for as a pooling of interests.
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME(LOSS) (Unaudited)
(in millions)
Three Months Ended
------------------
Aug. 30, Aug. 24,
1998 1997*
-------- --------
Net income(loss) $(104.8) $ 62.8
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale
securities 0.2 1.3
Reclassification adjustment for gain
included in net income - (4.0)
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0.2 (2.7)
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Comprehensive income(loss) $(104.6) $ 60.1
======= =======
*Note: Financial information for the three months ended August 24,
1997 has been restated to include Cyrix Corporation, which was acquired
on November 17, 1997 and accounted for as a pooling of interests.
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions)
Aug. 30, May 31,
1998 1998
ASSETS -------- --------
Current assets:
Cash and cash equivalents $ 376.2 $ 460.8
Short-term marketable investments 102.1 112.4
Receivables, net 213.2 208.5
Inventories 209.5 283.9
Deferred tax assets 181.2 166.2
Other current assets 68.6 76.4
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Total current assets 1,150.8 1,308.2
Property, plant and equipment 3,003.3 2,939.7
Less accumulated depreciation (1,353.7) (1,283.9)
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Net property, plant and equipment 1,649.6 1,655.8
Other assets 162.2 136.7
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Total assets $2,962.6 $3,100.7
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt $ 36.6 $ 53.9
Accounts payable 197.8 237.0
Accrued expenses 296.2 310.9
Income taxes 212.9 191.8
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Total current liabilities 743.5 793.6
Long-term debt 398.5 390.7
Deferred income taxes 3.3 4.4
Other non-current liabilities 52.3 53.1
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Total liabilities 1,197.6 1,241.8
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Commitments and contingencies
Shareholders' equity:
Common stock 83.1 82.7
Additional paid-in capital 1,223.1 1,212.8
Retained earnings 471.0 575.8
Accumulated other comprehensive loss (12.2) (12.4)
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Total shareholders' equity 1,765.0 1,858.9
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Total liabilities and shareholders' equity $2,962.6 $3,100.7
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
NATIONAL SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Three Months Ended
--------------------
Aug. 30, Aug. 24,
1998 1997*
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Cash flows from operating activities:
Net income(loss) $(104.8) $ 62.6
Adjustments to reconcile net income(loss)
with net cash (used by) provided by operations:
Depreciation and amortization 89.5 63.0
Gain on sale of investments - (6.7)
Loss on disposal of equipment 1.7 4.2
Tax benefit associated with stock options 0.2 9.4
Other, net - 0.1
Changes in certain assets and liabilities, net:
Receivables (4.7) (66.8)
Inventories 74.4 (16.6)
Other current assets 7.8 (7.6)
Accounts payable and accrued expenses (52.1) (2.4)
Current and deferred income taxes (18.7) (1.4)
Other non-current liabilities (0.8) 4.7
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Net cash (used by) provided by operating activities (7.5) 42.5
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Cash flows from investing activities:
Purchase of property, plant and equipment (73.9) (200.1)
Sale and maturity of marketable investments 33.3 546.8
Purchase of marketable investments (22.8) (586.8)
Purchase of investments and other, net (9.4) 3.0
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Net cash used by investing activities (72.8) (237.1)
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Cash flows from financing activities:
Issuance of debt - 0.4
Repayment of debt (9.5) (2.4)
Issuance of common stock, net 5.2 25.5
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Net cash (used by) provided by financing activities (4.3) 23.5
------- -------
Net change in cash and cash equivalents (84.6) (171.1)
Adjustment to conform pooling of interests for
cash and cash equivalents at beginning of year - 17.6
Cash and cash equivalents at beginning of period 460.8 897.8
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Cash and cash equivalents at end of period $ 376.2 $ 744.3
======= =======
*Note: Financial information for the three months ended August 24,
1997 has been restated to include Cyrix Corporation, which was acquired
on November 17, 1997 and accounted for as a pooling of interests.
See accompanying Notes to Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments necessary to present fairly
the financial position and results of operations of National
Semiconductor Corporation and its subsidiaries ("National" or the
"Company"). Interim results of operations are not necessarily
indicative of the results to be expected for the full year. This report
should be read in conjunction with the consolidated financial statements
and notes thereto included in the annual report on Form 10-K for the
fiscal year ended May 31, 1998.
Earnings Per Share:
- -------------------
A reconciliation of the shares used in the computation for basic and
diluted earnings per share follows:
Three Months Ended
------------------
Aug. 30, Aug. 24,
(in millions) 1998 1997
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Net income(loss) used for basic and diluted
earnings per share $ (104.8) $ 62.6
======== ========
Number of shares:
Weighted average common shares outstanding
used for basic earnings per share 165.8 162.3
Effect of dilutive securities:
Stock options - 3.6
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Weighted average common and potential
common shares outstanding used for
diluted earnings per share 165.8 165.9
======== =======
As of August 30, 1998, there were options outstanding to purchase 30.6
million shares of the Company's common stock with a weighted-average
exercise price of $15.34, which could potentially dilute basic earnings
per share in the future, but which were not included in diluted earnings
per share as their effect was antidilutive. As of August 30, 1998, the
Company also had outstanding $258.8 million of convertible subordinated
notes, which are convertible into approximately 6.0 million shares of
common stock. These notes were not assumed to be converted because they
were antidilutive in all periods presented.
Comprehensive Income:
- ---------------------
Beginning in fiscal 1999, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive
income and its components. SFAS No. 130 requires the Company to include
unrealized gains or losses on the Company's available-for-sale
securities and minimum pension liability, which were previously reported
as separate components of shareholder's equity, in other comprehensive
income.
The components of accumulated other comprehensive loss are as follows:
Aug. 30, May 31,
(in millions) 1998 1998
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Unrealized gain on available-for-sale
securities, net of tax $ 0.3 $ 0.1
Minimum pension liability (12.5) (12.5)
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$ (12.2) $ (12.4)
======= =======
Note 2. Components of Inventories
The components of inventories were:
Aug. 30, May 31,
(in millions) 1998 1998
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Raw materials $ 18.6 $ 19.3
Work in process 130.6 176.0
Finished goods 60.3 88.6
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Total inventories $ 209.5 $ 283.9
======= =======
Note 3. Consolidated Financial Statement Detail
Components of other interest income, net and
other income(expense), net, were:
Three Months Ended
------------------
Aug. 30, Aug. 24,
(in millions) 1998 1997
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Interest Income, Net
- --------------------
Interest income $ 7.0 $ 14.1
Interest expense (6.9) (2.4)
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Total interest income, net $ 0.1 $ 11.7
======= =======
Other Income, Net
- -----------------
Net intellectual property income $ 0.3 $ 0.7
Gain on investments, net - 6.7
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Total other income, net $ 0.3 $ 7.4
======= =======
Note 4. Statement of Cash Flow Information
Three Months Ended
------------------
Aug. 30, Aug. 24,
(in millions) 1998 1997
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Supplemental Disclosure of Cash Flow
- ------------------------------------
Information
-----------
Cash paid(refunded) for:
Interest $ 2.9 $ 3.7
Income taxes (22.0) 15.7
Interest on tax settlements 1.6 -
Supplemental Schedule of Noncash Investing
- ------------------------------------------
and Financing Activities
------------------------
Issuance of stock for employee benefit plans $ 1.3 $ 2.5
Issuance of restricted stock 0.7 -
Unrealized gain on available-for-sale
securities 0.2 1.3
Restricted stock cancellation 0.5 0.2
Note 5. Contingencies
In July 1996, the Company received notices of assessment from the
Malaysian Inland Revenue Department relating to the Company's
manufacturing operations in Malaysia. The assessments total
approximately $146.9 million Malaysian ringgits ($35.4 million),
exclusive of interest. The issues giving rise to the assessments relate
to intercompany transfer pricing, primarily for fiscal 1993. The
Company believes the assessments are without merit and has been
contesting them administratively. The Company believes it has adequate
tax reserves to satisfy the ultimate resolution of the assessments.
Note 6. Subsequent Event
On September 25, 1998, the Company announced that it had reached
agreement with International Business Machines Corporation ("IBM") for
termination of the existing wafer manufacturing and marketing agreement
between its Cyrix Corporation ("Cyrix") subsidiary and IBM. Under terms
of the agreement, IBM will cease the sale of Cyrix-designed processors
before the end of calendar 1998 and the Company's Cyrix subsidiary will
be relieved of its wafer purchase obligation to IBM. In addition, Cyrix
will transfer certain assets to IBM. As a result of the contract
termination and asset transfers, the Company will take a one-time pre-
tax charge to operations of approximately $50 million to $55 million in
its second quarter of fiscal 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview The Company recorded net sales of $469.6 million for the
first quarter of fiscal 1999, a 28.5 percent decrease from net sales of
$656.7 million for the same quarter of fiscal 1998. Lower sales
resulted from a slowdown in new orders that was affected by continued
economic uncertainties in the Asia Pacific region, which the Company
experienced through the first quarter of fiscal 1999. Increased
competition and availability of new higher speed processor products from
competitors also caused significant price reductions on the Cyrix 6X86
microprocessor products. In addition, the Company continued to
experience significantly lower sales for network (formerly local area
networks ("LAN")) products, which has resulted from the Company's
failure to introduce key new LAN products. A net loss of $104.8 million
was recorded for the first quarter of fiscal 1999, compared to net
income of $62.6 million for the first quarter of fiscal 1998.
Sales The decline in sales is a result of lower volume and price
erosion affecting many of the Company's product areas. Sales for
network products declined 68.8 percent in the first quarter of fiscal
1999 from the same quarter of fiscal 1998, as the Company continued to
experience declining shipments and price erosion in its existing mature
10/100 megabit LAN ethernet products while efforts to develop new
network products are based on digital signal processing technology. The
Company's failure to introduce key new network products during fiscal
1998 was the primary cause for the sharp drop in sales for network
products. Sales in the first quarter of fiscal 1999 for analog products
declined 23.3 percent from sales in the same quarter of fiscal 1998, as
a result of fewer shipments and modest price declines. Sales in the
first quarter of fiscal 1999 for personal systems products declined 34.6
percent from sales in the same quarter of fiscal 1998, as a result of
fewer shipments and price erosion, mostly on the Cyrix 6X86 products.
Despite the overall decline in sales for the first quarter of fiscal
1999 from fiscal 1998, the Company experienced continued growth in sales
for wide area network products (including application specific wireless
communication products), which grew 12.0 percent in the first quarter of
fiscal 1999 from the same quarter of fiscal 1998, reflecting both
increased unit shipments and unit prices.
Gross Margin Gross margin as a percentage of sales declined to 11.7
percent for the first quarter of fiscal 1999, compared to 39.7 percent
for the first quarter of fiscal 1998. The decline in gross margin for
the first quarter of fiscal 1999 was primarily caused by lower factory
utilization, which declined from 87 percent for the first quarter of
fiscal 1998 to 41 percent for the first quarter of fiscal 1999 as the
Company continued to run its manufacturing facilities at reduced
capacity utilization rates in order to manage inventories and reduce
cost. The decline in gross margin also reflects continued margin
erosion in the Cyrix microprocessor products, as well as the start of
depreciation beginning in the second half of fiscal 1998 associated with
the new 0.35/0.25 micron wafer fabrication facility in Maine.
Research and Development Research and development ("R&D") expenses
for the first quarter of fiscal 1999 increased by 9.0 percent from the
comparable quarter of fiscal 1998. Overall, the increase in R&D expenses
reflects the Company's accelerated investment in advanced submicron CMOS
process technology, which is part of the Company's focus on state-of-
the-art process technology and is one of the Company's strategic
imperatives. The increase also reflects the Company's continuing
investment in the development of new analog and mixed-signal technology
based products for applications in the personal systems, communications
and consumer markets, as well as expanded development of Cyrix
microprocessor based products. R&D spending for fiscal 1999 for process
technology grew significantly over the fiscal 1998 spending levels,
while spending for product development slightly declined as management
continues to adjust its strategic research and development programs to
align its spending with current business conditions. For the first
quarter of fiscal 1999, the Company expended approximately 32 percent of
its R&D effort toward the development of process technology and 68
percent for new product development.
Selling, General and Administrative Selling, general and
administrative expenses for the first quarter of fiscal 1999 decreased
by 15.1 percent from the first quarter of fiscal 1998. The decrease
reflects certain cost reduction actions taken in the second half of
fiscal 1998 to reduce the Company's overall cost structure in response
to weakened business conditions.
Interest Income and Interest Expense Net interest income was $0.1
million for the first quarter of fiscal 1999 compared to net interest
income of $11.7 million for the same quarter of fiscal 1998. The
decrease in net interest income was attributable to less interest earned
on lower cash balances compounded by higher interest expense. The
Company capitalized only $0.2 million of interest associated with
capital expansion projects in the first quarter of fiscal 1999, compared
to $5.4 million in the same quarter of fiscal 1998, which reduced
interest expense significantly in the fiscal 1998 quarter.
Other Income, Net Other income, net was $0.3 million for the first
quarter of fiscal 1999 compared to $7.4 million for the first quarter of
fiscal 1998. For the first quarter of fiscal 1999, other income, net
consisted entirely of net intellectual property income. For the first
quarter of fiscal 1998, other income, net included $0.7 of net
intellectual property income and a $6.7 million net gain from sale of
investments. Net intellectual property income for the first quarter of
both fiscal 1999 and fiscal 1998 did not include any receipts from any
individually material license arrangements.
Income Tax Expense Income tax benefit for fiscal 1999 is based on
the Company's expected effective tax rate of 25 percent.
Financial Condition During the first quarter of fiscal 1999, cash
and cash equivalents decreased by $84.6 million compared to a $171.1
million decrease in the first quarter of fiscal 1998. The decrease for
fiscal 1999 was primarily the result of the Company's continued
investment in property, plant and equipment of $73.9 million combined
with cash used in operating activities of $7.5 million that was
primarily caused by the net loss incurred in the first quarter of fiscal
1999. This compares to the decrease in fiscal 1998, which included the
Company's investment in property, plant and equipment of $200.1 million,
offset by $42.5 million generated from operating activities and $23.5
million generated from financing activities. Cash generated from
financing activities in fiscal 1998 came primarily from proceeds of
$25.5 million from the issuance of common stock.
Management foresees substantial cash outlays for plant and equipment
throughout fiscal 1999 with primary focus on capacity expansion in the
Maine 8-inch wafer fabrication facility, next generation process
capability and implementation and expansion of in-house assembly and
test capacity for Cyrix microprocessors. However, the fiscal 1999
capital expenditure level is expected to be significantly lower than the
fiscal 1998 level in response to current business conditions. Existing
cash and investment balances, together with existing lines of credit,
are expected to be sufficient to finance planned fiscal 1999 capital
investments.
Outlook The statements contained in this Outlook and in the
Financial Condition section of Management's Discussion and Analysis are
forward looking based on current expectations and management's
estimates. Actual results may differ materially from those set forth in
such forward looking statements. In addition to the risk factors
discussed in the Financial Condition and Outlook sections of
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 24 through 28 of the Company's 1998 Annual Report
on Form 10-K for the fiscal year ended May 31, 1998 filed with the
Securities and Exchange Commission, the following factors may also
affect the Company's operating results for fiscal 1999:
Although business conditions for the semiconductor industry and the
Company remained weak through the summer quarter, the Company believes
that it may have reached the bottom of the downturn as order rates for
the first quarter were flat with the previous quarter and showed some
signs of seasonal improvement, particularly for the personal computer
related products, as the Company exited the quarter. However, the
Company continues to be cautious about its future outlook, since there
is no assurance that this improvement will continue for any duration of
time. Based on current conditions, the Company does not anticipate any
significant growth in sales soon and as a result, it expects to incur a
loss for the second quarter of fiscal 1999.
Unless new orders substantially improve from the rate of orders
currently experienced, the Company will continue to run its
manufacturing facilities at reduced capacity utilization rates to manage
inventories and reduce cost. Consequently, gross margin will continue
to be unfavorably affected and the Company does not expect gross margin
to significantly improve soon from the rate experienced in the summer
quarter. The Company is also exploring alternative ways to reduce its
operating expenses with particular focus on eliminating excess capacity
in its manufacturing operations. Such actions, if significant, may lead
to one-time charges in future periods.
On September 25, 1998, the Company announced that it had reached
agreement with IBM for termination of the existing wafer manufacturing
and marketing agreement between its Cyrix subsidiary and IBM. Under
terms of the agreement, IBM will cease the sale of Cyrix-designed
processors before the end of calendar 1998 and the Company's Cyrix
subsidiary will be relieved of its wafer purchase obligation to IBM. In
addition, Cyrix will transfer certain assets to IBM. As a result of the
contract termination and asset transfers, the Company will take a one-
time pre-tax charge to operations of approximately $50 million to $55
million in its second quarter of fiscal 1999, which will have an
additional unfavorable impact on gross margin and operating results for
the second quarter of fiscal 1999. As a result of this agreement with
IBM, the Company is now more dependent on successfully ramping-up the
in-house manufacturing of Cyrix products at its South Portland, Maine
facility and faces a greater risk associated with any difficulties it
may encounter in such efforts.
In connection with the Company's efforts to undertake year 2000 projects
as discussed in the Outlook section of Management's Discussion and
Analysis of Financial Condition and Results of Operations in the
Company's 1998 Annual Report on Form 10-K for the fiscal year ended May
31, 1998, to date the Company has devoted substantially all of its year
2000 efforts in modifying and testing its critical business
applications, manufacturing tools and computer systems to be year 2000
compliant by the beginning of calendar 1999. Failure to successfully
complete year 2000 projects could cause significant disruption of
operations, including but not limited to interruption of manufacturing
activities, and inability to process invoices, payments or other
systematic business transactions. The Company believes that the largest
remediation effort and greatest risk from year 2000 issues arise from
its manufacturing and logistics operations. Failure to successfully
implement year 2000 modifications in manufacturing tools and related
systems could result in the inability to manufacture and deliver
products to customers. Projects related to the Company's manufacturing
processes are expected to be completed by May 1999. The Company is also
currently evaluating its exposure to contingencies related to the year
2000 issues for products it has sold. Although the Company believes that
its products do not directly contain specific calendar year functions,
customers may use the Company's products in conjunction with customer
supplied software, over which the Company has no control, that may
perform non-compliant year 2000 date computations. As a result, there
is a risk of litigation associated with the use of such products by
customers, including all the risks, cost and uncertainties associated
with litigation. While there can be no assurance that unforeseen
problems will not be encountered, the Company expects that all critical
year 2000 remediation projects will be completed on schedule. However,
because of its focus in ensuring the remediation projects are on
schedule, the Company has not yet fully developed contingency plans to
address alternative solutions in the event the Company fails to
successfully make any of its critical systems year 2000 compliant. The
Company expects to begin the development of contingency plans no later
than the beginning of calendar 1999, at which time it believes it will
be better able to identify any deficiencies and appropriately develop
specific contingency plans for further remediation efforts.
The forward looking statements discussed or incorporated by reference in
this outlook section involve a number of risks and uncertainties. Other
risks and uncertainties include, but are not limited to, the general
economy, regulatory and international economic conditions, the changing
environment of the semiconductor industry, competitive products and
pricing, growth in the personal computer and communications industries,
the effects of legal and administrative cases and proceedings, and such
other risks and uncertainties as may be detailed from time to time in
the Company's SEC reports and filings.
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in the Company's Annual Report on Form
10-K for the year ended May 31, 1998 and to the subheading "Financial
Market Risks" under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 28 of the
Company's Annual Report on Form 10-K for the year ended May 31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
There have been no material developments in the legal proceedings
reported in Item 3 in the Company's Annual Report on Form 10-K for the
year ended May 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
3.1 Second Restated Certificate of Incorporation of the Company as
amended (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No.
33-52775, which became effective March 22, 1994); Certificate of
Amendment of Certificate of Incorporation dated September 30,
1994 (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-8 Registration No.
333-09957, which became effective August 12, 1996).
3.2 By Laws of the Company.
4.1 Rights Agreement (incorporated by reference from the Exhibits to
the Company's Registration Form 8-A filed August 10, 1988).
First Amendment to the Rights Agreement (incorporated by
reference from the Exhibits to the Amendment No. 1 to the
Company's Registration Statement on Form 8-A filed December 11,
1995). Second Amendment to the Rights Agreement dated as of
December 17, 1996 (incorporated by reference from the Exhibits
to the Company's Amendment No. 2 to the Registration Statement
on Form 8-A filed January 17, 1997).
4.2 Form of Common Stock Certificate (incorporated by reference from
the Exhibits to the Company's Registration Statement on Form S-3
Registration No. 33-48935, which became effective October 5,
1992).
4.3 Indenture dated as of September 15, 1995 (incorporated by
reference from the Exhibits to the Company's Registration
Statement on Form S-3 Registration No. 33-63649, which became
effective November 6, 1995).
4.4 Registration Rights Agreement dated as of September 21, 1995
(incorporated by reference from the Exhibits to the Company's
Registration Statement on Form S-3 Registration No. 33-63649,
which became effective November 6, 1995).
4.5 Form of Note (incorporated by reference from the Exhibits to the
Company's Registration Statement on Form S-3 Registration No.
33-63649, which became effective November 6, 1995).
4.6 Indenture dated as of May 28, 1996 between Cyrix Corporation
("Cyrix") and Bank of Montreal Trust Company as Trustee
(incorporated by reference from the Exhibits to Cyrix's
Registration Statement on Form S-3 Registration No. 333-10669,
which became effective August 22, 1996).
4.7 Registration Rights Agreements dated as of May 28, 1996 between
Cyrix and Goldman, Sachs & Co. (incorporated by reference from
the Exhibits to Cyrix's Registration Statement on Form S-3
Registration No. 333-10669, which became effective August 22,
1996).
10.1 Management Contract or Compensatory Plan or Agreement:
Agreement with Kevin C. McDonough, as amended July 23, 1998.
10.2 Management Contract or Compensatory Plan or Agreement: 1999
Executive Officer Incentive Plan Agreement.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed for the quarter ending August
30, 1998.
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL SEMICONDUCTOR CORPORATION
Date: October 2, 1998 /s/ Richard D. Crowley, Jr.
----------------------------------
Richard D. Crowley, Jr.
Vice President and Controller
Signing on behalf of the registrant
and as principal accounting officer
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
NATIONAL SEMICONDUCTOR CORPORATION
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices
at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business
of the corporation may require.
ARTICLE II.
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be
held at such place either within or without the State of Delaware as may
be designated by the board of directors.
Section 2. Annual Meeting. An annual meeting of stockholders
shall be held on the fourth Friday in September of each year, at 10:30
A.M., or at such other date and time as shall be designated by the board
of directors. At the annual meeting the stockholders shall elect a
board of directors and transact such other business as may be properly
brought before the meeting.
Section 3. Special Meetings. Subject to the rights of the holders
of any series of stock having a preference over the Common Stock of the
corporation as to dividends or upon liquidation ("Preferred Stock") with
respect to such series of Preferred Stock, special meetings of the
stockholders may be called only by the chairman of the board or by the
board of directors pursuant to a resolution adopted by a majority of the
total number of directors which the corporation would have if there were
no vacancies (the "Whole Board").
Section 4. Notice of Meetings. The secretary or such other
officer of the corporation as is designated by the board of directors
shall serve personally or send through the mails or by telegraph a
written notice of annual or special meetings of stockholders, addressed
to each stockholder of record entitled to vote at his address as it
appears on the stock transfer books of the corporation, stating the time
and place of the meeting and the purpose or purposes for which the
meeting is called, not less than ten nor more than sixty days before the
date of the meeting. If mailed, notice shall be deemed to have been
given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records
of the corporation. Notice given by telegraph shall be deemed to have
been given upon delivery of the message to the telegraph company. Only
such business shall be conducted at a special meeting of stockholders as
shall have been brought before the meeting pursuant to the corporation's
notice of meeting. Any previously scheduled meeting of the stockholders
may be postponed, and (unless the Certificate of Incorporation otherwise
provides) any special meeting of the stockholders may be cancelled, by
resolution of the board of directors upon public notice given prior to
the date previously scheduled for such meeting of stockholders.
Section 5. Waiver of Notice. Notice of a meeting need not be
given to any stockholder who signs a waiver of notice, in person or by
proxy, whether before or after a meeting. The attendance of any
stockholder at a meeting, in person or by proxy, without protesting
either prior thereto or at its commencement the lack of notice of such
meeting, shall constitute a waiver of notice by him. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of
notice.
Section 6. Stockholder's List. The officer who has charge of the
stock transfer book of the corporation shall prepare and make, at least
ten days before every meeting of the stockholders at which directors are
to be elected, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to examination by any stockholder,
for any purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is
present.
Section 7. Quorum and Adjournment. Except as otherwise provided
by law or by the Certificate of Incorporation, the holders of a majority
of the outstanding shares of the corporation entitled to vote generally
in the election of directors (the "Voting Stock"), present in person or
represented by proxy, shall constitute a quorum at all meetings of
stockholders for the transaction of business, except that when specified
business is to be voted on by a class or series of stock voting as a
class, the holders of a majority of the shares of such class or series
shall constitute a quorum of such class or series for the transaction of
such business. The chairman of the meeting or a majority of the shares
so represented may adjourn the meeting from time to time, whether or not
there is such a quorum. The stockholders present at a duly called
meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified.
If the adjournment is for more than thirty days, or after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote.
Section 8. Proxies. At all meetings of stockholders, each
stockholder entitled to vote shall have one vote, to be exercised in
person or by proxy, for each share of capital stock having voting power,
held by such stockholder. All proxies shall be in writing, shall relate
only to a specific meeting (including continuations and adjournments of
the same), and shall be filed with the secretary at or before the time
of the meeting. Each proxy must be signed by the shareholder or his
attorney-in-fact. The person or persons named in a proxy for a specific
meeting may vote at any adjournment of the meeting for which the proxy
was given. If more than one person is named as proxy, a majority of
such persons so named present at the meeting, or if only one shall be
present, then that one, shall have and exercise all the powers conferred
upon all of the persons unless the proxy shall provide otherwise. A
proxy purporting to be executed by or on behalf of a stockholder shall
be deemed valid unless challenged prior to or at its exercise and the
burden of proving invalidity shall rest on the challenger.
Section 9. Notice of Stockholder Business and Nominations.
a. Annual Meetings of Stockholders.
(1) Nominations of persons for election to the board of
directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the corporation's notice of meeting, (b) by
or at the direction of the board of directors or (c) by any stockholder
of the corporation who was a stockholder of record at the time of giving
of notice provided for in this By-Law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
By-Law.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (c)
of paragraph (a)(1) of this By-Law, the stockholder must have given
timely notice thereof in writing to the secretary of the corporation and
such other business must otherwise be a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the
secretary at the principal executive offices of the corporation not
later than the close of business on the 60th day nor earlier than the
close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event
that the date of the annual meeting is more than 30 days before or more
than 60 days after such anniversary date, notice by the stockholder to
be timely must be so delivered not earlier than the close of business on
the 90th day prior to such annual meeting and not later than the close
of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date
of such meeting is first made by the corporation. In no event shall the
public announcement of an adjournment of an annual meeting commence a
new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as
a director all information relating to such person that is required to
be disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (b) as to any other business that
the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to the stock-
holder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of
such stockholder, as they appear on the corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this By-Law to the contrary, in the event that the
number of directors to be elected to the board of directors of the
corporation is increased and there is no public announcement by the
corporation naming all of the nominees for director or specifying the
size of the increased board of directors at least 70 days prior to the
first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-Law shall also be considered
timely, but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the secretary at the
principal executive offices of the corporation not later than the close
of business on the 10th day following the day on which such public
announcement is first made by the corporation.
b. Special Meetings of Stockholders. Only such business
shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the corporation's notice of
meeting. Nominations of persons for election to the board of directors
may be made at a special meeting of stockholders at which directors are
to be elected pursuant to the corporation's notice of meeting (a) by or
at the direction of the board of directors or (b) provided that the
board of directors has determined that directors shall be elected at
such meeting, by any stockholder of the corporation who is a stockholder
of record at the time of giving of notice provided for in this By-Law,
who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this By-Law. In the event the
corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such
stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by paragraph (a)(2) of
this By-Law shall be delivered to the secretary at the principal
executive offices of the corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of
a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
c. General.
(1) Only such persons who are nominated in accordance
with the procedures set forth in this By-Law shall be eligible to serve
as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this By-Law. Except as otherwise
provided by law, the Certificate of Incorporation or these By-Laws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this By-Law and, if any proposed nomination or
business is not in compliance with this By-Law, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this By-Law, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this By-
Law, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this By-Law. Nothing in this By-Law shall
be deemed to affect any rights (i) of stockholders to request inclusion
of proposals in the corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act or (ii) of the holders of any series of
Preferred Stock to elect directors under specified circumstances.
Section 10. Voting. When a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the capital stock
having voting power present in person or represented by proxy and
entitled to vote on the matter shall decide any question brought before
such meeting, except (i) in respect of elections of directors which
shall be decided, subject to the rights of the holders of any series of
Preferred Stock, by a plurality of the votes cast, and (ii) when the
question is one which by express provision of statute or Certificate of
Incorporation a different vote is required, in which case such express
provision shall govern and control the decision of such question. No
vote need be taken by ballot unless required by statute.
Section 11. Inspectors of Elections; Opening and Closing the
Polls. The board of directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who
serve the corporation in other capacities, including, without
limitation, as officers, employees, agents or representatives, to act at
the meetings of stockholders and make a written report thereof. One or
more persons may be designated as alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or
her ability. The inspectors shall have the duties prescribed by law.
The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting.
Section 12. Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten (10) days after the
date upon which the resolution fixing the record date is adopted by the
board of directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent
shall, by written notice to the secretary, request the board of
directors to fix a record date. The board of directors shall promptly,
but in all events within ten (10) days after the date on which such a
request is received, adopt a resolution fixing the record date (unless a
record date has previously been fixed by the board of directors pursuant
to the first sentence of this Section). If no record date has been fixed
by the board of directors pursuant to the first sentence of this Section
or otherwise within ten (10) days of the date on which such a request is
received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the board of directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in Delaware, its principal place of
business, or to any officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are
recorded. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the board
of directors and prior action by the board of directors is required by
applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the board of directors adopts the
resolution taking such prior action.
Section 13. Inspectors of Written Consent. In the event of the
delivery, in the manner provided by Section 12 of this Article to the
corporation of the requisite written consent or consents to take
corporate action and/or any related revocation or revocations, the
corporation shall engage independent inspectors of elections for the
purpose of promptly performing a ministerial review of the validity of
the consents and revocations. For the purpose of permitting the
inspectors to perform such review, no action by written consent without
a meeting shall be effective until such date as the independent
inspectors certify to the corporation that the consents delivered to the
corporation in accordance with Section 12 of this Article represent at
least the minimum number of votes that would be necessary to take the
corporate action. Nothing contained in this Section shall in any way be
construed to suggest or imply that the board of directors or any
stockholder shall not be entitled to contest the validity of any consent
or revocation thereof, whether before or after such certification by the
independent inspectors, or to take any other action (including, without
limitation, the commencement, prosecution, or defense of any litigation
with respect thereto, and the seeking of injunctive relief in such
litigation).
Section 14. Effectiveness of Written Consent. Every written
consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of
the earliest dated written consent received in accordance with Section
12 of this Article, a written consent or consents signed by a sufficient
number of holders to take such action are delivered to the corporation
in the manner prescribed in Section 12 of this Article.
ARTICLE III.
THE BOARD OF DIRECTORS
Section 1. Composition. The board of directors shall consist of
six directors subject to such automatic increase as may be required by
the corporation's Restated Articles of Incorporation. The board may
enlarge or reduce the size of the board in a vote of the majority of the
directors in office. No director need be a stockholder.
Section 2. Election and Term. Except as provided in Section 3 of
this Article, the directors shall be elected by a plurality vote at the
annual meeting of the stockholders. Each director shall hold office
until his successor is elected and qualified or until his earlier
resignation or removal.
Section 3. Vacancies and Newly Created Directorships. Any vacancy
on the board of directors, or any newly created directorships, however
occurring, may be filled by a majority of the directors then in office,
though less than a quorum or by a sole remaining director. Any vacancy
in the board of directors may also be filled by a plurality vote of the
stockholders unless such vacancy shall have been previously filled by
the board of directors.
Section 4. Powers. The business of the corporation shall be
managed by its board of directors which shall have and may exercise all
such powers of the corporation, including the power to make, alter or
repeal the bylaws of the corporation, and do all such lawful acts and
things as are not by statute directed or required to be exercised or
done by the stockholders.
Section 5. Place of Meetings. The board of directors of the
corporation may hold meetings both regular and special, either within or
without the State of Delaware. Members of the board of directors or any
committee designated by the board, may participate in a meeting of such
board or committee by means of a conference telephone by means of which
all persons participating in the meeting can hear each other, and
participation shall constitute presence in person at such meeting.
Section 6. Regular Meetings. Regular meetings of the board of
directors may be held without call or notice immediately following the
annual meeting of the stockholders and at such time and at such place as
shall from time to time be selected by the board of directors, provided
that in respect of any director who is absent when such selection is
made, the notice, waiver and attendance provisions of Section 7 of this
Article shall apply to such regular meetings.
Section 7. Special Meetings and Notice. Special meetings of the
board of directors may be called by the chairman of the board of
directors, a majority of the directors or the president on notice given
to each director, either personally (including by telephone) or by hand
delivery, first-class mail, overnight mail, courier service, telegram or
facsimile transmission sent to his business or home address, stating the
place, date and hour of the meeting. If mailed by first-class mail,
such notice shall be deemed to have been adequately given when deposited
in the United States mail, postage prepaid, directed to the director at
his business or home address, at least five (5) days before such
meeting. Notice given by telegraph, overnight mail or courier service
shall be deemed adequately given upon delivery of the message to the
telegraph company or to the overnight mail or courier service company at
least two days before such meeting. Notice given by facsimile
transmission shall be deemed adequately given upon transmission of the
message at least twelve (12) hours before such meeting. Notice given by
hand delivery or personally shall be deemed adequately given when
delivered at least twelve (12) hours before such meeting. Notice of a
meeting need not be given to any director who signs a waiver of notice,
whether before or after the meeting. The attendance of any director at
a meeting, without protesting either prior thereto or at its
commencement the lack of notice of such meeting, shall constitute a
waiver of notice by him. Any notice or waiver of notice of a meeting of
the board of directors need not specify the purposes of the meeting.
Section 8. Quorum and Voting. At all meetings of the board of
directors a majority less one of the total number of directors then in
office shall constitute a quorum for the transaction of business, except
that in no case shall less than two directors be deemed to constitute a
quorum, and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the board
of directors, a majority of less than a quorum may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Action by Consent. Any action required or permitted to
be taken at any meeting of the board of directors may be taken without a
meeting, if all members of the board of directors, then in office,
consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board of directors.
Section 10. Resignation. Any director may resign at any time upon
written notice delivered to the corporation at its principal office.
The resignation shall take effect at the time specified therein, and if
no time be specified, at the time of its dispatch to the corporation.
Section 11. Removal. A director may be removed for cause by the
vote of a majority of the stockholders at a special or annual meeting
after the director has been given reasonable notice and opportunity to
be heard before the stockholders.
Section 12. Committees. The board of directors may, by resolution
passed by a majority of the whole board of directors, designate one or
more committees, each committee to consist of one or more of the
directors of the corporation, which committee, to the extent provided in
the resolution, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by
resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of
directors when required.
ARTICLE IV.
OFFICERS
Section 1. Designation. The officers of the corporation shall
consist of a president, a treasurer, a secretary, and such other
officers including a chairman of the board of directors, one or more
group presidents, vice presidents (including group executive vice
presidents, corporate vice presidents and senior vice presidents),
assistant treasurers and assistant secretaries, as the board of
directors or the stockholders may deem warranted. With the exception of
the chairman of the board of directors who must be a director, no
officer need be a director or a stockholder. Any number of offices may
be held by the same person.
Section 2. Election and Term. Except for officers to fill
vacancies and newly created offices provided for in Section 6 of this
Article, the officers shall be elected by the board of directors at the
first meeting of the board of directors after the annual meeting of the
stockholders. All officers shall hold office at the pleasure of the
board of directors.
Section 3. Duties of Officers. In addition to those duties that
may from time to time be delegated to them by the board of directors,
the officers of the corporation shall have the following duties:
(a) Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and of the board of
directors at which he is present, shall be ex-officio a member of all
committees formed by the board of directors and shall have such other
duties and powers as the board of directors may prescribe.
(b) President. The president shall be the chief executive
officer of the corporation, shall have general and active management of
the business of the corporation, shall see that all orders and
resolutions of the board of directors are carried into effect, and, in
the absence or nonelection of the chairman of the board of directors,
shall preside at all meetings of the stockholders and the board of
directors at which he is present if he is also a director. The
president also shall execute bonds, mortgages, and other contracts
requiring a seal under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be delegated
expressly by the board of directors to some other officer or agent of
the corporation and shall have such other powers and duties as the
board of directors may prescribe.
(c) Group President. The group president or group
presidents, if any, shall have general and active management of the
group for which they are designated as president by the board of
directors and shall have such other duties and powers as vice-presidents
or as the board of directors or the president may prescribe.
(d) Vice-President. The vice-president or vice-presidents,
if any, shall have such duties and powers as the board of directors or
the president may prescribe. In the absence of the president or in the
event of his inability or refusal to act, the group president or vice
president, if any, or if there be more than one, the group presidents or
vice-presidents, in the order designated by the board of directors, or,
in the absence of such designation, then in the order of their election,
shall perform the duties and exercise the powers of the president.
(e) Secretaries and Assistant Secretaries. The secretary
shall record the proceedings of all meetings of the stockholders and all
meetings of the board of directors in books to be kept for that purpose,
shall perform like duties for the standing committees when required, and
shall give, or cause to be given, call and/or notices of all meetings of
the stockholders and meetings of the board of directors in accordance
with these by-laws. The secretary also shall have custody of the
corporate seal of the corporation, affix the seal to any instrument
requiring it and attest thereto when authorized by the board of
directors or the president, and shall have such other duties and powers
as the board of directors may prescribe.
The assistant secretary, if any, or if there be more than one,
the assistant secretaries, in the order designated by the board of
directors, or, if there be no such designation, then in order of their
election, shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall have such other duties and powers as the
board of directors may prescribe.
In the absence of the secretary or an assistant secretary at a
meeting of the stockholders or the board of directors, an acting
secretary shall be chosen by the stockholders or directors, as the case
may be, to exercise the duties of the secretary at such meeting.
In the absence of the secretary or an assistant secretary or
in the event of the inability or refusal of the secretary or an
assistant secretary to give, or cause to be given, any call and/or
notice required by law or these by-laws, any such call and/or notice may
be given by any person so directed by the board of directors, the
president or stockholders, upon whose requisition the meeting is called
in accordance with these by-laws.
(f) Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities, shall keep full
and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors. The
treasurer shall also disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, shall render to the board of directors, when the board of
directors so requires, an account of all his transactions as treasurer
and of the financial condition of the corporation, and shall have such
other duties and powers as the board of directors may prescribe. If
required by the board of directors, the treasurer shall give the
corporation a bond, which shall be renewed every six years, in such sum
and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
The assistant treasurer, if any, or if there be more than one,
the assistant treasurers in the order designated by the board of
directors, or, in the absence of such designation, then in the order of
their election, shall, in the absence of the treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall have such other duties and powers as
the board of directors may prescribe.
(g) Other Officers. Any other officer shall have such powers
and duties as the board of directors may prescribe.
Section 4. Resignation. Any officer may resign at any time upon
written notice delivered to the corporation at its principal office.
The resignation shall take effect at the time specified therein, and if
no time be specified, at the time of its dispatch to the corporation.
Section 5. Removal. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a
majority of the board of directors.
Section 6. Vacancies and Newly Created Offices. A vacancy in
office, however occurring, and newly created offices, shall be filled by
the board of directors.
ARTICLE V.
CAPITAL STOCK
Section 1. Stock Certificates. Each holder of stock in the
corporation shall be entitled to have a certificate signed in an
officer's official capacity or in the name of the corporation by the
chairman of the board of directors, or the president or a vice-president
and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation. Where a certificate is countersigned
(a) by a transfer agent other than the corporation or its employee, or,
(b) by a registrar other than the corporation or its employee, any other
signature on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 2. Lost, Stolen or Destroyed Certificates. The board of
directors, or at their direction any officer of the company, may direct
a new certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the board of directors, or at their
direction any officer of the company, may, in its (his) discretion and
as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 3. Transfer. Upon surrender to the secretary or the
transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and upon compliance with any provisions
respecting restrictions on transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 4. Issue of Stock. From time to time, the board of
directors may, by vote of a majority of the directors, issue any of the
authorized capital stock of the corporation for cash, property, services
rendered or expenses, or as a stock dividend and on any terms permitted
by law.
Section 5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting or entitled to
receive payment of any dividend or other distribution or allotment of
any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
Section 6. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VI.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation may be declared by the board of directors in any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of capital stock. Before payment of any
dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
Section 2. Checks. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the corporation shall
be fixed by a resolution of the board of directors.
Section 4. Seal. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VII.
AMENDMENTS
Section 1. Amendments. These by-laws may be amended at any proper
meeting of the stockholders or of the board of directors.
ARTICLE VIII.
INDEMNIFICATION
Section 1. Non-Derivative Proceedings. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contenders or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings,
had reasonable cause to believe that his conduct was unlawful.
Section 2. Derivative Proceedings. The corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. Amount of Indemnification. To the extent that a
director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 or 2, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Determination to Indemnify. Any indemnification under
Sections 1 or 2 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in written opinion, or (3) by the
stockholders.
Section 5. Advance Payment. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of a director,
officer, employee or agent to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the
corporation as authorized in this section or otherwise pursuant to the
law of Delaware.
Section 6. Non-Exclusiveness of By-Law. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any statute, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while
holding such office.
Section 7. Continuation of Indemnification. The indemnification
and advancement of expenses provided by, or granted pursuant to this
Article VIII, or permitted by statute or otherwise, shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such
a person.
Section 8. Indemnification Insurance. The corporation shall have
power to purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this section.
Exhibit 10.1
July 23, 1998
Mr. Kevin McDonough
Senior Vice President, Engineering
Cyrix Corporation
P.O. Box 853920
Richardson, Texas 75085-3920
Re: Employment with National Semiconductor Corporation
--------------------------------------------------
Dear Mr. McDonough:
National Semiconductor Corporation ("National") has determined that
because of your substantial management expertise and experience and
because of your knowledge of significant proprietary and confidential
business and technical information relating to the business of Cyrix
Corporation ("Cyrix") it is in the best interests of National and its
stockholders to secure the benefit of your continued employment
following the consummation of the merger between National and Cyrix (the
"Merger"). National desires to obtain your employment based upon the
following employment package which we hope you will accept by signing
this letter.
1. Compensation and Continued Employment. For the period
commencing on the effective closing date of the Merger (the "Closing")
under the Agreement and Plan of Merger by and among National,
Acquisition Corp. and Cyrix, dated July 28, 1997, through the end of the
24th month following the Closing (the "Term"), National agrees to employ
you at a base salary at least equal to the base salary paid to you by
Cyrix immediately preceding July 25, 1997. During the Term, you shall
perform such duties and responsibilities of an executive nature as may
be determined from time to time by National's Chief Executive Officer or
his designee. You will be entitled to participate in all National
benefit plans and programs generally available for similarly situated
employees, subject to the terms and conditions of such plans and
programs.
If you remain employed by National for a period of 12 months
following the Closing, in consideration for your activities and services
supporting the integration of Cyrix and National, you will be paid a
retention bonus equal to 200% of your annual base salary and bonus at
the end of said 12 month period. If you remain employed by National
through the end of the Term, you will then be paid an additional bonus
equal to 200% of your annual base salary and bonus at that time. All
payments under this letter agreement shall be subject to all applicable
federal, state and local income and other tax withholding requirements.
At the end of the Term, your continued employment with National
shall be on an at-will basis.
2. Severance. In the event you voluntarily terminate your
employment, or your employment is terminated as a result of cause,
disability or upon your death, you will receive your base salary through
your date of termination and all other benefits to which you are
entitled pursuant to the plans and programs in which you participate.
If your employment is terminated by National prior to the end of the
Term (other than for cause or disability), in addition to the amounts
described in the preceding sentence National will pay you a lump sum
severance amount equal to 400% of your annual base salary and target
bonus for such year of termination, less the present value of any other
severance amounts to which you are entitled. Such payments will be made
in two parts, half to be paid at termination and half 12 months
thereafter. In addition, National will provide you and your spouse and
dependents with continued medical coverage (subject to your continued
payment of the employee premium) until the first to occur of (i) the end
of the original Term, or (ii) your employment by an entity providing
health coverage.
3. Cause and Disability. "Cause shall mean: (i) conduct on your
part which is dishonest, fraudulent or criminal and is injurious to
Cyrix or National (including without limitation the commission of a
felony offense), (ii) your willful and material breach of Section 4 of
this letter agreement or any other confidentiality or proprietary
information agreement between you and Cyrix or National or (iii) your
willful and continued failure to perform your duties of employment,
after notice has been provided to you. "Disability" shall mean your
inability to perform your duties as a result of physical or mental
illness for a continuous period of (3) months or an aggregate of (6)
months during a 12 month period.
4. Proprietary Information and Inventions. You agree to hold in a
fiduciary capacity, maintain in confidence and use only for the benefit
of Cyrix or National all proprietary information and trade secrets of
Cyrix or National. You further agree that all inventions and
intellectual property developed from or in any way associated with your
employment with Cyrix have been properly assigned to Cyrix and you will
take appropriate steps to assure perfection of the ownership of Cyrix
and National of such property upon and after the Closing. You also
agree to execute as may be required from time to time agreements of
Cyrix and National to assign all inventions and intellectual property
developed from or in any way associated with your employment with Cyrix
and National and to protect proprietary information and intellectual
property of Cyrix and National. You agree that during your employment
with National or Cyrix, and for twelve (12) months thereafter, you will
not yourself compete with, nor will you serve as an employee, officer,
director or consultant, or in any other similar capacity, on behalf of
any person, firm, corporation, association or other entity that competes
with, the microprocessor business of National or Cyrix as then conducted
or as then proposed to be conducted. You further agree that during, and
for twelve (12) months following the termination of, your employment
with National or Cyrix you will not, directly or indirectly, solicit,
recruit, or hire, or assist any person, firm, corporation, association
or other entity in the solicitation, recruitment or hiring of, any
person then engaged by National or Cyrix as an employee, officer,
director or consultant, or so engaged by National or Cyrix within the
then prior six (6) months, nor will you interfere in any business
relationship of National or Cyrix.
5. Specific Performance. You agree that any remedy at law for a
breach of the covenants in Section 4 above will not be adequate and that
Cyrix or National may apply for and have injunctive relief in any court
of competent jurisdiction to restrain the breach or threatened breach or
otherwise to enforce specifically any of the covenants of such Section.
You consent to jurisdiction and venue in the federal and state courts
located in Northern California for the purpose of enforcing the terms of
this letter agreement.
6. Assignment. Your rights under this letter agreement are not
assignable or transferable.
7. Entire Agreement. This letter agreement sets forth the entire
agreement between you and National and may not be modified, amended or
changed except by written instrument signed by duly authorized
representatives of all parties. This letter agreement replaces all
prior offers and agreements between you and Cyrix (as to the matters
covered herein), which are hereby terminated.
8. Governing Law. The rights and obligations of the parties and
all interpretations and performances of this letter agreement shall be
governed in all respects by the laws of the State of California.
9. Exclusive Remedy. The payments to you contemplated by this
letter agreement shall constitute your exclusive and sole remedy for any
termination of your employment by National during the Term, and you
covenant not to assert or pursue any remedies, other than an action to
enforce this letter agreement, at law or in equity, with respect to any
such termination of employment.
10. Severability of Provisions. If any covenant set forth in this
agreement is determined by any court to be unenforceable by reason of
its extending for too great a period of time or over too great a
geographic area, or by reason of its being too extensive in any other
respect, such covenant shall be interpreted to extend only for the
longest period of time and over the greatest geographic area, and to
otherwise have the broadest application as shall be enforceable. The
invalidity or unenforceability of any particular provision of this
letter agreement shall not affect the other provisions hereof, which
shall continue in full force and effect. Without limiting the
foregoing, the covenants contained herein shall be construed as separate
covenants, covering their respective subject matters, with respect to
each of the separate cities, counties and states of the United States,
and each other country, and political subdivision thereof, in which
Cyrix or National transact any business.
Please indicate your agreement with the foregoing by executing this
letter agreement and the enclosed copy hereof in the space indicated
below. If you have any questions or concerns, please feel free to
direct those to National and, of course, if you feel it appropriate,
please consult with legal counsel regarding this letter agreement.
Please note terms of this letter agreement are confidential.
Agreed to and Accepted: Sincerely,
NATIONAL SEMICONDUCTOR
By: //S// KEVIN McDONOUGH CORPORATION
---------------------
KEVIN McDONOUGH
By: //s// RICHARD A. WILSON
Date: 7/29/98 -----------------------
--------------------
Name: RICHARD A. WILSON
----------------------
Title: Vice President,
---------------------
Human Resources
---------------------
Exhibit 10.2
NATIONAL SEMICONDUCTOR CORPORATION
1999 EXECUTIVE OFFICER INCENTIVE PLAN AGREEMENT
ARTICLE 1
Definitions
-----------
Whenever used in the Agreement, unless otherwise indicated, the
following terms shall have the respective meanings set forth below:
Agreement: This Executive Officer Incentive Plan Agreement.
- ---------
Award: The amount to be paid to a Plan Participant.
- -----
Award Date: The date set by the Committee for payment of Awards,
- ---------- usually approximately forty days after the Company
makes public its consolidated financial statements
for the fiscal year.
Base Salary: Generally, the annualized base remuneration received
- ----------- by a Participant from the Company at the end of the
fiscal year. Base Salary includes salary
continuation and sick leave paid by the Company.
Extraordinary items, including but not limited to
prior awards, relocation expenses, international
assignment allowances and tax adjustments, sales
incentives, amounts recognized as income from stock
or stock options, disability benefits (whether paid
by the Company or a third party) and other similar
kinds of extra or additional remuneration are
excluded from the computation of Base Salary.
Company: National Semiconductor Corporation ("NSC"), a ---
- ------- Delaware corporation, and any other corporation in
which NSC controls directly or indirectly fifty
percent (50%) or more of the combined voting power
of voting securities, and which has adopted this
Plan.
Committee: A committee comprised of directors of National who
- --------- are not employees of the Company, as more fully
defined in the Executive Officer Incentive Plan.
Disability: Inability to perform any services for the Company
- ---------- and eligible to receive disability benefits under
the standards used by the Company's disability
benefit plan or any successor plan thereto.
Executive Officer: An officer of the Company who is subject to the
- ----------------- reporting and liability provisions of Section 16 of
the Securities and Exchange Act of 1934.
Incentive Levels: Percentage of Base Salary assigned to a Participant
- ---------------- as a Target Award.
Participant: An Executive Officer designated as a Participant
- ----------- in accordance with the provisions of Article 3.
Performance Goal: Factors considered and scored to determine the
- ---------------- amount of a Participant's Award, which shall be
based on one or more of the business criteria listed
in Section 5(b) of the Plan. Performance Goals will
have four levels of performance as follows:
(i) Threshold -- The minimum acceptable level of
performance for which an Award may be earned on a
particular Performance Goal.
(ii) Target -- Good performance, as established by
the Committee, reflecting a degree of difficulty
which has a reasonable probability of achievement.
(iii) Stretch -- Better than Target performance and
reflecting a degree of difficulty with only a
moderate probability of achievement.
(iv) Best Expected -- Exceptional performance far
exceeding the Target level because of the great
degree of difficulty and the limited probability of
achievement.
Retirement: Permanent termination of employment with the
- ---------- Company, and (a) the Participant's age is either
sixty-five (65) or age is at least fifty-five (55)
and age plus years of service in the employ of the
Company is sixty-five (65) or more, and (b) the
retiring Participant certifies to the Vice
President-Finance of the Company that he or she does
not intend to engage in a full-time vocation.
Target Award: The Award, expressed as a percentage of Base Salary
- ------------ at the assigned Incentive Level, that may be earned
by a Participant for achievement of the Target level
of performance.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings assigned to them in the Executive
Officer Incentive Plan.
ARTICLE 2
Effective Date
--------------
The Agreement will become effective as of May 31, 1998, to be
effective for the Company's fiscal year 1999.
ARTICLE 3
Eligibility for Plan Participation
----------------------------------
A. Within ninety (90) days after the commencement of the Company's
fiscal year, the Committee shall designate those Executive Officers who
shall be Plan Participants for the fiscal year and their respective
Incentive Levels.
B. Participants will be notified once the Committee has designated
Participants for the fiscal year. Continued participation will be re-
evaluated by the Committee annually pursuant to Article 3A supra at the
beginning of each fiscal year.
C. Newly hired Executive Officers and persons who are promoted to
Executive Officers may be added as Participants to the Plan by the
Committee during the fiscal year. Such Participants will receive a
prorated Award based on time of participation in the Plan.
D. Participants may be removed from the Plan during the fiscal year
at the discretion of the Committee. Participants so removed will
receive a prorated Award based on length of participation in the Plan.
ARTICLE 4
Target Awards
-------------
A. Each Participant will be assigned an Incentive Level with
associated Target Awards expressed as percentages of the Participant's
Base Salary.
B. In the event that a Participant changes positions during the Plan
Period and the change results in a change in Incentive Level, whether
due to promotion or demotion, the Incentive Level will be prorated to
reflect the time spent in each position.
ARTICLE 5
Plan Performance Goals
----------------------
A. Performance Goals, associated weights and levels of performance
will be established by the Committee within ninety (90) days after the
start of the fiscal year. Each Performance Goal will have defined
Threshold, Target, Stretch and Best Expected levels of performance.
Performance Goals and their associated weights may change from one
fiscal year to another fiscal year to reflect the Company's operational
and strategic goals, but must be based on one or more of the business
criteria listed in Section 5(b) of the Plan.
B. Actual Award amounts may range between 0% and 200% of Target. A
scale showing the amount of the Participant's Award relative to the
Target Award at the various performance levels will be developed for
each Performance Goal. Performance levels and associated Awards (as a
percent of the Target Award) will be set generally from Threshold to
Best Expected for the Performance Goals, with Awards ranging from 50% of
the Target Award at the Threshold level to 200% of the Target Award at
the Best Expected level. Each Performance Goal will be scored at end of
the fiscal year with a rating from 0% to 200%. The sum of the scoring
on the Performance Goals will determine the total performance level for
the year, which shall be subject to calculation as provided in
Attachment A.
ARTICLE 6
Calculation and Payment of Awards
---------------------------------
A. The Committee shall set a limit on the maximum amount available
for Awards for the fiscal year. Subject to this maximum amount, a
Participant's Award will be calculated as a percentage of Base Salary as
follows:
1) The Participant's Target Award is determined prior to the
beginning of the fiscal year.
2) The performance of each Participant is scored at the end
of the fiscal year.
3) The overall performance of the Participants creates an
incentive pool.
4) The Participants' incentive pool may then be divided by
the Committee among some or all Participants, based on
individual performance scores. No one individual Award
may exceed 200% of the Participant's Target Award amount.
5) Total Awards may not exceed the maximum limit set for
Awards for the fiscal year. As a result, some or all
Award amounts may be adjusted in order not to exceed the
maximum limit.
B. The Committee will score the performance of the Plan
Participants. Awards will be paid only after the Committee certifies in
writing that the ratings on the Performance Goals have been attained.
C. Awards will be paid in cash on or about the Award Date.
D. Awards will reflect the Participant's Base Salary in effect at
the end of the fiscal year. Participants who take an unpaid leave of
absence during the fiscal year for good cause shown to the satisfaction
of the Committee will have their Awards prorated to reflect actual pay
earned during the fiscal year.
E. Any Awards that are prorated for any reason under the terms of
the Plan or this Agreement will be prorated based on the effective date
of the change that resulted in the proration.
ARTICLE 7
Termination of Employment
-------------------------
A. To be eligible to receive an Award, the Participant must be
employed by the Company on the last day of the fiscal year. A
Participant whose employment has terminated prior to that date will
forfeit the Award, except as otherwise provided in this Article 7.
B. If a Participant's employment is terminated during the fiscal
year by Disability, Retirement, or death, the Participant will receive
an Award reflecting the Participant's performance and actual period of
full-time employment during the fiscal year.
C. Unless local law or regulation provides otherwise, payments of
Awards made upon termination of employment by death shall be made on the
Award Date to: (a) beneficiaries designated by the Participant; if
none, then (b) to a legal representative of the Participant; if none,
then (c) to the persons entitled thereto as determined by a court of
competent jurisdiction.
D. Participants whose employment is terminated by reduction in force
during the fiscal year will receive no Award. If a Participant's
employment is terminated by reduction in force after the fiscal year but
before the Award Date, the Participant will receive the Award on the
Award Date.
E. The Committee reserves the right to reduce an Award to reflect a
Participant's absence from work during a fiscal year. A Participant
absent on the Award Date will not receive an Award until he or she
returns from the absence and satisfies the Committee the absence was for
good cause shown.
F. The right of a Participant to receive an Award, including Awards
deferred pursuant to the provisions of Article 8, shall be forfeited if
the Participant's employment is terminated for good cause shown such as
acts of moral turpitude, a reckless disregard of the rights of other
employees or because of or the Participant is discovered to have engaged
in fraud, embezzlement, dishonesty against the Company, obtaining funds
or property under false pretenses, assisting a competitor without
permission, or interfering with the relationship of the Company with a
customer. A Participant's Award will be forfeited for any of the above
reasons regardless of whether such act is discovered prior to or
subsequent to the Participant's termination of employment or payment of
an Award. If an Award has been paid, such payment shall be repaid to
the Company by the Participant.
ARTICLE 8
Deferral of Awards
------------------
A. If permitted by local law and regulations, a Participant is
entitled to make an irrevocable election to defer receipt of all or any
portion of any Award. For any fiscal year, the Notice of Election must
be completed prior to thirty (30) days before the end of the fiscal
year. Notices of Election are not self-renewing and must be completed
for each fiscal year if deferral is desired for the applicable fiscal
year.
B. For each Participant who elects deferral, the Company will
establish and maintain book entry accounts which will reflect the
deferred Award and any interest credited to the account.
C. For deferred Awards, Participant deferred accounts will be
credited each Award Date with interest set at the rate for long-term A-
rated corporate bonds, as reported by the investment banking firm of
Salomon Brothers Inc of New York City (or such other investment banking
firm as the Committee may specify) during the first week of each
calendar year. The interest rate will be reset at the beginning of each
calendar year. Interest will begin to accrue on the Award Date and will
be credited each Award Date until the date payment is actually made. If
a Participant's Award is distributed at any time other than on an Award
Date, the Participant's account will be credited with interest until the
date of distribution.
D. Participants will not receive deferred Awards until the earlier
of termination of employment for any reason (including Retirement,
Disability, or death) or a date pre-selected by the Participant. The
account balance will be paid in a lump sum in the month following the
earlier of termination of employment for any reason or the pre-selected
date unless installment payments are permitted and have been elected as
follows: Upon termination of employment by reason of Retirement or
Disability, a Participant who has previously elected to defer an Award may
irrevocably elect to have the balance of the deferred Award plus
accrued interest paid to the Participant in periodic, annual
installments over a period of ten (10) years. Payments shall commence
or be made annually on a day that is within thirty (30) days of the
anniversary date following the Participant's Retirement or Disability.
E. Subject to Section 7.F., if the Participant's employment is
terminated for any reason other than death, Disability or Retirement,
the Participant will be paid the entire account balance in a lump sum in
the month after termination, less any sums due the Company. If a
Participant has requested installment payments and dies either before or
after distribution has begun, the unpaid balance will be paid in a lump
sum in the month following the Participant's death, less any sums due
the Company.
F. Payment of part or all of the deferred Award may be accelerated
in the case of severe hardship for good cause shown to the satisfaction
of the Committee, which shall mean an emergency or unexpected situation
including, but not limited to, illness or accident involving the
Participant or any of the Participant's dependents. All payments in
case of hardship must be specifically approved by the Committee.
G. No Participant may assign, pledge or borrow against his or her
account except as provided in this Agreement.
H. If permitted by local law and regulations, the Participant may
designate a beneficiary to receive deferred Awards in the event of the
Participant's death. The Participant's beneficiary may be changed
without the consent of any prior beneficiary except as follows: In
those jurisdictions where spouses are granted rights by law in a
Participant's earnings, if the Participant is married at the time of
designation, the Participant's spouse must consent to the beneficiary
designation and any change in beneficiary. If no beneficiary is chosen
or the beneficiary does not survive the Participant, the Award account
balance will be paid in accordance with the terms of Article 7C or as
otherwise required by local law or regulation.
ARTICLE 9
Interpretations and Rule-Making
-------------------------------
The Committee shall have the sole right and power to: (i)
interpret the provisions of the Agreement, and resolve questions
thereunder, which interpretations and resolutions shall be final and
conclusive; (ii) adopt such rules and regulations with regard to the
administration of the Plan as are consistent with the terms of the Plan
and the Agreement, and (iii) generally take all action to equitably
administer the operation of the Plan and this Agreement.
ARTICLE 10
Declaration of Incentives, Amendment, or Discontinuance
-------------------------------------------------------
The Committee may on or before the Award Date: (i) determine not to
make any Awards to any or all Participants for any Plan Period; (ii)
make any modification or amendment to this Agreement for any or all
Participants provided such modification or amendment is in accordance
with the terms of the Plan; or (iii) discontinue this Agreement for any
or all Participants provided such modification or amendment is otherwise
in accordance with the Plan.
ARTICLE 11
Miscellaneous
-------------
A. Except as provided in Article 8 H, no right or interest in the
Plan is transferable or assignable except by will or the laws of descent
and distribution.
B. Participation in this Plan does not guarantee any right to
continued employment and the Committee and management reserve the right
to dismiss Participants for any reason whatsoever. Participation in one
fiscal year does not guarantee a Participant the right to participation
in any subsequent fiscal year.
C. The Company reserves the right to deduct from all Awards under
this Plan any sums due the Company as well as any taxes or other amounts
required by law to be withheld with respect to Award payments.
D. Awards that are deferred under Article 8 constitute an unfunded
Plan of deferred compensation. As such, any amounts payable thereunder
will be paid out of the general corporate assets of the Company and
shall not be transferred into a trust or otherwise set aside. All
accounts under the Plan will be for bookkeeping purposes only and shall
not represent a claim against specific assets of the Company. The
Participant will be considered a general creditor of the Company and the
obligation of the Company is purely contractual and shall not be funded
or secured in any way.
E. Maintenance of financial information relevant to measuring
performance during the fiscal year will be the responsibility of the
Chief Financial Officer of the Company.
F. The provisions of the Plan shall not limit, or restrict, the
right or power of the Committee to continue to adopt such other plans or
programs, or to make salary, bonus, incentive, or other payments, with
respect to compensation of Executive Officers, as in its sole judgment
it may deem proper.
G. Except to the extent superseded by federal law, this Agreement
shall be construed in accordance with the laws of the State of
California.
H. No member of the Company's board of directors or any officer,
employee, or agent of the Company shall have any liability to any
person, firm or corporation based on or arising out of this Agreement or
the Plan.
I. Any dispute relating to or arising from this Agreement shall be
determined by binding arbitration by a three member panel chosen under
the auspices of the American Arbitration Association and acting pursuant
to its Commercial Rules, sitting in San Jose, California. The panel may
assess all fees, costs and other expenses, including reasonable counsel
fees, as the panel sees fit. Notwithstanding the parties' election to
use arbitration to resolve disputes under this Agreement, nothing
contained in that election shall preclude either party, if the
circumstances warrant, from seeking extraordinary relief, such as
injunction and attachment, from any court of competent jurisdiction in
California.
ATTACHMENT A
Incentive |
Award as |
% of |
Target 200%---| |-------.
Award Max | | .
| | .
| | .
150%---| |-------.
| | .
| | .
| | .
100%---| |-------.
| | .
| | .
| | .
50%---|--------.
| .
| .
| .
|._______|________|________|________|________
50% 100% 150% 200%
Threshold Target Superior Best
Expected
Chart illustrates the manner in which awards are to be calculated
under the Executive Officer Incentive Plan. Achievement of performance
against goals between the Threshold Level and fifty percent of Target
Level results in an Incentive Award of 50% of Target, with the Committee
having discretion to adjust downward when it deems appropriate.
Similarly, performance levels against goals of between 50% and 100%
result in an Incentive Award of 100% of Target, while performance
against goals of between 100% and 150% result in an Incentive Award of
150% of Target (in each case, subject to downward - but not upward -
adjustment by the Committee). Finally, performance against goals of more
than 150% will result in the maximum incentive award of 200% of Target
award, subject to downward adjustment.
In summary, while the Plan formula sets the incentive awards upon
achievement of each level of performance, the shaded areas of the chart
reflect the areas of discretion on award payment that is vested with the
Committee.
DEFERRAL ELECTION
NATIONAL SEMICONDUCTOR CORPORATION
EXECUTIVE OFFICER INCENTIVE PLAN
Notice of Election
If you are a Participant in either the Company's Executive Officer
Incentive Plan ("EOIP") and receive an Award for fiscal year 1999, you
may accept payment in calendar year 1999 or you may defer payment until
a later date which is at least one year after the Award Date. If you
want to defer payment, complete this election form and return it to
George Macko, Santa Clara Mailstop 10-465, by April 24, 1999).
If you do not complete this form, you will receive payment in
calendar year 1999. For further details, refer to the National
Semiconductor Corporation EOIP documents.
* * * * *
DEFERRAL ELECTION:
In accordance with the National Semiconductor Corporation EOIP, I
hereby elect to defer all or part of the Award as specified below, which
Award would otherwise be paid to me under the terms of the EOIP at the
time Awards are otherwise paid to participants.
1. I elect to defer part or all of my EOIP Award, as follows:
(Choose one)
A. $ ________________
B. % ________________
I understand that if I have selected option A and the amount
selected exceeds the total of the Award amount, 100% of my Award amount
will be deferred.
2. I elect to have the amounts deferred to be payable on:
(Choose one):
A. Termination of employment for any reason (including
retirement, disability or death)
B. Preselected date at least one year after the Award Date
The preselected date is _____________
3. I have completed the attached Designation of Beneficiary
Form.
I UNDERSTAND THIS ELECTION IS IRREVOCABLE FOR THE 1999 EOIP AWARD AND IS
SUBJECT TO THE TERMS OF THE NATIONAL SEMICONDUCTOR APPLICABLE EOIP
DOCUMENT AND EOIP AGREEMENT.
Signature: ___________________________
Print Name: __________________________
Date: ________________________________
Badge Number: ________________________
Department Name & Number: ____________
______________________________________
Received by National Semiconductor Corporation
Date: ________________________________
By: __________________________________
Print Name: __________________________
Title: ________________________________
NOTE: Deferrals requested by participants who are not U.S. citizens
or residents may be limited by local law or regulation.
Designation of Beneficiary Form
Participant:_________________________________________________
If my death occurs before all amounts deferred pursuant to my EOIP
deferral election and any earnings credited thereto have been
distributed to me, I hereby designate the following person(s) as my
primary and, if desired, secondary beneficiary(ies) to receive such
amounts, in the percentages indicated. If no percentages are indicated,
the balance of amounts due me are to be distributed in equal portions to
each beneficiary.
Primary Beneficiary(ies)
_______________% ______________________________
Name
______________________________
Address
______________________________
Social Security Number
_______________% ______________________________
Name
______________________________
Address
______________________________
Social Security Number
Secondary Beneficiary(ies)
(To receive benefits only in the event of death of
all of the Primary Beneficiaries)
_______________% ______________________________
Name
______________________________
Address
______________________________
Social Security Number
_______________% ______________________________
Name
______________________________
Address
______________________________
Social Security Number
Date:_______________
________________________________________________
(Signature of Participant)
Instruction: Return this signed form to George Macko at NSSC M/S 10-465
with the rest of your deferral paperwork.
________________________________________________
Signature of Spouse (required for married
participants designating primary beneficiaries other than spouse).
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