<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No..............)
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary Proxy Statement
- ---
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
- ---
X Definitive Proxy Statement
- ---
Definitive Additional Materials
- ---
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- ---
Maxim Integrated Products, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check appropriate Box):
$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item
X 22(a)(2) of Schedule 14A.
- ---
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
- ---
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
O-11
- ---
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------
X Fee paid previously with preliminary material.
- ---
- --- Check box if any part of the fee is offset as provided by Exchange
Act Rule O-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
-----------------------------------------
2) From Schedule or Registration Statement No.,
--------------------
3) Filing Party:
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4) Date Filed:
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<PAGE> 2
[LOGO]
September 22, 1995
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Maxim
to be held at 11:00 a.m. on Thursday, November 16, 1995 at the Company's
offices at 120 San Gabriel Drive, Sunnyvale, California. At this meeting you
are being asked to vote on several matters recommended by the Board of
Directors. I join the Board in their recommendations. In addition, I want to
emphasize the importance of Proposal 3 -- our stock option proposal -- to our
past and future success.
As you know, the market for first rate people in the analog segment is
very competitive. The strength in the high technology sector of the economy
and, in particular, the semiconductor industry, continues to make the task of
recruiting, retaining and motivating talented employees very challenging. Our
ability to attract and retain these people is largely dependent upon our
ability to offer them the opportunity, through their dedication and creativity,
to participate in increases in stockholder values.
Our current stock option program is broad-based, with 93% of our
salaried employees participating in the plan. At June 30, 1995, over 7.8
million shares of previously granted options were not yet vested and will vest
over the next six years. New options in the program will be granted to new and
existing employees with vesting also stretching out over several years. Today
these options create strong incentives for our employees to increase the value
of your investment.
We believe those incentives have paid off for Maxim in the past by
contributing significantly to the success of our company and therefore to the
increases in value our stockholders have realized over the years. In 1995
alone, our revenues increased 63% and we generated over $86 million in cash
from operations. From our IPO in early 1988 until the end of fiscal 1995, our
stock price has increased an average of 48.5% per year and our stock market
value in fiscal 1995 alone increased 105% to over $1.7 billion.
In addition to aligning the interests of our employees with those of
the stockholders, the Company receives significant cash benefits from our stock
option programs, including $9.8 million of exercise proceeds in fiscal 1995 and
$11.5 million of additional cash as a result of the allowed tax deductions
generated by the program.
To manage dilution from the program, these proceeds were used in
fiscal 1995 to repurchase $11.9 million of the Company's common stock. We plan
to continue to use these proceeds to repurchase common stock. In fact, since
the beginning of fiscal 1996, we have repurchased an additional $10 million of
the Company's common stock.
<PAGE> 3
In addition, the proposed new grants will only be dilutive to our
earnings if our stock price increases. For example, in 1995 while our stock
market value increased 105%, our option program net of repurchases resulted in
less than a 5% increase in common and common equivalent shares outstanding.
This dilution is insignificant when compared to the $869 million increase in
stockholder value. The interests of our employees are clearly aligned with
those of the stockholders.
Lastly, we understand the importance of these programs and the need to
maintain the intent of the program. Our plan has specific provisions to ensure
the interests of our stockholders are preserved.
I join the Board of Directors in urging you to vote Yes on continuing
our option programs that have been instrumental to our success. I hope you are
able to attend the annual meeting. If you are unable to attend, it is
important that your shares are represented and voted at the meeting.
Therefore, regardless of how many shares you own, please sign, date and
promptly mail the enclosed proxy in the prepaid envelope provided.
Sincerely,
/s/ John F. Gifford
- --------------------------------
John F. Gifford
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Thursday, November 16, 1995
11:00 A.M.
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of
Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), will
be held at the Company's offices, 120 San Gabriel Drive, Sunnyvale, California
94086 on Thursday, November 16, 1995 at 11:00 a.m., to consider and act upon
the following matters:
(1) To elect four (4) directors.
(2) To approve an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of
Common Stock from 60,000,000 shares to 120,000,000 shares.
(3) To approve the Company's Incentive Stock Option Plan, 1987
Supplemental Stock Option Plan and 1987 Employee Stock
Participation Plan, each as amended.
(4) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for fiscal 1996.
(5) To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on September 18,
1995 are entitled to notice of and to vote at this meeting and any adjournment
or postponement thereof.
By Order of the Board of Directors
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
Sunnyvale, California
September 22, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING, PLEASE MARK, DATE, AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE
NEED BE AFFIXED TO THE ENVELOPE IF MAILED IN THE UNITED STATES.
<PAGE> 5
MAXIM INTEGRATED PRODUCTS, INC.
120 San Gabriel Drive
Sunnyvale, California 94086
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 16, 1995
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Maxim Integrated Products, Inc., a
Delaware corporation ("Maxim" or the "Company"), for use at its Annual Meeting
of Stockholders to be held at 11:00 a.m., local time, on November 16, 1995 and
at any adjournment or postponement of that meeting. The approximate mailing
date for this proxy statement and the enclosed proxy is September 25, 1995.
The proxy holders will vote all proxies in accordance with the instructions
contained in the proxy, and if no choice is specified the proxy holders will
vote in favor of the proposals set forth in the Notice of Meeting. Proxies
will confer upon the proxy holders discretionary authority to vote upon matters
which the Board of Directors does not know as of the date hereof are to be
presented at the meeting and upon matters incident to the conduct of the
meeting.
The Board of Directors has fixed the close of business on September
18, 1995 as the record date for the determination of stockholders entitled to
vote at the Annual Meeting. At that time, there were outstanding 29,863,028
shares of Common Stock.
Any person signing a proxy in the form accompanying this proxy
statement has the power to revoke it prior to or at the meeting. A proxy may
be revoked by a writing delivered to the Secretary of the Company stating that
the proxy is revoked, by a subsequent proxy signed by the person who signed the
earlier proxy, or by attendance at the meeting and voting in person.
Holders of Common Stock are entitled to one vote for each share held.
In the election of directors, however, each stockholder has cumulative voting
rights and is entitled to as many votes as equal the number of shares held by
such stockholder multiplied by the number of directors to be elected (four),
which votes may be cast for a single candidate or distributed among any or all
of the candidates. In the event of cumulative voting, proxy holders may
distribute votes among the nominees in such manner as they deem advisable.
Discretionary authority to cumulate votes is solicited by the Board of
Directors.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted in determining whether a matter has been approved.
The Company will bear the cost of soliciting proxies. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Original solicitation of proxies by mail
may be supplemented by telephone, telegram or personal solicitation by
directors, officers or other regular employees of the Company or, at the
Company's request, a private proxy solicitation firm. No additional
compensation will be paid to directors, officers or other regular employees for
such services, but any private proxy solicitation firm will be paid their
customary fee by the Company, estimated to be $5,000.
1
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of June 30, 1995 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table; (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be
beneficial owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
----------------------------------
Beneficial Owner Shares % of Total
- ---------------- ----------- ---------------
<S> <C> <C>
FMR Corp. 3,727,600 (2) 12.7%
Putnam Investments, Inc. 3,101,914 (3) 10.5%
Nicholas Applegate Capital Management 1,905,700 (4) 6.5%
T. Rowe Price Associates, Inc. 1,781,000 (5) 6.0%
John F. Gifford 536,741 (6) 1.8%
Stephen R. Combs 234,515 (7) *
David J. Fullagar 123,196 (8) *
Tunc Doluca 106,077 (9) *
Robert F. Scheer 86,266 (10) *
Robert F. Graham 57,500 (10) *
Frederick G. Beck 46,000 (10) *
James R. Bergman 37,500 (11) *
William N. Levin 30,000 (10) *
Michael J. Byrd 30,000 (10) *
A.R. Frank Wazzan 25,600 (12) *
Kenneth J. Huening 19,813 (10) *
All executive officers and directors
as a group (15 persons) 1,619,543 (13) 5.3%
- -------------------------------
</TABLE>
* Less than one percent
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13G filed with the SEC. Unless
otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, each of the stockholders named
in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 29,436,579 shares outstanding on June 30, 1995, adjusted as required by
rules promulgated by the SEC.
(2) FMR Corp. holds dispositive power over all shares shown, and sole voting
power over 8,500 shares. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109. The table is based upon information
supplied in a Schedule 13G dated February 13, 1995.
(3) Certain Putnam Investments, Inc. managers (together with their parent
corporations, Putnam Investments, Inc. and Marsh & McLennan Companies,
Inc.) are considered beneficial owners of these shares which were acquired
for certain of their advisory clients. Putnam Investments, Inc. holds
shared dispositive power over all shares shown and shared voting power
over 503,430 shares. The address of Putnam Investments, Inc. is One Post
Office Square, Boston, MA 02109. The address of Marsh & McLennan
Companies, Inc. is 1166 Avenue of the Americas, New York, NY 10036. The
table is based upon information supplied in a Schedule 13G dated January
23, 1995.
2
<PAGE> 7
(4) Nicholas Applegate Capital Management holds dispositive power over all
shares shown, and sole voting power over 1,361,300 shares. The address of
Nicholas Applegate Capital Management is 600 West Broadway, 29th Floor,
San Diego, California 92101. The table is based upon information supplied
in a Schedule 13G dated February 14, 1995.
(5) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc. serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, T. Rowe Price Associates, Inc. is deemed to be a
beneficial owner of such securities; however T. Rowe Price Associates,
Inc. expressly disclaims that it is, in fact, the beneficial owner of such
securities. T. Rowe Price Associates, Inc. holds dispositive power over
all the shares shown, and sole voting power over 47,200 shares. The
address of T. Rowe Price Associates, Inc. is 100 East Pratt Street,
Baltimore, MD 21202. The table is based upon information supplied in a
Schedule 13G dated February 14, 1995.
(6) Includes 276,753 shares subject to option exercisable within 60 days of
June 30, 1995. Does not include shares held in trust for the benefit of
Mr. Gifford's children.
(7) Includes 184,191 shares subject to options exercisable within 60 days of
June 30, 1995.
(8) Includes 58,250 shares subject to options exercisable within 60 days of
June 30, 1995. Does not include shares held in trust for the benefit of
Mr. Fullagar's children.
(9) Includes 72,333 shares subject to options exercisable within 60 days of
June 30, 1995.
(10) Represents shares subject to options exercisable within 60 days of June
30, 1995.
(11) Includes 27,500 shares subject to options exercisable within 60 days of
June 30, 1995.
(12) Includes 2,500 shares subject to options exercisable within 60 days of
June 30, 1995.
(13) Includes 1,127,439 shares subject to options exercisable within 60 days of
June 30, 1995. Does not include shares held in trust for the benefit of
Mr. Gifford's and Mr. Fullagar's respective children.
There is no family relationship between any of the directors, or
between any of such directors and any of the Company's executive officers.
PROPOSAL 1 - ELECTION OF DIRECTORS
Action is to be taken at the Annual Meeting with respect to the
election of directors to fill the four board positions presently authorized.
Each director to be elected will hold office until his successor is elected and
qualified, or until his earlier death, resignation or removal. Stock
represented by the accompanying proxy will be voted for the election of the
four nominees recommended by the Board of Directors, who are named in the
following table, subject to discretionary power to cumulate votes, unless the
proxy is marked in such a manner as to withhold authority so to vote. All of
the nominees were elected directors by a vote of the stockholders at the last
Annual Meeting of Stockholders which was held on November 10, 1994. The
candidates receiving the highest number of votes, up to the number of directors
to be elected, will be elected. If any nominee for any reason is unable to
serve or for good cause will not serve, the proxy may be voted for such
substitute nominee as the persons appointed in the proxy may in their
discretion determine. Stock represented by the accompanying proxy cannot be
voted for a greater number of persons than the number of nominees (four).
3
<PAGE> 8
The following is information regarding the nominees, including
information furnished by them as to their principal occupations for the
preceding five-year period, certain directorships, and their ages as of
September 18, 1995.
<TABLE>
<CAPTION>
Name Age Director Since
---------------------- --- --------------
<S> <C> <C>
James R. Bergman 53 1988
John F. Gifford 54 1983
Robert F. Graham 66 1990
A.R. Frank Wazzan 59 1990
</TABLE>
Mr. Bergman has been a general partner of DSV Associates since 1974
and a founder of DSV Partners, DSV Partners III and DSV Partners IV. These
firms provide venture capital and management assistance to emerging companies,
primarily in high technology. He is also a director of Quad Systems
Corporation.
Mr. Gifford, a founder of the Company, has served as Maxim's President
and Chief Executive Officer since its incorporation in April 1983.
Mr. Graham is Chairman of the Board of Novellus Systems, Inc. a
manufacturer of vapor deposition equipment for use in semiconductor
fabrication. He has been employed at Novellus since 1986.
Dr. Wazzan is Dean of the School of Engineering and Applied Science,
University of California, Los Angeles, a position he has held since 1987.
FURTHER INFORMATION CONCERNING THE BOARD
During the fiscal year ended June 30, 1995, the Board of Directors
held nine meetings. The Company has a standing Audit Committee, which met once
during the fiscal year and a standing Compensation Committee, which met three
times during the fiscal year. During the fiscal year ended June 30, 1995,
each Board Member attended 75% or more of the aggregate of the meetings of the
Board and of the committees on which he served.
The Audit Committee is comprised of Messrs. Bergman and Graham and Dr.
Wazzan. Among the committee's functions are recommending engagement of the
Company's independent auditors and meeting with such auditors to consider the
scope and results of the annual audit, and to receive and consider the
auditors' comments on internal controls, accounting staff and similar matters.
The Compensation Committee is comprised of Messrs. Bergman and Graham
and Dr. Wazzan. The Compensation Committee determines salaries and incentive
compensation for the president and other executive officers, awards stock
options to employees and consultants under the Company's stock option plans and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate.
Nonemployee directors of the Company receive a $4,000 annual retainer
and fees of $1,000 per meeting attended.
Nonemployee directors participate in the 1988 Nonemployee Director
Stock Option Plan (the "Director Plan"). The Director Plan authorizes the
grant of options to purchase up to 312,500 shares of the Company's Common
Stock. Options under the Director Plan may be granted only to directors of the
Company who are not employees of the Company. Mr. Gifford is not eligible to
participate in the
4
<PAGE> 9
Director Plan because he is an employee of the Company. The Director Plan is
administered by the Company's Board of Directors.
The Director Plan provides for the nondiscretionary grant of options
to purchase shares of Common Stock of the Company to nonemployee directors.
The grants are nondiscretionary in order to preserve the independence of the
directors with regard to their actions on other option grants under the
employee plans.
The Director Plan provides that each person who is elected for the
first time to be a nonemployee director shall, upon the date of his initial
election to be a nonemployee director by the Board or the stockholders, be
granted an option to purchase 20,000 shares of the Company's Common Stock. The
Director Plan provides that these initial option grants vest in quarterly
installments over three years.
The exercise price of each option under the Director Plan must be
equal to the fair market value of the stock subject to the option on the date
of grant. Fair market value is determined by referring to the last sale price
of the Company's Common Stock for the preceding trading day as reported in The
Wall Street Journal on the date of grant.
The Director Plan also provided for annual option grants of 10,000
shares to each nonemployee director which was amended to annual option grants
of 7,500 shares to each nonemployee director, effective February 23, 1995.
However, all of these additional annual option grants will only start to vest
after all previously granted options under the Director Plan have vested. Once
vesting commences, these additional annual grants will vest in quarterly
installments over a one-year period. Options under the Director Plan have a
five-year term; however, each option may terminate prior to the expiration date
if the optionee's service as a nonemployee director of the Company terminates.
In such instance, the option shall terminate with regard to unvested shares on
the date of termination as a nonemployee director and with regard to
unexercised vested shares seven months after the date of termination (12 months
in the event of death).
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation for the Company's Chief Executive Officer at June 30,
1995 and the eight most highly compensated executive officers other than the
CEO who were serving as executive officers at June 30, 1995 for all services
rendered in all capacities to the Company and its subsidiaries during the
fiscal years ended June 30, 1995, 1994 and 1993 is set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
----------
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
------------------ ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
John F. Gifford 1995 264,023 * 0
President, Chief 1994 264,023 450,000 270,000
Executive Officer and 1993 250,902 230,000 250,000
Chairman of the Board
</TABLE>
5
<PAGE> 10
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
----------
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
------------------ ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Stephen R. Combs 1995 183,330 * 0
Vice President 1994 185,110 84,000 60,000
1993 174,770 94,000 68,000
William N. Levin 1995 174,410 * 0
Vice President 1994 174,410 80,000 60,000
1993 164,646 86,000 52,000
David J. Fullagar 1995 174,142 * 0
Vice President 1994 174,142 81,500 60,000
1993 173,259 67,000 24,000
Frederick G. Beck 1995 170,000 * 0
Vice President 1994 78,846 33,430 96,000
1993 5,000 0 0
Michael J. Byrd 1995 170,000 * 0
Vice President and 1994 62,115 58,000 176,000
Chief Financial Officer
Robert F. Scheer 1995 141,000 * 0
Vice President 1994 132,346 110,200 64,000
1993 120,462 30,000 26,000
Tunc Doluca 1995 134,000 * 0
Vice President 1994 126,385 87,900 60,000
1993 113,827 26,000 64,000
Kenneth J. Huening 1995 118,000 * 0
Vice President 1994 105,881 77,200 60,000
1993 94,231 20,000 28,000
- -------------------------------
</TABLE>
* The Company has accrued $1,800,000 for executive officer performance
bonuses relating to fiscal 1995. The Compensation Committee has not
approved the specific bonus amounts for the executive officers. However,
it has set a range of up to $800,000 for the Company's chief executive
officer and up to $200,000 for a vice president. The annual salary
reviews for the Company officers have not occurred and adjustments have
not been determined.
OPTIONS GRANTED TO EXECUTIVE OFFICERS
The Board of Directors or the Compensation Committee of the Board
currently has authority to grant stock options to employees under the Incentive
Stock Option Plan, as amended (the "ISO Plan") and the 1987 Supplemental Stock
Option Plan, as amended (the "Supplemental Plan"). No stock options were
granted to the executive officers named in the foregoing Summary Compensation
Table during fiscal 1995. The following table sets forth certain information
regarding stock options exercised by and owned by the executive officers named
in the foregoing Summary Compensation Table.
6
<PAGE> 11
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND JUNE 30, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED JUNE 30, 1995 (#) JUNE 30, 1995 ($) (1)
ON VALUE -------------------------- --------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Gifford 165,162 6,158,190 234,171 535,000 10,434,974 17,957,188
Stephen R. Combs 87,142 2,876,760 171,691 140,500 8,288,067 4,879,062
William N. Levin 30,000 976,125 20,000 142,000 922,500 4,910,000
David J. Fullagar 10,000 419,375 55,000 129,000 2,520,908 4,783,500
Frederick G. Beck 24,000 623,250 40,500 101,500 1,888,312 2,872,438
Michael J. Byrd 0 0 25,000 151,000 681,250 4,038,250
Robert F. Scheer 5,400 175,063 78,766 127,500 3,705,237 4,421,663
Tunc Doluca 11,000 397,500 67,833 122,500 3,065,594 4,128,031
Kenneth J. Huening 18,778 616,210 12,813 119,000 579,187 4,199,350
</TABLE>
(1) Based on a price per share of $51.00, which was the price of a share
of Common Stock on the NASDAQ at the close of business on June 30,
1995.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of
Messrs. Combs, Levin, Fullagar, Beck, Byrd, Scheer, Doluca and Huening. The
agreement does not grant the executive officer any right to be retained by the
Company, and the Company may terminate employment of the executive officer
either with or without cause. In the event of termination of employment by the
Company with or without cause, all compensation and benefits, except benefits
provided by law (e.g., COBRA health insurance continuation benefits)
immediately cease to accrue. However, in the event of termination of
employment by the Company without cause, severance payments are to be made in
accordance with the Company's normal policy or as mutually agreed between the
Company and the executive officer.
If the executive officer terminates his full-time employment with the
Company and his written notice of termination provides that he is willing to
act as a consultant to the Company, the Company will make health insurance
coverage available to the executive officer and his family. The terms of the
consultancy, unless otherwise agreed, will provide for part-time consulting (up
to one day per month) and annual compensation equal to at least 5% of the
executive officer's base salary at the time of termination. Health insurance
coverage means coverage under any group health plan the Company maintains for
its employees.
During the ten-year period following the notice of termination, the
executive officer pays the same amount for health coverage as a similarly
situated full-time employee is required to pay for coverage under the Company's
group health plan. After the ten-year period, the executive officer pays the
Company's cost of the coverage. In the event of the executive officer's death
while receiving health insurance coverage, the executive officer's spouse is
eligible for health insurance coverage until her death so long as she pays for
the coverage in an amount equal to the cost for an employee with identical
coverage. In the event the executive officer becomes disabled while receiving
health insurance coverage, he is deemed to be a consultant to the Company
during the disability.
7
<PAGE> 12
Mr. Gifford entered into an employment agreement with the Company in
1987, which was amended and restated February 1994. The agreement provides
that Mr. Gifford shall propose annually the amount of his bonus to the Board of
Directors, which shall reflect the Company's achievements and profitability for
the preceding year, and shall be reflective of the accomplishments of the
management group as a whole. The Board of Directors, in its discretion, shall
approve or modify such proposed bonus; provided that any bonus awarded shall
not be less than the bonus paid to any officer. The employment agreement
provides vesting for 100% of the unvested portion of his stock options upon
either upon Mr. Gifford's death or upon his disability, which results in his
termination of employment, while employed by the Company. The employment
agreement also provides that in the event Mr. Gifford becomes disabled while
employed by the Company, as long as Mr. Gifford remains disabled, the Company
will provide for continuation of his base salary for life (offset by any
earnings) through insurance or direct payment, or both. In addition, if Mr.
Gifford's employment with the Company is terminated due to disability, the
Company will provide to Mr. Gifford the post-employment health insurance
coverage on the same terms as the other officers described above. In addition,
in the event Mr. Gifford's employment is terminated without cause as defined in
the agreement, the Company will retain Mr. Gifford as a consultant and Mr.
Gifford agrees to remain available to the Company as a consultant for a period
of either (i) one (1) year in the event that his employment is terminated with
justification as defined in the agreement or (ii) two (2) years if his
employment is terminated without justification as defined in the agreement.
During the period that Mr. Gifford serves as a consultant to the Company, he
shall not be required to devote more than two (2) days a week to such
consulting activities. During the period of Mr. Gifford's retention as a
consultant, he shall be entitled to full pay, which is defined as his average
annual total compensation (salary plus bonus) received during the previous two
years, normal employee benefits, and his stock options and shares of restricted
stock shall continue to vest. In addition, if Mr. Gifford's employment is
terminated without cause or justification, the vesting of his stock options and
shares of restricted stock shall be immediately accelerated so that the options
and stock that would otherwise have vested over the two (2) year period
commencing two (2) years after the date of termination shall become immediately
exercisable. Thus, if his termination is without cause or justification, Mr.
Gifford will vest a total of four (4) years of options and restricted stock,
two (2) years tied to continuing consulting retention and two (2) years by
acceleration of vesting that would otherwise have occurred if he had remained
employed for the third and fourth years after the date of his termination. The
employment agreement also provides that upon a "change of control" of the
Company as such term is defined in his employment agreement 50% of his unvested
stock and options shall become fully vested on the date of the sale or merger.
The remainder of the stock and options shall become fully vested within one
year of the sale or merger provided that Mr. Gifford is willing (whether or not
he is actually requested to do so) to remain as CEO for the remaining vesting
period of his options up to a maximum of one year. The employment agreement
provides Mr. Gifford fringe benefits substantially equal to other officers. If
Mr. Gifford terminates his full-time employment with the Company and his
written notice of termination provides that he is willing to act as a
consultant to the Company, the Company will provide to Mr. Gifford the post
employment health insurance coverage on the substantially same terms as the
other officers described above.
Mr. Byrd's employment agreement provides that he will receive three
additional options, exercisable at fair market value on the date of grant, of
18,000 shares each, to be vested in fiscal years 2000, 2001 and 2002, assuming
his position does not change prior to or during such period. The first such
option will be granted at the end of his second year of employment with the
Company.
8
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors reviews and
approves cash and equity compensation for the Company's chief executive officer
and other executive officers. Cash compensation is comprised of a salary and
bonus, and equity compensation has been comprised of stock options.
The level of compensation is related to both corporate and individual
performance. Corporate performance is judged based upon results in the current
year, but more importantly on the Company's performance over the longer term.
Individual performance is measured based upon particular responsibilities of
each function, performance to specified goals and general management skills.
Salary. The Compensation Committee meets at least annually to review
and approve each executive officer's salary for the ensuing fiscal year. The
base salary component of compensation is intended to reward an executive
officer for normal levels of performance, as opposed to the bonus component
which is intended to compensate for performance exceeding expected levels.
When reviewing base salaries, the Compensation Committee considers the
following factors: individual performance, corporate performance (such as that
described below under CEO Compensation), levels of responsibility and prior
experience. The Compensation Committee also reviews published information
regarding the compensation of executive officers at companies comparable to
Maxim to determine that the Company's compensation is both competitive and
reasonable, but does not attempt to set compensation within any particular
range or level by comparison with the compensation reviewed.
Bonus. Based upon the quality of corporate performance over time, the
Compensation Committee annually approves a maximum bonus pool for the CEO and
other executive officers of a percentage of profit before tax for the
applicable fiscal year. The actual cash bonus for each individual executive
officer, aside from the CEO (discussed below), is then determined by first
setting a maximum bonus for each officer position based upon perfect
performance of that position and the total bonus pool available, and then
considering the individual performance of the executive officer involved.
Although executive officer bonuses for fiscal 1995 have not yet been
determined, the Compensation Committee has set a range of up to $200,000 for
any executive officer (other than the CEO).
Stock Options. Given the Company's limited resources and commitment
to the bottom line, the Company believes it cannot rely solely on cash
compensation to compete for and to provide incentives to its employees. Stock
options are, therefore, used by the Company to provide long-term incentives to
executive officers. The Company has attempted for a number of years to provide
for each executive officer, and for most other employees who participate in the
Company's stock option program, a number of shares subject to option that will
vest over a continuous period of usually four to five years into the future.
To accomplish this the Company has added one to two years of unvested options
every one to two years. The number of options per officer is determined by an
assessment principally of the significance of the function performed by the
officer and also of the officer's individual past, current and expected future
contribution to the success of the Company.
CEO Compensation. Under the terms of Mr. Gifford's Employment
Agreement, his annual bonus "shall reflect the Company's achievements and
profitability for the preceding year, and shall be reflective of the
accomplishments of the management group as a whole." Although Mr. Gifford's
bonus
- --------------------------
(1) This Section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company under
the 1933 Act or the 1934 Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
9
<PAGE> 14
for fiscal 1995 has not yet been determined, the Compensation Committee has set
a range of up to $800,000 for Mr. Gifford.
Section 162(m). Section 162(m) of the Internal Revenue Code (the
"Code") limits the Company to a deduction for federal income tax purposes of no
more than $1 million of compensation paid to the chief executive officer and
the four other most highly paid executive officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The Board of Directors has determined that stock options granted under
the Option Plans with an exercise price at least equal to the fair market value
of the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation." As a result, the Company's stockholders
previously approved an amendment to the Option Plans that would generally allow
any compensation recognized by an executive officer named in the Summary
Compensation Table as a result of the grant of such a stock option to be
deductible by the Company.
COMPENSATION COMMITTEE
Robert F. Graham
James R. Bergman
A.R. Frank Wazzan
10
<PAGE> 15
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than ten percent stockholders are required by the SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended June 30,
1995, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with,
except that two reports, covering one transaction each, were filed late by Dr.
A.R. Frank Wazzan and James R. Bergman.
CERTAIN TRANSACTIONS
In connection with his relocation to the Company's facility in
Beaverton, Oregon, Robert F. Scheer, a Vice President of the Company, was
granted a loan in the original principal amount of $1,282,000 to assist him in
the purchase of a home in the Beaverton area. The loan bears interest at the
rate of 3% per annum and is due and payable upon the sale of his previous
residence. The loan is secured by a deed of trust on his Oregon home and by
his stock options and stock option proceeds. As of June 30, 1995, the amount
of indebtedness under the loan was $1,316,326, the largest aggregate amount of
indebtedness outstanding during fiscal 1995.
In connection with his employment as a Vice President of the Company,
Anthony C. Gilbert was granted a loan in the original principal amount of
$100,000, bearing interest at the rate of 6% per annum. The loan is secured by
a pledge agreement and is due and payable within five years or sooner if the
value of vested option exceeds $1 million. Recourse for the loan is limited to
stock options or stock option proceeds. At June 30, 1995 the amount of
indebtedness under the loan was $104,194, the largest aggregate amount of
indebtedness outstanding during fiscal 1995.
11
<PAGE> 16
PERFORMANCE GRAPH
The following chart shows the value of an investment of $100 on June
30, 1990 in cash of (i) the Company's Common Stock, (ii) the NASDAQ Stock
Market Composite Index and (iii) the NASDAQ Electronics Components Stock Index.
All values assume reinvestment of the full amount of all dividends and are
calculated as of June 30 of each year. (1)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95
<S> <C> <C> <C> <C> <C> <C>
Maxim Integrated Products 100 133 173 282 429 841
NASDAQ Stock Market - U.S. 100 106 127 160 162 215
NASDAQ Elec. Cmpnts 100 96 117 202 222 461
</TABLE>
- -------------------------------
(1) This Section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company under
the 1933 Act or the 1934 Act whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
12
<PAGE> 17
PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval,
an amendment to the Company's Certificate of Incorporation to increase the
Company's authorized number of shares of Common Stock from 60,000,000 shares to
120,000,000 shares.
The additional Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding
Common Stock of the Company, except for effects incidental to increasing the
number of shares of the Company's Common Stock outstanding. If the amendment
is adopted, it will become effective upon filing of a Certificate of Amendment
of the Company's Certificate of Incorporation with the Secretary of State of
the State of Delaware.
In addition to the 29,436,579 shares of Common Stock outstanding at
June 30, 1995, the Board has reserved 11,676,693 shares for issuance upon the
grant and exercise of options and rights under the Company's stock option and
stock purchase plans (excluding 225,000 shares reserved subject to stockholder
approval) and 300,000 shares issuable upon exercise of a warrant granted to
Tektronix Inc. in connection with the acquisition of the Tektronix integrated
circuit operations. Additionally, upon approval of Proposal 3, another
1,700,000 shares (including the 225,000 shares referred to above) will be
reserved for future grants under the Company's Stock Plans, leaving a remainder
of 16,886,728 authorized shares available unless this proposal is approved.
Although at present the Board of Directors has not made a
determination to issue the additional shares of Common Stock, it is
considering, and may approve in the near future, a stock dividend that would be
substantially equivalent to a stock split. The Board is considering this
action in order to improve the liquidity of the Company's stock for the benefit
of the stockholders.
Alternatively, to the extent that the additional shares were not used
for a stock dividend or split, they could be used, without further stockholder
approval, for various other purposes including, without limitation, raising
capital, providing equity incentives to employees, officers or directors,
establishing strategic relationships with other companies and/or expanding the
Company's business or product lines through the acquisition of other businesses
or products. The Company has no other current plans, intentions or agreements
that would require the issuance of newly authorized shares.
The issuance of the additional shares could have the effect of
delaying or preventing a change in control of the Company without further
action by the stockholders. In addition, the issuance of additional shares
could have the effect of diluting the earnings per share or book value per
share of outstanding shares of Common Stock, and such additional shares could
be used to dilute the stock ownership or voting rights of a person seeking to
obtain control of the Company.
The affirmative vote of a majority of the outstanding shares of Common
Stock will be required to approve the amendment to the Company's Certificate of
Incorporation. The Board of Directors recommends a vote FOR this proposal.
13
<PAGE> 18
PROPOSAL 3
APPROVAL OF INCENTIVE STOCK OPTION PLAN,
1987 SUPPLEMENTAL STOCK OPTION PLAN
AND 1987 EMPLOYEE STOCK PARTICIPATION PLAN, AS AMENDED
In August 1995, the Board of Directors adopted, subject to stockholder
approval, amendments to the Company's Incentive Stock Option Plan (the "ISO
Plan"), the 1987 Supplemental Stock Option Plan (the "Supplemental Plan"), the
1987 Employee Stock Participation Plan (the "ESP Plan") (collectively, the
"Employee Stock Plans") to increase the number of shares of the Company's
Common Stock on which options may be granted from the common pool established
for the Employee Stock Plans and the Supplemental Nonemployee Stock Option Plan
(the "Nonemployee Plan") by 1,700,000 shares. (The ISO Plan and the
Supplemental Plan are together referred to as "Option Plans." The Nonemployee
Plan and the Employee Stock Plans are together referred to as the "Stock
Plans.")
The Board of Directors is hereby submitting for stockholder
ratification and approval the Employee Stock Plans, including the amendments to
the Employee Stock Plans herein described.
The Company has determined that substantial equity participation for
employees is critically important to creating an organization in which
employees will remain for very long periods of time and the Employee Stock
Plans are designed to contribute toward this goal.
In order to be adopted, this proposal requires the affirmative vote of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting. The Board of Directors recommends a vote FOR this proposal.
The following table is a summary of the number of shares which have
been available for issuance under the Stock Plans since inception of the
Company:
<TABLE>
<CAPTION>
Yearly Option Pool
Fiscal Increase to Since Inception
Year Common Pool of the Company
---- ----------- --------------
<S> <C> <C>
1983 (Approved) 1,066,666 1,066,666
1984 (Approved) 533,334 1,600,000
1985 (Approved) 1,066,668 2,666,668
1987 (Approved) 1,333,332 4,000,000
1988 (Approved) 2,333,332 6,333,332
1989 (Approved) 1,266,668 7,600,000
1990 (Approved) 2,000,000 9,600,000
1991 (Approved) 2,700,000 12,300,000
1992 (Approved) 1,650,000 13,950,000
1993 (Approved) 2,000,000 15,950,000
1994 (Approved) 1,530,000 17,480,000
1995 (Approved) 3,600,000 21,080,000
1996 (Proposed) 1,700,000 22,780,000
</TABLE>
14
<PAGE> 19
As of June 30, 1995, 11,486,257 stock options remain outstanding, of which
3,645,783 options are vested and exercisable while the remaining 7,840,474
options vest over the next six years as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Number of Options to Vest
--------------------- -------------------------
<S> <C>
1996 1,879,308
1997 1,869,964
1998 1,737,092
1999 1,411,938
2000 781,777
2001 160,395
---------
7,840,474
=========
</TABLE>
The principal uses for the increase to the stock option pool are to
provide for option grants for recruiting employees by offering a means by which
their creativity and dedicated efforts will allow them to participate in the
increased stockholder value; and for grants to existing employees generally for
periods vesting beyond 1999, by adding option grants at the end of an employee's
current vesting period.
As of June 30, 1995, there were 11,486,257 shares subject to
outstanding options under the Option Plans (56,094 of these outstanding options
have been granted with their exercise subject to approval of this proposal),
and a maximum of 51,530 shares subject to outstanding rights under the ESP
Plan. As of June 30, 1995, without the stockholder approval sought hereby, no
options were available for future grant under the Stock Plans. All
non-executive officer employees, as a group, were granted options, from May
through June, to purchase an aggregate of 56,094 shares at an average exercise
price of $45.45, subject to stockholder approval.
As of June 30, 1995, options outstanding under the Option Plans had
exercise prices ranging from $0.75 to $46.75 and expiration dates ranging from
October 26, 1995 to June 1, 2005. As of June 30, 1995, rights outstanding
under the ESP Plan had an exercise price of $29.91 (or 85% of the fair market
value of the Company's Common Stock on the exercise date, if less), and an
expiration date of December 31, 1995.
The material features of the Employee Stock Plans are as follows:
Purpose
The common purpose of the Employee Stock Plans is to increase
stockholder value, which is accomplished largely as a result of the Company's
successful, on-going stock option programs in which 697 key salaried employees
(93% of all salaried employees) currently participate. The Company believes
that Maxim's long-term commitment to employee ownership of Maxim stock has
significantly contributed to limiting turnover among salaried employees. The
Company also strongly believes that the employee ownership of Maxim is largely
responsible for Maxim's consistent and impressive growth.
Administration
The Employee Stock Plans are administered by the Board of Directors of
the Company. The Board is authorized in each of the Employee Stock Plans to
delegate administration of the Employee Stock Plan to a committee composed of
not less than three members of the Board. The Board has
15
<PAGE> 20
delegated administration of the Option Plans to the Compensation Committee
composed of the nonemployee members of the Board who are "outside directors."
The definition of "outside director" excludes (i) current employees of the
Company, (ii) former employees of the Company receiving compensation for past
services (other than benefits under a tax-qualified pension plan), (iii) current
and former officers of the Company and (iv) directors currently receiving direct
or indirect remuneration from the Company in any capacity (other than as a
director).
The Board has the final power to construe and interpret the Employee
Stock Plans and the rights granted under them, and, subject to the provisions
of the applicable Employee Stock Plan, to determine: the persons to whom and
the dates on which options will be granted pursuant to the Option Plans; the
number of shares to be subject to each option; the time or times during the
term of each option within which all or a portion of such option may be
exercised; the exercise price; the type of consideration and the other terms of
the options; when and how rights to purchase Common Stock of the Company under
ESP Plan will be granted; the terms of each offering of rights under the ESP
Plan, which need not be identical; and the affiliates eligible to participate
in the ESP Plan.
Amendment
The Board may at any time amend or terminate any of the Employee Stock
Plans, except that such amendment or termination shall not impair or alter any
rights granted under a plan prior thereto without the consent of the person to
whom such rights were granted.
Any amendment of the ISO Plan, the Supplemental Plan, or the ESP Plan
must be approved, within 12 months before or after its adoption by the Board of
Directors, by a vote of a majority of the shares of the Company represented and
voting at a duly called meeting if the amendment would: (i) increase the number
of shares reserved for options under the respective Employee Stock Plan; (ii)
materially modify the eligibility requirements for participation in the
respective Employee Stock Plan; or (iii) materially increase the benefits which
may accrue to participants under the respective Employee Stock Plan.
The Board may suspend or terminate any or all of the Employee Stock
Plans at any time. Unless sooner terminated, the ISO Plan will terminate on
August 12, 2002, the Supplemental Plan will terminate on June 1, 1997 and the
ESP Plan will terminate on August 25, 1997.
Eligibility
Options under the Option Plans may be granted to employees (including
officers) of the Company or any affiliate. The number of eligible employees
was approximately 1,250 as of June 30, 1995. A director of the Company is not
eligible for the benefits of the Option Plans unless he is also an employee of
the Company or an affiliate. A director is not eligible to be granted options
under the Option Plans unless and until he is expressly declared eligible to
participate in any of such plans by action of the Board, and only if, at any
time discretion is exercised by the Board in the selection of a director as a
person to whom options or stock rights may be granted, or in the determination
of the number of shares which may be covered by such options or stock rights, a
majority of the Board and a majority of the directors acting on such matter are
disinterested persons (or, if administration of the Option Plans has been
delegated to a committee, all of the members of the committee are disinterested
persons).
For options that were granted under the ISO Plan, the aggregate fair
market value (determined at the time the options are granted) of the stock with
respect to which incentive stock options are first
16
<PAGE> 21
exercisable during any calendar year for any employee under all incentive stock
option plans of the Company and its affiliates may not exceed $100,000. Should
it be determined that any option granted under the ISO Plan exceeds the
applicable maximum, such option or portion thereof will be considered a
nonstatutory stock option as required in the ISO Plan or by law.
In November 1994, the Option Plans were amended to include a
per-employee, per-calendar year limitation equal to 1,500,000 shares
(approximately 5% of the outstanding shares of Common Stock). The purpose of
adding this limitation is to ensure that the Company generally will continue to
be able to deduct for tax purposes the compensation attributable to the
exercise of options granted under the Option Plans.
Under the ESP Plan, any person who is customarily employed at least 20
hours per week and five months per calendar year by the Company on the first
day of each Purchase Period (as defined in "Terms of Rights Under the Plans,
ESP" below) is eligible to participate, provided such employee has been in the
continuous employ of the Company for a specified period preceding the first day
of the purchase period as determined by the Board. The number of eligible
employees was approximately 1,400 as of June 30, 1995. Employees of an
affiliate of the Company designated by the Board of Directors are eligible to
participate in the ESP Plan provided they meet the same employment
requirements. Directors and officers of the Company or an affiliate who are
highly compensated (as defined in the Code) are not eligible to be granted
rights under the ESP Plan. Notwithstanding the foregoing, no employee shall be
eligible for the grant of any rights under the ESP Plan if, immediately after
such grant, that employee would own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
affiliate (including any stock which such employee may purchase under all
outstanding rights and options), nor can any employee be granted rights under
the ESP Plan which would permit that employee to buy more than $11,765 worth of
stock (determined at the fair market value of the shares at the time such
rights are granted) under all employee stock purchase plans of the Company and
its affiliates as defined in Section 423 of the Code in any calendar year.
Stock Subject to the Stock Plans
Up to 21,080,000 shares of the Company's Common Stock since fiscal
1983, have been authorized for issuance under each of the Stock Plans (up to
22,780,000 after the adoption of the proposed amendments), less any shares that
may be issued or subject to options granted under the other Stock Plans. Stock
subject to the Stock Plans may be unissued shares or reacquired shares, bought
on the market or otherwise. If options or rights granted under any of the
Stock Plans expire, lapse or otherwise terminate without being exercised, the
Common Stock not purchased under such options or rights again becomes available
for issuance under the Stock Plans.
Terms of Options and Rights under the Employee Stock Plans
Option Plans
The following is a description of the terms and conditions of options
permitted by the Option Plans. Such terms and conditions may change from time
to time, and the terms and conditions of separate options need not be
identical.
Exercise Price. The exercise price for any option granted under the
ISO Plan and the Supplemental Plan may not be less than 100% of the fair market
value and 85% of the fair market value, respectively, of the stock subject to
the option on the date of grant, subject to the limitation
17
<PAGE> 22
described below. However, no option may be granted to a person who, at the time
of the grant, owns stock constituting more than 10% of the total combined voting
power of all classes of stock entitled to vote of the Company or an affiliate
unless the exercise price is at least 110% of the fair market value of such
stock at the date the option is granted and the term of the option does not
exceed five years from the date such option is granted. The Option Plans permit
the Company's Board of Directors to reprice outstanding options by canceling
outstanding options and granting new lower priced options, or to lower the
exercise price of any outstanding option, subject to the limitation described
below.
Limitation on Grants. All options granted under the Supplemental Plan
must be granted at an exercise price at least equal to 85% of the fair market
value of the Company's stock on the date of grant, provided that the Board may
not grant options at an exercise price less than 100% of the fair market value
unless all the following criteria are met: (i) such grants are made only
infrequently; there is a presumption by the Board or the Compensation Committee
in favor of grants at 100% of fair market value, (ii) there is a good faith
determination by the Board or the Compensation Committee that a valid business
reason exists to support such a grant and such determination is recorded in
writing as part of the minutes of the meeting, and (iii) the total number of
shares granted under the Supplemental Plan at less than fair market value does
not exceed 5% of the aggregate pool of shares reserved for issuance under the
Employee Stock Plans.
In addition, options granted under the Option Plans may only be
repriced by the Board or the Compensation Committee under the following limited
conditions: (i) the number of options subject to repricing in any 12 month
period may not exceed 5% of the aggregate pool of shares reserved for issuance
under the Employee Stock Plans, and (ii) repricing should occur only
infrequently and must not be solely due to poor operating performance by the
Company.
Consideration. The purchase price of stock acquired pursuant to an
option must be paid either (i) in cash at the time the option is exercised or
(ii) at the discretion of the Board, either at the time of grant or exercise of
the option (A) by delivery to the Company of other Common Stock of the Company,
(B) pursuant to a deferred payment or other arrangement (which may include the
use of other Common Stock of the Company) or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement under the ISO Plan, interest is payable at least annually
and is charged at the minimum rate necessary to avoid imputation of interest
under the Code. Deferred payment arrangements under the Supplemental Plan may
be interest free or the Board may provide for interest at an appropriate rate.
Option Exercise. Options granted may be immediately exercisable or
allotted in periodic installments, as determined by the Board. If the total
number of shares subject to an option is allotted in periodic installments, then
during each of these periods, the option may be exercised with respect to some
or all of the shares allotted to said period, and/or with respect to some or all
of the shares allotted to a prior period with respect to which the option was
not fully exercised. During the remainder of the term of the option (if its
term extends beyond the end of the installment periods), the option may be
exercised with respect to any shares then remaining subject to the option. The
Board has the power to accelerate the time during which an option may be
exercised.
Early Exercise. The option may, but need not, include a provision
whereby the optionee may elect during the term of his employment with the
Company or an affiliate to exercise the option as to a part or all of the shares
subject to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any unvested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board determines to be
appropriate.
18
<PAGE> 23
Term. Options may have a maximum term of ten years, except that
options granted to persons owning more than 10% of the total combined voting
power of all classes of stock of the Company or an affiliate may have a maximum
term of five years.
Termination of Option. An option will terminate three months after
the optionee ceases to be employed by the Company or an affiliate, unless (i)
the termination of employment is due to such person's permanent and total
disability (as defined in the Code), in which case the option may, but need
not, provide that it may be exercised at any time within one year of such
termination; or (ii) the optionee dies while employed by the Company or an
affiliate, or within no more than three months after termination of such
employment, in which case the option may, but need not, provide that it may be
exercised by the person or persons to whom the rights of such option pass by
will or the laws of descent or distribution within 18 months of the optionee's
death; or (iii) the option by its terms specifically provides either (A) that
it will terminate sooner than three months after termination of the optionee's
employment or (B) that it may be exercised more than three months after
termination of the optionee's employment with the Company or an affiliate.
Nontransferability. An option is not transferable by the optionee
other than by will or by the laws of descent and distribution. During the
lifetime of an optionee, an option may be exercised only by the optionee.
ESP Plan
The Board has the power from time to time to grant or provide for the
grant of rights to purchase stock of the Company under the ESP Plan to eligible
employees (an "Offering") on a date or dates (the "Offering Date(s)") selected
by the Board. Each Offering will be in such form and will contain such terms
and conditions as the Board deems appropriate, except that each Offering must
include the substance of the required provisions of the ESP Plan, which are
described below. The provisions of separate Offerings need not be identical.
Each Offering can be no longer than 27 months (the "Purchase Period").
Offerings are expected to be of approximately 12 months' duration.
Participation. An eligible employee becomes a participant in an
Offering by delivering an agreement to the Company, within the time specified
in each Offering, authorizing payroll deductions of up to 20% of his
compensation (as defined in the ESP Plan) during the Purchase Period. All
payroll deductions made for a participant are credited to his account under the
ESP Plan and are deposited with the general funds of the Company. If
specifically allowed pursuant to the terms of the Offering, a participant may
make direct payments into his or her account to the extent such participant has
not had the maximum amount withheld during the Purchase Period. The purchase
price of the shares is accumulated by payroll deductions (or direct payments)
over the Purchase Period. At any time during the Purchase Period a participant
may terminate his payroll deductions, but a participant may increase, reduce or
begin such payroll deductions after the beginning of any Purchase Period only
as provided for in the Offering.
Number of Shares in an Offering. In connection with each Offering,
the Board will specify a maximum number of shares any employee may be granted
the right to purchase and the maximum aggregate number of shares which may be
purchased pursuant to such Offering by all participants. If the aggregate
number of shares purchased upon exercise of rights granted in the Offering
would exceed the maximum aggregate number, the Board will make a pro rata
allocation of the shares available in as nearly a uniform manner as practicable
and as it shall deem to be equitable. Unless the employee's right to purchase
shares will be exercised automatically on a date or dates specified in each
Offering (an
19
<PAGE> 24
"Exercise Date") at the applicable price. It is expected that Exercise Dates
will occur on the last day of each calendar quarter of each calendar year within
a Purchase Period.
Purchase of Stock. On each Exercise Date, the balance in each
participant's account will be applied to the purchase of whole shares of stock
of the Company. No fractional shares shall be issued upon the exercise of
rights granted under the ESP Plan. The amount remaining in each participant's
account after the purchase of shares which is less than the amount required to
purchase one share of stock on the final Exercise Date of an Offering shall be
held in each such participant's account for the purchase of shares under the
next Offering under the ESP Plan, unless such participant withdraws from such
next Offering or is no longer eligible to be granted rights under the ESP Plan,
in which case such amount is distributed to such participant after the Exercise
Date, without interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares which is
equal to the amount required to purchase whole shares of stock on the final
Exercise Date of an Offering is distributed in full to the participant after
such Exercise Date, without interest.
Purchase Price. The purchase price per share of stock acquired
pursuant to the ESP Plan will not be less than the lessor of: (i) an amount
equal to 85% of the fair market value of a share of Common Stock on the
Offering Date; or (ii) an amount equal to 85% of the fair market value of a
share of Common Stock on the Exercise Date.
Withdrawal. While each participant in the ESP Plan is required to
sign an agreement authorizing payroll deductions, the participant may withdraw
from a given Offering by terminating his payroll deductions and by delivering
to the Company a notice of withdrawal from the Offering. Such withdrawal may
be elected at any time prior to the end of the applicable Purchase Period.
Upon any withdrawal from an Offering by the employee, the Company will
distribute to the employee his accumulated payroll deductions (reduced for
prior purchases) without interest, and such employee's interest in the Offering
will be automatically terminated. The employee is not entitled to participate
again in that Offering. An employee's withdrawal from an Offering will not
have any effect upon that employee's eligibility to participate in subsequent
Offerings under the ESP Plan, but such employee is required to submit a new
participation agreement.
Termination of Employment. Rights granted pursuant to any Offering
under the ESP Plan shall terminate immediately upon cessation of an employee's
employment for any reason, and the Company shall distribute to such employee
all of his or her accumulated payroll deductions (reduced for prior purchases),
without interest.
Nontransferability. Rights granted under the ESP Plan are not
transferable and can only be exercised by the person to whom such rights are
granted.
Adjustment Provisions
If any change is made in the stock subject to the Employee Stock Plans
or subject to any rights granted under the Employee Stock Plans (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise), the Board shall make appropriate adjustments in the classes and
maximum number of shares subject to the Employee Stock Plans, the maximum
number of shares which may be granted to an employee during a calendar year,
and the classes, number of shares and price per share of stock subject to
outstanding options or rights.
20
<PAGE> 25
In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, then, pursuant to the
Employee Stock Plans, at the sole discretion of the Board of Directors, (1) any
surviving corporation shall assume any rights outstanding under such Plans or
shall substitute similar rights for those outstanding under such Plans, or (2)
such rights will continue in full force and effect, or (3) with respect to the
Option Plans, the time during which options may be exercised will be
accelerated and terminated if not exercised prior to such event, and with
respect to the ESP Plan, the rights will be exercised immediately prior to such
event.
Certain Federal Income Tax Consequences Relating to the Employee Stock Plans
In fiscal 1995, exercises of employee stock options resulted in over
$11.5 million of cash savings as a result of tax deductions for the Company and
in $9.8 million of cash to the Company from stock option exercises, for total
cash generated of over $21.3 million, a significant contribution to the
strength of the Company's balance sheet and a material reduction to any
dilutive effect of such programs. Approximately $11.9 million of the proceeds
have been used to repurchase 388,500 shares on the open market, reducing the
dilutive effect of the option program. The Company plans to continue
repurchasing its common stock.
Incentive Stock Options. Options under the ISO Plan are intended to
be eligible for the favorable federal income tax treatment accorded "incentive
stock options" under Section 422 of the Code. Incentive stock options
generally have the following tax consequences:
There are generally no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionees
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are transferred
to the optionee upon exercise of the option, any gain or loss on a disposition
of such stock will be long term capital gain or loss. Generally, if the
optionee disposes of the stock before the expiration of either of these holding
periods (a "disqualifying disposition"), at the time of disposition the
optionee will realize taxable ordinary income equal to the lesser of (i) the
excess of the fair market value on the date of exercise over the exercise
price, or (ii) the optionee's actual gain, if any, on the purchase and sale.
The optionee's additional gain or any loss upon the disqualifying disposition
will be a capital gain or loss which will be long-term or short-term depending
on whether the stock was held for more than one year. Capital gains currently
are generally subject to lower tax rates than ordinary income. The maximum
capital gains rate for federal income tax purposes is currently 28% while the
maximum ordinary income rate is effectively 39.6% at the present time.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the
Securities Exchange Act of 1934 (the "Exchange Act").
Upon exercise of an incentive stock option, the excess of the stock's
fair market value on the date of exercise over the option exercise price will
constitute an adjustment in calculating the optionee's alternative minimum tax,
if any.
21
<PAGE> 26
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disposition occurs.
Supplemental Stock Options. Options under the Supplemental Plan are
"nonstatutory stock options" which generally have the following federal income
tax consequences:
There are no tax consequences to the optionee or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option normally the optionee will recognize taxable ordinary income equal
to the excess of the stock's fair market value on the date of exercise over the
exercise price. Generally, with respect to employees the Company is required
to withhold from regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, the Company will be generally entitled to a business
expense deduction equal to the taxable ordinary income realized by the
optionee. Upon disposition of stock, the optionee will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon exercise of the option. Such gain or loss will be long or short-term
depending on whether the stock was held for more than one year. Slightly
different rules apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus
Budget Reconciliation Act of 1993, the U.S. Congress amended the Code to add
Section 162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Code Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that the option is granted by a compensation committee
comprised solely of "outside directors" and either: (i) the option plan
contains a per-employee limitation on the number of shares for which options
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the option is no less
than the fair market value of the stock on the date of grant, or (ii) the
option is granted (or exercisable) only upon the achievement (as certified in
writing by the compensation committee) of an objective performance goal
established in writing by the compensation committee while the outcome is
substantially uncertain, and the option is approved by the stockholders.
In November 1994, the stockholders approved an amendment to the Option
Plans which specified 1,500,000 shares as the maximum number of shares with
respect to which options may be granted to any employee under the Option Plans
during a calendar year.
ESP Plan. Participation in the ESP Plan is intended to qualify for the
favorable federal income tax treatment accorded employee stock purchase plans
under Section 423 of the Code. Under these provisions, a participant will be
taxed on amounts withheld for the purchase of shares as if such amounts were
actually received. Other than this, no income will be taxable to a participant
until
22
<PAGE> 27
disposition of shares acquired, and the method of taxation will depend upon the
holding period of the purchased shares.
If the shares are sold or disposed of at least two years after the
beginning of the offering period and at least one year after the purchased
shares are transferred to the participant, then the lesser of (i) the excess of
the fair market value of the shares at the time of such disposition over the
exercise price or (ii) the excess of the fair market value of the shares as of
the beginning of the offering period over the exercise price (determined as of
the beginning of the offering period) will be treated as ordinary income. Any
further gain or any loss will be taxed as a long-term capital gain or loss.
Capital gains currently are generally subject to lower tax rates than ordinary
income. The maximum capital gains rate for federal income tax purposes is 28%
while the maximum ordinary rate is effectively 39.6% at the present time.
If the shares are sold or disposed of before the expiration of either
or both of the holding periods described above, then the excess of the fair
market value of the shares on the exercise date over the exercise price will be
treated as ordinary income at the time of such disposition, and the Company in
the future may be required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance of any gain
will be treated as capital gain. Even if the shares are disposed of for less
than their fair market value measured as of the exercise date, the same amount
of ordinary income is attributable to a participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the shares on such exercise date. Any such capital gain or loss will
be long or short-term depending on whether the shares have been held for more
than one year from the date they are transferred to the participant.
There are no federal income tax consequences to the Company by reason
of the grant or exercise of rights under the ESP Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) of the code and the satisfaction of a tax reporting obligation).
Other Tax Consequences. The foregoing discussion is not a complete
description of the federal income tax aspects of incentive and nonstatutory
stock options or participation in the ESP Plan. In addition, administrative
and judicial interpretations of the application of the federal income tax laws
are subject to change. Furthermore, no information is given with respect to
state or local taxes that may be applicable.
Participants in the Employee Stock Plans who are residents of or are
employed in a country other than the United States may be subject to taxation
in accordance with the tax laws of that particular country in addition to or in
lieu of United States federal income taxes.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the year ending June 30, 1996, and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
23
<PAGE> 28
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice.
In the event the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of different
independent auditors at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its stockholders.
In order to be adopted, this proposal requires the affirmative vote of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting. The Board of Directors recommends a vote FOR this proposal.
OTHER MATTERS
The Board of Directors does not know of other matters which may come
before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying proxy
to vote, or otherwise to act, in accordance with their judgment on such
matters.
STOCKHOLDER PROPOSALS - 1996 ANNUAL MEETING
Proposals of stockholders which are intended to be presented at the
Company's 1996 Annual Meeting of Stockholders must be received by the Company
no later than May 27, 1996 in order to be included in the proxy statement and
proxy relating to that meeting.
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
September 22, 1995
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THIS
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES.
24
<PAGE> 29
MAXIM INTEGRATED PRODUCTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 16, 1995
The undersigned hereby appoints John F. Gifford and Michael J. Byrd,
and each of them, as proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Maxim Integrated Products,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Maxim Integrated Products, Inc. to be held on November 16, 1995
at 11:00 a.m., local time, and at any adjournment or postponement thereof, with
all powers that the undersigned would possess if personally present, upon and
in respect of the following materials and in accordance with the following
instructions, with discretionary authority as described in the proxy statement
as to any and all other matters that may properly come before the meeting or
any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR
AND FOR PROPOSALS 2, 3 AND 4.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED,
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 30
Please mark votes as in this example
ALL MATTERS ARE PROPOSED BY MAXIM INTEGRATED PRODUCTS, INC. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES AND FOR PROPOSALS 2, 3 AND 4.
1. Election of Directors
Nominees: J.R. Bergman J.F. Gifford R.F. Graham A.R. Wazzan
FOR WITHHELD
________________________________________
For all nominees except as noted above
2. Approval of amendment to Certificate of Incorporation increasing the
number of authorized shares of Common Stock form 60,000,000 shares to
120,000,000 shares.
FOR AGAINST ABSTAIN
3. Approval of Incentive Stock Option Plan, 2987 Supplemental Stock Option
Plan and 1987 Employee Stock Participation Plan, as amended.
FOR AGAINST ABSTAIN
4. Approval of Independent Auditors for fiscal 1996.
FOR AGAINST ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature:__________________________ Date:__________________
Signature:__________________________ Date:__________________
1
<PAGE> 31
MAXIM INTEGRATED PRODUCTS, INC.
INCENTIVE STOCK OPTION PLAN
Adopted June 30, 1983
As Amended by the Board of Directors on October 20, 1983
with the Approval of the Shareholders on February 6, 1984
As Further Amended by the Board of Directors on June 27, 1984
with the Approval of the Shareholders on October 3, 1984
As Further Amended by the Board of Directors on September 10, 1985
with the Approval of the Shareholders on September 25, 1985
As Further Amended by the Board of Directors on August 14, 1986
with the Approval of the Shareholders on November 6, 1986
As Further Amended by the Board of Directors on February 14, June 2 and
August 26, 1987 with the Approval of the Shareholders
on October 19, 1987
As Further Amended by the Board of Directors on January 29 and
August 23, 1988 with the Approval of the Stockholders
on October 26, 1988
As Further Amended by the Board of Directors on August 24, 1989
with the Approval of the Stockholders on November 3, 1989
As Further Amended by the Board of Directors on August 9, 1990
with the Approval of the Stockholders on October 26, 1990
As Further Amended by the Board of Directors on May 8, 1991
with the Approval of the Stockholders on November 7, 1991
As Further Amended by the Board of Directors on August 13, 1992
with the Approval of the Stockholders on November 5, 1992
As Further Amended by the Board of Directors on August 25, 1993
with the Approval of the Stockholders on November 5, 1993
As Further Amended by the Board of Directors on February 17, 1994,
March 23, 1994, April 21, 1994, and May 12, 1994
with the Approval of the Stockholders on November 10, 1994
1.
<PAGE> 32
As Further Amended by the Board of Directors on August 10, 1995
with the Approval of the Stockholders on November ___, 1995
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which employees of
Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), and its
Affiliates, as defined in subparagraph 1(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now holding positions with the Company, to secure and retain the
services of persons capable of filling such positions, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
2.
<PAGE> 33
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be identical),
including the time or times during the term of each option within which all or
portions of such option may be exercised; and the number of shares for which an
option shall be granted to each such person.
(2) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than three (3) persons (who may, but need not, be members
of the Board) (the "Committee"), all of the members of which Committee shall be
disinterested persons, if required and as defined by the provisions of
subparagraph 2(d), and may also be, in the discretion of the Board, outside
directors, as defined by the provisions of subparagraph 2(f). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the
3.
<PAGE> 34
Plan to the extent permitted by law, the powers theretofore possessed by the
Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this paragraph 2 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant options to eligible persons who (1)
are not then subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and/or (2) are either (i) not then covered
employees (as defined by the provisions of subparagraph 2(e)) and are not
expected to be covered employees at the time of recognition of income resulting
from such option, or (ii) not persons with respect to whom the Company wishes to
comply with Section 162(m) of the Code.
(d) The term "disinterested person", as used in this Plan, shall mean
an administrator of the Plan, whether a member of the Board or of any Committee
to which responsibility for administration of the Plan has been delegated
pursuant to subparagraph 2(c), who meets the definition of a "disinterested
person" set forth in Securities and Exchange Commission ("SEC") Rule 16b-3 or
any successor to such Rule.
(e) The term "covered employee," as used in this Plan, means the Chief
Executive Officer and the four (4) other highest compensated officers of the
Company.
(f) The term "outside director," as used in this Plan, means a director
who either (i) is not a current employee of the Company or an "affiliated
corporation" (as defined in the Treasury regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or an affiliated
corporation receiving compensation for prior services (other than benefits
4.
<PAGE> 35
under a tax qualified pension plan), was not an officer of the Company or an
affiliated corporation at any time, and is not currently receiving compensation
for personal services in any capacity other than as a director, or (ii) is
otherwise considered an "outside director" for purposes of Section 162(m) of the
Code.
(g) Any requirement that an administrator of the Plan be a
"disinterested person" shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate twenty-two million seven
hundred eighty thousand (22,780,000) shares (adjusted to reflect the stock
dividend effective November 23, 1994) of the Company's common stock; provided,
however, that such aggregate number of shares shall be reduced to reflect the
number of shares of the Company's common stock which has been sold under, or may
be sold pursuant to options granted under, the Company's 1987 Supplemental Stock
Option Plan, 1987 Employee Stock Participation Plan and Supplemental Nonemployee
Stock Option Plan to the same extent as if such sales had been made or options
had been granted pursuant to this Plan. If any option granted under the Plan
shall for any reason expire or otherwise terminate without having been exercised
in full, the stock not purchased under such option shall again become available
for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5.
<PAGE> 36
(c) An option may be granted to an eligible person under the Plan only
if the aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by such optionee during any calendar year under
all incentive stock option plans of the Company and its Affiliates does not
exceed one hundred thousand dollars ($100,000). Should it be determined that an
option granted under the Plan exceeds such maximum for any reason other than the
failure of a good faith attempt to value the stock subject to the option, such
option shall be considered a nonstatutory stock option to the extent, but only
to the extent, of such excess; provided, however, that should it be determined
that an entire option or any portion thereof does not qualify for treatment as
an incentive stock option by reason of exceeding such maximum, such option or
the applicable portion shall be considered a nonstatutory stock option.
4. ELIGIBILITY
(a) Options may be granted only to employees (including officers) of
the Company or its Affiliates. A director of the Company shall not be eligible
for the benefits of the Plan unless such director is also an employee (including
an officer) of the Company or any Affiliate.
(b) A director shall in no event be eligible for the benefits of the
Plan unless and until such director is expressly declared eligible to
participate in the Plan by action of the Board or the Committee, and only if, at
any time discretion is exercised by the Board in the selection of a director as
a person to whom options may be granted, or in the determination of the number
or maximum number of shares which may be covered by options granted to a
director, a majority of the Board and a majority of the directors acting in such
matter are disinterested persons, as defined
6.
<PAGE> 37
in subparagraph 2(d). The Board shall otherwise comply with the requirements of
Rule 16b-3 promulgated under the Exchange Act, as from time to time in effect.
(c) No person shall be eligible for the grant of an option under the Plan if, at
the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any of its
Affiliates unless the option price is at least one hundred ten percent (110%) of
the fair market value of such stock at the date of grant and the term of the
option does not exceed five (5) years from the date of grant.
(c) Subject to the provisions of paragraph 9 relating to adjustments
upon changes in stock, no person shall be eligible to be granted options
covering more than one million five hundred thousand (1,500,000) shares
(adjusted to reflect the stock dividend effective November 23, 1994) of the
Company's common stock in any calendar year.
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted.
7.
<PAGE> 38
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of grant or exercise of the option,
(A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person.
(e) The total number of shares of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the option
may be exercised with respect to some or all of the shares allotted to that
period, and/or with respect to some or all of the shares allotted to any prior
period as to which the option was not fully exercised. During the remainder of
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised
8.
<PAGE> 39
from time to time with respect to any shares then remaining subject to the
option. The provisions of this subparagraph 5(e) are subject to any option
provisions governing the minimum number of shares as to which an option may be
exercised.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 5(d), as a condition of exercising any
such option: (1) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters, and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the option for such person's own account and not
with any present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the option
has been registered under a then currently effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii), as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws.
(g) An option shall terminate three (3) months after termination of the
optionee's employment with the Company or an Affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent and
total disability, within the meaning of Section 422(c)(6) of the Code, in which
case the option may, but need not, provide that it may be exercised
9.
<PAGE> 40
at any time within one (1) year following such termination of employment; or
(ii) the optionee dies while in the employ of the Company or an Affiliate, or
within not more than three (3) months after termination of such employment, in
which case the option may, but need not, provide that it may be exercised at any
time within eighteen (18) months following the death of the optionee by the
person or persons to whom the optionee's rights under such option pass by will
or by the laws of descent and distribution; or (iii) the option by its terms
specifies either (a) that it shall terminate sooner than three (3) months after
termination of the optionee's employment, or (b) that it may be exercised more
than three (3) months after termination of the optionee's employment with the
Company or an Affiliate. This subparagraph 5(g) shall not be construed to extend
the term of any option or to permit anyone to exercise the option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any option is exercisable from the amount exercisable on the
date of termination of the optionee's employment.
(h) The option may, but need not, include a provision whereby the
optionee may elect at any time during the term of his or her employment with the
Company or any Affiliate to exercise the option as to any part or all of the
shares subject to the option prior to the stated vesting date of the option or
of any installment or installments specified in the option. Any shares so
purchased from any unvested installment or option may be subject to a repurchase
right in favor of the Company or to any other restriction the Board or the
Committee determines to be appropriate.
6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
10.
<PAGE> 41
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If the Company
is unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such options unless and until
such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Board or the Committee shall have the power to accelerate the
time during which an option may be exercised, or the time during which an option
or any portion thereof will vest pursuant to subparagraph 5(e), notwithstanding
the provisions in the option stating the time during which it may be exercised
or the time during which it will vest.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
11.
<PAGE> 42
(c) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the shareholders of the
Company provided for in the bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(d) Nothing in the Plan or any instrument executed or option granted
pursuant thereto shall confer upon any eligible employee or optionee any right
to continue in the employ of the Company or any Affiliate or shall affect the
right of the Company or any Affiliate to terminate the employment of any
eligible employee or optionee with or without cause.
(e) Outstanding options may be Repriced (as defined below) only subject
to the following conditions: (1) Repricing may be approved as to a number of
shares subject to outstanding options equal to not more than five percent (5%)
of the Total Shares Subject to the Plan (defined below) in any twelve (12) month
period; (2) Repricing requires the approval of a majority of the Board or the
Committee; and (3) the Board or the Committee shall not Reprice options unless
it records in the minutes of its meeting or action by written consent its good
faith determination that the following conditions have been satisfied: Repricing
is to occur only infrequently and the determination to approve Repricing derives
principally from conditions other than poor operating performance by the
Company. To "Reprice" for purposes of this Plan shall mean to amend an
outstanding option to reduce its exercise price or to issue a new option with a
lower exercise price to replace an outstanding option with a higher exercise
price, in either case without a material
12.
<PAGE> 43
adverse (to the optionee) change in the other terms of the outstanding option.
The Total Shares Subject to the Plan shall mean the aggregate number of shares
initially reserved for issuance under the Plan plus all increases in shares
reserved for issuance after the initial reservation.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, at the sole discretion of the
Board and to the extent permitted by applicable law: (i) any surviving
corporation shall assume any options outstanding under the Plan or shall
substitute similar options for those outstanding under the Plan, or (ii) the
time during which such
13.
<PAGE> 44
options may be exercised shall be accelerated and the options terminated if not
exercised prior to such event, or (iii) such options shall continue in full
force and effect.
10. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the shares of the Company represented and voting at a duly held
meeting within twelve (12) months before or after the adoption of the amendment,
where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants
under the Plan.
(a) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to
14.
<PAGE> 45
employee incentive stock options and/or to bring the Plan and/or options granted
under it into compliance therewith.
(c) Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN
(d) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 12, 2002. No options may
be granted under the Plan while the Plan is suspended or after it is terminated.
(e) Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12. EFFECTIVE DATE OF PLAN
The Plan as amended and restated herein shall become effective as
determined by the Board, but no options granted after the date of this amendment
and restatement of the Plan shall be exercised unless and until this restated
Plan has been approved by the vote of the holders of a majority of the
outstanding shares of the Company entitled to vote, or by the written consent of
the holders of the outstanding shares of the Company entitled to vote, to the
extent necessary under applicable laws to obtain incentive stock option
treatment under Section 422 of the Code, and, if required, an appropriate permit
has been issued by the Commissioner of Corporations of the State of California.
15.
<PAGE> 46
MAXIM INTEGRATED PRODUCTS, INC.
SUPPLEMENTAL NONEMPLOYEE STOCK OPTION PLAN
Adopted October 20, 1983
As Amended by the Board of Directors on August 14, 1986
Approved by the Shareholders on October 19, 1987
As Further Amended by the Board of Directors on January 29 and April 22, 1988
As Further Amended by the Board of Directors on August 9, 1990
As Further Amended by the Board of Directors on May 8, 1991
As Further Amended by the Board of Directors on August 13, 1992
As Further Amended by the Board of Directors on August 25, 1993
As Further Amended by the Board of Directors on
February 17, 1994, March 23, 1994, April 21, 1994, and May 12, 1994
As Further Amended by the Board of Directors on August 10, 1995
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which selected
consultants, advisors, independent contractors, vendors, customers and other
persons (which term shall include, for purposes of this Plan, individuals,
partnerships, corporations and other entities) having a past, current or
prospective business relationship with Maxim Integrated Products, Inc., a
Delaware corporation (the Company"), or any of its affiliates, as defined in
subparagraph 1(b), may be given an opportunity to purchase stock of the Company.
The Company, by means of the Plan, seeks to secure, retain and enhance the
benefits of relationships with such persons.
1.
<PAGE> 47
(b) The word "affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Section 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when, how and for what price, if any,
the option shall be granted; the provisions of each option granted (which need
not be identical), including the time or times during the term of each option
within which all or portions of such option may be exercised; and the number of
shares for which an option shall be granted to each such person.
(2) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
2.
<PAGE> 48
(3) To amend the Plan as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee of
the Board. If administration is delegated to a committee, the committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the committee at any time and revest in the Board
the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate twenty-two million seven
hundred eighty thousand (22,780,000) shares (adjusted to reflect the stock
dividend effective November 23, 1994) of the Company's Common Stock; provided,
however, that such aggregate number of shares shall be reduced to reflect the
number of shares of the Company's common stock which has been sold under, or may
be sold pursuant to outstanding options granted under, the Company's Incentive
Stock Option Plan, 1987 Employee Stock Participation Plan and 1987 Supplemental
Stock Option Plan to the same extent as if such sales had been made or options
had been granted pursuant to this Plan. If any option granted under the Plan
shall for any reason expire or otherwise terminate without having been exercised
in full, the stock not purchased under such option shall again become available
for the Plan. In addition, if
3.
<PAGE> 49
options granted under the Plan are exercised in accordance with the option
prior to the full vesting thereof, and shares of the stock so acquired are
thereafter repurchased by the Company in accordance with the terms of such
option, the stock so repurchased shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY
Options may be granted to any person having a past, current or
prospective business relationship with the Company or any of its affiliates as
to whom the Board or the committee has determined that providing such person an
opportunity for an equity interest in the Company is likely to be beneficial to
the Company or any of its affiliates. Eligible persons may include, without
limiting the generality of the foregoing, consultants, advisors, independent
contractors, suppliers and customers. Persons eligible under this Plan shall not
include (a) any person who is an employee of the Company or any of its
affiliates at the time of grant (but such person's subsequently becoming an
employee of the Company or an affiliate during the term of the option shall not
affect the option, and the exercisability of an option may be conditioned upon
an optionee's becoming and/or remaining an employee of the Company or an
affiliate), (b) any director of the Company, or (c) any person in which or whom
any director of the Company has any material financial interest. It shall be a
condition precedent to the effectiveness of any option grant hereunder that the
prospective optionee shall certify (A) as to what, if any, material financial
interest in such optionee is held by any director or officer of the Company and
(B) that the grantee
4.
<PAGE> 50
has made whatever disclosures as to the option grant and effected all other
compliances that may be required by him by law or by his employer, partners or
other persons to whom he may owe a duty of disclosure as to the option grant.
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Board or the committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The price to be paid upon acquisition of the option, provided that
such price may be equal to zero. Any such acquisition price shall be paid in
cash or in any other form of legal consideration that may be acceptable to the
Board or the committee in their discretion.
(b) The term of any option shall not be greater than ten (10) years
from the date it was granted.
(c) The exercise price of each option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted.
(d) The purchase price of stock acquired pursuant to an option shall be
paid, as specified in the option, either (i) in cash at the time the option is
exercised, or (ii) at the discretion of the Board or the committee, (A) by
delivery to the Company of other common stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company) with
the person to whom the option is granted or to whom the option is transferred
pursuant to
5.
<PAGE> 51
subparagraph 5(e), or (C) in any other form of legal consideration that may be
acceptable to the Board or the committee in their discretion, either at the
time of grant or exercise of the option.
In the case of any deferred payment arrangement specified at the time
of grant, an interest rate shall be stated which is not less than the rate then
specified which will prevent any imputation of higher interest under Section 483
of the Code.
(e) An option shall not be transferable except by will or by the laws
of descent and distribution or, as to a person other than an individual, in
connection with a merger or a sale or transfer of all or substantially all the
assets of the optionee.
(f) The total number of shares of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the option
may be exercised with respect to some or all of the shares allotted to that
period, and/or with respect to some or all of the shares allotted to any prior
period as to which the option was not fully exercised. During the remainder of
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised from time to time with respect to any
shares then remaining subject to the option. The provisions of this subparagraph
5(f) are subject to any option provisions governing the minimum number of shares
as to which an option may be exercised.
(g) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 5(e), as a condition of exercising any
such option: (1) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters and/or
to employ a purchaser representative who has such knowledge
6.
<PAGE> 52
and experience in financial and business matters that he is capable of
evaluating, alone or together with the optionee, the merits and risks of
exercising the option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii), as to any particular requirement, a
determination is made by counsel for the Company that such requirement is not
required in the circumstances under the then applicable federal securities
laws.
6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If the Company
is unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the
7.
<PAGE> 53
Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such options unless and until such authority is
obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Board or the committee shall have the power to accelerate the
time during which an option may be exercised, notwithstanding the provisions in
the option stating the time during which it may be exercised.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Board may make
appropriate adjustments in the maximum number of shares subject to the Plan and
the number of shares and price per share of stock subject to outstanding
options.
8.
<PAGE> 54
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, any outstanding options under the Plan
shall terminate, unless another corporation assumes such options or substitutes
similar options for those under the Plan or the Board determines in its sole
discretion that such options shall continue in full force and effect.
10. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
(b) Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 12, 2002. No options may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
9.
<PAGE> 55
12. EFFECTIVE DATE OF PLAN
The Plan as amended and restated herein shall become effective as
determined by the Board.
10.
<PAGE> 56
MAXIM INTEGRATED PRODUCTS, INC.
1987 SUPPLEMENTAL STOCK OPTION PLAN
Adopted June 2, 1987
As amended by the Board of Directors on August 26, 1987
Approved by Shareholders October 19, 1987
As further amended on January 29 and August 23, 1988
Approved by Stockholders on October 26, 1988
As further amended on August 24, 1988
Approved by Stockholders on November 3, 1989
As further amended on August 9, 1990
Approved by Stockholders on October 26, 1990
As further amended on May 8, 1991
Approved by Stockholders on November 7, 1991
As further amended on August 13, 1992
Approved by Stockholders on November 5, 1992
As further amended on August 25, 1993
Approved by Stockholders on November 5, 1993
As further amended on February 17, 1994,
March 23, 1994, April 21, 1994 and May 12, 1994
Approved by Stockholders on November 10, 1994
As further amended on August 10, 1995
Approved by Stockholders on November ___, 1995
1. PURPOSE
1.
<PAGE> 57
(a) The purpose of the Plan is to provide a means by which employees of
Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), and its
Affiliates, as defined in subparagraph 1(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now employed by the Company, to secure and retain the services of
persons capable of filling such positions and to provide incentives for such
persons to exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
<PAGE> 58
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be identical),
including the time or times during the term of each option within which all or
portions of such option may be exercised; and the number of shares for which an
option shall be granted to each such person.
(2) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than three (3) persons (who may, but need not, be members
of the Board) (the "Committee"), all of the members of which Committee shall be
disinterested persons, if required and as defined by the provisions of
subparagraph 2(d), and may also be, in the discretion of the Board, outside
directors, as defined by the provisions of subparagraph 2(f). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan to the extent permitted by law, the powers
theretofore possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
3.
<PAGE> 59
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Notwithstanding anything
in this paragraph 2 to the contrary, the Board or the Committee may delegate to
a committee of one or more members of the Board the authority to grant options
to eligible persons who (1) are not then subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and/or (2) are either (i)
not then covered employees (as defined by the provisions of subparagraph 2(e))
and are not expected to be covered employees at the time of recognition of
income resulting from such option, or (ii) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code.
(d) The term "disinterested person," as used in this Plan, shall mean
an administrator of the Plan, whether a member of the Board or of any Committee
to which responsibility for administration of the Plan has been delegated
pursuant to subparagraph 2(c), meets the definition of a "disinterested person"
set forth in Securities and Exchange Commission ("SEC") Rule 16b-3 or any
successor to such Rule.
(e) The term "covered employee," as used in this Plan, means the Chief
Executive Officer and the four (4) other highest compensated officers of the
Company.
(f) The term "outside director," as used in this Plan, means a director
who either (i) is not a current employee of the Company or an "affiliated
corporation" (as defined in the Treasury regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or an affiliated
corporation receiving compensation for prior services (other than benefits under
a tax qualified pension plan), was not an officer of the Company or an
affiliated corporation at any time, and is not currently receiving compensation
for personal services in any capacity other
4.
<PAGE> 60
than as a director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(g) Any requirement that an administrator of the Plan be a
"disinterested person" shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate twenty-two million seven
hundred eighty thousand (22,780,000) shares (adjusted to reflect the stock
dividend effective November 23, 1994) of the Company's common stock; provided,
however, that such aggregate number of shares shall be reduced to reflect the
number of shares of the Company's common stock which has been sold under, or may
be sold pursuant to outstanding options granted under, the Company's Incentive
Stock Option Plan, 1987 Employee Stock Participation Plan and Supplemental
Nonemployee Stock Option Plan to the same extent as if such sales had been made
or options had been granted pursuant to this Plan. If any option granted under
this Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for this Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) There is no maximum limit on the aggregate fair market value of the
stock for which any eligible person may be granted options under the Plan in any
calendar year.
5.
<PAGE> 61
4. ELIGIBILITY
(a) Options may be granted only to employees (including officers) of
the Company or its Affiliates. A director of the Company shall not be eligible
for the benefits of the Plan unless such director is also an employee (including
an officer) of the Company or any Affiliate.
(b) A director shall in no event be eligible for the benefits of the
Plan unless and until such director is expressly declared eligible to
participate in the Plan by action of the Board or the Committee, and only if, at
any time discretion is exercised by the Board in the selection of a director as
a person to whom options may be granted, or in the determination of the number
or maximum number of shares which may be covered by options granted to a
director, a majority of the Board and a majority of the directors acting in such
matter are disinterested persons, as defined in subparagraph 2(d). The Board
shall otherwise comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act, as from time to time in effect. (c)No person shall be eligible for
the grant of an option under the Plan if, at the time of grant, such person owns
(or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more then ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates unless the option price is at
least one hundred ten percent (110%) of the fair market value of such stock at
the date of grant and the term of the option does not exceed five (5) years from
the date of grant.
(c) Subject to the provisions of paragraph 9 relating to adjustments
upon changes in stock, no person shall be eligible to be granted options
covering more than one million five hundred
6.
<PAGE> 62
thousand (1,500,000) shares (adjusted to reflect the stock dividend effective
November 23, 1994) of the Company's common stock in any calendar year.
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be not less than
eighty-five percent (85%) of the fair market value of the stock subject to the
option on the date the option is granted; provided, however, that no option may
be granted at less than one hundred percent (100%) of the fair market value
except as follows: (1) Any grant at less than one hundred percent (100%) of fair
market value requires the approval of the Committee; (2) the Committee shall not
grant such option unless it records in the minutes of its meeting or action by
written consent its good faith determination that the following conditions have
been satisfied: grants of this nature are to be made only infrequently and only
where good business reasons outweigh a normal presumption in favor of grants at
one hundred percent (100%) of fair market value; and (3) the total number of
shares of stock subject to grant at less than one hundred percent (100%) of the
fair market value shall not exceed five percent (5%) of the Total Shares Subject
to the Plan. The Total Shares Subject to the Plan shall mean the
7.
<PAGE> 63
aggregate number of shares initially reserved for issuance under the Plan plus
all increases in shares reserved for issuance after the initial reservation.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of grant or exercise of the option
(A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee.
Deferred payment arrangements may be interest free or may provide for
interest at any rate deemed appropriate by the Board or the Committee.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person.
(e) The total number of shares of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the option
may be exercised with respect to some or all of the shares allotted to that
period, and/or with respect to some or all of the shares allotted to any prior
period as to which the option was not fully exercised. During the remainder of
the term of the option (if its term extends beyond the end of the installment
periods), the option may be exercised
8.
<PAGE> 64
from time to time with respect to any shares then remaining subject to the
option. The provisions of this subparagraph 5(e) are subject to any option
provisions governing the minimum number of shares as to which an option may be
exercised.
(f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 5(d), as a condition of exercising any
such option: (1) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the option for such person's own account and not
with a view to or for sale in connection with any distribution of the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then applicable securities laws.
(g) An option shall terminate three (3) months after termination of the
optionee's employment with the Company or an Affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent and
total disability, within the meaning of Section 422(c)(6) of the Code, in which
case the option may, but need not, provide that it may be
<PAGE> 65
exercised at any time within one (1) year following such termination of
employment; or (ii) the optionee dies while in the employ of the Company or an
Affiliate, or within not more than three (3) months after termination of such
employment, in which case the option may, but need not, provide that it may be
exercised at any time within eighteen (18) months following the death of the
optionee by the person or persons to whom the optionee's rights under such
option pass by will or by the laws of descent and distribution; or (iii) the
option by its terms specifies either (a) that it shall terminate sooner than
three (3) months after termination of the optionee's employment, or (b) that it
may be exercised more than three (3) months after termination of the optionee's
employment with the Company or an Affiliate. This subparagraph 5(g) shall not be
construed to extend the term of any option or to permit anyone to exercise the
option after expiration of its term, nor shall it be construed to increase the
number of shares as to which any option is exercisable from the amount
exercisable on the date of termination of the optionee's employment.
(h) The option may, but need not, include a provision whereby the
optionee may elect at any time during the term of his or her employment with the
Company or any Affiliate to exercise the option as to any part or all of the
shares subject to the option prior to the stated vesting date of the option or
of any installment or installments specified in the option. Any shares so
purchased from any unvested installment or option may be subject to a repurchase
right in favor of the Company or to any other restriction the Board or the
Committee determines to be appropriate.
6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
10.
<PAGE> 66
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority that counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Board or the Committee shall have the power to accelerate the
time during which an option may be exercised or the time during which an option
or any portion thereof will vest pursuant to subparagraph 5(e), notwithstanding
the provisions in the option stating the time during which it may be exercised
or the time during which it will vest.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
11.
<PAGE> 67
(c) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the shareholders of the
Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or option granted
pursuant thereto shall confer upon any eligible person or optionee any right to
continue in the employ of the Company or any Affiliate or shall affect the right
of the Company or any Affiliate to terminate the employment of any eligible
person or optionee with or without cause.
(e) Outstanding options may be Repriced (as defined below) only subject
to the following conditions: (1) Repricing may be approved as to a number of
shares subject to outstanding options equal to not more than five percent (5%)
of the Total Shares Subject to the Plan (defined below) in any twelve (12) month
period; (2) Repricing requires the approval of a majority of the Board or the
Committee; and (3) the Board or the Committee shall not Reprice options unless
it records in the minutes of its meeting or action by written consent its good
faith determination that the following conditions have been satisfied: Repricing
is to occur only infrequently and the determination to approve Repricing derives
principally from conditions other than poor operating performance by the
Company. To "Reprice" for purposes of this Plan shall mean to amend an
outstanding option to reduce its exercise price or to issue a new option with a
lower exercise price to replace an outstanding option with a higher exercise
price, in either case without a material adverse (to the optionee) change in the
other terms of the outstanding option. The Total Shares
12.
<PAGE> 68
Subject to the Plan shall mean the aggregate number of shares initially reserved
for issuance under the Plan plus all increases in shares reserved for issuance
after the initial reservation.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, at the sole discretion of the
Board and to the extent permitted by applicable law: (i) any surviving
corporation shall assume any options outstanding under the Plan or shall
substitute similar options for those outstanding under the Plan, or (ii) the
time during which such options may be exercised shall be accelerated and the
option terminated if not exercised prior to such event, or (iii) such options
shall continue in full force and effect.
13.
<PAGE> 69
10. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the shares of the Company represented and voting at a duly held
meeting within twelve (12) months before or after the adoption of the amendment,
where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants
under the Plan except to the extent permitted by Rule 16b-3 promulgated under
the Exchange Act, as those rules are in effect at the time the amendment is
adopted by the Board.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Rights and obligations under any option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom the option was granted.
11. TERMINATION OR SUSPENSION OF THE PLAN
14.
<PAGE> 70
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12. EFFECTIVE DATE OF PLAN
The Plan as amended and restated herein shall become effective as
determined by the Board, but no options granted after the date of this amendment
and restatement of the Plan shall be exercised unless and until this amended and
restated Plan has been approved by the vote or written consent of the holders of
a majority of the outstanding shares of the Company entitled to vote, and, if
required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
15.
<PAGE> 71
THIS DOCUMENT CONSTITUTES PART OF THE PROSPECTUS
COVERING THESE SECURITIES, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
MAXIM INTEGRATED PRODUCTS, INC.
SUPPLEMENTAL NONEMPLOYEE STOCK OPTION PLAN
The date of this document is August 29, 1995
<PAGE> 72
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DESCRIPTION OF THE NONEMPLOYEE PLAN . . . . . . . . . . . . . . . . . . . . 2
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Duration, Amendment and Termination . . . . . . . . . . . . . . . 3
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Subject to the Nonemployee Plan . . . . . . . . . . . . . . 3
Adjustment Provisions . . . . . . . . . . . . . . . . . . . . . . 4
Exercise of Rights and Regulatory Authority . . . . . . . . . . . 4
Terms of Rights Under the Nonemployee Plan . . . . . . . . . . . . 4
ERISA and Other Qualifications . . . . . . . . . . . . . . . . . . 6
United States Federal Income Tax Consequences Relating to the
Nonemployee Plan . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i.
<PAGE> 73
AVAILABLE INFORMATION
The United States federal securities laws require Maxim Integrated
Products, Inc. (the "Company") to provide information about its business and
financial status in annual reports, commonly known as "10-Ks" and quarterly
reports, commonly known as "10- Qs." These reports are filed with the United
States Securities and Exchange Commission. In addition, if certain important
corporate events occur during the year, the Company may file reports commonly
known as "8-Ks." The Company also prepares and files with the Commission a proxy
statement in connection with its annual meeting of stockholders. The proxy
statement provides further information about the Company and its officers,
directors and major stockholders. From time to time the Company may also file
other documents with the Securities and Exchange Commission as required by
Sections 13(a), 13(c), 14 and 15(d) of the United States Securities Exchange Act
of 1934 (the "Exchange Act").
All of these documents constitute part of the information required by
United States federal securities laws to be provided or made available to
participants in connection with their purchase of stock under the Company's
Supplemental Nonemployee Stock Option Plan (the "Nonemployee Plan"); that is,
these documents are incorporated by reference into these materials, which
constitute the Prospectus for the plan.
For a copy of these documents, all of which are available without
charge and upon written or oral request, please contact Stockholder Relations,
Maxim Integrated Products, Inc., 120 San Gabriel Drive, Sunnyvale, California,
U.S.A. 94086, telephone: (408) 737-7600, which will be happy to assist you.
If you are already a stockholder of the company, you should receive
copies of the company's proxy statement, reports to stockholders and other
stockholder communications. You may always request copies of this information,
which can be obtained without charge from Stockholder Relations.
1.
<PAGE> 74
INTRODUCTION
This Prospectus covers shares of the Company's Common Stock, $.001 par
value ("Common Stock") offered for sale to holders of options to purchase shares
of Common Stock granted or to be granted under the Company's Nonemployee Plan.
This Prospectus sets forth information concerning the Nonemployee Plan and the
Company, and will be distributed to participating persons pursuant to the United
States Securities Act of 1933 (the "Securities Act"). The terms and conditions
of the offer and sale of the Common Stock, including the prices of the shares,
are governed by the provisions of the Nonemployee Plan and the agreements
thereunder between the Company and each participating person. When used in this
Prospectus, unless the context indicates otherwise, the "Company" refer to Maxim
Integrated Products, Inc. and its consolidated subsidiaries.
DESCRIPTION OF THE NONEMPLOYEE PLAN
The following description of the essential features of the Nonemployee
Plan are qualified by reference to the full text of the Nonemployee Plan, copies
of which are being delivered to participating persons.
PURPOSE
The purpose of the Nonemployee Plan is to provide a means by which
selected consultants, advisors, independent contractors, vendors, customers and
others having a past, current or prospective business relationship with the
Company or any parent corporation or subsidiary corporation of the Company
("Affiliate"), as these terms are defined in Section 424 of the United States
Internal Revenue Code of 1986, as amended (the "Code"), may be given an
opportunity to purchase stock of the Company, thereby providing the Company with
a means to secure, retain and enhance the benefits of relationships with such
persons.
ADMINISTRATION
The Nonemployee Plan is administered by the Board of Directors of the
Company. The Board is authorized by the Nonemployee Plan to delegate
administration of the Plan to a committee composed of members of the Board.
The Board has the final power to construe and interpret the Nonemployee
Plan and the rights granted thereunder, and, subject to the provisions of the
Plan, to determine: the persons to whom and the dates on which options will be
granted, the number of shares to be subject to each
2.
<PAGE> 75
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration and the other terms of the options.
Questions concerning the administration of the Nonemployee Plan may be
addressed to Stock Administrator, Maxim Integrated Products, Inc., 120 San
Gabriel Drive, Sunnyvale, California 94086, telephone (408) 737-7600.
DURATION, AMENDMENT AND TERMINATION
The Board may at any time amend or terminate the Nonemployee Plan
except that such amendment or termination shall not impair or alter any rights
granted under the Plan prior thereto without the consent of the person to whom
such rights were granted. Unless sooner terminated, the Nonemployee Plan will
terminate on August 12, 2002.
ELIGIBILITY
Options granted under the Nonemployee Plan may be granted to any person
having a past, current or prospective business relationship with the Company or
any Affiliate as to whom the Board has determined that providing such person an
opportunity for an equity interest in the Company is likely to be beneficial to
the Company or any Affiliate. Eligible persons may include, without limiting the
generality of the foregoing, consultants, advisors, independent contractors,
suppliers and customers. No person who is an employee of the Company or any
Affiliate at the time of grant (but such person's subsequently becoming an
employee of the Company or any Affiliate during the term of the option shall not
affect the option, and the exercisability of an option may be conditioned upon
an optionee's becoming and/or remaining an employee of the Company or any
Affiliate, any director of the Company, or any person in which or whom any
director of the Company has any material financial interest is eligible to
participate in the Nonemployee Plan.
STOCK SUBJECT TO THE NONEMPLOYEE PLAN
Up to 22,780,000 shares of the Company's Common Stock are authorized
for issuance under the Nonemployee Plan and each of the Company's Incentive
Stock Option Plan, the Company's 1987 Supplemental Stock Option Plan and the
Company's 1987 Employee Stock Participation Plan (together referred to as the
"Employee Plans"), less any shares that may be issued or subject to options
granted under the other plans. Thus, the aggregate number of shares authorized
for issuance under the Nonemployee Plan and the Employee Plans, taken together,
may not exceed 22,780,000. Stock subject to the Nonemployee Plan may be unissued
shares or reacquired shares, bought on the market or otherwise. If options or
rights granted under the Nonemployee Plan or any of the Employee Plans expire,
lapse or otherwise terminate without
3.
<PAGE> 76
being exercised, the Common Stock not purchased under such options or rights
again becomes available for issuance under the Nonemployee Plan and the
Employee Plans.
ADJUSTMENT PROVISIONS
If any change is made in the stock subject to the Nonemployee Plan or
subject to any options granted under the Nonemployee Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Board may make appropriate adjustments in the classes and maximum number of
shares subject to the Nonemployee Plan and the classes, number of shares and
price per share of stock subject to outstanding options. [The number of shares
and related information set forth herein have been adjusted to give effect to
the 1 for 1 stock dividend effective November 23, 1994.]
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then any outstanding options under the Nonemployee Plan
shall terminate, unless another corporation assumes such options or substitutes
similar options for those under the Nonemployee Plan or the Board determines in
its sole discretion that such options shall continue in full force and effect.
EXERCISE OF RIGHTS AND REGULATORY AUTHORITY
The Company will seek to obtain from appropriate United States
regulatory agencies all authority necessary to issue and sell stock upon the
exercise of rights granted pursuant to the Nonemployee Plan. The Nonemployee
Plan provides that if the Company is unable to obtain authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company is relieved from any liability for failure to issue and
sell such stock unless and until such authority is obtained.
TERMS OF RIGHTS UNDER THE NONEMPLOYEE PLAN
The following is a description of the terms and conditions of options
permitted by the Nonemployee Plan. Such terms and conditions may change from
time to time, and the terms and conditions of separate options need not be
identical.
4.
<PAGE> 77
ACQUISITION PRICE. The Board determines the price to be paid upon
acquisition of an option under the Nonemployee Plan; the acquisition price may
be equal to zero. Any acquisition price must be paid in cash or in any other
form of legal consideration that may be acceptable to the Board in its
discretion.
EXERCISE PRICE. The exercise price of each option must be not less than
100% of the fair market value of the stock subject to the option on the date the
option is granted.
CONSIDERATION. The purchase price of stock acquired pursuant to an
option may be paid as specified in the option either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Board either at the time
of grant or exercise of the option (A) by delivery to the Company of other
Common Stock of the Company, (B) according to a deferred payment or other
arrangement (which may include the use of other Common Stock of the Company) or
(C) in any other form of legal consideration that may be acceptable to the Board
in its discretion. Any deferred payment arrangement specified at the time of
grant must have an interest rate not less than the rate then specified which
will prevent any imputation of higher interest under Section 483 of the Code.
OPTION EXERCISE. The total number of shares of stock subject to an
option may, but need not, be allotted in periodic installments. From time to
time during each of the installment periods, the option may be exercised with
respect to some or all of the shares allotted to that period, or with respect to
some or all of the shares allotted to any prior period as to which the option
was not fully exercised. During the remainder of the term of the option (if its
term extends beyond the end of the installment periods), the option may be
exercised from time to time with respect to any shares then remaining subject to
the option.
In connection with the exercise of options under the Nonemployee Plan,
the Company's regular procedures may qualify for certain programs authorized by
Regulation T as promulgated by the United States Federal Reserve Board. If
optionees elect to use such a program, the Company intends to comply with the
requirements of Regulation T.
EARLY EXERCISE. The option may, but need not, include a provision
whereby the optionee may elect to exercise the option as to a part or all of the
shares subject to the option prior to the stated vesting date of the option or
of any installment or installments specified in the option. Any shares so
purchased from any unvested installment or option may be subject to a repurchase
right in favor of the Company or to any other restriction the Board determines
to be appropriate.
TERM. The term of any option will not be greater than ten (10) years
from the date it is granted.
5.
<PAGE> 78
TERMINATION OF OPTION. The circumstances under which an option will
terminate generally will be specified in each individual option agreement.
NONTRANSFERABILITY. An option will not be transferable except by will
or by the laws of descent and distribution and will be exercisable during the
lifetime of the person to whom the option is granted only by such person.
ERISA AND OTHER QUALIFICATIONS
The Company is not aware of any provisions of the United States
Employee Retirement Income Security Act of 1974 to which the Nonemployee Plan is
subject.
The Nonemployee Plan is not qualified as a pension or profit sharing
plan under Section 401(a) of the Code. Persons who are granted stock options
under the Nonemployee Plan, therefore, are not entitled to the tax treatment
available to participants in plans qualified under that section.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE NONEMPLOYEE PLAN
Options under the Nonemployee Plan are subject to United States federal
income tax treatment pursuant to rules governing options that are not statutory
stock options having potentially favorable federal income tax treatment.
Options under the Nonemployee Plan (referred to herein as "nonstatutory
stock options") generally have the following U.S. federal income tax
consequences:
GRANT. There normally are no tax consequences to the optionee or the
Company by reason of the grant of nonstatutory stock options.
EXERCISE. Upon exercise of a nonstatutory stock option normally the
optionee will recognize taxable ordinary income in an amount by which the fair
market value of the Common Stock on the date of exercise exceeds the exercise
price.
Subject to the requirement of reasonableness and the satisfaction of a
tax reporting obligation, the Company will be entitled to a business expense
deduction in the amount of the taxable ordinary income realized by the optionee.
6.
<PAGE> 79
STOCK-FOR-STOCK EXERCISES. If the exercise price of a nonstatutory
stock option is paid in whole or in part in the form of shares of Common Stock
owned by the optionee immediately prior to the exercise, the tax consequences to
the optionee are: (i) a tax-free exchange of the previously held shares of
Common Stock for an equivalent number of the shares of Common Stock received
under the option, and (ii) the realization of ordinary income in an amount equal
to the excess of (a) the fair market value as of the date of exercise of any
additional shares received under the option in excess of the number of
previously held shares of Common Stock exchanged, over (b) the amount of cash,
if any, paid by the participant upon exercise. The tax basis and capital-gain
holding period of the shares received under the option in the tax-free exchange
will be the same as the tax basis and holding period of the previously held
shares. The tax basis of any additional shares received upon the exercise of the
nonstatutory stock option will equal the sum of the amount of ordinary income
recognized by the participant and the amount of any cash paid on exercise, and
the participant's holding period for these shares will begin on the date of
exercise.
DISPOSITION. Upon disposition of stock acquired upon exercise of a
nonstatutory stock option, the optionee will recognize a capital gain or loss in
an amount equal to the difference between the selling price and the sum of the
amount paid for such shares plus any amount recognized as ordinary income upon
exercise of the option. Such gain or loss will be long or short-term depending
on whether the stock was held for more than one year from the date the option
was exercised.
There are no tax consequences to the Company by reason of the
disposition by the optionee of Common Stock acquired upon exercise of a
nonstatutory stock option.
STOCK SUBJECT TO CERTAIN REPURCHASE OPTIONS. Under Section 83 of the
Code, shares acquired subject to certain repurchase options are deemed to be
subject to a substantial risk of forfeiture. Generally the optionee will not
recognize any income with respect to the shares purchased until the shares are
no longer subject to such substantial risk of forfeiture, at which time the
optionee will recognize ordinary compensation income equal to the excess, if
any, of the then fair market value of such shares over the exercise price for
such shares. If, however, such an optionee makes an appropriate election under
Section 83(b) of the Code within thirty days after the exercise of a
nonstatutory stock option, the optionee will recognize ordinary income in the
taxable year of exercise equal to the excess, if any, of the fair market value
of the Common Stock on the date of exercise, determined without regard to the
risk of forfeiture, over the exercise price for the shares. The optionee's basis
in the shares will be the amount paid for such shares plus any amount recognized
as ordinary income. Any gain or loss recognized by the optionee upon disposition
of the shares will be taxable as a capital gain or loss, which will be long or
short-term depending on whether the shares are held for more than one year from
the date on which ordinary income was measured. If a Section 83(b) election is
made and the optionee subsequently forfeits the benefit of
7.
<PAGE> 80
owning the shares (i.e., due to the exercise by the Company of its repurchase
option), the optionee will realize an economic loss equal to the amount of tax
paid due to the election, if any, and that loss will not be recognizable as a
loss for tax purposes.
OTHER TAX CONSEQUENCES. The foregoing discussion is not a complete
description of the United States federal income tax aspects of nonstatutory
stock options. In addition, administrative and judicial interpretations of the
application of the United States federal income tax laws are subject to change.
Furthermore, no information is given with respect to other taxes imposed by
state or local governments in the United States that may be applicable. Each
participant in the Nonemployee Plan should consult a tax adviser with respect to
the specific transaction contemplated.
Participants in the Nonemployee Plan who are residents of or are
employed in a country other than the United States may be subject to taxation in
accordance with the tax laws of that particular country in addition to or in
lieu of United States federal income taxes. Each such participant should consult
with his or her own tax adviser regarding the tax consequences and compliance
requirements associated with the granting of options and the purchase and sale
of shares under the Nonemployee Plan.
8.
<PAGE> 81
MAXIM INTEGRATED PRODUCTS, INC.
1987 EMPLOYEE STOCK PARTICIPATION PLAN
Adopted August 26, 1987
Approved by Shareholders on October 19, 1987
Amended January 29 and August 23, 1988
Approved by Stockholders on October 26, 1988
Amended August 24, 1989
Approved by Stockholders on November 3, 1989
Amended August 9, 1990
Approved by Stockholders on October 26, 1990
Amended May 8, 1991
Approved by Stockholders on November 7, 1991
Amended August 13, 1992
Approved by Stockholders on November 5, 1992
Amended August 25, 1993
Approved by Stockholders on November 5, 1993
Amended February 17, 1994, March 23, 1994,
April 21, 1994, and May 12, 1994
Approved by Stockholders on November 10, 1994
Amended November 10, 1994
Amended August 10, 1995
Approved by Stockholders on November ____, 1995
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which employees of
Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), and its
Affiliates, as defined in
1.
<PAGE> 82
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may
be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
2.
<PAGE> 83
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than three (3) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate twenty-two million seven
hundred eighty thousand (22,780,000) shares (adjusted to reflect the stock
dividend effective November 23, 1994) of the Company's $.001 par value common
stock (the "Common Stock"); provided, however, that such aggregate number of
shares
3.
<PAGE> 84
shall be reduced to reflect the number of shares of the Company's Common Stock
which has been sold under, or may be sold pursuant to outstanding options
granted under, the Company's Incentive Stock Option Plan, 1987 Supplemental
Stock Option Plan and Supplemental Nonemployee Stock Option Plan to the same
extent as if such sales had been made or options had been granted pursuant to
this Plan. If any right granted under the Plan shall for any reason terminate
without having been exercised, the Common Stock not purchased under such right
shall again become available for the Plan.
4. GRANT OF RIGHTS; OFFERING
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
4.
<PAGE> 85
5. ELIGIBILITY
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is at least twenty (20) hours per week and at least five (5) months
per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
5.
<PAGE> 86
(ii) the Purchase Period (as defined below) for such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Purchase Period (as defined below) for such Offering, he or she will
not receive any right under that Offering.
(c) Directors and executive officers of the Company or an Affiliate who
are highly compensated employees within the meaning of Section 423(b)(4)(D) of
the Code are not eligible to be granted rights under the Plan.
(d) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(d), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(e) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
6.
<PAGE> 87
6. RIGHTS; PURCHASE PRICE
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase the number
of shares of Common Stock of the Company purchasable with up to twenty percent
(20%) of such employee's Compensation (as defined in Section 7(a)) during the
period which begins on the Offering Date (or such later date as the Board
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each Offering made
under this Plan, the Board or the Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such Offering. In addition, in connection with each such Offering, the Board or
the Committee may specify the maximum fair market value of Common Stock which
may be purchased by any employee pursuant to such Offering as well as a maximum
aggregate number of shares which may be purchased by all eligible employees on
any given Exercise Date (as defined in the Offering) under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
7.
<PAGE> 88
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Exercise Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION
(a) An eligible employee may become a participant in an Offering by
delivering an agreement to the Company within the time specified in the
Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to twenty percent (20%) of such employee's
Compensation during the Purchase Period. Compensation is defined as total cash
compensation, including commissions, bonuses, overtime and other cash
compensation, and amounts elected to be deferred by the employee (that would
otherwise have been paid) under the Company's Cash or Deferred Savings Plan. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. At any time during the Purchase Period a participant may terminate
his or her payroll deductions. A participant may reduce, increase or begin such
payroll deductions after the beginning of any Purchase Period only as provided
for in the Offering. If specifically allowed pursuant to the terms of an
Offering, a participant may make direct payments into his or her account to the
extent such participant has not had the maximum amount withheld during the
Purchase Period.
(b) If a participant terminates his or her payroll deductions, such
participant may withdraw from the Offering by delivering to the Company a notice
of withdrawal in such form as
8.
<PAGE> 89
the Company provides. Such withdrawal may be elected at any time prior to the
end of the Purchase Period. Upon such withdrawal from the Offering by a
participant, the Company shall distribute to such participant all of his or her
accumulated payroll deductions (reduced to the extent, if any, such deductions
have been used to acquire stock for the participant) under the Offering without
interest, and such participant's interest in that Offering shall be
automatically terminated. A participant's withdrawal from an Offering will have
no effect upon such participant's eligibility to participate in any other
Offerings under the Plan but such participant will be required to deliver a new
participation agreement in order to participate in other Offerings under the
Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company or an Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), without interest.
(d) Rights granted under the Plan shall not be transferable, and shall
be exercisable only by the person to whom such rights are granted.
8. EXERCISE
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted
9.
<PAGE> 90
under the Plan. The amount, if any, of accumulated payroll deductions remaining
in each participant's account after the purchase of shares which is less than
the amount required to purchase one share of stock on the final Exercise Date of
an Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to such participant after such
Exercise Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Exercise Date of an Offering shall be distributed in full to such
participant after such Exercise Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If, on an Exercise Date of any Offering hereunder, the Plan
is not so registered, no rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Purchase Period
(reduced to the extent, if any, such deductions have been used to acquire stock
for the participants) shall be distributed to the participants, without
interest.
9. COVENANTS OF THE COMPANY
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
10.
<PAGE> 91
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall have
been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and the maximum number of
shares subject to
11.
<PAGE> 92
the Plan and the class(es) and the number of shares and price per share of
stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion, any surviving corporation shall assume outstanding rights or
substitute similar rights for those under the Plan, such rights shall continue
in full force and effect, or such rights shall be exercised immediately prior to
such event.
13. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the shares of the Company represented and voting at a duly held
meeting within 12 months before or after the adoption of the amendment, where
the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code); or
12.
<PAGE> 93
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code. It is expressly
contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible employees with the maximum benefits
provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee stock purchase plans and/or to bring
the Plan and/or rights granted under it into compliance therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted.
14. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom such rights were granted.
15. EFFECTIVE DATE OF PLAN
The Plan as amended and restated herein shall become effective as
determined by the Board, but no rights granted after the date of this amendment
and restatement of the Plan shall be
13.
<PAGE> 94
exercised unless and until this amended and restated Plan has been approved by
the vote of the holders of a majority of the outstanding shares of the Company
entitled to vote or by the written consent of the holders of the outstanding
shares of the Company entitled to vote to the extent necessary to obtain
employee stock purchase plan treatment under Section 423 of the Code, and, if
required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
14.
<PAGE> 95
THIS DOCUMENT CONSTITUTES PART OF THE PROSPECTUS
COVERING THESE SECURITIES, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
MAXIM INTEGRATED PRODUCTS, INC.
INCENTIVE STOCK OPTION PLAN
1987 SUPPLEMENTAL STOCK OPTION PLAN
1987 EMPLOYEE STOCK PARTICIPATION PLAN
The date of this document is August 29, 1995
<PAGE> 96
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DESCRIPTION OF THE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Duration, Amendment and Termination . . . . . . . . . . . . . . . . 3
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Subject to the Plans . . . . . . . . . . . . . . . . . . . . . 4
Adjustment Provisions . . . . . . . . . . . . . . . . . . . . . . . 5
Exercise of Rights and Regulatory Authority . . . . . . . . . . . . 5
Terms of Rights Under the Plans . . . . . . . . . . . . . . . . . . 6
Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . 6
Exercise Price . . . . . . . . . . . . . . . . . . . . . . . 6
Consideration . . . . . . . . . . . . . . . . . . . . . . . 6
Option Exercise . . . . . . . . . . . . . . . . . . . . . . 6
Early Exercise . . . . . . . . . . . . . . . . . . . . . . . 7
Sequential Exercise . . . . . . . . . . . . . . . . . . . . 7
Term . . . . . . . . . . . . . . . . . . . . . . . . . 7
Termination of Option . . . . . . . . . . . . . . . . . . . 7
Nontransferability . . . . . . . . . . . . . . . . . . . . . 7
Section 162(m) Limit. . . . . . . . . . . . . . . . . . . . 8
Supplemental Plan . . . . . . . . . . . . . . . . . . . . . 8
Exercise Price . . . . . . . . . . . . . . . . . . . . . . . 8
Consideration . . . . . . . . . . . . . . . . . . . . . . . 8
Option Exercise . . . . . . . . . . . . . . . . . . . . . . 9
Early Exercise . . . . . . . . . . . . . . . . . . . . . . . 9
Term . . . . . . . . . . . . . . . . . . . . . . . . . 9
Termination of Option . . . . . . . . . . . . . . . . . . . 9
Nontransferability . . . . . . . . . . . . . . . . . . . . . 9
Section 162(m) Limit. . . . . . . . . . . . . . . . . . . . 10
Participation Plan . . . . . . . . . . . . . . . . . . . . . 10
Participation . . . . . . . . . . . . . . . . . . . . . . . 10
Number of Shares in an Offering and Maximum Fair
Market Value. . . . . . . . . . . . . . . . . . . . . . . . 10
Purchase of Stock . . . . . . . . . . . . . . . . . . . . . 11
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i.
<PAGE> 97
<TABLE>
<S> <C>
Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . 11
Termination of Employment . . . . . . . . . . . . . . . . . 11
Nontransferability . . . . . . . . . . . . . . . . . . . . . 11
ERISA AND OTHER QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . 12
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLANS . . . . . . . . . . . . 12
Incentive Stock Options . . . . . . . . . . . . . . . . . . 12
Grant . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Disposition . . . . . . . . . . . . . . . . . . . . . . . . 13
Qualifying Disposition . . . . . . . . . . . . . . . . . . . 13
Disqualifying Disposition . . . . . . . . . . . . . . . . . 13
Stock for Stock Exercises . . . . . . . . . . . . . . . . . 14
Alternative Minimum Tax . . . . . . . . . . . . . . . . . . 15
Consequences to the Company . . . . . . . . . . . . . . . . 16
Supplemental Stock Options . . . . . . . . . . . . . . . . . 16
Grant . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Stock-for-Stock Exercises. . . . . . . . . . . . . . . . . . 16
Disposition . . . . . . . . . . . . . . . . . . . . . . . . 17
Stock of Officers and Directors Subject to Section 16(b)
and Stock Subject to Certain Repurchase Options . . . . . . 17
Participation Plan . . . . . . . . . . . . . . . . . . . . . 18
Qualifying Disposition . . . . . . . . . . . . . . . . . . . 18
Disqualifying Disposition . . . . . . . . . . . . . . . . . 18
Disposition . . . . . . . . . . . . . . . . . . . . . . . . 18
Consequences to the Company . . . . . . . . . . . . . . . . 18
Golden Parachute Rules . . . . . . . . . . . . . . . . . . . 19
Other Tax Consequences . . . . . . . . . . . . . . . . . . . 19
RESTRICTIONS ON RESALES BY OFFICERS AND DIRECTORS . . . . . . . . . . . . . . 19
Incentive Plan and Supplemental Plan . . . . . . . . . . . . . . . . 19
Participation Plan . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
ii.
<PAGE> 98
AVAILABLE INFORMATION
The United States securities laws require Maxim Integrated Products,
Inc. (the "Company") to provide information about its business and financial
status in annual reports, commonly known as "10-Ks" and quarterly reports,
commonly known as "10-Qs." These reports are filed with the Securities and
Exchange Commission. In addition, if certain important corporate events occur
during the year, the Company may file reports commonly known as "8-Ks." The
Company also prepares and files with the Commission a proxy statement in
connection with its annual meeting of stockholders. The proxy statement provides
further information about the Company and its officers, directors and major
stockholders. From time to time the Company may also file other documents with
the Securities and Exchange Commission as required by Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act").
All of these documents constitute part of the information required by
securities laws to be provided or made available to participants in connection
with their purchase of stock under the Company's Incentive Stock Option Plan
(the "Incentive Plan"), 1987 Supplemental Stock Option Plan (the "Supplemental
Plan"), and 1987 Employee Stock Participation Plan (the "Participation Plan");
that is, these documents are incorporated by reference into these materials,
which constitute the Prospectus for the plans.
For a copy of these documents, all of which are available without
charge and upon written or oral request, please contact Stockholder Relations,
Maxim Integrated Products, Inc., 120 San Gabriel Drive, Sunnyvale, California
94086, telephone: (408) 737- 7600, which will be happy to assist you.
If you are already a stockholder of the company, an optionee under any
of the Company's stock option plans or a participant in the Company's
Participation Plan, you should receive copies of the company's proxy statement,
reports to stockholders and other stockholder communications. You may always
request copies of this information, which can be obtained without charge from
Stockholder Relations.
1.
<PAGE> 99
INTRODUCTION
This Prospectus covers shares of the Company's Common Stock, $.001 par
value ("Common Stock") offered for sale to holders of options to purchase shares
of Common Stock granted or to be granted to employees of the Company under the
Company's Incentive Plan and Supplemental Plan and to holders of rights to
purchase shares of Common Stock granted or to be granted to employees of the
Company under the Company's Participation Plan. The Incentive Plan, Supplemental
Plan and Participation Plan are hereinafter referred to collectively as the
"Plans" and individually as a "Plan." This Prospectus sets forth information
concerning the Plans and the Company, and will be distributed to participating
employees pursuant to the Securities Act of 1933 (the "Securities Act"). The
terms and conditions of the offer and sale of the Common Stock, including the
prices of the shares, are governed by the provisions of the Plans and the
agreements thereunder between the Company and each participating employee. When
used in this Prospectus, unless the context indicates otherwise, the "Company"
refers to Maxim Integrated Products, Inc. and its consolidated subsidiaries.
DESCRIPTION OF THE PLANS
The following descriptions of the essential features of the Plans are
qualified by reference to the full texts of the Plans, copies of which are being
delivered to participating employees.
PURPOSE
The common purpose of the Plans is to provide a means by which selected
employees of the Company and any parent corporation or subsidiary corporation of
the Company ("Affiliate"), as those terms are defined in Section 424 of the
Internal Revenue Code of 1986, as amended (the "Code"), could be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of employees with the Company, to secure and retain the services of
persons capable of performing services for the Company, and to provide
incentives for employees to exert maximum efforts for the success of the
Company.
ADMINISTRATION
The Plans are administered by the Board of Directors of the Company.
The Board is authorized in each of the Plans to delegate administration of the
Plan to a committee composed of not less than three members of the Board. Each
of the members of a committee under the Incentive Plan or Supplemental Plan must
be disinterested within the meaning of Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time, and may also be outside directors within the
meaning of Section 162(m) of the Code.
The Board has the final power to construe and interpret the Plans and
the rights granted under them, and, subject to the provisions of the applicable
Plan, to determine: the persons to
2.
<PAGE> 100
whom and the dates on which options will be granted pursuant to the Incentive
Plan and Supplemental Plan, the number of shares to be subject to each option,
the time or times during the term of each option within which all or a portion
of such option may be exercised, the exercise price, the type of consideration
and the other terms of the options; when and how rights to purchase Common Stock
of the Company under the Participation Plan will be granted, the terms of each
offering of rights under the Participation Plan, and the Affiliates eligible to
participate in the Participation Plan.
Questions concerning the administration of the Plans may be addressed
to Stock Administrator, Maxim Integrated Products, Inc., 120 San Gabriel Drive,
Sunnyvale, California 94086, telephone (408) 737-7600.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate any or all of the Plans at any time.
Unless sooner terminated, the Incentive Plan will terminate on August 12, 2002,
the Supplemental Plan will terminate on June 1, 1997 and the Participation Plan
will terminate on August 25, 1997.
The Board may at any time amend or terminate any of the Plans, except
that such amendment or termination shall not impair or alter any rights granted
under a Plan prior thereto without the consent of the person to whom such rights
were granted. Any future amendment of the Plans must be approved, within 12
months before or after its adoption by the Board of Directors, by the majority
vote of the shares of the Company represented and voting at a duly held meeting
if the amendment would: (i) increase the number of shares reserved for options
or rights under the Plan; (ii) in the case of the Incentive Plan, (a) materially
modify the requirements as to eligibility for participation in the Plan, or (b)
materially increase the benefits accruing to participants under the Plan; (iii)
in the case of the Supplemental Plan, materially modify the eligibility
requirements for participation in the Plan, or materially increase the benefits
which may accrue to participants under the Plan except to the extent permitted
by 16b-3 promulgated under the Exchange Act, and (iv) with respect to the
Participation Plan, (a) modify provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval to
obtain employee stock purchase plan treatment under Section 423 of the Code), or
(b) modify the Plan in any other way that requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code.
ELIGIBILITY
Options under the Incentive Plan and the Supplemental Plan may be
granted to employees (including officers) of the Company or any Affiliate. A
director of the Company is not eligible for the benefits of the Incentive Plan
or the Supplemental Plan unless he or she is also an employee of the Company or
an Affiliate. A director is not eligible to be granted options under the
Incentive Plan or the Supplemental Plan unless and until he or she is expressly
declared eligible to participate
3.
<PAGE> 101
in such plan by action of the Board, and only if, at any time discretion is
exercised by the Board in the selection of a director as a person to whom
options or stock rights may be granted, or in the determination of the number of
shares which may be covered by such options or stock rights, a majority of the
Board and a majority of the directors acting on such matter are disinterested
persons (or, if administration of such Plan has been delegated to a committee,
all of the members of the committee are disinterested persons). Under the
Incentive Plan and the Supplemental Plan, a director is a disinterested person
if he or she meets the definition of "disinterested person" set forth in
Securities and Exchange Commission Rule 16b-3 or any successor thereof.
For options that were granted under the Incentive Plan prior to January
1, 1987, the aggregate fair market value (determined as of the time the option
was granted) of the stock for which any employee could have been granted options
in any calendar year under all incentive stock option plans of the Company and
affiliates could not exceed $100,000 plus any unused limit carryover (as defined
in Section 422A(c)(4) of the Internal Revenue Code of 1954, as amended) for such
year. For options granted after December 31, 1986, the aggregate fair market
value (determined at the time the options are granted) of the stock with respect
to which incentive stock options are first exercisable during any calendar year
for any employee under all incentive stock option plans of the Company and its
Affiliates may not exceed $100,000. Should it be determined that any option
granted under the Incentive Plan exceeds the applicable maximum, such option or
portion thereof will be considered a nonstatutory stock option as required in
the Incentive Plan or by law.
Under the Participation Plan, any person who is customarily employed at
least 20 hours per week and five months per calendar year by the Company or
designated Affiliates on the first day of each Purchase Period (as defined in
"Terms of Rights Under the Plans, Participation Plan" below) is eligible to
participate. Employees of an Affiliate of the Company designated by the Board of
Directors are eligible to participate in the Participation Plan provided they
meet the same employment requirements with respect to such Affiliate. Directors
and officers of the Company or an Affiliate who are highly compensated (as
defined in the Code) are not eligible to be granted rights under the
Participation Plan. Notwithstanding the foregoing, no employee shall be eligible
for the grant of any rights under the Participation Plan if, immediately after
such grant, that employee would own stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
Affiliate (including any stock which such employee may purchase under all
outstanding rights and options), nor can any employee be granted rights under
the Participation Plan which would permit that employee to buy more than $11,765
worth of stock (determined at the fair market value of the shares at the time
such rights are granted) under all employee stock purchase plans of the Company
and its Affiliates in any calendar year.
STOCK SUBJECT TO THE PLANS
Up to 22,780,000 shares of the Company's Common Stock are authorized
for issuance under each of the Incentive Plan, the Supplemental Plan and the
Participation Plan and the
4.
<PAGE> 102
Company's Supplemental Nonemployee Stock Option Plan ("Nonemployee Plan"), less
any shares that may be issued or subject to options granted under the other
plans. Thus, the aggregate number of shares authorized for issuance under the
Plans and the Nonemployee Plan, taken together, may not exceed 22,780,000. Stock
subject to the Plans may be unissued shares or reacquired shares, bought on the
market or otherwise. If options or rights granted under any of the Plans or the
Nonemployee Plan expire, lapse or otherwise terminate without being exercised,
the Common Stock not purchased under such options or rights again becomes
available for issuance under the Plans and the Nonemployee Plan.
ADJUSTMENT PROVISIONS
If any change is made in the stock subject to the Plans or subject to
any rights granted under the Plans (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Board shall make
appropriate adjustments in the classes and maximum number of shares subject to
the Plans and the classes, number of shares and price per share of stock subject
to outstanding options or rights. [The number of shares and related information
set forth herein have been adjusted to give effect to the 1 for 1 stock dividend
effective November 23, 1994.]
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, pursuant to the Plans, at the sole discretion of the
Board of Directors, (1) any surviving corporation shall assume any rights
outstanding under such Plans or shall substitute similar rights for those
outstanding under such Plans, or (2) such rights will continue in full force and
effect, or (3) with respect to the Incentive Plan and Supplemental Plan, the
time during which options may be exercised will be accelerated and the options
terminated if not exercised prior to such event, and with respect to the
Participation Plan, the rights will be exercised immediately prior to such
event.
EXERCISE OF RIGHTS AND REGULATORY AUTHORITY
The Company will seek to obtain from appropriate regulatory agencies
all authority necessary to issue and sell stock upon the exercise of rights
granted pursuant to the Plans. The Plans provide that if the Company is unable
to obtain authority which counsel for the Company deems necessary for the lawful
issuance of stock, the Company is relieved of liability for failure to issue
such stock unless and until such authority is obtained.
5.
<PAGE> 103
TERMS OF RIGHTS UNDER THE PLANS
INCENTIVE PLAN
The following is a description of the terms and conditions of options
permitted by the Incentive Plan. Such terms and conditions may change from time
to time, and the terms and conditions of separate options need not be identical.
EXERCISE PRICE. The exercise price for any option granted under the
Incentive Plan may not be less than the fair market value of the stock subject
to the option on the date of grant. However, no option may be granted to a
person who, at the time of the grant, owns stock constituting more than 10% of
the total combined voting power of all classes of stock entitled to vote of the
Company or an Affiliate unless the exercise price is at least 110% of the fair
market value of such stock at the date the option is granted and the term of the
option does not exceed five years from the date such option is granted. For
purposes of such determination, the optionee is considered to own all stock
directly or indirectly owned by or for such optionee's spouse, brothers and
sisters, ancestors and lineal descendants, and, in proportion to his interest in
a corporation, partnership, estate or trust, any stock owned directly or
indirectly by or for such an entity.
The Incentive Plan permits the Company's Board of Directors or the
committee administering the Incentive Plan to reprice outstanding options by
canceling out standing options and granting new lower priced options or to lower
the exercise price of any outstanding option.
CONSIDERATION. The exercise price of options granted under the
Incentive Plan must be paid either (i) in cash at the time the option is
exercised or (ii) at the discretion of the Board, either at the time of grant or
exercise of the option (A) by delivery to the Company of other Common Stock of
the Company, (B) pursuant to a deferred payment or other arrangement (which may
include the use of other Common Stock of the Company) with the person to whom
the option is granted or to whom the option is transferred as permitted by the
Incentive Plan, or (C) in any other form of legal consideration that may be
acceptable to the Board. In the case of any deferred payment arrangement,
interest will be payable at least annually and will be charged at the minimum
rate necessary to avoid imputation of interest under the Code.
OPTION EXERCISE. Options granted under the Incentive Plan may be
immediately exercisable or allotted in periodic installments, as determined by
the Board. If the total number of shares subject to an option is allotted in
periodic installments, then during each of these periods, the option may be
exercised with respect to some or all of the shares allotted to said period, or
with respect to some or all of the shares allotted to a prior period with
respect to which the option was not fully exercised, or both. During the
remainder of the term of the option (if its term extends beyond the end of the
installment periods) the option may be exercised with respect to any shares then
remaining subject to the option. The Board has the power to accelerate the time
during which an option may be exercised.
6.
<PAGE> 104
In connection with the exercise of options under the Incentive Plan,
the Company's regular procedures may qualify for certain programs authorized by
Regulation T as promulgated by the Federal Reserve Board. If optionees elect to
use such a program, the Company intends to comply with the requirements of
Regulation T.
EARLY EXERCISE. The option may, but need not, include a provision
whereby the optionee may elect during the term of his or her employment with the
Company or an Affiliate to exercise the option as to a part or all of the shares
subject to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any unvested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board determines to be
appropriate.
SEQUENTIAL EXERCISE. Incentive stock options granted before 1987 may
not be exercised by an optionee while there is outstanding (as defined in
Section 422A of the Internal Revenue Code of 1954, as amended) any other
incentive stock option that was previously granted to such optionee to purchase
stock of the Company, or of any corporation that (at the time of the granting of
such option) is an Affiliate of the Company or a predecessor corporation of any
of such corporations. This "sequential exercise restriction" does not apply to
the exercise of incentive stock options granted after 1986.
TERM. Options granted under the Incentive Plan may have a maximum term
of ten years, except that options granted to persons owning more than 10% of the
total combined voting power of all classes of stock of the Company or an
Affiliate may have a maximum term of five years.
TERMINATION OF OPTION. Optionees earn the right to exercise their
options by remaining as employees of the Company. Under the Incentive Plan, an
option will terminate three months after the optionee ceases to be employed by
the Company or an Affiliate, unless (i) the termination of employment is due to
such person's permanent and total disability (as defined in the Code), in which
case the option may, but need not, provide that it may be exercised at any time
within one year of such termination; or (ii) the optionee dies while employed by
the Company or an Affiliate, or within not more than three months after
termination of such employment, in which case the option may, but need not,
provide that it may be exercised (to the extent the option was exercisable at
the time of the optionee's death) by the person or persons to whom the rights of
such option pass by will or the laws of descent or distribution within 18 months
of the optionee's death; or (iii) the option by its terms specifically provides
either (A) that it will terminate sooner than three months after termination of
the optionee's employment or (B) that it may be exercised more than three months
after termination of the optionee's employment with the Company or an Affiliate.
NONTRANSFERABILITY. Under the Incentive Plan, an option may not be
transferred by the optionee other than by will or by the laws of descent and
distribution. During the lifetime of an optionee, an option may be exercised
only by the optionee.
7.
<PAGE> 105
SECTION 162(M) LIMIT. Under Section 162(m) of the Code, a publicly held
corporation cannot deduct the compensation it pays to a covered employee to the
extent that the compensation paid exceeds $1,000,000 in any tax year.
Compensation attributable to the exercise of stock options will not be included
in the $1,000,000 calculation if (i) the option grant is made by a committee of
at least two outside directors, (ii) the plan under which the option is granted
contains a per-employee limit on the number of shares that may be granted during
a specified period, (iii) stockholders approve by majority vote the per-employee
limit, and (iv) the exercise price of the option is no less than the fair market
value of the stock on the date of grant. Thus, no person is eligible to be
granted options under the Incentive Plan covering more than 1,500,000 shares in
any calendar year.
SUPPLEMENTAL PLAN
The following is a description of the terms and conditions of options
permitted by the Supplemental Plan. Such terms and conditions may change from
time to time, and the terms and conditions of separate options need not be
identical.
EXERCISE PRICE. The exercise price of each option must be not less than
85% of the fair market value of the stock subject to the option on the date the
option is granted. However, no option may be granted to a person who, at the
time of the grant, owns stock constituting more than 10% of the total combined
voting power of all classes of stock entitled to vote of the Company or an
Affiliate unless the exercise price is at least 110% of the fair market value of
such stock at the date the option is granted and the term of the option does not
exceed five years from the date such option is granted. For purposes of such
determination, the optionee is considered to own all stock directly or
indirectly owned by or for such optionee's spouse, brothers and sisters,
ancestors and lineal descendants, and, in proportion to his interest in a
corporation, partnership, estate or trust, any stock owned directly or
indirectly by or for such an entity.
The Supplemental Plan permits the Company's Board of Directors or the
committee administering the Supplemental Plan to reprice outstanding options by
canceling outstanding options and granting new lower priced options or to lower
the exercise price of any outstanding option.
CONSIDERATION. The purchase price of stock acquired pursuant to an
option may be paid either (i) in cash at the time the option is exercised, or
(ii) at the discretion of the Board either at the time of grant or exercise of
the option (A) by delivery to the Company of other Common Stock of the Company,
or (B) according to a deferred payment or other arrangement (which may include
the use of other Common Stock of the Company) or (C) in any other form of legal
consideration that may be acceptable to the Board in its discretion. Any
deferred payment arrangement may be interest free or may provide for interest at
any rate deemed appropriate by the Board.
OPTION EXERCISE. The total number of shares of stock subject to an
option may, but need not, be allotted in periodic installments. From time to
time during each of the installment periods,
8.
<PAGE> 106
the option may be exercised with respect to some or all of the shares allotted
to that period, or with respect to some or all of the shares allotted to any
prior period as to which the option was not fully exercised. During the
remainder of the term of the option (if its term extends beyond the end of the
installment periods), the option may be exercised from time to time with respect
to any shares then remaining subject to the option.
In connection with the exercise of options under the Supplemental Plan,
the Company's regular procedures may qualify for certain programs authorized by
Regulation T as promulgated by the Federal Reserve Board. If optionees elect to
use such a program, the Company intends to comply with the requirements of
Regulation T.
EARLY EXERCISE. The option may, but need not, include a provision
whereby the optionee may elect during the term of his or her employment with the
Company or an Affiliate to exercise the option as to a part or all of the shares
subject to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any unvested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board determines to be
appropriate.
TERM. The term of any option will not be greater than ten years from
the date it is granted, except that options granted to persons owning more than
10% of the total combined voting power of all classes of stock of the Company or
an Affiliate may have a maximum term of five years.
TERMINATION OF OPTION. Optionees earn the right to exercise their
options by remaining as employees of the Company. Options granted under the
Supplemental Plan will terminate three months after termination of the
optionee's employment with the Company or an Affiliate, unless (i) the
termination of employment of the optionee is due to such person's permanent and
total disability, in which case the option may, but need not, provide that it
may be exercised at any time within one year following the optionee's
termination of employment; or (ii) the optionee dies while in the employ of the
Company or an affiliate, or within not more than three months after the
termination of the optionee's employment, in which case the option may, but need
not, provide that it may be exercised at any time within 18 months following the
death of the optionee by the person or persons to whom the optionee's rights
under such option pass by will or by the laws of descent and distribution; or
(iii) the option by its terms specifies either (A) that it will terminate sooner
than three months after termination of the optionee's employment or (B) that it
may be exercised more than three months after termination of the optionee's
employment with the Company or an Affiliate.
NONTRANSFERABILITY. An option will not be transferable except by will
or by the laws of descent and distribution, and will be exercisable during the
lifetime of the person to whom the option is granted only by such person.
9.
<PAGE> 107
SECTION 162(M) LIMIT. Under Section 162(m) of the Code, a publicly held
corporation cannot deduct the compensation it pays to a covered employee to the
extent that the compensation paid exceeds $1,000,000 in any tax year.
Compensation attributable to the exercise of stock options will not be included
in the $1,000,000 calculation if (i) the option grant is made by a committee of
at least two outside directors, (ii) the plan under which the option is granted
contains a per-employee limit on the number of shares that may be granted during
a specified period, (iii) stockholders approve by majority vote the per-employee
limit, and (iv) the exercise price of the option is no less than the fair market
value of the stock on the date of grant. Thus, no person is eligible to be
granted options under the Supplemental Plan covering more than 1,500,000 shares
in any calendar year.
PARTICIPATION PLAN
The Board has the power from time to time to grant or provide for the
grant of rights to purchase stock of the Company under the Participation Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board. Each Offering will be in such form and will contain such
terms and conditions as the Board deems appropriate, except that each Offering
must include the substance of the required provisions of the Participation Plan,
which are described below. The provisions of separate Offerings need not be
identical. Each Offering can be no longer than 27 months. Offerings are expected
to be of approximately 12 months' duration (a "Purchase Period").
PARTICIPATION. An eligible employee becomes a participant in an
Offering by delivering an agreement to the Company, within the time specified in
each Offering, authorizing payroll deductions of up to 20% of his or her
compensation (as defined in the Participation Plan) during the Purchase Period.
All payroll deductions made for a participant are credited to his or her account
under the Participation Plan and are deposited with the general funds of the
Company. If specifically allowed pursuant to the terms of the Offering, a
participant may make direct payments into his or her account to the extent such
participant has not had the maximum amount withheld during the Purchase Period.
The purchase price of the shares is accumulated by payroll deductions (or direct
payments) over the Purchase Period. At any time during the Purchase Period a
participant may terminate his or her payroll deductions, but a participant may
increase, reduce or begin such payroll deductions after the beginning of any
Purchase Period only as provided for in the Offering.
NUMBER OF SHARES IN AN OFFERING AND MAXIMUM FAIR MARKET VALUE. In
connection with each Offering, the Board will specify a maximum number of shares
that may be purchased by any participant in the Offering and the maximum
aggregate number of shares which may be purchased pursuant to such Offering by
all participants. If the aggregate number of shares purchased upon exercise of
rights granted in the Offering would exceed the maximum aggregate number, the
Board will make a pro rata allocation of the shares available in as nearly a
uniform manner as practicable and as it deems equitable. In addition, the Board
may specify the maximum
10.
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fair market value of stock of the Company any employee may be granted the right
to purchase pursuant to such Offering.
PURCHASE OF STOCK. Unless the employee's participation is discontinued
(see "Withdrawal" below), that employee's right to purchase shares will be
exercised automatically on a date or dates specified in each Offering (an
"Exercise Date") at the applicable price. It is expected that Exercise Dates
will occur on the last day of each calendar quarter of each calendar year within
a Purchase Period. On each Exercise Date, the balance in each participant's
account will be applied to the purchase of whole shares of stock of the Company.
No fractional shares shall be issued upon the exercise of rights granted under
the Participation Plan. The amount remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Exercise Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Participation Plan, unless such participant withdraws from such next
Offering or is no longer eligible to be granted rights under the Participation
Plan, in which case such amount shall be distributed to such participant after
the Exercise Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Exercise Date of an Offering shall be distributed in full to the
participant after such Exercise Date, without interest.
PURCHASE PRICE. The purchase price per share of stock acquired pursuant
to the Participation Plan will not be less than the lesser of: (i) an amount
equal to 85% of the fair market value of a share of Common Stock on the Offering
Date; or (ii) an amount equal to 85% of the fair market value of a share of
Common Stock on the Exercise Date.
WITHDRAWAL. While each participant in the Participation Plan is
required to sign an agreement authorizing payroll deductions, the participant
may withdraw from a given Offering by terminating his or her payroll deductions
and by delivering to the Company a notice of withdrawal from the Offering. Such
withdrawal may be elected at any time prior to the end of the applicable
Purchase Period. Upon any withdrawal from an Offering by the employee, the
Company will distribute to the employee his or her accumulated payroll
deductions (reduced for prior purchases) without interest, and such employee's
interest in the Offering will be automatically terminated. The employee is not
entitled to participate again in that Offering. An employee's withdrawal from an
Offering will not have any effect upon that employee's eligibility to
participate in subsequent Offerings under the Participation Plan, but such
employee will be required to submit a new participation agreement.
TERMINATION OF EMPLOYMENT. Rights granted pursuant to any Offering
under the Participation Plan shall terminate immediately upon cessation of an
employee's employment for any reason, and the Company shall distribute to such
employee all of his or her accumulated payroll deductions (reduced for prior
purchases), without interest.
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NONTRANSFERABILITY. Rights granted under the Participation Plan are not
transferable and can only be exercised by the person to whom such rights are
granted.
ERISA AND OTHER QUALIFICATIONS
The Company is not aware of any provisions of the Employee Retirement
Income Security Act of 1974 to which the Plans are subject.
The Plans are not qualified as pension or profit sharing plans under
Section 401(a) of the Code. Employees who are granted stock rights under the
Plans, therefore, are not entitled to the tax treatment available to
participants in plans qualified under that section.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLANS
Options under the Incentive Plan and rights under the Participation
Plan are intended to be eligible for the potentially favorable federal income
tax treatment accorded statutory stock options under the Code. Options under the
Supplemental Plan are subject to federal income tax treatment pursuant to rules
governing options that are not statutory stock options.
For tax years after 1986 and before 1991, the deduction allowed under
prior law for a taxpayer with net long-term capital gains was repealed with the
result that net long-term capital gains generally have been taxed at the same
rate applicable to ordinary income. Consequently, the treatment of gain or loss
as capital gain or loss has been less significant under current law than in
prior years. The Revenue Recognition Act of 1990 (the "1990 Act"), signed into
law on November 5, 1990, reduced the maximum tax rate applicable to capital
gains of individuals to 28% after 1990. As a result, for tax years after 1990,
many individuals will once again pay tax on capital gains at a lower marginal
rate than on ordinary income.
In addition, there will continue to be other differences between
capital gains and ordinary income. Currently, any gain or loss recognized upon
the sale of a capital asset (which includes stock acquired under the Plans) is
characterized as a capital gain or loss which is long-term or short-term
depending on how long the asset was held. Such gains and losses are subject to
certain other provisions of the Code not applicable to ordinary income. For
example, such gains and losses are "netted" against other capital gains and
losses and only $3,000 of net capital losses may be deducted against ordinary
income in any year by any individual taxpayer. These differences will continue
to be relevant after 1990.
INCENTIVE STOCK OPTIONS
Potentially favorable tax treatment is provided for stock options that
qualify as "incentive stock options" under Section 422 of the Code. The
following discussion of the federal income tax
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consequences associated with incentive stock options is based on the Code
itself, temporary and proposed regulations and, where the Company believes it
is reasonable and appropriate, prior regulations and rulings.
GRANT. There are generally no federal income tax consequences to the
optionee by reason of the grant of an incentive stock option.
EXERCISE. Upon exercise of an incentive stock option, the optionee does
not recognize taxable income. However, the exercise of an incentive stock option
will have alternative minimum tax consequences. (See "Alternative Minimum Tax"
below.)
DISPOSITION. The federal income tax consequences of disposing of Common
Stock acquired through the exercise of an incentive stock option depend on the
timing of the disposition in relation to the dates on which the option was
granted and on which the stock was transferred to the optionee upon exercise of
the option (generally, the exercise date).
A disposition generally includes any transfer of legal title (including
a gift) but does not include a transfer into joint ownership with right of
survivorship if the optionee remains one of the joint owners, a pledge or a
transfer by bequest or inheritance, exchanges qualifying under certain
provisions of the Code regarding tax-free exchanges of stock, or certain
transfers to a spouse or former spouse incident to a divorce. However, if an
optionee exchanges stock acquired through the exercise of a statutory stock
option (including an incentive stock option) as payment of the exercise price of
another incentive stock option then such exchange will be treated as a
disposition (and will be a disqualifying disposition) of such stock, unless the
applicable holding periods of such stock were met (see "Disqualifying
Disposition" below).
QUALIFYING DISPOSITION. If an optionee holds Common Stock acquired
through exercise of an incentive stock option for at least two years from the
date on which the option is granted and at least one year from the date on which
the shares are transferred to the optionee upon exercise of the option, any gain
or loss on a disposition of such stock will be taxed to the optionee as a
long-term capital gain or loss equal to the difference between the consideration
received upon such disposition and the optionee's basis in such stock (generally
the option exercise price).
DISQUALIFYING DISPOSITION. Generally, if the optionee disposes of the
stock before the expiration of either of the holding periods described above,
and the transaction is one in which any loss, if any were sustained, would be
recognized under the Code, then at the time of disposition the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the optionee's adjusted
basis in the stock, or (ii) the optionee's actual gain, if any, on the purchase
and sale (i.e., the excess, if any, of the amount received upon disposition over
the optionee's adjusted basis in the stock). The optionee's additional gain, if
any, will be a capital gain. If the optionee has incurred a loss on the purchase
and sale, then the optionee will realize no ordinary income and the loss will be
a capital loss. Such capital
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gain or loss will be long-term or short-term depending on whether the stock was
held for more than one year from the date of exercise.
Under proposed regulations, an exception to these general disqualifying
disposition rules will apply with respect to optionees who acquire stock subject
to a risk of forfeiture. Generally, stock will be treated as subject to a risk
of forfeiture if it is subject to a repurchase option or if the optionee is
subject to Section 16(b) of the Exchange Act and exercises an option within six
months of its grant date. (Although it is unclear, it appears that the Internal
Revenue Service takes the position that shares acquired more than six months
after an option is granted are not treated as subject to a risk of forfeiture
even if the shares cannot be sold immediately, due to a prior "purchase" under
Section 16(b).)
In such event, the amount of ordinary income recognized on the
disposition generally will be equal to the lesser of (i) the excess, if any, of
the fair market value of the stock on the date(s) the risk of forfeiture lapses
over the option exercise price, or (ii) the optionee's actual gain, if any, on
the purchase and sale. It may be possible, however, to make a valid election
under Section 83(b) of the Code to have the fair market value on the date of
exercise (determined without regard to the risk of forfeiture) be controlling.
In any event, if the gain realized upon disposition exceeds the ordinary income
amount determined above, the optionee will have capital gain to the extent of
such excess. If the optionee has incurred a loss on the purchase and sale, the
optionee will realize no ordinary income and the loss will be a capital loss.
Any capital gain or loss will be long-term or short-term depending on whether
the stock was held for more than one year from the date on which ordinary income
is measured. If a Section 83(b) election is made, it may also affect the
optionee's alternative minimum tax liability, if any. (See "Alternative Minimum
Tax" below.)
If the optionee disposes of the stock before the expiration of either
of the holding periods described above, and the transaction is one in which
loss, if any were sustained, is not recognized under the Code (for example, the
sale of stock to the optionee's spouse), the optionee will still recognize
ordinary income as discussed above (but not limited by the actual gain realized
on the disposition). No loss will be recognized, and subsequent tax consequences
will be determined under the section of the Code which governs such
non-recognition.
The Company will be required to report to the Internal Revenue Service
any ordinary income realized by the optionee by reason of a disqualifying
disposition if such information is available to the Company and may be required
in the future to withhold taxes from the optionee's compensation with respect to
such income in order to preserve its deduction.
STOCK FOR STOCK EXERCISES. Under proposed regulations, if the exercise
price of an incentive stock option is paid in whole or in part in the form of
shares owned by the optionee immediately prior to the exercise, the optionee
will be treated as having made a tax-free exchange of the previously held shares
for an equivalent number of shares received under the option (the "equivalent
shares"). Consequently, the optionee generally will recognize no income by
reason of
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such exercise. However, ordinary income could be recognized if the already owned
shares were acquired upon exercise of an incentive stock option or under an
employee stock purchase plan as defined in Section 423 of the Code and the
exchange were treated as a disposition (see "Disposition" above). The tax basis,
holding periods and consequences of a subsequent disposition of shares received
upon exercise will depend on whether the shares disposed of are equivalent
shares or additional shares received at the time of exercise ("additional
shares").
For purposes of calculating any capital gain or loss upon a subsequent
taxable disposition, the optionee's basis in the equivalent shares will be equal
to his basis in the shares surrendered plus any ordinary income recognized by
reason of the exchange, and the holding period of the surrendered shares will
carryover to the equivalent shares. However, for purposes of calculating any
ordinary income on a subsequent disqualifying disposition, the amount treated as
having been paid for the equivalent shares will be equal to their fair market
value on the date of exercise and the holding period for such shares will begin
on the date of exercise.
It appears that the optionee's basis in any additional shares will be
zero for purposes of calculating any capital gain upon a later disposition. For
purposes of calculating any ordinary income upon a disqualifying disposition of
the additional shares the amount treated as having been paid for the additional
shares will be zero. The holding period of the additional shares will begin on
the date of exercise for all purposes. In the event of a disqualifying
disposition of shares acquired upon exercise of an incentive stock option with
stock, the shares with the lowest basis (i.e., the additional shares and not the
equivalent shares) will be treated as having been disposed of first.
ALTERNATIVE MINIMUM TAX. The alternative minimum tax is a separately
computed tax that is imposed only if and to the extent it exceeds the optionee's
regular tax for the taxable year. Basically, the alternative minimum tax is an
amount equal to twenty-six percent of the taxpayer's "alternative minimum
taxable income" for the year of up to $175,000 and twenty-eight percent of any
excess ($87,500 in the case of a married individual filing a separate return).
"Alternative minimum taxable income" generally is determined by (i) reducing the
optionee's adjusted gross income by an exemption amount ($45,000 for joint
declarations and $33,750 for single taxpayers, less $0.25 for each dollar of
alternative minimum taxable income in excess of $150,000 or $112,500,
respectively) and certain specifically defined deductions, and (ii) by adding to
the amount so calculated certain tax preference items and other adjustments.
As a general rule, upon exercise of an incentive stock option the
excess of the fair market value of the stock acquired on the date of exercise
over the exercise price, the "spread" amount, is added to taxable income as an
adjustment in computing alternative minimum taxable income. An exception to this
general rule will apply with respect to optionees who acquire stock subject to a
risk of forfeiture (including optionees who purchase stock subject to certain
repurchase options and, in some cases, optionees subject to Section 16(b) of the
Exchange Act). In such event, the amount of the adjustment generally will be
equal to the excess, if any, of the fair market value of the stock
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on the date(s) the risk of forfeiture lapses over the option exercise price and
will be included in alternative minimum taxable income in the year(s) in which
the risk of forfeiture lapses. It may be possible, however, to make a valid
election under Section 83(b) of the Code within 30 days from the date of
exercise to have the fair market value on the date of exercise (determined
without regard to the risk of forfeiture) be controlling and to recognize the
adjustment in the year of exercise. If a Section 83(b) election is made, it also
may have implications for purposes of calculating ordinary income, if any, in
the event of a disqualifying disposition (see "Incentive Stock Options,
Disqualifying Disposition" above).
In calculating alternative minimum taxable income in the year of sale,
the optionee's basis in stock acquired pursuant to an incentive stock option
exercised in a tax year beginning after 1986 is increased for the adjustment
amount included in alternative minimum taxable income by reason of exercising
the option. Further, to the extent alternative minimum tax is incurred by reason
of exercising an incentive stock option after 1986, a credit is allowed against
the taxpayer's regular tax liability in later years. However, the credit cannot
be used to reduce taxes below the later year's alternative minimum tax.
CONSEQUENCES TO THE COMPANY. There are no federal income tax
consequences to the Company by reason of the grant or exercise of an incentive
stock option. To the extent the optionee recognizes ordinary income by reason of
a disqualifying disposition, the Company will be entitled (subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code, and
the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disposition occurs.
SUPPLEMENTAL STOCK OPTIONS
Options under the Supplemental Plan (referred to herein as
"nonstatutory stock options") generally have the following federal income tax
consequences:
GRANT. There normally are no tax consequences to the optionee or the
Company by reason of the grant of nonstatutory stock options.
EXERCISE. Upon exercise of a nonstatutory stock option normally the
optionee will recognize taxable ordinary income in an amount by which the fair
market value of the Common Stock on the date of exercise exceeds the exercise
price. Generally, with respect to employees, the Company is required to withhold
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized, or the Company may be required to ensure that the amount of
tax required to be withheld is available for payment.
Subject to the requirement of reasonableness, the provisions of Section
162(m) of the Code, and the satisfaction of a tax reporting obligation, the
Company will generally be entitled to a business expense deduction in the amount
of the taxable ordinary income realized by the optionee.
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STOCK-FOR-STOCK EXERCISES. If the exercise price of a nonstatutory
stock option is paid in whole or in part in the form of shares of Common Stock
owned by the optionee immediately prior to the exercise, the tax consequences to
the optionee are: (i) a tax-free exchange of the previously held shares of
Common Stock for an equivalent number of the shares of Common Stock received
under the option, and (ii) the realization of ordinary income in an amount equal
to the excess of (a) the fair market value as of the date of exercise of any
additional shares received under the option in excess of the number of
previously held shares of Common Stock exchanged, over (b) the amount of cash,
if any, paid by the participant upon exercise. The tax basis and capital-gain
holding period of the shares received under the option in the tax-free exchange
will be the same as the tax basis and holding period of the previously held
shares. The tax basis of any additional shares received upon the exercise of the
nonstatutory stock option will equal the sum of the amount of ordinary income
recognized by the participant and the amount of any cash paid on exercise, and
the participant's holding period for these shares will begin on the date of
exercise.
DISPOSITION. Upon disposition of stock acquired upon exercise of a
nonstatutory stock option, the optionee will recognize a capital gain or loss in
an amount equal to the difference between the selling price and the sum of the
amount paid for such shares plus any amount recognized as ordinary income upon
exercise of the option. Such gain or loss will be long or short-term depending
on whether the stock was held for more than one year from the date the option
was exercised.
There are no tax consequences to the Company by reason of the
disposition by the optionee of Common Stock acquired upon exercise of a
nonstatutory stock option.
STOCK OF OFFICERS AND DIRECTORS SUBJECT TO SECTION 16(B) AND STOCK
SUBJECT TO CERTAIN REPURCHASE OPTIONS. Tax consequences to an optionee who is an
officer or director of the Company or who acquires stock subject to a repurchase
option may differ from those described above.
Shares acquired subject to certain repurchase options are deemed to be
subject to a substantial risk of forfeiture. Shares acquired upon the exercise
of a nonqualified stock option by an optionee subject to Section 16(b) also will
be deemed to be subject to a risk of forfeiture if the option is exercised
within six months of the date of grant of the option. Generally, if shares are
subject to a substantial risk of forfeiture, the date on which ordinary income
is measured and recognized is delayed until the risk of forfeiture lapses,
unless, within 30 days of exercise, the optionee elects otherwise. Because
options granted under the Option Plan to officers and directors may provide that
the options can be exercised earlier than six months after the date of grant,
the shares received upon exercise of options could be subject to a risk of
forfeiture. Officers and directors receiving options exercisable within six
months after the date of grant and desiring to exercise the options within such
six months should see a tax advisor.
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Although it is unclear, it appears that the Internal Revenue Service
takes the position that shares acquired more than six months after an option is
granted are not treated as subject to a risk of forfeiture even if the shares
cannot be sold immediately, due to a prior "purchase" under Section 16(b).
PARTICIPATION PLAN
Participation in the Participation Plan is intended to qualify under
the provisions of Sections 421 and 423 of the Code. Under these provisions, a
participant will be taxed on amounts withheld as if actually received, but,
except for this, no income will be taxable to a participant until disposition of
the shares acquired. The method of taxation upon disposition will depend upon
the holding period of the purchased shares.
QUALIFYING DISPOSITION. If the shares are sold or disposed of by the
participant at least two years after the beginning of the Purchase Period and at
least one year after the purchased shares are transferred to the participant, or
if the participant dies at any time while owning the shares, then the lesser of
(i) the excess of the fair market value of the shares at the time of such
disposition or death over the purchase price or (ii) the excess of the fair
market value of the shares on the date the shares were purchased over the
purchase price (determined as of the date of grant) will be treated as ordinary
income to the participant at the time of any disposition or for the taxable year
closing with the participant's death. Any further gain upon such disposition
will be taxed as a long-term capital gain, and if the shares are sold and the
sales price is less than the purchase price, there is no ordinary income and the
participant has a long-term capital loss equal to the difference between the
sales price and the purchase price.
DISQUALIFYING DISPOSITION. If the shares are sold or disposed of before
the expiration of either or both of the holding periods described above, then
the excess of the fair market value of the shares on the purchase date over the
exercise price will be treated as ordinary income to the participant at the time
of such disposition, and the Company in the future may be required to withhold
income taxes relating to such ordinary income from other payments made to the
participant. The balance of any gain will be treated as capital gain. Even if
the shares are disposed of for less than their fair market value measured as of
the purchase date, the same amount of ordinary income is attributed to a
participant, and a capital loss is recognized equal to the difference between
the sales price and the fair market value of the shares on such purchase date.
Any such capital gain or loss will be long-term capital gain or loss if the
shares have been held more than one year from the date they are transferred to
the participant.
DISPOSITION. A disposition generally includes any transfer of legal
title (including a gift) but does not include a transfer into joint ownership
with right of survivorship if the optionee remains one of the joint owners, a
pledge or a transfer by bequest or inheritance, exchanges qualifying under
certain provisions of the Code regarding tax-free exchanges of stocks, or
certain transfers to a spouse or former spouse incident to a divorce. However,
if an optionee exchanges stock acquired
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through the exercise of a statutory stock option (including stock acquired under
the Participation Plan) as payment of the exercise price of an incentive stock
option, then such exchange will be treated as a disposition of such stock unless
the applicable holding periods of such stock were met, as described in the
preceding paragraphs.
CONSEQUENCES TO THE COMPANY. There are no federal income tax
consequences to the Company by reason of the grant or exercise of rights under
the Participation Plan. The Company is entitled to a deduction to the extent
amounts are taxed as ordinary income to a participant (subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code, and
the satisfaction of a tax reporting obligation).
GOLDEN PARACHUTE RULES. In the event that there is a change in control
of the Company, payments received by certain optionees that are contingent upon
the change in control may constitute "parachute payments." If, by reason of such
change in control, the exercisability of outstanding options is accelerated, the
value of the acceleration is added to other contingent payments, if any, in
determining whether the optionee has received "excess parachute payments." In
general, if an optionee receives excess parachute payments, an excise tax equal
to 20% of such excess parachute payments is imposed on the optionee, and the
Company does not receive a deduction for such amount.
OTHER TAX CONSEQUENCES. The foregoing discussion is not a complete
description of the federal income tax aspects of incentive and nonstatutory
stock options or participation in the Participation Plan. In addition,
administrative and judicial interpretations of the application of the federal
income tax laws are subject to change. Furthermore, no information is given with
respect to state or local taxes that may be applicable. Each participant in the
Plans should consult a tax adviser with respect to the specific transaction
contemplated.
Participants in the Plans who are residents of or are employed in a
country other than the United States may be subject to taxation in accordance
with the tax laws of that particular country in addition to or in lieu of United
States federal income taxes. Each such participant should consult with his or
her own tax adviser regarding the tax consequences and compliance requirements
associated with the granting of options and the purchase and sale of shares
under the Plans.
RESTRICTIONS ON RESALES BY OFFICERS AND DIRECTORS
Persons who are "affiliates" of the Company (as that term is defined in
Rule 144 of the Securities and Exchange Commission) may only sell shares of
Common Stock acquired under the Participation Plan and the Supplemental Plan
pursuant to (i) an effective registration statement under the Securities Act
covering their resale, (ii) Rule 144 of the Securities and Exchange Commission,
or (iii) another exemption from the registration requirements of the Securities
Act. Resales or reoffers may not be made pursuant to this Prospectus.
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INCENTIVE PLAN AND SUPPLEMENTAL PLAN
Officers or directors of the Company are also subject to the provisions
of Section 16 of the Exchange Act with respect to purchases and sales of the
Company's equity securities and related reporting obligations. If an optionee is
granted an option under the Plan, he or she is deemed to have made a "purchase"
on the grant date of the stock for which the option is exercisable. However,
this "purchase" is exempt from the application of Section 16 liability if at
least six months elapses from the date of grant of the option to the date of
sale of the stock acquired under the option. Generally, the exercise of the
option is no longer deemed to be the purchase of the stock. Officers and
directors of the Company subject to Section 16 are advised to consult counsel
prior to effecting transactions in the Company's securities.
PARTICIPATION PLAN
The Securities and Exchange Commission adopted new regulations
governing the application of Section 16 which became effective May 1, 1991.
However, the Company is permitted to delay adoption of the new provisions under
Rule 16b-3 relating to employee plans until the end of a transition period
lasting until September 1, 1996 or such different date as set in further
rulemaking under Rule 16b-3. Your securities transactions in securities acquired
under the Participation Plan before the Company adopts the new provisions under
Rule 16b-3, may be treated differently, for purposes of Section 16, than
transactions in plan securities after such adoption.
Prior to such adoption, purchases of stock for you under the
Participation Plan are treated as transactions exempt from Section 16(b).
Accordingly, you can sell stock purchased for you under the Participation Plan
immediately (subject to compliance with the requirements as to window periods,
etc.) and, as the purchase and sale will not be matched, no Section 16(b)
liability will be found. Of course, if you have made or make non-exempt
purchases within six months, any sale of Participation Plan stock would result
in a matchable 16(b) transaction.
The new provisions are more restrictive. After the Company adopts the
new provisions under Rule 16b-3, your purchase of stock under the Participation
Plan will be an exempt purchase not matched against your sales of the Company's
securities only if you make an irrevocable election at least six months in
advance of your purchase of stock or you do not sell the Participation Plan
stock for six months from the date of purchase. If you sell the Participation
Plan stock within six months after purchase, you may have to turn over any
profit made on the sale of the Participation Plan stock to the Company.
The IRS has taken the position that shares of stock subject to Section
16 are subject to a risk of forfeiture. Therefore, because under the new
provisions, once adopted, you may have to turn your profit over to the Company
if you sell your plan stock too early, stock received under the Participation
Plan is subject to a risk of forfeiture. The risk of forfeiture may have an
impact on the tax you owe upon the sale of stock received under the
Participation Plan.
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In addition, the new 16b-3 provisions state that if you withdraw from
participation in the Participation Plan and later re- enroll in the plan, your
purchases under the Participation Plan will be exempt from Section 16(b) only if
at least six months elapse from the date you withdrew from participation in the
Participation Plan to the date your participation recommences. You should
consider any instruction to reduce your payroll withholding to a small amount or
to stop your payroll withholding to be a "withdrawal" for purposes of this new
provision.
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