<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Maxim Integrated Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
October 1, 1998
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 19, 1998 at the Company's Event Center
located at 433 N. Mathilda Avenue, Sunnyvale, California (close to the
intersection of Mathilda and Maude in Sunnyvale). PLEASE NOTE THE NEW ADDRESS
THIS YEAR FOR THE LOCATION OF THE MEETING.
At this meeting you are being asked to vote on several matters recommended
unanimously by the Board of Directors. I want to emphasize the importance of
Proposal 2 -- our stock option proposal -- to our past and future success.
This year, 1998, marks the 10th anniversary of Maxim as a public company.
This has been a period of success for Maxim and for you as a Maxim stockholder.
We believe that our option programs have provided incentives that have benefited
all involved, our employees and our stockholders. An investment in our IPO in
1988 has earned over 44% per year through fiscal 1998. An investment five years
ago would have produced an even higher annual return, over 49% through fiscal
1998. Over those same periods, our market capitalization grew from approximately
$77 million at our IPO in 1988 to approximately $502 million at the end of
fiscal 1993 and to approximately $4.7 billion through fiscal 1998.
In 1998 we continued our efforts to address the two common criticisms of
many option programs: dilution of stockholder interests and undue weighting of
option benefits toward the most senior management.
Our option grants under our basic option plan, the 1996 Stock Incentive
Plan, have been at full fair market value at the time of grant. Since there can
be no dilution unless and until the stock price goes up, there is no immediate
dilution. If the stock price increases in the future, the optionee benefits, but
so do all stockholders. The added benefit to you, the stockholder, in addition
to the increase in the value of your stock, is that those increasingly valuable
options effectively tie the employee to the company for long periods. Our
typical option grants are long-term. For new employees, the grants normally
become exercisable in increments over five years. For follow-on grants to
existing employees, grants typically become exercisable only after four, five,
or even six years from grant. Largely as a result of how we have structured and
used our option program, we have enjoyed very low turnover in our technical
workforce. In fiscal 1998, for example, technical employee turnover was
approximately 2%, which we believe compares very favorably to others in our
industry.
Maxim's management is also concerned about minimizing dilution. For a
number of years we have pursued the practice of repurchasing our stock from time
to time using the proceeds we receive or anticipate receiving from stock option
exercises, plus the anticipated tax benefits to Maxim from deductions on account
of option exercises and sales. In 1998, we repurchased approximately 3.7 million
shares for approximately $123.1 million, using the $37.2 million of option
exercise proceeds and the $74.3 million of tax benefits realized.
For many years, we have made very broad grants of options throughout our
salaried workforce and, as I reported to you last year, even to large groups of
key hourly employees. Virtually all salaried employees receive stock option
incentives as part of their compensation packages. Today, employees below
officer level hold 79% of all outstanding options. In addition, our Employee
Stock Participation Plan is a payroll withholding plan available only to
non-officers. Thus, we are not one of those companies whose options are granted
predominantly to officers and selected key individuals.
We are very pleased with the results of our recruiting efforts in fiscal
1998. Of our option grants below officer level, over 52% went to new hires.
Largely because of this option program, we had a very successful year in
recruiting technically experienced individuals, including many of the engineers
we will need to achieve our long-term revenue plan. Our option program has also
allowed us to recruit small entrepreneurial start-up
<PAGE> 3
companies consisting of 5 - 10 engineers who have proven to have the right
stuff. These small technical acquisitions should continue to strengthen our
technological leadership and contribute to our future growth. Our prior years'
recruiting efforts paid off once again in 1998 when we introduced to the market
250 new precision analog and mixed-signal products, an increase of more than 20%
over last year. With this year's increase, we have added over 600 new products
in the past three years, a dramatic performance both in absolute terms and
compared to our competition. We believe that new product introduction is the
single most critical factor for our future growth, and so we are very pleased
with our engineering recruiting successes and our level of innovation in fiscal
1998. We intend, with your support, to continue to rely on our option programs
to support future recruiting and retention of the key employees who will carry
us into our next decade as a public company.
From a financial point of view, our extraordinary results continued through
the end of fiscal 1998. Our net revenues, earnings, and earnings per share all
increased by over 25%. Our cash, cash equivalents and short-term investments
increased by $99 million, over 44%, after the common stock repurchases discussed
above and investment of $105 million in capital equipment. Our return on average
stockholders' equity for fiscal 1998 was 32.5%, still one of the highest in our
industry.
I and our Board of Directors urge you to vote to ratify our option programs
and approve the other items being presented to you.
Yours sincerely,
/s/ JOHN F. GIFFORD
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
<PAGE> 4
MAXIM INTEGRATED PRODUCTS, INC.
120 SAN GABRIEL DRIVE
SUNNYVALE, CALIFORNIA 94086
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 19, 1998
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 Event Center located at 433 N. Mathilda Avenue, Sunnyvale,
California 94086 on Thursday, November 19, 1998 at 11:00 a.m., Pacific Standard
Time, to consider and vote upon the following proposals:
1. To elect four (4) directors of the Company to serve for the ensuing
year and until their successors are elected and qualified.
2. To ratify and approve amendments to increase the number of shares
available for issuance under the Company's 1996 Stock Incentive Plan, as
amended, and 1987 Employee Stock Participation Plan, as amended.
3. To ratify the retention of Ernst & Young LLP as the Company's
independent auditors for fiscal year ending June 26, 1999.
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on September 24,
1998 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ JOHN F. GIFFORD
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
Sunnyvale, California
October 9, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE TO ENSURE YOUR REPRESENTATION AND THE
PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND IN YOUR PROXY CARD AND
THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES IN PERSON, YOU MAY
STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET FORTH
IN THE PROXY STATEMENT.
<PAGE> 5
MAXIM INTEGRATED PRODUCTS, INC.
120 SAN GABRIEL DRIVE
SUNNYVALE, CALIFORNIA 94086
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1998
This Proxy Statement is furnished to stockholders 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., Pacific Standard Time, on
November 19, 1998 at the Company's Event Center located at 433 N. Mathilda
Avenue, Sunnyvale, California 94086 and at any adjournment or postponement of
that meeting. The approximate mailing date for this Proxy Statement and the
enclosed proxy is October 9, 1998. 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 does not know as of the date
hereof are to be presented at the Annual Meeting and upon matters incident to
the conduct of the meeting.
The Board of Directors has fixed the close of business on September 24,
1998 as the record date (the "Record Date") for the determination of
stockholders entitled to vote at the Annual Meeting. At that time, there were
outstanding 130,736,138 shares of Common Stock. The presence of a majority of,
or 65,368,070 of these shares of the Common Stock, either in person or by proxy,
will constitute a quorum for the transaction of business at the Annual Meeting.
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 written instrument 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). If
cumulative voting is requested at the meeting, stockholders' 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.
All votes will be tabulated by the inspector of elections 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, facsimile 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 27, 1998 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers, directors and nominees 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 NUMBER OF SHARES PERCENT OF TOTAL
---------------- ---------------- ----------------
<S> <C> <C>
Janus Capital Group(2)................................ 15,600,830 11.9%
Putnam Investments, Inc.(3)........................... 11,090,642 8.5
FMR Corp.(4).......................................... 9,799,860 7.5
T. Rowe Price Associates, Inc.(5)..................... 8,911,100 6.8
AIM Management Group(6)............................... 6,610,700 5.1
John F. Gifford(7).................................... 1,355,288 1.0
Ziya G. Boyacigiller(8)............................... 528,000 *
Tunc Doluca(9)........................................ 484,158 *
James R. Bergman(10).................................. 140,000 *
Robert F. Graham(11).................................. 122,500 *
A.R. Frank Wazzan(12)................................. 81,900 *
Frederick G. Beck(13)................................. 72,000 *
Kenneth J. Huening(13)................................ 50,000 *
B. Kipling Hagopian(14)............................... 49,124 *
All executive officers and directors as a group
(17 persons)(15).................................... 5,372,825 4.0%
</TABLE>
- ---------------
* Less than one percent
(1) This table is based upon information supplied by officers, directors,
nominees for director, principal stockholders and the Company's transfer
agent, and contained in Schedules 13G filed with the Securities and
Exchange Commission (the "SEC"). Unless otherwise indicated, the address of
each person or entity listed is Maxim Integrated Products, Inc., 120 San
Gabriel Drive, Sunnyvale, California 94086. 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 130,752,346 shares outstanding
on June 27, 1998, adjusted as required by rules promulgated by the SEC.
(2) These securities are owned by various individual and institutional
investors for which Janus Capital Group 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, Janus Capital Group is deemed to be a beneficial owner of such
securities; however Janus Capital Group expressly disclaims that it is, in
fact, the beneficial owner of such securities. Janus Capital Group holds
shared dispositive power and shared voting power over all of the shares
shown. The address of Janus Capital Group is 100 Fillmore Street, Suite
300, Denver, CO 80206. The table is based upon information supplied in a
Schedule 13G/A dated February 10, 1998.
(3) Certain Putnam Investments, Inc. investment managers (together with their
parent corporation, Putnam Investments, Inc. and its parent corporation,
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 441,192 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,
2
<PAGE> 7
New York, NY 10036. The table is based upon information supplied in a
Schedule 13G dated September 17, 1998.
(4) FMR Corp. holds sole dispositive power over all shares shown, and sole
voting power over 885,200 shares. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109. The table is based upon information
supplied in a Schedule 13G/A dated February 14, 1998.
(5) These securities are owned by various individual and institutional
investors for 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 1,042,900 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/A
dated February 10, 1998.
(6) AIM Management Group holds sole dispositive power and sole voting power
over all shares shown. The address of AIM Management Group is 1315
Peachtree Street NE, Atlanta, GA 30309. The table is based upon information
supplied in a Schedule 13G/A dated February 12, 1998.
(7) Includes 304,356 shares subject to options exercisable within 60 days of
June 27, 1998. Does not include shares held in trust for the benefit of Mr.
Gifford's children.
(8) Includes 328,000 shares subject to options exercisable within 60 days of
June 27, 1998.
(9) Includes 289,004 shares subject to options exercisable within 60 days of
June 27, 1998.
(10) Includes 30,000 shares subject to options exercisable within 60 days of
June 27, 1998.
(11) Includes 62,500 shares subject to options exercisable within 60 days of
June 27, 1998.
(12) Includes 7,500 shares subject to options exercisable within 60 days of June
27, 1998.
(13) Represents shares subject to options exercisable within 60 days of June 27,
1998.
(14) Includes 30,000 shares subject to options exercisable within 60 days of
June 27, 1998.
(15) Includes 1,713,360 shares subject to options exercisable within 60 days of
June 27, 1998. Does not include shares held in trust for the benefit of Mr.
Gifford's 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 13, 1997. 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 October 9, 1998.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
James R. Bergman................................. 56 1988
John F. Gifford.................................. 57 1983
B. Kipling Hagopian.............................. 56 1997
A.R. Frank Wazzan................................ 63 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. Since August 1996, Mr. Bergman has been a partner
of Brantley Venture Management, L.P., the General Partner of Brantley Venture
Partners, III, a private venture capital partnership. Since October 1996, Mr.
Bergman has served as Vice President of Brantley Capital Corporation, a
publicly-held business development company traded on the Nasdaq SmallCap Market.
He is also a director of Quad Systems Corporation and DeCrane Aircraft Holdings,
Inc., both publicly held and traded on the Nasdaq National Market.
Mr. Gifford, a founder of the Company, has served as Maxim's President and
Chief Executive Officer since its incorporation in April 1983.
Mr. Hagopian was a founder of Brentwood Associates, a venture capital
investment company, and has been a general partner of all of the funds started
by Brentwood from inception in 1972 until 1989. He has been a Special Limited
Partner of each of the three Brentwood funds started since then. Mr. Hagopian is
also Chairman and President of Segue Productions, a feature film production
company, and a partner of Apple Oaks Partners LLC, a private investment company
which manages his own capital and the capital of one other individual.
Dr. Wazzan is Dean of the School of Engineering and Applied Science,
University of California, Los Angeles, a position he has held since 1987. He has
been employed by UCLA since 1962.
FURTHER INFORMATION CONCERNING THE BOARD
During the fiscal year ended June 27, 1998, the Board of Directors held
four meetings. The Company has a standing Audit Committee, which met once during
the fiscal year and a standing Compensation Committee, which met four times
during the fiscal year. The Board does not have a nominating committee or a
committee performing the functions of a nominating committee. During the fiscal
year ended June 27, 1998, all members of the Board attended at least 75% of the
meetings of the Board and of the committees on which each served, except Mr.
Robert Graham who, due to illness, attended no committee meetings and only one
Board meeting.
The Audit Committee is comprised of Messrs. Bergman and Hagopian and Dr.
Wazzan. Mr. Graham was also a member of the Audit Committee until November 1997.
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 Hagopian and
Dr. Wazzan. Mr. Graham was also a member of the Compensation Committee until
November 1997. 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
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 $1,000 per meeting attended.
4
<PAGE> 9
Directors participate in the 1996 Stock Incentive Plan (the "1996 Plan")
which authorizes the granting of non-qualified stock options with respect to an
aggregate of 22,000,000 shares of the Company's Common Stock (subject to
adjustments provided therein). Each director receives an annual non-qualified
stock option grant covering 20,000 shares that vest in quarterly installments
during the year following the year in which all prior option grants become fully
vested.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation for the Company's Chief Executive Officer at June 27, 1998
and the four most highly compensated executive officers other than the CEO who
were serving as executive officers at June 27, 1998 for all services rendered in
all capacities to the Company and its subsidiaries during the fiscal years ended
June 27, 1998 and June 30, 1997 and 1996 is set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
NAME AND ----------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
------------------ ---- --------- ---------- ------------
<S> <C> <C> <C> <C>
John F. Gifford................................ 1998 $264,023 $ * 700,000
President, Chief Executive Officer 1997 264,023 1,288,756 800,000
and Chairman of the Board 1996 264,023 788,840 --
Frederick G. Beck.............................. 1998 170,000 * 90,000
Vice President 1997 170,000 265,881 70,000
1996 170,000 234,810 80,000
Ziya G. Boyacigiller........................... 1998 170,000 * 120,000
Vice President 1997 167,000 349,150 80,000
1996 152,000 233,390 --
Tunc Doluca.................................... 1998 170,000 * 150,000
Vice President 1997 170,000 409,145 140,000
1996 158,000 158,017 --
Kenneth J. Huening............................. 1998 170,000 * 90,000
Vice President 1997 150,000 331,258 140,000
1996 139,000 194,999 --
</TABLE>
- ---------------
* Pursuant to the Company's Bonus Plan, approved by the Company's stockholders
in 1997, $4,730,260 is available for executive officer performance bonuses
relating to fiscal 1998. Under the provisions of the Bonus Plan the
Compensation Committee is not obliged to award the entire bonus pool and no
officer may be paid more than 50% of the pool, or $2,365,130. The annual
salary reviews for the Company's officers have not yet occurred and
performance bonuses have not yet been determined.
5
<PAGE> 10
OPTIONS GRANTED TO EXECUTIVE OFFICERS
The Board of Directors currently has authority to grant stock options to
employees under the 1996 Plan. The following three tables set forth certain
information regarding stock options granted to, exercised by and owned by the
executive officers named in the foregoing Summary Compensation Table during
fiscal 1998.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------- ------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE(2) 5%($) 10%($)
---- ---------- ------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John F. Gifford............ 400,000(3) 5.02% $29.0625 10/27/07 $7,310,900 $18,527,256
300,000(4) 3.77 28.125 06/17/08 5,306,298 13,447,202
Frederick G. Beck.......... 60,000(3) .75 29.0625 10/27/07 1,096,635 2,779,088
30,000(4) .38 28.125 06/17/08 530,630 1,344,720
Ziya G. Boyacigiller....... 80,000(3) 1.00 29.0625 10/27/07 1,462,180 3,705,451
40,000(4) .50 28.125 06/17/08 707,506 1,792,960
Tunc Doluca................ 100,000(5) 1.26 29.0625 10/27/07 1,827,725 4,631,814
50,000(4) .63 28.125 06/17/08 884,383 2,241,200
Kenneth J. Huening......... 60,000(3) .75 29.0625 10/27/07 1,096,635 2,779,088
30,000(4) .38 28.125 06/17/08 530,630 1,344,720
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% annual rates of stock price appreciation prescribed by the SEC
and are not intended to forecast possible future appreciation, if any, of
the Company's stock price. No gain to the optionees is possible without an
increase in the price of the Company's stock, which will benefit all
stockholders.
(2) The options were granted for a term of ten years, but are subject to earlier
termination under certain circumstances relating to termination of
employment or a change of control of the Company. Options may be repriced
under certain limited circumstances.
(3) The options were granted on 10/28/97 and will become exercisable on a
quarterly basis during the year ending July 1, 2002.
(4) The options were granted on 6/18/98 and will become exercisable on a
quarterly basis during the year ending July 1, 2003.
(5) The options were granted on 10/28/97 and will become exercisable on a
quarterly basis during the years ending July 1, 2001 and 2002.
6
<PAGE> 11
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND JUNE 27, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED JUNE 27, 1998(#) JUNE 27, 1998($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Gifford.......... 1,209,582 $39,833,188 174,356 2,150,000 $4,446,078 $29,531,250
Frederick G. Beck........ 72,000 2,092,500 48,000 360,000 1,206,000 5,217,500
Ziya G. Boyacigiller..... 160,000 5,952,425 306,000 398,000 8,579,769 5,988,531
Tunc Doluca.............. 138,328 4,750,511 259,004 440,000 7,014,167 6,104,375
Kenneth J. Huening....... 145,252 4,646,822 20,000 380,000 510,000 5,965,625
</TABLE>
- ---------------
(1) Based on a price per share of $31.0625, which was the price of a share of
Common Stock on the Nasdaq National Market at the close of business on June
27, 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Beck, Boyacigiller, Doluca and Huening. The agreements do not grant the
executive officers any right to be retained by the Company, and the Company may
terminate employment of each 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.
Mr. Gifford entered into an employment agreement with the Company in 1987,
which was amended and restated in February 1994. The agreement provides that Mr.
Gifford 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 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 (offset by any earnings) for life through insurance or direct
payment, or both. In addition, if Mr. Gifford's employment with the Company is
7
<PAGE> 12
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.
In addition, the Company and Mr. Gifford have entered into a deferred
compensation plan, pursuant to which Mr. Gifford defers receipt of a portion of
his cash compensation. Deferred payments bear interest at the rate equal to the
interest rate (as adjusted from time to time) that employees of the Company are
required to pay the Company under the Company's employee loan program (6% in
fiscal year 1998). Interest is credited at least quarterly. Deferred payments,
including interest, are payable beginning (i) upon his termination as an
employee or consultant to the Company, in approximately equal quarterly
installments over a five year period with interest at the Bank of America prime
rate from time to time, (ii) upon his death, payable to his designated
beneficiary, in a lump sum payment as soon as administratively possible or (iii)
in the event of an unforeseeable emergency. As of June 27, 1998, Mr. Gifford's
deferred account balance, including interest thereon, totaled $3,240,096.
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
- ---------------
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 Securities Act of 1933, as amended (the "Securities
Act") or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
8
<PAGE> 13
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 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. In 1997 the Company adopted, and its stockholders approved, a Bonus
Plan for the Company's executive officers. Under the Bonus Plan, a bonus pool
will be created up to a maximum of 3% of the Company's pre-tax earnings, with
the specific amount of the pool determined by equal weighting of two performance
criteria: (a) the rate of growth in the Company's earnings per share and (b) the
increase in the market price of its stock. The bonus pool will be based on the
Company's actual achievement related to these objective performance criteria
versus a target growth of 30% per year. From this pool, each executive officer
will receive a bonus in respect of each fiscal year, in an amount to be
determined by the Compensation Committee based on the same objective performance
criteria. The maximum bonus that may be paid in any fiscal year to any executive
officer, including the Chief Executive Officer, is one-half of the pool. After
the end of each fiscal year, the Compensation Committee is to determine and
certify the Company's performance as compared to the criteria set for that
fiscal year, and to determine the amount of each executive officer's bonus for
such year. The Compensation Committee reserves the right to pay any executive
officer less than the maximum bonus determined under the objective performance
criteria based upon the Compensation Committee's determination of that executive
officer's individual performance during the year. The actual cash bonus for each
individual executive officer, aside from the CEO (discussed below), is
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.
Executive officer bonuses for fiscal 1998 have not yet been determined.
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
three 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. Mr. Gifford is a participant in the Bonus Plan and is
subject to the maximum bonus limitation described above. Consistent with the
Bonus Plan and 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."
Mr. Gifford's bonus for fiscal 1998 has not yet been determined.
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.
9
<PAGE> 14
The Board has determined that stock options shall be treated as
"performance-based compensation." The Company's stockholders previously approved
the option plans, which 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. In addition, the
stockholders have approved the Bonus Plan, and the Company believes that awards
paid under the Bonus Plan are exempt from the $1 million deduction limitation of
Section 162(m).
COMPENSATION COMMITTEE
James R. Bergman
B. Kipling Hagopian
A.R. Frank Wazzan
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 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 27, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that two
transactions were reported late on a Form 5 by Mr. Hagopian.
CERTAIN TRANSACTIONS
The Company employs in various positions Tracy Jones, Cameron Jones and
Kevin Lynch, the daughter, son-in-law and son-in-law, respectively, of the
Company's Chief Executive Officer. In fiscal 1998, Mrs. Jones received a total
of $51,890 of cash compensation and $102,421 in realized gains from the exercise
of stock options. Mr. Jones received $53,781 of cash compensation in fiscal
1998. Mr. Lynch received a total of $94,049 of cash compensation and $199,625 in
realized gains from the exercise of stock options during fiscal 1998. Also,
during the fiscal year, Mrs. Jones, Mr. Jones and Mr. Lynch were granted options
to purchase 3,000, 3,400 and 6,000 shares, respectively, of the Company's Common
Stock at exercise prices between $29.5625 and $35.21875 per share. The Company
believes that the terms of each such individual's employment, including their
cash compensation and option grants, are commensurate with other employees in
comparable positions. The exercise price of each option granted to these
individuals was at 100% of the fair market value of the Company's Common Stock
on the date of grant.
10
<PAGE> 15
PERFORMANCE GRAPH
The following chart shows the value of an investment of $100 on June 30,
1993 in each of (i) the Company's Common Stock, (ii) the Nasdaq Stock Market
(U.S.) Index and (iii) the Nasdaq Electronic Components Index. All values assume
reinvestment of the full amount of all dividends and are calculated as of June
30 of each year.(1)
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MAXIM INTEGRATED PRODUCTS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
<TABLE>
<CAPTION>
MAXIM INT NASDAQ EL NASDAQ ST
<S> <C> <C> <C>
JUN-93 100 100 100
JUN-94 152 110 101
JUN-95 298 227 135
JUN-96 319 240 173
JUN-97 664 394 210
JUN-98 740 393 278
</TABLE>
* $100 Invested on June 30, 1993 in Stock or Index --
Including Reinvestment of Dividends.
Year Ending June 30.
- ---------------
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 Securities Act or the Exchange Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
11
<PAGE> 16
PROPOSAL 2
RATIFICATION AND APPROVAL OF AMENDMENTS
TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
UNDER THE COMPANY'S 1996 STOCK INCENTIVE PLAN, AS AMENDED,
AND 1987 EMPLOYEE STOCK PARTICIPATION PLAN, AS AMENDED
The Company's stockholders are being asked to act upon a proposal to ratify
and approve the action of the Board of Directors amending the 1996 Stock
Incentive Plan (the "1996 Plan") and the 1987 Employee Stock Participation Plan
(the "ESP Plan") to increase the pool of shares of Common Stock issuable under
the 1996 Plan and the ESP Plan (the "Employee Stock Plans") by 7,500,000 shares
(the "Increase"). Ratification of the Increase requires the approval of a
majority of the shares represented in person or by proxy and voting at the
Annual Meeting.
A general description of the principal terms of the Employee Stock Plans,
the Increase approved by the Board of Directors and the purpose of such Increase
are set forth below. Unless otherwise marked, all properly signed and returned
proxies will be voted FOR Proposal No. 2. The Board of Directors recommends a
vote FOR this proposal.
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.
Since the 1996 Plan was adopted in August 1996, the number of shares that
have been available for issuance (after adjustments to give effect to the 2 for
1 stock split in December 1997) is as follows: on adoption, 7,000,000 shares
increased to 14,500,000 shares in 1997. The current proposal is to increase the
pool for the Employee Stock Plans to a total of 22,000,000 shares.
Prior to adoption of the 1996 Plan the ESP Plan shared in the common pool
of shares available for the stock option plans that were superseded by the 1996
Plan. The total pool for all those plans, including the ESP Plan, was 91,120,000
shares at the time of adoption of the superseding 1996 Plan.
As of June 27, 1998, 44,695,504 stock options remain outstanding from all
of the Company's stock option plans, of which 17,308,790 options were vested and
exercisable while the remaining 27,386,714 options vest over the next ten years
as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, NUMBER OF OPTIONS TO VEST
-------------------- -------------------------
<S> <C>
1999..................................... 7,230,172
2000..................................... 6,562,284
2001..................................... 5,294,129
2002..................................... 4,643,349
2003..................................... 2,808,758
2004..................................... 676,685
2005..................................... 60,228
2006..................................... 45,603
2007..................................... 46,045
2008..................................... 19,461
</TABLE>
The principal uses for the Increase are to provide for option grants under
the 1996 Plan for recruiting employees by offering a means by which their
creativity and dedicated efforts will allow them to participate in increased
stockholder value; and for grants to existing employees generally for periods
vesting beyond 2002, by adding option grants at the end of an employee's current
vesting period. In addition, the pool will be available for the ESP Plan to
offer incentive to eligible employees to contribute to increases in stock
values. The Board of Directors believes that the attraction, retention and
motivation of highly qualified personnel are essential to the Company's
continued growth and success and that incentive plans such as the 1996 Plan and
ESP Plan are necessary for the Company to remain competitive in its compensation
practices.
12
<PAGE> 17
As of June 27, 1998, there were a total of 44,695,504 shares subject to
outstanding options under the option plans 15,021,363 of which were subject to
options outstanding under the 1996 Plan, and a maximum of 417,985 shares subject
to outstanding rights under the ESP Plan.
As of June 27, 1998, options outstanding under the option plans had
exercise prices ranging from $0.80 to $38.50 and expiration dates ranging from
August 31, 1998 to June 17, 2008. Options outstanding under the 1996 Plan had
exercise prices ranging from $0.89 to $38.50 and expiration dates ranging from
November 14, 2001 to June 17, 2008.
As of June 27, 1998, rights outstanding under the ESP Plan had an exercise
price of $28.58 (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, 1998.
Amended Plan Benefits. As of the date of this Proxy Statement, no executive
officer, employee or director and no associates of any executive officer or
director has been granted any options subject to shareholder approval of the
proposed amendment. In addition, no executive officer or employee of the Company
has been granted any rights to purchase stock pursuant to the ESP Plan subject
to shareholder approval of the proposed amendment. The benefits to be received
pursuant to the 1996 Plan and ESP Plan amendment by the Company's directors,
executive officers and employees are not determinable at this time.
THE MATERIAL FEATURES OF THE 1996 PLAN ARE AS FOLLOWS:
Purpose. The purpose of the 1996 Plan is to increase stockholder value,
which is accomplished largely as a result of the Company's successful, on-going
stock option programs in which 1,325 salaried employees (approximately 94% 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 employees. The Company also strongly
believes that the employee ownership of Maxim is largely responsible for Maxim's
consistent and impressive growth.
The 1996 Plan originally authorized the granting of incentive stock options
and non-qualified stock options with respect to an aggregate of 7,000,000 shares
of the Company's Common Stock and has been amended by the Board of Directors to
authorize the granting of options with respect to an additional 15,000,000
shares. The 1996 Plan replaced the Company's 1987 Supplemental Stock Option Plan
which expired on June 1, 1997, and the Company's Incentive Stock Option Plan and
Supplemental Nonemployee Stock Option Plan which will both expire on August 12,
2002. Any shares or options returned to the option plans will increase the
number of shares available for options under the 1996 Plan. At June 27, 1998,
the 1,154,098 shares available for grant under the 1996 Plan equaled
approximately 0.9% of the Company's common and common equivalent shares. The
closing price of the Company's Common Stock on the Nasdaq National Market on
September 24, 1998 was $29.75.
The Common Stock covered by the 1996 Plan may be either authorized but
unissued shares or treasury shares. If there is a lapse, expiration, termination
or cancellation of any option granted under the 1996 Plan without the issuance
of shares or payment of cash thereunder, or if shares are issued under any
option under the 1996 Plan and thereafter are reacquired at their original
purchase price by the Company pursuant to rights reserved upon the issuance
thereof, or pursuant to the payment of the purchase price of shares under
options by delivery of other Common Stock of the Company, the shares subject to
or reserved for such option, or so reacquired, may again be used for new options
under the 1996 Plan. However, the Common Stock issued under the 1996 Plan that
is not reacquired by the Company pursuant to rights reserved upon the issuance
thereof or pursuant to payment of the purchase price of shares under options by
delivery of other Common Stock of the Company may not exceed the total number of
shares reserved for issuance under the 1996 Plan.
The following summary of certain provisions of the 1996 Plan is qualified
in its entirety by reference to the 1996 Plan, a copy of which has been filed
electronically with the SEC as an appendix to this Proxy Statement.
Administration. The 1996 Plan provides that grants of options and other
determinations under the 1996 Plan shall be made by (i) the Board of Directors
or (ii) a Committee designated by the Board (the
13
<PAGE> 18
"Administrator") which, in case of grants of options to employees who are
officers or directors of the Company, is constituted in a manner to permit the
grants and related transactions under the 1996 Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3 of the Securities
Exchange Commission and which, in the case of grants to "covered employees," is
intended to constitute "performance-based compensation" is made up solely of two
or more "outside directors" as such terms are defined under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
Performance Based Compensation. Section 162(m) of the Code limits to $1
million annually the deduction a public corporation may claim for compensation
paid to any of its top five executive officers, except in limited circumstances.
One such exception is for "performance based compensation," which is defined as
compensation paid solely on account of the attainment of one or more performance
goals, but only (1) if the goals are determined by a compensation committee of
the Board of Directors comprised of two or more outside directors, (2) the
performance goals are disclosed to stockholders and approved by a majority vote
before the remuneration is paid, and (3) before the remuneration is paid, the
compensation committee certifies that the performance goals and any other
material terms were in fact satisfied.
Internal Revenue Service regulations provide that compensation attributable
to a stock option will be deemed to satisfy the requirement that performance
goals be pre-established if the grant of the option is made by the compensation
committee; the plan under which the option is granted states the maximum number
of shares with respect to which options or rights may be granted during a
specified period to any employee; and, under the terms of the option, the amount
of compensation the employee could receive is based solely on an increase in the
value of the stock after the date of the grant.
The 1996 Plan includes features intended to permit the Administrator to
grant options to employees that will qualify as performance-based compensation.
The 1996 Plan limits the number of shares with respect to which incentive stock
options and non-qualified stock options may be granted in any one fiscal year of
the Company to any one participant to 6,000,000 shares.
Eligibility. Selected employees, directors, consultants, advisors,
independent contractors, vendors, customers and others having a past, current or
prospective business relationship with the Company and any parent or
subsidiaries will be eligible to receive options under the 1996 Plan. Options
may be granted to eligible persons residing in foreign jurisdictions under
additional terms and conditions to accommodate local laws and to provide such
eligible persons favorable treatment under local laws, provided that no such
terms are inconsistent with the 1996 Plan.
Duration. The 1996 Plan will continue in effect until terminated by the
Board of Directors, except that no option may be granted more that ten years
after the date of adoption of the 1996 Plan by the Board of Directors.
Adjustments. The 1996 Plan provides for adjustment in the number of shares
reserved and in the shares covered by each outstanding option in the event of a
stock dividend or stock split and may provide in the Administrator's discretion
for vesting of options and removal of restrictions on options in the event of
certain corporate transactions, including a change of ownership or control of
the Company. Generally, a change in control will occur for purposes of the 1996
Plan in the event of the acquisition by any person of beneficial ownership of
50% or more of the Company's voting stock, other than an acquisition directly
from the Company or as part of a business combination approved by the Board of
Directors.
Options. The 1996 Plan provides that the purchase price of any incentive
stock option shall be at least 100% of the fair market value of the Common Stock
at the time the option is granted. The 1996 Plan further provides that the
purchase price of any non-qualified stock option shall be not less than 85% of
fair market value at the time the option is granted unless otherwise determined
by the Administrator, provided that the exercise price may be less than 100% of
fair market value only if the Administrator determines in writing in good faith
that (i) such grants are made infrequently, (ii) there is a good business reason
for the grant that outweighs the normal presumption of per share exercise price
of not less than one hundred percent of the fair market value per share on the
date of grant, and (iii) the aggregate number of shares subject to such option
does not exceed 5% of the total number of shares identified in the 1996 Plan as
amended from time to time.
14
<PAGE> 19
The 1996 Plan provides that the aggregate fair market value (determined as of
the time the option is granted) of the Common Stock with respect to which
incentive stock options may become exercisable for the first time by any
individual during any calendar year may not exceed $100,000. The Administrator
may provide for the payment of the purchase price in cash, by delivery of other
Common Stock of the Company having a market value equal to the purchase price of
such shares, or by any other method, such as delivery of promissory notes. A
participant may pay the purchase price by delivery of an exercise notice
accompanied by a copy of irrevocable instructions to a broker to deliver
promptly to the Company sale or loan proceeds to pay the purchase price.
The Administrator may permit or require a participant to pay all or a
portion of the federal, state and local taxes, including FICA and Medicare
withholding tax, arising in connection with the exercise of a non-qualified
stock option by having the Company withhold shares or by delivering shares
received in connection with the option or previously acquired, having a fair
market value approximating the amount to be withheld.
The period of any option will be ten years from the date it is granted,
except that the period for options granted to non-employee directors shall be
five years. Options are exercisable for a period of 90 days after termination or
retirement, 547 days after termination due to death, or 365 days after
termination due to disability.
Amendments and Discontinuance. The Plan is subject to amendment or
termination by the Board of Directors without stockholder approval as deemed in
the best interests of the Company. However, no such amendment shall, without the
consent of the holder, reduce the amount of any option or adversely change the
terms and conditions thereof.
The terms and conditions applicable to any options granted and outstanding
may at any time be amended, modified, or canceled by mutual agreement between
the Administrator and the participant so long as any amendment or modification
does not increase the number of shares of Common Stock issuable under the 1996
Plan. In addition, options granted under the 1996 Plan 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 1996
Plan, and (ii) repricing should occur only infrequently and must not be solely
due to poor operating performance by the Company.
Federal Income Tax Consequences. In fiscal 1998, exercises of employee
stock options resulted in over $74.3 million of cash savings as a result of tax
deductions for the Company and in $37.2 million of cash to the Company from
stock option exercises, for total cash generated of over $111.5 million, a
significant contribution to the strength of the Company's balance sheet and,
given the Company's use of such funds to repurchase its Common Stock in the open
market, a material reduction to any dilutive effect of such programs.
Under existing law and regulations, the grant of non-qualified stock
options will not result in income taxable to the employee or provide a deduction
to the Company. However, the exercise of a non-qualified stock option results in
taxable income to the holder, and the Company is entitled to a corresponding
deduction. At the time of the exercise of a non-qualified stock option, the
amount so taxable and so deductible will be the difference between the fair
market value of the shares purchased and the exercise price.
No income is recognized by an optionee when an incentive stock option is
granted or exercised. If the holder holds the shares received on exercise of an
incentive stock option for at least two years from the date of grant and one
year from date of receipt of the optioned stock, any gain realized by the holder
on the disposition of the stock will be accorded long-term capital gain
treatment, and no deduction will be allowed to the Company. If the holding
period requirements are not satisfied, the employee will recognize ordinary
income at the time of disposition equal to the lessor of (i) the gain realized
on the disposition, or (ii) the difference between the option price and the fair
market value of the shares on the date of exercise. Any additional gain on the
disposition not reflected above will be long-term or short-term capital gain,
depending upon the length of time the shares are held. The Company will be
entitled to an income tax deduction equal to the amount of ordinary income
recognized by the employee.
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The foregoing discussion is not a complete description of the federal
income tax aspects of options under the 1996 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 to any options. Participants in the
1996 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.
THE MATERIAL FEATURES OF THE ESP PLAN ARE AS FOLLOWS:
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 3,000 as of June 27, 1998. 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 Participation Plans of the Company and its affiliates as defined
in Section 423 of the Code in any calendar year.
The following summary of certain provisions of the ESP Plan is qualified in
its entirety by reference to the ESP Plan, a copy of which has been filed
electronically with the SEC as an appendix to this Proxy Statement.
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
"Exercise Date") at the applicable
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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 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 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.
Federal Income Tax Consequences. The following summarizes only the federal
income tax consequences of participation under the Purchase Plan. State and
local tax consequences may differ.
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. Upon disposition of
the shares, the participant will generally be subject to tax and the amount of
the tax will depend upon the participant's holding period. If the shares have
been held by the participant for more than two years after the date of option
grant, the lesser of (i) 15% of the fair market value of the shares on the date
the option was granted or (ii) the difference between the fair market value of
the shares on the date of the disposition of the shares and the purchase price
will be treated as ordinary income, and any further gain will be treated as
long-term capital gain. If the shares are disposed of before the expiration of
these holding periods, the excess of the fair market value of the shares on the
exercise date over the purchase price will be treated as ordinary income, and
any further gain or loss on such disposition will be long-term or short-term
capital gain or loss, depending on the holding period. The Company is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent of ordinary income reported by participants
upon disposition of shares within two years from date of grant or within one tax
year of the date of purchase.
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ADJUSTMENT PROVISIONS UNDER THE EMPLOYEE STOCK PLANS
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.
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.
PROPOSAL 3
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 26, 1999, 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.
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 -- 1999 ANNUAL MEETING
Pursuant to Rule 14a-8 of the Exchange Act a stockholder proposal must be
received by the Company no later than June 7, 1999 to be considered for
presentation at the 1999 Annual Meeting.
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If a stockholder intends to present a proposal at the 1999 Annual Meeting
which is submitted outside the requirements of Rule 14a-8 under the Exchange
Act, and does not notify the Company of such proposal on or before August 21,
1999, then management proxies will be permitted to use their discretionary
voting authority to vote on the proposal if the proposal is raised at the 1999
Annual Meeting of Stockholders.
/s/ JOHN F. GIFFORD
John F. Gifford
President, Chief Executive Officer and
Chairman of the Board
October 9, 1998
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.
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3280-PS-98
<PAGE> 25
APPENDIX A
MAXIM INTEGRATED PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
Adopted August 16, 1996
Approved by Shareholders November 14, 1996
As further amended by the Board of Directors on April 16, 1997 and May 15, 1997
Approved by Shareholders November 13, 1997
As further amended by the Board of Directors on March 10, 1998,
May 14, 1998, and August 13, 1998
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
(c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Options granted to residents therein.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means a change in ownership or control
of the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing
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Directors who are not Affiliates or Associates of the offeror do not recommend
such stockholders accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means any committee appointed by the Board to
administer the Plan.
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means Maxim Integrated Products, Inc., a Delaware
corporation.
(j) "Consultant" means any person who is a consultant, advisor,
independent contractor, vendor, customer or other person having a past, current
or prospective business relationship with the Company or any Parent or
Subsidiary.
(k) "Continuing Directors" means members of the Board who either
(i) have been Board members continuously for a period of at least thirty-six
(36) months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
(l) "Continuous Status as an Employee, Director or Consultant"
means that the employment, director or consulting relationship with the Company,
any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status
as an Employee, Director or Consultant shall not be considered interrupted in
the case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
(m) "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated,
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(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with complete liquidation
or dissolution of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
(n) "Covered Employee" means any person who is a "covered
employee" under Section 162(m)(3) of the Code.
(o) "Director" means a member of the Board.
(p) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Parent or Subsidiary of the
Company for purposes of Section 422 of the Code. The payment of a director's fee
by the Company shall not be sufficient to constitute "employment" by the
Company. Except for purposes of grants of Incentive Stock Options, "Employee"
also includes any person whom an officer identifies as a prospective employee of
the Company or any Parent or Subsidiary of the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(r) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) Where there exists a public market for the Common
Stock, the Fair Market Value of a share of Common Stock shall be (A) the closing
sale price of the Common Stock for the last market trading day prior to the date
of the determination or on the date of the determination, as determined by the
Administrator at the time of the determination (or, if no sales were reported on
either such date, on the last trading date on which sales were reported) on the
stock exchange determined by the Administrator to be the primary market for the
Common Stock or the Nasdaq National Market, whichever is applicable or (B) if
the Common Stock is not traded on any such exchange or national market system,
the closing price of a Share on the Nasdaq Small Cap Market for the day prior to
the time of the determination (or, if no such price was reported on that date,
on the last date on which such price was reported), in each case, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or
(ii) In the absence of an established market of the type
described in (i), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith.
(s) "Grantee" means an Employee, Director or Consultant who
receives an Option under the Plan.
(t) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
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(u) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(w) "Option" means a stock option granted pursuant to the Plan.
(x) "Option Agreement" means the written agreement evidencing
the grant of an Option executed by the Company and the Grantee, including any
amendments thereto.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Performance-Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
(aa) "Plan" means this 1996 Stock Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
(cc) "Share" means a share of the Common Stock.
(dd) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(ee) "Subsidiary Disposition" means the disposition by the
Company of its equity holdings in any subsidiary corporation effected by a
merger or consolidation involving that subsidiary corporation, the sale of all
or substantially all of the assets of that subsidiary corporation or the
Company's sale or distribution of substantially all of the outstanding capital
stock of such subsidiary corporation.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10 below, the maximum
aggregate number of Shares which may be issued pursuant to this Plan is
22,000,000 Shares [adjusted to reflect the stock dividend effective December 5,
1997]; provided, however, that such maximum aggregate number of Shares shall be
increased by the number of Shares or options returned to the Company's Incentive
Stock Option Plan, 1987 Employee Stock Participation Plan, and Supplemental
Nonemployee Stock Option Plan. Notwithstanding the foregoing, the maximum
aggregate number of Shares available for grant of Incentive Stock Options shall
be 22,000,000 Shares, and such number shall not be subject to adjustment as
described above. The Shares to be issued pursuant to the Plan may be authorized,
but unissued, or reacquired Common Stock.
(b) If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option exchange
program, or if any unissued Shares are retained by the Company upon exercise of
an Option in order to satisfy the exercise
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<PAGE> 29
price for such Option or any withholding taxes due with respect to such Option,
such unissued or retained Shares shall become available for future grant under
the Plan (unless the Plan has terminated). Shares that actually have been issued
under the Plan pursuant to an Option shall not be returned to the Plan and shall
not become available for future distribution under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and
Officers. With respect to grants of Options to Directors or Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.
(ii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Options and may limit such authority by requiring
that such Options must be reported to and ratified by the Board or a Committee
within six (6) months of the grant date, and if so ratified, shall be effective
as of the grant date.
(iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Options to any Covered Employee
intended to qualify as Performance-Based Compensation shall be made only by a
Committee (or subcommittee of a Committee) which is comprised solely of two or
more Directors eligible to serve on a committee making Options qualifying as
Performance-Based Compensation. In the case of such Options granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.
(iv) Administration Errors. In the event an Option is
granted in a manner inconsistent with the provisions of this subsection (a),
such Option shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants
to whom Options may be granted from time to time hereunder;
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(ii) to determine whether and to what extent Options are
granted hereunder;
(iii) to determine the number of Shares or the amount of
other consideration to be covered by each Option granted hereunder;
(iv) to determine the Fair Market Value of the Common
Stock in accordance with Section 2(r) of the Plan;
(v) to approve forms of Option Agreement for use under
the Plan;
(vi) to determine the terms and conditions of any Option
granted hereunder;
(vii) to amend the terms of any outstanding Option
granted under the Plan, provided that any amendment that would adversely affect
the Grantee's rights under an outstanding Option shall not be made without the
Grantee's written consent;
(viii) to reduce the exercise price of any Option to
reflect a reduction in the Fair Market Value of the Common Stock since the grant
date of the Option without a material adverse impact on the Grantee; provided,
however, that (A) such reductions in the aggregate do not apply to Options
covering more than five percent (5%) of the maximum aggregate number of Shares
available under Section 3((a)), above (as amended from time to time), in any
twelve (12) month period, (B) such reduction is approved by a majority of the
members of the Administrator, and (C) the Administrator determines in good faith
and in writing that such reductions occur only infrequently and principally in
response to conditions other than poor operating performance by the Company. For
purposes of this subsection ((viii)), the issuance of an Option in replacement
of an existing Option with a lower exercise price (or a lower base amount on
which appreciation is measured) without a material adverse impact on the Grantee
shall be deemed to be a reduction in the exercise price of the earlier granted
Option;
(ix) to construe and interpret the terms of the Plan and
Options granted pursuant to the Plan;
(x) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Option shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan; and
(xi) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. Eligibility. Non-Qualified Stock Options may be granted to Employees,
Directors and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee, Director or Consultant who has been granted an Option
may, if otherwise eligible, be granted
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additional Options. Options may be granted to such Employees of the Company and
its subsidiaries who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Options.
(a) Designation of Option. Each Option shall be designated in
the Option Agreement as either an Incentive Stock Option or a Non-Qualified
Stock Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as Incentive
Stock Options which become exercisable for the first time by a Grantee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the date the Option with respect to such
Shares is granted.
(b) Conditions of Option. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms and conditions of each
Option including, but not limited to, the Option vesting schedule, form of
payment upon exercise of the Option and satisfaction of any performance
criteria.
(c) Individual Option Limit. The maximum number of Shares with
respect to which Options may be granted to any individual in any fiscal year of
the Company shall be 6,000,000 [adjusted to reflect the stock dividend effective
December 5, 1997]. The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization pursuant to Section
10, below. To the extent required by Section 162(m) of the Code or the
regulations thereunder, in applying the foregoing limitation with respect to an
individual, if any Option is canceled, the canceled Option shall continue to
count against the maximum number of Shares with respect to which Options may be
granted to the individual. For this purpose, the repricing of an Option shall be
treated as the cancellation of the existing Option and the grant of a new
Option.
(d) Term of Option. The term of each Option shall be ten (10)
years from the date of grant for all Grantees other than Directors who are not
Employees, in whose case the term shall be five (5) years from the date of
grant. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
(e) Transferability of Options. Incentive Stock Options may not
be sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution, and may be
exercised during the lifetime of the Grantee only by the Grantee. Non-Qualified
Stock Options shall be transferable to the extent provided in the Option
Agreement.
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<PAGE> 32
(f) Time of Granting Options. The date of grant of an Option
shall for all purposes be the date on which the Administrator makes the
determination to grant such Option, or such other date as is determined by the
Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
(g) Vesting During Leave of Absence. During any leave of absence
from employment, directorship or consulting arrangement with the Company or any
Parent or Subsidiary, vesting of such Grantee's Options shall cease, and shall
resume upon the Grantee's return to his or her relationship with the Company,
Parent or Subsidiary. The dates on which such Grantee's Options vest shall
thereafter be adjusted by the duration of the leave of absence.
7. Option Exercise Price, Consideration and Taxes.
(a) Exercise Price. The exercise price for an Option shall be as
follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the
per Share exercise price shall be not less than eighty-five percent (85%) of the
Fair Market Value per Share on the date of grant unless otherwise determined by
the Administrator; provided, however, that in the case the per Share exercise
price is less than one hundred percent (100%) of the Fair Market Value per Share
on the date of the grant, the Administrator determines in writing and in good
faith that (A) such grants are made infrequently, (B) there is a good business
reason for the grant that outweighs the normal presumption of a per Share
exercise price of not less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant, and (C) the aggregate number of Shares
subject to such Options does not exceed five percent (5%) of the aggregate
maximum number of Shares under Section 3((a)), above, as amended from time to
time.
(iii) In the case of Options intended to qualify as
Performance-Based Compensation, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.
(b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise of an Option including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the
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<PAGE> 33
Administrator may determine, the Administrator is authorized to accept as
consideration for Shares issued under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised (but only to the extent
that such exercise of the Option would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless
otherwise determined by the Administrator);
(v) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of
payment.
(c) Taxes. In connection with each option granted pursuant to
this Plan, at any time when the Company could have any withholding obligation
(whether for Federal, state, local or foreign income, disability, Medicare,
employment or other taxes or otherwise) as a result of exercise of an option,
the lapse of any substantial risk of forfeiture to which the shares are subject
at the time of exercise, or the disposition of shares acquired upon such
exercise, the Company shall have no obligation to permit exercise of such option
or to issue any shares upon exercise of the option unless and until either the
exercise of the option is accompanied by sufficient payment, as determined by
the Company in its absolute discretion, to meet those withholding obligations on
such exercise, lapse or disposition or other arrangements are made that are
satisfactory to the Company in its absolute discretion to provide otherwise for
such payment. The Company shall have no liability to any optionee or transferee
for exercising the foregoing right not to permit exercise or issue shares.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Option granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Option Agreement.
(ii) An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Until the issuance (as evidenced by the
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<PAGE> 34
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to Shares subject to an Option, notwithstanding the exercise of an
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Option Agreement or Section 10,
below.
(b) Exercise of Option Following Termination of Employment,
Director or Consulting Relationship.
(i) An Option may not be exercised after the termination
date of such Option set forth in the Option Agreement and may be exercised
following the termination of a Grantee's Continuous Status as an Employee,
Director or Consultant only to the extent that the Grantee was entitled to
exercise it at the date of such termination (but in no event later than the
expiration of the term of such option as set forth in the Option Agreement).
Options shall be exercisable for a period of ninety (90) days following
termination generally, and for a period of five hundred forty-seven (547) days
following termination due to death of the Grantee or three hundred sixty-five
(365) days following termination due to the disability of the Grantee (or, in
each case, such other period of time as is determined by the Administrator,
which such determination in the case of an Incentive Stock Option shall be made
at the time of grant of the Option).
(ii) All Options shall terminate to the extent not
exercised on the last day of the period specified in paragraph (i) above or the
last day of the original term of the Option, whichever occurs first.
(iii) Any Option designated as an Incentive Stock Option
to the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Status as an Employee, Director or Consultant shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Option
Agreement.
(c) Exercise of Option Following Termination of Employment,
Director or Consulting Relationship. In the event of termination of a Grantee's
Continuous Status as an Employee, Director or Consultant with the Company for
any reason other than disability or death (but not in the event of an Grantee's
change of status from Employee to Consultant or from Consultant to Employee),
such Grantee may, but only within ninety (90) days after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Grantee was entitled to exercise it at the date of such
termination or to such other extent as may be determined by the Administrator.
If the Grantee should die within ninety (90) days after the date of such
termination, the Grantee's estate or the person who acquired the right to
exercise the Option by bequest or inheritance may exercise the Option to the
extent that the Grantee was entitled to exercise it at the date of such
termination within five hundred forty-seven (547) days of the Grantee's date of
death, but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement. In the event of an Grantee's change of
status from
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<PAGE> 35
Employee to Consultant, an Employee's Incentive Stock Option shall convert
automatically to a Non-Qualified Stock Option on the ninety-first (91st) day
following such change of status. If the Grantee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(d) Disability of Grantee. In the event of termination of a
Grantee's Continuous Status as an Employee, Director or Consultant as a result
of his or her disability, Grantee may, but only within three hundred sixty-five
(365) days from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Non-Qualified Stock Option on the day three (3)
months and one day following such termination. To the extent that Grantee is not
entitled to exercise the Option at the date of termination, or if Grantee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(e) Death of Grantee. In the event of the death of a Grantee,
the Option may be exercised at any time within five hundred forty-seven (547)
days following the date of death (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement), by the Grantee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Grantee was entitled to exercise
the Option at the date of death. If, at the time of death, the Grantee was not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Grantee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance does not exercise the Option within the
time specified herein, the Option shall terminate.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and
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<PAGE> 36
the number of Shares which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been returned to the
Plan, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other similar event resulting in an increase or
decrease in the number of issued shares of Common Stock. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the number or price
of Shares subject to an Option.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change in Control or
Subsidiary Disposition or at the time of an actual Corporate Transaction, Change
in Control or Subsidiary Disposition and exercisable at the time of the grant of
an Option under the Plan or any time while an Option remains outstanding, to
provide for the full automatic vesting and exercisability of one or more
outstanding unvested Options under the Plan and the release from restrictions on
transfer and repurchase or forfeiture rights of such Options in connection with
a Corporate Transaction, Change in Control or Subsidiary Disposition, on such
terms and conditions as the Administrator may specify. The Administrator also
shall have the authority to condition any such Option vesting and exercisability
or release from such limitations upon the subsequent termination of the
Continuous Status as an Employee or Consultant of the Grantee within a specified
period following the effective date of the Change in Control or Subsidiary
Disposition. The Administrator may provide that any Options so vested or
released from such limitations in connection with a Change in Control or
Subsidiary Disposition, shall remain fully exercisable until the expiration or
sooner termination of the Option. Effective upon the consummation of a Corporate
Transaction, all outstanding Options under the Plan shall terminate unless
assumed by the successor company or its Parent.
(b) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent required to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such manner and to such a
degree as required.
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(b) No Option may be granted during any suspension of the Plan
or after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan shall
not affect Options already granted, and such Options shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon any
Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
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APPENDIX B
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 16, 1995
Amended August 16, 1996
Approved by Stockholders on November 14, 1996
Amended August 13, 1998
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), 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
1.
<PAGE> 39
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).
(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 one hundred and thirteen
million one hundred and twenty thousand (113,120,000) shares [adjusted to
reflect the stock dividends effective November 23, 1994, November 29, 1995 and
December 5, 1997] of the Company's $.001 par value common stock (the "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 1996 Stock Incentive Plan, the 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
2.
<PAGE> 40
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.
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;
(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.
3.
<PAGE> 41
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:
(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 that 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 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.
4.
<PAGE> 42
(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 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.
(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
5.
<PAGE> 43
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 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
(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.
6.
<PAGE> 44
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 on August 25, 2007. 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 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.
7
<PAGE> 45
PROXY
MAXIM INTEGRATED PRODUCTS, INC.
120 San Gabriel Drive
Sunnyvale, CA 94086
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON NOVEMBER 19, 1998.
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 19, 1998 at 11:00 a.m.,
Pacific Standard 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 AND 3.
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 AND 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SEE REVERSE
SIDE SIDE
<PAGE> 46
[X] 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 AND 3.
Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the Proxies will have
authority to vote FOR the election of all directors, and FOR Items 2 and 3.
1. Election of Directors
Nominees: James R. Bergman, John F. Gifford,
B. Kipling Hagopian, A.R. Frank Wazzan
FOR WITHHELD
[ ] [ ]
[ ] _____________________________________________
For, except vote withheld from the above nominee(s):
FOR AGAINST ABSTAIN
2. To ratify and approve amendments to increase [ ] [ ] [ ]
the number of shares available for issuance
under the Company's 1996 Stock Incentive Plan,
as amended and 1987 Employee Stock
Participation Plan, as amended.
FOR AGAINST ABSTAIN
3. To ratify and approve the retention of Ernst [ ] [ ] [ ]
& Young LLP as the Company's independent
auditors for fiscal 1999.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED REPLY
ENVELOPE.
Please mark your choices in blue or black ink.
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:_____
