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:
/ / 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 Sec. 240.14a-11(c) or Sec. 240.14a-12
CHIPS AND TECHNOLOGIES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHIPS AND TECHNOLOGIES, INC.
2950 Zanker Road, San Jose, CA 95134
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
CHIPS AND TECHNOLOGIES, INC.
2950 Zanker Road
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 9, 1995
To the Stockholders of Chips and Technologies, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
Chips and Technologies, Inc. ("Chips" or the "Company") will be held on November
9, 1995, at 3:30 p.m. at the Red Lion Hotel, 2050 Gateway Place, San Jose,
California 95110 for the following purposes:
1. To elect one (1) Class I director.
2. To approve an increase to the share reserve under the Chips
and Technologies, Inc. Amended and Restated 1994 Stock Option Plan (the "Option
Plan") by 1,000,000 shares.
3. To approve an increase to the share reserve under the First
Amended Chips and Technologies, Inc. 1988 Nonqualified Stock Option Plan for
Outside Directors (the "Outside Directors Plan") by 200,000 shares.
4. To ratify the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending June 30, 1996.
5. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on September 15, 1995
are entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose germane to the meeting during ordinary business
hours at the Red Lion Hotel, 2050 Gateway Place, San Jose, California 95110.
By Order of the Board of Directors
Jeffery Anne Tatum, Secretary
San Jose, California
October 13, 1995
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE SO THAT YOUR
STOCK MAY BE REPRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
CHIPS AND TECHNOLOGIES, INC.
2950 Zanker Road
San Jose, California 95134
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of Chips
and Technologies, Inc. ("Chips" or the "Company") for use at the Annual Meeting
of Stockholders to be held November 9, 1995, or any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and accompanying proxy are being first sent to stockholders
on approximately October 13, 1995.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended June 30, 1995
is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
business on September 15, 1995 will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 20,265,796 shares of Common
Stock of the Company issued and outstanding. Each holder of shares of Common
Stock is entitled to one (1) vote for each share of stock held on the proposals
presented in this Proxy Statement. Stockholders may vote in person or by proxy.
The Company's Bylaws provide that a majority of all of the shares of stock
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be borne
by the Company. In addition to soliciting stockholders by mail through its
regular employees, the Company will request banks and brokers to solicit
customers of theirs who have stock of the Company registered in the names of
such banks and brokers or their nominees, and will reimburse such banks and
brokers for their reasonable, out-of-pocket costs. The Company may use the
services of its officers, directors, and others, including professional proxy
solicitors, to solicit proxies, personally or by telephone.
Voting of Proxies. All valid proxies received prior to the meeting will
be voted. All shares represented by a proxy will be voted and, where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted for
each nominee and in favor of each proposal. A stockholder giving a proxy has the
power to revoke his or her proxy at any time prior to the closing of the polls
at the meeting by delivery to the Secretary of the Company of a written
instrument revoking the proxy or a duly executed proxy with a later date, or by
attending the meeting and voting in person.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the
Company's Common Stock owned on June 30, 1995 by (i) each person who is known by
the Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each director and director nominee of the Company, (iii) the Chief Executive
Officer and the four other most highly compensated executive officers whose
compensation is disclosed under the caption "Executive Compensation and Other
Matters", and (iv) all executive officers and directors of the Company as a
group.
Shares Owned (1)
-----------------------------
Number Percentage
Name and Address of Beneficial Owners of Shares of Class
- ------------------------------------- --------- ----------------
FMR Corporation(2) ........................ 2,222,800 12.85
Gordon A. Campbell......................... 910,485(3) 4.56
Gene P. Carter............................. 125,179(4) *
Henri A. Jarrat............................ 145,000(5) *
James F. Stafford.......................... 527,077(6) 2.60
Bernard V. Vonderschmitt................... 51,300(7) *
Keith A. Angelo............................ 200,503(8) 1.00
Richard E. Christopher..................... 155,000(9) *
Morris E. Jones, Jr........................ 480,637(10) 2.40
Lawrence A. Roffelsen...................... 180,000(11) *
All directors and executive officers
as a group (12 persons).................. 3,210,781(12) 14.60%
- --------------------
* Represents less than 1%
1 Unless otherwise indicated below, the persons and entities named in the
above table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable.
2 The address of FMR Corporation is 82 Devonshire Street, Boston,
Massachusetts 02109.
3 Includes 240,000 shares subject to immediately exercisable options.
Includes 25,731 unvested shares.
4 Includes 75,000 shares subject to immediately exercisable options.
Includes 34,587 unvested shares.
5 All shares are subject to immediately exercisable options. Includes 98,295
unvested shares.
6 Includes 525,000 shares subject to immediately exercisable options.
Includes 218,750 unvested shares.
7 Includes 50,000 shares subject to immediately exercisable options.
Includes 24,586 unvested shares.
8 Includes 199,500 shares subject to immediately exercisable options.
Includes 88,232 unvested shares.
9 All shares are subject to immediately exercisable options. Includes 70,834
unvested shares.
10 Includes 260,000 shares subject to immediately exercisable options.
Includes 58,855 unvested shares.
11 All shares are subject to immediately exercisable options. Includes 79,168
unvested shares.
12 Includes 2,264,500 shares subject to immediately exercisable options.
Includes 963,938 unvested shares.
2
<PAGE>
PROPOSAL ONE
NOMINATION AND ELECTION OF DIRECTORS
Pursuant to the Bylaws and actions of the Board of Directors, five (5)
directors constitute the full Board of Directors. The directors are divided into
three classes, with one class to be elected for a three year term at each annual
meeting of stockholders. Gordon A. Campbell and Gene P. Carter, whose terms
expire in 1995, currently serve as the Class I directors. Henri A. Jarrat and
James F. Stafford serve as Class III directors, and their terms expire in 1996.
Bernard V. Vonderschmitt serves as a Class II director and his term expires in
1997.
At the Annual Meeting of Stockholders, one (1) director, Gene P.
Carter, has been nominated for election to Class I of the Board of Directors,
to hold office until the earlier to occur of (i) the meeting of stockholders to
be held in 1998 and the election and qualification of his successor, or (ii) a
resignation or the vacancy of office as a result of death, removal, or other
cause in accordance with the Bylaws of the Company. Mr. Campbell has announced
that he will not stand for reelection and he will therefore step down from the
Board of Directors after the 1995 Annual Meeting of Stockholders. As a result,
Class I will have one vacant seat, which the Board of Directors intends to fill.
Proxies cannot be voted for more than the one named nominee.
If a quorum is present and voting, the nominee for Class I director
receiving the highest number of votes will be elected as a Class I director.
Abstentions and shares held by brokers that are present, but not voted because
the brokers were prohibited from exercising discretionary authority, i.e.,
"broker non-votes", will be counted as present in determining if a quorum is
present.
Certain information concerning the current directors, including the
Class I nominee to be elected at this meeting, is set forth below.
Director Position with the Company Age Term
- ------------------ ------------------------- --- ------------------------
Gordon A. Campbell Chairman of the Board 51 Director since 1984;
term ends 1995.
Gene P. Carter Director 61 Director since 1988;
term ends 1995.
Henri A. Jarrat Director 57 Director since 1994;
term ends 1996.
James F. Stafford President, Chief Executive 51 Director since 1993;
Officer and Director term ends 1996.
Bernard V. Director 71 Director since 1992;
Vonderschmitt term ends 1997.
Mr. Campbell is a founder of the Company and has served as a director
and Chairman of the Board since December 1984, and as President and Chief
Executive Officer from January 1985 through July 1993. He is also a founder and
since 1993 has been President and Chairman of the Board of Techfarm, Inc., a
company formed to launch technology based start-up companies. Mr. Campbell is
also a founder of Seeq Technology, Inc., and, from January 1981 to October 1984,
he served as that company's President and Chief Executive Officer. Mr. Campbell
also serves as a director of 3Com Corporation, Bell Microproducts, Inc., Reply
Corporation and Scotts Valley Instruments, Inc. and as Chairman of the Board of
Exponential Technology, Inc., Summit Systems and Absolute Time Corporation. Mr.
Campbell is also President, Chief Executive Officer and Chairman of the Board of
3D/fx Interactive, Inc.
3
<PAGE>
Mr. Carter has served as a director of the Company since March 1988.
From August 1977 to September 1984, Mr. Carter served as Vice President of Sales
for Apple Computer, Inc. He has been self-employed as a private investor since
1984. Mr. Carter also serves as a director on the board of directors of Adobe
Systems, Inc.
Mr. Jarrat was appointed to the Board of Directors in August 1994. He
is currently President of Jarrat Global Enterprises, Inc. From 1983 to 1987, he
served as President and Chief Operating Officer of VLSI Technology, Inc., and
for seven years prior to 1983, he served at Motorola, Inc. as a Corporate Vice
President and General Manager.
Mr. Stafford was appointed to the Board of Directors in August 1993 and
was named President and Chief Executive Officer in July 1993. Mr. Stafford
served as Acting Chief Financial Officer from April 1993 until December 31,
1993. He previously served as Senior Vice President and Chief Operating Officer
from January 1992 to July 1993, as Senior Vice President, Product Line
Operations from February 1990 to January 1992, as Vice President, Product Line
Operations from July 1989 to February 1990, as Vice President, Operations from
December 1985 to July 1989, and as Director of Operations from January 1985 to
December 1985.
Mr. Vonderschmitt has served as a director of the Company since August
1992. He is a co-founder of Xilinx, Inc. and has served as its Chief Executive
Officer since February 1984. Prior to founding Xilinx, he spent two and one-half
years at Zilog, Inc., then a subsidiary of Exxon, as Vice President and General
Manager of the Microprocessor Division. Prior to joining Zilog, he was with RCA
for more than twenty years in mostly technical management positions. During his
last seven years at RCA, Mr. Vonderschmitt served as Vice President and General
Manager of the Solid State Division. Mr. Vonderschmitt also serves as a director
on the boards of Xilinx, Inc., IMP, Inc., Sanmina, Inc. and Credence Systems
Corporation.
During the fiscal year ended June 30, 1995, the Board of Directors held
nine (9) meetings. No director attended fewer than 75% of such meetings of the
Board of Directors and the committees on which he serves.
There are two (2) standing committees of the Board of Directors: the
Audit Committee and the Compensation Committee. The Board does not have a
standing Nominating Committee.
The Audit Committee's function is to review with the independent
accountants and management the annual financial statements and independent
accountants' opinion, review the scope and results of the examination of the
Company's financial statements by the independent accountants, approve all
professional services performed by the independent accountants and related fees,
recommend the retention of the independent accountants to the Board, subject to
ratification by the stockholders, and periodically review the Company's
accounting policies and internal accounting and financial controls. The members
of the Audit Committee are Bernard Vonderschmitt and Gene Carter. During the
fiscal year ended June 30, 1995, the Audit Committee held one (1) meeting.
The Compensation Committee is responsible for setting and administering
the policies governing the annual compensation of the Company's executive
officers, including cash compensation and stock option programs, and approving
the grant of options for employees. The members of the Compensation Committee
are Bernard Vonderschmitt and Gene Carter. During the fiscal year ended June 30,
1995, the Compensation Committee held ten (10) meetings.
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation of Executive Officers
The following table sets forth information concerning the compensation
of the Chief Executive Officer and the four other most highly compensated
executive officers of the Company as of June 30, 1995, during the fiscal years
ended June 30, 1993, 1994, and 1995:
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------------------ ------------
Awards
------
Fiscal Options/
Name and Principal Position Year Salary Bonus Shares
- ------------------------------ ------ ------ ----- ------
James F. Stafford 1995 $236,259 $118,797 125,000
President and Chief Executive 1994 $225,009 $0 125,000
Officer 1993 $181,924 $0 275,000(1)
Keith A. Angelo 1995 $155,297 $74,750 25,000
Vice President, Marketing 1994 $141,755 $0 50,000
1993 $125,682 $0 165,000(2)
Richard E. Christopher 1995 $164,306 $78,232 25,000
Vice President, Sales 1994 $158,440 $0 35,000
1993 $149,121 $0 180,000(3)
Morris E. Jones, Jr. 1995 $180,566 $84,448 25,000
Senior Vice President, Advanced 1994 $178,506 $0 35,000
Products and Chief Technical 1993 $170,715 $0 150,000(4)
Officer
Lawrence A. Roffelsen 1995 $155,297 $74,750 25,000
Vice President, Engineering 1994 $141,755 $0 50,000
1993 $64,430 $0 105,000
- --------------------------
1 Includes options to purchase 50,000 shares which were repriced on August
3, 1992, replacing options granted in fiscal 1991.
2 Includes options to purchase 105,000 shares which were repriced on
August 3, 1992, replacing options granted in fiscal years 1991, 1992 and
1993.
3 Includes options to purchase 75,000 shares which were repriced on August
3, 1992, replacing options granted in fiscal 1993 which are also
included in the above table and which were canceled.
4 Includes options to purchase 100,000 shares which were repriced on
August 3, 1992, replacing options granted in fiscal 1991 and 1992 which
were canceled.
5
<PAGE>
<TABLE>
Stock Options Granted in Fiscal 1995
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the fiscal
year ended June 30, 1995, to the persons named in the Summary Compensation
Table.
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for Option
Individual Grants in Fiscal 1995 Term(1)
- ---------------------------------------------------------------------------------- ----------------------------
% of Total
Options
Granted to Exercise
Employees or Base
Options in Fiscal Price Expiration
Name Granted Year ($/Sh) Date 5% ($) 10% ($)
- ----------------------- ---------- ---------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
James F. Stafford 125,000 17.6466% $13.063 06/29/05 $1,026,906 $2,602,382
Keith A. Angelo 25,000 3.5293% 13.063 06/29/05 $ 205,381 $ 520,476
Richard E. Christopher 25,000 3.5293% 13.063 06/29/05 $ 205,381 $ 520,476
Morris E. Jones, Jr. 25,000 3.5293% 13.063 06/29/05 $ 205,381 $ 520,476
Lawrence A. Roffelsen 25,000 3.5293% 13.063 06/29/05 $ 205,381 $ 520,476
<FN>
- ------------------------------
(1) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission's
rules. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Company, overall market conditions and
the option holders' continued employment through the vesting period.
The amounts reflected in this table may not necessarily be achieved.
</FN>
</TABLE>
Option Exercises and Fiscal 1995 Year-End Values
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the fiscal year
ended June 30, 1995, and unexercised options held as of June 30, 1995, by the
persons named in the Summary Compensation Table:
6
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 6/30/95 at 6/30/95(1)(2)
--------------------------------- --------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable(1) Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James F. 100,000 $637,188 525,000 218,750 $2,641,406 $863,224
Stafford
Keith A. 20,000 $119,375 199,500 88,232 $913,953 $533,409
Angelo
Richard E. 10,000 $65,000 155,000 70,834 $717,403 $383,521
Christopher
Morris E. 20,000 $85,000 260,000 58,855 $1,687,858 $286,198
Jones, Jr.
Lawrence A. 0 0 180,000 79,168 $914,911 $459,764
Roffelsen
<FN>
- --------------------------
1 Generally, Company stock options granted are immediately exercisable at
date of grant, but vest over a four year period at the rate of 6/48ths
six (6) months after the date of grant for executive officers and after
the date of hire for initial grants and 1/48th one (1) month after the
date of grant for current employees who are not executive officers, and
1/48th per month thereafter for each full month of the optionee's
continuous employment with the Company. The table indicates the amount
of such options which are unvested under the caption "Unexercisable".
2 Based on a value of $13.125 per share which was the closing price of
the Company's Common Stock on June 30, 1995. The value shown is for all
outstanding options which have an exercise price below the closing
price on June 30, 1995 of the Company's Common Stock regardless of
vesting restrictions.
</FN>
</TABLE>
Change of Control Arrangements
Options granted under the Company's Amended and Restated 1994 Stock
Option Plan and the First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors (the "Outside Directors Plan") contain
provisions pursuant to which, under certain circumstances, all outstanding
options granted under such plans shall become fully vested and immediately
exercisable upon a "transfer of control" as defined in such plans.
Compensation of Directors
The Company's outside directors each receive $1,500 for each Board of
Directors meeting which the director attends. In addition, each receives $1,000
for each committee meeting of the Board of Directors he attends which is held
separately from a Board meeting and $500 for each committee meeting he attends
that is held consecutively with a Board meeting (excluding Compensation
Committee meetings held solely for the purpose of approving routine stock option
grants). For other compensation arrangements with certain directors, see
"Certain Transactions and Other Relationships".
7
<PAGE>
The Company's Outside Directors Plan currently provides that upon the
effective date of the Outside Directors Plan or initial election to the Board of
Directors, each non-employee director (an "Outside Director") will receive a
one-time grant of an option to purchase 20,000 shares of the Company's Common
Stock and an additional grant of an option to purchase 10,000 shares of the
Company's Common Stock on each anniversary of his or her tenure as an Outside
Director. In addition, an Outside Director who serves as the Chairman of the
Board receives a stock option to purchase 5,000 shares of the Company's Common
Stock upon appointment and on each anniversary of his tenure as Chairman, and
each director receives a stock option to purchase 2,500 shares of the Company's
Common Stock each year for each committee of the Board of Directors on which a
director serves. The Board of Directors has proposed an amendment to the Outside
Directors Plan to increase the number of shares reserved for issuance thereunder
from 350,000 to 550,000. See "PROPOSAL THREE APPROVAL OF AMENDMENT TO THE FIRST
AMENDED CHIPS AND TECHNOLOGIES, INC. 1988 NONQUALIFIED STOCK OPTION PLAN FOR
OUTSIDE DIRECTORS TO INCREASE SHARE RESERVE".
Certain Transactions and Other Relationships
In August 1994, the Company loaned $100,000 at an interest rate of 7%
per annum to Keith A. Angelo, an executive officer of the Company. The
outstanding balance of the loan will be forgiven at a rate of 25% per year as
Mr. Angelo continues his employment with the Company. If he voluntarily leaves
his employment with the Company or if Mr. Angelo's employment is terminated for
cause before August 1, 1998, the outstanding balance must be repaid in full at
that time.
In August 1994, the Company entered into an independent contractor
agreement (the "Contractor Agreement") with Jarrat Global Enterprises, Inc.
("JGE"), a corporation whose principal shareholder is Henri A. Jarrat, a
director of the Company. Pursuant to the Contractor Agreement, JGE will receive
$8,000 per month, plus options to purchase a number of shares of Company stock
to be determined by the Company's Board of Directors, as compensation for Mr.
Jarrat providing the Company with requested business advice, including
management consulting in specific areas, until November 1996, unless terminated
earlier by either party.
In August 1993, Nancy S. Dusseau, Vice President and General Counsel,
and Jeffrey A. Grammer, Vice President, Corporate Development, terminated their
employment with the Company. In connection with these terminations, each officer
entered into an agreement with the Company which provided that, in exchange for
the provision by the former officer of certain consulting services to the
Company and a release of any claims against the Company, the Company would pay
certain benefits, including extending medical benefits for up to one year. The
agreements provide that the Company would (1) pay Ms. Dusseau $11,667 per month
and Mr. Grammer $12,167 per month, each for nine months; (2) accelerate the
vesting of 54,588 and 22,271 shares of Company stock under stock options
previously granted Ms. Dusseau and Mr. Grammer, respectively; and (3) extend the
exercise date of their vested stock options to August 14, 1994.
In July 1993, Gordon A. Campbell terminated his employment as President
and Chief Executive Officer of the Company. In connection with his termination,
Mr. Campbell and the Company agreed that, in exchange for the provision by Mr.
Campbell of certain consulting services to the Company and a release of any
claims against the Company, the Company would (1) pay Mr. Campbell $27,084 per
month for one year; (2) extend his medical benefits for up to one year; (3)
accelerate the vesting of 76,633 shares of Company stock under stock options
previously granted Mr. Campbell; (4) extend vesting eligibility for 250,000
shares under a performance-based option; and (5) extend the exercise date of Mr.
Campbell's vested stock options to August 31, 1994. The Board of Directors
retained the right to terminate the foregoing agreement with Mr. Campbell in the
event he did not perform the consulting services to which he agreed. In May
1994, the Board of Directors extended to August 31, 1995 the exercise date of
550,000 shares of Company stock under stock options previously granted Mr.
Campbell, which included the options for 76,633 shares and 250,000 shares
described above in (3) and (4), respectively.
8
<PAGE>
In September 1993, the Company entered into an asset sale agreement
(the "Agreement") with Techfarm, Inc. ("Techfarm"). Techfarm is a corporation
whose principal shareholders were Gordon A. Campbell, the Company's former
President and Chief Executive Officer, and two other former executive officers
of the Company. Mr. Campbell is currently the sole shareholder of Techfarm and
the Company's Chairman of the Board. Pursuant to the Agreement, Techfarm
purchased certain of the Company's assets, including the Company's interest in
its Russian joint venture, Summit Systems ("Summit"), the Company's ethernet and
token ring technology, and the technology associated with the Company's
development of future multimedia products. The Company received a license back
to the ethernet and multimedia technology for future products and agreed that,
for a period of five (5) years, it will not engage directly in any of the
businesses conducted by the networking business or the Summit business as of the
date of the Agreement. In connection with the purchase, Techfarm assumed certain
of the Company's liabilities, including the liabilities associated with the
termination of interests in Summit other than the Company's and the liabilities
under any contracts assumed by Techfarm, including certain joint development
contracts. In exchange for the foregoing assets, Techfarm paid the Company
$100,000 in cash and delivered a promissory note for $1,615,000. The note bore
interest at 10% per annum and the principal and any accrued interest were
payable in four installments, one every six months. The first installment was
paid March 31, 1994, a second installment was paid on September 29, 1994 and the
balance was repaid and the note retired October 14, 1994.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with during the
fiscal year ended June 30, 1995.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee during fiscal 1995 was composed of two
independent, non-employee directors of the Company, Gene P. Carter and Bernard
V. Vonderschmitt. See "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION".
Changes to Benefit Plans
The Board of Directors has proposed an amendment to increase the share
reserve under the Amended and Restated Chips and Technologies, Inc. 1994 Stock
Option Plan (the "Option Plan") by 1,000,000 shares. See "PROPOSAL TWO -
APPROVAL OF AMENDMENT TO AMENDED AND RESTATED CHIPS AND TECHNOLOGIES, INC. 1994
STOCK OPTION PLAN TO INCREASE SHARE RESERVE" for a discussion of the proposed
increase in the share reserve of the Option Plan. The Board of Directors has
also proposed an amendment to increase the share reserve under the Outside
Directors Plan by 200,000 shares. See "PROPOSAL THREE - APPROVAL OF AMENDMENT TO
THE FIRST AMENDED CHIPS AND TECHNOLOGIES, INC. 1988 NONQUALIFIED STOCK OPTION
PLAN FOR OUTSIDE DIRECTORS TO INCREASE SHARE RESERVE" for a discussion of the
proposed increase in the share reserve of the Outside Directors Plan.
The following table sets forth the stock options that were granted
under the Option Plan in the fiscal year ended June 30, 1995, and grants of
stock options that are expected to be made under the Outside Directors Plan
during the fiscal year ending June 30, 1996, to (i) the Chief Executive Officer
and the four other most highly compensated executive officers of the Company as
of June 30, 1995; (ii) all current executive officers as
9
<PAGE>
a group; (iii) all current directors who are not executive officers as a group;
(iv) all employees, including all officers who are not executive officers, as a
group. Grants of stock options under the Option Plan are to be made at the
discretion of the Board of Directors. Accordingly, future grants of stock
options under the Option Plan are not yet determinable.
<TABLE>
NEW PLAN BENEFITS
<CAPTION>
First Amended
Chips and
Technologies, Inc.
1988 Nonqualified
Chips and Technologies Inc. Stock Option Plan
Amended and Restated 1997 Stock for Outside
Option Plan(1) Directors
------------------------------- --------------------
Exercise Number
Price(2) of Number of
Name and Position (per share) Shares Shares(3)
- ------------------------------ ----------- ------ --------------------
<S> <C> <C> <C>
James F. Stafford $13.063 125,000 N/A
President and Chief Executive
Officer
Keith A. Angelo $13.063 25,000 N/A
Vice President, Marketing
Richard E. Christopher $13.063 25,000 N/A
Vice President, Sales
Morris E. Jones, Jr. $13.063 25,000 N/A
Senior Vice President,
Advanced Products and Chief
Technical Officer
Lawrence A. Roffelsen $13.063 25,000 N/A
Vice President, Engineering
Executive Officer Group
(8 persons) $13.063 300,000 N/A
Non-Executive Director
Group (4 persons) $ 7.675(4) 125,000 55,000
Non-Executive Officer
Employee Group
(174 persons) $ 7.795 378,350 N/A
<FN>
- --------------------
1 Employees, directors and individuals who are rendering services as
consultants, advisors, or other independent contractors to the Company
are eligible to participate in the Option Plan.
2 Future exercise prices of options are unknown, as they are based upon
fair market value at the date of grant.
3 All options granted under the Outside Directors Plan will have an
exercise price equal to the fair market value on the date of grant.
Assumes grants of standard options under the Outside Directors Plan to
Messrs. Gordon A. Campbell, Gene P. Carter, Bernard V. Vonderschmitt
and Henri A. Jarrat.
4 Represents the weighted average exercise price of an option for 25,000
shares with a per share exercise price of $4.875 and an option for
100,000 shares with a per share exercise price of $8.375, both of which
were granted to Mr. Jarrat during the fiscal year ended June 30, 1995.
</FN>
</TABLE>
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation Committee
The Compensation Committee is composed of two independent, non-employee
directors of the Company, neither of whom are former employees of the Company.
During fiscal 1995, the Committee members were Gene P. Carter and Bernard V.
Vonderschmitt. The Committee is responsible for setting and administering the
policies governing the annual compensation of the Company's executive officers,
including cash compensation and stock option programs, and approving the grant
of options for employees.
Compensation Philosophy
The Compensation Committee strives to align executive compensation with
the value achieved by the executive team for the Company's stockholders. Toward
that goal, the Company's compensation program emphasizes both short and
long-term incentives designed to attract, motivate, and retain highly qualified
executives who will effectively manage the Company and maximize stockholder
value. The Company uses salary, executive officer bonuses and stock options to
motivate executive officers to achieve the Company's business objectives and to
align the incentives of officers with the long-term interests of stockholders.
The Committee reviews and evaluates each executive officer's base and variable
compensation annually relative to corporate performance and comparative market
information.
In setting total compensation, the Committee considers individual and
Company performance, as well as market information in the form of published
survey data provided to the Committee by the Company's human resources staff.
The market data consists primarily of base salary and total cash compensation
rates, as well as incentive bonus and stock programs, of companies considered by
the Committee to be comparable companies in the semiconductor industry. The
Committee's policy is to generally target levels of cash and equity compensation
paid to its executive officers at approximately five percent above the average
of such compensation paid by comparable companies in the semiconductor industry.
The Committee also reviews current literature concerning trends in executive
compensation structures.
The Company has considered the potential impact of Section 162(m)
("Section 162(m)") of the Internal Revenue Code adopted under the federal
Revenue Reconciliation Act of 1993. Section 162(m) disallows a tax deduction for
any publicly-held corporation for individual compensation exceeding $1 million
in any taxable year for any of the named executive officers, unless compensation
is performance-based. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and the Company
believes that any options granted under the Option Plan will meet the
requirement of being performance-based in accordance with the regulations under
Section 162(m), the Committee believes that Section 162(m) will not reduce the
tax deduction available to the Company. The Company's policy is to qualify to
the extent reasonable its executive officers' compensation for deductibility
under applicable tax laws.
Forms of Compensation
Specific executive compensation elements and the factors on which they were
based are:
o Base Salary. The Committee reviews the performance and sets the
salary of all executive officers on an annual basis. In making its decisions,
the Committee considers the evaluations and recommendations of the Chief
Executive Officer as to the performance, attainment of goals and objectives, and
the current and anticipated future contributions of each officer to the Company,
and the relative salary of the Chief Executive Officer and each of the Company's
other officers compared to the average ratio of base pay of the chief executive
officer to the top four other executive officers according to survey data for
the semiconductor industry. In making its decision regarding the Chief Executive
Officer's base compensation, the Committee reviews the Chief Executive Officer's
performance and sets his salary independently, after considering his
11
<PAGE>
performance, current and anticipated future contributions to the Company and the
salary levels for chief executive officers at comparable companies.
o Bonus. The Company seeks to provide near term incentives through
bonuses to executives who make contributions of outstanding value to the
Company. For fiscal 1995, the Company paid bonuses to the Chief Executive
Officer and to the other executive officers based on an executive bonus plan
(the "Executive Bonus Plan"), which provided for bonuses based on the degree of
attainment of target objectives for annual revenue and operating income for the
Company, with each objective having equal weight under the plan. The targets
were set by the Committee during the first ninety days of the fiscal year. Based
on the relative attainment of the targets, a scale of potential bonuses was
determined, expressed as a percent of salary, one scale for the Chief Executive
Officer and another for the other named executive officers, with a maximum
dollar amount per individual, and with all bonus payments subject to a maximum
percentage of operating income.
o Long-term Incentives. Longer term incentives are provided through the
Amended and Restated Chips and Technologies, Inc. 1994 Stock Option Plan (the
"Option Plan") and the Company's Employee Stock Purchase Plan (the "Purchase
Plan"). Both the Option Plan and the Purchase Plan reward executives through the
growth in the value of the Company's stock. All of the Company's employees are
eligible to participate in the Option Plan and the Purchase Plan. Initial stock
options are granted upon hire and additional, discretionary options are awarded
depending on individual performance and contribution.
At the commencement of an executive officer's employment, and
periodically thereafter, the Chief Executive Officer recommends to the Committee
an award of stock options under the Option Plan. The Committee grants stock
options at the market price for the Company's Common Stock on the date of grant.
Therefore, such grants will only have value if the Company's Common Stock price
increases over the exercise price. The Committee believes that stock options
serve to align the incentives of executive officers with the interests of
stockholders because of the direct benefit executive officers receive through
improved stock performance. Recommendations for the grant of options may take
into account a number of factors, including the promotion of team effort by the
executive officers, the relative position and responsibilities of each executive
officer, their relative equity ownership and degree of vesting, and the
historical and expected contributions of each executive officer to the Company.
Generally, stock options vest over a period of four years in order to encourage
executive officers to continue their employment with the Company.
Fiscal 1995 Compensation
Compensation for the Chief Executive Officer and the other executive
officers for the last fiscal year was set according to the Company's established
compensation philosophy described above.
James F. Stafford, the Company's Chief Executive Officer, received an
approximately 6% upward adjustment in his base salary during fiscal 1995, based
on a comparison of salaries paid to chief executive officers of comparable
semiconductor companies, benchmark companies with similar market capitalizations
with annual sales volume in the range of $100 million to $199 million and the
average ratio of salaries of chief executive officers to the salaries of the top
four other executive officers at surveyed companies in the semiconductor
industry. Mr. Stafford's base salary as so adjusted was below 75% of the
salaries in effect for chief executive officers at the same companies surveyed.
The base salaries for the other named executive officers of the Company were
each raised on the basis of a similar analysis in fiscal 1995 from their levels
in fiscal 1994.
The Committee established target bonuses, expressed as a percentage of
base salary, for Mr. Stafford and for the other executive officers under the
Executive Bonus Plan for fiscal 1995, the size of which were based upon the
comparative market compensation data discussed above. The actual bonuses were
measured and paid in accordance with the provisions of the Executive Bonus Plan
described above, based on the Company's attainment of revenue and operating
income goals. Mr. Stafford's fiscal 1995 bonus amount was equivalent to
approximately 50% of his base salary. The fiscal 1995 bonus amount for the other
named executive officers
12
<PAGE>
was equivalent to approximately 48% of their base salaries. The bonuses paid
reflect the attainment by the Company of performance above or close to the
established targets. The fiscal 1995 bonuses paid were at the high end of the
range but did not reach the maximum potential bonus awards.
During fiscal 1995, the Committee approved the grant of a new stock
option for 125,000 shares to Mr. Stafford and new grants of options for 25,000
shares to each of the other named executive officers. These option grants were
based on the performance of the officers in fiscal 1994 and fiscal 1995, and
were intended to promote team effort by the management group. The grants reflect
the Committee's continuing policy to subject a portion of each executive
officer's overall compensation to the market performance of the Company's common
stock and to maintain the option holdings of each officer at a level consistent
with that for other executive officers at the survey companies in the
semiconductor industry.
The Compensation Committee
Gene P. Carter
Bernard V. Vonderschmitt
13
<PAGE>
<TABLE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of the H&Q Technology Index and the Nasdaq Stock Market - U.S.
Index for the period commencing on June 30, 1990, and ending on June 30, 1995.
<CAPTION>
Comparison of Cumulative Total Return From June 30, 1990,
through June 30, 1995(1)
Chips and Technologies, Inc.
[GRAPHIC OMITTED]
6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Chips and Technologies, Inc. 100.00 36 33 18 18 62
H&Q Technology 100.00 101 114 140 142 237
Nasdaq-U.S. 100.00 106 127 160 162 215
<FN>
1 Assumes that $100.00 was invested on June 30, 1990, in the Company's
Common Stock at the price of $21.25 per share and at the closing sales
price for each index on that date and that all dividends were
reinvested. No cash dividends have been declared on the Company's
Common Stock. Stockholder returns over the indicated period should not
be considered indicative of future stockholder returns.
</FN>
</TABLE>
14
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO
AMENDED AND RESTATED CHIPS AND TECHNOLOGIES, INC. 1994 STOCK OPTION PLAN
TO INCREASE SHARE RESERVE
The Company established the Option Plan in January 1985. The purpose of
the Option Plan is to encourage stock ownership by employees, directors and
consultants of the Company or any parent or subsidiary corporation of the
Company, to give them a greater personal interest in the success of the business
and to provide added incentive to continue and advance in their employment or
service to the Company. On January 8, 1987, the Board of Directors amended and
restated the Option Plan to conform to certain changes in governing law effected
by the Tax Reform Act of 1986. On August 11, 1994, the Board of Directors
amended and restated the Option Plan, extended its term and renamed the Option
Plan the "Amended and Restated Chips and Technologies, Inc. 1994 Stock Option
Plan". As of June 30, 1995, 3,775,071 shares of Common Stock were reserved for
issuance upon the exercise of outstanding options at a weighted average exercise
price of $5.8905 per share with exercise prices ranging from $3.125 to $13.063,
and 1,679,220 shares of Common Stock remained available for future option grants
(excluding the 1,000,000 shares now proposed for stockholder approval), which is
equal to approximately 8.5% of the total number of shares of Common Stock
outstanding. See "Executive Compensation and Other Matters" for additional
information regarding grants and exercises of options under the Option Plan.
Proposed Amendment to the Option Plan
The Board of Directors has approved an increase in the number of shares
of Company Common Stock reserved under the Option Plan by 1,000,000 shares, and
the stockholders are being asked to approve the same increase at the Annual
Meeting. As of September 15, 1995, 1,321,571 shares of Common Stock (excluding
the 1,000,000 shares now proposed for stockholder approval) were available to
support future grants of options under the Option Plan. The Board believes that
the adoption of this proposal is in the best interests of the Company for the
reasons discussed below.
The Company seeks to attract, motivate and retain talented and
enterprising employees by rewarding performance and encouraging behavior that
will improve the Company's profitability. The Company believes that the Option
Plan plays an important role in achieving these objectives by encouraging broad
employee stock ownership. The Company believes that equity incentives provided
by the Option Plan help align the interests of the employees with the interests
of the Company's stockholders, and enhance the Company's ability to continue
recruiting and retaining top talent. Management believes that the continued
operation of the Option Plan necessitates an increase in the share reserve under
the Option Plan.
Summary of the Provisions of the Option Plan
The following summary of the Option Plan describes the Option Plan as
amended in 1994 and is qualified in its entirety by the specific language of the
Option Plan, a copy of which is available to any stockholder upon request.
Options granted under the Option Plan prior to its amendment in 1994 have
various terms that are different from those described herein, including the
immediate termination of such an option upon an optionee's termination of
employment with the Company.
The Option Plan is administered by the Board of Directors and/or a duly
appointed committee of the Board of Directors which has discretion to determine
optionees, the number of shares to be covered by each option, the vesting
schedule and all other terms of the options. As of June 30, 1995, 3,775,071
shares of Common Stock were reserved for issuance upon the exercise of
outstanding options. If the stockholders approve the 1,000,000 increase in the
number of shares of Company Common Stock reserved under the Option Plan,
2,679,220 shares of Common Stock would remain available for future option grants
as of June 30, 1995, which is equal to approximately 13.6% of the total number
of shares of Common Stock outstanding (subject to adjustment in the event of
stock dividends, stock splits, reverse stock splits, combinations,
reclassifications, or like changes in the capital structure of the Company). No
optionee may be granted options to purchase in excess of 500,000 shares per
fiscal year (such limit
15
<PAGE>
to be subject to adjustment in the event of stock dividends, stock splits,
reverse stock splits, combinations, reclassifications, or like changes in the
capital structure of the Company). All options must be granted, if at all, by
August 11, 2004.
The Option Plan provides for the grant of incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and nonqualified stock options.
Stock options may be granted to employees, prospective employees, directors and
consultants of the Company; provided, however, that Incentive Stock Options may
be granted only to employees. As of June 30, 1995, 174 employees and consultants
were eligible to participate in the Option Plan.
All options granted under the Option Plan must have an exercise price
not less than the fair market value of the Common Stock of the Company, as
determined by the Board, on the date of grant. Any Incentive Stock Option
granted to a person who at the time of the grant owns stock comprising more than
10% of the total voting power of all classes of stock of the Company must have
an exercise price equal to at least 110% of the fair market value of the Common
Stock of the Company, as determined by the Board on the date of grant.
Options granted under the Option Plan may be exercised by payment of
the exercise price (1) in cash, by check or cash equivalent, (2) by tender to
the Company of shares of the Company's Common Stock which (a) either have been
owned by the optionee for more than six months or were not acquired, directly or
indirectly from the Company, and (b) have a value not less than the exercise
price, (3) by the optionee's recourse promissory note, if specifically permitted
by the Board and set forth in the option agreement, (4) by the assignment of the
proceeds of the sale of some or all of the shares being acquired upon the
exercise of an option, (5) by such other consideration as the Board may allow,
or (6) by any combination thereof. Incentive Stock Options granted under the
Option Plan are exercisable for a period of ten years from the date of grant. At
the discretion of the Board of Directors, nonqualified stock options granted
under the Option Plan may have a term longer than ten years. After expiration,
the shares subject to an unexercised option become available for future grants.
Unless otherwise provided by the Board of Directors, options are
exercisable at any time after grant. Shares purchased upon exercise of an option
are subject to the Company's right to repurchase the unvested portion of such
shares at their original purchase price upon termination of the optionee's
employment with the Company or the optionee's attempt to sell, exchange,
transfer, pledge or otherwise dispose of the unvested shares. Shares so
repurchased become available for future option grants. Unless otherwise
determined by the Board of Directors, the number of shares subject to the
Company's repurchase right decreases over a four-year period, commencing on the
option grant date or the optionee's date of hire, as specified by the Board of
Directors. Ordinarily, an option is exercisable, during the lifetime of the
optionee, only by the optionee, and is not transferable or assignable by the
optionee other than by will or the laws of descent and distribution; provided,
however, that the Board may provide that Nonqualified Stock Options may be
assigned or transferred to third parties.
If an optionee ceases to be an employee of the Company for any reason,
the optionee may exercise his or her option (to the extent exercisable on the
date of termination) within thirty days after the date of termination, but in
any event not later than the termination of the option.
In the event of a Transfer of Control (as defined in the Option Plan),
the unexercisable and/or unvested portion of all outstanding options will become
immediately exercisable and vested as of a date 30 days prior to the Transfer of
Control, unless the acquiring company either assumes the options granted under
the Option Plan or else substitutes its own options for the Option Plan options.
Any options which are neither assumed or substituted for by the acquiring
company nor exercised as of the date of the Transfer of Control will terminate
effective as of the date of the Transfer of Control.
The Board of Directors may terminate or amend the Option Plan at any
time; provided, however, that without the approval of the stockholders of the
Company, the Board may not amend the Option Plan to increase the number of
shares of Common Stock covered thereby, to change the class of persons eligible
to receive Incentive Stock Options or to expand the class of persons eligible to
receive nonqualified stock options.
16
<PAGE>
Summary of the Federal Income Tax Consequences of the Option Plan
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law with respect to
participation in the Option Plan and does not attempt to describe all possible
federal or other tax consequences of such participation. Furthermore, the tax
consequences of options are complex and subject to change, and a taxpayer's
particular situation may be such that some variation of the described rules is
applicable.
Optionees should consult their own tax advisors prior to the exercise
of any option and prior to the disposition of any shares of Common Stock
acquired upon the exercise of an option.
Incentive Stock Options. Options designated as Incentive Stock Options
are intended to fall within the provisions of Section 422 of the Code. An
optionee recognizes no taxable income as the result of the grant or exercise of
such an option.
For optionees who do not dispose of their shares for two years
following the date the option was granted nor within one year following the
transfer of the shares upon exercise of the option, the gain on sale of the
shares (which is defined to be the difference between the sale price and the
purchase price of the shares) will be taxed as long-term capital gain. If an
optionee is entitled to a long-term capital gain treatment upon a sale of the
stock, the Company will not be entitled to any deduction for federal income tax
purposes. If an optionee disposes of shares within two years after the date of
grant or within one year from the date of exercise (a "disqualifying
disposition"), the difference between the option price and the fair market value
of the shares on the date of exercise (not to exceed the gain realized on the
sale if the disposition is a transaction with respect to which a loss, if
sustained, would be recognized) will be taxed at ordinary income rates at the
time of disposition. Any gain in excess of that amount will be a capital gain.
If a loss is recognized, there will be no ordinary income, and such loss will be
a capital loss. A capital gain or loss will be long-term if the optionee's
holding period is more than twelve months. Generally, any ordinary income
recognized by the optionee upon the disposition of the stock would be deductible
by the Company for federal income tax purposes.
The difference between the option price and the fair market value of
the shares on the determination date of an Incentive Stock Option (which is
generally the date of exercise) is an adjustment in computing the optionee's
alternative minimum taxable income and may be subject to an alternative minimum
tax which is paid if such tax exceeds the regular tax for the year. Special
rules may apply with respect to certain subsequent sales of the shares in a
disqualifying disposition, certain basis adjustments for purposes of computing
the alternative minimum taxable income on a subsequent sale of the shares and
certain tax credits which may arise with respect to optionees subject to the
alternative minimum tax.
Nonqualified Stock Options Nonqualified stock options have no special
tax status. An optionee generally recognizes no taxable income as a result of
the grant of such an option. Upon exercise of an option, the optionee normally
recognizes ordinary income in the amount of the difference between the option
price and the fair market value of the shares on the determination date (which
is generally the date of exercise). If the optionee is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The "determination date" is the date on which the option is exercised
unless the shares are not vested and/or the sale of the shares at a profit would
subject the optionee to suit under Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), in which case the determination date
is the later of (i) the date on which the shares vest, or (ii) the date the sale
of the shares at a profit would no longer subject the optionee to suit under
Section 16(b) of the Exchange Act. (Section 16(b) of the Exchange Act generally
is applicable only to officers, directors and beneficial owners of more than 10%
of the Common Stock of the Company.) If the determination date is after the
exercise date, the optionee may elect, pursuant to Section 83(b) of the Code, to
have the exercise date be the determination date by filing an election with the
Internal Revenue Service not later than thirty days after the date the option is
exercised. Upon the sale of stock acquired by the exercise of a nonqualified
stock option, any gain or loss, based on the difference between the sale price
and the fair market value on the date of recognition of income, will be taxed as
capital gain or loss. A capital gain or loss will be long-term if the optionee's
holding period is more than twelve months from the date of recognition of
income. No tax deduction is available to the Company
17
<PAGE>
with respect to the grant of the option or the sale of the stock acquired
pursuant to such grant. Generally, the Company would be entitled to a deduction
equal to the amount of ordinary income recognized by the optionee as a result of
the exercise of the option.
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome of
the vote. The Company's management believes that in order to attract and retain
additional key employees essential to the success of the Company, it is
necessary to increase the share reserve of the Option Plan. THEREFORE, THE BOARD
OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE THEREUNDER BY 1,000,000 SHARES.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO THE FIRST AMENDED
CHIPS AND TECHNOLOGIES, INC. 1988 NONQUALIFIED STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS TO INCREASE SHARE RESERVE
The First Amended Chips and Technologies, Inc. 1988 Stock Option Plan
For Outside Directors (the "Outside Directors Plan") was adopted by the Board of
Directors in March 1988 and approved by the stockholders in October 1988. On
October 13, 1993, the Board of Directors amended and restated the Outside
Directors Plan to modify the automatic grant feature and renamed the Outside
Directors Plan the "First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors." The Outside Directors Plan was created
in order to assist the Company in the recruitment, retention and motivation of
highly qualified non-employee members of its Board of Directors. The Outside
Directors Plan provides for the granting of nonqualified stock options to
directors of the Company who are not employees of the Company pursuant to the
fixed formula described below. Since its inception, a total of 350,000 shares of
the Company's Common Stock have been reserved for issuance under the Outside
Directors Plan. As of June 30, 1995, there were 138,333 shares of Common Stock
available for issuance and not already subject to corresponding options
previously granted under the Outside Directors Plan.
Each of the Company's nonemployee directors (the "Outside Directors")
is automatically granted an option to purchase 20,000 shares of the Company's
Common Stock upon his or her initial election to the Board. In addition, each
Outside Director receives an additional automatic option grant of 10,000 shares
of Common Stock on each anniversary date of his or her appointment to the Board
or, in the case of directors appointed prior to the effective date of the
Outside Directors Plan, March 1, the effective date of the Outside Directors
Plan (the "Anniversary Date").
The Outside Directors Plan also provides that each Outside Director is
to receive an additional option for 2,500 shares each year for each Board
committee on which the director serves. An Outside Director who serves as
Chairman of the Board shall receive an additional option for 5,000 shares for
each year he or she serves as Chairman of the Board.
Proposed Amendment to the Outside Directors Plan
On August 28, 1995 the Board of Directors adopted, subject to
stockholder approval, an amendment to the Outside Directors Plan to increase the
shares reserved for issuance thereunder by 200,000 shares (from 350,000 to
550,000). Management of the Company believes that approval of the increase in
the share reserve for the Outside Directors Plan is in the best interests of the
Company and its stockholders because approval of the increase will enable the
Company to attract and retain qualified persons to serve as non-employee
directors of the Company.
18
<PAGE>
Summary of the Provisions of the Outside Directors Plan
The following summary of the Outside Directors Plan, including the
proposed amendment, is qualified in its entirety by the specific language of the
Outside Directors Plan, a copy of which is available to any stockholder upon
request.
The Outside Directors Plan is administered by the Board of Directors or
a duly appointed committee of the Board of Directors. Options granted under the
Outside Directors Plan are nonqualified stock options. Only directors of the
Company who are not employees of the Company or its present or future parent or
subsidiary corporations are eligible to participate in the Outside Directors
Plan.
The exercise price of any option granted under the Outside Directors
Plan may not be less than 100% of the fair market value of the Common Stock of
the Company on the date of grant, as determined pursuant to the Outside
Directors Plan. All options must be granted, if at all, within ten years from
March 1, 1988, the effective date of the Outside Directors Plan. Shares subject
to an option granted under the Outside Directors Plan may be purchased for cash,
by check or direct payment authorization.
Under the Outside Directors Plan, options are immediately exercisable
in full, subject to a right of repurchase in favor of the Company if an optionee
ceases to be a director of the Company within four years of the date of grant of
the option or attempts to transfer any unvested shares within such four year
period. Options vest (i.e. the Company's right of repurchase expires) over four
years, at the rate of 6/48 after six months from the date of grant of the option
and 1/48 for each full month thereafter. Options granted prior to November 10,
1993 have an option term of five years. Options granted after that date have an
option term of ten years. During the lifetime of the optionee, the option may be
exercised only by the optionee. An option may not be transferred or assigned,
except by will or the laws of descent and distribution.
If an optionee ceases to be a director of the Company for any reason,
except death or disability, the optionee may exercise his or her option (to the
extent unexercised and exercisable on the date of termination) within 90 days
after the date of termination of service as a director, but in any event not
later than the expiration of the option term. If an optionee ceases to be a
director of the Company due to death or disability, the optionee (or his or her
legal representative) may exercise the option (to the extent unexercised and
exercisable on the date of termination) within twelve months after the date of
termination of service as a director, but in any event not later than the
expiration of the option term. The period for exercise of an option upon
termination of service as a director is extended under certain circumstances if
exercise of the option would be a violation of applicable federal and/or state
securities laws, or if exercise would subject the optionee to loss of profits
under Section 16(b) of the Securities Exchange Act of 1934, as amended.
In the event of a transfer of control of the Company, any unexercisable
portion of an option becomes immediately exercisable as of a date before the
transfer of control. The Board of Directors may terminate or amend the Outside
Directors Plan at any time, but without stockholder approval the Board of
Directors may not amend the Outside Directors Plan to increase the number of
shares covered by the plan or to expand the class of persons eligible to receive
options under the plan.
19
<PAGE>
Summary of the Federal Income Tax Consequences of the Outside Directors Plan
For a summary of the tax consequences to the optionee and to the
Company of option grants and option exercises under the Outside Directors Plan,
see the discussion of nonqualified stock options under "PROPOSAL TWO - APPROVAL
OF AMENDMENT TO AMENDED AND RESTATED CHIPS AND TECHNOLOGIES, INC. 1994 STOCK
OPTION PLAN TO INCREASE SHARE RESERVE - Summary of the Federal Income Tax
Consequences of the Option Plan".
Vote Required and Board of Directors' Recommendation
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum. Abstentions
will have the same effect as a negative vote. Broker non-votes, on the other
hand, will have no effect on the outcome of the vote.
The Board of Directors believes that the amendment of the Outside
Directors Plan is in the best interest of the Company and its stockholders,
because availability of an adequate number of shares reserved for issuance under
the Outside Directors Plan is an important factor in attracting and retaining
qualified directors essential to the success of the Company. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE FIRST AMENDED
CHIPS AND TECHNOLOGIES, INC. 1988 NONQUALIFIED STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY
200,000 SHARES.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP
as independent accountants to audit the financial statements of the Company for
the fiscal year ending June 30, 1996. Price Waterhouse LLP has acted in such
capacity since its appointment during the fiscal year ended June 30, 1985. A
representative of Price Waterhouse LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS RATIFY THE
APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR ENDING JUNE 30, 1996. If the appointment is not ratified,
management will consider the appointment of other independent accountants. The
affirmative vote of a majority of the votes cast at the Annual Meeting of
Stockholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum, but will not be counted as having been voted on the
proposal.
STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of the stockholders of the Company must be received by the Company at
its offices at 2950 Zanker Road, San Jose, California 95134, not later than June
15, 1996, and satisfy the conditions established by the Securities and Exchange
Commission for stockholder proposals to be included in the Company's proxy
statement for that meeting.
20
<PAGE>
TRANSACTION OF OTHER BUSINESS
At the date of the Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is as hereinabove set forth. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
Jeffery Anne Tatum, Secretary
October 13, 1995
21
<PAGE>
P
R
O
X
Y
CHIPS AND TECHNOLOGIES, INC.
Proxy for Annual Meeting of Stockholders
Solicited by the Board of Directors
The undersigned hereby appoints James F. Stafford and Jeffery Anne
Tatum or either of them as proxy with the power of substitution to vote and act
on and consent in respect to any and all shares of the stock of Chips and
Technologies, Inc. (the "Company"), held or owned by or standing in the name of
the undersigned on the Company's books on September 15, 1995, at the Annual
Meeting of Stockholders of the Company to be held at the Red Lion Hotel, 2050
Gateway Place, San Jose, California 95110 at 3:30 p.m., local time, on November
9, 1995, and any continuation or adjournment thereof, with all powers the
undersigned would possess if personally present at the meeting.
The undersigned hereby directs and authorizes said proxies, and each of
them, or their substitute or substitutes, to vote as hereinabove specified with
respect to the nominees and the proposals listed on the reverse side hereof, or,
if no specification is made, to vote in favor thereof.
The undersigned hereby further confers upon said proxies, and each of
them, or their substitute or substitutes, discretionary authority to vote with
respect to all other matters, which may properly come before the meeting or any
continuation or adjournment thereof.
The undersigned hereby acknowledges receipt of: (a) Notice of Annual
Meeting of Stockholders of the Company, (b) accompanying Proxy Statement, and
(c) Annual Report to Stockholders for the year ending June 30, 1995. The
undersigned hereby expressly revokes any and all proxies heretofore given or
executed by the undersigned with respect to the shares of stock represented by
this Proxy and, by filing this Proxy with the Secretary of the Company, gives
notice of such revocation.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE>
[X] Please mark
votes as in
this example.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
1. Election of two (2) directors to Class I of the Board of Directors.
Nominees: Gordon A. Campbell and Gene P. Carter
FOR
all nominees listed above
[ ] (except as marked to the contrary below)
WITHHOLD AUTHORITY
[ ] to vote for all
nominees listed above
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
- --------------------------------------------------------------------------------
[ ] MARK HERE FOR ADDRESS
CHANGE AND NOTE BELOW
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
FOR AGAINST ABSTAIN
2. To approve an increase to the
share reserve under the
Company's Amended and [ ] [ ] [ ]
Restated 1994 Stock Option Plan
by 1,000,000 shares.
3. To approve an increase to the
share reserve under the First
Amended Chips and
Technologies, Inc. 1988 [ ] [ ] [ ]
Nonqualified Stock Option Plan
for Outside Directors by
200,000 shares.
4. To ratify the appointment of
Price Waterhouse LLP as
independent accountants of the [ ] [ ] [ ]
Company for the fiscal year
ending June 30, 1996.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. Please date the
Proxy.
Signature: Date:
----------------------------------------------- --------------
Signature: Date:
----------------------------------------------- --------------
<PAGE>
AMENDED AND RESTATED
CHIPS AND TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
1. Establishment and Purpose.
-------------------------
(a) Establishment. The Chips and Technologies, Inc. 1985 Stock
-------------
Option Plan was adopted on January 11, 1985 and was amended and restated on
January 8, 1987 (the "Initial Plan"). The Initial Plan is amended and restated
in its entirety and renamed the Amended and Restated Chips and Technologies,
Inc. 1994 Stock Option Plan (the "Plan") effective upon approval by the
stockholders of Chips and Technologies, Inc.
(b) Purpose. The Plan is established to create additional
-------
incentive for key employees, directors and consultants or advisors of Chips and
Technologies, Inc. and any successor corporation thereto (collectively referred
to as the "Company"), and any present or future parent and/or subsidiary
corporations of such corporation (all of whom along with the Company being
individually referred to as a "Participating Company" and collectively referred
to as the "Participating Company Group"), to promote the financial success and
progress of the Participating Company Group. For purposes of the Plan, a parent
corporation and a subsidiary corporation shall be as defined in sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration.
--------------
(a) Administration by Board and/or Compensation Committee. The
-----------------------------------------------------
Plan shall be administered by the Board of Directors of the Company (the
"Board") and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the Board
shall also mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted herein, including, without
limitation, the power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law. All questions
of interpretation of the Plan or of any options granted under the Plan (an
"Option") shall be determined by the Board, and such determinations shall be
final and binding upon all persons having an interest in the Plan and/or any
Option.
(b) Disinterested Administration. With respect to the
------------------------------
participation in the Plan of employees who are also officers or directors of the
Company subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Plan shall be administered by the Board in compliance
with the "disinterested administration" requirement of Rule 16b-3, as
promulgated under the Exchange Act and amended from time to time or any
successor rule or regulation ("Rule 16b-3").
(c) Compliance with Section 162(m) of the Code. In the event
------------------------------------------
a Participating Company is a "publicly held corporation" as defined in paragraph
(2) of
1
<PAGE>
section 162(m) of the Code, as amended by the Revenue Reconciliation Act of 1993
(P.L. 103-66), and the regulations promulgated thereunder ("Section 162(m)"),
the Company may establish a committee of outside directors meeting the
requirements of Section 162(m) to approve the grant of Options which might
reasonably be anticipated to result in the payment of employee remuneration that
would otherwise exceed the limit on employee remuneration deductible for income
tax purposes pursuant to Section 162(m).
(d) Options Authorized. Options may be either incentive
-------------------
stock options as defined in section 422(a) of the Code ("Incentive Stock
Options") or options not intended to qualify as Incentive Stock Options
("Nonqualified Stock Options").
(e) Authority of Officers. Any officer of a Participating
-----------------------
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
3. Eligibility. The Options may be granted only to employees
-----------
(including officers) and directors of the Participating Company Group or to
individuals who are rendering services as consultants, advisors, or other
independent contractors to the Participating Company Group. The Board shall, in
the Board's sole discretion, determine which persons shall be granted Options
(an "Optionee"). A director of the Company shall be eligible to be granted only
a Nonqualified Stock Option unless the director is also an employee of the
Company. For purposes of the foregoing sentence, "employees" shall include
prospective employees to whom Options are granted in connection with written
offers of employment with Participating Company Group and "consultants" or
"advisors" shall include prospective consultants or advisors to whom Options are
granted in connection with written consulting or advising offers with the
Participating Company Group. An individual who is rendering services as a
consultant, advisor, or other independent contractor shall be eligible to be
granted only a Nonqualified Stock Option. An Optionee may, if otherwise
eligible, be granted additional Options.
4. Shares Subject to Option. Options shall be options for the
-------------------------
purchase of the authorized but unissued Common Stock of the Company (the
"Stock"), subject to adjustment as provided in paragraph 9 below. The maximum
number of shares of Stock which may be issued under the Plan (including the
Initial Plan) shall be seventeen million two hundred thousand (17,200,000)
shares. Subject to adjustment as provided in paragraph 9 below, at any such time
as a Participating Company is a "publicly held corporation" as defined in
Section 162(m), no person shall be granted within any fiscal year of the Company
Options which in the aggregate cover more than five hundred thousand (500,000)
shares (the "Per Person Limit"). In the event that any outstanding Option under
the Plan (including the Initial Plan) for any reason expires or is terminated or
canceled and/or shares of Stock subject to repurchase are repurchased by the
Company, the shares allocable to the unexercised portion of such Option, or such
repurchased shares, may again be subject to an Option grant. Notwithstanding the
foregoing, any such shares shall be made subject to a new Option only if the
grant of
2
<PAGE>
such new Option and the issuance of such shares pursuant to such new Option
would not cause the plan or any Option granted under the Plan to contravene Rule
16b-3.
5. Time for Granting Options. All Options shall be granted, if at
-------------------------
all, on or before August 11, 2004.
6. Terms, Conditions and Form of Options. Subject to the
------------------------------------------
provisions of the Plan, the Board shall determine for each Option (which need
not be identical) the number of shares of Stock for which the Option shall be
granted, the option price of the Option, the exercisability of the Option,
whether the Option is to be treated as an Incentive Stock Option or as a
Nonqualified Stock Option and all other terms and conditions of the Option not
inconsistent with the Plan. Options granted pursuant to the Plan shall be
evidenced by written agreements specifying the number of shares of Stock covered
thereby, in such form as the Board shall from time to time establish, and shall
comply with and be subject to the following terms and conditions:
(a) Option Price. The option price for each Option shall be
-------------
established in the sole discretion of the Board; provided, however, that (i) the
option price per share for an Option shall be not less than the fair market
value, as determined by the Board, of a share of Stock on the date of the
granting of the Option, and (ii) no Incentive Stock Option granted to an
Optionee who at the time the Option is granted owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
a Participating Company within the meaning of section 422(b)(6) of the Code
and/or ten percent (10%) of the total combined value of all classes of stock of
a Participating Company (a "Ten Percent Owner Optionee") shall have an option
price per share less than one hundred ten percent (110%) of the fair market
value of a share of Stock on the date the Option is granted.
(b) Exercise Period of Options. The Board shall have the power
--------------------------
to set the time or times within which each Option shall be exercisable or the
event or events upon the occurrence of which all or a portion of each Option
shall be exercisable and the term of each Option; provided, however, that (i) no
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years after the date such Option is granted and (ii) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the date such Option is granted.
(c) Payment of Option Price. Payment of the option price for
------------------------
the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's stock owned by the Optionee having a value, as
determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the option price, (iii) if specifically permitted by the Board and set
forth in the Optionee's Option Agreement, by the Optionee's recourse promissory
note, (iv) by the assignment of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of an Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time
3
<PAGE>
by the Board of Governors of the Federal Reserve System), (v) by such other
consideration and method of payment as the Board, in its sole discretion, may
allow, or (vi) by any combination thereof.
The Board may at any time or from time to time, by adoption of or by
amendment to the form of Standard Option Agreement described in paragraph 7
below, or by other means, grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the option price and/or which
otherwise restrict one (1) or more forms of consideration. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
the Company's stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's stock. Furthermore, no promissory note shall be
permitted if an exercise using a promissory note would be a violation of any
law. Any permitted promissory note shall be due and payable not more than five
(5) years after the Option is exercised, and interest shall be payable at least
annually and be at least equal to the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. The Board
shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired on
exercise of the Option and/or with other collateral acceptable to the Company.
(x) Unless otherwise provided by the Board, an Option may
not be exercised by tender to the Company of shares of the Company's stock
pursuant to clause (ii) of this paragraph 6(c) unless such shares of the
Company's stock either have been owned by the Optionee for more than six (6)
months or were not acquired, directly or indirectly, from the Company.
(y) Unless otherwise provided by the Board, in the event the
Company at any time becomes subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(z) The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise pursuant to clause (iv) of this
paragraph 6(c).
4
<PAGE>
7. Standard Forms of Stock Option Agreement.
----------------------------------------
(a) Incentive Stock Options. Unless otherwise provided for by
-----------------------
the Board at the time an Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement attached
hereto as Exhibit A and incorporated herein by reference.
(b) Nonqualified Stock Options. Unless otherwise provided for
--------------------------
by the Board at the time an Option is granted, an Option designated as a
"Nonqualified Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of nonqualified stock option agreement attached
hereto as Exhibit B and incorporated herein by reference.
(c) Standard Term for Options. Unless otherwise provided for
-------------------------
by the Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. Authority to Vary Terms. The Board shall have the authority
------------------------
from time to time to vary the terms of the standard forms of stock option
agreement either in connection with the grant of an individual Option or in
connection with the authorization of a new standard form or forms; provided,
however, that the terms and conditions of such revised or amended standard form
or forms of stock option agreement shall be in accordance with the terms of the
Plan.
9. Effect of Change in Stock Subject to Plan. Appropriate
------------------------------------------------
adjustments shall be made in the number and class of shares of Stock subject to
the Plan, to the Per Person Limit set forth in paragraph 4 above, and to any
outstanding Options and in the option price of any outstanding Options in the
event of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company.
10. Transfer of Control. A "Transfer of Control" shall be deemed
-------------------
to have occurred in the event any of the following occurs with respect to the
Control Company. For purposes of applying this Paragraph 10, the "Control
Company" shall mean the corporation whose stock is subject to the Option.
(a) the direct or indirect sale or exchange by the
stockholders of the Control Company of all or substantially all of the stock of
the Control Company where the stockholders of the Control Company before such
sale or exchange do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Control Company;
(b) a merger in which the stockholders of the Control Company
before such merger do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Control Company; or
5
<PAGE>
(c) the sale, exchange, or transfer of all or substantially
all of the Control Company's assets (other than a sale, exchange, or transfer to
one or more corporations where the stockholders of the Control Company before
such sale, exchange or transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the corporation(s) to
which the assets were transferred).
In the event of a Transfer of Control, any unexercisable and/or
unvested portion of the outstanding Options shall be immediately exercisable and
vested as of the date thirty (30) days prior to the date of the Transfer of
Control unless the Board provides for the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), to either assume the Control Company's rights and
obligations under outstanding Options or substitute options for the Acquiring
Corporation's stock for such outstanding Options. The exercise and/or vesting of
any Option that was permissible solely by reason of this paragraph 10 shall be
conditioned upon the consummation of the Transfer of Control. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as of
the date of the Transfer of Control.
11. Provision of Information. Each Optionee shall be given access
------------------------
to information concerning the Company equivalent to that information generally
made available to the Company's common stockholders.
12. Options Non-Transferable. Unless otherwise provided by the
-------------------------
Board, during the lifetime of the Optionee, the Option shall be exercisable only
by the Optionee and no Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
13. Termination or Amendment of Plan and Options. The Board,
------------------------------------------------
including any duly appointed committee of the Board, may terminate or amend the
Plan and/or any Option at any time; provided, however, that without the approval
of the Company's stockholders, there shall be (a) no increase in the total
number of shares of Stock covered by the Plan (except by operation of the
provisions of paragraph 9 above), (b) no change in the class of persons eligible
to receive Incentive Stock Options, and (c) no expansion in the class of persons
eligible to receive Nonqualified Stock Options. In addition to the foregoing,
the approval of the Company's stockholders shall be sought for any amendment to
the Plan or an Option for which the Board deems stockholder approval necessary
in order to comply with Rule 16b-3. In any event, no amendment may adversely
affect any then outstanding Option or any unexercised portion thereof, without
the consent of the Optionee, unless such amendment is required to enable an
Option designated as an Incentive Stock Option to qualify as an Incentive Stock
Option.
14. Continuation of Initial Plan as to Outstanding Options.
-------------------------------------------------------------
Notwithstanding any other provision to the contrary, the terms of the Initial
Plan shall remain in effect and apply to Options granted pursuant to the Initial
Plan.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Amended and Restated Chips and Technologies, Inc. 1994 Stock
Option Plan was duly adopted by the Board of Directors of the Company on the
11th day of August, 1994.
/s/ Jeffery Anne Tatum
------------------------------------
Jeffery Anne Tatum,
Secretary
7
<PAGE>
AMENDED AND RESTATED
CHIPS AND TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
PLAN HISTORY
August 11, 1994 Board of Directors adopts the Plan with a share
reserve of 17,200,000 shares.
November 10, 1994 Stockholders approve the adoption of the Plan.
8
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
Between
CHIPS AND TECHNOLOGIES, INC.
and
--------------------------------
You have been granted an option under the Amended and Restated Chips
and Technologies, Inc. 1994 Stock Option Plan (the "Plan"). This Agreement
describes the terms and conditions of your option (the "Agreement").
Number of Shares Your option is for shares of the common
--------------
stock of Chips and Technologies, Inc., a Delaware
corporation ("Chips").
Option Price You may purchase your option shares for $
--------
per share, which was the closing price of the common
stock of Chips on , 199 .
------------- ---
Type of Option This option is intended to be an incentive stock option
as provided in section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), but Chips does not
warrant that it qualifies as such. You should consult
with your own tax advisor regarding the tax effects of
this Option and the requirements necessary to obtain
favorable income tax treatment under section 422 of the
Code.
Grant Date The "Grant Date" of your option is , 19 .
--------- --
This is the date the Board of Directors of Chips
approved your option grant.
Initial Vesting Date The "Initial Vesting Date" of your option is ,
----------
19 . This is the date your option begins to vest.
----
Exercisability You may exercise your option immediately in its
entirety after the Grant Date unless the total value of
all of your incentive stock options from Chips which
first become exercisable in 19 exceeds $100,000 (see
--
$100,000 Exercise Limitation below). However, if you
buy unvested option shares, they may not be sold or
otherwise transferred until they become vested (see
Right of Repurchase below).
Term Your option will expire on , 19 , unless your
--------- --
employment with Chips (or a parent corporation or
subsidiary corporation of Chips as defined in section
424 of the Code) is terminated as explained below, or
unless Chips is involved in a "transfer of control"
transaction as explained below.
Vesting of Option On the Initial Vesting Date, of the
---------------
option shares will be vested. Thereafter, 1/48 of the
option shares will vest for each
1
<PAGE>
full month of your continuous employment with Chips (or
a parent or subsidiary corporation of Chips) from the
Initial Vesting Date. Your option stops vesting when
your employment with Chips (or a parent corporation or
subsidiary corporation of Chips) terminates. Vesting
during an approved leave of absence is governed by the
applicable Leave of Absence Policy in effect at the
time you go on leave.
$100,000 Exercise The total value of all of your Chips' incentive stock
Limitation ---
options (including this option) which are exercisable
for the first time during 19 (the value is determined
--
at the time each option was granted) shall not exceed
one hundred thousand dollars ($100,000). Such
limitation on exercise shall be referred to in this
Agreement as the "$100,000 Exercise Limitation." If
compliance with the $100,000 Exercise Limitation will
prevent you from exercising the option for any vested
shares for more than thirty (30) days after the vesting
date for such shares, the option shall be deemed to be
two (2) options. The first option shall be for the
maximum number of shares that can comply with the
$100,000 Exercise Limitation without preventing the
option from being exercisable as to vested shares. The
second option, which shall not be treated as an
---
incentive stock option, shall be for the balance of the
shares subject to the option and shall be exercisable
on the same terms and at the same time as set forth in
this Agreement. Unless otherwise specified in your
notice of exercise, the first option shall be deemed to
be exercised first and then the second option shall be
deemed to be exercised.
Right of Repurchase You can buy shares that have not yet vested. The number
of shares you buy over and above your vested shares are
"unvested shares." They may not be sold or otherwise
transferred until they become vested.
If your employment with Chips (or a parent corporation
or subsidiary corporation of Chips) terminates for any
reason, with or without cause while you are holding
unvested shares, or if you or your legal representative
attempts to sell, exchange, transfer, pledge, or
otherwise dispose of any unvested shares (other than
pursuant to an "ownership change" as defined below),
Chips may buy those unvested shares back from you at
the option price you originally paid. If Chips wishes
to exercise its right to repurchase the unvested
shares, it must give you notice within 60 days after
(i) the termination of your employment, or exercise of
the option, if later, or (ii) Chips has received notice
of the attempted disposition. Chips must exercise its
right to repurchase the unvested shares, if at all, for
all of the unvested shares, except as Chips and you
otherwise agree. However, Chips will not repurchase
your unvested shares if you
2
<PAGE>
transfer your unvested shares to your ancestors,
descendants, or spouse or to a trustee for their
benefit, provided that the transferee agrees in writing
to take the shares subject to Chips' right of
repurchase. In the event Chips is unable to exercise
the right of repurchase under the provisions of Section
160 of the Delaware General Corporation Law, or the
corresponding provisions of other applicable law, Chips
has the right to assign the right of repurchase to one
or more persons as may be selected by Chips' Board of
Directors.
To ensure that the unvested shares will be available
for repurchase, you are required to deposit the
certificate for the shares with an escrow agent
designated by Chips under the terms and conditions of
an escrow agreement approved by Chips.
If Chips exercises its right to repurchase your
unvested shares, payment by Chips to the escrow agent
on behalf of you or your legal representative will be
made in cash within 60 days after the date of the
mailing of the written notice. For purposes of this
payment, cancellation of any outstanding promissory
note that you have previously delivered to Chips will
be treated as payment in cash to the extent of the
unpaid principal and any accrued interest canceled.
Within 30 days after payment by Chips, the escrow agent
will give the shares which Chips has purchased to Chips
and give the payment received from Chips to you.
The certificates for unvested shares have stamped on
them a special legend referring to Chips' right of
repurchase. As your vesting percentage increases, you
may request, at reasonable intervals, that Chips
exchange those legended shares which have vested for
shares that are freely transferable.
Transfer of Control The following events constitute an "ownership change"
of Chips: (1) the direct or indirect sale or exchange
by Chips' stockholders of all or substantially all of
Chips' stock; (2) a merger in which Chips is a party;
or (3) the sale, exchange, or transfer of all or
substantially all of Chips' assets (other than a sale,
exchange, or transfer to one or more corporations where
Chips' stockholders before such sale, exchange, or
transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock
of the corporation(s) to which the assets were
transferred).
A "transfer of control" of Chips means an ownership
change in which Chips' stockholders before such
ownership change do not retain, directly or indirectly,
at least a majority of the beneficial interest in
Chips' voting stock.
3
<PAGE>
In the event of a transfer of control, all shares
acquired upon exercise of your option shall become
vested shares effective 30 days prior to the transfer
of control, unless the Chips' Board of Directors
arranges with the surviving, continuing, successor, or
purchasing corporation, as the case may be, for such
corporation to assume Chips' rights and obligations
under this Agreement or substitute its own option for
your Chips' option. Your option will terminate
effective as of the date of the transfer of control to
the extent that your option is neither exercised as of
the date of the transfer of control nor assumed by the
surviving, continuing, successor, or purchasing
corporation, as the case may be.
Regular Termination If your employment with Chips (or a parent corporation
or subsidiary corporation of Chips) terminates for any
reason, with or without cause, your option, to the
extent unexercised, may be exercised (to purchase
vested shares only) within 30 days after the date of
your termination.
Restrictions on You may not sell shares that you acquire by exercising
Resale: General your option at any time you are in possession of
material inside information concerning Chips. In
addition, sales of shares that you acquire by
exercising your option will be governed by Chips'
employee trading policy, as in effect at the time of
the proposed sale.
Restrictions on If you are an officer of Chips, shares that you acquire
Resale: Officers by exercising your option may only be sold during the
officers' trading restriction period. This period
commences on the third business day following the
release of quarterly financial results and ends
twenty-one days thereafter, unless extended by Chips'
President or Chief Financial Officer.
Notice of Exercise When you wish to exercise your option, you must send an
executed Notice of Exercise to:
Chips and Technologies, Inc.
2950 Zanker Road
San Jose, California 95134
Attn: Financial Services 1-7
Your notice must specify how many whole shares you wish
-----
to purchase, and must contain such representations and
agreements as to your investment intent with respect to
the shares as may be required by Chips. Your notice
must be delivered in person or by certified mail to
Chips' Stock Administrator prior to the expiration date
of the term of the Option, accompanied by an executed
copy of the then current form of escrow instructions,
if you are exercising your option for unvested shares,
and full payment of the option
4
<PAGE>
price for the number of shares being purchased. The
Notice of Exercise is effective when it is received by
Chips. Chips will not be required to issue fractional
shares upon the exercise of your option.
Form of Payment When you submit your Notice of Exercise, you must
include payment of the option price for the number of
shares you are purchasing. Payment may be made in one
(or a combination of two or more) of the following
forms:
- Your personal check, a cashier's check, or a
money order;
- Irrevocable directions to a securities broker
approved by Chips to sell your option shares
and to deliver all or a portion of the sale
proceeds to Chips in payment of the option
price. (The balance of the sales proceeds, if
any, will be delivered to you.) The directions
must be given by signing a form provided
by Chips.
Withholding Taxes In order to exercise your option, you must make
arrangements to pay any federal and state withholding
taxes that may be due as a result of the option
exercise. In the future, at any time requested by
Chips, you must make arrangements to pay any federal or
state withholding taxes that may be due as a result of
any transfer of any shares acquired on exercise of your
option, the operation of any federal or state law
providing for the imputation of interest, or the lapse
of any restriction with respect to any shares acquired
on exercise of your option.
Certificate Registration The certificate or certificates issued upon the
exercise of your option will be registered in your
name.
Restriction on Grant The grant of your option and the issuance of shares
of Option and Issuance upon the exercise of the option are subject to
of Shares compliance with all applicable requirements of federal
or state law with respect to such securities. Your
option may not be exercised if the issuance of shares
upon such exercise would constitute a violation of any
applicable federal or state securities law or other law
or regulations. As a condition to the exercise of your
option, Chips may require you to make any
representation or warranty to Chips as may be necessary
or
5
<PAGE>
appropriate to evidence compliance with any applicable
law or regulation. Chips may place legends on the
certificates for your option shares referring to any
applicable federal or state securities law
restrictions.
Restriction on Issuance In the event that the adoption of any amendment of
of Shares to Section 16 the Plan is subject to the approval of Chips'
Insiders stockholders in order for the option to comply with the
requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the option shall not be exercisable
prior to such stockholder approval if you are subject
to Section 16(b) of the Exchange Act, unless the Board,
in its sole discretion, approves the exercise of the
option prior to such stockholder approval.
Transfer of Option Prior to your death, only you may exercise your option,
and you cannot transfer or assign your option. However,
you may dispose of your option in your will.
Regardless of any marital property settlement
agreement, Chips is not obligated to honor a Notice of
Exercise from your former spouse, nor is Chips
obligated to recognize your former spouse's interest in
your option in any other way.
Changes in Stock Appropriate adjustments shall be made in the number,
Subject to the Option exercise price and class of shares of stock subject to
the option in the event of a stock dividend, stock
split, reverse stock split, combination,
reclassification or like change in the capital
structure of Chips.
In the event of any such change in the capital
structure of Chips, any and all new substituted or
additional securities to which you are entitled by
reason of your ownership of the shares acquired upon
exercise of your option will be immediately subject to
Chips' right of repurchase with the same force and
effect as the shares subject to the right of repurchase
immediately before such event (see Right of Repurchase
above).
Employee Rights Your option or this Agreement do not give you the right
to be retained as an employee by Chips (or a parent
corporation or subsidiary corporation of Chips). Chips
reserves the right to terminate your employment at any
time, with or without cause.
Stockholder Rights You, or your estate or heirs, have no rights as a
stockholder of Chips until a certificate for your
option shares has been issued. No adjustments are made
for dividends or other rights if the applicable record
date occurs prior to the date your stock certificate is
issued, except in the event of a change in the stock
subject to the option as described above.
6
<PAGE>
Applicable Law This Agreement will be interpreted and enforced under
the laws of the State of California.
Other Agreements The text of the Plan is incorporated in this Agreement
by reference. This Agreement and the Plan constitute
the entire understanding between you and Chips
regarding your option. Any prior agreements,
understandings, commitments, or negotiations concerning
your option are superseded.
Binding Effect This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
heirs, executors, administrators, successors and
assigns.
Amendment Chips may at any time amend or terminate the Plan
and/or your Option. However, no amendment or
termination may adversely affect your option without
your consent, unless such amendment is necessary in
order to enable the option to qualify as an incentive
stock option.
Time of Expiration Whenever there is a reference in this Agreement to a
date when your option expires, the option will expire
on that date at 5:00 p.m. local time in San Jose,
California.
By signing this Agreement, you agree to all of the terms and conditions
described above and in the Plan, including Chips' right to repurchase unvested
shares.
CHIPS AND TECHNOLOGIES, INC.
By:
------------------------------------
OPTIONEE
---------------------------------------
7
<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
Between
CHIPS AND TECHNOLOGIES, INC.
and
-------------------------
You have been granted an option under the Amended and Restated Chips
and Technologies, Inc. 1994 Stock Option Plan (the "Plan"). This Agreement
describes the terms and conditions of your option (the "Agreement").
Number of Shares Your option is for shares of the common
----------
stock of Chips and Technologies, Inc., a Delaware
corporation ("Chips").
Option Price You may purchase your option shares for $ per
-----
share, which was the closing price of the common
stock of Chips on , 199 .
---------- --
Type of Option This option is intended to be a nonqualified stock
option and will not be treated as an incentive stock
option as provided in section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Grant Date The "Grant Date" of your option is ,
-----------
19 . This is the date the Board of Directors of
--
Chips approved your option grant.
Initial Vesting Date The "Initial Vesting Date" of your option is ,
-------
19 . This is the date your option begins to vest.
--
Exercisability You may exercise your option immediately in its
entirety after the Grant Date. However, if you buy
unvested option shares, they may not be sold or
otherwise transferred until they become vested (see
Right of Repurchase below).
Term Your option will expire on , 19 ,
------------ ---
unless your employment or service with Chips (or a
parent corporation or subsidiary corporation of Chips
as defined in section 424 of the Code) is terminated
as explained below, or unless Chips is involved in a
"transfer of control" transaction as explained below.
Vesting of Option On the Initial Vesting Date, of the option
----------
shares will be vested. Thereafter, 1/48 of the option
shares will vest for each full month of your
continuous employment or service with Chips (or a
parent or subsidiary corporation of Chips) from the
Initial Vesting Date. Your option stops vesting when
your employment or service with Chips (or a parent
corporation or subsidiary corporation of Chips)
terminates. Vesting during an approved leave of
absence is
1
<PAGE>
governed by the applicable Leave of Absence Policy in
effect at the time you go on leave.
Right of Repurchase You can buy shares that have not yet vested. The
number of shares you buy over and above your vested
shares are "unvested shares." They may not be sold or
otherwise transferred until they become vested.
If your employment or service with Chips (or a parent
corporation or subsidiary corporation of Chips)
terminates for any reason, with or without cause
while you are holding unvested shares, or if you or
your legal representative attempts to sell, exchange,
transfer, pledge, or otherwise dispose of any
unvested shares (other than pursuant to an "ownership
change" as defined below), Chips may buy those
unvested shares back from you at the option price you
originally paid. If Chips wishes to exercise its
right to repurchase the unvested shares, it must give
you notice within 60 days after (i) the termination
of your employment or service, or exercise of the
option, if later, or (ii) Chips has received notice
of the attempted disposition. Chips must exercise its
right to repurchase the unvested shares, if at all,
for all of the unvested shares, except as Chips and
you otherwise agree. However, Chips will not
repurchase your unvested shares if you transfer your
unvested shares to your ancestors, descendants, or
spouse or to a trustee for their benefit, provided
that the transferee agrees in writing to take the
shares subject to Chips' right of repurchase. In the
event Chips is unable to exercise the right of
repurchase under the provisions of Section 160 of the
Delaware General Corporation Law, or the
corresponding provisions of other applicable law,
Chips has the right to assign the right of repurchase
to one or more persons as may be selected by Chips'
Board of Directors.
To ensure that the unvested shares will be available
for repurchase, you are required to deposit the
certificate for the shares with an escrow agent
designated by Chips under the terms and conditions of
an escrow agreement approved by Chips.
If Chips exercises its right to repurchase your
unvested shares, payment by Chips to the escrow agent
on behalf of you or your legal representative will be
made in cash within 60 days after the date of the
mailing of the written notice. For purposes of this
payment, cancellation of any outstanding promissory
note that you have previously delivered to Chips will
be treated as payment in cash to the extent of the
unpaid principal and any accrued interest canceled.
Within 30 days after payment by Chips, the escrow
agent will give the shares which Chips has purchased
to Chips and give the payment received from Chips to
you.
2
<PAGE>
The certificates for unvested shares have stamped on
them a special legend referring to Chips' right of
repurchase. As your vesting percentage increases, you
may request, at reasonable intervals, that Chips
exchange those legended shares which have vested for
shares that are freely transferable.
Transfer of Control The following events constitute an "ownership change"
of Chips: (1) the direct or indirect sale or exchange
by Chips' stockholders of all or substantially all of
Chips' stock; (2) a merger in which Chips is a party;
or (3) the sale, exchange, or transfer of all or
substantially all of Chips' assets (other than a
sale, exchange, or transfer to one or more
corporations where Chips' stockholders before such
sale, exchange, or transfer retain, directly or
indirectly, at least a majority of the beneficial
interest in the voting stock of the corporation(s) to
which the assets were transferred).
A "transfer of control" of Chips means an ownership
change in which Chips' stockholders before such
ownership change do not retain, directly or
indirectly, at least a majority of the beneficial
interest in Chips' voting stock.
In the event of a transfer of control, all shares
acquired upon exercise of your option shall become
vested shares effective 30 days prior to the transfer
of control, unless the Chips' Board of Directors
arranges with the surviving, continuing, successor,
or purchasing corporation, as the case may be, for
such corporation to assume Chips' rights and
obligations under this Agreement or substitute its
own option for your Chips' option. Your option will
terminate effective as of the date of the transfer of
control to the extent that your option is neither
exercised as of the date of the transfer of control
nor assumed by the surviving, continuing, successor,
or purchasing corporation, as the case may be.
Regular Termination If your employment or service with Chips (or a parent
corporation or subsidiary corporation of Chips)
terminates for any reason, with or without cause,
your option, to the extent unexercised, may be
exercised (to purchase vested shares only) within 30
days after the date of your termination.
Restrictions on You may not sell shares that you acquire by
Resale: General exercising your option at any time you are in
possession of material inside information concerning
Chips. In addition, sales of shares that you acquire
by exercising your option will be governed by Chips'
employee trading policy, as in effect at the time of
the proposed sale.
Restrictions on If you are an officer of Chips, shares that you
Resale: Officers acquire by exercising your option may only be sold
during the officers' trading
3
<PAGE>
restriction period. This period commences on the
third business day following the release of quarterly
financial results and ends twenty-one days
thereafter, unless extended by Chips' President or
Chief Financial Officer.
Notice of Exercise When you wish to exercise your option, you must send
an executed Notice of Exercise to:
Chips and Technologies, Inc.
2950 Zanker Road
San Jose, California 95134
Attn: Financial Services 1-7
Your notice must specify how many whole shares you
-----
wish to purchase, and must contain such
representations and agreements as to your investment
intent with respect to the shares as may be required
by Chips. Your notice must be delivered in person or
by certified mail to Chips' Stock Administrator prior
to the expiration date of the term of the Option,
accompanied by an executed copy of the then current
form of escrow instructions, if you are exercising
your option for unvested shares, and full payment of
the option price for the number of shares being
purchased. The Notice of Exercise is effective when
it is received by Chips. Chips will not be required
to issue fractional shares upon the exercise of your
option.
Form of Payment When you submit your Notice of Exercise, you must
include payment of the option price for the number of
shares you are purchasing. Payment may be made in one
(or a combination of two or more) of the following
forms:
- Your personal check, a cashier's check,
or a money order;
- Irrevocable directions to a securities
broker approved by Chips to sell your
option shares and to deliver all or a
portion of the sale proceeds to Chips in
payment of the option price. (The
balance of the sales proceeds, if any,
will be delivered to you.) The
directions must be given by signing a
form provided by Chips.
4
<PAGE>
Withholding Taxes In order to exercise your option, you must make
arrangements to pay any federal and state withholding
taxes that may be due as a result of the option
exercise. In the future, at any time requested by
Chips, you must make arrangements to pay any federal
or state withholding taxes that may be due as a
result of any transfer of any shares acquired on
exercise of your option, the operation of any federal
or state law providing for the imputation of
interest, or the lapse of any restriction with
respect to any shares acquired on exercise of your
option.
Certificate Registration The certificate or certificates issued upon the
exercise of your option will be registered in your
name.
Restriction on Grant The grant of your option and the issuance of shares
of Option and Issuance upon the exercise of the option are subject to
of Shares compliance with all applicable requirements of
federal or state law with respect to such securities.
Your option may not be exercised if the issuance of
shares upon such exercise would constitute a
violation of any applicable federal or state
securities law or other law or regulations. As a
condition to the exercise of your option, Chips may
require you to make any representation or warranty to
Chips as may be necessary or appropriate to evidence
compliance with any applicable law or regulation.
Chips may place legends on the certificates for your
option shares referring to any applicable federal or
state securities law restrictions.
Restriction on Issuance In the event that the adoption of any amendment of
of Shares to Section 16 the Plan is subject to the approval of Chips'
Insiders stockholders in order for the option to comply with
the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the option shall not be exercisable
prior to such stockholder approval if you are subject
to Section 16(b) of the Exchange Act, unless the
Board, in its sole discretion, approves the exercise
of the option prior to such stockholder approval.
Transfer of Option Prior to your death, only you may exercise your
option, and you cannot transfer or assign your
option. However, you may dispose of your option in
your will.
Regardless of any marital property settlement
agreement, Chips is not obligated to honor a Notice
of Exercise from your former spouse, nor is Chips
obligated to recognize your former spouse's interest
in your option in any other way.
5
<PAGE>
Changes in Stock Appropriate adjustments shall be made in the number,
Subject to the Option exercise price and class of shares of stock subject
to the option in the event of a stock dividend, stock
split, reverse stock split, combination,
reclassification or like change in the capital
structure of Chips.
In the event of any such change in the capital
structure of Chips, any and all new substituted or
additional securities to which you are entitled by
reason of your ownership of the shares acquired upon
exercise of your option will be immediately subject
to Chips' right of repurchase with the same force and
effect as the shares subject to the right of
repurchase immediately before such event (see Right
of Repurchase above).
Employee Rights Your option or this Agreement do not give you the
right to be retained as an employee by Chips (or a
parent corporation or subsidiary corporation of
Chips). Chips reserves the right to terminate your
employment at any time, with or without cause.
Stockholder Rights You, or your estate or heirs, have no rights as a
stockholder of Chips until a certificate for your
option shares has been issued. No adjustments are
made for dividends or other rights if the applicable
record date occurs prior to the date your stock
certificate is issued, except in the event of a
change in the stock subject to the option as
described above.
Applicable Law This Agreement will be interpreted and enforced under
the laws of the State of California.
Other Agreements The text of the Plan is incorporated in this
Agreement by reference. This Agreement and the Plan
constitute the entire understanding between you and
Chips regarding your option. Any prior agreements,
understandings, commitments, or negotiations
concerning your option are superseded.
Binding Effect This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective
heirs, executors, administrators, successors and
assigns.
Amendment Chips may at any time amend or terminate the Plan
and/or your Option. However, no amendment or
termination may adversely affect your option without
your consent.
Time of Expiration Whenever there is a reference in this Agreement to a
date when your option expires, the option will expire
on that date at 5:00 p.m. local time in San Jose,
California.
6
<PAGE>
By signing this Agreement, you agree to all of the terms and conditions
described above and in the Plan, including Chips' right to repurchase unvested
shares.
CHIPS AND TECHNOLOGIES, INC.
By:
-------------------------
OPTIONEE
----------------------------
7
<PAGE>
First Amended
CHIPS AND TECHNOLOGIES, INC.
1988 Nonqualified Stock Option Plan
For Outside Directors
1. Purpose. The Chips and Technologies, Inc. 1988 Nonqualified Stock
-------
Option Plan for Outside Directors (the "Prior Plan") was established effective
as of March 1, 1988 (the "Effective Date"), to create additional incentive for
the outside directors of Chips and Technologies, Inc. and any successor
corporation thereto (collectively referred to as the "Company"), to promote the
financial success and progress of the Company. The Prior Plan is amended and
restated as the First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors (the "Plan") effective upon approval of
the Company's stockholders (the "Amendment Effective Date").
2. Administration. The Plan shall be administered by the Board of
--------------
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references to the Board shall also mean the committee if such committee has been
appointed. All questions of interpretation of the Plan or of any options granted
under the Plan (an "Option") shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in
the Plan and/or any Option. All Options shall be nonqualified stock options. Any
officer of the Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
3. Eligibility and Type of Option. The Options may be granted only to
------------------------------
directors of the Company who are not employees of the Company or any present
parent and/or subsidiary corporations of the Company. Options granted to
eligible directors of the Company ("Outside Directors") shall be nonqualified
stock options, that is, options which do not meet the requirements of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in sections 424(e) and 424(f) of the Code.
4. Shares Subject to Option. Options shall be options for the purchase
------------------------
of the authorized but unissued common stock of the Company (the "Stock") subject
to adjustment as provided in Paragraph 8 below. The maximum number of shares of
Stock which may be issued under the Plan shall be 350,000 shares. In the event
that any outstanding Option for any reason expires or is terminated and/or
shares subject to
1
<PAGE>
repurchase are repurchased by the Company, the shares of Stock allocable to the
unexercised portion of such Option may again be subjected to an Option.
5. Time for Granting Options. All Options shall be granted, if at all,
-------------------------
within ten (10) years from the Effective Date.
6. Terms, Conditions and Form of Options. Options granted pursuant to
-------------------------------------
the Plan shall be evidenced by written agreements ("Stock Option Agreements")
specifying the number of shares of Stock covered thereby, in substantially the
form attached hereto as Exhibit A and incorporated herein by reference (the
"Option Agreement"), except as set forth herein, and shall comply with and be
subject to the following terms and conditions:
(a) Automatic Grant of Options.
--------------------------
(i) Each Outside Director shall be granted an Option for
Twenty Thousand (20,000) shares of Stock upon the later of the Effective Date or
the date said Outside Director is first elected to serve on the Board.
(ii) The Anniversary Date of an Outside Director who was
elected to the Board prior to the Effective Date shall be the date which is
twelve (12) months after the Effective Date, and successive anniversaries
thereof. The Anniversary Date of any Outside Director who is elected to the
Board on or after the Effective Date shall be the date which is twelve (12)
months after such election and successive anniversaries thereof. The Anniversary
Date of a director who is employed by the Company or a present parent and/or
subsidiary corporation of the Company and who subsequently terminates such
employment while remaining on the Board shall be the date following such
termination of employment.
(iii) Each Outside Director shall be granted on the Amendment
Effective Date an additional Option for the Ten Thousand (10,000) shares of
Stock for each odd Anniversary Date of such Outside Director which occurred
subsequent to the later of the Effective Date or such Outside Director's
election to the Board and prior to the Amendment Effective Date. For example, an
Outside Director elected to the Board prior to the Effective Date would be
granted an Option for Thirty Thousand (30,000) shares of Stock computed as
follows:
10,000 multiplied by 3 odd year Anniversary Dates (3-1-89, 3-1-91 and 3-1-93).
Vesting on each Ten Thousand (10,000) share Option granted pursuant to this
Paragraph 6(a)(iii) shall run from the odd Anniversary Date to which such grant
relates.
(iv) Each Outside Director shall be granted an additional
Option for Ten Thousand (10,000) shares of Stock upon every Anniversary Date
occurring on or after the Amendment Effective Date of said Outside Director's
tenure as a Director.
2
<PAGE>
(v) Each Outside Director shall be granted an additional
Option on the Amendment Effective Date and on every Anniversary Date thereafter
on which such Outside Director is a member of one or more Board Committees
("Committee Membership") for a number of shares of Stock determined as follows.
For each Committee Membership, the Outside Director shall be granted Two
Thousand Five Hundred (2,500) shares of Stock.
(vi) An Outside Director who is serving as Chairman of the
Board shall be granted an additional Option on the Amendment Effective Date and
upon every Anniversary Date thereafter on which the Outside Director is so
serving as Chairman of the Board for Five Thousand (5,000) shares of Stock.
(vii) Notwithstanding any other provision of the Plan, no
Option shall be granted to any individual who is no longer serving as an Outside
Director of the Company, Committee Member, or Chairman of the Board, as the case
may be, on an Anniversary Date which would otherwise be a date of grant.
(viii) For purposes of determining the number of Option shares
under Paragraphs 6(a)(v) and (vi), only service while an Outside Director shall
be counted.
(b) Option Price. The option price per share for an Option shall
-------------
be the fair market value, as determined by the closing price of the Company's
common stock on the National Association of Securities Dealers Automated
Quotation System (the "NASDAQ System") as reported in the Wall Street Journal on
the date prior to the date of the granting of the Option. If the such date prior
to the date of the granting of the Option does not fall on a day on which the
Company's Stock is trading on the NASDAQ System or a national securities
exchange, the date on which the Option price per share shall be established
shall be the last day on which the Company's Stock was so traded prior to the
date of the granting of the Option. Notwithstanding the foregoing, an Option may
be granted with an exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying with the provisions of section 424(a)
of the Code.
(c) Exercise Period of Options. Any Option granted hereunder shall
--------------------------
be exercisable for a term of ten (10) years.
(d) Payment of Option Price. Payment of the option price for the
------------------------
number of shares of Stock being purchased pursuant to any Option shall be made:
(i) in cash;
(ii) by check, or
(iii) by the assignment of the proceeds of a sale of some or
all of the shares being acquired upon the exercise of the Option (including,
without limitation,
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<PAGE>
through an exercise complying with the provisions of Regulation T as promulgated
from time to time by the Board of Governors of the Federal Reserve System).
7. Authority to Vary Terms. The Board shall have the authority from
-----------------------
time to time to vary the terms of the Option Agreement either in connection with
the grant of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
such revised or amended stock option agreements shall be in accordance with the
terms of the Plan.
8. Effect of Change in Stock Subject to the Plan. Appropriate
-----------------------------------------------------
adjustments shall be made in the number and class of shares of Stock subject to
the Plan and to any outstanding Options and in the option price of any
outstanding Options in the event of a stock dividend, stock split, reverse stock
split, combination, reclassification, or like change in the capital structure of
the Company.
9. Ownership Change and Transfer of Control. For the purposes hereof,
----------------------------------------
the "Control Company" shall mean Chips and Technologies, Inc. An "Ownership
Change" shall be deemed to have occurred in the event of any of the following
occurrences with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer of all or substantially all of
the Control Company's assets.
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, shall either (i) provide that any unvested portion of the Option
shall be immediately exercisable and vested as of a date prior to the Transfer
of Control, as the Board so determines, or (ii) arrange with the surviving,
continuing, successor, or purchasing corporation, as the case may be, that such
corporation either assume the Company's rights and obligations under outstanding
stock option agreements or substitute options for such corporation's stock for
such outstanding options. Any Options which are neither exercised as of the date
of the Transfer of Control nor assumed by the surviving, continuing, successor,
or purchasing corporation, as the case may be, shall terminate effective as of
the date of the Transfer of Control.
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<PAGE>
10. Options Non-Transferable. During the lifetime of the Optionee, an
-------------------------
Option shall be exercisable only by said Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
11. Termination or Amendment of Plan. The Board, including any duly
---------------------------------
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's stockholders,
there shall be (i) no increase in the total number of shares covered by the Plan
(except by operation of the provisions of Paragraph 8, above), and (ii) no
expansion in the class of persons eligible to receive nonqualified stock
options. Notwithstanding the foregoing, the Plan may not be amended more
frequently than once every six (6) months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder. In any event, no amendment may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of
the Optionee.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing First Amended Chips and Technologies, Inc. 1988 Nonqualified
Stock Option Plan for Outside Directors was duly adopted by the Board of
Directors of the Company on the 1st day of October, 1993, and approved by a
majority of the stockholders of the Company on November 10, 1993.
/s/ JEFFERY ANNE TATUM
----------------------------
Jeffery Anne Tatum,
Secretary
5
<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
Between
CHIPS AND TECHNOLOGIES, INC.
and
[[first name]] [[last name]]
Grant Number [[grant number]]
You have been granted an option under the Chips and Technologies, Inc.
1988 Nonqualified Stock Option Plan for Outside Directors (the "Plan"). This
Agreement describes the terms and conditions of your option (the "Agreement").
Number of Shares Your option is for [[shares]] shares of the common
stock of Chips and Technologies, Inc., a Delaware
corporation ("Chips"). Chips will make appropriate
adjustments in the number, option price, and class of
your shares if there is a stock dividend, stock
split, or like change in the capital structure of
Chips. If a majority of Chips' shares which are of
the same class as your shares are converted into the
shares of another corporation ("New Shares"), Chips
may make your option exercisable for New Shares but
shall adjust the number of shares and the exercise
price for the New Shares in a fair and equitable
manner.
Option Price You may purchase your option shares for
[[option price]] per share, which was the closing
price of the common stock of Chips on [[grant date]],
your Grant Date.
Type of Option This option is intended to be a nonqualified stock
option and will not be treated as an incentive stock
option as defined in section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code").
Grant Date The "Grant Date" of your option is [[grant date]].
Initial Vesting Date The "Initial Vesting Date" of your option is
[[period1vestdate]], which is six (6) months from the
Grant Date. This is the date your option begins to
vest.
Exercisability You may exercise your option immediately in its
entirety on or after the Grant Date. However, if you
buy unvested
1
<PAGE>
option shares, they may not be sold or otherwise
transferred until they become vested. (See Right of
Repurchase below).
Term Your option will expire on [[period1expiredate]], the
"Expiration Date, which is five (5) years from the
Grant Date, unless your services as a director of
Chips is terminated as explained below, or unless
Chips is involved in a "transfer of control"
transaction as explained below.
Vesting of Options On the Initial Vesting Date, [[period1sharesvesting]]
shares of the option will be vested (one-eighth (1/8)
of the option shares). Thereafter one-forty-eighth
(1/48) of the option shares will vest for each full
month of your continuous service as a director of
Chips from the Initial Vesting Date. Your option
stops vesting when your service as a director of
Chips terminates.
Your Right to Buy You can buy shares that have not yet vested. The
Unvested Shares number of shares you buy over and above your vested
shares are "unvested shares." They may not be sold or
otherwise be transferred until they become vested.
Chips' Right to If your service as a director of Chips terminates for
Repurchase Your any reason, with or without cause while you are
Unvested Shares holding unvested shares, or if you or your legal
representative attempts to sell, exchange, transfer,
pledge, or otherwise dispose of any unvested shares
(other than pursuant to an ownership change), Chips
may buy those unvested shares back from you at the
option price you originally paid as adjusted to
reflect changes in the number, exercise price and
class of the shares.
If Chips wishes to exercise its right to repurchase
your unvested shares, it must give you written notice
within sixty (60) days after the later of (i) the
termination of your service as a director or your
exercise of your option, if later, or (ii) the date
Chips received notice of the attempted disposition of
the shares by you or your legal representative.
Chips must exercise its right to repurchase the
unvested shares, if at all, for all of the unvested
shares unless Chips and you otherwise agree. However,
Chips will not repurchase your unvested shares if you
transfer your unvested shares to your ancestors,
descendents, or spouse or to a trustee for their
benefit and the transferee agrees in writing (in a
form
2
<PAGE>
satisfactory to Chips) to take the shares subject to
Chips' right of repurchase.
In the event Chips is unable to exercise the right of
repurchase under the provisions of Section 160 of the
Delaware General Corporation Law, or the
corresponding provisions of other applicable law,
Chips may assign the right of repurchase to one or
more persons selected by Chips' Board of Directors.
Escrow for Unvested To ensure that the unvested shares will be available
Shares for repurchase by Chips, when you buy any unvested
shares, you will be required to deposit the
certificate for the shares with an escrow agent
designated by Chips under the terms and conditions of
an escrow agreement approved by Chips. Chips will pay
the escrow costs.
Payment by Chips If Chips exercises its right to repurchase your
through Escrow unvested shares, Chips will make payment to the
escrow agent on behalf of you or your legal
representative in cash within sixty (60) days after
Chips mails to you its written notice of exercise of
right of repurchase. For purposes of this payment,
cancellation of any outstanding promissory note of
yours that you have previously delivered to Chips
will be treated as payment in cash to the extent of
the unpaid principle and any accrued interest
canceled. Within thirty (30) days after payment by
Chips, the escrow agent will give the shares which
Chips has purchased to Chips and give the payment
received from Chips to you.
Legend on Unvested Shares Chips may stamp your certificates for unvested shares
you purchase with a special legend referring to
Chips' right of repurchase. As your vesting
percentage increases, you may request, at reasonable
intervals, that Chips exchange such legended shares
which have vested for shares without such a legend.
Ownership Change The following events constitute an "ownership change"
of Chips: (1) the direct or indirect sale or exchange
by Chips' stockholders of all or substantially all of
Chips' stock; (2) a merger in which Chips is a party;
or (3) the sale, exchange, or transfer of all or
substantially all of Chips' assets (other than a
sale, exchange, or transfer to one or more
corporations where Chips' stockholders before such
sale, exchange, or
3
<PAGE>
transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting
stock of the corporation(s) to which the assets were
transferred).
If there is an ownership change, Chips' right of
repurchase will continue but your services as a
director will include service with Chips and any
parent or subsidiary corporation of Chips (as defined
in Section 424 of the Code) at the time you were a
director whether or not such corporation was included
in such term before and after the ownership change.
Transfer of Control A "transfer of control" of Chips means an ownership
change in which Chips' stockholders before such
ownership change do not retain, directly or
indirectly, at least a majority of the beneficial
interest in Chips' voting stock.
In the event of a transfer of control, Chips' Board
of Directors, in its sole discretion, will either (i)
provide that all shares acquired on exercise of your
option become vested shares effective upon the
transfer of control, or (ii) arrange with the
surviving, continuing, successor, or purchasing
corporation, as the case may be, that such
corporation either assume Chips' rights and
obligations under this Agreement or substitute
options for such corporation's stock for your option.
Your option will terminate on the date of the
transfer of control to the extent that your option is
neither exercised as of the date of the transfer of
control nor assumed by the surviving, continuing,
successor, or purchasing corporation, as the case may
be.
Termination of Your If you cease to be a director of Chips for any
Services as Director reason, your option as to unvested shares expires
immediately.
If you cease to be a director of Chips because of
your death or disability as defined in Section 422(c)
of the Code, your option as to vested shares expires
six (6) months after your services as a director end
or on the Expiration Date of the term of the option,
whichever is first.
If you cease to be a director of Chips because of any
other reason, your option as to vested shares expires
ninety (90) days after your services as a director
ends or on the Expiration Date of the term of the
option, whichever is first.
4
<PAGE>
Restrictions on Resale You may not sell your option shares at any time you
are in possession of material inside information. In
addition, your sale of your option shares will be
governed by Chips' trade restriction policy in effect
at the time of the proposed sale.
You may sell your option shares only during the
trading window. This window currently commences on
the third day following the release of quarterly
financial results and ends ten (10) business days
thereafter, unless extended by Chips' President or
chief Financial Officer.
Notice of Exercise When you wish to exercise your option, you must send
a signed Notice of Exercise to Chips at its main
office which currently is:
Chips and Technologies, Inc.
3050 Zanker Road
San Jose, CA 95134
Attn: Financial Services 1-7
Your notice must specify how many whole shares you
wish to purchase and must contain any representations
and agreements as to your investment intent with
respect to the shares required by Chips. Your notice
must be delivered in person or by certified mail to
Chips' Stock Administrator prior to the Expiration
Date of the Option, accompanied by a signed form of
Chips' then current escrow instructions, if you are
exercising your option for unvested shares, and full
payment of the option price for the number of shares
you are purchasing. The Notice of Exercise is
effective when it is received by Chips. Chips will
not be required to issue fractional shares upon the
exercise of your option.
Form of Payment When you submit your Notice of Exercise, you must
include payment of the option price for the number of
shares you are purchasing. Payment may be made in one
(or a combination of two or more) of the following
forms:
- Your personal check
- A cashier's check
- Cash
- Assignment of the sale proceeds of some
or all of the shares acquired on exercise
of the option (including an exercise
complying with
5
<PAGE>
Regulation T of the Board of Governors of
the Federal Reserve System)
Withholding Taxes In order to exercise your option, you must make
arrangements to pay any federal and state withholding
taxes that may be due as a result of the option
exercise. Thereafter, at any time requested by Chips,
you must make arrangements to pay any federal or
state withholding taxes that may be due as a result
of any transfer of any shares acquired on exercise of
your option, the operation of any federal or state
law providing for the imputation of interest, or the
lapse of any restriction with respect to any shares
acquired on exercise of your option.
Certificate Registration Chips will register the certificate or certificates
issued upon the exercise of your option in your name
or, if applicable, in the name of your heir(s).
Transfer of Option Prior to your death, only you may exercise your
option, and you cannot transfer or assign your
option. However, you may dispose of your option in
your will or by the laws of descent and distribution.
Stock Dividends If, from time to time, there is any stock dividend,
stock split, or other change in the character or
amount of any of Chips' outstanding stock, then any
and all new substituted or additional securities to
which you are entitled by reason of your ownership of
option shares will be immediately subject to Chips'
right of repurchase with the same force and effect as
your option shares subject to the right of repurchase
immediately before such event. (See Right of
Repurchase above.)
Stockholder Rights You, or your estate or heirs, have no rights as a
stockholder of Chips until a certificate for your
option shares has been issued. No adjustments will be
made for dividends or other rights if the applicable
record date occurs prior to the date your stock
certificate is issued, unless there is a change in
the stock as described in the Plan.
Applicable Law This Agreement will be interpreted and enforced under
the laws of the State of California.
6
<PAGE>
Other Agreements The Plan, as it may be amended from time to time, is
incorporated in this Agreement by reference. This
Agreement and the Plan constitute the entire
understanding between you and Chips regarding your
option. Any prior agreements, understandings,
commitments, or negotiations concerning your option
are superseded.
Amendment Chips may at any time amend or terminate the Plan
and/or your option. However, no amendment or
termination may adversely affect your option without
your consent.
Binding Effect This Agreement will benefit, and will bind, you,
Chips, and the respective heirs, executors,
administrators, successors and assigns of you and
Chips.
Time of Expiration Whenever there is a reference in this Agreement to a
date when your option expires, the option will expire
on that date at 5:00 p.m. local time in San Jose,
California.
By signing this Agreement, you and Chips agree to all of the terms and
conditions described above and in the Plan, including Chips' right to repurchase
unvested shares.
CHIPS AND TECHNOLOGIES, INC.
By:
------------------------------------
James E. Stafford, President and
Chief Executive Officer
Dated:
---------------------------------
OPTIONEE
By:
------------------------------------
Dated:
---------------------------------
7
