<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
only (as permitted by Rule 14a-6(a)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(a) or sec. 140.14a-12
</TABLE>
Chips and Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(e)(1)ii), or 14a-6(i)(1), or 14a-6(1)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(d) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-
(2) Form, Schedule or Registration Statement No.:
-
(3) Filing Party:
-
(4) Date Filed:
-
<PAGE> 2
CHIPS AND TECHNOLOGIES, INC.
2950 ZANKER ROAD
SAN JOSE, CALIFORNIA 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 7, 1996
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
7, 1996, at 3:30 p.m. at the San Jose Sheraton, 1801 Barber Lane, Milpitas, CA
95035 for the following purposes:
1. To elect two (2) Class III directors.
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 ratify the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending June 30, 1997.
4. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on September 13, 1996
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 San Jose Sheraton, 1801 Barber Lane, Milpitas, CA 95035.
By Order of the Board of Directors
Jeffery Anne Tatum, Secretary
San Jose, California
September 27, 1996
- --------------------------------------------------------------------------------
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> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION............................................................................................. 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................................................. 2
PROPOSAL ONE - NOMINATION AND ELECTION OF DIRECTORS............................................................. 3
EXECUTIVE COMPENSATION AND OTHER MATTERS........................................................................ 5
Compensation of Executive Officers..................................................................... 5
Stock Options Granted in Fiscal 1996................................................................... 6
Option Exercises and Fiscal 1996 Year-End Values....................................................... 7
Change of Control Arrangements......................................................................... 8
Compensation of Directors.............................................................................. 8
Certain Transactions and Other Relationships........................................................... 8
Compensation Committee Interlocks and Insider Participation............................................ 9
Changes to Benefit Plans............................................................................... 9
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION........................................................................................... 11
Compensation Committee................................................................................. 11
Compensation Philosophy................................................................................ 11
Forms of Compensation.................................................................................. 12
Fiscal 1996 Compensation............................................................................... 13
COMPARISON OF STOCKHOLDER RETURN................................................................................ 14
PROPOSAL TWO - APPROVAL OF AMENDMENT TO AMENDED AND RESTATED
CHIPS AND TECHNOLOGIES, INC. 1994 STOCK OPTION PLAN TO
INCREASE SHARE RESERVE................................................................................. 15
Proposed Amendment to the Option Plan.................................................................. 15
Summary of the Provisions of the Option Plan........................................................... 15
Summary of the Federal Income Tax Consequences of the Option Plan...................................... 17
Vote Required and Board of Directors' Recommendation................................................... 18
PROPOSAL THREE - RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS............................................................................................ 19
STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING.................................................. 19
TRANSACTION OF OTHER BUSINESS................................................................................... 19
</TABLE>
i
<PAGE> 4
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 7, 1996, 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 September 27, 1996.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended June 30, 1996
is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
business on September 13, 1996 will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 20,640,656 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 their
customers 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> 5
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, 1996 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.
<TABLE>
<CAPTION>
SHARES OWNED (1)
------------------------------
NUMBER PERCENTAGE
NAME BENEFICIAL OWNERS OF SHARES OF CLASS
- ---------------------- ------------------------------
<S> <C> <C>
Gene P. Carter............................... 130,179(2) *
Henri A. Jarrat.............................. 165,000(3) *
James F. Stafford............................ 502,077(4) 2.38
Bernard V. Vonderschmitt..................... 66,300(5) *
Keith A. Angelo.............................. 195,503(6) *
Richard E. Christopher....................... 145,000(7) *
Morris E. Jones, Jr.......................... 530,637(8) 2.54
Lawrence A. Roffelsen........................ 230,000(9) 1.1
All directors and executive officers
as a group (12 persons).................... 2,624,021(10) 11.52
</TABLE>
- ------------------------------------
* 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) Includes 90,000 shares subject to immediately exercisable options.
Includes 30,525 unvested shares. Includes 40,179 shares held by the Carter
Family Trust, of which Mr. Carter is a Trustee.
(3) Includes 155,000 shares subject to immediately exercisable options.
Includes 59,454 unvested shares.
(4) Includes 500,000 shares subject to immediately exercisable options.
Includes 250,004 unvested shares.
(5) Includes 65,000 shares subject to immediately exercisable options.
Includes 24,275 unvested shares.
(6) Includes 194,500 shares subject to immediately exercisable options.
Includes 95,316 unvested shares.
(7) All shares are subject to an immediately exercisable option. Includes
83,961 unvested shares.
(8) Includes 310,000 shares subject to immediately exercisable options.
Includes 82,398 unvested shares.
(9) All shares are subject to an immediately exercisable option. Includes
94,795 unvested shares.
(10) Includes 2,152,500 shares subject to immediately exercisable options.
Includes 970,358 unvested shares.
2
<PAGE> 6
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. There are currently four
directors in office, and one seat is vacant. The directors are divided into
three classes, with one class to be elected for a three year term at each annual
meeting of stockholders. Henri A. Jarrat and James F. Stafford, whose terms
expire in 1996, currently serve as the Class III directors. Bernard V.
Vonderschmitt serves as a Class II director, and his term expires in 1997. Gene
P. Carter serves as a Class I director, and his term expires in 1998.
At the Annual Meeting of Stockholders, two (2) directors, Henri A.
Jarrat and James F. Stafford, have been nominated for election to Class III of
the Board of Directors, to hold office until the earlier to occur of (i) the
meeting of stockholders to be held in 1999 and the election and qualification of
their successors, 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.
If a quorum is present and voting, the two nominees for Class III
directors receiving the highest number of votes will be elected as Class III
directors. 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 III nominees to be elected at this meeting, is set forth below.
<TABLE>
<CAPTION>
Director Position with the Company Age Term
- ------------------ -------------------------- --- -------------------------
<S> <C> <C> <C>
Gene P. Carter Director 62 Director since 1988; term
ends 1998.
Henri A. Jarrat Director 58 Director since 1994; term
ends 1996.
James F. Stafford President, Chief Executive 52 Director since 1993; term
Officer, and Director ends 1996.
Bernard V. Director 73 Director since 1992; term
Vonderschmitt ends 1997.
</TABLE>
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 of Adobe Systems, Inc. and of
Portable Energy Products.
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
3
<PAGE> 7
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 served as its President and/or
Chief Executive Officer from February 1984 until January 1996. He became
Chairman of the Board of Xilinx on February 1, 1996. 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, 1996, the Board of Directors held
ten (10) 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, 1996, 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 grants of options for employees. The members of the Compensation Committee
are Bernard Vonderschmitt and Gene Carter. During the fiscal year ended June 30,
1996, the Compensation Committee held eight (8) meetings.
4
<PAGE> 8
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, 1996, during the fiscal years
ended June 30, 1994, 1995, and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------- ------------
Awards
Fiscal Options/
Name and Principal Position Year Salary Bonus Shares
- --------------------------- ------ -------- -------- --------
<S> <C> <C> <C> <C>
James F. Stafford 1996 $277,510 $200,000 100,000
President, Chief Executive 1995 $236,259 $118,797 125,000
Officer 1994 $225,009 $0 125,000
Keith A. Angelo 1996 $164,821 $100,149 50,000
Vice President, Marketing 1995 $155,297 $74,750 25,000
1994 $141,755 $0 50,000
Richard E. Christopher 1996 $171,981 $104,121 50,000
Vice President, Sales 1995 $164,306 $78,232 25,000
1994 $158,440 $0 35,000
Morris E. Jones, Jr. 1996 $187,432 $112,578
Senior Vice President, 1995 $180,566 $84,448 50,000
Advanced Products and 1994 $178,506 $0 25,000
Chief Technical Officer 35,000
Lawrence A. Roffelsen 1996 $165,906 $100,797 50,000
Vice President, Engineering 1995 $155,297 $74,750 25,000
1994 $141,755 $0 50,000
</TABLE>
- ------------------------------------
5
<PAGE> 9
STOCK OPTIONS GRANTED IN FISCAL 1996
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the fiscal
year ended June 30, 1996, to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants in Fiscal 1996 Option Term(1)
- -------------------------------------------------------------------------------- -------------------------
% of Total
Options
Granted to Exercise
Employees or Base
Options in Fiscal Price Expira-
Name Granted Year ($/Sh) tion Date 5% ($) 10% ($)
- ---------------------- ------- ---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James F. Stafford 100,000 5.3698% $8.945 03/26/06 $562,542 $1,425,602
Keith A. Angelo 50,000 2.6849% 8.945 03/26/06 $281,273 $712,801
Richard E. Christopher 50,000 2.6849% 8.945 03/26/06 $281,273 $712,801
Morris E. Jones, Jr. 50,000 2.6849% 8.945 03/26/06 $281,273 $712,801
Lawrence A. Roffelsen 50,000 2.6849% 8.945 03/26/06 $281,273 $712,801
</TABLE>
- --------------------------------------------
(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 optionholders' continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved.
6
<PAGE> 10
OPTION EXERCISES AND FISCAL 1996 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, 1996, and unexercised options held as of June 30, 1996, by the
persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 6/30/96 at 6/30/96(1)(2)
------------------------------- -----------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable(1) Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James F.
Stafford 125,000 $1,244,062 500,000 250,004 $1,026,903 $434,850
Keith A.
Angelo 55,000 $351,000 194,500 95,316 $440,829 $189,045
Richard E.
Christopher 60,000 $359,218 145,000 83,961 $249,295 $131,112
Morris E.
Jones, Jr. 0 $ 0 310,000 82,398 $1,095,938 $123,691
Lawrence A.
Roffelsen 0 $ 0 230,000 94,795 $703,679 $186,571
</TABLE>
- ------------------------------------
(1) Generally, for executive officers and newly hired employees of the
Company, stock options granted are immediately exercisable at the date
of grant, but vest over a four year period commencing six months after
the date of grant. At the end of six months, 6/48ths of the option
shares vest; thereafter they vest at the rate of 1/48th per month for
each full month of the optionee's continuous employment with the
Company. For non-executive officer employees who receive discretionary
option grants during their employment, stock options are immediately
exercisable at the date of grant and vest over a four year period
commencing one month after the date of grant at the rate of 1/48th per
month for each full month of the optionee's continuous employment with
the Company. Unvested options are listed in the above table under the
heading "Unexercisable."
(2) Based on a value of $9.75 per share which was the closing price of the
Company's Common Stock on June 30, 1996. The value shown is for all
outstanding options which have an exercise price below the closing
price on June 30, 1996 of the Company's Common Stock regardless of
vesting restrictions.
7
<PAGE> 11
CHANGE OF CONTROL ARRANGEMENTS
Options granted under the Company's Amended and Restated 1994 Stock
Option Plan and the Company's 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 that 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".
The Company's Outside Directors Plan currently provides that upon his
or her 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.
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 is 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 with Jarrat Global Enterprises, Inc. ("JGE"), a corporation whose
principal shareholder is Henri A. Jarrat, a director of the Company. Pursuant to
the agreement, Henri Jarrat received options to purchase 125,000 shares of
Company stock and JGE receives $8,000 per month as compensation for providing
the Company with requested business advice, including management consulting in
specific areas, until November 1996.
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 make certain payments to Mr.
Campbell, extend his medical benefits, and accelerate
8
<PAGE> 12
the vesting on certain stock options held by him. 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, all of which
were subsequently exercised by Mr. Campbell, and of which options to purchase
200,000 shares were exercised in July, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during fiscal 1996 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 following table sets forth the stock options that were granted
under the Option Plan in the fiscal year ended 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, 1996; (ii) all current executive officers as 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.
9
<PAGE> 13
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
CHIPS AND TECHNOLOGIES INC.
AMENDED AND RESTATED 1994
STOCK OPTION PLAN(1)
---------------------------
EXERCISE
PRICE(2) NUMBER
(PER OF
NAME AND POSITION SHARE) SHARES
------------------------- -------- ---------
<S> <C> <C>
James E. Stafford $8.945 100,000
President and Chief
Executive Officer
Keith A. Angelo $8.945 50,000
Vice President, Marketing
Richard E. Christopher $8.945 50,000
Vice President, Sales
Morris E. Jones, Jr. $8.945 50,000
Senior Vice President,
Advanced Products and
Chief Technical Officer
Lawrence A. Roffelsen $8.945 50,000
Vice President,
Engineering
Executive Officer Group
(8 persons) $8.945 385,000
Non-Executive Director
Group (4 persons) $0 0
Non-Executive Officer
Employee Group
(200 persons) $11.3754 1,395,450
</TABLE>
- ------------------------------------
(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.
10
<PAGE> 14
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 is a former employee of the Company.
During fiscal 1996, 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 for approving the
grant of options for employees.
COMPENSATION PHILOSOPHY
The Compensation Committee strives to align executive compensation with
the value achieved by the executive staff 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 generally to 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) of
the Internal Revenue Code ("Section 162(m)") 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 compensation received through the exercise of 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.
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<PAGE> 15
FORMS OF COMPENSATION
Specific executive compensation elements and the factors on which they were
based are:
- 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
performance, current and anticipated future contributions to the Company and the
salary levels for chief executive officers at comparable companies.
- BONUS. The Company seeks to provide near term incentives through
bonuses to executives who make contributions of outstanding value to the
Company. For fiscal 1996, 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.
- 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 with an exercise price equal to 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. 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 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.
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<PAGE> 16
FISCAL 1996 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 8% upward adjustment in his base salary during fiscal 1996, 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. The base salaries for the other named executive officers of the
Company were each raised in fiscal 1996 from their levels in fiscal 1995 on the
basis of a similar analysis.
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 1996, the size of which was 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 1996 bonus under the Executive Bonus Plan
was equivalent to approximately 54.7% of his base salary. In addition, Mr.
Stafford was awarded an additional $48,000 for exceptional performance in fiscal
1996. The fiscal 1996 bonus amount for the other named executive officers was
equivalent to approximately 54.7% of their base salaries. Each executive officer
was awarded an additional $10,000 for exceptional performance in fiscal 1996.
The bonuses paid reflect the attainment by the Company of performance above or
close to the established targets. The fiscal 1996 bonuses paid were at the high
end of the range but did not reach the maximum potential bonus awards.
During fiscal 1996, the Committee approved the grant of a new stock
option for 100,000 shares to Mr. Stafford and new grants totalling 285,000
shares to the other four named executive officers. These option grants were
based on the performance of the officers in fiscal 1996, and were intended to
recognize individual performance over that period, as well as to insure equity
positions based on contribution. The grants reflect the Committee's continuing
policy to subject a significant 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
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<PAGE> 17
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, 1991, and ending on June 30,
1996(1).
COMPARISON OF CUMULATIVE TOTAL RETURN FROM JUNE 30, 1991, THROUGH JUNE 30, 1996
CHIPS AND TECHNOLOGIES, INC.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CHIPS & TECHNOLOGIES, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[LINE CHART]
<TABLE>
<CAPTION>
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Chips and Technologies, Inc. 100.00 92 49 49 172 128
H&Q Technology 100.00 114 139 141 236 280
NASDAQ-U.S. 100.00 120 151 153 204 261
</TABLE>
(1) Assumes that $100.00 was invested on June 30, 1991, in the Company's
Common Stock at the price of $76.25 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.
* $100 invested on 6/30/91 in stock or index--including reinvestment of
dividends. Fiscal year ending June 30.
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<PAGE> 18
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, 1996, 4,463,641 shares of Common Stock were reserved for
issuance upon the exercise of outstanding options at a weighted average exercise
price of $7.76 per share with exercise prices ranging from $3.125 to $14.50, and
1,168,783 shares of Common Stock remained available for future option grants,
which is equal to approximately 5.7% of the total number of shares of Common
Stock outstanding (excluding the 1,000,000 shares now proposed for stockholder
approval). 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. 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 and stock value. The Company believes
that the Option Plan plays an important role in achieving these objectives by
encouraging broad employee stock ownership and directly rewarding employees when
stock value increases. 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.
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<PAGE> 19
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. If the stockholders approve the
1,000,000 share increase in the number of shares of Company Common Stock
reserved under the Option Plan, 2,168,783 shares of Common Stock would remain
available for future option grants as of June 30, 1996, which is equal to
approximately 10.5% 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 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, 1996, 209 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.
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
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<PAGE> 20
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 last date of employment, 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.
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 date
of exercise of the option, the gain on sale of the shares (which is defined to
be the difference between the sale price and the option 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
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<PAGE> 21
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 for the stock 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 stock 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 stock 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 for the stock is more than twelve months from the date of
recognition of income. No tax deduction is available to the Company 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 on the proposal 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
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<PAGE> 22
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
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, 1997. 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, 1997. 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 on this proposal 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 May
30, 1997, and must 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.
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
September 27, 1996
19
