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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------
FORM 10-Q
(Mark One)
| X | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarter period ended December 31, 1995
OR
|__| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15012
CHIPS AND TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0047943
(State or other jurisdiction of incorporation or (I.R.S. Employee
organization) Identification No.)
2950 Zanker Road, San Jose, California 95134
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (408)434-0600
Former name, former address and former fiscal year. If
changed since last report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At December 31, 1995, the registrant had 20,381,564 shares of common
stock outstanding.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Unaudited Condensed Consolidated Financial Statements 3
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not applicable
Item 2. Changes in Securities Not applicable
Item 3. Defaults upon Senior Securities Not applicable
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information Not applicable
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands except share amounts) DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $27,803 $22,385
Short-term investments 24,698 23,644
Accounts receivable, net of allowance for
doubtful accounts of $1,139 and $1,032, respectively 12,337 14,696
Inventory 9,305 11,667
Prepaid and other assets 988 2,549
------- -------
Total current assets 75,131 74,941
Property and equipment, net 10,851 10,550
Other assets 2,295 276
------- -------
Total assets $88,277 $85,767
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,900 $ 8,072
Current portion of capitalized lease obligations 898 689
Other accrued liabilities 7,626 9,585
------- -------
Total current liabilities 15,424 18,346
Long-term capitalized lease obligations, less current portion 863 849
Notes payable 876
------- -------
Total liabilities 16,287 20,071
------- -------
Stockholders' equity:
Common stock, 20,382,000 and 19,744,000 shares issued
and outstanding 204 197
Capital in excess of par value 76,645 73,016
Notes receivable from officer (77) (107)
Unrealized gain on investments 8,860 16,267
Retained deficit (13,642) (23,677)
------- -------
Total stockholders' equity 71,990 65,696
------- -------
Total liabilities and stockholders' equity $88,277 $85,767
======= =======
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
(In thousands except per share amounts) 1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $38,259 $23,277 $75,478 $43,650
Cost of sales 23,301 14,418 46,159 27,153
------- ------- ------- -------
Gross margin 14,958 8,859 29,319 16,497
Operating expenses
Research and development 4,811 3,286 9,716 6,294
Selling, general and administrative 5,214 4,130 10,118 7,932
Restructuring recovery -- (1,057) -- (1,429)
------- ------- ------- -------
Total operating expenses 10,025 6,359 19,834 12,797
Income from operations 4,933 2,500 9,485 3,700
Interest income and other, net 1,297 134 1,665 244
------- ------- ------- -------
Income before taxes 6,230 2,634 11,150 3,944
Provision for income taxes 623 263 1,115 317
------- ------- ------- -------
Net Income $5,607 $2,371 $10,035 $3,627
======= ======= ======= =======
Net income per share $0.26 $0.13 $0.46 $0.20
======= ======= ======= =======
Shares used in per share calculation 21,804 19,967 21,991 18,537
======= ======= ======= =======
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
(In thousands) 1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 10,035 $ 3,627
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 1,303 1,326
Gain on sale of land (949)
Changes in operating assets and liabilities:
Accounts receivable 2,359 (2,351)
Inventory 2,362 (3,646)
Accounts payable (1,172) (814)
Other assets and liabilities (2,227) 1,105
Accrued restructuring costs (498)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 11,711 (1,251)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,604) (1,545)
Purchase of short-term investments (8,461) (1,511)
Deposit for capacity agreement (2,000)
Proceeds from sale of land and other 2,759 168
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (9,306) (2,888)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to capital lease obligations, net of principle payment 223 620
Repayment of note payable principle (876) (30)
Proceeds from issuance of stock 3,636 1,359
Repayments (issuance) of officer's loan 30 (100)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,013 1,849
-------- --------
Net increase (decrease) in cash and cash equivalents 5,418 (2,290)
Cash and cash equivalents at beginning of period 22,385 17,372
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,803 $ 15,082
======== ========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 125 $ 474
Income taxes 148 170
Additions under capital lease obligations 778 1,229
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the financial position, operating results and cash flows for
those periods presented. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended June 30, 1995, included in the Company's 1995
Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of
the results that may be expected for the entire year.
NOTE 2. SHORT-TERM INVESTMENTS
The Company classified all investments on December 31, 1995 as
available-for-sale. The fair market value and the amortized cost of the
securities at December 31, 1995 are presented in the table below. The
investments are adjusted to fair market value as of the balance sheet date and
any unrealized gains were recorded as a separate component of stockholders'
equity. During the quarter ended December 31, 1995, the unrealized gain from
short-term investments decreased by $7.4 million as compared to $16.3 million on
June 30, 1995. The decrease was primarily due to a decline in the fair market
value of NexGen Common Stock.
<TABLE>
<CAPTION>
Unrealized Unrealized Fair
(In thousands) Amortized Holding Holding Market
Gain Losses Value Cost
- -------------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C>
NexGen Common Stock $ -- $8,819 $ -- $ 8,819
U.S. Government and Corporation
Obligations 15,839 40 -- 15,879
- -------------- ------- ------ -------- -------
Total $15,839 $8,859 $ -- $24,698
============== ======= ====== ======== =======
</TABLE>
NOTE 3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
(In thousands) December 31, 1995 June 30, 1995
----------------- -------------
<S> <C> <C>
Work-in-process $3,787 $ 5,471
Finished goods 5,518 6,196
------ -------
$9,305 $11,667
====== =======
</TABLE>
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NOTE 4. INCOME TAXES
The Company provides for income taxes during interim reporting periods based
upon an estimate of the annual effective tax rate of approximately 10%. This
rate is substantially lower than the statutory income tax rate because the
Company utilizes its net operating loss carryforwards to offset a significant
portion of the Company's estimated income tax liability. The estimated tax rate
reflects alternative minimum taxes and other state tax obligations.
NOTE 5. NET INCOME PER SHARE
Net income per share is based on the weighted average common shares outstanding
and dilutive common equivalent shares (using the treasury stock method). Common
equivalent shares include stock options and warrants.
NOTE 6. LONG-TERM CAPACITY AGREEMENTS
During the second quarter of fiscal 1996, the Company entered into two wafer
capacity agreements, one with Taiwan Semiconductor Manufacturing Company
('TSMC') and another with Chartered Semiconductor Manufacturing PTE LTD ('CSM').
These agreements require deposits to be paid by the Company totaling $23.5
million and $20.0 million, respectively. Both agreements were entered into for
the purpose of securing additional wafer supplies.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Net sales for the second quarter of fiscal 1996 increased 3% from the prior
quarter and 64% from the same quarter a year ago. Gross margin for the second
quarter of fiscal 1996 improved slightly compared to the prior quarter and the
same quarter a year ago. Revenues from portable graphics accelerators continue
to represent a substantial majority of the Company's net sales. Operating
expenses in the second quarter of fiscal 1996 have increased in absolute dollars
compared to the same quarter a year ago, largely due to higher sales commissions
from higher net sales and increased Research & Development spending.
NET SALES
Net sales for the second quarter of fiscal 1996 were $38.3 million, an increase
of $15.0 million from $23.3 million reported for the same quarter in fiscal
1995. Net sales for the first half of fiscal 1996 were $75.5 million, an
increase of $31.8 million from $43.7 million for the same period of fiscal 1995.
The increase in net sales was mainly due to significant increases in unit
shipments of portable graphics accelerators. Revenue from portable graphics
accelerator products comprised 87% of the Company's net sales in the second
quarter of fiscal 1996, compared to 59% of net sales in the same quarter of
fiscal 1995.
GROSS MARGIN
The gross margin percentage was 39.1% in the second quarter of fiscal 1996,
compared to 38.1% for the same quarter of fiscal 1995. For the first half of
fiscal 1996, the gross margin was 38.8% , compared to 37.8% for the same period
of fiscal 1995. The improvement in gross margin percentage was primarily due to
an improved mix of products.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased $1.5 million from the second quarter
of fiscal 1995 to $4.8 million in the second quarter of fiscal 1996. The
research and development expenses were approximately 13% of net sales in the
second quarter of fiscal 1996, compared to 14% in the second quarter of fiscal
1995. For the first half of fiscal 1996, research and development expenses were
13% of net sales as compared to 14% in the same period of fiscal 1995. Research
and development spending increased mainly from higher engineering staffing
levels and product prototyping costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $1.1 million from the
second quarter of fiscal 1995 to $5.2 million in the second quarter of fiscal
1996. Selling, general and administrative expenses were approximately 14% of net
sales in the second quarter of fiscal 1996, compared to 18% in the second
quarter of fiscal 1995. For the first half of fiscal 1996, selling, general and
administrative expenses as a percentage of net sales were 13% as compared to 18%
in the same period of fiscal 1995. The increase in absolute dollars was
primarily due to higher commission expenses as the result of higher sales.
Although expenses increased in absolute dollars, selling, general and
administrative expenses as a percentage of sales declined as sales grew at a
faster rate than spending.
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INTEREST INCOME AND OTHER, NET
Interest and other income for the second quarter of fiscal 1996 was $1.3
million, compared to $0.1 million in the second quarter of fiscal 1995. In
December 1995, the Company sold an undeveloped parcel of land and recorded a
$0.9 million gain on the sale.
INCOME TAXES
The Company provides for income taxes during interim reporting periods based
upon an estimate of the annual effective tax rate of approximately 10%. This
rate is substantially lower than the statutory income tax rate because the
Company utilizes its net operating loss carryforwards to offset a significant
portion of the Company's estimated income tax liability. The estimated tax rate
reflects alternative minimum taxes and other state tax obligations.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short term investments were $52.5 million on December
31, 1995, an increase of $6.5 million from $46.0 million on June 30, 1995. This
increase was primarily attributable to cash generated from operating activities
and proceeds from the sale of the Company's land. The increase was partially
offset by usage of cash for a deposit to a foundry to obtain a commitment for
the supply of additional wafers and by repayment of a note related to a building
lease settlement. Short term investments as of December 31, 1995 included $8.8
million of NexGen Common Stock. The market value of such stock declined from
$16.3 million as of June 30, 1995. These holdings were subject to contractual
restrictions on transfer which lapsed in November; however, the Company did not
reduce its share position during the quarter.
During the first half of fiscal 1996, total liabilities decreased $3.8 million
from $20.1 million on June 30, 1995. The decrease was primarily attributable to
the repayment of an outstanding promissory note and payment of income tax
liabilities.
The Company entered into wafer capacity agreements during the quarter with
Taiwan Semiconductor Manufacturing Company ('TSMC') and Chartered Semiconductor
Manufacturing PTE LTD ('CSM'). Both agreements were entered into for the purpose
of securing additional guaranteed wafer supplies through the year 2000 and both
require the payment of cash deposits and the purchase by the Company of certain
quantities of wafers. Under the agreement with TSMC, the Company will deposit
$23.5 million with TSMC during calendar year 1996. The deposit will be applied
against the price of wafers purchased under the agreement, and is not refundable
except under certain circumstances. The agreement with CSM requires the Company
to make deposits totaling $20 million over the next two years. The deposits will
be refunded to the Company at the end of the agreement term except subject to
certain conditions, including purchase by the Company of the required quantity
of wafers. The Company expects to finance these deposits from existing cash
balances and funds generated from operations.
The Company's capital requirements consist primarily of financing working
capital items and funding operational activities. The Company has agreements
with three banking institutions for a combined total of $21 million in unsecured
lines of credit. The lines of credit will expire at various times from August
1996 through August 1997. There was no borrowing against line of credit
agreements as of December 31, 1995. The Company's line of credit agreements
contain certain covenants related to financial performance and condition, and
the ability to borrow under such lines is subject to compliance with such
covenants. On October 13, 1995, the Company filed a Registration Statement on
Form S-3 with respect to the proposed offering of 3,350,000 shares of common
stock. Subsequently, the Company decided to indefinitely postpone this offering
and has no present plan as to when it may go forward with the offering. The
Company expects that its existing cash balances, bank lines of credit and funds
generated from operations will be sufficient to meet the Company's capital and
operating requirements for the remainder of this fiscal year.
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FACTORS AFFECTING FUTURE OPERATING RESULTS
This report includes a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties,
including those discussed below or in the Company's report on Form 10-K for the
fiscal year ended June 30, 1995, that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words "expect," "anticipate" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statement, which speak only as of the date hereof.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
As previously announced, the Company expects its revenues will decline in the
third quarter of fiscal 1996 by $2 to $3 million as compared to revenue in the
most recent quarter due to a delay in getting a product into volume production
at a third foundry. However, gross margin percentages for the next quarter is
expected to remain stable as compared to the quarter just ended. The Company's
quarterly revenues, gross margin and other operating results have been and will
continue to be affected by a wide variety of factors that could have a material
adverse effect during any particular period, including the level of orders that
are received and can be shipped in a quarter, the rescheduling or cancellation
of orders by its customers, gain or loss of any strategic relationships with
customers, availability and cost of foundry capacity and raw materials, the
Company's ability to predict product demand and manage its inventory levels,
fluctuations in manufacturing yields, the timing of qualification of new
foundries or foundry production lines, new product introductions by the
Company's competitors, the Company's ability and timing in introducing new
products and technologies, market acceptance of products of both the Company and
its customers, supply constraints and price or other fluctuations for other
components incorporated into its customers' products, such as portable display
screens and memory devices, competitive pressures on selling prices, changes in
product or customer mix, and the level of expenditures for research and
development and for selling, general and administrative functions.
The Company does not own or operate a wafer fabrication facility, and all of its
semiconductor device requirements are supplied by outside foundries. In
addition, all of the Company's semiconductor products are currently assembled
and tested by third party vendors, primarily in Asia. The Company's reliance on
subcontractors to manufacture, assemble and test its products involves
significant risks, including reduced control over delivery schedules, quality
assurance, manufacturing yields and cost and potential misappropriation of the
Company's intellectual property. Delays in delivery of the Company's products,
problems with quality or yields, cost increases and other factors beyond the
Company's control could result in the loss of customers, limitations or
reductions in the Company's revenues or other material adverse effects on the
Company's business, conditions and operating results.
In connection with the manufacture of its products, the Company expects to
obtain access to and qualify new foundries or new production lines at
established foundries that employ advance manufacturing and process
technologies, which are currently available from a limited number of foundries.
The Company expects that the majority of its products will utilize increasingly
advanced process geometries in order to achieve high performance and lower
production costs. The Company is currently qualifying a new foundry supplier and
is in the process of qualifying certain of its existing products at additional
foundry suppliers and on new semiconductor process technologies. The
qualification process can take six months or longer. The Company has in the past
experienced increased costs and delays in connection with the qualification of
new foundries or new production lines or processes at established foundries.
Failure to qualify and obtain adequate access to advanced process technologies
to supply products on a timely basis would delay product introduction and
delivery to the Company's customers. Delays, as well as cost increases or
quality and yield problems resulting from the qualification of new foundries or
new production lines or processes at established foundries, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The semiconductor industry is experiencing worldwide capacity limitations in the
production of advanced semiconductor devices, and access to wafer fabrication
capacity is difficult to secure. The Company believes that available foundry
manufacturing capacity is in particularly short supply for advanced process
geometries, and in particular 0.5 micron. As a result of this capacity shortage,
manufacturers may be able to raise prices and to impose burdensome terms and
conditions on their customers in exchange for assurances of supply allocation.
The Company has entered into agreements with two foundries
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to secure additional foundry capacity which require the Company to make deposits
in an aggregate amount of $43.5 million. The Company may also be required to
enter into additional arrangements in the future. Although the Company has
recently entered into these two foundry agreements, there is no assurance that
the Company will be able to obtain enough production capacity to meet its
demands.
A limited number of customers account for a substantial portion of the Company's
net sales. The Company expects that sales to a limited number of customers will
continue to account for a substantial portion of its net sales for the
foreseeable future. Some companies with strong presence in the desktop PC market
have recently announced lower than expected revenue results due to various
issues affecting the desktop PC market. The Company's business is primarily in
the portable computer segment of the market which does not appear to have been
similarly affected. However, in the event that one or more of the Company's
major customers were to cancel and/or substantially reschedule orders for
significant quantities of product, the Company's results of operation could be
materially adversely affected.
The Company relies on obtaining and maintaining design wins for its products
with leading personal computer manufacturers. In the event that the Company's
competitors have products, product features and performance which are perceived
as valuable by the market but are not included in the Company's products, the
Company could lose current design wins or not acquire new design wins. In
addition, other factors such as internal product development delays, aggressive
competition and intangible factors affecting customers relationships could also
adversely impact design wins. To the extent that the Company is unable to retain
existing design wins or to acquire new design wins and the associated revenues
generated from them for the Company's existing and future products, there could
be a material adverse on the Company's business, financial condition and results
of operations.
The Company currently places noncancelable orders to purchase its products from
independent foundries on an approximate three month rolling basis, while its
customers generally place purchase orders with the Company fewer than three
months prior to delivery. Customers may cancel their orders without significant
penalty. Consequently, if anticipated sales and shipments in any quarter are
canceled or do not occur as quickly as expected, expense and inventory levels
could be disproportionately high and revenues could be reduced, and the
Company's business, financial condition and results of operations could be
materially adversely affected.
In recent periods, due to various market, supply, economic and competitive
factors, there has been a favorable pricing environment for PC components
including the Company's graphics products; however, the PC semiconductor market
is generally characterized by price erosion and there can be no assurance that
the Company will not experience increased price competition, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company expects its competitors to aggressively price
alternative solutions to attempt to gain or maintain market position. To the
extent that the Company must reduce prices to meet competition, maintain market
share or meet customer requirements, gross margin percentages achieved in recent
periods may not be sustainable.
The largest portion of the Company's sales is comprised of portable graphics
accelerators. The Company expects that the majority of it revenues for at least
the next two quarters will continue to be from sales of those products. While
the market for PCs in general and portable computers in particular has recently
experienced substantial growth, the overall industry has historically been
cyclical and seasonal, and there can be no assurance that growth rates
experienced in prior periods will continue in the future.
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PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Legal Proceedings Not applicable
Item 2. Changes in Securities Not applicable
Item 3. Defaults upon Senior Securities Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders of Chips and
Technologies, Inc. was held on November 9, 1995 in San
Jose, California. 17,539,200 shares of common stock or
86.5% of the total outstanding shares as of the record
date were present or represented by proxies at the
meeting. The matters voted upon at the meeting and the
results of those votes were as follows:
1. Election of one class I director, Gene P. Carter. Mr. Carter received
16,900,140 affirmative votes and 639,060 votes were withheld.
2. Approval of an increase to the share reserve under the
Amended and Restated 1994 Stock Option Plan by 1,000,000
shares. The proposal received 7,336,209 affirmative
votes, 3,530,041 negative votes and 322,111 abstentions.
The brokers' non-vote totaled 6,350,839 shares.
3. Approval of an increase to the share reserve under the
First Amended 1988 Nonqualified Stock Option Plan for
Outside Directors by 200,000 shares. The proposal
received 7,903,121 affirmative votes, 3,374,811 negative
votes and 329,848 abstentions. The brokers' non-vote
totaled 5,931,420 shares.
4. Appointment of Price Waterhouse LLP as the independent
accountants of the Company for the fiscal year ending
June 30, 1996. The proposal received 17,347,417
affirmative votes, 48,881 negative votes and 142,902
abstentions.
Item 5. Other Information Not applicable
Item 6 Exhibits 14
The exhibits listed in the
Exhibit Index set forth on page 14 of this report are
incorporated herein by reference.
Reports on Form 8-K Not applicable
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHIPS AND TECHNOLOGIES, INC.
(Registrant)
/s/ James F. Stafford
-----------------------------------
James F. Stafford
President & Chief Executive Officer
/s/ Timothy R. Christoffersen
-----------------------------------
Timothy R. Christoffersen
Vice President of Finance
Chief Financial Officer and
Principal Accounting Officer
Date: February 12, 1996
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<C> <C> <C>
3.1 (1) Amended Certificate of Incorporation of Chips and Technologies, Inc.
3.2 (2) Restated By-laws of Chips and Technologies, Inc.
4.1 (3) Stockholders' Rights Agreement dated August 23, 1989.
10.1 * First Amended 1988 Nonqualified Stock Option Plan for Outside Directors dated October 1,
1993 (as amended through November 9, 1995) .
10.2 (1) * Form of Indemnity Agreement between the Company and each of its directors and executive
officers.
10.3 (4) Restated Secured Promissory Note, Secured Continuing Guarantee, and Restated Loan and
Security Agreement between Techfarm, Inc. and Chips and Technologies, Inc. dated March
31, 1994.
10.4 (4) * Promissory note to the Company from Keith Angelo dated August 1, 1994.
10.5 (4) * Independent Contractor Services Agreement between the Company and Henri Jarrat dated
August 11, 1994.
10.6 * Amended and restated 1994 stock option plan dated November 10, 1994 (as amended through
November 9, 1995).
10.7 (5) * Executive bonus plan dated September 21, 1995
10.8 Option Agreement between the Company and Taiwan Semiconductor Manufacturing Company dated
November 6, 1995. (**)
10.9 Deposit Agreement between the Company and Chartered Semiconductor Manufacturing PTE LTD
dated November 16, 1995. (**)
11.1 Statement re: Calculation of Earnings per Share.
27.0 Financial Data Schedule for the quarter ended December 31, 1995
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1990.
(2) Incorporated by reference to Registration Statement No. 33-8005 effective October 8, 1986.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1989.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for the period ended June 30, 1994.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995.
* Denotes management contracts or compensatory plans or arrangements covering executive officers or directors of Chips and
Technologies, Inc.
** Confidential treatment has been requested for a portion of this document.
</TABLE>
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Exhibit 10.1
FIRST AMENDED
CHIPS AND TECHNOLOGIES, INC.
1988 NONQUALIFIED STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
(AS AMENDED THROUGH NOVEMBER 9, 1995)
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 550,000 shares. In the event
that any outstanding Option for any reason expires or is terminated and/or
shares subject to repurchase are repurchased by the
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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.
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(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
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, through
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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.
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.
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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 October 1, 1993, approved by a majority of the
stockholders of the Company on November 10, 1993, and as subsequently amended
through November 9, 1995.
Jeffery Anne Tatum,
Secretary
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EXHIBIT A
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
Between
CHIPS AND TECHNOLOGIES, INC.
and
[firstname] [lastname]
Grant Number [grantnumber]
You have been granted an option under the First Amended 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 [optionprice]
per share, which was the closing price of the common
stock of Chips on [grantdate].
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 [grantdate].
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.
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Exercisability You may exercise your option immediately in its
entirety on or 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 to Repurchase below).
Term Your option will expire on [period1expiredate], the
"Expiration Date", which is ten (10) years from the
Grant Date, unless your service 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
Unvested Shares 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 be transferred until they become
vested.
Chips' Right to
Repurchase Your
Unvested Shares If your service as a director 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
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.
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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 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 (the
"Board").
Escrow for Unvested
Shares To ensure that the unvested shares will be available
for repurchase by Chips, when you buy any unvested
shares, you may 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
through Escrow If Chips exercises its right to repurchase your
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 principal
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
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such legended shares which have vested for shares
without such a legend.
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 to
Repurchase above.)
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.
If there is an ownership change, Chips' right of
repurchase will continue but your service 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, the Board, in
its sole discretion, will either (i) provide that any
unvested portion of your option will become 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 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
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of the transfer of control nor assumed by the
surviving, continuing, successor, or purchasing
corporation, as the case may be.
Termination of Your
Service as Director If you cease to be a director of Chips for
any 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 service as a director ends 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
one (1) month after your service as a director ends or
on the Expiration Date of the term of the option,
whichever is first.
However, if a sale, within the applicable time periods
set forth in the preceding two paragraphs, of shares
acquired upon the exercise of the option would subject
you to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended, your option as to
vested shares will not expire until the earliest to
occur of (i) the tenth (10th) day following the date
on which your sale of such shares would no longer be
subject to such suit, (ii) the one hundred and
ninetieth (190th) day after your service as a director
ends, or (iii) the Expiration Date.
Notwithstanding the foregoing, no additional vesting
will occur after your service as a director
terminates.
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
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ends twenty-eight (28) 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.
2950 Zanker Road
San Jose, CA 95134
Attn: Corporate Services
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, by certified or
registered mail, return receipt requested, by
confirmed facsimile transmission, or by such other
means as Chips may permit, to Chips' Stock
Administrator, or other authorized representative of
Chips, prior to the Expiration Date, 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 Regulation T of the Board
of Governors of the Federal Reserve
System)
Taxes You will be responsible for the payment of any tax
liability on income related to the option, its
exercise and/or the transfer of any shares acquired
upon exercise of the option
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and Chips will issue a Form 1099-MISC to report any
such income.
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.
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.
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.
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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:
-----------------------
Its:
-----------------------
Dated:
-----------------------
OPTIONEE
-----------------------------
Name:
-----------------------
Dated:
-----------------------
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Exhibit 10.6
AMENDED AND RESTATED
CHIPS AND TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
(As Amended Through November 9, 1995)
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").
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(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 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
eighteen million two hundred thousand (18,200,000) 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
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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 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
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<PAGE> 4
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 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> 5
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> 6
(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.
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<PAGE> 7
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing is the Amended and Restated Chips and Technologies, Inc. 1994
Stock Option Plan as duly adopted by the Board of Directors of the Company on
August 11, 1994 and as subsequently amended through November 9, 1995.
--------------------------
Jeffery Anne Tatum,
Secretary
7
<PAGE> 8
EXHIBIT A
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> 9
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'
Limitation incentive stock 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> 10
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.
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<PAGE> 11
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
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
Resale: Officers you acquire 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> 12
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
of Option and Issuance shares upon the exercise of the option are
of Shares subject to 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> 13
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
of Shares to Section 16 amendment of the Plan is subject to the
Insiders approval of Chips' 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
Subject to the Option number, 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.
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<PAGE> 14
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> 15
EXHIBIT B
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
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<PAGE> 16
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> 17
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
Resale: Officers you acquire by exercising your option may
only be sold during the officers' trading
3
<PAGE> 18
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> 19
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
of Option and Issuance shares upon the exercise of the option are
of Shares subject to 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
of Shares to Section 16 amendment of the Plan is subject to the
Insiders approval of Chips' 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> 20
Changes in Stock Appropriate adjustments shall be made in the
Subject to the Option number, 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> 21
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
By: __________________________
7
<PAGE> 1
"[ ]" indicates that the
confidential portion has been
omitted and filed separately with
the Commission.
EXHIBIT 10.8
OPTION AGREEMENT
BETWEEN
CHIPS AND TECHNOLOGIES, INC.
AND
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
NOVEMBER 6, 1995
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. VOLUME COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. WAFER PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. OTHER PURCHASE TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. FAILURE TO PURCHASE THE OPTION CAPACITY; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. BOARD APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
Confidential Treatment
Requested
OPTION AGREEMENT
THIS AGREEMENT is made and becomes effective as of November 6, 1995 (the
"Effective Date") by Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC", a
company organized under the laws of the Republic of China with its registered
address at No. 121, Park Ave. 3, Science-Based Industrial Park, Hsinchu, Taiwan,
and, Chips and Technologies, Inc., a company organized under the laws of
California, with its registered address at 2950 Zanker Road, San Jose,
California 95134 ("Customer").
RECITALS
WHEREAS, TSMC currently supplies Customer with wafers and Customer wishes
to increase the volume of wafers to be purchased from TSMC;
WHEREAS, in order to increase its output, TSMC must [
]
WHEREAS, as a condition to TSMC's acceleration of these facilities, TSMC
has asked that Customer make a capacity commitment and advance payment for the
right to buy additional capacity, and Customer is willing to do so:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties agree as follows:
3
<PAGE> 4
Confidential Treatment
Requested
1. DEFINITIONS
(a) "Base Capacity" used in this Agreement shall mean the Best Effort
Capacity as defined in this Section 1(b) below.
(b) "Best Effort Capacity" used in this Agreement shall mean the capacity
commitment made by Customer and TSMC on the best effort basis pursuant
to an existing Agreement, if any.
(c) "Customer Committed Capacity" used this Agreement shall mean the total
capacity that Customer agrees to purchase from TSMC pursuant to this
Agreement, and is set forth in Exhibit B.
(d) "Option Capacity" used in this Agreement shall mean the firm capacity
commitment made by Customer pursuant to this Agreement, for which
Capacity Customer agrees to pay the Option Fee as defined in this
Section 1(f) below.
(e) "Option Fee" used in this Agreement shall mean the deposit that
Customer agrees to place with TSMC as the advance payment for the
Option Capacity.
(f) "TSMC Committed Capacity" used in this Agreement shall mean the total
capacity that TSMC agrees to provide to Customer pursuant to this
Agreement, and is set forth in Exhibit B.
(g) [
]
4
<PAGE> 5
Confidential Treatment
Requested
2. VOLUME COMMITMENT
(a) Customer agrees to purchase from TSMC the Customer Committed Capacity,
and subject to the payment of the Option Fee by Customer under Section
5 below, TSMC agrees to provide to Customer the TSMC Committed
Capacity, as set forth in Exhibit B. [
]
(b) Each month, Customer agrees to provide to TSMC a six-month rolling
forecast of the number of wafers that Customer will purchase, [
] The forecast
must be based on wafers out or deliveries expected to be made by TSMC.
(c) TSMC will use its reasonable effort to cause its fabs to be capable of
producing wafers of more advanced specifications, as set forth in the
TSMC Technology Road Map attached as Exhibit C.
3. WAFER PRICE
(a) The wafer prices for the Customer Committed Capacity [
] for the same technology, the same fab and the
same period of time. In the event that the wafer prices for the
Customer Committed Capacity do not comply with the preceding sentence,
TSMC will make proper price changes for the unfilled orders, upon
Customer's notice in writing.
(b) The parties shall negotiate in good faith each year the wafer prices
for the Customer Committed Capacity of the following year, [
]
5
<PAGE> 6
Confidential Treatment
Requested
4. OTHER PURCHASE TERMS AND CONDITIONS
The Customer/TSMC Wafer Foundry Agreement dated (to be completed) will
apply to all purchases of wafers by Customer from TSMC, except that the
provisions of this Agreement will supersede the above Agreement with
respect to the subject matter hereof.
5. OBLIGATION TO PAY OPTION FEE FOR OPTION CAPACITY
(a) Customer agrees to pay to TSMC the Option Fee in the amount of [ ]
per Wafer Equivalent for the right to purchase the Option Capacity
pursuant to this Agreement. The Option Fee is set forth in Exhibit D,
and shall be paid in cash by no later than dates specified in this
Exhibit. Except that TSMC exercises its first right of refusal and
accepts the Customer's offer pursuant to Section 6 below, the Option
Fee for any calendar year, once paid, shall be non-refundable except as
outlined in this contract, and will be credited against the wafer
prices for the Option Capacity provided by TSMC for that particular
year under this Agreement.
(b) Customer further agrees to deliver to TSMC, within seven (7) days
following the Effective Date, three (3) promissory notes each in an
amount of the Option Fee due and payable to TSMC or order, which
promissory notes are in the form of Exhibit E (1-3). The promissory
notes shall be returned by TSMC to Customer within seven (7) days upon
receipt of the corresponding Option Fee by TSMC.
6
<PAGE> 7
Confidential Treatment
Requested
6. FAILURE TO PURCHASE THE OPTION CAPACITY;
FIRST RIGHT OF REFUSAL
[
]
(b) Any of Customer's right or obligation set forth in Section 6(a) shall
not affect its obligation to pay the Option Fee pursuant to Section 5
above, except that if this Agreement is assigned to any third parties
acceptable to TSMC pursuant to this Section 6(a) above, such third
parties shall pay the Option Fee and abide by the terms and conditions
of this Agreement and Customer's obligations for that Option Capacity
shall terminate.
7. TERM AND TERMINATION
(a) The term of this Agreement shall commence from the Effective Date, and
continue until December 31, 1999.
(b) TERMINATION BY TSMC FOR CUSTOMER'S FAILURE TO PAY THE OPTION FEE
TSMC may terminate this Agreement if Customer fails to pay the Option
Fee pursuant to Section 5 above, and does not cure
7
<PAGE> 8
or remedy such breach within thirty(30) days of receiving written
notice of such breach.
(c) TERMINATION FOR OTHER BREACH OR FOR BANKRUPTCY
Either party may terminate this Agreement if, (i) the other party
breaches any material provisions of this Agreement (other than the
breach of Section 5 above), and does not cure or remedy such breach
within sixty (60) days of receiving written notice of such breach, or
(ii) becomes the subject of a voluntary or involuntary petition in
bankruptcy or any proceeding relating to insolvency, receivership or
liquidation, if such petition or proceeding is not dismissed with
prejudice within sixty (60) days after filing.
(d) EFFECT OF TERMINATION
Both parties shall remain liable to the other party for any outstanding
and matured rights and obligations at the time of termination,
including all outstanding payments of the Option Fee and for the wafers
already ordered and/or shipped to Customer.
In addition, if this Agreement is terminated by Customer due to a
breach by TSMC, then TSMC shall refund to Customer any portion of the
Option Fee already paid by Customer to TSMC but not yet credited to the
purchase prices of wafers in accordance with Section 5 above.
(e) Customer may terminate this Agreement in the event that TSMC is more
than twelve months late with respect to the Technology Roadmap attached
as Exhibit C.
8. BOARD APPROVAL
Customer shall obtain the approval by its Board of Directors of this
Agreement, and submit to TSMC, at the time of executing this Agreement,
an authentic copy of it's board resolution authorizing the
representative designated below to execute this Agreement.
8
<PAGE> 9
9. LIMITATION OF LIABILITY
In no event shall TSMC be liable for any indirect, special, incidental
or consequential damages (including loss of profits and loss of use)
resulting from, arising out of or in connection with TSMC's performance
or failure to perform under this Agreement, or resulting from, arising
out of or in connection with TSMC's producing, supplying, and/or sale
of the wafers, whether due to a breach of contract, breach of warranty,
tort, or negligence of TSMC, or otherwise.
10. NOTICE
All notices required or permitted to be sent by either party to the
other party under this Agreement shall be sent by registered mail
postage prepaid, or by personal delivery, or by fax. Any notice given
by fax shall be followed by a confirmation copy within ten (10) days.
Unless changed by written notice given by either party to the other,
the addresses and fax numbers of the respective parties shall be as
follows:
To TSMC:
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.
No. 121, Park Avenue 3
Science-Based Industrial Park
Hsinchu, Taiwan
Republic of China FAX: 886-35-781545
To Customer:
CHIPS AND TECHNOLOGIES, INC.
2950 Zanker Road
San Jose, CA 95134 FAX: (408) 894-2086
9
<PAGE> 10
11. ENTIRE AGREEMENT
This Agreement, including Exhibits A-E, constitutes the entire
agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces all prior or contemporaneous
understandings, agreements, dealings and negotiations, oral or written,
regarding the subject matter hereof. No modification, alteration or
amendment of this Agreement shall be effective unless in writing and
signed by both parties. No waiver of any breach or failure by either
party to enforce any provision of this Agreement shall be deemed a
waiver of any other or subsequent breach, or a waiver of future
enforcement of that or any other provision.
12. GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the Republic of China.
13. ARBITRATION
Each party will make best efforts to resolve amicably any disputes or
claims under this Agreement among the parties. In the event that a
resolution is not reached among the parties within thirty (30) days
after written notice by any party of the dispute or claim, the dispute
or claim shall be finally settled by binding arbitration in Taipei
under The Rules of Arbitration of the International Chamber of Commerce
by three (3) arbitrators appointed in accordance with such rules. The
arbitration proceeding shall be conducted in English. Judgment on the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
14. ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of each
party and its successors, and except that Customer may assign this
Agreement under Section 6 above, neither party shall assign any of its
rights hereunder, nor delegate its obligations hereunder, to any third
party, without the prior written consent of the other.
10
<PAGE> 11
15. CONFIDENTIALITY
Neither party shall disclose the existence or contents of this
Agreement except as required by Customer's assignment of this Agreement
to any third parties pursuant to Section 6 above, in confidence to its
advisers, as required by applicable law, or otherwise with the prior
written consent of the other party.
16. FORCE MAJEURE
Neither party shall be responsible for delays or failure in performance
resulting from acts beyond the reasonable control of such party. Such
acts shall include but not limited to acts of God, war, riot, labor
stoppages, governmental actions, fires, floods, and earthquakes.
IN WITNESS WHEREOF, the parties, have executed this Agreement as of the date
first stated above.
TAIWAN SEMICONDUCTOR CHIPS AND
MANUFACTURING CO., LTD. TECHNOLOGIES, INC.
BY:____________________ BY:_________________
Donald Brooks Jim Stafford
President President
11
<PAGE> 12
Confidential Treatment
Requested
EXHIBIT A
CAPACITY FACTOR TABLE
[
]
12
<PAGE> 13
Confidential Treatment
Requested
EXHIBIT B
CHIPS & TECHNOLOGY/TSMC
COMMITTED CAPACITY
[
]
13
<PAGE> 14
Confidential Treatment
Requested
EXHIBIT C
TSMC CMOS TECHNOLOGY ROADMAP
[
]
14
<PAGE> 15
Confidential Treatment
Requested
EXHIBIT D
OPTION FEES
[
]
15
<PAGE> 16
EXHIBIT E(1)
PROMISSORY NOTE ONE (1)
Amount: US$______________ Due Date: January 31, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before January 31, 1996, pay the Option Fee due in full on or before January
31, 1996, plus interest calculated from the Due date stated herein to the date
of full payment at the rate of 10% per annum on any unpaid portion of the
principal amount stated herein, and said payment will be made at
________________ (Place of Payment).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
-------------------------
Issue Place:
-------------------------
Maker's Signature:
--------------------
Maker's Address:
--------------------
--------------------
16
<PAGE> 17
EXHIBIT E(2)
PROMISSORY NOTE TWO (2)
Amount: US$_____________ Due Date: July 31, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before July 31, 1996, pay the Option Fee due in full on or before July 31,
1996, plus interest calculated from the Due date stated herein to the date of
full payment at the rate of 10% per annum on any unpaid portion of the principal
amount stated herein, and said payment will be made at ________________ (Place
of Payment).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
-------------------------
Issue Place:
-------------------------
Maker's Signature:
--------------------
Maker's Address:
--------------------
--------------------
17
<PAGE> 18
EXHIBIT E(3)
PROMISSORY NOTE THREE (3)
Amount: US$_______________ Due Date: November 1, 1996
In connection with the capacity commitment of Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") to Chips and Technologies, Inc.
("Chips") relating to the Option Fees (as defined in the Option Agreement
between Chips and TSMC dated as of this date (the "Agreement")), Chips must, on
or before November 1, 1996, elect one of the following alternatives: (i) to pay
the Option Fee due in full on or before November 1, 1996; (ii) to execute full
recourse promissory notes for the amount of the Option Fee due, payable in equal
installments on January 31, 1997 and July 31, 1997; or (iii) to not pay the
Option Fee and to thereby release TSMC from that portion of the capacity
commitment relating to the Option Fee. In the event Chips does not elect one of
the alternatives set forth in clauses (i) and (ii) above, Chips shall be deemed
to have elected the alternative set forth in clause (iii).
The sole recourse of TSMC in the event Chips fails to make such payment
shall be TSMC's right to terminate the Agreement. In the event Chips elects not
to pay the Option Fee, Chips will have no further obligation or liability to
TSMC with respect to this Note including, but not limited to, no obligation with
respect to principal, accrued interest, penalties, or consequential, indirect or
special damages of any type.
This Note shall be governed in all respects by the laws of the State of
California. Chips agrees to waive protest and notice of nonpayment and dishonor.
Issue Date:
-------------------------
Issue Place:
-------------------------
Maker's Signature:
--------------------
Maker's Address:
--------------------
--------------------
18
<PAGE> 1
"[ ]" indicates that the
confidential portion has been
omitted and filed separately with
the Commission.
EXHIBIT 10.9
Dated this day of 1995
Between
CHARTERED SEMICONDUCTOR MANUFACTURING PTE LTD
And
CHIPS AND TECHNOLOGIES, INC.
-----------------------------------------
DEPOSIT AGREEMENT
-----------------------------------------
<PAGE> 2
DEPOSIT AGREEMENT
THIS AGREEMENT is made the 16th day of November 1995 by and between :
(1) CHARTERED SEMICONDUCTOR MANUFACTURING PTE LTD, a company incorporated
in Singapore with its registered office at No. 2 Science Park Drive
Singapore Science Park, Singapore 0511 (hereinafter referred to as
"CSM"); and
(2) CHIPS AND TECHNOLOGIES, INC., a company incorporated in California and
having its place of business at 2950 Zanker Road, San Jose, CA 95134
United States of America (hereinafter referred to as "Customer").
WHEREAS:
(A) CSM is engaged primarily in the business of the development,
manufacturing, assembly, marketing and selling of semiconductors, with
its 2 wafer fabrication facilities situated in Singapore. CSM intends
to establish a third wafer fabrication facility in Singapore.
(B) Customer desires to deposit certain funds with CSM to enable CSM to
procure increased wafer fabrication capacity and to make available to
Customer certain wafer manufacturing capacity, on the terms and
conditions of this Agreement.
IT IS HEREBY AGREED as follows:
1. THE DEPOSIT
1.1 In consideration of CSM agreeing to make available to Customer certain
wafer manufacturing capacity, Customer will deposit with CSM the sum of
US$20,000,000 (the "Deposit") on such dates and in such amounts as
specified in Annex A.
1.2 The Deposit shall be paid by telegraphic transfer to an account
designated by CSM and such Deposit shall be maintained by Customer to
the full amount of US$20,000,000 during the term of this Agreement.
1.3 Upon the expiry of the term of this Agreement or the earlier
termination thereof in accordance with Clause 6 or Clause 7.2, CSM will
return to Customer the Deposit, without interest and subject to any
deductions made by CSM pursuant to the terms of this Agreement.
1
<PAGE> 3
2. CSM SUPPLY COMMITMENT
2.1 In consideration of the payment of the Deposit by Customer and
Customer's maintenance of the full deposit amount of US$20,000,000 with
CSM, CSM will make available to Customer, wafer manufacturing capacity
for [ ] wafers (based on [ ] wafers) in each calendar quarter
commencing from the second calendar quarter of 1996 until the expiry or
the earlier termination of the term of this Agreement, in such
quantities as set out in Annex B (the "CSM Supply Commitment").
2.2 The Parties agree that the [ ] of the CSM Supply Commitment for
each [
]
Example
[
]
2.3 Unless otherwise expressly provided in this Agreement, the sale of
wafers by CSM to Customer, the capacity of which is made available to
Customer under this Agreement, shall be governed by the terms and
conditions of CSM's foundry agreement to be entered into by CSM and
Customer (the "Foundry Agreement").
2.4 CSM reserves the right to adjust the pricing of wafers to be supplied
by CSM from time to time depending on prevailing market conditions
and/or subject to the provisions of Clause 8.6, Provided however that
CSM shall give Customer not less than [ ] prior written notice of such
adjustment. In any event, the price of wafers supplied to Customer
shall be [
]
2
<PAGE> 4
Confidential Treatment
Requested
3. CUSTOMER LOADING COMMITMENT
3.1 Customer agrees to place purchase orders with CSM for such quantity of
[ ] wafers (based on [ ] wafers) for delivery during the
calendar quarters set out in Annex B (the "Customer Loading
Commitment"). The quantity of wafers for which orders are placed by
Customer is hereinafter referred to as the "Customer Actual Loading".
3.2 The Customer Actual Loading for each calendar quarter during the term
of the Agreement shall be equal to the Customer Loading Commitment. In
addition, the [ ] in the Customer Actual Loading shall not
exceed [ ] without the prior written approval of CSM.
3.3 Notwithstanding the provisions of Clause 3.2, CSM agrees to waive
payment of liquidated damages under Clause 4 if the Customer Actual
Loading for any calendar [ ] is in aggregate not less than [ ] of
the Customer Loading Commitment for that [ ].
4. LIQUIDATED DAMAGES
4.1 The Parties acknowledge that in the initial period, CSM and Customer
would work together to qualify Customer's products at CSM's wafer
fabrication facility. Accordingly, the provisions of Clause 4 for the
payment of liquidated damages shall be effective in respect of the CSM
Supply Commitment and the Customer Loading Commitment from the first
calendar quarter of 1997 onwards. In addition, CSM shall not be liable
for any losses or damages whatsoever incurred by Customer in the event
that CSM fails to deliver the Customer Actual Loading for the period
prior to the first calender quarter of 1997.
4.2 In the event that the Customer Actual Loading for any calendar [ ] is
less than [ ] of the Customer Loading Commitment for that [ ],
Customer shall pay to CSM liquidated damages calculated based on the
shortfall from [ ] of the Customer Loading Commitment for that [ ],
at CSM's [ ] per wafer for such [ ]. The formula for
calculation of such liquidated damages shall be as follows:
[
]
4.3 In the event that CSM fails to deliver at least [ ] of the Customer
Actual Loading for any calendar [ ], CSM shall pay to Customer
liquidated damages calculated based on the shortfall from [ ] of the
Customer Actual Loading, based on CSM's [ ] per wafer for that
[ ]. The formula for calculation of such liquidated damages shall be
as follows:
3
<PAGE> 5
Confidential Treatment
Requested
[
]
4.4 CSM and Customer agree and acknowledge that the amount payable as
liquidated damages pursuant to Clauses 4.2 and 4.3 is a genuine
pre-estimate of the loss which would be suffered by the non-defaulting
Party as a consequence of the failure of the defaulting Party to
fulfill its respective obligations under Clauses 2 and 3 of this
Agreement.
4.5 CSM and Customer each agrees that their respective liability, in CSM's
case to fulfill the CSM Supply Commitment under Clause 2 and in
Customer's case to fulfill the Customer Loading Commitment under Clause
3, shall be limited to the liability expressly specified in Clause 4
and that neither Party shall be liable for any indirect, special or
consequential damages even if such Party had or should have had any
knowledge, actual or constructive, of the possibility of such damages.
5. SET OFF AND MAINTENANCE OF DEPOSIT
5.1 CSM shall be entitled to deduct from and set-off against the Deposit,
the following sums due from Customer:
(a) the amount of liquidated damages as they fall due pursuant to
Clause 4; and
(b) any payment falling due and remaining unpaid under the Foundry
Agreement.
5.2 At the end of each calendar quarter, CSM shall issue a written notice
to Customer stating the amount of the liquidated damages and/or overdue
payments and Customer shall pay the relevant sum to CSM so as to
maintain the Deposit at US$20,000,000, within 30 days of the date of
such notice.
5.3 CSM's right of deduction and set-off pursuant to Clause 5.2 shall be in
addition to CSM's right to claim the aforesaid liquidated damages and
overdue payments separately as a debt due from Customer and shall not
in any way prejudice such right or any other rights or remedies which
CSM may have at law or in equity.
4
<PAGE> 6
Confidential Treatment
Requested
6. TERM AND TERMINATION
6.1 The term of this Agreement shall expire on 31 December 2000 and may be
earlier terminated in the following events:
(a) At the option of CSM, in the event that the amount of the
Deposit falls below [ ] and Customer fails to make payment
of the shortfall up to [ ] to CSM within the period set out
in Clause 5.2;
(b) At the option of CSM, in the event that the Customer Actual
Loading is in aggregate less than [ ] of the Customer Loading
Commitment for [ ] consecutive calendar months;
(c) At the option of Customer, in the event that CSM fails to
deliver to Customer in aggregate at least [ ] of the Customer
Actual Loading for [ ] consecutive calendar months;
(d) At the option of either Party, in any of the following events:-
(i) the inability of the Party to pay its debts in the
normal course of business; or
(ii) the other Party ceasing or threatening to cease wholly
or substantially to carry on its business, otherwise
than for the purpose of a reconstruction or
amalgamation without insolvency; or
(iii) any encumbrancer taking possession of or a receiver,
manager, trustee or judicial manager being appointed
over the whole or any substantial part of the
undertaking, property or assets of the other Party; or
(iv) the making of an order by a court of competent
jurisdiction or the passing of a resolution for the
winding-up of the other Party or any company
controlling the other Party, otherwise than for the
purpose of a reconstruction or amalgamation without
insolvency.
6.2 Termination of the Agreement pursuant to Clause 6.1 shall take effect
immediately upon the issue of a written notice to that effect by the
Party terminating the Agreement to the other. The termination of this
Agreement howsoever caused shall be without prejudice to any
obligations or rights of either Party which have accrued prior to such
termination and shall not affect any provision of this Agreement which
is expressly or by implication provided to come into effect on or to
continue in effect after such termination.
5
<PAGE> 7
7. FORCE MAJEURE
7.1 CSM's obligation to provide the CSM Supply Commitment and Customer's
obligation to place purchase orders in accordance with the terms of
this Agreement shall be suspended upon the occurrence of a force
majeure event such as act of God, flood, earthquake, fire, explosion,
act of government, war, civil commotion, insurrection, embargo, riots,
lockouts, labour disputes affecting CSM or Customer as the case may be,
for such period as such force majeure event may subsist. Upon the
occurrence of a force majeure event, the affected Party shall notify
the other Party in writing of the same and shall by subsequent written
notice after the cessation of such force majeure event inform the other
Party of the date on which that Party's obligation under this Agreement
shall be reinstated.
7.2 Notwithstanding anything in this Clause 7, upon the occurrence of a
force majeure event affecting either Party, and such force majeure
event continues for a period exceeding 6 consecutive months without a
prospect of a cure of such event, the other Party shall have the
option, in its sole discretion, to terminate this Agreement. Such
termination shall take effect immediately upon the written notice to
that effect from the other Party to the Party affected by the force
majeure event.
8. WARRANTY AND INDEMNITY
8.1 Customer warrants that it has the right to use and license the use of
the design provided by Customer and processes provided by Customer and
hereby grants to CSM the right to use the aforesaid design and
processes for the performance of its obligations under this Agreement
and the Foundry Agreement.
8.2 Except to the extent provided in paragraph 8.4 Customer shall
indemnify, hold harmless and defend CSM against any claims that
Customer's products or a process or design licensed from or otherwise
provided by Customer and used by CSM for the performance of its
obligations under this Agreement is an infringement of any letters
patent or other intellectual property rights, including, without
limitation, any infringement based on specifications furnished by
Customer or resulting from the use of any equipment or process
specified by Customer.
8.3 CSM shall notify Customer of any claim of infringement or of
commencement of any suit, action, or proceedings alleging infringement
of any intellectual property rights of any third party forthwith after
receiving notice thereof. Customer shall have the right in its sole
discretion and at its expense to participate in the defence of any such
claim, suit, action or proceedings and in any and all negotiations with
respect thereto.
8.4 CSM shall indemnify, hold harmless and defend Customer against any
claims that the wafers manufactured by CSM pursuant to this Agreement
or any of CSM's
6
<PAGE> 8
manufacturing processes used by CSM for the performance of its
obligations under this Agreement is an infringement of any letters
patent or other intellectual property rights of any third party.
8.5 Customer shall notify CSM of any claim of infringement or of
commencement of any suit, action, or proceedings alleging infringement
of any intellectual property rights of any third party forthwith after
receiving notice thereof. CSM shall have the right in its sole
discretion and at its expense to participate in the defence of any such
claim, suit, action or proceedings and in any and all negotiations with
respect thereto.
8.6 Customer hereby agrees that in the event that CSM is required to make
any payments, including without limitation, licence fees or royalty
payments, to any third party in respect of any of CSM's manufacturing
processes used by CSM in the performance of its obligations under this
Agreement, CSM shall be entitled to adjust the pricing of the wafers
supplied to Customer accordingly. Such adjustment shall be effective
upon CSM giving to Customer not less than 3 months' prior written
notice thereof.
9. CONFIDENTIALITY
9.1 All Confidential Information shall be kept confidential by the
recipient unless or until the recipient Party can reasonably
demonstrate that any such Confidential Information is, or part of it
is, in the public domain through no fault of its own, whereupon to the
extent that it is in the public domain or is required to be disclosed
by law this obligation shall cease. For the purposes of this Agreement,
"Confidential Information" shall mean all communications between the
Parties, and all information and other materials supplied to or
received by either of them from the other (a) prior to or on the date
of this Agreement whether or not marked confidential; (b) after the
date of this Agreement which is marked confidential with an appropriate
legend, marking, stamp or other obvious written identification by the
disclosing Party, and (c) all information concerning the business
transactions and the financial arrangements of the Parties with any
person with whom any of them is in a confidential relationship with
regard to the matter in question coming to the knowledge of the
recipient.
9.2 The Company and the Parties and shall take all reasonable steps to
minimise the risk of disclosure of Confidential Information, by
ensuring that only they themselves and such of their employees and
directors whose duties will require them to possess any of such
information shall have access thereto, and will be instructed to treat
the same as confidential.
9.3 The obligation contained in this Clause shall endure, even after the
termination of this Agreement, for a period of 5 years from the date of
receipt of the Confidential
7
<PAGE> 9
Information except and until such Confidential Information enters the
public domain as set out above.
10. NOTICES
10.1 Addresses
All notices, demands or other communications required or permitted to
be given or made under or in connection with this Agreement shall be in
writing and shall be sufficiently given or made (a) if delivered by
hand or commercial courier or (b) sent by pre-paid registered post or
(c) sent by legible facsimile transmission (provided that the receipt
of such facsimile transmission is confirmed and a copy thereof is sent
immediately thereafter by pre-paid registered post) addressed to the
intended recipient at its address or facsimile number set out below. A
Party may from time to time notify the others of its change of address
or facsimile number in accordance with this Clause.
CSM
No. 2 Science Park Drive
Singapore Science Park,
Singapore 0511
Facsimile no: (65) 777-3981
Attn: Mr. Tan Bock Seng
President
Customer
2950 Zanker Road
San Jose, CA 95134
United States of America
Facsimile no: (408) 894-2087
Attn: Mr. James Stafford
President
10.2 Deemed Delivery
Any such notice, demand or communication shall be deemed to have been
duly served (a) if delivered by hand or commercial courier, or sent by
pre-paid registered post, at the time of delivery; or (b) if made by
successfully transmitted facsimile transmission, at the time of
dispatch (provided that the receipt of such facsimile transmission is
confirmed and that immediately after such dispatch, a copy thereof is
sent by pre-paid registered post.
8
<PAGE> 10
11. WAIVER AND REMEDIES
11.1 No delay or neglect on the part of either Party in enforcing against
the other Party any term or condition of this Agreement or in
exercising any right or remedy under this Agreement shall either be or
be deemed to be a waiver or in any way prejudice any right or remedy of
that Party under this Agreement.
11.2 No remedy conferred by any of the provisions of this Agreement is
intended to be exclusive of any other remedy which is otherwise
available at law, in equity, by statute or otherwise and each and every
other remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity, by statute or otherwise. The election of any one or more of
such remedies by either of the Parties hereto shall not constitute a
waiver by such Party of the right to pursue any other available remedy.
12. SEVERANCE
If any provision or part of this Agreement is rendered void, illegal or
unenforceable in any respect under any enactment or rule of law, the
validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
13. ENTIRE AGREEMENT
This Agreement and the Manufacturing agreement constitute the entire
agreement between CSM and Customer with respect to the subject matter
hereof and shall supersede all previous agreements and undertakings
between Parties.
14. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of Singapore. The Parties hereby irrevocably submit to the
non-exclusive jurisdiction of the courts of Singapore.
15. RENEWAL OPTION
Six months before the expiration of this agreement, Customer will have
the option to renew this aagreement for a period of up to two years,
with the terms of the renewal to be negotiated by the parties.
9
<PAGE> 11
IN WITNESS WHEREOF the Parties have hereunto entered into this Agreement the
date first above written.
Signed by Tan Bock Seng, President )
CHARTERED SEMICONDUCTOR )
MANUFACTURING PTE LTD )
in the presence of : )
--------------------------
- --------------------------------
Name
Signed by James Stafford, President )
CHIPS AND TECHNOLOGIES, INC. )
in the presence of : )
--------------------------
- --------------------------------
Name
10
<PAGE> 12
Confidential Treatment
Requested
ANNEX A
Payment Schedule
[
]
CHIPS AND TECHNOLOGIES, INC.
<PAGE> 13
Confidential Treatment
Requested
ANNEX B
[
]
CHIPS AND TECHNOLOGIES, INC.
<PAGE> 1
EXHIBIT 11.1 STATEMENT RE: CALCULATION OF EARNINGS PER SHARE - UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
(In thousands except per share amounts) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 5,607 $ 2,371 $10,035 $ 3,627
Interest saving on convertible debenture 151 $ 0
------- ------- ------- -------
Net income for calculation of earnings per share $ 5,607 $ 2,522 $10,035 $ 3,627
======= ======= ======= =======
Average number of common and common equivalent shares:
Weighted average common shares outstanding 20,330 17,102 20,181 17,000
Dilutive common stock equivalents:
Common stock options and warrant, using treasury stock method 1,474 1,408 1,810 1,468
Convertible preferred stock -- 69 -- 69
Convertible debentures -- 1,388 -- *
------- ------- ------- -------
Common and common equivalent shares used in the
calculation of net income per share: 21,804 19,967 21,991 18,537
======= ======= ======= =======
Earnings per share: $ 0.26 $ 0.13 $ 0.46 $ 0.20
======= ======= ======= =======
</TABLE>
* Antidilutive
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTER
OF FISCAL 1996 10Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 27,803
<SECURITIES> 24,698
<RECEIVABLES> 12,337
<ALLOWANCES> 1,139
<INVENTORY> 9,305
<CURRENT-ASSETS> 75,131
<PP&E> 35,905
<DEPRECIATION> 25,054
<TOTAL-ASSETS> 88,277
<CURRENT-LIABILITIES> 15,424
<BONDS> 0
0
0
<COMMON> 76,849
<OTHER-SE> (4,859)
<TOTAL-LIABILITY-AND-EQUITY> 88,277
<SALES> 38,259
<TOTAL-REVENUES> 38,259
<CGS> 23,301
<TOTAL-COSTS> 23,301
<OTHER-EXPENSES> 4,811
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,230
<INCOME-TAX> 623
<INCOME-CONTINUING> 5,607
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,607
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
