<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 1, 1996 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 1-10079
-------
CYPRESS SEMICONDUCTOR CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2885898
---------------------------- ---------------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or identification No.)
organization)
3901 North First Street, San Jose, California 95134-1599
- -------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 943-2600
----------------
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark 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 at least the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
April 1, 1996 (all one class): 79,519,000
--------------------------------------------
1
<PAGE>2
CYPRESS SEMICONDUCTOR CORPORATION
FORM 10-Q
Quarter Ended April 1, 1996
Index
Part I - Financial Information
- --------------------------------
Item 1. Condensed Consolidated Financial Statements Pages 3 - 8
Item 2. Management's Discussion and Analysis Pages 9 - 12
Part II - Other Information
- --------------------------------
Item 1. Legal Proceedings Page 13
Item 6. Exhibits and Reports on Form 8-K Pages 13
2
<PAGE>3
<TABLE>
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<CAPTION>
Apr. 1, Jan. 1,
1996 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,090 $ 9,487
Short-term investments 109,983 152,131
---------- ----------
Total cash, cash equivalents and
short-term investments 111,073 161,618
Accounts receivable, net of allowances of
$2,479 at April 1, 1996 and $2,828 at
January 1, 1996 101,536 108,587
Inventories 36,858 28,978
Other current assets 58,394 52,454
---------- ----------
Total current assets 307,861 351,637
Property, plant and equipment (net) 387,456 336,593
Other assets, including restricted investments
of $43,379 at April 1, 1996 and $39,257 at
January 1, 1996 68,375 62,498
---------- ----------
Total assets $ 763,692 $ 750,728
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,016 $ 82,315
Accrued liabilities 40,735 46,800
Deferred income on sales to distributors 14,263 13,190
Income taxes payable 26,828 18,752
---------- ----------
Total current liabilities 167,842 161,057
Convertible subordinated notes 96,452 95,879
Deferred income taxes 15,653 15,653
Other long-term liabilities 5,881 6,040
---------- ----------
Total liabilities 285,828 278,629
---------- ----------
3
<PAGE>4
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except share data)
(Unaudited)
Apr. 1, Jan. 1,
1996 1996
---------- ----------
<S> <C> <C>
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized; none issued and
outstanding -- --
Common stock, $.01 par value, 250,000,000
shares authorized; 89,779,000 and
88,924,000 issued; 79,519,000 and
81,501,000 outstanding 898 889
Additional paid-in capital 297,070 292,713
Retained earnings 296,739 262,462
---------- ----------
594,707 556,064
Less shares of common stock held in
treasury, at cost: 10,260,000 at April 1, 1996
and 7,423,000 at January 1, 1996 (116,843) (83,965)
---------- ----------
Total stockholders' equity 477,864 472,099
---------- ----------
Total liabilities and stockholders'
equity $ 763,692 $ 750,728
========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>5
<TABLE>
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
----------------------
Apr. 1, Apr. 3,
1996 1995
---------- ----------
<S> <C> <C>
Revenues $ 170,171 $ 123,365
---------- ----------
Costs and expenses:
Cost of revenues 76,861 60,834
Research and development 21,416 15,671
Selling, general and administrative 18,140 15,291
Other non-recurring costs (Note 4) -- 17,800
---------- ----------
Total operating costs and expenses 116,417 109,596
---------- ----------
Operating income 53,754 13,769
Interest expense (1,647) (1,733)
Interest and other income 1,873 2,303
---------- ----------
Income before income taxes 53,980 14,339
Provision for income taxes (19,703) (5,234)
---------- ----------
Net income $ 34,277 $ 9,105
========== ==========
Net income per share:
Primary $ 0.41 $ 0.11
Fully diluted $ 0.39 $ 0.11
Weighted average common and
common equivalent shares
outstanding:
Primary 83,418 87,223
Fully diluted 91,358 95,607
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>6
<TABLE>
CYPRESS SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
----------------------
Apr. 1, Apr. 3,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 34,277 $ 9,105
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,604 13,291
Provision for other non-recurring costs -- 17,800
Non-cash interest and amortization of debt
issuance costs 676 643
Changes in operating assets and liabilities:
Receivables 7,051 (2,170)
Inventories (7,880) 2,214
Other assets (8,630) (5,585)
Accounts payable and accrued liabilities (2,523) (5,186)
Deferred income 1,073 585
Income taxes payable and deferred income taxes 8,076 (624)
---------- ----------
Net cash generated by operations 53,724 30,073
---------- ----------
Cash flows from investing activities:
(Increase) Decrease in short-term investments (net) 42,148 (20,279)
Acquisition of property, plant and equipment (71,635) (28,689)
---------- ----------
Net cash used for investing activities (29,487) (48,968)
---------- ----------
Cash flows from financing activities:
Repurchase of common stock (32,878) --
Issuance of common stock 4,366 11,341
Restricted investments related to building lease
agreement (4,122) (9,800)
---------- ----------
Net cash generated (used) by financing activities (32,634) 1,541
---------- ----------
Net decrease in cash and cash equivalents (8,397) (17,354)
Cash and cash equivalents, beginning of year 9,487 33,308
---------- ----------
Cash and cash equivalents, end of quarter $ 1,090 $ 15,954
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>7
CYPRESS SEMICONDUCTOR CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Interim Statements
In the opinion of management, the accompanying, unaudited condensed
consolidated financial statements contain all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
information included therein. While the Company believes that the disclosures
are adequate to make the information not misleading, it is suggested that this
financial data be read in conjunction with the audited financial statements and
notes thereto for the year ended January 1, 1996 included in the Company's 1995
Annual Report on Form 10-K.
For interim financial reporting purposes, the Company reports on a 13-week
quarter. The results of operations for the three month period ended April 1,
1996 are not necessarily indicative of the results to be expected for the full
year.
2. Inventories
April 1, January 1,
1996 1996
---------- ----------
Raw materials $ 10,160 $ 9,859
Work in process 16,954 12,682
Finished goods 9,744 6,437
---------- ----------
$ 36,858 $ 28,978
========== ==========
3. Net Income Per Share
Net income per share is computed using the weighted average number of shares of
outstanding common stock and common equivalent shares, when dilutive. Common
equivalent shares include shares issuable under the Company's stock option
plans as determined by the treasury stock method. Fully diluted earnings per
share assumes full conversion of the convertible subordinated notes into common
shares and the elimination of the related interest requirements (net of income
taxes).
4. Impact of Litigation
In the normal course of business, the Company receives and makes inquiries with
regard to possible patent infringement. Where deemed advisable, the Company
may seek or extend licenses or negotiate settlements.
In May 1995, in a case before the U.S. District Court in Dallas, Texas, a jury
delivered a verdict of $17.8 million against the Company in a patent
infringement lawsuit filed by Texas Instruments ("TI"). In August 1995, the
judge reversed the decision stating TI failed to prove that Cypress infringed
7
<PAGE>8
on TI's patents covering the plastic encapsulation process used to package
semiconductor devices. TI has filed an appeal, in which the Company will
continue to defend itself. In March 1995, the Company recorded a one-time pre-
tax charge of $17.8 million with respect to the original decision. The Company
continues to maintain this reserve pending further resolution of this matter.
In June 1995, the U.S. District Court of Northern California dismissed by a
summary judgement the class-action lawsuit filed against the Company and
certain of its officers. The suit filed was for alleged violations of the
Securities Exchange Act of 1934 and certain provisions of state law regarding
disclosure of short-term business prospects. The plaintiffs have filed for an
appeal, in which the Company will continue to defend itself.
The Company will vigorously defend itself in these matters and, subject to the
inherent uncertainties of litigation and based upon discovery completed to
date, management believes that the resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operations. However, should the outcome of either of these actions be
unfavorable, the Company may be required to pay damages and other expenses,
which could have a material adverse effect on the Company's financial position
and results of operations. In addition, the Company could be required to alter
certain of its production processes or products as a result of these matters.
In June 1995, Advanced Micro Devices ("AMD") charged the Company with patent
infringement and filed suit in the U.S. District Court in Delaware. The suit
claims that the Company infringed several of AMD's Programmable Logic Patents.
In November 1995, the Company filed a patent infringement action against AMD in
the U.S. District Court for the District of Minnesota. The Company alleged
infringement by AMD of a number of the Company's patents in this action. In
April 1996, the Company and AMD signed a cross-licensing agreement terminating
the patent litigation between the companies. The agreement allows each company
to continue to produce its own products with no threat of future patent
lawsuits by the other company.
8
<PAGE>9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result
of the factors set forth in "Factors Affecting Future Results" and elsewhere in
this Report.
RESULTS OF OPERATIONS:
- --------------------------
Revenues for the quarter ended April 1, 1996 increased 37.9% over the
comparable period a year ago, increasing to $170.2 million in 1996 compared to
$123.4 million in 1995. The increase in revenues was primarily due to sales
growth in the Company's Memory Products Division ("MPD") and Data
Communications Division ("DCD"). MPD's revenues grew to $104.1 million in the
first quarter of 1996 compared to $64.5 million during the same fiscal 1995
quarter. MPD 's revenue growth was partly due to higher average selling prices
("ASPs") in the Static Random Access Memory ("SRAM") products, with some shift
into the 1 megabit line of products and partially due to higher sales volume,
particularly into the Telecommunication and Datacommunication markets.
Although the Company experienced higher ASPs in its sale of SRAM products in
the first quarter of fiscal year 1996 in comparison to the comparable quarter a
year ago, more recently these products have experienced a reduction in ASPs and
the Company expects this trend to continue in the near term. The decrease in
ASPs is caused by overall market demand softness partly attributable to over
supply and the resulting inventory level correction by the end customers. The
greater availability of products due to excess supply has also changed the
ordering cycle of customers due to their expectation of immediate product
availability or at least the acceptability of much shorter leadtimes. The
continuation of these factors in the future could have a materially adverse
effect on the Company's results of operations. This increase in sales volume
allowed DCD's revenues to grow to $25.5 million in the first quarter of fiscal
year 1996 compared to $20.5 million in the comparable 1995 quarter. Although
the ASP's of DCD's line of products continued to decline, the increase in sales
volume more than offset the drop in ASP's.
The Company's cost of revenues as a percentage of revenues for the quarter
ended April 1, 1996 decreased to 45.2% compared to 49.3% in the comparable
period in 1995. Manufacturing costs as a percentage of revenues continued to
decline due to increased sales volume, resulting in lower fixed costs per unit,
a die size reduction program in the Company's domestic wafer fabrication
plants, and improved manufacturing efficiencies. A change in product mix,
especially in the Memory Products and Datacommunications Divisions, also
contributed to lower cost of revenues in the first quarter of 1996 as the sales
volume shifted to products yielding better margins.
9
<PAGE>10
Research and development ("R & D") expenses as a percent of revenues decreased
slightly to 12.6% for the quarter ended April 1, 1996, compared to 12.7% for
the comparable period in 1995. Although actual R & D spending during the first
three months of 1996 increased $5.7 million over the comparable period a year
ago, its rate of growth has been less than the rate of growth in revenues. The
Company expects R & D spending to continue to increase in absolute dollars as
the Company increases its activities in its new and existing design centers to
develop new products and process technologies.
Selling, general and administrative ("SG&A") expenses as a percent of revenues
for the quarter ended April 1, 1996 decreased to 10.7%, compared to 12.4% in
the same period last year. Although absolute spending in SG&A increased from
the prior year, the rate of growth has been less than the rate of growth in
revenues. The increase in absolute spending for SG&A is primarily due to
growing headcount and associated spending in sales and marketing as the Company
continues its efforts to increase revenue by penetrating new markets and
supporting its existing line of products. The Company expects absolute
spending in sales and marketing to continue to increase as a result of the
Company's efforts to sustain revenue growth. The Company also expects absolute
spending in general and administrative expenses to grow moderately in the
future in order to maintain and support the Company's growth.
Operating income for the quarter ended April 1, 1996 was $53.8 million, or
31.6% of revenues, compared with $13.8 million, or 11.1% of revenues in the
comparable period in 1995. During the first quarter of 1995, the Company
recorded a one-time charge of $17.8 million ($11.3 million net of taxes)
related to the verdict issued against the Company in the patent infringement
lawsuit filed by Texas Instruments. Although the verdict was reversed in favor
of the Company in August 1995, the Company continues to hold the reserve
pending further resolution of this matter. Without the one-time charge,
operating income for the first quarter of 1995 would have been $31.6 million,
or 25.6% of revenues.
For the quarter ended April 1, 1996, the Company recorded net interest and
other income of $0.2 million compared to net interest and other income of $0.6
million in the comparable period of 1995. Although the average cash and short
term investment balance during the first quarter of 1996 was significantly less
than the average balance during the first quarter of the prior year, the return
on investments increased due to a stronger bond market.
FACTORS AFFECTING FUTURE RESULTS:
- -----------------------------------
The Company believes that its future operating results will continue to be
subject to variations based on a wide variety of factors. Such factors
include, but are not limited to: general economic conditions, the cyclical
nature of the semiconductor industry and the markets addressed by the Company's
products such as networking, computer and telecommunications markets, failure
of expected growth in demand for, or areas of expected new demand for,
semiconductor products to materialize, the availability and extent of
utilization of manufacturing capacity, fluctuations in manufacturing yields,
price erosion, competitive factors, the timing of new product introductions,
10
<PAGE>11
product obsolescence and the ability to develop and implement new technologies
including the ramp of the Company's RAM3 process to full commercial production.
The Company is also dependent on subcontract vendors for a portion of the
assembly and test manufacturing of its products, which presents risks including
the lack of guaranteed production capacity, delay in delivery, susceptibility
to disruption in supply, and reduced control over product cost, adverse weather
conditions, and manufacturing yields. The Company's operating results could
also be impacted by sudden fluctuations in customer requirements, currency
exchange rate fluctuations and other economic conditions affecting customer
demand and the cost of operations in one or more of the global markets in which
the Company does business. Typically, the Company requires new orders, in
addition to its existing backlog, to meet each quarter's revenue plan. As a
participant in the semiconductor industry, the Company operates in a
technologically advanced, rapidly changing and highly competitive environment.
While the Company cannot predict what effect these and other factors will have
on the Company, they could result in significant volatility in the Company's
future performance. To the extent the Company's performance may not meet
expectations published by external sources, public reaction could result in a
sudden and significantly adverse impact on the market price of the Company's
securities, particularly on a short-term basis.
The Company's headquarters and some manufacturing facilities are located near
major earthquake faults. In the event of a major earthquake, the Company could
suffer damages which could materially and adversely affect the operating
results and financial condition of the Company.
Current pending litigation and claims are set forth in Note 4 of the Notes to
Condensed Consolidated Financial Statements. The Company will vigorously
defend itself in these matters and, subject to the inherent uncertainties of
litigation and based upon discovery completed to date, management believes that
the resolution of these matters will not have a material adverse impact on the
Company's financial position or results of operations. However, should the
outcome of any of the actions be unfavorable, the Company may be required to
pay damages and other expenses, which could have a material adverse effect on
the Company's financial position and results of operations. In addition, the
Company could be required to alter certain of its production processes or
products as a result of these matters.
LIQUIDITY AND CAPITAL RESOURCES:
- ---------------------------------
The Company's cash, cash equivalents and short-term investments totaled $111.1
million at April 1, 1996, a decrease of $50.5 million compared to the end of
1995. The decrease in cash, cash equivalents and short-term investments is
primarily due to the purchase of capital equipment and the Company's repurchase
of its common stock.
During the first quarter of fiscal 1996, the Company generated $53.7 million in
cash from operations, compared to $30.1 million generated during the comparable
period in 1995. A majority of the increase in cash from operations is
attributable to the significant increase in revenues and earnings recorded
during the first quarter of 1996 compared to the first quarter of 1995.
11
<PAGE>12
Cash used for investing activities was $29.5 million for the three month period
ending April 1, 1996 compared to a cash use for investing activities of $49.0
million for the comparable period in 1995. During the first quarter of 1996,
the Company acquired additional property, plant and equipment totalling $71.6
million. The additions primarily related to increasing capacity in the wafer
producing fabrication facilities in Minnesota, Texas and San Jose. In
addition, the Company increased the level of capital equipment purchases for
its new assembly and test facility in the Philippines. Capital purchases for
the remainder of fiscal 1996 are expected to be approximately $175.0 million as
the Company continues to buy equipment to expand capacity, particularly in
backend manufacturing. Offsetting the purchases of capital equipment was the
conversion of short-term investments into cash of $42.1 million. A majority of
the cash was used to pay for capital equipment and to fund the Company's
repurchase of its common stock.
Cash used for financing activities in the first quarter of 1996 was $32.6
million compared to cash generated from financing activities of $1.5 million in
the comparable period in 1995. During the first quarter of 1996, the Company
completed its stock repurchase program which began in the fourth quarter of
1995 by repurchasing 2.6 million shares of its own common stock for $32.9
million. The Company also received $4.4 million related to the issuance of
common stock through its Employee Stock Purchase Program and the Employee Stock
Option Program. Due to the Company's relatively lower stock price, this
quarter's receipts from such issuances were significantly less than the $11.3
million received during the first quarter of 1995.
In May 1995, in a case before the District Court in Dallas, Texas, a jury
delivered a verdict of $17.8 million against the Company in a patent
infringement lawsuit filed by Texas Instruments. In August 1995, the judge
reversed the decision. The plaintiff has filed an appeal which is pending. In
the first quarter of 1995, the Company recorded a one-time pretax charge of
$17.8 million with respect to the original decision. The Company continues to
maintain this reserve pending further resolution of this matter.
In 1994 and April 1995, the Company entered into certain operating lease
agreements with respect to its office and manufacturing facilities in San Jose
and Minnesota. These agreements require quarterly payments which vary based on
the London interbank offering rate (LIBOR). These leases provide the Company
with the option of either acquiring the properties at their original cost or
arranging for the property to be acquired at the end of the respective lease
terms. The Company must maintain a specific level of restricted cash or
investments to serve as collateral for these leases and maintain compliance
with certain financial covenants. In the first three months of 1996, the
Company added $4.1 million to the restricted investments, bringing the total to
$43.4 million. In April 1996, the Company entered into an additional operating
lease agreement with respect to two office facilities in San Jose and added
$13.6 million to its restricted investments. These restricted investments are
classified as non-current assets on the balance sheet.
While the Company plans to fund working capital requirements through existing
capital resources and internally generated cash flow, the Company may, based
upon favorable market conditions, choose to raise additional capital through
the issuance of equity or debt securities of the Company. The Company may also
from time to time consider using available funds to acquire complementary
technologies and businesses.
12
<PAGE>13
PART II - OTHER INFORMATION
ITEM 1. The information required by this item is included in Part I in Note 4
of Notes to the Condensed Consolidated Financial Statements.
ITEM 6:
(a) Exhibit - 10.5 "Amended and Restated 1994 Stock Option Plan"
Exhibit - 10.10 "1996 Key Employee Bonus Plan Agreement (KEBP)"
Exhibit - 11.1 "Computation of Net Income Per Common Share and
Dilutive Common Share Equivalents"
Exhibit - 27 "Financial Data Schedule"
(b) Reports on Form 8-K - None
13
<PAGE>14
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.
CYPRESS SEMICONDUCTOR CORPORATION
Date: May 16, 1996 /s/ T.J. Rodgers
----------------------- ---------------------------------
T.J. Rodgers
President and Chief Executive
Officer
/s/ Emmanuel Hernandez
---------------------------------
Emmanuel Hernandez
Vice President, Finance and
Administration and Chief Financial
Officer
14
<PAGE>1
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
CYPRESS SEMICONDUCTOR CORPORATION
1994 STOCK OPTION PLAN
(As amended and Restated on January 25, 1996)
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are:
to attract and retain the best available personnel for positions of
substantial responsibility;
to provide additional incentive to Employees and Consultants and Outside
Directors; and
to promote the success of the Company's business.
2. COMPONENTS OF THE PLAN. The Plan provides for:
the discretionary granting of Options to Employees and Consultants, which
Options may be either Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant; and
the grant of Nonstatutory Stock Options to Outside Directors pursuant to
an automatic, non-discretionary formula.
3. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 5 of the Plan.
(b) "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option plans under state corporate and
securities laws and the Code.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a Committee appointed by the Board in accordance
with Section 5 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Cypress Semiconductor Corporation, a Delaware
corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is
compensated for such services; provided, however, that the term
"Consultant" shall not include Outside Directors, unless such
Outside Directors are compensated for services to the Company other
than through payment of director's fees.
<PAGE>2
(i) "CONTINUOUS STATUS AS A DIRECTOR" means that the Director
relationship is not interrupted or terminated.
(j) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
employment or consulting relationship with the Company or any Parent
or Subsidiary is not interrupted or terminated. Continuous Status
as an Employee or Consultant shall not be considered interrupted in
the case of: (i) any leave of absence approved by the Company,
including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options, no
such leave may exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including
certain Company policies) or statute; provided, further, that on the
ninety-first (91st) day of any such leave (where reemployment is not
guaranteed by contract or statute) the Optionee's Incentive Stock
Option shall cease to be treated as an Incentive Stock Option and
will be treated for tax purposes as a Nonstatutory Stock Option; or
(ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
(k) "DIRECTOR" means a member of the Board.
(l) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(m) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the
Company.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(o) "EXISTING DIRECTORS" means members of the Board on October 12, 1988.
(p) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair
Market Value of a Share of Common Stock shall be the closing sale
price for such stock (or the mean of the closing bid and asked
prices, if no sales were reported), as quoted on such exchange
(or the exchange with the greatest volume of trading in Common
Stock) or system on the date of such determination (or, in the
event such date is not a trading day, the trading day immediately
prior to the date of such determination), as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable; or
<PAGE>3
(ii) If the Common Stock is quoted on the NASDAQ system (but not on
the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock shall
be the mean of the closing bid and asked prices for such stock
on the date of such determination (or, in the event such date is
not a trading day, the trading day immediately prior to the date
of such determination), as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the
Administrator.
(q) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "NOTICE OF GRANT" means a written notice evidencing certain terms and
conditions of an individual Option grant. The Notice of Grant is
part of the Option Agreement.
(t) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "OPTION" means a stock option granted pursuant to the Plan or the
Terminated Plans.
(v) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(w) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding options
are surrendered in exchange for options with a lower exercise price.
(x) "OPTIONED STOCK" means the Common Stock subject to an Option.
(y) "OPTIONEE" means an Employee, Consultant or Outside Director who
holds an outstanding Option.
(z) "OUTSIDE DIRECTOR" means a Director who is not an Employee or
Consultant.
(aa) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(bb) "PLAN" means this 1994 Stock Option Plan.
<PAGE>4
(cc) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(dd) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 14 of the Plan.
(ee) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ff) "TERMINATED PLANS" means the Company's 1985 Incentive Stock Option
Plan and 1988 Directors' Stock Option Plan, which are terminated
upon adoption of, and superseded by, this Plan; however, outstanding
Options under the Terminated Plans shall continue in full force in
effect, subject to the provisions of such Options and this Plan.
4. STOCK SUBJECT TO THE PLAN. Subject to Section 14 of the Plan, the total
number of Shares reserved and available for issuance under the Plan is
3,455,791 Shares (pre-split) (including 455,791 Shares (pre-split)
previously authorized but unissued under the Terminated Plans), plus shares
subject to options outstanding under the Terminated Plans at the time of
adoption of this plan which are subsequently forfeited in connection with
termination of employment or other failure to exercise, increased on the
first day of each new fiscal year of the Company from and including the 1995
fiscal year by a number of Shares equal to 4.5% of the number of Shares
outstanding as of the last business day preceding each such first day of
each new fiscal year. However, the number of Shares available for issuance
pursuant to Incentive Stock Options shall not include the foregoing annual
increase, which shall be used solely for Nonstatutory Stock Options.
Subject to Section 14 of the Plan, if any Shares that have been
optioned under an Option (whether granted under this Plan or the Terminated
Plans) cease to be subject to such Option (other than through exercise of
the Option), or if any Option granted hereunder or thereunder is forfeited,
or any Option otherwise terminates prior to the issuance of Common Stock to
the participant, the Shares that were subject to such Option shall again be
available for distribution in connection with future Options under the Plan.
Shares that have actually been issued under the Plan upon exercise of an
Option shall not in any event be returned to the Plan and shall not become
available for future distribution under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to (A)
Directors and Officers, and (B) Employees and Consultants who are
neither Directors nor Officers.
(ii) ADMINISTRATION WITH RESPECT TO DISCRETIONARY OPTION GRANTS TO
INDIVIDUALS SUBJECT TO SECTION 16(b). With respect to discretionary
Option grants made to Employees and Consultants who are also
Officers or Directors subject to Section 16(b) of the Exchange Act,
the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan
<PAGE>5
intended to qualify as a discretionary plan under Rule 16b-3, or (B)
a committee designated by the Board to administer the Plan, which
committee shall be constituted to comply with the rules governing a
plan intended to qualify as a discretionary plan under Rule 16b-3.
Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause)
and substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the rules
governing a plan intended to qualify as a discretionary plan under
Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO DISCRETIONARY OPTION GRANTS TO OTHER
PERSONS. With respect to discretionary Option grants made to
Employees or Consultants who are neither Directors nor Officers of
the Company, the Plan shall be administered by (A) the Board or (B)
a committee designated by the Board, which committee shall be
constituted to satisfy Applicable Laws. Once appointed, such
Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by
Applicable Laws.
(iv) ADMINISTRATION WITH RESPECT TO AUTOMATIC GRANTS TO OUTSIDE
DIRECTORS. Automatic Grants to Outside Directors shall be pursuant
to a non-discretionary formula as set forth in Section 11 hereof and
therefore shall not be subject to any discretionary administration.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall
have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 3(p) of the Plan;
(ii) to select the Consultants and Employees to whom Options may be
granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be covered by
each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
<PAGE>6
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding
any Option or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was
granted;
(viii) to construe and interpret the terms of the Plan and Options granted
pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(x) to modify or amend each Option (subject to Section 16(c) of the
Plan);
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to Options; and
(xiv) to make all other determinations deemed necessary or advisable for
administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
6. ELIGIBILITY.
(a) DISCRETIONARY STOCK OPTIONS. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who
has been granted an Option may be granted additional Options.
(b) OUTSIDE DIRECTOR STOCK OPTIONS. Outside Directors shall be eligible to
receive only Nonstatutory Stock Options pursuant to Section 11 hereof.
7. LIMITATIONS.
(a) Each Option shall be designated in the Notice of Grant or Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that
the aggregate Fair Market Value:
<PAGE>7
(i) of Shares subject to an Optionee's incentive stock options granted
by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any calendar year
(under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory
Stock Options. For purposes of this Section 7(a), incentive stock
options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be determined as
of the time of grant.
(b) Neither the Plan nor any Option shall confer upon an Optionee any right
with respect to continuing the Optionee's employment or consulting
relationship or tenure as a director with the Company, nor shall they
interfere in any way with the Optionee's, the Company's, or the
Company's stockholders', right to terminate such employment or
consulting relationship or tenure as a director with the Company at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options to Employees:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 500,000 Shares.
(ii) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as
described in Section 14(a).
(iii) If an Option is canceled (other than in connection with a
transaction described in Section 14), the canceled Option will be
counted against the limit set forth in Section 7(c)(i). For this
purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the
grant of a new Option.
8. TERM OF PLAN. The Plan shall become effective upon the date, in 1994, of
its approval by the stockholders of the Company. It shall continue in
effect for a term of ten (10) years unless terminated earlier under Section
16 of the Plan.
9. TERM OF OPTION. The term of each Option shall be ten (10) years from the
date of grant or such shorter term as may be provided in the Notice of Grant
or Option Agreement. In the case of an Incentive Stock Option granted to an
Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant or Option
Agreement.
10. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
<PAGE>8
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price
shall be no less than one hundred (100%) of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be no less than eighty-five percent (85%) of Fair Market
Value per Share on the date of grant.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied
before the Option may be exercised. In so doing, the Administrator may
specify that an Option may not be exercised until the completion of a
service period.
(c) FORM OF CONSIDERATION. Except with respect to automatic stock option
grants to Outside Directors, the Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at
the time of grant. Such form of consideration shall be set forth in the
Notice of Grant or Option Agreement and may, as determined by the
Administrator, consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise
of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised;
(v) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay
the exercise price;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws.
<PAGE>9
11. AUTOMATIC STOCK OPTION GRANTS TO OUTSIDE DIRECTORS.
(a) PROCEDURE FOR GRANTS. The provisions set forth in this Section 11 shall
not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options to
Outside Directors hereunder shall be automatic and non-discretionary and
shall be made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option to
purchase 80,000 Shares (the "First Option") upon the date on which
such person first becomes a Director, whether through election by
the stockholders of the Company or appointment by the Board of
Directors to fill a vacancy.
(iii) After the First Option has been granted to an Outside Director, such
Outside Director shall thereafter be automatically granted an Option
to purchase 20,000 Shares (a "Subsequent Option") on a date one year
after the date of grant of the First Option and on the same date
each year thereafter.
(iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof,
in the event that an automatic grant hereunder would cause the
number of Shares subject to outstanding Options plus the number of
Shares previously purchased upon exercise of Options to exceed the
number of Shares available for issuance under the Plan, then each
such automatic grant shall be for that number of Shares determined
by dividing the total number of Shares remaining available for grant
by the number of Outside Directors on the automatic grant date. Any
further grants shall then be deferred until such time, if any, as
additional Shares become available for grant under the Plan.
(v) The terms of an Option granted hereunder shall be as follows:
(1) the term of the Option shall be ten (10) years.
(2) the Option shall be exercisable only while the Outside Director
remains a Director of the Company, except as set forth in
subsection (c) hereof.
(3) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Option.
(4) the Option shall become exercisable as follows:
(A) If it is a First Option, it shall become exercisable
cumulatively in installments of 16,000 Shares per year
beginning on the date one year after such Director's
election to the Board of Directors.
<PAGE>10
(B) If it is a Subsequent Option, it shall become exercisable
cumulatively in installments of 4,000 Shares per year
beginning on the date one year after the date on which it
was granted.
(b) CONSIDERATION FOR EXERCISING OUTSIDE DIRECTOR STOCK OPTIONS. The
consideration to be paid for the Shares to be issued upon exercise of an
automatic Outside Director Option shall consist entirely of cash, check,
other Shares of Common Stock which (i) either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly from the Company and (ii) have a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, or any combination of such
methods of payment.
(c) POST-DIRECTORSHIP EXERCISABILITY.
(i) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director ceases
to serve as a Director, he may, but only within ninety days (90)
after the date he ceases to be a Director of the Company, exercise
his Option to the extent that he was entitled to exercise it at the
date of such termination. To the extent that he was not entitled to
exercise an Option at the date of such termination, or if he does
not exercise such Option (which he was entitled to exercise) within
the time specified herein, the Option shall terminate.
(ii) DISABILITY OF DIRECTOR. Notwithstanding the provisions of Section
11(c)(i) above, in the event a Director is unable to continue his
service as a Director with the Company as a result of his
Disability, he may, but only within six (6) months from the date of
termination, exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of termination,
or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall
terminate.
(iii) DEATH OF DIRECTOR. In the event of the death of an Optionee:
(A) during the term of the Option who is at the time of his death a
Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months
following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise
that would have accrued had the Optionee continued living and
remained in Continuous Status a Director for twelve (12) months
after the date of death; or
(B) within thirty (30) days after the termination of Continuous
Status as a Director, the Option may be exercised, at any time
within six (6) months following the date of death, by the
Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of
termination.
<PAGE>11
12. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as set forth in the Option
Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written notice of exercise (in accordance with the Option Agreement)
from the person entitled to exercise the Option, and (ii) full payment
for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement
and the Plan. Shares issued upon exercise of an Option shall be issued
in the name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse. Until the stock certificate
evidencing such Shares is issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of
the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Upon termination
of an Optionee's Continuous Status as an Employee or Consultant, other
than upon the Optionee's death or Disability, the Optionee may exercise
the Option, but only within such period of time as is specified in the
Notice of Grant or Option Agreement, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in
no event later than the expiration of the term of such Option as set
forth in the Notice of Grant or Option Agreement). In the absence of a
specified time in the Notice of Grant or Option Agreement, the Option
shall remain exercisable for three months following the Optionee's
termination of Continuous Status as an Employee or Consultant. In the
case of an Incentive Stock Option, such period of time shall not exceed
three (3) months from the date of termination; in the case of a
Nonstatutory Stock Option, such period of time shall not exceed twenty-
four (24) months from the date of termination. If, at the date of
termination, the Optionee is not entitled to exercise the entire Option,
the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not
exercise the Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
<PAGE>12
(c) DISABILITY OF OPTIONEE. In the event that an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at
any time within (i) for discretionary stock options, six (6) months or
such other period of time not exceeding twelve (12) months, as is
specified in the Notice of Grant or Option Agreement, or (ii) for
automatic stock option grants to Outside Directors, six (6) months from
the date of such termination. Any such Options may only be exercised to
the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant or Option Agreement).
If, at the date of termination, the Optionee is not entitled to exercise
his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his death an of
the Company and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following
the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous
Status an Employee or Consultant for twelve (12) months after the
date of death; or
(ii) within thirty (30) days after the termination of Continuous Status
as an Employee or Consultant, the Option may be exercised, at any
time within six (6) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
(e) RULE 16b-3. Options granted to individuals subject to Section 16 of the
Exchange Act ("Insiders") must comply with the applicable provisions of
Rule 16b-3 and shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
13. NON-TRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET SALE
OR CHANGE OF CONTROL.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common
Stock which have been authorized for issuance under the Plan but as to
<PAGE>13
which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well as the
price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease
in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment
shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect,
and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, with respect to discretionary Options
granted under the Plan (but not with respect to Options granted to
Outside Directors) the Board may, in the exercise of its sole discretion
in such instances, declare that any such Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his
or her Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. With respect to a
discretionary Option granted under the Plan (but not with respect to
Options granted to Outside Directors), the Administrator may, in the
exercise of its sole discretion and in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise
such Option as to all of the Optioned Stock, including as to Shares
which would not otherwise be exercisable. With respect to Options
granted to Outside Directors on or after the Effective Date of the Plan,
in the event that the successor corporation does not agree to assume
such Options or to substitute equivalent options, each such outstanding
Option shall become fully vested and exercisable, including as to Shares
as to which it would not otherwise be exercisable, unless the Board, in
its discretion, determines otherwise. With respect to Options granted
to Outside Directors prior to the Effective Date of the Plan, in the
event that the successor corporation does not agree to assume such
Options or to substitute equivalent options, such Options shall
terminate.
If the Administrator makes a discretionary Option fully exercisable
in lieu of assumption or substitution in the event of a merger or sale
of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and the Option will terminate upon the expiration
of such period.
<PAGE>14
For the purposes of this subsection, the Option shall be considered
assumed if, following the merger or sale of assets, the option confers
the right to purchase, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the
Option, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.
15. OPTION DATE OF GRANT. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination
granting such Option, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Rule 16b-3 or with Sections 422 and 424 of the Code (or any successor
rules or statutes or other applicable laws, rules or regulations,
including the requirements of any exchange or quotation system on which
the Common Stock is listed or quoted). Such stockholder approval, if
required, shall be obtained in such a manner and to such a degree as is
required by the applicable law, rule or regulation.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the exercise
of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated
thereunder, Applicable Laws, and the requirements of any stock exchange
or quotation system upon which the Shares may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
<PAGE>15
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.
18. LIABILITY OF COMPANY.
(a) INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of
any liability in respect of the failure to issue or sell such Shares as
to which such requisite authority shall not have been obtained.
(b) OPTION GRANTS EXCEEDING ALLOTTED SHARES. If the Optioned Stock covered
by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional stockholder
approval, such Option shall be void with respect to such excess Optioned
Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained
in accordance with Section 16(b) of the Plan.
19. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
<PAGE>16
CYPRESS SEMICONDUCTOR CORPORATION
1994 STOCK OPTION PLAN
NOTICE OF GRANT
Unless otherwise defined herein, capitalized terms used herein shall have
the same meanings as set forth in the Plan.
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter.
TERMINATION PERIOD:
This Option may be exercised for 30 days after termination of the
Optionee's employment or consulting relationship with the Company. Upon the
death or Disability of the Optionee, this Option may be exercised for such
longer period as provided in the Plan. In the event of the Optionee's change in
status from Employee to Consultant or Consultant to Employee, this Option
Agreement shall remain in effect. In no event shall this Option be exercised
later than the Term/Expiration Date as provided above.
<PAGE>17
CYPRESS SEMICONDUCTOR CORPORATION
1994 STOCK OPTION PLAN
OPTION AGREEMENT
Unless otherwise defined herein, capitalized terms used herein shall have
the same meanings as set forth in the Plan.
1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee"), an option (the "Option") to purchase the number of Shares,
as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms an
conditions of the Plan, which is incorporated herein by reference. Subject
to Section 14(c) of the Plan, in the event of a conflict between the terms
and conditions of the Plan and the terms and conditions of this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of
Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement.
In the event of Optionee's death, Disability or other termination of
Optionee's employment or consulting relationship, the exercisability
of the Option is governed by the applicable provisions of the Plan and
this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised
(the "Exercised Shares"), and such other representations and
agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares.
This Option shall be deemed to be exercised upon receipt by the
Company of such fully executed Exercise Notice accompanied by such
aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of
law and the requirements of any stock exchange or quotation service upon
which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the
Optionee on the date the Option is exercised with respect to such Exercised
Shares.
<PAGE>18
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (ii) have a Fair Market Value
on
the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term set out
in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal and California tax consequences
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur regular federal
income tax and California income tax liability upon exercise of a
NSO. The Optionee will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Exercised Shares on the date
of exercise over their aggregate Exercise Price. If the Optionee is
an Employee, the Company will be required to withhold from his or
her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(ii) INCENTIVE STOCK OPTION. If this Option qualifies as an ISO, the
Optionee will have no regular federal income tax or California
income tax liability upon its exercise, although the excess, if any,
of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in
<PAGE>19
the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at least one year, any
gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year after
exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO
Shares within one year after exercise or two years after the grant
date, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent
of the excess, if any, of the lesser of (A) the difference between
the Fair Market Value of the Shares acquired on the date of exercise
and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an
ISO on or before the later of (i) two years after the grant date, or
(ii) one year after the exercise date, the Optionee shall immediately
notify the Company in writing of such disposition. The Optionee agrees
that he or she may be subject to income tax withholding by the Company
on the compensation income recognized from such early disposition of ISO
Shares by payment in cash or out of the current earnings paid to the
Optionee.
<PAGE>20
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.
OPTIONEE: CYPRESS SEMICONDUCTOR CORPORATION
___________________________________ By:____________________________________
Signature
___________________________________ Title:_________________________________
Print Name
____________________________________
Residence Address
____________________________________
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms and
conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
<PAGE>21
EXHIBIT A
CYPRESS SEMICONDUCTOR CORPORATION
1994 STOCK OPTION PLAN
EXERCISE NOTICE
Cypress Semiconductor Corporation
3901 North First Street
San Jose, CA 95134
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, ________________, 199__, the
undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Cypress Semiconductor Corporation (the
"Company") under and pursuant to the 1994 Stock Option Plan (the "Plan") and
the Stock Option Agreement dated , 19___ (the "Option
Agreement"). The purchase price for the Shares shall be $ , as
required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full
purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of
the Company) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 14 of the Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer adverse
tax consequences as a result of Purchaser's purchase or disposition of the
Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company
for any tax advice.
<PAGE>22
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in
their entirety all prior undertakings and agreements of the Company and
Purchaser with respect to the subject matter hereof, and such agreement is
governed by California law except for that body of law pertaining to
conflict of laws.
Submitted by:Accepted by:
PURCHASER:CYPRESS SEMICONDUCTOR CORPORATION
__________________________________ By: _________________________________
Signature
__________________________________ Its: ________________________________
Print Name
Address:Address:
_______________________________ 3901 North First Street
San Jose, CA 95134
_______________________________
<PAGE>1
CYPRESS SEMICONDUCTOR CORPORATION
1996 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
ARTICLE 1 - PLAN OBJECTIVE
1.1 The objective of this Key Employee Bonus Plan is to provide incentive to
key employees of the Company based on the Company's overall Sales and
Earnings Per Share (EPS) achievement, the Company's growth relative to
selected competitors, and the individual's performance against set
individual Critical Success Factors (CSFs).
ARTICLE 2 - EFFECTIVE DATE
2.1 This agreement will become effective January 1, 1996 for the plan period
of fiscal year 1996. The plan period for fiscal year 1996 covers January
2, 1996 to December 30, 1996.
ARTICLE 3 - ELIGIBILITY FOR PLAN PARTICIPATION
3.1 Prior to the commencement of each Plan Period, members of Cypress'
Executive Staff will recommend to the President/CEO for approval proposed
participants for the plan period and their incentive levels.
3.2 Prior to the commencement of each Plan Period, the CEO and his Executive
Staff's plan participation and their incentive levels will be presented to
the Compensation Committee of the Board of Directors for approval.
3.3 Participants are notified of their eligibility at the beginning of each
plan period.
3.4 Newly hired employees may be added as participants during the plan
period. Other employees who are currently not plan participants may be
considered for participation at the beginning of the plan period, provided
however that they have assumed greater responsibility or demonstrated
greater contribution to the company. Participants added during the plan
period shall receive prorated awards based on the number of months of
participation in the plan with a minimum of six months participation.
Otherwise, eligibility will be deferred until the next plan period.
Exceptions are subject to CEO approval.
3.5 Changes in plan participants require the approval of the President/CEO.
ARTICLE 4 - CALCULATION OF THE BONUS
4.1 The total possible bonus is determined by the absolute performance
of Cypress in both revenue and earnings per share (EPS) and by the
relative performance of Cypress' revenue growth versus a select list of
competitors' revenue growth. (For 1996, the comparison competitors are
shown in Attachment A.)
a) The target bonus is the individual incentive target of each
participant.
<PAGE>2
b) The estimated bonus is comprised of two parts, one based on Sales
and one based on EPS with each element accounting for the generation
of half of the bonus.
ESTIMATED BONUS BASED ON REVENUE
If the actual sales for FY96 are equal to $775 million, the estimated
bonus for revenue is multiplied by 25%.
Revenue lower than $775 million will result in zero bonus for the revenue
portion of the plan.
Actual sales performance between $775 million and $950 million will result in a
multiplier for revenue which ranges from 25%-200% as shown in the table below.
For example, if the actual FY96 revenue equals $867 million, the estimated
bonus for revenue is multiplied by a factor of 112.8%.
For the purpose of computing the bonus multiplier for revenue, the
actual FY96 sales will be rounded to the nearest million.
Table 1
Bonus Multiplier for Sales
For every $2M sales of Plan
Sales ($M) Addtl Cum
FY96 Bonus Multiplier Bonus Multiplier
---------------- -------------------- --------------------
775 0.00% 0.0%
777 3.64% 3.6%
779 3.64% 7.3%
781 3.64% 10.9%
783 3.64% 14.6%
785 3.64% 18.2%
787 3.64% 21.8%
789 3.64% 25.5%
791 3.64% 29.1%
793 3.64% 32.7%
795 3.64% 36.4%
797 3.64% 40.0%
799 3.64% 43.7%
801 3.64% 47.3%
803 3.64% 50.9%
805 3.64% 54.6%
807 3.64% 58.2%
809 3.64% 61.8%
811 3.64% 65.5%
813 3.64% 69.1%
815 3.64% 72.8%
817 3.64% 76.4%
819 3.64% 80.0%
821 3.64% 83.7%
<PAGE>3
Table 1 (Continued)
Bonus Multiplier for Sales
For every $2M sales of Plan
Sales ($M) Addtl Cum
FY96 Bonus Multiplier Bonus Multiplier
---------------- -------------------- --------------------
823 3.64% 87.3%
825 3.64% 91.0%
827 3.64% 94.6%
829 3.64% 98.2%
830 1.82% 100.0%
831 1.64% 101.7%
833 1.64% 103.3%
835 1.64% 105.0%
837 1.64% 106.6%
839 1.64% 108.2%
841 1.64% 109.9%
843 1.64% 111.5%
845 1.64% 113.2%
847 1.64% 114.8%
849 1.64% 116.4%
851 1.64% 118.1%
853 1.64% 119.7%
855 1.64% 121.4%
857 1.64% 123.0%
859 1.64% 124.6%
861 1.64% 126.3%
863 1.64% 127.9%
865 1.64% 129.5%
867 1.64% 131.2%
869 1.64% 132.8%
871 1.64% 134.5%
873 1.64% 136.1%
875 1.64% 137.7%
877 1.64% 139.4%
879 1.64% 141.0%
881 1.64% 142.7%
883 1.64% 144.3%
885 1.64% 145.9%
887 1.64% 147.6%
889 1.64% 149.2%
891 1.64% 150.9%
893 1.64% 152.5%
895 1.64% 154.1%
897 1.64% 155.8%
899 1.64% 157.4%
901 1.64% 159.0%
903 1.64% 160.7%
905 1.64% 162.3%
907 1.64% 164.0%
909 1.64% 165.6%
911 1.64% 167.2%
913 1.64% 168.9%
<PAGE>4
Table 1 (Continued)
Bonus Multiplier for Sales
For every $2M sales of Plan
Sales ($M) Addtl Cum
FY96 Bonus Multiplier Bonus Multiplier
---------------- -------------------- --------------------
915 1.64% 170.5%
917 1.64% 172.2%
919 1.64% 173.8%
921 1.64% 175.4%
923 1.64% 177.1%
925 1.64% 178.7%
927 1.64% 180.4%
929 1.64% 182.0%
931 1.64% 183.6%
933 1.64% 185.3%
935 1.64% 186.9%
937 1.64% 188.6%
939 1.64% 190.2%
941 1.64% 191.8%
943 1.64% 193.5%
945 1.64% 195.1%
947 1.64% 196.7%
949 1.64% 198.4%
950 1.64% 200.0%
<PAGE>5
ESTIMATED BONUS BASED ON EPS
If the actual EPS for FY96 is equal to $1.60 the estimated bonus for EPS is
multiplied by 50%.
EPS lower than $1.60 will result in zero bonus for the EPS portion
of the plan.
Actual EPS performance between $1.60 and $2.10 will result in a multiplier
for EPS which ranges from 50%-200% as shown in the table below.
For example, if the actual FY96 EPS equals $1.83, the estimated bonus for EPS
is multiplied by a factor of 89.7%.
For the purpose of computing the multiplier for EPS, the actual
EPS will be rounded to the nearest penny.
Table 2
Bonus Multiplier for EPS
For every Penny EPS in Plan
EPS Addtl Cum
FY96 Bonus Multiplier Bonus Multiplier
---------------- -------------------- --------------------
1.60 50.00% 50.0%
1.61 1.73% 51.7%
1.62 1.73% 53.5%
1.63 1.73% 55.2%
1.64 1.73% 56.9%
1.65 1.73% 58.6%
1.66 1.73% 60.3%
1.67 1.73% 62.1%
1.68 1.73% 63.8%
1.69 1.73% 65.5%
1.70 1.73% 67.2%
1.71 1.73% 69.0%
1.72 1.73% 70.7%
1.73 1.73% 72.4%
1.74 1.73% 74.1%
1.75 1.73% 75.9%
1.76 1.73% 77.6%
1.77 1.73% 79.3%
1.78 1.73% 81.0%
1.79 1.73% 82.8%
1.80 1.73% 84.5%
1.81 1.73% 86.2%
1.82 1.73% 87.9%
1.83 1.73% 89.7%
1.84 1.73% 91.4%
1.85 1.73% 93.1%
1.86 1.73% 94.8%
1.87 1.73% 96.6%
1.88 1.73% 98.3%
1.89 1.73% 100.0%
1.90 4.76% 104.8%
<PAGE>6
Table 2 (Continued)
Bonus Multiplier for EPS
For every Penny EPS in Plan
EPS Addtl Cum
FY96 Bonus Multiplier Bonus Multiplier
---------------- -------------------- --------------------
1.91 4.76% 109.5%
1.92 4.76% 114.3%
1.93 4.76% 119.1%
1.94 4.76% 123.8%
1.95 4.76% 128.6%
1.96 4.76% 133.3%
1.97 4.76% 138.1%
1.98 4.76% 142.9%
1.99 4.76% 147.6%
2.00 4.76% 152.4%
2.01 4.76% 157.1%
2.02 4.76% 161.9%
2.03 4.76% 166.7%
2.04 4.76% 171.4%
2.05 4.76% 176.2%
2.06 4.76% 180.9%
2.07 4.76% 185.7%
2.08 4.76% 190.5%
2.09 4.76% 195.2%
2.10 4.76% 200.0%
c) When the estimated bonus for revenue and EPS have been calculated,
the two are added together. The resulting calculated total bonus is
multiplied by the Cypress growth factor. The Cypress growth factor is
calculated by taking the weighted average of the actual growth
percentages of the selected competitor companies for their Fiscal year
1996, dividing that composite growth factor into the Cypress growth
rate and taking the square of the result:
Cypress Growth Rate in FY96
CYPRESS GROWTH FACTOR = -----------------------------------
Composite Competitors' Growth Rate
d) The actual bonus is the sum of the estimated bonus for revenue and
the estimated bonus for EPS, multiplied by the Cypress growth factor.
<PAGE>7
ARTICLE 5 - INCENTIVE LEVEL CONFIGURATION
A participant's possible bonus is divided into two parts; one portion
based on their individual performance and one part based on the average
performance of the Executive Staff against their CSFs.
5.1 Incentive levels for each plan participant will be defined to include
weights for the following bonus plan elements:
Corporate - bonus plan element based on company performance
performance
Individual CSF's - bonus plan scoring based on participant's
accomplishment of their CSFs (average of
individual's CSFs for the year)
5.2 Each plan participant will be given an incentive level expressed as a
percent of Base Salary. The following incentive levels have been defined:
80% CEO, Senior VPs
30% VPs, Key Mgrs, Key Employees
20% Other Key Employees
5.3 Plan participants will be measured based on the following incentive plan
elements:
20% Bonus 30% Bonus 80% Bonus
----------- ----------- -----------
Corporate performance 20% 40% 50%
Individual CSFs 80% 60% 50%
5.4 Participants can earn 0% to 100% scores on CSFs.
5.5 For the purpose of the KEBP, EPS is defined as Earnings Per Share
reported by the company adjusted for extra-ordinary events not included in
the fiscal year's Plan, i.e. 95.12 Plan.
5.6 Plan payout will be based on the plan participant's base salary at the
end of the plan period.
5.7 Should an employee change jobs during the plan period, and the change
result in a change in incentive level either as a result of a promotion or
demotion, the new incentive level will be determined immediately and the
employee will be notified in writing. In any case, changes in incentive
level require the approval of the CEO.
5.8 Quarterly, VPs will present their CSF achievement at the Executive
Staff. The CSF achievement of the direct reports to the VPs will be
presented and discussed at the first Operations Review of each quarter.
Results for the prior quarter and CSF plans for the current quarter are
presented.
<PAGE>8
ARTICLE 6 - CALCULATION OF ACTUAL BONUS BASED ON CSF PERFORMANCE
6.1 A participant's actual bonus is calculated as:
Participants Incentive Plan Actual
Possible X Element for = Bonus for
Bonus Company Performance Company Performance
Participants Incentive Plan Individuals Actual
Possible X Element for X CSF = Bonus for
Bonus CSF Score Score Individual CSFs
Actual Actual Total
Bonus for + Bonus for = Actual
Company Performance Individual CSFs Bonus
6.2 A 0% threshold will be defined for each CSF. This threshold, which
could be timing and/or deliverable-based, is a point at which CSF score
starts to be earned. If a participant does not reach/complete the minimum
threshold, the CSF will be scored 0% (zero). Progress beyond the
threshold earns the participant a pro-rated score up to 100%.
ARTICLE 7 - PAYMENT OF BONUS EARNED
7.1 At the end of the plan period, the CEO will present the actual bonuses
[along with the computation of the estimated bonuses] to the Compensation
Committee of the Board for their approval.
7.2 Actual bonuses for each participant will be calculated using the formulas
above.
7.3 Actual bonuses will be paid in three installments, defined as follows:
50% of bonus earned at the end of the plan period will be paid one
week after financial results are made public from the fiscal year
concluded (tentatively January 31st).
25% of bonus earned will be paid 6 months after the first
installment (tentatively July 31st).
25% of bonus earned will be paid in the following year coinciding
with that plan year's first 50% payout (tentatively January 31st).
On the basis of this schedule, 1st payout for 1996 plan period is
tentatively January 31, 1997.
<PAGE>9
ARTICLE 8 - ELIGIBILITY FOR PAYMENT
8.1 To be eligible for bonus payment, the participant must be employed by
the company at the scheduled payment date. A participant who terminates
employment prior to the payment date will forfeit the bonus including all
future payment schedules, except as otherwise provided in this article.
8.2 Disability: If a participant is disabled, i.e. inability to perform any
services for the company and eligible to receive disability benefits under
the standards used by the company's disability benefit plan, the
participant will receive an award representing a proration for
each month of employment in the plan period.
8.3 Retirement: If a participant retires, i.e. permanent termination of
employment with the company in accordance with the company's retirement
policies, the participant will receive an award representing a proration
for each month of employment in the plan period.
8.4 Death: If a participant dies, awards will be paid to the beneficiary
designated by the participant, otherwise, to the persons entitled thereto
as determined by a court of competent jurisdiction. The award will be a
proration of each month of employment in the plan period.
8.5 Lay-off: If a participant is terminated by lay-off during the plan
period, no bonus will be awarded. If a participant is terminated by
lay-off after the plan period but prior to a scheduled bonus payment, it
will be the discretion of the CEO to pay bonus in full or
on a prorate basis. No bonus will be paid to employees who are
terminated for cause.
8.6 All qualified bonus payments including future schedule pursuant to para
8.2, 8.3 and 8.5 will be paid in lump-sum.
8.8 The CEO reserves the right to reduce the bonus award of a participant on
a pro-rata basis to reflect a participant's leave of absence during the
plan period.
ARTICLE 9 - MISCELLANEOUS
9.1 Unless as defined in article 8.4, no right or interest in this plan is
transferable or assignable except by will or laws of descent and
distribution.
9.2 Participation in this plan does not guarantee any right to continued
employment with the Company.
9.3 Participation in the plan in a particular plan period is not a guarantee
to participation in subsequent plan periods.
9.4 Management reserves the right to discontinue participation of any
participant in this plan, at any time, and for whatever reasons.
<PAGE>10
9.5 This plan is unfunded and the company does not intend to set up a
sinking fund. Consequently, payments arising out of bonus earned shall be
paid out of the company's general assets. Accounts recognized by the
company for book purposes is not an indication of funds set aside for
payment. Plan participants are considered as general creditors of the
company and the obligation of the company is purely contractual and
is not secured by any particular company asset.
9.6 The provision of this plan shall not limit the CEO and the Compensation
Committee of the Board of Directors to modify said plan, or adopt such
other plans on matters of compensation, bonus or incentive, which in its
own judgment it deems proper,
at any time.
9.7 This agreement is construed to be in accordance with the laws of the
State of Delaware.
<PAGE>1
<TABLE>
CYPRESS SEMICONDUCTOR CORPORATION
EXHIBIT 11.1
COMPUTATION OF NET INCOME PER COMMON SHARE AND DILUTIVE
COMMON SHARE EQUIVALENTS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
----------------------
Apr. 1, Apr. 3,
1996 1995
---------- ----------
<S> <C> <C>
PRIMARY:
- ----------------------------
Weighted average number of common shares outstanding 79,966 78,868
Common share equivalents from dilutive effect of
outstanding stock options 3,452 8,355
---------- ----------
Weighted average number of common shares and dilutive
common share equivalents outstanding 83,418 87,223
========== ==========
Net income used in per share computation $ 34,277 $ 9,105
========== ==========
Net income per common and common equivalent share $ 0.41 $ 0.11
========== ==========
FULLY DILUTED:
- ----------------------------
Weighted average number of common shares outstanding 79,966 78,868
Common share equivalents from dilutive effect of
outstanding stock options 3,452 8,799
Shares issuable upon conversion of convertible
subordinated notes 7,940 7,940
---------- ----------
Weighted average number of common shares and dilutive
common share equivalents outstanding 91,358 95,607
========== ==========
Net income used in per share computation $ 35,191 $ 9,999
========== ==========
Net income per common and common equivalent share $ 0.39 $ 0.11
========== ==========
</TABLE>
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED APRIL 1,
1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-START> JAN-02-1996
<PERIOD-END> APR-01-1996
<CASH> 1,090
<SECURITIES> 109,983
<RECEIVABLES> 101,536
<ALLOWANCES> 2,479
<INVENTORY> 36,858
<CURRENT-ASSETS> 307,861
<PP&E> 616,288
<DEPRECIATION> 228,832
<TOTAL-ASSETS> 763,692
<CURRENT-LIABILITIES> 167,842
<BONDS> 96,452
<COMMON> 898
0
0
<OTHER-SE> 476,966
<TOTAL-LIABILITY-AND-EQUITY> 763,692
<SALES> 170,171
<TOTAL-REVENUES> 170,171
<CGS> 76,861
<TOTAL-COSTS> 76,861
<OTHER-EXPENSES> 21,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,647
<INCOME-PRETAX> 53,980
<INCOME-TAX> 19,703
<INCOME-CONTINUING> 34,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,277
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.39
</TABLE>
