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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 0-15858
IMP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 94-2722142
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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2830 North First Street
San Jose, California 95134
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code: (408) 432-9100
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
None None
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Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value
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 the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, as of June 21, 1996 was approximately $277,897,878 (based upon the
closing price for shares of the Registrant's Common Stock as reported by the
Nasdaq National Market System on that date). Shares of Common Stock held by each
officer, director and holder of 5% or more of the outstanding Common Stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
On June 21, 1996, approximately 29,133,073 shares of Common Stock, $.001
par value, were outstanding.
Documents Incorporated by Reference
Designated portions of the following documents are incorporated by
reference into this Annual Report on Form 10-K where indicated:
IMP, Inc. Annual Report to Stockholders for the fiscal year ended March 31,
1996, Parts II and IV.
IMP, Inc. Proxy Statement for the 1996 Annual Meeting of Stockholders to be
held on August 21, 1996, Part III.
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PART I
ITEM I. BUSINESS.
Except for the historical information contained herein, the matters
discussed in this document are forward-looking statements that involve certain
risks and uncertainties, including the risks and uncertainties set forth below
under "Factors Affecting Future Results."
INTRODUCTION
IMP, Inc. is a supplier of analog and mixed signal CMOS integrated
circuit solutions for communications, computer and control applications. IMP is
a technology leader in the field of analog signal processing and programmable
analog design techniques.
Wafers are manufactured in the Company's fabrication plant in San Jose,
California. IMP also uses these facilities to provide wafer foundry and full IC
manufacturing services to other semiconductor vendors using CMOS and BiCMOS
process technology.
The Company was originally incorporated in California in January 1981
as International Microelectronic Products. It reincorporated in Delaware as
International Microelectronic Products, Inc. in April 1987 and the new
corporation succeeded to the business of its predecessor. The Company amended
its Certificate of Incorporation in September 1993 to change its name to IMP,
Inc.
HISTORY
The Company's original focus was the design, development and
manufacturing of digital cell-based, CMOS, application-specific custom ICs
("ASICs"). It was a pioneer in this segment of the business, being one of the
first vendors to employ advanced computer aided engineering ("CAE") software and
an extensive library of pre-characterized cells. IMP was also one of the first
to integrate mixed analog and digital functions onto the same chip. The Company
made its initial public stock offering in 1987; and is traded on the Nasdaq
National Market System under the symbol IMPX.
In the early 1990's, IMP redirected its wafer fabrication and process
development resources away from the design and fabrication of custom circuits
and towards the supply of analog wafer foundry services to other semiconductor
companies. To date, the Company has manufactured more than 1,000 designs from
customer database tapes.
In the early 1990's IMP began to develop a portfolio of standard
products based on the core analog process and design competencies created in the
customer arena. Today, IMP's primary focus is to deliver value to its customers
through innovative, high-integration application-
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specific standard analog and mixed-signal integrated circuits. To reflect this
new identity as an analog device supplier, the Company's name was formally
changed in 1993 to abbreviate International Microelectronic Products to IMP,
Inc.
IMP PRODUCT STRATEGY
The overall IMP product strategy is to create a portfolio of
proprietary, CMOS high-integration, analog and mixed-signal IC solutions serving
the computer, communications and control markets based on IMP analog signal
processing and programmable architecture design expertise and associated analog
wafer manufacturing and testing capabilities. These products are developed by
focused product line activities within the Company.
ANALOG SIGNAL PROCESSING PRODUCTS
Analog Signal Processing products integrate analog interface and signal
conditioning solutions for data storage, data transmission and related system
functions. The current product focus is on highly-integrated analog and
mixed-signal application specific standard product solutions for removable-media
data storage systems.
The first standard products in this area introduced by IMP were also
the industry's first CMOS programmable, continuous-time filter chips. Three
families of devices replaced dozens of discrete components and low-density IC
packages and provided the lowest cost and lowest power solution for use in
communications and small form-factor tape and disk drive systems.
In 1992, IMP introduced the 62C738, the first completely integrated
CMOS read-channel IC for high-performance hard disk drives. It was featured on
the front cover of Electronic Design magazine for this and as also being the
first 3V solution for the new generation of small-form factor drives aimed at
low-power applications in the portable PC market. A successor to this product,
the 62C538, is used in the popular, removable-media high density Zip drive from
Iomega Corporation.
In 1995, IMP introduced the 55T500 Super Combo integrated circuit for
QIC-based hard disk drive back-up and mass storage peripherals. This device
integrates functions previously occupying three chips; a preamplifier, read
channel and write driver. Two more devices for the tape market, the 55T510 and
520 use a BiCMOS process to provide these same capabilities at much higher
performance levels for Travan class drives.
Today, IMP is a leading supplier of analog signal processing ICs to the
secondary mass-storage market, comprising manufacturers of high-density tape
back-up and removable disk products. In addition to Iomega, IMP's major
customers include Conner-Archive and the Colorado Memory Systems division of
Hewlett-Packard.
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ELECTRICALLY-PROGRAMMABLE ANALOG CIRCUITS
EPAC devices provide designers with improved analog system solutions
through the benefits of programmable analog architectures and development tools.
These benefits include in-system reconfiguration, high levels of integration,
ease-of-development and fast time-to-market. A key element of the product line
strategy is to supply complete integration solutions to analog design tasks in
microcontroller-based systems that can be quickly and easily implemented by
digital designers.
IMP announced the industry's first Electrically-Programmable Analog
Circuit ("EPAC")(TM) products and development tools in 1994 and shipped the
first products in 1995. EPAC devices, which may be considered as the analog
counterpart to the digital field programmable gate array, extend the benefits of
higher levels of integration, fast time-to-market, reduced development costs and
unique user-configurable functionality to analog and mixed signal designs.
A dynamically programmable EEPROM/SRAM-based architecture allows device
functionality to be reconfigured "on-the-fly" to create "adaptive analog"
functions meeting real-time system operating needs. This is particularly
powerful when used in association with a programmable microcontroller and opens
up new approaches to analog design in embedded control systems.
The Company's Analog Magic(TM) software is a windows-based CAE design
tool, which when used with IMP developed programming and in-system evaluation
hardware reduces the development time of an EPAC-device-based analog sub-system
to hours, from days or weeks.
The first EPAC device, the 50E10, is aimed at general purpose signal
conditioning, data acquisition, data conversion and analog interface
applications. A second device, the 50E30, will allow designers to add
programmable analog monitoring and diagnostics data acquisition features to
printed circuit boards. IMP plans to introduce multiple EPAC products addressing
other analog and mixed signal market segments.
ANALOG WAFER FOUNDRY SERVICES
The Wafer Foundry Services product line provides wafer fabrication
services on value-added analog processes to OEM manufacturers and other
semiconductor vendors. The product line also includes selective ASIC design
programs and strategic relationships to acquire analog and mixed-signal
products, processes and other intellectual property.
IMP offers nearly 15 years of high-quality manufacturing experience on
a broad range of proven CMOS processes. The Company operates a Class 10, 16,000
sq. foot wafer fabrication plant in San Jose, California. Processes in
production today include BiCMOS, CMOS and EEPROM technologies. Alliances with
off-shore wafer foundries which have installed IMP
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process technologies insure security of supply and access to additional
manufacturing capacity to the Company and its customers.
IMP manufactures products using N-well and P-well, single and double
layer poly CMOS analog processes. Process geometries range from high-voltage, 5
micron down to high-speed, 0.8 micron. Key features of IMP process capabilities
include double poly technology to ensure maximum capacitor stability in analog
circuits. Vertical and lateral bipolar transistors are available to minimize
noise in analog inputs and support high-drive outputs. Processes optimized for
battery-operated circuits, provide true low-voltage operation, down to 1.5V.
BiCMOS technology options provide highly-integrated solutions for users
requiring the speed of bipolar and the low power/high density of CMOS. Three
BiCMOS processes meet various application requirements including low cost,
high-speed (7 GHz transit frequency) designs, and 12V power supply operation.
Electrically Erasable CMOS modules permit the incorporation of unique
user-configurable features into digital, analog and mixed-signal designs. These
include post-fabrication calibrations and reprogramming of device functionality.
To augment its wafer foundry business, IMP offers migration services
for conversion of customer's programmable digital device designs, such as FPGAs,
Complex PLDs and PALs, into masked gate arrays. With its own on-shore wafer
fabrication facility, IMP is able to support both fast-turn prototype and
high-volume production demands.
IMP believes that ownership and control of wafer fabrication capability
is essential to the success of an analog and mixed-signal vendor. IMP's strategy
of internal on-shore wafer manufacturing, coupled with selective use of
off-shore wafer foundries provides it with the optimum mix of security of supply
and control of process technology while minimizing capital investment in plant
and equipment
ALLIANCES
The Company seeks to enter into long-term technology sharing agreements
with selected companies to create a strong link between their development
programs and IMP's design and process technologies. These agreements are
especially important to the Company's development of successful products, since
they provide valuable information about customer needs. The Company's integrated
chip set for magneto-resistive tape drives has been developed and marketed
through a long-term technology sharing agreement with 3M, makers of the tape
cartridges used in such drives.
In fiscal 1992, the Company announced it had licensed its programmable
filter technology to Asahi Chemical Industry Co., Ltd. ("Asahi") for the
development, manufacture and sale of products in Japan. The agreement gives
Asahi rights to manufacture and sell IMP filter products in Japan, and gives
Asahi other rights to IMP's filter technology. The two companies are in
discussions regarding the joint development of advanced integrated circuits for
the mass storage industry.
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The Company announced in November 1991 the signing of a wafer
fabrication agreement with SEEQ Technology, Inc. ("SEEQ"). SEEQ has closed its
fabrication facility and IMP serves as one of several outside sources for SEEQ's
manufacturing. In March 1992, IMP entered into a design and process technology
transfer agreement with South African Micro-Electronic Systems Pty, Limited
("SAMES"). SAMES purchased process design methodology and related technology and
has qualified as a second source for IMP manufacturing. See "Patents and
Licenses."
MARKETING, SALES AND CUSTOMERS
IMP's marketing strategy is to identify the key growth areas for
high-integration analog ICs, attract business from market leaders and emphasize
quality, service and performance. The Company typically engages in extensive
discussions with its customer's management and engineering personnel to
understand the customer's needs. Close relationships evolved during the design
and prototype stages of IC development. These relationships enable the Company
and its customers to work together more effectively and efficiently on future
programs, thereby lowering the Company's selling costs and shortening sales lead
time.
The Company sales force consists of four (4) Sales Managers and one (1)
Vice President of Sales who reports to the President and Chief Executive
Officer. The sales staff manages several manufacturer's representatives in the
United States and internationally. In some cases these representatives promote
products that are competitive with those of the Company. The Company works
closely with the manufacturer's representatives to target their sales forces on
prospective customers identified by IMP. Potential new customers are reviewed by
IMP for the opportunities they present and for consistency with IMP's marketing
strategies.
In fiscal 1995, the Company entered into distribution agreements with
three firms to distribute the Company's newly announced EPAC products. Wyle
Laboratories will cover the United States, Tekelec the European market and
Macnica in Japan. In fiscal 1996, the Company entered into an agreement with
Digikey, under which EPAC development systems would be sold through their
catalog sales operation.
Export sales, principally in Europe and the Pacific Basin, accounted
for 5.8%, 21% and 18.2% of the Company's total revenues in fiscal 1996, 1995 and
1994, respectively. The Company's export sales are billed in United States
dollars and therefore are not subject to currency exchange fluctuations.
Although export sales are subject to certain governmental restrictions,
including the Export Administration Act of 1979, the Export Administration
Amendments Act of 1985 and regulations promulgated thereunder, the Company has
not experienced any material difficulties to date because of these restrictions.
During fiscal 1996, IMP's largest customer was Rockwell International
Corporation accounting for approximately 33% of total sales. Iomega accounted
for approximately was 13%
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of total sales, and QLogic accounted for approximately 10%. The arrangements
with Iomega and QLogic generally provide that they may be terminated at will by
either party and do not require any commitment to purchase a specific number of
products, although cancellation or rescheduling charges may be imposed in
certain circumstances. Other than the companies identified above, no customer
accounted for more than 10% of total sales during fiscal 1996. Continuing a
recent trend, the Company's product mix of component sales in fiscal 1996 was
comprised of approximately 73% for sales of foundry services and approximately
27% for sales of ASSPs. The unanticipated loss of any of its major customers or
the unanticipated cancellation or rescheduling of orders by them could have a
material adverse impact on the Company's business, particularly if the Company's
efforts with other customers do not result in the volume manufacturing orders
anticipated by the Company. In addition, if the ASSP products that were
introduced in recent years are not successful, the Company could be adversely
affected.
The Company had a backlog of approximately $42 million as of March 31,
1996 compared to approximately $8 million at March 26, 1995. Backlog represents
only those orders released for shipment within six months. The Company's
standard customer contracts generally impose charges for cancellation of
released orders, and because its products and services cannot generally be
resold to other customers, the Company's practice is to attempt to collect such
charges in the event of such cancellations. However, because of changes in
delivery schedules or cancellations by customers, the Company's backlog as of
any particular date may not be representative of sales for any succeeding
period. The Company typically warrants its products against defects in materials
and workmanship for a period of one year.
The Company recognized revenues of approximately $800,000 in fiscal
1994 from technology licensing activity, and none in fiscal 1995 or fiscal 1996.
The Company cannot predict the level and timing of future technology licensing
activity.
RESEARCH AND DEVELOPMENT
IMP's strategy to design and manufacture ICs requires a significant
commitment to research and development. The Company's research and development
efforts consist of direct research and development expenditures, product
development work funded by customers and strategic alliances with technology
partners, which provide the Company with access to additional technologies and
design expertise. The Company's total research and development expenses were
approximately $9.9 million, $8.6 million and $8.6 million in fiscal 1996, 1995
and 1994, respectively.
The Company's research and development programs are currently focused
on development of new products, enhancing its CMOS process and developing
EECMOS, 3-volt, BiCMOS and 0.8 micron manufacturing processes. The greatest
amount of resources are concentrated in the area of product development,
especially with respect to ASSPs.
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The Company has in the past and expects in the future to enter into
cross-licensing agreements under which it would acquire certain rights
pertaining to the technologies of its partners in exchange for the transfer of
similar rights to its partners or for other consideration. See "Marketing, Sales
and Customers" and "Patents and Licenses."
COMPETITION
The Company currently competes in the markets for silicon foundry,
programmable device conversion services and application specific standard
integrated circuit products (ASSPs) based on high integration analog technology.
The silicon foundry market is intensely competitive and IMP expects competition
will increase. Currently, the Company's principal competitors in this market
include Orbit Semiconductor, Symbios Logic (formerly NCR Microelectronics), VLSI
Technology, Inc., the Semiconductor Division of Gould/AMI and, to a lesser
extent, LSI Logic Corporation, and Texas Instruments.
The principal competitive factors in the silicon foundry market include
service, price, design consultancy and manufacturing capability, quality, and
manufacturing cycle time. IMP believes its competitive strengths arise from its
experience in cell-based design methodology, CMOS process technologies and mixed
analog/digital capability. The Company also believes it competes effectively
because of its service-oriented approach and close customer relationships, which
result in flexibility and responsiveness to customer requirements. There can be
no assurance that the Company will be able to compete successfully in the
future.
The market for programmable device conversion, is also intensely
competitive and the Company expects competition will increase here as well.
IMP's principal competitors in the United States are similar to those in the
customer-specific IC market. The Company's competitors also include several
Japanese semiconductor manufacturers. The principal competitive factors in this
market are price, manufacturing cycle time and service.
The market for ASSPs is also intensely competitive with the competitive
pressures expected to increase. The Company believes that it competes
effectively in this market because of its expertise in high-integration mixed
signal technology. With respect to programmable filters and disk drive read
channels, the Company's principal competitor is Silicon Systems, Inc. In
addition, the Company has licensed technology from and to parties which have, in
certain cases, the right to use the technology to develop products competitive
to those of the Company. The principal competitive factors in the ASSP market
are knowledge of the needs of system designers, manufacturing cycle time, sales
coverage, price and service. The Company believes that it competes favorably
with respect to most of these factors.
The Company's principal competitors and many of its potential
competitors have substantially greater technical, manufacturing, financial and
marketing resources than the Company. In addition, IMP faces competition from
smaller companies, although many of such companies do not have an internal wafer
manufacturing capability.
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PATENTS AND LICENSES
The Company has 13 United States patents, one of which is jointly
owned, and has filed 16 United States patent applications to certain of its
inventions. The issued patents expire at various time from 2009 to 2013.
Although patents, patent protection and patent applications may have value, the
Company believes that other factors such as managerial and technological
experience and creative abilities of its personnel are of more significance in
the rapidly changing semiconductor industry.
The Company has entered into several joint development and technology
exchange agreements with third parties, including SAMES, Asahi Chemical Industry
Co., Ltd. and SEEQ. The Company believes these arrangements provide a cost
effective method for expanding its technology base.
The Company has also obtained licenses for certain ASSPs and
technology, and may obtain licenses to other ASSPs and technology in the future.
Because of technological developments in the semiconductor industry, it is
possible that certain of the Company's designs or processes may involve
infringement of existing patents. The Company has from time to time received
communications from third parties asserting patent rights, mask work rights,
copyrights or trademark rights on certain of the Company's products and
technologies. The Company has entered into an agreement with two such parties
pursuant to which the Company obtained a license to certain rights in exchange
for making certain royalty payments. The Company believes that, based upon
industry practice, any necessary licenses or rights under patents could be
obtained on conditions that would not have a material adverse effect on the
Company. However, there can be no assurance that such licenses could in fact be
obtained.
The Company has also acquired software and licenses to software from a
number of software companies, primarily for CAD and CAE applications.
The Company attempts to protect its trade secrets and other proprietary
information through agreements with customers and suppliers, proprietary
information agreements with employees and other security measures. Although the
Company intends to protect its rights vigorously, there can be no assurance that
these measures will be successful.
EMPLOYEES
As of March 31, 1996, the Company employed approximately 434 persons,
including approximately 293 in manufacturing, 46 in manufacturing support, 36 in
design engineering, 14 in research and development, 17 in sales and marketing
and 28 in administrative, financial and management positions.
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The Company's ability to attract and retain qualified personnel is
essential to its continued success. None of the Company's employees is
represented by collective bargaining agreements, nor has the Company ever
experienced any work stoppage through employee initiated actions. The Company
believes its employee relations are good.
ITEM 2. PROPERTIES.
The Company's primary manufacturing activities and process technology
research and development activities are located in a 59,000 square foot building
in San Jose, California leased under an agreement expiring in fiscal 2000. The
Company's general administrative activities and design services are located in a
nearby 22,000 square foot building leased under an agreement expiring in fiscal
2000. The Company's design research and development activities are performed in
a 8,800 square foot office located in Pleasanton, California. The Company
believes that its existing facilities are adequate to meet its requirements for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
IMP v. Power Max
On or about July 14, 1995, the Company instituted a collection action
in the California Superior Court, Santa Clara County (#CV751019) against a
former customer, Power Max Enterprises, Inc. The Company later amended the
complaint to add the shareholders, directors and officers of Power Max (and a
related Company) personally liable for the debts of Power Max. Power Max filed a
cross-complaint against the Company, alleging that the Company interfered with a
contractual relationship between Power Max and Ma Laboratories, Inc. The Company
has in turn filed a cross-complaint for indemnity against Ma Labs. The Company
believes that Power Max's cross-complaint is without merit and intends to defend
it vigorously.
IMP v. ID Technologies
On or about January 5, 1996, the Company instituted a collection action
in the California Superior Court, Santa Clara County (#CV755019) against a
former customer, ID Technologies. ID Technologies filed an answer generally
denying the allegations and filed a cross-complaint against the Company for
allegedly breaching a contract. The Company believes that ID Technologies'
cross-complaint is without merit and intends to defend it vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 26, 1995.
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EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company and their respective ages
and positions are as follows:
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Name Age Position
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Barry M. Carrington 53 Chairman of the Board
David A. Laws 54 President and Chief Executive Officer
Charles S. Isherwood 63 Senior Vice President -
Corporate Services, Chief
Financial Officer and Secretary
Robert J. Crossley 57 Vice President - Administration
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Mr. Carrington joined the Company in May 1982 as Vice President,
Operations. In October 1982, he was named President and Chief Operating Officer.
He has been a director since October 1982. In August 1986, he was appointed
Chief Executive Officer. In May 1996, Mr. Carrington resigned as President and
Chief Executive Officer and was appointed as Chairman of the Board. Prior to
joining IMP, Mr. Carrington was employed by the Semiconductor Division of
Gould/AMI for 10 years, where the last position he held was Senior Vice
President and Manufacturing Group Manager.
Mr. Laws joined the Company in February 1995 as its Senior Vice
President, Marketing and Business Development. In May 1996, he was appointed
President and Chief Executive Officer and as a director of the Company. Mr.
Laws was President and Chief Executive Officer of QuickLogic Corporation, a
company engaged in the development of field programmable gate arrays, from
September 1990 to January 1994. From January 1986 to September 1990, Mr. Laws
was Vice President of Marketing for Altera Corporation, a supplier of
programmable logic devices. Prior to Altera, he served in various positions at
Advanced Micro Devices from May 1975 to January 1986, including as Managing
Director of the PLD business unit and Vice President of Business Development.
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Mr. Isherwood joined the Company in August 1986 as Senior Vice
President, Chief Financial Officer and Secretary and in January 1988 was named
Executive Vice President. In April, 1991, Mr. Isherwood was named Senior Vice
President - Corporate Services. Prior to joining IMP, he was employed by
Gould/AMI for 18 years, the first ten of which were as Senior Vice President of
Manufacturing and the last eight of which were as Senior Vice President of
Corporate Services.
Mr. Crossley joined the Company in February 1988 as Manager, Human
Resources. In June 1990 he was named Director, Human Resources and in November
1991 he was named Vice President - Administration. Prior to joining IMP, Mr.
Crossley was employed by Advanced Micro Devices for 13 years, most recently as
Director, Human Resources.
Officers are elected by and serve at the discretion of the Board of
Directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Incorporated by reference from page 19 of the Annual Report to
Stockholders for the fiscal year ended March 31, 1996 filed as Exhibit 13.1 to
this Annual Report on Form 10-K, except that the information regarding the
the appoximate number of holders of the Company's Common Stock should read 613
shareholders of record as of March 31, 1996.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from page 18 of the Annual Report to
Stockholders for the fiscal year ended March 31, 1996 filed as Exhibit 13.1 to
this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Incorporated by reference from pages 16 to 18 of the Annual
Report to Stockholders for the fiscal year ended March 31, 1996 filed as Exhibit
13.1 to this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements of the Company at March 31,
1996 and for each of the three years in the period ended March 31, 1996 and the
independent auditor's report thereon and the Company's unaudited quarterly
financial data for the two-year period ended March 31, 1996 are incorporated by
reference from pages 5 to 14 of the Annual Report to Stockholders for the fiscal
year ended March 31, 1996 filed as Exhibit 13.1 to this Annual Report on Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
(1) Identification of Directors:
The information concerning the Company's directors and
nominees is incorporated by reference from the section entitled "Proposal No. 1
- --Election of Directors" in the Proxy Statement for the 1996 Annual Meeting of
Stockholders to be held on August 21, 1996, a copy of which will be filed with
the Securities and Exchange Commission no later than 120 days from the end of
the Company's last fiscal year.
(2) Identification of Executive Officers:
See Part I, "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the section entitled "Executive
Compensation" in the Proxy Statement for the 1996 Annual Meeting of Stockholders
to be held on August 21, 1996, a copy of which will be filed with the Securities
and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the sections entitled "Share
Ownership" in the Proxy Statement for the 1996 Annual Meeting of Stockholders to
be held on August 21, 1996, a copy of which will be filed with the Securities
and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the section entitled "Certain
Relationships and Related Transactions" in the Proxy Statement for the 1996
Annual Meeting of Stockholders to be held on August 21, 1996, a copy of which
will be filed with the Securities and Exchange Commission.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements. The following
financial statements and supplemental data are included in Item 8 of this Annual
Report on Form 10-K by incorporation by reference from the Annual Report to
Stockholders for the fiscal year ended March 31, 1996 filed as Exhibit 13.1
hereto:
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Page(s) in
Annual Report
to Stockholders
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Statements of Operations
for each of the three years in the
period ended March 31, 1996 6
Balance Sheets at
March 31, 1996 and March 26, 1995 5
Statement of Stockholders'
Equity for each of the three years for
the period ended March 31, 1996 7
Statements of Cash Flows for
each of the three years for the period
ended March 31, 1996 8
Notes to Consolidated Financial Statements 9-14
Report of Price Waterhouse, Independent Accountants 15
</TABLE>
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2. Index to Financial Statement Schedules. The following
financial statement schedules for each of the three years in the period ended
March 31, 1996, are filed as part of this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page(s) in
Annual Report on
Description Form 10-K
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Report of Independent Accountants II-1
VIII. Valuation and Qualified Accounts II-2
</TABLE>
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
3. (a) Exhibits - see Exhibit List below.
(b) Form 8-K. The Company filed no reports on Form
8-K during the fourth quarter of the fiscal year 1996.
EXHIBIT LIST
Exhibit
Number Description
- ------ -----------
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(9) Certificate of Amendment to Restated Certificate of
Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981
between the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983 between
the Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984
between the Company and Orchard Investment Company No. 701.
10.28(1) Employment Agreement dated as of March 4, 1987, between the
Company and Barry Carrington.
-17-
<PAGE> 17
10.29(1) Form of Indemnification Agreement executed by the Company and
its officers and directors.
10.39(2) Letter Agreement dated January 21, 1988 between the Company
and Barry Carrington.
10.40(2) Letter Agreement dated October 19, 1987 between the Company
and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe
Limited.
10.48(6) Supply Agreement between the Company and IMP Europe Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary
Shares in IMP Europe Limited dated as of July 3, 1990, between
the Company and Dialogue Semiconductor Limited.
Exhibit
Number Description
- ------ -----------
10.50(7)* License Agreement dated as of September 12, 1991, between the
Company and Asahi Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by and
between the Company and Asahi Chemical Industry Co., Ltd.
10.52 Business Loan Agreement dated as of August 19, 1991 by and
between the Company and Silicon Valley Bank, including
Promissory Notes, dated August 19, 1991, Commercial Pledge
Agreement, dated August 19, 1991, Commercial Security
Agreement, dated August 19, 1991, Agreement to Provide
Insurance, dated August 19, 1991, Non-Interference Agreement,
dated December 20, 1991, Change in Terms Agreement, dated
March 16, 1992, Change in Terms Agreement, dated July 15,
1992, Change in Terms Agreement dated August 15, 1992,
Modification to Loan Agreement dated February 19, 1993, Change
in Terms Agreement dated February 19, 1993 and Disbursement
Request and Authorization dated February 19, 1993. Loan
Modification Agreement dated September 19, 1994.
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the
Company and South African Micro-Electronic Systems Pty Limited
-18-
<PAGE> 18
10.54(9) First Amendment dated March 11, 1994 to Real Property Lease
Agreement dated August 26, 1981 between the Company and
Orchard Investments Company No. 701.
10.55(9) First Amendment dated December 21, 1987, Second Amendment
dated March 15, 1989, Third Amendment dated November 25,1991,
Fourth Amendment dated December 13, 1993 and Fifth Amendment
dated March 11, 1994 to the Real Estate Lease Agreement dated
July 6, 1983 between the Company and Orchard Investment
Company No. 701.
10.56(10) Loan Modification Agreement dated September 19, 1995 by and
between the Company and Silicon Valley Bank.
10.57(10) Letter Agreement dated February 13, 1995 between the Company
and David Laws.
10.58(10) Real Property Sublease Agreement dated November 9, 1992 by and
between the Company and AT&T Resource Management Corporation,
and Master Lease dated September 23, 1986 by and between AT&T
Resource Management Corporation and American Telephone and
Telegraph Company.
13.1 Annual Report to Stockholders.
23.1 Consent of Price Waterhouse, Independent Accountants
28.1 1996 Employee Stock Purchase Plan and forms of agreements
thereto.
28.2 Stock Option Plan and forms of agreements thereto.
* "*" on such exhibits indicates that portions have been omitted for
which confidential treatment has been requested and filed separately with the
Securities and Exchange Commission.
(1) Incorporated by reference from an identically numbered exhibit filed
with the Company's Registration Statement on Form S-1 (File No.
33-13600) declared effective by the Securities and Exchange Commission
on June 10, 1987.
(2) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March
27, 1988 filed with the Securities and Exchange Commission on June 25,
1988.
(3) Incorporated by reference to an identically numbered exhibit filed with
the Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-8 (File No. 33-16624), as filed with the Securities
and Exchange Commission on November 13, 1987.
-19-
<PAGE> 19
(4) Incorporated by reference to an identically numbered exhibit filed with
the Company's Registration Statement on Form S-8 (File No. 33-24635) as
filed with the Securities and Exchange Commission on September 15,
1988.
(5) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March
26, 1989 filed with the Securities and Exchange Commission on June 26,
1989.
(6) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March
31, 1991 filed with the Securities and Exchange Commission on July 1,
1991.
(7) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March
29, 1992 filed with the Securities and Exchange Commission on June 29,
1992, as amended by Amendment to Application or Report on Form 8 filed
with the Securities and Exchange Commission on September 16, 1992.
(8) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Annual Report on Form 10-K for the year ended
March 28, 1993 filed with the Securities and Exchange Commission on
June 28, 1993.
(9) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Amendment to the Annual Report on Form 10-K
for the year ended March 27, 1994 filed with the Securities and
Exchange Commission on July 6, 1994.
(10) Portions incorporated by reference from an identically numbered exhibit
filed with the Company's Annual Report on Form 10-K for the year ended
March 26, 1995 filed with the Securities and Exchange Commission on
June 26, 1995.
-20-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in San Jose,
California on this 26th day of June, 1996.
IMP, INC.
By: /s/ Charles S. Isherwood
------------------------------------------
Charles S. Isherwood
Senior Vice President--Corporate Services,
Chief Financial Officer
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ David A. Laws President, Chief June 26, 1996
- --------------------------- Executive Officer
David A. Laws and Director
Chairman of the Board June , 1996
- ---------------------------
Barry M. Carrington
-21-
<PAGE> 21
/s/ Charles S. Isherwood Senior Vice June 26, 1996
- ---------------------------- President--Corporate
Charles S. Isherwood Services, Chief Financial
Officer and Secretary
/s/ George Rassam Controller June 26, 1996
- ---------------------------- (Principal Accounting
George Rassam Officer)
/s/Zvi Grinfas Director June 26, 1996
- ----------------------------
Zvi Grinfas
/s/ Peter D. Olson Director June 27, 1996
- ----------------------------
Peter D. Olson
/s/ Bernard V. Vonderschmitt Director June 27, 1996
- ----------------------------
Bernard V. Vonderschmitt
-22-
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of IMP, Inc.
Our audits of the financial statements referred to in our report dated April 30,
1996 appearing on Page 15 of the 1996 Annual Report to the Stockholders of IMP,
Inc. (which report and financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a) of this 10-K. In our opinion, the
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.
/s/Price Waterhouse
- -------------------
Price Waterhouse LLP
San Jose, California
June 27, 1996
II-1
<PAGE> 23
SCHEDULE VIII
IMP, Inc.
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance Balance
at the Charged to at the
Beginning Costs and Deduction End of
of Period Expenses* Write-Offs Period
--------- --------- ---------- ------
<S> <C> <C> <C> <C>
Provisions for returns,
allowance and doubtful
accounts and returns:
Year ended March 27, 1994 $715 $ 159 $ 0 $556
Year ended March 26, 1995 $556 $(239) $ 0 $795
Year ended March 31, 1996 $795 $-- $140 $655
</TABLE>
*Includes amounts charged directly to revenues.
II-2
<PAGE> 1
EXHIBIT 13.1
IMP, INC. 1996
[GRAPHIC]
GROWTH, INNOVATION, PROFITABILITY
ANNUAL REPORT
<PAGE> 2
PROFILE
IMP, Inc. is a manufacturer of analog and mixed-signal integrated circuits for
computer, communications and control applications. It is a leader in analog
signal processing technology and is the inventor of the EPAC(TM) (Electrically
Programmable Analog Circuit) device.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands except per share data) 1996 1995 Change
<S> <C> <C> <C>
Net revenue $76,827 $59,750 29%
Research and development 9,934 8,590 16%
Net income 5,469 790 593%
Net income per share $ .20 $ .03 567%
Total assets 50,733 41,301 23%
Long term-debt excluding
current portion 8,979 4,799 87%
Stockholders' equity 25,445 18,463 38%
</TABLE>
<PAGE> 3
DEAR STOCKHOLDER:
Steady growth fueled the most successful year in IMP's history.
Revenues for FY1996 ended March 31, 1996 increased by 28% to $76.8 million, our
best ever, up from $59.8 million in FY1995. We improved profitability, with net
income of $5.5 million, or $0.20 per share, versus $790,000, or $0.03 per share,
in FY1995. At year end, IMP's backlog was at the record level of over $42
million.
We continued on track with our plan to strongly augment our wafer
fabrication (fab) foundry business fabricating wafers on an OEM basis for other
companies, with revenue growth in proprietary, high integration analog and mixed
signal integrated circuits (ICs). While our foundry business is a steady source
of income for the company, finished, packaged and tested products provide higher
revenue, and represent the future for IMP. When sold as standard products, based
on IMP intellectual property and proprietary know-how, they typically also
generate higher profit margins. A major goal for the company is to grow this
segment of its business. Standard products comprised approximately 22% of our
revenues for the year, compared to 12% in FY1995, and grew to over 35% of fourth
quarter sales.
Our standard products for removable media storage applications made a
significant contribution to our success in FY1996. We consider the removable
media storage market to be more resilient than the mainstream personal computer
(PC) business, and less vulnerable to pricing and unit volatility. In this area,
IMP is a primary supplier of read channel ICs to Iomega Corporation for
inclusion in its Zip drive. The easy-to-use, 100MB removable Zip disk stores 70
times the data of the floppy disk and has been well received in the marketplace.
IMP recently announced an order for over $10 million from Iomega, and shipped
the one millionth Zip chip in
1
<PAGE> 4
the fiscal fourth quarter of 1996. We shipped a similar device to JTS
Corporation for its recently introduced Nordic drive. We also continue to supply
ICs to Hewlett Packard's Colorado Memory Systems Division, a leading vendor of
tape back-up systems.
We introduced two new products for the removable storage market in
FY1996, the IMP55T510 and the IMP55T520. These products for high density Travan
tape drive back-up provide not only a read mode and a write mode, but also a
"read-while-write" mode, a new feature that allows simultaneous processing of
data, resulting in higher performance, increased flexibility, improved system
speed and enhanced reliability.
IMP's revolutionary EPAC(TM) (Electrically Programmable Analog Circuit)
concept achieved credibility as a truly innovative product in FY1996. Hundreds
of development systems have been sold worldwide. We continue to invest in the
EPAC family, with new EPAC devices planned for introduction in FY1997. We expect
this line of products to begin showing a significant contribution to results by
the end of FY1997.
We operated our wafer fab facility at near full capacity in FY1996. Our
goals for our foundry business have been to become more profitable, minimize
risk, and run the fab as near full capacity as possible. With these goals in
mind, we have entered into long term partnerships with companies who are leaders
in their field. For example, we manufacture wafers for Rockwell International's
high performance modem ICs. Modems, with a variety of applications, are required
by end-users to access the Internet. We also signed a long term agreement with
International Rectifier, a company that provides power management
semiconductors, which are a necessity in just about every form of electronic
product. We continue our long-term alliance with SAMES, a member of the AMS
Group, with a fab facility in South Africa, which provides secondary foundry
support, allowing us to grow without the costs of expanding our fab facility. We
established the Silicon Venture Partners program aimed at
2
<PAGE> 5
fstart-up companies, with IMP providing wafer fabrication in exchange for
intellectual property such as product, marketing and technology rights, or a
share of future profits.
Our ability to design, manufacture and test analog (also commonly
referred to as "linear") and mixed-signal (analog and digital on the same chip)
ICs is the core competence of IMP. With over 15 years experience, IMP has
developed an expertise in the high-integration analog and mixed-signal market
niche, which has few competitors because of their challenging design and
manufacturing complexity.
Both analog and digital signals are found throughout electronic
equipment today. Analog signals represent the continuously varying information
associated with the real world of voltage, current, frequency, capacitance, or
time, while digital signals have discrete values of one or zero, and are
concerned with the handling of numbers. Digital ICs include memory, logic and
other microcomponents. While digital products usually receive attention as the
"glamour" chips of the semiconductor industry, analog and mixed-signal ICs are
essential to interface real-world information with these digital chips. Analog
and mixed-signal devices also do not demand the most advanced process technology
geometries. While digital products might be manufactured at the 0.6-micron
level, for example, 1.2-micron might be appropriate for comparable generation
analog products.
The analog and mixed-signal market is forecast by Dataquest, an
independent market research firm, to grow at double-digit rates through the end
of the decade to $32.8 billion. In addition, the analog and mixed-signal market
is typically not as volatile as the digital market.
In FY1996 we began telling our story on the worldwide Internet
(http://www.impweb.com), added a fax-on-demand system (1-800-249-1614) for
faster literature response to customers, and retained Morgen-Walke
3
<PAGE> 6
Associates to enhance our investor relations focus. Our investment in research
and development, consistent with the industry average for semiconductors, was
13% of revenues, and included product development in removable storage
technology and EPAC devices.
We executed our plan in FY1996, and maintained the discipline required
to stay on track, and we look forward to the coming year.
I would like to thank our employees, our greatest resource, for your
support this past year, and a special thanks to our shareholders, for your
continued support.
Sincerely,
/s/Barry Carrington
- -------------------
BARRY CARRINGTON
President and Chief Executive Officer
Except for the historical information contained herein, the matters discussed in
this document are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under "Factors Affecting Future Results."
<PAGE> 7
Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except per share amounts) March 31, 1996 March 26, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents including restricted
cash of $2,000 in 1995 $ 9,038 $ 8,484
Accounts receivable, net of allowances
for doubtful accounts and returns of $655 and $795 13,658 11,799
Inventories 10,302 9,148
Other current assets 491 739
-------- --------
Total current assets 33,489 30,170
Leasehold improvements and machinery and equipment:
Leasehold improvements 7,883 7,883
Machinery and equipment 73,782 61,676
-------- --------
81,665 69,559
Less accumulated depreciation and amortization (64,496) (58,583)
-------- --------
Net leasehold improvements and machinery and equipment 17,169 10,976
Deposits and other long term assets 75 155
-------- --------
$ 50,733 $ 41,301
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 1,311 $ 6,500
Accounts payable 6,175 6,003
Accrued payroll and related expenses 2,140 1,588
Other current liabilities 2,021 459
Current portion of capital lease obligations 4,662 3,489
-------- --------
Total current liabilities 16,309 18,039
Long-term capital lease obligations 8,979 4,799
Stockholders' Equity:
Convertible preferred stock, $0.001 par value;
5,000 shares authorized; no shares issued and outstanding -- --
Common stock, $0.001 par value: 50,000 shares authorized;
29,133 and 28,044 outstanding 29 28
Additional paid in capital 69,052 67,540
Accumulated deficit (39,739) (45,208)
Treasury stock; at cost 2,029 shares (3,897) (3,897)
Total stockholders' equity 25,445 18,463
-------- --------
$ 50,733 $ 41,301
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
Statements of Operations
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Fiscal Year Ended March 31, 1996 March 26, 1995 March 27, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $ 76,827 $ 59,750 $ 48,195
Cost of revenues 52,155 42,340 33,025
-------- -------- --------
Gross profit 24,672 17,410 15,170
Operating expenses:
Research and development 9,934 8,590 8,560
Selling, general and administrative 8,284 6,796 4,765
-------- -------- --------
Total operating expenses 18,218 15,386 13,325
-------- -------- --------
Income from operations 6,454 2,024 1,845
Interest expense, net (879) (1,234) (1,455)
Provision for income tax 106 -- --
Net income $ 5,469 $ 790 $ 390
-------- -------- --------
Net income per share $ .20 $ .03 $ .01
-------- -------- --------
Shares used in computing net income per share 27,956 26,462 26,324
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 9
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Fiscal Years ended March 31, 1996, Additional Receivable Total
March 26, 1995 and March 27, 1994 Common Stock Paid-in Accumulated Treasury from Stockholders'
(In thousands, except per share amounts) Shares Amount Capital Deficit Stock Stockholders Equity
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE MARCH 28, 1993 27,345 $27 $66,630 $(46,388) $(3,897) $(44) $16,328
------ --- ------- -------- ------- ---- -------
Issuance of common stock
under incentive stock option
plan and employee stock
purchase plan 343 1 420 -- -- -- 421
Repayment of notes receivable
issued under stock
purchase agreements -- -- -- -- -- 44 44
Net income -- -- -- 390 -- -- 390
------ --- ------- -------- ------- ---- -------
BALANCE, MARCH 27, 1994 27,688 $28 $67,050 $(45,998) $(3,897) $ -- $17,183
Issuance of common stock
under incentive stock option
plan and employee stock
purchase plan 356 -- 490 -- -- -- 490
Net income -- -- -- 790 -- -- 790
------ --- ------- -------- ------- ---- -------
BALANCE, MARCH 26, 1995 28,044 $28 $67,540 $(45,208) $(3,897) $ -- $18,463
Issuance of common stock
under incentive stock option
plan and employee stock
purchase plan 1,089 1 1,512 -- -- -- 1,513
Net income -- -- -- 5,469 -- -- 5,469
------ --- ------- -------- ------- ---- -------
BALANCE, MARCH 31, 1996 29,133 $29 $69,052 $(39,739) $(3,897) $ -- $25,445
------ --- ------- -------- ------- ---- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 10
Statement of Cash Flows
<TABLE>
<CAPTION>
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
Fiscal Year ended (In thousands) March 31, 1996 March 26, 1995 March 27, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,469 $ 790 $ 390
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,913 5,258 4,301
Increase (decrease) from changes in:
Accounts receivable (1,859) (3,341) 164
Inventories (1,154) (506) (220)
Other assets 328 (154) (427)
Accounts payable 172 (27) 416
Accrued payroll and related expenses 552 341 (327)
Other current liabilities 1,562 41 (463)
-------- ------- -------
Net cash provided by operating activities 10,983 2,402 3,834
Cash flows from investing activities:
Net cash used for investing activities for
purchase of capital equipment (1,959) (922) (733)
Cash flows from financing activities:
Net increase (decrease) under line of credit (5,189) -- 500
Principal payments under capital lease obligations (4794) (4,111) (4,685)
Proceeds from long term financing agreement -- 3000 --
Proceeds from exercise of options
to purchase common stock 1,513 490 465
-------- ------- -------
Net cash used for financing activities (8,470) (621) (3,720)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents 554 859 (619)
Cash and cash equivalents at beginning of period 8,484 7,625 8,244
Cash and cash equivalents at end of period,
including restricted cash of $2,000 in 1995,
and $3,625 in 1994 9,038 8,484 7,625
-------- ------- -------
Supplemental information:
Cash paid during the year for interest $ 1,065 $ 1,329 $ 1,475
Acquisition of equipment under capital lease obligations $ 10,147 $ 4,380 $ 3,952
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 11
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company develops and manufactures mixed signal CMOS integrated circuit
solutions for communications, computer and control applications. IMP is a
technology leader in the field of analog signal processing and programmable
analog design techniques.
Fiscal Year: The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal years 1995 and 1994 each included 52 weeks. Fiscal year 1996 included 53
weeks.
Basis of Presentation: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: For purposes of the statement of cash flows, the
Company considers all highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents. The fair
market value of these highly liquid instruments approximated cost at March 31,
1996 and 1995. At March 26, 1995, $2,000,000 in cash and cash equivalents were
restricted as collateral under the Company's line of credit agreement (See
Note 2).
Inventories: Inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in first-out basis) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
(In thousands) March 31, 1996 March 26, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 987 $ 854
Work-in-process 8,425 7,285
Finished goods 890 1,009
------- ------
$10,302 $9,148
------- ------
</TABLE>
Leasehold improvements and machinery and equipment: Leasehold improvements and
machinery and equipment are stated at cost and are amortized using the
straight-line method over the shorter of the period of the lease or the
estimated useful lives of the assets. Machinery and equipment under capital
lease obligations have a capitalized value and net book value of $41,224,000 and
$12,589,000 at March 31, 1996 and $44,500,000 and $6,270,000 at March 26, 1995.
Net revenues: Component revenues are recognized as products are shipped. Design
revenues are recognized under design and engineering contracts as defined
development phases are completed by the Company and accepted by the customers.
Design engineering revenues aggregated $2,580,000, $2,283,000 and $3,094,000 for
fiscal years ended 1996, 1995 and 1994, respectively. Costs related to design
engineering revenues aggregating $1,576,000, $1,403,000 and $1,673,000 for
fiscal 1996, 1995 and 1994 respectively are included in research and development
as incurred. Technology license revenues are recognized after significant
contractual obligations have been fulfilled. Technology license revenues were
$800,000 for fiscal 1994, and are included in net revenues. Related costs, which
are minimal, are included in research and development as incurred.
9
<PAGE> 12
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
Related Party: In fiscal 1994, the Company derived $750,000 of technology
license revenues from SAMES, one of the Company's strategic foundry partners.
During FY95, the Company purchased $2,700,000 of inventory from SAMES and at
March 26, 1995, IMP had an accounts payable balance to SAMES of $602,000. In
fiscal 1996, IMP's and SAMES' management resigned from the seat each occupied on
the other's Board of Directors. During FY96, the Company continued to conduct
purchasing and selling activities with SAMES under a standard customer/vendor
arrangement.
Accounting for Income Taxes: The Company accounts for income taxes under the
liability approach.
Net Income Per Share: Net income per share is computed using weighted average
common shares outstanding during the period including dilutive stock options
(using the treasury stock method).
Concentration of credit risk: The Company performs credit evaluations of its
customers and maintains reserves for losses. At March 31, 1996 customers
individually representing more than 10% of the Company's 1996 net revenues also
accounted for 46% of accounts receivable. At March 26, 1995, customers
individually representing more than 10% of the Company's 1995 net revenues also
accounted for 25% of accounts receivable. The Company's products are primarily
sold to resellers.
NOTE 2
LINE OF CREDIT
At March 31, 1996 the Company had a financing agreement in place with a bank
under which the Company may borrow up to 80 percent of eligible accounts
receivable in an amount not to exceed $5,000,000 and may borrow up to an
additional $3,000,000 for capital equipment. Total borrowings under the line
cannot exceed $8,000,000 and bear interest at the bank's reference rate plus .50
percent for the line of credit based on receivables and the bank's reference
rate plus one percent for the capital equipment line (a total of 9.25 and 9.75
percent at March 31, 1996, respectively). At March 31, 1996, $1,311,000 was
outstanding under the line. Under the agreement the Company is restricted from
paying dividends and is required to maintain certain financial ratios among
other restrictive covenants. In addition, the line is secured by inventories and
other unencumbered assets of the Company. The line of credit expires on October
1, 1996 at which time the Company will have to negotiate an extension. In 1991,
the Company issued warrants to purchase 50,000 shares of common stock in
connection with a new credit line from a bank. The warrants are exercisable at a
price of $1.00 per share and expire in September 1996.
10
<PAGE> 13
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
NOTE 3
CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at year end consisted of Capital
lease obligations which represent the present value of future payments under
various equipment lease agreements. The following schedule sets forth, by years,
future minimum lease payments under the capital lease obligations together with
present value of net minimum lease payments:
<TABLE>
<CAPTION>
Fiscal Year (In thousands) March 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 5,880
1998 4,687
1999 3,138
2000 and beyond 2,326
-------
Total minimum lease payments 16,031
Less interest 2,390
-------
Present value of minimum lease payments 13,641
Less current portion 4,662
Capital lease obligations $ 8,979
-------
</TABLE>
In fiscal 1995, the Company financed its own equipment with an asset-based
lender for $3,000,000, payable over 3 years. The remaining balance on this debt
at March 31, 1996 is $2,260,000. This line of credit does not contain any
restrictive or financial covenants.
NOTE 4
COMMITMENTS
The Company leases its facilities under non-cancellable operating lease
agreements which expire in December 1999. Rent expense charged to operations was
$1,460,000, $1,545,000, $1,749,000 in fiscal 1996, 1995 and 1994, respectively.
The aggregate minimum annual rent commitments under all operating
leases as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
- --------------------------------------------------------------------------------
<S> <C>
1997 1,448
1998 1,448
1999 1,302
2000 1,258
2001 and thereafter 1,123
------
$6,579
------
</TABLE>
11
<PAGE> 14
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
NOTE 5
CONTINGENCIES
From time to time, the Company is made aware of various patent-related and other
claims arising in the normal course of business. The Company evaluates such
claims and negotiates license agreements with claimants as necessary. In the
opinion of management, these proceedings will not have a material adverse effect
on the results of operations of the Company.
NOTE 6
STOCKHOLDERS' EQUITY
Employee stock purchase plan: In December 1986, the Company adopted a qualified
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
with the plan becoming effective on June 10, 1987 upon the completion of the
Company's initial public offering of its common stock. In fiscal 1995, the
Company's Board of Directors authorized an additional 500,000 shares to be
reserved for issuance under the plan and now provides for a total of 377,685
shares of the stock to be issued. During fiscal year 1996, approximately 378,000
shares at an aggregate price of approximately $586,000 were issued under the
plan (301,000 shares at an aggregate price of $440,000 in fiscal 1995, and
291,000 shares at an aggregate price of approximately $377,000 in fiscal 1994).
As of March 31, 1996, there were no shares available for issuance under the
plan.
Shares are purchased by participants at 85% of the lower fair market value on
certain marking dates through payroll deductions (up to 15% of participants base
compensation).
1992 Stock option plan: The Company has an option plan which provides for the
issuance of incentive stock options and non-statutory stock options to
employees, officers and directors to purchase common stock at a price not less
than 85% (100% for incentive stock options) of the fair market value of the
stock on the grant date. To date all options have been granted at 100% of fair
market value. The plan was amended and renamed the 1992 Stock Option Plan. The
Plan terminates in 2002. In fiscal 1993, the Company's Board of Directors
authorized an additional 500,000 shares to be reserved for issuance under the
plan and now provides for a total of 4,177,000 shares of the stock to be issued.
Options granted under the plan primarily vest ratably over four years and expire
five to ten years from the date of grant. The Board of Directors has the right
to determine the terms of each option including allowing optionees to exercise
their options early, subject to a right to repurchase unvested shares. The
Company authorized an additional 500,000 shares in fiscal 1996.
The Board of Directors may grant the right to surrender unexercised options for
an amount equal to the difference between the fair market value of the number of
shares vested at the surrender date and the aggregate option price vested for
such shares. The Company has not granted any such stock appreciation rights.
12
<PAGE> 15
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
Activity under the plan is as follows:
<TABLE>
<CAPTION>
Shares
available Number of Aggregate
(In thousands, expect per share amounts): for grant Shares Price per Share Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES 3/28/93 719 2,089 $ .81 $ 2.94 $ 2,647
Options granted (29) 29 $1.625 $ 2.75 63
Options exercised -- (52) $ .81 $1.625 (50)
Options canceled 32 (252) $ .81 $ 2.75 (42)
---- ------ ------ ------ -------
BALANCES 3/27/94 722 1,814 $ .81 $ 2.94 $ 2,618
Options granted (615) 615 $ 1.50 $ 1.88 987
Options exercised -- (55) $ .81 $ 1.62 (51)
Options canceled 55 (55) $ .81 $ 2.75 (92)
---- ------ ------ ------ -------
BALANCES 3/26/95 162 2,319 $ .81 $ 2.75 $ 3,462
Additional shares available 500 -- -- -- --
Options granted (359) 359 $ 1.85 $ 9.25 1,976
Options exercised -- (711) $ .81 $ 3.81 (914)
Options canceled 74 (74) $ .81 $ 5.94 (175)
---- ------ ------ ------ -------
BALANCES 3/31/96 377 1,893 $ .81 $ 9.25 $ 4,349
---- ------ ------ ------ -------
</TABLE>
At March 31, 1996 and March 26, 1995, stock options aggregating 1,060,313 and
1,545,495 shares of common stock respectively, were exercisable.
13
<PAGE> 16
Notes to Financial Statements
Years ended March 31, 1996, March 26, 1995 and March 27, 1994
NOTE 7
INCOME TAXES
The Company has utilized net operating losses generated in prior years to offset
current year taxable income. The remaining net Federal and State operating loss
carry-forwards of approximately $31,000,000 and $11,000,000, respectively, at
March 31, 1996 may be utilized to reduce future taxable income. These amounts
expire beginning in 1996 through 2008. Deferred tax assets (liabilities) are
comprised of the following (in thousands):
<TABLE>
<CAPTION>
Federal March 31, 1996 March 26, 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss, tax-effected $ 10,703 $ 15,232
Non-deductible expenses 3,044 66
Investment and R&D tax credit 2,469 2,976
Other 577 565
-------- --------
16,793 18,839
Valuation allowance (16,793) (18,839)
-------- --------
Net deferred tax asset -- --
-------- --------
</TABLE>
The Company has recorded a full valuation allowance against the gross deferred
tax asset, because the future realization is uncertain.
NOTE 8
SEGMENT INFORMATION
The Company operated in one industry segment and is engaged in the design
development, manufacture and marketing of integrated circuits. Export sales to
Western Europe were $2,277,000, $3,796,000 and $7,155,000 and to Asia were
$2,194,000, $8,842,000, and $2,947,000 in fiscal 1996, 1995 and 1994,
respectively.
During the fiscal years 1996, 1995, 1994 sales to certain customers
individually represented more than 10% of the Company's net revenues as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Rockwell 33% 34% 15%
Iomega 13% * *
QLogic 10% * 10%
Dialog * * 15%
</TABLE>
*less than 10% of net revenues
14
<PAGE> 17
Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF IMP, INC.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of IMP, Inc., at March 31, 1996 and March 26,
1995, and the results of its operations and of its cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
- -----------------------
Price Waterhouse LLP
San Jose, California
April 30, 1996
15
<PAGE> 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Except for the historical information contained herein, the matters discussed in
this document are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below under
"Factors Affecting Future Results."
RESULTS OF OPERATIONS
Revenues in fiscal 1996 rose 28% to $76.8 million, from $59.8 million in fiscal
1995. Revenues in fiscal 1995 increased 24% over the $48.2 million of fiscal
1994. The fiscal 1994-1995 growth was driven mainly by foundry growth, while
fiscal 1995-1996 growth was primarily due to increased sales of standard
products for secondary storage applications and higher average selling prices
for foundry products. Foundry product sales accounted for 73% of sales in fiscal
1996, 88% in fiscal 1995 and 80% in fiscal 1994. The Company anticipates that
foundry product sales will continue to decline as a percentage of revenues. The
Company's standard products consist primarily of Application Specific Standard
Products (ASSP) and the Company anticipates that revenues from sales of these
products will increase as a percentage of revenues. There were no technology
revenues in fiscal 1996 and 1995, compared to $.8 million in fiscal 1994.
Cost of revenues as a percentage of sales was 67.9% in fiscal 1996,
compared to 70.9% in fiscal 1995, and 68% in fiscal 1994. The improvement in
fiscal 1996 was due to a higher level of factory utilization and increasing mix
of standard products, which have higher average selling prices as compared with
foundry products. There can be no assurance that the demand for higher margin
ASSP products will be sufficient to absorb the additional capacity made
available by the reduction of the foundry products.
Research and Development (R&D) expense in fiscal 1996 was $9.9 million,
compared to $8.6 million in fiscal 1995 and $8.6 million in fiscal 1994. The
increase was due to higher product development spending for secondary storage
and EPAC(TM) products. The Company believes that R&D expenses will continue to
grow in fiscal 1997, but could fluctuate as a percentage of sales.
Selling, general and administrative (SG&A) increased in fiscal 1996 to
$8.3 million, up from $6.8 million in fiscal 1995 and $4.8 million in fiscal
1994. The spending increases were primarily due to sales commissions. The
Company expects SG&A expenses to continue to increase due to higher commissions,
and higher standard product marketing expenses.
Interest expense net in fiscal 1996 was $879,000 compared to $1.2
million in fiscal 1995, and $1.5 million in fiscal 1994. The reduction was due
to lower interest rates on capitalized leases.
The Company had a net profit of $5.5 million in fiscal 1996, or $.20
per share, compared to $790,000 in fiscal 1995, or $.03 per share, and $390,000,
or $.01 per share, in fiscal 1994. Net income for fiscal 1995 included a
$440,000 reduction of inventory reserve requirements to reflect the sale of
products that had previously been reserved.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $9.0 million at March 31, 1996 from $8.5
million at March 26, 1995. The increase is due to increased cash flows from
operations offset by the purchase of capital equipment and payments on existing
lines of credit and capital lease obligations.
16
<PAGE> 19
Management's Discussion and Analysis of
Financial Condition and Results of Operations
To date, the Company has financed its operations primarily through
public and private sales of its equity securities and lease and bank financing.
As of March 31, 1996 the Company had borrowed $1.3 million under an existing
line of credit. The Company expects to increase the level of its borrowings in
fiscal 1997 to finance capital additions for manufacturing capacity and
efficiency.
Cash flows provided by operating activities in fiscal 1996 were $10,893,000
compared to $2,402,000 in fiscal 1995. The increase in cash flows provided by
operating activities in fiscal 1996 compared to fiscal 1995 was due primarily to
the net profit in fiscal 1996 of $5,469,000 and increases in accrued payroll and
related expenses and other current liabilities. Partially offsetting these
favorable operating activities were increases in accounts receivable and
inventories to support the higher level of revenue volume during 1996.
Cash flows used for investing activities in fiscal 1996 and fiscal 1995
were $500,000 and $922,000, respectively, reflecting cash invested in property
and equipment acquisitions for increased manufacturing capacity and
administrative use. Management expects capital additions, including assets
acquired under capital leases, to increase in fiscal 1997 primarily for
manufacturing capacity and efficiency.
Cash flows used for financing activities in fiscal 1996 were
$9,929,000. During fiscal 1996, the Company made payments on its line of credit
totaling $5,189,000 and on capital lease obligations of $6,253,000 offset by
proceeds from stock option exercises of $1,513,000. Cash flows used for
financing activities in fiscal 1995 were $621,000 and consisted primarily of
payments on capital lease obligations of $4,111,000 offset by proceeds from long
term financing of $3,000,000 and proceeds from stock option exercises of
$490,000.
The Company expects to fund future operations and current maturities of
long term debt with existing cash, its available line of credit, lease
financings, and cash from operations. The Company believes that existing cash,
its bank line, and cash from operations will be sufficient for the company's
needs through at least the end of March 31, 1997.
FACTORS AFFECTING FUTURE RESULTS
The Company's business, financial condition and results of operations have been,
and may in the future be, affected by a variety of factors, including the
availability of raw materials, concentration of customers, markets for its
customer's products, foundry capacity, the development and introduction of new
technology and products and the availability of trained design processing
engineers, in particular those skilled in analog design. Specifically, although
the Company believes it currently has adequate access to necessary raw
materials, it does not have any long-term commitments for the supply of raw
wafers and polysubstrates. The Company announced in July 1995 that one of its
semiconductor products was designed into the Zip drive by Iomega Corporation.
Any decline in the demand for the Zip drive, or any other decline in the demand
by end-users of the products produced by the Company's customers could lead to a
decline in, or cancellation of, orders for the Company's products by Iomega or
other customers, which could adversely affect the Company's business and results
of operations.
The Company's foundry is operating at or near full currently available
capacity. The ability of the Company to transition from the fabrication of
lower-margin products to higher-margin products, including both those developed
by the Company and those for which it serves as a third-party foundry, is very
important for the Company's future results of operations. In addition, the
Company will seek to obtain outside foundry capacity where appropriate. There
can be no assurances that the Company will be successful in these efforts.
17
<PAGE> 20
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Any adverse fluctuation in the Company's business, financial condition
or results of operations could have an adverse effect on the trading price of
the Company's common stock. In addition, the trading prices for semiconductor
company stocks have experienced a dramatic increase in calendar years 1994,
1995, and the first part of 1996. Any decline in the market for semiconductor
company stocks as has been experienced recently, or for technology stocks in
general, could also have a material adverse effect on the trading price of the
Company's common stock.
Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Year Ended
In thousands, except per share amounts March 31, 1996 March 26, 1995 March 27, 1994 March 28, 1993 March 29, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
State of Income Data:
Net revenues $76,827 $59,750 $48,195 $55,935 $45,846
Net income (loss) 5,469 790 390 (2,322) (6,069)
Net income (loss) per share .20 .03 .01 (.09) (.25)
Balance Sheet Data:
Total assets 50,733 41,301 36,397 36,149 46,103
Long term obligations
excluding current portion 8,979 4,799 1,648 2,240 5,131
Stockholders' equity $25,445 $18,463 $17,183 $16,328 $18,198
</TABLE>
18
<PAGE> 21
Common Stock Information
IMP's common stock has been traded in the over-the-counter market since the
Company's initial public offering on June 10, 1987 and is quoted on NASDAQ under
the symbol IMPX. The following table sets forth the range of high and low
closing for the quarters indicated. No dividends have been paid on common stock.
For a description of restrictions on the Company's ability to pay dividends see
Note 2 to the consolidated financial statements.
The Company had 740 shareholders of record as of March 26, 1995. The Company has
not paid cash dividends on its common stock and presently intends to continue
this policy in order to retain earnings for the development of the Company's
business.
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
High Low High Low
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 3.562 1.625 2.000 1.437
Second Quarter 7.500 3.250 2.000 1.562
Third Quarter 9.250 5.562 2.000 1.437
Fourth Quarter 8.812 5.000 1.812 1.406
</TABLE>
Interim financial information (unaudited) amounts are in thousands, except per
share date.
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 26, 1995
Net revenue 13,472 15,134 15,727 15,417
Gross profit 4,090 4,654 4,453 4,213
Net income 15 511 173 91
Net income per share .00 .02 .01 .00
YEAR ENDED MARCH 31, 1996
Net revenue 16,510 18,514 20,029 21,774
Gross Profit 5,066 5,668 6,519 7,419
Net income 593 1,070 1,655 2,151
Net income per share .02 .04 .06 .08
</TABLE>
Net income for the fourth quarter of fiscal 1995 included a $440,000 reduction
of inventory reserve requirements to reflect the sale of products that had
previously been reserved.
19
<PAGE> 22
Corporate Information
<TABLE>
<S> <C>
BOARD OF DIRECTORS, IMP TRANSFER AGENT & REGISTRAR
Barry M. Carrington Boston Equiserve(TM)
President and CEO Boston, MA
Zvi Grinfas
Consultant COUNSEL
Peter D. Olson Venture Law Group
President and CEO Menlo Park, CA
Spatial Media, Inc.
Bernard V. Vonderschmitt INDEPENDENT ACCOUNTANTS
Chairman of the Board
Xilinx, Inc. Price Waterhouse LLP
San Jose, CA
OFFICERS
CORPORATE OFFICE
Barry M. Carrington
President and Chief Executive Officer 2830 North First Street
San Jose, CA 95134-2071
Charles S. Isherwood Tel: 408.432.9100
Senior Vice President, Corporate Services Fax: 408.434.0335
Chief Financial Officer and Secretary web: http://www.impweb.com
David Laws
Senior Vice President, Marketing COMMON STOCK
Robert J. Crossley NASDAQ Symbol: IMPX
Vice President, Administration
Moiz B. Khambaty ANNUAL MEETING
Vice President, Technology
The Annual Meeting of Shareholders will be held
Jerry L. DaBell at 2:00 p.m. local time on Wednesday, August 21 at:
Vice President, Product Development and Applications
LeBaron Hotel
Russ Almand 1350 N. First Street
Vice President, Worldwide Sales San Jose, CA 95112
Eugene J. Vaatveit
Vice President, Manufacturing FORM 10-K
Jerry Block A copy of the Company's Form 10-K Annual Report
Vice President, Materials as filed with the Securities and Exchange Commission
is available without charge upon written request to:
George Rassam
Controller Investor Relations
IMP, Inc.
2830 North First Street
San Jose, CA 95134-2071
</TABLE>
20
<PAGE> 23
IMP, Inc.
2830 North First Street
San Jose, CA 95134-2071
Tel: 408.432.9100 Fax: 408.434.0335
web: http://www.impweb.com
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-85008, No. 33-65578, No. 33-62751) of IMP, Inc.
of our report dated April 30, 1996 appearing on page 15 of the Annual Report to
Stockholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page II-1 of this Annual Report on Form
10-K.
Price Waterhouse LLP
San Jose, California
June 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> MAR-27-1995
<PERIOD-END> MAR-31-1996
<CASH> 9038
<SECURITIES> 0
<RECEIVABLES> 13658
<ALLOWANCES> 655
<INVENTORY> 10302
<CURRENT-ASSETS> 33489
<PP&E> 81665
<DEPRECIATION> (64496)
<TOTAL-ASSETS> 50733
<CURRENT-LIABILITIES> 16309
<BONDS> 0
0
0
<COMMON> 29
<OTHER-SE> 69052
<TOTAL-LIABILITY-AND-EQUITY> 50733
<SALES> 76827
<TOTAL-REVENUES> 76827
<CGS> 52155
<TOTAL-COSTS> 52155
<OTHER-EXPENSES> 18218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 879
<INCOME-PRETAX> 5575
<INCOME-TAX> 106
<INCOME-CONTINUING> 5469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5469
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
<PAGE> 1
Exhibit 28.1
IMP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of IMP, Inc. by providing eligible employees with the opportunity to
acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Compensation Committee of the Board in its capacity as
Plan Administrator shall have full authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for proper
administration of the Plan as it may deem necessary or appropriate. Decisions of
the Plan Administrator shall be final and binding on all parties having an
interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock, including shares of
Common Stock purchased on the open market. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
750,000 shares.
B. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase
under the Plan through a series of successive offering periods until such time
as (i) the maximum number
<PAGE> 2
of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not
to exceed twenty-four (24) months) as determined by the Plan Administrator prior
to the start date. The initial offering period shall commence on October 1, 1996
and terminate on the last business day in September 1998. The next offering
period shall begin on the first business day in October 1998 and terminate on
the last business day in September 2000. Subsequent offering periods shall begin
as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series
of successive semi-annual Purchase Intervals. Purchase Intervals shall run from
the first business day in October to the last business day in March each year
and from the first business day in April each year to the last business day in
September in the following year. Accordingly, there shall be a maximum of four
(4) semi-annual Purchase Intervals within each offering period. However, the
first Purchase Interval in effect for the initial offering period under the Plan
shall begin on October 1, 1996 and continue through March 31, 1997.
D. Should the Fair Market Value per share of Common
Stock on any Purchase Date within an offering period be less than the Fair
Market Value per share of Common Stock on the start date of that offering
period, then that offering period shall automatically terminate immediately
after the purchase of shares of Common Stock on such Purchase Date, and a new
offering period shall commence on the next business day following such Purchase
Date. The new offering period shall have a duration of twenty-four (24) months,
unless the Plan Administrator establishes a shorter duration within five (5)
business days following the start date of that offering period.
E. Under no circumstances shall any shares of Common
Stock be issued under the Plan until such time as (i) the Plan shall have been
approved by the Corporation's stockholders and (ii) the Corporation shall have
complied with all applicable requirements of the Securities Act, all applicable
listing requirements of any securities exchange (or the Nasdaq National Market
if applicable) on which shares of the Common Stock are listed for trading and
all other applicable statutory and regulatory requirements.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the
start date of any offering period may join that offering period at that time or
on any subsequent Quarterly Entry Date within that offering period, provided
such individual remains an Eligible Employee.
B. An individual who first becomes an Eligible Employee
after the start date of any offering period may join such offering period on any
Quarterly Entry Date within that offering period on which he or she remains an
Eligible Employee.
2.
<PAGE> 3
C. The date an Eligible Employee enters an offering
period shall be designated his or her Entry Date for purposes of that offering
period.
D. To participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designate) prior to his or her scheduled Entry Date into that offering period.
However, each individual who is a Participant in an offering period on the date
such offering period terminates pursuant to Paragraph IV.D shall automatically
be enrolled in the new offering period which commences immediately after such
termination date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant
for purposes of acquiring shares of Common Stock in an offering period may be
any multiple of one percent (1%) of the Base Salary paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized shall continue in effect
for the remainder of the offering period, except to the extent such rate is
changed in accordance with the following guidelines:
- The Participant may, not less than ten (10)
days prior to any Quarterly Adjustment Date within the offering period,
file the appropriate form with the Plan Administrator to increase or
decrease the rate of his or her payroll deduction for the remainder of
that offering period. The new rate (which may not exceed the fifteen
percent (15%) maximum) shall become effective on the first Quarterly
Adjustment Date following the filing of such form.
B. Payroll deductions shall begin on the first pay day
following the start date of the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
3.
<PAGE> 4
D. The Participant's acquisition of Common Stock under
the Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be
granted a separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments
during the remainder of such offering period, upon the terms set forth below.
The Participant shall execute a stock purchase agreement embodying such terms
and such other provisions (not inconsistent with the Plan) as the Plan
Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right
shall be automatically exercised in installments on each Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant (other than any Participant whose payroll
deductions have previously been refunded in accordance with the Termination of
Purchase Right provisions below) on each such Purchase Date. The purchase shall
be effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. PURCHASE PRICE. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall be equal to eighty-five percent (85%) of the
lower of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Purchase Interval ending with that Purchase Date by the purchase price in effect
for the Participant for that Purchase Date. However, the maximum number of
shares of Common Stock purchasable per Participant
4.
<PAGE> 5
on any one Purchase Date shall not exceed 1,000 shares, subject to periodic
adjustments in the event of certain changes in the Corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date because
they are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following
provisions shall govern the termination of outstanding purchase rights:
(i) A Participant may, not later than ten (10)
days prior to the next Purchase Date in the offering period, terminate
his or her outstanding purchase right for that offering period by
filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from
the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall be refunded as soon as possible.
(ii) The termination of such purchase right shall
be irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted. In
order to resume participation in any subsequent offering period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) prior to his or her Entry Date into that
offering period.
(iii) Should the Participant cease to remain an
Eligible Employee for any reason (including death, disability or change
in status), then his or her outstanding purchase right shall
immediately terminate, and the Participant's payroll deductions for the
Purchase Interval in which such purchase right so terminates shall be
immediately refunded. However, should the Participant cease to remain
in active service by reason of an approved unpaid leave of absence,
then the Participant shall have the right, exercisable up until the
last business day of the Purchase Interval in which such leave
commences, to (a) withdraw all the payroll deductions collected to date
on his or her behalf for that Purchase Interval or (b) have such funds
held for the purchase of shares on his or her behalf on the next
scheduled Purchase Date. In no event, however, shall any further
payroll deductions be collected on the Participant's behalf during such
leave. Upon the Participant's return to active service, his or her
payroll deductions under the Plan shall automatically resume at the
rate in effect at the time the leave began.
5.
<PAGE> 6
G. CORPORATE TRANSACTION. The Participant's outstanding
purchase right shall automatically be exercised, immediately prior to the
effective date of any Corporate Transaction, by applying the payroll deductions
of such Participant for the Purchase Interval in which such Corporate
Transaction occurs to the purchase of whole shares of Common Stock at a purchase
price per share equal to eighty-five percent (85%) of the lower of (i) the Fair
Market Value per share of Common Stock on his or her Entry Date into the
offering period in which such Corporate Transaction occurs or (ii) the Fair
Market Value per share of Common Stock immediately prior to the effective date
of such Corporate Transaction. However, the applicable limitation on the number
of shares purchasable per Participant shall continue to apply to any such
purchase.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and each Participant shall, following the receipt of such notice,
have the right to terminate his or her outstanding purchase right prior to the
effective date of the Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number
of shares of Common Stock which are to be purchased pursuant to outstanding
purchase rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock pro-rated to such
individual, shall be refunded.
I. ASSIGNABILITY. The purchase right shall be
exercisable only by the Participant and shall not be assignable or transferable
by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no
stockholder rights with respect to the shares subject to his or her outstanding
purchase right until the shares are purchased on the Participant's behalf in
accordance with the provisions of the Plan and the Participant has become a
holder of record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value of such stock on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
6.
<PAGE> 7
B. For purposes of applying such accrual limitations to
the purchase rights granted under this Plan, the following provisions shall be
in effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period for which such
right is granted.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one (1) or more other purchase rights at a rate
equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, the
purchase right of a Participant does not accrue for a particular Purchase
Interval, then the payroll deductions which the Participant made during that
Purchase Interval with respect to such purchase right shall be promptly
refunded.
D. In the event there is any conflict between the
provisions of this Article and one or more provisions of the Plan or any
instrument issued thereunder, the provisions of this Article shall be
controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on May 15, 1996 and
shall become effective on October 1, 1996 as the successor to the Corporation's
1987 Employee Stock Purchase Plan. The initial purchase rights under the Plan
shall be granted on such effective date. However, no such purchase right shall
be exercised, and no shares of Common Stock shall be issued, under the Plan
unless the Plan is approved by the Corporation's stockholders at the 1996 Annual
Meeting. In the event such stockholder approval is not obtained, then all
outstanding purchase rights under this Plan shall immediately terminate, all
payroll deductions collected with respect to those terminated rights shall be
refunded, and no further purchase rights shall be granted under the Plan.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in October 2006, (ii)
the date on which all shares available for issuance under the Plan shall have
been sold pursuant to purchase rights exercised under the Plan or (iii) the date
on which all purchase rights are exercised in connection with a Corporate
Transaction. No further purchase rights shall be granted or
7.
<PAGE> 8
exercised, and no further payroll deductions shall be collected, under the Plan
following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at
any time to become effective immediately following the close of any Purchase
Interval. However, the Board may not, without the approval of the Corporation's
stockholders, (i) materially increase the number of shares of Common Stock
issuable under the Plan or the maximum number of shares purchasable per
Participant on any one Purchase Date, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) alter the
purchase price formula so as to reduce the purchase price payable for the shares
of Common Stock purchasable under the Plan, or (iii) materially increase the
benefits accruing to Participants under the Plan or materially modify the
requirements for eligibility to participate in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration
of the Plan shall be paid by the Corporation.
B. The provisions of the Plan shall be governed by the
laws of the State of California without resort to that State's conflict-of-laws
rules.
C. Nothing in the Plan shall confer upon the Participant
any right to continue in the employ of the Corporation or any Corporate
Affiliate for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Corporate Affiliate
employing such person) or of the Participant, which rights are hereby expressly
reserved by each, to terminate such person's employment at any time for any
reason, with or without cause.
8.
<PAGE> 9
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE
IMP, INC.
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid
to a Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan, plus any
pre-tax contributions made by the Participant to any Code Section 401(k) salary
deferral plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate. The following items
of compensation shall NOT be included in Base Salary: (i) all overtime payments,
bonuses, commissions (other than those functioning as base salary equivalents),
profit-sharing distributions and other incentive-type payments and (ii) any and
all contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Corporation or any
Corporate Affiliate under any employee benefit or welfare plan now or hereafter
established.
B. BOARD shall mean the Corporation's Board of
Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as
amended.
D. COMMON STOCK shall mean the Corporation's common
stock.
E. CORPORATE AFFILIATE shall mean any parent or
subsidiary corporation of the Corporation (as determined in accordance with Code
Section 424), whether now existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the
following stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean IMP, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of IMP, Inc. which shall by appropriate action adopt the
Plan.
A-1.
<PAGE> 11
H. ELIGIBLE EMPLOYEE shall mean any person who is
engaged, on a regularly-scheduled basis of more than twenty (20) hours per week
for more than five (5) months per calendar year, in the rendition of personal
services to any Participating Corporation as an employee for earnings considered
wages under Code Section 3401(a).
I. ENTRY DATE shall mean any of the Quarterly Entry
Dates in effect for an offering period on which an Eligible Employee joins that
offering period in accordance with the provisions of Article V. The earliest
Entry Date under the Plan shall be October 1, 1996.
J. FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
K. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
L. PARTICIPATING CORPORATION shall mean the Corporation
and such Corporate Affiliate or Affiliates as may be authorized from time to
time by the Board to extend the benefits of the Plan to their Eligible
Employees. The Participating Corporations in the Plan as of the initial offering
period are listed in attached Schedule A.
M. PLAN shall mean the Corporation's 1996 Employee Stock
Purchase Plan, as set forth in this document.
A-2.
<PAGE> 12
N. PLAN ADMINISTRATOR shall mean the Compensation
Committee of the Board in its capacity as administrator of the Plan.
O. PURCHASE INTERVAL shall mean each successive period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant. The initial Purchase Interval
under the Plan shall run from October 1, 1996 to March 31, 1997.
P. PURCHASE DATE shall mean the last business day of
each Purchase Interval. The initial Purchase Date shall be March 31, 1997.
Q. QUARTERLY ADJUSTMENT DATE shall mean the quarterly
date in each offering period as of which a Participant may increase or decrease
his or her rate of payroll deduction under the Plan for the remainder of that
offering period. The Quarterly Adjustment Dates for each offering period shall
be the first business day in January, April, July and October each year.
R. QUARTERLY ENTRY DATE shall mean any quarterly date
within an offering period on which an Eligible Employee may enter that offering
period. The Quarterly Entry Dates for each offering period shall be the first
business day in January, April, July and October each year. However, the
earliest Quarterly Entry Date under the Plan shall be the October 1, 1996 start
date of the initial offering period under the Plan.
S. SECURITIES ACT shall mean the Securities Act of 1933,
as amended.
T. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
A-3.
<PAGE> 1
Exhibit 28.2
IMP, INC.
STOCK OPTION PLAN
(AS AMENDED AND RESTATED THROUGH MAY 15, 1996)
ARTICLE ONE
GENERAL
I. PURPOSES OF THE RESTATED PLAN
This IMP, Inc. Stock Option Plan (the "Plan"), is intended to
promote the interests of IMP, Inc., a Delaware corporation (the "Company"), by
providing a method whereby key employees and key consultants of the Company or
its parent or subsidiary corporations who perform valuable services for the
Company and its parent and subsidiary corporations and the non-employee members
of the Company's Board of Directors may be offered incentives or rewards which
will encourage them to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Company and continue to render services to
the Company or its parent and subsidiary corporations.
For purposes of the Plan, each corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company shall
be considered to be a SUBSIDIARY of the Company, provided each such corporation
(other than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. Each corporation (other than the Company) in an unbroken chain of
corporations ending with the Company shall be considered to be a PARENT of the
Company, provided each such corporation (other than the Company) in the unbroken
chain owns, at the time of determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
II. ADMINISTRATION OF THE PLAN
A. A Committee of two (2) or more non-employee Board
members appointed by the Board (the "Primary Committee") shall have sole and
exclusive authority to administer the Discretionary Option Grant Program of
Article Two with respect to Section 16 Insiders. No non-employee Board member
shall be eligible to serve on the Primary Committee if such individual has,
during the twelve (12)-month period immediately preceding the date of his or her
appointment to the Committee received an option grant or stock award under the
Plan or any other stock option, stock appreciation, stock bonus or other stock
plan of the Company (or any parent or subsidiary), other than pursuant to the
automatic option grant provisions of Article Three. For purposes of the Plan,
SECTION 16 INSIDER shall mean an officer or director of the Company subject to
the short-swing profit liabilities of Section 16 of the Securities Exchange Act
of 1934, as amended (the "1934 Act").
<PAGE> 2
B. Administration of the Discretionary Option Grant
Program of Article Two with respect to all other persons eligible to participate
in that program may, at the Board's discretion, be vested in the Primary
Committee or in a Secondary Committee of one (1) or more Board members appointed
by the Board (the "Secondary Committee"), or the Board may retain the power to
administer that program with respect to all such persons. The Board may provide
the Secondary Committee with exclusive authority to administer the Discretionary
Option Grant Program with respect to non-Section 16 Insiders or may provide the
Secondary Committee with such authority on a separate but concurrent basis with
the Primary Committee so that both such committees may make grants under the
Discretionary Option Grant Program to non-Section 16 Insiders. The members of
the Secondary Committee may be Board members who are Employees eligible to
receive discretionary option grants under the Plan or any other stock option,
stock appreciation, stock bonus or other stock plan of the Company (or any
parent or subsidiary).
C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and may
be removed by the Board at any time.
D. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program of Article Two and to
make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program under its jurisdiction or any stock option
thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member of
the Primary Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants under
the Plan.
F. Administration of the Automatic Option Grant Program
of Article Three shall be self-executing in accordance with the terms of that
program, and no Plan Administrator shall exercise any discretionary functions
with respect to option grants made thereunder.
2.
<PAGE> 3
III. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive options pursuant to
the Discretionary Option Grant Program shall be limited to the following
individuals: (i) key Employees (including officers and directors) and key
consultants of the Company or its parent or subsidiary corporations as the Plan
Administrator shall select from time to time and (ii) the non-employee Board
members (other than those at the time serving as members of the Primary
Committee). Non-employee Board members (including those at the time serving as
members of the Primary Committee) shall also be eligible to receive one or more
option grants pursuant to the provisions of the Automatic Option Grant Program.
B. Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to determine
the number of shares to be covered by each grant made under the Discretionary
Option Grant Program of Article Two, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or a
non-statutory option not intended to meet such requirements, the time or times
at which each such option is to be granted and is to become exercisable, and the
maximum term for which the option is to be outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
the Company's authorized but unissued or reacquired Common Stock, $.001 par
value per share ("Common Stock"). The maximum number of shares which may be
issued over the term of the Plan shall not exceed 5,427,000* shares. The total
number of shares issuable under the Plan shall be subject to adjustment from
time to time in accordance with Section IV.D below.
B. In no event may which any one individual
participating in the Plan be granted stock options or separately exercisable
stock appreciation rights for more than 1,000,000 shares of Common Stock in the
aggregate over the term of the Plan, subject to periodic adjustment in
accordance with the provisions of Section IV.D of this Article One. However, for
purposes of such limitation, any stock options or stock appreciation rights
granted prior to July 31, 1994 shall not be taken into account.
C. Should an option expire or terminate for any reason
prior to exercise or surrender in full (including options cancelled in
accordance with the cancellation-regrant
- --------
* The share reserve includes the 750,000 share increase authorized by
the Board on May 15, 1996, subject to stockholder approval at the 1996 Annual
Meeting. From and after June 30, 1996, the maximum number of shares which may be
issued under the Plan shall not exceed 3,009,908 shares, subject to adjustment
under Section IV.D.
3.
<PAGE> 4
provisions of Section IV of Article Two of the Plan), the shares subject to the
portion of the option not so exercised or surrendered shall be available for
subsequent option grants under the Plan. Shares subject to any option or portion
thereof surrendered or cancelled in accordance with Section V of Article Two of
the Plan or Section III of Article Three of the Plan and all share issuances
under the Plan, whether or not subsequently repurchased by the Company pursuant
to its repurchase rights under the Plan, shall reduce on a share-for-share basis
the number of shares of Common Stock available for subsequent option grants
under this Plan. In addition, should the exercise price of an outstanding option
under the Plan be paid with shares of Common Stock, then the number of shares
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised, and not by the net number of shares of
Common Stock issued to the option holder.
D. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
combination of shares, recapitalization or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, then, appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
number and/or class of securities for which any one individual may be granted
stock options and separately exercisable stock appreciation rights over the
remaining term of the Plan, (iii) the number and/or class of securities for
which options are to be granted to newly-elected or continuing non-employee
Board members pursuant to the automatic grant provisions of Article Three and
(iv) the number and/or class of securities and the option price per share in
effect under each outstanding option (including automatic grants made under
Article Three) in order to prevent the dilution or enlargement of benefits
thereunder.
4.
<PAGE> 5
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Discretionary option grants under the Plan shall be authorized
by action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not employees of the Company or its parent or subsidiary corporations
may only receive non-statutory options under the Plan. Each such discretionary
grant shall be evidenced by an instrument in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
and incorporate the terms and conditions specified below. Each instrument
evidencing an Incentive Option shall, in addition, comply with the applicable
provisions of Section II.
A. Option Price.
1. The option price per share shall be fixed by
the Plan Administrator but shall in no event be less than eighty-five percent
(85%) of the fair market value per share of Common Stock on the date of grant
(the "Grant Date"). For such purpose, the Grant Date shall be the date on which
the Plan Administrator approves the option or, if later, the date the optionee
commences Service (as defined below in Section I.C.6 of this Article Two).
2. If any individual to whom an Incentive
Option or a non-statutory option is to be granted pursuant to the provisions of
the Plan is on the Grant Date the owner of stock (as determined under Section
424(d) of the Internal Revenue Code) possessing 10% or more of the total
combined voting power of all classes of stock of the Company or any one of its
parent or subsidiary corporations (such person to be herein referred to as a 10%
Stockholder), then the option price per share shall not be less than one hundred
ten percent (110%) of the fair market value per share of Common Stock on the
Grant Date.
3. The option price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
VI of this Article Two, be payable in one of the alternative forms specified
below:
(i) payment in cash or check payable to the
Company's order; or
(ii) payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Company's
reported
5.
<PAGE> 6
earnings and valued at fair market value on the Exercise Date (as such
term is defined below); or
(iii) to the extent the option is exercised for
vested shares, payment through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
written instructions (I) to a Company-designated broker-dealer to
effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date, an
amount equal to the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Company by reason of such purchase
and (II) to the Company to deliver the certificates for the purchased
shares directly to such broker-dealer.
For purposes of this subparagraph 3, the Exercise Date shall
be the date on which written notice of the option exercise is delivered to the
Company. Except to the extent the sale and remittance procedure specified above
is utilized for the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
4. The fair market value per share of Common
Stock on any relevant date under subparagraph 1, 2 or 3 above (and for all other
valuation purposes under the Plan) shall be determined in accordance with the
following provisions:
(i) If the Common Stock is not at the time
listed or admitted to trading on any stock exchange but is traded on
the Nasdaq National Market, the fair market value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of fair market
value.
(ii) If the Common Stock is at the time listed or
admitted to trading on any stock exchange, then the fair market value
shall be the closing selling price per share of Common Stock on the
date in question on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such
prices are officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of Common Stock on such
exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date
for which such quotation exists.
6.
<PAGE> 7
B. Term and Exercise of Options. Each option granted
under the Plan shall become exercisable at such time or times, during such
period, and for such number of shares as shall be determined by the Plan
Administrator and set forth in the instrument evidencing such option; provided,
however, that no such option shall have a term in excess of ten (10) years from
the Grant Date. During the lifetime of the optionee, the option, together with
any stock appreciation rights pertaining to such option, shall be exercisable
only by the optionee and shall not be assignable or transferable by the optionee
except for any transfer of the option effected by will or by the laws of descent
and distribution following the optionee's death.
C. Effect of Termination of Service.
1. Should an optionee cease to remain in
Service for any reason (including death or permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code) while the holder of one or more
outstanding options under the Plan, then each such option shall in no event
remain exercisable for more than a twelve (12) month period (or such shorter
period determined by the Plan Administrator and specified in the instrument
evidencing the option) following the date of such cessation of Service. Under no
circumstances shall any such option be exercisable after the specified
expiration date of the option term. Each such option shall, during the
applicable twelve (12) month or shorter period, be exercisable only to the
extent of the number of vested shares (if any) for which the option is
exercisable on the date of the optionee's cessation of Service. Upon the
expiration of such twelve (12) month or shorter period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
exercisable. However, the option shall immediately, upon the optionee's
cessation of Service, terminate and cease to be outstanding to the extent it is
not otherwise at that time exercisable for vested shares.
2. Should the optionee cease Service and
thereafter die while holding one or more outstanding options under the Plan,
then each such option may be exercised, but only to the extent of the number of
vested shares (if any) for which the option is exercisable on the date of the
optionee's cessation of Service (less any shares for which the option is
subsequently exercised by optionee prior to his or her death), by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution, provided and only if such exercise occurs
prior to the earlier of (i) the first anniversary of the date of the optionee's
death or (ii) the specified expiration date of the option term. Upon the
occurrence of the earlier event, the option shall terminate and cease to be
exercisable.
3. Should the optionee die prior to cessation
of Service, then each option under the Plan held by such optionee at the time of
death may be subsequently exercised, for all or any part of the vested shares of
Common Stock at the time subject to such option, by the personal representative
of the optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance
7.
<PAGE> 8
with the laws of descent and distribution, provided and only if such exercise
occurs prior to the earlier of (i) the first anniversary of the date of the
optionee's death or (ii) the specified expiration date of the option term. Upon
the occurrence of the earlier event, the option shall terminate and cease to be
exercisable.
4. If (i) the optionee's Service is terminated
for misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement or any unauthorized disclosure or use of
confidential information or trade secrets) or (ii) the optionee makes or
attempts to make any unauthorized use or disclosure of confidential information
or trade secrets of the Company or its parent or subsidiary corporations, then
in any such event each outstanding option held by the optionee under the Plan
shall immediately terminate and cease to be exercisable.
5. Notwithstanding subparagraphs 1 and 2 above,
the Plan Administrator shall have complete discretion, exercisable either at the
time the option is granted or at any while the option remains outstanding, to
establish as a provision applicable to the exercise of one or more options
granted under the Plan that during the limited period of exercisability
following cessation of Service as provided in Section I.C.1 above or following
the Employee's death as provided in Section I.C.2 or Section I.C.3 above, the
option may be exercised not only with respect to the number of vested shares for
which it is exercisable at the time of the optionee's cessation of Service or
death but also with respect to one or more subsequent installments of
purchasable shares in which the optionee would otherwise have vested had such
cessation of Service not occurred.
6. For purposes of the foregoing provisions of
this Section I of Article Two (and all other provisions of the Plan), unless it
is specifically provided otherwise in the option agreement evidencing the option
grant and/or the purchase agreement evidencing the shares purchased under such
option, the optionee shall be deemed to remain in Service for so long as such
individual renders services on a periodic basis to the Company or any parent or
subsidiary corporation in the capacity of an Employee, a non-employee member of
the board of directors or an independent consultant or advisor. The optionee
shall be considered to be an Employee for so long as such individual remains in
the employ of the Company or one or more of its parent or subsidiary
corporations subject to the control and direction of the employer entity not
only as to the work to be performed but also as to the manner and method of
performance.
D. Stockholder Rights. An option holder shall have none
of the rights of a stockholder with respect to any shares covered by the option
until such individual shall have exercised the option, paid the option price for
the purchased shares and been issued a stock certificate for those shares. No
adjustment shall be made for dividends or distributions (whether paid in cash,
securities or other property) for which the record date is prior to the date
such stock certificate is issued.
8.
<PAGE> 9
E. Repurchase Rights. The shares of Common Stock
acquired upon the exercise of options granted under the Plan may be subject to
repurchase by the Company in accordance with the following provisions:
1. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the optionee cease Service while holding such unvested shares,
then the Company shall have the right to repurchase, at the option exercise
price paid per share, any or all of those unvested shares. Any such repurchase
right shall be exercisable by the Company (or its assignees) upon such terms and
conditions (including the establishment of the appropriate vesting schedule and
other provisions for the expiration of such right in one or more installments
over the optionee's period of Service) as the Plan Administrator may specify in
the instrument evidencing such right.
2. The Plan Administrator may assign the
Company's repurchase rights under subparagraph 1 above to any person or entity
selected by the Plan Administrator, including one or more stockholders of the
Company.
3. All of the Company's outstanding repurchase
rights shall automatically terminate, and all shares subject to such terminated
rights shall immediately vest in full, upon the occurrence of any Corporate
Transaction under Section III of Article Two, except to the extent that: (i) any
such repurchase right is, in connection with the Corporate Transaction, to be
assigned to the successor corporation (or parent thereof) or (ii) such
termination is precluded by other limitations imposed by the Plan Administrator
at the time the repurchase right is granted.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under the Plan. Only Employees may be granted
Incentive Options. Options which are specifically designated as "non-statutory"
options when issued under the Plan shall not be subject to such terms and
conditions.
A. Option Price. The option price per share of the
Common Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the fair market value per share of Common Stock on the
Grant Date.
B. Dollar Limitation. The aggregate fair market value
(determined as of the respective Grant Date or Dates) of the Common Stock for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Company or its parent or subsidiary corporations) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two or more such options which become exercisable for
the first time in the same calendar year, the foregoing limitation on
9.
<PAGE> 10
the exercisability thereof as Incentive Options shall be applied on the basis of
the order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive
Option is to be granted pursuant to the provisions of the Plan is on the Grant
Date a 10% Stockholder, then the option shall not have a term in excess of five
(5) years from the Grant Date.
Except as modified by the preceding provisions of this Section
II, all the provisions of the Plan shall be applicable to the Incentive Options
granted hereunder.
III. CORPORATE TRANSACTION
A. In the event of one or more of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the
Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the
State of the Company's incorporation;
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Company; or
(iii) any reverse merger in which the Company is
the surviving entity, but in which fifty percent (50%) or
more of the Company's outstanding voting stock is transferred
to holders different from those who held the stock
immediately prior to such merger,
each option outstanding under the Plan shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to that option and may be exercised for all or any portion of such
shares. However, no such acceleration of the outstanding options under the Plan
shall occur if and to the extent (i) the outstanding options are, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof or (ii) the acceleration of the options is subject to other applicable
limitations imposed by the Plan Administrator at the time of grant. Immediately
following the consummation of the Corporate Transaction, all outstanding options
under the Plan shall, except to the extent assumed by the successor corporation
or its parent company, terminate and cease to be outstanding.
B. If the Company is the surviving entity in any merger
or other business combination, then each option which remains outstanding under
the Plan immediately after such merger or other business combination shall be
appropriately adjusted to apply and
10.
<PAGE> 11
pertain to the number and class of securities which would be issuable, in
consummation of such merger or business combination, to an actual holder of the
same number of shares of Common Stock as are subject to such option immediately
prior to such merger or business combination, and appropriate adjustments shall
also be made to the option price payable per share, provided the aggregate
option price payable for the option shares shall remain the same. Appropriate
adjustments shall also be made to the class and number of securities available
for issuance under the Plan on both an aggregate and per participant basis
following the consummation of such merger or business combination.
C. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction shall remain exercisable as an Incentive
Option only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a non-statutory
option under the Federal tax laws.
D. The grant of options under this Plan shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND NEW GRANT OF OPTIONS
The Primary Committee shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Plan (other than
the automatic grants made pursuant to Article Three) and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of the fair market value per share of Common
Stock on the new Grant Date (or one hundred percent (100%) of such fair market
value in the case of an Incentive Option or, in the case of a 10% Stockholder,
one hundred ten percent (110%) of such fair market value).
V. SURRENDER OF OPTIONS FOR CASH OR STOCK
A. One or more option holders may be granted, upon such
terms and conditions as the Plan Administrator may establish at the time of the
option grant or at any time thereafter, the right to surrender all or part of an
unexercised option in exchange for a distribution equal in amount to the excess
of (i) the fair market value (on the surrender date) of the number of shares in
which the optionee is at the time vested under the surrendered option or portion
thereof over (ii) the aggregate option price payable for those vested shares.
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution
11.
<PAGE> 12
to which the option holder shall accordingly become entitled under this Section
V may be made in shares of Common Stock valued at fair market value at date of
surrender, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the option holder shall retain whatever rights the option
holder had under the surrendered option (or surrendered portion thereof) on the
date of surrender and may exercise such rights at any time prior to the later of
(i) the expiration of the five (5)-business day period following receipt of the
rejection notice or (ii) the last day on which the option is otherwise
exercisable in accordance with the terms of the instrument evidencing such
option, but in no event may such rights be exercised at any time after ten (10)
years (or five (5) years in the case of a 10% Stockholder) after the date of the
option grant.
D. Notwithstanding the foregoing provisions of this
Section V, one or more officers of the Company subject to the short-swing profit
restrictions of the Federal securities laws may, in the Plan Administrator's
sole discretion, be granted limited stock appreciation rights in tandem with
their outstanding options under this Article Two. Each outstanding option with
such a limited stock appreciation right in effect for at least six (6) months
shall automatically be cancelled, to the extent exercisable for vested shares of
Common Stock, upon the occurrence of a Hostile Take-Over (as defined below), and
the optionee shall in return be entitled to a cash distribution from the Company
in an amount equal to the excess of (i) the fair market value (on the
cancellation date) of the number of shares in which the optionee is at the time
vested under the cancelled option or cancelled portion over (ii) the Take-Over
Price (as defined below) payable for such vested shares. Such cash distribution
shall be made within five (5) days following the consummation of the Hostile
Take-Over. Neither the approval of the Plan Administrator nor the consent of the
Board shall be required in connection with such option cancellation and cash
distribution. The balance (if any) of each such option shall continue in full
force and effect in accordance with the terms and conditions of the instrument
evidencing such grant.
E. For purposes of Section V.D, the following
definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event (i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board does not recommend such
stockholders to accept and (ii) more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer are accepted
from holders other than Section 16 Insiders.
12.
<PAGE> 13
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the fair market value per share on the date
of option cancellation, as determined pursuant to the valuation
provisions of Section I.A.4 of this Article Two, or (b) the highest
reported price per share of Common Stock paid in effecting such Hostile
Take-Over. However, if the cancelled option is an Incentive Option, the
Take-Over Price shall not exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grant under the Plan.
VI. FINANCING
The Plan Administrator may assist any optionee (including any
officer or director) in the exercise of one or more options under this Article
Two of the Plan by (a) authorizing the extension of a loan to such optionee from
the Company or (b) permitting the optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
loan or installment method of payment (including the interest rate and terms of
repayment) will be established by the Plan Administrator in its sole discretion;
provided, however, that loans and installment payments may be granted without
security or collateral, but the maximum credit available to the optionee shall
not exceed the sum of the aggregate option price of the purchased shares (less
their par value), plus any Federal and State income and employment tax liability
incurred by the optionee in connection with such exercise. The Plan
Administrator may, in its absolute discretion, determine that one or more loans
extended under this Section VI shall be subject to forgiveness by the Company in
whole or in part upon such terms and conditions as the Plan Administrator in its
discretion deems appropriate.
VII. EXTENSION OF EXERCISE PERIODS
The Plan Administrator shall have full power and authority
exercisable in its sole discretion to extend, at the time the option is granted
or at any time the option remains outstanding, the period of time for which the
option is to remain exercisable following the optionee's cessation of Service
from the twelve (12) month or shorter period set forth in the option agreement
to such greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the specified expiration date of the option term.
13.
<PAGE> 14
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. AUTOMATIC GRANTS
A. Grant Dates. Option grants shall be made pursuant to
the provisions of this Article Three as follows:
(i) Each individual who is serving as a Board
member on the date of the 1989 Annual Stockholders Meeting and is neither an
employee of the Company nor any of its parent or subsidiary corporations shall
automatically be granted on such date a non-statutory option under the Plan to
purchase 20,000 shares of Common Stock.
(ii) Each individual who first becomes a
non-employee Board member after the date of the 1989 Annual Stockholders
Meeting, whether through appointment by the Board or election by the Company's
stockholders, shall, on the date of such election or appointment, receive an
automatic option grant to purchase 20,000 shares of Common Stock.
(iii) Each individual who continues to serve as a
non-employee Board member shall receive additional automatic option grants, each
for 20,000 shares of Common Stock, at successive four (4)-year intervals over
his or her period of continued Board service. The first such additional grant
shall be made on the later of (A) the date of the 1994 Annual Stockholders
Meeting or (B) the date of the Annual Stockholders Meeting held in the calendar
year in which occurs the fourth anniversary of the grant date of the initial
automatic option grant made to such individual under this Article Three,
provided he or she is re-elected to the Board at that Annual Meeting. Additional
automatic grants for 20,000 shares each shall be made to such individual at
every fourth Annual Stockholders Meeting thereafter over such individual's
period of continued service as a non-employee Board member.
B. Limitation. Except for the automatic grants to be
made pursuant to the provisions of this Article Three, non-employee Board
members shall not be eligible to receive any additional option grants under this
Plan or any other stock plan of the Company (or its parent or subsidiary
corporations).
C. Adjustment. The number and/or class of securities
subject to each automatic option grant to be made to the non-employee Board
members under this Article Three shall be subject to periodic adjustment
pursuant to the applicable provisions of Section IV.D of Article One.
14.
<PAGE> 15
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Option Price. The option price per share shall be
equal to one hundred percent (100%) of the fair market value per share of Common
Stock on the automatic grant date.
B. Payment. The option price shall be payable in one of
the alternative forms specified below:
(i) payment in cash or check payable to the
Company's order; or
(ii) payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Company's
reported earnings and valued at fair market value on the Exercise Date
(as such term is defined below); or
(iii) to the extent the option is exercised for
vested shares, payment through a broker-dealer sale and remittance
procedure pursuant to which the optionee shall provide irrevocable
written instructions (I) to a Company-designated broker-dealer to
effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date, an
amount equal to the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Company by reason of such purchase
and (II) to the Company to deliver the certificates for the purchased
shares directly to such broker-dealer.
For purposes of this Section II.B, the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Company, and the fair market value per share of Common Stock on any relevant
date shall be determined in accordance with the provisions of Section I.A.4 of
Article Two. Except to the extent the sale and remittance procedure specified
above is utilized for the exercise of the option, payment of the option price
for the purchased shares must accompany such notice.
C. Option Term. Each automatic grant under this Article
Three shall have a maximum term of ten (10) years measured from the automatic
grant date.
D. Exercisability. Each automatic grant shall become
exercisable for all the option shares upon the optionee's completion of six (6)
months of Board service measured from the automatic grant date, but any shares
purchased under the option shall be subject to the repurchase rights of the
Company under Section II.E of this Article Three.
15.
<PAGE> 16
E. Repurchase Right. The shares purchased under each
automatic option grant shall be subject to repurchase by the Company, at the
option price paid per share, in the event the optionee ceases to serve as a
Board member. However, the Company's repurchase right shall lapse in accordance
with the following schedule:
(i) The repurchase right will lapse with respect
to 25% of the option shares upon the optionee's completion of one year
of Board service measured from the automatic grant date.
(ii) The repurchase right will lapse with respect
to the remaining option shares in a series of thirty-six (36)
successive equal monthly installments over the optionee's period of
continued Board service, with the first such installment to lapse on
the 13th calendar month after the automatic grant date.
(iii) The repurchase right shall also terminate in
its entirety should any of the following events occur prior to the
optionee's cessation of Board service: (A) the death or permanent
disability of the optionee, (B) a Change in Control under Section III
of this Article Three or (C) a Corporate Transaction under Section III
of this Article Three.
F. Non-Transferability. During the lifetime of the
optionee, the option, together with the special stock appreciation right
pertaining to such option under Section III.C of this Article Three, shall be
exercisable only by the optionee and shall not be assignable or transferable by
the optionee except for any transfer of the option effected by will or by the
laws of descent and distribution following the optionee's death.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to serve as a
Board member for any reason (other than death) while holding an automatic option
grant under this Article Three, then the optionee shall have a six (6)-month
period following the date of such cessation of Board service in which to
exercise that option for any or all of the shares of Common Stock in which the
optionee is vested at the time of such cessation of Board service. The option
shall immediately, upon the optionee's cessation of Board service for any
reason, terminate and cease to be outstanding with respect to any option shares
in which the optionee is not otherwise at that time vested.
2. Should the optionee die while a Board member
or during the six (6)-month period following his or her cessation of Board
service, then the option may subsequently be exercised, for any or all of the
shares of Common Stock in which the optionee is vested at the time of his or her
cessation of Board service (less any option shares subsequently purchased by the
optionee prior to death), by the personal representative of the optionee's
estate or by the person or persons to whom the option is transferred pursuant
16.
<PAGE> 17
to the optionee's will or in accordance with the laws of descent and
distribution. The right to exercise such option shall terminate upon the earlier
of (i) the first anniversary of the optionee's death or (ii) the expiration date
of the option term.
3. For purposes of this Article Three, an
optionee will be deemed to remain in Board service for so long as such optionee
remains a member of the Board or of the board of directors of any parent or
subsidiary corporation of the Company.
4. In no event shall any automatic grant under
this Article Three remain exercisable after the specified expiration date of the
ten (10)-year option term. Upon the expiration of the applicable exercise period
in accordance with subparagraphs 1 and 2 above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be exercisable with respect to any vested option shares for which
the option has not otherwise been exercised.
H. Stockholder Rights. The holder of an automatic option
grant under this Article Three shall have no stockholder rights with respect to
any shares covered by that option until such individual shall have exercised the
option, paid the exercise price for the purchased shares and been issued a stock
certificate for such shares. No adjustment shall be made for dividends or
distributions (whether paid in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
I. Remaining Terms. The remaining terms and conditions
of each automatic option grant shall be as set forth in the prototype
Non-Employee Director Automatic Grant Agreement attached as Exhibit A to the
Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction (as such
term is defined in Section III of Article Two above), the option shares at the
time subject to each automatic option grant outstanding under this Article Three
shall immediately vest in full so that each such option shall, immediately prior
to the specified effective date for the Corporate Transaction, become fully
exercisable for all of those shares as fully-vested shares of Common Stock and
may be exercised for all or any portion of those vested shares. Immediately
following the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to be outstanding,
unless assumed by the successor corporation or parent thereof.
B. In the event of any Change in Control of the Company,
the option shares at the time subject to each automatic option grant outstanding
under this Article Three shall immediately vest in full so that each such option
shall, immediately prior to the effective date of such Change in Control, become
fully exercisable for all of those shares as fully-vested shares of Common Stock
and may be exercised for all or any portion of those
17.
<PAGE> 18
vested shares. For purposes of this Article Three, a Change in Control shall be
deemed to occur in the event:
(i) any person or related group of persons
(other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
which the Board does not recommend the Company's stockholders to
accept; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least two-thirds of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
C. Upon the occurrence of a Hostile Take-Over, each
automatic option grant at the time outstanding under this Article Three shall
automatically be cancelled, provided that option has been so outstanding for a
period of at least six (6) months. The optionee shall in return receive a cash
distribution from the Company in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
cancelled option (whether or not those shares are vested) over (ii) the
aggregate option price payable for such shares. The cash distribution payable
upon such cancellation shall be made within five (5) days following the
consummation of the Hostile Take-Over. Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in connection with
such option cancellation and cash distribution.
D. Hostile Take-Over shall have the meaning assigned to
such term in Section V.E of Article Two, and the Take-Over Price per share shall
be deemed to be equal to the greater of (a) the fair market value per share on
the option cancellation date, as determined pursuant to the valuation provisions
of Section I.A.4 of Article Two, or (b) the highest reported price per share of
Common Stock paid in effecting such Hostile Take-Over.
E. The shares of Common Stock subject to each option
cancelled in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
18.
<PAGE> 19
F. The automatic option grants outstanding under this
Article Three shall in no way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program, and any
automatic option grants outstanding under this Article Three, may not be amended
at intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.
19.
<PAGE> 20
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, (i) no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance with Section IV of Article Three. In addition, the Board shall not,
without the approval of the stockholders of the Company, (i) increase the
maximum number of shares issuable under the Plan or the number of shares for
which any one individual participating in the Plan may be granted stock options
and separately exercisable stock appreciation rights over the remaining term of
the Plan, except for permissible adjustments under Section IV.D of Article One
or Section III.B of Article Two, (ii) materially modify the eligibility
requirements for the grant of options under the Plan or (iii) otherwise
materially increase the benefits accruing to participants under the Plan.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Company's 1981 Stock Option Plan was initially
adopted by the Board in October 1981. The 1981 Stock Option Plan was restated in
its entirety by the Board on December 16, 1986, and such restatement was
approved by the stockholders on February 26, 1987. The Plan as so restated was
subsequently amended on several occasions, and those amendments were approved by
the Company's stockholders on August 3, 1988 and August 2, 1989. On May 13,
1992, the Plan was further restated by the Board, and the 1992 restatement was
subsequently approved by the Company's stockholders. On August 18, 1994, the
Plan was again restated to authorize the automatic option grants provided
pursuant to Section I.A.(iii) of Article Three. Such restatement was approved by
the Company's stockholders at the 1995 Annual Meeting. On November 8, 1995 the
Board further amended the Plan to authorize the appointment of a secondary
committee of Board Members to administer the Discretionary Option Grant Program
of Article Two of the Plan with respect to individuals other than Section 16
Insiders.
B. The provisions of the 1994 restatement shall apply
only to options granted under the Plan on or after August 18, 1994. All options
issued and outstanding under the Plan prior to such date shall continue to be
governed by the terms and conditions of the Plan (and the instrument evidencing
each such option) as in effect on the date each such option was previously
granted, and nothing in the 1994 restatement shall be deemed to affect or
otherwise modify the rights or obligations of the holders of those options.
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C. The special sale and remittance procedure for the
exercise of outstanding options under the Plan shall be in effect for all
currently-outstanding options which already include such procedure as a method
of exercise and for all options granted after May 13, 1992. In addition, such
procedure shall be available for all non-statutory options currently held by
officers and directors which do not otherwise include such procedure and for any
disqualifying dispositions of Incentive Option shares effected after May 13,
1992.
D. The Plan was amended on May 15, 1996 to (i) increase
the maximum number of shares of Common Stock authorized for issuance over the
term of the Plan by an additional 750,000 shares and (ii) allow the non-employee
Board members (other than those at the time serving as members of the Primary
Committee). However, no shares granted on the basis of the 750,000-share
increase to the Plan shall become exercisable in whole or in part unless and
until such increase is approved by the Corporation's stockholders. Should such
stockholder approval not be obtained at the 1996 Annual Meeting, then any
options granted on the basis of the 750,000-share increase shall terminate
without ever becoming exercisable for any of the option shares, and no further
option grants shall be made on the basis of such share increase. In addition,
without such stockholder approval, the non-employee Board members (other than
those serving on the Primary Committee) shall not become eligible to receive
option grants under the Discretionary Option Grant Program, but will continue to
participate in the Automatic Option Grant Program.
E. Unless sooner terminated in accordance with Section
III of Articles Two and Three, the Plan shall terminate upon the earlier of (i)
August 16, 2005 or (ii) the date on which all shares available for issuance
under the Plan shall have been issued or cancelled pursuant to the exercise of
options or stock appreciation rights granted hereunder. If the date of
termination is determined under clause (i) above, then any options outstanding
on such date shall thereafter continue to have force and effect in accordance
with the provisions of the instruments evidencing such options.
F. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided (i) an amendment to increase the maximum
number of shares issuable under the Plan is adopted by the Board prior to the
initial grant of any such option and within one year thereafter such amendment
is approved by the stockholders of the Company and (ii) each option so granted
is not to become exercisable, in whole or in part, at any time prior to the
obtaining of such stockholder approval.
III. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
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IV. MISCELLANEOUS PROVISIONS
A. The implementation of the Plan, the granting of any
option hereunder, and the issuance of stock upon the exercise or surrender of
any such option shall be subject to the procurement by the Company of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the stock issued pursuant to it.
B. Neither the action of the Company in establishing or
restating the Plan, nor any action taken by the Plan Administrator hereunder,
nor any provision of the Plan shall be construed so as to grant any individual
the right to remain in the employ or service of the Company (or any parent or
subsidiary) for any period of specific duration, and the Company (or such parent
or subsidiary corporation) may terminate such individual's employment or service
at any time and for any reason, with or without cause.
22.
