<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 240.14a-11(c) or
Section 240.14a-12
IMP, INC.
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction: $13,000,000
(5) Total fee paid: $2,600 at the time of filing preliminary
proxy.
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date filed:
<PAGE> 2
IMP, INC.
2830 North First Street
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 1996
TO THE STOCKHOLDERS OF IMP, INC.:
The Annual Meeting of Stockholders of IMP, Inc. (the
"Company") will be held at the Le Baron Hotel, 1350 North First Street, San
Jose, California on Wednesday, August 21, 1996, at 2:00 p.m. (the "Annual
Meeting") for the following purposes:
1. To elect the Board of Directors to serve until the next
Annual Meeting and until their successors are elected and qualified;
2. To approve an amendment to the Stock Option Plan (the
"Option Plan") to (i) increase the number of shares of Common Stock reserved for
issuance by an additional 750,000 shares and (ii) allow the non-employee members
of the Board of Directors to participate in the Discretionary Option Grant
Program in effect under the Option Plan.
3. To approve the 1996 Employee Stock Purchase Plan (the "1996
Purchase Plan") as the successor to the Company's 1987 Purchase Plan, pursuant
to which 750,000 shares of Common Stock will be reserved for issuance.
4. To ratify the appointment of Price Waterhouse as the
Company's independent auditors for the fiscal year ending March 30, 1997; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this Notice. Any stockholders of record at the
close of business on June 22, 1996 will be entitled to vote at the Annual
Meeting and at any adjournment thereof. The transfer books will not be closed. A
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection at the offices of the Company. If you do not plan to attend the
Annual Meeting in person, please sign, date and return the enclosed proxy in the
envelope provided. If you attend the Annual Meeting and vote by ballot your
proxy will be revoked automatically and only your vote at the Annual Meeting
will be counted. The prompt return of your proxy will assist us in preparing for
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
San Jose, California Charles S. Isherwood
July 8, 1996 Secretary
<PAGE> 3
IMP, INC.
2830 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 21, 1996
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
IMP, Inc., a Delaware corporation (the "Company"), for use at the annual meeting
of stockholders to be held on August 21, 1996 (the "Annual Meeting"). The Annual
Meeting will be held at 2:00 p.m. at the Le Baron Hotel, 1350 North First
Street, San Jose, California. Stockholders of record on June 22, 1996 will be
entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and accompanying proxy (the "Proxy") and Notice of
Annual Meeting were first mailed to all stockholders entitled to vote on or
about July 8, 1996.
VOTING
On June 22, 1996, the record date for determination of stockholders
entitled to vote at the Annual Meeting, there were 29,133,073 shares of Common
Stock outstanding. No shares of the Company's preferred stock are outstanding.
Each stockholder is entitled to one vote for each share of Common Stock held by
such stockholder. All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions will be counted towards the tabulations of
votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved or not.
REVOCABILITY OF PROXIES
Any person giving a Proxy has the power to revoke it at any time before
its exercise. It may be revoked by filing with the Secretary of the Company at
the Company's principal executive offices, IMP, Inc., 2830 North First Street,
San Jose, California, 95134, a notice of revocation or another signed Proxy with
a later date. You may also revoke your Proxy by attending the Annual Meeting and
voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees or agents
of the Company. No compensation will be paid to these individuals for any such
services. Except as described above, the Company does not presently intend to
solicit proxies other than by mail.
<PAGE> 4
SHARE OWNERSHIP
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of March 31, 1996 for
(i) each director and nominee, (ii) all persons who are beneficial owners of
five percent (5%) or more of the Company's Common Stock, (iii) the executive
officers named in the compensation tables, and (iv) all current directors and
executive officers of the Company as a group. Unless otherwise indicated, each
of the stockholders has sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Percent of Total
Name Shares Shares Outstanding(1)
---- --------- ---------------------
<S> <C> <C>
Barry M. Carrington(2).......................... 679,202 2.33%
Zvi Grinfas(3).................................. 497,977 1.70%
David A. Laws (4)............................... 112,903 *
Peter D. Olson(5)............................... 133,750 *
Bernard V. Vonderschmitt(6)..................... 52,000 *
Robert Crossley(7).............................. 15,566 *
Charles S. Isherwood(8)......................... 142,307 *
All directors and officers as a
group (8 persons)(9)....................... 1,686,369 5.78%
</TABLE>
- -------------------
* Less than one percent (1%).
(1) Percentage of beneficial ownership is calculated assuming 29,133,000
shares of Common Stock were outstanding on March 31, 1996. This
percentage may include Common Stock of which such individual or entity
has the right to acquire beneficial ownership within sixty days of
March 31, 1996, including but not limited to the exercise of an option;
however, such Common Stock shall not be deemed outstanding for the
purpose of computing the percentage owned by any other individual or
entity. Such calculation is required by General Rule 13d-3(d)(1)(i)
under the Securities Exchange Act of 1934.
(2) Includes 6,500 shares held in trust for Mr. Carrington's children, for
which he serves as trustee, as to which shares Mr. Carrington disclaims
beneficial ownership. Also includes 374,473 shares issuable upon
exercise of options within sixty (60) days of March 31, 1996.
(3) Includes 28,750 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
(4) Includes 112,500 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
(5) Includes 28,750 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
(6) Includes 40,000 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
(7) Includes 10,943 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
-2-
<PAGE> 5
(8) Includes 120,000 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
(9) Includes 744,703 shares issuable upon exercise of options within sixty
(60) days of March 31, 1996.
-3-
<PAGE> 6
- -------------------------------------------------------------------------------
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
The persons named below are nominees for director to serve until the
next annual meeting of stockholders and until their successors have been elected
and qualified. The Company's Bylaws provide that the authorized number of
directors shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of stockholders. The authorized number of
directors is currently five (5), but will be set at four (4) as of the date of
the Annual Meeting. The Board of Directors has selected four (4) nominees, all
of which are currently directors of the Company. Proxies cannot be voted for a
greater number of persons than four (4). Each person nominated for election has
agreed to serve if elected and management has no reason to believe that any
nominee will be unavailable to serve. Unless otherwise instructed, the
proxyholders will vote the proxies received by them for the nominees named
below. The four (4) candidates receiving the highest number of affirmative votes
of the shares entitled to vote at the Annual Meeting will be elected directors
of the Company.
NOMINEES
Set forth below is information regarding the nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of March 31, 1996.
<TABLE>
<CAPTION>
FIRST YEAR ELECTED
NAME AGE DIRECTOR
---- --- ------------------
<S> <C> <C>
Zvi Grinfas 55 1981
David A. Laws 54 1996
Peter D. Olson 53 1989
Bernard V. Vonderschmitt 72 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Grinfas, 55, a co-founder of the Company, has been a director of
the Company since its organization in January 1981. He served as Senior Vice
President for the Company, managing the Business Development Group, until
December 1984. At that time he became Senior Vice President, Engineering, a
position he held until May 1986, when he became Vice President, Business
Development and Sales Director of Southern Europe of IMP Europe Limited. Mr.
Grinfas ceased working for IMP Europe Limited in December 1988, and has been
employed as a consultant since that time, including serving in the function of
General Manager, Microelectronic Operations for Elron Electronics Industries,
Ltd. from February 1989 through February 1990.
Mr. Laws, 54, 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.
Mr. Olson, 53, has been a director of the Company since August 1989.
Since July 1994, Mr. Olson has been President of Spatial Media, Inc. Mr. Olson
was a co-founder of Octel Communications Corporation ("Octel"), a
telecommunications company, and served as Executive Vice President and Chief
Technical Officer of Octel from 1982 to July 1994.
-4-
<PAGE> 7
Mr. Vonderschmitt, 72, was a co-founder of Xilinx, Inc. ("Xilinx"), a
supplier of field programmable gate arrays. He has served as the President of
Xilinx since February 1984 and is currently a director of Xilinx. Mr.
Vonderschmitt also serves as a director on the boards of directors of Chips and
Technologies, Inc., Credence Systems Corporation and Sanmina Corporation, as
well as various private companies. He has been a director of the Company since
February 1991.
There are no family relationships among executive officers or directors
of the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1996, the Board of Directors
held four (4) meetings. As of March 31, 1996, the Company had four standing
Committees: an Audit Committee, a Compensation Committee, a Nominating Committee
and a Stock Option Committee.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing reports of the
Company's external auditors regarding the Company's accounting practices and
systems of internal accounting controls. This Committee currently consists of
Messrs. Grinfas, Olson and Vonderschmitt. This Committee held four (4) meetings
during the last fiscal year.
The Compensation Committee reviews and approves the Company's general
compensation policies and sets compensation levels for the Company's executive
officers. This Committee currently consists of Messrs. Grinfas, Olson and
Vonderschmitt. This Committee held two (2) meetings during the last fiscal year.
The Nominating Committee is responsible for recommending nominees for
members of the Company's Board of Directors. This Committee currently consists
of Messrs. Laws, Olson and Vonderschmitt. This Committee held one (1) meeting
during the last fiscal year. The Nominating Committee has not instituted
proceedings to consider nominees recommended by security holders, but may do so
in the future.
The Stock Option Committee has been granted separate but concurrent
jurisdiction to make option grants under the Company's Discretionary Option
Grant Program to individuals that are not subject to the short-swing trading
restrictions under the federal securities laws. This Committee currently
consists of Mr. Laws. This Committee held no meetings during the last fiscal
year, but acted pursuant to written consent on seventeen (17) occasions.
No incumbent director serving for the full fiscal year attended fewer
than 75% of the aggregate number of meetings of the Board of Directors and
meetings of Committees of the Board on which he serves.
DIRECTORS' COMPENSATION
Each non-employee member of the Board of Directors receives $1,500 for
each full fiscal quarter that he serves as a member of the Board of Directors,
and $1,000 for each meeting he attends. Mr. Grinfas does not receive fees, but
instead receives reimbursement for his travel expenses incurred in attending
meetings of the Board of Directors, which totaled approximately $24,000 in
fiscal 1996. In addition, non-employee members of the Board are eligible to
receive options to purchase shares of the Company's Common Stock.
Each individual newly elected or appointed as a non-employee member of
the Board will be granted on such date of election or appointment an automatic
option grant for 20,000 shares of Common Stock under the Company's Stock Option
Plan (the "Option Plan"). Each individual who continues to serve as a
non-employee Board member will 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
will 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, provided he or she is re-elected
to the Board at that Annual Meeting. Additional automatic grants for 20,000
shares each will be made to such individual at every fourth
-5-
<PAGE> 8
Annual Stockholders Meeting thereafter over such individual's period of
continued service as a non-employee Board member.
Each such grant becomes exercisable for all of the shares upon the
optionee's completion of six (6) months of service on the Board and becomes
immediately exercisable for all of the option shares if the Company is acquired
by merger, asset sale or hostile take-over. The option shares are subject to
repurchase at the original exercise price if the optionee ceases Board service
prior to vesting in the shares. The Board member will vest in twenty-five
percent (25%) of the option shares upon completion of one (1) year of Board
service, and the balance will vest in thirty-six (36) successive equal monthly
installments over the optionee's continued period of Board service, subject to
accelerated vesting upon the optionee's death or disability or if the Company is
acquired by merger, asset sale or hostile take-over. Such options have a maximum
term of ten (10) years, subject to earlier termination upon the optionee's
cessation of Board service. Upon the successful completion of a hostile tender
offer for more than fifty percent (50%) of the Company's outstanding Common
Stock, each automatic option grant will be cancelled, and the non-employee Board
member will be entitled to a cash distribution from the Company based upon the
tender-offer price.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominees listed
herein.
-6-
<PAGE> 9
- -------------------------------------------------------------------------------
PROPOSAL NO. 2
APPROVAL AND RATIFICATION OF AMENDMENT TO THE STOCK OPTION PLAN
- -------------------------------------------------------------------------------
INTRODUCTION
The Company's stockholders are being asked to approve an amendment to
the Company's Stock Option Plan (the "Option Plan") which will increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Option Plan by an additional 750,000 shares and allow the non-employee
members of the Board of Directors to participate in the Discretionary Option
Grant Program in effect under the Option Plan. The purpose of the new amendment
is to (i) assure that the Company will continue to have a sufficient reserve of
Common Stock available under the Option Plan to attract and retain the services
of key individuals essential to the Company's long-term growth and success and
(ii) enhance the equity incentives available under the Option Plan for
non-employee Board members in order to provide them with an opportunity to
acquire a more substantial stock ownership interest in the Company. The
amendment was adopted by the Board of Directors on May 15, 1996, subject to
stockholder approval at the 1996 Annual Meeting.
The following is a summary of the principal features of the Option Plan
as amended, together with the applicable tax and accounting implications for the
Company and the participants. However, the summary does not purport to be a
complete description of all the provisions of the Option Plan. Any stockholder
of the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the Secretary of the Company at the Company's principal
executive offices in San Jose, California.
The Option Plan was originally adopted by the Board in October 1981 and
subsequently approved by the stockholders. A restatement of the Option Plan was
adopted by the Board on December 16, 1986 and approved by the stockholders on
February 26, 1987. The Board amended the Option Plan on May 3, 1989 to establish
an automatic grant program for non-employee Board members, and such amendment
was approved by the stockholders on August 2, 1989. The Option Plan was
subsequently amended by the Board on both May 13, 1992 and August 18, 1994, and
those amendments were subsequently approved by the stockholders at the 1992 and
1995 Annual Meetings, respectively.
STRUCTURE
The Option Plan is divided into two separate components: the
Discretionary Option Grant Program and the Automatic Option Grant Program. Under
the Discretionary Option Grant Program, options may be issued to key employees
(including officers and directors) and key consultants in the service of the
Company (or its parent or subsidiary companies) who contribute to the
management, growth and financial success of the Company. Under the Automatic
Option Grant Program, non-employee Board members will receive a series of option
grants over their period of continued service on the Board.
ADMINISTRATION
The Compensation Committee of the Board administers the provisions of
Discretionary Option Grant Program with respect to all officers and directors of
Company subject to the short-swing trading restrictions of the federal
securities laws. With respect to all other participants, the Discretionary
Option Grant Program may be administered by either the Compensation Committee or
a committee of one or more Board members appointed by the Board or by the entire
Board itself. Currently, the Compensation Committee administers the
Discretionary Option Grant Program with respect to all participants. The Board
has also created a Stock Option Committee that has separate but concurrent
jurisdiction with the Compensation Committee to make option grants under the
Discretionary Option Grant Program to individuals who are not subject to the
short-swing trading restrictions of the federal securities laws. Each entity,
whether the Compensation Committee or the secondary committee or the Board, will
be referred to in this summary as Plan Administrator with respect to its
particular administrative functions under the Discretionary Option Grant
Program, and each such Plan Administrator will have complete
-7-
<PAGE> 10
discretion (subject to the provisions of the Option Plan) to authorize grants
under the Discretionary Option Grant Program within the scope of its
administrative jurisdiction.
Accordingly, the Plan Administrator will have full authority to
determine the eligible individuals who are to receive option grants, the time or
times when the option grants are to be made, the number of shares of Common
Stock subject to each such grant, the date or dates on which the option is to
become exercisable, and the maximum term for which the option is to be
outstanding. The Plan Administrator will also have the discretion to determine
whether the granted option is to be an incentive stock option under the Federal
tax laws or a nonstatutory option. In addition, the Plan Administrator will have
full authority to accelerate the exercisability of one or more outstanding
options at any time upon such terms and conditions as it deems appropriate.
Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program, and no Plan
Administrator will have any discretionary authority with respect to those option
grants.
SHARE RESERVE
A total of 5,427,000 shares of Common Stock have been reserved for
issuance over the ten-year term of the Option Plan, including the 750,000-share
increase for which stockholder approval is sought under this Proposal. In no
event, however, may any one participant in the Option Plan be granted stock
options or separately exercisable stock appreciation rights for more than
1,000,000 shares in the aggregate under the Option Plan. For purposes of such
limitation, stock options and stock appreciation rights granted prior to July
31, 1994 will not be taken into account.
As of March 31, 1996 approximately 2,417,092 shares of Common Stock had
been issued upon the exercise of options granted under the Option Plan,
1,888,888 shares of Common Stock were subject to outstanding options under the
Option Plan, and 1,121,020 shares of Common Stock were available for issuance
under future option grants, assuming approval of this Proposal No. 2.
Should an option expire or terminate for any reason prior to exercise
in full, the shares subject to the portion of the option not so exercised will
be available for subsequent issuance under the Option Plan. Shares subject to
any option surrendered in accordance with the stock appreciation right
provisions of the Option Plan will not be available for subsequent issuance.
ELIGIBILITY
Officers and other key employees of the Company and its parent or
subsidiary corporations (whether now existing or subsequently established), key
consultants in the service of the Company or such parent or subsidiary
corporations and non-employee Board members (other than those serving on the
Compensation Committee) will be eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Non-employee Board members (including
those serving on the Compensation Committee) will also participate in the
Automatic Option Grant Program.
As of March 31, 1996, approximately 433 employees (including four
executive officers) were eligible to participate in the Discretionary Option
Grant Program, and three non-employee Board members were eligible to participate
in the Automatic Option Grant Program.
-8-
<PAGE> 11
PRICE AND EXERCISABILITY
The exercise price of shares issued under the Discretionary Option
Grant Program may not be less than 85% of the fair market value per share of
Common Stock on the grant date, and no option may be outstanding for more than a
10-year term. If the granted option is intended to be an incentive stock option
under the Federal tax laws, the option price must not be less than 100% of the
fair market value per share of Common Stock on the grant date. Options issued
under the Discretionary Option Grant Program generally become exercisable in a
series of installments over the optionee's period of service with the Company.
The option price is payable in cash or in shares of Common Stock.
Outstanding options may also be exercised through a cashless exercise procedure
pursuant to which a designated brokerage firm is to effect an immediate sale of
the shares purchased under the option and pay over to the Company, out of the
sales proceeds available on the settlement date, sufficient funds to cover the
option price for the purchased shares plus all applicable withholding taxes. The
Plan Administrator may also assist any optionee (including an officer) in the
exercise of outstanding options under the Discretionary Option Grant Program by
authorizing a loan from the Company or permitting the optionee to pay the option
price in installments over a period of years. The terms and conditions of any
such loan or installment payment will be established by the Plan Administrator
in its sole discretion, and may include provision for forgiveness of such
indebtedness in whole or in part, but in no event may the maximum credit
extended to the optionee exceed the aggregate option price payable for the
purchased shares (less the par value), plus any Federal and state income or
employment taxes incurred in connection with the purchase.
No optionee is to have any stockholder rights with respect to the
option shares until such optionee has exercised the option, paid the option
price for the purchased shares and been issued a stock certificate for those
shares. Options are not assignable or transferable other than by will or the
laws of inheritance following the optionee's death and, during the optionee's
lifetime, the option may be exercised only by the optionee.
VALUATION
For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value per share of
Common Stock on any relevant date will be the closing selling price per share on
such date on the Nasdaq National Market. On March 29, 1996 the fair market value
per share of Common Stock was $7.00 on the basis of the closing selling price on
that date.
TERMINATION OF SERVICE
All options granted under the Discretionary Option Grant Program must
be exercised within twelve months (or such shorter period as the Plan
Administrator may establish at the time of grant) after the optionee ceases for
any reason to be in the employ or service of the Company or its parent or
subsidiary corporations. The Plan Administrator will, however, have complete
discretion to extend the period of time for which any option is to remain
exercisable following the optionee's cessation of employment or service, but
under no circumstances may an option be exercised after the specified expiration
date of the option term. If the optionee's employment is terminated for
misconduct or the optionee makes or attempts to make any unauthorized use of
confidential information of the Company or its parent or subsidiary
corporations, then any outstanding option held by the optionee will immediately
terminate.
Each option under the Discretionary Option Grant Program will be
exercisable only to the extent of the number of shares for which that option is
exercisable at the time of the optionee's cessation of employment or service,
unless the Plan Administrator accelerates the exercisability of the option in
whole or in part. Such acceleration may be authorized at any time while the
option remains outstanding, whether before or after the optionee's actual
cessation of service.
-9-
<PAGE> 12
CORPORATE TRANSACTION
Each outstanding option under the Discretionary Option Grant Program
will become immediately exercisable for all of the shares of Common Stock
subject to such option in the event of a Corporate Transaction (as defined
below), unless (i) that option is assumed by the successor corporation (or its
parent corporation) or replaced with a comparable option to purchase shares of
stock of the successor corporation (or its parent corporation) or (ii) the
acceleration of such option is precluded by other limitations imposed by the
Plan Administrator at the time of grant. A Corporate Transaction includes one or
more of the following transactions:
a. 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;
b. the sale, transfer or other disposition of all or substantially all
of the assets of the Company; or
c. 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.
Immediately following the consummation of the Corporate Transaction,
all outstanding options will terminate, except to the extent assumed by the
successor corporation (or its parent company).
STOCK APPRECIATION RIGHTS
At the discretion of the Plan Administrator, options may be granted
with stock appreciation rights. A stock appreciation right grants the holder the
right to surrender all or part of an unexercised option under the Discretionary
Option Grant Program in exchange for a distribution from the Company equal in
amount to the excess of (i) the fair market value (on the date of surrender) of
the shares of Common Stock in which the optionee is at the time vested under the
surrendered option over (ii) the aggregate option price payable for such shares.
The appreciation distribution may be made, at the discretion of the Plan
Administrator, either in shares of Common Stock valued at fair market value on
the date of surrender, in cash or in a combination of cash and Common Stock. No
surrender of an option will be effective unless it is approved by the Plan
Administrator.
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
discretion, be granted limited stock appreciation rights in tandem with their
outstanding options under the Discretionary Grant Program. Any option with such
a limited stock appreciation right in effect for at least six months will
automatically be cancelled upon the occurrence of a Hostile Take-Over, and the
optionee will in return be entitled to a cash distribution from the Company in
an amount equal to the excess of (i) the Take-Over Price of the number of shares
of Common Stock in which the optionee is at the time vested under the cancelled
option over (ii) the aggregate exercise price payable for such vested shares.
Neither the Plan Administrator's approval nor the Board's consent will be
required in connection with such cancellation and cash distribution.
For purposes of such option cancellation provisions, the following
definitions are in effect under the Option Plan:
1. Hostile Take-Over means the acquisition by any person or related
group of persons (other than the Company or its affiliates) of securities
possessing more than 50% of the 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, provided at least 50%
of the securities so acquired in such tender or exchange offer are obtained from
holders other than the officers and directors of the Company.
-10-
<PAGE> 13
2. Take-Over Price means the greater of (A) the fair market value of
the shares subject to the cancelled option, measured on the cancellation date in
accordance with the valuation provisions of the Option Plan described above or
(B) the highest reported price per share paid in effecting the Hostile
Take-Over.
The acceleration of options in the event of a Corporate Transaction and
the cash-out of options upon a Hostile Take-Over may be seen as anti-takeover
provisions and may have the effect of discouraging a merger proposal, takeover
attempt or other effort to gain control of the Company.
CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator has the authority to effect, at any time and
from time to time, with the consent of the affected optionees, the cancellation
of any or all options outstanding under the Discretionary Option Grant Program
and to grant in substitution therefor new options covering the same or different
numbers of shares of Common Stock but having an exercise price per share not
less than 85% of the fair market value per share of Common Stock on the new
grant date (or 100% of fair market value if the new option is to be an incentive
stock option).
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, option grants have been made
to the current non-employee Board members, and option grants will be made to
individuals who join the Board as non-employee Board members in the future.
These special grants may be summarized as follows:
1. Each individual who was serving as a non-employee Board member at
the time of the 1989 Annual Meeting was automatically granted on such date a
nonstatutory stock option to purchase 20,000 shares of Common Stock at the fair
market value of the Common Stock on such date.
2. Each individual who first becomes a non-employee Board member at any
time after the 1989 Annual Meeting, whether through election by the stockholders
or appointment by the Board, will be automatically granted, at the time of such
initial election or appointment, a nonstatutory stock option to purchase 20,000
shares of Common Stock.
3. Each individual who continues to serve as a non-employee Board
member will 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 will be made upon 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, provided he or she is re-elected to the Board at that Annual
Meeting. Additional automatic grants for 20,000 shares each will be made to such
individual at every fourth Annual Stockholders Meeting thereafter over such
individual's continued period of service as a non-employee Board member.
Each option grant under the Automatic Option Grant Program is subject
to the following terms and conditions:
- The option price per share will be equal to 100% of the fair market
value per share of Common Stock on the automatic grant date, and each option is
to have a maximum term of ten years measured from the grant date.
- Each automatic option grant will become exercisable for the option
shares six months after the grant date, provided the optionee continues as a
member of the Board.
- Shares purchased under the automatic option grant will be subject to
repurchase by the Company, at the option price paid per share, in the event the
optionee should cease to be a Board member prior to vesting in those shares. The
option shares will vest in a series of installments over the optionee's period
of Board service as follows: 25% of the option shares will vest upon optionee's
completion of one year of Board service
-11-
<PAGE> 14
measured from the automatic grant date, and the balance of the option shares
will vest in a series of 36 successive equal monthly installments upon the
optionee's completion of each additional month of Board service thereafter. Full
and immediate vesting of the option shares will occur upon the optionee's death
or permanent disability while a Board member.
- Each automatic option will remain exercisable for a six-month period
following the optionee's termination of service as a Board member for any reason
other than death. Should the optionee die while serving as a Board member or
during the six-month period following his or her cessation of Board service,
then such option will remain exercisable for a 12-month period following such
optionee's death and may be exercised by the personal representatives of the
optionee's estate or the person to whom the grant is transferred by the
optionee's will or the laws of inheritance. In no event, however, may the option
be exercised after the expiration date of the option term. During the applicable
exercise period, the option may not be exercised for more than the number of
shares (if any) in which the optionee is vested at the time of his or her
cessation of Board service.
- The option will become immediately exercisable for all of the shares
of Common Stock at the time subject to such option in the event of a Corporate
Transaction (see "Corporate Transaction" above). Immediately following the
consummation of the Corporate Transaction, the option will terminate, except to
the extent assumed by the successor corporation (or its parent company).
- The option will become immediately exercisable for all of the shares
of Common Stock at the time subject to such option in the event of a Change in
Control. A Change in Control will be deemed to occur under the Option Plan in
the event:
(A) any person or related group of persons (other than the
Company or any affiliate) acquires beneficial ownership of securities
possessing more than 50% of the 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
(B) there is a change in the composition of the Board over a
period of 24 consecutive months or less such that a majority of the
Board members cease, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who are
either (i) Board members who have served continuously during such
period (continuing Board members) or (ii) Board members who were
elected or nominated during such period by continuing Board members.
- Each automatic option in effect for at least six months will
automatically be cancelled upon the occurrence of a Hostile Take-Over (see
"Stock Appreciation Rights" above), and the optionee will in return be entitled
to a cash distribution from the Company in an amount equal to the excess of (A)
the Take-Over Price of the shares of Common Stock at the time subject to the
cancelled option (whether or not the option is otherwise at the time exercisable
for such shares) over (B) the aggregate exercise price payable for such shares.
- The remaining terms and conditions of the option grants under the
Automatic Option Grant Program will in general conform to the terms described
above for option grants made under the Discretionary Option Grant Program and
will be incorporated into the option agreement evidencing the automatic grant.
EXCESS GRANTS
The Option Plan permits the grant of options to purchase shares of the
Company's Common Stock in excess of the number of shares then available for
issuance under the Option Plan. Any option so granted cannot be exercised prior
to stockholder approval of an amendment increasing the number of shares
available for issuance under the Option Plan.
-12-
<PAGE> 15
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the
Option Plan by reason of (A) a Corporate Transaction or (B) any stock split,
stock dividend, combination of shares, recapitalization or other similar change
in the corporate structure of the Company effected without receipt of
consideration, then unless such change results in the termination of all
outstanding options pursuant to the Corporate Transaction provisions of the
Option Plan, appropriate adjustments will be made to (i) the maximum number
and/or class of securities available for issuance under the Option Plan, (ii)
the maximum number and class of securities for which any one participant may be
granted stock options and separately exercisable stock appreciation rights under
the Option Plan, (iii) the number and/or class of securities and price per share
in effect under each outstanding option under the Discretionary Option Grant
Program, (iv) the number and/or class of securities per non-employee Board
member for which automatic option grants are subsequently to be made under the
Automatic Option Grant Program, and (v) the number and/or class of securities
and price per share of the Common Stock in effect under each automatic grant
outstanding under the Automatic Option Grant Program. The purpose of such
adjustments to the outstanding options is to preclude the enlargement or
dilution of rights and benefits under such options.
STOCK OPTIONS
The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table of the Executive Compensation and
Related Information section of this Proxy Statement and the various indicated
individuals and groups, the number of shares of Common Stock subject to options
granted under the Option Plan during the last fiscal year, together with the
weighted average exercise price payable per share.
<TABLE>
<CAPTION>
====================================================================================================================
NUMBER OF OPTION SHARES WEIGHTED AVERAGE
NAME AND POSITION EXERCISE PRICE ($)
====================================================================================================================
<S> <C> <C>
Barry M. Carrington,
President and Chief Executive 0
Officer (1) --
====================================================================================================================
David A. Laws,
Senior Vice President, 0 --
Marketing and Business Development(2)
====================================================================================================================
Charles S. Isherwood,
Senior Vice President, Corporate Services, 0 --
Chief Financial Officer and Secretary
====================================================================================================================
Robert Crossley,
Vice President, Administration 0 --
====================================================================================================================
All current executive officers as a group (4 persons) 0 --
====================================================================================================================
Zvi Grinfas, Director 0 --
====================================================================================================================
Peter D. Olson, Director 0 --
====================================================================================================================
Bernard V. Vonderschmitt, Director 20,000 $5.94
====================================================================================================================
All directors (other than executive officers) as a group (3 20,0000 $5.94
persons)
====================================================================================================================
All employees, including current officers who are not executive
officers, as a group (433 persons) 359,490 $5.50
====================================================================================================================
</TABLE>
(1) Mr. Carrington resigned as President and Chief Executive Officer and
was appointed Chairman of the Board of the Company on May 15, 1996.
(2) Mr. Laws was appointed President and Chief Executive Officer of the
Company on May 15, 1996.
-13-
<PAGE> 16
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend or modify the Option Plan in any or all respects
whatsoever. However, the Board will not, without stockholder approval, increase
the maximum number of shares available for issuance under the Option Plan except
in the event of certain changes to the Company's capitalization, and certain
other amendments may require stockholder approval pursuant to applicable laws or
regulations.
The Board may terminate the Option Plan at any time, but in all events
the Option Plan will terminate upon the earlier of August 16, 2005 or the date
all shares available for issuance under the Option Plan are issued or cancelled
pursuant to the exercise or surrender of options granted under the Option Plan.
Any options outstanding at the time of the termination of the Option Plan will
remain in force in accordance with the provisions of the instruments evidencing
such grants.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1995 Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two years after the option grant date and more
than one year after the exercise date. If either of these two holding periods is
not satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
-14-
<PAGE> 17
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any charge to
the Company's earnings, but the Company must disclose, in pro-forma statements
to the Company's financial statements, the impact those options would have upon
the Company's reported earnings were the value of those options at the time of
grant treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented
at the 1996 Meeting and entitled to vote on Proposal No. 2 is required for
approval of the amendment to the Option Plan. The Board of Directors believes
that the amendment to the Option Plan is necessary in order to continue to
provide equity incentives to attract and retain the services of key employees,
consultants and non-employee Board members. For this reason, the Board of
Directors recommends that the stockholders vote FOR this Proposal No. 2
Should such stockholder approval not be obtained, then the
750,000-share increase to the share reserve will not be implemented, and any
stock options granted on the basis of that increase will immediately terminate
without becoming exercisable for the shares of Common Stock subject to those
options. No additional options will be granted on the basis of such share
increase, and the Option Plan will terminate as to future issuances once the
existing share reserve as last approved by the stockholders has been issued. In
addition, without such stockholder approval, the non-employee Board members will
not become eligible to receive option grants under the Discretionary Option
Grant Program, but will continue to participate in the Automatic Option Grant
Program.
NEW PLAN BENEFITS
There have been no option grants made on the basis of the 750,000
shares increase which forms part of the amendment to the Option Plan for which
stockholder approval is sought under this Proposal No. 2.
-15-
<PAGE> 18
- -------------------------------------------------------------------------------
PROPOSAL NO. 3
APPROVAL OF 1996 EMPLOYEE STOCK PURCHASE PLAN
- -------------------------------------------------------------------------------
The Company's stockholders are being asked to approve the 1996 Employee
Stock Purchase Plan (the "1996 Purchase Plan"), pursuant to which 750,000 shares
of Common Stock will be reserved for issuance. The Board of Directors has
authorized the implementation of the 1996 Purchase Plan as the successor to the
Company's 1987 Employee Stock Purchase Plan (the "Predecessor Plan"). The
Predecessor Plan terminated on April 30, 1996, when the remainder of the share
reserve under that plan was issued to the participating employees, and no
further shares of Common Stock are available for issuance under the Predecessor
Plan.
The 1996 Purchase Plan is intended to provide eligible employees of the
Company and its participating affiliates with the continuing opportunity to
acquire a propriety interest in the Company through participation in a
payroll-deduction based employee stock purchase plan designed to operate in
compliance with Section 423 of the Internal Revenue Code. The 1996 Purchase Plan
was adopted by the Board on May 15, 1996, and the initial purchase period under
the 1996 Purchase Plan will begin on October 1, 1996. However, no purchase
rights under the 1996 Purchase Plan will be exercised, and no shares of Common
Stock will be issued under the 1996 Purchase Plan unless it is approved by the
Company's stockholders at the Annual Meeting.
The following is a summary of the principal features of the 1996
Purchase Plan. The summary, however, does not purport to be a complete
description of all the provisions of the 1996 Purchase Plan. Any stockholder of
the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the Secretary of the Company at the Company's principal
executive offices in San Jose, California.
SHARE RESERVE
750,000 shares of Common Stock have been reserved for issuance over the
ten-year term of the 1996 Purchase Plan. This share reserve will be drawn from
either newly-issued shares of Common Stock or shares of Common Stock repurchased
by the Company, including shares repurchased on the open market.
In the event any change is made to the outstanding shares of Common
Stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without the Company's receipt of consideration, appropriate adjustments
will be made to (i) the class and maximum number of securities issuable under
the 1996 Purchase Plan, including the class and number of securities issuable
per participant on any one purchase date, and (ii) the class and maximum number
of securities subject to each outstanding purchase right and the purchase price
payable per share thereunder.
ADMINISTRATION
The 1996 Purchase Plan will be administered by the Compensation
Committee of the Company's Board of Directors. Such committee, as Plan
Administrator, will have full authority to adopt such rules and procedures as it
may deem necessary for proper plan administration and to interpret the
provisions of the 1996 Purchase Plan. All costs and expenses incurred in plan
administration will be paid by the Company without charge to participants.
-16-
<PAGE> 19
OFFERING PERIODS AND PURCHASE PERIODS
The 1996 Purchase Plan will be implemented in a series of successive
offering periods, each with a maximum duration (not to exceed twenty-four (24)
months) designated by the Plan Administrator prior to the start date. The
initial offering period will begin on October 1, 1996 and will continue through
September 30, 1998. The next offering period will start on the first business
day in October 1998, and any subsequent offering periods will begin as
designated by the Plan Administrator.
Each offering period will be comprised of a series of successive
semi-annual purchase periods. Purchase periods will run from the first business
day in April to the last business day in September each year and from the first
business day in October each year to the last business day in March in the
following year. Accordingly, there will be a maximum of four (4) semi-annual
purchase periods within each offering period. Shares of Common Stock will be
purchased on behalf of participants on the last day of each such semi-annual
period. The initial purchase period will begin on the October 1, 1996 start date
of the initial offering period under the 1996 Purchase Plan and will end on
March 31, 1997.
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 will automatically terminate immediately after the purchase of shares of
Common Stock on that purchase date, and a new offering period will begin on the
next business day. The new offering period will 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.
ELIGIBILITY
Any individual who is employed on a basis under which he or she is
regularly expected to work for more than 20 hours per week for more than five
months per calendar year in the employ of the Company or any participating
parent or subsidiary corporation (including any corporation which subsequently
becomes such at any time during the term of the 1996 Purchase Plan) will be
eligible to participate in the 1996 Purchase Plan.
An 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 (the first business day in February, May, August or
November each year) within that offering period. An individual who first becomes
an eligible employee after such start date may join the offering period on any
quarterly entry date within that offering period on which he or she is an
eligible employee.
The participant will be granted a separate purchase right for each
offering period in which he or she participates. The purchase right will be
granted at the time the participant joins the offering period and will allow
such individual to purchase shares of Common Stock at semi-annual intervals over
the remainder of that offering period with his or her accumulated payroll
deductions.
As of March 31, 1996, approximately 433 employees, including four
executive officers, were eligible to participate in the 1996 Purchase Plan.
-17-
<PAGE> 20
PAYROLL DEDUCTIONS AND STOCK PURCHASES
Each participant may authorize periodic payroll deductions in any
multiple of 1% (up to a maximum of 15%) of his or her base salary each offering
period to be applied to the acquisition of Common Stock on each semi-annual
purchase date. On each semi-annual purchase date (the last business day in March
and September of each year), the payroll deductions of each participant will
automatically be applied to the purchase of whole shares of Common Stock at the
purchase price in effect for the participant for that purchase date.
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 will
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.
VALUATION
The fair market value per share of Common Stock on any relevant date
will be the closing selling price per share on such date on the Nasdaq National
Market. On March 29, 1996, the fair market value per share of Common Stock was
$7.00 per share.
SPECIAL LIMITATIONS
The Purchase Plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following limitations:
(i) No purchase right may be granted to any individual who owns stock
(including stock purchasable under any outstanding purchase rights)
possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company of any of its affiliates.
(ii) No purchase right granted to a participant may permit such
individual to purchase Common Stock at a rate greater than $25,000
worth of such Common Stock (valued at the time such purchase right is
granted) for each calendar year the purchase right remains outstanding
at any time.
(iii) No participant may purchase more than 1,000 shares of Common
Stock on any semi-annual purchase date.
TERMINATION OF PURCHASE RIGHTS
The purchase right will immediately terminate upon the participant's
termination of employment or loss of eligible employee status or upon his or her
affirmative withdrawal from the offering period. The payroll deductions
collected for the purchase period in which the purchase right terminates will be
refunded.
-18-
<PAGE> 21
ASSIGNABILITY
No purchase right will be assignable or transferable and will be
exercisable only by the participant.
STOCKHOLDER RIGHTS
No participant will have any stockholder rights with respect to the
shares of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
ACQUISITION
Should the Company be acquired by merger or asset sale during an
offering period, all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of such acquisition. The purchase price
for each participant will be 85% of the lower of (i) the fair market value per
share of Common Stock on the participant's entry date into the offering period
in which such acquisition occurs or (ii) the fair market value per share of
Common Stock immediately prior to such acquisition.
PRO-RATION OF SHARES
Should the total number of shares of Common Stock to be purchased
pursuant to outstanding purchase rights on any particular date exceed the number
of shares then available for issuance under the 1996 Purchase Plan, then the
Plan Administrator will 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, will be refunded.
AMENDMENT AND TERMINATION
The 1996 Purchase Plan will terminate upon the earliest to occur of (i)
September 30, 2006, (ii) the date on which all available shares are issued or
(iii) the date on which all outstanding purchase rights are exercised in
connection with an acquisition of the Company.
The Board may at any time alter, suspend or discontinue the 1996
Purchase Plan as of the close of any purchase period. However, the Board may
not, without stockholder approval, increase the number of shares issuable under
the 1996 Purchase Plan, and certain other amendments may require stockholder
approval pursuant to applicable laws or regulations.
FEDERAL TAX CONSEQUENCES
The 1996 Purchase Plan is intended to be an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code. Under a
plan which so qualifies, no taxable income will be recognized by a participant,
and no deductions will be allowable to the Company, in connection with the grant
or the exercise of an outstanding purchase right. Taxable income will not be
recognized until there is a sale or other disposition of the shares acquired
under the 1996 Purchase Plan or in the event the participant should die while
still owning the purchased shares.
-19-
<PAGE> 22
If the participant sells or otherwise disposes of the purchased shares
within two (2) years after his or her entry date into the offering period in
which such shares were acquired or within one (1) one year after the actual
purchase date of those shares, then the participant will recognize ordinary
income in the year of sale or disposition equal to the amount by which the fair
market value of the shares on the purchase date exceeded the purchase price paid
for those shares, and the Company will be entitled to an income tax deduction,
for the taxable year in which such sale or disposition occurs, equal in amount
to such excess.
If the participant sells or disposes of the purchased shares more than
two (2) years after his or her entry date into the offering period in which such
shares were acquired and more than one (1) one year after the actual purchase
date of those shares, then the participant will recognize ordinary income in the
year of sale or disposition equal to the lesser of (i) the amount by which the
fair market value of the shares on the sale or disposition date exceeded the
purchase price paid for those shares or (ii) 15% of the fair market value of the
shares on his or her entry date into the offering period, and any additional
gain upon the disposition will be taxed as a long-term capital gain. The Company
will not be entitled to any income tax deduction with respect to such sale or
disposition.
If the participant still owns the purchased shares at the time of
death, the lesser of (i) the amount by which the fair market value of the shares
on the date of death exceeds the purchase price or (ii) 15% of the fair market
value of the shares on his or her entry date into the offering period in which
those shares were acquired will constitute ordinary income in the year of death.
ACCOUNTING TREATMENT
Under current accounting rules, the issuance of shares of Common Stock
under the 1996 Purchase Plan will not result in a compensation expense
chargeable against the Company's reported earnings. However, the Company must
disclose, in pro-forma statements to the Company's financial statements, the
impact the purchase rights granted under the 1996 Purchase Plan would have upon
the Company's reported earnings were the value of those purchase rights treated
as compensation expense.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the 1996 Annual
Meeting is required for approval of the 1996 Purchase Plan. Should such
stockholder approval not be obtained, then all outstanding purchase rights under
the 1996 Purchase Plan will terminate without being exercised, and no further
purchase rights will be granted and no stock issuances will be made under the
1996 Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE 1996 PURCHASE PLAN. THE BOARD BELIEVES THAT IT IS IN THE BEST
INTERESTS OF THE COMPANY TO CONTINUE A PROGRAM OF STOCK OWNERSHIP FOR THE
COMPANY'S EMPLOYEES IN ORDER TO PROVIDE THEM WITH A MEANINGFUL OPPORTUNITY TO
ACQUIRE A SUBSTANTIAL PROPRIETARY INTEREST IN THE COMPANY AND THEREBY ENCOURAGE
SUCH INDIVIDUALS TO REMAIN IN THE COMPANY'S SERVICE AND MORE CLOSELY ALIGN THEIR
INTERESTS WITH THOSE OF THE STOCKHOLDERS.
PLAN BENEFITS
Each participant in the 1996 Purchase Plan will have the right to
purchase a maximum of 1,000 shares of Common Stock on each purchase date within
the initial offering period beginning October 1, 1996. However, neither the
actual number of shares of Common Stock which may be issued per participant on
each such purchase date nor the actual purchase price to be paid per share is
determinable at this time. The table below shows, as to each of the executive
officers named in the Summary Compensation Table which appears in the Executive
Compensation section of this Proxy Statement and the various indicated groups,
the following information with respect to transactions under the Predecessor
Plan effected during the period from January 1, 1995 to the April 30, 1996
termination date of that plan: (i) the number of shares of Common Stock
purchased under the Predecessor Plan during that period and (ii) the weighted
average purchase price paid per share of Common Stock in connection with such
purchases.
-20-
<PAGE> 23
<TABLE>
<CAPTION>
====================================================================================================================
NUMBER OF SHARES PURCHASED WEIGHTED AVERAGE
NAME AND POSITION EXERCISE PRICE ($)
====================================================================================================================
<S> <C> <C>
Barry M. Carrington, 0 --
President and Chief Executive
Officer (1)
====================================================================================================================
David A. Laws,
Senior Vice President, 94 $5.95
Marketing and Business Development(2)
====================================================================================================================
Charles S. Isherwood,
Senior Vice President, Corporate Services, 0 --
Chief Financial Officer and Secretary
====================================================================================================================
Robert Crossley,
Vice President, Administration 304 $5.95
====================================================================================================================
All current executive officers as a group (4 persons) 398 $5.95
====================================================================================================================
All employees, including current officers who are not executive
officers, as a group (433 persons) 377,287 $1.55
====================================================================================================================
</TABLE>
(1) Mr. Carrington resigned as President and Chief Executive Officer and
was appointed Chairman of the Board of the Company on May 15, 1996.
(2) Mr. Laws was appointed President and Chief Executive Officer of the
Company on May 15, 1996.
-21-
<PAGE> 24
- -------------------------------------------------------------------------------
PROPOSAL NO. 4
RATIFICATION OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
The Company is asking the stockholders to ratify the selection of Price
Waterhouse as the Company's independent auditors for the fiscal year ending
March 30, 1997. The affirmative vote of the holders of a majority of the Common
Stock present or represented at the Annual Meeting will be required to ratify
the selection of Price Waterhouse.
In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the selection is ratified,
the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
stockholders.
Price Waterhouse has audited the Company's financial statements
annually beginning with the fiscal year ended March 27, 1994. Its
representatives are expected to be present at the Annual Meeting. They will have
the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of Price Waterhouse to serve as the Company's
independent auditors for the fiscal year ending March 30, 1997.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent (10%) stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than ten percent (10%) stockholders, except that Mr. Peter D. Olson,
a member of the Board of Directors, did not timely report a purchase of shares
in the open market in June 1995.
-22-
<PAGE> 25
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
As members of the Compensation Committee of the IMP, Inc. Board of
Directors ("Board"), it is our duty to set the base salary of executive officers
and to administer the Option Plan and the Employee Stock Purchase Plan (the
"Purchase Plan") under which grants may be made to such officers and other key
employees. In addition, we approve the individual bonus programs to be in effect
for executive officers each fiscal year and the base salaries of the Company's
executive officers.
For the 1996 fiscal year, the Committee established the compensation
payable to Mr. Carrington, President and Chief Executive Officer, and the
Company's other executive officers, Mr. Crossley, Vice President-Administration;
Mr. Isherwood, Senior Vice President-Corporate Services, Chief Financial Officer
and Secretary, and Mr. Laws, the Senior Vice President-Marketing and Business
Development.
GENERAL COMPENSATION POLICY. Each executive officer's compensation
package is comprised of three elements: (i) base salary which reflects
individual performance and Company performance and is designed generally to be
competitive with salary levels in the industry, (ii) annual bonus awards payable
in cash and tied to the Company's achievement of performance goals, and (iii)
long-term stock-based incentive awards which strengthen the mutuality of
interests between the executive officers and the Company's stockholders.
FACTORS. The primary factors which were considered in establishing the
components of each executive officer's compensation package for the 1996 fiscal
year are summarized below. The Committee may in its discretion apply entirely
different factors, particularly different measures of financial performance, in
setting executive compensation for future fiscal years.
* BASE SALARY. The base salary for each executive officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions with the Company's principal competitors, and internal comparability
standards, however, the Committee does not take into account any specific salary
surveys in setting the base salary levels for the Company's executive officers.
The Committee believes that the Company's most direct competitors for executive
talent are not necessarily all of the companies that the Company would use in a
comparison for shareholder returns. Therefore, the compensation comparison group
is not necessarily the same as the industry group index in the Performance Graph
below.
* ANNUAL INCENTIVE COMPENSATION. Targeted annual bonuses, set as a
targeted percentage of salary based on position, are earned by each executive
officer on the basis of the Company's achievement of certain sales and
profitability goals established by the Committee at the start of the fiscal
year. For fiscal year 1996, the performance targets were based on the Company's
1996 Operating Plan as approved by the Committee. Actual awards are subject to
decrease or increase on the basis of the Company's performance and at the
discretion of the Committee. Company performance for 1996 was measured on the
basis of annual revenue and earnings per share growth, as well as performance on
specific technical objectives. The revenue growth goal, earnings per share
growth goal, and technical objectives as a group were weighted equally in
determining bonuses. In 1996, the revenue growth goal was met, earnings per
share growth goal was met, and technical objectives as a group were completed as
targeted. Payouts to executive officers during fiscal year 1996 are illustrated
in the Summary Compensation Table below.
* LONG-TERM INCENTIVE COMPENSATION. The Committee periodically approves
grants of stock options under the Option Plan to the Company's executive
officers. The grants are designed to align the interests of each executive
officer with those of the stockholders and provide each individual with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. Each grant generally allows the officer to
acquire shares of Common Stock at a fixed price per share (the market price on
the grant date) over a specified period of time (up to 10 years), thus providing
a return to the executive officer only if the market price of the shares
appreciates over the option term. During the 1993 fiscal year, the Committee
approved an evergreen program under the Option Plan designed to provide for the
annual grant of options to ensure that top performing employees, including
executive officers, have a significant equity stake in the Company. The program
-23-
<PAGE> 26
takes into account the individual's option holdings, as well as direct stock
holdings, at the time annual awards are made. The size of the option grant to
each executive officer, generally is set to achieve a potential percentage
ownership stake in the Company that the Committee deems appropriate in order to
create a meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but also takes into account the individual's
potential for future responsibility and promotion over the option term and the
individual's personal performance in recent periods. Each such factor is given
equal weight. No option grants were made to the executive officers in fiscal
year 1996.
CEO COMPENSATION. The annual base salary for the Company's Chief
Executive Officer, Mr. Carrington was established by action of the full Board on
August 1, 1988 and remained in effect until March 28, 1994, when it was
increased in an amount consistent with merit increases awarded to all officers.
Mr. Carrington received a bonus of $12,825.00 for the 1996 fiscal year. No
option grant was made to Mr. Carrington during the 1996 fiscal year in view of
the significant equity stake in the Company that he currently holds.
We conclude our report with the acknowledgment that no member of the
Compensation Committee is a former or current officer or employee of the Company
or any of its subsidiaries except as follows: Mr. Grinfas was a co-founder of
the Company and served as Senior Vice President for the Company, managing the
Business Development Group, until December 1984. At that time he became Senior
Vice President, Engineering, a position he held until May 1986, when he became
Vice President, Business Development and Sales Director of Southern Europe of
IMP Europe Limited, at the time a subsidiary of the Company. Mr. Grinfas ceased
working for IMP Europe Limited in December 1988.
* COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m). Section 162(m)
of the Internal Revenue Code disallows a tax deduction to publicly held
companies for compensation paid to certain of their executive officers, to the
extent that compensation exceeds $1 million per covered officer in any fiscal
year. The limitation applies only to compensation which is not considered to be
performance-based. Non-performance based compensation paid to the Company's
executive officers for the 1996 fiscal year did not exceed the $1 million limit
per officer, and the Committee does not anticipate that the non-performance
based compensation to be paid to the Company's executive officers for fiscal
1997 will exceed that limit. The Company's Option Plan has been structured so
that any compensation deemed paid in connection with the exercise of option
grants made under that plan with an exercise price equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is very unlikely that the cash compensation payable to any of the Company's
executive officers in the foreseeable future will approach the $1 million limit,
the Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Committee will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1 million level.
Compensation Committee
Zvi Grinfas
Peter D. Olson
Bernard V. Vonderschmitt
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the foregoing report and the Performance Graph
which follows shall not be deemed to be incorporated by reference into any such
filings.
-24-
<PAGE> 27
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of the
other executive officers of the Company (determined as of the end of the last
fiscal year) whose total annual salary and bonus for the past fiscal year
exceeded $100,000 ("Named Executive Officers"), for services rendered in all
capacities to the Company and its subsidiaries for each of the last three (3)
fiscal years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
================================================================================================================
Long Term
Securities
Underlying Other
Name and Position Year Salary($)(1) Bonus($) Options(#) Compensation($)(2)
================================================================================================================
<S> <C> <C> <C> <C> <C>
Barry M. Carrington, 1996 182,906 12,825 0 2,304
President and Chief 1995 175,870 0 0 2,304
Executive Officer(3) 1994 165,110 4,013 0 2,304
- ----------------------------------------------------------------------------------------------------------------
David A. Laws, 1996 166,624 0 0 2,628
Senior Vice President, Marketing 1995 15,707 0 0 321
and Business Development(4) 1994 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------
Charles S. Isherwood, 1996 166,118 11,325 0 5,266
Senior Vice President, 1995 156,053 0 0 1,418
Corporate Services, Chief Financial 1994 146,269 3,546 20,000 5,616
Officer and Secretary
- ----------------------------------------------------------------------------------------------------------------
Robert Crossley, 1996 113,150 7,725 0 3,600
Vice President, Administration 1995 106,523 0 0 3,600
1994 95,920 2,275 0 3,276
================================================================================================================
</TABLE>
- ---------------
(1) Salary includes amounts deferred pursuant to the Company's 401(k) plan.
The amounts shown under the Bonus column include cash bonuses earned
for the indicated fiscal years.
(2) Represents the premium paid on behalf of each executive officer for
supplemental life insurance.
(3) Mr. Carrington resigned as President and Chief Executive Officer and
was appointed Chairman of the Board of the Company on May 15, 1996.
(4) Mr. Laws joined the Company in February 1995. He was appointed
President and Chief Executive Officer on May 15, 1996.
-25-
<PAGE> 28
STOCK OPTIONS
No stock options or stock appreciation rights were granted to the Named
Executive Officers during the 1996 fiscal year.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of stock
options during the 1996 fiscal year by the Named Executive Officers and the
unexercised options held as of the end of the 1996 fiscal year by such
individuals. For purposes of the latter calculation, the FY-End market value of
the shares is deemed to be the closing sale price of the Company's Common Stock
as reported on the National Association of Securities Dealers Automated
Quotations System on Friday, March 29, 1996. No stock appreciation rights were
exercised by the Named Executive Officers during the 1996 fiscal year, and no
stock appreciation rights were held by those individuals at the end of such
year.
<TABLE>
<CAPTION>
====================================================================================================================
Value of
Number of Number of Unexercised
Shares Unexercised In-the-Money
Acquired Value Options at Options at
on Realized(1) FY-End(#) FY-End ($1.78)
Exercise
====================================================================================================================
Name Exercisable Unexercisable Exercisable Unexercisable
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Barry M. Carrington 61,729 $309,262.29 374,473 0 $2,317,988 $ 0
- --------------------------------------------------------------------------------------------------------------------
David A. Laws 0 $ 0 104,166 295,834 $ 572,913 $1,627,087
- --------------------------------------------------------------------------------------------------------------------
Charles S. Isherwood 0 $ 0 119,166 834 $712,413 $ 4,687
- --------------------------------------------------------------------------------------------------------------------
Robert Crossley 34,623 $168,185.30 2,960 667 $16,854 $ 3,749
====================================================================================================================
</TABLE>
(1) Value realized is equal to the fair market value of the shares on the
date of exercise, less the aggregate exercise price.
-26-
<PAGE> 29
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
Except as indicated below, none of the Company's executive officers
have employment contracts or severance agreements with the Company, and their
employment may be terminated at any time at the discretion of the Board of
Directors.
In connection with the employment of David Laws as Senior Vice
President, Marketing and Business Development, the Company entered into an
employment agreement dated February 10, 1995 (the "Employment Agreement")
providing for initial annual base salary and bonus for fiscal year 1996 of
$160,000 and $40,000, respectively, subject to periodic increases over time. Mr.
Laws' fiscal year 1997 bonus is conditioned upon the Company achieving the
performance goals set forth in its annual plan as approved by the Company's
Board of Directors. The Employment Agreement further provides that should the
Company terminate Mr. Laws within the first year of his employment with the
Company without cause, Mr. Laws' salary and benefits will be continued for a
period of twelve (12) months from the date of such termination.
STOCK PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
for the last five-year period, assuming $100 invested on March 31, 1990 and the
reinvestment of dividends. Also depicted are the composite prices of companies
listed on the Nasdaq National Market-U.S. Companies Index and the Index of
Electronic Component Stocks on the Nasdaq National Market--comprised of
companies primarily engaged in the manufacture of electronic components and
accessories, also assuming $100 invested on March 31, 1990. This information has
been provided to the Company by the Center for Research in Securities Prices and
the Nasdaq National Market.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURNS
3/31/91 3/31/92 3/31/93 3/31/94 3/31/95 3/31/96
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IMP $100.00 $161.00 $223.00 $173.00 $173.00 $693.00
Nasdaq $100.00 $126.00 $146.00 $157.00 $176.00 $243.00
Nasdaq Component Stock $100.00 $123.00 $203.00 $246.00 $322.00 $423.00
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE> 30
This Section is not "Soliciting Material," is not deemed filed with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1992, the Company entered into an arrangement with Mr. A.
Kenneth Davis, Jr., the Company's then Executive Vice President and General
Manager-ASSP Group, which provides that if his employment had been terminated
prior to April 1, 1994 by: (a) reason of his death or disability, (b) reason of
a change in control of the Company, or (c) the Company for any reason, Mr. Davis
would have been entitled to twelve (12) months salary. If termination for any of
the above reasons occurs after April 1, 1994, he will be entitled to six (6)
months salary. In addition, if the termination were due to a change in control
of the Company, all of his then unexercisable options would become exercisable.
If the Company terminates him or if he dies or becomes disabled, then one-half
of his then unexercisable options would have become exercisable. The above
severance arrangement is subject to satisfaction of certain conditions on the
part of Mr. Davis. Mr. Davis ceased active employment with the Company on April
3, 1995. Pursuant to the terms of his employment agreement with the Company, and
provided that he continues to satisfy certain conditions, Mr. Davis will
continue to be paid by the Company through November 2, 1995 and one-half of his
unexercisable options on April 3, 1995 became exercisable.
In June 1993, the Company entered into an addendum (the "Technology
Addendum") to an existing Technology Transfer Agreement with South African Micro
Electronics Systems [Pty.], Ltd. ("SAMES"). Mr. Barry Carrington, a director of
the Company and its President and Chief Executive Officer, is a former director
of SAMES. Mr. Heinz Fellinger, a director of the Company until May 10, 1995, is
the Managing Director of SAMES. Pursuant to the Technology Addendum, the Company
licensed its proprietary 1.0 micron process technology to SAMES, in exchange for
a total payment price of $750,000, paid in a series of installments through
January 1, 1995. SAMES shall also pay the Company for technical services
rendered by the Company in connection with the license. In fiscal year 1993,
1994 and 1995, respectively, the Company purchased $0, $430,000 and $2,700,000
of inventory from SAMES.
In June 1993, the Company also entered into an addendum to its existing
Foundry Agreement with SAMES, where SAMES agreed to fabricate the Company's 1.0
micron products, and allocated fabrication capacity to the Company through 1996.
During fiscal 1996, the Company billed Spatial Media $200,000 in
engineering charges for the design of an integrated circuit. Peter D. Olson, a
member of the Company's Board of Directors, is the principal stockholder, Chief
Executive Officer and a member of the Board of Directors of Spatial Media.
STOCKHOLDER PROPOSALS FOR 1996 PROXY STATEMENT
Stockholder proposals that are intended to be presented at the
Company's annual meeting of stockholders to be held in 1997 must be received by
the Company no later than March 8, 1997 in order to be included in the proxy
statement and related proxy materials.
-28-
<PAGE> 31
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES
AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, IMP, INC.,
MS 200/JE, 2830 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95134.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the Annual Meeting. If other matters are properly
brought before the Annual Meeting, however, it is the intention of the persons
named in the accompanying proxy to vote the shares represented thereby on such
matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Charles S. Isherwood, Secretary
Dated: July 8, 1996
-29-
<PAGE> 32
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> 33
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> 34
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> 35
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> 36
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> 37
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> 38
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> 39
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> 40
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE
IMP, INC.
<PAGE> 41
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> 42
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> 43
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> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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> 50
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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
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> 60
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> 61
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> 62
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> 63
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.
20.
<PAGE> 64
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.
21.
<PAGE> 65
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.
<PAGE> 66
DETACH HERE IMP 1
PROXY
IMP, INC.
ANNUAL MEETING OF STOCKHOLDERS, AUGUST 21, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
IMP, INC.
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held on August 21, 1996
and the Proxy Statement and appoints David A. Laws and Charles S. Isherwood, and
each of them, as the Proxy of the undersigned, with full power of substitution,
to vote all shares of Common Stock of IMP, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Le Baron Hotel, 1350 North First Street, San Jose, California, on
Wednesday, August 21, 1996 at 2:00 p.m. (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the following manner set forth on
the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 67
DETACH HERE IMP 1
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR each of the directors listed below
and a vote FOR the other proposals. This Proxy, when properly executed, will be
voted as specified below. THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS LISTED BELOW AND FOR THE OTHER PROPOSALS IF NO SPECIFICATION IS MADE.
1. To elect the following directors to serve until the next annual
meeting of stockholders and until their successors are elected
and qualified.
Nominees: Zvi Grinfas, David A. Laws, Peter D. Olson,
Bernard V. Vonderschmitt
FOR WITHHELD
[ ] [ ]
[ ] __________________________________
For all nominees except as noted above
2. To approve an amendment to the Stock Option
Plan (the "Option Plan") to (i) increase the
number of shares of Common Stock reserved
for issuance by an additional 750,000 shares
and (ii) allow the non-employee members of FOR AGAINST ABSTAIN
the Board of Directors to participate in the [ ] [ ] [ ]
Discretionary Option Grant Program in effect
under the Option Plan.
3. To approve the 1996 Employee Stock [ ] [ ] [ ]
Purchase Plan as the successor to the
Company's 1987 Purchase Plan, pursuant to
which 750,000 shares of Common Stock will
be reserved for issuance.
4. To ratify the appointment of Price Waterhouse [ ] [ ] [ ]
LLP as the Company's independent auditors for
the fiscal year ending March 30, 1997, and
5. To transact such other business as may [ ] [ ] [ ]
properly come before the Annual Meeting or
any adjournment or postponement thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please sign your name.
Signature:________________ Date:_______ Signature:________________ Date:_______
