<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
</TABLE>
IMP, Inc.
Name of Person(s) Filing Proxy Statement (if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed
<PAGE> 2
IMP, INC.
2830 North First Street
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 14, 2000
TO THE STOCKHOLDERS OF IMP, INC.:
The Annual Meeting of Stockholders of IMP, Inc. (the "Company") will be
held at the executive offices of IMP, Inc., 2830 North First Street, San Jose,
California on June 14, 2000 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 and adopt the Phase 2 Stock Purchase Agreement dated
as of December 15, 1999 (the "Stock Purchase Agreement") between
the Company and Teamasia Semiconductors PTE Ltd., a Singapore
corporation ("Teamasia"), pursuant to which, among other things,
the Company will issue and sell to Teamasia an aggregate of
4,793,235 shares of common stock of the Company;
3. To approve and adopt an amendment to the Company's Certificate of
Incorporation (the "Certificate of Incorporation Amendment") to
that stockholder approval or unanimous approval by the Board of
Directors be required to approve any purchase of shares of stock
of the Company resulting in Teamasia and/or its affiliates
holding more than 51% of the Company's Common Stock on a fully
diluted basis;
4. To approve and adopt the 1999 IMP, Inc. Stock Option Plan;
5. To approve and adopt the 2000 IMP, Inc. Stock Option Plan;
6. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending
March 26, 2000; and
7. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES TO THE BOARD OF DIRECTORS,
"FOR" THE APPROVAL AND ADOPTION OF THE STOCK PURCHASE AGREEMENT, "FOR" THE
APPROVAL AND ADOPTION OF THE CERTIFICATE OF INCORPORATION AMENDMENT, "FOR" THE
APPROVAL AND ADOPTION OF THE 1999 IMP, INC. STOCK OPTION PLAN, "FOR" THE
APPROVAL AND ADOPTION OF THE 2000 IMP, INC. STOCK OPTION PLAN, AND "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice, which is incorporated herein by this
reference. Any stockholders of record at the close of business on April 26,
2000 will be entitled to vote at the Annual Meeting and 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 plan to
attend the Annual Meeting and vote by ballot, your proxy will be revoked
<PAGE> 3
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
/s/ Brad Whitney
Brad Whitney
Chief Executive Officer and President
San Jose
May 17, 2000
ii
<PAGE> 4
IMP, INC.
2830 North First Street
San Jose, California 95134
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2000
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 June 14, 2000 (the "Annual Meeting") and any
adjournment or postponement thereof. The Annual Meeting will be held at 2:00
p.m. at the executive offices of IMP, Inc., 2830 North First Street, San Jose,
California 95134. Stockholders of record on April 26, 2000 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 May 17, 2000.
VOTING
On April 26, 2000, there were approximately 4,050,801 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, with respect to
Proposal No. 3 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 use. 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 or 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. Teamasia has retained Mackenzie & Partners, Inc. to assist in
the solicitation of proxies for a customary fee plus reasonable out of pocket
expenses. Except for the compensation to a third party solicitation firm for
certain services, 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.
SHARE OWNERSHIP
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of April 26, 2000 for
(i) each director (ii) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (iii) the Company's Chief Executive
1
<PAGE> 5
Officer and the Company's four most highly paid executive officers who earned in
excess of $100,000 during the fiscal year ended March 28, 1999, 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>
----------------------------------------------------------------------------------
<S> <C> <C>
Number of Shares Percent of Total
Name Shares
Outstanding(1)
----------------------------------------------------------------------------------
Teamasia Semiconductors PTE Ltd. 671,173(2) 16.6%
James Phillips Ferguson(3) 2,500 *
Barry Wiley 0 *
Zvi Grinfas(4) 39,837 *
David A. Laws(5) 809 *
Peter D. Olson 2,084 *
Bernard V. Vonderschmitt 4,117 *
Jerry DaBell(6) 10,028 *
Moiz Khambaty 7,167 *
Subbarao Pinamaneni(7) 0 *
Tarsaim Batra 9,499 *
Ron Laugesen 11,512
Brad Whitney(8) 1,000 *
Joy Leo 0 *
All current directors and
executive officers as a 73,132 1.8%
group (9 persons)
------------------------------------
----------------------------------------------------------------------------------
</TABLE>
* Less than one percent (1%).
(1) Percentage of beneficial ownership is calculated assuming 4,050,801 shares
of Common Stock were outstanding on April 26, 2000. This percentage may
include Common Stock of which such individual or entity has the right to
beneficial ownership within 60 days of April 26, 2000, 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) This does not include the 4,793,235 Shares of Common Stock to be issued upon
the consummation of the transaction described in Proposal No. 2, below. The
address of Teamasia is PSA Building, P.O. Box 512, Singapore 911148.
(3) As of September 1999, Mr. Ferguson is no longer a director or officer of the
Company. Shares beneficially owned by Mr. Ferguson are in the name of the
Ferguson Family Trust.
(4) 1,298 of the shares beneficially owned by Mr. Grinfas are in the name of Zvi
and Eva Grinfas.
(5) Shares beneficially owned by Mr. Laws are in the name of the Laws Family
Trust. As of April, 1999, Mr. Laws is no longer an officer of the Company.
(6) As of March 2000, Mr. DaBell is no longer an officer of the Company. Shares
beneficially owned by Mr. DaBell are in the name of Jerry and Christy
DaBell.
(7) Mr. Pinamaneni is a Managing Director and stockholder of Teamasia
Semiconductors PTE Ltd. Mr. Pinamaneni disclaims beneficial ownership of the
Company's Common Stock owned by Teamasia Semiconductors PTE Ltd. (except to
the extent of his beneficial ownership therein).
(8) Shares beneficially owned by Mr. Whitney are in the name of Brad and Gail
Whitney.
2
<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 the stockholders. The authorized number of
directors is currently four (4). The Board of Directors has selected four (4)
nominees, of which four are currently directors of the Company. 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, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE FIRST YEAR ELECTED DIRECTOR
<S> <C> <C>
Brad Whitney 45 2000
Zvi Grinfas 59 1981
Subbarao Pinamaneni 46 1999
Bernard Vonderschmitt 76 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Whitney, 45, Chief Executive Officer and President, was appointed to
the Board of Directors in January 2000 to fill an existing vacancy. From 1998 to
1999 he served as Senior Vice President of New Business for Bourns, Inc. From
1992 until 1997 he served as President and Chief Operating Officer of Linfinity
Microelectronics, Inc.
Mr. Grinfas, 59, Chairman of the Board, is a co-founder of the Company
and 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 was then employed as a consultant, which included serving in the
function of General Manager, Microelectronic Operations for Elron Electronics
Industries, Ltd. from February 1989 through February 1990. Mr. Grinfas served as
Chief Executive Officer and President of the Company from August, 1999 until
January, 2000; after his service in these capacities, Mr. Grinfas has assumed a
reduced role in the management of the Company.
Mr. Vonderschmitt, 76, was co-founder of Xilinx, Inc. ("Xilinx"), a
supplier of field programmable gate arrays. He served as the President of Xilinx
from its inception in February 1984 to August 1994 and as it Chief Executive
Officer from August 1994 to January 1996 and is currently Chairman of the board
of directors of Xilinx. Mr. Vonderschmitt also serves as a director on the
boards of directors of Credence Systems Corporation and Sanmina Corporation, as
well as private companies. He has been a director of the Company since February
1991.
3
<PAGE> 7
Mr. Subbarao Pinamaneni, 46, has over 20 years of experience in the
semiconductor industry. He has worked for major semiconductor companies,
including National Semiconductor and Altera Semiconductors, in the United States
and Asia. His responsibilities have included managing packaging and testing
operations. Mr. Pinamaneni is the nominee to the Company's Board of Directors of
Teamasia Semiconductors (India) Ltd. pursuant to the provisions of the Stock
Purchase Agreement, dated October 8, 1999, by and between the Company and
Teamasia, a copy of which is included as Exhibit B to this Proxy Statement. In
April 1995, Mr. Pinamaneni filed a voluntary petition for Chapter 11 Bankruptcy
which case was concluded in November 1997. Mr. Pinamaneni serves as Managing
Director of Teamasia.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
During the fiscal year ended March 28, 1999, the Board of Directors held
seven (7) meetings. As of March 28, 1999, 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 accountants and reviewing reports of the
Company's external accountants regarding the Company's accounting practices and
systems of internal accounting controls. This Committee, during the fiscal year
ended March 28, 1999, consisted of Messrs. Grinfas, Olson and Vonderschmitt.
This Committee held zero (0) 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, during the fiscal year ended March 28, 1999, consisted
of Messrs. Grinfas, Olson and Vonderschmitt. This Committee held one (1) meeting
during the last fiscal year and also acted by unanimous written consent zero (0)
times.
The Nominating Committee is responsible for recommending nominees for
members of the Company's Board of Directors. This Committee, during the fiscal
year ended March 28, 1999, consisted of Messrs. Olson and Vonderschmitt. This
Committee held zero (0) meetings during the last fiscal year.
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, during the
fiscal year ended March 28, 1999, consisted of Mr. Ferguson. This Committee held
zero (0) meetings during the last fiscal year and acted by unanimous written
consent fifteen (15) times.
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.
COMPENSATION OF DIRECTORS
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 $27,869 in
fiscal 1999. 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 2,000 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 2,000 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 2,000 shares each
will 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.
4
<PAGE> 8
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 canceled, and the non-employee Board
member will be entitled to a cash distribution from the Company based upon the
tender-offer price.
APPROVAL REQUIRED
Approval of Proposal No. 1 requires the approval of the holders of a
majority of the total votes of the shares present and entitled to vote on the
matter at the Annual Meeting, provided that the total votes cast on the matter
represent over 50% in interest of all shares entitled to vote on the matter.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
5
<PAGE> 9
- --------------------------------------------------------------------------------
PROPOSAL NO. 2
APPROVAL OF STOCK PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
At the Annual Meeting, stockholders are being asked to approve the Phase
2 Stock Purchase Agreement between the Company and Teamasia Semiconductors PTE
Ltd., a Singapore corporation (together with Teamasia Semiconductors (India)
Ltd., a limited liability company formed under the laws of India, "Teamasia"),
dated as of December 15, 1999 (the "Stock Purchase Agreement"). A copy of the
Stock Purchase Agreement is included as Exhibit A to this proxy statement.
Stockholders are urged to read the full text of the Stock Purchase Agreement
carefully.
BACKGROUND
The Company's revenue has continued to steadily decrease from its high
in the fiscal year ending March 31, 1996 to the present. The Company has
chronically been dependent on a small number of customers, most of whom
decreased their purchases from the Company during this period. The Company also
suffered from a general market slowdown in fiscal 1999. Consequently, its
manufacturing facilities have been underutilized and its fixed operating costs
relatively high.
Although the Company has taken measures to reduce costs in other areas,
it has continued to spend aggressively on research and development and sales to
position itself for the future. However, revenue from new products has not
materialized in time to offset negative cash flow. The unfavorable cash flow
from operations and development activities resulted in cash-on-hand decreasing
to less than $1.0 million by the quarter ending June 27, 1999.
Beginning in July 1999, the Company began to experience severely limited
liquidity which had the potential over the near term to cause it to cease
operations. In response to this situation, the Board of Directors commenced a
review of the Company's strategic alternatives. Included among the possibilities
were the sale of the Company or the merger of the Company with another party.
The Company received a number of inquiries, expressions of interest and
proposals for a variety of different types of transactions. There were a number
of inquiries without specific terms - simply an expression of interest to
acquire the Company or parts of it. These inquiries included discussions with
sixteen different companies in the semiconductor industry. The Company also had
discussions with other semiconductor companies about substantial product-line
licenses or acquisitions. The Board of Directors pursued each such expression of
interest or proposal received in order to fully understand its terms and to
determine whether the terms proposed could be materially improved. During this
process, the Board of Directors recognized that the Company would be unable to
continue operations without additional capital.
In September of 1999, there was considerable doubt whether the Company
could meet each upcoming payroll obligation, and as a result the Company was in
immediate need of a significant cash infusion. The Company narrowed the
proposals under serious consideration down to a few and pursued intense
negotiations with each party submitting a proposal in order to be able to
closely assess the relative benefits of each proposal to the Company and its
stockholders. The Company provided complete financial information to all the
companies making an offer. They all were offered the opportunity to conduct
confidential full due diligence (several of them did) and were made fully aware
of the Company's financial situation. The Company made it very clear to all
parties that an immediate cash infusion was required. In addition to the offer
from Teamasia discussed in length below, there were two other specific offers.
One party suggested a merger with the Company. This offer was rejected because
the valuation of the Company was lower than the valuation negotiated with
Teamasia and the party was not willing to commit funds to satisfy the Company's
need for an immediate cash infusion. Another party proposed a transaction for
acquisition of 51% of the Company. The proposed valuation for the Company in
this proposed transaction was lower than that offered by Teamasia and the source
of funding was unclear. This party requested a premium of warrants which made
this offer even more dilutive to the Company's existing shareholders. After
studying the three proposals, on September 24, 1999, the Company entered into a
letter of intent with Teamasia (the "Letter of Intent") pursuant to which the
Company and Teamasia agreed to pursue the negotiation of a substantial equity
6
<PAGE> 10
investment in the Company by Teamasia and the other related agreements described
herein. The Prior Agreement (defined below) and the Stock Purchase Agreement
substantially reflect the transactions contemplated by the Letter of Intent.
Teamasia is a manufacturer of small-signal discrete and power
semiconductors headquartered in India. Through personal industry relationships,
Mr. Tarsaim Batra, the Company's Chief Operating Officer, contacted Teamasia
because he heard they were searching for a wafer foundry to acquire. Teamasia
was brought to Mr. Zvi Grinfas' attention by Mr. Batra. Mr. Grinfas was the
Company's then-acting Chief Executive Officer. At the time the Company was in
detailed discussions with one of the parties discussed in the prior paragraph,
but since this party was not able to provide the Company with immediate cash,
Mr. Grinfas tried to determine if the Company could do a three-way transaction
where Teamasia would provide some immediate cash and in return, would receive
some part of the merged entity that would result from the merger of the Company
and the third party. A three-way meeting was held between the Company, Teamasia
and the third party in which the Chief Executive Officer of the third party
detailed his offer to acquire the Company. When matters did not work out to
Teamasia's satisfaction, Teamasia improved their offer to the Company to include
short-term cash and responsibility for restructuring the Company's debts.
PRIOR AGREEMENT TERMS; PRICE NEGOTIATIONS
On October 8, 1999, the Company entered into a stock purchase agreement
(the "Prior Agreement") with Teamasia Semiconductors (India) Ltd., pursuant to
which the Company issued and sold to Teamasia, and Teamasia purchased from the
Company, an aggregate of 671,173 shares of Common Stock of the Company ("Common
Shares") for an aggregate purchase price equal to $2,050,000, or $3.05 per
share, representing 16.6% of the outstanding Common Stock of the Company. The
purchase of Common Shares by Teamasia under the Prior Agreement closed in stages
during the months of October, November and December 1999, with the final closing
having occurred on December 8, 1999. The Company agreed to use the proceeds from
the sale of Common Shares to Teamasia as follows: (a) to pay normal payroll
expenses to its employees, (b) to pay specified lease obligations and (c) to pay
other operating expenses approved by Teamasia. A copy of the Prior Agreement is
included as Exhibit B to this proxy statement.
Mr. Grinfas and Teamasia negotiated an overall post-transaction (i.e.,
after both the stock purchase covered by the prior agreement and the stock
purchase covered by the stock purchase agreement, considered together) value of
the Company of $10 million. The Company's average market capitalization for 30
days prior to the signing of the letter of intent was $8.88 million. For the 30
days prior to signing the prior agreement, the average market capitalization was
$8.31 million. The purchase price of $5.98 million was based upon 51% Teamasia
ownership After both transactions, including the effect of options, warrants,
and treasury stock.
The average price of Teamasia's shares between the prior agreement and
the stock purchase agreement was $1.09 per share, which was the best offer
available to the Company during the time period that negotiations occurred.
During that period, the closing price varied from $1.25 to $4.125 per share and
generally fell in the $2.00 - $3.00 range. The average closing share price for
the 30 days leading up to the prior agreement was $2.60. It should be noted,
however, that due to the relatively small volume of trading in the Company's
shares, its per share price is often subject to extreme volatility.
After the Company and Teamasia reached informal agreement on the terms,
the overall transaction was separated into two agreements. The first agreement
was structured so that shareholder approval was not required under applicable
law or NASDAQ rules. This structure permitted Teamasia to provide an immediate
cash infusion to the Company, without the delay associated with seeking
shareholder approval.
As provided by the Prior Agreement, the Company added one member
designated by Teamasia to the Board of Directors of the Company. Teamasia
designated Subbarao Pinamaneni to serve on the Board of Directors, and on
November 4, 1999 he was elected by the Board of Directors to fill an existing
vacancy. In addition, under the Letter of Intent and the Prior Agreement,
Teamasia committed to purchase wafers from the Company commencing in the third
quarter of fiscal 2000 and continuing through the second quarter of fiscal 2001.
Teamasia agreed to purchase a minimum of 750 wafers per week during the third
fiscal quarter of 2000 and a minimum of 1,500 wafers per week during the fourth
fiscal quarter of 2000 and the first and second fiscal quarters of 2001.
7
<PAGE> 11
Under the terms of the Prior Agreement, Teamasia has rights to require
that the Company register the Common Shares in the event that the Company
effects a registration of shares under the federal securities laws. Teamasia
also has rights of first offer to buy its pro rata share of any shares of Common
Stock or other equity securities or any securities which are convertible into or
exercisable for Common Stock or other equity securities sold by the Company, so
long as it has ownership of 15% or more of the Company's fully diluted common
equity. The right of first offer does not apply to an issuance of Common Stock,
options or Preferred Stock issued (i) as a stock dividend to holders of Common
or Preferred Stock, (ii) upon exercise of any warrants, options and rights
existing as of the date of the prior agreement, (iii) to directors, officers,
employees or consultants of the Company under the Company's option or equity
purchase plans, (iv) to banks or other lenders of equipment lessors in
connection with the Company's financings or (v) issued in a merger or
consolidation or as consideration for an asset acquisition by the Company.
Teamasia is permitted to assign its rights under the Prior Agreement provided
that Teamasia's right of first offer may be assigned only to (a) any or all of
its beneficial owners, (b) an affiliate or (c) a purchaser that is not a
competitor of the Company that purchases all of Teamasia's shares of Common
Stock in the Company.
As provided in the Letter of Intent and the Prior Agreement, the Company
and Teamasia agreed to negotiate the terms of an additional investment in the
Company by Teamasia that would result in Teamasia owning a majority of the fully
diluted Common Stock of the Company. On December 15, 1999, upon completing such
negotiation, the Company and Teamasia entered into the Stock Purchase Agreement
which is now being presented to the stockholders of the Company for their
approval pursuant to NASDAQ rules and applicable law.
STOCK PURCHASE AGREEMENT TERMS
Under the terms of the Stock Purchase Agreement, the Company has agreed
to issue and sell to Teamasia, and Teamasia has agreed to purchase from the
Company, an aggregate of 4,793,235 shares of Common Stock of the Company for the
aggregate purchase price of $3,930,000, or $0.82 per share ("Purchase Price")
(Teamasia will then hold a total of 5,464,408 shares). This Purchase Price
represents the $5.98 million total investment by Teamasia in exchange for 51%
of the fully diluted Common Stock of the Company, less the $2.05 million
investment by Teamasia under the Prior Agreement. The purchase will occur at a
closing not later than 14 business days after approval by the stockholders of
the Company (the "Closing"). With the purchase of these shares and the shares
previously acquired under the terms of the Prior Agreement, Teamasia will own
approximately 61.9% of the outstanding Common Stock of the Company, or
approximately 51% of the fully diluted Common Stock of the Company after taking
into account the IMP, Inc. Option Plan, the 1999 IMP, Inc. Option Plan (each
described below), the Company's employee stock purchase plan and outstanding
warrants. Teamasia's purchase of shares under the Stock Purchase Agreement will
result in a change of control of the Company, as Teamasia will have the power to
elect a majority of the Company's Board of Directors.
The Stock Purchase Agreement also provides that in the event that
Bernard Vonderschmitt ceases to serve as a member of the Board of Directors, Mr.
Grinfas may, in his sole discretion and provided he is then still serving as a
member of the Board of Directors, designate a person to replace Mr.
Vonderschmitt. The Stock Purchase Agreement also provides that a new chief
executive officer hired by the Company will also be designated to serve as a
member of the Board of Directors. Mr. Whitney became the Chief Executive Officer
on January 17, 2000 and has served on the Board of Directors since that date. In
addition, the Stock Purchase Agreement provides that, promptly after the
Closing, the Company's Board of Directors take the necessary steps to add one
additional person designated by Teamasia as a fifth member of the Company's
Board of Directors.
The Stock Purchase Agreement further provides that if Teamasia
(considered together with its affiliates) seeks to purchase or otherwise acquire
(directly or indirectly) additional Common Stock of the Company, and after such
purchase or other acquisition Teamasia (considered together with its affiliates)
would own more than 51% of the fully diluted Common Stock of the Company, such
purchase or other acquisition is required to be (i) unanimously approved by the
Board of Directors or (ii) approved by holders of at least 51% of the Common
Stock of the Company but will be so approved only if holders of no more than
twenty percent (20%) of the Common Stock of the Company vote against such
purchase or other acquisition. The foregoing special provision will terminate at
such time as Teamasia (considered together with its affiliates) owns Common
Stock representing 75% or more of the outstanding Common Stock. The Company has
agreed to use its reasonable best efforts to incorporate the foregoing provision
into the Company's Certificate of Incorporation. The incorporation of the
foregoing provision into the Company's Certificate of Incorporation is a
condition to Teamasia's obligations under the Stock Purchase Agreement and may
be waived by Teamasia.
8
<PAGE> 12
The Stock Purchase Agreement further provides that the Company's Board
of Directors will adopt a new option plan covering 1,000,000 shares of the
Company's Common Stock (or allocation of an additional 1,000,000 shares of
Common Stock to an existing option plan). On January 7, 2000, the Board of
Directors approved the creation of an option plan for 1,000,000 Common
Shares called the 2000 IMP, Inc., Stock Option Plan. Such approval is
subject to approval by the Company's stockholders, and such additional
allocation is being submitted to the Company's stockholders for their approval
in Proposal No. 5 below.
As a condition to the Closing of the Stock Purchase Agreement, the
Company is required to obtain the consents of certain creditors, including
creditors under capital leases and revolving credit agreements. Consents have
been obtained from all creditors.
During the period between December 15, 1999 and the date upon which the
Company has received the approval from its stockholders of the transaction with
Teamasia and all other required governmental approvals and has made the
amendments to its Certificate of Incorporation set forth in Proposal No. 3
(the "Approval Date"), if the Company so requests, Teamasia is required to use
reasonable efforts to provide the Company with additional financing up to the
amount of the Purchase Price upon commercially reasonable terms, which amount
shall be re-paid at the Closing. During the period between the Approval Date and
the date of the Closing, if the Company so requests, Teamasia is required to
provide the Company with such additional financing, upon the same terms.
Under the terms of the Stock Purchase Agreement, Teamasia will have
rights to require that the Company register all shares of Common Stock acquired
by Teamasia under the Stock Purchase Agreement and the Prior Stock Purchase
Agreement in the event that the Company effects a registration of shares under
the federal securities laws. Upon the closing, Teamasia will also have rights of
first offer to buy its pro rata share of any shares of Common Stock or other
equity securities or any securities which are convertible into or exercisable
for Common Stock or other equity securities sold by the Company, so long as it
has ownership of 40% or more of the Company's fully diluted Common Equity. The
right of first offer does not apply to an issuance of Common Stock, options or
Preferred Stock issued (i) as a stock dividend to holders of Common or Preferred
Stock, (ii) upon exercise of any warrants, options and rights existing as of the
date of the prior agreement, (iii) to directors, officers, employees or
consultants of the Company under the Company's option or Equity Purchase Plans,
(iv) to banks or other lenders of equipment lessors in connection with the
Company's financings or (v) issued in a merger or consolidation or as
consideration for an asset acquisition by the Company. Teamasia is permitted to
assign its rights under the Stock Purchase Agreement provided that Teamasia's
right of first offer may be assigned only to (a) any or all of its beneficial
owners, (b) an affiliate or (c) a purchaser that is not a competitor of the
Company that purchases all of Teamasia's shares of Common Stock in the Company.
MANAGEMENT DISCUSSION
Management believes that the Stock Purchase Agreement with Teamasia
offers the Company significant benefits of both a financial and strategic
nature.
The proceeds of $3,930,000 from the sale of Common Stock to Teamasia
pursuant to the Stock Purchase Agreement will result in an improvement in the
Company's equity base and its liquidity. The stock purchase agreement will
improve the Company's equity base by $3,875,000 and Common Stock of $55,000 and
similarly improve cash and cash equivalent by $3,930,000. Upon closing and
receipt of such proceeds together with the proceeds of operations, the Company
expects to have cash resources sufficient to meet its needs at least through
December 2000. The Company does not expect to obtain additional funding from
Teamasia beyond the purchase price paid under the Stock Purchase Agreement.
The Company also expects to realize a number of significant strategic
benefits from its relationship with Teamasia. First, the Company will gain
access to certain Asian markets in which the Company is not presently active.
The Company, through its relationship with Teamasia, is expected to also have
opportunities to utilize Teamasia's assembly facility in Hyderabad, India.
Management believes that because of India's low infrastructure cost and low
labor cost, coupled with high English literacy and education levels among
workers, the assembly operation will be an efficient, low-cost facility.
Management also believes that Teamasia's
9
<PAGE> 13
pricing offers will be attractive to the Company. There are no agreements
presently in place under which the Company would use Teamasia's facility.
In addition, the Company expects to receive significant wafer
production orders from Teamasia. Teamasia's wafer purchase price is at an arm's
length price. The Teamasia wafer purchase price is determined using the same
process used to set wafer prices for other customers. Wafer processing consists
of applying multiple layers of material on a silicon substrate. Prices are set
based upon the number of layers and a price per layer. Teamasia does not receive
special pricing. Teamasia's orders should alleviate to some degree the current
underutilization of the Company's fabrication facilities. This will allow the
Company to operate its facilities more efficiently.
The Company, through its relationship with Teamasia, also expects to
benefit from additional product development and design capabilities. Teamasia is
in the process of establishing a product development and design center in India,
and the Company expects that its product development and design personnel work
closely with their counterparts at Teamasia, resulting in an increase in the
Company's product range and reduction of the product development cycle for power
management semiconductor devices.
Teamasia has advised the Company that completing the second phase of
Teamasia's equity investment in the Company, as contemplated by the Stock
Purchase Agreement, is a material element of its decision to place additional
production orders with the Company. There can be no assurance that replacement
customers can be located in the event that the second phase of Teamasia's equity
investment in the Company is not completed and Teamasia elects not to place
additional orders with the Company.
The entire Teamasia transaction (as set forth in the Prior Agreement and
the Stock Purchase Agreement) offered substantial advantages over the other
proposals described in the "Background" section above. Management believes that
the capital infusion required in order to improve the Company's cash position
which the Teamasia transaction provides significantly outweighs any
disadvantages. These disadvantages include the relatively low price for the
equity sold to Teamasia and the limitations placed on third-party equity
investments in the Company in the future due to the rights of first offer
contained in the Prior Agreement and the Stock Purchase Agreement.
The price offered by Teamasia exceeded all other offers that the Company
received. This fact, coupled with the requirement that the Company satisfy its
cash flow needs led management to recommend that the Board approve the execution
of the Prior Agreement despite any disadvantages it presented and leads
management and the Board to seek approval from the stockholders of the Company
of this Proposal No. 2.
APPROVAL REQUIRED
Approval of Proposal No. 2 requires the approval of the holders of a
majority of the Common Stock present in person or represented by proxy. Teamasia
will be allowed to vote its shares (representing 16.6% of the outstanding Common
Stock of the Company) on this Proposal.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
STOCK PURCHASE AGREEMENT BY AND BETWEEN THE COMPANY AND TEAMASIA SEMICONDUCTORS
PTE LTD.
10
<PAGE> 14
- --------------------------------------------------------------------------------
PROPOSAL NO. 3
AMENDMENT TO CERTIFICATE OF INCORPORATION
- --------------------------------------------------------------------------------
INTRODUCTION
Section 6.6 of the Stock Purchase Agreement with Teamasia (discussed in
Proposal No. 2, above) provides certain limitations on Teamasia and its
affiliates with respect to future additional share purchases of Common Stock of
the Company (such limitations take effect after the share purchase contemplated
in the Stock Purchase Agreement and exclude the exercise of stock options by
members of the Board of Directors who may be considered affiliates of Teamasia).
As set forth below, Teamasia's additional purchases will be subject to either
stockholder approval or approval by a unanimous Board of Directors. Such
additional purchases may take the form of a purchase of stock, purchase of
assets, merger or combination, or other form of acquisition. If, in connection
with any such additional purchase, Teamasia and/or its affiliates would:
(1) increase their percentage ownership of the fully diluted Common
Stock of the Company, AND
(2) hold more than 51% of the fully diluted Common Stock of the Company
after such additional purchase,
THEN the transaction by which such additional purchase occurs must
EITHER:
(A) be unanimously approved by the Board of Directors of the Company; OR
(B) be approved by a vote of the stockholders of the Company in which at
least fifty-one percent (51%) of the stockholders vote in favor of the
transaction, and no more than twenty percent (20%) of the stockholders vote
against it (abstentions and broker non-votes will not be counted as votes
against such transaction).
Notwithstanding the foregoing, in the event that Teamasia or its
affiliates acquire equal to or greater than seventy five percent (75%) of the
outstanding Common Stock of the Company, this provision shall terminate. Section
4.1(g) of the Stock Purchase Agreement provides that, as a condition to the
obligations of Teamasia under the Stock Purchase Agreement, the Company will use
its reasonable efforts to amend and restate the Company's Certificate of
Incorporation to incorporate the provisions of Section 6.6 of the Stock Purchase
Agreement. The Company's stockholders are asked to approve this proposed
amendment.
MANAGEMENT DISCUSSION
The actions set forth in this Proposal will offer additional protections
to the Company's minority stockholders (those not affiliated in any way with
Teamasia). By amending the Certificate of Incorporation to impose certain
special limitations regarding stockholder or unanimous Board of Directors
approval for certain additional purchases of Common Stock of Teamasia, the
Company's minority stockholders will receive additional assurance that such a
transaction will not occur except with the unanimous approval of the Board of
Directors of the Company or on terms which are not objectionable to a
significant percentage of the Company's minority stockholders. Whether or not
this amendment is approved, however, Teamasia will be subject to the contractual
limitations contained in the Stock Purchase Agreement.
APPROVAL REQUIRED
Approval of Proposal No. 3 requires the affirmative vote of a majority
of the outstanding shares of Common Stock of the Company. Teamasia will be
allowed to vote its shares (representing 16.6% of the outstanding Common Stock
of the Company) on this Proposal.
11
<PAGE> 15
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
12
<PAGE> 16
- --------------------------------------------------------------------------------
PROPOSAL NO. 4
APPROVAL AND ADOPTION OF 1999 IMP, INC. STOCK OPTION PLAN
- --------------------------------------------------------------------------------
INTRODUCTION
The Company's stockholders are being asked to approve the 1999 IMP, Inc.
Stock Option Plan (the "1999 Option Plan"), under which 250,000 shares of Common
Stock will be authorized for issuance over the term of the 1999 Option Plan. The
purpose of the 1999 Option Plan is to is retain the services of key employees
who are essential to the Company's long-term growth and success. The 1999 Option
Plan was approved by the Board of Directors of the Company on October 14, 1999.
The Board of Directors approved the 1999 Option Plan specifically to deal with
the uncertainty about the Company's future caused by the Company's financial
problems during the months of July through September 1999 and to attempt to
preclude existing employees from seeking or accepting other opportunities during
the ongoing period of uncertainty.
The following is a summary of the principal features of the 1999 Option
Plan. Although the summary does not include a discussion of all the provisions
of the 1999 Option Plan, it is a complete discussion of all material provisions
thereof. Any stockholder of the Company who wishes to obtain a copy of the
actual plan document may do so upon written request to the Chief Executive
Officer of the Company at the Company's principal executive offices in San Jose,
California.
STRUCTURE
The 1999 Option Plan will provide for employees below the level of
officer and consultants to the Company (and the Company's subsidiaries or
affiliates as applicable) to have the opportunity to acquire shares of Common
Stock by granting non-statutory stock options which are not intended to qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
ADMINISTRATION
At the Board of Directors' discretion, administration of the 1999 Option
Plan shall be vested in a Committee of one (1) or more Board members appointed
by the Board (the "Committee"), or the Board may retain the power to administer
the 1999 Option Plan. If the Board retains this authority, the Board shall be
the Committee for purposes of the 1999 Option Plan. Members of the Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Committee shall, within the scope of its
administrative functions under the 1999 Option Plan, have full power and
authority to establish such rules and regulations as it may deem appropriate for
proper administration of the 1999 Option Plan and to make such determinations
under, and issue such interpretations of, the 1999 Option Plan and any
outstanding options thereunder as it may deem necessary or advisable. Decisions
of the Committee within the scope of its administrative functions under the 1999
Option Plan shall be final and binding on all parties who have an interest under
its jurisdiction or any stock option issued under the 1999 Option Plan.
SHARE RESERVE
As of December 31, 1999 approximately 233,200 shares of Common Stock
were subject to outstanding options granted under the 1999 Option Plan and
16,800 shares were available for issuance under future option grants.
ELIGIBILITY
The persons eligible to receive options under the 1999 Option Plan shall
be limited to key employees and key consultants of the Company or its parent or
subsidiary corporations who are below the level of the Company's officers
13
<PAGE> 17
as the Committee shall select from time to time. Under no circumstances shall
any individual who is a "Section 16 Insider" be eligible for the grant of an
option under the 1999 Option Plan. For this person, a "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 Committee 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 Plan, the time or times at which each such
option is to be granted and is to be become exercisable, and the maximum term
for which the option is to be outstanding.
PRICE AND EXERCISABILITY
The option price per share shall be fixed by the Committee and, to the
extent required under applicable law, 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. To the extent required by applicable law, if any individual to whom an
option is to be granted is on the date of grant 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, 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 date of grant. 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 Committee may also assist any
optionee in the exercise of outstanding options 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 of any loan or installment method of payment will
be established by the Committee 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 purchased shares (less the par value), plus any Federal
and State income and employment tax liability incurred by the optionee in
connection with such exercise.
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.
All options granted under the 1999 Option Plan shall vest on the earlier
to occur of a) September 30, 2000 or b) the termination of optionee's services
for any reason other than misconduct following a Corporate Transaction (as
defined below). The vesting period for such options is shorter than is typical
of most option plans (and shorter than for options granted under the IMP, Inc.,
Stock Option Plan, which is the Company's principal option plan) due to the
judgment of the Board of Directors that it was in the Company's best interest to
grant options having a relatively short vesting period in order to provide
important incentive over the near term for essential employees to remain
employed with the Company.
TERMINATION OF SERVICE
All options granted under the 1999 Option Plan must be exercised within
twelve months (or such shorter period determined by the Committee and specified
in the instrument evidencing the option) after the optionee ceases for any
reason to be in the employ or service of the Company or its parent or subsidiary
corporations. Under no circumstances shall any such option be exercisable after
the specified expiration date of the option term. Each option 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.
CORPORATE TRANSACTION
Each outstanding option will become immediately exercisable for all of
the shares of Common Stock subject to such option in the event of a Corporate
Transaction, unless (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
14
<PAGE> 18
acceleration of the options is subject to other applicable limitations imposed
by the Committee at the time of grant. Immediately following the consummation of
the Corporate Transaction, all outstanding options under the Option Plan shall,
except to the extent assumed by the successor corporation or its parent company,
terminate and cease to be outstanding. A Corporate Transaction includes one or
more of the following transactions:
1. 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;
2. the sale, transfer or other disposition of all or
substantially all of the assets of the Company; or
3. 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,
APPROVAL REQUIRED
Approval of Proposal No. 4 requires the approval of the holders of a
majority of the Common Stock present in person or represented by proxy.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF
THE 1999 IMP, INC. STOCK OPTION PLAN.
15
<PAGE> 19
- --------------------------------------------------------------------------------
PROPOSAL NO. 5
APPROVAL AND ADOPTION OF 2000 IMP, INC. STOCK OPTION PLAN
- --------------------------------------------------------------------------------
INTRODUCTION
The Company's stockholders are being asked to approve the 2000 IMP, Inc.
Stock Option Plan (the "2000 Option Plan"), the purpose of which is to attract
and retain the services of key individuals essential to the Company's long-term
growth and success. The 2000 Option Plan was adopted by the Board of Directors
on January 7, 2000, subject to stockholder approval at the Company's next Annual
Meeting.
The following is a summary of the principal features of the 2000 Option
Plan, together with the applicable tax and accounting implications for the
Company and the participants. Although the summary does not include a discussion
of all the provisions of the 2000 Option Plan, it is a complete discussion of
all material provisions thereof. 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.
STRUCTURE
The 2000 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
the 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. Each Plan Administrator has complete discretion (subject to the
provisions of the 2000 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.
16
<PAGE> 20
SHARE RESERVE
A total of 1,000,000 shares of Common Stock have been reserved for
issuance over the term of the 2000 Option Plan. In no event may any one
participant in the 2000 Option Plan be granted stock options or separately
exercisable stock appreciation rights for more than 1,000,000 shares in the
aggregate under the 2000 Option Plan.
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 2000 Option Plan. Shares subject to
any option surrendered in accordance with the stock appreciation right
provisions of the 2000 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.
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 2000 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 SmallCap Market. On April 24, 2000 the fair market
value per share of Common Stock was $2.63 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
17
<PAGE> 21
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.
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 canceled 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 canceled
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 2000 Option Plan:
18
<PAGE> 22
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.
2. TAKE-OVER PRICE means the greater of (A) the fair market value of the
shares subject to the canceled option, measured on the cancellation date in
accordance with the valuation provisions of the 2000 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 will be made to
current or future non-employee Board members.
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 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.
19
<PAGE> 23
- 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 2000 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 canceled 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 canceled 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.
- No automatic option will be granted if the Board member receives an
automatic grant under another of the Company's option plans.
- 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 2000 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 2000 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 2000 Option Plan.
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the
2000 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 2000
Option Plan, appropriate adjustments will be made to (i) the maximum number
and/or class of securities available for issuance under the 2000 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 2000 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
20
<PAGE> 24
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 OPTION GRANTS IN 1999
No stock options were granted to the executive officers named in the
Summary Compensation Table in fiscal 1999.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend or modify the 2000 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 2000
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 2000 Option Plan at any time, but in all
events the 2000 Option Plan will terminate upon the earlier of August 16, 2005
or the date all shares available for issuance under the 2000 Option Plan are
issued or canceled pursuant to the exercise or surrender of options granted
under the 2000 Option Plan. Any options outstanding at the time of the
termination of the 2000 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 2000 Option 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.
21
<PAGE> 25
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.
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
deferred compensation expense 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 recognized by the Company over the vesting period of the
options. 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,
on a pro-forma basis in the Notes to the Company's financial statements, the
impact those options would have upon the Company's reported earnings were the
value of those options determined using a fair-value method. 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 may be recognized as a compensation expense.
APPROVAL REQUIRED
Approval of Proposal No. 5 requires the approval of the holders of a
majority of the Common Stock present in person or represented by proxy.
MANAGEMENT DISCUSSION
The approval of the 2000 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.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
2000 OPTION PLAN.
NEW PLAN BENEFITS
No option grants made under the 2000 Option Plan shall be effective
until stockholder approval of the Option Plan is obtained.
22
<PAGE> 26
- --------------------------------------------------------------------------------
PROPOSAL NO. 6
RATIFICATION OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
INTRODUCTION
The Company is asking the stockholders to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ending March 27, 2000. 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 PricewaterhouseCoopers LLP.
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.
PricewaterhouseCoopers LLP 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.
APPROVAL REQUIRED
Approval of Proposal No. 6 requires the approval of the holders of a
majority of the Common Stock present in person or represented by proxy.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP.
23
<PAGE> 27
ADDITIONAL INFORMATION
================================================================================
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 the
fiscal year ended March 28, 1999 were met in a timely manner by its executive
officers, Board members and greater than ten percent (10%) stockholders.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
It is the duty of the Compensation Committee of the Company's Board of
Directors 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,
the Compensation Committee approves the individual bonus programs for executive
officers each fiscal year and the base salaries of the Company's executive
officers.
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 1999 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 stockholder 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. Actual awards are subject to decrease or increase on the basis of the
Company's performance and at the discretion of the Chief Executive Officer. FOR
FISCAL YEAR 1999, THE COMPENSATION COMMITTEE ESTABLISHED THE FOLLOWING
PERFORMANCE GOALS: (i) SALES MUST EXCEED $50 MILLION, (ii) SALES AND EARNINGS
MUST INCREASE EACH FISCAL QUARTER AND (iii) THE COMPANY MUST REPORT A NET PROFIT
IN THE FOURTH QUARTER. UPON SUCCESSFUL COMPLETION OF EACH OF THESE GOALS, THE
COMPANY WOULD PAY EACH EXECUTIVE OFFICER A BONUS EQUAL TO 25% OF HIS OR HER BASE
SALARY. These goals were not met, and accordingly, the Company's executive
officers were not paid bonuses under the Company's annual incentive bonus
program for fiscal year 1999. See the "Summary
24
<PAGE> 28
Compensation Table" for a description of how certain executive officers were
paid additional compensation other than through the annual incentive bonus
program.
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
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. There were no option grants to executive officers in fiscal 1999.
CEO COMPENSATION. James Philips Ferguson, former President and Chief
Executive Officer, received a base salary of $190,000 per year with a potential
bonus of 40% of such base salary if certain sales and earnings goals of the
Company were met. These goals were not met, and accordingly, Mr. Ferguson was
not paid an incentive bonus for fiscal year 1999.
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. He
also served as Chief Executive Officer and President of the Company from August
1999 until January 2000.
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 1999 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
2000 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 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 $1 million level.
Compensation Committee
Zvi Grinfas
Peter D. Olson
Bernard V. Vonderschmitt
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in
25
<PAGE> 29
whole or in part, the foregoing report and the Performance Graph which follows
shall not be deemed to be incorporated by reference into any such filings.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and the four other
most highly-compensated executive officers of the Company ("Named Executive
Officers"), for services rendered in all capacities to the Company and its
subsidiaries for each of the last three (3) fiscal years:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Long Term
Securities Other
Salary Underlying Compensation
Name and Position Year ($)(1) Bonus ($) Options ($)(2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
James Philips Ferguson, 1999 200,008 -- -- 9,240
Former President and Chief 1998 140,460 -- 25,000 7,980
Executive Officer 1997 -- -- -- --
- ----------------------------------------------------------------------------------------------------
Barry Wiley, 1999 168,785 -- -- 5,148
Former Vice President Sales 1998 110,779 -- 12,000 4,132
and Marketing 1997 -- -- -- --
- ----------------------------------------------------------------------------------------------------
David A. Laws, 1999 156,094 -- -- 7,300
Former Chairman of the Board 1998 178,208 250,000 -- 3,600
1997 185,985 40,000 24,584 7,600
- ----------------------------------------------------------------------------------------------------
Jerry DaBell, 1999 153,037 -- -- 5,797
Former Senior Vice President, 1998 149,866 -- 6,500 5,989
Design Engineering 1997 134,376 22,913 -- 6,519
- ----------------------------------------------------------------------------------------------------
Moiz Khambaty, 1999 146,480 -- -- 9,192
Vice President Technology 1998 146,449 -- 7,000 8,616
1997 133,225 21,000 -- 10,777
- ----------------------------------------------------------------------------------------------------
</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) Includes the premium paid on behalf of each executive officer for
supplemental life insurance plus any other amount as indicated for each
individual.
STOCK OPTION GRANTS IN 1999
No stock options were granted to the executive officers named in the
Summary Compensation Table in fiscal 1999.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of stock
options during the 1999 fiscal year by the Named Executive Officers and those
who were formerly Executive Officers during fiscal year 1999 and the unexercised
options held as of the end of the 1999 fiscal year by such individuals. For
purposes of the latter calculation, the fiscal year-end market value of the
shares is deemed to be $3.31, the closing sale price of the Company's Common
26
<PAGE> 30
Stock as reported on the National Association of Securities Dealers Automated
Quotations System on Friday, March 29, 1999. No stock appreciation rights were
exercised by the Named Executive Officers and those who where formerly Executive
Officers in fiscal year 1999 during the 1999 fiscal year, and no stock
appreciation rights were held by those individuals at the end of such year.
All share information reflects the one-for-ten reverse stock split that took
place on January 13, 1999.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Options at FY99- In-the-Money Options at
end (#) FY99-end ($)
--------------------------------------------------------
Number
of Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
James Philips Ferguson -- -- 9,999 15,001 33,112 $49,683
- ------------------------------------------------------------------------------------------------------------
Barry Wiley -- -- 4,602 7,398 15,242 24,502
- ------------------------------------------------------------------------------------------------------------
David A. Laws -- -- 29,688 312 98,327 1,033
- ------------------------------------------------------------------------------------------------------------
Jerry DaBell -- -- 4,664 6,336 15,442 20,985
- ------------------------------------------------------------------------------------------------------------
Moiz Khambaty -- -- 4,040 5,960 13,380 19,740
- ------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Certain Relationships and Related Transactions. As described in
Proposal No. 2, the Company has entered into certain transactions with Teamasia.
Mr. Pinamaneni, in addition to serving as a director of the Company, is a
Managing Director and stockholder of Teamasia.
(b) Employment Contracts.
28
<PAGE> 32
Except as described 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.
By letter agreement between the Company and its new Chief Executive
Officer and President, Brad Whitney, dated January 13, 2000, the Company
confirmed, among other things, an annual salary of $200,000 along with a
severance package that includes twelve (12) months' salary in the event of an
involuntary termination of Mr. Whitney's employment without cause. Mr. Whitney
will also receive stock options and other employee benefits and can earn a
performance-based bonus if the Company meets certain financial results during
the 2001 fiscal year and following fiscal years.
By letter agreement between the Company and its new Chief Financial
Officer, Joy E. Leo, effective January 31, 2000, the Company confirmed, among
other things, an annual salary of $170,000 along with a severance package that
includes six (6) months' salary in the event of an involuntary termination of
Ms. Leo's employment without cause. Ms. Leo will also receive stock options and
other employee benefits and can earn a performance-based bonus if the Company
meets certain financial results during the 2001 fiscal year and following fiscal
years.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP 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.
STOCKHOLDER PROPOSALS FOR 2000 PROXY STATEMENT
Stockholder proposals that are intended to be presented at the Company's
annual meeting of stockholders to be held in 2000 must be received by the
Company no later than January 1, 2001 in order to be included in the proxy
statement and related proxy materials. Any stockholder proposal received by the
Company later than March 15, 2001 shall be considered untimely.
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, 1994 and the
reinvestment of dividends. Also depicted are the composite prices of companies
listed on the Nasdaq National Market Index and the Nasdaq Index of Electronic
Equipment Manufacturers--comprised of companies primarily engaged in the
manufacture of electronic components and accessories--also assuming $100
invested on March 31, 1994. This information has been provided to the Company by
Media General Financial Services.
29
<PAGE> 33
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG IMP, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[PERFORMANCE GRAPH]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURNS
<TABLE>
<CAPTION>
3/31/94 3/31/95 3/31/96 3/31/97 3/29/98 3/31/99
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IMP, Inc. $100 $100 $400 $118 $84 $72
Nasdaq $100 $111 $151 $168 $258 $382
Nasdaq Electronic Equipment $100 $131 $172 $302 $345 $506
Manufacturers
- --------------------------------------------------------------------------------------------------
</TABLE>
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.
30
<PAGE> 34
INCORPORATION BY REFERENCE
The Company incorporates by reference the documents listed below
containing certain financial and other information about the Company.
(1) The Company's Form 10-K/A No. 5 for the fiscal year ended March 28,
1999, filed April 11, 2000;
(2) The Company's Quarterly Report on Form 10-Q/A No. 2 for the fiscal
quarter ended June 27, 1999 filed March 15, 2000;
(3) The Company's Quarterly Report on Form 10-Q/A for the fiscal quarter
ended September 27, 1999 filed March 15, 2000; and
(4) The Company's Quarterly Report on Form 10-Q/A for the fiscal quarter
ended December 26, 1999 filed March 15, 2000.
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
/s/ Brad Whitney
Brad Whitney
President and CEO
Dated: May 17, 2000
31
<PAGE> 35
EXHIBIT A
December 15, 1999 Stock Purchase Agreement
(Previously Filed)
<PAGE> 36
EXHIBIT] B
October 8, 1999 Stock Purchase Agreement
(Previously Filed)
<PAGE> 37
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
IMP, INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 2000
The undersigned stockholder of IMP, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated May 17, 2000, and hereby appoints each of Zvi
Grinfas and Brad Whitney proxy and attorney-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned at the Annual Meeting
of Stockholders of IMP, Inc. to be held on June 14, 2000 at 2:00 p.m., local
time, at the executive offices of IMP, Inc. 2830 North First Street, San Jose,
California, and at any adjournment or postponement thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1. Proposal to elect the nominees herein to the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To withhold a vote for a particular nominee, strike through the name or
names on the following list:
Brad Whitney Zvi Grinfas
Bernard Vonderschmitt Subbarao Pinamaneni
2. Proposal to approve Stock Purchase Agreement with Teamasia
Semiconductors PTE Ltd.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Certificate of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to adopt the 1999 IMP, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to adopt the 2000 IMP, Inc. Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Proposal to ratify the appointment of the Independent Accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. To vote on such other business as may properly come before the
meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: TO ELECT THE NOMINEES HEREIN TO THE BOARD
OF DIRECTORS, FOR APPROVAL OF A STOCK PURCHASE AGREEMENT WITH TEAMASIA
SEMICONDUCTORS PTE LTD., FOR APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION, TO APPROVE AND ADOPT THE 1999 IMP, INC. STOCK OPTION PLAN, FOR
APPROVAL AND ADOPTION OF TO THE 2000 IMP, INC. STOCK OPTION PLAN; FOR
RATIFICATION OF THE INDEPENDENT ACCOUNTANTS AND IN THE DISCRETION OF THE PROXY
HOLDER ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
<PAGE> 38
(This Proxy should be marked, dated signed by the stockholder(s)
exactly as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)
__________________________ Date: ____________________
Signature
3
