<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X ] Quarterly report pursuant to section 13 or 15(d) of the Securities Act
of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Act
of 1934
For the transition period from _____ to _____
Commission file number: 0-20784
TRIDENT MICROSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0156584
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
189 North Bernardo Avenue, Mountain View, CA 94043-5216
(Address of principal executive offices) (Zip code)
(415) 691-9211
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's $0.001 par value Common Stock
outstanding at March 31, 1996 was 12,516,981
This document (including exhibits) contains 18 pages.
<PAGE> 2
TRIDENT MICROSYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1: Unaudited Financial Information
Condensed Consolidated Balance Sheet - March 31, 1996 and
June 30, 1995 3
Condensed Consolidated Statement of Operations for the Three Months and Nine Months
Ended March 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows for the Nine Months
Ended March 31, 1996 and 1995 5
Notes to the Unaudited Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II: OTHER INFORMATION:
Item 1: Legal Proceedings Not Applicable
Item 2: Changes in Securities Not Applicable
Item 3: Defaults upon Senior Securities Not Applicable
Item 4: Submission of Matters to Vote by Security Holders Not Applicable
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE> 3
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31
1996 JUNE 30,
(UNAUDITED) 1995
----------- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,492 $ 30,609
Short-term investments 17,771 30,027
Accounts receivable, net 18,796 8,767
Inventories 27,713 11,636
Deferred income taxes 1,796 1,796
Prepaid expenses & other assets 1,306 1,228
--------- ---------
Total current assets 95,874 84,063
Property and equipment, net 5,000 3,679
Investment, prepayments and other assets 30,776 923
--------- ---------
Total assets $ 131,650 $ 88,665
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,067 $ 11,527
Accrued expenses & other liabilities 9,133 7,030
Income taxes payable 6,753 3,967
--------- ---------
Total current liabilities 46,953 22,524
--------- ---------
Stockholders' equity:
Capital stock 34,489 31,398
Deferred compensation (78) (253)
Notes receivable from stockholders (585) (634)
Retained earnings 50,871 35,630
--------- ---------
Total stockholders' equity 84,697 66,141
--------- ---------
Total liabilities and stockholders' equity $ 131,650 $ 88,665
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 46,007 $ 29,801 $123,921 $ 75,684
Cost of sales 28,730 18,831 77,572 51,557
-------- -------- -------- --------
Gross margin 17,277 10,970 46,349 24,127
Research and development expenses 5,367 3,465 13,522 9,586
Selling, general and administrative expenses 4,245 2,985 12,028 7,904
-------- -------- -------- --------
Income from operations 7,665 4,520 20,799 6,637
Interest income, net 542 500 1,615 1,326
-------- -------- -------- --------
Income before provision for income taxes 8,207 5,020 22,414 7,963
Provision for income taxes 2,626 1,606 7,172 2,547
-------- -------- -------- --------
Net income $ 5,581 $ 3,414 $ 15,242 $ 5,416
======== ======== ======== ========
Net income per share $ 0.42 $ 0.26 $ 1.14 $ 0.42
======== ======== ======== ========
Common and common equivalent shares used in
computing per share amount 13,370 13,134 13,424 12,995
======== ======== ======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
---------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,242 $ 5,416
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation & amortization 1,321 1,131
Provision for doubful accounts and sales returns 48 (11)
Loss on disposal of fixed assets (112) 3
Amortization of deferred compensation 175 201
Changes in assets & liabilities:
Accounts receivable (10,077) (3,425)
Inventories (16,077) 3,343
Prepaid expenses and other current assets (78) (229)
Other assets 663 (726)
Accounts payable 19,540 (2,410)
Accrued expenses & other liabilities 2,103 851
Income tax payable 2,786 1,061
-------- --------
Net cash provided by operating activities 15,534 5,205
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment to vendor under capacity agreement (16,800) -
Sales of short-term investments, net 12,256 386
Payment on equity investment (13,716) -
Purchases of long-term investments, net - (7,852)
Purchase of property and equipment, net (2,531) (1,379)
-------- --------
Net cash used in investing activities (20,791) (8,845)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 3,091 502
Principal repayment by stockholder of note receivable 49 -
-------- --------
Net cash provided by financing activities 3,140 502
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,117) (3,138)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 30,609 25,194
-------- --------
CASH AND CASH EQUIVALENT AT END OF PERIOD $ 28,492 $ 22,056
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
TRIDENT MICROSYSTEMS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of Trident Microsystems, Inc. (the "Company"), the
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position, operating results and cash flows for those periods presented. The
condensed consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and are not
audited. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended June 30, 1995 included in the Company's annual report on Form
10-K filed with the Securities and Exchange Commission.
The results of operations for the interim periods presented are not
necessarily indicative of the results that may be expected for any other period
or for the entire fiscal year which ends June 30, 1996.
NOTE 2: INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Finished goods $ 8,498 $ 8,334
Work in process 19,215 3,302
------- -------
$27,713 $11,636
======= =======
</TABLE>
6
<PAGE> 7
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentages that statement of
operations items are to net sales for the three months and nine months ended
March 31, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of sales 62 63 63 68
--- --- --- ---
Gross margin 38 37 37 32
Research and development 12 12 11 13
Selling, general and administrative 9 10 9 10
--- --- --- ---
Income from operations 17 15 17 9
Interest income, net 1 2 1 1
--- --- --- ---
Income before income taxes 18 17 18 10
Provision for income taxes 6 5 6 3
--- --- --- ---
Net income 12% 12% 12% 7%
=== === === ===
</TABLE>
Net Sales
Net sales for the three months ended March 31, 1996 were $46.0 million
or 54% over the $29.8 million reported in the three months ended March 31, 1995.
Net sales for the nine months ended March 31, 1996 were $123.9 million or 64%
over the $75.7 million reported in the nine months ended March 31, 1995. The
increases in net sales were attributable to increases in unit volume and higher
average selling prices (ASPs) of higher performance graphical user interface
(GUI) accelerator products both for desktop and mobile computers. The increase
in ASPs was primarily attributable to the introduction of new higher priced GUI
accelerators and the increase of percentage of sales of GUI accelerator products
to approximately 75% and 68% of the Company's net sales in the three months and
nine months ended March 31, 1996, respectively, from approximately 69% and 61%
in the three months and nine months ended March 31, 1995, respectively. Sales
increased in all regions including North America, Europe and Asia.
7
<PAGE> 8
The Company continues to make major efforts to design products to fill
the needs of leading PC systems manufacturers and adapter card manufacturers.
Sales to North American and European customers increased to 28% in the three
months ended March 31, 1996 from 22% in the three months ended March 31, 1995.
The Company expects Asian customers will continue to account for a significant
portion of the Company's sales. Sales to Asian customers, primarily in Hong
Kong, Taiwan, Korea and Japan, accounted for approximately 72% in the three
months ended March 31, 1996, down from 78% in the same quarter of fiscal 1995.
Sales to two customers and their affiliates accounted for approximately 21% and
12% of net sales for the three months ended March 31, 1996. Sales to three
customers and their affiliates accounted for approximately 27%, 19% and 10% of
net sales, respectively, for the same period of the prior fiscal year.
Substantially all of the sales transactions were denominated in U.S. dollars
during both periods.
The Company plans to continuously introduce new and higher performance
GUI accelerators, graphics controller and multimedia video products which it
will seek to sell to existing customers as well as new customers in Asia, North
America and Europe. The Company's future success depends upon the regular and
timely introduction of these and other new products and upon those products
meeting customer requirements. There can be no assurance that the Company will
be able to successfully complete the development of these products or to
commence shipments of these products in a timely manner, or that product
specifications will not be changed during the development period. In addition,
even if regularly and timely developed and shipped, there can be no assurance
that the products described above will be well accepted in the market place.
Gross Margin
Trident's gross margin increased from 37% and 32% of net sales for the
three months and nine months ended March 31, 1995, respectively, to 38% and 37%
for the three months and nine months ended March 31, 1996, respectively. The
increase in the gross margin was primarily the result of increased volume
shipments of new GUI accelerator products with higher gross margins during the
current periods and reductions in the manufacturing costs of certain products.
The Company believes that it is common for the prices of high
technology products to decline over time as availability and competition
increase and new, advanced products are introduced. The Company expects ASPs of
existing products to continue to decline although average ASPs may remain
constant or increase as a result of introductions of new higher performance
products with higher gross margin. The Company's strategy is to maintain gross
margins through the introduction of new products with higher margins, the
reduction in manufacturing costs accomplished through the Company's custom
design methodology and the migration to the newest process technology and taking
advantage of the economies of scale of volume production. As a result, the
Company depends upon the success of new product development and the timely
introduction of new products, as well as upon the achievement of its
manufacturing cost reduction efforts. There can be no assurance that the Company
can successfully or timely develop and introduce new products or that it can
successfully reduce manufacturing costs.
8
<PAGE> 9
Research and Development
Research and development expenditures increased from $3.5 million in
the three months ended March 31, 1995 to $5.4 million in the three months ended
March 31, 1996. Research and development expenditures increased from $9.6
million in the nine months ended March 31, 1995 to $13.5 million in the nine
months ended March 31, 1996. Research and development expenditures as a
percentage of net sales remained constant at 12% in both the three months ended
March 31, 1995 and 1996. Research and development expenditures as a percentage
of net sales decreased from 13% in the nine months ended March 31, 1995 to 11%
in nine months ended March 31, 1996 due to the increase in the net sales at a
faster rate than the increase in expenditures. The increases in expenditures in
the three months and nine months ended March 31, 1996 were primarily due to the
increase in headcount and associated personnel-related costs, increased
depreciation, increased outside engineering services, increased non-recurring
engineering expenses and costs associated with the acquisition of new technology
during the three months and nine months ended March 31, 1996. The Company has
increased its research and development efforts to introduce new products and
intends to continue making substantial investments in research and development.
Selling, General and Administrative
Selling, general and administrative expenditures increased from $3.0
million in the three months ended March 31, 1995 to $4.2 million in the three
months ended March 31, 1996. Selling, general and administrative expenditures
increased from $7.9 million in the nine months ended March 31, 1995 to $12.0
million in the nine months ended March 31, 1996. The increases in selling costs
were primarily due to increased personnel-related costs for increased sales
staff in the U.S. and Asia, additional commissions due to distributors and sales
representatives as a result of higher sales through such channels and increased
promotional activities. Selling, general and administrative expenditures as a
percentage of net sales decreased from 10% in both the three months and the nine
months ended March 31, 1995 to 9% in the three months and flat in the nine
months ended March 31, 1996 due to the increase in the net sales at a faster
rate than the increase in expenditures.
9
<PAGE> 10
Interest Income, Net
The amount of interest income earned by the Company varies directly
with the amount of its cash, cash equivalents, short-term investments and
long-term investments and the prevailing interest rates. Interest income
increased slightly in the three months ended March 31, 1996 from the three
months ended March 31, 1995 as a result of increased prevailing interest rates
offset by the decrease of cash, cash equivalents, short-term and long-term
investments available. Interest income increased from $1.3 million in the nine
months ended March 31, 1995 to $1.6 million in the nine months ended March 31,
1996 primarily due to increased amount of cash, cash equivalents and short-term
investments available and increased prevailing interest rates during the current
period. A significant amount of the interest earned by the Company was not
subject to federal income taxes. The Company expects interest income to decline
from the current level because of the lower balance of cash, cash equivalent,
short-term investments and long-term investments, as it made payments of $13.7
million to UMC during the quarter ended March 31, 1996.
Provision for Income Taxes
As a percentage of income before income taxes, the provision for income
taxes was 32% for both the three months and nine months ended March 31, 1996 and
1995. The effective income tax rates were below the statutory rate primarily
because operations in foreign countries were subject to lower income tax rates
and a significant portion of earned interest was not subject to federal income
tax.
Future Results
The Company's statements regarding expected increases in the percentage
of sales to leading PC systems manufacturers, plans regarding introduction of
new products, and expected increases in research and development and selling,
general and administrative expenses are forward looking statements and actual
results might vary materially from the results expected by the Company. A number
of factors could affect such results, including those identified above and the
factors discussed below.
The Company's business is influenced by a variety of factors which
include the overall market for desktop and notebook PC computers, the success of
the Company's customers and their resultant net orders, seasonal customer
demand, timing of new product introductions, marketplace acceptance of new
product offerings, overall product mix, competitors' activities and the
availability of foundry and assembly capacities. The Company's future operating
results are also influenced by its dynamic product area and by its planned
growth in expenditures and the relation of planned increased expenses to future
operating results as well as by a variety of global, political, regulatory and
foreign exchange factors. These factors will all affect the Company's results
and there can be no assurance of Company's future operating results.
The Company supplies components to a variety of OEM customers that in
turn sell their products into the overall PC marketplace. Their success
influences the overall net orders that the Company may receive and attempt to
fill. Should there be a downturn in the overall PC business or should the
existing customers not be in a position to place orders or to accept order
fulfillment, the Company's performance could be adversely impacted and there can
be no assurance that the Company would be successful in achieving offsetting
orders. The success of the Company's marketing and sales efforts can also be
affected by changes in the global graphics marketplace. Because the Company's
customers distribute their products
10
<PAGE> 11
worldwide, such factors as shifts in market share from Asian clone makers to
other manufacturers have in the past affected the Company's operating results.
It is likely that future shifts would continue to influence the Company's
business. Since a substantial portion of the Company's revenues has been and are
expected to continue to be generated from customers in Asia, it is likely that
the Company's operating results will fluctuate with changes in the Asian
economies, particularly those of Taiwan and Hong Kong. Past performance has
indicated that seasonal performance variations should be expected with the
historic slowest PC sales occurring during the summer. This factor influences
when the Company's customers place their orders and when delivery is required.
Because the Company operates in the increasingly highly competitive
graphics controller product area, timely introductions of new products are
required. In order to be able to timely introduce new products a number of risk
factors have to be overcome. A fundamental business risk is whether or not the
Company can continue to develop products that will be accepted by a
fast-changing marketplace. The Company attempts to determine which products have
a high likelihood of marketplace acceptance and attempts to create functional
and manufacturable designs for those products. However the Company can not
assure that product development, the timing of the product introductions or the
marketplace acceptance of current products or of products to be developed will
be successful. The Company continues to invest in research and development and
in the personnel required to support new product introductions and new customers
including leading PC systems manufacturers. Should there be a shortfall in the
Company's business performance, the Company's financial results would be
adversely impacted by the planned growth in expenditures. Additional influences
on the Company's performance will be the actions of existing or future
competitors, the development of new technologies, the incorporation of graphics
functionality into other PC system components and possible claims by third
parties of infringement of patent or similar intellectual property rights.
The Company relies upon several independent foundries to manufacture
its products either in finished or in wafer form, and orders production either
on contract or spot basis. The Company's ability to supply product to its
customers is thus dependent upon its continuing relationships with those
foundries and in turn upon their uninterrupted ability to supply the Company's
product. Recently, there has been a worldwide shortage of advanced process
technology foundry capacity. To respond to this shortage, the Company has
entered into a number of contracts providing for additional capacity. Certain of
such contracts require substantial advance payments. There can be no assurance
that the Company will obtain sufficient foundry capacity to meet customer
demands in the future, particularly if that demand should increase, or that the
additional capacity from current foundries and new foundry sources will be
available and will satisfy the Company's requirements on timely basis or at
acceptable quality or per unit prices.
The Company's products are assembled and tested by a variety of
independent subcontractors. The Company's reliance on independent assembly and
testing houses to provide these services involves a number of risks, including
the absence of guaranteed capacity and reduced control over delivery schedules,
quality assurance and costs.
Constraints or delays in the supply of the Company's products, whether
due to the factors above or to other unanticipated factors, could have adverse
effects on the Company's results. These could be caused by the Company electing
to purchase products from higher cost sources and could result in the loss of
orders.
The market price of the Company's Common Stock has been, and may
continue to be, extremely volatile. Factors such as new product announcements by
the Company or its competitors, quarterly fluctuations in the Company's
operating results and general conditions in the high technology and in the
11
<PAGE> 12
graphics controller market may have a significant impact on the market price of
the Company's Common Stock.
The Company has recently experienced a period of significant growth,
which has and could continue to strain its limited personnel, financial and
other resources. In particular, the sale and distribution of products to
numerous leading PC systems manufacturers in diverse markets and the
requirements of such manufacturers for design support would place substantial
demands on the Company's research and development and sales functions. An
expansion of sales and distribution of products to numerous diverse large system
manufacturing customers, should they occur, would require expansion of the
Company's research and development, production and marketing and sales
capabilities. Sales growth, should it occur, will require additional foundry
capacity and the Company has contracted to expand available foundry capacity.
Future results will in part depend upon and could be significantly impacted by
the Company's ability to manage its resources to support future activities and
upon its ability to finance expanded foundry capitalization and production
costs.
The Company's future operating results also may be affected by various
factors which are beyond the Company's control. These include adverse changes in
general economic conditions, political instability, governmental regulation or
intervention affecting the personal computer industry, government regulation
resulting from U.S. foreign and trade policy, fluctuations in foreign exchange
rates particularly with regard to the relationship of the U.S. dollar and Asian
currencies. The Company is unable to predict future economic, political,
regulatory and foreign exchange changes and cannot determine their impact on
future performance.
12
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $28.5 million and short-term investments
of $17.8 million. Cash and cash equivalents and short-term investments have
decreased $2.1 million and $12.2 million, respectively, from the beginning of
the fiscal year primarily due to the investing activities during the nine months
period ended March 31, 1996.
In the nine months ended March 31, 1996, $15.5 million of cash were
provided by operating activities mainly as a result of profitable operations and
adjustment of non-cash expenses, an increase in the outstanding accounts payable
to vendors, accrued expenses and other liabilities and income tax payable;
offset in part by an increase in outstanding accounts receivable balances,
inventories and other assets. In the nine months ended March 31, 1995, $5.2
million of cash were provided by operating activities mainly due to decreased
requirements for working capital as a result of profitable operations and
adjustment of non-cash expenses, a decrease of inventory level, an increase in
income taxes payable; offset in part by an increase in outstanding accounts
receivable balances and a decrease in the outstanding accounts payable to
vendors.
Capital expenditures in the nine months ended March 31, 1996 and 1995
were $2.5 million and $1.4 million, respectively.
In order to obtain a supply of wafers sufficient to meet possible
increased demand, and especially to obtain wafers manufactured using advanced
process technologies, the Company entered into an agreement in June 1995 with
Taiwan Semiconductor Manufacturing Company ("TSMC"), the Company's major
foundry, under which the Company is committed to purchase and TSMC is committed
to provide a certain number of wafers each year through December 31, 1999. In
addition, the Company has the option to purchase an additional amount of wafers
each year during the period. The Company made a prepayment of $16.8 million in
August 1995. The payment can be applied to partially offset the price of wafers
purchased under the option, but is not refundable except in certain
circumstances. Based on the timing specified in the supply agreement, the
prepayment will be applied at a rate of $4.8 million per year for fiscal years
ending June 30, 1997 through 1999 and $2.4 million for the fiscal year ending
June 30, 2000. If the Company expects to purchase fewer units specified in the
supply agreement, then the Company will use the guideline of FAS 121 to assess
whether the value of the prepayment is impaired.
In August 1995, the Company also entered into a joint venture agreement
with United Microelectronics Corporation ("UMC"), one of the Company's current
foundries, under which the Company is committed to invest $60 million over the
next three years for certain equity ownership in a joint venture with UMC and
other venture partners to establish a new foundry. Under the agreement, the new
foundry guarantees to Trident a certain percentage of its total wafer supply.
Committed equity contributions under the joint venture agreement were estimated
at $15 million, $30 million and $15 million during fiscal year 1996, 1997 and
1998, respectively. The Company made the first payment amounting to $13.7
million in January 1996.
13
<PAGE> 14
These investments with TSMC and UMC are intended to secure capacity so
that the Company can meet expected increased demand, should it occur, and are an
investment in the future of Trident. However, there are certain risks associated
with these methods including the ability of the Company to utilize the capacity
for which it has made substantial investments and the ability of UMC, together
with its partners, to successfully build the new foundry. These agreements and
the risks associated with these and other foundry relationships, are described
under the caption "Business-Manufacturing" of the Form 10-K Annual Report.
The Company will continue to consider possible transactions to secure
additional foundry capacity as long as circumstances warrant. The aforementioned
agreements with TSMC and UMC have utilized a significant amount of the Company's
available funds. However, the Company believes its current resources are
sufficient to meet its needs for at least the next twelve months. In addition to
the $15 million line of credit as discussed below, the Company regularly
considers transactions to finance its activities, including debt and equity
offerings and new credit facilities or other financing transaction.
SUBSEQUENT EVENT
In May 1996, the Company obtained a credit facility of an unsecured
revolving line of credit of $15 million with a maturity date of December 31,
1997. Under the terms of the line of credit , the Company may elect to convert a
portion or the total credit into a three-year term loan. The facility requires
the Company to comply with certain covenants regarding financial ratios and
reporting requirements.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Not applicable
ITEM 2: CHANGES IN SECURITIES
Not applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4: SUBMISSION OF MATTERS TO VOTE BY SECURITY HOLDERS
Not applicable.
ITEM 5: OTHER INFORMATION
In January 1996, the Company adopted the 1996 Non-statutory Stock Option
Plan under which 1,500,000 shares of Common Stock are reserved for
issuance as of January 17, 1996 to key employees and consultants. Under
the 1996 Non-statutory Stock Option Plan, non-statutory stock options
may be granted at prices not less than 85% of the fair market value at
the date of grant, as determined by the Board of Directors. Options
generally become exercisable and vest cumulatively in 25% increments
upon the anniversary of the date of grant.
15
<PAGE> 16
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed with this Form:
<TABLE>
<CAPTION>
Exhibit Description
- - ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation.(1)
3.2 Bylaws of Trident Delaware Corporation, a Delaware corporation.(1)
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock Certificate.(1)
10.1 Loan Agreement and Revolving Credit Note dated December 17, 1991,
between the Company and First Interstate Bank of California, together with a
Security Agreement executed in connection therewith.(1)
10.2 Form of Loan and Option Agreement between the Company and
certain of its employees executed in connection with the
Series E Preferred Stock Purchase Agreement dated December
26, 1991, together with form of Promissory Note and form of
Non-Recourse Pledge Agreement, each executed by such
employees in connection with such Loan and Option
Agreement.(1)
10.3(*) Form of the Company's Employee Stock Purchase Plan.(1)
10.4(*) Summary description of the Company's 401(k) plan.(1)
10.5(*) Form of Indemnity Agreement for officers, directors and agents.(1)
10.6(*) Form of Non-statutory Stock Option Agreement between the Company and
Frank C. Lin.(1)
10.7(*) Form of 1992 Stock Option Plan amending and restating the 1990 Stock
Option Plan included as Exhibit 10.5.(1)
10.8 Lease Agreement dated March 23, 1994 between the Company and Chan-
Paul Partnership for the Company's principal offices located at 189 North
Bernardo Avenue, Mountain View, California(2)
10.9 Option Agreement between the Company and Taiwan Semiconductor
Manufacturing Company dated June 25, 1995.(3)(4)
10.10 Foundry Venture Agreement dated August 18, 1995 by and between the
Company and United Microelectronics Corporation.(3)(4)
10.11 1996 Non-statutory Stock Option Plan together with form of Non-statutory
Stock Option Agreement. (5)
11.1 Statement Re Computation of Per Share Earnings. (5)
</TABLE>
(1) Previously filed on October 27, 1992 as an exhibit to Registrant's
Registration Statement on S-1 (File No. 33-53768).
(2) Previously filed on May 13, 1994 as an exhibit to Registrant's
Quarterly Report on Form 10-Q.
(3) Previously filed on September 28, 1995 as an exhibit to Registrant's
Annual Report in Form 10-K.
(4) Confidential treatment has been requested for a portion of this
document.
(5) Filed herewith.
(*) Management contracts or compensatory plans or arrangements covering
executive officer or directors of the Company.
The Company did not file any reports on Form 8-K during the quarter ended March
31, 1996.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on May 14, 1996 on its
behalf by the undersigned thereunto duly authorized.
Trident Microsystems, Inc.
(Registrant)
- - --------------------------------------
Frank C. Lin
President, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)
- - --------------------------------------
James T. Lindstrom
Vice President, Finance and Administration,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- - ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation.(1)
3.2 Bylaws of Trident Delaware Corporation, a Delaware corporation.(1)
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Common Stock Certificate.(1)
10.1 Loan Agreement and Revolving Credit Note dated December 17, 1991,
between the Company and First Interstate Bank of California, together with a
Security Agreement executed in connection therewith.(1)
10.2 Form of Loan and Option Agreement between the Company and
certain of its employees executed in connection with the
Series E Preferred Stock Purchase Agreement dated December
26, 1991, together with form of Promissory Note and form of
Non-Recourse Pledge Agreement, each executed by such
employees in connection with such Loan and Option
Agreement.(1)
10.3(*) Form of the Company's Employee Stock Purchase Plan.(1)
10.4(*) Summary description of the Company's 401(k) plan.(1)
10.5(*) Form of Indemnity Agreement for officers, directors and agents.(1)
10.6(*) Form of Non-statutory Stock Option Agreement between the Company and
Frank C. Lin.(1)
10.7(*) Form of 1992 Stock Option Plan amending and restating the 1990 Stock
Option Plan included as Exhibit 10.5.(1)
10.8 Lease Agreement dated March 23, 1994 between the Company and Chan-
Paul Partnership for the Company's principal offices located at 189 North
Bernardo Avenue, Mountain View, California(2)
10.9 Option Agreement between the Company and Taiwan Semiconductor
Manufacturing Company dated June 25, 1995.(3)(4)
10.10 Foundry Venture Agreement dated August 18, 1995 by and between the
Company and United Microelectronics Corporation.(3)(4)
10.11 1996 Non-statutory Stock Option Plan together with form of Non-statutory
Stock Option Agreement. (5)
11.1 Statement Re Computation of Per Share Earnings. (5)
</TABLE>
(1) Previously filed on October 27, 1992 as an exhibit to Registrant's
Registration Statement on S-1 (File No. 33-53768).
(2) Previously filed on May 13, 1994 as an exhibit to Registrant's
Quarterly Report on Form 10-Q.
(3) Previously filed on September 28, 1995 as an exhibit to Registrant's
Annual Report in Form 10-K.
(4) Confidential treatment has been requested for a portion of this
document.
(5) Filed herewith.
(*) Management contracts or compensatory plans or arrangements covering
executive officer or directors of the Company.
<PAGE> 1
EXHIBIT 10.11
EXHIBIT 10.11
TRIDENT MICROSYSTEMS, INC.
1996 NONSTATUTORY STOCK OPTION PLAN
<PAGE> 2
TRIDENT MICROSYSTEMS, INC.
1996 NONSTATUTORY STOCK OPTION PLAN
1. Establishment and Purposes of Plan. The Trident Microsystems, Inc.
1996 Nonstatutory Stock Option Plan (the "Plan") is hereby established effective
as of January 17, 1996 (the "Effective Date"). The purposes of the Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business. Options
granted hereunder shall be only Nonstatutory Stock Options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been
appointed, or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if
one is appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Trident Microsystems, Inc., a
Delaware corporation.
(f) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services.
(g) "Continuous Status as an Employee or Consultant" shall
mean the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board; provided that such leave is for a period
of not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(h) "Employee" shall mean any person employed by the Company
or any Parent or Subsidiary of the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(j) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code.
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<PAGE> 3
(k) "Option" shall mean a stock option granted pursuant to the
Plan.
(l) "Option Agreement" shall mean a written agreement between
the Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(m) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(n) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(o) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1996 Nonstatutory Stock Option
Plan.
(q) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of shares may be issued under the Plan
shall be 1,500,000 and shall consist of authorized but unissued or reacquired
shares of Common Stock or any combination thereof.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board of
Directors of the Company. The Board of Directors may appoint a Committee
consisting of not less than two members of the Board of Directors to administer
the Plan on behalf of the Board of Directors and to exercise any or all of the
powers set forth in paragraph (b), subject to such terms and conditions as the
Board of Directors may prescribe. From time to time the Board of Directors may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan. The Board of Directors may delegate
to the Chief Executive Officer the authority to
2
<PAGE> 4
grant Options under the Plan; provided, however, that (i) the Chief Executive
Officer shall not grant an Option to himself or to any other person subject to
Section 16 under the Exchange Act, and (ii) the Chief Executive Officer shall
not grant Options to any one person for more than 30,000 shares without approval
of the Board of Directors.
(b) Powers of the Board. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion: (i) to determine,
upon review of relevant information and in accordance with Section 8(b) of the
Plan, the fair market value of the Common Stock; (ii) to determine the exercise
price per share of Options to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan; (iii) to determine the
Employees or Consultants to whom, and the time or times at which, Options shall
be granted and the number of Shares to be represented by each Option; (iv) to
interpret the Plan; (v) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vi) to determine the terms and provisions of each Option
granted (which need not be identical) and to modify or amend each Option
including the exercise price thereof; (vii) to accelerate or defer (with the
consent of the Optionee) the exercise date of any Option, consistent with the
provisions of Section 5 of the Plan; (viii) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board; and (ix) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. Eligibility.
(a) Options may be granted only to Employees and/or
Consultants, who, at the time an Option is granted to such person, is not an
officer or a director of the Company or any other person whose transactions in
Common Stock are subject to Section 16 of the Exchange Act. An Employee or
Consultant who has been granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options.
(b) The Plan shall not confer upon any Optionee any right with
respect to continuation of any employment or consulting relationship with the
Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate his employment or consulting relationship at any
time, with or without cause.
6. Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the Shares available
for issuance under the Plan have been issued and all restrictions on such shares
under the terms of the Plan and the agreements evidencing Options granted under
the Plan have lapsed.
7. Term of Option. The term of each Option shall be ten (10) years from
the effective date of grant thereof or such shorter term as may be provided in
the Option Agreement.
3
<PAGE> 5
8. Exercise Price and Forms of Payment.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be no less than 85% of the fair market value per Share on the
effective date of grant.
(b) The fair market value shall be determined by the Board in
its discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the fair market value per Share shall be the closing price on such exchange on
the date of grant of the Option, as reported in the Wall Street Journal.
(c) Payment of the exercise price for the number of Shares
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Common Stock owned
by the Optionee having a value, as determined by the Board (but without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company), not less than the exercise price, (iii) by the Optionee's promissory
note in a form approved by the Company, (iv) by the assignment of the proceeds
of a sale or loan with respect to some or all of the shares being acquired upon
the exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a "Cashless
Exercise"), or (v) by any combination thereof. The Board may at any time or from
time to time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price and/or which otherwise
restrict one (1) or more forms of consideration.
(i) Notwithstanding the foregoing, an Option may not
be exercised by tender to the Company of shares of Common Stock to the extent
such tender of Common Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Common Stock unless such shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(ii) No promissory note shall be permitted if the
exercise of an Option using a promissory note would be a violation of any law.
Any permitted promissory note shall be on such terms as the Board shall
determine at the time the Option is granted. The Board shall have the authority
to permit or require the Optionee to secure any promissory note used to exercise
an Option with the Shares acquired upon
4
<PAGE> 6
the exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
(iii) The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise.
9. Exercise of Option.
(a) Exercisability. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board,
including performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan; provided, however, that
subject to the authority of the Board of Directors or Committee to provide for a
more accelerated schedule of dates of exercisability, all Options shall be
exercisable cumulatively as to 20% of the Shares upon the first anniversary of
the date of grant, 40% upon the second anniversary, 60% upon the third
anniversary, 80% upon the fourth anniversary, and 100% upon the fifth
anniversary.
(b) Procedure for Exercise; Rights as a Stockholder. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment
may, as authorized by the Board, consist of any consideration and method of
payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
(c) Termination of Status as an Employee or Consultant. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (as the case may be), such Optionee may, but only within such period
of time as is determined by the Board, after the date of such termination (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of such
5
<PAGE> 7
termination, or if he does not exercise such Option within the time specified,
the Option shall terminate.
(d) Disability of Optionee. Notwithstanding the provisions of
Section 9(c) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), he may, but only within
such period of time not exceeding twelve (12) months as is determined by the
Board, after the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise his Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise the Option
at the date of termination, or if he does not exercise such Option within the
time specified, the Option shall terminate.
(e) Death of Optionee. In the event of the death of an
Optionee:
(i) during the term of the Option who is at the time
of his death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, within such period as the Board may
determine (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an Employee or
Consultant twelve (12) months after the date of death; or
(ii) within such period of time as is determined by
the Board, after the termination of Continuous Status as an Employee or
Consultant, the Option may be exercised, at any time following the date of death
as determined by the Board (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that had accrued
at the date of termination.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent and distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, the number of shares of Common
Stock which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split,
6
<PAGE> 8
reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action. In
the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event that such successor corporation, parent or subsidiary does not
agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
12. Time of Granting Options. The effective date of grant of an Option
shall for all purposes be, in the discretion of the Board, either (a) the date
on which the Board makes the determination granting such Option if an immediate
grant is intended or (b) a particular date determined by the Board if a grant is
intended to become effective on a subsequent date. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such determination.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not adversely affect Options already granted,
unless mutually agreed otherwise between the Optionee and the Board, which
agreement must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and
7
<PAGE> 9
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation, and to make any representation or warranty with respect thereto as
may be requested by the Company.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any lia bility in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Options Agreement. Options shall be evidenced by written Option
Agreements in such form as the Board or the Committee shall approve.
17. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all stockholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
IN WITNESS WHEREOF, the undersigned Secretary of Trident Microsystems,
Inc. certifies that the foregoing is the Trident Microsystems, Inc. 1996
Nonstatutory Stock Option Plan as duly adopted by the Board of Directors of the
Company on January 17, 1996
8
<PAGE> 10
PLAN HISTORY
January 17, 1996 Board adopts Plan with a share reserve of 1,500,000 Shares.
9
<PAGE> 11
EXHIBIT 10.11
STANDARD FORM OF
NONSTATUTORY STOCK OPTION AGREEMENT
FOR USE UNDER
TRIDENT MICROSYSTEMS, INC.
1996 NONSTATUTORY STOCK OPTION PLAN
<PAGE> 12
TRIDENT MICROSYSTEMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
Trident Microsystems, Inc., a Delaware corporation (the "Company"), has
granted Cheng-Shie Wang (the "Optionee") an option (the "Option") to purchase a
total of 10,000 shares of Common Stock (the "Shares") subject to the terms,
definitions and provisions of the Trident Microsystems, Inc. 1996 Nonstatutory
Stock Option Plan (the "Plan") adopted by the Company, which are incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
1. Nature of the Option. This Option is intended by the Company and the
Optionee to be a Nonstatutory Stock Option, and does not qualify for any special
tax benefits to the Optionee. This Option is not an incentive stock option
within the meaning of Section 422 of the Code.
2. Exercise Price. The exercise price is $ 16.00 for each share of
Common Stock, which price is not less than the fair market value per share of
the Common Stock on the date of grant.
3. Exercise of Option. The Option shall be exercisable during the term
specified in Section 11 below as follows, subject to the other terms of the
Option:
(a) Right to Exercise.
(i) Except as otherwise provided herein, the Option
shall be exercisable cumulatively according to the following vesting schedule:
(A) no Shares prior to April 23, 1997 ;
(B) twenty-five percent (25%) of the Shares
on and after the date in clause (A);
(C) twenty-five percent (25%) of the Shares
on and after the date which is twelve (12) months after the date in clause (A);
(D) twenty-five percent (25%) of the Shares
on and after the date which is twenty-four (24) months after the date in clause
(A);
(E) twenty-five percent (25%) of the Shares
on and after the date which is thirty-six (36) months after the date in clause
(A).
(ii) Limitations on Exercise.
(A) The Option may not be exercised more
than once in any calendar quarter; provided, however, that the foregoing
restriction shall not apply so
1
<PAGE> 13
as to prevent an exercise (1) following the termination of an Optionee's service
as an Employee or Consultant as provided in Section 7, (2) following a
termination of service due to disability as provided in Section 8, (3) in the
event of the death of the Optionee as provided in Section 9, or (4) during the
fifteen (15) day period immediately preceding a proposed dissolution,
liquidation or merger as provided in the Plan.
(B) The Option may not be exercised as to
less than one hundred (100) shares at any one time or, if less, the number of
shares remaining exercisable pursuant to the Option.
(C) The Option may not be exercised for a
fraction of a share.
(D) In the event of Optionee's death,
disability or other termination of employment, the exercisability of the Option
is governed by Sections 7, 8 and 9 below.
(E) In no event may the Option be exercised
after the date of expiration of the term of the Option as set forth in Section
11 below.
(b) Method of Exercise. The Option shall be exercisable by
written notice, in the form attached hereto signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company,
accompanied by payment of the exercise price.
No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, the Shares shall be considered transferred to
the Optionee on the date on which the Option is exercised with respect to such
Shares. The certificate or certificates for the Shares as to which the Option is
exercised shall be registered in the name of the Optionee, or, if applicable,
the heirs of the Optionee.
4. Method of Payment. Payment of the purchase price shall be made (i)
in cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of the Company's Common Stock owned by the Optionee having a Fair Market
Value (as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than
the exercise price, (iii) by means of a Cashless Exercise, as defined below, or
(iv) by any combination of the foregoing.
(a) Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company of shares of Common Stock to the extent such
tender of shares would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Common Stock
unless such shares either have been
2
<PAGE> 14
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(b) A "Cashless Exercise" means the assignment in a form
acceptable to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant
to a program or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve or terminate any such
program or procedure.
5. Tax Withholding. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes payroll withholding and otherwise agrees to make adequate provision
for foreign, federal and state tax withholding obligations, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any Shares acquired on exercise of the Option,
(iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option.
6. Restrictions on Grant and Exercise. The grant of the Option and the
issuance of the Shares upon exercise of the Option shall be subject to
compliance with all applicable requirements of federal or state law with respect
to such securities. The Option may not be exercised if the issuance of Shares
upon such exercise would constitute a violation of any applicable federal or
state securities laws or other law or regulations. In addition, no Option may be
exercised unless (i) a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), shall at the time of exercise of the Option
be in effect with respect to the Shares issuable upon exercise of the Option or
(ii) in the opinion of legal counsel to the Company, the Shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
7. Termination of Status as an Employee or Consultant. If the Optionee
ceases to serve as an Employee or Consultant for any reason, except death or
permanent and total disability (as defined in Section 22(e)(3) of the Code), the
Optionee may, but only within thirty (30) days after the date the Optionee
ceases to be an Employee or Consultant of the Company (and in no event later
than the date of expiration of the term of the Option as set forth in Section 11
below), exercise the Option to the extent that the Optionee was entitled to
exercise it at the date of such termination. To the extent that the Optionee was
not entitled to exercise the Option at the date of such termination, or
3
<PAGE> 15
if the Optionee does not exercise the Option within the time specified herein,
the Option shall terminate.
8. Disability of Optionee. Notwithstanding the provisions of Section 7
above, if the Optionee is unable to continue his or her employment or consulting
relationship with the Company as a result of permanent and total disability (as
defined in Section 22(e)(3) of the Code), the Optionee may, but only within
twelve (12) months from the date of termination of the employment or consulting
relationship (and in no event later than the date of expiration of the term of
the Option as set forth in Section 11 below), exercise the Option to the extent
the Optionee was entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise the Option (which the Optionee
was entitled to exercise) within the time specified herein, the Option shall
terminate.
9. Death of Optionee. In the event of the death of the Optionee:
(a) during the term of the Option while an Employee or
Consultant of the Company and having been in Continuous Status as an Employee or
Consultant since the date of grant of the Option, the Option may be exercised,
at any time within twelve (12) months following the date of death (but in no
event later than the date of expiration of the term of the Option as set forth
in Section 11 below), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that would have accrued had Optionee continued living and
remained in Continuous Status as an Employee or Consultant twelve (12) months
after the date of death; or
(b) within three (3) months after the termination of the
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the date of expiration of the term of the Option as set
forth in Section 11 below), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
To the extent that an Option subject to this Section 9 is not
exercisable or is not exercised, the Option shall terminate.
10. Non-Transferability of Option. The Option may not be transferred in
any manner otherwise than by will or by the laws of descent and distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of the Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
11. Term of Option. The Option may not be exercised more than ten (10)
years from the effective date of grant of the Option, and may be exercised
during such term only in accordance with the Plan and the terms of the Option.
4
<PAGE> 16
12. Rights as a Stockholder, Employee or Consultant. The Optionee shall
have no rights as a stockholder with respect to any Shares covered by the Option
until the date of the issuance of a certificate or certificates for the Shares
for which the Option has been exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date such certificate or certificates are issued, except as provided in
Section 11 of the Plan. Nothing in the Option shall confer upon the Optionee any
right to continue in the employ of the Company or interfere in any way with any
right of the Company to terminate the Optionee's employment or consulting
relationship at any time.
13. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing Shares subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company
any and all certificates representing Shares acquired pursuant to the Option in
the possession of the Optionee in order to effectuate the provisions of this
paragraph.
14. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
15. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein, and there are no agreements,
understandings, restrictions, representations, or warranties among the Optionee
and the Company with respect to such subject matter other than those as set
forth or provided for herein. To the extent contemplated herein, the provisions
of this Option Agreement shall survive any exercise of the Option and shall
remain in full force and effect.
16. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
DATE OF GRANT: April 29, 1996
TRIDENT MICROSYSTEMS, INC.,
a Delaware corporation
By:
--------------------------
President
5
<PAGE> 17
The Optionee acknowledges receipt of a copy of the Plan and represents
that the Optionee is familiar with the terms and provisions of this Option
Agreement and the Plan, and hereby accepts this Option subject to all of the
terms and provisions thereof. The Optionee understands that the Option does not
confer any right to continued employment. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Dated:
------------------------
---------------------------
Optionee
6
<PAGE> 18
NONSTATUTORY STOCK OPTION
NOTICE OF EXERCISE
To: Secretary
Trident Microsystems, Inc.
I hereby exercise my Option to purchase the number of shares (the
"Shares") of Common Stock of Trident Microsystems, Inc. (the "Company") set
opposite my signature below. Full payment for the Shares in the manner set forth
in my Option Agreement accompanies this notice.
I hereby authorize payroll withholding and otherwise will make adequate
provision for foreign, federal and state tax withholding obligations, if any, as
more fully set forth in my Option Agreement.
I understand that the Shares are being purchased pursuant to the terms
of the Trident Microsystems, Inc. 1996 Nonstatutory Stock Option Plan and my
Option Agreement, copies of which I have received and carefully read and
understand.
Date of Exercise:
---------------------
Date of Option Agreement:
--------------
Shares Being Purchased:
----------------
Price per Share: $
---------------------
------------------------------
Signature
------------------------------
Print Name
------------------------------
Social Security Number
------------------------------
Address
------------------------------
<PAGE> 1
EXHIBIT 11.1
TRIDENT MICROSYSTEMS, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNT, UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 5,581 $ 3,414 $15,242 $ 5,416
------- ------- ------- -------
Weighted average outstanding common stock 12,448 11,685 12,159 11,645
Weighted average incremental common equivalents
from dilutive stock options 922 1,449 1,265 1,350
------- ------- ------- -------
Weighted average common and common equivalent shares 13,370 13,134 13,424 12,995
------- ------- ------- -------
Net income per share $ 0.42 $ 0.26 $ 1.14 $ 0.42
======= ======= ======= =======
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 46,263,000
<SECURITIES> 0
<RECEIVABLES> 19,341,000
<ALLOWANCES> 545,000
<INVENTORY> 27,713,000
<CURRENT-ASSETS> 95,874,000
<PP&E> 10,644,000
<DEPRECIATION> 5,644,000
<TOTAL-ASSETS> 131,650,000
<CURRENT-LIABILITIES> 46,953,000
<BONDS> 0
0
0
<COMMON> 34,489,000
<OTHER-SE> 50,208,000
<TOTAL-LIABILITY-AND-EQUITY> 131,650,000
<SALES> 46,007,000
<TOTAL-REVENUES> 46,007,000
<CGS> 28,730,000
<TOTAL-COSTS> 28,730,000
<OTHER-EXPENSES> 9,612,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,207,000
<INCOME-TAX> 2,626,000
<INCOME-CONTINUING> 5,581,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,581,000
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
