<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -------------------------------------------------------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO ______________
COMMISSION FILE NO. 0-27232
BENCHMARQ MICROELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2532442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17919 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
(Address of principal executive offices) (Zip code)
(972) 437-9195
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---------- ----------
As of November 8, 1996, there were 6,692,726 shares of the registrant's common
stock outstanding.
<PAGE>
CAUTIONARY STATEMENT
The Company wishes to caution readers that the following important factors,
in addition to others noted throughout this Form 10-Q, in some cases have
affected, and in the future could affect, the Company's actual results and could
cause the Company's actual results for the fourth quarter of 1996, and beyond,
to differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company, including, without limitation, statements made
regarding future product sales contained in Part I, Item 2, in the section
entitled "Overview", gross margins contained in Part I, Item 2, in the section
--------
entitled "Results of Operations-Gross Margin", research and development expenses
----------------------------------
contained in Part I, Item 2, in the section entitled "Results of Operations-
---------------------
Research and Development", selling, general and administrative expenses
- ------------------------
contained in Part I, Item 2, in the section entitled "Results of Operations-
---------------------
Selling, General and Administrative", and capital expenditures and cash
- -----------------------------------
requirements contained in Part I, Item 2, in the section entitled "Liquidity and
-------------
Capital Resources":
- -----------------
--an accelerated decline in the average selling prices for the Company's
battery management products, NVSRAM (as defined herein) products and RTC
(as defined herein) products;
--insufficient expansion of the Company's production capacity to meet the
sales demand for battery management products;
--slower or declining acceptance of battery management products, NVSRAM
products or RTC products;
--increases in the prices of materials and components, especially, wafers,
SRAMs (as defined herein) and batteries;
--timing or delay of new product introductions by the Company or its
competitors;
--loss of key personnel;
--excess production capacity;
--inability to achieve acceptable margins on the non-proprietary
components included in certain battery management products;
--timing and size of significant orders;
--changes in product mix;
--advances in technologies;
--growth of selling, general and administrative expense at a rate faster
than that of sales and revenues;
--adverse rulings in patent infringement and product liability litigation;
--labor disputes; and
--failure to comply with government regulations.
In addition, the Company refers readers to the discussion of certain risk
factors pertaining to the Company contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 and in the Company's
Registration Statement on Form S-1 (Registration No. 33-06896) filed with the
Securities and Exchange Commission on September 13, 1995.
2
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Balance Sheets at September 30, 1996 (unaudited) and
December 31, 1995............................................. 4
Statements of Income for the Three and Nine Months Ended
September 30, 1996 and 1995 (unaudited) except for the
Nine Months Ended September 30, 1995)......................... 5
Statements of Cash Flows for the Nine Months Ended
September 30, 1996 (unaudited) and 1995....................... 6
Notes to Financial Statements (unaudited)......................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 16
Signatures................................................................. 17
3
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 1,920,965 $12,653,260
Short-term investments............................................. 12,146,063 -
Receivables, net of allowance for doubtful accounts and returns of
$8,570 and $179,923 at September 30, 1996 and December 31, 1995.. 4,441,203 4,156,598
Inventories........................................................ 4,168,245 3,150,594
Other current assets............................................... 570,427 161,840
----------------------------
Total current assets........................................... 23,246,903 20,122,292
Property and equipment, at cost:
Furniture and fixtures............................................. 740,212 578,453
Equipment.......................................................... 3,717,869 2,366,890
Computer software.................................................. 410,224 342,404
----------------------------
4,868,305 3,287,747
Accumulated depreciation........................................... 2,445,492 1,629,890
----------------------------
2,422,813 1,657,857
Equipment under capital lease obligations............................. 4,315,636 2,704,511
Accumulated amortization........................................... 965,824 638,820
----------------------------
3,349,812 2,065,691
Prepayment for product purchases...................................... 5,880,000 -
Other assets.......................................................... 21,756 39,181
----------------------------
Total assets................................................... $34,921,284 $23,885,021
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 2,271,387 $ 2,403,842
Note payable....................................................... 3,380,000 -
Payroll and related benefits....................................... 402,317 257,000
Income taxes payable............................................... 426,361 107,931
Other accrued liabilities.......................................... 649,858 485,194
Deferred income on shipments to distributors....................... 1,537,709 670,336
Current obligations under capital leases........................... 1,334,914 814,869
----------------------------
Total current liabilities...................................... 10,002,546 4,739,172
Obligations under capital leases, less current obligations............ 1,448,407 890,540
Stockholders' equity..................................................
Common stock, $ .001 par value,50,000,000 shares authorized;
6,744,315 and 6,500,496 shares issued at September 30, 1996 and
December 31, 1995, respectively.................................. 6,744 6,501
Additional paid-in capital......................................... 24,728,114 23,931,866
Accumulated deficit................................................ (1,248,275) (5,670,258)
Unrealized loss on short-term investments, net..................... (3,452) -
Treasury stock, 64,000 common shares, at cost...................... (12,800) (12,800)
----------------------------
Total stockholders' equity..................................... 23,470,331 18,255,309
----------------------------
Total liabilities and stockholders' equity..................... $34,921,284 $23,885,021
============================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------------------ -------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net revenues.............................. $10,519,122 $7,229,458 $28,061,885 $21,067,187
Cost of sales............................. 5,677,989 4,244,440 15,811,719 11,939,382
------------------------ -------------------------
Gross margin.............................. 4,841,133 2,985,018 12,250,166 9,127,805
Operating expenses:
Research and development............... 754,481 525,986 2,044,708 1,594,003
Selling, general, and administrative... 2,121,534 1,571,894 5,967,486 4,470,075
------------------------ -------------------------
Total operating expenses............... 2,876,015 2,097,880 8,012,194 6,064,078
------------------------ -------------------------
Income from operations.................... 1,965,118 887,138 4,237,972 3,063,727
Other income (expense):
Interest income........................ 171,555 100,413 513,609 290,635
Interest expense....................... (57,464) (91,984) (151,599) (268,957)
Other.................................. - 199 (37,999) 1,481
------------------------ -------------------------
Income before provision for income taxes.. 2,079,209 895,766 4,561,983 3,086,886
Income tax provision (benefit)............ (26,300) 64,150 140,000 234,550
------------------------ -------------------------
Net income................................ $ 2,105,509 $ 831,616 $ 4,421,983 $ 2,852,336
======================== =========================
Net income per common and
common equivalent share................ $ 0.29 $ 0.14 $ 0.61 $ 0.46
======================== =========================
Shares used in computing net income per
common and common equivalent share..... 7,333,755 6,470,873 7,299,261 6,408,744
======================== =========================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
--------------------------
(unaudited)
<S> <C> <C>
Operating Activities:
Net income........................................................... $ 4,421,983 $ 2,852,336
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 1,180,568 723,585
Loss on disposition of fixed assets............................ 37,999 -
Deferred income taxes.......................................... (494,985) -
Changes in operating assets and liabilities:
Receivables................................................ (284,605) 745,526
Inventories................................................ (1,017,651) (1,305,253)
Prepaid expenses and other assets.......................... 103,823 (392,828)
Accounts payable........................................... (132,455) (25,497)
Income taxes payable....................................... 465,882 34,806
Deferred income on shipments to distributors............... 867,373 93,127
Accrued liabilities........................................ 309,981 (2,049)
--------------------------
Net cash provided by operating activities............................ 5,457,913 2,723,753
Investing Activities:
Prepayment for product purchases..................................... (2,500,000) -
Investment in short-term investments................................. (30,042,645) -
Maturities of short-term investments................................. 17,893,130 -
Capital expenditures................................................. (1,201,123) (1,092,687)
--------------------------
Net cash used by investing activities................................ (15,850,638) (1,092,687)
Financing Activities:
Proceeds from issuance of common stock upon exercise of options...... 64,655 16,303
Proceeds from issuance of common stock, net of offering costs........ 584,384 -
Principal payments under capital lease obligations................... (988,609) (595,901)
Principal payments on notes payable.................................. - (8,271)
--------------------------
Net cash used by financing activities................................ (339,570) (587,869)
--------------------------
Net change in cash and cash equivalents.............................. (10,732,295) 1,043,197
Cash and cash equivalents at beginning of period..................... 12,653,260 5,599,090
--------------------------
Cash and cash equivalents at end of period........................... $ 1,920,965 $ 6,642,287
==========================
Supplemental Cash Flows Information
Cash paid for interest......................................... $ 151,599 $ 268,957
==========================
Cash paid for income taxes..................................... $ 169,103 $ 199,744
==========================
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared by
BENCHMARQ Microelectronics, Inc. (the "Company" or "BENCHMARQ") in accordance
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods presented have been included. Operating results for the three
and nine-month periods ended September 30, 1996, are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996. For
further information, refer to the financial statements and the footnotes thereto
included in the BENCHMARQ Microelectronics, Inc. annual report on Form 10-K for
the year ended December 31, 1995.
2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per share amounts are computed using the weighted average number
of common and common equivalent shares. For the three and nine-month periods
ended September 30, 1996, common equivalent shares consisted of stock options
and warrants (using the treasury stock method). For the three and nine-month
periods ended September 30, 1995, common equivalent shares consisted of
convertible preferred stock (using the if converted method) and stock options
and warrants (using the modified treasury stock method).
3. SHORT-TERM INVESTMENTS
Short-term investments consist of U. S. government debt securities
(carrying value of $1,980,931 at September 30, 1996), state and municipal debt
securities (carrying value of $3,120,038 at September 30, 1996) and corporate
debt securities (carrying value of $7,045,094 at September 30, 1996). At
September 30, 1996, all of these securities were classified as available for
sale. Accordingly, these securities are stated at fair value, with unrealized
gains and losses reported as a separate component of stockholders' equity.
Interest on all securities is included in interest income.
The Company's Board of Directors has approved investment guidelines with
regard to diversification, quality, maturities and allowed investments. At the
time of purchase there can be no more than 10% of the portfolio invested per
issuer or guarantor with the exception of U. S. government backed securities,
and all securities must meet minimum investment grade standards.
7
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
4. INVENTORIES
Inventories are stated at the lower of standard cost, which
approximates actual cost determined on a first-in, first-out basis, or market.
Inventories, net, consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C>
Finished goods................................. $1,299,288 $ 690,491
Work-in-process................................ 1,839,651 1,232,253
Raw materials.................................. 1,029,306 1,227,850
---------- -----------
$4,168,245 $ 3,150,594
========== ===========
</TABLE>
5. INCOME TAXES
The Company's effective tax rate for the nine months ended September 30,
1996 reflects the realization of a net deferred tax asset of approximately
$495,000. The realization of the net deferred tax asset is based on the
Company's revised estimated effective tax rate for the year ended December 31,
1996.
6. COMMITMENTS
In May 1996, the Company entered into an Option Agreement with Taiwan
Semiconductor Manufacturing Co., Ltd. ("TSMC") (the "Option Agreement").
Pursuant to the Option Agreement, the Company agreed to pay $5,880,000 as an
advance payment for certain quantities of wafers, of which $2,500,000 was paid
in May 1996 and the Company issued a promissory note due March 31, 1997 for the
remaining $3,380,000. Under the terms of the Option Agreement, which is
essentially a take or pay arrangement, the Company has committed to purchase
from TSMC and TSMC has committed to provide to the Company certain quantities
of wafers through 2000. Additionally, in July 1996, the Company entered into a
Wafer Production Agreement (the "Wafer Agreement") with TSMC which primarily
governs the production and supply process relating to the wafers to be purchased
under the Option Agreement.
7. COMMON STOCK
In December 1995, the Company sold 1,000,000 shares of its common stock
pursuant to an initial public offering ("IPO"). In January 1996, the
underwriters of the Company's IPO purchased an additional 85,000 shares of the
Company's common stock to cover over-allotments on the same terms and conditions
as set forth in the prospectus for the IPO dated December 1, 1995. The Company
received net proceeds of $584,384 from the sale of the additional shares.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
BENCHMARQ was incorporated in 1989 and is engaged in the design,
development and marketing of mixed-signal integrated circuits ("ICs") and
electronic modules for portable and power-sensitive electronic systems. The
Company introduced its first products in October 1990, and made its first
shipments, principally of nonvolatile static random access memory ("NVSRAM")
modules, in December 1990. In August 1991, the Company shipped its initial
battery management product and in December 1991 shipped its first real-time-
clock ("RTC") product.
BENCHMARQ currently is directing the majority of its research and
development efforts to the development of battery management products, which are
its strategic focus. Currently, the Company's battery management product line
is comprised of: ICs that measure and report the charge capacity of a battery
("Gas Gauge ICs"); ICs that control battery charging ("Charger ICs"); and ICs
that protect against excessive charging and discharging of Lithium Ion
batteries. In addition, the Company's battery management product line includes
modules that measure and report the charge capacity of a battery and modules
that control battery charging. The Company's objective is to continue to grow
sales of battery management products, which have been the Company's largest
revenue product line for the last four consecutive quarters, to a more dominant
position within the Company's revenue structure. Ongoing efforts to develop
NVSRAM and RTC products have been selective and relatively modest. The Company
believes that its revenues from RTC products and NVSRAM products will not
increase materially over the long-term and may decline due to competitive
pressure. Accordingly, the Company expects that favorable future operating
results will be substantially dependent upon its ability to expand sales of
battery management products. The Company has experienced significant growth in
sales of battery management products in the last four quarters primarily due to
increased sales of Gas Gauge ICs into portable PC applications. Battery
management revenues as a percentage of total revenues grew from 36% in first
quarter 1996 to 45% in second quarter 1996 and 51% in third quarter 1996. There
can be no assurance that the Company will be successful in substantially
increasing sales of battery management products, or that sales of RTC products
or NVSRAM products will not decline more rapidly than anticipated.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996, Compared with Three Months Ended
September 30, 1995
Net Revenues. Total net revenues in third quarter 1996 were approximately
$10.5 million, a 46% increase over the same period in 1995. This increase was
due principally to increased sales of Gas Gauge ICs into the portable PC market,
and to a lesser extent increased sales of Charger
9
<PAGE>
IC devices, which are sold into cellular, consumer, power tool and portable
computer applications, and sales of RTC IC devices and modules into the PC
market. Revenues from battery management product sales exceeded 50% of total
Company revenues for the first time in third quarter 1996.
Revenues from the sale of Gas Gauge ICs represented a majority of battery
management revenues in third quarter 1996 and a majority of battery management
revenue growth from third quarter 1995. Most of the increased demand for Gas
Gauge ICs came from the portable PC market, and the Gas Gauge IC designed for
use with the newer Lithium Ion rechargeable batteries was a significant factor
in this growth.
The Company entered third quarter 1996 with uncharacteristically high
levels of RTC module finished goods inventory due to soft demand in second
quarter 1996. Demand for RTC modules, primarily in desktop PC applications,
increased in third quarter 1996 and the unit sales growth as compared to third
quarter 1995 was primarily provided by this inventory. The Company does not,
however, anticipate a significant increase in RTC module production rates. The
markets for the RTC ICs and modules are very competitive.
The Company experienced lower sales of NVSRAM products in third quarter
1996 compared with third quarter 1995 in large part due to weak demand from the
networking and telecom markets. The Company believes this weak demand is
principally the result of efforts by end customers to lower their inventory
levels. Competitive pressures are a significant factor in these markets.
Revenue generated from RTC royalties and other miscellaneous sources was
0.4% of total revenue in third quarter 1996, compared with 5.1% in third quarter
1995. This reduction is due principally to the fourth quarter 1995 termination
of a third party design contract and significantly lower third party shipments
of products that incorporate the Company's RTC technology under license
agreement.
The following table sets forth for the periods indicated the amount (in
thousands) and percentage of total net revenues by type of product:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C> <C> <C>
Battery Management Products $ 5,384 51.2% $1,768 24.5%
NVSRAM Products 2,125 20.2 2,688 37.2
RTC Products 2,967 28.2 2,397 33.2
RTC Royalties/Other 43 0.4 376 5.1
--------------- --------------
Total Net Revenue $10,519 100.0% $7,229 100.0%
=============== ==============
</TABLE>
10
<PAGE>
The Company's revenues from international customers accounted for
approximately $7.7 million, or 73% of total net revenues, for the quarter ended
September 30, 1996, compared to $3.4 million, or 47% of total net revenues, for
the comparable period in 1995. During the third quarter of 1996, approximately
65% of the Company's total net revenues was derived from customers in the Asia-
Pacific region. The Company's distributor in Taiwan accounted for approximately
$2.7 million, or 26%, of total net revenues in the third quarter of 1996. No
other customer directly accounted for greater than 10% of the total net
revenues.
Export sales are subject to a variety of risks, including those arising
from fluctuations in currency exchange rates, tariffs, import restrictions and
other trade barriers, unexpected changes in regulatory requirements, longer
accounts receivable payment cycles, potentially adverse tax consequences and
export license requirements. Because the Company's international sales have to
date been denominated in U.S. dollars, increases in the value of the U.S. dollar
could increase the price in local currencies of the Company's products in
foreign markets and make the Company's products relatively more expensive than
competitors' products that are denominated in local currencies.
Gross Margin. The Company's gross margin represented 46% of total net
revenues for the three month period ended September 30, 1996 and 41% for the
comparable period in 1995. Gross margin increased approximately $1,856,000, or
62%, to approximately $4.8 million for the third quarter 1996, compared to $3.0
million in the third quarter 1995. Much of the improvement in gross margin as a
percentage of revenues was due to growth in revenues from battery management
product sales. Additionally, the Company's purchase costs for wafers and static
random access memory ("SRAMs") were generally lower in third quarter 1996 than
the same period in 1995. However, lower average selling prices on certain
products and the downward revision of inventory standard costs offset some of
the gross margin improvement.
The Company expects that average selling prices, primarily with respect to
its RTC and NVSRAM products will continue to decline. The Company believes that
its ability to maintain or increase its gross margin over the long-term will
primarily require it to increase its sales of battery management products. There
can be no assurance, however, that the Company will be able to achieve these
objectives.
Research and Development. The Company's research and development expense
increased approximately 43% to $754,000 in the third quarter 1996, compared to
$526,000 in third quarter 1995. This increase was due primarily to increased
compensation and payroll related expenses and product tooling. As a percentage
of total revenues, research and development expense decreased to approximately
7.2% in third quarter 1996 from 7.3% in third quarter 1995.
The Company intends to continue to make a significant investment in
research and development, particularly with respect to battery management
product opportunities, and believes that research and development expense will
therefore increase in absolute dollars.
11
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expense increased approximately $550,000 to $2.1 million in third quarter 1996
as compared to the same period in 1995. This increase was due primarily to
increases in compensation, external sales commissions, general marketing and
other general expenses. Selling, general and administrative expense represented
approximately 20.2% and 21.7% of total net revenues in third quarter 1996 and
1995, respectively. Selling, general and administrative expense in absolute
dollars is expected to continue to increase as the Company expands its business.
Other Income (Expense). Other income (expense), consists primarily of
interest earned on short-term investments, net of interest expense on capital
lease obligations, and a $2.0 million subordinated note payable in 1995. In
third quarter 1996, the Company realized net other income of approximately
$114,000, compared to $9,000 in third quarter 1995. This improvement primarily
reflects higher average balances of invested funds and the retirement of the
$2.0 million subordinated note payable in December 1995. Proceeds from the
Company's IPO contributed significantly to the increase in funds available for
investment.
Provision for Income Taxes. The Company generated pre-tax income during
the third quarter 1996 and 1995, which was substantially offset by net operating
loss carryforwards from prior operating periods. The Company also recognized a
net deferred tax asset in the third quarter 1996 based on its estimated
effective tax rate for the year ended December 31, 1996. This resulted in a net
income tax benefit of $26,300 in the third quarter 1996. A provision for income
tax of $64,150 was recorded in the three months ended September 30, 1995,
consisting of alternative minimum tax and state income tax.
Nine Months Ended September 30, 1996, Compared with Nine Months Ended
September 30, 1995
Net Revenues. Total net revenues for the nine months ended September 30,
1996 were approximately $28.1 million, a 33% increase over the same period in
1995. This increase was due principally to increased sales of Gas Gauge ICs into
the portable PC market, and to a lesser extent increased sales of Charger IC
devices, which are sold into cellular, consumer, power tool and portable
computer applications, and sales of RTC IC devices into the PC market. Revenues
from battery management product sales represented approximately 45% of total
revenues for the nine months ended September 30, 1996, compared to 25% for the
comparable period in 1995. Revenue generated from RTC royalties and other
miscellaneous sources was 1.0% of total revenue for the nine months ended
September 30, 1996, compared with 6.7% for the nine months ended September 30,
1995.
12
<PAGE>
The following table sets forth for the periods indicated the amount (in
thousands) and percentage of total net revenues by type of product:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C> <C> <C>
Battery Management Products $12,572 44.8% $ 5,305 25.2%
NVSRAM Products 7,422 26.4 6,962 33.1
RTC Products 7,791 27.8 7,379 35.0
RTC Royalties/Other 277 1.0 1,421 6.7
--------------- ---------------
Total Net Revenue $28,062 100.0% $21,067 100.0%
=============== ===============
</TABLE>
The Company's revenues from international customers accounted for
approximately $18.7 million, or 67% of total net revenues, for the nine months
ended September 30, 1996, compared to $10.9 million, or 52% of total net
revenues, for the comparable period in 1995. During the nine months ended
September 30, 1996, approximately 60% of the Company's total net revenues was
derived from customers in the Asia-Pacific region. The Company's distributor in
Taiwan accounted for approximately $5.8 million, or 21%, of total net revenues
for the nine months ended September 30, 1996. No other customer directly
accounted for greater than 10% of the total net revenues.
Gross Margin. The Company's gross margin represented 44% and 43% of total
net revenues for the nine month periods ended September 30, 1996 and 1995,
respectively. Gross margin increased approximately $3.1 million, or 34%, to
approximately $12.3 million for the nine-month period ended September 30, 1996,
compared to $9.1 million for the nine-month period ended September 30, 1995.
Excluding the impact of royalties and design fees, the gross margin percentage
would have been approximately 43% and 40% for the nine months ended September
30, 1996 and 1995, respectively. Much of this improvement in gross margin as a
percentage of revenues is due to the growth in revenues from battery management
product sales. Battery management products are the Company's highest gross
margin percentage product line and its strategic focus.
Research and Development. The Company's research and development
expense increased approximately 28% to $2.0 million for the nine months ended
September 30, 1996 as compared to approximately $1.6 million for the nine months
ended September 30, 1995. This increase was due primarily to increased
compensation and payroll related expenses and product tooling. As a percentage
of total revenues, research and development expense decreased to approximately
7.3% for the nine months ended September 30, 1996 from 7.6% for the comparable
period in 1995.
Selling, General and Administrative. Selling, general and administrative
expense increased approximately $1.5 million to $6.0 million for the nine months
ended September 30, 1996 as compared to the same period in 1995. This increase
was due primarily to increases in compensation, external sales commissions,
depreciation, legal, and other general expenses. Much
13
<PAGE>
of the increase in legal expenses was due to a declaratory judgment proceeding
brought by the Company against Dallas Semiconductor Corporation, in which the
Company sought a ruling that the Company's products did not infringe upon
certain patents held by Dallas Semiconductor Corporation. Such legal proceedings
were dismissed by the Court in June 1996. Selling, general and administrative
expense represented approximately 21.3% and 21.2% of total net revenues for the
nine months ended September 30, 1996 and 1995, respectively.
Other Income (Expense). Other income (expense), consists primarily of
interest earned on short-term investments, net of interest expense on capital
lease obligations and a $2.0 million subordinated note payable in 1995. For the
nine months ended September 30, 1996, the Company realized net other income of
approximately $324,000, compared to $23,000 for the same period in 1995. This
improvement primarily reflects higher average balances of invested funds and the
retirement of the $2.0 million subordinated note payable in December 1995.
Proceeds from the Company's IPO contributed significantly to the increase in
funds available for investment.
Provision for Income Taxes. The Company generated pre-tax income during
the nine-month periods ended September 30, 1996 and 1995, which was
substantially offset by net operating loss carryforwards from prior operating
periods. The Company also recognized a net deferred tax asset in the third
quarter 1996 based on its estimated effective tax rate for the year ended
December 31, 1996. This resulted in provisions for income taxes of $140,000 and
$235,000 for the nine months ended September 30, 1996 and 1995, respectively,
consisting of alternative minimum tax and state income tax.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital needs are to finance accounts receivable,
inventories and additions of capital assets. Approximately $5.5 million of cash
was generated by operating activities during the nine-month period ended
September 30, 1996 as compared to $2.7 million in the comparable period in 1995.
Net cash used in investing activities of approximately $15.9 million during
the nine-month period ended September 30, 1996 was attributable primarily to the
investment of much of the Company's cash equivalents into short-term investments
with higher expected yields. In addition, approximately $2.5 million was used to
prepay certain quantities of wafers pursuant to the Option Agreement under which
TSMC is committed to supply and the Company is committed to purchase wafers.
Finally, approximately $1.2 million was used for capital expenditures consisting
primarily of assembly and test capacity expansion. Comparatively, net cash used
in investing activities during the nine-month period ended September 30, 1995
amounted to approximately $1.1 million and consisted of capital expenditures.
Financing activities have consisted primarily of the issuance of equity and
payments under capital lease obligations. Financing activities used cash during
the nine-month period ended September 30, 1996 of approximately $340,000, which
consisted of proceeds of approximately
14
<PAGE>
$649,000 from issuances of stock and payments of approximately $989,000 under
capital lease obligations. During the comparable nine-month period ended
September 30, 1995, financing activities used net cash of approximately
$588,000, primarily due to payments under capital lease obligations.
The Company's principal sources of liquidity are cash generated from
operations as well as cash and cash equivalents and short-term investments of
approximately $14.1 million at September 30, 1996. The Company's short-term
investments are primarily in government debt securities and corporate debt
securities. In addition, the Company has a lease line of credit with BancBoston
Leasing, Inc. During the nine month period ended September 30, 1996, the
Company used approximately $2.1 million of credit under its outstanding lease
line primarily for additions of assembly and test equipment. As of October 31,
1996, approximately $1.2 million was available under the lease line for
additional acquisitions of equipment. However, as of such date, equipment
purchase orders totaling approximately $236,000 were outstanding against the
available lease line of credit.
The Company anticipates capital asset additions to exceed $500,000 for the
remainder of 1996, primarily to expand test capacity for certain of its battery
management products, a portion of which may be financed under the Company's
lease line.
The Company believes that existing cash balances and other capital
resources will be sufficient to meet the Company's cash requirements at least
through 1996. However, the Company may also seek to establish additional lines
of credit to augment its funding of operating activities. There can be no
assurance that such additional financing, if required, will be available on
terms acceptable to the Company, if at all.
In addition, the Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products,
technologies and additional sources of wafer supply. The Company also may seek
additional equity or debt financing to fund such activities. The sale of
additional equity or convertible debt securities could result in dilution to the
Company's stockholders. There can be no assurance that such additional
financing, if required, will be available on terms acceptable to the Company, if
at all.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
The exhibits filed as a part of this report are listed below.
Exhibit No. Description
----------- -----------------------------------------------------
10.1 The 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan
(Amended and Restated as of April 1, 1996)
10.2 The BENCHMARQ Microelectronics, Inc. Profit Sharing Plan
(Amended and Restated as of April 1, 1996)
10.3 The BENCHMARQ Microelectronics, Inc. 1989 Stock Option
Plan (Amended and Restated as of September 18, 1996)
10.4 The BENCHMARQ Microelectronics, Inc. 1995 Flexible
Stock Option Plan (Amended and Restated as of
September 18,1996)
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1996.
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
BENCHMARQ MICROELECTRONICS, INC.
NOVEMBER 13, 1996 /S/ DERRELL C. COKER
-------------------------------
DERRELL C. COKER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
NOVEMBER 13, 1996 /S/ REGINALD B. MCHONE
-------------------------------
REGINALD B. MCHONE
VICE PRESIDENT, FINANCE AND
ADMINISTRATION, CHIEF FINANCIAL
OFFICER AND SECRETARY (PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
17
<PAGE>
EXHIBIT 10.1
------------
THE 1995 BENCHMARQ MICROELECTRONICS, INC. BONUS PLAN
----------------------------------------------------
(AMENDED AND RESTATED AS OF APRIL 1, 1996)
ARTICLE 1 - OBJECTIVE
The 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan (the "Bonus Plan") is
intended to allow BENCHMARQ Microelectronics, Inc. (the "Company") to attract
and retain the services of key employees. The principle objectives of the Bonus
Plan are to ensure that key employees are fairly compensated relative to
industry standards and that they are rewarded for the achievement of certain
specified operating objectives. The Bonus Plan relates to salary rates, annual
bonuses, and stock options.
ARTICLE 2 - PLAN YEAR AND EFFECTIVE DATE
The Bonus Plan shall be maintained on the basis of a calendar year (the
"Plan Year"), unless otherwise indicated herein. The Bonus Plan shall first be
effective July 1, 1995, and the first Plan Year shall be a short Plan Year
commencing on such date and ending December 31, 1995.
ARTICLE 3 - PARTICIPATION
The following six (6) groups of employees of the Company (the
"Participant Groups") shall be eligible for bonuses under the Bonus Plan:
Group 1. The Chief Executive Officer ("CEO").
Group 2. The President and all Vice Presidents (along with the CEO, these
individuals shall be referred to herein as "Executive Officers").
Group 3. The Corporate Controller, the Treasurer, and the Assistant Vice
Presidents (hereinafter referred to as "Officers").
Group 4. The Department Managers of Marketing, Product & Test, Assembly
Manufacturing, Product Testing, Purchasing & Materials, and
Applications.
Group 5. Senior Members of the Technical Staff (as designated by the CEO
and Chief Technical Officer of the Company ("CTO")). Each Plan
Year, the CEO and CTO may appoint up to two employees to become
members of Participant Group 5 ("SMTS"). To be appointed to the
SMTS, an individual must be a full-time employee of the Company
and hold an engineering position in one of the following
departments: Design, Product & Test, or Applications
Engineering. Department Managers, Officers, and Executive
Officers are eligible to become members of the SMTS, but they
will not be eligible for a Group 5 bonus, as determined pursuant
to Article 6 hereof. In addition, SMTS members will not be
eligible for a Group 6 bonus, as determined pursuant to Article 6
hereof.
Group 6. Key employees, not otherwise described above, who are nominated
by an Executive Officer for a particular Plan Year and whose
nominations are approved by the Compensation Committee of the
Board of Directors of the Company ("Compensation Committee").
Each Executive Officer may nominate up to three (3) employees for
Group 6 status to the Compensation Committee each Plan Year; such
nominations must be supported by a written description of the
nominees' contributions to the success of the Company.
<PAGE>
Whether a particular employee is included within one or more of the six (6)
Participant Groups described above shall be determined by the Compensation
Committee in its sole discretion. The Compensation Committee may, in its sole
discretion, change the coverage of each Participant Group at any time. For
purposes of bonuses under Article 6 hereof, if an individual would otherwise be
eligible for inclusion in two (2) Participant Groups described above (for
example, because he or she held two positions with the Company), such individual
shall be included only in the highest ranking Participant Group for which he or
she is eligible, with Group 1 being the highest ranking Participant Group.
ARTICLE 4 - SALARY RATES
As part of the Company's annual review process, the CEO will recommend to
the Compensation Committee salary rates for the upcoming year for all personnel
in Participant Groups 1 through 5. The Compensation Committee may use whatever
resources it deems appropriate, including external sources, to confirm industry
standard salary rates. Salary rates approved by the Compensation Committee will
be implemented by the Human Resources Department.
ARTICLE 5 - STOCK OPTION GRANTS
At various times and in compliance with the terms of the BENCHMARQ
Microelectronics, Inc. 1995 Flexible Stock Option Plan, the Compensation
Committee may grant stock options to personnel in any of the six (6) Participant
Groups. These stock options may be either incentive stock options or
nonqualified options.
ARTICLE 6 - BONUSES
Section 6.1 - Bonus Criteria. As part of the Company's annual planning
----------------------------
process, the CEO and Chief Financial Officer of the Company ("CFO") will,
concurrently with their recommendation of an annual budget/plan, recommend to
the Compensation Committee performance objectives for the Company. The
Compensation Committee will then establish specific target performance
objectives for the Company concurrently with their approval of the annual
budget/plan. Performance objectives approved by the Compensation Committee will
be communicated by the CFO to all personnel in Participant Groups 1 through 5.
Each Group 6 participant's bonus for a Plan Year shall be that percentage of
such employee's base annual salary (not to exceed 5%) as is approved by the
Compensation Committee for such Plan Year.
The remainder of this Section 6.1 describes the criteria that will
generally be used to determine bonuses for employees in Participant Groups 1
through 5. Actual bonus criteria for a particular Plan Year will be determined
in accordance with the procedures described in the preceding paragraph. Bonuses
will be based on the Company's degree of achievement of certain performance
objectives, referred to as Cash Bonus Payment Parameters ("CBPP"). The degree
of CBPP achievement (the "CBPP Factor") will be determined by dividing the
Company's actual CBPP performance by its budgeted CBPP objective.
Participant Groups 1 & 2. Each member of Participant Groups 1 and 2 will
------------------------
be assigned three (3) CBPPs. For each full percentage point that each CBPP
Factor assigned to a participant is above a minimum of 85%, up to 105%, such
participant will receive 5% of one-third (1/3) of his or her Potential Cash
Bonus ("PCB"). Each participant's PCB will be represented as a percentage of
such participant's base annual salary, such percentage to be determined annually
by the Compensation Committee.
-2-
<PAGE>
Participant Groups 3 & 4. Each member of Participant Groups 3 and 4 will
------------------------
be assigned two (2) CBPPs. For each full percentage point that each CBPP Factor
assigned to a participant is above a minimum of 85%, up to 105%, such
participant will receive 5% of one-third (1/3) of his or her PCB. Payment of
the remaining one-third (1/3) of his or her PCB, or any portion thereof, is in
the discretion of the participant's supervising Executive Officer. This
discretionary bonus component must be justified in writing by the participant's
supervising Executive Officer and submitted to the Compensation Committee for
authorization. Each participant's PCB will be represented as a percentage of
such participant's base annual salary, such percentage to be determined annually
by the Compensation Committee.
Participant Group 5. Each member of Participant Group 5 will be assigned
-------------------
one (1) CBPP. For each full percentage point that his or her CBPP Factor is
above a minimum of 85%, up to 105%, such participant will receive 5% of one-
third (1/3) of his or her PCB. The remaining two-thirds (2/3) of each Group 5
participant's PCB will be based on such participant's performance, measured
against technical and project objectives negotiated with his or her cost center
supervisor and supervising Executive Officer. These negotiated objectives will
be submitted to the Compensation Committee by the CEO in January of each Plan
Year. A written assessment of performance, along with a determination of the
percentage of objectives achieved, will be submitted in writing to the
Compensation Committee by the participant's supervising Executive Officer during
the following January. The Compensation Committee will review the written
assessment and determination of the percentage of objectives achieved, and will
authorize an achievement factor, which will be multiplied by two-thirds (2/3) of
the participant's PCB to determine his or her remaining bonus. Each
participant's PCB will be represented as a percentage of such participant's base
annual salary, such percentage to be determined annually by the Compensation
Committee.
Section 6.2 - Bonus Payments and Procedures. Bonus payments will generally
-------------------------------------------
be made quarterly and/or annually at the discretion of the compensation
committee, but in no case later than the first payroll date immediately
following the completion of the Company's annual audit by the Company's
independent auditors. The Compensation Committee may postpone, eliminate, or
adjust any bonus payment at any time prior to payment hereunder if such payment
would require material and adverse adjustments to the Company's financial
statements or if the Company's independent auditors would otherwise issue a
qualified opinion on the Company's financial statements.
Section 6.3 - Bonus Amounts and Cap. Amounts necessary to pay bonuses
-----------------------------------
shall be accrued quarterly and shall be paid as described above.
Notwithstanding anything herein to the contrary, the total amount payable
hereunder for any Plan Year shall be capped at seven percent (7%) of the
Company's pre-tax income for such Plan Year, determined without regard to
accruals for bonus payments hereunder and accruals for profit sharing program
bonuses under The BENCHMARQ Microelectronics, Inc. Profit Sharing Program. To
the extent this 7% cap limits the bonuses otherwise payable hereunder, each
participant's bonus shall accordingly be limited in a pro rata manner such that
each participant has the same percentage reduction in his or her bonus.
ARTICLE 7 - ADMINISTRATION
Unless otherwise indicated herein, the Compensation Committee shall
administer and interpret the Bonus Plan in its sole and absolute discretion.
Any determinations made by the Compensation Committee under the Bonus Plan shall
be final and binding on participants and all other parties concerned.
The Compensation Committee is authorized to amend or terminate the Bonus
Plan in any manner it deems appropriate (including retroactive amendments) by a
written instrument executed by the Compensation Committee or a member of the
Compensation Committee who is authorized to execute such instrument on behalf of
the Compensation Committee.
-3-
<PAGE>
EXHIBIT 10.2
------------
THE BENCHMARQ MICROELECTRONICS, INC. PROFIT SHARING PROGRAM
-----------------------------------------------------------
(AMENDED AND RESTATED AS OF APRIL 1, 1996)
ARTICLE 1 - OBJECTIVE
The BENCHMARQ Microelectronics, Inc. Profit Sharing Program ("Profit
Sharing Program" or "Program") is intended to allow BENCHMARQ Microelectronics,
Inc. (the "Company") to provide financial incentives and rewards to all eligible
employees of the Company for excellent financial performance by the Company.
The Program shall first be effective for the Company's fiscal quarter commencing
July 1, 1995.
ARTICLE 2 - PARTICIPATION
To be eligible for the Profit Sharing Program for a particular fiscal
quarter of the Company, an employee must both (1) be in continuous full-time
employment with the Company from the first day of the applicable fiscal quarter
to the last day of such fiscal quarter, and (2) be a full-time employee of the
Company on the payment date of the Profit Sharing Program bonus for such fiscal
quarter. The Committee (as defined below) shall, in its sole and absolute
discretion, determine whether an employee is a full-time employee for this
purpose.
ARTICLE 3 - PROFIT SHARING PROGRAM BONUS PAYMENTS
Profit Sharing Program bonuses shall generally be accrued each quarter
of the Company's fiscal year. Profit Sharing Program bonus payments for the
first three quarters of the Company's fiscal year shall generally be made on the
payroll date immediately following the Company's public release of earnings.
Fourth quarter Profit Sharing Program bonus payments shall generally be made on
the pay date immediately following the completion of the Company's annual audit
by its independent auditors.
ARTICLE 4 - PROFIT SHARING PROGRAM BONUS AMOUNTS
In order for a Profit Sharing Program bonus amount to accrue during a
quarter, the Company must achieve a pre-tax income, determined without regard to
accruals hereunder and accruals for bonus payments under The 1995 BENCHMARQ
Microelectronics, Inc. Bonus Plan ("PTIB"), return on net revenue of 12%
("ROR"). If this target is achieved, the Profit Sharing Program bonus pool
shall accrue at 3.5% of the particular fiscal quarter's PTIB.
ARTICLE 5 - ALLOCATION OF BONUS AMOUNTS
To determine an employee's proportionate share of the Profit Sharing
Program bonus pool for a particular fiscal quarter of the Company, the following
steps shall be undertaken:
Step 1: The Program accruals for the quarter shall be divided by the
------ aggregate base wages and salaries for the quarter of all
employees eligible for a Program bonus ("PSP Percentage").
Step 2: The PSP Percentage shall then be multiplied by each eligible
------ "indirect employee's" base wage or salary for the quarter to
determine such employee's bonus amount for the quarter.
Step 3: The remaining portion of the Program accruals for the quarter
------ shall be divided equally, as a flat dollar amount, among the
eligible "direct employees."
<PAGE>
The Committee shall determine whether an employee is a "indirect employee"
or a "direct employee" in its sole and absolute discretion. If an eligible
employee's pay rate changes during a quarter, the rate in effect at the end of
such quarter shall be used for Program calculations. In addition, base wages
and salaries shall exclude sales commissions, bonuses, overtime premiums, and
such other forms of compensation as determined by the Committee.
ARTICLE 6 - ADMINISTRATION
The Board of Directors of the Company (the "Board") shall appoint a
committee (the "Committee") of at least two individuals to administer the Profit
Sharing Program; provided, however, if the Board does not appoint such
individuals, the Compensation Committee of the Board shall serve as the
Committee hereunder. The Committee shall administer and interpret the Profit
Sharing Program in its sole and absolute discretion. Any determinations made by
the Committee under the Profit Sharing Program shall be final and binding on
participants and all other parties concerned.
The Committee is authorized to amend or terminate the Profit Sharing
Program in any manner it deems appropriate (including retroactive amendments) by
a written instrument executed by the Committee or a member of the Committee who
is authorized to execute such instrument on behalf of the Committee.
ARTICLE 7 - MATCHING CONTRIBUTIONS
In addition, upon achievement of the 15% pre-tax return on sales goal for a
fiscal year, the PSP authorizes the Compensation Committee of the Board of
Directors to, at its discretion, fund a 401(k) matching contribution pool of up
to 2.5% of PTIB. Discretionary matching contributions, if any, will be made
annually.
2
<PAGE>
EXHIBIT 10.3
------------
BENCHMARQ Microelectronics, Inc.
1989 STOCK OPTION PLAN
(Amended and Restated as of September 18, 1996)
1. Purposes of the Plan. The purposes of the Plan are to attract and
--------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentives to all the Employees and Consultants of the
Company and to promote the success of the Company's business. It is intended
that each option granted hereunder will either qualify as an "incentive stock
option", as defined in Section 422A(b) of the Code, or be a "non-statutory stock
option."
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 has been appointed.
(b) "Book Value" means the excess of the value of the assets of an entity
----------
over the liabilities of such entity (determined in accordance with United States
generally accepted accounting principles, consistently applied).
(c) "Change in Control" shall mean, (i) the occurrence of an event of a
-----------------
nature that would be required to be reported by the Company in response to Item
1 of a Current Report on Form 8-K (or any successor to such form) promulgated
pursuant to the Exchange Act; provided, without limitation, such a Change in
Control shall be deemed to have occurred if (A) any Person or Group (other than
(I) the Company, (II) any wholly-owned Subsidiary of the Company, (III) any
employee benefit plan, including, without limitation, an employee stock
ownership plan, established by the Company or any wholly-owned Subsidiary of the
Company or (IV) any trustee or other fiduciary holding securities under any
employee benefit plan established by the Company or any wholly-owned Subsidiary
of the Company), becomes the "beneficial owner" (as defined in Rule 13d-3 (or
any successor to such rule) promulgated under the Exchange Act), directly or
indirectly, of securities of the Company or any Material Subsidiary of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company's or such Material Subsidiary's then outstanding securities or (b)
during any period of twenty-four (24) months, individuals who at the beginning
of such period constitute the Board cease for any reason to constitute at least
a majority thereof, unless the election by the Board or the nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were directors at
the beginning of such twenty-four (24) month period or whose election or
nomination for election was previously so approved; (ii) a merger, consolidation
or conversion involving the Company is consummated, other than a merger,
consolidation or conversion that would result in the holders of voting
securities of the Company outstanding immediately prior thereto owning (directly
or indirectly) not less than fifty percent (50%) of the combined voting power of
the voting securities of the surviving or resulting entity outstanding
immediately after such merger, consolidation or conversion, (iii) the
stockholders of the Company approve a plan of complete liquidation of the
Company (iv) an agreement for the sale or other disposition of all or
substantially all of the Company's assets (evaluated on a consolidated basis,
without regard to whether the sale or disposition is effected via a sale or
disposition of assets of the Company, the sale or disposition of the securities
of one or more Subsidiaries of the Company or the sale or disposition of the
assets of one or more Subsidiaries of the Company) is consummated, (v) the
Company issues securities in an exchange of securities, other than an exchange
of securities (including all related exchanges of securities) that would result
in the holders of voting securities of the Company outstanding immediately prior
thereto continuing to own not less than fifty percent (50%) of the combined
voting power of the voting securities of the Company to be outstanding
immediately
<PAGE>
subsequent to such exchange of securities or (vi) the stockholders of the
Company are issued securities in an exchange of securities, other than an
exchange of securities (including all related exchanges of securities) that
would result in the holders of voting securities of the Company outstanding
immediately prior thereto owning not less than fifty percent (50%) of the
combined voting power of the voting securities (which are to be outstanding
immediately subsequent to such exchange of securities) of the issuer of the
securities issued in such exchange of securities.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor legislation thereto.
(e) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(f) "Common Stock" shall mean the common stock, par value $0.001 per
------------
share, of the Company.
(g) "Company" shall mean BENCHMARQ Microelectronics, Inc., a Delaware
-------
corporation.
(h) "Consultant" shall mean any Person who or which is engaged by the
----------
Company or any Parent or Subsidiary of the Company to render consulting services
and is compensated for such consulting services.
(i) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted while an Employee is on sick leave,
military leave or any other leave of absence approved by the Board, if the
period of such leave does not exceed 90 days, or, if longer, so long as the
Employee's right to reemployment with the Company or any Parent or Subsidiary is
guaranteed either by statute or contract.
(j) "Corporate Transaction" shall mean any recapitalization (other than a
---------------------
transaction within the scope of Section 11(a)), merger, consolidation or
conversion involving the Company or any exchange of shares involving the Common
Stock.
(k) "Corporate Transaction Consideration" shall have the meaning set
-----------------------------------
forth in Section 11(c) of the Plan.
(l) "Employee" shall mean any individual, including an officer or
--------
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and any successor legislation thereto.
(n) "Expiration Date" shall mean the date on which the term of an Option
---------------
expires.
(o) "Group" shall have the meaning ascribed to such term in Section 13(d)
-----
of the Exchange Act.
(p) "Incentive Stock Option" shall mean an option granted under the Plan
----------------------
that is intended to qualify as an incentive stock option within the meaning of
Section 422A(b) of the Code.
-2-
<PAGE>
(q) "Material Subsidiary" shall mean any Subsidiary of which the Book
-------------------
Value or fair market value (whichever is greater) constitute fifty percent (50%)
or more of the Book Value of the Company. The fair market value of a Subsidiary
will be determined in good faith by the Board.
(r) "Non-Statutory Stock Option" shall mean an option granted under the
--------------------------
Plan that does not (whether at the time of grant or thereafter) qualify as an
Incentive Stock Option.
(s) "Option" shall mean an option which is granted pursuant to the Plan to
------
purchase Shares.
(t) "Optioned Stock" shall mean the Shares subject to an Option.
--------------
(u) "Optionee" shall mean an Employee or Consultant to whom an Option has
--------
been granted.
(v) "Parent" shall mean a "parent corporation", whether now or hereafter
------
existing, as defined in Section 425(e) of the Code.
(w) "Person" shall mean any individual, employee benefit plan,
------
corporation, trust, partnership, joint venture, limited liability company or
other business entity.
(x) "Permitted Modification" shall be deemed to be any modification of an
----------------------
Option which is made in connection with a Corporate Transaction and which
provides that subsequent to the consummation of the Corporate Transaction (A)
the exercise price of such Option will be proportionately adjusted to reflect
the exchange ratio applicable to the particular Corporate Transaction and/or (B)
the nature and amount of consideration to be received upon exercise of the
Option will be the same (on a per share basis) as was received by persons who
were holders of Shares immediately prior to the consummation of the Corporate
Transaction.
(y) "Plan" shall mean this 1989 Stock Option Plan.
----
(z) "Share" shall mean a share of Common Stock.
-----
(aa) "Subsidiary" shall mean a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to provisions of Section 11 of the
-------------------------
Plan, the aggregate number of Shares which may be optioned and sold under the
Plan is 823,232 (after giving effect to all exercises of Options prior to
September 18, 1996). The Shares may be authorized, but unissued, or reacquired
Common Stock. 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 grants under the Plan.
-3-
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board of Directors
---------
of the Company; provided, however, the Board of Directors may appoint a
Committee consisting of not less than three members of the Board of Directors to
administer the Plan on behalf of the Board of Directors, subject to such terms
and conditions as the Board of Directors may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board of
Directors. 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 and remove all members of the Committee, and thereafter directly
administer the Plan. Members of the Board who are either eligible for Options or
have been granted Options may vote on any matters affecting the administration
of the Plan or the grant of any Options pursuant to the Plan, except that no
such member shall act upon the granting of an Option to himself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board during which action is taken with respect to the granting of Options
to him. So long as the Company has equity securities registered pursuant to
Section 12 of the Exchange Act, the Plan shall be administered in accordance
with the requirements of Rule 16b-3 promulgated under the Exchange Act.
(b) Powers of the Board. Subject to the provisions of the Plan, the Board
-------------------
shall have the authority, in its discretion: (i) to grant Options; (ii) to
determine, in accordance with Section 8(b) of the Plan, the fair market value
per Share of the Common Stock; (iii) to determine, in accordance with Section
8(a) of the Plan, the exercise price per Share at which Options may be
exercised; (iv) to determine the Employees and Consultants to whom, and the time
or times at which, Options shall be granted, the number of Shares to be
represented by each Option and whether such Options shall be Incentive Stock
Options, Non-Statutory Stock Options or any combination thereof; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the holder
thereof, to modify or amend any outstanding Option; (viii) to accelerate or
defer (with the consent of the Optionee) the exercise date of any outstanding
option; (ix) 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 (x) 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) Grant of Options. Incentive Stock Options may be granted only to
----------------
Employees. Non-Statutory Stock Options may be granted to either Employees or
Consultants. An Employee or Consultant who has been granted an Option may, if
he is otherwise eligible, be granted an additional Option or Options.
(b) No Right of Employment. The Plan shall not confer upon any Optionee
----------------------
any right with respect to continuation of employment by, or consulting
relationship with, the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship at
any time.
(c) Limitation Upon Incentive Stock Options. Subject to the provisions of
---------------------------------------
this Section 5, to the extent that the aggregate fair market value of Shares
with respect to which Incentive Stock Options (determined without regard to the
provisions of this Section 5) are exercisable for the first time
-4-
<PAGE>
by any Employee during any calendar year (under all plans of the Company or any
Parent or Subsidiary of the Company) exceeds $100,000, such Options shall be
treated as Options that are Non-Statutory Stock Options. For purposes of this
Section 5(c), which shall be applied by taking Options into account in the order
in which they were granted, the fair market value of any Shares shall be
determined as of the time the Option with respect to such Shares is granted.
6. Term of Plan. The Plan shall become effective upon the date of its
------------
adoption by the Board of Directors or, if earlier, the date of its approval by
vote of the holders of a majority of the outstanding Shares entitled to vote on
the adoption of the Plan. It shall continue in effect for a term of ten (10)
years from such date, unless sooner terminated under Section 12 of the Plan.
7. Term of Option. The term of each Option shall be ten (10) years from
--------------
the date of grant thereof or such shorter term as may be determined by the
Board. However, in the case of any Incentive Stock Option granted to an
Employee who, at the time of grant, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary of the Company, the term of such Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter time as
may be determined by the Board.
8. Exercise Price and Method of Payment.
------------------------------------
(a) Exercise Price. 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 in the case of an Incentive Stock Option, such price shall not be
less than 100% (or, in the case of an Incentive Stock Option granted to an
Employee who, at the time of grant, owns stock representing more than ten (10%)
percent of the voting power of all classes of stock of the Company or any Parent
or Subsidiary of the Company, 110%) of the fair market value per Share on the
date such Option was granted.
(b) Fair Market Value. For purposes of the Plan, the term "fair market
-----------------
value" on any date shall mean (i) if the Common Stock is listed or admitted to
trade on a national securities exchange, the closing price of the Common Stock
on the composite tape, as published in the Wall Street Journal, of the principal
national securities exchange on which the Common Stock is so listed or admitted
to trade, on such date or, if there is no trading in Shares on such date, then
the closing price of the Common Stock as quoted on such composite tape on the
next preceding date on which there was trading in such Shares; (ii) if the
Common Stock is not listed or admitted to trade on a national securities
exchange, then the closing price of the Common Stock as quoted on the National
Market System of the National Association of Securities Dealers, Inc. ("NASD");
(iii) if the Common Stock is not listed or admitted to trade on a national
securities exchange or the National Market System of the NASD, the mean between
the bid and asked price for the Common Stock on such date, as furnished by the
NASD through NASDAQ or a similar organization if NASDAQ is no longer reporting
such information; or (iv) if the Common Stock is not listed or admitted to trade
on a national securities exchange or the National Market System of the NASD and
if bid and asked prices for the Common Stock are not so furnished by the NASD
or a similar organization, the values established by the Board for purposes of
granting Options under the Plan. Fair market value shall be determined without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
(c) Payment. Payment for Shares issuable upon exercise of an Option shall
-------
be made in cash, or by check, promissory note, or if authorized by the Board, by
delivery of other Shares having a fair market value on the date of delivery
equal to the aggregate exercise price of the Shares as to which said Option is
being exercised, or by any combination of such methods of payment or by any
other method of payment as may be permitted under applicable law and as may be
authorized by the Board.
-5-
<PAGE>
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable at such times under such conditions as shall be
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. An Option may not be exercised for a fraction of a Share. 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 form of 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. No adjustment will be made for a dividend or other
right for which the record date is prior to the date as of which the stock
certificate is issued, except as provided in Section 11 of the Plan. Each
exercise of an Option shall reduce, pro tanto, the total number of Shares that
may thereafter be purchased under such Option. Subject to the provisions of
Section 5(c), in no event shall the exercise of an Incentive Stock Option by an
Employee have any effect on the exercise of any Non-Statutory Stock Options
granted to such Employee, nor shall the exercise of a Non-Statutory Stock Option
have any effect on the exercise of any Incentive Stock Options granted to such
Employee.
(b) Termination of Status as an Employee. If an Optionee ceases to be an
------------------------------------
Employee, he may, but only prior to the earlier of (i) the close of business on
the Expiration Date or (ii) the close of business on the last day of the period
ending thirty (30) days after the date he ceases to be an Employee, 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
such date, or does not exercise it within the time specified herein, the option
shall terminate.
(c) Disability of Employee. Notwithstanding the provisions of Section
----------------------
9(b) above, in the event an Employee is unable to continue his employment with
the Company as a result of his permanent and total disability (as defined in
Section 22(e)(3) of the Code), he may, but only prior to the earlier of (i) the
close of business on the Expiration Date or (ii) the close of business on the
last day of the period ending twelve (12) months from the date of termination,
exercise his Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise the Option
at such date, or if he does not exercise it within the time specified herein,
the Option shall terminate.
(d) Death of Employee. Notwithstanding the provisions of Section 9(b)
-----------------
above, upon the death of an Employee, any Option held by him shall terminate and
be of no further effect, except as provided below:
(i) If the Employee's death occurs during the term of the Option and,
at the time of his death, the Employee was an Employee of the Company and
had been in Continuous Status as an Employee since the date of grant of the
Option, the Option may be exercised, at any time prior to the earlier of
(A) the close of business on the Expiration Date or (B) the close of
business on the last day of the period ending twelve (12) months following
the date of the Employee's death, by the Employee's estate or by the person
who acquired the right to exercise the Option by bequest or inheritance,
but only as to the number of Shares subject to the Option as to which the
right to exercise had accrued to the Employee at the date of death.
-6-
<PAGE>
(ii) If the Employee's death occurs within thirty (30) days after the
termination of his Continuous Status as an Employee, the Option may be
exercised, at any time prior to the earlier of (A) the close of business on
the Expiration Date or (B) the close of business on the last day of the
period ending three (3) months following the date of the Employee's death,
by the Employee's estate or by a person who acquired the right to exercise
the option by bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the date of termination.
(e) Death, Disability or Termination of Consultants. Options granted
-----------------------------------------------
under the Plan to Consultants may contain such terms and conditions with respect
to the death or disability of a Consultant or the termination of a Consultant's
consulting relationship with the Company as the Board deems necessary or
appropriate. Such terms and conditions will be set forth in the option agreement
referenced in Section 15 of the Plan.
(f) Vesting and Exercise of Vested Options. Each Option granted pursuant
--------------------------------------
to the Plan may only be exercised to the extent that the Optionee is vested in
such Option. Each Option shall vest separately in accordance with the option
vesting schedule determined by the Board, which will be incorporated into the
option agreement entered into between the Company and such Optionee. The option
vesting schedule may be accelerated if, in the sole discretion of the Board, the
acceleration of the option vesting schedule would be in the best interests the
Company. Upon the occurrence of a Change in Control, all Options which have
not previously been terminated, exercised or cancelled shall become fully vested
and immediately exercisable.
10. Non-Transferability of Options. No Option granted hereunder may be
------------------------------
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution. Any Option
granted hereunder may be exercised, during the lifetime of the Optionee, only by
the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Reorganizations. Subject to any required action by the stockholders
---------------
of the Company, the number of Shares covered by each outstanding Option, and the
aggregate number of Shares which have been authorized for issuance under the
Plan, as well as the exercise price per Share covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split or the payment of a stock
dividend with respect to the Common Stock or any other increase or decrease in
the number of issued Shares 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 subject to an Option.
(b) Dissolution/Liquidation. In the event of the dissolution or
-----------------------
liquidation of the Company, each Option shall terminate as of a date to be fixed
by the Board; provided, however, that not less than thirty (30) days' written
notice of the date so fixed shall be given to each Optionee. During such period
each Option which has not previously been terminated, exercised or cancelled
will fully vest and become exercisable (subject to the expiration of the term of
such Option), notwithstanding the vesting schedule set forth in the option
agreement evidencing the grant of such Option or any performance based
restrictions. Upon the date fixed by the Board, any unexercised Option shall
terminate and be of no further effect.
-7-
<PAGE>
(c) Corporate Transactions in which the Common Stock Remains Outstanding.
--------------------------------------------------------------------
If a Corporate Transaction is consummated and immediately following the
consummation of such Corporate Transaction the Persons who were holders of
Shares immediately prior to the consummation of such Corporate Transaction do
not receive any securities or other property ("Corporate Transaction
Consideration") as a result of such Corporate Transaction and continue to hold
solely the shares of Common Stock held by them immediately prior to the
consummation of such Corporate Transaction, the Options will remain outstanding
and will continue in full force and effect (without any modification) following
the consummation of such Corporate Transaction.
(d) Corporate Transactions in which the Common Stock Does Not Remain
----------------------------------------------------------------
Outstanding. If a Corporate Transaction is consummated and immediately
- -----------
following the consummation of such Corporate Transaction, the Persons who were
holders of Shares immediately prior to the consummation of such Corporate
Transaction do receive Corporate Transaction Consideration as a result of such
Corporate Transaction or do not continue to hold solely the shares of Common
Stock held by them immediately prior to the consummation of such Corporate
Transaction, the terms and conditions of the Options will be modified as
follows:
(i) If the documentation pursuant to which a Corporate Transaction
will be consummated provides for the assumption by the entity issuing
Corporate Transaction Consideration to the Persons who were the holders of
Shares immediately prior to the consummation of such Corporate Transaction
of the Options granted pursuant to the Plan without any modification or
amendment (other than Permitted Modifications), such Options will remain
outstanding and will continue in full force and effect, subject to the
Permitted Modifications, following the consummation of such Corporate
Transaction.
(ii) If the documentation pursuant to which a Corporate Transaction
will be consummated does not provide for the assumption by the entity
issuing Corporate Transaction Consideration to the Persons who were the
holders of Shares immediately prior to the consummation of such Corporate
Transaction of the Options granted pursuant to the Plan without any
modification or amendment (other than Permitted Modifications), all vesting
restrictions (performance based or otherwise) will accelerate and the
holders of such Options may (subject to the expiration of the term of such
Options) exercise such Options without regard to such vesting restrictions
during the ten (10) day period immediately preceding the consummation of
such Corporate Transaction. For purposes of the immediately preceding
sentence, all performance based goals will be deemed to have been satisfied
in full. The Company will provide each Optionee with reasonable notice of
the termination of such vesting restrictions and the impending termination
of such Options. Upon the consummation of such a Corporate Transaction,
all unexercised Options will automatically terminate and cease to be
outstanding.
12. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may terminate the Plan at any
-------------------------
time. The Board may amend the Plan at any time in such respects as the Board
may deem advisable; provided, that the following amendments shall require
approval of the holders of a majority of the outstanding shares of the Company
entitled to vote:
(i) any change in the aggregate number of Shares which may be
optioned and sold under the Plan, other than in connection with an
adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of Employees eligible
to be granted Incentive Stock Options; or
-8-
<PAGE>
(iii) if the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such amendment, any change in
the Plan which would materially increase the benefits accruing to
participants under the Plan.
(b) Effect of Amendment or Termination. The amendment or termination of
----------------------------------
the Plan shall not change in any way the rights and obligations under any Option
which was granted to an Optionee prior to such amendment or termination, unless
the Optionee shall have consented to such change in writing.
13. Conditions Upon Issuance of Shares. No Options granted hereunder may
----------------------------------
be exercised and no Shares issuable upon exercise of such Options may be
transferred unless and until the Board determines that such exercise/transfer
will be made in compliance with all applicable laws, rules and regulations,
including, without limitation, applicable securities laws, rules and regulations
and the rules and regulations of any securities exchange or automated
transaction reporting system on which the securities of the Company are listed
or admitted to trading. The Company does not have any obligation to take any
action to register or qualify Shares pursuant to applicable securities laws or
to perfect an exemption from such registration/qualification requirements. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
14. Reservation of Shares. The Company, during the term of the Plan and
---------------------
each Option, will at all times reserve and keep available such number of Shares
as shall be sufficient to satisfy the requirements of the Plan and such Options.
The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve, and shall contain, in the
case of Incentive Stock Options, such provisions as shall be necessary for the
Options to which such option agreements relate to qualify as to Incentive Stock
Options.
16. Stockholder Approval. If the Plan is adopted by action of the Board
--------------------
of Directors prior to approval by the Company's stockholders, continuance of the
Plan shall be subject to approval of the Plan by the stockholders of the Company
within 12 months after the date on which the Plan is so adopted. With respect
to any amendment of the Plan requiring approval of the Company's stockholders,
such approval shall be obtained within 12 months before or after the date such
amendment is adopted; provided, that if the Company has a class of equity
security registered under Section 12 of the Exchange Act at the time of such
amendment, such amendment shall not become effective until such approval has
been obtained. If, after the Plan has been adopted, the Company registers any
class of any equity security pursuant to Section 12 of the Exchange Act, the
Plan and all amendments thereto since the Plan's adoption shall be submitted to
the stockholders of the Company for their approval. Such approval shall be
obtained at or prior to the first annual meeting of stockholders held subsequent
to the first such registration of securities. Such approval of the
stockholders, and their approval of any subsequent amendment to the Plan
requiring their approval, shall be solicited: (i) substantially in accordance
with Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder; or (ii) after the Company has furnished in writing to the
stockholders entitled to vote substantially the same information concerning the
Plan as that which would be required by the rules and regulations then in effect
under Section 14(a).
-9-
<PAGE>
EXHIBIT 10.4
------------
BENCHMARQ MICROELECTRONICS, INC.
1995 FLEXIBLE STOCK OPTION PLAN
(Amended and Restated as of September 18, 1996)
I
Purpose of Plan; Administration
-------------------------------
I.1 Purpose. The purpose of the BENCHMARQ Microelectronics, Inc. 1995
-------
Flexible Stock Option Plan (the "Plan") is to strengthen BENCHMARQ
Microelectronics, Inc. (the "Company") by providing a means of retaining and
attracting competent personnel by extending to participating officers,
employees, directors and consultants (as defined in Section 1.3) of the Company,
or of a Parent or Subsidiary (as defined herein) of the Company, added long-term
incentives for high levels of performance and for unusual efforts designed to
improve the financial performance of the Company. It is intended that this
purpose be achieved through the opportunity for ownership of shares of the
common stock, par value $.001 per share, of the Company (the "Stock") and the
benefits of stock appreciation offered under the Plan. It is further intended
that pursuant to this Plan the Committee (as defined in Section 1.2) may grant
either incentive stock options as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or nonqualified stock options. As used
herein, the term "Parent" will be deemed to have the meaning set forth in
Section 424(e) of the Code and the term "Subsidiary" will be deemed to have the
meaning set forth in Section 424(f) of the Code.
I.2 Administration. The Plan shall be administered by the
--------------
Compensation Committee (the "Committee") established by the Board of Directors
of the Company (the "Board"). Such Committee shall be comprised of two (2) or
more directors, each of whom shall be "non-employee directors," as defined in
Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Subject to the express provisions of the Plan, the Committee shall
have the authority to construe and interpret the Plan, to define the terms used
in the Plan, to prescribe, amend and rescind rules and regulations relating to
the administration of the Plan, to determine the duration and purposes of leaves
of absence which may be granted to participants without constituting a
termination of their employment or other service for purposes of the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The determinations of the Committee on all matters referred to in
this Plan shall be conclusive. No member of the Committee shall be liable for
any action, failure to act, determination or interpretation made in good faith
with respect to the Plan or any transaction under the Plan.
Subject to the express provisions of the Plan, the Committee shall
determine from the eligible class those individuals to whom incentive stock
options or nonqualified stock options under the Plan shall be granted (the
"Optionees"), the terms and provisions (which need not be identical) of the
respective agreements (the "Option Agreements") evidencing such options, the
time at which options shall be granted, and the number of shares of Stock
subject to each option.
I.3 Participation. Officers, employees, directors and consultants of
-------------
the Company or any Parent or Subsidiary of the Company shall be eligible for
selection to participate in the Plan upon approval by the Committee; provided,
however, that only those individuals who are employed by the Company or a Parent
or Subsidiary of the Company shall be eligible to receive incentive stock
options. For purposes of the Plan, the term "consultant" shall mean any person
or entity who or which is engaged by the Company or a Parent or Subsidiary of
the Company to render consulting services and is compensated for such consulting
services.
-1-
<PAGE>
I.4 Stock Subject to the Plan. Subject to adjustment as provided in
-------------------------
Section 3.1 hereof, the shares to be offered under the Plan shall be treasury
shares or shares of the Company's authorized but unissued Stock. The aggregate
number of shares of Stock to be issued upon exercise of all options granted
under the Plan shall not exceed 500,000 shares (after giving effect to all
exercises of options prior to September 18, 1996), subject to adjustment as set
forth in Sections 3.1 hereof. The aggregate number of shares of Stock to be
issued to any individual within any calendar year shall not exceed 100,000
shares. If any option granted hereunder shall lapse or terminate for any reason
without having been fully exercised, the shares subject thereto shall again be
available for purposes of the Plan.
I.5 Restrictions on Exercise. No options granted hereunder may be
------------------------
exercised and no shares of Stock issuable upon exercise of such options may be
transferred unless and until the Committee determines that such
exercise/transfer will be made in compliance with all applicable laws, rules and
regulations, including, without limitation, applicable securities laws, rules
and regulations and the rules and regulations of any securities exchange or
automated transaction reporting system on which the securities of the Company
are listed or admitted to trading. The Company does not have any obligation to
take any action to register or qualify shares of Stock pursuant to applicable
securities laws or to perfect an exemption from such registration/qualification
requirements. As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares of Stock are being purchased only for
investment and without any present intention to sell or distribute such shares
of Stock if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
II
Stock Options
-------------
II.1 Grant and Option Price. The Committee may grant one or more
----------------------
options to any eligible individual. Options granted under the Plan shall be
granted within ten (10) years from the earlier of the date the Plan is adopted
by the Board or approved by the stockholders of the Company, and such options
may be intended to qualify as Incentive Stock Options (as hereinafter defined),
or the Committee may in its discretion grant nonqualified stock options under
the Plan. All options shall be subject to the terms and conditions set forth in
the Plan and such other terms and conditions established by the Committee as are
not inconsistent with the purposes and provisions of the Plan.
Except as otherwise provided herein, the purchase price of the Stock
covered by each option shall be determined by the Committee and set forth in the
Option Agreement, but as to Stock covered by an Incentive Stock Option the
purchase price shall not be less than 100% of the Fair Market Value (as such
term is defined in this Section 2.1) of such Stock on the date of the grant of
the option. Notwithstanding the foregoing, the purchase price of Stock covered
by an Incentive Stock Option granted to any individual who owns or is deemed to
own more than 10% of the total combined voting power and value of all classes of
stock of the Company, its Parent, if any, or a Subsidiary, shall not be less
than 110% of the Fair Market Value (as such term is defined in this Section 2.1)
of such Stock on the date of the grant of the option. For purposes of the Plan,
the term "Fair Market Value" on any date shall mean (i) if the Stock is listed
or admitted to trade on a national securities exchange, the closing price of the
Stock on the Composite Tape, as published in the Wall Street Journal, of the
principal national securities exchange on which the Stock is so listed or
admitted to trade, on such date or, if there is no trading of the Stock on such
date, then the closing price of the Stock as quoted on such Composite Tape on
the next preceding date on which there was trading in such shares; (ii) if the
Stock is not listed or admitted to trade or a national securities exchange, then
the closing price of the Stock as quoted on the National Market System of the
National Association of Securities Dealers, Inc. ("NASD"); (iii) if the Stock is
not listed or admitted to trade on a national securities exchange or the
-2-
<PAGE>
National Market System of the NASD, the mean between the bid and asked price for
the Stock on such date, as furnished by the NASD through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information; or (iv) if the
Stock is not listed or admitted to trade on a national securities exchange or
the National Market System of the NASD and if bid and asked prices for the Stock
are not so furnished by the NASD or a similar organization, the values
established by the Committee for purposes of granting options under the Plan.
In addition to the above rules, Fair Market Value shall be determined without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
II.2 Stock Option Agreement. Subject to the provisions of Section 1.2
----------------------
hereof, each option granted pursuant to the Plan shall be evidenced by a Stock
Option Agreement in substantially the form of Exhibit "A" or "B" attached hereto
and incorporated fully herein by reference (each, an "Option Agreement").
Exhibit "A" shall be used whenever such option is intended to be an "incentive
stock option" within the meaning of Section 422 of the Code ("Incentive Stock
Option"). Exhibit "B" shall be used whenever such option is intended to be a
nonqualified stock option, as determined in the sole and absolute discretion of
the Committee.
II.3 Option Period. Except as otherwise provided herein, each option
-------------
and all rights or obligations thereunder shall expire on such date as the
Committee shall determine (the "Expiration Date"), but not later than the tenth
anniversary of the date on which the option is granted, and shall be subject to
earlier termination as hereinafter provided. Notwithstanding the foregoing, the
Expiration Date of an Incentive Stock Option granted to any individual who owns
or is deemed to own more than 10% of the total combined voting power and value
of all classes of stock of the Company, its Parent, if any, or a Subsidiary,
shall be a date which is not later than the fifth anniversary of the date on
which the option is granted, and shall be subject to earlier termination as
hereinafter provided.
II.4 Terms of Options. Each option granted under this Plan by its
----------------
terms shall require the officer, employee, director or consultant granted such
option to remain in the continuous employ or service of the Company or of a
Parent or Subsidiary of the Company for such period of time, if any, from the
date of grant of such option before the right to exercise any part of the option
will accrue as the Committee may determine at the time of granting such option.
II.5 Exercise of Options. Each option shall become exercisable and the
-------------------
total number of shares of Stock subject thereto shall be as the Committee shall
determine, as set forth in the Option Agreement evidencing such option. The
purchase price of the Stock purchased upon exercise of an option shall be paid
in full in cash or by check at the time of each exercise of an option or by such
other consideration as may be provided for in the Option Agreement by the
Committee; provided, however, that if the Option Agreement so provides and upon
receipt of all regulatory approvals, the person exercising the option may
deliver, in payment of a portion or all of the purchase price, shares of Stock,
including a multiple series of exchanges of such Stock, which shall be valued at
the Fair Market Value of such Stock on the date of exercise of the option. No
options shall be exercisable except in respect of whole shares of Stock.
II.6 Nontransferability of Options. An option granted under the Plan
-----------------------------
shall, by its terms, be nontransferable by the Optionee other than by will or by
the laws of descent and distribution, and shall be exercisable during the
Optionee's lifetime only by the Optionee or by the Optionee's duly appointed
guardian or personal representative.
-3-
<PAGE>
II.7 Termination of Relationship.
---------------------------
(a) If the employment or other service of the Optionee is terminated
for any reason other than (i) Disability (as hereinafter defined) of the
Optionee, or (ii) death of the Optionee, an option (to the extent otherwise
exercisable on the date of such termination) shall be exercisable by the
Optionee at any time prior to the Expiration Date of the option or within
thirty (30) days after the date of such termination of employment or other
service, whichever is the shorter period.
(b) If the Optionee's employment or other service is terminated by
reason of the Optionee's Disability, an option (to the extent otherwise
exercisable on the date of the Optionee's termination of employment or
other service by reason of Disability) shall be exercisable by the Optionee
at any time prior to the Expiration Date of the option or within twelve
(12) months after the date of such termination, whichever is the shorter
period. As used herein, the term "Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. The determination of whether
or not an Optionee's employment or service is terminated by reason of
Disability shall be in the sole and absolute discretion of the Committee.
An individual shall not be considered Disabled unless he furnishes proof of
the existence thereof in such form and manner, and at such times, as the
Committee may require.
(c) If an Optionee dies while in the employ or other service of the
Company or of a Parent of Subsidiary of the Company, the option shall be
exercisable (to the extent otherwise exercisable on the date of the death
of such Optionee) by the person or persons entitled to do so under the
Optionee's will, or, if the Optionee shall fail to make testamentary
disposition of said option or shall die intestate, by the Optionee's legal
representative or representatives, at any time prior to the Expiration Date
of the option or within twelve (12) months after the date of such death,
whichever is the shorter period.
(d) If an Optionee dies within thirty (30) days after his termination
of employment or other service, or within the twelve-month period described
in subsection (b) above, an option shall be exercisable (to the extent
otherwise exercisable on the date of such termination) by the person or
persons entitled to do so under the Optionee's will, or, if the Optionee
shall fail to make testamentary disposition of said option or shall die
intestate, by the Optionee's legal representative or representatives, at
any time prior to the Expiration Date of the option or within three (3)
months after the date of death, whichever is the shorter period.
II.8 Issuance of Stock Certificates. Upon exercise of an option, but
------------------------------
subject to the provisions of Section 3.6 of this Plan, the person exercising the
option shall be entitled to one (1) stock certificate evidencing the shares of
Stock acquired upon such exercise; provided, however, that any person who
tenders shares of Stock in payment of a portion or all of the purchase price of
Stock purchased upon exercise of the option shall be entitled to receive a
separate certificate representing the number of shares purchased in
consideration of the tender of such Stock.
II.9 Limitation on Grant of Incentive Stock Options. The aggregate Fair
----------------------------------------------
Market Value (determined at the time the option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an Optionee during any calendar year (under all such plans of the individual's
employer and its Parent or Subsidiary) shall not exceed $100,000. In the event
the limits of this Section 2.9 would otherwise be exceeded, the Optionee may
still exercise his option, but such option, to the extent of such excess, shall
be deemed to be a nonqualified stock option.
-4-
<PAGE>
II.10 Other Limitations. The Board shall impose any other limitations on
-----------------
the terms and conditions of Incentive Stock Options granted under the Plan
required in order that such options qualify as Incentive Stock Options as that
term is defined in Section 422 of the Code.
II.11 "Stand-Off" Agreement. By exercising an option granted under the
---------------------
Plan, each Optionee will be deemed to have agreed for a period of time (not to
exceed 90 days, but up to 270 days if approved by a majority of the Board) from
the effective date of any registration (other than a registration effected
solely to implement an employee benefit plan or a transaction to which Rule 145
promulgated under the Securities Act of 1933, as amended (the "Act"), is
applicable) of securities of the Company (upon request of the Company or of the
underwriters managing any underwritten offering of the Company's securities) not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any shares of Stock received upon exercise of an option or
any shares of Stock covered by an option granted under the Plan, other than
shares of Stock included in the registration, without the prior written consent
of the Company or such underwriters, as the case may be.
III
Other Provisions
----------------
III.1 Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the stockholders of the Company, the number of shares of
Stock covered by each outstanding option, and the aggregate number of shares of
Stock which have been authorized for issuance under the Plan, as well as the
exercise price per share of Stock covered by each such outstanding option, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Stock resulting from a stock split or the payment of a stock dividend
with respect to the Stock or any other increase or decrease in the number of
issued shares of 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 Stock subject to an option.
In the event of the dissolution or liquidation of the Company, each
Option shall terminate as of a date to be fixed by the Committee; provided,
however, that not less than thirty (30) days' written notice of the date so
fixed shall be given to each Optionee. During such period each option which has
not previously been terminated, exercised or canceled will fully vest and become
exercisable (subject to the expiration of the term of such option),
notwithstanding the vesting schedule set forth in the Option Agreement
evidencing the grant of such option or any performance based restriction. Upon
the date fixed by the Committee, any unexercised option shall terminate and be
of no further effect.
If a Corporate Transaction (as hereinafter defined) is consummated and
immediately following the consummation of such Corporate Transaction the persons
who were holders of shares of Stock immediately prior to the consummation of
such Corporate Transaction do not receive any securities or other property
("Corporate Transaction Consideration") as a result of such Corporate
Transaction and continue to hold solely the shares of Stock held by them
immediately prior to the consummation of such Corporate Transaction, the options
will remain outstanding and will continue in full force and effect (without any
modification) following the consummation of such Corporate Transaction.
If a Corporate Transaction is consummated and immediately following
the consummation of such Corporate Transaction the persons who were holders of
shares of Stock immediately prior to the consummation of such Corporate
Transaction do receive Corporate Transaction Consideration as a
-5-
<PAGE>
result of such Corporate Transaction or do not continue to hold solely the
shares of Stock held by them immediately prior to the consummation of such
Corporate Transaction, the terms and conditions of the options will be modified
as follows:
(i) If the documentation pursuant to which a Corporate Transaction
will be consummated provides for the assumption by the entity issuing
Corporate Transaction Consideration to the persons who were the holders of
shares of Stock immediately prior to the consummation of such Corporate
Transaction of the options granted pursuant to the Plan without any
modification or amendment (other than Permitted Modifications (as
hereinafter defined)), such options will remain outstanding and will
continue in full force and effect, subject to the Permitted Modifications,
following the consummation of such Corporate Transaction.
(ii) If the documentation pursuant to which a Corporate Transaction
will be consummated does not provide for the assumption by the entity
issuing Corporate Transaction Consideration to the persons who were the
holders of shares of Stock immediately prior to the consummation of such
Corporate Transaction of the options granted pursuant to the Plan without
any modification or amendment (other than Permitted Modifications), all
vesting restrictions (performance based or otherwise) will accelerate and
the holders of such options may (subject to the expiration of the term of
such options) exercise such options without regard to such vesting
restrictions during the ten (10) day period immediately preceding the
consummation of such Corporate Transaction. For purposes of the
immediately preceding sentence, all performance based goals will be deemed
to have been satisfied in full. The Company will provide each Optionee
with reasonable notice of the termination of such vesting restrictions and
the impending termination of such options. Upon the consummation of such a
Corporate Transaction, all unexercised options will automatically terminate
and cease to be outstanding.
As used herein, the term "Corporate Transaction" will be deemed to mean any sale
of all or substantially all of the assets of the Company or the merger of the
Company with or into another corporation. As used herein, the term "Permitted
Modifications" will be deemed to mean any modification of an option which is
made in connection with a Corporate Transaction and which provides that
subsequent to the consummation of the Corporate Transaction (i) the exercise
price of such option will be proportionately adjusted to reflect the exchange
ratio applicable to the particular Corporate Transaction and/or (ii) the nature
and amount of consideration to be received upon exercise of the option will be
the same (on a per share basis) as was received by persons who were holders of
shares of Stock immediately prior to the consummation of the Corporate
Transaction.
Notwithstanding the foregoing, in the event of the consummation of a
Corporate Transaction in which a Change in Control (as hereinafter defined)
occurs, all vesting restrictions (performance based or otherwise) applicable to
options will accelerate and the holders of such options may (subject to the
expiration of the term of such options) exercise such options without regard to
such vesting restrictions. For purposes of the immediately preceding sentence,
all performance based goals will be deemed to have been satisfied in full. As
used herein, the term "Change in Control" will be deemed to mean (i) a merger of
the Company with or into another corporation is consummated, other than a merger
that would result in the holders of voting securities of the Company outstanding
immediately prior thereto owning (directly or indirectly) not less than fifty
percent (50%) of the combined voting power of the voting securities of the
surviving or resulting entity outstanding immediately after such merger or (ii)
an agreement for the sale or other disposition of all or substantially all of
the Company's assets (evaluated on a consolidated basis, without regard to
whether the sale or disposition is effected via a sale or disposition of assets
of the Company, the sale or disposition of the securities of one or more
Subsidiaries of the Company or the sale or disposition of the assets of one or
more Subsidiaries of the Company) is consummated.
-6-
<PAGE>
III.2 Continuation of Employment. Nothing contained in the Plan (or in
--------------------------
any option granted pursuant to the Plan) shall confer upon any Optionee any
right to continue in the employ or other service of the Company or any Parent or
Subsidiary or constitute any contract or agreement of employment or interfere in
any way with the right of the Company or any Parent or Subsidiary to reduce any
person's compensation from the rate in existence at the time of the granting of
an option or to terminate such person's employment or other service. Nothing
contained herein or in any Option Agreement shall affect any other contractual
rights of an employee.
III.3 Withholding. The Company or the Parent or any Subsidiary of the
-----------
Company shall have the right to deduct any sums that the Committee reasonably
determines that federal, state or local tax law requires to be withheld with
respect to the exercise of any option or as otherwise may be required by those
laws. The Company or the Parent or any Subsidiary of the Company may require as
a condition to issuing shares of Stock upon exercise of an option that the
Optionee or other person exercising the option pay any sums that federal, state
or local tax law requires to be withheld with respect to the exercise. Neither
the Company nor the Parent or any Subsidiary of the Company shall be obligated
to advise any Optionee of the existence of the tax or the amount which the
employer corporation will be so required to withhold. Upon the exercise of a
nonqualified stock option, if tax withholding is required, an Optionee may, with
the consent of the Committee, have shares of Stock withheld ("Share
Withholding") by the Company from the shares of Stock otherwise to be received;
provided, that if the Optionee is subject to the provisions of Section 16 under
- --------
the Exchange Act, no Share Withholding shall be permitted unless such
transaction complies with the requirements of Rule 16b-3 promulgated under the
Exchange Act. The number of shares so withheld should have an aggregate Fair
Market Value on the date of exercise sufficient to satisfy the applicable
withholding taxes.
III.4 Amendment and Termination. The Board may at any time suspend or
-------------------------
terminate the Plan and may, with the consent of the holder of an option, make
such modifications of the terms and conditions of such holder's option as it
shall deem advisable. No option may be granted during any suspension of the
Plan or after such termination. The amendment, suspension or termination of the
Plan shall not, without the consent of the Optionee, alter or impair any rights
or obligations under any option theretofore granted under the Plan.
The Board may at any time amend the Plan as it shall deem advisable without
further action on the part of the stockholders of the Company; provided, that
--------
the Board may not amend any provision of the Plan relating to the amount and
price of Stock subject to the option granted hereunder or the timing of grants
hereunder more than once every six (6) months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder; and provided further, that any amendment to the Plan must be
-------- -------
approved by the stockholders of the Company, if the amendment would (i) increase
the aggregate number of shares of Stock which may be issued pursuant to options
granted under the Plan; (ii) change the minimum option price; (iii) increase the
maximum terms of options provided for herein; (iv) materially modify the
requirements as to eligibility for participation in the Plan; (v) remove the
administration of the Plan from the Committee; or (vi) materially increase the
benefits accruing to holders of options under the Plan.
Notwithstanding the above, the Committee may grant to an Optionee, if he is
otherwise eligible, additional options or, with the consent of the Optionee, may
grant a new option in lieu of an outstanding option, at a price and for a term
which in any respect is greater or less than that of the earlier option, subject
to the general limitations of Article II hereof.
III.5 Time of Grant and Exercise. The granting of an option pursuant to
--------------------------
the Plan shall take place at the time of the Committee's action, as described in
Section 2.1 hereof; provided, however, that if the appropriate resolutions of
the Committee indicate that an option is to be granted as of and at
-7-
<PAGE>
some future date, the date of grant shall be such future date. In the event
action by the Committee is taken by written consent of its members, the action
by the Committee shall be deemed to have been taken at the time the last member
required for a valid action of the Committee signs the consent.
An option shall be deemed to be exercised when the Secretary of the Company
receives written notice of such exercise from the person entitled to exercise
the option together with payment of the purchase price made in accordance with
Section 2.5 of this Plan.
III.6 Privileges of Stock Ownership; Non-Distributive Intent. The holder
------------------------------------------------------
of an option shall not be entitled to the privileges of ownership as to any
shares of Stock not actually issued and delivered to the holder. Upon exercise
of an option for Stock at a time when there is not in effect under the Act a
registration statement relating to the shares of Stock issuable upon exercise
thereof or not available for delivery a prospectus, the holder of the option
shall represent and warrant in writing to the Company that, inter alia, the
----- ----
shares of Stock purchased are being acquired for investment and not with a view
to the resale or distribution thereof. No shares of Stock shall be issued upon
the exercise of any option unless and until there shall have been compliance
with any then applicable requirements of the Securities and Exchange Commission
(the "Commission"), other regulatory agencies having jurisdiction and any
exchanges or automated quotation systems upon which securities subject to the
option may be listed or admitted to trading.
III.7 Effective Date of the Plan. The Plan shall be effective upon
--------------------------
approval by the affirmative vote of the holders of a majority of the outstanding
shares of Stock present and entitled to vote at a meeting duly held or by the
written consent of the holders of a majority of the shares of Stock entitled to
vote.
III.8 Expiration. Unless previously terminated by the Board, the Plan
----------
shall expire at the close of business on the date which is the last day of the
ten (10) year period beginning on the date on which the stockholders approve the
Plan, and no option shall be granted under it thereafter, but such expiration
shall not affect any option theretofore granted.
III.9 Governing Law. The Plan and the options issued hereunder shall be
-------------
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware applicable to contracts made and performed within that State.
III.10 No Liability for Good Faith Determinations. Neither the members of
------------------------------------------
the Board nor any member of the Committee shall be liable for any act, omission
or determination taken or made in good faith with respect to the Plan or any
option granted under it.
III.11 Execution of Receipts and Releases. Any payment or any issuance or
----------------------------------
transfer of shares of Stock to the Optionee, or to his legal representative,
heir, legatee or distributee, in accordance with the provisions hereof, shall,
to the extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Board may require any Optionee, legal representative, heir,
legatee or distributee, as a condition precedent to such payment, to execute a
release and receipt therefor in such form as it shall determine.
III.12 Company Records. Records of the Company or any Parent or Subsidiary
---------------
of the Company regarding the Optionee's period of employment or other service,
termination of employment or other service and the reason therefor, leaves of
absence, re-employment and other matters shall be conclusive for all purposes
hereunder, unless determined by the Board to be incorrect.
-8-
<PAGE>
III.13 Information. The Company or any Parent or Subsidiary of the Company
-----------
shall, upon request or as may be specifically required hereunder, furnish or
cause to be furnished all of the information or documentation which is necessary
or required by the Board or the Committee to perform its duties and functions
under the Plan.
III.14 No Liability of Company. The Company assumes no obligation or
-----------------------
responsibility to the Optionee or his personal representatives, heirs, legatees
or distributees for any act of, or failure to act on the part of, the Board or
the Committee.
III.15 Company Action. Any action required of the Company shall be by
--------------
resolution of its Board or by a person authorized to act by Board resolution.
III.16 Severability. In the event any provision of this Plan shall be held
------------
to be illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.
III.17 Notice. Whenever any notice is required or permitted hereunder,
------
such notice must be in writing and personally delivered or sent by mail. Except
as otherwise provided in Section 3.5 of this Plan, any notice required or
permitted to be delivered hereunder shall be deemed to be delivered on the date
on which it is personally delivered or, whether actually received or not, on the
third (3rd) business day after it is deposited in the United States mail,
certified or registered, postage pre-paid, addressed to the person who is to
receive it at the address which such person has theretofore specified by written
notice delivered in accordance herewith. The Company or an Optionee may change,
at any time and from time to time, by written notice to the other, the address
which it or he had theretofore specified for receiving notices. Until it is
changed in accordance herewith, the Company and each Optionee shall specify as
its and his address for receiving notices the address set forth in the Option
Agreement pertaining to the shares to which such notice relates.
III.18 Waiver of Notices. Any person entitled to notice hereunder may
-----------------
waive such notice.
III.19 Successors. The Plan shall be binding upon the Optionee, his heirs,
----------
legatees and legal representatives, upon the Company, its successors and assigns
and upon the Board and its successors.
III.20 Headings. The titles and headings of sections and paragraphs are
--------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
III.21 Word Usage. Words used in the masculine shall apply to the feminine
----------
where applicable and, wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
-9-
<PAGE>
EXHIBIT 11
BENCHMARQ MICROELECTRONICS, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1996 1995 1996 1995
------------------- -----------------
<S> <C> <C> <C> <C>
Earnings:
Net income....................................... $ 2,105 $ 831 $ 4,422 $ 2,852
Add: Interest expense, net of tax effect, on
subordinated promissory notes assumed retired - 34 - 69
------------------- -----------------
Adjusted net income.............................. $ 2,105 $ 865 $ 4,422 $ 2,921
=================== =================
Shares:
Weighted average common shares outstanding....... 6,671 276 6,610 256
Weighted average common equivalent shares:
Add: Common shares issued upon assumed
conversion of preferred stock........... - 5,106 - 5,106
Common shares issued on assumed
exercise of stock options and warrants.. 1,242 1,211 1,137 1,170
Less: Shares assumed repurchased.............. 579 122 448 123
------------------- -----------------
Weighted average common and common equivalent
shares........................................... 7,334 6,471 7,299 6,409
=================== =================
Earnings per common and common equivalent share.... $ 0.29 $ 0.14 $ 0.61 $ 0.46
=================== =================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1996 Balance Sheet and the Statement of Income for the nine months
ended September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,920,965
<SECURITIES> 12,146,063
<RECEIVABLES> 4,449,773
<ALLOWANCES> 8,570
<INVENTORY> 4,168,245
<CURRENT-ASSETS> 23,246,903
<PP&E> 9,183,941
<DEPRECIATION> 3,411,316
<TOTAL-ASSETS> 34,921,284
<CURRENT-LIABILITIES> 10,002,546
<BONDS> 0
0
0
<COMMON> 6,744
<OTHER-SE> 23,463,587
<TOTAL-LIABILITY-AND-EQUITY> 34,921,284
<SALES> 28,061,885
<TOTAL-REVENUES> 28,061,885
<CGS> 15,811,719
<TOTAL-COSTS> 23,823,913
<OTHER-EXPENSES> 37,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,599
<INCOME-PRETAX> 4,561,983
<INCOME-TAX> 140,000
<INCOME-CONTINUING> 4,421,983
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,421,983
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
