<PAGE>
UNITED STATES
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 MARCH 31, 1997
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 May 5, 1997, there were 6,847,117 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 second quarter of 1997, 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 and improved market opportunities 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", capital
- -----------------------------------------------------------
expenditures and cash requirements contained in Part I, Item 2, in the section
entitled "Liquidity and Capital Resources", and comments regarding litigation
---------------------------------
contained in Part II, Item 1, in the section entitled "Litigation" and Note 5 to
------------
"Notes to Financial Statements":
- -------------------------------
-- 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 NVSRAM, RTC and battery management products;
-- timing and size of significant orders;
-- inability to utilize wafer capacity committed to under the terms of the
Option Agreement with Taiwan Semiconductor Manufacturing Co., Ltd.;
-- 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, 1996 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
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets at March 31, 1997 (unaudited) and December 31, 1996... 4
Statements of Income for the Three Months Ended March 31, 1997
and 1996 (unaudited)............................................... 5
Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 (unaudited).......................... 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 1. Legal Proceedings.................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders.................. 14
Item 6. Exhibits and Reports on Form 8-K..................................... 15
Signatures................................................................... 16
</TABLE>
3
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------------- ---------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 2,258,127 $ 2,575,350
Short-term investments............................. 12,283,828 12,878,526
Receivables, net of allowance for doubtful accounts
and estimated returns of $191,041 and $388,471
at March 31, 1997 and December 31, 1996.......... 5,525,566 4,410,448
Inventories........................................ 4,087,630 4,035,175
Deferred income tax assets......................... 175,978 660,095
Prepaid expenses................................... 1,128,584 354,978
----------- -----------
Total current assets........................... 25,459,713 24,914,572
Property and equipment, at cost:
Furniture and fixtures............................. 1,086,075 810,553
Equipment.......................................... 4,128,301 3,976,191
Computer software.................................. 522,987 520,809
----------- -----------
5,737,363 5,307,553
Accumulated depreciation........................... 3,080,051 2,806,832
----------- -----------
2,657,312 2,500,721
Equipment under capital lease obligations........... 4,357,540 4,274,173
Accumulated amortization........................... 1,284,495 1,067,143
----------- -----------
3,073,045 3,207,030
Prepayment for product purchases.................... 5,040,000 5,880,000
Noncurrent deferred income tax and other assets..... 106,014 306,784
----------- -----------
Total assets................................... $36,336,084 $36,809,107
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 1,970,117 $ 1,852,516
Note payable....................................... 1,380,000 3,380,000
Payroll and related benefits....................... 341,693 618,154
Other accrued liabilities.......................... 1,154,394 837,223
Deferred income on shipments to distributors....... 1,220,556 1,219,800
Current obligations under capital leases........... 1,276,364 1,311,905
----------- -----------
Total current liabilities...................... 7,343,124 9,219,598
Obligations under capital leases, less
current obligations............................... 1,022,799 1,259,927
Stockholders' equity................................
Common stock, $ .001 par value, 50,000,000 shares
authorized; 6,869,539 and 6,841,808 shares issued
at March 31, 1997 and December 31, 1996,
respectively...................................... 6,870 6,842
Additional paid-in capital......................... 24,968,278 24,932,678
Retained earnings.................................. 3,035,350 1,392,162
Net unrealized gain (loss) on short-term
investments,..................................... (27,537) 10,700
Treasury stock, 64,000 common shares, at cost...... (12,800) (12,800)
----------- -----------
Total stockholders' equity..................... 27,970,161 26,329,582
----------- -----------
Total liabilities and stockholders' equity..... $36,336,084 $36,809,107
=========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
------------ -----------
<S> <C> <C>
Net revenues.............................. $11,712,148 $8,475,115
Cost of sales............................. 5,813,580 5,054,125
----------- ----------
Gross margin.............................. 5,898,568 3,420,990
Operating expenses:
Research and development............... 815,514 590,435
Selling, general, and administrative... 2,645,636 1,819,321
----------- ----------
Total operating expenses............... 3,461,150 2,409,756
----------- ----------
Income from operations.................... 2,437,418 1,011,234
Other income (expense):
Interest income........................ 187,364 171,861
Interest expense....................... (52,368) (42,928)
Other.................................. (5,226) (15,167)
----------- ----------
Income before provision for income taxes.. 2,567,188 1,125,000
Income tax provision...................... 924,000 67,500
----------- ----------
Net income................................ $ 1,643,188 $1,057,500
=========== ==========
Net income per common and
common equivalent share................ $0.21 $0.15
=========== ==========
Shares used in computing net income per
common and common equivalent share..... 7,672,358 7,225,063
=========== ==========
</TABLE>
See Accompanying Notes
5
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
--------------- -------------
<S> <C> <C>
Operating Activities:
Net income....................................................... $ 1,643,188 $ 1,057,500
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 494,741 344,963
Loss on disposition of fixed assets........................... 5,226 15,167
Deferred income taxes......................................... 649,821 -
Changes in operating assets and liabilities:
Receivables................................................ (1,115,118) (85,260)
Inventories................................................ (52,455) (741,426)
Prepaid expenses and other assets.......................... 101,460 (70,080)
Accounts payable........................................... 117,601 (47,037)
Income taxes payable....................................... 144,729 12,497
Deferred income on shipments to distributors............... 756 60,734
Accrued liabilities........................................ (104,019) (149,496)
------------ ------------
Net cash provided by operating activities........................ 1,885,930 397,562
Investing Activities:
Prepayment for product purchases................................. (2,000,000) -
Investment in short-term investments............................. (15,662,324) (14,421,570)
Maturities of short-term investments............................. 16,218,785 2,986,254
Capital expenditures............................................. (439,205) (222,430)
------------ ------------
Net cash used by investing activities............................ (1,882,744) (11,657,746)
Financing Activities:
Proceeds from issuance of common stock upon exercise of options.. 35,628 21,836
Proceeds from issuance of common stock, net of offering costs.... - 584,384
Principal payments under capital lease obligations............... (356,037) (331,089)
------------ ------------
Net cash provided (used) by financing activities................. (320,409) 275,131
------------ ------------
Net change in cash and cash equivalents.......................... (317,223) (10,985,053)
Cash and cash equivalents at beginning of period................. 2,575,350 12,653,260
------------ ------------
Cash and cash equivalents at end of period....................... $ 2,258,127 $ 1,668,207
============ ============
Supplemental Cash Flows Information:
Cash paid for interest........................................ $ 52,368 $ 42,928
============ ============
Cash paid for income taxes.................................... $ 129,450 $ 55,003
============ ============
</TABLE>
See Accompanying Notes
6
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
(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 period presented have been included. Operating results for the three
month period ended March 31, 1997, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. 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, 1996.
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 month period ended March
31, 1997, common equivalent shares consisted of stock options (using the
treasury stock method). For the three month period ended March 31, 1996, common
equivalent shares consisted of stock options and warrants (using the treasury
stock method).
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary or "basic" earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary or "basic" earnings per share for the first
quarter ended March 31, 1997 and 1996 of $0.03 and $0.01 per share,
respectively. The impact of Statement No. 128 on the calculation of fully
diluted or "diluted" earnings per share for these quarters is not expected to be
material.
3. 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>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Finished goods............................... $1,651,550 $1,737,739
Work-in-process.............................. 1,315,180 1,145,276
Raw materials................................ 1,120,900 1,152,160
---------- ----------
$4,087,630 $4,035,175
========== ==========
</TABLE>
7
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
4. COMMITMENTS
The Company currently obtains substantially all of its semiconductor wafers
for use in its products from Taiwan Semiconductor Manufacturing Company
("TSMC"). The Company expects to remain dependent on TSMC for substantially all
of its wafer capacity for the foreseeable future. In May 1996, the Company
entered into an Option Agreement with TSMC (the "Option Agreement"). Pursuant to
the Option Agreement, the Company has committed to purchase and TSMC has
committed to provide specified quantities of wafers at prevailing market prices
during the years 1997 through 2000. Additionally, the Company has an option to
purchase and TSMC has committed to provide certain additional wafers (the
"Option Wafers") to be purchased during the years 1997 through 2000. The
Company has agreed to pay $5,880,000 as an advance payment for the Option Wafers
TSMC has committed to provide during the term of the Option agreement, of which
$2,500,000 was paid in May 1996. The Company issued a promissory note due March
31, 1997, for the remaining $3,380,000. Effective March 31, 1997, the Company
and TSMC amended the Option Agreement to incorporate the use by the Company of a
proposed new TSMC manufacturing process and to reschedule until December 31,
1997, $1,380,000 of the note payable originally due on March 31, 1997. The
Company paid $2,000,000 as scheduled on March 31, 1997. The advanced payment
will be credited at specified amounts upon purchase of the Option Wafers or will
be forfeited if such wafers are not purchased in a given year. Additionally,
the Company has reclassed to prepaid expenses the portion of the advanced
payment for Option Wafers that it believes it will benefit from in 1997.
5. CONTINGENCY
BENCHMARQ filed a declaratory judgment action against Dallas Semiconductor
Corporation ("DSC") in January 1997 to resolve certain allegations of patent
infringement asserted against BENCHMARQ by DSC. BENCHMARQ filed its action
against DSC in the United States District Court for the Eastern District of
Texas, Sherman Division. BENCHMARQ had previously sought declaratory relief in a
similar action filed in December 1995 which was dismissed on June 25, 1996,
based on DSC's assurance to the court that it had not charged BENCHMARQ with
patent infringement. The parties failed to reach agreement in subsequent
negotiations. Since the filing of the suit by BENCHMARQ in January 1997 in
Sherman, Texas, DSC filed a lawsuit against BENCHMARQ in February 1997 in the
United States District Court for the Northern District of Texas, Dallas
Division, alleging infringement of some of the same patents at issue in the
Sherman litigation filed in December 1995 and January 1997 by the Company. The
Company is confident that it has not violated any of the patents asserted by DSC
and intends to vigorously pursue its case. However, due to the uncertainties
associated with any litigation, the ultimate outcome cannot presently be
determined.
8
<PAGE>
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 rechargeable
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 incorporate certain of the Company's battery management ICs. The
Company's primary objective is to continue to grow sales of battery management
products, which have been the Company's largest revenue product line for the
last six 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. 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 March 31, 1997, Compared with Three Months Ended March 31,
1996
Net Revenues. Total net revenues in first quarter 1997 were approximately
$11.7 million, a 38% increase over the same period in 1996. This increase was
due principally to increased unit sales of Gas Gauge ICs into the portable PC
market, increased unit sales of Charger IC devices, which are typically sold
into mobile communications, consumer, power tool and portable computer
applications, and increased unit sales of high density NVSRAM modules into the
networking and telecommunication markets. Battery management revenue growth from
first quarter 1996 was split evenly between Gas Gauge ICs and Charger ICs and
represented a majority of the Company's total revenue growth from first quarter
1996. NVSRAM revenues, which benefited from relatively strong sales by the
Company's domestic distributors and expanded demand from international
customers, represented 48% of the Company's year-over-year total net revenue
growth. Revenues from sales of PC real-time-clocks declined in first quarter
1997 as compared with the same period in 1996.
9
<PAGE>
The Company's total net revenues for the first quarter of 1997 declined 3%
from the fourth quarter of 1996. Revenues from sales of NVSRAM products
increased as compared to the fourth quarter of 1996, primarily for the same
reasons as when compared to the first quarter of 1996. Revenues from sales of
Gas Gauge IC's decreased from the fourth quarter of 1996, as expected, due
primarily to the "platform transition" taking place in the notebook PC market
caused in part by Intel's introduction of its advanced performance MMX(TM)
processor. However, revenues from Charger ICs increased 7% from the fourth
quarter of 1996 due in part to demand from mobile communications and portable
consumer applications. Based on current market indications, the Company believes
that the platform changes should result in increased battery management (Gas
Gauge) opportunities beginning in the second quarter of 1997.
Revenues from sales of battery management products comprised 40% of the
Company's total net revenues in the first quarter of 1997, down from 45% in the
fourth quarter of 1996. This change reflects both the impact that slowed demand
from the notebook PC market had on battery management revenues and the increase
in sales of high density NVSRAM modules. Within the battery management product
line, Gas Gauge IC revenues continued to represent the largest source of battery
management revenues.
Average selling prices for battery management products were down slightly
compared with the fourth quarter of 1996. Certain individual NVSRAM product
average selling prices trended down from the fourth quarter of 1996. However,
overall average selling prices for the NVSRAM product line increased versus the
fourth quarter of 1996 due to the increased number of higher density units
included in the sales mix. The average selling prices for individual RTC
products were essentially flat compared with the preceding quarter. Although
first quarter was not significantly impacted, there are signs that RTC pricing
competition is likely to increase. This is most evident in the RTC module
products.
Revenue generated from RTC royalties and other miscellaneous sources was
1.0% of total revenue in first quarter 1997, compared with 1.8% in first quarter
1996.
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 MARCH 31,
-------------------------------
1997 1996
--------------- --------------
<S> <C> <C> <C> <C>
Battery Management Products $ 4,731 40.4% $3,063 36.1%
NVSRAM Products 4,170 35.6 2,619 30.9
RTC Products 2,699 23.0 2,644 31.2
RTC Royalties/Other 112 1.0 149 1.8
------- ----- ------ -----
Total Net Revenue $11,712 100.0% $8,475 100.0%
======= ===== ====== =====
</TABLE>
The Company's revenues from international customers accounted for
approximately $7.4 million, or 63% of total net revenues, for the quarter ended
March 31, 1997, compared to $5.2 million, or 62% of total net revenues, for the
comparable period in 1996. During the first quarter of 1997, approximately 49%
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
$1.9 million, or 16%, of the Company's total net revenues in the first quarter
of 1997. No other customer directly accounted for greater than 10% of the total
net revenues.
10
<PAGE>
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 50% of total net
revenues for the three month period ended March 31, 1997 and 40% for the
comparable period in 1996. Gross margin increased approximately $2,478,000, or
72%, to approximately $5.9 million for the first quarter of 1997, compared to
$3.4 million in the first quarter of 1996. The improvement in gross margin as a
percentage of revenues as compared to the first quarter of 1996 was due to a
strong mix of battery management and high density NVSRAM product sales,
relatively moderate pressure on average selling prices and reductions in certain
product costs.
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 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 38% to $816,000 in the first quarter of 1997, compared
to $590,000 in the first quarter of 1996. This increase was due primarily to
increased staffing and development tooling. As a percentage of total net
revenues, research and development expense was flat at approximately 7.0% in
both the first quarter of 1997 and the first quarter of 1996.
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.
Selling, General and Administrative. Selling, general and administrative
expense increased approximately $826,000 to $2.6 million in the first quarter of
1997 as compared to the same period in 1996 in large part to support increased
sales and marketing activities. Selling, general and administrative expense
represented approximately 22.6% and 21.5% of total net revenues in the first
quarter of 1997 and 1996, 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. In first quarter 1997, the Company realized net other income
of approximately $130,000, compared to $114,000 in first quarter 1996. This
improvement primarily reflects higher average balances of invested funds.
11
<PAGE>
Provision for Income Taxes. The Company generated pre-tax income during
the first quarter of 1997 and 1996. The Company employed an effective tax rate
of 36% and recorded a provision for income tax of $924,000 in the first of
quarter 1997. The pre-tax income generated during the first quarter of 1996 was
substantially offset by net operating loss carryforwards from prior operating
periods. A provision for income tax of $67,500 was recorded in the first
quarter of 1996, 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 $1.9 million of cash
was generated by operating activities during the three-month period ended March
31, 1997 as compared to $398,000 in the comparable period in 1996.
Net cash used in investing activities of approximately $1.9 million during
the three-month period ended March 31, 1997 was attributable primarily to the
$2.0 million prepayment for certain quantities of wafers pursuant to the Option
Agreement under which TSMC is committed to supply and the Company is committed
to purchase wafers. In addition, approximately $439,000 was used for capital
expenditures consisting in large part of assembly and engineering equipment and
office expansion. Finally, approximately $556,000 was provided by net
maturities of marketable securities. Comparatively, net cash used in investing
activities during the three-month period ended March 31, 1996 amounted to
approximately $11.7 million and consisted primarily of the investment of much of
the Company's cash equivalents into short-term investments to improve interest
income and, to a lessor extent, capital expenditures for assembly and test
expansion.
Financing activities have consisted primarily of the issuance of equity and
payments made pursuant to capital lease obligations. Financing activities used
cash during the three-month period ended March 31, 1997 of approximately
$320,000, which consisted of proceeds of approximately $36,000 from issuances of
stock and payments of approximately $356,000 under capital lease obligations.
During the comparable three-month period ended March 31, 1996, financing
activities provided net cash of approximately $275,000, primarily due to
issuances of stock to the underwriters of the Company's IPO to cover over-
allotments and partially offset by 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 $14.5 million at March 31, 1997. 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 three month period ended March 31, 1997, the Company
used approximately $83,000 of credit under its outstanding lease line for
additions of test equipment. As of April 30, 1997, approximately $1.0 million
was available under the lease line for additional acquisitions of equipment.
However, as of such date, equipment purchase orders totaling approximately
$119,000 were outstanding against the available lease line of credit.
12
<PAGE>
The Company anticipates capital asset additions to range between $2.5
million and $3.5 million for the remainder of 1997, a large part of which will
be used to expand product 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 1997. 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.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
BENCHMARQ filed a declaratory judgment action against Dallas Semiconductor
Corporation ("DSC") in January 1997 to resolve certain allegations of patent
infringement asserted against BENCHMARQ by DSC. BENCHMARQ filed its action
against DSC in the United States District Court for the Eastern District of
Texas, Sherman Division. BENCHMARQ had previously sought declaratory relief in
a similar action filed in December 1995 which was dismissed on June 25, 1996,
based on DSC's assurance to the court that it had not charged BENCHMARQ with
patent infringement. The parties failed to reach agreement in subsequent
negotiations. Since the filing of the suit by BENCHMARQ in January 1997 in
Sherman, Texas, DSC filed a lawsuit against BENCHMARQ in February 1997 in the
United States District Court for the Northern District of Texas, Dallas
Division, alleging infringement of some of the same patents at issue in the
Sherman litigation filed in December 1995 and January 1997 by the Company. In
its lawsuit, DSC is seeking injunction against patent infringement, damages for
lost profit (which may under certain circumstances be trebled), pre and post
judgment interest and attorney's fees. To date DSC has not specified an amount
of monetary damages to which it alleges it is entitled. The Company is
confident that it has not violated any of the patents asserted by DSC and
intends to vigorously pursue its case. However, due to the uncertainties
associated with any litigation, the ultimate outcome cannot presently be
determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of BENCHMARQ was held in Richardson,
Texas, at 9:30 a.m., local time, on April 16, 1997.
(b) Proxies were solicited by the Board of Directors of BENCHMARQ pursuant to
Regulation 14A under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the Board of Directors' nominees and all
nominees were duly elected and, the proposal to approve certain amendments
to the BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan was
duly approved.
(c) As of March 3, 1997, the date of record, a total of 6,797,954 shares of
BENCHMARQ common stock were outstanding and entitled to vote, of which
6,175,104 shares present in person or by proxy, representing approximately
91 percent, voted on the election of the Board of Directors' nominees. The
results of the voting on the election of the Board of Directors' nominees
were as follows:
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Voting FOR Election WITHHOLDING AUTHORITY
Nominee for Director as Director to Vote for Election as Director
- ------------------------ ------------------- --------------------------------
<S> <C> <C>
Derrell C. Coker 6,163,284 11,820
L.J. Sevin 6,163,284 11,820
Harvey B. Cash 6,163,284 11,820
Dietrich Erdmann 4,981,244 1,193,860
Jack Kilby 6,162,884 12,220
Charles H. Phipps 6,159,676 15,428
</TABLE>
14
<PAGE>
As of March 3, 1997, the date of record, a total of 6,797,954 shares of
BENCHMARQ common stock were outstanding and entitled to vote, of which
5,417,201 shares present in person or by proxy, representing approximately
80 percent, voted on the proposal to approve certain amendments to the
BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan. The
results of the voting on the proposal to approve certain amendments to the
BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Shares voted FOR 2,989,214
Shares voted AGAINST 2,412,086
Shares ABSTAINED 15,901
BROKER NON-VOTES 757,903
</TABLE>
(d) Inapplicable.
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 Amendment to Option Agreement between Taiwan Semiconductor
Manufacturing Co., Ltd. and BENCHMARQ Microelectronics,
Inc. (Confidential treatment has been requested by the
Company for portions of this agreement.)
10.2 BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option
Plan (Amended and Restated as of March 11, 1997)
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
March 31, 1997
15
<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.
MAY 6, 1997 /S/ DERRELL C. COKER
--------------------
DERRELL C. COKER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
MAY 6, 1997 /S/ REGINALD B. MCHONE
----------------------
REGINALD B. MCHONE
VICE PRESIDENT, FINANCE AND
ADMINISTRATION, CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER) AND SECRETARY
16
<PAGE>
EXHIBIT 10.1
Amendment to Option Agreement
This Amendment, made to Option Agreement between Benchmarq
Microelectronics, Inc., and Taiwan Semiconductor Manufacturing Co., Ltd., dated
May 31, 1996 (the "Option Agreement"), is effective as of March 31, 1997 (the
"Effective Date") by and between Benchmarq Microelectronics, Inc., a company
organized under the laws of Delaware, USA, with its principal address at 17919
Waterview Parkway, Dallas, Texas 75252, USA ("Customer"), and Taiwan
Semiconductor Manufacturing Co., Ltd., a company organized under the laws of the
R.O.C, with its registered address at No. 121, Park Ave. 3, Science-Based
Industrial Park, Hsinchu, Taiwan, R.O.C ("TSMC").
In consideration of mutual covenants and conditions, both parties agree to
amend the Option Agreement as follows:
I. Defined terms used herein but not defined herein shall have the meaning set
forth in the Option Agreement.
II. Amend Sections 5 (b), 11 and 15 as follows:
5 (b) Customer shall deliver to TSMC, within seven (7) days following the
Effective Date of this Amendment, one promissory note in an amount of
US$1,380,000 due as specified in Exhibit D and payable to TSMC or order,
which promissory note is in the form of Exhibit E. The executed version of
the form of promissory note attached as Exhibit E shall be returned by TSMC
to Customer within seven (7) days upon receipt of corresponding Option Fee by
TSMC. TSMC shall return to Customer the original promissory note, dated May
31,1996, executed by customer in the amount of US$3,380,000 to Customer
within seven (7) days following the Effective Date of this Amendment.
1
<PAGE>
11. This Agreement, including Exhibits A-E and the Amendment, constitutes the
entire agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces all prior or contemporaneous
understanding, agreements, dealings and negotiations, oral or written,
regarding the subject matter hereof. In the event any provision of this
Agreement conflicts with the Amendment, this Amendment shall govern with
respect to the subject matter therein. No modification, alteration or
amendment of this Agreement shall be effective unless made in writing and
signed by both parties. No waiver of any breach or failure by either party
to enforce any provision of this Agreement shall be deemed a wavier of any
other or subsequent breach, or a waiver of future enforcement of that or
any other provision.
15. Both parties shall keep in strict confidence the existence and contents of
this Agreement and the Amendment, and take best precaution possible to
prevent any unauthorized disclosure or use thereof. Both parties agree that
no disclosure of this Agreement, the Amendment or any matters relating
hereto may be made without the disclosing party first providing the
proposed disclosure to the other party two weeks in advance for consent and
reasonable changes. In the event disclosure is required by laws or
governmental regulations, the disclosing party shall provide the other
party two weeks prior written notice and give the other party the
opportunity to protest, participate in preparing disclosure or make
reasonable changes thereto.
III. Add new Section 2 (d)
Subject to availability of 0.5um embedded flash process technology at TSMC
by July 1997, both parties will adopt either Exhibit B.1 or Exhibit B.2 to
be Exhibit B and applied to this Agreement. Upon production release (i.e.
approval for "Open Order Entry" at Benchmarq) of the first product
utilizing the 0.5um embedded flash process technology, Exhibit B.1 shall be
adopted as Exhibit B and applied to this Agreement. In the event 0.5um
embedded flash process technology is not available at TSMC by July 1997 or
in the event Customer decides not to utilize 0.5um embedded flash process
technology available at TSMC on or before December 31, 1997, Exhibit B.2
shall be adopted as Exhibit B and applied to this Agreement.
2
<PAGE>
Add to the End of Section 7(a)
"In the event that Exhibit B.2 is adopted as Exhibit B and applied to this
Agreement, this Agreement shall be extended to December 31, 2001."
Add to the End of Section 7(d)
"In no event shall either party be liable for indirect, consequential, or
special damage arising from this Agreement or its performance."
IV. Replace Original Exhibits A, B and D with New Exhibits A, B.1, B.2 and D.
Benchmarq Microelectronics, Inc. Taiwan Semiconductor
Manufacturing Co., Ltd.,
/s/ Derrell Coker /s/ Donald W. Brooks
- ----------------- --------------------
Derrell Coker Donald W. Brooks
President & CEO President
3
<PAGE>
EXHIBIT A
EQUIVALENCY FACTOR TABLE
- --------------------------------------------------------------------------------
******* ****** ********* **********
****************** ********* ******** ******** *********
***********
**********
********************** * * *
********************* * * *
********************* * * *
********************** * * *
********************* * * *
*********************** * * *
*************************** * * *
********************** * * *
********************* * * * *
********************* * * * *
*********************** * * * *
******************** * * *
******************** * * * *
******************** * * * *
********************* * * * *
************************* * * * *
*************************** * * * *
************************* * * * *
******************** * * * *
********************* * * * *
******************** * * * *
************************* * * * *
- -------------------------------------------------------------------------------
Remarks: (1) ******************************************************************
(2) ************************************************************
(3) ************************************
(4) ********************************************************
Date of issue: 04/11/97
(* - "PORTIONS OF THE SUBJECT EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT")
4
<PAGE>
Exhibit B.1
BENCHMARQ/TSMC
COMMITTED CAPACITY
Unit: *********************
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
************* * * * * *
*************
- -------------------------------------------------------------------------------
******************** * * * *
- -------------------------------------------------------------------------------
**************** * * * *
- -------------------------------------------------------------------------------
*************** * * * *
- -------------------------------------------------------------------------------
********************* * * * *
- -------------------------------------------------------------------------------
************** ******** * * * * *
*****************
****************
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
****************** ******** * * * *
*******************
****************
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
* - ***************************************************************************
Deposit Required: US$5.88M -- *******************************
***************
Option Fee Schedule: US$2.50M -- March 31, 1996 (Paid)
US$2.00M -- March 31, 1997 (Paid)
US$1.38M -- December 31, 1997
(* - "PORTIONS OF THE SUBJECT EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT")
5
<PAGE>
Exhibit B.2
BENCHMARQ/TSMC
COMMITTED CAPACITY
Unit: *********************
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------
- -----------------------------------------------------------------
************* * * * * * *
*************
- -----------------------------------------------------------------
******************** * * * * *
- -----------------------------------------------------------------
**************** * * * * *
- -----------------------------------------------------------------
*************** * * * * *
- -----------------------------------------------------------------
********************* * * * * *
- -----------------------------------------------------------------
************** ********* * * * * * *
*****************
****************
- -----------------------------------------------------------------
- -----------------------------------------------------------------
****************** ******** * * * * *
*******************
****************
- -----------------------------------------------------------------
* - ***************************************************************************
Deposit Required: US$5.88M -- *******************************
****************
Option Fee Schedule: US$2.50M -- March 31, 1996 (Paid)
US$2.00M -- March 31, 1997 (Paid)
US$1.38M -- December 31, 1997
(* - "PORTIONS OF THE SUBJECT EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT")
6
<PAGE>
Exhibit D
OPTION FEE
Year Option Capacity Option Fee Due Date
(Unit: ******** (Unit: US$)
**********)
- -------------------------------------------------------------------------
1997-2000 *** $2.5M March 31,1996(Paid)
(or 2001) $2.0M March 31,1997(Paid)
$1.38M December 31,1997
(* - "PORTIONS OF THE SUBJECT EXHIBIT HAVE BEEN OMMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT")
7
<PAGE>
EXHIBIT E
STANDARD FORM OF PROMISSORY NOTE
Amount: US $1,380,000 DUE DATE: DECEMBER 31, 1997
The Undersigned, BENCHMARQ Microelectronics, Inc. (the "Maker"), unconditionally
promise to pay the Taiwan Semiconductor Manufacturing Co., Ltd. or its order the
sum of US Dollars One Million, Three Hundred, Eighty Thousand and no/cents
($1,380,000), plus interest calculated from the Due date stated herein to the
date of full payment at the rate of 10% per annum on any unpaid portion of the
principal amount stated herein, and said payment will be made at Dallas, Texas.
This Note shall be governed in all respects by the laws of the State of
California.
The Maker of this Note agrees to waive protests and notice of whatever kind.
Issue Date: April 17, 1997
Issue Place: Collin County,
City of Dallas, Texas
Maker: BENCHMARQ Microelectronics, Inc.
By: /s/ Derrell Coker
-----------------
President and Chief Executive Officer
Maker's Address: 17919 Waterview Parkway
Dallas, Texas 75252
8
<PAGE>
EXHIBIT 10.2
BENCHMARQ MICROELECTRONICS, INC.
1995 FLEXIBLE STOCK OPTION PLAN
(Amended and Restated as of March 11, 1997)
I
Purpose of Plan; Administration
-------------------------------
1.1 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.
1.2 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 to amend or modify
any outstanding option (with the consent of the Optionee (as defined herein)),
to accelerate or defer the exercise date of any outstanding option (with the
consent of the Optionee), 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.
1.3 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
A-1
<PAGE>
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.
1.4 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 1,247,576 shares (after giving effect to all exercises of
options prior to March 11, 1997), 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.
1.5 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
-------------
2.1 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
A-2
<PAGE>
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 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.
2.2 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.
2.3 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.
2.4 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.
2.5 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.
2.6 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.
A-3
<PAGE>
2.7 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.
2.8 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.
2.9 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.
A-4
<PAGE>
2.10 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.
2.11 "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.
2.12 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 Committee, 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 Committee,
the acceleration of the option vesting schedule would be in the best interests
of the Company.
III
Other Provisions
----------------
3.1 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 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 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
A-5
<PAGE>
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 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
A-6
<PAGE>
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.
3.2 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.
3.3 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.
3.4 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;
A-7
<PAGE>
(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.
3.5 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 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.
3.6 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.
3.7 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.
3.8 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.
3.9 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.
3.10 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.
3.11 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
A-8
<PAGE>
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.
3.12 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.
3.13 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.
3.14 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.
3.15 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.
3.16 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.
3.17 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.
3.18 Waiver of Notices. Any person entitled to notice hereunder may waive
-----------------
such notice.
3.19 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.
3.20 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.
3.21 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.
A-9
<PAGE>
EXHIBIT 11
BENCHMARQ MICROELECTRONICS, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------------
1997 1996
-------- ------
<S> <C> <C>
Earnings:
Net income............................................. $1,643 $1,057
====== ======
Shares:
Weighted average common shares outstanding............. 6,788 6,554
Weighted average common equivalent shares:
Add: Common shares issued on assumed
exercise of stock options and warrants........ 1,212 852
Less: Shares assumed repurchased.................... 328 181
------ ------
Weighted average common and common equivalent shares..... 7,672 7,225
====== ======
Earnings per common and common equivalent share.......... $ 0.21 $0.15
====== ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 BALANCE SHEET AND THE STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,258,127
<SECURITIES> 12,283,828
<RECEIVABLES> 5,716,607
<ALLOWANCES> 191,041
<INVENTORY> 4,087,630
<CURRENT-ASSETS> 25,459,713
<PP&E> 10,094,903
<DEPRECIATION> 4,364,546
<TOTAL-ASSETS> 36,336,084
<CURRENT-LIABILITIES> 7,343,124
<BONDS> 0
0
0
<COMMON> 6,870
<OTHER-SE> 27,963,291
<TOTAL-LIABILITY-AND-EQUITY> 36,336,084
<SALES> 11,712,148
<TOTAL-REVENUES> 11,712,148
<CGS> 5,813,580
<TOTAL-COSTS> 9,274,730
<OTHER-EXPENSES> 5,226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,368
<INCOME-PRETAX> 2,567,188
<INCOME-TAX> 924,000
<INCOME-CONTINUING> 1,643,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,643,188
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
