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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CATALYST SEMICONDUCTOR, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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CATALYST SEMICONDUCTOR, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 2000
TO THE STOCKHOLDERS OF CATALYST SEMICONDUCTOR, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Catalyst
Semiconductor, Inc., a Delaware corporation (Company), will be held on August
21, 2000 at 10:00 a.m., local time, at the offices of the Company at 1250
Borregas Avenue, Sunnyvale, California 94089 for the following purposes:
1. To elect two Class II Directors to serve for a three-year term expiring
upon the Annual Meeting of Stockholders next following April 30, 2003 or
until such directors' respective successors are duly elected and
qualified.
2. To approve an amendment to the Company's 1993 Director Stock Option Plan
to (i) increase the number of shares of Common Stock reserved for
issuance thereunder by 450,000 shares; (ii) change the annual grant date
to May 1; (iii) change the annual grant amount to 15,000 shares; (iv)
change the initial grant amount to 30,000 shares; (v) alter the vesting
period from a three-year annual vesting period to a straight thirty-six
month vesting period; and (vi) extend the term of grants from five years
to ten years from the date of grant.
3. To approve amendments to the Company's Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by
2,500,000 shares and to make changes in the Plan necessary to comply
with applicable state securities law.
4. To approve an amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 500,000 shares and to make any changes in the Plan
necessary to comply with applicable tax and securities laws.
5. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending April 30, 2001.
6. To transact such other business as may properly come before the meeting
and any adjournment or postponement thereof.
The enclosed Proxy Statement (Proxy Statement) more fully describes the
foregoing items and business to be conducted at the Annual Meeting.
The Board of Directors has fixed the close of business on July 26, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments and postponements thereof.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return, as
soon as possible, the enclosed proxy card in the accompanying reply envelope. If
you decide to attend the Annual Meeting, please notify in writing the Secretary
of the Company at the Company's principal executive offices, that you wish to
vote in person and your proxy will not be voted. The Company's principal
executive offices are located at 1250 Borregas Avenue, Sunnyvale, California
94089. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED
PROXY, OR ATTEND THE ANNUAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
Peter Cohn
Secretary
Sunnyvale, California
July 28, 2000
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND IN ANY EVENT NO LATER THAN
AUGUST 18, 2000 IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IF A QUORUM IS NOT
REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF RE-ISSUING THESE PROXY
MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 3
CATALYST SEMICONDUCTOR, INC.
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PROXY STATEMENT
FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 2000
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GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Catalyst Semiconductor, Inc. (Company) for use at the Annual Meeting of
Stockholders to be held on August 21, 2000 at 10:00 a.m., local time, or at any
adjournment thereof (Annual Meeting) for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the offices of the Company at 1250 Borregas Avenue, Sunnyvale,
California 94089.
The Company currently anticipates that definitive proxy materials will be
released to the Company's stockholders on or about July 28, 2000. No preliminary
proxy materials have been or will be released to the Company's stockholders.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on July 26, 2000
(Record Date) are entitled to notice of and to vote at the meeting. As of the
close of business on July 26, 2000, there were 16,293,529 shares of the
Company's Common Stock outstanding and entitled to vote and approximately 138
stockholders of record, including one holder who is a nominee for an
undetermined number of beneficial owners.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company at its principal executive offices at 1250 Borregas Avenue, Sunnyvale,
California 94089, a written notice of revocation, or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
VOTING GENERALLY; SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of the Company's directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved or not.
The cost of soliciting proxies, consisting of the printing, handling and
mailing of the proxy card and related material, and the actual expense incurred
by brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
material to the beneficial owners of stock, will be paid by the Company. In
order to assure that a majority vote will be present in person or by proxy at
the Annual Meeting, it may be necessary for certain officers, directors, regular
employees and other representatives of the Company to solicit proxies by
telephone, facsimile, telegraph, electronic means, or in person. These persons
will receive no extra compensation for their services. The Company reserves the
right to have an outside solicitor conduct the solicitation of proxies and to
pay such solicitor for its services.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled to
vote at the Annual Meeting (Votes Cast) with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes should be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for purposes of
determining the number of Votes Cast with respect to the particular proposal on
which the broker has expressly not voted. Accordingly, the Company intends to
treat broker non-votes in this manner. Thus, a broker non-vote will not affect
the outcome of the voting on a proposal.
COMPANY INFORMATION
The Company's principal executive offices are located at 1250 Borregas
Avenue, Sunnyvale, California 94089. The telephone number of the Company's
principal offices is (408) 542-1000.
PROPOSAL 1
ELECTION OF TWO CLASS II DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors shall be
established by the Board or the stockholders of the Company. The Company's
Certificate of Incorporation provides that the directors shall be divided into
three classes, with the classes serving for staggered, three year terms.
Pursuant to the Company's Bylaws, the Board has currently set the number of
Directors at eight, consisting of three Class I directors, two Class II
directors and three Class III directors. Two Class II directors are to be
elected at the Annual Meeting. These Class II directors will hold office until
the Annual Meeting next following the fiscal year ending April 30, 2003 or until
their successors have been duly elected and qualified. The terms of the Class I
and Class III directors will expire at the Annual Meeting of Stockholders next
following the fiscal year ending April 30, 2002 and April 30, 2001,
respectively.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominee named below each of whom currently is
a director of the Company. In the event that a nominee of the Company becomes
unable or declines to serve as director at the time of the Annual Meeting, the
proxy holders will vote the proxies for any substitute nominee who is designated
by the current Board of Directors to fill such vacancy. It is not expected that
the nominees listed below will be unable or will decline to serve as a director.
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INFORMATION WITH RESPECT TO NOMINEES AND CONTINUING DIRECTORS
Set forth below are the names of, and certain information as of July 26,
2000 about, the nominees for and current Class II directors and the current
Class I and Class III directors with unexpired terms.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Nominees for and Current Class II Directors
Patrick Verderico(1)....................... 55 President and Chief Executive Officer of
Integrated Packaging and Assembly Corporation
Glen G. Possley............................ 59 Managing General Partner, Glen-Ore Associates
Cynthia M. Butitta......................... 45 Principal, Altair Capital Associates
Continuing Class I Directors
Hideyuki Tanigami.......................... 50 President and Chief Executive Officer of
Marubun USA Corporation
Radu M. Vanco.............................. 50 President, Chief Executive Officer and Director
of Catalyst Semiconductor, Inc.
Henry C. Montgomery........................ 64 Chairman of the Board of Montgomery Financial
Services Corporation
Continuing Class III Directors
Lionel M. Allan............................ 57 President and Chief Executive Officer of Allan
Advisors, Inc.
Roland Duchatelet.......................... 53 Chairman of the Board, Elex NV; Chairman of
Melexis NV
</TABLE>
---------------
(1) Mr. Verderico has stated his intention to not stand for re-election as a
member of the Company's Board of Directors.
Except as indicated below, each director has been engaged in the principal
occupation set forth above during the past five years. There are no family
relationships between any directors or executive officers of the Company.
Mr. Verderico has served as a director of the Company since April 1996. He
has stated his intention to not stand for re-election as a member of the
Company's Board of Directors. From July 1997 to present, Mr. Verderico has
served as President and Chief Executive Officer of Integrated Packaging Assembly
Corporation (IPAC). From April 1997 to July 1997, Mr. Verderico served as
Executive Vice President and Chief Operating Officer of IPAC. From April 1996 to
July 1996, Mr. Verderico served as Executive Vice President and Chief Operating
Officer of Maxtor Corporation, a hard disk drive company. From 1994 to March
1996, he served as Chief Financial Officer and Vice President, Finance and
Administration, of Creative Technology, a multimedia products manufacturer. Mr.
Verderico has also been a director of Micro Component Technology, Inc. since
December 1992 and a director of Integrated Packaging Assembly Corporation since
July 1997.
Dr. Glen G. Possley has served as a director of the Company since July
2000. He is currently a managing general partner at Glen-Ore Associates. From
January 1998 through January 2000, Dr. Possley was a partner at International
Technology Ventures and N-Able Group. From June 1994 to December 1997 Dr.
Possley was President of SubMicron Technology, Inc., a semiconductor company.
From April 1992 to May 1994 he was Senior Vice President of Manufacturing at
Ramtron International, a semiconductor company. Dr. Possley is currently a
director of Novellus Systems, Inc., Anon, Inc. and TecHarmonic, Inc. He received
a BS in Mathematics from Western University in 1963 and a PhD in Physical
Chemistry from the University of Kentucky in 1969.
Cynthia M. Butitta has served as a director of the Company since June 2000.
Ms. Butitta co-founded Altair Capital Associates, LLC, a provider of financial
advisory services in November 1998 and continues to serve as a principal and she
founded Butitta Consulting Services LLC in September 1997. From December 1995 to
September 1997, she served as the CFO and Vice President of Finance and
Administration for
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Connetics Corporation, a provider of services. She has also served as the CFO
for Telik, Inc. since August 1998. From June 1994 to December 1995, Ms. Butitta
served as the CFO and Vice President of Finance and Administration at InSite
Vision, Inc. Ms. Butitta is also a director of Telik, Inc. She holds a BS in
Business & Accounting from Edgewood College in Madison, Wisconsin and a MBA from
the University of Wisconsin, Madison.
Mr. Tanigami became Chairman of the Company in March 1998 and has served as
a director of the Company since February 1996. From 1985 to April 1994, Mr.
Tanigami served as Vice President, Corporate Development, of the Company. From
January 1996 to present, he has served as President and Chief Executive Officer
of Marubun USA Corporation, an electronics distribution company. From June 1994
to present, he has also served as President of Technology Matrix, Inc., and
since 1985 has been President and Chief Executive Officer of Global Technology
Sourcing, Inc., an international consulting firm.
Radu M. Vanco has served the Company as President and Chief Executive
Officer since March 1998 and as a director since November 1995. From October
1996 to March 1998 he served as Executive Vice President of Engineering, from
October 1996 to December 1997 as Chief Operating Officer, and from November 1992
to October 1995 as Vice President, Engineering. Mr. Vanco holds an MS in
Electrical Engineering from the Polytechnical Institute, Bucharest, Romania.
Henry C. Montgomery has served as a director of the Company since July
2000. Mr. Montgomery previously served as a member of our Board of Directors
from 1990 to 1995. Since 1990, Mr. Montgomery has been and continues to serve as
the Chairman of the Board of Montgomery Financial Services Corporation, a
management consulting and financial services firm. Mr. Montgomery serves as a
director of Swift Energy Corporation. He holds a BA in Economics from Miami
University in Oxford, Ohio.
Lionel M. Allan has served as a director of the Company since August 1995.
Mr. Allan is President and Chief Executive Officer of Allan Advisors, Inc., a
legal consulting firm that he founded in 1992. Mr. Allan is also a director and
past Chairman of the Board of KTEH Public Television Channel 54, in San Jose,
California, a director of Accom, Inc., a digital video systems company. Mr.
Allan is a past director of Global Motorsport Group, Inc. (formerly known as
Custom Chrome, Inc.) and is also a director of several privately held
corporations. Mr. Allan holds a JD from Stanford University.
Roland M. Duchatelet has served the Company as a director since September
1999. From September of 1989 to present, Mr. Duchatelet has served as Chairman
of Elex NV, a holding company in Belgium which owns 5,500,000 shares of the
Company's Common Stock representing approximately 33.8% of the Company's
outstanding Common Stock. Additionally, Mr. Duchatelet serves as Chairman of the
Board of Directors of Melexis NV, a position he has held since May of 1994. Mr.
Duchatelet is also a director of Sigma Delta Holding NV, XFAB GmbH, EPIQ sarl,
SM2E S.A. and Stichting Administratiekantoor XPEQT.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of nine meetings during
the period from May 1, 1999 to April 30, 2000 (Fiscal 2000), one of which was a
telephonic meeting and also took action by unanimous written consent one time
during this period. The Board of Directors has an Audit Committee, a
Compensation Committee and a Non-Section 16 Option Committee. The Board of
Directors has no nominating committee or any committee performing similar
functions.
The Audit Committee currently consists of Messrs. Verderico, Possley,
Montgomery and Ms. Butitta. Mr. Verderico will not be seeking re-election as a
member of the Board of Directors and therefore will cease being a member of the
Audit Committee following the Annual Meeting. Pursuant to its written charter,
the Audit Committee is charged with reviewing the Company's annual audit and
meeting with the Company's independent auditors to review the Company's internal
controls and financial management practices. The Audit Committee held four
meetings during the last fiscal year.
The Compensation Committee currently consists of Messrs. Tanigami and
Allan. The Compensation Committee is responsible for reviewing and approving the
Company's compensation policies and the
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compensation paid to executive officers. The Compensation Committee held nine
meetings during the last fiscal year.
The Non-Section 16 Option Committee, which may make grants of up to 50,000
shares to persons who are not executive officers or directors of the Company,
currently consists of the Chief Executive Officer of the Company. The
Non-Section 16 Option Committee acted by written consent on eight occasions.
No incumbent director attended fewer than 88% of the meetings of the Board
of Directors and of the committees on which such director served and that were
held during the period such individual was a director during the Fiscal 2000.
COMPENSATION OF DIRECTORS
The Company's non-employee directors, currently consisting of Messrs.
Allan, Duchatelet, Tanigami, Possley and Montgomery and Ms. Butitta, received or
will receive cash compensation in the amount of $3,600 for each quarter in which
they attend one or more meetings of the Board of Directors. In addition,
directors are reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at such meetings.
Each non-employee director of the Company is entitled to participate in the
Company's 1993 Director Stock Option Plan (Director Option Plan) by receiving
automatic annual grants of Common Stock of the Company. Initial grants under the
Director Option Plan of options to purchase 20,000 shares each were made to
Messrs. Allan, Duchatelet, Tanigami and Verderico on August 14, 1995, September
8, 1999, February 10, 1996 and April 4, 1996, respectively, at exercise prices
of $5.125, $2.00, $6.00 and $5.00 per share, respectively, and pending approval
of the stockholders of Proposal 2, Ms. Butitta was granted options to purchase
30,000 shares on June 14, 2000 at an exercise price of $9.50 and Messrs. Possley
and Montgomery were each granted options to purchase 30,000 shares on July 9,
2000 at an exercise price of $7.875. Each of Mr. Allan, Mr. Verderico, Mr.
Duchatelet and Mr. Tanigami were granted options under the Director Option Plan
to purchase 7,500 shares of Common Stock on April 1, 2000 at an exercise price
of $8.375. All options which have been granted prior to May 1, 2000 under the
Director Option Plan are subject to cumulative yearly vesting as to one-third of
the total grant on each anniversary of the date of grant, and terminate five
years from the date of grant unless terminated sooner upon termination of the
optionee's status as a director or otherwise pursuant to the Director Option
Plan. Grants subsequent to May 1, 2000 shall be subject to the terms of the
amended Director Option Plan pending stockholder approval of Proposal 2.
VOTE REQUIRED FOR ELECTION
The affirmative vote of a majority of the Votes Cast is required for each
nominee to be elected as Class II director. Votes withheld from a director will
be counted for purposes of determining the presence or absence of a quorum but
will not be counted as affirmative votes. A broker non-vote will be counted for
purposes of determining the presence or absence of a quorum, but, under Delaware
law, will have no other legal effect upon the election of a Class II director.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
CLASS II DIRECTOR NOMINEES SET FORTH HEREIN.
PROPOSAL 2
APPROVAL OF AMENDMENT OF THE 1993 DIRECTOR STOCK OPTION PLAN
At the Annual Meeting, stockholders are being asked to approve amendments
to (Director Plan Amendment) to the Catalyst Semiconductor, Inc. 1993 Director
Stock Option Plan (Director Option Plan) that would increase the shares reserved
for issuance thereunder by 450,000 shares of Common Stock, change the annual
grant date from April 1 to May 1, change the annual Subsequent Option amount
from 7,500 shares to 15,000 shares, change the Initial Option amount from 20,000
shares to 30,000 shares, alter the vesting
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period from a three-year annual vesting period to a straight thirty-six month
vesting period and change the term of the grants from five years to ten years.
GENERAL
The Director Option Plan provides for the grant of options to directors who
are not employees of the Company. The aggregate number of shares reserved for
issuance under the Director Option Plan includes options previously granted and
exercised under the Director Option Plan. The increase in shares reserved for
issuance under the Director Option Plan has been necessitated by the grant of
additional stock options to current directors as previously granted options vest
and become exercisable. The increase will provide sufficient additional stock to
continue the Company's policy of attracting and retaining highly qualified
persons to serve as outside directors of the Company.
The Director Option Plan was adopted by the Board of Directors in October
1991, approved by the stockholders in May 1993 and amendments were approved by
the stockholders at the Company's Annual Meetings in August 1996 and November
1999. On June 23, 2000, the Board of Directors approved the Director Plan
Amendment, subject to approval by the Company's stockholders. The stockholders
are being asked to approve the Director Plan Amendment at the Annual Meeting.
A total of 770,000 shares of Common Stock have been reserved for issuance
over the term of the Director Option Plan, including the 450,000-share increase
for which stockholder approval is sought in this Proposal 2. As of June 30,
2000, 169,989 shares had been issued upon exercise of options granted under the
Director Option Plan, options for 102,510 shares were outstanding under the
Director Option Plan and 47,501 shares remained available for future grants. As
of the date hereof, an additional 450,000 shares are available for grant subject
to stockholder approval at the Annual Meeting. Shares not purchased under an
option prior to its expiration will be available for future option grants under
the Director Option Plan. As of June 30, 2000, the fair market value of shares
subject to outstanding options was approximately $8.625 per share, based upon
the closing price of the Common Stock as reported on the Over-the-Counter
Bulletin Board on such date.
Employees and employee directors are ineligible to participate in the
Director Option Plan (other than with respect to options granted to them under
the Director Option Plan prior to commencement of employment with the Company).
The Company cannot now determine the exact number of options to be granted in
the future under the Director Option Plan. See "Proposal 1 -- Election of
Directors -- Director Compensation" for the number of stock options granted to
the four current directors who were not employees of the Company during Fiscal
Year 2000. See "-- Eligibility" for a description of the basis upon which stock
options are granted under the Director Option Plan.
PURPOSE
The purpose of the Director Option Plan is to attract and retain highly
qualified persons to serve as outside directors of the Company.
ADMINISTRATION
The Director Option Plan is designed to work automatically and not to
require administration. However, to the extent administration is necessary, it
will be provided by the Board of Directors. No discretion concerning decisions
regarding the Director Option Plan shall be afforded to any person who is not a
"disinterested" person under Rule 16b-3 promulgated under the Exchange Act. The
interpretation and construction of any provisions of the Director Option Plan by
the Board of Directors shall be final and conclusive. Members of the Board
receive no additional compensation for their services in connection with the
administration of the Director Option Plan.
ELIGIBILITY
The Director Option Plan currently provides for the grant of nonstatutory
options to non-employee directors of the Company. Pending stockholder approval
of the Director Plan Amendment, each such director
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is granted an option to purchase 30,000 shares of Common Stock (Initial Option)
on the date on which such person first becomes a director, whether thorough
election by the stockholders of the Company or appointment by the Board of
Directors to fill a vacancy or termination of employment by the Company while
remaining as a director. Thereafter, on May 1 of each year, each non-employee
director is granted an option to purchase 15,000 shares of Common Stock
(Subsequent Option) if, on such date, he or she has served on the Company's
Board for at least six months.
Except for automatic option grants under the Director Option Plan,
non-employee directors will not be eligible to receive any additional option
grants or stock issuances under the Director Option Plan. The Director Option
Plan provides for neither a maximum nor a minimum number of shares subject to
options that may be granted to any one non-employee director, but does provide
for the number of shares which may be included in any grant and the method of
making a grant. The Company currently has six non-employee directors.
TERMS OF OPTIONS
Pending stockholder approval of the Director Plan Amendment, options
granted under the Director Option Plan have a term of ten years. Each option is
evidenced by an option agreement between the Company and the director to whom
such option is granted and is subject to the following additional terms and
conditions.
(a) Rule 16b-3: Options granted to directors must comply with the
applicable provisions of Rule 16b-3, or any successor thereto, and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Director Option Plan transactions
(b) Exercise of the Option: Currently, the Director Option Plan provides
that each option becomes exercisable cumulatively to the extent of 1/3 of the
shares subject to the option on each of the first three anniversaries of the
date of grant. The Director Plan Amendment would change this such that each
option shall become exercisable as to 1/36 of the shares subject to the option
each month. In either case, options granted under the Director Option Plan are
exercised by giving written notice of exercise to the Company, specifying the
number of full shares of Common Stock to be purchased and tendering payment to
the Company of the purchase price. Payment for shares issued upon exercise of an
option may consist of cash, check, promissory note, an exchange of shares of the
Company's Common Stock, which have been held for at least six months, through a
broker-dealer sale and remittance procedure which will allow the optionee to
exercise the option and sell the purchased shares with sale proceeds used to
satisfy the option price payable for the purchased shares, delivery of an
irrevocable subscription agreement for the shares which irrevocably obligates
the optionee to take and pay for the shares not more than 12 months after the
date of delivery of the subscription agreement, or a combination thereof.
(c) Option Price: The option price is determined by the Board of Directors
and under the Director Option Plan is 100% of the fair market value of the
Company's Common Stock on the date of grant. The Board of Directors determines
such fair market value based upon the closing sales price of the Company's
Common Stock on the Nasdaq National Market on the date of grant, or if not a
market trading day, on the last market trading day prior to the date of grant.
(d) Termination of Status as a Director: The Director Option Plan provides
that if an optionee ceases to serve as a director of the Company for any reason
other than death or disability, options may be exercised within six months after
the date he or she ceases to be a director as to all or part of the shares that
the optionee was entitled to exercise at the date of such termination but in no
event may an option be exercised after its expiration date.
(e) Death: If an optionee should die while serving as a director of the
Company, the option may be exercised at any time within one year after death but
only to the extent that the options were exercisable as of the date of death but
in no event after the expiration date of the option.
(f) Disability: If an optionee is unable to continue his or her service as
a director of the Company as a result of his or her total and permanent
disability, the option may be exercised at any time within six months of
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his or her termination, but only to the extent he or she was entitled to
exercise it at the date of such termination. In no event may an option be
exercised after its termination date.
(g) Termination of Options: Currently, no option is exercisable by any
person after the expiration of five years from the date the option was granted,
however the proposed Director Plan Amendment would change this to ten years from
the date the option was granted.
(h) Nontransferability of Options: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order, and is exercisable only by the optionee
or a permitted transferee during his or her lifetime or, in the event of death,
by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
(i) Acceleration of Options: In the event of a merger or consolidation of
the Company with or into another corporation involving a change of control of
the Company, sale of all or substantially all of the assets of the Company, or
change of half of the incumbent directors following a meeting of stockholders,
the exercisability of the outstanding options shall be automatically accelerated
and each option shall be assumed by the successor corporation and remain
exercisable for a period of at least 90 days.
(j) Other Provisions: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Director Option Plan as may
be determined by the Board of Director.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization such as a
stock split, reverse stock split, recapitalization, stock dividend or other
change in capital structure, an appropriate adjustment shall be made in the
number and class of shares of stock subject to the Director Option Plan, the
option price and in the number of shares subject to each option.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Director Option Plan from time to time
or may terminate it without approval of the stockholders, but no amendment or
termination shall be made that would impair the rights of any optionee under any
prior grant without his or her consent. In addition, the Company shall obtain
stockholder approval of any amendment to the Director Option Plan in such a
manner and to the extent necessary to comply with Rule 16b-3 under the Exchange
Act, the provisions of the Code, or any other applicable law or regulation.
Further, the provisions of the Director Option Plan concerning the grants of
options under the Director Option Plan may not be amended more than once every
six months. In any event, the Director Option Plan will terminate on April 30,
2003.
TAX INFORMATION
Options granted under the Director Option Plan are nonstatutory stock
options. Under U.S. tax laws an optionee will not recognize any taxable income
at the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the option price.
Because the optionee is a director of the Company, the date of taxation under
U.S. tax laws (and the date of measurement of taxable ordinary income) may be
deferred in certain circumstances unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Code. Upon resale of such
shares by the optionee, any difference between the sales price and the exercise
price, to the extent not recognized as ordinary income as provided above, will
be treated as capital gain (or loss). Under U.S. tax laws capital gain is fully
included in gross income. Capital losses are allowed in full against capital
gains plus $3,000 of other income. The Company will be entitled to a tax
deduction in the amount and at the time that the optionee recognizes ordinary
income under U.S. tax laws with respect to shares acquired upon exercise of a
nonstatutory option.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON HOLDERS OF OPTIONS OR UPON THE COMPANY. IT ALSO
DOES NOT REFLECT PROVISIONS OF THE INCOME TAX LAWS OF
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ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast shall be required to
approve the proposed amendment to the Director Option Plan. If an insufficient
number of affirmative votes are obtained, the amendment to the Director Option
Plan will not be implemented.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
PROPOSED AMENDMENT TO THE DIRECTOR OPTION PLAN.
PROPOSAL 3
APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve
amendments (Option Plan Amendments) to the Company's Stock Option Plan (Option
Plan) to increase the number of shares of Common Stock reserved for issuance
thereunder by 2,500,000 shares and make changes in the Option Plan necessary to
comply with applicable state securities law. The following is a summary of
principal features of the Option Plan. The summary, however, does not purport to
be a complete description of all the provisions of the Option Plan. Any
stockholder of the Company who wishes to obtain a copy of the actual plan
document may do so upon written request to the Secretary of the Company at its
principal executive offices.
GENERAL
The Option Plan was adopted by the Board of Directors and approved by the
stockholders in 1989. An amendment and restatement of the Option Plan to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (Exchange
Act), to allow for cashless exercises and to increase the number of shares
available for issuance thereunder was approved by the Board of Directors and by
the stockholders in 1993.
Amendments to the Option Plan to increase the number of shares available
for issuance thereunder and to limit the number of options, stock appreciation
rights ("SARs) and stock purchase rights an employee may be granted under the
Option Plan in any fiscal year of the Company to comply with Section 162(m) of
the Internal Revenue Code (Code) were approved by the Board of Directors and by
the stockholders in 1995. Amendments to increase the number of shares reserved
for issuance under the Option Plan were approved by the Board of Directors and
by the stockholders in 1996 and 1998. In June 2000, the Board of Directors
approved an amendment to increase the number of shares reserved for issuance
under the Option Plan by 2,500,000. Such amendment is subject to approval by the
Company's stockholders. The stockholders are being asked to approve the Option
Plan Amendment at the Annual Meeting.
The Option Plan provides for the grant of options, stock purchase rights
and SARs to officers, employees and consultants of the Company. The Option Plan
Amendments increasing the number of shares reserved for issuance under the
Option Plan has been necessitated by the hiring of new officers, employees and
consultants, the grant of additional stock options to current officers,
employees and consultants as previously granted options vest and become
exercisable, and by the need to provide adequate incentive to the Company's
officers, employees and consultants to retain their services. The increase will
provide additional stock to continue the Company's policy of equity ownership by
officers, employees and consultants as an incentive to contribute to the
Company's success.
Options granted under the Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Code or nonstatutory stock
options at the discretion of the Board of Directors and as reflected in the
terms of the written option agreement. The Option Plan is not a qualified
deferred compensation plan under Section 401(a) of the Code, and is not subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
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A total of 7,630,000 shares of common stock have been reserved for issuance
over the term of the Option Plan, including the 2,500,000-share increase for
which stockholder approval is being sought in this Proposal 3. As of June 30,
2000, and after giving effect to the Option Plan Amendments which are the
subject of stockholder approval at the Annual Meeting contemplated by this Proxy
Statement), 2,717,154 shares had been issued upon exercise of options granted
under the Option Plan, options for 2,240,520 shares were outstanding under the
Option Plan and 142,312 shares remained available for future grants. As of the
date hereof, an additional 2,500,000 shares are available for grant subject to
stockholder approval at the Annual Meeting. As of June 30, 2000, the fair market
value of shares underlying outstanding options was approximately $8.625 per
share based upon the closing price for the Common Stock as reported on the OTC
Bulletin Board on such date.
PURPOSE
The purpose of the Option Plan is to provide incentive to eligible
employees, consultants and officers whose present and potential contributions
are important to the continued success of the Company, to afford these
individuals the opportunity to acquire a proprietary interest in the Company,
and to enable the Company to enlist and retain qualified personnel for the
successful conduct of its business. The Board of Directors does not believe that
the shares currently available for grant under the Option Plan are sufficient to
retain existing employees and attract new employees.
ADMINISTRATION
The Option Plan may be administered by the Board of Directors or by a
committee of the Board of Directors and shall be administered in a manner that
complies with Rule 16b-3 under the Exchange Act. Currently, the Option Plan is
administered by the Compensation Committee which is currently composed of Mr.
Tanigami and Mr. Allan. Members of the Compensation Committee receive no
additional compensation for their services in connection with the administration
of the Option Plan. All questions of interpretation of the Option Plan are
determined by the Board of Directors (or its committee or committees) and its
decisions are final and binding upon all participants. The Company has
established a Non-Section 16 Option Committee which may make grants of options
to purchase up to 50,000 shares in any fiscal year to persons who are not
directors or executive officers of the Company. This Committee currently
consists of Mr. Vanco, the Chief Executive Officer of the Company.
ELIGIBILITY
The Option Plan provides that either incentive stock options or
nonstatutory stock options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the Option Plan provides that nonstatutory stock options may be
granted to consultants (excluding directors who are not compensated for their
consulting services or are paid only a director's fee by the Company) of the
Company or any of its subsidiaries. The Board of Directors or its committee
selects the optionees and determines the number of shares to be subject to each
option. In making such determination, there are taken into account the duties
and responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company, and
other relevant factors.
The Option Plan provides that the maximum number of shares of Common Stock
which may be granted under options (or rights) to any one employee during any
fiscal year shall be 1,000,000. In addition, the Company may make an additional
one time grant of options (or rights) for 250,000 shares for any newly hired
employee. These limitations are intended to preserve the Company's ability to
deduct for federal income tax purposes any compensation expense relating to
stock options granted to certain executive officers under the Option Plan.
Without this limitation, federal tax legislation enacted in 1993 might not allow
the Company to deduct such compensation expense.
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In addition to the foregoing limitation on discretion for certain grants,
there is also a limit on the aggregate market value of shares subject to all
incentive stock options that may be granted to an optionee during any calendar
year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the optionee. Each option is subject to the following additional principal
terms and conditions:
(a) Exercise of the Option. The Board of Directors or its committee
determines when options may be exercised. In general, such options become
exercisable as to one-fourth of the total shares granted on the one-year
anniversary of the date of grant with the remainder becoming exercisable on a
ratable monthly basis over the three year period thereafter, for so long as the
optionee remains an employee of or consultant to the Company, but must become
exercisable at the rate of at least 20% per year over five years from the date
the option is granted. An option is exercised by giving written notice of
exercise to the Company specifying the number of full shares of Common Stock to
be purchased and by tendering of payment of the purchase price. The option
exercise price may be paid in cash, promissory note, shares of the Company's
Common Stock, or through a broker-dealer sale and remittance procedure which
will allow the optionee to exercise the option and sell the purchased shares on
the same day, with the sale proceeds used to satisfy the option price payable
for the purchased shares.
(b) Exercise Price. The exercise price of each option granted under the
Option Plan is determined by the Board of Directors or its committee and may not
be less than 85% of the fair market value of the Common Stock on the date the
option is granted, or, in the case of an incentive stock option, may not be less
than 100% of the fair market value of the Common Stock on the date the option is
granted. The fair market value per share is equal to the closing price of the
Company's Common Stock on the OTC Bulletin Board on the last market trading day
prior to the date of grant. In the case of any option granted to an optionee who
owns more than 10% of the voting power of all classes of stock of the Company,
its parent or subsidiaries, the exercise price must not be less than 110% of the
fair market value on the date the option is granted.
(c) Termination of Employment. Currently, the Option Plan provides that if
the optionee's employment or consulting relationship terminates for any reason
other than disability or death, options under the Option Plan may be exercised
during the period of time determined by the Board or Committee at the date of
grant but not later than six months (three months in the case of an incentive
stock option) but not less than 30 days after such termination and may be
exercised only to the extent the option was exercisable on the date of
termination. In no event (either under the current terms of the Option Plan or
under the proposed amendments thereto) may an option be exercised by any person
after the expiration of its term.
(d) Disability. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his total and
permanent disability, options may be exercised within six months of termination
and may be exercised only to the extent the option was exercisable on the date
of termination, but in no event may an option be exercised after its expiration
date.
(e) Death. Under the Option Plan, if an optionee should die while employed
or retained by the Company, options may be exercised within six months after the
date of death (or such longer period of time not exceeding twelve months as is
determined by the Board or its committee and specified in the option agreement)
to the extent the options would have been exercisable on the date of death. In
no event may an option be exercised after its expiration date.
(f) Term of Options. The Option Plan provides that options granted under
the Option Plan shall be exercisable during the period of time specified by the
Board of Directors or its committee as provided in the option agreement but as
to incentive stock options, no later than ten years from the date of grant. In
general, these agreements provide for a term of ten years. Incentive stock
options granted to an optionee who, immediately before the grant of such option,
owned more than 10% of the total combined voting power of all classes of stock
of the Company, its parents or subsidiaries, may not in any case have a term of
more than five years. No option may be exercised by any person after its
expiration date.
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(g) Options Not Transferable. An option is not transferable by the optionee
other than by will or the laws of descent and distribution, and is exercisable
only by the optionee during his or her lifetime and in the event of the
optionee's death by a person who acquires the right to exercise the option by
bequest or inheritance or by reason of the optionee's death.
(h) Acceleration of Options. In the event of a merger of the Company with
or into another corporation or a sale of substantially all of the Company's
assets, each option will be assumed or an equivalent option substituted by the
successor corporation. In the event that the successor corporation does not
assume the option or substitute an equivalent option, the Board shall provide
that the exercisability of all outstanding options shall be automatically
accelerated and that the options shall be exercisable for a period of not less
than 15 days following the date notice of such acceleration is given.
(i) Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board of Directors or its committee.
OTHER AWARDS
The Option Plan also allows the Company to grant SARs and stock purchase
rights. SARs may be granted in connection with or independent of options and
entitle the holder thereof to receive an amount, in cash or Common Stock, at the
Company's discretion, equal to the excess of the fair market value of the shares
subject to the SAR on the date of its exercise over the fair market value on the
date of grant. Stock purchase rights allow an offeree to purchase stock, subject
to a right of the Company to repurchase unvested shares in the event of
termination of employment. Shares purchased pursuant to stock purchase rights
vest over time, based on continued employment. No SARs or stock purchase rights
have been granted under the Option Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization upon any
stock split, reverse stock split, stock dividend, combination or
reclassification of Common Stock or any other increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the Option Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Board of Directors or its committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Option Plan at any time or from time
to time or may terminate it without approval of the stockholders; provided,
however, that stockholder approval is required for any amendment to the Option
Plan that increases the number of shares that may be issued under the Option
Plan, modifies the standards of eligibility, modifies the limitation on grants
to employees described in the Option Plan or results in other changes which
would require stockholder approval to qualify options granted under the Option
Plan as performance-based compensation under Section 162(m) of the Code.
However, no action by the Board of Directors or stockholders may alter or impair
any option previously granted under the Option Plan. Unless sooner terminated,
the Option Plan will terminate on December 31, 2002, provided that any
outstanding option, SAR, stock purchase right or long term performance award
under the Option Plan shall remain outstanding until they expire by their terms.
At such time as the Company has securities listed on the Nasdaq National Market,
or another appropriate market, the Company may, without stockholder approval,
amend the requirement that options grants or stock purchase rights not be issued
at a price below 85% of the fair market value of the Common Stock on the date
the option or stock purchase right is granted.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the U.S. federal income tax
consequences of transactions under the Option Plan based on federal income tax
laws in effect on the date of this Proxy Statement. This summary is not intended
to be exhaustive and does not address all matters which may be relevant to a
particular optionee
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based on his or her specific circumstances. The summary addresses only current
U.S. federal income tax law and expressly does not discuss the income tax laws
of any state, municipality, non-U.S. taxing jurisdiction or gift, estate or
other tax laws other than federal income tax law. The Company advises all
optionees to consult their own tax advisor concerning the tax implications of
option grants and exercises and the disposition of stock acquired upon such
exercises, under the Option Plan.
Options granted under the Option Plan may be either incentive stock
options, which are intended to qualify for the special tax treatment provided by
Section 422 of the Code, or nonstatutory stock options, which will not qualify.
If an option granted under the Option Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
will incur no tax liability due to the exercise, except to the extent that such
exercise causes the optionee to incur alternative minimum tax. (See discussion
below.) The Company will not be allowed a deduction for federal income tax
purposes as a result of the exercise of an incentive stock option regardless of
the applicability of the alternative minimum tax. Upon the sale or exchange of
the shares more than two years after grant of the option and one year after
exercise of the option by the optionee, any gain will be treated as a long-term
capital gain. If both of these holding periods are not satisfied, the optionee
will recognize ordinary income equal to the difference between the exercise
price and the lower of the fair market value of the Common Stock on the date of
the option exercise or the sale price of the Common Stock. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on a disposition of the shares prior
to completion of both of the above holding periods in excess of the amount
treated as ordinary income will be characterized as long-term capital gain if
the sale occurs more than one year after exercise of the option or as short-term
capital gain if the sale is made earlier. For individual taxpayers, the current
U.S. federal income tax rate on long-term capital gains is 20% whereas the
maximum rate on other income is 39.6%. Capital losses for individual taxpayers
are allowed in full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a nonstatutory stock option.
However, upon its exercise, the optionee will recognize ordinary income for tax
purposes measured by the excess of the fair market value of the shares over the
exercise price. In certain circumstances, where the shares are subject to a
substantial risk of forfeiture when acquired, the date of taxation may be
deferred unless the optionee files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by an optionee who is
also an employee of the Company will be subject to income and employment tax
withholding by the Company by payment in cash by the optionee or out of the
optionee's current earnings. Upon the sale of such shares by the optionee, any
difference between the sale price and the fair market value of the shares as of
the date of exercise of the option will be treated as capital gain or loss, and
will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year from date of exercise.
Stock purchases, stock appreciation rights and long-term performance awards
will generally be taxed in the same manner as the exercise of a nonstatutory
stock option.
ALTERNATIVE MINIMUM TAX
The exercise of an incentive stock option may subject the optionee to the
alternative minimum tax under Section 55 of the Code. The alternative minimum
tax is calculated by applying a tax rate of 26% to alternative minimum taxable
income of joint filers up to $175,000 ($87,500 for married taxpayers filing
separately) and 28% to alternative minimum taxable income above that amount.
Alternative minimum taxable income is equal to (i) taxable income adjusted for
certain items, plus (ii) items of tax preference less (iii) an exemption amount
of $45,000 for joint returns, $33,750 for unmarried individual returns and
$22,500 in the case of married taxpayers filing separately (which exemption
amounts are phased out for upper income taxpayers). Alternative minimum tax will
be due if the tax determined under the foregoing formula exceeds the regular tax
of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock
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option. As a result, the optionee recognizes alternative minimum taxable income
equal to the excess of the fair market value of the Common Stock on the date of
exercise over the option exercise price. Because the alternative minimum tax
calculation may be complex, optionees should consult their own tax advisors
prior to exercising incentive stock options.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON HOLDERS OF OPTIONS OR UPON THE COMPANY AND DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL TAX
STATUS. IT ALSO DOES NOT REFLECT PROVISIONS OF THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE, AND DOES
NOT DISCUSS ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER THAN INCOME TAX
CONSEQUENCES.
RESTRICTIONS ON RESALE
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act.
The Common Stock acquired under the Option Plan by an affiliate may be reoffered
or resold only pursuant to an effective registration statement or pursuant to
Rule 144 under the Securities Act or another exemption from the registration
requirements of the Securities Act.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast is required to approve
the proposed amendments to the Option Plan. If an insufficient number of
affirmative votes are obtained, the amendments to the Option Plan will not be
implemented.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
PROPOSED AMENDMENTS TO THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY 2,500,000 SHARES AND TO MAKE
OTHER CHANGES NECESSARY TO COMPLY WITH APPLICABLE STATE LAW.
PROPOSAL 4
APPROVAL OF AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders are being asked to approve
amendments (Purchase Plan Amendments) to the Company's Employee Stock Purchase
Plan (Purchase Plan) to increase the number of shares of Common Stock reserved
for issuance thereunder by 500,000 shares and make changes in the Purchase Plan
necessary to comply with applicable state securities law. The following is a
summary of principal features of the Purchase Plan. The summary, however, does
not purport to be a complete description of all the provisions of the Purchase
Plan. Any stockholder of the Company who wishes to obtain a copy of the actual
plan document may do so upon written request to the Secretary of the Company at
its principal executive offices.
REASONS FOR THE AMENDMENT
The Employee Stock Purchase Plan currently provides that the aggregate
number of shares of common stock available for purchase under the Purchase Plan
is 250,000. However, to date, 229,829 of those originally available shares of
common stock have already been purchased through the Purchase Plan, leaving only
20,171 shares available for future purchases. As the number of our employees
grows, we expect the demand for shares under the Purchase Plan to grow as well.
Considering the growing number of employees who are expected to participate in
the Purchase Plan, we expect the shares made available by the amendment, if
approved by our stockholders, will meet our needs until approximately 2002.
Because the Purchase Plan is a key benefit for employees and is part of what we
believe is a very competitive compensation package, which
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allows us to attract and retain high-quality employees, we feel strongly that
the Purchase Plan should be amended so that there is a sufficient number of
shares available for future purchases. The following is a description of the
material features of the Purchase Plan:
GENERAL
The Purchase Plan was adopted by the Board of Directors in March 1993 and
was activated in February 1996 in connection with the Company's initial public
offering. At our 1993 annual meeting, our stockholders approved the Purchase
Plan providing an opportunity for our eligible employees to purchase common
stock through payroll deductions. On June 23, 2000, the Board of Directors
adopted, subject to stockholder approval, an amendment to our Purchase Plan,
which increased the aggregate number of shares of common stock available for
purchase under the Purchase Plan from 250,000 to 750,000. All other provisions
of the Purchase Plan remain in full force and effect. We believe that the
Purchase Plan is an effective means of aligning employees' interests, through
their purchases of common stock, with the interests of stockholders. The
Purchase Plan is an integral part of our over-all employee benefits package,
which we rely on to help attract and retain motivated and talented employees.
The purpose of the Purchase Plan is to provide employees with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. The
Purchase Plan was suspended effective June 1998 due to the Company's delisting
from the NASDAQ stock market. The Company has reapplied to be listed on NASDAQ
and such application is pending. In the event that the Company is successful in
its efforts to become re-listed, the suspension of the Purchase Plan will cease.
ADMINISTRATION
The Purchase Plan may be administered by the Board or a committee appointed
by the Board. All questions of interpretation or application of the Purchase
Plan are determined by the Board or its appointed committee, and its decisions
are final, conclusive and binding upon all participants.
ELIGIBILITY
Each Employee of the Company (including officers), who works at least 20
hours per week and more than five (5) months in any calendar year, is eligible
to participate in the Purchase Plan if employed at least 30 days prior to the
first day of an Offering Period; provided, however, that certain limitations
imposed by Section 423(b) of the Code and limitations on stock ownership as set
forth in the Purchase Plan may apply. Eligible Employees become participants in
the Purchase Plan by filing with the Company a subscription agreement
authorizing payroll deductions prior to the first day of each Offering Period
unless a different time for filing the subscription agreement has been set by
the Board.
PARTICIPATION IN AN OFFERING
The Purchase Plan has consecutive and overlapping twelve month offering
periods that begin every six months on February 1 and August 1 of each year
(Offering Periods). Each twelve month Offering Period includes two six-month
purchase periods (each a Purchase Period), during which payroll deductions are
accumulated and, at the end of which, shares of Common Stock are purchased with
a participant's accumulated payroll deductions. The Board has the power to
change the duration of future Offering Periods, if such change is made at least
five days prior to the scheduled beginning of the first Offering Period to be
affected. To participate in the Purchase Plan, an eligible Employee must
authorize payroll deductions pursuant to the Purchase Plan. Such payroll
deductions may not exceed 10% of a participant's compensation during the
Offering Period. Once an Employee becomes a participant in the Purchase Plan,
the Employee will automatically participate in each successive Offering Period
until such time as the Employee withdraws from the Purchase Plan or the
Employee's employment with the Company terminates. At the beginning of each
Offering Period, each participant is automatically granted an option to purchase
shares of the Company's Common Stock. The option expires at the end of the
Offering Period or upon termination of employment, whichever is earlier, but is
exercised at the end of each Purchase Period to the extent of the payroll
deductions accumulated during such Purchase Period. In no event shall a
participant be permitted to purchase during any
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Purchase Period more than a number of Shares determined by dividing $12,500 by
the Fair Market Value of a share of the Company's Common Stock on the first day
of the Offering Period, subject to exceptions and limitations stated in the
Purchase Plan.
TERMS OF PURCHASES
(a) Purchase Price, Shares Purchased. Shares of Common Stock may be
purchased under the Purchase Plan at a Purchase Price not less than 85% of the
lesser of the Fair Market Value of the Common Stock on (i) the first day of the
Offering Period or (ii) the last day of the Purchase Period. The Fair Market
Value of the Common Stock on any relevant date will be the closing price per
share as reported shall be the closing sales price for such stock as quoted on
the OTC bulletin board. The number of shares of Common Stock a participant
purchases in each Offering Period is determined by dividing the total amount of
payroll deductions withheld from the participant's compensation prior to the
last day of the Purchase Period by the Purchase Price.
(b) Withdrawal. Generally, a participant may withdraw from an Offering
Period at any time by written notice without affecting his or her eligibility to
participate in future Offering Periods. However, once a participant withdraws
from a particular Offering Period, that participant may not participate again in
the same Offering Period. To participate in a subsequent Offering Period, the
participant must deliver to the Company a new subscription agreement.
(c) Termination of Employment. Termination of a participant's employment
for any reason, including disability or death, or the failure of the participant
to remain in the continuous scheduled employ of the Company for at least 20
hours per week, cancels his or her option and participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of death, to the person
or persons entitled thereto as provided in the Purchase Plan.
ADJUSTMENTS IN CAPITALIZATION
Subject to any required action by the stockholders of the Company, the
number of shares reserved under the Purchase Plan as well as the price per share
of Common Stock covered by each option under the Purchase Plan which has not yet
been exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
DISSOLUTION OR LIQUIDATION
In the event of the proposed dissolution or liquidation of the Company, any
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board.
MERGER OR ASSET SALE
In the event of a sale of all or substantially all of the assets of the
Company, or the merger of the Company with and into another corporation, each
option under the Purchase Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event the successor corporation refuses to assume
or substitute for the options, the Board shall shorten any Purchase Periods and
Offering Periods then in progress by setting a new Exercise Date (New Exercise
Date) and any Offering Periods shall end on the New Exercise Date. The New
Exercise Date shall be prior to the merger or asset sale. If the Board shortens
any Purchase Periods and Offering Periods then in
16
<PAGE> 19
progress, the Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date has been
changed to the New Exercise Date and that all options will be exercised
automatically on the New Exercise Date, unless the participant has already
withdrawn from the Offering Period.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time terminate or amend the Purchase
Plan. An Offering Period may be terminated by the Board of Directors at the end
of any Purchase Period if the Board determines that termination of the Purchase
Plan is in the best interests of the Company and its stockholders. Generally, no
such termination can affect options previously granted. No amendment shall be
effective unless it is approved by the holders of a majority of the votes cast
at a duly held stockholders' meeting, if such amendment would require
stockholder approval in order to comply with Section 423 of the Code. The
Purchase Plan will terminate in 2003.
UNITED STATES INCOME TAX INFORMATION FOR PURCHASE PLAN
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
(2) years from the first day of the Offering Period, the participant will
recognize ordinary income measured as the lesser of (i) the excess of the fair
market value of the shares at the time of such sale or disposition over the
purchase price, or (ii) an amount equal to 15% of the fair market value of the
shares as of the first day of the Offering Period. Any additional gain will be
treated as long-term capital gain. If the shares are sold or otherwise disposed
of before the expiration of this holding period, the participant will recognize
ordinary income generally measured as the excess of the fair market value of the
shares on the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be long-term or
short-term capital gain or loss, depending on the holding period. The Company is
not entitled to a deduction for amounts taxed as ordinary income or capital gain
to a participant except to the extent of ordinary income recognized by
participants upon a sale or disposition of shares prior to the expiration of the
holding period(s) described above.
THE FOREGOING IS A BRIEF SUMMARY OF THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF TRANSACTIONS UNDER THE PURCHASE PLAN BASED ON FEDERAL INCOME TAX
LAWS IN EFFECT ON THE DATE OF THIS PROXY STATEMENT. THIS SUMMARY IS NOT INTENDED
TO BE EXHAUSTIVE AND DOES NOT ADDRESS ALL MATTERS WHICH MAY BE RELEVANT TO A
PARTICULAR OPTIONEE BASED ON HIS OR HER SPECIFIC CIRCUMSTANCES. THE SUMMARY
ADDRESSES ONLY CURRENT U.S. FEDERAL INCOME TAX LAW AND EXPRESSLY DOES NOT
DISCUSS THE INCOME TAX LAWS OF ANY STATE, MUNICIPALITY, NON-U.S. TAXING
JURISDICTION OR GIFT, ESTATE OR OTHER TAX LAWS OTHER THAN FEDERAL INCOME TAX
LAW. THE COMPANY ADVISES ALL OPTIONEES TO CONSULT THEIR OWN TAX ADVISOR
CONCERNING THE TAX IMPLICATIONS OF OPTION GRANTS AND EXERCISES AND THE
DISPOSITION OF STOCK ACQUIRED UPON SUCH EXERCISES, UNDER THE PURCHASE PLAN.
PURCHASE PLAN BENEFITS
The Company is unable to predict the amount of benefits that will be
received by or allocated to any particular participant under the Purchase Plan.
17
<PAGE> 20
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast is required to approve
the proposed amendments to the Purchase Plan. If an insufficient number of
affirmative votes are obtained, the amendments to the Purchase Plan will not be
implemented.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT OF THE PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
auditors, to audit the financial statements of the Company for the year ending
April 30, 2001, and recommends that the stockholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so. The representatives also are expected to be available to
respond to appropriate questions from stockholders. The Board of Directors
believes that reappointing PricewaterhouseCoopers LLP is in the best interest of
the Company.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast is required to ratify
the appointment of PricewaterhouseCoopers LLP as the Company's independent
auditors.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 2001.
18
<PAGE> 21
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company in fiscal
2000, 1999 and 1998 to (i) the Company's Chief Executive Officer and (ii) the
four most highly compensated officers other than the Chief Executive Officer who
served as executive officers at April 30, 2000 (collectively, the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------- -------------------------------------------------
AWARDS PAYOUTS
OTHER ---------- ------------------------
ANNUAL RESTRICTED SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPEN- STOCK UNDERLYING LTIP COMPENSA-
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION($) AWARDS($) OPTIONS(#) PAYOUTS($) TION($)(3)
--------------------------- ------ --------- -------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Radu M. Vanco.................. 2000 $337,500 $422,500 -- -- -- -- $288
President and Chief Executive 1999 $265,000 $ 60,000 -- -- 1,413,166(1) -- $174
Officer 1998 $225,000 $ 69,391 -- -- 313,166(2) -- $609
Bassam Khoury.................. 2000 $159,123 $157,500 -- -- -- -- $ 66
Vice President of Marketing 1999 $140,000 $ 30,000 -- -- 294,746(1) -- $ 66
1998 $140,732 -- -- -- 41,430(2) -- $106
Gelu Voicu..................... 2000 $164,349 $157,500 -- -- -- -- $288
Vice President of Product 1999 $134,769 $ 30,000 -- -- 303,000(1) -- $174
Engineering and Manufacturing 1998 $126,523 -- -- -- 83,000(2) -- $183
Thomas E. Gay III.............. 2000 $130,000 $ 97,500 -- -- -- -- $288
Vice President, Finance and 1999 $106,375 $ 25,000 -- -- 260,000(1) -- $121
Administration, and Chief 1998 -- -- -- -- -- -- --
Financial Officer
Irvin W. Kovalik............... 2000 $150,000 $126,874 -- -- -- -- $702
Vice President, Sales 1999 $ 80,000 -- -- -- 250,000 -- $288
1998 -- -- -- -- -- -- --
</TABLE>
---------------
(1) Options listed for fiscal 1999 long-term compensation awards include the
following number of options granted as a result of repricings (and
consequent cancellation of previously granted options) on September 22, 1998
for each of the following named executive officers: Mr. Vanco, 413,166
shares; Mr. Khoury, 94,746 shares; Mr. Voicu, 103,000 shares; and Mr. Gay,
60,000 shares. The repriced options retain the same vesting schedule as the
options that were replaced but may be exercised for a period of ten years
following the date of the repricing. Also includes options referenced in the
second paragraph of note (2) below.
(2) Options listed for fiscal 1998 long-term compensation awards reflect the
following number of options granted as a result of repricings (and
consequent cancellation of previously granted options) on January 15, 1998
for each of the following named executive officers: Mr. Vanco, 313,166
shares; Mr. Khoury, 74,746 shares; and Mr. Voicu, 83,000 shares. Options to
purchase the following number of shares granted to the following persons in
fiscal 1998 were issued as a result of the repricing on January 15, 1998 of
previously granted options: Mr. Vanco -- 313,166; Mr. Khoury -- 74,746; Mr.
Voicu -- 83,000. Such repriced options have been reflected as grants in
prior fiscal year long-term compensation awards to the extent applicable,
however, the 83,000 shares granted to Mr. Voicu do not include 15,000 shares
previously granted in fiscal 1998 to Mr. Voicu. The repriced options retain
the same vesting schedule as the options that were replaced but may be
exercised for a period of ten years following the date of the repricing.
Does not include options granted to the following individuals in April 1998
which options were subject to stockholder approval of an increase in the
number of shares available under the Company's stock option plan: Mr.
Vanco -- 100,000; Mr. Khoury -- 20,000; Mr. Voicu -- 20,000.
(3) The amount included under "All Other Compensation" represents the dollar
value of term life insurance premiums paid by the Company for the benefit of
such Named Officer.
EMPLOYEE BENEFIT PLANS
Each current Named Officer is entitled to participate in the Option Plan.
The Option Plan provides for the grant of options, stock purchase rights, SARs
and long-term performance awards.
19
<PAGE> 22
The following table sets forth certain information with respect to stock
options granted during fiscal 2000 to the Named Officers. No SARs were granted
in fiscal 2000. In accordance with the rules of the Securities and Exchange
Commission, also shown below is the potential realizable value over the term of
the option (the period from the grant date to the expiration date) based on
assumed rates of stock appreciation from the option exercise price of 5% and
10%, compounded annually. These amounts are based on certain assumed rates of
appreciation and do not represent the Company's estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of the Common Stock.
OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------- -----------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN OR BASE EXPIRATION
NAME OPTIONS GRANTED(#) FISCAL YEAR(3) PRICE($/SH) DATE 5%($) 10%($)
---- ------------------- ---------------- ------------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Radu M. Vanco............. -- N/A -- -- -- --
Bassam Khoury............. -- N/A -- -- -- --
Gelu Voicu................ -- N/A -- -- -- --
Irv Kovalik............... -- N/A -- -- -- --
Thomas E. Gay III......... -- N/A -- -- -- --
</TABLE>
The following table sets forth information with respect to options
exercised in fiscal 2000 by the Named Officers and the value of unexercised
options at April 30, 2000.
AGGREGATE OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED APRIL 30, 2000(#) APRIL 30, 2000($)(1)
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) RECEIVED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Radu M. Vanco.......... 285,000 $1,630,173 396,498 731,668 $2,973,735 $5,487,510
Irv Kovalik............ 0 0 83,333 166,667 $ 624,998 $1,250,003
Bassam Khoury.......... 71,514 $ 386,139 70,939 152,293 $ 532,043 $1,142,198
Gelu Voicu............. 0 0 152,374 150,626 $1,142,805 $1,129,695
Thomas E Gay III....... 30,000 $ 127,175 70,624 159,376 $ 529,680 $1,195,320
</TABLE>
---------------
(1) Represents the market price at fiscal year end ($7.625) less the exercise
price. For purposes of this calculation, the fiscal year end market price of
the shares is deemed to be the closing sale price of the Company's Common
Stock as reported on the Over-the-Counter bulletin board market on April 28,
2000.
DIRECTOR COMPENSATION
In addition to options granted pursuant to the Company's stock option
plans, non-employee directors receive quarterly fees in an amount equal to
$3,600 for each quarter in which such director attends a Board meeting. See
"Certain Relationships and Related Transactions" for other payments and
arrangements with directors.
REPORT ON COMPENSATION OF EXECUTIVE OFFICERS
The following is a report of the Compensation Committee of the Board of
Directors of the Company (Committee) describing the compensation philosophy and
parameters applicable to the Company's executive
20
<PAGE> 23
officers with respect to the compensation paid to such officers during fiscal
2000. The actual compensation paid to the Named Officers during fiscal 2000 is
shown in the "Summary Compensation Table."
The Committee is responsible for reviewing and approving the Company's
compensation policies and the actual compensation paid to the Company's
executive officers. At the end of fiscal 2000, the Committee was comprised of
two (2) of the non-employee directors, Lionel Allan and Hideyuki Tanigami.
Compensation Philosophy. The general philosophy of the Company's
compensation program is to offer the Company's Chief Executive Officer and other
executive officers competitive compensation packages based upon both the
Company's performance as well as the individual's performance and contributions.
The Company's compensation policies are intended to motivate and reward highly
qualified executives for long-term strategic management and the enhancement of
stockholder value, to support a performance-oriented environment that rewards
achievement of specific internal Company goals and to attract and retain
executives whose abilities are critical to the long-term success and
competitiveness of the Company. This is further subject to the Company's
financial condition and results of operations. The Company's compensation
program is comprised of three main components, Base Salary, Bonus Plan and Stock
Options.
Base Salary. Base salary for executive officers is set annually by
reviewing the competitive pay practices of comparable companies, the skills and
performance level of the individual executives and the needs of the Company.
Bonus Plan. The Company's officers are eligible for bonuses under the terms
of individual bonus arrangements. When bonuses are given, they are based upon
the individual's achievement of specific corporate goals as well as the
individual's experience and contributions to the success of the Company.
During fiscal 2000, Messrs. Gay, Khoury, Kovalik, Vanco and Voicu received
bonuses. No other executive officer received a bonus during fiscal 2000. See
"Certain Relationships and Related Transactions."
Stock Options. The Committee believes that stock options provide additional
incentives to officers to work toward maximizing stockholder value. The
Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants based upon performance and promotions, as well as
additional grants to provide continuing motivation as earlier grants vest in
full. Options granted by the Company to its executive officers and other
employees have exercise prices equal to fair market value at the time of grant
and, generally, vest over a four-year period.
Severance Arrangements. See Item 13 for a description of severance
arrangements for certain executive officers.
Compensation for the Chief Executive Officer. Mr. Vanco's base salary was
established at a level which the Committee determined to be similar to the
amounts paid by comparably sized companies. Effective December 1, 1999, Mr.
Vanco's base annual salary was increased to $325,000.
The Committee considers equity based compensation, in the form of stock
options, to be an important component of a Chief Executive Officer's
compensation. These grants are intended to motivate leadership for long-term
Company growth and profitability. No stock options were granted to Mr. Vanco in
fiscal 2000.
Tax Deductibility of Executive Compensation. The Committee has considered
the potential impact of Section 162(m) of the Internal Revenue Code adopted
under the federal Revenue Reconciliation Act of 1993. This Section disallows a
tax deduction for any publicly-held corporation for individual compensation
exceeding $1,000,000 in any taxable year for any of the executive officers named
in the Proxy Statement,
21
<PAGE> 24
unless compensation is performance-based. The Committee has studied the impact
of Section 162(m) on the Company's Option Plan.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Lionel Allan, Hideyuki Tanigami
THE BOARD OF DIRECTORS
Lionel M. Allan, Hideyuki Tanigami,
Radu M. Vanco, Patrick Verderico,
Roland Duchatelet, Cynthia M. Butitta,
Glen G. Possley, Henry C. Montgomery
AUDIT COMMITTEE REPORT
The Audit Committee acts pursuant to a written charter which was amended
and restated effective May 18, 2000. The Audit Committee has reviewed and
discussed the audited financial statements with management and it has discussed
with the independent auditors the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU sec.380), as it may be
modified or supplemented. The Audit Committee has received written disclosures
and a letter from the independent accountants as required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as it may be modified or
supplemented, and has discussed with the independent accountant the independent
accountant's independence. Based upon the above materials and discussions, the
Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K, for the last
fiscal year for filing with the Commission.
THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
Patrick Verderico, Cynthia M. Butitta,
Glen G. Possley, Henry C. Montgomery
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors.
During fiscal 2000, Messrs. Tanigami and Allan served as the members of the
Compensation Committee of the Board of Directors. Mr. Tanigami, Chairman of the
Board of Directors was employed by the Company in various capacities from
October 1985 to April 1994 including the most recent position as Vice President
of Corporate Development. Mr. Vanco participated in the Board's final approval
of executive compensation matters.
22
<PAGE> 25
PERFORMANCE GRAPH
The following line graph compares the annual percentage change in the
cumulative total stockholder return for the Company's Common Stock with the S&P
500 Index and the S&P Electronics (Semi/ Components) Index for the period
commencing March 31, 1995 and ending on April 30, 2000. The graph assumes that
$100 was invested on March 31, 1995, and that all dividends are reinvested.
Historic stock price performance should not necessarily be considered indicative
of future stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CATALYST SEMICONDUCTOR, INC., THE S & P 500 INDEX
AND THE S & P ELECTRONICS (SEMICONDUCTORS) INDEX
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
CATALYST SEMICONDUCTOR, S & P ELECTRONICS
INC. S & P 500 (SEMICONDUCTORS)
----------------------- --------- -----------------
<S> <C> <C> <C>
3/31/95 100.00 100.00 100.00
4/30/96 135.00 134.05 129.13
4/30/97 33.75 167.75 254.68
4/30/98 16.25 236.63 269.47
4/30/99 6.00 288.27 394.79
4/30/00 152.50 317.47 956.04
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the preceding Report of the Compensation
Committee of the Board of Directors on Executive Compensation, the Report of the
Board of Directors on Option Repricing and the Performance Graph are not to be
incorporated by reference into any of those previous filings; nor is such report
or graph to be incorporated by reference into any future filings which the
Company may make under those statutes.
23
<PAGE> 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of July
14, 2000 by (i) each beneficial owner of more than 5% of the Company's Common
Stock, (ii) each director, (iii) each Named Officer and (iv) all current
directors and executive officers as a group. Except as otherwise indicated, each
person has sole voting and investment power with respect to all shares shown as
beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OF TOTAL
------------------------------------ --------- --------
<S> <C> <C>
Elex N.V ................................................... 5,500,000 33.8%
Transportstraat 1
B 3980
Tessenderlo, Belgium
Radu M. Vanco(1)............................................ 492,679 3.0
Lionel M. Allan(1).......................................... 14,170 *
Hideyuki Tanigami(1)........................................ 16,667 *
Patrick Verderico(1)........................................ 12,500 *
Cynthia Butitta............................................. 2,500 *
Glen G. Possley............................................. 1,667 *
Henry C. Montgomery......................................... 1,667 *
Bassam Khoury(1)............................................ 140,225 *
Gelu Voicu(1)............................................... 191,211 *
Thomas E. Gay III(1)........................................ 115,625 *
Irvin W. Kovalik(1)......................................... 109,374 *
Roland Duchatelet(1)(2)..................................... 5,506,666 33.8
Frank Reynolds(1)........................................... 6,250 *
Barry Wiley................................................. 0 *
All current directors and executive officers as a group (12
persons)(3)............................................... 6,612,201 40.6%
</TABLE>
---------------
* Percentage of shares beneficially owned is less than one percent of total.
(1) Includes shares issuable upon exercise of stock options as of June 14, 2000
or within 60 days thereafter as follows:
<TABLE>
<S> <C>
Radu M. Vanco....................................... 491,498 shares at $0.1250
Lionel M Allan...................................... 4 shares at $0.4690
14,166 shares at $0.1250
Hideyuki Tanigami................................... 16,667 shares at $0.1250
Patrick Verderico................................... 12,500 shares at $0.1250
Cynthia Butitta..................................... 2,500 shares at $9.50
Glen G. Possley..................................... 1,667 shares at $7.90625
Henry C. Montgomery................................. 1,667 shares at $7.875
Bassam Khoury....................................... 76,563 shares at $0.1250
Gelu Voicu.......................................... 177,165 shares at $0.1250
Thomas E. Gay III................................... 95,625 shares at $0.1250
Irvin W. Kovalik.................................... 109,374 shares at $0.1250
Frank Reynolds...................................... 6,250 shares at $0.1250
Roland Duchatelet................................... 6,666 shares at $2.00
</TABLE>
(2) Includes 5,500,000 shares held by Elex NV of which Mr. Duchatelet is a
controlling person.
24
<PAGE> 27
(3) Includes 1,012,312 shares issuable upon exercise of stock options as of July
14, 2000 or within 60 days thereafter, held by Messrs. Vanco, Allan,
Tanigami, Verderico, Possley, Montgomery, Khoury, Voicu, Gay, Duchatelet and
Reynolds as described in Note 1 above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fourth quarter of fiscal 2000, the Company began taking delivery
of wafers fabricated at X-fab Texas, Inc. (Xfab), a wholly owned subsidiary of
Elex NV, a Belgian holding company that owns 33.8% of the outstanding shares of
the Company. The wafers provided by Xfab supplement the same designs fabricated
at Oki Semiconductor in Japan, the Company's principal wafer fab since 1985. The
Company believes that the cost of such wafers is no greater than comparable
materials available from alternative foundry services. During the fiscal year
ended April 30, 2000, the Company's purchases from Xfab totaled $899,000. As of
April 30, 2000, the total amount owed to Xfab was $857,000. Mr. Duchatelet is
the Chairman and CEO and a major stockholder of Elex NV and has served as a
member of the Company's Board of Directors since 1999.
In addition, the Company has an arrangement to obtain engineering services
from Lxi Corporation, a California corporation (Lxi), a provider of engineering
services. Lxi currently provides these services through Essex com SRL ("Essex"),
its wholly owned Romanian subsidiary. As of April 30, 2000, Essex employed
approximately 13 engineers to perform the services on behalf of Catalyst. This
number fluctuates from time to time, depending upon the needs of the project.
The services relate to key development projects of the Company including
development, design, layout and test program development services. Messrs.
Vanco, Voicu and Gay own approximately 91%, 3% and 1%, respectively, of Lxi. The
fees for such engineering services are on terms believed by the Company to be
fair to the Company and no less favorable to the Company than arms length
commercial terms. During the fiscal years ended April 30, 2000 and April 30,
1999 the Company recorded $534,000 and $437,000 respectively of engineering fees
to Essex and Lxi for engineering design services. As of April 30, 2000 the total
amount owed to Essex and Lxi was $167,000. Messrs. Vanco, Voicu and Gay received
no payments during the fiscal years ended April 30, 2000 and April 30, 1999,
except Mr. Gay who received $1,200 from Lxi during 1999. Such payment to Mr. Gay
was made for services rendered prior to his joining the Company in connection
with his duties as Treasurer of Lxi. Mr. Gay resigned such position immediately
prior to joining the Company. Mr. Gay continues to serve as a director of Lxi.
The Company entered into agreements with Messrs. Vanco, Voicu, Khoury, Gay,
Kovalik and Reynolds in August 1998, April 1998, April 1998, June 1998, May 1999
and May 1999, respectively, which entitle such officers to certain severance
payments in the event of a termination as a result of a merger, sale or change
in ownership of the Company (a "Change of Control") and certain other benefits
upon any involuntary termination by the Company without cause (an "Involuntary
Termination"). Pursuant to the terms and conditions of said agreements, such
individuals will receive the following benefits: (a) Mr. Vanco -- for
termination as a result of a Change of Control he shall receive severance
payments equal to 2, 1 1/2 and 1 times his salary if terminated within one, two
or three or more years, respectively, following his agreement; for an
Involuntary Termination he shall receive a severance payment equal to his annual
salary; upon a Change of Control or his death or Involuntary Termination, all
stock options shall be immediately vested and be exercisable for a period of
three years following any such death or Involuntary Termination. (b) each of
Messrs. Gay, Khoury, Kovalik, Reynolds and Voicu for termination as a result of
a Change of Control he shall receive a severance payment equal to one-half his
salary; for an Involuntary Termination he shall receive a severance payment
equal to one-quarter of his annual salary; upon a Change of Control or his death
or Involuntary Termination, all stock options shall be immediately vested and be
exercisable for a period of one year following any such death or Involuntary
Termination. For the purposes of determining the severance payments described
above, salary is defined as the annual salary payable to an officer for the
fiscal year in which such officer's termination occurs plus any guaranteed
bonus.
Mr. Allan serves as a consultant to the Company and received consulting
fees of $8,333 per month throughout fiscal 2000. Mr. Tanigami serves in a
similar capacity and received fees of $6,000 per month from May 1999 through
December 1999. Effective January 2000, the monthly consulting fee was increased
to $8,333 per month.
25
<PAGE> 28
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by the Delaware General Corporation
Law. The Company's Bylaws also provide that the Company shall indemnify its
directors, officers, employees and agents in such circumstances. In addition,
the Company has entered into separate indemnification agreements with its
officers and directors that may require the Company, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
The terms of the transactions described above were negotiated at arms
length such that the terms were as favorable to the Company as could have been
obtained from an unaffiliated third party.
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange
Act) requires the Company's executive officers and directors and persons who own
more than ten percent of a registered class of the Company's equity securities
to file an initial report of ownership on Form 3 and changes in ownership on
Form 4 or 5 with the Securities and Exchange Commission (SEC). Executive
officers, directors and greater than ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of copies of such forms received by it, the
Company believes that during the fiscal year ended April 30, 2000, all such
reports were timely filed except for late filings of a Form 4 by each of Messrs.
Khoury and Vanco and late filings of a Form 5 by each of Messrs. Allan,
Duchatelet, Tanigami and Verderico. Again based solely on its review of copies
of such forms received by it, the Company believes that all filing requirements
applicable to its officers, directors and ten percent stockholders have been
complied with.
1934 EXCHANGE ACT REPORTS
The Company hereby undertakes to mail, without charge, to any stockholder
of the Company upon written request, copies of reports it files with the
Securities and Exchange Commission, including financial statements, schedules
and exhibit lists contained therein. Requests should be sent to the Chief
Financial Officer of the Company at its principal executive offices at 1250
Borregas Avenue, Sunnyvale, California 94089. Such documents are also available
on EDGAR at the website of the Securities and Exchange Commission at
www.sec.gov.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE
PRESENTED AT NEXT ANNUAL MEETING
Proposals to be presented by stockholders of the Company at the Company's
2001 Annual Meeting must be received by the Company at its principal executive
offices no later than April 21, 2001. Such proposals may be included in next
year's proxy statement if they comply with the applicable rules and regulations
promulgated by the United States Securities and Exchange Commission.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
FOR THE BOARD OF DIRECTORS
Peter Cohn
Secretary
Dated: July 28, 2000
26
<PAGE> 29
CATALYST SEMICONDUCTOR, INC.
AMENDED & RESTATED
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
(AS OF MAY 18, 2000)
PURPOSE
The purpose of the Audit Committee established by this charter will be
to make such examinations as are necessary to monitor the corporate financial
reporting and the internal and external audits of Catalyst Semiconductor, Inc.
(the "Company"), to provide to the Board of Directors (the "Board") the results
of its examinations and recommendations derived therefrom, to outline to the
Board improvements made, or to be made, in internal accounting controls, to
nominate independent auditors, to supervise the finance function of the Company
(which will include, among other matters, the Company's investment activities)
and to provide the Board such additional information and materials as it may
deem necessary to make the Board aware of significant financial matters which
require Board attention.
The Audit Committee will undertake those specific duties and
responsibilities listed below, and such other duties as the Board from time to
time may prescribe.
CHARTER REVIEW
The Audit Committee will review and reassess the adequacy of this
charter at least once per year. This review is initially intended to be
conducted at the first Audit Committee meeting following the Company's Annual
Meeting of Stockholders, but may be conducted at any time the Audit Committee
desires to do so. Additionally, to the extent and in the manner that the Company
is legally required to do by the rules of the Securities and Exchange Commission
(the "SEC"), this charter (as then constituted) shall be publicly filed.
MEMBERSHIP
The Audit Committee must be comprised of at least three members of the
Board. Such members will be elected and serve at the pleasure of the Board. The
members of the Audit Committee will not be employees of the Company. Each member
of the Audit Committee shall be an "independent director," as defined by and to
the extent required by the Rules of the National Association of Securities
Dealers, Inc. ("NASD").
Further, each member of the Audit Committee must be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement, or must become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. Additionally, at least one member of the Audit Committee must have
past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
<PAGE> 30
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. Notwithstanding the
foregoing, one director who is not independent, as defined in the NASD Rules,
and who is not a current employee or an immediate family member of such
employee, may be appointed to the Audit Committee, if the board, under
exceptional and limited circumstances, determines that membership on the Audit
Committee by the individual is required by the best interests of the Company and
its stockholders, and the Board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination.
MEETINGS
The Audit Committee will meet separately with the Chief Executive
Officer and separately with the Chief Financial Officer of the Company at least
quarterly to review the financial affairs of the Company. The Audit Committee
will meet with the independent auditors of the Company upon the completion of
the annual audit, and at such other times as it deems appropriate, to review the
independent auditors' examination and management report.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Nominating the independent auditors for annual approval by the
Board and ratification by the stockholders;
2. Reviewing the plan for the audit and related services at least
annually;
3. Reviewing audit results and annual and interim financial
statements;
4. Ensuring the receipt of, and reviewing, a written statement from
the Company's auditors delineating all relationships between the
auditor and the Company, consistent with Independence Standards
Board Standard 1;
5. Reviewing and actively discussing with the Company's auditors
any disclosed relationship or service that may impact the
objectivity and independence of the auditor;
6. Taking, or recommending that the Board take, appropriate action
to oversee the independence of the outside auditor;
7. Overseeing the adequacy of the Company's system of internal
accounting controls, including obtaining from the independent
auditors management letters or summaries on such internal
accounting controls;
8. Overseeing the effectiveness of the internal audit function;
9. Overseeing the Company's compliance with the Foreign Corrupt
Practices Act;
10. Overseeing the Company's compliance with SEC requirements for
disclosure of auditor's services and Audit Committee members and
activities; and
11. Overseeing the Company's finance function, which may include the
adoption from time to time of a policy with regard to the
investment of the Company's assets.
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<PAGE> 31
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board delegates to it.
Finally, the Audit Committee shall ensure that the Company's auditors
understand both (i) their ultimate accountability to the Board and the Audit
Committee, as representatives of the Company's stockholders, and (ii) the
Board's and the Audit Committee's ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the Company's independent
auditors (or to nominate the outside auditor to be proposed for stockholder
approval in any proxy statement).
REPORTS
The Audit Committee will to the extent deemed appropriate record its
summaries of recommendations to the Board in written form that will be
incorporated as a part of the minutes of the Board. To the extent required, the
Audit Committee will also prepare and sign a Report of the Audit Committee for
inclusion in the Company's proxy statement for its Annual Meeting of
Stockholders.
3
<PAGE> 32
CATALYST SEMICONDUCTOR, INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED ON JUNE 23, 2000
This Stock Option Plan is an amendment and restatement of the Catalyst
Semiconductor, Inc., Founders' Stock Option Plan.
1. Purpose of the Plan. The purpose of this Stock Option Plan is to
enable the Company to provide incentive to eligible employees, consultants and
officers whose present and potential contributions are important to the
continued success of the Company, to afford these individuals the opportunity to
acquire a proprietary interest in the Company, and to enable the Company to
enlist and retain in its employment qualified personnel for the successful
conduct of its business. It is intended that this purpose will be effected
through the granting of (a) stock options, (b) stock purchase rights, and (c)
stock appreciation rights.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or such of its Committees as
shall be administering the Plan, in accordance with Section 8 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under applicable securities laws,
Delaware corporate law and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 8 of the Plan.
(f) "Common Stock" means the Common Stock, $.001 par value, of
the Company.
(g) "Company" means Catalyst Semiconductor, Inc., a Delaware
corporation, and its predecessor Catalyst Semiconductor, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship is not interrupted or terminated by
the Company, or any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered
<PAGE> 33
interrupted in the case of: (i) any leave of absence approved by the
Administrator, including sick leave, military leave, or any other personal
leave; provided, however, that for purposes of Continuous Status as an Employee
or Consultant, no such leave may exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including written
Company policies) or statute or unless (in the case of Options and Rights other
than Incentive Stock Options) the Administrator has expressly designated a
longer leave period during which (for purposes of such Options or Rights)
Continuous Status as an Employee or Consultant shall continue; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor; and provided further that any vesting or lapsing
of the Company's right to repurchase Shares at their original purchase price
shall cease on the ninety-first (91st) consecutive day of any leave of absence
approved by the Administrator and shall not recommence until such date, if any,
upon which the Consultant or Optionee resumes his or her service with the
Company.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
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<PAGE> 34
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Listed Security" means any security of the Company which is
listed or approved for listing on a national security exchange or designated or
approved for designation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
(p) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(q) "Nonstatutory Stock Option" means any Option that is not an
Incentive Stock Option.
(r) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option, Stock Purchase Right, SAR or
Long-Term Performance Award grant. The Notice of Grant is part of the Option
Agreement, the SAR Agreement and the Long-Term Performance Award Agreement.
(s) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(v) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(w) "Optioned Stock" means the Common Stock subject to an Option
or Right.
(x) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this Stock Option Plan, formerly the Founders'
Stock Option Plan.
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<PAGE> 35
(aa) "Restricted Stock" means shares of Common Stock subject to a
Restricted Stock Purchase Agreement acquired pursuant to a grant of Stock
Purchase Rights under Section 6 below.
(bb) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(cc) "Right" means and includes SARs, Long-Term Performance
Awards and Stock Purchase Rights granted pursuant to the Plan.
(dd) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(ee) "SAR" means a stock appreciation right granted pursuant to
Section 5 of the Plan.
(ff) "SAR Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual SAR
grant. The SAR Agreement is subject to the terms and conditions of the Plan.
(gg) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(hh) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 7 of the Plan, as evidenced by a Notice of Grant.
(ii) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(jj) "10% Stockholder" means the owner of Common Stock (as
determined under Section 424(d) of the Code) possessing more than 10% of the
total combined voting power of all classes of stoke of the company or any Parent
or Subsidiary of the Company.
3. Shares Subject to the Plan. Subject to the provisions of Section
10 of the Plan, the total number of Shares reserved and available for
distribution under the Plan is 7,630,000 Shares. Subject to Section 10 of the
Plan, if any Shares that have been optioned under an Option cease to be subject
to such Option (other than through exercise of the Option), or if any Option or
Right granted hereunder is forfeited or any such award otherwise terminates
prior to the issuance of Common Stock to the participant, the shares that were
subject to such Option or Right shall again be available for distribution in
connection with future Option or right grants under the Plan; provided, however,
that Shares that have actually been issued under the Plan, whether upon exercise
of an Option or Right, shall not in any event be returned to the Plan and shall
not become available for future distribution under the Plan.
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<PAGE> 36
4. Eligibility. Nonstatutory Stock Options and Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Right may be granted additional Options or Rights.
5. Limitation on Grants to Employees. Subject to adjustment as
provided in this Plan, the maximum number of Shares which may be subject to
Options or Rights granted to any one Employee under this Plan for any fiscal
year of the Company shall be 1,000,000. In connection with his or her initial
employment, an Employee may be granted up to an additional 250,000 Shares, which
Shares do not count against the 1,000,000 limitation.
6. Options and SARs.
(a) Options. The Administrator, in its discretion, may grant
Options to eligible participants and shall determine whether such Options shall
be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a Notice of Grant which shall expressly identify the Options as
Incentive Stock Options or as Nonstatutory Stock Options, and be in such form
and contain such provisions as the Administrator shall from time to time deem
appropriate. Without limiting the foregoing, the Administrator may at any time
authorize the Company, with the consent of the respective recipients, to issue
new Options or Rights in exchange for the surrender and cancellation of
outstanding Options or Rights. Option agreements shall contain the following
terms and conditions:
(i) Exercise Price; Number of Shares. The per Share
exercise price for the Shares issuable pursuant to an Option shall be such price
as is determined by the Administrator; provided that in the case of an Incentive
Stock Option, the price shall be no less than 100% of the Fair Market Value of
the Common Stock on the date the Option is granted, subject to any additional
conditions set out in Section 6(a)(iv) below; provided, further, that in the
case of any Option (A) granted to any person, who at the time of the grant of
such Option, owns stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
price shall be no less than 110% of the Fair Market Value of the Common Stock on
the date the Option is granted, or (B) granted to any person the price shall be
no less than 85% of the Fair Market Value of the Common Stock on the date the
Option is granted.
The Notice of Grant shall specify the number of Shares to
which it pertains.
(ii) Vesting Period and Exercise Dates. At the time an
Option is granted, the Administrator will determine the terms and conditions to
be satisfied before Shares may be purchased, including the dates on which Shares
subject to the Option may first be purchased. As to any Option the Administrator
may specify vesting requirements and/or performance criteria with respect to the
Company and/or the Optionee; provided that such Option shall become exercisable
at the rate of at least 20% per year over five years from the date the Option is
granted. In the event that any of the Shares issued upon exercise of an Option
should be subject to a right of repurchase in the Company's favor, such
repurchase right shall lapse at
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<PAGE> 37
the rate of at least 20% per year over five years from the date the Option is
granted. At the time an Option is granted, the Administrator shall fix the
period within which the Option may be exercised, which shall not be earlier than
the end of the vesting period, if any, nor, in the case of an Incentive Stock
Option, later than ten (10) years, from the date of grant.
(iii) Form of Payment. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of:
(1) cash;
(2) check;
(3) promissory note;
(4) other Shares which (1) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (2) have a Fair Market Value on
the date of surrender not greater than the aggregate exercise price of the
Shares as to which said Option shall be exercised;
(5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and any broker
approved by the Company, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price;
(6) any combination of the foregoing methods of
payment; or
(7) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
(iv) Special Incentive Stock Option Provisions. In
addition to the foregoing, Options granted under the Plan which are intended to
be Incentive Stock Options under Section 422 of the Code shall be subject to the
following terms and conditions:
(1) Dollar Limitation. To the extent that the
aggregate Fair Market Value of (a) the Shares with respect to which Options
designated as Incentive Stock Options plus (b) the shares of stock of the
Company, Parent and any Subsidiary with respect to which other incentive stock
options are exercisable for the first time by an Optionee during any calendar
year under all plans of the Company and any Parent and Subsidiary exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of the preceding sentence, (a) Options shall be taken into account in
the order in which they were granted, and (b) the Fair Market Value of the
Shares shall be determined as of the time the Option or other incentive stock
option is granted.
(2) 10% Stockholder. If any Optionee to whom an
Incentive Stock Option is to be granted pursuant to the provisions of the Plan
is, on the date of grant, a
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<PAGE> 38
10% Stockholder, then the following special provisions shall be applicable to
the Option granted to such individual:
(a) The per Share Option price of Shares
subject to such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of Common Stock on the date of grant; and
(b) The Option shall not have a term in
excess of five (5) years from the date of grant.
Except as modified by the preceding provisions of this subsection 6(a) (iv) and
except as otherwise limited by Section 422 of the Code, all of the provisions of
the Plan shall be applicable to the Incentive Stock Options granted hereunder.
(v) Other Provisions. Each Option granted under the Plan
may contain such other terms, provisions, and conditions not inconsistent with
the Plan as may be determined by the Administrator.
(vi) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
(b) SARs.
(i) In Connection with Options. At the sole discretion of
the Administrator, SARs may be granted in connection with all or any part of an
Option, either concurrently with the grant of the Option or at any time
thereafter during the term of the Option. The following provisions apply to SARs
that are granted in connection with Options:
(1) The SAR shall entitle the Optionee to exercise
the SAR by surrendering to the Company unexercised a portion of the related
Option. The Optionee shall receive in Exchange from the Company an amount equal
to the excess of (1) the Fair Market Value on the date of exercise of the SAR of
the Common Stock covered by the surrendered portion of the related Option over
(2) the exercise price of the Common Stock covered by the surrendered portion of
the related Option. As to any SAR granted prior to the date, if ever, upon which
the Common Stock becomes a Listed Security the exercise price shall be no less
than is required by any applicable law, rule or regulation (including the
California Corporate Securities Law). Notwithstanding the foregoing, the
Administrator may place limits on the amount that may be paid upon exercise of
an SAR; provided, however, that such limit shall not restrict the exercisability
of the related Option.
(2) When an SAR is exercised, the related Option,
to the extent surrendered, shall cease to be exercisable.
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<PAGE> 39
(3) An SAR shall be exercisable only when and to
the extent that the related Option is exercisable and shall expire no later than
the date on which the related Option expires.
(4) An SAR may only be exercised at a time when the
Fair Market Value of the Common Stock covered by the related Option exceeds the
exercise price of the Common Stock covered by the related Option.
(ii) Independent of Options. At the sole discretion of the
Administrator, SARs may be granted without related Options. The following
provisions apply to SARs that are not granted in connection with Options:
(1) The SAR shall entitle the Optionee, by
exercising the SAR, to receive from the Company an amount equal to the excess of
(1) the Fair Market Value of the Common Stock covered by the exercised portion
of the SAR, as of the date of such exercise, over (2) the Fair Market Value of
the Common Stock covered by the exercised portion of the SAR, as of the last
market trading date prior to the date on which the SAR was granted; provided,
however, that the Administrator may place limits on the aggregate amount that
may be paid upon exercise of an SAR.
(2) SARs shall be exercisable, in whole or in part,
at such times as the Administrator shall specify in the Optionee's SAR
agreement.
(iii) Form of Payment. The Company's obligation arising
upon the exercise of an SAR may be paid in Common Stock or in cash, or in any
combination of Common Stock and cash, as the Administrator, in its sole
discretion, may determine. Shares issued upon the exercise of an SAR shall be
valued at their Fair Market Value as of the date of exercise.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a Stockholder. Any
Option or SAR granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator 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 or SAR 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 or SAR by the person entitled to exercise the Option or
SAR 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 Administrator (and, in the case of an Incentive Stock Option, determined at
the time of grant) and permitted by the Option Agreement consist of any
consideration and method of payment allowable under subsection 6(a)(iii) 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
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<PAGE> 40
the record date is prior to the date the stock certificate is issued, except as
provided in Section 9 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised. Exercise of an SAR in any manner shall, to the
extent the SAR is exercised, result in a decrease in the number of Shares which
thereafter shall be available for purposes of the Plan, and the SAR shall cease
to be exercisable to the extent it has been exercised.
(ii) Rule 16b-3. Options and SARs granted to individuals
subject to Section 16 of the Exchange Act ("Insiders") must comply with the
applicable provisions of Rule 16b-3 and shall contain such additional conditions
or restrictions as may be required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
(iii) Termination of Employment or Consulting
Relationship. In the event an Optionee's Continuous Status as an Employee or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option or SAR, but only within such period of
time as is determined by the Administrator at the time of grant, not to exceed
six (6) months (three (3) months in the case of an Incentive Stock Option) but
not less than thirty (30) days from the date of such termination, and only to
the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date of such
termination, and to the extent that the Optionee does not exercise such Option
or SAR (to the extent otherwise so entitled) within the time specified herein,
the Option or SAR shall terminate.
(iv) Disability of Optionee. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option or SAR, but
only within six (6) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date of such
termination, and to the extent that the Optionee does not exercise such Option
or SAR (to the extent otherwise so entitled) within the time specified herein,
the Option or SAR shall terminate.
(v) Death of Optionee. Notwithstanding Sections 5(c)(iii)
and 5(c)(iv) above, in the event of an Optionee's death during Optionee's
Continuous Status as an Employee or Consultant, the Optionee's estate or a
person who acquired the right to exercise the deceased Optionee's Option or SAR
by bequest or inheritance may exercise the Option or SAR, but only within six
(6) months (or such longer period, not to exceed twelve (12) months, as the
Option or SAR Agreement may provide) following the date of death, and only to
the extent that the Optionee was entitled to exercise it at the date of death
(but in no event later than the expiration of the full term of such Option or
SAR as set forth in the Option or SAR Agreement). To the
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extent that Optionee was not entitled to exercise an Option or SAR at the date
of death, and to the extent that the Optionee's estate or a person who acquired
the right to exercise such Option does not exercise such Option or SAR (to the
extent otherwise so entitled) within the time specified herein, the Option or
SAR shall terminate.
7. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that the offeree shall be entitled
to purchase, the price to be paid, and the time within which the offeree must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock Purchase
Agreement in the form determined by the Administrator. As to any Stock Purchase
Right, the price shall be no less than 85% of the Fair Market Value on the date
the Administrator made the determination to grant the Stock Purchase Right or,
in the case of a Stock Purchase Right granted to any person, who at the time of
the grant of such Stock Purchase Right, owns stock representing more than 10% of
the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the price shall be no less than 100% of the Fair Market
Value of the Common Stock on the date the Administrator made the determination
to grant the Stock Purchase Right.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine; provided, that with respect to an Optionee who is
not an Officer, Director or Consultant of the Company or of any Parent or
Subsidiary of the Company, it shall lapse at a minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
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(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 9
of the Plan.
8. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3 and Applicable Laws, the Plan may (but need not) be administered by
different administrative bodies with respect to (A) Directors who are employees,
(B) Officers who are not Directors and (C) Employees who are neither Directors
nor Officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options and Rights to eligible participants
who are Officers or Directors of the Company, the Plan shall be administered by
(A) the Board, if the Board may make grants under the Plan in compliance with
Rule 16b-3, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted (1) in such a manner as to permit grants
under the Plan to comply with Rule 16b-3 and (2) in such a manner as to satisfy
the Applicable Laws.
(iii) Administration with Respect to Other Persons. With
respect to grants of Options to eligible participants who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed pursuant
to subsection (ii) or (iii) of this Section 8(a), such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of any 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 a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Rights may be granted hereunder;
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(iii) to determine whether and to what extent Options and
Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Right or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) to determine whether and under what circumstances an
Option or Right may be settled in cash instead of Common Stock or Common Stock
instead of cash;
(x) to reduce the exercise price of any Option or Right;
(xi) to modify or amend each Option or Right (subject to
Section 15 of the Plan);
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Right
previously granted by the Administrator;
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions applicable
to Options and Rights and any Restricted Stock; and
(xv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
9. Non-Transferability of Options. Options and Rights may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the
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<PAGE> 44
laws of descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options or Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Right, the maximum number of
Shares of Common Stock for which Options and Rights to any Employee under
Section 5 of the Plan as well as the price per share of Common Stock covered by
each such outstanding Option or Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Right
has not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option or Right shall terminate
as of a date fixed by the Board and give each Optionee the right to exercise his
or her Option or Right as to all or any part of the Optioned Stock, including
Shares as to which the Option or Right would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Right shall be assumed or an
equivalent Option or Right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, in lieu of such assumption or substitution,
provide for the Optionee to have the right to exercise the Option or Right as to
all or a portion of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable. If the Administrator makes an Option or Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Right shall be exercisable for a period of not less than fifteen (15) days from
the date of such notice, and the Option or Right will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Right shall be considered assumed if, immediately following the merger or sale
of assets, the Option or Right confers the right to purchase, for each Share of
Optioned
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<PAGE> 45
Stock subject to the Option or Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation and the participant, provide for the
consideration to be received upon the exercise of the Option or Right, for each
Share of Optioned Stock subject to the Option or Right, to be solely common
stock of the successor corporation or its Parent equal in Fair Market Value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.
11. Date of Grant. The date of grant of an Option or Right shall be,
for all purposes, the date on which the Administrator makes the determination
granting such Option or Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
12. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Right unless the exercise of such Option or Right and
the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Right, the Company may require the person exercising such Option or
Right 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.
13. Liability of Company.
(a) Inability to Obtain Authority. 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.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional stockholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless stockholder approval of an amendment sufficiently
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<PAGE> 46
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 15(b) of the Plan.
14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Stockholder Approval. Continuance of the Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 162(m) or 422 of the Code (or any successor rule
or statute or other applicable law, rule or regulation, including the
requirements of any exchange or quotation system on which the Common Stock is
listed or quoted). At such time as the Company has a Listed Security, the
further proviso in Section 6(a)(i) and the last sentence of Section 7(a) may be
deleted without shareholder approval. Such stockholder approval, if required,
shall be obtained in such a manner and to such a degree as is required by the
applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Taxation Upon Exercise of Option or Right. At the discretion of
the Administrator, Optionees may satisfy withholding obligations as provided in
this Section 17. When an Optionee incurs tax liability in connection with an
Option or Right, which tax liability is subject to withholding under applicable
tax laws, the Optionee may satisfy the tax withholding obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) by surrendering to the Company Shares
which (i) in the case of Shares previously acquired from the Company, have been
owned by the Optionee for more than six months on the date of surrender, and
(ii) have a fair market value on the date of surrender equal to or less than the
amount required to be withheld, or (d) by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option or Right that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
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<PAGE> 47
If the Optionee is an Insider, any surrender of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is an Insider, the election must comply with
the applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
18. Term of the Plan. The Plan shall expire, and no further Options
shall be granted pursuant to the Plan, on December 31, 2002.
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<PAGE> 48
CATALYST SEMICONDUCTOR, INC.
1993 DIRECTOR STOCK OPTION PLAN
AS AMENDED AND RESTATED ON JUNE 23, 2000
1. Purpose of the Plan. The purpose of this 1993 Director Stock
Option Plan is to attract and retain highly qualified personnel to serve as
Outside Directors of the Company.
All options granted hereunder shall be "non-statutory stock
options."
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Catalyst Semiconductor, Inc., a Delaware
corporation, and its predecessor corporation Catalyst Semiconductor, Inc., a
California corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and
Directors, 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 in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the date of determination, or, if
not a market trading day, on the last market trading day prior to the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but
<PAGE> 49
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means an Outside Director who receives an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1993 Director Stock Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 770,000 Shares (the "Pool") of Common Stock (which number
gives effect to a one-for-nine reverse stock split of the Shares approved by the
Board in March 1993 ("Post-Split")). 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 grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. The provisions set forth in this
Section 4(b) shall not be amended more than once every six months, other than to
comply with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options hereunder shall
be automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
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<PAGE> 50
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each new Outside Director who shall first join the
Board on or after March 1, 1993 (including any new Outside Director who shall
have first joined the Board of Catalyst Semiconductor, Inc., a California
corporation, subsequent to March 1, 1993), shall automatically be granted an
Option to purchase 30,000 Post-Split Shares upon the date on which such person
first becomes an Outside Director, whether through election by the stockholders
of the Company, appointment by the Board to fill a vacancy, or termination of
employment by the Company while remaining as a Director (a "One-Time Grant"). In
addition, on May 1, 2001, and on each May 1 thereafter during the term of this
Plan, each Outside Director who shall have been an Outside Director for at least
six (6) months as of such date shall automatically receive an Option to purchase
15,000 Post-Split Shares (an "Annual Grant").
(iii) The terms of each Option granted hereunder shall be
as follows:
(A) the term of the Option shall be ten (10) years;
(B) the Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof;
(C) the exercise price per Share shall be 100% of
the Fair Market Value per Share on the date of grant of the Option;
(D) each Annual Grant and One-Time Grant shall
become exercisable at the rate of 1/36th of the Optioned Stock on each monthly
anniversary of the date of grant, so that 100% of the Optioned Stock granted
under any such grant shall be exercisable in full three (3) years after the date
of grant of the Option, assuming in each case Continuous Status as a Director.
(iv) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased upon exercise of Options to exceed the Pool, then
each such automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by the number
of Outside Directors entitled to receive Options on the grant date. No further
grants shall be made until such time, if any, as additional Shares become
available for grant under the Plan through action of the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 2(i) of the Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) to authorize any person to execute on behalf of the
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<PAGE> 51
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final.
5. Eligibility. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4(b) hereof. An Outside Director who has been granted an Option
may, if he or she is otherwise eligible, be granted an additional Option or
Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect
until April 30, 2003, unless sooner terminated under Section 11 of the Plan.
7. Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash, (ii) check, (iii)
promissory note, (iv) other shares which have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised and which, in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than 12 months
on the date of surrender, (v) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(vi) delivery of an irrevocable subscription agreement for the Shares which
irrevocably obligates the Optionee to take and pay for the Shares not more than
12 months after the date of delivery of the subscription agreement, (vii) any
combination of the foregoing methods of payment, or (viii) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
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
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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 consist
of any consideration and method of payment allowable under Section 7 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. A share certificate for the number
of Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. In the event
an Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within 90 days from the date of such termination, and only to the extent that
the Optionee was entitled to exercise it at the date of such termination (but in
no event later than the expiration of its five-year term). To the extent that
the Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within six months from the date of such termination, and
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of its five-year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death while
a Director, the Optionee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance may exercise the Option, but only within
one year following the date of death, and only to the extent that the Optionee
was entitled to exercise it at the date of death (but in no event later than the
expiration of its five-year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will, by the laws of descent
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<PAGE> 53
or distribution or pursuant to a qualified domestic relations order, and may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
permitted transferee.
10. Adjustments.
(a) Changes in Capitalization. In the event that the stock of the
Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization, or in the event that the outstanding number of
shares of stock of the Company is increased through payment of a stock dividend,
appropriate proportionate adjustments shall be made in the number and class of
shares of stock subject to the Plan, the number and class of shares subject to
any Option outstanding under the Plan, and the exercise price of any such
outstanding Option; provided, however, that the Company shall not be required to
issue fractional shares as a result of any such adjustment. Any such adjustment
shall be made upon approval by the Board, whose determination shall be
conclusive. If there is any other change in the number or type of the
outstanding shares of stock of the Company, or of any other security into which
such stock shall have been changed or for which it shall have been exchanged,
and if the Board in its sole discretion determines that such change equitably
requires an adjustment in the Options then outstanding under the Plan, such
adjustment shall be made in accordance with the determination of the Board. No
adjustments shall be required by reason of the issuance or sale by the Company
for cash or other consideration of additional shares of its stock or securities
convertible into or exchangeable for shares of its stock.
(b) Change in Control. In the event of a "Change in Control" of
the Company, as defined in paragraph (c) below, then the following provisions
shall apply:
(i) Any Option outstanding on the date of such Change in
Control ("Outstanding Option") that is not yet exercisable and vested on such
date shall become fully exercisable and vested;
(ii) Each Outstanding Option shall be assumed by the
successor corporation (if any) or by a Parent or Subsidiary of the successor
corporation (if any);
(iii) Each Outstanding Option shall remain exercisable by
the Optionee for a period of at least ninety (90) days from the date of the
Change in Control; and
(iv) Each Optionee with an Outstanding Option shall be
provided with written notice of the period of exercisability provided for in
subsection (b)(iii) above promptly after the date of the Change in Control by
the Company or by the entity surviving after the Change in Control.
(c) Definition of "Change in Control". For purposes of this
Section 10, a "Change in Control" means the happening of any of the following:
(i) when any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee), is or becomes the "beneficial
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<PAGE> 54
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than fifty (50%) of
the combined voting power of the Company's then outstanding securities entitled
to vote generally in the election of directors; or
(ii) a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iii) the stockholders of the Company approve an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets; or
(iv) a change in the composition of the Board occurring as
a result of any one meeting of the stockholders of the Company, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either are (A) directors of the Company as
of the date the Plan is approved by the stockholders, or (B) elected, or
nominated for election, to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act (or any other applicable law or regulation), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations
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<PAGE> 55
promulgated thereunder, state securities laws and the requirements of any stock
exchange or market system upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to 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.
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.
14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject
to approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the first granting of an Option
hereunder. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law.
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<PAGE> 56
CATALYST SEMICONDUCTOR, INC.
EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED AS OF JUNE 23, 2000
The following constitute the provisions of the Employee Stock Purchase
Plan of Catalyst Semiconductor, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Catalyst Semiconductor, Inc., a Delaware
corporation.
(e) "Compensation" shall mean all compensation, including base
straight time gross earnings, payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions and all other
compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of
the Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
<PAGE> 57
(i) "Exercise Date" shall mean the last day of each Offering
Period, or, with respect to an Extended Offering Period, the last day of each
Purchase Period.
(j) "Extended Offering Period" shall mean a period of
approximately twelve (12), eighteen (18) or twenty-four (24) months, commencing
on the date or dates so specified by the Board, during which options granted
pursuant to the Plan may be exercised. The duration, commencement and
termination of Extended Offering Periods may be changed pursuant to Section 4 of
this Plan.
(k) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for the Common Stock (or the closing bid, if no sales were reported) , as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in Common Stock) on the date of such determination (or, if not a market
trading day, then the last market trading day prior to the date of
determination), as reported in The Wall Street Journal or such other source as
the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ system
(but not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(4) For purposes of the Enrollment Date under the first
Offering period under the Plan, the Fair Market Value of the Common Stock shall
be the "price to public" as set forth in the final prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424 under the Securities Act
of 1933, as amended.
(l) "Offering Period" shall mean a period of approximately six
(6) months, commencing on the first Trading Day on or after June 1 and
terminating on the last Trading Day in the period ending the following November
30, or commencing on the first Trading Day on or after December 1 and
terminating on the last Trading Day in the period ending the following May 31,
during which options granted pursuant to the Plan may be exercised. The
duration, commencement and termination of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Period" shall mean, with respect to an Extended
Offering Period, the approximately six (6) month period commencing after one
Exercise Date and ending with the next Exercise Date, except that the first
Purchase Period of any Extended Offering
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Period shall commence on the Enrollment Date and end with the next Exercise
Date. The duration, commencement and termination of Purchase Periods may be
changed pursuant to Section 4 of this Plan.
(o) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(p) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(r) "Trading Day" shall mean a day on which national stock
exchanges and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date, shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries to accrue
at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods or Extended Offering Periods, as determined by the Board, with
a new Offering Period or Extended Offering Period, as the Board may determine,
commencing on the first Trading Day on or after June 1 and December 1 each year,
or on such other dates as the Board shall determine, and continuing thereafter
until terminated in accordance with Section 19 hereof. The Board shall have the
power: (i) to implement Extended Offering Periods, (ii) to change the duration,
commencement and termination of Offering Periods, Extended Offering Periods
and/or Purchase Periods with respect to future offerings without stockholder
approval if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period, Extended Offering Period or
Purchase Period to be effective thereafter, and (iii) to implement overlapping
Offering Periods and/or Extended Offering Periods.
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5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period or Extended Offering Period in an amount not less
than one percent (1%) and not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period or Extended
Offering Period, and the aggregate of such payroll deductions during all
concurrent Offering Periods and Extended Offering Periods shall not exceed ten
percent (10%) of the participant's Compensation during any such Offering Period
or Extended Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period or Purchase Period. The
change in rate shall be effective with the first full payroll period following
five (5) business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in participation
more quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods and Purchase Period unless terminated as provided in
Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b) (8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period or Purchase Period which is scheduled to end during the current
calendar year (the "Current Period") that the aggregate of all payroll
deductions which were previously used to purchase stock under the Plan in a
prior Offering Period or Purchase Period which ended during that calendar year
plus all payroll deductions accumulated with respect to the Current Period equal
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Offering
Period or Purchase Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.
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(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during any Offering Period (or, with
respect to an Extended Offering Period, during any six-month Purchase Period)
more than a number of Shares determined by dividing $12,500 by the Fair Market
Value of a share of the Company's Common Stock on the Enrollment Date, and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof, and shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period or Purchase Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal, Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering
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Period or Extended Offering Period will be automatically terminated, and no
further payroll deductions for purchase of shares will be made for such Offering
Period or Extended Offering Period. If a participant withdraws from an Offering
Period or Extended Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period or Extended Offering Period unless
the participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof ), for any reason, including by virtue of him or her having
failed to remain an Employee of the Company for at least twenty (20) hours per
week during an Offering Period or Extended Offering Period in which the Employee
is a participant, he or she will be deemed to have elected to withdraw from the
Plan and the payroll deductions credited to such participant's account during
the Offering Period or Extended Offering Period but not yet used to exercise the
option will be returned to such participant or, in the case of his or her death,
to the person or persons entitled thereto under Section 14 hereof, and such
participant's option will be automatically terminated.
11. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 750,000 shares
(which number gives effect to a one-for-nine reverse split of the Common Stock
approved by the Board in March 1993) subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof. If on a given
Exercise Date the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will
be registered in the name of the participant or in the name of the participant
and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties. Members of the
Board who are eligible Employees are permitted to participate in the Plan,
provided that:
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(1) Members of the Board who are eligible to participate
in the Plan may not vote on any matter affecting the administration of the Plan
or the grant of any option pursuant to the Plan.
(2) If a Committee is established to administer the Plan,
no member of the Board who is eligible to participate in the Plan may be a
member of the Committee.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferabilily. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
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16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments, Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period or Extended Offering Period(s) then
in progress by setting a new Exercise Date (the "New Exercise Date") or to
cancel each outstanding right to purchase and refund all sums collected from
participants during the Offering Period(s) or Extended Offering Period(s) then
in progress. If the Board shortens the Offering Period(s) or Extended Offering
Period(s) then in progress in lieu of assumption or substitution in the event of
a merger or sale of assets, the Board shall notify each participant in writing,
at least ten (10) business days prior to the New Exercise Date, that the
Exercise Date for his option has been changed to the New Exercise Date and that
his option will be exercised automatically on the New Exercise Date, unless
prior to such date he has withdrawn from the Offering Period(s) or Extended
Offering Period(s) as provided in Section 10 hereof. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash
8
<PAGE> 64
or other securities or property) received in the sale of assets or merger by
holders of Common Stock for each share of Common Stock held on the effective
date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalization, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 18 hereof,
no such termination can affect options previously granted, provided that an
Offering Period or Extended Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the termination of
the Plan is in the best interests of the Company and its stockholders. Except as
provided in Section 18 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant. To
the extent necessary to comply with Rule 16b-3 or under Section 423 of the Code
(or any successor rule or provision or any other applicable law or regulation),
the Company shall obtain stockholder approval in such a manner and to such a
degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
Extended Offering Periods or Purchase Periods, limit the frequency and/or number
of changes in the amount withheld during an Offering Period, Extended Offering
Period or Purchase Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in
9
<PAGE> 65
the form specified by the Company at the location, or by the person, designated
by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to 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 applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Additional Restrictions of Rule 16b-3. The terms and conditions
of options granted hereunder to, and the purchase of shares by, persons subject
to Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. Automatic Transfer to Lower Price Extended Offering Period. To
the extent permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value
of the Common Stock on any Exercise Date in an Extended Offering Period is lower
than the Fair Market Value of the Common Stock on the Enrollment Date of such
Extended Offering Period, then all participants in such Extended Offering Period
shall be automatically withdrawn from such Extended Offering Period immediately
after the exercise of their option on such Exercise Date and automatically
re-enrolled in the immediately following Extended Offering Period as of the
first day thereof.
10
<PAGE> 66
EXHIBIT A
CATALYST SEMICONDUCTOR, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application Enrollment Date:
-------- ---------
Change in Payroll Deduction Rate
--------
Change of Beneficiary(ies)
--------
1. _______________________________________ hereby elects to participate
in the Catalyst Semiconductor, Inc. Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the
amount of _____% of my Compensation on each payday (not to exceed 10%) during
the Offering Period in accordance with the Employee Stock Purchase Plan. (Please
note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for
the purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I understand
that if I do not withdraw from an Offering Period, any accumulated payroll
deductions will be used to automatically exercise my option.
4. I have received a copy of the complete "Employee Stock Purchase
Plan." I understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand my ability to
exercise the option under this Subscription Agreement is subject to obtaining
stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):
_____________________
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal to
the excess of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby agree to
notify the Company in writing within 30 days after the date of any disposition
of shares and I will make adequate provision for Federal, state or other tax
withholding obligations if M, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company any tax
deductions or
<PAGE> 67
benefits attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and 1-year
holding periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such disposition, and
that such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock
Purchase Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)
---------------------------------- --------------------------------------
Relationship
--------------------------------------
(Address)
NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)
---------------------------------- --------------------------------------
Relationship
--------------------------------------
(Address)
Employee's Social
Security Number:
--------------------------------------
Employee's Address:
--------------------------------------
--------------------------------------
--------------------------------------
2
<PAGE> 68
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Date:
--------------------------------- -----------------------------------
Signature of Employee
-----------------------------------
Spouse's Signature (If beneficiary
other than spouse)
3
<PAGE> 69
EXHIBIT B
CATALYST SEMICONDUCTOR, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period or Extended Offering
Period of the Catalyst Semiconductor, Inc. Employee Stock Purchase Plan which
began on __________ 19___ (the "Enrollment Date") hereby notifies the Company
that he or she hereby withdraws from such Offering Period or Extended Offering
Period. He or she hereby directs the Company to pay to the undersigned as
promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period or Extended Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period or Extended Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period or Extended Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods or Extended Offering Periods only by delivering to the Company
a new Subscription Agreement.
Name and Address of Participant:
----------------------------------------
----------------------------------------
----------------------------------------
Signature:
----------------------------------------
Date:
------------------------------------
<PAGE> 70
PROXY
CATALYST SEMICONDUCTOR, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 2000
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Radu M. Vanco and Thomas E. Gay III, and
each of them with full power of substitution, to represent the undersigned and
to vote all shares of stock in CATALYST SEMICONDUCTOR, INC., a Delaware
corporation (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at 1250 Borregas
Avenue, Sunnyvale, California 94089 at 10:00 a.m., local time, and at any
adjournment or postponement thereof (i) as hereinafter specified upon the
proposals listed on the reverse side and as more particularly described in the
Proxy Statement of the Company dated July 28, 2000 (the "Proxy Statement"),
receipt of which is hereby acknowledged, and (ii) in their discretion upon such
other matters as may properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND
5.
---------------- ----------------
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
---------------- ----------------
<PAGE> 71
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING. A vote FOR the following proposals is recommended
by the Board of Directors.
<TABLE>
<S> <C>
1. To elect the following two persons as 2. To approve the amendment of the Company's
Class II directors to hold office for a 1993 Director Stock Option Plan, including
three-year term and until their successors the increase to the number of shares
are elected and qualified: issuable thereunder by 450,000 shares.
Nominees: (01) Cynthia M. Butitta and [ ] FOR [ ] AGAINST [ ] ABSTAIN
(02) Glen G. Possley
3. To approve the amendment of the Company's
[ ] FOR [ ] WITHHELD Stock Option Plan to increase the number
of shares issuable thereunder by
[ ] 2,500,000 shares.
--------------------------------------
For both nominees as noted [ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] Mark here if you 4. To approve the amendment of the Company's
plan to attend the Employee Stock Purchase Plan to increase
Annual Meeting the number of shares issuable thereunder
by 500,000 shares.
[ ] Mark here for
address change [ ] FOR [ ] AGAINST [ ] ABSTAIN
and note below.
5. To ratify the appointment of
PriceWaterhouseCoopers LLP as independent
accountants of the Company for the fiscal
year ending April 30, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. The proxies are also authorized to vote,
in their discretion on such other
business as may properly come before the
meeting or any adjournment or
postponement hereof.
PLEASE SIGN HERE. Sign exactly as your name(s)
appear on your stock certificate. If shares of
stock are held of record in the name of two or more
persons or in the name of husband and wife, whether
as joint tenants or otherwise, both or all of such
persons should sign the Proxy. If shares of stock
are held of record by a corporation, the Proxy
should be executed by the President or Vice
President and the Secretary or Assistant Secretary.
Executors or administrators or other fiduciaries
who execute the Proxy for a deceased stockholder
should give their full title. Please date the
proxy.
Signature:___________________________ Date:_______ Signature:___________________________ Date:_______
</TABLE>
