<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1999
Commission File No. 0-24414
RF Monolithics, Inc.
(Exact name of registrant as specified in its charter)
_________________
Delaware 75-1638027
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification)
4441 Sigma Road, Dallas, Texas 75244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 233-2903
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
As of June 30, 1999, 5,867,512 shares of the Registrant's Common Stock, $.001
par value, were outstanding.
<PAGE>
RF MONOLITHICS, INC.
FORM 10-Q
QUARTER ENDED MAY 31, 1999
TABLE OF CONTENTS
Item
Number Page
------ ----
PART I. CONDENSED FINANCIAL INFORMATION
<TABLE>
<S> <C>
1. Condensed Financial Statements:
Condensed Balance Sheets
May 31, 1999 (Unaudited), and August 31, 1998 1
Condensed Statements of Income - Unaudited
Three Months Ended May 31, 1999 and 1998,
and Nine Months Ended May 31, 1999 and 1998 2
Condensed Statements of Cash Flows - Unaudited
Nine Months Ended May 31, 1999 and 1998 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<C> <S> <C>
1. Legal Proceedings 14
2. Changes in Securities 14
3. Defaults Upon Senior Securities 14
4. Submission of Matters to a Vote of Security Holders 14
5. Other Information 14
6. Exhibits and Reports on Form 8-K 14
</TABLE>
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
PART I. CONDENSED FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
RF MONOLITHICS, INC.
CONDENSED BALANCE SHEETS
(In Thousands)
___________________________________________________________________________________________________________________________________
May 31, August 31,
ASSETS 1999 1998
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 667 $ 199
Short-term investments 4,789 5,414
Trade receivables - net 11,419 11,357
Inventories 13,003 8,514
Prepaid expenses and other 943 976
Deferred income tax benefits 328 635
------- -------
Total current assets 31,149 27,095
PROPERTY AND EQUIPMENT - Net 18,335 17,129
OTHER ASSETS - Net 519 566
------- -------
TOTAL $50,003 $44,790
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and line of credit $ 5,520 $ 2,699
Accounts payable - trade 4,128 3,400
Accounts payable - construction and equipment 999 866
Accrued expenses and other liabilities 1,970 2,405
Income taxes payable 270 439
------- -------
Total current liabilities 12,887 9,809
LONG-TERM DEBT 193 815
STOCKHOLDERS' EQUITY:
Common stock: 5,842 and 5,696 shares issued and outstanding 6 6
Additional paid -in capital 27,774 26,862
Treasury Stock (227) --
Retained earnings 9,781 7,353
Unearned compensation (455) (75)
Accumulated other comprehensive income 44 20
------- -------
Total stockholders' equity 36,923 34,166
------- -------
TOTAL $50,003 $44,790
======= =======
See notes to condensed financial statements.
</TABLE>
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RF MONOLITHICS, INC.
CONDENSED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per-Share Amounts)
<TABLE>
______________________________________________________________________________________________________________________
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES $12,967 $14,595 $38,949 $40,691
COST OF SALES 8,263 8,708 25,117 24,231
------- ------- ------- -------
GROSS PROFIT 4,704 5,887 13,832 16,460
OPERATING EXPENSES:
Research and development 1,155 1,276 3,808 4,056
Sales and marketing 1,378 1,557 3,996 4,427
General and administrative 785 774 2,175 2,260
Litigation -- -- -- 641
------- ------- ------- -------
Total operating expenses 3,318 3,607 9,979 11,384
------- ------- ------- -------
INCOME FROM OPERATIONS 1,386 2,280 3,853 5,076
OTHER INCOME (EXPENSE):
Interest income 55 74 176 225
Interest expense (101) (107) (269) (245)
Other income (expense) (3) (10) 7 (1)
------- ------- ------- -------
Total (49) (43) (86) (21)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,337 2,237 3,767 5,055
INCOME TAX EXPENSE 475 778 1,337 1,823
------- ------- ------- -------
NET INCOME $ 862 $ 1,459 $ 2,430 $ 3,232
======= ======= ======= =======
EARNINGS PER SHARE:
Basic $0.15 $0.26 $0.42 $0.58
======= ======= ======= =======
Diluted $0.15 $0.24 $0.41 $0.54
======= ======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 5,818 5,628 5,757 5,578
======= ======= ======= =======
Diluted 5,894 5,979 5,907 6,011
======= ======= ======= =======
See notes to condensed financial statements.
</TABLE>
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RF MONOLITHICS, INC.
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands, Except Per-Share Amounts)
______________________________________________________________________________________________________________
Nine Months Ended
May 31,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,430 $ 3,232
Noncash items included in net income:
Deferred taxes 307 629
Depreciation and amortization 3,114 2,749
Provision for doubtful accounts 95 83
Other 53 49
Cash from (used in) operating working capital:
Trade receivables (157) (923)
Inventories (4,489) (2,217)
Prepaid expenses and other 33 (64)
Accounts payable - trade 728 1,204
Accrued expenses and other liabilities (435) 89
Income taxes payable (169) (94)
------- -------
Net cash from operations 1,510 4,737
INVESTING ACTIVITIES:
Increase in short-term investments (4,458) (4,069)
Decrease in short-term investments 5,107 3,889
Acquisition of property and equipment (4,208) (5,650)
Decrease (increase) in other assets (12) 41
------- -------
Net cash used in investing activities (3,571) (5,789)
FINANCING ACTIVITIES:
Borrowings on notes payable and line of credit 3,000 1,500
Repayments of notes payable and line of credit (375) (375)
Repayments of capital leases (479) (453)
Borrowings of accounts payable - construction and equipment 133 724
Common stock issued for options exercised 204 232
Common stock issued under the Purchase Plan 273 500
Common stock acquired under the Repurchase Program (227) --
------- -------
Net cash from financing activities 2,529 2,128
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 468 1,076
CASH AND CASH EQUIVALENTS:
Beginning of period 199 482
------- -------
End of period $ 667 $ 1,558
======= =======
SUPPLEMENTAL INFORMATION:
Interest paid $ 284 $ 229
======= =======
Income taxes paid $ 1,178 $ 1,168
======= =======
Property and equipment acquisitions by debt $ 53 $ 37
======= =======
See notes to condensed financial statements.
</TABLE>
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<PAGE>
RF MONOLITHICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed financial statements include all adjustments,
consisting only of normal recurring adjustments and accruals, that in the
opinion of the management of RF Monolithics, Inc. (the "Company" or "RFM") are
necessary for a fair presentation of the Company's financial position as of May
31, 1999, the results of operations for the three and nine months ended May 31,
1999 and 1998, and cash flows for the nine months ended May 31, 1999 and 1998.
These unaudited interim condensed financial statements should be read in
conjunction with the audited financial statements of the Company and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
August 31, 1998, filed with the Securities and Exchange Commission.
Operating results for the nine months ended May 31, 1999, are not necessarily
indicative of the results to be achieved for the full fiscal year ending August
31, 1999.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
May 31, August 31,
1999 1998
<S> <C> <C>
Raw materials and supplies $ 5,988 $4,677
Work in process 4,685 2,139
Finished goods 2,330 1,698
------- ------
Total $13,003 $8,514
======= ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment includes construction in progress of $5,557,000 at May
31, 1999, and $3,941,000 at August 31, 1998, which is composed of equipment and
other assets not yet placed in service primarily related to increasing the
capacity of the Company's manufacturing facilities.
4. CREDIT FACILITIES
In July 1999, the Company utilized approximately $1.0 million of an equipment-
collateralized lease facility. This initial utilization will be recorded as an
operating lease and leaves approximately $2.0 million available under this
facility with a commercial bank, to be advanced in stages prior to October 22,
1999. Additionally, in July 1999, the Company obtained an extension of the Line
of Credit until December 2001 and an increase of credit to $7.5 million.
Currently, there is $4.5 million outstanding on this line.
- 4 -
<PAGE>
5. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE,
requires a reconciliation of both the numerator and denominator of the earnings
per share calculations. There are no adjustments to net earnings to arrive at
income for either per share calculation.
Reconciliation of share amounts is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended Nine months ended
May 31, May 31,
---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 1998 1999 1998
Shares outstanding for basic
earnings per share 5,818 5,628 5,757 5,578
Effect of dilutive stock options 76 351 150 433
----- ----- ----- -----
Shares outstanding for diluted
earnings per share 5,894 5,979 5,907 6,011
===== ===== ===== =====
</TABLE>
6. CAPITAL STOCK
In March 1999, the Company began a program to repurchase stock on the open
market. A total of 36,000 shares of common stock have been purchased at an
average cost of $6.31. The shares are accounted for using the treasury stock
method.
In April 1999, the Board of Directors of the Company (the Board) approved and
established the 1999 Equity Incentive Plan. The plan allows the granting of non-
qualified options to purchase 200,000 shares of stock in the Company to non-
officer employees and consultants at the fair market value. Under this plan, the
Board approved options to purchase 127,000 shares to be granted to non-officer
employees at an exercise price of $6.0625, which was the market value on the
date of grant. These options will vest over a four-year period.
In April 1999, the Board approved the grant of 73,700 shares of restricted stock
in accordance with the 1997 Equity Incentive Plan, which vest over a 4 year
period and resulted in $447,000 in deferred compensation. The Board approved
the grant of incentive stock options to purchase 107,500 shares of stock in
accordance with the 1997 Equity Incentive Plan at an exercise price of $6.0625,
which was the market value on the date of grant. The options granted vest over a
4 year period and leave approximately 120,000 shares available for future grants
under this plan.
7. LITIGATION EXPENSE
Litigation expense, which amounted to $641,000 in the prior year-to-date period,
consists of expenses related to the resolution of the legal matter with
TimeKeeping Systems, Inc. Expenses include legal expenses, settlement costs and
related travel. There were no legal expenses related to the matter in the
current year.
8. COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," requires companies to report and display comprehensive income and its
components (revenues, expenses, gains and losses). Comprehensive income includes
all changes in equity during a period except those resulting from investments by
owners and distributions to owners. Comprehensive income consists of the
following (in thousands):
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
MAY 31, 1999 May 31, 1999
------------ -------------
<S> <C> <C>
Net income, as reported $862 $1,530
Current period change in unrealized gain on
short-term investments -- 24
---- ------
Comprehensive Income $862 $2,454
==== ======
</TABLE>
- 5 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion may be understood more fully by reference to the
financial statements, notes to the financial statements, and management's
discussion and analysis of financial condition and results of operations
contained in the Company's Annual Report on Form 10-K for the year ended August
31, 1998, filed with the Securities and Exchange Commission.
General
RFM offers products in four product areas: Low-power components, low
power Virtual Wire(R) radio systems, frequency control modules and filters. The
Company sells to original equipment manufacturers in automotive, computer,
consumer, industrial and telecommunications market segments worldwide.
The Company received certification of ISO9001 and QS9000 registration in
the second quarter of this fiscal year. ISO9001 and QS9000 registration has
been adopted worldwide as the standard for quality and assures a fundamental
quality system is in place. The Company believes the registration is recognized
around the world as a key element to do business in a global marketplace.
Achieving ISO9001 certification and QS9000 registration is integral to the
Company's strategy for continuous improvement and excellence, and reflects our
commitment to customer satisfaction.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section and in the
Company's Form 10-K for the year ended August 31, 1998.
Results of Operations
The following discussion relates to the financial statements of the
Company for the three and nine month periods ended May 31, 1999 (current quarter
and current year-to-date period), of the fiscal year ending August 31, 1999, in
comparison to the three and nine month periods ended May 31, 1998 (comparable
quarter of the prior year and comparable year-to-date period). In addition,
certain comparisons with the three month period ended February 28, 1999
(previous quarter), are provided where management believes it is useful to the
understanding of trends.
The selected financial data for the periods presented may not be
indicative of the Company's future financial condition or results of operations.
-6-
<PAGE>
The following table sets forth, for the three and nine month periods
ended May 31, 1999 and 1998, (i) the percentage relationship of certain items
from the Company's statements of income to sales and (ii) the percentage change
in these items between the current periods and the comparable periods of the
prior year:
<TABLE>
<CAPTION>
Percentage of Total Sales Percentage Change From
------------------------- ----------------------
Three Months Nine Months Three Months Nine Months
Ended May 31, Ended May 31, Ended May 31, Ended May 31,
------------------------ ----------------------- ------------------ ------------------
1999 1998 1999 1998 1998 to 1999 1998 to 1999
----------- ----------- ----------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100 % 100 % 100 % 100 % (11) % (4) %
Cost of sales 64 60 64 60 (5) 4
---- ---- ---- ---- ----- -----
Gross profit 36 40 36 40 (20) (16)
---- ---- ---- ---- ----- -----
Research and development 9 9 10 10 (10) (6)
Sales and marketing 11 11 10 11 (12) (10)
General and administrative 6 5 6 5 1 (4)
Litigation -- -- -- 2 -- (100)
---- ---- ---- ---- ----- -----
Total operating expenses 26 25 26 28 (8) (12)
---- ---- ---- ---- ----- -----
Income from operations 10 15 10 12 (39) (24)
Other income (expense), net -- -- -- -- 14 310
---- ---- ---- ---- ----- -----
Income before income taxes 10 15 10 12 (40) (26)
Income tax expense 3 5 4 4 (39) (27)
---- ---- ---- ---- ----- -----
Net income 7 % 10 % 6 % 8 % (41) % (25) %
==== ==== ==== ==== ===== =====
</TABLE>
Sales
The following table sets forth the components of the Company's sales and
the percentage relationship of the components to sales by product area for the
periods ended as indicated (in thousands, except percentage data):
<TABLE>
<CAPTION>
Amounts % of Total
------- ----------
Three Months Nine Months Three Months Nine Months
Ended May 31, Ended May 31, Ended May 31, Ended May 31,
------------------ ------------------ --------------- ---------------
1999 1998 1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Low power components $ 9,116 $10,702 $27,470 $29,164 70 % 73 % 71 % 72 %
Low power Virtual Wire (R)
radio systems 2,129 791 4,688 2,169 16 6 12 5
Frequency control modules 875 1,238 3,047 2,951 7 8 8 7
Filters 791 1,766 3,624 6,113 6 12 9 15
Technology development 56 98 120 294 1 1 -- 1
------- ------- ------- ------- ---- ---- ---- ----
Sales $12,967 $14,595 $38,949 $40,691 100 % 100 % 100 % 100 %
======= ======= ======= ======= ==== ==== ==== ====
</TABLE>
Sales were down 11% from the current quarter over the comparable quarter
of the prior year and 1% from the previous quarter. Current year-to-date period
sales decreased 4% from the comparable year-to-date period. The change in sales
in the current quarter over comparable quarter of the prior year was primarily
the result of a decrease in prices in low-power components while the number of
units shipped remained constant.
Due to pricing pressure in the low-power component line, as well as delay
in receipt of raw material components from suppliers for the new transceiver
product, the Company anticipates flat to modest sales growth for the final
quarter of fiscal 1999.
Sales of low-power component product units decreased 2% and average unit
selling prices decreased 14%, resulting in a 15% decline in sales when compared
to the comparable quarter of the prior year. The low-power component product
line experienced a decline in the average per unit selling price of
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<PAGE>
approximately 4% in the current quarter compared to the previous quarter's
sales. The low-power component market is very competitive and has in recent
years experienced severe product price erosion. The Company expects this price
erosion may continue for some time. This trend may result in decreased sales for
low-power components in future periods, despite increases in the number of units
sold. In response to this ongoing trend, the Company is continuing efforts to
drive costs of manufacturing down. The Company is also developing new technology
products and product families in order to expand and diversify sales
applications and our customer base. However, the Company cannot make assurances
that these cost reduction efforts and new product development activities will be
effective on a timely basis and offset the impact further declines in average
selling prices on gross margins and operating results.
Virtual Wire(R) short-range radio device systems sales increased 169% in
comparison to the comparable quarter of the prior year. This was primarily
attributable to an increased number of units sold for those products, offset by
a decrease in average selling price as the Company has started to sell these
products in higher volume applications that require lower selling prices. The
Company has devoted significant capital and technical, sales and marketing
resources to the Virtual Wire(R) short-range radio device systems products. The
latest product offering in this product family is the transceiver module, which
is a fully integrated short-range radio device module. The transceiver module
offers robust operation, small size, low-power consumption and low costs for
short-range wireless data applications. The transceiver was introduced in the
fiscal second quarter. The Company believes these types of products provide an
opportunity to exploit its proprietary technology and pursue its strategy of
focusing on value-added products. The Company is assisting a number of
customers in incorporating these products into a wide variety of new
applications. The timing of when any sales resulting from such new applications
reach the production phase is dependent upon the timing of both the customers'
product development cycles and their product introduction cycles. It is
uncertain if the Company's vendors for these products will be able to deliver
enough components to meet potential customer requirements for the fourth quarter
of fiscal 1999. If these vendors fail to satisfy the Company's requirements on
a timely basis and at competitive prices the Company could suffer manufacturing
delays, a possible loss in sales or higher than anticipated costs of
manufacturing, which would affect operating results adversely. As a result, it
is difficult to predict when, or if, these new products will make a significant
contribution to the Company's sales.
Sales of filter products decreased 55% in the current quarter and 41% in
the current year-to-date period when compared to the comparable periods of the
prior year, respectively. The decrease in the current quarter in comparison to
the comparable quarter of the prior year is due to a reduction in shipments to a
European customer which reduced its requirements while realigning its
manufacturing operations. The decrease in year-to-date filter sales in
comparison to last year results from the elimination of sales to a single
wireless LAN customer of approximately $1.8 million. The Company believes this
customer was impacted by economic conditions in Asia and ceased production at
the end of the second quarter of the Company's 1998 fiscal year. The Company has
devoted significant resources to developing and supporting the growth of its
filter products. The product development and introduction cycle for filter
products takes between six to eighteen months to complete. As a result, it is
difficult to predict when, or if, this strategy to focus on filter products will
make a significant contribution to the Company's sales.
International sales (primarily in Europe and Asia) were approximately 53%
of the Company's sales during the current quarter and 58% in the comparable
quarter of the prior year. International sales were approximately 54% and 56% of
sales during the current year-to-date period and the comparable year-to-date
period, respectively. Sales to customers in Asia were 16% of total sales in the
current quarter, compared to 13% in the comparable quarter of the prior year and
11% in the previous quarter. There can be no assurance that economic conditions
in Asia will not result in reductions in sales either directly to customers in
Asia or to customers in North American or Europe who may have end customers in
Asia.
-8-
<PAGE>
The Company considers all product sales with a billing address and a
delivery destination in North America to be domestic sales. All other sales are
considered international. These sales are denominated primarily in U.S.
currency. The Company intends to continue its focus on international sales in
the future and expects that international sales will continue to represent a
significant portion of its business. This focus on international sales may not
be achieved. Even if achieved, the Company's international sales are highly
sensitive to fluctuations in such markets. There can be no assurance that these
sales will continue as there are inherent risks in the Company's international
business activities, which include unexpected changes in regulatory
requirements, tariffs and other trade barriers, additional costs associated with
marketing and delivering products into foreign countries, the impact of
fluctuations in foreign exchange rates and longer accounts receivable cycles.
The Company's top five customers accounted for approximately 28% of the
Company's sales in the current quarter, 28% in the comparable quarter of the
prior year and 29% in the previous quarter. The relative portion of the
revenues to the Company's top five customers from the comparable quarter of the
prior year to the current quarter was consistent in total, but included a change
in customers from a European filter customer, discussed above, to a domestic
distribution customer. The remaining customers are similar in nature to those
represented in the prior year.
While the Company has achieved sales increases in prior periods, there
can be no assurance that such sales increases can be achieved in future periods.
The Company's success is highly dependent on achieving technological advantages
in its product design and manufacturing capabilities, as well as its ability to
sell its products in a competitive marketplace that can be influenced by
external factors such as economic and regulatory conditions. Competition
includes alternative technologies and duplication of the Company's technologies
and could adversely affect the Company's selling prices and market share. Sales
in any specific quarter are also dependent on the Company being able to respond
to customer demand with increasingly shorter lead times. The Company attempts to
anticipate customer requirements with its planning and sales forecasting
systems, but there can be no assurances that demand occurring late in a quarter
can be delivered in that same quarter.
Gross Profit
The current quarter gross margin and year-to-date gross margin were 36.3%
and 35.5% respectively, down from 40.3% and 40.5% in the comparable periods of
the prior year, respectively. The decrease was primarily due to decreased gross
margins for the Company's low-power component products. Margins for these
products decreased because the per-unit selling prices decreased, amid
competitive pressures, more rapidly than per-unit manufacturing costs. Per-unit
manufacturing costs continued to decrease due to improved production processes
that increased yields and productivity. However, the trend toward lower per-unit
manufacturing costs, which occurred in recent years, may not continue. Moreover,
if average selling prices decrease faster than per-unit manufacturing costs
decrease, then the Company's gross profit margins would be adversely impacted.
Gross margins for the Company's other products were relatively stable in
comparison to the prior year in both the current quarter and current year-to-
date periods, with improvements in the low-power Virtual Wire(R) radio systems
margins resulting from increased volumes and lower manufacturing costs per unit.
The Company has experienced a requirement by its customers for shorter
lead times resulting in less accessibility to future customer order information.
These events put pressure on the Company's manufacturing facilities to improve
delivery lead-time and the need to stock more inventory. Costs in the current
quarter and year-to-date period included a significant amount of overtime and
other costs needed to meet customer demand that occurred late in the quarter.
The Company is attempting to improve its planning and sales forecasting systems
with the implementation of a new software system. However, there can be no
assurance that in future periods the Company will be able to avoid significant
overtime and other costs related to responding to customer requirements with
greatly reduced lead times.
-9-
<PAGE>
The Company has in the past experienced sudden increases in demand, which
have put pressure on its manufacturing facilities to increase capacity to meet
this demand. In addition, new products sometimes require different
manufacturing processes than the Company currently possesses. The Company has
devoted the majority of its capital expenditures to increasing capacity and
improving its manufacturing processes. The Company may not be able to continue
to increase its manufacturing capacity and improve its manufacturing processes
in a timely manner in order to take advantage of increased market demand.
Failure to do this would result in a loss of potential sales in the periods
impacted.
Research and Development
Research and development expenses in the current quarter decreased
approximately $121,000, or 10%, over the comparable quarter of the prior year.
Current year-to-date research and development expenses decreased 6% in
comparison to the comparable year-to-date period. Decreases in the current
quarter reflect cost control activities conducted to reduce the profit impact of
lower overall sales.
The year-to-date period fluctuation in research and development expenses
reflects prior year activity that included unusually large amounts of material
usage expense incurred on several development projects, as well as outside
testing costs incurred while developing a low cost sealing process. The Company
expects that research and development expenses will increase in absolute dollars
in future periods, although spending related to the introduction of the new
packaging process is expected to decrease. Since research and development
expenses decreased at a similar rate as sales, such expenses remained at 9% of
sales in the current quarter, when compared to the comparable quarter of the
prior year.
Sales and Marketing
Current quarter sales and marketing expenses decreased approximately
$179,000, or 12%, from the comparable quarter of the prior year and 10% on a
year-to-date basis. This decrease reflects reduced commissions on flat sales and
an effort to control costs and to lower program costs in relation to flat sales.
As a result, sales and marketing expenses were 11% of sales in the current
quarter and in the comparable quarter of the prior year. The Company expects to
incur higher sales and marketing expenses in absolute dollars in future periods
as it continues to increase its contacts with customers.
General and Administrative
General and administrative expenses for the current quarter increased
approximately $11,000, or 1%, from the comparable quarter of the prior year and
4% in comparison to the comparable year-to-date period. The Company expects
general and administrative expenses will increase in absolute dollars in future
periods.
Litigation
There was no litigation expense for the current quarter or current year
to date period, compared to litigation expense of $641,000 in the comparable
year-to-date period, which consisted of expenses related to the resolution of
the legal matter with TimeKeeping Systems, Inc. Expenses included legal
expenses, settlement costs and related travel. There were no legal expenses
related to the matter in the current year. The Company does not expect expenses
with regard to this matter in future periods.
Income from Operations
Income from operations was approximately $1,386,000, or 11% of sales in
the current quarter, compared to approximately $2,280,000 or 15% of sales in the
comparable quarter of the prior year. On a year-to-date basis, current year
income from operations was 10% of sales, compared to 12% of sales for the
comparable year-to-date period. The decrease in income from operations as a
percent of sales is due to the previously discussed decrease in gross margin
offset partially by overall decreases in operating expenses.
-10-
<PAGE>
Income Tax Expense
The Company's income tax expense in the current quarter and current year-
to-date period decreased slightly compared to the comparable periods of the
prior year, reflecting a decrease in income before taxes.
Net Income
Net income decreased 41% to approximately $862,000 ($.15 per diluted
common share) in the current quarter, compared to approximately $1,459,000 ($.24
per diluted common share) for the comparable quarter of the prior year. On a
year-to-date basis, net income decreased 25% from the comparable year-to-date
period.
Liquidity and Capital Resources
The principal sources of liquidity at May 31, 1999, consisted of $5.5
million of cash and short-term investments and $3.5 million of unused credit
facilities. These credit facilities include $500,000 unused under a line of
credit agreement with a commercial bank which expires December 31, 1999, and
$3.0 million in an equipment-collateralized term lease facility with a
commercial bank, available until October 22, 1999. The credit facilities contain
restrictions and financial covenants relating to various financial ratios,
including net worth, interest coverage and levels of debt compared to tangible
net worth. As of May 31, 1999, the Company was in compliance with such
restrictions and covenants. Subsequent to May 31, 1999, the Company obtained an
extension of the Line of Credit until December 2001 and an increase of credit to
$7.5 million. Currently, there is $4.5 million outstanding on this line.
Net cash provided by operating activities was approximately $1.5 million
and $4.7 million for the year-to-date periods of fiscal 1999 and 1998,
respectively. The decrease in cash generated from operations was primarily due
to an increase in cash used for inventory. Inventories increased to support
shorter lead times and an increase in demand late in the quarter for short-range
Virtual Wire(R) radio products. The largest area of increase was in work-in-
process inventory, as the Company's factories began to respond to this demand.
Cash used in investing activities was approximately $3.6 million and $5.8
million for the year-to-date periods of fiscal 1999 and 1998, respectively,
primarily as a result of capital expenditures. The Company expects to acquire a
total of approximately $9 million to $11 million of capital equipment by the end
of fiscal 1999, consisting primarily of equipment needed for its manufacturing
facilities. Some of this equipment may be acquired under the equipment-
collateralized operating lease facility with a commercial bank.
Net cash generated from financing activities was $2.5 million and $2.1
million for the current year-to-date periods of fiscal 1999 and 1998,
respectively, primarily related to cash from borrowings on the line of credit
and borrowings for capital equipment acquisitions.
The Company believes that cash generated from operations, if any, banking
facilities and the $5.5 million balance in cash and short-term investments will
be sufficient to meet the Company's operating cash requirements through the rest
of the calendar year. To the extent that these sources of funds are
insufficient to meet the Company's capital requirements, the Company may be
required to raise additional funds. No assurance can be given that additional
financing will be available or, if available, that it will be available on
acceptable terms.
Year 2000 Readiness Disclosure
The Year 2000 issue involves potential inability of information or
other data dependent systems to properly distinguish year references as of the
turn of the century. The Company believes the Year 2000 issue represents a
material risk to the Company.
-11-
<PAGE>
The Company itself is heavily dependent upon the proper functioning of
its own computer systems, including (1) computers and related software for its
financial and manufacturing information systems, (2) computers, programmable
logic controllers and other data dependent equipment in its manufacturing
processes, and (3) computers, scientific equipment and related software for its
engineering, research and development activities. Any failure or malfunctioning
on the part of these or other systems could cause disruptions of operations,
including a temporary inability to process financial transactions, manufacture
products or engage in ordinary business activities in ways that are not
currently known, discernible, quantifiable or otherwise anticipated by the
Company.
The Company has formed a team to evaluate and deal with the impact of
the Year 2000 issue. It has developed a plan (the "Plan") for the Company to
become Year 2000 compliant in a timely manner. The Plan covers both systems
such as networked computers and software that are commonly called information
technology ("IT") systems and those such as embedded technology in manufacturing
equipment ("non-IT") systems. The Plan also covers Year 2000 readiness of
customers and vendors.
The Company's Plan consists of five phases. The first phase is Year
2000 awareness and project planning. The second is the inventory of systems and
prioritization of potential problems. The third phase is initial contingency
planning and testing of prioritized material items for assessment of Year 2000
compliance. The fourth phase is the remediation of any noted problems. The
fifth phase is the refinement of contingency plans.
For IT systems, the Company's core business information systems were
replaced on September 1, 1998 by Glovia(TM) and Oracle(R) software, which are
represented by providers and tested by RFM to be Year 2000 compliant. Other
material IT systems were remediated as of June 30, 1999. For non-IT systems,
remediation was also completed as of June 30, 1999.
The Company's suppliers (particularly sole-source and long lead-time
suppliers) and key customers may be adversely affected by their respective
failures to address the Year 2000 issue. If the Company's suppliers are unable
to provide goods or services, the Company's operations could be materially
adversely effected. Key customers which encounter Year 2000 difficulties could
fail to order or take delivery of the Company's products, or could fail to make
or delay payments to the Company. Such failure or delay could have a material
adverse effect on the Company's business and results of operations. While some
of these risks are outside the control of the Company, the Company's Plan
includes communications with suppliers and customers to ascertain the state of
their Year 2000 compliance program. The questionnaire phase of this activity
has been completed, and phone and on-site interviews of critical suppliers has
also been completed. Remediation through second source identification of
suppliers and business forecasting for customers is complete. Preparation and
refinement of contingency plans related to suppliers and customers will continue
through the second half of calendar 1999.
As of June 30, 1999, phases one through four of the Company's Year 2000
Project have been completed as planned; Phase I-Awareness Project Planning,
Phase II-Inventory and Prioritization, Phase III-Initial Contingency Planning
and Testing and Phase IV-Remediation.
The Company currently has completed initial contingency plans to deal
with some of the most likely worst case scenarios. The Company currently
anticipates that it will refine and complete Phase V-Contingency Planning during
the second half of calendar 1999.
The total cost of the purchase and implementation of Year 2000
Remediation solutions is approximately $2 million, which has already been
incurred. Time spent by implementation team members is included in the Company's
normal operating budget. The Year 2000 implementation program has not caused
material delays in non-Year 2000 related IT projects.
The Company has determined that its products are not affected by
calendar dating. Therefore, there is no known or anticipated Year 2000 impact
on its product offering.
-12-
<PAGE>
The Company believes its Year 2000 Plan will reduce the probability of
significant interruptions of normal operations resulting from Year 2000 issues.
However, the Company may not have properly identified and assessed all Year 2000
issues. In addition, its key suppliers or customers could experience Year 2000
problems. If any of these potential situations occur, the Company's contingency
plans may not be adequate to protect the Company from the adverse effects of
such problems. The worst case scenario resulting from Year 2000 issues would be
a material adverse impact on the Company's results of operations, caused by an
interruption in normal business operations, or an adverse impact on the
Company's relationships with customers, suppliers or others.
-13-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The Company hereby incorporates by reference all exhibits filed
in connection with Form 10-K for the year ended August 31, 1998 and the
Forms 10-Q for the quarters ended November 30, 1998 and February 28, 1999.
(b) The Company did not file any reports on Form 8-K during the quarter ended
May 31, 1999.
(c) Exhibit Number Description
-------------- -----------
10.25 Form of Restricted Stock Bonus Agreement
10.26 1999 Equity Incentive Plan
10.27 Form of Notice of Grant of Stock Options and Grant
Agreement
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RF MONOLITHICS, INC.
Dated: July 14, 1999 By: /s/ Sam L. Densmore
------------------------------
Sam L. Densmore
CEO, President and Director
/s/ James P. Farley
------------------------------
James P. Farley
VP and Controller
-15-
<PAGE>
EXHIBIT 10.25
FORM OF RESTRICTED STOCK BONUS AGREEMENT
This Agreement is made as of *Grant_Date*, by and between RF MONOLITHICS,
INC., a Delaware corporation (the "Company"), and *Recipient_Name* (the
"Recipient").
Witnesseth:
Whereas, the Company desires to issue Common Stock of the Company as herein
described, on the terms and conditions hereinafter set forth, as a stock bonus
to the Recipient for services performed as an Employee, Director or Consultant
in connection with and in furtherance of the Company's compensatory benefit plan
for participation of Employees, Directors or consultants and is subject to the
terms and conditions contained in the Company's 1997 Equity Incentive Plan (the
"Plan"). Defined terms not defined in this agreement shall have the meaning
given such terms in the Plan.
Now, Therefore, It Is Agreed between the parties as follows:
1. The Company hereby awards to Recipient *Share_Words* (*Share*_) shares
of the Company's common stock (the "Shares"), in consideration for Recipient's
prior services to the Company. No payment of cash or property by Recipient shall
be required as consideration for the issuance of the Shares. Notwithstanding the
foregoing, the award and issuance of the Shares are subject to the terms and
conditions set forth in this Agreement and the Plan.
2. Provided Recipient's Continuous Service as an Employee, Director or
Consultant has not terminated prior to such date, twenty-five percent (25%) of
the Shares shall vest on each May 1, commencing with May 1, 2000 (each such date
a "Vesting Date").
3. If at any time prior to a Vesting Date, Recipient's Continuous Service
as an Employee, Director or Consultant ceases, vesting of the Shares shall
immediately cease, Thereafter, Recipient shall have no further right to vesting
in the Shares, and the Shares shall automatically be reacquired by the Company
upon the ninetieth (90th) day following such termination of Continuous Service
as an Employee, Director or Consultant unless the Company agrees to waive the
automatic reacquisition as to some or all of the Shares that have not then
vested. Any such waiver shall only be effective by the Company giving written
notice to the Recipient or the Recipient's representative (whose appointment is
due to Recipient's death or disability) with a copy to also be delivered to the
Escrow Agent (described below). If the Company does not timely or fully waive
its automatic reacquisition, then the Escrow Agent shall transfer to the Company
the Shares still subject to automatic reacquisition.
4. This award is contingent upon and will not be effective unless and
until the date on which the Shares constituting the award have been registered
under the Securities Act.
<PAGE>
5. By accepting this award, Recipient agrees that the Company may require
him or her, as a condition precedent to the release of Shares from the escrow
described below, to enter into an arrangement providing for a cash payment to
the Company of any tax withholding obligation of the Company or an Affiliate of
the Company arising by reason of: (1) the receipt of these Shares; or (2) the
lapse of any substantial risk of forfeiture to which the Shares are subject at
the time of vesting.
6. To insure that unvested Shares will be available for delivery to the
Company upon termination of Recipient's service, Recipient agrees to deliver to
and deposit with the Secretary of the Company or other person selected by the
Company (the "Escrow Agent"), as escrow agent in this transaction, two (2)
Assignment Separate From Certificate forms duly endorsed (with date and number
of shares blank) substantially in the form of Exhibit B attached hereto,
together with the certificate or certificates evidencing the Shares. Such
documents are to be held by the Escrow Agent and delivered by the Escrow Agent
pursuant to the Joint Escrow Instructions of the Company and Recipient
substantially in the form of Exhibit A attached hereto and incorporated by this
reference, which instructions shall also be delivered to the Escrow Agent
hereunder.
7. Recipient shall not sell or transfer unvested Shares. The Shares
issued hereunder shall be endorsed with appropriate legends determined by the
Company.
8. The Company shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such Shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
9. Subject to the provisions of paragraph 7 above, Recipient shall,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Company with respect to the Shares deposited in said escrow.
10. The acquisition and vesting of the Shares may have adverse tax
consequences to the Recipient which may be avoided or mitigated by filing an
election under Section 83(b) of the Code. Recipient has reviewed with
Recipient's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. Recipient acknowledges that he or she is relying solely on the advice
of such advisors and not on any statements or representations of the Company or
any of its agents. An election under Section 83(b) of the Code must be filed
within thirty (30) days after the effective date of this Agreement. RECIPIENT
ACKNOWLEDGES THAT IT IS HIS OR HER OWN RESPONSIBILITY, AND NOT THE COMPANY'S, TO
FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF RECIPIENT REQUESTS THE
COMPANY TO MAKE THE FILING ON HIS OR HER BEHALF.
11. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement. Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent that party thereafter from
2
<PAGE>
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
12. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party hereto at its address hereinafter
shown below its signature or at such other address as such party may designate
by ten (10) days' advance written notice to the other party hereto.
13. This Agreement shall inure to the benefit of the successors and
assigns of the Company and, subject to the restrictions on transfer herein set
forth, shall be binding upon Recipient, his or her heirs, executors,
administrators, successors and assigns.
14. This Agreement does not constitute an employment contract nor shall be
deemed to create in any way whatsoever any obligation on Recipient's part to
continue in the employ of the Company or any Affiliate of the Company, or to
limit the ability of the Company or any Affiliate of the Company to terminate
Recipient's employment with the Company or Affiliate of the Company at any time,
for any reason or for no reason.
15. Recipient acknowledges that he or she has reviewed this Agreement in
its entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of this Agreement.
16. This Agreement, together with the Exhibits hereto, constitutes the
entire, final and exclusive statement of the agreement of the parties with
respect to the subject matter hereof.
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
Recipient: RF MONOLITHICS, INC.
______________________________ ______________________________
*Recipient_Name* *RFM_Name*, *RFM_Title*
*Address* 4441 Sigma Road,
*City*, *State* *ZIp* Dallas, Texas 75244
Exhibit A - Joint Escrow Instructions
Exhibit B - Assignment Separate From Certificate
3
<PAGE>
Exhibit A
JOINT ESCROW INSTRUCTIONS
Date:*Grant_Date*
*RFM_Name*
RF Monolithics, Inc.
4441 Sigma Road,
Dallas, Texas 75244
Dear Sir/Madam:
As Escrow Agent for both RF Monolithics, Inc., a Delaware corporation (the
"Company"), and the undersigned recipient of stock of the Company ("Recipient"),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Restricted Stock Bonus Agreement
("Agreement"), dated *Grant_Date* relating to shares of the Company's common
stock issued under the Company's 1997 Equity Incentive Plan (the "Plan"), to
which a copy of these Joint Escrow Instructions is attached as Exhibit A, in
accordance with the following instructions:
1. In the event Recipient ceases to render services as an Employee, Director
or Consultant (defined terms not defined herein shall have the meaning
given such terms in the Plan.) during the vesting period set forth in
paragraph 2 of the Agreement, then on the ninetieth (90th) day following
the date of cessation of all such services, you shall transfer to the
Company the shares of stock then being held by you, unless the Company or
its assignee will give to Recipient and you a written notice specifying
that some or all of such shares of stock shall be transferred to Recipient.
Recipient and the Company hereby irrevocably authorize and direct you to
close the transaction contemplated by such event or by such notice in
accordance with the terms of this document or said notice.
2. At the closing you are directed (a) to date any stock assignments necessary
for the transfer in question, (b) to fill in the number of shares being
transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company.
3. Recipient irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Recipient does hereby irrevocably constitute and appoint you as his or her
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities and other property all documents of assignment
and/or transfer and all stock certificates necessary or appropriate to make
all securities negotiable and complete any transaction herein contemplated.
1
<PAGE>
4. This escrow shall terminate upon vesting of the shares or upon the earlier
return of the shares to the Company or Recipient.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Recipient, you shall deliver all of same to any pledgee entitled thereto
or, if none, to Recipient and shall be discharged of all further
obligations hereunder.
6. The duties of you, Recipient and the Company hereunder may be altered,
amended, modified or revoked only by a writing signed by all of the parties
hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party
or parties or their assignees. You shall not be personally liable for any
act you may do or omit to do hereunder as Escrow Agent or as attorney-in-
fact for Recipient while acting in good faith and any act done or omitted
by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given
by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree
of any court, you shall not be liable to any of the parties hereto or to
any other person, firm or corporation by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been
entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under any statute
of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you
may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer or assistant officer of the Company or if you
shall resign by written notice to each party. In the event of any such
termination, the Company may appoint any officer or assistant officer of
the Company as successor Escrow Agent and Recipient hereby confirms the
appointment of such successor or successors as his or her attorney-in-fact
and agent to the full extent of your appointment.
2
<PAGE>
13. If you reasonably require other or further instruments in connection with
these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to
the delivery and/or ownership or right of possession of the securities, you
may (but are not obligated to) retain in your possession without liability
to anyone all or any part of said securities until such dispute shall have
been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but
you shall be under no duty whatsoever to institute or defend any such
proceedings.
15. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Box, by registered or certified mail with postage
and fees prepaid, addressed to each of the other parties hereunto entitled
at the following addresses, or at such other addresses as a party may
designate by ten (10) days' written notice to each of the other parties
hereto:
Company: RF Monolithics, Inc.
4441 Sigma Road,
Dallas, Texas 75244
Recipient: *Recipient_Name*
*Address*
*City*, *State* *ZIp*
Escrow Agent: *RFM_Name*
RF Monolithics, Inc.
4441 Sigma Road,
Dallas, Texas 75244
16. By signing these Joint Escrow Instructions you become a party hereto only
for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
[THIS PORTION INTENTIONALLY LEFT BLANK]
3
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to
the original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions
in whole or in part.
Very truly yours,
RF Monolithics, Inc.
_______________________________
*RFM_Name*, *RFM_Title*
Recipient
_______________________________
*Recipient_Name*
Escrow Agent:
__________________________________
*RFM_Name*
[THIS PORTION INTENTIONALLY LEFT BLANK]
4
<PAGE>
Exhibit B
ASSIGNMENT SEPARATE FROM CERTIFICATE
Pursuant to that certain Restricted Stock Bonus Agreement (the
"Agreement") dated as of *Grant_Date*, *Recipient_Name* hereby assigns and
transfers unto RF Monolithics, Inc., a Delaware corporation ("Assignee")
________________________ (__________) shares of the common stock of the
Assignee, standing in the undersigned's name on the books of said corporation,
represented by Certificate No.(s) ________ herewith and do hereby irrevocably
constitute and appoint the Secretary of the Corporation as attorney to transfer
the said stock on the books of the within named Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, and only to the
extent that such shares remain subject to reacquisition by the Company under the
terms of the Agreement.
Dated: *Grant_Date*
_______________________________
*Recipient_Name*
[THIS PORTION INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT 10.26
1999 EQUITY INCENTIVE PLAN
Adopted by the Board on April 8, 1999
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company, and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Nonstatutory Stock Options, (ii) stock bonuses, and
(iii) rights to purchase restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Nonstatutory Stock Options granted pursuant to Section 6 hereof, or
(ii) stock bonuses or rights to purchase restricted stock granted pursuant to
Section 7 hereof.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" shall mean (i) the willful breach of habitual neglect of
assigned duties related to the Company, including compliance with Company
policies; (ii) conviction (including any plea of nolo contendere) of Executive
of any felony or crime involving dishonesty; (iii) any act of personal
dishonesty knowingly taken by Executive in connection with his responsibilities
as an employee and intended to result in personal enrichment of Executive or any
other person; (iv) bad faith conduct that is materially detrimental to the
Company; (v) inability of Executive to perform Employee's duties due to alcohol
or illegal drug use; (vi) the Executive's failure to comply with any legal
written directive of the Board of Directors of the Company; or (vii) any act or
omission of the Executive which is of substantial detriment to the Company
because of the Executive's intentional failure to comply with any statute, rule
or regulation, except any act or omission believed by Executive in good faith to
have been in or not opposed to the best interest of the Company (without intent
of Executive to gain, directly or indirectly, a profit to which
1.
<PAGE>
Executive was not legally entitled) and except that Cause shall not mean bad
judgment or negligence other than habitual neglect of duty.
(d) "Change of Control" shall mean:
(i) Any acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of 35% or more of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of the Board of Directors of the Company (the "Outstanding Voting
Securities"); or
(ii) in connection with or in anticipation of, any acquisition,
merger or reorganization in which individuals who, as of the date hereof,
constitute the Board (the "incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A of the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(iii) the sale or other disposition of all or substantially all of
the assets of the Company; but
(iv) "Change of Control" shall not mean (A) any acquisition, merger,
or reorganization by the Company in which the beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 65% or more of the stockholders
of the Company immediately prior to such acquisition, merger, or reorganization
of either (1) the Outstanding Common Stock or (2) the Outstanding Voting
Securities remains unchanged after such acquisition, merger or reorganization or
(B) any acquisition, merger, or reorganization by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(g) "Company" means RF Monolithics, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate of the Company to render consulting services and who is
compensated for such
2.
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services, provided that the term "Consultant" shall not include those persons
who render services only as a Director.
(i) "Continuous Service as an Employee, Director or Consultant" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Service as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company, its
Affiliates or their successors.
(j) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(k) "Director" means a member of the Board.
(l) "Employee" means any person employed by the Company or any Affiliate
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 the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, 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
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's 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 Board deems reliable.
(ii) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a
3.
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business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an "incentive stock option" pursuant to Section 422 of the Code and the
regulations promulgated thereunder.
(q) "Officer" means a person who is an officer of the Company within the
meaning of Rule 4460(i)(1)(A) of the Rules of the National Association of
Securities Dealers, Inc.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(u) "Plan" means this 1999 Equity Incentive Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(w) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(y) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(z) "Voluntary Resignation" shall mean any termination of Executive's
employment with the Company upon such Executive's own initiative, including
Executive's retirement, provided, however, that if such Executive's salary,
title, duties, or benefits are materially reduced subsequent to or in
anticipation of a Change of Control, such resignation by the Executive shall not
be deemed a "Voluntary Resignation."
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
4.
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(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be a Nonstatutory Stock Option, a
stock bonus, a right to purchase restricted stock, or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of one or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power, for the purpose of granting a Stock Award to
an eligible Officer, to delegate to a subcommittee of two or more Non-Employee
Directors any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the number of shares of stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate two hundred thousand (200,000)
shares of the Company's common stock. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
5.
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Stock Awards may be granted only to Employees or Consultants. Provided
further, that Covered Employees shall not be eligible to receive Stock Awards
under the Plan, and Officers other than Covered Employees are only eligible to
receive grants that are an inducement essential to such individual entering into
an employment agreement with the Company or an Affiliate of the Company.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption of or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) Transferability. An Option shall not be transferable except by will or
by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person unless
the applicable Option Agreement expressly provides for other transferability.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to
6.
<PAGE>
the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate.. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Employment or Consulting Relationship. In the event an
Optionee's Continuous Service as an Employee, Director or Consultant terminates
(other than upon the Optionee's death or disability), the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
as of the date of termination, unless the Option Agreement expressly provides
that the Option may become exercisable for additional shares after the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionee's Continuous
Service as an Employee, Director or Consultant (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Service as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Service as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the first paragraph of this
subsection 6(f), or (ii) the expiration of a period of three (3) months after
the termination of the Optionee's Continuous Service as an Employee, Director or
Consultant during which the exercise of the Option would not be in violation of
such registration requirements.
7.
<PAGE>
(g) Disability of Optionee. In the event an Optionee's Continuous Service
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination, unless the
Option Agreement expressly provides that the Option may become exercisable for
additional shares after the date of termination), but only within such period of
time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Service as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
as of the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time during Continuous Service as an
Employee, Director or Consultant to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to a repurchase right in favor of
the Company or to any other restriction the Board determines to be appropriate.
7. Terms of Stock Bonuses and Purchases of Restricted Stock.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may
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determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) Transferability. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement, except that payment of the common stock's
"par value" (as defined in the Delaware General Corporation Law) shall not be
made by deferred payment, or other arrangement with the person to whom the stock
is sold; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) Termination of Continuous Service as an Employee, Director or
Consultant. In the event a participant's Continuous Service as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. Cancellation And Re-Grant Of Options. The Board or the Committee shall have
the authority to effect, at any time and from time to time, (i) the repricing of
any outstanding Options under the Plan and/or (ii) with the consent of the
affected holders of Options, the cancellation of any outstanding Options under
the Plan and the grant in substitution therefor of new Options under the Plan
covering the same or different numbers of shares of stock, but having an
exercise price per share per share of stock on the new grant date that results
in a ratio between such exercise price and Fair Market Value on such date of
grant that is not less than the ratio between the original exercise price and
Fair Market Value on the original date of grant. Notwithstanding the foregoing,
the Board or the Committee may grant an Option with an exercise price lower than
that set forth above if such Option is granted as part of a transaction
described in section 424(a) of the Code.
9.
<PAGE>
9. Covenants of the Company.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act, either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee or Consultant nor any person to whom a Stock Award
is transferred under subsection 6(d) or 7(b) shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such person has satisfied all requirements
for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Stock Awards any right to continue in the employ of the Company or any Affiliate
(or to continue acting as a Director or Consultant) or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with or
without cause to terminate the relationship of any Consultant in accordance with
the terms of that Consultant's agreement with the Company or Affiliate of the
Company to which such Consultant is providing services.
(d) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and
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risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(e) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
12. Adjustments Upon Changes In Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a), and the outstanding Stock Awards will be
appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Stock Awards. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of a Change of Control, then: (i) any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 12(b)) for those outstanding under the Plan, or
(ii) in the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, (A) with respect to Stock Awards held by persons
then performing services as Employees, Directors or Consultants the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated prior to such event and the Stock Awards
terminated if not exercised (if applicable) after such acceleration and at or
prior to such event,
11.
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and (B) with respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall be terminated if not exercised (if applicable) prior to such
event. If any acquiring or surviving corporation assumes Stock Awards
outstanding under the Plan or substitutes similar stock awards for those
outstanding under the Plan, then if the Continuous Service as an Employee,
Director or Consultant of the holder of a Stock Award (or substitute stock
award) is terminated for any reason other than (i) death, (ii) Cause, (iii)
illness, accident, or other physical or mental incapacity which prevents the
holder of such award from performing his or her duties for more than one hundred
and eighty (180) days during any twelve (12) month period, or (iv) Voluntary
Resignation, then the vesting of such award shall be accelerated in full and, if
applicable, such award shall be exercisable in full for the post-termination
exercise period provided in such award's agreement.
13. Amendment of the Plan and Stock Awards.
(a) The Board at any time, and from time to time, may amend the Plan.
(b) The Board, in its sole discretion, may submit the Plan and/or any
amendment to the Plan for stockholder approval
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
14. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.
15. Effective Date of Plan.
The Plan shall become effective on adoption by the Board.
12.
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EXHIBIT 10.27
FORM OF NOTICE OF GRANT OF STOCK OPTIONS AND GRANT AGREEMENT
This grant is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's employees or
consultants under the 1999 Equity Incentive Plan (the "Plan"). Defined terms
not explicitly defined in this Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, 1/48th of the
shares will vest (become exercisable) each month beginning the first day of the
month following the date of grant and monthly thereafter until either (i) you
cease to provide services to the Company for any reason, or (ii) this option
becomes fully vested.
2. Exercise Price and Method of Payment.
(a) Exercise Price. The exercise price, per share, of this option is
as stated on page one (1) of this Agreement and is not less than the fair market
value of the Common Stock on the date of grant of this option.
(b) Method of Payment. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise; or
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds.
3. Whole Shares. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
4. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
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5. Term. The term of this option commences on the date of grant, and
expires ten (10) years from the date this option is granted (the "Expiration
Date"), unless this option expires sooner as set forth below or in the Plan. In
no event may this option be exercised on or after the Expiration Date. This
option shall terminate prior to the Expiration Date as follows: three (3)
months after the termination of your Continuous Service as an Employee, Director
or Consultant with the Company or an Affiliate of the Company unless one of the
following circumstances exists:
(a) Your termination of Continuous Service as an Employee, Director or
Consultant is due to your permanent and total disability (within the meaning of
Section 422(c)(6) of the Code). This option will then expire on the earlier of
the Expiration Date set forth above or twelve (12) months following such
termination of Continuous Service as an Employee, Director or Consultant.
(b) Your termination of Continuous Service as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Service as an Employee, Director or
Consultant for any other reason. This option will then expire on the earlier of
the Expiration Date set forth above or twelve (12) months after your death.
(c) If during any part of such three (3) month period you may not exercise
your option solely because of the condition set forth in paragraph 5 above, then
your option will not expire until the earlier of the Expiration Date set forth
above or until this option shall have been exercisable for an aggregate period
of three (3) months after your termination of Continuous Service as an Employee,
Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Service as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Service as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of Continuous
Service of an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the date of termination of Continuous Service
of an Employee, Director or Consultant under the provisions of paragraph 2 of
this option.
6. Exercise.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to Section 6 of
the Plan.
3
<PAGE>
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (A) the exercise of this option; (B) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (C) the disposition of shares acquired upon such exercise; and
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
date of this option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of this option.
7. Transferability. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you.
8. Agreement Not a Service Contract. This Agreement is not an employment
contract and nothing in this Agreement shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this Agreement shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
9. Notices. Any notices provided for in this Agreement or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
10. Governing Plan Document. This Agreement is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to Agreement provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this Agreement and those of the
Plan, the provisions of the Plan shall control.
Attachments: 1999 Equity Incentive Plan
4
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