<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
INTEGRATED PACKAGING ASSEMBLY CORPORATION
------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Integrated
Packaging Assembly Corporation, a Delaware corporation (the "Company"), will be
held on Friday, September 3, 1999, at 10:00 a.m., local time, at the Company's
offices at 2221 Old Oakland Road, San Jose, California, for the following
purposes:
1. To elect five (5) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To amend the Company's Restated Certificate of Incorporation to increase
the authorized number of shares of Common Stock by 125,000,000 shares to
200,000,000 shares and increase the authorized number of shares of
Preferred Stock by 5,000,000 shares to 10,000,000 shares.
3. To amend the Company's 1993 Stock Option Plan to increase the number of
shares available for issuance thereunder by 17,485,079 shares to an
aggregate of 20,000,000 shares.
4. To amend the Company's Employee Stock Purchase Plan to increase the
number of shares available for issuance thereunder by 1,600,000 shares
to an aggregate of 2,000,000 shares.
5. To approve the Company's 1999 Director Option Plan with 4,000,000 shares
reserved for issuance thereunder.
6. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the Company for the 1999 fiscal year.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on August 12, 1999 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy as promptly as possible in the postage-
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she has returned a proxy.
FOR THE BOARD OF DIRECTORS
J. Robert Suffoletta
Secretary
San Jose, California
August , 1999
IMPORTANT: Whether or not you plan to attend the meeting, you are requested
to complete and promptly return the enclosed proxy in the envelope provided.
<PAGE>
INTEGRATED PACKAGING ASSEMBLY CORPORATION
2221 Oakland Road
San Jose, California
PROXY STATEMENT FOR 1998
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Integrated Packaging Assembly Corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held on Friday, September 3, 1999, at 10:00 a.m.,
local time, or at any adjournment thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the Company's offices at 2221 Old Oakland Road, San
Jose, California 95131.
The proxy solicitation materials were mailed on or about August , 1999 to
all stockholders of record on August 12, 1999.
INFORMATION CONCERNING SOLICITATION AND VOTING
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to the Secretary of the Company
at the above address of the Company, written notice of revocation or a duly
executed proxy bearing a later date, or by attending the meeting and voting in
person.
Record Date and Voting Securities
Stockholders of record at the close of business on August 12, 1999 (the
"Record Date") are entitled to notice of the meeting and to vote at the
meeting. At the Record Date, shares of the Company's Common Stock, $0.001
par value, were issued and outstanding and 4,000,000 shares of the Company's
Series A Convertible Preferred Stock, $0.001 par value, were issued and
outstanding.
Voting and Solicitation
Proxies properly executed, duly returned to the Company and not revoked,
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote according to their best
judgment.
Except as otherwise provided herein, each stockholder is entitled to one
vote for each share of Common Stock on all matters presented at the meeting.
The Series A Convertible Preferred Stock shall be voted equally with the shares
of Common Stock and not as a separate class. The stockholder of Series A
Convertible Preferred Stock shall be entitled to such number of votes as shall
be equal to the whole number of shares of Common Stock into which the holder's
aggregate number of shares of Series A Convertible Preferred Stock are
convertible. The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock and Series A Convertible Preferred Stock issued and outstanding on
the Record Date. Shares that are voted "FOR," "AGAINST," "WITHHELD" or
"ABSTAIN" are treated as being present at the meeting for purposes of
establishing a quorum and are also treated as shares entitled to vote at the
Annual Meeting (the "Votes Cast") with respect to such matter. Abstentions will
have the same effect as a vote against a proposal. Broker non- votes will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but such non-votes will not be counted for purposes of
determining the number of Votes Cast with respect to the particular proposal on
which a broker has expressly not voted. Thus, a broker non-vote will not effect
the outcome of the
1
<PAGE>
voting on a proposal, except with respect to Proposal Two which requires
approval by the affirmative vote of a majority of the outstanding shares of the
Company on the Record Date. With respect to Proposal Two, a broker non-vote
will have the same effect as a vote against the proposal.
The cost of soliciting proxies will be borne by the Company. The Company may
also reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and employees, without additional compensation, personally
or by telephone or telegram.
Deadline for Receipt of Stockholder Proposals
Stockholders of the Company may submit proper proposals for inclusion in the
Company's proxy statement and for consideration at the next annual meeting of
its stockholders by submitting their proposals in writing to the Secretary of
the Company in a timely manner. In order to be included in the Company's proxy
materials for the annual meeting of stockholders to be held in the year 2000,
stockholder proposals must be received by the Secretary of the Company no later
than , 2000, and must otherwise comply with the requirements of Rule 14a-8
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In addition, the Company's Bylaws establish an advance notice procedure with
regard to certain matters, including stockholder proposals not included in the
Company's proxy statement, to be brought before an annual meeting of
stockholders. For nominations or other business to be properly brought before
the meeting by a stockholder, such stockholder must provide written notice
delivered to the Secretary of the Company 90 days in advance of the annual or
special meeting, which notice must contain specified information concerning the
matters to be brought before such meeting and concerning the stockholder
proposing such matters. A copy of the full text of the Bylaw provisions
discussed above may be obtained by writing to the Secretary of the Company. All
notices of proposals by stockholders, whether or not included in the Company's
proxy materials, should be sent to Integrated Packaging Assembly Corporation,
2221 Old Oakland Road, San Jose, California 95131, Attention: Corporate
Secretary.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2000 Annual Meeting, which is not eligible
for inclusion in the proxy statement and form of proxy relating to that
meeting, the stockholder must do so no later than , 2000. If such a
stockholder fails to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary voting authority when the
proposal is raised at the 2000 Annual Meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of five (5) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five (5) nominees named below, all
of whom are presently directors of the Company. If any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for the nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until the next Annual Meeting or
until a successor has been elected and qualified.
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Vote Required; Recommendation of Board of Directors
A board of five (5) directors is to be elected at the Annual Meeting. The
Company's Board of Directors currently consists of five (5) persons. The five
(5) nominees receiving the highest number of Votes Cast will be elected as
directors for the ensuing year.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED BELOW:
<TABLE>
<CAPTION>
Name Age Principal Occupation
---- --- --------------------
<S> <C> <C>
Patrick Verderico....... 55 Chief Executive Officer and President of the Company
Donald W. Brooks........ 60 Co-Chief Executive Officer of UMC Group (USA)
Edward S. Duh........... 34 Vice President, Orient Semiconductor Electronics, Limited
Calvin Lee.............. President, Orient Semiconductor Electronics, Limited
Edmond Tseng............ 51 President, Orient Semiconductor Electronics, Inc. (USA)
</TABLE>
Except as set forth below, each nominee has been engaged in his principal
occupation described above during the past five (5) years. There is no family
relationship among any directors or executive officers of the Company.
Patrick Verderico joined the Company in April 1997 as its Chief Operating
Officer and was appointed the Company's President and Chief Executive Officer
and a director in July 1997. From August 1996 to April 1997, Mr. Verderico was
an independent business consultant. From April 1996 to July 1996, Mr. Verderico
was Chief Operating Officer and Executive Vice President of Maxtor Corporation,
a disk drive manufacturer. From January 1994 to March 1996, Mr. Verderico was
Chief Financial Officer and Vice President Finance and Administration of
Creative Technology, a multi-media company. From October 1992 to January 1994,
Mr. Verderico was Chief Financial Officer and Vice President Finance and
Administration of Cypress Semiconductor, Inc., a manufacturer of integrated
circuits. Prior to 1992, Mr. Verderico had various management positions in
finance and operations with Coopers & Lybrand, Philips Semiconductors and
National Semiconductor. Mr. Verderico is also a director of Catalyst
Semiconductor and Micro Component Technology, Inc.
Donald W. Brooks has been a director of the Company since April 1999. Since
July 1997, Mr. Brooks has been the Co-Chief Executive Officer of UMC Group
(USA). From February 1991 to April 1997, Mr. Brooks was President of Taiwan
Semiconductor Company, a silicon foundry company. Prior to 1991, Mr. Brooks had
various executive positions in Current Ventures, Fairchild Semiconductor and
Texas Instruments. Mr. Brooks is also a director of UMC Group (USA).
Edward S. Duh has been a director of the Company since April 1999. Since
July 1993, Mr. Duh has been the Vice President and Special Assistant to the
President of Orient Semiconductor Electronics, Limited, an IC packaging and
electronics manufacture service company.
Calvin Lee has been a director of the Company since April 1999. Since 1994,
Mr. Lee has been the President of Orient Semiconductor Electronics, Limited, an
IC packaging and electronics manufacture service company.
Edmond Tseng has been a director of the Company since April 1999. Mr. Tseng
has served as President of Orient Semiconductor Electronics, Inc. (USA), an IC
packaging and electronics manufacture service company, since it was established
in 1990. Mr. Tseng has 28 years experience in the IC packaging industry. Mr.
Tseng is also a director of Asante Technologies.
Board Meetings and Committees
The Board of Directors of the Company held sixteen (16) meetings during
fiscal 1998.
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<PAGE>
The Audit Committee, which consisted of former directors Paul Low and Eric
Young until July 14, 1998 and former directors Gill Cogan and Eric Young for
the remainder of fiscal 1998, held one (1) meeting during fiscal 1998. The
Audit Committee currently consists of Messrs. Brooks and Duh. The Audit
Committee reviews the financial statements and the internal financial reporting
system and controls of the Company with the Company's management and
independent accountants, recommends resolutions for any dispute between the
Company's management and its auditors, and reviews other matters relating to
the relationship of the Company with its independent accountants.
The Compensation Committee, which consisted of former directors Philip
Chapman and Gill Cogan during fiscal 1998, held one (1) meeting during fiscal
1998. The Compensation Committee currently consists of Messrs. Brooks, Lee and
Tseng. The Compensation Committee makes recommendations to the Board of
Directors regarding the Company's executive compensation policies and
administers the Company's stock option plan and employee stock purchase plan.
The Option Committee consists of Mr. Verderico, and has the ability to grant
options (not to exceed 80,000 shares) to non-executive officers under the
Company's stock option plans.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Each director of the Company during 1998 attended at least 75% of (i) the
total number of meetings of the Board of Directors held during fiscal 1998 and
(ii) the total number of meetings held by all committees of the Board of
Directors during fiscal 1998 on which such director served.
Compensation of Directors
Directors receive no cash remuneration for serving on the Board of
Directors. Non-employee directors participate in the Company's Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for the grant of
nonstatutory stock options to non-employee directors. A total of 100,000 shares
of Common Stock has been authorized for issuance under the Director Plan. Each
non-employee director who joins the Board will automatically be granted a
nonstatutory option to purchase 20,000 shares of Common Stock on the date upon
which such person first becomes a director (the "Initial Grant"). In addition,
each non-employee director will automatically receive a nonstatutory option to
purchase 5,000 shares of Common Stock upon such director's annual re-election
to the Board, provided the director has been a member of the Board for at least
six months upon the date of such re-election (the "Subsequent Grant"). The
exercise price of each option granted under the Director Plan must be equal to
the fair market value of the Common Stock on the date of grant. The Initial
Grant vests over a four-year period, with 25% of the shares subject to the
Initial Grant vesting on the first anniversary of the Initial Grant and the
remainder vesting monthly thereafter, and the Subsequent Grant vests monthly
over a 12 month period, in each case unless terminated sooner upon termination
of the optionee's status as a director or otherwise pursuant to the Director
Plan. In the event of a merger of the Company with or into another corporation
or a consolidation, acquisition of assets or other change in control
transaction involving the Company, each option becomes exercisable in full or
will be assumed or an equivalent option substituted by the successor
corporation. Unless terminated sooner, the Director Plan will terminate in
2006. The Director Plan is currently administered by the Board of Directors.
The Board has authority to amend or terminate the Director Plan, provided that
no such action may impair the rights of any optionee without the optionee's
consent. No options were granted under the Director Plan in fiscal 1998.
PROPOSAL TWO
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation (the "Certificate") currently
provides that the Company is authorized to issue two classes of stock
consisting of 75,000,000 shares of Common Stock, $0.001 par value
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<PAGE>
per share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share.
In June 1999, the Board of Directors authorized an amendment to the
Certificate, subject to stockholder approval, to increase the authorized number
of shares of (i) Common Stock to 200,000,000 shares and (ii) Preferred Stock to
10,000,000 shares. The stockholders are being asked to approve such amendment
to the Certificate. The proposed amendment would give the Board the authority
to issue additional shares of Common Stock and Preferred Stock without
requiring future stockholder approval of such issuances except as may be
required by applicable law.
As of August 12, 1999, shares of Common Stock were issued and
outstanding; 54,995,082 shares of Common Stock were reserved for issuance upon
conversion of oustanding shares of the Company's Series A Convertible Preferred
Stock; 514,921 shares of Common Stock were reserved for future grant or for
issuance upon the exercise of outstanding options under the Company's 1993
Stock Option Plan; 750,000 shares of Common Stock were reserved for future
grant or for issuance upon the exercise of outstanding options under the
Company's Nonstatutory Stock Option Plan; 400,000 of Common Stock shares were
reserved for future sale or issuance under the Company's Employee Stock
Purchase Plan; and 100,000 shares of Common Stock were reserved for future
grant or for issuance upon the exercise of outstanding options under the
Company's 1996 Director Option Plan. Thus, only shares were available for
other corporate purposes.
As of August 12, 1999, 4,000,000 shares of the Company's Series A
Convertible Preferred Stock were issued and outstanding.
The principal purpose of the proposed amendment to the Certificate is to
authorize additional shares of Common Stock and Preferred Stock which will be
available in the event the Board of Directors determines that it is necessary
or appropriate to raise additional capital through the sale of securities, to
grant options or other stock incentives to the Company's employees, to acquire
another company or its business or assets, to seek to establish a strategic
relationship with a corporate partner or to permit a future stock dividend or
stock split. Other than in connection with the exercise of stock options and
pursuant to the Employee Stock Purchase Plan, the Board of Directors has no
present agreement or arrangement to issue any such shares. If the amendment is
approved by the stockholders, the Board of Directors does not intend to solicit
further stockholder approval prior to the issuance of any additional shares of
Common Stock and Preferred, except as may be required by applicable law.
The increase in the authorized number of shares of Common Stock and
Preferred Stock and the subsequent issuance of such shares could have the
effect of delaying or preventing a change in control of the Company without
further action by the stockholders. Shares of authorized and unissued Common
Stock and Preferred Stock could (within the limits imposed by applicable law)
be issued in one or more transactions which would make a change in control of
the Company more difficult, and therefore less likely. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of outstanding shares of Common Stock and Preferred Stock,
and such additional shares could be used to dilute the stock ownership or
voting rights of persons seeking to obtain control of the Company. The holder
of the Company's Series A Convertible Preferred Stock and the holders of the
Company's Common Stock have a right of first refusal to purchase, at the same
price and on the same general terms, a pro rata portion of equity securities
that the Company may propose to issue in certain future transactions. The right
of first refusal expires upon a change in control of the Company or, in the
case of the holders of Common Stock, October 29, 1999 (if earlier).
Vote Required; Recommendation of Board of Directors
The approval of the amendment to the Certificate requires the affirmative
vote of a majority of the outstanding shares of the Company's (i) Common Stock
and (ii) Preferred Stock, voting separately. An abstention or broker non-vote
will have the same effect as a vote against the proposal.
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<PAGE>
The Board of Directors has unanimously approved the amendment to the
Certificate and recommends that the stockholders vote "FOR" this proposal.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO 1993 STOCK OPTION PLAN
The Company's Board of Directors and stockholders have previously adopted
and approved the Company's 1993 Stock Option Plan (the "Option Plan"). A total
of 2,514,921 shares of Common Stock are presently reserved for issuance under
the Option Plan. In June 1999, the Board of Directors approved an amendment to
the Option Plan, subject to stockholder approval, to increase the shares
reserved for issuance thereunder by 17,485,079 shares, bringing the total
number of shares issuable under the Option Plan to 20,000,000.
As of August 12, 1999, shares were available for future issuance under
the Option Plan.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the Option Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 17,485,079 shares,
bringing the total number of shares issuable under the Option Plan to
20,000,000. The Board believes that the amendment will enable the Company to
continue its policy of widespread employee stock ownership as a means to
motivate high levels of performance and to recognize key employee
accomplishments.
The Company also has a Nonstatutory Stock Plan which provides for the grant
of nonstatutory stock options to non-executive officer employees. As of August
12, 1999, shares were available for future issuance under the Nonstatutory
Stock Plan and options to purchase an aggregate of shares were subject to
outstanding options under such plan.
Options granted under the Option Plan are intended to meet the requirements
of being performance-based within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended. For a description of the principal features
of the Option Plan, see "Exhibit A--Description of 1993 Stock Option Plan."
Vote Required; Recommendation of Board of Directors
The approval of the amendment to the Option Plan requires the affirmative
vote of a majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT OF THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
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<PAGE>
PROPOSAL FOUR
APPROVAL OF AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors and stockholders have previously adopted
and approved the Company's Employee Stock Purchase Plan (the "Purchase Plan").
A total of 400,000 shares of Common Stock are presently reserved for issuance
under the Purchase Plan. In June 1999, the Board of Directors approved an
amendment to the Purchase Plan, subject to stockholder approval, to increase
the shares reserved for issuance thereunder by 1,600,000 shares, bringing the
total number of shares issuable under the Purchase Plan to 2,000,000 shares.
As of August 12, 1999, shares were available for future issuance under
the Purchase Plan.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the Purchase Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 1,600,000 shares,
bringing the total number of shares issuable under the Purchase Plan to
2,000,000. The Board believes that the amendment will enable the Company to
continue its policy of widespread employee stock ownership as a means to
motivate high levels of performance. For a description of the principal
features of the Purchase Plan, see "Exhibit B--Description of Employee Stock
Purchase Plan."
Vote Required; Recommendation of Board of Directors
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT OF THE PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
PROPOSAL FIVE
APPROVAL OF DIRECTOR OPTION PLAN
In June 1999, the Company's Board of Directors adopted and approved the
Company's 1999 Director Option Plan (the "Director Plan"), subject to
stockholder approval. No options have been granted under the Director Plan. The
Company's 1996 Director Option Plan has been suspended by the Board pending
approval of the Director Plan at the Annual Meeting. The Company's Stock Plan
and Purchase Plan will not be affected by the adoption of the Director Plan.
Subject to the other provisions of the Director Plan, the maximum number of
shares of Common Stock which may be optioned and sold under the Director Plan
shall be 4,000,000 shares. The Director Plan provides that each nonemployee
director of the Company will be granted an option to purchase 100,000 shares of
Common Stock on the date such director first joins the Board and that each
nonemployee director will also be granted an option to purchase 100,000 shares
of Common Stock upon such directors annual reelection to the Board if the
director has served on the Board for at least six (6) months as of the date of
the reelection. All options granted under the Director Plan will have an
exercise price equal to the fair market value of the Common Stock on the date
of grant and will be fully vested and exercisable on the date of grant.
The Director Plan may be amended from time to time by the Board provided
that no amendment may impair the rights of any holder of any outstanding
option.
At the Annual Meeting, the stockholders are being requested to approve the
Director Plan and the reservation of the shares thereunder. The Board believes
that the adoption of the Director Plan will enable the
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Company to attract and retain the best available personnel to serve as outside
directors of the Company. For a description of the principal features of the
Director Plan, see "Exhibit C -- Description of the 1999 Director Option Plan."
Vote Required; Recommendation of Board of Directors
The approval of the Director Plan requires the affirmative vote of a
majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE DIRECTOR PLAN.
PROPOSAL SIX
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the 1999
fiscal year. This nomination is being presented to the stockholders for
ratification at the meeting. PricewaterhouseCoopers LLP has audited the
Company's financial statements since the Company's inception. A representative
of PricewaterhouseCoopers LLP is expected to be present at the meeting, will
have the opportunity to make a statement, and is expected to be available to
respond to appropriate questions.
Vote Required, Recommendation of Board of Directors
The affirmative vote of a majority of the Votes Cast on the proposal at the
Annual Meeting is required to ratify the Board's selection. If the stockholders
reject the nomination, the Board will reconsider its selection.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE 1999 FISCAL YEAR.
ADDITIONAL INFORMATION
Principal Share Ownership
As of August 12, 1999, the following person was known by the Company to be
the beneficial owner of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
Beneficial
Ownership
------------------
Name Number Percent
---- ---------- -------
<S> <C> <C>
Orient Semiconductor Electronics, Limited ("OSE") (1).... 55,321,104 %
</TABLE>
- --------
(1) Includes 54,995,082 shares of Common Stock issuable upon conversion of the
4,000,000 shares of the Company's Series A Convertible Preferred Stock held
by OSE. OSE holds all of the outstanding shares of the Company's Series A
Convertible Preferred Stock, which can be converted into shares of Common
Stock at any time. Director Calvin Lee is President of OSE, director Edward
S. Duh is Vice President of OSE, and director Edmond Tseng is President of
OSE, Inc. (USA).
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Security Ownership of Management
The following table sets forth the beneficial ownership of the Company's
Common Stock as of August 12, 1999 (i) by each director of the Company, (ii) by
the Company's Chief Executive Officer, the Company's former Chief Financial
Officer and the two other most highly compensated executive officers of the
Company for fiscal year 1998 (such officers are collectively referred to as the
"Named Executive Officers"), and (iii) by all current directors and executive
officers as a group:
<TABLE>
<CAPTION>
Beneficial
Ownership
------------------
Name Number Percent
---- ---------- -------
<S> <C> <C>
Patrick Verderico (1)................................... *
Gerald K. Fehr (2)...................................... 662,825 *
Ernest G. Barrieau III (3).............................. *
Alfred V. Larrenaga (4)................................. *
Edward S. Duh (5)....................................... 55,321,104 %
Calvin Lee (5).......................................... 55,321,104 %
Edmond Tseng (5)........................................ 55,321,104 %
Donald W. Brooks........................................ *
All directors and executive officers as a group
( persons) (6)........................................ %
</TABLE>
- --------
* Less than 1%
(1) Includes shares issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days of August 12, 1999.
(2) Includes shares issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days of August 12, 1999.
(3) Includes shares issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days of August 12, 1999.
(4) Includes shares issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days of August 12, 1999.
(5) Includes 54,995,082 shares of Common Stock issuable upon conversion of the
4,000,000 shares of the Company's Series A Convertible Preferred Stock held
by OSE. OSE holds all of the outstanding shares of the Company's Series A
Convertible Preferred Stock, which can be converted into shares of Common
Stock at any time. Director Calvin Lee is President of OSE, director Edward
S. Duh is Vice President of OSE, and director Edmond Tseng is President of
OSE, Inc. (USA).
(6) Includes shares issuable upon exercise of options to purchase Common
Stock which are exercisable within 60 days of August 12, 1999.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid to
the Named Executive Officers during the Company's last three fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation (1) Compensation
------------------------ ------------
Fiscal Awards
Name and Principal Position Year Salary Bonus Options
--------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
Patrick Verderico (2) ................... 1998 $318,269 $116,500 --
Chief Executive Officer and President 1997 214,617 50,000 400,000
Ernest G. Barrieau III (3)............... 1998 190,956 48,985 --
Former Executive Vice President, Sales
and Marketing 1997 54,983 12,015 150,000
Gerald K. Fehr........................... 1998 173,460 24,933 100,000
Executive Vice President, Operations and 1997 183,996 6,000 --
Chief Technology Officer 1996 143,000 25,000 10,000
Alfred V. Larrenaga (4).................. 1998 167,307 28,995 --
Former Executive Vice President, 1997 53,538 6,000 125,000
Finance and Chief Financial Officer
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits which for each Named
Executive Officer did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for such officer during any fiscal year.
(2) Mr. Verderico joined the Company in April 1997.
(3) Mr. Barrieau joined the Company in October 1997 and left the Company in
June 1999.
(4) Mr. Larrenaga joined the Company in August 1997 and left the Company in
June 1999.
Option Information
The following tables set forth information regarding stock options granted
to the Named Executive Officers during fiscal 1998, as well as options held by
such officers as of December 31, 1998.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants (1)
--------------------------------------
Potential
Realizable Value
% of Total at Annual Rates
Options Exercise of Stock Price
Granted to or Base Appreciation for
Employees Price Option Term(2)
Options in Fiscal Per Expiration ----------------
Name Granted Year Share Date 5% 10%
---- ------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Patrick Verderico....... -- -- -- -- -- --
Ernest G. Barrieau III.. -- -- -- -- -- --
Gerald K. Fehr.......... 100,000 21.8% $1.0625 01/27/08 $66,820 $169,335
Alfred V. Larrenaga..... -- -- -- -- -- --
</TABLE>
- --------
(1) Each of these options was granted pursuant to the Option Plan and is
subject to the terms of such plan as described in Exhibit A hereto. These
options were granted at an exercise price equal to the fair market value of
the Company's Common Stock as determined by the Board of Directors of the
Company on the date of grant and, as long as the optionee maintains
continuous employment with the Company, vest over a four year period at a
rate of 25% of the shares subject to the option on the first anniversary of
the date of grant and an additional 1/48th of the shares subject to the
option at the end of each one-month period thereafter.
10
<PAGE>
(2) Potential gains are net of the exercise price but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if they were exercised at the end of
the option term. The assumed 5% and 10% rates of stock appreciation are
based on appreciation from the exercise price per share. These rates are
provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. Actual gains, if any, on stock option exercises
are dependent on the future financial performance of the Company, overall
stock market conditions and the option holders' continued employment
through the vesting period.
Aggregated Option Exercises in Last Fiscal Year And
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
---------------------------------------------------
Number of Unexercised Value of Unexercised In-
Options at Fiscal Year the-Money Options at
Shares End(1) Fiscal Year End(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Patrick Verderico....... -- $ -- 166,667 233,333 $ -- $ --
Ernest G. Barrieau III.. -- -- 43,750 106,250 -- --
Gerald K. Fehr.......... -- -- 6,042 103,958 -- --
Alfred V. Larrenaga..... -- -- 41,667 83,333 -- --
</TABLE>
- --------
(1) In January 1998, all outstanding options were exchanged for new options
with an exercise price of $1.0625 per share, which represented the fair
market value of the Common Stock on the date of approval for such
repricing.
(2) The value of unexercised options at fiscal year end represents the
difference between the exercise price of the options and the closing price
of the Company's Common Stock on December 31, 1998 of $0.08 per share. As
of such date, the exercise price of such options was more than the fair
market value of the Common Stock.
Ten Year Option Repricings
The following table sets forth certain information with respect to the
Company's exchange of outstanding options with its executive officers. For
further information with respect to such option exchanges, see "Report of the
Compensation Committee of the Board of Directors."
<TABLE>
<CAPTION>
Length of
Original
Option Term
Securities Market Price Exercise Remaining
Underlying of Stock at Price at (In Years)
Options Time of Time of at Date of
Name Date Repriced Repricing Repricing Repricing
---- -------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Patrick Verderico........ 01/27/98 300,000 1.0625 4.2500 9
01/27/98 100,000 1.0625 3.0625 9
Ernest G. Barrieau II.... 01/27/98 150,000 1.0625 2.0313 9
Gerald K. Fehr........... 01/27/98 10,000 1.0625 8.7500 8
Alfred V. Larrenaga...... 01/27/98 125,000 1.0624 3.0625 9
</TABLE>
- --------
(1) The market price of stock at the time of the repricing is the new exercise
price of each such option.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors during 1998 consisted
of Messrs. Chapman and Cogan, neither of whom was an officer or employee of the
Company. No member of the Compensation
11
<PAGE>
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee (the "Committee") was comprised of Messrs.
Chapman and Cogan during 1998. The Committee currently is comprised of Messrs.
Brooks, Lee and Tseng. The Committee sets, reviews and administers the
Company's executive compensation program. The role of the Committee is to
establish and recommend salaries and other compensation paid to executive
officers of the Company and to administer the Company's stock option plans and
employee stock purchase plan. The Committee approves all stock option grants to
executive officers, all executive officer base salaries and any cash bonus
payments to executive officers and reviews all stock option grants to
employees.
The Company's executive pay programs are designed to attract and retain
executives who will contribute to the Company's long-term success, to mesh
executive and stockholder interests through stock option based plans and to
provide a compensation package that recognizes individual contributions and
Company performance.
The Committee has determined that the most effective means of compensation
are base salaries, incentive bonuses and long-term incentives through the
Company's stock option programs.
Base Salary. The base salaries of executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience and performance of the individual, with reference to the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions in high growth, technology-based companies of reasonably
similar size. The Committee reviews executive salaries annually and adjusts
them as appropriate to reflect changes in the market conditions and individual
performance and responsibility. During fiscal 1998, salaries for executive
officers were increased by 6% to 8%. The Chief Executive Officer's salary was
increased from $300,000 to $325,000.
Bonus. The Company maintains a bonus plan for executive officers which
provides for bonuses based on achievement of individual and company performance
goals. Specifically, each executive officer can earn from 50% to 63% of his
annual base salary in the form of incentive bonus payments if all company and
individual performance goals are satisfied. The target Bonus factor for the
Chief Executive Officers is 63%. The bonus is based 50% upon achievement of
individual performance goals and 50% upon achievement of company performance
goals. This bonus program reflects the Committee's view that bonuses should
only be paid when the Company and the individual executive achieve
predetermined performance goals. Messrs. Verderico, Barrieau, Fehr and
Larrenaga were paid bonuses in 1998 in the amounts of $116,500, $48,985,
$24,933 and $28,995, respectively. All such bonuses were paid based on
achievement of management business objectives. The bonus plan for executive
officers was suspended for the third and fourth quarters of 1998.
Stock Options. Under the Company's Option Plan, stock options may be granted
to executive officers and other employees of the Company. Upon joining the
Company, an individual's initial option grant is based on the individual's
responsibilities and position. The size of any annual stock option awards is
based primarily on an individual's performance and responsibilities. The
Committee believes stock option grants are an effective method of ensuring that
the executive is taking a longer term view of the Company's performance and
that the executive's and the stockholder's interests are in alignment.
The options granted to the Company's executive officers include a provision
that provides that the options shall become fully vested and exercisable in the
event of a change in control of the Company.
In January 1998, the Company's Board of Directors approved the repricing of
options for all employees that held options with exercise prices in excess of
$1.0625 per share and such employees were offered the opportunity to exchange
such options for new options at $1.0625 per share, which was the fair market
value of the Common Stock on the date of the approval. In order to participate
in the option exchange program,
12
<PAGE>
employees were required to not exercise their options until January 30, 1999.
The Board undertook this action in light of the reduction in the trading price
of the Company's Common Stock and in consideration of the importance to the
Company of retaining its employees by offering them appropriate equity
incentives. The Board also considered the highly competitive environment for
obtaining and retaining qualified employees and the overall benefit to the
Company's stockholders from a highly motivated group of employees.
Other. Other elements of executive compensation include Company-wide medical
and life insurance benefits and the ability to defer compensation pursuant to a
401(k) plan. The Company does not currently match contributions under the
401(k) plan.
The Company's Chief Executive Officer does not receive any other special or
additional compensation other than as described above.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code and the regulations thereunder (the "Section"). The
Section disallows a tax deduction for any publicly-held corporation for
individual compensation exceeding $1 million in any taxable year for any of the
Named Executive Officers, unless such compensation is performance-based. Since
the cash compensation of each of the Named Executive Officers is below the $1
million threshold and the Committee believes that any options granted under the
Option Plan will meet the requirements of being performance-based, the
Committee believes that the Section will not reduce the tax deduction available
to the Company. The Company's policy is to qualify, to the extent reasonable,
its executive officers' compensation for deductibility under applicable tax
laws. However, the Committee believes that its primary responsibility is to
provide a compensation program that will attract, retain and reward the
executive talent necessary to the Company's success.
Consequently, the Committee recognizes that the loss of a tax deduction
could be necessary in some circumstances.
Compensation Committee of the Board
of Directors
Philip R. Chapman*
Gill Cogan*
* Messrs. Chapman and Cogan resigned as directors of the Company in April
1999. The Compensation Committee currently consists of Messrs. Brooks, Lee
and Tseng.
13
<PAGE>
Comparison of Total Cumulative Stockholder Return
The following graph sets forth the Company's total cumulative stockholder
return as compared to the Standard & Poor's 500 Index and the Philadelphia
Semiconductor Index for the period February 28, 1996 (the date of the Company's
initial public offering) through December 31, 1998. Total stockholder return
assumes $100 invested at the beginning of the period in the Common Stock of the
Company, the stocks represented in the Standard & Poor's 500 Index and the
stocks represented in the Philadelphia Semiconductor Index, respectively. Total
return also assumes reinvestment of dividends; the Company has paid no
dividends on its Common Stock.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
[graph appears here]
Comparison of Total Cumulative Stockholder Return
<TABLE>
<CAPTION>
2/28/96 12/31/96 12/31/97 12/31/98
------- -------- -------- --------
<S> <C> <C> <C> <C>
IPAC......................................... 7.50 8.078 0.625 0.08
S & P 500.................................... 644.75 740.74 970.43 1,229.23
Philadelphia Semiconductor Index............. 196.45 240.30 263.63 350.56
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of copies of filings under Section 16(a) of the
Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that
during fiscal 1998 all Section 16 filing requirements were met.
CERTAIN TRANSACTIONS
On April 29, 1999, OSE purchased 4,000,000 shares of the Series A
Convertible Preferred Stock (the "Series A Preferred") of the Company for a
cash purchase price of $6,800,000. OSE acquired the shares of Series A
Preferred from the Company pursuant to a Preferred Stock Purchase Agreement
dated April 29, 1999 (the "Purchase Agreement"). Each share of Series A
Preferred is initially convertible into 13.7487705 shares of the Company's
Common Stock. Each share of Series A Preferred has voting rights equal to the
number of shares of Common Stock into which each such share is convertible.
Pursuant to the Company's Certificate of Designation of Series A Convertible
Preferred Stock, the holders of Series A Preferred shall be entitled to elect
three (3) members of the Company's Board of Directors; the holders of Common
Stock shall be entitled to elect one (1) member of the Board of Directors; and
the holders of Common Stock and Series A Preferred, voting together as a single
class on an as-is-converted basis, shall be entitled to elect the remaining
members of the Board of Directors. Messrs. Duh, Lee and Tseng are currently
serving on the Board as representatives of the holders of the Series A
Preferred.
On July 1, 1999, the Company issued 326,022 shares of Common Stock to OSE as
a dividend on the Series A Preferred held by OSE in accordance with the terms
of such shares.
The holder of the Company's Series A Convertible Preferred Stock and the
holders of the Company's Common Stock have a right of first refusal to
purchase, at the same price and on the same general terms, a pro rata portion
of equity securities that the Company may propose to issue in certain future
transactions. The right of first refusal expires upon a change in control of
the Company or, in the case of the holders of Common Stock, October 29, 1999
(if earlier).
14
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
San Jose, California
August 12, 1999
15
<PAGE>
EXHIBIT A
DESCRIPTION OF THE 1993 STOCK OPTION PLAN
General. The Company's 1993 Stock Option Plan (the "Option Plan") was
adopted by the Board of Directors in April 1993 and approved by the
stockholders in June 1993. The Option Plan authorizes the Board, or one or more
committees which the Board may appoint from among its members (the
"Committee"), to grant stock options. Prior to the proposed amendment to the
Option Plan to be voted on at the Annual Meeting, a total of 2,514,921 shares
of Common Stock has been reserved for issuance under the Option Plan. Options
granted under the Option Plan may be either "incentive stock options" as
defined in Section 422 of the Code, or nonstatutory stock options, as
determined by the Board or the Committee.
Purpose. The general purpose of the Option Plan is to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to employees and consultants and to promote the
success of the Company's business.
Administration. The Option Plan may be administered by the Board or the
Committee (collectively, the "Administrator"). Subject to the other provisions
of the Option Plan, the Administrator has the authority to: (i) determine the
fair market value of the stock; (ii) approve forms of agreement for use under
the Option Plan; (iii) select the persons to whom options are to be granted;
(iv) determine the number of shares to be made subject to each option; (v)
determine whether and to what extent options are to be granted; (vi) prescribe
the terms and conditions of each option (including the exercise price, whether
an option will be classified as an incentive stock option or a nonstatutory
option and the provisions of the stock option to be entered into between the
Company and the grantee); and (vii) reduce the exercise price of an option to
the then current fair market value. All decisions, interpretations and other
actions of the Administrator shall be final and binding on all holders of
options and on all persons deriving their rights therefrom.
Eligibility. The Option Plan provides that options may be granted to the
Company's Employees and Consultants (as such terms are defined in the Option
Plan). Incentive stock options may be granted only to Employees. Any optionee
who owns more than 10% of the combined voting power of all classes of
outstanding stock of the Company (a "10% Stockholder") is not eligible for the
grant of an option unless the exercise price of the option is at least 110% of
the fair market value of the Common Stock on the date of grant.
Terms and Conditions of Options. Each option granted under the Option Plan
is evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options to purchase shares of Common Stock at the time the options are
granted. However, excluding options issued to 10% Stockholders, the
exercise price under an incentive stock option must not be less than 100%
of the fair market value of the Common Stock on the date the option is
granted and the exercise price of a nonstatutory stock option must not be
less than 85% of the fair market value of the Common Stock on the date the
option is granted. Generally, the fair market value shall be the closing
sales price for such stock as quoted on the OTC bulletin board on the last
market trading day prior to the date of determination.
(b) Form of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement and generally
may be made by cash, check, promissory note, other shares of Common Stock
of the Company owned by the optionee, delivery of an exercise notice
together with irrevocable instructions to a broker to deliver the exercise
price to the Company from the sale or loan proceeds, or by a combination
thereof.
(c) Exercise of the Option. Each stock option agreement will specify the
term of the option and the date when the option is to become exercisable.
However, in no event shall an option granted under the Option Plan be
exercised more than ten (10) years after the date of grant. Moreover, in
the case of an incentive stock option granted to a 10% Stockholder, the
term of the option shall be for no more than five
A-1
<PAGE>
(5) years from the date of grant. No options may be exercised by any person
after the expiration of its term.
(d) Termination of Employment. If an optionee's employment terminates
for any reason (other than death or permanent disability), the optionee may
exercise his or her option, but only within such period of time as is
determined by the Administrator at the time of grant (such period not to
exceed ninety (90) days in the case of an Incentive Stock Option) from the
date of such termination, and only to the extent that the optionee was
entitled to exercise it at the date of such termination (but in no event
later than the expiration of the term of such option as set forth in the
option agreement). To the extent that the optionee was not entitled to
exercise an option at the date of such termination, and to the extent that
the optionee does not exercise such option (to the extent otherwise so
entitled) within the time permitted, the option shall terminate.
(e) Permanent Disability. If an Employee is unable to continue
employment with the Company as a result of disability, then all options
held by such optionee under the Option Plan shall expire upon the earlier
of (i) twelve (12) months after the date of termination of such employment
or (ii) the expiration date of the option. The optionee may exercise all or
part of his or her option at any time before such expiration to the extent
that such option was exercisable at the time of termination of employment.
(f) Death. If an optionee dies while employed by the Company, his or her
option shall expire upon the earlier of (i) twelve (12) months after the
optionee's death or (ii) the expiration date of the option. The executor or
other legal representative of the optionee may exercise all or part of the
optionee's option at any time before such expiration to the extent that
such option was exercisable at the time of death.
(g) Nontransferability of Options. During an optionee's lifetime, his or
her option(s) shall be exercisable only by the optionee and shall not be
transferable other than by will or laws of descent and distribution.
(h) Value Limitation. If the aggregate fair market value of all shares
of Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000,
the excess options shall be treated as nonstatutory options.
(i) Rule 162(m) Limitation. No Employee may be granted, during any
fiscal year of the Company, options to purchase more than 2,000,000 shares
of Common Stock; provided, however, that an Employee may be granted options
to purchase an additional 2,000,000 shares of Common Stock in connection
with his or her initial employment.
Adjustment Upon Change in Capitalization, Change in Control. In the event
that the stock of the Company is changed by reason of any stock split, reverse
stock split, stock dividend, recapitalization or other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company, appropriate proportional adjustments shall be
made in the number and class of shares of stock subject to the Option Plan, the
number of shares of stock subject to any option outstanding under the Option
Plan, and the exercise price of any such outstanding option. Any such
adjustment will be made by the Board, whose determination shall be conclusive.
In connection with any merger, consolidation, acquisition of assets or like
event involving the Company, each outstanding option may be assumed or an
equivalent option substituted by a successor corporation. If the successor
corporation does not assume the options or substitute substantially equivalent
options, the Administrator will provide for optionees to have the right to
exercise the option as to all or a portion of the optioned stock, including
shares as to which it would not otherwise be exercisable.
Amendments, Suspensions and Termination of the Option Plan. The Board may
amend, suspend or terminate the Option Plan at any time; provided, however,
that stockholder approval is required for any amendment to the extent necessary
to comply with Rule 16b-3 promulgated under the Exchange Act or Section 422 of
the Code, or any similar rule or statute. In any event, the Option Plan will
terminate automatically in April 2003.
A-2
<PAGE>
Federal Tax Information for Option Plan. Options granted under the Option
Plan may be either "incentive stock options," as defined in Section 422 of the
Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two (2) years after grant of
the option and one (1) year after exercising the option, any gain or loss will
be treated as long term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% Stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of
the shares in excess of the amount treated as ordinary income will be
characterized as long-term or short-term capital gain or loss, depending on the
holding period.
All options which do not qualify as incentive stock options are referred to
as nonstatutory options. An optionee will not recognize any taxable income at
the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by
an optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
Option Plan Benefits. The Company is unable to predict the amount of
benefits that will be received by or allocated to any particular participant
under the Option Plan. The following table sets forth the dollar amount and the
number of shares granted under the Option Plan during the last fiscal year to
(i) each of the Company's Named Executive Officers, (ii) all executive officers
as a group, (iii) all non-employee directors as a group and (iv) all employees
other than executive officers as a group:
OPTION PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
Number
of Value of
Shares Shares
Name Granted Granted(1)
- ---- ------- ---------
<S> <C> <C>
Gerald K. Fehr.............................................. 100,000 $106,250
All executive officers as a group ( persons)............... 100,000 106,250
All non-employee directors as a group (3 persons)........... -- --
All employees other than executive officers as a group......
</TABLE>
- --------
(1) The dollar value of option grants under the Option Plan was computed by
multiplying the number of shares granted times the exercise price of the
option. All options granted under the Option Plan were granted at an
exercise price equal to the fair market value of the Common Stock on the
date of grant.
A-3
<PAGE>
EXHIBIT B
DESCRIPTION OF EMPLOYEE STOCK PURCHASE PLAN
General. The Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors in December 1995 and was activated in February 1996
in connection with the Company's initial public offering. Prior to the proposed
amendment to the Purchase Plan to be voted on at the Annual Meeting, a total of
400,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
Administration. The Purchase Plan may be administered by the Board or a
committee appointed by the Board. All questions of interpretation or
application of the Purchase Plan are determined by the Board or its appointed
committee, and its decisions are final, conclusive and binding upon all
participants.
Eligibility. Each Employee of the Company (including officers), who works at
least 20 hours per week and more than five (5) months in any calendar year, is
eligible to participate in the Purchase Plan if employed at least 30 days prior
to the first day of an Offering Period; provided, however, that certain
limitations imposed by Section 423(b) of the Code and limitations on stock
ownership as set forth in the Purchase Plan may apply. Eligible Employees
become participants in the Purchase Plan by filing with the Company a
subscription agreement authorizing payroll deductions prior to the first day of
each Offering Period unless a different time for filing the subscription
agreement has been set by the Board.
Participation in an Offering. The Purchase Plan has consecutive and
overlapping twelve month offering periods that begin every six months on
February 1 and August 1 of each year (the "Offering Periods"). Each twelve
month Offering Period includes two six-month purchase periods (each a "Purchase
Period"), during which payroll deductions are accumulated and, at the end of
which, shares of Common Stock are purchased with a participant's accumulated
payroll deductions. The Board has the power to change the duration of future
Offering Periods, if such change is made at least five days prior to the
scheduled beginning of the first Offering Period to be affected. To participate
in the Purchase Plan, an eligible Employee must authorize payroll deductions
pursuant to the Purchase Plan. Such payroll deductions may not exceed 10% of a
participant's compensation during the Offering Period. Once an Employee becomes
a participant in the Purchase Plan, the Employee will automatically participate
in each successive Offering Period until such time as the Employee withdraws
from the Purchase Plan or the Employee's employment with the Company
terminates. At the beginning of each Offering Period, each participant is
automatically granted an option to purchase shares of the Company's Common
Stock. The option expires at the end of the Offering Period or upon termination
of employment, whichever is earlier, but is exercised at the end of each
Purchase Period to the extent of the payroll deductions accumulated during such
Purchase Period. In no event shall a participant be permitted to purchase
during any Purchase Period more than a number of Shares determined by dividing
$12,500 by the Fair Market Value of a share of the Company's Common Stock on
the first day of the Offering Period, subject to exceptions and limitations
stated in the Purchase Plan.
Purchase Price, Shares Purchased. Shares of Common Stock may be purchased
under the Purchase Plan at a Purchase Price not less than 85% of the lesser of
the Fair Market Value of the Common Stock on (i) the first day of the Offering
Period or (ii) the last day of the Purchase Period. The Fair Market Value of
the Common Stock on any relevant date will be the closing price per share as
reported shall be the closing sales price for such stock as quoted on the OTC
bulletin board. The number of shares of Common Stock a participant purchases in
each Offering Period is determined by dividing the total amount of payroll
deductions withheld from the participant's compensation prior to the last day
of the Purchase Period by the Purchase Price.
Withdrawal. Generally, a participant may withdraw from an Offering Period at
any time by written notice without affecting his or her eligibility to
participate in future Offering Periods. However, once a participant withdraws
from a particular Offering Period, that participant may not participate again
in the same
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Offering Period. To participate in a subsequent Offering Period, the
participant must deliver to the Company a new subscription agreement.
Termination of Employment. Termination of a participants's employment for
any reason, including disability or death, or the failure of the participant to
remain in the continuous scheduled employ of the Company for at least 20 hours
per week, cancels his or her option and participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of death,
to the person or persons entitled thereto as provided in the Purchase Plan.
Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares reserved under the Purchase
Plan as well as the price per share of Common Stock covered by each option
under the Purchase Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, any Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.
Merger or Asset Sale. In the event of a sale of all or substantially all of
the assets of the Company, or the merger of the Company with and into another
corporation, each option under the Purchase Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation. In the event the successor
corporation refuses to assume or substitute for the options, the Board shall
shorten any Purchase Periods and Offering Periods then in progress by setting a
new Exercise Date (the "New Exercise Date") and any Offering Periods shall end
on the New Exercise Date. The New Exercise Date shall be prior to the merger or
asset sale. If the Board shortens any Purchase Periods and Offering Periods
then in progress, the Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
has been changed to the New Exercise Date and that all options will be
exercised automatically on the New Exercise Date, unless the participant has
already withdrawn from the Offering Period.
Amendment and Termination of the Plan. The Board of Directors may at any
time terminate or amend the Purchase Plan. An Offering Period may be terminated
by the Board of Directors at the end of any Purchase Period if the Board
determines that termination of the Purchase Plan is in the best interests of
the Company and its stockholders. Generally, no such termination can affect
options previously granted. No amendment shall be effective unless it is
approved by the holders of a majority of the votes cast at a duly held
stockholders' meeting, if such amendment would require stockholder approval in
order to comply with Section 423 of the Code. The Purchase Plan will terminate
in 2006.
Federal Tax Information for Purchase Plan. The Purchase Plan, and the right
of participants to make purchases thereunder, is intended to qualify under the
provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the holding period. If the shares are sold or
otherwise disposed of more than two (2) years from the first day of the
Offering Period, the participant will recognize ordinary income measured as the
lesser of (i) the excess of the fair market value of the shares at the time of
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such sale or disposition over the purchase price, or (ii) an amount equal to
15% of the fair market value of the shares as of the first day of the Offering
Period. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of this holding
period, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company is not entitled to a deduction for amounts
taxed as ordinary income or capital gain to a participant except to the extent
of ordinary income recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
Purchase Plan Benefits. The Company is unable to predict the amount of
benefits that will be received by or allocated to any particular participant
under the Purchase Plan. The following table sets forth the dollar amount and
the number of shares purchased under the Purchase Plan during the last fiscal
year to (i) each of the Company's Named Executive Officers, (ii) all executive
officers as a group, and (iii) all employees other than executive officers as a
group.
PURCHASE PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
Number Value of
of Shares
Name Shares Purchased(1)
- ---- ------ -----------
<S> <C> <C>
Patrick Verderico..........................................
Ernest G. Barrieau III.....................................
Gerald K. Fehr.............................................
Alfred V. Larrenaga........................................
All executive officers as a group ( persons)..............
All employees other than executive officers as a group.....
</TABLE>
- --------
(1) The dollar value of shares issued under the Purchase Plan was computed by
multiplying the number of shares granted times the purchase price of the
shares.
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EXHIBIT C
DESCRIPTION OF THE 1999 DIRECTOR OPTION PLAN
General. The Company's 1999 Director Option Plan (the "Director Plan") was
adopted by the Board of Directors in June 1999 with a total of 4,000,000 shares
reserved for issuance thereunder. The Director Plan authorizes the Board to
grant nonstatutory stock options to nonemployee directors of the Company.
Personnel. The purpose of the Director Plan is to attract and retain the
best available personnel to serve as outside directors of the Company.
Administration. The Director Plan is administered by the Board. However, all
options granted under the Director Plan are automatic and non-discretionary.
Upon re-election to the Board at the Annual Meeting of stockholders each year
during the term of the Director Plan, each outside director will automatically
receive an option to purchase 100,000 shares (the "Annual Grant"), if on such
date, he or she shall have served on the Board for at least six (6) months.
Additionally, each new outside director will automatically be granted an option
to purchase 100,000 shares upon the date on which such person becomes a
director (the "Initial Grant").
The Board has the authority to: (i) determine the fair market value of the
Common Stock in accordance with the terms of the Director Plan; (ii) interpret
the Director Plan; (iii) prescribe, amend and rescind rules and regulations
relating to the Director Plan; (iv) authorize any person to execute, on behalf
of the Company, any instrument required to effectuate the grant of an option
previously granted under the Director Plan; and (v) make all other
determinations deemed necessary or advisable for the administration of the
Director Plan. All decisions, determinations and interpretations of the Board
shall be final.
Eligibility. The Director Plan provides that options may be granted only to
the Company's outside directors.
Terms and Conditions. Each option granted under the Director Plan is
evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The price to be paid for shares of Common Stock
upon the exercise of an option granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date the option is
granted. If the Common Stock is listed on any established stock exchange or
a national market system, the fair market value shall be the closing sale
price for such stock (or the closing bid if no sales were reported) as
quoted on such system or exchange on the date the option is granted. If the
Common Stock is traded on the over-the-counter market, the fair market
value shall be the mean of the high bid and low asked prices on the date
the option is granted.
(b) Form of Consideration. The consideration to be paid for the shares
of Common Stock issued upon exercise of an option shall be determined by
the Board. Such form of consideration may vary for each option, and may
consist entirely of (1) cash, (2) check, (3) delivery of a properly
executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price; or (4) any combination of the
foregoing methods of payment.
(c) Exercise of the Option. Annual Grants and Initial Grants under the
Director Plan will become exercisable immediately. In no event may an
option granted under the Director Plan be exercised more than ten (10)
years after the date of grant. An option granted under the Director Plan is
not exercisable for a fraction of a share. An option is exercised by giving
written notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased and by tendering full payment of the
purchase price.
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(d) Termination of Status as a Director. If the optionee's status as a
director terminates for any reason (other than death or permanent
disability), then all options held by such optionee under the Director Plan
expire upon the earlier of (i) three months after such termination or (ii)
the expiration date of the option. The optionee may exercise all or part of
his or her option at any time before such expiration to the extent that
such option was exercisable as of the date of termination of the optionee's
status as a director.
(e) Permanent Disability. If the optionee's status as a director
terminates as a result of total and permanent disability (as defined in the
Code), then all options held by such optionee under the Director Plan shall
expire upon the earlier of (i) twelve months after the date of such
termination or (ii) the expiration date of the option. The optionee may
exercise all or part of his or her option at any time before such
expiration to the extent that such option was exercisable at the time of
termination of the optionee's status as a director.
(f) Death. If an optionee dies while serving as a director of the
Company, the director's options under the Director Plan shall expire upon
the earlier of (i) twelve months after his or her death or (ii) the
expiration date of the option. The executor or legal representative of the
optionee may exercise all or part of the optionee's option at any time
before such expiration to the extent that such option was exercisable at
the time of the optionee's death.
(g) Nontransferability of Options. An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution, and
is exercisable during the optionee's lifetime only by the optionee. In the
event of the optionee's death, options held by the optionee may be
exercised by a person who acquires the right to exercise the option by
bequest or inheritance.
Adjustments Upon Changes in Capitalization, Dissolution or Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares covered by each
outstanding Option and the number of shares which have been authorized for
issuance under the Director Plan but as to which no Options have yet been
granted or which have been returned to the Director Plan upon cancellation
or expiration of an Option, as well as the price per Share covered by each
such outstanding Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Mergers or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an
equivalent option, each outstanding Option shall become fully vested and
exercisable, including as to Shares as to which it would not otherwise be
exercisable. If an Option becomes fully vested and exercisable in the event
of a merger or sale of assets, the Board shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty days from the date
of such notice, and the Option shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option or right
confers the right to purchase, for each Share of Optioned Stock subject to
the Option immediately prior to the
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merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders
of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the
outstanding Shares).
Amendment and Termination of the Director Plan. The Board may amend, alter,
suspend or discontinue the Director Plan; provided, however, that such action
shall not impair the rights of any optionee under the Director Plan without the
optionee's consent.
Federal Income Tax Consequences. All options granted under the Director Plan
are nonstatutory options. An optionee who is granted a nonstatutory stock
option will not recognize any taxable income at the time he or she is granted a
nonstatutory option. However, upon its exercise, the optionee will recognize
taxable income generally measured by the excess of the then fair market value
of the shares purchased over the purchase price. Any taxable income recognized
in connection with an option exercise by an optionee who is also an employee of
the Company will be subject to tax withholding by the Company. The Company will
be entitled to a deduction in the same amount as ordinary income recognized by
the outside director. Upon sale of such shares by the optionee, any difference
between the sales price and the optionee's purchase price, to the extent not
recognized as taxable income as provided above, will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
Director Plan Benefits. Only outside directors of the Company are eligible
to receive grants under the Director Plan. No options have been granted under
the Director Plan.
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<PAGE>
INTEGRATED PACKAGING ASSEMBLY CORPORATION
1993 STOCK OPTION PLAN
(as amended through May 26, 1999)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under this Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of Directors
in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Company" means Integrated Packaging Assembly Corporation, a
California corporation.
(f) "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the
Company.
(g) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company
or any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options, such leave
is for a period of not more than ninety (90) days, unless reemployment upon
the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted from time to
time; or (ii) in the case of transfers between locations of the Company or
between the Company, its Subsidiaries or its successor.
(h) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any date, the value of the Stock
determined as follows:
(i) If the Stock is listed on any established stock exchange or a
national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales
were reported, as quoted on such system or exchange or the exchange
with the greatest volume of trading in Stock for the last market
trading day prior to the time of determination) as reported in the Wall
Street Journal or such other source as the Administrator deems
reliable;
D-1
<PAGE>
(ii) If the Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Stock or;
(iii) In the absence of an established market for the Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(k) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(m) "Option" means a stock option granted pursuant to the Plan.
(n) "Optioned Stock" means the Stock subject to an Option.
(o) "Optionee" means an Employee or Consultant who receives an Option.
(p) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "Plan" means this 1993 Stock Option Plan.
(r) "Share" means a share of the Stock, as adjusted in accordance with
Section 12 of the Plan.
(s) "Stock" means the Common Stock of the Company;
(t) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the
Plan, the maximum number of shares of Stock which may be optioned and sold
under the Plan is 20,000,000 shares. The shares may be authorized, but
unissued, or reacquired Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the
Board if the Board may administer the Plan in compliance with Rule 16b-
3 promulgated under the Exchange Act or any successor thereto ("Rule
16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted in such a
manner as to permit the Plan to comply with Rule 16b-3 with respect to
a plan intended to qualify thereunder as a discretionary plan. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan.
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<PAGE>
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors,
non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the Company, the
Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be constituted in such a
manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of the
corporate and securities laws of California and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Stock, in accordance
with Section 2(j) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Stock to be covered by
each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or
waiver of forfeiture restrictions regarding any Option or other award
and/or the shares of Stock relating thereto, based in each case on such
factors as the Administrator shall determine, in its sole discretion);
provided, however, that so long as a permit under Section 25113 of the
California Corporation Code is in effect with respect to the Plan, each
Option under this Plan must vest at a rate of no less than 20% per year
over 5 years;
(vii) to determine whether and under what circumstances an Option
may be bought-out for cash under subsection 9(f);
(viii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining
the amount, if any, of any deemed earnings on any deferred amount
during any deferral period);
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Stock covered by such
Option shall have declined since the date the Option was granted; and
(x) to provide for the early exercise of an Option for the purchase
of unvested Shares, subject to such terms and conditions as the
Administrator may determine.
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<PAGE>
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time, with or
without cause.
(e) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class
of common equity securities required to be registered under Section 12 of
the Exchange Act, the following limitations shall apply to grants of
Options to Employees:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 250,000 Shares.
(ii) In connection with his or her initial employment, an Employee
may be granted Options to purchase up to an additional 250,000 Shares
which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described
in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option will be
counted against the limit set forth in subsection (i) above. For this
purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new
Option.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders
of the Company as described in Section 18 of the Plan. It shall continue in
effect until April 6, 2003 unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, the term shall be no more than ten (10)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement. However, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the
D-4
<PAGE>
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the
date of grant.
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be
no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall
be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other shares of the Company's capital
stock which (x) in the case of shares of the Company's capital stock
acquired upon exercise of an Option either have been owned by the Optionee
for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (5) delivery of a
properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan
proceeds required to pay the exercise price, (6) any combination of the
foregoing methods of payment, (7) or such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan. An Option may not be exercised
for a fraction of a Share.
An Option shall be deemed to be exercised, and the Optionee deemed
to be a shareholder of the shares being purchased upon exercise, when
written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration
and method of payment allowable under Section 8(b) of the Plan.
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Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Optionee may, within at least thirty
(30) days with such determination in the case of an Incentive Stock Option
not exceeding three (3) months after the date of such termination (but in
no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that
Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the
date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his total
and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within twelve (12) months from the date of such
termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to
the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following
the date of death (but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Liquidation, Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of
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consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to
an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent
option substituted by the successor corporation or a Parent or Subsidiary
of the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the Option, the Optionee shall have the
right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If an Option is
exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Option shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option confers the
right to purchase or receive, for each Share of Optioned Stock subject to
the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by
the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or sale of assets was not
solely common stock of the successor corporation or its Parent, the Board
may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of
the successor corporation or its Parent equal in fair market value to the
per share consideration received by holders of Common Stock in the merger
or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain shareholder approval
of any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
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14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
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INTEGRATED PACKAGING ASSEMBLY CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
(as amended through May 26, 1999)
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Integrated Packaging Assembly Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Integrated Packaging Assembly Corporation, a
California corporation, and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all W-2 compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not
guaranteed either by statute or by contract, the employment relationship
will be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable, or;
(3) For purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
Registration Statement filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common
Stock.
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(4) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Offering Period" shall mean the period of approximately twelve (12)
months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after February 1 and
August 1 of each year and terminating on the last Trading Day in the
periods ending twelve months later. The first Offering Period shall begin
on the effective date of the registration statement related to the initial
public offering of the Company's Common Stock that is filed with the
Securities and Exchange Commission and shall end on the last Trading Day on
or before July 31, 1996. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1996 Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six (6) month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence
on the Enrollment Date and end with the next Exercise Date.
(o) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq National Market are open for trading.
3. Eligibility.
(a) Any Employee, as defined in Section 2(g), who has been employed by
the Company for at least thirty (30) days prior to a given Enrollment Date
shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would
own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) which permits his or her rights to
purchase stock under all employee stock purchase plans of the Company and
its subsidiaries to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) worth of stock (determined at the fair market value of
the shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after February 1 and August 1 each year, or on such other
dates as the Board shall determine, and continuing thereafter until terminated
in accordance with Section 19 hereof. The first Offering Period shall begin on
the effective date of the registration statement related to the initial public
offering of the Company's Common Stock that is filed with the Securities and
Exchange Commission and shall end on the last Trading Day on or before July 31,
1996. The first Offering Period shall consist of one Purchase Period commencing
and ending on the first and last day of the first Offering Period, as
aforesaid. Subsequent Offering Periods shall consist of two Purchase Periods,
unless otherwise determined by the Board in its discretion. The Board shall
have the power to change the duration of Offering Periods (including the
commencement dates thereof) with respect to future offerings without
shareholder approval if such change is announced at least five (5) days prior
to the scheduled beginning of the first Offering Period to be affected
thereafter.
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5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of
the Compensation which he or she receives on each pay day during the
Offering Period, and the aggregate of such payroll deductions during the
Offering Period shall not exceed ten percent (10%) of the participant's
Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change
in payroll deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering Period. The change
in rate shall be effective with the first full payroll period following
five (5) business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior
Purchase Period which ended during that calendar year plus all payroll
deductions accumulated with respect to the Current Purchase Period equal
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise
upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to
make available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during any Purchase Period (other than the
first Purchase
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Period) more than a number of Shares determined by dividing $12,500 ($25,000 in
the case of the first Purchase Period) by the Fair Market Value of a share of
the Company's Common Stock on the Enrollment Date, and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b)
and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his
or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically
terminated, and no further payroll deductions for the purchase of shares
will be made for such Offering Period. If a participant withdraws from an
Offering Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a
new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she will be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option will be returned to such participant or, in the case of
his or her death, to the person or persons entitled thereto under Section
14 hereof, and such participant's option will be automatically terminated.
The preceding sentence notwithstanding, a participant who receives payment
in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of
hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be two million
(2,000,000) shares, subject to adjustment upon changes in capitalization of
the Company as provided in Section 18 hereof. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised
exceeds the number of shares then available under the Plan, the Company
shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant
and his or her spouse.
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13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board or
a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding
upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered
by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee
or person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to
such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may
deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
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18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to
an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless
the Board determines, in the exercise of its sole discretion and in lieu of
such assumption or substitution, to shorten the Offering Periods then in
progress by setting a new Exercise Date (the "New Exercise Date"). If the
Board shortens the Offering Periods then in progress in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for his option has been
changed to the New Exercise Date and that his option will be exercised
automatically on the New Exercise Date, unless prior to such date he has
withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be
deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to
the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock for
each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares
of Common Stock); provided, however, that if such consideration received in
the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the
Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common
Stock and the sale of assets or merger.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is
in the best interests of the Company and its shareholders. Except as
provided in Section 18 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Rule 16b-3 or under
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the
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Offering Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common
Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders
of the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent permitted
by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the Common Stock
on any Exercise Date in an Offering Period is lower than the Fair Market Value
of the Common Stock on the Enrollment Date of such Offering Period, then all
participants in such Offering Period shall be automatically withdrawn from such
Offering Period immediately after the exercise of their option on such Exercise
Date and automatically re-enrolled in the immediately following Offering Period
as of the first day thereof.
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EXHIBIT A
INTEGRATED PACKAGING ASSEMBLY CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
Original Application Enrollment Date:
Change in Payroll Deduction Rate
Change of Beneficiary(ies)
1. hereby elects to participate in the Integrated Packaging Assembly
Corporation 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock Purchase
Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
% of my Compensation on each payday (1-10%) during the Offering Period
in accordance with the Employee Stock Purchase Plan. (Please note that no
fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I understand
that if I do not withdraw from an Offering Period, any accumulated payroll
deductions will be used to automatically exercise my option.
4. I have received a copy of the complete "Integrated Packaging Assembly
Corporation 1996 Employee Stock Purchase Plan." I understand that my
participation in the Employee Stock Purchase Plan is in all respects subject
to the terms of the Plan. I understand that my ability to exercise the
option under this Subscription Agreement is subject to obtaining shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and spouse only):.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the
excess of the fair market value of the shares at the time such shares were
purchased over the price which I paid for the shares. I hereby agree to
notify the Company in writing within 30 days after the date of any
disposition of my shares and I will make adequate provision for Federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary to
make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by me. If I dispose of such shares
at any time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income
will be taxed as ordinary income only to the extent of an amount equal to
the lesser of (1) the excess of the fair market value of the shares at the
time of such disposition over the purchase price which I paid for the
shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
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NAME: (Please print) __________________________________________________
(First) (Middle) (Last)
___________________________________ ___________________________________
Relationship
___________________________________
(Address)
Employee's Social
Security Number: ___________________________________
Employee's Address: ___________________________________
___________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ____________________________ ___________________________________
Signature of Employee
___________________________________
Spouse's Signature (If beneficiary
other than spouse)
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EXHIBIT B
INTEGRATED PACKAGING ASSEMBLY CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Integrated
Packaging Assembly Corporation 1996 Employee Stock Purchase Plan which began on
, 19 (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
_____________________________________
_____________________________________
_____________________________________
Signature:
_____________________________________
Date: _______________________________
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<PAGE>
INTEGRATED PACKAGING ASSEMBLY CORPORATION
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option Plan are
to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive
to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Integrated Packaging Assembly Corporation, a
Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as defined in
section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Director Option Plan.
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(q) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is Four Million (4,000,000) Shares (the "Pool"). The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an Option
to purchase One Hundred Thousand (100,000) Shares (the "First Option")
on the date on which the later of the following events occurs: (A) the
effective date of this Plan, as determined in accordance with Section 6
hereof, or (B) the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the Company
or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director but who remains
a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an Option
to purchase One Hundred Thousand (100,000) Shares (a "Subsequent
Option") on the date each director is reelected to the Board at the
Company's Annual Meeting of Stockholders provided he or she is then an
Outside Director and if as of such date, he or she shall have served on
the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16
hereof shall be conditioned upon obtaining such shareholder approval of
the Plan in accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be equal to the Fair
Market Value per Share on the date of grant of the First Option.
(D) the First Option shall be fully vested and exercisable on its
date of grant.
(vi) The terms of a Subsequent Option granted hereunder shall be as
follows:
(A) the term of the Subsequent Option shall be ten (10) years.
(B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
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<PAGE>
(C) the exercise price per Share shall be equal to the Fair
Market Value per Share on the date of grant of the Subsequent
Option.
(D) the Subsequent Option shall be fully vested and exercisable
on its date of grant.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool,
then the remaining Shares available for Option grant shall be granted
under Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional Shares
become available for grant under the Plan through action of the Board
or the shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth
in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 16 of the Plan. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (iv) any combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has
been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may consist of any consideration and method of
payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section
10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may
exercise his or her Option, but only within three (3) months following the
date of such
F-3
<PAGE>
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of such termination, and to
the extent that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event Optionee's status as a Director
terminates as a result of Disability, the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of termination, or if he or
she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option on the date of death,
and to the extent that the Optionee's estate or a person who acquired the
right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not been
previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee
serves as a Director or a director of the Successor Corporation. Following
such assumption or substitution, if the Optionee's status as a Director or
director of the Successor Corporation, as applicable, is terminated other
than upon a voluntary resignation by the Optionee, the Option or option
shall become fully exercisable,
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including as to Shares for which it would not otherwise be exercisable.
Thereafter, the Option or option shall remain exercisable in accordance
with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares). If such consideration received in the merger or sale
of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger
or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by
any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
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14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
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INTEGRATED PACKAGING ASSEMBLY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Patrick Verderico and F. Terrence Markle,
jointly and severally, proxies with full power of substitution, to vote all
shares of Common Stock of Integrated Packaging Assembly Corporation, a Delaware
corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held at the Company's offices located at
2221 Old Oakland Road, San Jose, California on Friday, September 3, 1999 at
10:00 a.m. Pacific Time, and at any adjournment thereof (1) as hereinafter
specified upon the proposals listed on the reverse side hereof and as more
particularly described in the Proxy Statement of the Company dated August ,
1999 (the "Proxy Statement"), receipt of which is hereby acknowledged, and (2)
in their discretion, upon such other matters as may properly come before the
meeting. The undersigned hereby acknowledges receipt of the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 6.
(Continued and to be signed on reverse side)
----------------------------FOLD AND DETACH HERE----------------------------
<PAGE>
/x/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS
FOR WITHHELD
[_] [_]
Patrick Verderico [_] [_]
Donald W. Brooks [_] [_]
Edward S. Duh [_] [_]
Calvin Lee [_] [_]
Edmond Tseng
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_]
2. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK BY 125,000,000 TO 200,000,000
SHARES AND INCREASE THE AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK BY
5,000,000 SHARES TO 10,000,000 SHARES.
FOR [_] AGAINST [_] ABSTAIN [_]
3. PROPOSAL TO AMEND THE COMPANY'S 1993 STOCK PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE THEREUNDER BY 17,485,079 SHARES TO 20,000,000
SHARES.
FOR [_] AGAINST [_] ABSTAIN [_]
4. PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER BY 1,600,000 SHARES TO
2,000,000 SHARES.
FOR [_] AGAINST [_] ABSTAIN [_]
5. PROPOSAL TO APPROVE THE COMPANY'S 1999 DIRECTOR OPTION PLAN WITH 4,000,000
SHARES RESERVED FOR ISSUANCE THEREUNDER.
FOR [_] AGAINST [_] ABSTAIN [_]
6. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS FOR THE 1999 FISCAL YEAR. PROPOSAL TO RATIFY THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR THE
1999 FISCAL YEAR.
FOR [_] AGAINST [_] ABSTAIN [_]
AND IN THEIR DISCRETION, UPON SUCH OTHER MATTER, OR MATTERS, WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION, FOR THE AMENDMENT TO THE COMPANY'S 1993
STOCK OPTION PLAN, FOR THE AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE
PLAN, FOR THE ADOPTION OF THE COMPANY'S 1999 DIRECTOR OPTION PLAN, FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
Signature(s) ____________________________ Dated _____________, 1999
Signature(s) ____________________________ Dated _____________, 1999
