<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File No. 0-25502
INFORMATION STORAGE DEVICES, INC.
(Exact name of registrant as specified in its charter)
California 77-0197173
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
2045 Hamilton Avenue
San Jose, CA 95125
(Address of principal executive offices, including zip code)
(408) 369-2400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
As of October 31, 1997, there were outstanding 9,742,351 shares of the
Registrant's Common Stock.
<PAGE>
INFORMATION STORAGE DEVICES, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Part I - Financial Information Page
- ------------------------------- ----
Item 1. Financial Statements
Condensed Balance Sheets at December 31, 1996
and September 27, .....................................................3
Condensed Statements of Operations for the Three Months and
Nine Months Ended September 28, 1996 and September 27, 1997............4
Condensed Statements of Cash Flows for the
Nine Months Ended September 28, 1996 and September 27, 1997............5
Notes to Condensed Financial Statements.....................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........................7
Item 3. Quantitative and Qualitative Disclosures About Market Risks................10
Part II - Other Information
Item 1. Legal Proceedings..........................................................11
Item 4. Submission of Matters to a Vote of Security Holders........................11
Item 6. Exhibits and Reports on Form 8-K...........................................12
Signatures.................................................................13
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets 9-27-97 12-31-96
------- --------
Current assets:
Cash and cash equivalents $ 29,473 $ 21,927
Short-term investments 47,358 55,544
Accounts receivable, net 9.899 3,203
Inventories 9,250 10,059
Other current assets 2,355 2,874
-------- --------
Total current assets 68,862 71,680
Property and equipment, net 5,995 5,835
Other assets 2,031 1,200
Long-term investments 750 150
-------- --------
Total Assets $ 77,638 $ 78,865
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,363 $ 1,270
Accounts payable and accrued liabilities 9,676 4,009
Deferred revenue 1,360 1,299
------- --------
Total current liabilities 12,399 6,578
Long-term liabilities 960 1,986
-------- --------
Shareholders' equity 64,279 70,301
-------- --------
Total Liabilities and Shareholders' Equity 77,638 78,865
======== ========
</TABLE>
<PAGE>
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
9-27-97 9-28-96 9-27-97 9-28-96
------- ------- ------- -------
Net revenues $ 13,813 $ 8,153 $ 33,542 $ 31,671
Cost of goods sold 8,848 8,219 21,736 24,800
-------- -------- -------- --------
Gross margin 4,965 (66) 11,806 6,871
Operating Expenses:
Research and development 2,703 2,662 7,904 8,650
In-process research and development (1) -- -- 4,000 --
Selling, general and administrative 3,514 2,620 8,604 7,649
-------- -------- -------- --------
Total operating expenses 6,217 5,282 20,508 16,299
Income (loss) from operations (1,252) (5,348) (8,702) (9,428)
-------- -------- -------- --------
Interest and other income, net 551 566 1,693 1,900
-------- -------- -------- --------
Income (loss) before income taxes (701) (4,782) (7,009) (7,528)
Provision for income taxes -- 961 1 --
-------- -------- -------- --------
Net Income (loss) $ (701) $(5,743) $(7,010) $(7,528)
======== ======== ======== ========
Earnings (loss) per share $ (0.07) $ (0.59) $ (0.73) $ (0.76)
======== ======== ======== ========
Shares used in computing earnings per share 9,654 9,661 9,622 9,867
======== ======== ======== ========
</TABLE>
(1) In-process research and development as a result of the CompactSPEECH(TM)
acquisition (see Item 2, "Overview").
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended
-----------------
9-27-97 9-28-96
------- -------
Cash flows from operating activities:
Net income (loss) $(7,010) $(7,528)
Adjustments to reconcile net income (loss) to net cash
used in operating activities-----
Depreciation and amortization 2,323 1,972
Compensation costs related to stock and stock option grant 58 207
Provision for allowance for doubtful accounts and returns -- 20
Changes in assets and liabilities -----
Accounts receivable (6,696) 3,198
Inventories 809 (4,169)
Prepaid expenses and other assets (241) (592)
Accounts payable 4,329 (6,258)
Accrued liabilities and bonuses 874 95
Deferred revenue 61 51
Other liabilities 561 (12)
------- -------
Net cash used in operating activities (4,932) (13,016)
Cash flows from investing activities:
Purchase of property and equipment (2,343) (1,764)
Change in other assets (211) (539)
Purchase of short-term investments (21,462) (64,014)
Proceeds from maturities and sale of short-term investments 37,175 76,855
Purchase of long-term investments (600) --
------- -------
Net cash provided by investing activities 12,559 10,538
Cash flows from financing activities:
Proceeds from sale of common stock, net of issuance costs 946 506
Repurchase of common stock -- (9,712)
Payments on capitalized lease obligations (1,027) (835)
------- -------
Net cash used in financing activities (81) (10,041)
Net increase (decrease) in cash and cash equivalents 7,546 (12,519)
Cash and cash equivalents at beginning of period 21,927 29,202
------- -------
Cash and cash equivalents at end of period $ 29,473 $ 16,683
======= =======
</TABLE>
<PAGE>
Notes to Condensed Financial Statements
1. Basis of Presentation:
----------------------
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto for the year ended
December 31, 1996.
The unaudited condensed financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) that are, in the
opinion of management, necessary to state fairly the financial results for the
periods presented. The results for such periods are not necessarily indicative
of the results to be expected for the full fiscal year.
2. Inventories:
------------
Inventories consist of material, labor and manufacturing overhead and are
stated at the lower of cost (first-in, first-out basis) or market. The
components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
September 27, 1997 December 31, 1996
------------------ -----------------
Work-in-process........................ $ 5,376 $ 6,157
Finished goods......................... 3,874 3,902
------ ------
$ 9,250 $10,059
======= =======
</TABLE>
3. Earnings (Loss) Per Share:
--------------------------
Net income per share is computed using the weighted average number of
shares of common stock, and dilutive common equivalent shares from stock options
using the treasury stock method. Fully diluted net income per share is
substantially the same as primary net income per share.
4. New Accounting Standards:
-------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 128 (SFAS 128), "Earnings per
Share," which is required to be adopted by the Company in its fourth quarter of
fiscal 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating earnings per share, primary earnings
per share will be replaced with basic earnings per share and fully diluted
earnings per share will be replaced with diluted earnings per share. For basic
earnings per share, the dilutive effect of stock options will be excluded. If
SFAS 128 had been applied by the Company during the third quarter and nine
months ended September 27, 1997 and September 28, 1996, basic net income per
share and diluted net income per share would have been substantially the same as
the reported primary earnings per share.
In July 1997, the Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income" was issued and is effective for
fiscal years ending after December 15, 1997. The adoption is not expected to
have a material effect on the financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This report includes forward-looking statements that involve a number of
risks and uncertainties. Actual results may differ materially because of a
number of factors, including those set forth under "Other Factors That May
Affect Future Operating Results" on page 15 of the ISD 1996 Form 10-K filed with
the Securities and Exchange Commission.
Overview
ISD designs, develops, and markets semiconductor voice solutions based on
innovative analog and digital technologies and mixed signal expertise. ISD's
patented ChipCorder(R) and CompactSPEECH(TM) technologies enable solid state
voice recording and playback applications in the communications, consumer, and
industrial markets. ChipCorder delivers single chip solutions, simple
integration, exceptional sound quality, low power consumption, batteryless voice
storage, and low cost. CompactSPEECH delivers powerful digital speech
processing, advanced telecom capabilities, long recording times, cost effective
high voice quality, multi-language speech synthesis, and batteryless voice
storage.
The Company distributes its products through a direct sales organization
and a worldwide network of over 50 sales representatives and distributors. The
Company was incorporated in California in December 1987 and introduced its first
product in February 1991. ISD is an ISO 9001 certified Company.
ISD subcontracts with independent foundries to fabricate the wafers for
all of its products. This approach enables the Company to concentrate its
resources on the design and test areas, where the Company believes it has the
greatest competitive advantage, and eliminates the high cost of owning and
operating a semiconductor wafer fabrication facility. The Company is dependent
on these foundries to allocate to the Company a portion of their foundry
capacity sufficient to meet the Company's needs, to produce products of
acceptable quality and with acceptable manufacturing yields, and to deliver
products to the Company on time. Historically, the Company has experienced
difficulties in each of these areas, and the Company expects that it could
experience such difficulties in the future.
Although the Company believes that current foundry capacity is adequate to
meet the Company's anticipated needs, there can be no assurance that the Company
will be able to qualify additional foundry capacity or otherwise obtain needed
quantities of wafers within expected time frames or at all. Moreover, in order
to reduce future manufacturing costs, the Company is designing smaller die sizes
with smaller geometry processes to increase the number of die produced on each
wafer. Despite these trends in the Company's design of its integrated circuits,
there can be no assurance that the Company's foundries will achieve or maintain
acceptable cost reductions, manufacturing yields, and process control in the
future, or that sudden declines in yields will not occur. Failures to improve,
or fluctuations in, manufacturing yields and process controls, particularly at
times when the Company is experiencing severe pricing pressures from its
customers or its competitors, would have a material adverse effect on the
Company's results of operations.
In March 1997, the Company acquired the CompactSPEECH product line from
National Semiconductor Corporation ("National") for approximately $5.0 million
in cash. As part of this acquisition, the Company also acquired certain
intellectual property rights and access to speech recognition technology. In
addition, ISD established ISD Israel, Ltd. ("ISDIL"), a wholly-owned subsidiary
of ISD incorporated and located in Israel. The ISDIL Development Center
currently has a staff of fourteen.
In July 1997, the Company announced an expansion of its technology
portfolio to include flash memory technology for the development of new longer
duration voice circuits. This announcement included strategic agreements with
Silicon Storage Technology, Inc. ("SST") and Winbond Electronics Corporation
("Winbond"). This technology license agreement provides ISD access to SST's
non-volatile SuperFlash(R) memory technology and 0.6 micron SuperFlash process
technology. (SuperFlash is a registered trademark of SST.) The SST agreement is
expected to expand the Company's ability to produce longer duration products
while giving the Company additional resources to explore high density SuperFlash
based products. ISD and Winbond have entered into a long term manufacturing
agreement to produce such longer duration flash memory products.
<PAGE>
In August 1997, the Company announced an agreement with Bright Microelectronics,
Inc. ("Bright") to develop a series of high density, four bits per cell digital
memory chips based on the Company's multi-level storage technology. This
agreement is intended to further solidify the Company's strategy to broaden its
family of record and playback chips to include flash technology. As part of its
agreement with Bright, the Company made an equity investment in Bright.
Results of Operations
The following table sets forth, as a percentage of net revenues, each line
item in the Company's statements of operations for the periods indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
- -----------------------------------------------------------------------------------------------
9-27-97 9-28-96 9-27-97 9-28-96
------- ------- ------- -------
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 64.1 100.8 64.8 78.3
----- ----- ------ ------
Gross margin 35.9 (0.8) 35.2 21.7
----- ----- ------ ------
Operating Expenses: -- -- -- --
Research and development 19.6 32.6 23.5 27.3
In-process research and development (1) -- -- 11.9 --
Selling, general and administrative 25.4 32.1 25.7 24.2
----- ----- ----- -----
Total operating expenses 45.0 64.7 61.1 51.5
----- ----- ----- -----
Income (loss) from operations (9.1) (65.5) (25.9) (29.8)
Interest and other income, net 4.0 6.9 5.0 6.0
----- ------ ------ ------
Income (loss) before income taxes (5.1) (58.6) (20.9) (23.8)
Provision for income taxes -- 11.8 -- --
----- ----- ------ ------
Net Income (loss) (5.1) (70.4) (20.9) (23.8)
----- ------ ------ ------
</TABLE>
(1) - In-process research and development as a result of the CompactSPEECH(TM)
acquisition (see Item 2, "Overview").
Net Revenues
During the nine months ended September 27, 1997, the Company's net
revenues were principally derived from the sale of integrated circuits for voice
recording and playback. Net revenues for the third quarter of 1997 were $13.8
million compared to $8.2 million for the third quarter of 1996 and $11.4 million
for the second quarter of 1997. Third quarter net revenues for 1997 included
$4.2 million derived from the recently acquired CompactSPEECH product line, or
about 30% of the quarter's net revenues. Net revenues for the nine months ended
September 27, 1997 were $33.5 million. This was an increase of 5.7% from net
revenues of $31.7 million for the nine months ended September 28, 1996. This
increase in net revenues reflects the addition of the ISD33000 family of
ChipCorder products and the addition of the CompactSPEECH products. The failure
of new or broader applications or markets to develop, or the failure of the
existing market to continue to be receptive to these products, could have a
material effect on net revenues and the Company's results of operations.
<PAGE>
During the third quarter of 1997, sales to the Company's top ten customers
accounted for 67% of net revenues compared to 84% in the third quarter of 1996.
In the third quarter of 1997, the Company's top five customers were Philips,
Motorola, Matshusita, Marubun, and Siemens. These customers accounted for 14%,
11%, 10%, 7% and 7% of third quarter net revenues, respectively. The loss of, or
significant reduction in purchases by, a current major customer would have a
material adverse effect on the Company's financial condition and results of
operations if the Company were unable to obtain the orders from new or existing
customers to offset such losses or reductions.
The communications market in the third quarter of 1997 accounted for 80%
of net revenues compared to 61% for the third quarter of 1996. For the nine
months ending September 27, 1997, the communications market accounted for about
78% of net revenues compared to about 73% for the first nine months of 1996. The
consumer and industrial markets were 15% and 5%, respectively, of net revenues
for the third quarter of 1997 compared to 32% and 7%, respectively, of net
revenues for the third quarter of 1996. For the nine months ending September 27,
1997, the consumer and industrial markets accounted for about 14% and 8%,
respectively, compared to about 21% and 6% for the first nine months of 1996.
These results reflect ISD's increased focus on voice solutions for the
communications market. The Company's communications customers represent products
which include telephone answering machines, cellular phones, cordless phones,
personal handy phones and pagers. The failure of new applications or markets to
develop, or the failure of existing markets, particularly the communications
market, to continue to be receptive to the Company's products or to offset
reduced revenues from the consumer market, could have a material adverse effect
on the Company's business, financial condition, and results of operations.
International sales for the third quarter of 1997 were 80% of total sales,
compared to 60% for the third quarter of 1996. Sales to Japan were 25% of total
sales in the third quarter of 1997, down from 29% in the third quarter of 1996,
and sales to the rest of Asia were 19% in the third quarter of 1997, down from
20% in the third quarter of 1996. Sales to Europe accounted for 36% of total
sales in the third quarter of 1997, up from 11% in the same period last year.
North American sales were 20% in the third quarter of 1997, down from 40% for
the same period last year. Because of its reliance on export sales and its
dependence on foundries outside the United States, the Company is subject to the
risks of conducting business internationally, including foreign government
regulation and general geopolitical risk such as political and economic
instability, potential hostilities, changes in diplomatic and trade
relationships, and currency fluctuations any of which could have a material
effect on the Company's financial conditions or results of operations. In
addition, recent volatility in the currency and equity markets of certain Asian
countries, excluding Japan, could have a material land adverse effect on the
Company's sales in these countries, which could contribute to a material and
adverse effect on the Company's business, financial conditions, and results of
operations.
Gross Margin
The Company's gross margin for the third quarter of 1997 was $5.0 million,
or 36% compared to a negative $66,000 or -1% gross margin for the third quarter
of 1996. Gross margin for the nine months ending September 27, 1997 was 35%
compared to 22% for the same period of 1996. This improvement in margin reflects
an increase in shipments of the higher margin ISD33000 and CompactSPEECH
products compared to the third quarter of 1996. However, gross margin for the
third quarter of 1997 was affected by a yield problem on the ISD33000 product
which occurred late in the third quarter of 1997. This problem has been
recognized; corrective action has been taken; and it is expected that yield will
return to an acceptable level before the end of the fourth quarter. The Company
could continue to experience fluctuations in manufacturing yields, which could
adversely affect gross margins, particularly if higher yields and reduced costs
are not achieved. Additionally, the Company could experience variations in gross
margins as a result of declines in its average selling prices or shifts in
product and customer mix.
<PAGE>
Research and Development
Research and development expenses were $2.7 million, or 20% of net
revenues in the third quarter of 1997, compared to $2.7 million or 33% of net
revenues in the same period of 1996. Research and development expenses for the
first three quarters of 1997 were 24% compared to 27% for the same period of
1996. Research and development expenses are expected to increase as a result of
the Company's technology and new product activity associated with the technology
announcements disclosed in the "Overview" section. However, there can be no
assurance that new products will be successfully developed or achieve market
acceptance, that yield problems on new products utilizing new foundry processes
will not arise in the future, or that product yields can be improved with
respect to existing products or to new products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3.5 million, or 25% of
net revenues in the third quarter of 1997, compared to $2.6 million, or 32% of
net revenues in the third quarter of 1996. Selling, general and administrative
expenses for the first three quarters of 1997 were 26% compared to 24% for the
same period of 1996. Selling, general and administrative expenses were higher
than last year's equivalent quarter and the previous quarter because of higher
commissions associated with higher revenues as well as additional legal costs
associated with high patent activity and the technology-related agreements
discussed in the "Overview Section". Selling, general and administrative
expenses could increase as a result of these activities, or related activities
as well as additional marketing costs associated with CompactSPEECH.
Interest and Other Income, Net
Interest and other income was $0.6 million for the third quarters of 1997
and 1996. Interest and other income for 1997 primarily represents interest
income earned on the proceeds of the Company's initial and follow-on public
offerings of common stock.
Provision for Income Taxes
Because of the loss incurred in the third quarter of 1997, the Company has
made no provisions for income taxes. In the third quarter of 1996, the Company
showed an income tax provision of approximately $1.0 million.
Liquidity and Capital Resources
The Company has a line of credit with a commercial bank under which the
Company may borrow up to $15 million based on eligible assets; the term of the
credit line runs through June 30, 1998. At September 27, 1997, the Company had
no borrowings outstanding under this line of credit, but the credit line is
being used to guarantee certain letters of credit generated by the Company. The
line of credit does not restrict the Company from paying cash dividends on its
capital stock and the only financial covenant is to maintain a minimum of
pledged investments of $17.7 million in the Company's Liquidity Management
account with the bank. The Company is currently in compliance with this
financial covenant under the line of credit agreement. As of September 27, 1997,
the amount of unrestricted equity available for distribution as a result of
these covenants was $46.5 million.
The Company's operating activities used net cash of $4.9 million in the
first nine months of 1997, primarily due to the Company's net loss, but also due
to an increase in accounts receivable of $6.7 million. Capital purchases were
$2.3 million for the first nine months of 1997. The Company has entered into a
new operating lease agreement of $1.2 million of which $0.7 million is available
over the next three quarters.
<PAGE>
At September 27, 1997, the Company had cash, cash equivalents and
short-term investments of $47.4 million, long-term investments of $0.8 million,
and working capital of $56.5 million compared to $55.5 million, $0.2 million,
and $58.7 million respectively at December 31, 1996. The Company believes its
existing cash, cash equivalents and short-term investments, together with its
available line of credit and current equipment lease lines, will be sufficient
to satisfy the Company's projected working capital and capital expenditure
requirements through at least the next twelve months.
Item 3. Quantitative and Qualitative Disclosures About Market
Risks
Not applicable.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In January 1995, Atmel Corporation ("Atmel") notified the Company and
Samsung Electronics Co., Ltd. ("Samsung") of certain claims and demanded that
the Company and Samsung either negotiate licenses with Atmel or cease
manufacturing the Company's products at Samsung. The Company received an opinion
from its patent counsel, Blakely, Sokoloff, Taylor & Zafman, that the Company
does not violate any of the patents identified in Atmel's notice to the Company,
and the Company believes the patent claims are without merit. The Company also
believes that the other claims in the notice from Atmel were without merit, and
its general counsel, on January 14, 1995, after reviewing with appropriate
senior and knowledgeable personnel at the Company the factual information
surrounding the other claims, provided a written response to Atmel that these
claims were without merit. Atmel filed a complaint on June 15, 1995 in the
United States District Court for the Northern District of California which
alleges causes of action against the Company for patent infringement, trade
secret misappropriation, breach of written contract, breach of contract
implied-in-fact, unjust enrichment and declaratory relief. Atmel, in addition to
damages and injunctive relief, is seeking a declaration from the Court that
Atmel is a co-owner of the Company's ChipCorder products. All the causes of
action alleged in the complaint appear to be based on the same circumstances
alleged in the January 1995 Atmel notice. The Company believes the causes of
action in the complaint to be without merit and has had its general counsel file
an answer denying any wrongful conduct and asserting counterclaims for damage
caused to the Company by Atmel's termination of the fabrication arrangement
between the parties. Although the action has been pending for more than two
years, compulsory discovery was stayed until recently. The court has bifurcated
the issues related to liability and damages and has stayed discovery on
liability issues. A hearing on the appropriate construction of the claims is set
for November 1997. While the Company does not believe the ultimate resolution of
this matter will have a material impact on its business or financial position,
it may have a material adverse impact on the results of operations in the period
in which it is resolved.
Item 4. Submission of Matters to a Vote of Securities Holders
The Company's Annual Meeting of Shareholders was held on August 7, 1997.
The following matters were voted upon by shareholders pursuant to proxies
solicited pursuant to Regulation 14A, promulgated under the Securities Exchange
Act of 1934.
(a) The following individuals were elected to the Board of
Directors:
<TABLE>
<CAPTION>
<S> <C> <C>
Votes For Votes Withheld
--------- --------------
David L. Angel 9,293,227 65,322
Frederick B. Bamber 9,338,742 19,807
Eugene J. Flath 9,338,642 19,907
Alan V. King 9,333,372 25,177
Eric J. Ochiltree 9,338,742 19,807
Frederick L. Zieber 9,340,122 18,427
</TABLE>
<PAGE>
(b) Approval of an amendment to the ISD 1994 Equity Incentive Plan that
increases the number of shares of Common Stock reserved for issuance thereunder
by 750,000 shares, from 2,000,000 shares to 2,750,000 shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstain No Vote
6,214,304 1,219,304 10,383 1,914,557
</TABLE>
(c) Approval of an amendment to the ISD 1994 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 50,000 shares, from 120,000 shares to 170,000 shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstain No Vote
6,730,612 783,721 10,603 1,833,613
</TABLE>
(d) Ratification of appointment of Arthur Andersen LLP as independent auditors
for the fiscal year ending December 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstain No Vote
9,344,554 6,527 7,468 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith.
Exhibit
Number Exhibit Title
- ------- -------------
10.02 - Registrant's 1994 Equity Incentive Plan, as amended, and related
documents.
10.04 - Registrant's 1994 Employee Stock Purchase Plan, as amended.
11.01 - Statement regarding computation of per share earnings.
27.01 - Financial Data Schedule
(b) The Company did not file a report on Form 8-K during the period ended
September 27, 1997.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMATION STORAGE DEVICES, INC.
(Registrant)
Date: November 11, 1997
/S/ Felix J. Rosengarten
------------------------
Felix J. Rosengarten
Vice President, Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
<PAGE>
EXHIBIT 10.02
INFORMATION STORAGE DEVICES, INC.
1994 EQUITY INCENTIVE PLAN
As Adopted September 12, 1994
As Amended through April 30, 1997
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be 2,750,000 Shares. Any shares issuable upon
exercise of options granted pursuant to the 1987 Stock Option Plan (the "Prior
Plan") that expire or become unexercisable for any reason without having been
exercised in full, shall no longer be available for distribution under the Prior
Plan, but shall be available for distribution under this Plan. Subject to
Sections 2.2 and 18, Shares shall again be available for grant and issuance in
connection with future Awards under the Plan that: (a) are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option, (b) are subject to an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price, or (c) are subject to an Award that otherwise terminates without
Shares being issued.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. No person shall be eligible to receive more than
500,000 Shares at any time during the term of this Plan pursuant to the grant of
Awards hereunder. A person may be granted more than one Award under the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Award
Agreement and any other agreement or document
executed pursuant to the Plan;
<PAGE>
(b) prescribe, amend and rescind rules and regulations
relating to the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other
consideration subject to Awards;
(f) determine whether Awards will be granted singly, in combination,
in tandem with, in replacement of, or as alternatives to, other
Awards under the Plan or any other incentive or compensation plan
of the Company or any Parent, Subsidiary or Affiliate of the
Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment
of Awards;
(i) correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Award
or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or
advisable for the administration of the Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of the Plan
or Award, at any later time, and such determination shall be final and binding
on the Company and all persons having an interest in any Award under the Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under the Plan to Participants who are not Insiders of the
Company.
4.3 Exchange Act Requirements. If two or more members of the
Board are Outside Directors, the Committee shall be comprised of at least two
members of the Board, all of whom are Outside Directors and Disinterested
Persons. The Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange Act,
which shall consist of the appointment by the Board of a Committee consisting of
not less than two members of the Board, each of whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under the Plan
shall be evidenced by an Award Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
<PAGE>
5.3 Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement; provided, however, that no Option shall be exercisable after
the expiration of ten (10) years from the date the Option is granted, and
provided further that no ISO granted to a person who directly or by attribution
owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Parent or Subsidiary of the Company ("Ten
Percent Shareholder") shall be exercisable after the expiration of five (5)
years from the date the ISO is granted. The Committee also may provide for the
exercise of Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number or percentage as the Committee
determines.
5.4 Exercise Price. The Exercise Price shall be determined by the
Committee when the Option is granted and may be not less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that (i) the Exercise
Price of an ISO shall be not less than 100% of the Fair Market Value of the
Shares on the date of grant and (ii) the Exercise Price of any ISO granted to a
Ten Percent Shareholder shall not be less than 110% of the Fair Market Value of
the Shares on the date of grant. Payment for the Shares purchased may be made in
accordance with Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set forth
in the Stock Option Agreement, exercise of an Option shall always be subject to
the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then Participant may
exercise such Participant's Options only to the
extent that such Options would have been
exercisable upon the Termination Date no later than
three (3) months after the Termination Date (or
such shorter time period as may be specified in the
Stock Option Agreement), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is terminated because of death
or Disability (or the Participant dies within three
(3) months of such termination), then Participant's
Options may be exercised only to the extent that
such Options would have been exercisable by
Participant on the Termination Date and must be
exercised by Participant (or Participant's legal
representative or authorized assignee) no later
than twelve (12) months after the Termination Date
(or such shorter time period as may be specified in
the Stock Option Agreement), but in any event no
later than the expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If
the Fair Market Value of Shares on the date of grant with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
<PAGE>
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
the Plan, no term of the Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee shall determine to whom an offer will be made, the number of
Shares the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to the Plan shall be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each Participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of the Plan. The offer of Restricted Stock shall be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted, except in the case of a sale to a Ten Percent
Shareholder, in which case the Purchase Price shall be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
the Plan.
6.3 Restrictions. Restricted Stock Awards shall be subject to
such restrictions as the Committee may impose. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company pursuant to an Award Agreement (the "Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in the Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.
<PAGE>
7.2 Terms of Stock Bonuses. The Committee shall determine the
number of Shares to be awarded to the Participant and whether such Shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee shall determine.
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to the Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to
the Participant;
(b) by surrender of shares that either: (1) have been
owned by Participant for more than six (6) months
and have been paid for within the meaning of SEC
Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note
has been fully paid with respect to such shares);
or (2) were obtained by Participant in the public
market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who
-------- -------
are not employees of the Company shall not be
entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral
other than the Shares; provided, further, that the
-------- -------
portion of the Purchase Price equal to the par
value of the Shares, if any, must be paid in cash.
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) by tender of property;
<PAGE>
(f) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association
of Securities Dealers (a "NASD Dealer") whereby the
Participant irrevocably elects to exercise the Option and to
sell a portion of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from Participant and a NASD
Dealer whereby Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company;
or
(g) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under the Plan by authorizing a guarantee by the Company of
a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Awards are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, then except as provided below, the election
shall be irrevocable as to the particular Shares as to
which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Committee;
(d) if the Participant is an Insider and if the Company
is subject to Section 16(b) of the Exchange Act:
(1) the election may not be made within six (6)
months of the date of grant of the Award, except as
otherwise permitted by SEC Rule 16b-3(e) under the
Exchange Act, and (2) either (A) the election to
use stock withholding must be irrevocably made at
least six (6) months prior to the Tax Date
(although such election may be revoked at any time
at least six (6) months prior to the Tax Date) or
(B) the exercise of the Option or election to use
stock withholding must be made in the ten (10) day
period beginning on the third day following the
release of the Company's quarterly or annual
summary statement of sales or earnings; and
<PAGE>
(e) in the event that the Tax Date is deferred until
six (6) months after the delivery of Shares under
Section 83(b) of the Code, the Participant shall
receive the full number of Shares with respect to
which the exercise occurs, but such Participant
shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the
Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant shall have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company shall be subject to the same restrictions as
the Restricted Stock; provided, further, that the Participant shall have no
right to retain such stock dividends or stock distributions with respect to
Shares that are repurchased at the Participant's original Purchase Price
pursuant to Section 12.
10.2 Financial Statements. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness,
at: (A) with respect to Shares that are "Vested" (as defined in the Award
Agreement), the higher of: (l) Participant's original Purchase Price, or (2) the
Fair Market Value of such Shares on Participant's Termination Date, provided,
that such right of repurchase (i) must be exercised as to all such "Vested"
Shares unless a Participant consents to the Company's repurchase of only a
portion of such "Vested" Shares and (ii) terminates when the Company's
securities become publicly traded; or (B) with respect to Shares that are not
"Vested" (as defined in the Award Agreement), at the Participant's original
Purchase Price, provided, that the right to repurchase at the original Purchase
Price lapses at the rate of at least 20% per year over 5 years from the date the
Shares were purchased (or from the date of grant of options in the case of
Shares obtained pursuant to a Stock Option Agreement and Stock Option Exercise
Agreement), and if the right to repurchase is assignable, the assignee must pay
the Company, upon assignment of the right to repurchase, cash equal to the
excess of the Fair Market Value of the Shares over the original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
<PAGE>
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under the Plan shall be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company shall have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant shall be required to execute and deliver a written
pledge agreement in such form as the Committee shall from time to time approve.
The Shares purchased with the promissory note may be released from the pledge on
a prorata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
18. CORPORATE TRANSACTIONS.
18.1 Corporate Transactions. In the event of a Corporate
Transaction (as defined in this Section 18.1), the exercisability of each Option
shall be automatically accelerated so that each Option shall, immediately before
the specified effective date for the Corporate Transaction, become fully
exercisable with respect to the total number of Shares and may be exercised for
all or any portion of such Shares; provided, that an Option shall not be
accelerated if and to the extent that such Option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof. The
determination of comparability shall be made by the Board or the Committee, and
the Board or the Committee's determination shall be final, binding and
conclusive. Upon the consummation of a Corporate Transaction, all outstanding
Options shall, to the extent not previously exercised or assumed by the
successor corporation or its parent, terminate and cease to be exercisable.
<PAGE>
"Corporate Transaction" means (i) a merger or acquisition in
which the Company is not the surviving entity (except for a transaction the
principal purpose of which is to change the State in which the Company is
incorporated), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (iii) any other corporate
reorganization or business combination that is not approved by the Board and in
which the beneficial ownership of 50% or more of the Company's outstanding
voting stock is transferred.
18.2 Dissolution. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify the Optionee at least fifteen
(15) days prior to such proposed action. To the extent that Options have not
been previously exercised, such Options will terminate immediately prior to the
consummation of such proposed action.
18.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Option under this Plan in substitution of
such other company's Option, or (b) assuming such Option as if it had been
granted under this Plan if the terms of such assumed Option could be applied to
an Option granted under this Plan. Such substitution or assumption shall be
permissible if the holder of the substituted or assumed Option would have been
eligible to be granted an Option under the Plan if the other company had applied
the rules of the Plan to such grant. In the event the Company assumes an Option
granted by another company, the terms and conditions of such Option shall remain
unchanged (except that the Exercise Price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become effective
on the closing of the first registration of the Company's Common Stock for sale
to the public under the Securities Act (the "Effective Date"). The Plan shall be
approved by the shareholders of the Company (excluding Shares issued pursuant to
this Plan), consistent with applicable laws, within twelve (12) months before or
after the date the Plan is adopted by the Board. Upon the Effective Date, the
Board may grant Awards pursuant to the Plan; provided, however, that: (a) no
Option may be exercised prior to initial shareholder approval of the Plan; (b)
no Option granted pursuant to an increase in the number of Shares approved by
the Board shall be exercised prior to the time such increase has been approved
by the shareholders of the Company; and (c) in the event that shareholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be canceled, any Shares issued pursuant to any Award
shall be canceled and any purchase of Shares hereunder shall be rescinded. After
the Company becomes subject to Section 16(b) of the Exchange Act, the Company
will comply with the requirements of Rule 16b-3 (or its successor), as amended,
with respect to shareholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from
the date the Plan is adopted by the Board or, if earlier, the date of
shareholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
<PAGE>
23. DEFINITIONS. As used in the Plan, the following terms shall
have the following meanings:
"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"Award" means any award under the Plan, including any Option,
Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"Company" means Information Storage Devices, Inc., a corporation
organized under the laws of the State of California, or any successor
corporation.
"Disability" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"Disinterested Person" means a director who has not, during the
period that person is a member of the Committee and for one year prior to
service as a member of the Committee, been granted or awarded equity securities
pursuant to the Plan or any other plan of the Company or any Parent, Subsidiary
or Affiliate of the Company, except in accordance with the requirements set
forth in Rule 16b-3(c)(2)(i) (and any successor regulation thereto) as
promulgated by the SEC under Section 16(b) of the Exchange Act, as such rule is
amended from time to time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Price" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
last trading day prior to the date of determination as reported
in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the last
trading day prior to the date of determination on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the last trading day prior to the date of
determination as reported by The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Board in good
faith.
<PAGE>
"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"Outside Director" means any director who is not (a) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company,
(b) a former employee of the Company or any Parent, Subsidiary or Affiliate of
the Company who is receiving compensation for prior services (other than
benefits under a tax-qualified pension plan), (c) a current or former officer of
the Company or any Parent, Subsidiary or Affiliate of the Company or (d)
currently receiving compensation for personal services in any capacity, other
than as a director, from the Company or any Parent, Subsidiary or Affiliate of
the Company; provided, however, that at such time as the term "Outside
Director", as used in Section 162(m) is defined in regulations promulgated under
Section 162(m) of the Code, "Outside Director" shall have the meaning set forth
in such regulations, as amended from time to time and as interpreted by the
Internal Revenue Service.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under the Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under the
Plan.
"Plan" means this Information Storage Devices, Inc. 1994 Equity
Incentive Plan, as amended from time to time.
"Restricted Stock Award" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for
issuance under the Plan, as adjusted pursuant to Sections 2 and 15, and any
successor security.
"Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"Termination" or "Terminated" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee shall have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").
<PAGE>
INFORMATION STORAGE DEVICES, INC.
1994 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
----------------------
This Stock Option Agreement ("Agreement") includes the Notice of Grant
of Stock Options attached hereto (the "Notice of Grant"), which is incorporated
herein by reference, and is made and entered into as of the date of grant shown
on the Notice of Grant (the "Date of Grant") by and between the Company and the
participant named on the Notice of Grant ("Participant"). Capitalized terms not
defined in this Agreement or on the Notice of Grant have the meaning ascribed to
them in the Company's 1994 Equity Incentive Plan (the "Plan").
1. Grant of Option. The Company hereby grants to Participant an option
(the "Option") to purchase the total number of shares of Common Stock of the
Company (the "Shares") at the Exercise Price Per Share shown on the Notice of
Grant (the "Exercise Price"), subject to all of the terms and conditions of this
Agreement and the Plan. If designated as an Incentive Stock Option on the Notice
of Grant, the Option is intended to qualify as an "incentive stock option"
("ISO") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Exercise Period. This Option becomes exercisable as it vests.
Provided Participant continues to provide services to the Company or any
Subsidiary, Parent or Affiliate of the Company throughout the specified period,
the Option shall become exercisable as shown on the Notice of Grant. The Option
shall expire on the Expiration Date shown on the Notice of Grant and must be
exercised, if at all, on or before the Expiration Date.
3. Termination.
3.1 Termination for Any Reason Except Death or Disability. If
Participant is Terminated for any reason, except death or Disability, the
Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the date of Termination, may be exercised by
Participant no later than three (3) months after the date of Termination, but in
any event no later than the Expiration Date.
3.2
Termination Because of Death or Disability. If Participant is Terminated because
of death or Disability of Participant, the Option, to the extent that it is
exercisable by Participant on the date of Termination, may be exercised by
Participant (or Participant's legal representative) no later than twelve (12)
months after the date of Termination, but in any event no later than the
Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this Agreement
shall confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Parent, Subsidiary or Affiliate of the
Company, or limit in any way the right of the Company or any Parent, Subsidiary
or Affiliate of the Company to terminate Participant's employment or other
relationship at any time, with or without cause.
4. Manner of Exercise.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as Exhibit A, or in such other form as may be approved by the Company
from time to time (the "Exercise Agreement"), which shall set forth, inter alia,
Participant's election to exercise the Option, the number of Shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises the Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise the Option.
<PAGE>
4.2 Limitations on Exercise. The Option may not be exercised unless
such exercise is in compliance with all applicable federal and state securities
laws, as they are in effect on the date of exercise. The Option may not be
exercised as to fewer than 100 Shares unless it is exercised as to all Shares as
to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:
(a) by cancellation of indebtedness of the Company to
the Participant;
(b) by surrender of shares of the Company's Common
Stock that either: (1) have been owned by
Participant for more than six (6) months and have
been paid for within the meaning of SEC Rule 144
and, if such shares were purchased from the Company
by use of a promissory note, such note has been
fully paid with respect to such shares); or (2)
were obtained by Participant in the open public
market; and (3) are clear of all liens, claims,
encumbrances or security interests;
(c) by tender of a full recourse promissory note
having such terms as may be approved by the
Committee and bearing interest at a rate sufficient
to avoid imputation of income under Sections 483
and 1274 of the Code; provided, however, that
-------- -------
Participants who are not employees of the Company
shall not be entitled to purchase Shares with a
promissory note unless the note is adequately
secured by collateral other than the Shares;
provided, further, that the portion of the Purchase
-------- -------
Price equal to the par value of the Shares, if any,
must be paid in cash.
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) by tender of property;
(f) provided that a public market for the Company's
stock exists, (1) through a "same day sale"
commitment from Participant and a broker-dealer
that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby
-------------
Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so
purchased to pay for the exercise price and whereby
the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly
to the Company, or (2) through a "margin"
--
commitment from Participant and a NASD Dealer
whereby Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for
a loan from the NASD Dealer in the amount of the
exercise price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company;
or
(g) by any combination of the foregoing.
<PAGE>
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Participant may provide for payment of withholding taxes upon exercise
of the Option by requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be withheld. In such
case, the Company shall issue the net number of Shares to the Participant by
deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. Notice of Disqualifying Disposition of ISO Shares. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years
after the Date of Grant, and (2) the date one year after transfer of such Shares
to Participant upon exercise of the Option, Participant shall immediately notify
the Company in writing of such disposition. Participant agrees that Participant
may be subject to income tax withholding by the Company on the compensation
income recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to Participant.
6. Compliance with Laws and Regulations. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. The Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and may
be exercised during the lifetime of Participant only by Participant. The terms
of the Option shall be binding upon the executors, administrators, successors
and assigns of Participant.
8. Tax Consequences. Set forth below is a brief summary as of the Date
of Grant of some of the federal and California tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.
8.1 Exercise of ISO. If the Option qualifies as an ISO, there will
be no regular federal or California income tax liability upon the exercise of
the Option, although the excess, if any, of the fair market value of the Shares
on the date of exercise over the Exercise Price will be treated as a tax
preference item for federal income tax purposes and may subject the Participant
to the alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the Option does not
qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price. The Company will be required to withhold from
Participant's compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
<PAGE>
8.3 Disposition of Shares. If the Shares are held for more than
twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of the Option (and, in the case of an ISO, are disposed of more than
two years after the Date of Grant), any gain realized on disposition of the
Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within one
year of exercise or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price. The Company will be
required to withhold from Participant's compensation or collect from Participant
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.
9. Privileges of Stock Ownership. Participant shall not have any of
the rights of a shareholder with respect to any Shares until Participant
exercises the Option and pays the Exercise Price.
10. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the
Committee for review. The resolution of such a dispute by the Committee
shall be final and binding on the Company and Participant.
11. Entire Agreement. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
12. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
13. Successors and Assigns. The Company may assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
15. Acceptance. Participant hereby acknowledges receipt of a copy of
the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax advisor prior to such
exercise or disposition.
<PAGE>
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
<PAGE>
- ---------------------------------------------------------------------
Exhibit A
- ---------------------------------------------------------------------
INFORMATION STORAGE DEVICES, INC.
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock as set
forth below:
Participant Number of Shares Purchased:
Social Security Number: Purchase Price per Share:
Address: Aggregate Purchase Price:
Date of Option Agreement:
- -----------------------------------
Type of Option: [ ] Exact Name of Title to Shares:
Incentive Stock Option _____
_____
[ ] Nonqualified Stock Option
Participant hereby delivers to the Company the Aggregate Purchase Price,
to the extent permitted in the Option Agreement as follows (check as applicable
and complete):
[ ] in cash (by check) in the amount of $__________________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Participant
in the amount of $_______________________;
[ ] by delivery of ___________ fully-paid, nonassessable and
vested shares of the common stock of the Company owned by
Participant for at least six (6) months prior to the date
hereof (and which have been paid for within the meaning of SEC
Rule 144), or obtained by Participant in the open public
market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current Fair
Market Value of $_________ per share;
[ ] by tender of a full recourse promissory note in the principal amount of
$____________________________, secured by a Pledge Agreement of even date
herewith;
[ ] by the waiver hereby of compensation due or accrued to
Participant for services rendered in the amount of
$----------------------;
[ ] by tender of property in the amount of $______________;
[ ] through a "same-day-sale" commitment, delivered herewith, from
Participant and the NASD Dealer named therein, in the amount of
$___________________; or
[ ] through a "margin" commitment, delivered herewith from Participant and
the NASD Dealer named therein, in the amount of $_____________________.
Market Standoff Agreement. Participant, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Participant during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Exchange Act, provided that all officers and directors
of the Company are required to enter into similar agreements. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.
Tax Consequences. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANT'S PURCHASE OR DISPOSITION OF
THE SHARES. PARTICIPANT REPRESENTS THAT PARTICIPANT HAS CONSULTED WITH ANY TAX
CONSULTANT(S) PARTICIPANT DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Agreement, the Plan and the Option Agreement constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Participant with respect to the
subject matter hereof, and is governed by California law except for that body of
law pertaining to conflict of laws. Date:
Signature of Participant
<PAGE>
EXHIBIT 10.04
INFORMATION STORAGE DEVICES, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
As Adopted on September 12, 1994
As Amended through April 30, 1997
1. Establishment of Plan. Information Storage Devices, Inc. (the
"Company") proposes to grant options for purchase of the Company's Common Stock
to eligible employees of the Company and its Subsidiaries (as hereinafter
defined) pursuant to this Employee Stock Purchase Plan (this "Plan"). For
purposes of this Plan, "Parent Corporation" and "Subsidiary" (collectively,
"Subsidiaries") shall have the same meanings as "parent corporation" and
"subsidiary corporation" in Sections 424(e) and 424(f), respectively, of the
Internal Revenue Code of 1986, as amended (the "Code"). The Company intends the
Plan to qualify as an "employee stock purchase plan" under Section 423 of the
Code (including any amendments to or replacements of such Section), and the Plan
shall be so construed. Any term not expressly defined in the Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 170,000 shares of the Company's Common Stock is reserved for issuance
under the Plan. Such number shall be subject to adjustments effected in
accordance with Section 14 of the Plan.
2. Purpose. The purpose of the Plan is to provide employees of the Company
and Subsidiaries designated by the Board of Directors of the Company (the
"Board") as eligible to participate in the Plan with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.
3. Administration. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). If, at the time the Company
registers under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a majority of the Board is not comprised of Disinterested Persons as
defined in Rule 16b-3(d) promulgated under the Exchange Act, the Board shall
appoint a committee consisting of at least two (2) members of the Board, each of
whom is a Disinterested Person. As used in this Plan, references to the
"Committee" shall mean either such committee or the Board if no committee has
been established. After registration of the Company under the Exchange Act,
Board members who are not Disinterested Persons may not vote on any matters
affecting the administration of this Plan, but any such member may be counted
for determining the existence of a quorum at any meeting of the Board. Subject
to the provisions of the Plan and the limitations of Section 423 of the Code or
any successor provision in the Code, all questions of interpretation or
application of the Plan shall be determined by the Board and its decisions shall
be final and binding upon all participants. Members of the Board shall receive
no compensation for their services in connection with the administration of the
Plan, other than standard fees as established from time to time by the Board for
services rendered by Board members serving on Board committees. All expenses
incurred in connection with the administration of the Plan shall be paid by the
Company.
4. Eligibility. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under the
Plan except the following:
(a) employees who are not employed by the Company or Subsidiaries
fifteen (15) days before the beginning of such Offering Period;
(b) employees who are customarily employed for less than twenty (20)
hours per week;
(c) employees who are customarily employed for less than five (5) months
in a calendar year;
(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own stock or
hold options to purchase stock or who, as a result of being granted an option
under the Plan with respect to such Offering Period, would own stock or hold
options to purchase stock possessing 5 percent or more of the total combined
voting power or value of all classes of stock of the Company or any of its
Subsidiaries.
<PAGE>
5. Offering Dates. The Offering Periods of the Plan (the "Offering
Period") shall be of 6 months duration commencing February 1 and August 1 of
each year and ending on July 31 and January 31 respectively, during which
payroll deductions of the participant are accumulated under this Plan. The first
day of each Offering Period is referred to as the "Offering Date". The last
business day of each Offering Period is referred to as the "Purchase Date". The
Board shall have the power to change the duration of Offering Periods with
respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
6. Participation in the Plan. Eligible employees may become participants
in an Offering Period under the Plan on the first Offering Date after satisfying
the eligibility requirements by delivering a subscription agreement to the
Company's or Subsidiary's (whichever employs such employee) treasury department
(the "Treasury Department") not later than the 15th day of the month before such
Offering Date unless a later time for filing the subscription agreement
authorizing payroll deductions is set by the Board for all eligible employees
with respect to a given Offering Period. An eligible employee who does not
deliver a subscription agreement to the Treasury Department by such date after
becoming eligible to participate in such Offering Period shall not participate
in that Offering Period or any subsequent Offering Period unless such employee
enrolls in the Plan by filing a subscription agreement with the Treasury
Department not later than the 15th day of the month preceding a subsequent
Offering Date. Once an employee becomes a participant in an Offering Period,
such employee will automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws from the Plan or terminates further participation in the
Offering Period as set forth in Section 11 below. Such participant is not
required to file any additional subscription agreement in order to continue
participation in the Plan.
7. Grant of Option on Enrollment. Enrollment by an eligible employee in
the Plan with respect to an Offering Period will constitute the grant (as of the
Offering Date) by the Company to such employee of an option to purchase on the
Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing the amount accumulated in such employee's payroll
deduction account during such Offering Period by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date or (ii) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Purchase Date; provided,
however, that the number of shares of the Company's Common Stock subject to any
option granted pursuant to this Plan shall not exceed the lesser of (a) the
maximum number of shares set by the Board pursuant to Section 10(c) below with
respect to the applicable Offering Period, or (b) the maximum number of shares
which may be purchased pursuant to Section 10(b) below with respect to the
applicable Offering Period. Fair market value of a share of the Company's Common
Stock shall be determined as provided in Section 8 hereof.
8. Purchase Price. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of the Plan the term "fair market value" on a given date
shall mean the fair market value of the Company's Common Stock as determined by
the Board in its sole discretion, exercised in good faith; provided, however,
that where there is a public market for the Common Stock, the fair market value
per share shall be the average of the closing bid and asked prices of the Common
Stock on the last trading day prior to the date of determination, as reported in
The Wall Street Journal (or if not so reported, as otherwise reported by the
Nasdaq Stock Market), or, in the event the Common Stock is listed on a stock
exchange or on the Nasdaq National Market, the fair market value per share shall
be the closing price on the exchange or on the Nasdaq National Market on the
last trading date prior to the date of determination as reported in The Wall
Street Journal.
<PAGE>
9. Payment Of Purchase Price; Changes In Payroll Deductions; Issuance Of
Shares.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than two percent (2%), nor greater than ten percent (10%), not to exceed
$25,000 per year or such lower limit set by the Committee. Compensation shall
mean all W-2 compensation, including, but not limited to base salary, wages,
commissions, overtime, shift premiums and bonuses, plus draws against
commissions; provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in the Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one change may be made effective
during any Offering Period. A participant may increase or decrease the rate of
payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
the 15th day of the month before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to his or
her account under the Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(d) On each Purchase Date, so long as the Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be refunded to such participant in cash, without interest;
provided, however, that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Offering Period. In the event that the Plan has been oversubscribed,
all funds not used to purchase shares on the Purchase Date shall be returned to
the participant, without interest. No Common Stock shall be purchased on a
Purchase Date on behalf of any employee whose participation in the Plan has
terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company
shall arrange the delivery to each participant of a certificate representing the
shares purchased upon exercise of his option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. 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.
10. Limitations on Shares to be Purchased.
(a) No employee shall be entitled to purchase stock under the Plan at a
rate which, when aggregated with his or her rights to purchase stock under all
other employee stock purchase plans of the Company or any Subsidiary, exceeds
$25,000 in fair market value, determined as of the Offering Date (or such other
limit as may be imposed by the Code) for each calendar year in which the
employee participates in the Plan.
<PAGE>
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty (30) days prior to the commencement of any Offering Period, the Board
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the "Maximum
Share Amount"). In no event shall the Maximum Share Amount exceed the amounts
permitted under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum Share Amount not less than
fifteen (15) days prior to the commencement of the next Offering Period. Once
the Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Board as
set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in the Plan exceeds the number of shares then available
for issuance under the Plan, the Company will make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the Board
shall determine to be equitable. In such event, the Company shall give written
notice of such reduction of the number of shares to be purchased under a
participant's option to each participant affected thereby.
(e) Any payroll deductions accumulated in a participant's account which
are not used to purchase stock due to the limitations in this Section 10 shall
be returned to the participant as soon as practicable after the end of the
Offering Period, without interest.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under the Plan
by signing and delivering to the Treasury Department notice on a form provided
for such purpose. Such withdrawal may be elected at any time at least fifteen
(15) days prior to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or her
interest in the Plan shall terminate. In the event a participant voluntarily
elects to withdraw from the Plan, he or she may not resume his or her
participation in the Plan during the same Offering Period, but he or she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
the Plan.
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee, immediately terminates his or her participation in
the Plan. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representative, without interest. For purposes of this Section
12, an employee will not be deemed to have terminated employment or failed to
remain in the continuous employ of the Company in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. Return of Payroll Deductions. In the event a participant's interest in
the Plan is terminated by withdrawal, termination of employment or otherwise, or
in the event the Plan is terminated by the Board, the Company shall promptly
deliver to the participant all payroll deductions credited to his account. No
interest shall accrue on the payroll deductions of a participant in the Plan.
14. Capital Changes. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, 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 or the payment of a stock dividend (but only on 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 shall be final, binding and conclusive.
Except as expressly provided herein, no issue 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.
<PAGE>
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. 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, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, or
in the event of the Company being consolidated with or merged into any other
corporation.
15. Nonassignability. 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 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect.
16. Reports. Individual accounts will be maintained for each participant
in the Plan. Each participant shall receive promptly after the end of each
Offering Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Offering Period.
17. Notice of Disposition. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "Notice Period"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to the Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. No Rights to Continued Employment. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. Equal Rights And Privileges. All eligible employees shall have equal
rights and privileges with respect to the Plan so that the Plan qualifies as an
"employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in the Plan.
<PAGE>
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. Term; Shareholder Approval. This Plan shall become effective on the
date that it is adopted by the Board. This Plan shall be approved by the
shareholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. No purchase of shares pursuant to the Plan shall occur prior to such
shareholder approval. Thereafter, no later than twelve (12) months after the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 with respect to shareholder approval.
The Plan shall continue until the earlier to occur of termination by the Board,
issuance of all of the shares of Common Stock reserved for issuance under the
Plan or ten (10) years from the adoption of the Plan by the Board.
22. 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 the end of an
Offering Period but prior to delivery to him 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 a Purchase Date.
(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 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 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.
23. Conditions Upon Issuance of Shares; Limitation on Sale 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.
24. Applicable Law. The Plan shall be governed by the substantive
laws (excluding the conflict of laws rules) of the State of California.
25. Amendment or Termination of the Plan. The Board may at any time amend,
terminate or the extend the term of the Plan, except that any such termination
cannot affect options previously granted under the Plan, nor may any amendment
make any change in an option previously granted which would adversely affect the
right of any participant, nor may any amendment be made without approval of the
shareholders of the Company obtained in accordance with Section 21 hereof within
twelve (12) months of the adoption of such amendment (or earlier if required by
Section 21) if such amendment would:
(a) increase the number of shares that may be issued under the Plan;
(b) change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(c) constitute an amendment for which shareholder approval is required
in order to comply with Rule 16b-3 (or any successor rule) of the Exchange Act.
<PAGE>
EXHIBIT 11.01
INFORMATION STORAGE DEVICES, INC.
Statement of Computation of Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
------------------ -----------------
9/27/97 9/28/96 9/27/97 9/28/96
------- ------- ------- -------
Net income (loss) $ (701) $(5,743) $(7,010) $(7,528)
Weighted average common stock outstanding 9,654 9,661 9,622 9,867
Common stock equivalents:
Stock options -- -- -- --
Warrants -- -- -- --
Total shares used in computing net income (loss) per share 9,654 9,661 9,622 9,867
Net income (loss) per share $(0.07) $(0.59) $(0.73) $(0.76)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 29,473
<SECURITIES> 17,885
<RECEIVABLES> 9,899
<ALLOWANCES> 0
<INVENTORY> 9,250
<CURRENT-ASSETS> 68,862
<PP&E> 14,202
<DEPRECIATION> 8,207
<TOTAL-ASSETS> 77,638
<CURRENT-LIABILITIES> 12,399
<BONDS> 960
0
0
<COMMON> 79,207
<OTHER-SE> (274)
<TOTAL-LIABILITY-AND-EQUITY> 77,677
<SALES> 13,813
<TOTAL-REVENUES> 13,813
<CGS> 8,800
<TOTAL-COSTS> 8,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 551
<INCOME-PRETAX> (652)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (652)
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
