<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ROSS Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ROSS TECHNOLOGY LOGO
5316 HIGHWAY 290 WEST, SUITE 500
AUSTIN, TEXAS 78735
July 18, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ROSS Technology, Inc., to be held at 10:00 a.m. on Monday, August 11, 1997, at
its executive offices, 5316 Highway 290 West, First Floor, Austin, Texas 78735.
At the meeting, we will vote on the proposals described in the accompanying
Notice and Proxy Statement. We will also report to you on the operations of the
Company. You will have the opportunity to ask questions about the Company that
may be of general interest to stockholders.
The enclosed proxy statement contains important information concerning the
matters to be voted on at the Annual Meeting. We hope you will take the time to
study it carefully. Your vote is very important, regardless of how many shares
you own. Even if you presently plan to attend our Annual Meeting, please
complete, sign, date and return the enclosed proxy card promptly in the
accompanying self-addressed, postage prepaid envelope. If you do join us at the
Annual Meeting and wish to vote in person, you may revoke your proxy at that
time.
The other members of the Board of Directors and I look forward to seeing
you at the meeting.
Sincerely,
/s/ FRED T.MAY
Fred T. May
Chairman of the Board
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE> 3
ROSS TECHNOLOGY LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 1997
TO THE STOCKHOLDERS OF ROSS TECHNOLOGY, INC.:
The 1997 Annual Meeting of Stockholders of ROSS Technology, Inc., a
Delaware corporation (the "Company"), will be held at its executive offices,
5316 Highway 290 West, First Floor, Austin, Texas 78735 on Monday, August 11,
1997, at 10:00 a.m., local time, for the following purposes:
1. To elect a board of eight Directors for the Company to hold office
until the next annual meeting of stockholders and until their respective
successors have been elected and qualified.
2. To approve the amendment and restatement of the Company's Stock
Option and Restricted Stock Purchase Plan 2.0 to increase the maximum
number of shares that may be sold pursuant to the Plan from 5,575,000 to
7,200,000, to limit the number of options that may be issued in any year to
a single individual, to redefine the requirements for Directors to serve on
the committee that administers the Plan, to redefine the events which may,
among other things, cause the acceleration of vesting of stock options and
stock purchase rights granted pursuant to the Plan, to permit non-employee
Directors to receive discretionary grants under the Plan in addition to
automatic grants, and to make certain other changes.
3. To consider and transact such other business as may properly come
before the Annual Meeting and at any adjournments or postponements thereof
(the "Annual Meeting").
Only stockholders of record on the books of the Company as of the close of
business on July 18, 1997 will be entitled to notice of and to vote at the
Annual Meeting. A list of stockholders entitled to vote will be available for
inspection at the offices of the Company, 5316 Highway 290 West, Suite 500,
Austin, Texas 78735, for ten days prior to the Annual Meeting.
PLEASE READ THE ENCLOSED PROXY STATEMENT CAREFULLY.
It is important that your shares be represented at the Annual Meeting.
THEREFORE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED, POSTAGE PREPAID ENVELOPE. If you later find that you
can be present or desire to revoke your proxy for any reason, you may do so at
any time before the voting at the Annual Meeting.
By Order of the Board of Directors of the
Company
/s/ FRANCIS S. (KIT) WEBSTER III
Francis S. (Kit) Webster III
Secretary
July 18, 1997
Austin, Texas
<PAGE> 4
ROSS TECHNOLOGY, INC.
5316 HIGHWAY 290 WEST, SUITE 500
AUSTIN, TEXAS 78735
PROXY STATEMENT RELATING TO
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 1997
---------------------
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors (the "Board") of ROSS Technology,
Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held at its executive offices, 5316 Highway
290 West, First Floor, Austin, Texas 78735, on Monday, August 11, 1997,
beginning at 10:00 a.m., local time, and at any adjournment or postponement
thereof (the "Annual Meeting"), pursuant to the accompanying Notice of Annual
Meeting. The stockholders of the Company will consider (i) the election of eight
Directors for the Company who would serve for the coming year, (ii) the
amendment and restatement of the Company's Stock Option and Restricted Stock
Purchase Plan 2.0, and (iii) any other business that properly comes before the
Annual Meeting.
---------------------
This Proxy Statement is dated July 18, 1997 and, together with the form of
proxy, shall first be mailed to the Company's stockholders on or about July 21,
1997.
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VOTING RIGHTS AND PROXIES
RECORD DATE; OUTSTANDING SECURITIES
Only common stockholders of record on the books of the Company as of the
close of business on July 18, 1997 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. On July 8, 1997, the Company had
23,534,123 shares of common stock (the "Common Stock") issued and outstanding.
Each share of Common Stock outstanding on the Record Date is entitled to one
vote at the Annual Meeting on each matter to be voted on.
QUORUM
The holders of a majority of the outstanding shares entitled to vote at the
Annual Meeting, present in person or represented by proxy (including abstentions
and broker non-votes), constitute a quorum for the transaction of business at
the Annual Meeting.
PROXIES AND SOLICITATION OF PROXIES
Your proxy may be revoked by you at any time prior to its use by (i) filing
with the Secretary of the Company a written revocation or a duly executed proxy
bearing a later date or (ii) attending the Annual Meeting and voting in person.
Subject to such revocation, all shares represented by valid proxies will be
voted at the Annual Meeting in accordance with the specifications on such
proxies. If no specifications are given by the stockholder executing the proxy
card, valid proxies will be voted to elect the persons nominated for election to
the Board of Directors of the Company listed on the proxy card, to approve the
amendment and restatement of the Company's Stock Option and Restricted Stock
Purchase Plan 2.0, and in the discretion of the appointed proxies to vote upon
such other matters as may properly come before the Annual Meeting. The Company
is not aware of any other matters to be considered at the Annual Meeting. Under
the Company's Bylaws, stockholders may not present proposals for action, or
nominate Directors, at the Annual Meeting unless written notice thereof,
containing the information required by such Bylaws, was delivered to the
Secretary of the Company no later than July 18, 1997. No such proposals or
nominations were received by such date.
Proxies may be solicited by mail, personal interview, telephone and
telecopy by Directors, officers and employees of the Company on a part-time
basis and for no additional compensation. The entire cost of soliciting proxies
under this Proxy Statement will be borne by the Company and will include amounts
paid in reimbursement to banks, brokerage firms and others for their expenses in
forwarding soliciting material.
If you have any questions or need further assistance in voting your shares,
please call the Chief Financial Officer of the Company at (512) 436-2000.
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<PAGE> 6
ELECTION OF DIRECTORS
(ITEM NO. 1 ON PROXY CARD)
At the Company's Annual Meeting, stockholders will be asked to vote on the
election of eight Directors who will constitute the full Board of Directors of
the Company (the "Board"). The eight nominees receiving the highest number of
votes from holders of shares of the Common Stock of the Company represented and
voting at the Annual Meeting will be elected to the Board. Unless a nominee
other than the nominees listed below is properly nominated, abstentions and
broker non-votes will not have an effect on the election of the nominees listed
below. Each Director so elected will hold office until the next annual meeting
and until his successor is elected and qualified.
GENERAL
Each proxy received will be voted for the election of the persons named
below, unless the stockholder signing such proxy withholds authority to vote for
one or more of these nominees in the manner described on the proxy. Although it
is not contemplated that any nominee named below will decline or be unable to
serve as a Director, in the event any nominee declines or is unable to serve as
a Director, the proxies will be voted by the proxy holders as directed by the
Board of Directors.
There are no family relationships between any Director, nominee or
executive officer and any other Director, nominee or executive officer of the
Company. Except as described in this Proxy Statement, there are no arrangements
or understandings between any Director, nominee or executive officer and any
other person pursuant to which he has been or will be selected as a Director
and/or executive officer of the Company.
INFORMATION REGARDING THE NOMINEES FOR THE BOARD OF DIRECTORS OF THE COMPANY
The following is a list of and certain biographical information for the
persons nominated by the Board of Directors of the Company for election as
Directors of the Company. All of the nominees are currently Directors of the
Company. Directors' ages are as of July 1, 1997.
FRED T. MAY, 60, has served as the Chairman of the Board of the Company
since March 1997, and served as Acting President and Chief Executive Officer
from March 1997 until May 1997. Mr. May has served as a Director of the Company
since 1991 (except for the period from July 1993, when Fujitsu Limited
("Fujitsu") acquired the Company, to December 1993), and served as Secretary of
the Board from February 1994 until October 1995. He retired from IBM in 1987
after serving 26 years in various positions including Vice President of
Engineering and Vice President of Product Development for the Office Products
Division, Development Laboratory Director in Austin, Texas, and Development
Engineering Manager for Advanced IBM Workstations. Mr. May was on the staff of
the Electrical and Computer Engineering Department of the University of Texas at
Austin from 1987 until 1993. Mr. May holds a B.S. in Electrical Engineering from
The University of Kentucky and an M.S. in Electrical Engineering from the
University of Tennessee, and has over 30 years of experience in the computer
industry. He has also been self-employed as a management consultant since 1987.
RYUSUKE HOSHIKAWA, 54, has served as a Director of the Company since 1993.
He joined Fujitsu in 1968 and is presently a Director of Fujitsu and the Group
President of Fujitsu's LSI Products Group. Prior to holding that position, Mr.
Hoshikawa held various engineering and management positions with Fujitsu
including that of Group Senior Vice President of its Logic LSI Group, General
Manager of its Logic LSI Design Division and Manager of the IC Design Group. Mr.
Hoshikawa graduated from Hokkaido University with a Masters degree in
Electronics.
WILLIAM J. RADUCHEL, 51, has served as a Director of the Company since
1996. He has been an officer of Sun Microsystems, Inc. ("Sun") since 1988 and a
corporate executive officer since 1989. His current positions are Vice President
of Corporate Planning and Development and Chief Information Officer. Mr.
Raduchel also serves as an independent general partner of Technology Funding
Venture Partners IV, a venture capital fund. He previously worked at Xerox
Corporation, McGraw Hill, Inc., Data Resources, Inc., the Institute for
3
<PAGE> 7
Defense Analyses and Harvard University. Mr. Raduchel earned a B.A. in Economics
from Michigan State University and an M.A. and Ph.D. in Economics from Harvard
University.
MASAHIRO SAIDA, 52, has served as a Director of the Company since 1993. He
joined Fujitsu in 1967 and is presently the Deputy Group Manager of Fujitsu's
Computer Systems Group. Prior to holding that position, Mr. Saida held various
engineering and management positions with Fujitsu including that of Manager of
Workstation Development and General Manager of its Open Systems Division. Mr.
Saida graduated from Kyoto University with a degree in Electronics.
JACK W. SIMPSON, SR., 55, was appointed President and Chief Executive
Officer and a Director of the Company in May 1997. Mr. Simpson was the President
of the Network Systems Group of Scientific-Atlanta, Inc., an electronics
company, from October 1993 until May 1997. He was President of Infobyte, Inc., a
consulting firm, from December 1992 until October 1993. Prior to joining
Infobyte, Inc., Mr. Simpson was President and Chief Executive Officer of Mead
Data Central, Inc. for 10 years. Prior to joining Mead Data Central, Inc., Mr.
Simpson was employed by IBM, where, in his last position as Director of Office
Systems Laboratory, he was responsible for delivery of office communications
hardware and software. Mr. Simpson graduated from The University of Kentucky
with a B.S. and an M.S. in Electrical Engineering.
YASUSHI TAJIRI, 51, has served as a Director of the Company since 1993. He
joined Fujitsu in 1970 and is presently the General Manager of Fujitsu's
Strategy and Planning Division Marketing Group. Prior to holding that position,
Mr. Tajiri held various management positions with Fujitsu including that of
General Manager of its Business Development Division, International Computer
Business Group, Manager of its Information Systems Division, International
Operations Group, and Manager of its Business Development Department II,
International Operations Group. Mr. Tajiri graduated from Otaru Business College
with a degree in Commerce.
EDWARD F. THOMPSON, 59, has served as a Director of the Company since 1995.
He also serves as a Senior Advisor to Fujitsu and acts as an independent board
member for or advisor to various other Fujitsu subsidiaries. From 1976 to 1994,
Mr. Thompson was employed by Amdahl Corporation (a manufacturer of mainframe
computers, approximately 45% of the stock of which is owned by Fujitsu) in
Sunnyvale, California, where he held various management positions including
Chief Financial Officer and Corporate Secretary, as well as Chairman of the
Board of its subsidiary, Amdahl Capital Corporation. Mr. Thompson presently
serves on the Boards of Directors of HaL Computer Systems, Inc. and Fujitsu
Computer Products of America, Inc., each of which is a subsidiary of Fujitsu. He
also serves as Chairman of the Board of Directors of Systems Integrators
Incorporated, which company is not affiliated with Fujitsu. Mr. Thompson has
over 30 years of experience in the computer and high technology fields. Mr.
Thompson holds a B.S. in Aeronautical and Astronautical Engineering from the
University of Illinois and an M.B.A. from Santa Clara University.
SEIICHI YOSHIKAWA, 51, has served as a Director of the Company since 1996.
He joined Fujitsu in 1969 and is presently the Group Senior Vice President of
Fujitsu's External Affairs Group. Prior to holding that position, Mr. Yoshikawa
served in a number of positions with Fujitsu, including Group Senior Vice
President of Fujitsu's Legal and Industry Relations Group. Mr. Yoshikawa
graduated from Tokyo University with a degree in Law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINEES
LISTED ABOVE AS DIRECTORS.
CERTAIN INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND ITS COMMITTEES
There are currently five committees of the Board. These committees meet
both formally and informally, and the members of the Committees speak frequently
with each other. The Executive Committee currently consists of Messrs. Tajiri
(its Chairman), May, Saida, Simpson and Thompson. The Executive Committee has
all the powers of the full Board, except that it is not authorized (i) to amend
the Certificate of Incorporation or Bylaws of the Company, (ii) to adopt an
agreement of merger or consolidation pursuant to Section 251 or 252 of the
Delaware General Corporation Law or to adopt a certificate of ownership and
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<PAGE> 8
merger pursuant to Section 253 of the Delaware General Corporation Law, (iii) to
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, (iv) to recommend to the
stockholders a dissolution of the Company or (v) to declare a dividend or
authorize the issuance of stock, in each case except as may be reasonably
necessary to implement any decision of the full Board or to act on any matters
previously considered and approved by the full Board (with such technical
changes and corrections as the Executive Committee deems appropriate). The
Executive Committee had ten meetings in the fiscal year ended March 31, 1997
("Fiscal 1997").
The Finance and Audit Committee currently consists of Messrs. Thompson (its
Chairman), May, Tajiri and Yoshikawa. The Finance and Audit Committee recommends
to the Board for its approval a certified public accounting firm to conduct the
Company's annual audit. The Finance and Audit Committee will also (i) confer
from time to time with the Company's certified public accountants regarding
their audit work and the details thereof, (ii) review management letters of the
Company's certified public accounting firm, (iii) meet and consult with the
Company's executive and financial officers to discuss accounting policies,
internal controls and procedures and implement recommendations of the Board
relating to financial matters, (iv) review staffing of the Company's accounting
and financial departments and make recommendations to the Board relating to
these departments, (v) review the Company's budgets and long range financial
planning, (vi) review, evaluate and report to the Board with respect to
operating plans and budgets proposed from time to time by management, (vii)
report to the Board regarding contracts, arrangements and commitments materially
affecting the finances of the Company, (viii) report to the Board regarding
significant economic and fiscal data which may produce an impact upon the
Company's operating results or financial condition or may affect decisions to be
made by the Board, and (ix) provide assistance and recommendations to the Board
with respect to the general financial needs, policies and practices of the
Company. The Finance and Audit Committee had nine meetings in Fiscal 1997.
The Human Resources Committee currently consists of Messrs. Yoshikawa (its
Chairman), May, Tajiri and Thompson. The Human Resources Committee has full
power and authority to (i) consider and approve all matters with respect to
executive officer and employee compensation, and management development and
succession, (ii) assist with the administration of the Company's compensation
plans, including the making of recommendations to the Board with respect to the
establishment of such plans and the terms and provisions thereof, (iii) make
recommendations to the Board with respect to the annual salaries and other
compensation of the officers of the Company, (iv) provide assistance and
recommendations to the Board with respect to the compensation policies and
practices of the Company, and (v) provide assistance and recommendations to the
Board with respect to policies and practices regarding executive performance
measurement, management effectiveness and employee incentives. The Human
Resources Committee had eight meetings in Fiscal 1997.
The Stock Option Committee currently consists of Messrs. Yoshikawa (its
Chairman), Tajiri and Thompson. The Stock Option Committee considers and reviews
all matters with respect to the grant and issuance of options and restricted
stock purchase rights to purchase shares of Common Stock pursuant to, and
administers, the Stock Option and Restricted Stock Purchase Plan 2.0 and the
1995 Qualified Employee Stock Purchase Plan. The Stock Option Committee had one
meeting in Fiscal 1997.
A special committee (the "Special Committee"), which currently consists of
Messrs. May and Simpson, was established in March 1997 in connection with the
review of certain agreements and other matters between the Company and Fujitsu,
the Company's majority stockholder. The Special Committee did not meet in Fiscal
1997.
During the period that Mr. May served as Acting Chief Executive Officer and
President of the Company, Mr. May's membership on the committees described above
(other than the Special Committee) was suspended.
New committees may be added, existing committees may be disbanded, and the
charter or composition of any committee may be modified at any time in the
discretion of the Board.
During Fiscal 1997, the Board of Directors held eight regularly scheduled
and special meetings. Each incumbent Director attended at least 75% of (i) the
eight formal meetings of the Board of Directors and
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(ii) the total number of formal meetings of the committees on which he served
(during the periods that he served).
The members of the Board of Directors who are employed by Fujitsu or by the
Company receive no separate remuneration for acting as Directors of the Company.
The Board has implemented a policy pursuant to which Messrs. May and Thompson
and all other Directors who are not employees of the Company or of any five
percent stockholder of the Company are paid an annual fee of $10,000 per year
for service on the Board of Directors, plus $10,000 per year for each committee
on which such Director also serves. Each such Director is also paid $1,500 per
day for in-person attendance at Board and committee meetings and $500 per day
for telephonic attendance at such meetings. (Mr. Raduchel has declined to
receive any compensation for his services as a Director and Mr. May did not
receive any separate compensation for his services as a Director during the
period he served as the Company's Acting President and Chief Executive Officer.)
Under the current policy, a Director's aggregate compensation (excluding
reimbursement of expenses) for service as a Director for any calendar year may
not exceed $50,000. Effective June 1997, Mr. May receives an additional $3,500
per month for his services as Chairman of the Board of the Company (which is not
included in the $50,000 limit). The Board has the authority to revise this fee
structure in its discretion.
All Directors are entitled to receive reimbursement for expenses incurred
in connection with service on the Board or Board committees. In addition, all
Directors are eligible to participate in, and (other than Mr. Raduchel) have
received option grants under, the Company's Stock Option and Restricted Stock
Purchase Plan 2.0 (the "Stock Plan"). The Stock Plan provides for the automatic
grant of non-qualified stock options ("NSOs") to Directors who are not
substantially full-time employees of the Company, including any Director who is
an employee or designee of any stockholder if such stockholder permits the
Director to hold the options as his or her personal property (a "Qualifying
Director"). Each person who becomes a Qualifying Director after September 1995
will initially be granted an NSO to purchase 10,000 shares of Common Stock on
the date he or she first becomes a Qualifying Director, which NSO shall vest
ratably each month over four years and have a term of ten years from the grant
date, unless he or she otherwise received Company options within one year prior
to such date. In addition, on each August 31 thereafter, each Qualifying
Director will receive another NSO to purchase an additional 2,000 shares of
Common Stock (an "Annual Director Grant"), which will vest ratably each month
during the 37th through 48th months following the grant date. All such NSOs must
have an exercise price not less than the per share fair market value on the date
of grant, and commencing September 1995, no Qualifying Director is eligible to
receive additional grants under the Stock Plan. Certain changes to the foregoing
provisions were adopted by the Board of Directors on June 24, 1997 and will be
effective if the proposed amendment and restatement of the Stock Plan is
approved by the Company's stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Human Resources Committee consists of Messrs. Yoshikawa (Chairman),
May, Tajiri and Thompson. None of Messrs. Yoshikawa, Tajiri and Thompson are or
were officers or employees of the Company or any of its subsidiaries, while Mr.
May is currently the Chairman of the Board of the Company and served as Acting
President and Chief Executive Officer from March 1997 until May 1997 and
received compensation therefor. None of the members of the Human Resources
Committee had any other relationships which would require disclosure by the
Company pursuant to Item 404 of Regulation S-K ("Certain Relationships and
Related Transactions").
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EXECUTIVE OFFICERS OF THE COMPANY
Each of the executive officers of the Company holds office at the pleasure
of the Board of Directors, subject to any rights he may have under any
employment agreement. The current executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Jack W. Simpson, Sr. President and Chief Executive Officer
Francis S. (Kit) Webster III Chief Financial Officer and Secretary
Mitchell K. Alsup Chief Architect
Frank A. Baffi Vice President of Sales
Joe D. Jones Vice President of Operations
Trevor S. Smith Vice President of Engineering
Carter L. Godwin Chief Accounting Officer and Corporate Controller
</TABLE>
Background information for Mr. Simpson is provided above. See "Election of
Directors."
FRANCIS S. (KIT) WEBSTER III, 51, was appointed Chief Financial Officer and
Secretary of the Company in April 1997. Mr. Webster was the President of Nirvana
Systems, Inc., a PC-based securities analysis software developer in Austin from
1995 to 1997. Prior to joining Nirvana Systems, he served as President and Chief
Operating Officer of U.S. Medical Products, Inc., an Austin-based manufacturer
and distributor of orthopedic implants from 1992 to 1994, and from 1984 to 1994
as Senior Vice President and Chief Financial Officer of The Continuum Company,
Inc., an Austin-based provider of software and services to the insurance
industry. Mr. Webster is a Certified Public Accountant and graduated from Rice
University with an M.E.E. in Electrical Engineering in 1968.
MITCHELL K. ALSUP, 44, the Company's Chief Architect, joined the Company in
1991 and since that time has been responsible for architectural development of
the latest generation of hyperSPARC(TM) microprocessors and the Company's next
generation "Viper" microprocessor. Prior to joining the Company, Mr. Alsup spent
10 years at Motorola, Inc., where he acted as, among other things, the principal
designer of Motorola's 88000 line of microprocessors. Mr. Alsup spent three
years at NCR where he served as a project leader. Mr. Alsup graduated from
Carnegie-Mellon University in 1975 with a B.S. in Electrical Engineering.
FRANK A. BAFFI, 46, was appointed Vice President of Sales of the Company in
April 1997. Mr. Baffi was the Vice President, Worldwide Sales, of Crystal
Semiconductor, a manufacturer of semiconductor chips based in Austin, Texas,
from 1994 to 1997. From 1993 to 1994, Mr. Baffi was Western Regional Sales
Manager of Quality Semiconductor of San Jose, California, a manufacturer of
semiconductor chips, and from 1991 to 1993 Mr. Baffi was Southwest Regional Vice
President for Bell Microproducts of Milpitas, California, an electronics
distributor. Mr. Baffi graduated from Long Island University with an M.S. in
Electrical Engineering.
JOE D. JONES, 39, joined the Company in 1991 as the Director of Quality
Assurance, in 1993 assumed the position of Vice President of hyperSPARC(TM)
Operations and in 1995 became Vice President of Operations. Mr. Jones performs
production control, outside manufacturing management and customer quality
engineering functions for the Company. Prior to joining the Company, Mr. Jones
served as Quality Assurance Manager with Cypress Semiconductor, a producer of
semiconductor electronic devices, for five years, and in addition spent four
years with Advanced Micro Devices in various engineering and management
positions. Mr. Jones holds a B.S. in Chemical Engineering from the University of
Texas at Austin and has approximately 14 years of experience in the
semiconductor industry.
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<PAGE> 11
TREVOR S. SMITH, 44, is one of the founders of the Company and served as
its Vice President of Design from its inception in 1988 until 1996 and as Vice
President of Development from 1996 until June 1997, when he became Vice
President of Engineering. Prior to founding the Company, he spent three years
with Motorola, serving as, among other things, manager of MPU standard cell
cores and cell library development, and three years at ICL Limited, a European
computer design and manufacturing company, where he served as manager of CPU
development for Emitter Coupled Logic (a high speed bipolar transistor-based
technology) and CMOS mainframe CPUs. Mr. Smith holds a B.Sc. in Physics and
Electronic Engineering from the University of Manchester, England, and has over
18 years of experience in the computer and microprocessor industry.
CARTER L. GODWIN, 31, joined the Company in 1992 as a financial analyst and
has since held various other positions with the Company including Accounting
Manager and his current position of Chief Accounting Officer and Corporate
Controller. From 1988 to 1991, Mr. Godwin worked as a staff accountant for Price
Waterhouse LLP. Mr. Godwin received a B.B.A. in Accounting from the University
of Texas at Austin.
8
<PAGE> 12
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned
by each person who served as the Company's President and the four other most
highly compensated executive officers of the Company whose annual salaries and
bonuses exceeded $100,000 in total during Fiscal 1997 (collectively, the "Named
Officers") for services rendered in all capacities to the Company and its
subsidiaries for that and the previous fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------------------------
COMPENSATION($)(1) SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS(2) OPTIONS(#)(3) COMPENSATION($)
--------------------------- ----------- ------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Fred T. May(4)......................... 1997 -- -- 2,000 70,083(9)
Chairman of the Board................ 1996 -- -- 10,000 59,500(10)
Roger D. Ross(5)....................... 1997 281,912 281,912 177,778 --
Formerly Chairman, President and
CEO............................... 1996 264,706 299,960(6) 177,778 109,556(11)
Mitchell K. Alsup(5)................... 1997 217,508 217,508 35,556 --
Chief Architect...................... 1996 205,196 235,319(6) 35,556 --
Trevor S. Smith(5)..................... 1997 208,426 208,426 44,444 --
Vice President of Engineering........ 1996 196,630 237,690(6) 44,444 4,620(12)
Joe D. Jones........................... 1997 117,916 -- 13,333 4,616(13)
Vice President of Operations......... 1996 105,748 43,873(7) 8,889 4,231(12)
Carter L. Godwin....................... 1997 84,904 30,000(8) 10,000 --
Chief Accounting Officer and
Corporate......................... 1996 69,251 28,414(7) 1,111 --
Controller
</TABLE>
- ---------------
(1) Certain of the Named Officers received personal benefits in addition to
salary and cash bonuses, including car allowances. However, the aggregate
amount of such personal benefits for any Named Officer did not exceed the
lesser of $50,000 and 10% of the total of the annual salary and bonus
reported for such Named Officer.
(2) Except as otherwise noted, reflects bonuses earned pursuant to
then-existing employment agreements.
(3) All grants in Fiscal 1997, other than the grant of options to Mr. May in
connection with his services as a Director of the Company and the grant of
an option to Mr. Jones to purchase 4,444 shares of Common Stock, represent
grants of replacement options to the Named Officers, in exchange for all
options granted to the Named Officers in Fiscal 1996, to implement a
repricing of the Company's outstanding stock options. See "Stock Option
Repricing."
(4) Compensation information is included regarding Mr. May because he served as
the Company's Acting President and Chief Executive Officer from March 3,
1997 to May 21, 1997. Includes compensation earned by Mr. May in his
capacity as a Director.
(5) Messrs. Ross, Alsup and Smith received the above-described compensation for
Fiscal 1996 and a portion of Fiscal 1997 pursuant to employment agreements
with the Company, which expired in accordance with their terms on June 30,
1996. Messrs. Alsup and Smith continue to be employed by the Company
without employment agreements. Mr. Ross resigned as an officer of the
Company on March 3, 1997, but has continued as an employee of the Company
(although, after April 30, 1997, Mr. Ross has been deemed to be an employee
of the Company on unpaid leave). See "Employment Agreements and
Change-in-Control Arrangements."
(6) Includes for Messrs. Ross, Alsup and Smith (i) $104,547, $79,557 and
$77,659, respectively, earned pursuant to the Company's employee bonus
program in effect in Fiscal 1996 and (ii) incentive bonuses of $66,851,
$50,877 and $59,524, respectively.
(7) Consists of bonus earned pursuant to the Company's employee bonus program
in effect in Fiscal 1996.
(8) Incentive bonus.
(9) Consists of (a) $25,000 paid to Mr. May as a consulting fee for his
services during Fiscal 1997 as Acting President and Chief Executive Officer
of the Company and (b) $45,083 of Directors' fees. Mr. May's compensation
for his services as Acting President and Chief Executive Officer was in
lieu of any Directors' fees he would have been otherwise entitled to during
the period of such services.
(10) Consists of Directors' fees for Fiscal 1996.
(11) Consists of (i) $4,620 of matching contributions by the Company under its
401(k) Plan and Trust and (ii) $104,936 relating to the purchase of an
automobile by the Company for Mr. Ross's use pursuant to the terms of his
now-expired employment agreement (including a tax "gross up" payment to Mr.
Ross with respect to the taxes incurred by him as the result of such
purchase).
(12) Consists of matching contributions by the Company under its 401(k) Plan and
Trust.
(13) Consists of payment of accrued vacation balance.
9
<PAGE> 13
OPTION GRANTS DURING FISCAL 1997
The following table lists the stock options granted to the Named Officers
during Fiscal 1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(A) VALUE AT
----------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(B)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME GRANTED (#) IN FISCAL YEAR SHARE DATE 0% 5% 10%
---- ----------- -------------- --------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger D. Ross........ 177,778 28.2 $3.125 2/18/2007 0 $349,386 $885,414
Mitchell K. Alsup.... 35,556 5.6 $3.125 2/18/2007 0 69,878 177,085
Trevor S. Smith...... 44,444 7.1 $3.125 2/18/2007 0 87,436 221,351
Joe D. Jones......... 13,333 2.1 $3.125 2/18/2007 0 26,203 66,404
Carter L. Godwin..... 10,000 1.6 $3.125 2/18/2007 0 19,653 49,804
</TABLE>
- ---------------
(a) These options were granted under the Stock Option and Restricted Stock
Purchase Plan 2.0 with an exercise price equal to the closing price of the
Company's Common Stock on the Nasdaq National Market System on the date of
grant. The table does not include an Annual Director Grant to Fred T. May on
August 31, 1996 of options to purchase 2,000 shares of the Company's Common
Stock with an exercise price of $7.00 per share and vesting in twelve equal
monthly installments beginning September 30, 1999. Mr. May received such
Annual Director Grant in his capacity as a Director of the Company and did
not receive any options in Fiscal 1997 in connection with his service as
Acting President and Chief Executive Officer of the Company.
(b) The amounts shown are not the values of the options on the dates they were
granted. Instead, these are hypothetical future values based on the
difference between the option exercise price and the assumed future Common
Stock price at the end of the 10-year term of the options using hypothetical
rates of annual stock price appreciation of 0%, 5% and 10%, respectively.
There can be no assurance that the appreciation rates specified in the table
will occur.
All of the option grants shown in the table, other than the grants to
Messrs. Jones and Godwin of options to purchase 4,444 shares of Common Stock and
8,889 shares of Common Stock, respectively, represent grants of replacement
options authorized by the Board of Directors to implement a repricing of the
Company's outstanding stock options. Each of the Named Officers participating in
the repricing exchange relinquished an equivalent number of options issued in
September 1995. See "Stock Option Repricing."
Options granted to the Named Officers in Fiscal 1997 (other than the
options issued to Mr. May pursuant to the Annual Director Grant) were one-third
vested as of the grant date, with the remaining two-thirds to vest in thirty-two
equal monthly installments, and may be exercised as to the vested portion
beginning six months after the grant date. In addition, all of the options will
vest in connection with a "change of control", which will be deemed to have
occurred if (a) there is a change in the identity of more than half of the
members of the Board (excluding redesignation by Fujitsu and/or Sun of any of
their respective designees) over any six month period or (b) the Company within
a 12-month period ceases to own more than one half of its gross assets (measured
at the commencement of such period) by virtue of one or more bulk transfers of
its assets. The options expire 10 years from the date of grant, six months after
termination of employment, or eighteen months after termination of employment
due to the death or permanent disability of the optionee.
STOCK OPTION REPRICING
On February 18, 1997, the Board of Directors adopted a resolution pursuant
to which all employees (including the Named Officers) have been or will be
offered the opportunity to cancel outstanding stock options with exercise prices
in excess of $3.125 per share (the closing price of the Company's Common Stock
on the Nasdaq National Market System on that date) in exchange for replacement
options exercisable at $3.125 which were otherwise identical to the cancelled
options except that, in the case of the Named Officers, (i) the cancelled
options would have expired on September 12, 2005 and vested in forty-eight
monthly installments commencing December 31, 1995, such that such options would
have been fully vested on November 30, 1999, and (ii) the replacement options
expire on February 18, 2007 and were one-third vested on February 18, 1997, with
the remaining two-thirds to vest in thirty-two equal monthly installments, such
that the replacement options will be fully vested on November 30, 1999. The
option exchange offer is an
10
<PAGE> 14
acknowledgement of the importance to the Company of having equity incentives in
the hands of its employees. Stock options which are "out of the money" provide
no particular compensatory incentive if an employee is considering alternative
opportunities. The Board decided to include officers in the exchange because of
the importance of their administrative and technical leadership to the success
of the Company's business.
The following table sets forth all exchanges and repricings of Named
Officer stock options since the Company's initial public offering of its Common
Stock in 1995:
<TABLE>
<CAPTION>
SECURITIES MARKET PRICE EXERCISE LENGTH OF
UNDERLYING OF STOCK PRICE AT ORIGINAL OPTION
OPTIONS AT TIME OF TIME OF TERM REMAINING
REPRICED REPRICING OR REPRICING OR NEW EXERCISE AT DATE OF
OR AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
---- ------ ---------- ------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Ross............. 2/18/97 177,778 3.125 12.00 3.125 103 months
Mitchell K. Alsup......... 2/18/97 35,556 3.125 12.00 3.125 103 months
Trevor S. Smith........... 2/18/97 44,444 3.125 12.00 3.125 103 months
Joe D. Jones.............. 2/18/97 8,889 3.125 12.00 3.125 103 months
Carter L. Godwin.......... 2/18/97 10,000 3.125 12.00 3.125 103 months
</TABLE>
THE FOREGOING STOCK OPTION REPRICING
REPORT IS MADE BY THE BOARD OF DIRECTORS
<TABLE>
<C> <C>
Fred T. May Jack W. Simpson, Sr.
Ryusuke Hoshikawa Yasushi Tajiri
William J. Raduchel Edward F. Thompson
Roger D. Ross Seiichi Yoshikawa
Masahiro Saida
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Effective May 21, 1997, Mr. Simpson was hired as the Company's President
and Chief Executive Officer. In conjunction with his employment, the Company
entered into a letter agreement pursuant to which the Company would enter into a
four-year employment agreement with Mr. Simpson. The Company offered Mr. Simpson
an attractive compensation package in order to convince him to leave Scientific
Atlanta, Inc. ("SFA") after three years as President of Network Systems at that
company. Pursuant to this arrangement, Mr. Simpson's base salary for the
Company's fiscal year ending March 30, 1998 ("Fiscal 1998") will be computed
based upon an annual rate of $349,960, with an annual review for merit purposes.
Mr. Simpson is also eligible to receive bonuses based on the Company's meeting
certain predetermined goals and objectives set by the Board, up to a maximum of
100% of his base salary based on the Company's exceeding goals by 50% and/or
tied directly to the Company's stock price. Pursuant to the employment
arrangement, Mr. Simpson is to receive a replacement bonus of $130,000, life
insurance with a face value equal to three times his annual salary and bonus,
and a deferred annuity targeted to yield approximately $150,000 per year at age
60, to replace salary, insurance policies, and SERP plans he had while an
officer at SFA. Mr. Simpson is also eligible for the Company's standard
vacation, holiday and benefits programs.
Among other things, the letter agreement also obligates the Company to
award Mr. Simpson with 100,000 stock options or shares of restricted stock at an
exercise price (or purchase price) of $.05 per share, vesting 50% on April 1,
1998 and 50% on April 1, 1999; 400,000 stock options or shares of restricted
stock at an exercise price (or purchase price) equal to the closing price of the
Company's Common Stock on the Nasdaq National Market System on Mr. Simpson's
date of hire, which price was $2.437, and vesting 100,000 immediately, and the
remainder at a rate of 6,250 per month over the next four years; and 100,000
performance-related stock options or shares of restricted stock at an exercise
price (or purchase price) of $.05 per share, vesting 50% when the average
closing price of the Company's Common Stock exceeds the price on Mr. Simpson's
date of hire by $5.00 (or a stock price of $7.437), and 50% when such average
closing price exceeds the price on Mr. Simpson's date of hire by $10.00 (or a
stock price of $12.437). The grants of options
11
<PAGE> 15
(or stock purchase rights) to Mr. Simpson are conditioned upon stockholder
approval of the amendment and restatement of the Company's Stock Option and
Restated Stock Purchase Plan 2.0 which, among other things, increases the number
of shares of Common Stock which may be issued pursuant to such plan.
Except for his performance-related options (or restricted stock), all of
Mr. Simpson's options (or restricted stock) will vest in the event of a "change
of control" of the Company, which will be deemed to have occurred if (a) there
is a change in the identity of more than half of the members of the Board
(excluding redesignation by Fujitsu and/or Sun or any of their respective
designees) over any six month period or (b) the Company within a 12-month period
ceases to own more than one half of its gross assets (measured at the
commencement of such period) by virtue of one or more bulk transfers of its
assets. The options will expire 10 years from the date of grant, six months
after termination of employment, or eighteen months after termination of
employment due to the death or permanent disability of Mr. Simpson. In the event
Mr. Simpson's employment is terminated without cause, the Company will continue
to pay his direct compensation and to fund insurance and medical benefits for a
period of 24 months. Mr. Simpson's stock options (or restricted stock),
excluding performance-related stock options (or restricted stock), will continue
to vest for the twenty-four month period. In addition, if Mr. Simpson is
terminated without cause and the price of the Company's Common Stock is $7.50
per share or more above the price on Mr. Simpson's hire date, the Company will
fund Mr. Simpson's annuity for a minimum of 24 months from Mr. Simpson's hire
date. Mr. Simpson may also be terminated for cause without any severance
benefits, provided that he is properly alerted and given fair opportunity to
explain or correct the stated cause. "Cause" is restricted to actions or events
where Mr. Simpson has responsibility and accountability.
Pursuant to a letter agreement dated April 1, 1997, Mr. Webster was hired
as the Company's Chief Financial Officer (and was subsequently appointed
Secretary) at a base salary of approximately $150,000. Mr. Webster may also earn
an incentive bonus of up to fifty percent of his base salary, with the
qualifying standards to be determined by mutual agreement of Mr. Webster, the
Company's Chief Executive Officer and the Human Resources Committee of the Board
of Directors. Mr. Webster is also eligible to participate in the Company's Stock
Option and Restricted Stock Purchase Plan 2.0. Subject to approval of the Board
of Directors and stockholder approval of the amendment and restatement of the
Company's Stock Option and Restricted Stock Purchase Plan 2.0, Mr. Webster is to
receive an initial grant of 100,000 options under such plan at an exercise price
of $1.625 per share, the closing price of the Company's Common Stock on the
NASDAQ National Market System on April 16, 1997, the first date of Mr. Webster's
employment. If Mr. Webster's employment is terminated without cause, the Company
will continue to pay his base salary for a period of six months following the
date of termination, less any amounts that Mr. Webster earns or reasonably could
have earned during that same period.
Pursuant to a letter agreement dated April 12, 1997 (the "Baffi Letter
Agreement"), Mr. Baffi was hired as the Company's Vice President of Sales at a
base salary of approximately $170,000, subject to merit review during the
Company's merit review cycle. Mr. Baffi is also eligible for a sales commission
plan of up to 100% of his base salary, with the qualifying standards to be
determined by mutual agreement of Mr. Baffi, the Company's Chief Executive
Officer and the Human Resources Committee of the Board of Directors. Mr. Baffi
is also eligible to participate in the Company's Stock Option and Restricted
Stock Purchase Plan 2.0. Subject to approval of the Board of Directors and
stockholder approval of the amendment and restatement of the Company's Stock
Option and Restricted Stock Purchase Plan 2.0, Mr. Baffi is to receive an
initial grant of 150,000 options under such plan at an exercise price of $1.812
per share, the closing price of the Company's Common Stock on the NASDAQ
National Market System on April 28, 1997, the first date of Mr. Baffi's
employment, such options to vest 25% after one year of employment, with the
remainder vesting ratably over the next three year period. In the event of a
"change of control" of the Company, which will be deemed to have occurred if (a)
there is a change in the identity of more than half of the members of the Board
(excluding redesignation by Fujitsu and/or Sun or any of their respective
designees) over any six month period or (b) the Company within a 12-month period
ceases to own more than one half of its gross assets (measured at the
commencement of such period), or a sale of all or substantially all of the
Company's assets, Mr. Baffi's unvested stock options will vest in full. If Mr.
Baffi's employment is terminated without cause, the vesting of Mr. Baffi's stock
options will be accelerated by twelve months and the Company will continue to
pay
12
<PAGE> 16
his base salary for a period of twelve months following the date of termination.
In addition, pursuant to the Baffi Letter Agreement, a twelve month acceleration
of Mr. Baffi's stock options will occur if, without Mr. Baffi's agreement, (a)
Mr. Baffi's job is located outside the general area of Austin, Texas, requiring
Mr. Baffi to relocate, (b) Mr. Baffi ceases to report directly to the Company's
Chief Executive Officer or President, or (c) Mr. Baffi is no longer the senior
corporate executive whose principal responsibility is the management and
direction of the Company's sales function.
The Company entered into employment agreements, effective June 1993, with
Messrs. Ross, Alsup and Smith, which agreements expired in accordance with their
respective terms on June 30, 1996. During the term of their respective
agreements, Mr. Ross served as the Company's President and as the Chairman of
the Company's Board of Directors, Mr. Alsup served as the Company's Chief
Architect and Mr. Smith served as the Company's Vice President of Design and
later as Vice President of Development. Under their respective employment
agreements, as of the end of Fiscal 1996, Messrs. Ross, Alsup and Smith were
entitled to receive base salaries of $264,706, $205,196 and $196,630 per year,
respectively, each payable in bi-weekly installments. In addition, the
agreements entitled Messrs. Ross, Alsup and Smith to certain life, health,
dental insurance and other benefits, and to receive each year a minimum annual
incentive bonus, which for the twelve months ending June 30, 1996 was equal to
100% of their then respective base salaries.
Following the expiration of each of the above-listed employment agreements
with Messrs. Ross, Alsup and Smith, each of such officers (other than Mr. Ross
following his resignation as an officer of the Company on March 3, 1997) has
continued to be employed by the Company in his current position without an
employment contract (although commencing June 1997, Mr. Smith has served as Vice
President of Engineering). Mr. Ross continued to be an employee of the Company
after his resignation as an officer, although after April 30, 1997 Mr. Ross has
been deemed to be an employee of the Company on unpaid leave.
Mr. Ross has asserted that he and the Company are parties to an oral
employment agreement, pursuant to which he is entitled to a $4,000,000 cash
severance package plus full vesting of options and certain other benefits as
well as his unpaid Fiscal 1996 bonus and accrued vacation. The Company has
denied that it has any severance obligations to Mr. Ross, whether contractual or
otherwise, or that any employment agreement exists between the Company and Mr.
Ross. The Company, however, has agreed to negotiate in good faith with Mr. Ross
to agree upon a severance package and such negotiations are on-going. There can
be no assurance that such negotiations will result in a severance package
acceptable to both sides.
1995 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
To provide employees with an opportunity to purchase Common Stock through
payroll deductions, the Company established the 1995 Qualified Employee Stock
Purchase Plan (the "ESPP") The ESPP is intended to qualify for preferential tax
treatment under Section 423 of the Code. Under the ESPP, the Company's
employees, subject to certain restrictions described below, may purchase in the
aggregate up to 40,000 shares of Common Stock at less than the fair market value
of such shares.
The ESPP is administered by the Stock Option Committee, and provides for
consecutive 24-month offering periods, beginning every six months, with exercise
dates at the end of each six-month period. The first 24-month offering period
commenced August 1, 1996. Each eligible employee who enrolls at the commencement
of any such offering period will be given an option to purchase shares during
such period at the lesser of 85% of (a) the fair market value on the
commencement date of the offering period or (b) the fair market value on the day
prior to the last day of the six-month exercise period. In addition, if the fair
market value of a share of Common Stock is lower at the end of any six-month
exercise period than it was at the beginning of the 24-month offering period, a
new 24-month offering period will automatically commence on the day after that
exercise date and all participants will be automatically enrolled in a new
24-month offering period (unless the participant objects in writing prior to
such re-enrollment). Purchases under the ESPP will be funded with deductions
from a participating employee's compensation, which may not exceed 10% nor be
less than 2% of such employee's compensation during any offering period.
Further, no employee may be granted options to purchase more than $25,000 of
fair market value of Common Stock during any calendar year.
13
<PAGE> 17
A total of 40,000 shares of Common Stock have been reserved for issuance
under the ESPP, and, as of July 8, 1997, 33,175 shares of Common Stock have been
issued under the ESPP.
401(k) PLAN
Effective January 1, 1989, the Company implemented its 401(k) Plan and
Trust (the "401(k) Plan"), pursuant to which each employee of the Company may
elect to defer into the 401(k) Plan a percentage of his or her salary, not to
exceed certain statutory limits. Each employee is eligible to begin
participation in the 401(k) Plan on the first day of the first month coinciding
with or following his or her date of hire by the Company. The Company may make
discretionary contributions to the 401(k) Plan on behalf of any participating
employee in an amount to be determined by the Board. Such discretionary Company
contributions are 20% vested after two years of service and continue to vest at
a rate of 20% per additional year of service thereafter. Salary deferral
contributions are 100% vested when made. As of July 8, 1997, the Company had not
made a contribution to the 401(k) Plan for Fiscal 1997.
EMPLOYEE REVENUE SHARING PLAN
Under the Company's Employee Revenue Sharing Plan (the "Revenue Sharing
Plan") in effect during Fiscal 1997, if net revenues for any of three
measurement periods (as defined below) equaled or exceeded 85% of the revenue
growth targets for the measurement period, then the Company paid to its
full-time employees (including executive officers, but excluding commissioned
employees) bonuses ranging in the aggregate from 1% to 3% of net revenues for
the measurement period. For Fiscal 1997, the measurement periods were
established as (a) April 2, 1996 to September 30, 1996, (b) October 1, 1996 to
March 31, 1997, and (c) the entire fiscal year. For any measurement period,
bonuses were paid only if the Company achieved a net profit, on a fully accrued
basis, for the measurement period. At the close of each fiscal quarter, 3.0% of
the net revenue of the Company was accrued and reserved in a "revenue bonus
pool" to fund the Revenue Sharing Plan. The Company did not meet the targets
established under the Revenue Sharing Plan in Fiscal 1997. The Revenue Sharing
Plan is subject to cancellation at any time by the Board of Directors, and no
employee shall be deemed to have vested rights under the Revenue Sharing Plan
for the measurement period during which such cancellation is made effective or
for any subsequent quarter or measurement period. For Fiscal 1998 and subsequent
fiscal years, the Board of Directors intends to have only one measurement
period, which will be the fiscal year.
INDEMNIFICATION AGREEMENTS
The Company has entered or will enter into separate indemnification
agreements with each of its current Directors and officers that require the
Company, among other things, to indemnify them against certain liabilities which
may arise by reason of their status or service as Directors or officers. The
Company believes that these agreements and its Certificate of Incorporation and
Bylaw provisions regarding indemnification of Directors and officers are
necessary to attract and retain qualified persons as Directors and officers.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Human Resources Committee, which is composed entirely of outside
directors, is responsible for making recommendations to the Board regarding
annual salaries and other compensation of the officers of the Company, providing
assistance and recommendations with respect to the compensation policies and
practices of the Company and assisting with the administration of the Company's
compensation plans.
The goals of the Human Resources Committee are to align executive officer
compensation with the Company's business performance and objectives, as well as
to enable the Company to attract, retain and reward well-qualified executives,
which the Human Resources Committee believes is crucial to the Company's
long-term success. In support of these goals, the Committee's general approach
towards executive compensation is to pay compensation, including salaries,
bonuses and non-cash compensation, commensurate with the executives' experience
and expertise and, where relevant, competitive with the compensation paid to
executives in the semiconductor industry and workstation systems business. To
ensure competitive pay, the
14
<PAGE> 18
Company from time to time reviews the compensation practices of other leading
companies in the industries in which it competes, and believes that its
compensation levels fall in the mid- to upper-range in those industries, which
the Company believes is necessary to attract and retain qualified executives.
The Company's compensation program consists of both cash- and equity-based
compensation, which the Human Resource Committee believes permits the Company to
attract, retain and motivate well-qualified executive officers and employees who
can enhance stockholder value and manage and timely deliver increasingly
successful and complex products to the Company's customers. The components of
the Company's compensation program are the following:
Cash-Based Compensation
The Human Resources Committee sets base salary guidelines and percentage
average annual merit increases on the basis of level of responsibility, prior
performance, the Committee's perception of the executive's ability to deliver
future performance and other factors. Compensation levels for competitive
positions in the Company's industries as well as geographic demographics are
considered in making this determination.
Under the Company's employee revenue sharing plan in effect during Fiscal
1997, if during any of three measurement periods the Company's net revenues
equaled or exceeded 85% of the revenue growth targets for that measurement
period, the Company would distribute bonuses to all of its employees, including
its executive officers (but excluding commissioned employees), with each
individual employee's bonus being equal to his or her pro rata share of the
aggregate bonus pool based on the employee's respective wages or salaries
received in that quarter. The Company did not meet these targets in Fiscal 1997.
The Committee is currently considering various alternatives and additions to the
revenue sharing plan, although it anticipates that any replacement plan or
revisions will also apply objective, Company-wide performance criteria relative
to shareholder value.
In addition, to further align its executives' compensation with the
Company's short- and long-term business strategies, management initiatives and
values, the Human Resources Committee may, with the Board's approval, authorize
the payment of discretionary bonuses based upon an assessment of each
executive's contributions to the Company. The Company chose to include such
bonuses as part of the compensation packages for the recently-hired President
and Chief Executive Officer, Chief Financial Officer and Vice President of
Sales. In the future, the Company will consider various alternative bonus
arrangements and criteria for use with other Company executives. While the
Committee believes that, in general, discretionary bonuses should be related to
Company, business unit and executive performance, specific performance criteria
have not yet been established.
Equity-Based Compensation
The Human Resources Committee believes that stock ownership by key
executives provides a valuable incentive for such executives and helps align the
executives' interests with those of the Company's stockholders. To facilitate
these objectives, the Company adopted the Stock Option and Restricted Stock
Purchase Plan 2.0 (the "Stock Plan"), pursuant to which the Company may grant
stock options to executives (as well as other employees and Directors) to
purchase up to 5,575,000 shares of the Company's Common Stock (7,200,000 shares
if the recent amendment and restatement of the Stock Plan is approved by the
Company's stockholders). In general, the options become exercisable over a
defined period in order to encourage continued employment with the Company. In
addition, under the Stock Plan, the Company may in its discretion grant to
eligible participants (in lieu of options) rights to purchase shares of
restricted Common Stock. The Human Resources Committee makes recommendations to
the Stock Option Committee (which administers the Stock Plan) regarding option
grants and sales of restricted Common Stock to the Company's executive officers.
Roger Ross was the Company's Chief Executive Officer from its inception in
1988 until March 1997, when he resigned. In determining Mr. Ross's compensation,
the Human Resources Committee evaluated Company and individual performance,
compensation paid to the Company's other executive officers, and total
15
<PAGE> 19
compensation (including salary, bonus and equity compensation) paid to chief
executive officers of comparable semiconductor and workstation systems
companies. In Fiscal 1997, Mr. Ross's salary was $281,912, and he accrued a cash
bonus of $281,912 under the terms of his expired employment agreement, which was
not based on the Company's performance. Mr. Ross did not receive any new stock
option grants in Fiscal 1997, other than a replacement grant in connection with
the Company's replacement grant program to re-price existing options. The
Company anticipates that it will use similar criteria in the future to determine
the compensation for the Company's current Chief Executive Officer, Mr. Simpson,
with additional emphasis on Company performance, and any compensation program
will include providing the Chief Executive Officer with a substantial stake in
the Company's future performance and success, through option grants or
otherwise, in order to more closely align his interests with those of the
Company's stockholders.
The federal tax law includes requirements in order for annual compensation
in excess of $1 million payable to the chief executive officer and certain
executive officers of the Company to be fully deductible. The Company will not
necessarily and in all circumstances limit executive compensation to that
deductible under these provisions, which are set forth in Section 162(m) of the
Internal Revenue Code. The Committee will consider, however, various
alternatives to preserve the deductibility of compensation payments and benefits
to the extent reasonably practicable and to the extent consistent with its other
objectives.
July 15, 1997 HUMAN RESOURCES COMMITTEE
Seiichi Yoshikawa (Chairman)
Fred T. May
Yasushi Tajiri
Edward F. Thompson
16
<PAGE> 20
PERFORMANCE GRAPH
Set forth below is a comparison of the percentage change in total
stockholder return of the Company's Common Stock and the returns for the Nasdaq
National Market System and the S&P Electronic Index for Semiconductor Companies.
The total stockholder return calculation is for the period commencing on
November 7, 1995 (the date of the Company's initial public offering of Common
Stock) and includes the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN* AMONG THE COMPANY,
S&P ELECTRONIC INDEX FOR SEMICONDUCTOR COMPANIES & THE NASDAQ NATIONAL MARKET
SYSTEM INDEX**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) COMPANY NASDAQ S & P ELECTRONIC
<S> <C> <C> <C>
NOV. 7, 1995 100 100 100
APRIL 1, 1996 67 106 73
MARCH 31, 1997 14 117 112
</TABLE>
- ---------------
* ASSUMES $100 INVESTED ON NOVEMBER 7, 1995 IN COMMON STOCK OF THE COMPANY, S&P
ELECTRONIC INDEX FOR SEMICONDUCTOR COMPANIES & THE NASDAQ NATIONAL MARKET
SYSTEM INDEX
** TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
The above graph shows historical stock price performance (including
reinvestment of dividends) and is not necessarily indicative of future
performance.
17
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From April 2, 1996 to June 30, 1997, the Company purchased a significant
portion of its wafer fabrication needs, in addition to other computer related
products, from Fujitsu and its affiliates. Such purchases totaled approximately
$29.7 million in the aggregate over such period. From April 2, 1996 to June 30,
1997, the Company sold microprocessor products to Fujitsu, Fujitsu/ICL (a
subsidiary of Fujitsu) and other Fujitsu affiliates for an aggregate amount of
approximately $20.0 million. The Company believes that the above-described
purchases from and sales to Fujitsu and its affiliates were on terms comparable
to those available from unaffiliated suppliers or purchasers (as the case may
be) except that Fujitsu generally provides more favorable payment terms to the
Company (depending on the type of product).
On March 31, 1997, the Company entered into a Development Agreement with
Fujitsu whereby Fujitsu would partially fund the development of a derivative of
the Company's Colorado 4 microprocessor for use in embedded control
applications. Assuming that the Company develops the product in accordance with
the terms of the agreement, Fujitsu will pay the Company a total development fee
equal to $4,500,000 as well as royalties in return for certain rights with
respect to the product. During Fiscal 1997, the Company received $3.5 million
pursuant to this agreement. The Development Agreement provides for future
payments to the Company upon completion of certain milestones and acceptance by
Fujitsu.
On June 25, 1997, the Company and Fujitsu entered into a Development
Agreement, pursuant to which, among other things, Fujitsu would pay the Company
an aggregate of $34.5 million in partial funding for the Company's "Viper"
64-bit microprocessor development project and for a license for associated
intellectual property. The resulting technology will be co-owned by the Company
and Fujitsu, and each company will have the right to exploit the technology in
derivative products and to grant sublicenses on a limited basis. Payments are to
be made periodically through March 31, 1999, upon the attainment of certain
milestones, and are subject to reduction, and the contract is subject to
cancellation under certain conditions if milestones are not met.
On November 18, 1996 and February 20, 1997, Fujitsu executed separate
letters of guaranty ("Guaranty Letters") in favor of The Dai-Ichi Kangyo Bank,
Limited ("DKB") pursuant to which Fujitsu guaranteed the payment by the Company
of up to $50,000,000 of indebtedness ($25,000,000 per Guaranty Letter) incurred
under certain loan agreements between the Company and DKB. The Company has
agreed to pay Fujitsu a fee in respect of each of the Guaranty Letters equal to
one half of one percent (0.5%) of the aggregate amount outstanding under the
credit facilities between the Company and DKB and subject to the Guaranty
Letters.
As described under "Executive Compensation," the Company has or had
employment agreements with certain of its executive officers.
18
<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of July 8, 1997 information as to the
beneficial ownership of the Company's Common Stock by (i) each person who is
known by the Company to own beneficially more than 5% of its outstanding shares
of Common Stock (for whom addresses are also provided), (ii) each of the
Company's Directors, (iii) each Named Officer, and (iv) all Directors and
executive officers of the Company as a group. In each instance, information as
to the number of shares beneficially owned and the nature of ownership has been
provided by the individual or entity identified or described and is not within
the direct knowledge of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER(1) OWNED CLASS(2)
------------------- ------------------- ----------
<S> <C> <C>
Fujitsu Limited(3).......................................... 14,078,571 59.8
1-1, Kamikodanaka 4-Chome
Nakahara-ku
Kawasaki 211-88, Japan
Roger D. Ross(3)(4)......................................... 1,581,070 6.7
One Highland Center
Marble Falls, Texas 78645
Mitchell K. Alsup(5)........................................ 334,695 1.4
Trevor S. Smith(6).......................................... 418,369 1.8
Joe D. Jones(7)............................................. 85,511 *
Carter L. Godwin(8)......................................... 14,133 *
Fred T. May(9).............................................. 101,000 *
Edward F. Thompson(10)...................................... 29,167 *
Ryusuke Hoshikawa(9)(11).................................... 5,000 *
William J. Raduchel(12)..................................... 0 *
Masahiro Saida(9)(11)....................................... 5,000 *
Jack W. Simpson, Sr.(13).................................... 0 *
Yasushi Tajiri(9)(11)....................................... 5,000 *
Seiichi Yoshikawa(11)(14)................................... 3,958 *
All Directors and Executive................................. 2,582,903 10.9
Officers as a group (15 persons) (4)-(14)
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the Common Stock.
(1) Addresses provided for beneficial owners of more than 5% of the Common
Stock.
(2) Applicable percentages of beneficial ownership are based on 23,534,123
shares of Common Stock outstanding as of July 8, 1997. Additionally, where
applicable, shares of Common Stock underlying options exercisable by any
listed stockholder within 60 days of July 8, 1997 have been deemed to be
outstanding and beneficially owned by such stockholder, but only for
purposes of determining such stockholder's (and not any other
stockholder's) percentage holdings.
(3) The Company, Fujitsu, Sun and Mr. Ross have entered into a Shareholders
Agreement pursuant to which Sun has agreed to vote its shares of Common
Stock in favor of the slate of nominees to the Company's Board of Directors
approved by the Board, which slate will include, under certain
circumstances, an individual designated by Sun. Pursuant to this agreement,
Fujitsu and Mr. Ross (so long as he owns at least 5% of the outstanding
shares of the Company's Common Stock) have agreed to vote under certain
circumstances for a designee of Sun. Pursuant to this agreement, at the
Annual Meeting Fujitsu and Mr. Ross will vote to elect Sun's designee, Mr.
Raduchel, to the Company's Board of Directors.
(4) Includes options exercisable for 59,259 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997. Also includes 11,811
shares beneficially held by Mr. Ross' spouse (including 1,811 shares
purchasable upon exercise of stock options which have vested or will vest
within 60 days of July 8, 1997), although Mr. Ross disclaims beneficial
ownership of such shares.
(5) Includes options exercisable for 14,695 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
(6) Includes options exercisable for 18,369 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
(7) Includes options exercisable for 5,511 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
(8) Includes options exercisable for 4,133 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
(9) Includes options exercisable for 5,000 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
19
<PAGE> 23
(10) Includes options exercisable for 24,167 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
(11) Beneficial ownership of shares held by Fujitsu is not attributed to
Directors who are employees of Fujitsu.
(12) Mr. Raduchel is an employee of Sun. Pursuant to Sun's internal policies,
Mr. Raduchel has declined to accept grants of options to purchase shares of
Common Stock pursuant to the Company's Stock Option and Restricted Stock
Purchase Plan 2.0, including Annual Director Grants. In addition,
beneficial ownership of shares held by Sun is not attributed to Mr.
Raduchel.
(13) Does not include (i) options to purchase 100,000 shares of Common Stock
which Mr. Simpson will receive upon approval of the proposed amendment to
the Stock Option and Restricted Stock Purchase Plan 2.0 and which will vest
immediately or (ii) options to purchase 25,000 shares of Common Stock which
Mr. Simpson will receive upon approval of the proposed amendment to the
Stock Option and Restricted Stock Purchase Plan 2.0 and which, upon grant,
will be vested within 60 days of July 8, 1997.
(14) Includes options exercisable for 3,958 shares of Common Stock which have
vested or will vest within 60 days of July 8, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Directors and officers of the Company and persons who
beneficially own more than 10% of the Company's Common Stock are required to
file with the Securities and Exchange Commission and the Company reports of
ownership, and changes in ownership, of the Company's Common Stock. Based solely
on a review of the reports received by it, the Company believes that, during
Fiscal 1997, all of its Directors, officers and greater than 10% beneficial
owners complied with all applicable filing requirements under Section 16(a),
except that: Mr. Ross failed to file on a timely basis one Statement of Changes
of Beneficial Ownership of Securities with respect to five dispositions of
Common Stock and an Annual Statement of Changes in Beneficial Ownership for
Fiscal 1997 with respect to three acquisitions of Common Stock and two
dispositions and two acquisitions of stock options; Messrs. Alsup, Godwin, Jones
and Smith each failed to file on a timely basis an Annual Statement of Changes
in Beneficial Ownership for Fiscal 1997 with respect to one disposition and one
acquisition of stock options; and Messrs. Hoshikawa, May, Saida, Tajiri,
Thompson and Yoshikawa each failed to file on a timely basis an Annual Statement
of Changes in Beneficial Ownership for Fiscal 1997 with respect to one
acquisition of stock options. The Company believes that the delinquent filings
with respect to stock options were due to a delay in updating the Company's
stock option records to reflect automatic grants of options to Directors as well
as the grants of replacement options to implement a repricing of the Company's
outstanding stock options.
20
<PAGE> 24
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE COMPANY'S STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN 2.0
(ITEM NO. 2 ON PROXY CARD)
The stockholders of the Company are being asked to approve the amendment
and restatement of the Company's Stock Option and Restricted Stock Purchase Plan
2.0 (the "Stock Plan") as the Company's Stock Option and Restricted Stock
Purchase Plan 3.0 (the "Amended Stock Plan"). The amendments reflected in the
Amended Stock Plan, and the reason for such amendments, are as follows:
Increase In Aggregate Number of Shares
The Board believes that it is necessary to increase the number of shares of
Common Stock available for issuance under the Stock Plan in order to insure that
the Company maintains the ability in the future to continue to utilize the Stock
Plan to attract and retain highly qualified officers and other employees by
providing adequate incentives through the issuance of stock options and stock
purchase rights. Under the Stock Plan, a maximum of 5,575,000 shares of Common
Stock may be issued pursuant to the exercise of options and stock purchase
rights which have been or may be granted under the Stock Plan. As of July 8,
1997, the Company had issued options and stock purchase rights (either exercised
or still outstanding) covering 5,230,197 shares, leaving 344,803 shares
available for issuance pursuant to options and stock purchase rights that may be
granted in the future (including pursuant to ratification of option grants made
in the ordinary course to new employees). The Board believes that the number of
shares currently available for future option grants and stock purchase grants is
not sufficient for its purposes, and, as a result, the Amended Stock Plan
increases the shares of Common Stock available for issuance to 7,200,000. Based
on the closing price of the Company's Common Stock on the Nasdaq National Market
System on July 15, 1997, such shares had an aggregate market value of $14.4
million ($3.25 million of which related to the additional 1,625,000 shares of
Common Stock authorized for issuance under the Amended Stock Plan).
Preservation of the Company's Tax Deduction for Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally disallows tax deductions to a publicly-traded corporation for
compensation paid to certain executive officers in excess of $1,000,000 per
officer per year. Grants of stock options and stock purchase rights under the
Stock Plan have been exempt from the limitation of Section 162(m) because the
Company was not a publicly-traded corporation when it adopted the Stock Plan.
The amendment to the Stock Plan to increase the aggregate number of shares of
Common Stock available for issuance thereunder, however, will render this
exemption unavailable. Accordingly, the Amended Stock Plan contains the
following amendments to the Stock Plan, which are designed to make the grants of
stock options qualify as "performance-based compensation," and so preserve the
Company's tax deductions with respect to stock options:
(a) The Amended Stock Plan limits the number of options that can be
granted to any participant in any fiscal year of the Company to those which
cover 600,000 shares of Common Stock, and the number of stock purchase
rights which can be granted to any participant in any fiscal year of the
Company to those which cover 600,000 shares of Common Stock reduced by the
number of shares covered by options granted to such participant in such
fiscal year. The Stock Plan had no such limits.
(b) The Amended Stock Plan requires that the members of the Board
committee which administers the Stock Plan must be both (a) "non-employee
directors" within the meaning of Rule 16b-3 of the Exchange Act, and (b)
"outside directors" within the meaning of Section 162(m) of the Code. The
Stock Plan provided that the members of such Board committee must be
"disinterested directors" within the meaning of former Rule 16b-3 of the
Exchange Act.
Amendment of Definition of "Major Event"
The Stock Plan contains provisions which are designed to preserve the
economic position of each participant in the event of a "Major Event," defined
to include (a) a change in the identity of more than half of the members of the
Board (excluding redesignation by Fujitsu and/or Sun of any of their respective
designees) over any six month period, (b) the Company within a 12-month period
ceasing to own more than one half of its gross assets (measured at the
commencement of such period) by virtue of one or more bulk
21
<PAGE> 25
transfers of its assets or (c) certain mergers and consolidations. The Board
believes that it is desirable to modify the definition of "Major Event" to
include, in general, (i) a person or group (other than Fujitsu) acquiring more
than a fifty percent voting interest in the Company, (ii) the acquisition by
Fujitsu, directly or indirectly, of all of the stock of the Company, and (iii)
certain mergers, consolidations and reorganizations, and a sale of substantially
all of the Company's assets, following which the stockholders of the Company
immediately prior to the transaction do not continue to own at least fifty
percent of the voting power of the outstanding securities of the Company or the
entity resulting from such transaction. The Board believes that the revised
definition of "Major Event" more accurately reflects the types of transactions
in which the economic interests of the participants in the Stock Plan may be at
risk and thus deserving of protection. The Amended Stock Plan accordingly
clarifies and modifies the definition of "Major Event," as described below.
Additional Participation by Non-Employee Directors
The Stock Plan provides that any director who is not a substantially
full-time employee of the Company ("Non-Employee Directors") could only receive
automatic grants of options. The Stock Plan includes this provision because of
the requirements of former Rule 16b-3 of the Exchange Act. Because this rule has
been changed so that this restriction is no longer necessary, the Board believes
that it is advisable to eliminate this restriction to provide the Company with
additional compensation flexibility in order to attract and retain qualified
Non-Employee Directors. Accordingly, the Amended Stock Plan eliminates this
restriction.
Certain Technical Changes
The Amended Stock Plan also amends the Stock Plan in certain technical
respects, which the Board believes are not material.
REQUIRED VOTE
Affirmative votes representing a majority of shares of Common Stock present
in person or represented by proxy at the Annual Meeting and entitled to vote on
this proposal will be required to approve this proposal. Abstentions will count
as votes against this proposal because they will be counted as present at the
meeting and entitled to vote on this proposal. However, broker non-votes will
not be so considered and thus will not affect the determination as to whether
the requisite majority approval has been obtained with respect to this proposal.
SUMMARY OF THE AMENDED STOCK PLAN
The principal features of the Amended Stock Plan are summarized below. This
summary, however, is not intended to be a complete discussion of all of the
terms of the Amended Stock Plan. A copy of the Amended Stock Plan is attached
hereto as Exhibit A.
Shares Subject to the Amended Stock Plan
Up to an aggregate of 7,200,000 shares of Common Stock are authorized for
issuance under the Amended Stock Plan. Shares which are not issued before the
expiration or termination of an option or are forfeited shares of restricted
stock will thereafter be available for future options and stock purchase rights
under the Amended Stock Plan. The aggregate number of shares available under the
Amended Stock Plan and the number of shares subject to outstanding options and
stock purchase rights will be increased or decreased to reflect any changes in
the outstanding Common Stock of the Company by reason of any recapitalization,
reorganization, reclassification, stock dividend, stock split, reverse stock
split, or similar transaction.
Type of Options and Stock Purchase Rights
Two types of options may be granted under the Amended Stock Plan: options
intended to qualify as incentive stock options under Section 422 of the Code
("ISOs"), and options not so qualified for favorable federal income tax
treatment ("NSOs"). Stock purchase rights which give participants the right to
purchase Common Stock subject to certain restrictions may also be granted under
the Amended Stock Plan. Each option granted shall be subject to a stock option
agreement, and each stock purchase right granted shall be
22
<PAGE> 26
subject to a stock purchase agreement, between the participant and the Company.
Such agreements shall contain such terms and provisions as the Committee may
determine in its discretion, and need not be uniform.
Eligibility and Participation
All key employees, officers, Directors, consultants, and advisors to the
Company or any subsidiary are eligible for selection to participate in the
Amended Stock Plan, subject to two restrictions: (1) no ISO may be granted to
any person who, at the time of grant, is not a regular employee of the Company,
and (2) no participant may receive grants of options with respect to more than
600,000 shares of Common Stock or grants of stock purchase rights with respect
to more than 600,000 shares of Common Stock reduced by the number of shares
covered by options granted to such participant in such fiscal year (subject to
adjustment in the event of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or similar transaction) during
any fiscal year of the Company or portion thereof. If an option is cancelled or
any restricted stock is forfeited (i.e., repurchased by the Company), the
cancelled option or the forfeited stock continues to be counted against the
maximum number of shares for which options or stock purchase rights may be
granted to a participant during a fiscal year of the Company or portion thereof.
Subject to such limitations, an individual who has been granted an option or
stock purchase right may, if such individual is otherwise eligible, be granted
additional options or stock purchase rights as the Committee may determine.
Administration of the Stock Plan
The Amended Stock Plan shall be administered by a Committee of the Board
(the "Committee") consisting of two or more directors of the Company who are
both (a) "non-employee directors" within the meaning of Rule 16b-3 of the
Exchange Act, and (b) "outside directors" within the meaning of Section 162(m)
of the Code.
Stock Purchase Rights; Restricted Stock
Each stock purchase right shall entitle the participant to whom it is
granted to purchase, within 60 days after the date of grant, shares of Common
Stock on the terms, conditions, and restrictions determined by the Committee in
its sole discretion. Unless the Committee determines otherwise, such Common
Stock shall be restricted stock, in that it shall be subject to a repurchase
option exercisable upon the voluntary or involuntary termination of the
participant's employment with the Company for any reason, including death or
disability. The purchase price for restricted stock repurchased by the Company
on the participant's termination of employment shall be the original price paid
by the participant, unless the Committee determines otherwise. The repurchase
option shall lapse, and the restricted stock shall accordingly vest, at such
rate as the Committee may determine.
Automatic Grants of Options to Non-Employee Directors
Any Director who is not a substantially full-time employee of the Company,
including any Director who is an employee or designee of any stockholder if such
stockholder permits such Director to hold options as his or her personal
property (a "Non-Employee Director"), shall receive automatic grants of NSOs.
Each person who becomes a Non-Employee Director will initially be granted an NSO
to purchase 10,000 shares of Common Stock on the date he or she first becomes a
Non-Employee Director, unless he or she was a regular employee of the Company,
or otherwise received Company options, within one year before such date. Such
NSO shall become exercisable ratably each month over four years, and shall have
a term of 10 years from the grant date. In addition, on each August 31st
thereafter, each Non-Employee Director who has completed six months of service
as a Non-Employee Director as of such August 31st shall receive another NSO to
purchase an additional 2,000 shares of Common Stock, which such NSO shall become
exercisable ratably each month during the 37th through 48th months following the
grant date. All such NSOs shall have an exercise price not less than the
per-share fair market value of Common Stock on the date of grant, and, once
exercisable, shall be fully exercisable for a period of 10 years from the date
of grant. The number of NSOs to be automatically granted to Non-Employee
Directors shall be adjusted on any recapitalization, reorganization,
reclassification, stock dividend, stock split, reverse stock split, or similar
transaction. In addition to automatic grants, the Committee may make grants of
options and stock purchase rights under the Amended Stock Plan to Non-Employee
Directors as it may determine in its discretion.
23
<PAGE> 27
Option Price; Exercisability of Options
The purchase price for shares of Common Stock covered by each option shall
be determined by the Committee, but, in the case of an ISO, shall not be less
than 100% of the fair market value of such shares on the date of grant, or, if
the ISO is granted to a 10% shareholder of the Company (measured by ownership of
voting power), not less than 110% of the fair market value of such shares on the
date of grant. Except for NSOs automatically issued to Non-Employee Directors,
the Committee shall determine when and under what conditions any option shall
become exercisable. However, the aggregate fair market value of shares of Common
Stock (determined at the date of grant) for which ISOs (whenever granted) are
exercisable for the first time by a participant during any calendar year shall
not exceed $100,000. The purchase price of shares on the exercise of an option
shall be paid in full at the time of exercise in cash or by check payable to the
order of the Company, or, subject to the approval of the Committee, by the
delivery of shares of Common Stock already owned by the participant, by the
participant's five-year, full-recourse, interest-bearing promissory note,
secured by the shares issuable on the exercise of the option, or through a
"cashless" exercise.
Duration of Option
Each option shall expire on the date specified by the Committee, but all
options shall expire within 10 years of the date of grant. ISOs granted to 10%
shareholders of the Company (measured by ownership of voting power) shall expire
within five years from the date of grant.
Termination of Employment; Death or Disability
If a participant ceases to be employed by the Company or any of its
subsidiaries for any reason other than death or permanent disability, the
participant's ISOs and NSOs shall be exercisable for a period of three months
(unless otherwise determined by the Committee in an individual option agreement)
after the termination of employment. If a participant dies or becomes
permanently disabled, the participant's ISOs and NSOs shall be exercisable for a
period of 12 months (unless otherwise determined by the Committee in an
individual option agreement) after the date of death or permanent disability.
After a participant's death, any ISOs which remained exercisable on the date of
death may be exercised by the person or persons to whom the participant's rights
pass by will or the laws of descent and distribution. The termination of a
participant's employment by reason of death, disability or otherwise will cause
any stock purchase right to lapse immediately, unless otherwise determined by
the Committee.
Major Events
Upon a "Major Event," the Amended Stock Plan shall terminate, all options
theretofore granted shall terminate, and all nonvested shares of restricted
stock shall be forfeited, but the Committee may provide for any or all of the
following alternatives: (i) the options theretofore granted will become
immediately exercisable, (ii) the successor corporation will assume the options
and restricted stock agreements, or substitute new options covering the stock of
the successor corporation and restricted stock of the successor corporation,
with appropriate adjustments as to the number and kind of shares and option
prices, (iii) the successor corporation will continue the Amended Stock Plan,
(iv) the options will be cashed out, or (v) restricted stock will vest (i.e.,
the Company's repurchase options will be cancelled). Under the Amended Stock
Plan, a "Major Event" occurs when (a) any person or group other than Fujitsu or
its affiliates becomes the beneficial owner of securities of the Company, or of
any entity resulting from a merger or consolidation of the Company, representing
more than 50 percent of the combined voting power of the Company or such entity,
(b) Fujitsu or its affiliates directly or indirectly acquire all of the
outstanding Common Stock of the Company, or (c) the consummation of a merger,
consolidation, or reorganization to which the Company is a party, or a sale of
substantially all of the assets of the Company, if persons who are not
stockholders of the Company immediately before the consummation of such
transaction or Fujitsu or its affiliates are the beneficial owners, immediately
following the consummation of such transaction, of more than 50% of the combined
voting power of the outstanding securities of the Company or the entity
resulting from such transaction.
24
<PAGE> 28
Rights as a Stockholder; Assignability
The recipient of an option will have no rights as a stockholder with
respect to shares of Common Stock covered by the option until the date such
recipient becomes a holder of record of such shares. An ISO granted under the
Amended Stock Plan shall, by its terms, be non-transferable by the option
holder, either voluntarily or by operation of law, other than by will or the
laws of descent and distribution, and shall be exercisable during the option
holder's lifetime only by him or her. An NSO or a nonvested share of restricted
stock issued under the Amended Stock Plan shall be nontransferable by the
participant, either voluntarily or by operation of law, other than by will or
the laws of descent and distribution, pursuant to a "qualified domestic
relations order" as defined in the Code, or, with the consent of the Committee,
to a member of the holder's immediate family or a trust exclusively for the
benefit of one or more of the holder's immediate family as part of the holder's
estate plan.
Amendment, Termination, and Duration of the Amended Stock Plan
The Amended Stock Plan shall continue in effect until terminated by the
Board, or until no shares of Common Stock remain available for issuance under
the Amended Stock Plan. The Board may suspend or terminate the Amended Stock
Plan at any time. The Board may also amend the Amended Stock Plan at any time,
except that no such amendment without appropriate stockholder approval shall
increase the maximum number of shares which may be issued under the Amended
Stock Plan, change the minimum exercise price of ISOs, increase the maximum term
of ISOs, permit the granting of options to anyone other than those eligible
under the terms of the Amended Stock Plan, or otherwise materially increase the
benefits accruing to participants under the Amended Stock Plan. Furthermore, no
amendment of the Amended Stock Plan shall amend or impair any rights or
obligations under any option, stock purchase right, or restricted stock purchase
agreement theretofore granted under the Amended Stock Plan, without specific
action of the Board or the Committee, and the written consent of the holder of
the affected option, stock purchase right, or restricted stock; provided,
however, that the Board or the Committee may unilaterally amend this Plan or any
option, Stock Purchase Right or Restricted Stock purchase agreement, without the
consent of the holder thereof, if such amendment is necessary or desirable to
comply with the Securities Act, state blue sky laws, or applicable listing
requirements of any principal securities exchange on which shares of the same
class of securities for which the options or Stock Purchase Rights are
exercisable are listed, to preserve the status of options as ISOs, or to
preserve the tax deductibility to the Company of any awards made under this
Plan. All ISOs granted under the Amended Stock Plan shall be granted within 10
years from the date of the adoption of the Stock Plan.
FEDERAL INCOME TAX MATTERS
The following discussion of federal income tax consequences does not
purport to be a complete analysis of all of the potential tax effects of the
Amended Stock Plan. It is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change. No information is provided
with respect to persons who are not citizens or residents of the United States,
or foreign, state or local tax laws, or estate and gift tax considerations. In
addition, the tax consequences to a particular participant may be affected by
matters not discussed above. ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT
HIS TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO HIM OF THE AMENDED STOCK
PLAN, INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF
CHANGES IN THE TAX LAWS.
The Amended Stock Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
Non-Qualified Stock Options
Under current federal income tax law, the grant of an NSO has no tax effect
on the Company or the optionee to whom it is granted. If the shares of Common
Stock received on the exercise of an NSO are not subject to restrictions on
transfer or risk of forfeiture, the exercise of the NSO will result in ordinary
income to
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the optionee equal to the excess of the fair market value of the shares at the
time of exercise over the option price. The optionee's tax basis in the shares
will be equal to the aggregate exercise price paid by the optionee plus the
amount of taxable income recognized upon the exercise of the option. Upon any
subsequent disposition of the shares, any gain or loss recognized by the
optionee will be treated as capital gain or loss and will be long-term capital
gain or loss if the shares are held for more than one year after exercise. At
the time of recognition of ordinary income by the optionee upon exercise, the
Company will normally be allowed to take a deduction for federal income tax
purposes in an amount equal to such recognized income.
Incentive Stock Options
The federal income tax consequences associated with ISOs are generally more
favorable to the optionee and less favorable to the Company than those
associated with NSOs. Under current federal income tax law, the grant of an ISO
does not result in income to the optionee or in a deduction for the Company at
the time of the grant. Generally, the exercise of an ISO will not result in
income for the optionee if the optionee does not dispose of the shares within
two years after the date of grant nor within one year after the date of
exercise. If these requirements are met, the basis of the shares of Common Stock
upon a later disposition will be the option price, any gain on the later
disposition will be taxed to the optionee as long-term capital gain, and the
Company will not be entitled to a deduction. The excess of the market value on
the exercise date over the option price is an adjustment to regular taxable
income in determining alternative minimum taxable income, which could cause the
optionee to be subject to the alternative minimum tax. If the optionee disposes
of the shares before the expiration of either of the holding periods described
above (a "Disqualifying Disposition"), the optionee will have compensation
taxable as ordinary income, and the Company will normally be entitled to a
deduction, equal to the lesser of (a) the fair market value of the shares on the
exercise date minus the option price, or (b) the amount realized on the
disposition minus the option price. If the price realized in any such
Disqualifying Disposition of the shares exceeds the fair market value of the
shares on the exercise date, the excess will be treated as long-term or
short-term capital gain, depending on the optionee's holding period for the
shares.
Restricted Stock
Under current federal income tax law, the grant of a stock purchase right
has no tax effect on the Company or the individual to whom it is granted. The
income tax consequences resulting from a purchase of restricted stock pursuant
to the exercise of a stock purchase right will vary depending on whether the
purchaser makes an election under Section 83(b) of the Code. Such election may
be made within 30 days of the date the restricted stock is purchased with
respect to some or all of the shares of restricted stock purchased. If no
election is made, the participant will not recognize any income as a result of
the purchase of shares subject to the transfer restrictions and forfeiture
provisions (i.e., the Company's repurchase right) described above. The
participant will recognize compensation income when the transfer restrictions or
forfeiture provisions lapse or are otherwise removed in an amount equal to the
difference between the purchase price paid for such shares and the fair market
value of such shares when such restrictions lapse or are otherwise removed. In
addition, any dividends paid on any shares while such shares are subject to
transfer restrictions and forfeiture provisions will be considered compensation
income and not dividend income.
If the participant makes an election under Section 83(b) of the Code, the
participant recognizes compensation income when he or she purchases the shares
in an amount equal to the difference between the fair market value of such
shares at the time of purchase (determined without regard to the transfer
restrictions) and the purchase price paid for such shares. The participant
recognizes no additional income upon the subsequent lapse or removal of the
transfer restrictions or forfeiture provisions with respect to such shares, and
any dividends paid on the shares while such shares are subject to the transfer
restrictions and forfeiture provisions will be taxed as dividend (rather than
compensation) income.
In general, the Company is entitled to a deduction in the amount of the
compensation income recognized by the participant at the time the participant
recognizes such income, provided certain reporting requirements are timely met.
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If and to the extent any shares are forfeited (i.e., repurchased by the
Company), the participant will be allowed to deduct -- as an ordinary deduction
if no Section 83(b) election was made or as a capital loss if such an election
was made -- an amount equal to the difference, if any, between the purchase
price paid for the shares and the amount received as a result of the forfeiture.
The participant will recognize a capital gain or loss upon the subsequent
sale or other taxable disposition of such shares (other than a sale to the
Company as a result of the forfeiture provisions), in an amount equal to the
difference between the proceeds realized from the sale or other disposition and
the sum of (a) the purchase price paid for such shares plus (b) in the case of a
gain taxable to a participant who made a Section 83(b) election, the amount of
gross income taxable as compensation to such participant as a result of the
purchase of the shares.
The Company is not entitled to any deduction corresponding to any capital
gains realized by a participant.
$1,000,000 Limit on Deductible Compensation
Section 162(m) of the Code provides that any publicly-traded corporation
will be denied a deduction for compensation paid to certain executive officers
to the extent that the compensation exceeds $1,000,000 per officer per year.
However, the deduction limit does not apply to "performance-based compensation,"
as defined in Section 162(m). Compensation is performance-based compensation if
(i) the compensation is payable on account of the attainment of one or more
performance goals; (ii) the performance goals are established by a compensation
committee of the board of directors consisting of "outside directors"; (iii) the
material terms of the compensation and the performance goals are disclosed to
and approved by the stockholders in a separate vote; and (iv) the compensation
committee certifies that the performance goals have been satisfied. The Company
believes that, if the stockholders approve the Amended Stock Plan, the stock
options granted thereunder (unless granted for purchase prices below the fair
market value of the stock subject to the options) will satisfy the requirements
to be treated as performance-based compensation, and accordingly will not be
subject to the deduction limit of Section 162(m) of the Code. The Company
believes, however, that it is unlikely that stock purchase rights granted under
the Amended Stock Plan, or the purchase of restricted stock thereunder, will
qualify as performance-based compensation. The Company's ability to deduct
compensation attributable to the purchase of restricted stock under stock
purchase rights will therefore probably be subject to the limit of Section
162(m) of the Code.
Excess Parachute Payments
Under Section 4999 of the Code, certain officers, stockholders, or
highly-compensated individuals ("Disqualified Individuals") will be subject to
an excise tax (in addition to federal income taxes) of 20% of the amount of
certain "excess parachute payments" which they receive as a result of a change
in control of the Company. Furthermore, Section 280G of the Code prevents the
Company from taking a deduction for any "excess parachute payments." The cash
out or acceleration of the vesting of stock options or restricted stock upon a
Major Event may cause the holders of such stock options and restricted stock who
are Disqualified Individuals to recognize certain amounts as "excess parachute
payments" on which they must pay the 20% excise tax, and for which the Company
will be denied a tax deduction.
Special Rules; Withholding of Taxes
Special tax rules may apply to a participant who is subject to Section 16
of the Exchange Act. Other special tax rules will apply if a participant
exercises a stock option by delivering shares of Common Stock which he or she
already owns, or through a "cashless exercise."
The Company may take whatever steps the Committee deems appropriate to
comply with any applicable withholding tax obligation, including requiring any
participant to pay the amount of any applicable withholding tax to the Company
in cash. The Committee may, in its discretion, authorize "cashless withholding."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT
AND RESTATEMENT OF THE STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN 2.0.
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INDEPENDENT PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick LLP ("KPMG") has served as the Company's
independent certified public accountants for Fiscal 1997. Representatives of
KPMG are expected to be present at the Annual Meeting and will be available to
respond to appropriate questions and to make any statements they desire.
OTHER BUSINESS
The Company does not know of any other business to be presented to the
Annual Meeting and does not intend to bring any other matters before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
the persons named in the accompanying proxy are empowered, in the absence of
contrary instructions, to vote according to their best judgment.
ANNUAL REPORT
The Company is delivering with this Proxy Statement a copy of its Annual
Report to Stockholders for Fiscal 1997. However, it is not intended that the
Annual Report to Stockholders be a part of this Proxy Statement or a
solicitation of proxies.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholders who wish to present proposals for action, or to nominate
Directors, at the next annual meeting of stockholders of the Company (that is,
the next annual meeting following the Annual Meeting that is now scheduled to be
held on August 11, 1997) must give written notice thereof to the Secretary of
the Company at the address set forth on the cover page of this Proxy Statement
not less than sixty days in advance of such meeting or, if later, the tenth day
following the first public announcement of such meeting. Such written notice
must contain the information required by Section 2.14 of Article II of the
Company's Bylaws.
In order to be eligible for inclusion in the Company's proxy statement and
proxy card for the next Annual Meeting of Stockholders pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, stockholder proposals must be
received by the Secretary of the Company at its principal executive offices no
later than March 20, 1998. However, in order for such stockholder proposals to
be eligible to be brought before the stockholders at the next annual meeting,
the stockholder submitting such proposals must also comply with the procedures,
including the deadlines, required by Section 2.14 of Article II of the Company's
Bylaws, as referenced in the preceding paragraph. Stockholder nominations of
Directors are not stockholder proposals within the meaning of Rule 14a-8 and are
not eligible for inclusion in the Company's proxy statement.
By Order of the Board Directors
/s/ FRED T. MAY
Fred T. May
Chairman of the Board
Austin, Texas
July 18, 1997
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PLEASE PROMPTLY VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING. A RETURN SELF-ADDRESSED ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
A PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED. AT ANY
TIME BEFORE A VOTE AT THE ANNUAL MEETING YOU MAY REVOKE YOUR PROXY BY (1) A
LATER DATED PROXY OR A WRITTEN NOTICE OF REVOCATION DELIVERED TO THE INSPECTOR
OF ELECTIONS OR (2) ADVISING THE INSPECTOR OF ELECTIONS AT THE MEETING THAT YOU
ELECT TO VOTE IN PERSON. ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF
REVOKE A PROXY.
THE ANNUAL MEETING IS ON AUGUST 11, 1997. PLEASE RETURN YOUR PROXY IN TIME.
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EXHIBIT A
ROSS TECHNOLOGY, INC.
STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN 3.0
1. PURPOSE.
The purpose of this Stock Option and Restricted Stock Purchase Plan 3.0
(the "Plan") of ROSS TECHNOLOGY, INC., a Delaware corporation (the "Company"),
is to secure for the Company and its shareholders the benefits arising from
stock ownership by selected officers and other key employees, directors,
consultants and advisers of the Company or any of its subsidiaries. The Plan
will provide a means whereby such persons may purchase shares of the common
stock of the Company (the "Common Stock") pursuant to (i) options which will
satisfy the requirements of "incentive stock options" ("ISOs") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii)
"nonqualified" stock options ("NSOs") and (iii) rights to purchase Common Stock
pursuant to a restricted stock purchase agreement entered into between the
Company and the purchaser ("Stock Purchase Rights").
2. ADMINISTRATION.
The Plan shall be administered by a committee of the Board of Directors of
the Company (the "Board") consisting of two or more directors of the Company
(the "Committee") or, if no committee has been appointed by the Board, then by
the Board. From such time, if ever, as the Company becomes obligated to file
reports under the Securities Exchange Act of 1934, as amended ("Exchange Act"),
the Plan shall be administered only by the Committee which shall then consist
solely of persons who are both "non-employee directors" within the meaning of
Rule 16b-3 ("Rule 16b-3") promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code. Any action of the
Committee with respect to administration of the Plan shall be taken by a
majority vote or unanimous written consent of its members.
Subject to the provisions of the Plan, the Committee shall have the full,
absolute and unconditional discretion and authority (i) to construe and
interpret the Plan, (ii) to define the terms used herein, (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan, (iv) to determine
the individuals to whom and the time or times at which options and Stock
Purchase Rights shall be granted, whether any option will be an ISO or NSO, the
number of shares to be subject to each option or Stock Purchase Right, the
option price or restricted stock purchase price (as the case may be), the number
of installments, if any, in which each option or Stock Purchase Right may be
exercised, (v) to determine the circumstances under which exercisability of any
option or vesting of any restricted stock may be accelerated, (vi) to determine
the duration of each option, (vii) to approve and determine the duration of
leaves of absence which may be granted to participants without constituting a
termination of their employment for the purposes of the Plan, (viii) to amend
the terms of any outstanding option or restricted stock, with the consent of the
option holder (or as otherwise provided in the individual option agreement),
(ix) to convert an ISO into an NSO with the consent of the option holder, and
(x) to make all other determinations necessary or advisable for the
administration of the Plan. All determinations and interpretations made by the
Committee shall be made in good faith and shall be binding and conclusive on all
participants in the Plan and their legal representatives and beneficiaries.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 17, the shares to be offered
under the Plan shall consist of the Company's authorized but unissued Common
Stock, and the aggregate amount of such stock which may be issued upon exercise
of all options and Stock Purchase Rights under the Plan shall not exceed Seven
Million Two Hundred Thousand (7,200,000) shares. If any option granted under the
Plan shall expire or terminate for any reason without having been exercised in
full, or if the Company shall repurchase any Restricted Stock (as defined in
Section 12(a)) pursuant to the repurchase option described in Section 12(b), the
unpurchased shares subject to such expired or terminated option or the shares of
Restricted Stock so
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repurchased, as the case may be, shall again be available for options to be
granted or Restricted Stock to be issued under the Plan.
4. ELIGIBILITY AND PARTICIPATION.
Subject to Section 5, all officers and other key employees of the Company
or of any subsidiary corporation (as defined in Section 424(f) of the Code)
shall be eligible for selection to participate in the Plan. Subject to Section
5, Directors of the Company who are not regular employees of the Company and
other non-employees who provide services to the Company or any subsidiary
corporation may also participate in the Plan if the Board or the Committee so
determines. An individual who has been granted an option or Stock Purchase Right
may, if such individual is otherwise eligible, be granted one or more additional
options or Stock Purchase Rights if the Committee shall so determine, subject to
the other provisions of the Plan. No ISO may be granted to any person who, at
the time the ISO is granted, is not an employee of the Company. The aggregate
fair market value (determined at the time the option is granted) of the stock
with respect to which ISOs (whenever granted) are exercisable for the first time
by an option holder during any calendar year (under all incentive stock option
plans of the Company and its affiliates) shall not exceed one hundred thousand
dollars ($100,000). All ISOs granted under the Plan shall be granted within ten
(10) years from the date of adoption of this Plan. No participant may receive
grants during any fiscal year of the Company or portion thereof of ISOs and
NSOs, which, in the aggregate, cover more than Six Hundred Thousand (600,000)
shares, or of Stock Purchase Rights which, in the aggregate, cover more than Six
Hundred Thousand (600,000) shares reduced by the number of shares covered by
ISOs and NSOs granted to such participant in such fiscal year or portion
thereof, subject to adjustment as provided in Section 17. If an option expires
or terminates for any reason without having been exercised in full, or if the
Company repurchases any Restricted Stock pursuant to the repurchase option
described in Section 12(b), the unpurchased shares subject to such expired or
terminated option or the Restricted Stock so repurchased will continue to count
against the maximum numbers of shares for which options or Stock Purchase Rights
may be granted to a participant during any fiscal year of the Company or portion
thereof.
5. FORMULA AWARDS TO NON-EMPLOYEE DIRECTORS.
Any person who is or becomes a director and who is not a full-time or
substantially full-time employee of the Company, including without limitation
any representative or employee of any stockholder of the Company who is
permitted by such stockholder to hold Company stock options as his or her own
personal property, is referred to herein as a "Non-Employee Director." From and
after the date of approval and adoption of this Section 5, each person who
becomes a Non-Employee Director shall automatically be granted an NSO to
purchase Ten Thousand (10,000) shares of Common Stock, subject to adjustment
pursuant to Section 17, which grant shall be made effective on the date he or
she first becomes a Non-Employee Director; provided that he or she has not been
an employee of the Company, or otherwise received a grant of Company stock
options, within one year prior to such date.
During the term of the Plan, on August 31 of each year, each Non-Employee
Director shall also be granted an NSO to purchase an additional Two Thousand
(2,000) shares of Common Stock, all subject to adjustment pursuant to Section
17; provided, however, that no such annual grant shall be made to any person who
has not completed at least six (6) months of service as a Non-Employee Director
as of such August 31.
The purchase price under each NSO granted to Non-Employee Directors shall
equal one hundred percent (100%) of the fair market value of the stock subject
to such NSO (as determined under Section 9) on the date the NSO is granted. Each
NSO initially granted to a Non-Employee Director pursuant to the first paragraph
of this Section 5 shall vest monthly over four years following the grant date at
a rate of two and one-twelfths percent (2.08333%) per month. Each NSO granted to
a Non-Employee Director on August 31 of any year pursuant to the preceding
paragraph shall vest at a rate of eight and one-third percent (8.33333%) per
month commencing with the thirty-seventh month following the grant date, such
that 100% of such option shall vest by the date four years after the grant date.
Once exercisable, each such NSO shall be fully exercisable for a period of ten
(10) years from the date of grant.
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In addition to the grants described in this Section 5, the Committee may
make such other grants of options and/or Stock Purchase Rights under this Plan
to Non-Employee Directors as it may determine in its discretion.
6. DURATION OF OPTIONS.
Each option and all rights associated therewith shall expire on such date
as the Committee may determine (as set forth in the particular option
agreement), and shall be subject to earlier termination as provided herein;
provided, however, that all stock options shall expire in any event within ten
(10) years from the date on which such options are granted, and provided,
further, that in the case of ISOs granted to any person possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company (a "10% Shareholder"), each ISO shall expire in any event within five
(5) years from the date on which such ISO is granted.
7. PURCHASE PRICE.
Subject to Section 5, the purchase price of the stock covered by each
option or Stock Purchase Right shall be determined by the Committee, but (a) in
the case of ISOs, shall not be less than one hundred percent (100%) of the fair
market value of such stock (as determined under Section 9) on the date the ISO
is granted, and (b) in the case of ISOs granted to 10% Shareholders, shall not
be less than one hundred and ten percent (110%) of the fair market value of such
stock (as determined under Section 9) on the date the ISO is granted. The
purchase price of the shares upon exercise of an option or Stock Purchase Right
shall be paid in full at the time of exercise in cash or by check payable to the
order of the Company, or, subject in each case to the approval of the Committee
in its sole discretion, (i) in the case of options, by delivery of shares of
Common Stock already owned by, and in the possession of the option holder, (ii)
by a five-year, full-recourse promissory note, bearing interest at a rate to be
determined by the Committee in its discretion, made by option holder in favor of
the Company, secured by the shares issuable upon exercise or other property, or
(iii) in the case of options, through a "cashless exercise," in any case
complying with applicable law (including, without limitation, state and federal
margin requirements), or any combination thereof. Shares of Common Stock used to
satisfy the exercise price of an option shall be valued at their fair market
value determined (in accordance with Section 9) on the date of exercise (or if
such date is not a business day, as of the close of the business day immediately
preceding such date).
8. EXERCISE OF OPTIONS.
Subject to Section 5, each option granted under this Plan shall be
exercisable (i) in such installments and at such times before its expiration
date as the Committee shall determine, and (ii) subject to such other
conditions, if any, as the Committee shall determine. Unless otherwise
determined by the Committee, if the option holder shall not in any given
installment period purchase all of the shares which the option holder is
entitled to purchase in such installment period, then the option holder's right
to purchase any shares not purchased in such installment period shall continue
until the expiration date or sooner termination of the option holder's option.
9. FAIR MARKET VALUE OF COMMON STOCK.
So long as the Common Stock continues to be publicly traded, the fair
market value of the Common Stock, as of any given measurement date, shall be the
average of the highest and the lowest sale prices of the Common Stock on the
principal national securities exchange on which the Common Stock is traded or
the closing sales price or the average of the last bid and asked prices of the
Common Stock on the NASDAQ National Market System or "over the counter" market,
as applicable, in each case on such measurement date, or, if such measurement
date is not a trading day, on the last trading day preceding such measurement
date. If the Common Stock ceases to be publicly traded, the fair market value of
a share of Common Stock shall be determined for purposes of the Plan by the
Committee with reference to the most recent sale price of the Common Stock, the
earnings history, book value, prospects of the Company in light of market
conditions
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generally and such other factors as the Committee may deem appropriate to
reflect the fair market value thereof.
10. WITHHOLDING TAX.
The Company shall have the right to take whatever steps the Committee deems
necessary or appropriate to comply with all applicable federal, state, local,
and employment tax withholding requirements, and the Company's obligations to
deliver shares upon the exercise of options or Stock Purchase Rights under this
Plan shall be conditioned upon compliance with all such withholding tax
requirements. Without limiting the generality of the foregoing, upon (i) the
disposition by an employee or other person of shares of Common Stock acquired
pursuant to the exercise of an ISO granted pursuant to the Plan within two years
of the granting of the ISO or within one year after exercise of the ISO, (ii)
the exercise of NSOs, or (iii) the purchase by an employee of Restricted Stock
or the lapse or termination of the Company's repurchase option on Restricted
Stock, the Company shall have the right to withhold taxes from any other
compensation or other amounts which it may owe to the employee, or to require
such employee or such other person to pay to the Company the amount of any taxes
which the Company may be required to withhold with respect to such shares.
Without limiting the generality of the foregoing, the Committee in its
discretion may authorize a participant to satisfy all or part of any withholding
tax liability by (A) having the Company withhold from the shares which would
otherwise be issued on the exercise of an NSO that number of shares having a
fair market value as of the date the withholding tax liability arises equal to
or less than the amount of the withholding tax liability, or (B) by delivering
to the Company previously-owned and unencumbered shares of the Common Stock of
the Company (including unencumbered shares of Restricted Stock as to which the
Company's repurchase option has lapsed) having a fair market value as of the
date the withholding tax liability arises equal to or less than the amount of
the withholding tax liability.
11. NONTRANSFERABILITY.
An ISO granted under the Plan shall, by its terms, be non-transferable by
the option holder, either voluntarily or by operation of law, other than by will
or the laws of descent and distribution, and shall be exercisable during the
option holder's lifetime only by the option holder, regardless of any community
property interest therein of the spouse of the option holder, or such spouse's
successors in interest. If the spouse of the option holder shall have acquired a
community property interest in such option, the option holder, or the option
holder's permitted successors in interest, may exercise the option on behalf of
the spouse of the option holder or such spouse's successors in interest.
An NSO granted under the Plan shall, by its terms, be non-transferable by
the option holder, either voluntarily or by operation of law, other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code, and shall be exercisable during the
option holder's lifetime only by the option holder, or, to the extent permitted
by the Committee or by the terms of the option agreement, the spouse of the
option holder who obtained the option pursuant to such a qualified domestic
relations order described herein or pursuant to Section 15.
Each share of Restricted Stock issued under the Plan shall, by its terms,
be non-transferable by the holder thereof, either voluntarily or by operation of
law, other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, until the Company's
repurchase rights with respect to such share lapse or are cancelled in full.
At the discretion of the Committee, any option agreement may contain
restrictions on transfer of the shares issuable upon exercise of the option, and
any Restricted Stock purchase agreement may contain restrictions on transfer of
the shares purchased thereunder, in each case including a right of first refusal
and/or a right of repurchase by the Company.
Notwithstanding the foregoing, to the extent that the Committee so
authorizes at the time an option or Stock Purchase Right is granted or amended,
such option or Stock Purchase Right, or Restricted Stock purchased under such
Stock Purchase Right, may be assigned, in connection with the holder's estate
plan, in whole or in part, during the holder's lifetime to one or more members
of the holder's immediate family or to a
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trust established exclusively for one or more of such immediate family members.
Rights under the assigned portion may be exercised by the person or persons who
acquire a proprietary interest in such option, Stock Purchase Right, or
Restricted Stock pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option, Stock
Purchase Right, or Restricted Stock immediately before such assignment and shall
be set forth in such documents issued to the assignee as the Committee deems
appropriate. For purposes of this Section 11, the term "immediate family" means
an individual's spouse, children, stepchildren, grandchildren and parents.
12. STOCK PURCHASE RIGHTS.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with stock option awards granted under the Plan
and/or any other cash or non-cash awards made outside of the Plan. After the
Committee determines that it will offer Stock Purchase Rights under the Plan, it
shall advise the offeree in writing of the terms, conditions and restrictions
related to the offer, including the number of shares of Common Stock that such
person shall be entitled to purchase, the price to be paid and the time within
which such person must accept such offer, which shall in no event exceed 60 days
from the date the Stock Purchase Right was granted. The offer shall be accepted
by execution of a Restricted Stock purchase agreement in the form determined by
the Committee. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Committee determines otherwise, the
Restricted Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for shares repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at such rate as the Committee may determine.
(c) Other Provisions. The Restricted Stock purchase agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Committee in its sole discretion. In addition, the
provisions of Restricted Stock purchase agreements need not be the same with
respect to each purchaser.
13. SHARES TO BE ISSUED IN COMPLIANCE WITH FEDERAL SECURITIES LAWS AND EXCHANGE
RULES.
At the discretion of the Committee, any option agreement may provide that
the option holder (and any transferee), by accepting such option, represents and
agrees that none of the shares purchased upon exercise of the option will be
acquired with a view to any sale, transfer or distribution of said shares in
violation of the Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations promulgated thereunder, or any applicable state "blue
sky" laws, and the person entitled to exercise the same shall furnish evidence
satisfactory to the Company (including a written and signed representation) to
that effect in form and substance satisfactory to the Company, including an
indemnification of the Company in the event of any violation of the Securities
Act or state blue sky laws by such person. In addition, at the discretion of the
Committee, any Restricted Stock purchase agreement may provide that the
purchaser (and any transferee), by accepting such Restricted Stock, represents
and agrees that none of the shares so purchased are being acquired with a view
to any sale, transfer or distribution of said shares in violation of the
Securities Act and the rules and regulations promulgated thereunder, or any
applicable state "blue sky" laws, and such agreement may provide for
indemnification of the Company in the event of any violation of the Securities
Act or state blue sky laws by such purchaser. The Company shall use its
reasonable efforts to take all necessary and appropriate action to assure that
the shares issuable upon the exercise of any option or Stock Purchase Right
shall be issued in full compliance with the Securities Act, state blue sky laws
and all applicable listing requirements of any principal securities exchange on
which shares of the same class are listed.
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14. TERMINATION OF EMPLOYMENT.
If a holder of an ISO or NSO ceases to be employed by the Company or any of
its subsidiary corporations for any reason other than the option holder's death
or permanent disability (within the meaning of Section 22(e)(3) of the Code),
the option holder's ISO or NSO shall be exercisable for a period of three (3)
months (unless otherwise specified by the Committee in an individual stock
option agreement) after the date the option holder ceases to be an employee of
the Company or such subsidiary corporation (unless by its terms it sooner
expires) to the extent exercisable on the date of such cessation of employment
and shall thereafter expire and be void and of no further force or effect. A
leave of absence approved in writing by the Committee shall not be deemed a
termination of employment for the purposes of this Section 14, but no option may
be exercised during any such leave of absence, except during the first three (3)
months thereof. Termination of employment or other relationship with the Company
by the holder of a Stock Purchase Right shall cause such Stock Purchase Right to
lapse immediately, unless otherwise determined by the Committee in its
discretion. Any option or Stock Purchase Right transferred pursuant to a
qualified domestic relations order pursuant to Section 11 shall continue to be
subject to the provisions governing the grant to the original grantee, including
without limitation, the provisions governing exercisability, vesting and
termination (which shall be determined by reference to the employment status of
the original grantee), unless the option agreement or the Committee provides
otherwise.
15. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER.
If the holder of an ISO or NSO dies or becomes permanently disabled (within
the meaning of Section 22(e)(3) of the Code) while the option holder is employed
by the Company or any of its subsidiaries, the option holder's ISO or NSO shall
be exercisable for a period of twelve (12) months (unless otherwise specified by
the Committee in an individual stock option agreement) after the date of such
death or permanent disability (unless by its terms it sooner expires) to the
extent exercisable on the date of death or permanent disability and shall
thereafter expire and be void and of no further force or effect. During such
period after death, such ISO or NSO may, to the extent that it remained
unexercised (but exercisable by the option holder according to such option's
terms) on the date of such death, be exercised by the person or persons to whom
the option holder's rights under the option shall pass by the option holder's
will or by the laws of descent and distribution. The death or disability of a
holder of a Stock Purchase Right shall cause such Stock Purchase Right to lapse
immediately, unless otherwise determined by the Committee in its discretion.
16. PRIVILEGES OF STOCK OWNERSHIP.
No person entitled to exercise any option granted under the Plan shall have
any of the rights or privileges of a stockholder of the Company in respect of
any shares of stock issuable upon exercise of such option until certificates
representing such shares shall have been issued and delivered. No shares shall
be issued and delivered upon the exercise of any option unless and until there
shall have been full compliance with all applicable requirements of the
Securities Act (whether by registration or satisfaction of exemption
conditions), all applicable listing requirements of any national securities
exchange or other market system on which shares of the same class are then
listed and any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery.
17. ADJUSTMENTS.
If the outstanding shares of the Common Stock (or any other class of shares
or securities which shall have become eligible for grant under the Plan pursuant
to this sentence) are increased or decreased or changed into or exchanged for a
different number or kind of shares or securities of the Company through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, an appropriate and
proportionate adjustment shall be made in the maximum number and kind of shares
as to which options may be granted under this Plan. A corresponding adjustment
changing the number or kind of shares allocated to unexercised options or
portions thereof, which shall have been granted prior to any such change, shall
likewise be made. Any such adjustment in the outstanding options shall be made
without change in the aggregate purchase price applicable to the unexercised
portion of the option but with a
A-6
<PAGE> 39
corresponding adjustment in the price for each share or other unit of any
security covered by the option. A corresponding adjustment shall also be made as
to the number of shares to be granted to Non-Employee Directors pursuant to the
formula provisions of Section 5.
Upon the happening of a "Major Event" (as defined below), the Plan shall
terminate, all options and Stock Purchase Rights theretofore granted hereunder
shall terminate, and the Company shall repurchase all Restricted Stock remaining
subject to repurchase options, unless the Committee provides, in its discretion,
in the individual option agreements, or otherwise in writing in connection with
such Major Event, for one or more of the following alternatives with respect to
options and one or more of the following alternatives with respect to Stock
Purchase Rights and Restricted Stock: (i) for the options theretofore granted to
become immediately exercisable notwithstanding the provisions of Section 8; (ii)
for the assumption by the successor corporation of the options and Stock
Purchase Rights theretofore granted or agreements regarding Restricted Stock
theretofore issued, or the substitution by such corporation for such options,
rights and Restricted Stock of new options and rights covering the stock of the
successor corporation and restricted stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices; (iii) for the continuance of the Plan by such
successor corporation, in which event the Plan and the options, Stock Purchase
Rights and Restricted Stock theretofore granted shall continue in the manner and
under the terms so provided; (iv) for the payment in cash or stock in lieu of
and in complete satisfaction of such options, Stock Purchase Rights and
Restricted Stock; or (v) for the cancellation of the Company's repurchase
options on Restricted Stock. A "Major Event" shall mean the occurrence of any of
the following:
(A) Any "Person" or "Group" (as such terms are defined in Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) other than Fujitsu Limited, a Japanese corporation, or a Person
controlled thereby (collectively, "Fujitsu") is or becomes the "Beneficial
Owner" (within the meaning of Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company, or of any entity resulting
from a merger or consolidation involving the Company, representing more
than fifty percent (50%) of the combined voting power of the then
outstanding securities of the Company or such entity.
(B) The consummation of the acquisition by Fujitsu, directly or
indirectly, and regardless of the form or manner of the acquisition, of all
of the issued and outstanding shares of Common Stock of the Company.
(C) The consummation of (x) a merger, consolidation or reorganization
to which the Company is a party, whether or not the Company is the Person
surviving or resulting therefrom, or (y) a sale, assignment, lease,
conveyance or other disposition of all or substantially all of the assets
of the Company, in one transaction or a series of related transactions, to
any Person other than the Company, where any such transaction or series of
related transactions as is referred to in clause (x) or clause (y) above in
this subparagraph (C) (a "Transaction") does not otherwise result in a
"Major Event" pursuant to subparagraph (A) of this definition of "Major
Event"; provided, however, that no such Transaction shall constitute a
"Major Event" under this subparagraph (C) if the Persons who were the
stockholders of the Company immediately before the consummation of such
Transaction and Fujitsu are the Beneficial Owners, immediately following
the consummation of such Transaction, of fifty percent (50%) or more of the
combined voting power of the then outstanding voting securities of the
Person surviving or resulting from any merger, consolidation or
reorganization referred to in clause (x) above in this subparagraph (C) or
the Person to whom the assets of the Company are sold, assigned, leased,
conveyed or disposed of in any transaction or series of related
transactions referred in clause (y) above in this subparagraph (C).
Adjustments under this Section 17 shall be made by the Committee, whose
reasonable determination in good faith as to what adjustments shall be made, and
the extent thereof, shall be final, binding and conclusive. No fractional shares
of stock shall be issued under the Plan on any such adjustment.
A-7
<PAGE> 40
18. AMENDMENT AND TERMINATION OF PLAN.
The Board may at any time suspend or terminate the Plan. Subject to Section
5, the Board may also at any time amend or revise the terms of the Plan,
provided that no such amendment or revision shall, unless appropriate
stockholder approval of such amendment or revision is obtained, increase the
maximum number of shares in the aggregate which may be sold pursuant to options
granted under the Plan, except as permitted under the provisions of Section 17,
or change the minimum purchase price of ISOs set forth in Section 7, or increase
the maximum term of ISOs provided for in Section 6, or permit the granting of
options to anyone other than as provided in Section 4, or otherwise materially
increase the benefits accruing to participants under the Plan.
Notwithstanding any other provision of this Plan to the contrary, no
amendment, revision, suspension or termination of the Plan shall in any way
modify, amend, alter or impair any rights or obligations under any option or
Stock Purchase Right theretofore granted, or Restricted Stock purchase agreement
theretofore entered into, under the Plan, without (a) specific action of the
Board or the Committee, and (b) the written, signed consent of the holder of the
affected option, Stock Purchase Agreement, or Restricted Stock; provided,
however, that the Board or the Committee may unilaterally amend this Plan or any
option, Stock Purchase Right or Restricted Stock purchase agreement, without the
consent of the holder thereof, if such amendment is necessary or desirable to
comply with the Securities Act, state blue sky laws, or applicable listing
requirements of any principal securities exchange on which shares of the same
class of securities for which the options or Stock Purchase Rights are
exercisable are listed, to preserve the status of options as ISOs, or to
preserve the tax deductibility to the Company of any awards made under this
Plan.
19. EFFECTIVE DATE OF PLAN.
The Plan shall be submitted for approval by the holders of the outstanding
voting stock of the Company within twelve (12) months from the date the Plan is
adopted by the Board. The Plan shall be deemed approved by the holders of the
outstanding voting stock of the Company (a) by the affirmative vote of the
holders of a majority of the voting shares of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
Delaware General Corporation Law or (b) by the execution of a unanimous written
consent duly executed in accordance with the Delaware General of Corporation Law
by the holders of all the outstanding voting shares of the Company.
The Stock Option and Restricted Stock Purchase Plan 3.0 shall be effective
upon its adoption by the Company's Board of Directors, provided that, within
twelve (12) months of such adoption, such Plan is approved by the affirmative
vote of the holders of a majority of the voting shares of the Company present,
or represented, and entitled to vote at a meeting duly held in accordance with
the Delaware General Corporation Law.
20. GOVERNING LAW.
The Plan shall be governed for all purposes by the laws of the State of
Delaware, and any issue arising in connection with the interpretation or
enforcement of the Plan or of the terms or conditions of any option granted
under the Plan shall be resolved in accordance therewith.
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<PAGE> 41
PROXY
(COMMON STOCK)
ROSS TECHNOLOGY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 1997
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders of ROSS Technology, Inc. (the "Company") dated
July 18, 1997 and the accompanying Proxy Statement relating to the
above-referenced Annual Meeting, and hereby appoints Jack W. Simpson, Sr.
or, in his absence, Francis S. (Kit) Webster III, with full power of
substitution and resubstitution in each, as attorneys and proxies of the
undersigned.
Said proxies are hereby given authority to vote all shares of common
stock of the Company which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of the Company, to be held on August 11,
1997 at the Company's executive offices, 5316 Highway 290 West, First
Floor, Austin, Texas 78735, at 10:00 a.m., local time, and at any and all
adjournments or postponements thereof (the "Annual Meeting") on behalf of
the undersigned on the following matters and in the manner designated on
the reverse side:
<PAGE> 42
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE
1. Election of Eight (8) Directors NOMINEES: FRED T. MAY
RYUSUKE HOSHIKAWA
[ ] FOR all of the nominees
listed at right (except as WILLIAM J. RADUCHEL
withheld in the space below)
MASAHIRO SAIDA
[ ] WITHHOLD authority to vote
for all nominees listed at right JACK W. SIMPSON, SR.
Instruction: To withhold authority to vote YASUSHI TAJIRI
for any individual nominee, write that
nominee's name in the space provided below: EDWARD F. THOMPSON
------------------------------------------- SEIICHI YOSHIKAWA
2. Approval of the amendment and restatement of the Company's Stock Option
and Restricted Stock Purchase Plan 2.0
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote on such other
matters as may come before the Annual Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY, AND WHEN
PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS IN THIS PROXY. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE AS
DIRECTORS OF THE COMPANY AND FOR APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE COMPANY'S STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN 2.0.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED, POSTAGE PAID ENVELOPE.
Signature Dated: , 1997
----------------------- -------------------------- --------
SIGNATURE IF HELD JOINTLY
NOTE: Please date and sign exactly as your name(s) appear on this proxy card.
If shares are registered in more than one name, all such persons should
sign. A corporation should sign in its full corporate name by a duly
authorized officer, stating his or her title. When signing as attorney,
executor, administrator, trustee or guardian, please sign in your official
capacity and give your full title as such. If a partnership, please sign
in the partnership name by an authorized person.
