SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
[x] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
MAXIM INTEGRATED PRODUCTS, INC.
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
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(1) Amount Previously Paid:
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[MAXIM LOGO]
Dear Maxim Stockholder:
You are invited to attend Maxim's Annual Meeting of Stockholders at
11:00 a.m. on Thursday, November 13, 2003 at the Company's Event Center, located
at 433 N. Mathilda Avenue, Sunnyvale, California. At this meeting you will be
asked to vote on several proposals recommended unanimously by the Board of
Directors. In this letter, I am highlighting the importance of Proposal 2--our
stock option proposal, and Proposal 3--our employee stock participation plan
proposal. This year we are requesting approval of 3% of outstanding shares, 9.4
million options for Proposal 2 and 0.4 million shares for Proposal 3, totaling
9.8 million options, a 30% reduction from the 14.0 million options (4.4% of
outstanding shares) approved last year.
This year, we celebrate Maxim's 15th anniversary as a publicly traded
company. Since Maxim's IPO, an investment in the Company's common stock has
earned our stockholders an average annual return of 37%. This performance could
not have been achieved without the long-term dedication and productivity of our
employees. Maxim's success is and will continue to be dependent upon recruiting
and retaining engineers that can perform at the highest levels within their
professions. Bringing state-of-the-art semiconductor solutions to market
requires the well-orchestrated efforts of engineering teams consisting of
product definers, circuit designers, and applications, test, process, and
package engineers. The men and women with the skills needed to move Maxim
forward are few and far between; their services are in high demand in our
industry. Maxim's employee stock option program is essential to our success in
recruiting and retaining these key personnel. The judicious use of stock options
has enabled Maxim to assemble one of the most experienced, talented teams of
engineers in our industry.
Allowing employees to share in the success of their Company through
stock option participation is a proven formula for success at Maxim. Our stock
option program is very broad based, with 99% of professional employees receiving
option grants, and 82% of unvested options currently outstanding held by
employees below the corporate officer level. Holding options with vesting
extending 4 to 6 years into the future, these employees are part owners in our
Company. Their exceptional and steady performance and long-term attitude are
consistent with that ownership. The entrepreneurial spirit and competitive drive
that are so pervasive at Maxim reflect our employees' stake in the Company's
growth and profitability. They understand that their stock options will only
have value if Maxim creates value for our stockholders. The long-term incentives
provided by the option program are key to retaining a team of high achievers.
We remain committed to the goals of dilution management and enhancement
of stockholder value. During fiscal 2003, our option grants net of cancellations
totaled approximately 13.0 million shares, and our repurchases of our common
stock totaled approximately 4.5 million shares. Consistent with our goal of
dilution management, we have reduced the number of options in this year's
proposal from prior years' levels.
As part of our corporate governance policy, we have always sought
stockholder approval for our annual increases to employee option plans.
Additionally, as many of you know, our option plan prohibits amending
outstanding options by reducing their exercise prices. We continue to believe
that is the right way to conduct our business. All of us are aware of instances
in which senior corporate executives have misused option programs for their
personal gain at the expense of employees and stockholders. We strongly rebuke
such improprieties. We trust that programs such as
Maxim's, that benefit employees and stockholders alike, will not suffer by
association, and we request your continued support.
Our Board of Directors and I strongly encourage you to vote to ratify
and approve our option program. We look forward to a continuation of the
profitable partnership between Maxim's stockholders and employees, one that has
worked so well over the past 15 years.
Yours sincerely,
/s/ John F. Gifford
-------------------
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
MAXIM INTEGRATED PRODUCTS, INC.
120 San Gabriel Drive
Sunnyvale, California 94086
Notice of Annual Meeting of Stockholders
To Be Held November 13, 2003
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Maxim
Integrated Products, Inc., a Delaware corporation (the "Company"), will be held
at the Company's Event Center located at 433 N. Mathilda Avenue, Sunnyvale,
California 94086 on Thursday, November 13, 2003 at 11:00 a.m., Pacific Standard
Time, to consider and vote upon the following proposals:
1. To elect five directors of the Company to serve for the ensuing
year and until their successors are elected and qualified.
2. To ratify and approve an amendment to the Company's 1996 Stock
Incentive Plan, as amended, increasing the number of shares available for
issuance thereunder by 9,400,000 shares from 95,200,000 shares to
104,600,000 shares.
3. To ratify and approve an amendment to the Company's 1987 Employee
Stock Participation Plan, as amended, increasing the number of shares
available for issuance thereunder by 400,000 shares from 14,651,567 shares
to 15,051,567 shares.
4. To ratify the retention of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 26, 2004.
5. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are more
fully described in the Proxy Statement, which is attached and made a part of
this Notice. The Annual Meeting will be open to stockholders of record, proxy
holders and others by invitation only. Beneficial owners of shares held by a
broker or nominee must present proof of such ownership to attend the meeting.
The Board of Directors has fixed the close of business on September 15, 2003 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ John F. Gifford
-------------------
John F. Gifford
President, Chief Executive Officer
and Chairman of the Board
Sunnyvale, California
October 7, 2003
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the Annual Meeting, you are urged to submit
your proxy as soon as possible so that your shares can be voted at the meeting
in accordance with your instructions. You may submit your proxy (1) over the
Internet, as outlined on the enclosed proxy card, (2) by telephone, as outlined
on the enclosed proxy card, or (3) by signing, dating and returning the enclosed
proxy card promptly in the accompanying envelope. If you submit your proxy and
then decide to attend the Annual Meeting to vote your shares in person, you may
still do so. Your proxy is revocable in accordance with the procedures set forth
in the Proxy Statement.
MAXIM INTEGRATED PRODUCTS, INC.
120 San Gabriel Drive
Sunnyvale, California 94086
--------------------------------------------------
Proxy Statement for Annual Meeting of Stockholders
--------------------------------------------------
November 13, 2003
General Information
This Proxy Statement is furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors (the "Board") of Maxim
Integrated Products, Inc., a Delaware corporation ("Maxim" or the "Company"),
for use at its Annual Meeting of Stockholders to be held at 11:00 a.m., Pacific
Standard Time, on November 13, 2003 at the Company's Event Center located at 433
N. Mathilda Avenue, Sunnyvale, California 94086 and at any adjournment or
postponement of that meeting. The approximate mailing date for this Proxy
Statement and the enclosed proxy is October 7, 2003.
The proxy holders will vote all proxies in accordance with the
instructions contained in the proxy, and if no choice is specified the proxy
holders will vote in favor of each of the proposals set forth in the Notice of
Meeting. Proxies will confer upon the proxy holders discretionary authority to
vote upon matters that the Board does not know as of the date hereof are to be
presented at the Annual Meeting and upon matters incident to the conduct of the
meeting.
The Board has fixed the close of business on September 15, 2003 as the
record date (the "Record Date") for the determination of stockholders entitled
to vote at the Annual Meeting. At that time, there were outstanding 327,776,365
shares of Common Stock. The presence of a majority, or 163,888,183, of these
shares of the Common Stock, either in person or by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting.
Revocability of Proxies
Any person signing a proxy in the form accompanying this proxy
statement has the power to revoke it prior to or at the meeting. A proxy may be
revoked by a written instrument delivered to the Secretary of the Company
stating that the proxy is revoked, by a subsequent proxy signed by the person
who signed the earlier proxy, or by attendance at the meeting and voting in
person. Attendance at the Annual Meeting in and of itself does not revoke a
prior proxy.
Voting and Solicitation
Holders of Common Stock are entitled to one vote for each share held.
In the election of directors, however, each stockholder has cumulative voting
rights and is entitled to as many votes as equal the number of shares held by
such stockholder multiplied by the number of directors to be elected (five). If
cumulative voting is requested at the meeting, stockholders' votes may be cast
for a single candidate or distributed among any or all of the candidates. In the
event of cumulative voting, proxy holders may distribute votes among the
nominees in such manner as they deem advisable. Discretionary authority to
cumulate votes is solicited by the Board.
An automated system administered by the Company's transfer agent will
tabulate votes cast by proxy at the meeting, and the inspector of elections
appointed for the meeting will tabulate votes cast in person at the meeting. The
ratification and approval of Proposals No. 2, 3 and 4, the amendment to the
Company's 1996 Stock Incentive Plan, as amended, increasing the number of shares
available for issuance by 9,400,000 shares, the amendment to the Company's 1987
Employee Stock Participation Plan, as amended, increasing the number of shares
available for issuance by 400,000 shares, and the ratification and approval of
the independent auditors for the Company for the current year will require the
affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote at the meeting. Because abstentions
are treated as shares present or represented and entitled to vote for the
purposes of determining whether a matter has been approved by the stockholders,
abstentions have the same effect as negative votes. Broker non-votes and shares
as to which proxy authority has been withheld with respect to any matter are not
deemed to be entitled to vote for purposes of determining whether stockholder
approval of that matter has been obtained, therefore, with respect to Proposals
No. 2, 3 and 4, requiring the affirmative vote of a majority of the shares
present and entitled to vote, broker non-votes have no effect.
The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram, facsimile or personal solicitation by directors,
officers or other regular employees of the Company or, at the Company's request,
a private proxy solicitation firm. No additional compensation will be paid to
the Company's directors, officers or other regular employees for such services,
but any private proxy solicitation firm will be paid their customary fee by the
Company, estimated to be $12,000.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of June 28, 2003 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table; (iii) all executive officers, directors and
director nominees as a group; and (iv) all those known by the Company to be
beneficial owners of more than five percent of its Common Stock. The number of
shares beneficially owned is determined under the rules of the Security and
Exchange Commission (the "SEC"), and the information is not necessarily
indicative of beneficial ownership for any other purpose.
Beneficial Ownership(1)
------------------------------------------
Beneficial Owner Number of Shares Percent of Total
------------------------------------------------------ ---------------- ----------------
Janus Capital Management LLC (2) 35,373,380 10.90%
AXA (Alliance Capital Management (3) 25,210,161 7.77%
The TCW Group (4) 24,195,950 7.45%
John F. Gifford (5) 3,864,351 1.18%
Tunc Doluca (6) 1,298,316 *
Vijay Ullal (7) 967,876 *
Pirooz Parvarandeh (8) 721,080 *
Alan Hale (9) 261,988 *
James R. Bergman (10) 198,000 *
A. R. Frank Wazzan (11) 103,467 *
B. Kipling Hagopian (12) 70,340 *
Merlyn D. Sampels (13) 71,944 *
All executive officers and directors as a group
(19 persons) (14) 11,087,220 3.34%
---------------------------------
*Less than one percent
(1) This table is based upon information supplied by officers, directors,
nominees for director, principal stockholders and the Company's transfer
agent, and contained in Schedules 13G filed with the SEC. Unless otherwise
indicated, the address of each person or entity listed is Maxim Integrated
Products, Inc., 120 San Gabriel Drive, Sunnyvale, California 94086. Unless
otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, each of the stockholders named
in this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 324,637,007 shares outstanding on June 28, 2003, adjusted as required
by rules promulgated by the SEC.
(2) These securities are owned by various individual and institutional
investors for whom Janus Capital Management LLC ("Janus Capital") serves
as investment adviser with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Janus Capital is deemed to be a
beneficial owner of such securities; however Janus Capital expressly
disclaims that it is, in fact, the beneficial owner of such securities.
Janus Capital holds sole dispositive power and voting power over
35,000,075 of the shares shown and shared dispositive power and voting
power over 373,305 shares. The address of Janus Capital Management LLC is
100 Fillmore Street, Suite 300, Denver, CO 80206. The table is based upon
information supplied in a Schedule 13G/A filed February 14, 2003.
(3) AXA Assurances I.A.R.D. Mutuelle and certain related entities thereof hold
(i) sole voting power over 13,689,436 of the shares shown, (ii) shared
voting power over 4,684,026 shares shown, (iii) sole dispositive power
over 25,206,705 of the shares shown and (iv) shared voting power over
3,456 shares shown. The address of AXA Assurances I.A.R.D. Mutuelle 370,
rue Saint Honore, 75001 Paris, France. The table is based upon information
supplied in a Schedule 13G/A filed February 12, 2003.
(4) TCW Group, Inc. on behalf of the TCW Business Unit holds shared
dispositive power and shared voting power over all shares shown. The
address of TCW Group, Inc. on behalf of the TCW Business Unit is 865 South
Figueroa Street, Los Angeles, CA 90017. The table is based upon
information supplied in a Schedule 13G/A filed February 5, 2003.
(5) Includes (i) 1,506,453 shares subject to options exercisable within 60
days of June 28, 2003 and (ii) 100,000 shares held by the Gifford
Foundation for which beneficial ownership is disclaimed. Does not include
shares held in trust for the benefit of Mr. Gifford's children.
(6) Includes 643,828 shares subject to options exercisable within 60 days of
June 28, 2003.
(7) Includes 830,762 shares subject to options exercisable within 60 days of
June 28, 2003.
(8) Includes 720,000 shares subject to options exercisable within 60 days of
June 28, 2003.
2
(9) Includes 254,291 shares subject to options exercisable within 60 days of
June 28, 2003.
(10) Includes 8,000 shares subject to options exercisable within 60 days of
June 28, 2003.
(11) Includes 22,667 shares subject to options exercisable within 60 days of
June 28, 2003.
(12) Includes 25,000 shares subject to options exercisable within 60 days of
June 28, 2003.
(13) Includes 70,635 shares subject to options exercisable within 60 days of
June 28, 2003.
(14) Includes 6,875,734 shares subject to options exercisable within 60 days of
June 28, 2003. Does not include shares held in trust for the benefit of
Mr. Gifford's children.
There is no family relationship between any of the directors, or between
any of such directors and any of the Company's executive officers.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Action is to be taken at the Annual Meeting with respect to the
election of five directors. Each director to be elected will hold office until
his successor is elected and qualified, or until his earlier death, resignation
or removal. Stock represented by the accompanying proxy will be voted for the
election of the five nominees recommended by the Board, who are named in the
following table, subject to discretionary power to cumulate votes, unless the
proxy is marked in such a manner as to withhold authority so to vote. All of the
nominees were elected directors by a vote of the stockholders at the last Annual
Meeting of Stockholders which was held on November 14, 2002. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, will be elected. If any nominee for any reason is unable to serve or
for good cause will not serve, the proxy may be voted for such substitute
nominee as the persons appointed in the proxy may in their discretion determine.
Stock represented by the accompanying proxy cannot be voted for a greater number
of persons than the number of nominees (five).
The following is information regarding the nominees, including
information furnished by them as to their principal occupations for the
preceding five-year period, certain directorships, and their ages as of
September 15, 2003.
Name Age Director Since
---- --- --------------
James R. Bergman 61 1988
John F. Gifford 62 1983
B. Kipling Hagopian 61 1997
M. D. Sampels 70 2001
A. R. Frank Wazzan 68 1990
Mr. Bergman was a founder and general partner of DSV Associates since
1974 and a founder and general partner of its successors, DSV Partners, DSV
Partners III and DSV Partners IV. These firms provided venture capital and
management assistance to emerging companies, primarily in high technology. Since
August 1996, Mr. Bergman has been a partner of Brantley Venture Management,
L.P., the General Partner of Brantley Venture Partners III and IV private
venture capital partnerships. Since July 1997, he has also served as a special
limited partner of Cardinal Health Partners and Cardinal Partners II, which are
also private venture capital funds.
Mr. Gifford is a founder of the Company and has served as Maxim's
President and Chief Executive Officer since its incorporation in April 1983.
Mr. Hagopian was a founder of Brentwood Associates, a venture capital
investment company, and has been a general partner of all of the funds started
by Brentwood from inception in 1972 until 1989. He has been a Special Limited
Partner of each of the five Brentwood funds started since 1989. Mr. Hagopian is
also Chairman and President of Segue Productions, a feature film production
company, and a Managing Director of Apple Oaks Partners LLC, a private
investment company which manages his own capital and the capital of one other
individual.
Mr. Sampels is a shareholder in the law firm of Jenkens & Gilchrist, a
professional corporation. He served as a director of Dallas Semiconductor
Corporation ("Dallas") from 1985 until the Company acquired Dallas in April
2001. He became a director of the Company upon the closing of that acquisition.
Dr. Wazzan is Distinguished Professor and Dean Emeritus of the School
of Engineering and Applied Science, University of California, Los Angeles. From
1987 until 2001, Dr. Wazzan was Dean of that School. He has been employed by
UCLA since 1962.
The affirmative vote of a plurality of all the votes cast at the Annual
Meeting is required to approve the foregoing proposal.
The Board recommends a vote FOR the election of the nominees named above.
4
FURTHER INFORMATION CONCERNING THE BOARD
During the fiscal year ended June 28, 2003, the Board held nine (9)
meetings, including four regularly scheduled quarterly meetings. The Company has
a standing Audit Committee, which met six (6) times during the fiscal year, a
standing Compensation Committee, which met four (4) times during the fiscal year
and a standing Interim Option Committee consisting of the Chief Executive
Officer as the sole member. The Board does not have a formal nominating
committee. The outside directors perform the functions of a nominating committee
to suggest and screen candidates for the position of director. During the fiscal
year ended June 28, 2003, all director nominees attended at least 75% of the
meetings of the Board and of the committees on which each served.
The Audit Committee is comprised of Messrs. Bergman and Hagopian and
Dr. Wazzan. In June 2000, the Board adopted a new charter for the Audit
Committee and in September 2002, upon the recommendation of the Audit Committee,
the Board approved an amendment to the new charter. The Audit Committee provides
assistance to the Board in fulfilling its responsibilities to the Company's
stockholders with respect to the Company's outside auditor and the corporate
accounting and reporting practices, as well as the quality and integrity of the
Company's financial statements and reports. A full statement of the functions of
the Audit Committee is set forth in the attached appendix. See also "Audit
Committee Report" below. The Board has determined that all members of the Audit
Committee are "independent" as that term is defined in Rule 4200 of the listing
standards of the National Association of Securities Dealers.
The Compensation Committee is comprised of Messrs. Bergman and Hagopian
and Dr. Wazzan. The Compensation Committee is authorized to approve salaries and
incentive compensation for the president and other executive officers, and to
award stock options to employees, consultants and other eligible grantees under
the Company's stock option plans and performs such other functions regarding
compensation as the Board may delegate.
The Interim Option Committee is comprised of the Chief Executive
Officer. This Committee is authorized to make stock option grants and otherwise
administer the Company's 1996 Stock Incentive Plan, except that the Interim
Option Committee is not authorized to make option grants to officers. The
Interim Option Committee is authorized to make grants to non-employee directors.
Non-employee directors of the Company receive a $4,000 annual retainer
and fees of $1,000 per regularly scheduled quarterly meeting attended.
Non-employee directors participate in the 1996 Stock Incentive Plan
(the "1996 Plan"), which authorizes the granting of non-qualified stock options
with respect to an aggregate of 104,600,000 shares of the Company's Common Stock
(subject to adjustments as provided therein). Each non-employee director
receives an initial non-qualified stock option grant upon his election to the
Board that vests over a period of years. In subsequent years, he receives grants
whose vesting commences when prior grants have become fully vested. In fiscal
year 2003, non-employee directors received grants vesting in fiscal year 2007 as
follows: Messrs. Bergman, Hagopian, Sampels, and Dr. Wazzan each received a
grant of 12,000 shares; and Dr. Wazzan received an additional grant of 8,000
shares for his service as a member of a special Committee of the Board.
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
January 28, 2001, by and among the Company, MI Acquisition Sub, Inc. and Dallas
pursuant to which Dallas became a wholly-owned subsidiary of the Company (the
"Dallas Acquisition"), the Company assumed or guaranteed Dallas' liabilities and
obligations under certain Agreements between Dallas and Mr. Sampels, including
(i) three stock option agreements, including a stock option agreement dated July
21, 1999, covering 39,090 shares of the Company's Common Stock at an exercise
price of $38.80 and entitling Mr. Sampels to receive, upon exercise thereof, a
cash bonus not to exceed an amount equal to the then existing maximum statutory
federal income tax rate (including any surtax or similar charge or assessment)
for individual taxpayers multiplied by the amount of income, if any, realized
for federal income tax purposes as a result of the exercise of such option; all
options under these three stock option agreements are fully vested and
exercisable; (ii) the Dallas Executives Retiree Medical Plan, as amended, in
which Mr. Sampels and his spouse are participants and are entitled to receive
medical benefits for life, at no cost to them; (iii) an Indemnification
Agreement and certain other indemnification arrangements; and (iv) a
Split-Dollar Insurance Agreement. The Split-Dollar Insurance Agreement with Mr.
Sampels, originally entered into between Mr. Sampels and Dallas in February
1994, and amended in July 2000 and January 2001, requires that the Company pay
cash premiums for life insurance policies for the insured and provides for the
recovery of the Company's premiums for life insurance policies from the cash
value or death benefits collaterally assigned to the Company by the insured. In
fiscal year 2003, the Company paid premiums of $412,257 for the split-dollar
life insurance policies on Mr. Sampels. Pursuant to December 1993 resolutions of
the Dallas Board of Directors, Mr. Sampels, as a former non-employee director of
Dallas, is entitled to a tax gross-up resulting from any federal income tax
liability attributable to non-cash benefits obtained while a director of Dallas,
whether such liability occurs prior or subsequent to the cessation of
directorship with Dallas.
5
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The compensation for the Company's Chief Executive Officer at June 28,
2003 and the four most highly compensated executive officers other than the
Chief Executive Officer who were serving as executive officers at June 28, 2003
for all services rendered in all capacities to the Company and its subsidiaries
during the fiscal years ended June 28, 2003, June 29, 2002 and June 30, 2001 is
set forth below.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
------------
Annual Compensation Securities
Name and Fiscal ------------------- Underlying
Principal Position Year Salary ($) Bonus ($) (1) Options (#)
---------------------- ------ ---------- ------------- ------------
John F. Gifford 2003 $ 80,769 --- 800,000
President, Chief 2002 300,000 --- 1,400,000
Executive Officer and 2001 300,000 2,893,117 600,000
Chairman of the Board
Tunc Doluca 2003 155,000 --- 200,000
Vice President 2002 200,000 --- 300,000
2001 200,000 757,240 130,000
Alan Hale (2)(3) 2003 162,908 --- 60,000
Vice President 2002 208,650 --- 120,000
2001 52,163 180,000 240,000
Pirooz Parvarandeh 2003 155,000 --- 200,000
Vice President 2002 200,000 --- 300,000
2001 200,000 671,135 119,333
Vijay Ullal 2003 155,000 --- 150,000
Vice President 2002 200,000 --- 300,000
2001 200,000 654,581 140,762
-------------------
(1) Pursuant to the Company's Bonus Plan, approved by the Company's
stockholders in 1997, $5,681,000 is available for executive officer
performance bonuses relating to fiscal year 2003. Under the provisions of
the Bonus Plan, the Compensation Committee is not obliged to award the
entire bonus pool and no officer may be paid more than 50% of the pool, or
$2,840,500 Performance bonuses for fiscal year 2003 have not yet been
determined for the Company's officers. No bonuses were earned under the
Company's Bonus Plan in fiscal year 2002.
(2) The above table excludes amounts paid to Mr. Hale pursuant to the terms of
a change of control agreement between Dallas and Mr. Hale dated May 20,
1999, as amended (the "Change of Control Agreement"), which was triggered
by the Dallas Acquisition. The terms of the Change of Control Agreement
were previously disclosed by Dallas and the Company in filings with the
Securities and Exchange Commission. Among other benefits provided for in
the Change of Control Agreement, see page 8 "Employment Agreements", Mr.
Hale received severance payments in the amount of $1,713,518 on April 11,
2001 and $247,978 on April 11, 2002. In addition, pursuant to the terms of
the Dallas Acquisition, the Company assumed Dallas' liabilities and
obligations under a Split-Dollar Insurance Agreement with Mr. Hale. This
agreement, originally entered into in February 1994 and amended in July
2000 and January 2001, requires that the Company pay cash premiums for life
insurance policies for Mr. Hale and provide for the recovery of the
Company's premium costs from the cash value or death benefits collaterally
assigned to the Company by Mr. Hale. In fiscal year 2003, the Company paid
no premiums for the split-dollar life insurance policies on Mr. Hale.
(3) In August 2001 Mr. Hale received a distribution of 5,885 shares of Common
Stock of the Company, pursuant to terms previously established under the
Dallas Executive Deferred Compensation Plan in which he was a participant
and the terms of the merger that resulted in the Dallas Acquisition, having
a total market value on the date of distribution of $287,803.
6
Options Granted To Executive Officers
The Board and the committees to which it delegates authority currently
have authority to grant stock options to employees and others under the 1996
Plan. The following tables set forth certain information regarding stock options
granted to, exercised by and owned by the executive officers named in the
foregoing Summary Compensation Table during fiscal 2003.
Option Grants in Fiscal Year 2003
Potential Realizable
Individual Grants Value At
----------------------------------------------- Assumed Annual Rates
Number of Percent of of Stock Price
Securities Total Options Appreciation for
Underlying Granted To Exercise or Option Term(1)
Options Employees in Base Price Expiration --------------------------
Name Granted (#) Fiscal Year (2) ($/Sh) Date (3) 5% ($) 10% ($)
------------------- ----------- --------------- ----------- ---------- ----------- -----------
John F. Gifford 800,000(4) 4.12% $39.82 05/12/2013 $20,034,067 $50,770,260
Tunc Doluca 200,000(5) 1.03% 33.04 12/31/2012 4,155,736 10,531,450
Alan Hale 60,000(6) 0.31% 33.04 12/31/2012 1,246,721 3,159,435
Pirooz Parvarandeh 200,000(7) 1.03% 33.04 12/31/2012 4,155,736 10,531,450
Vijay Ullal 150,000(8) 0.77% 33.04 12/31/2012 3,116,802 7,898,588
(1) The dollar amounts under these columns are the result of calculations at
the assumed 5% and 10% annual rates of stock price appreciation prescribed
by the SEC and are not intended to forecast possible future appreciation,
if any, of the Company's stock price. No gain to the optionees is possible
without an increase in the price of the Company's stock, which will
benefit all stockholders.
(2) Based on a total of 19,432,732 options granted to employees of the Company
in fiscal year 2003.
(3) The options were granted for a term of ten years, but are subject to
earlier termination under certain circumstances relating to termination of
employment or a change of control of the Company.
(4) The options were granted on May 12, 2003 and will become exercisable on a
quarterly basis at the following rates: 600,000 during the year ending
July 1, 2005, 60,000 during the year ending July 1, 2006, and 140,000 in
the year ending July 1, 2007.
(5) The options were granted on December 31, 2002 and will become exercisable
on a quarterly basis at the following rates: 100,000 during the year
ending July 1, 2005, 50,000 each during the years ending July 1, 2006 and
July 1, 2007.
(6) The options were granted on December 31, 2002 and will become exercisable
on a quarterly basis during the year ending July 1, 2008.
(7) The options were granted on December 31, 2002 and will become exercisable
on a quarterly basis at the following rates: 60,000 each during the years
ending July 1, 2005 and July 1, 2006, and 80,000 during the year ending
July 1, 2008..
(8) The options were granted on December 31, 2002 and will become exercisable
on a quarterly basis at the following rates: 100,000 during the year
ending July 1, 2005, 50,000 during the year ending July 1, 2006.
7
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2003
AND JUNE 28, 2003 OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired June 28, 2003 (#) June 28, 2003 ($)(1)
on Value ------------------------------- ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------- ------------ ------------ ----------- ------------- ----------- -------------
John F. Gifford -- -- 1,291,453 3,198,449 $22,873,370 $11,948,764
Tunc Doluca 73,440 $1,734,243 618,828 855,000 15,022,392 2,136,343
Alan Hale 41,195 1,115,303 239,896 314,395 1,423,277 127,200
Pirooz Parvarandeh 40,000 1,272,092 700,000 803,333 18,012,490 1,771,675
Vijay Ullal 199,000 7,567,975 805,762 805,000 20,689,197 2,067,343
(1) Based on a price per share of $34.42, which was the price of a share of
Common Stock on the Nasdaq National Market at the close of business on June
28, 2003.
Employment Agreements
The Company has entered into employment agreements with each of Messrs.
Doluca, Parvarandeh and Ullal. The agreements do not grant the executive
officers any right to be retained by the Company, and the Company may terminate
employment of each executive officer either with or without cause. In the event
of termination of employment by the Company with or without cause, all
compensation and benefits, except benefits provided by law (e.g., COBRA health
insurance continuation benefits) immediately cease to accrue. However, in the
event of termination of employment by the Company without cause, severance
payments are to be made in accordance with the Company's normal policy or as
mutually agreed between the Company and the executive officer.
If the executive officer terminates his full-time employment with the
Company and his written notice of termination provides that he is willing to
continue to provide certain services to the Company, the Company will make
health insurance coverage available to the executive officer and his family. The
terms of his service, unless otherwise agreed, will provide for part-time
services (up to one day per month) and annual compensation equal to at least 5%
of the executive officer's base salary at the time of termination. Health
insurance coverage means coverage under any group health plan the Company
maintains for its employees.
During the ten-year period following the notice of termination, the
executive officer pays the same amount for health coverage as a similarly
situated full-time employee is required to pay for coverage under the Company's
group health plan. After the ten-year period, the executive officer pays the
Company's cost of the coverage. In the event of the executive officer's death
while receiving health insurance coverage, the executive officer's spouse is
eligible for health insurance coverage until her death so long as she pays for
the coverage in an amount equal to the cost for an employee with identical
coverage. In the event the executive officer becomes disabled while receiving
health insurance coverage, he is deemed to have met his service obligations to
the Company during the disability.
In addition to the executive officers identified above, most other
officers of the Company are parties to employment agreements with provisions
substantially similar to those described above.
Upon the closing of the Dallas Acquisition, the Company assumed a
one-year employment agreement entered into as of April 11, 2001 between Dallas
and Alan Hale. As per the terms of the employment agreement Mr. Hale received a
cash payment in the amount of $247,978 on April 11, 2002. Pursuant to the Dallas
Acquisition and the terms of the Change of Control Agreement, Mr. Hale (for his
lifetime) and his spouse (for her lifetime) shall also have the right to
continue to participate, at no cost to Mr. Hale or his spouse, in all health,
dental, disability, accident and life insurance plans or arrangements in which
Mr. Hale or his spouse were participating immediately prior the Dallas
Acquisition, including, but not limited to, the Dallas Executives Retiree
Medical Plan which was assumed by the Company in connection with the Dallas
Acquisition, as if Mr. Hale continued to be an employee of the Company. In
addition, Mr. Hale will be entitled to receive a retirement benefit of $65,000,
commencing on his 55th birthday and payable annually thereafter until his death.
The Change of Control Agreement may not be amended or terminated without Mr.
Hale's consent.
Mr. Gifford entered into an employment agreement with the Company in
1987, which was amended and restated in February 1994. The agreement provides
that Mr. Gifford propose annually the amount of his bonus to the Board, which
shall reflect the Company's achievements and profitability for the preceding
year, and shall be reflective of the accomplishments of the management group as
a whole. The Board, in its discretion, shall approve or modify such proposed
bonus; provided
8
that any bonus awarded shall not be less than the bonus paid to any officer. The
employment agreement provides vesting for 100% of the unvested portion of his
stock options either upon Mr. Gifford's death or upon his disability, which
results in his termination of employment, while employed by the Company. The
employment agreement also provides that in the event Mr. Gifford becomes
disabled while employed by the Company, as long as Mr. Gifford remains disabled,
the Company will provide for continuation of his base salary (offset by any
earnings) for life through insurance or direct payment, or both. In addition, if
Mr. Gifford's employment with the Company is terminated due to disability, the
Company will provide to Mr. Gifford post-employment health insurance coverage on
the same terms as the other officers described above. In addition, in the event
Mr. Gifford's employment is terminated without cause, as defined in the
agreement, the Company will retain Mr. Gifford and Mr. Gifford agrees to remain
available to the Company for a period of either (i) one year, in the event that
his employment is terminated with justification, as defined in the agreement or
(ii) two years, if his employment is terminated without justification, as
defined in the agreement. During the period that Mr. Gifford continues to serve
the Company, he shall not be required to devote more than two days a week to
such activities. During the period of Mr. Gifford's retention as a service
provider, he shall be entitled to full pay, which is defined as his average
annual total compensation (salary plus bonus) received during the previous two
years, normal employee benefits, and his stock options and shares of restricted
stock shall continue to vest. In addition, if Mr. Gifford's employment is
terminated without cause or justification, the vesting of his stock options and
shares of restricted stock shall be immediately accelerated so that the options
and stock that would otherwise have vested over the two year period commencing
two years after the date of termination shall become immediately exercisable.
Thus, if his termination is without cause or justification, Mr. Gifford will
vest a total of four years of options and restricted stock, two years tied to
continuing service retention and two years by acceleration of vesting that would
otherwise have occurred if he had remained employed for the third and fourth
years after the date of his termination. The employment agreement also provides
that upon a "change of control" of the Company, as such term is defined in his
employment agreement, 50% of his unvested stock and options shall become fully
vested on the date of the sale or merger. The remainder of the stock and options
shall become fully vested within one year of the sale or merger, provided that
Mr. Gifford is willing (whether or not he is actually requested to do so) to
remain as Chief Executive Officer for the remaining vesting period of his
options up to a maximum of one year. The employment agreement provides Mr.
Gifford fringe benefits substantially equal to other officers. If Mr. Gifford
terminates his full-time employment with the Company and his written notice of
termination provides that he is willing to continue to provide certain services
to the Company, the Company will provide to Mr. Gifford post-employment health
insurance coverage on substantially the same terms as the other officers
described above.
In addition, the Company and Mr. Gifford have entered into a deferred
compensation plan, pursuant to which Mr. Gifford defers receipt of a portion of
his cash compensation. Deferred payments bear interest at the rate equal to the
interest rate (as adjusted from time to time) that employees of the Company are
required to pay the Company under the Company's employee loan program (6% in
fiscal year 2003). Interest is credited at least quarterly. Deferred payments,
including interest, are payable beginning (i) upon Mr. Gifford's termination as
an employee or service provider to the Company, in approximately equal quarterly
installments over a five year period with interest at the Bank of America prime
rate from time to time, (ii) upon his death, payable to his designated
beneficiary, in a lump sum payment as soon as administratively possible or (iii)
in the event of an unforeseeable emergency. As of June 28, 2003, Mr. Gifford's
deferred account balance, including interest thereon, totaled $15,850,695.
9
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Compensation Committee Report on
Executive Compensation and Audit Committee Report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
such filings under the Securities Act or the Exchange Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is authorized to determine
salaries and incentive compensation for the Company's Chief Executive and other
officers. The strategy followed by the Compensation Committee emphasizes
incentive compensation over salary to create a strong link between compensation
and performance, and thereby more effectively align management with the
interests of shareholders. Incentive compensation is comprised of bonuses and
stock options. The Chief Executive normally recommends salaries, bonuses and
option grants to the Compensation Committee. The levels of incentive
compensation are related to both corporate and individual performance. Corporate
performance is judged based upon results in the current year, but more
importantly on the Company's performance over the longer term. Individual
performance is measured based upon particular responsibilities of each function,
performance to specified goals and general management skills.
Salary. The Compensation Committee meets at least annually to review
and approve each officer's salary for the ensuing year. The base salary
component of compensation is a standardized minimum for the Chief Executive
Officer and each Vice President that does not change substantially from
year-to-year under normal circumstances and is not intended to be tied to
individual responsibilities or performance. By contrast the bonus component of
compensation is intended to compensate for performance exceeding minimum
expected levels and varies according to the importance to the Company of the
functions performed and the quality of the individual's performance. Individual
members of the Compensation Committee take into consideration their knowledge of
published information regarding the compensation of officers at companies
comparable to Maxim. Officer salaries for the first quarter of fiscal 2003 were
unchanged from fiscal 2002 and for the last three quarters of fiscal 2003 have
been reduced by 30% from fiscal 2002 levels to support Company-wide cost
reduction goals.
Bonus. In 1997, the Company adopted, and its stockholders approved, a
Bonus Plan for the Company's officers. Under the Bonus Plan, a bonus pool of up
to a maximum of 3% of the Company's pre-tax earnings will be created, with the
specific amount of the pool determined by equal weighting of two performance
criteria: (a) up to 1 1/2% of such earnings tied to the year-to-year rate of
growth in the Company's earnings per share and (b) up to 1 1/2% of such
earnings tied to the year-to-year increase in the market price of its stock. The
bonus pool will be based on the Company's actual achievement related to these
objective performance criteria versus a target growth of 30% per year for each
test. From this pool, each officer will receive a bonus in respect of each
fiscal year, in an amount to be approved by the Compensation Committee based on
the same objective performance criteria and the analysis and recommendations of
the Chief Executive Officer. The maximum bonus that may be paid in any fiscal
year to any officer, including the Chief Executive Officer, is one-half of the
pool. After the end of each fiscal year, the Compensation Committee is to
determine and certify the Company's performance as compared to the criteria set
for that fiscal year, and to determine the amount of each officer's bonus for
such year. The Compensation Committee reserves the right to pay any officer less
than the maximum bonus determined under the objective performance criteria based
upon the Compensation Committee's determination of that officer's individual
performance during the year and on all other relevant factors, including other
compensation received during the year, such as stock option grants. The actual
cash bonus for each individual officer, aside from the Chief Executive Officer
(discussed below), is determined by first setting a maximum bonus for each
officer position based upon perfect performance of that position and the total
bonus pool available, and then considering the individual performance of the
officer involved.
Under the terms of the Bonus Plan, the officers earned no bonuses for
fiscal year 2002 because the Company did not achieve either year-to-year
earnings or stock price growth.
In addition to bonuses paid pursuant to the Bonus Plan, the Company has
the power to give bonuses to officers outside the terms of the Bonus Plan.
Bonuses given outside the Bonus Plan may be based on specific officer-group
achievements, such as the successful completion of the Dallas Semiconductor
merger or for other individual reasons. No such bonuses were made with respect
to fiscal year 2002.
Stock Options. Given the Company's commitment to growing earnings and
earnings per share and its philosophy that stock incentives are the best way to
assure alignment of the employees' and the stockholders' interests, the Company
believes it cannot rely solely on cash compensation to compete for and to
provide incentives to its employees. Stock options are, therefore, used by the
Company to provide long-term incentives to officers. The Company has attempted
for a number of years to provide for each officer, and for most other employees
who participate in the Company's stock option program, a number of shares
subject to stock options that will vest over a continuous period of usually five
years into the future. To accomplish this, the Company has periodically added
options scheduled to begin vesting after existing grants have become
10
fully vested. The number of stock options per officer is determined, based on
recommendations by the Chief Executive Officer, by an assessment principally of
the significance of the function performed by the officer and also of the
officer's individual past, current and expected future contribution to the
success of the Company.
Chief Executive Officer Compensation. For the first quarter of fiscal
2003 Mr. Gifford's annual salary was unchanged from fiscal 2002 at $300,000, and
to support Company-wide cost reduction goals, for the last three quarters of
fiscal 2003 Mr. Gifford received no salary. Mr. Gifford is a participant in the
Bonus Plan and is subject to the maximum Bonus Plan limitation described above.
Consistent with the Bonus Plan and Mr. Gifford's Employment Agreement, his
annual bonus "shall reflect the Company's achievements and profitability for the
preceding year, and shall be reflective of the accomplishments of the management
group as a whole." Mr. Gifford's bonus for fiscal year 2003 has not yet been
determined.
Section 162(m). Section 162(m) of the Internal Revenue Code (the
"Code") limits the Company to a deduction for federal income tax purposes of no
more than $1 million of compensation paid to the Chief Executive Officer and the
four other most highly paid executive officers in a taxable year. Compensation
above $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code.
The Board has determined that stock options shall be treated as
"performance-based compensation." The Company's stockholders previously approved
the option plans, which would generally allow any compensation recognized by an
executive officer named in the Summary Compensation Table as a result of the
grant of such a stock option to be deductible by the Company. In addition, the
stockholders have approved the Bonus Plan, and the Company believes that awards
paid under the Bonus Plan are exempt from the $1 million deduction limitation of
Section 162(m).
COMPENSATION COMMITTEE
James R. Bergman
B. Kipling Hagopian
A. R. Frank Wazzan
11
AUDIT COMMITTEE REPORT
The Audit Committee assists the Company's Board in fulfilling its
responsibilities to the Company's stockholders with respect to the Company's
outside auditor and corporate accounting and reporting practices as well as the
quality and integrity of the Company's financial statements and reports. Since
the effective date of the Sarbanes-Oxley Act of 2002 (the "New Law"), the
Committee has become responsible for the appointment, compensation and oversight
of the work of the Company's independent auditors.
The Committee held six (6) meetings during fiscal year 2003 and two (2)
meetings in fiscal year 2004 during the period leading up to the filing of this
Proxy Statement.
With regard to the fiscal 2003 audit, the Committee discussed with
Maxim's independent auditors the scope, extent and procedures for their audit.
Following completion of the audit, the Committee met with the independent
auditors, with and without management present, to discuss the results of their
examinations, the cooperation received by the auditors during the audit
examination, their evaluation of Maxim's internal controls and the overall
quality of the Company's financial reporting.
Management has the primary responsibility for the Company's financial
statements, reporting process and systems of internal controls. In fulfilling
its responsibilities, the Committee reviewed and discussed the audited financial
statements in the Annual Report on Form 10-K with management, including a
discussion of the quality and acceptability of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The independent auditors are responsible for expressing an opinion on
the conformity of the audited financial statements with generally accepted
accounting principles. The Committee reviewed and discussed with the independent
auditors their judgments as to the quality and acceptability of Maxim's
accounting principles and such other matters as are required to be discussed
under generally accepted auditing standards pursuant to Statement of Auditing
Standards No. 61. In addition, the Committee received from the independent
auditors written disclosures regarding their independence as required by the
Independence Standards Board, discussed with the independent auditors the
auditors' independence from management and the Company, and considered the
compatibility of nonaudit services with the auditors' independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Annual Report on Form 10-K for the year
ended June 28, 2003 for filing with the Securities and Exchange Commission.
In addition, the Committee approved the appointment of Ernst & Young
LLP as the Company's independent auditors for fiscal 2004, and the Board of
Directors concurred with such selection. The Audit Committee has recommended to
the stockholders that they ratify the selection of Ernst & Young LLP as the
Company's independent auditors for fiscal 2004.
Finally, the Committee reviewed and reassessed the adequacy of the
Audit Committee charter. In light of the requirements of the New Law, the
Committee concluded that no changes are currently advisable. The Committee noted
that further changes may need to be made when the Securities and Exchange
Commission and the national securities exchange or association with which
Maxim's shares are listed take further actions carrying out their
responsibilities under the New Law.
AUDIT COMMITTEE
James R. Bergman
B. Kipling Hagopian
A. R. Frank Wazzan
12
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended June 28, 2003, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that
options granted on December 31, 2002 to Messrs. Beck, Doluca, Gal, Georges,
Ghaffaripour, Gilbert, Hale, Hood, Huening, Jasper, Navid, Parvarandeh, Rigg,
and Ullal were reported late, the option granted to Dr. Wazzan on June 25, 2003
was reported late, and a transaction reflecting a gift of 30 shares by Mr.
Gifford was not timely filed. Corrective filings have since been made.
CERTAIN TRANSACTIONS
The Company employs Kevin Lynch, the son-in-law of the Company's Chief
Executive Officer. In fiscal year 2003, Mr. Lynch received $118,850 of cash
compensation and exercised stock options held for an average of six years
totaling 11,000 shares at exercise prices ranging from $9.83 to $14.78 per
share. Also, during the fiscal year, Mr. Lynch was granted options to purchase
16,581 shares of the Company's Common Stock at an exercise price of $21.35 per
share.
The Company employs Robert Bergman, the son of James R. Bergman, a
director of the Company. In fiscal year 2003, Robert Bergman received $89,203 of
cash compensation and was granted options to purchase 3,906 shares of the
Company's Common Stock at an exercise price of $21.35 per share.
The Company employs Eric Birkeland, the son-in-law of Fred G. Beck,
Executive Vice President of Sales of the Company. In fiscal year 2003, Eric
Birkeland received $92,892 cash compensation and exercised stock options held
for an average of five years totaling 7,425 shares at exercise prices ranging
from $7.63 to $17.61. Also, during the fiscal year, Mr. Birkeland was granted
options to purchase 3,750 shares of the Company's Common Stock at an exercise
price of $33.85.
During fiscal year 2003 the law firm of Jenkens & Gilchrist, a
professional corporation, provided legal services to Dallas. Mr. Sampels, a
director of the Company, is a shareholder of Jenkens & Gilchrist.
13
PERFORMANCE GRAPH(1)
The following chart shows the value of an investment of $100 on June
30, 1998 in cash of (i) the Company's Common Stock, (ii) the Nasdaq Stock Market
(U.S.) Index and (iii) the Nasdaq Electronic Components Index. All values assume
reinvestment of the full amount of all dividends and are calculated as of the
end of each fiscal year. The stock price performance shown on this graph is not
necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN*
AMONG MAXIM INTEGRATED PRODUCTS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[REPRESENTATION OF LINE CHART]
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03
------ ------ ------ ------ ------ ------
Maxim Integrated Products, Inc. 100 201.61 447.89 284.65 246.79 222.11
Nasdaq Stock Market (U.S.) 100 138.14 208.30 117.08 79.76 88.66
Nasdaq Electronic Components 100 161.71 440.07 160.48 97.10 109.22
* $100 Invested on June 30, 1998 in Stock or Index -
Including Reinvestment of Dividends.
Fiscal Year Ended June 28, 2003.
--------
(1) This Section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company
under the Securities Act or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
14
PROPOSAL NO. 2
RATIFICATION AND APPROVAL OF AN AMENDMENT TO THE COMPANY's 1996 STOCK
INCENTIVE PLAN, AS AMENDED, INCREASING THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE THEREUNDER BY 9,400,000 FROM
95,200,000 SHARES TO 104,600,000 SHARES
The Company's stockholders are being asked to act upon a proposal to
ratify and approve an amendment to the Company's 1996 Stock Incentive Plan, as
amended (the "1996 Plan"), increasing the number of shares available for
issuance thereunder by 9,400,000 from 95,200,000 shares to 104,600,000 shares.
In August 2003, the Company's Board amended the 1996 Plan to increase the pool
of shares of Common Stock issuable under the 1996 Plan by 9,400,000 shares (the
"Increase") from 95,200,000 shares to 104,600,000 shares.
Ratification and approval of the Increase requires the approval of a
majority of the shares represented in person or by proxy and voting at the
Annual Meeting.
A general description of the principal terms of the 1996 Plan, the
Increase approved by the Board and the purpose of such Increase is set forth
below. Unless otherwise marked, all properly signed and returned proxies will be
voted FOR Proposal No. 2.
The Board recommends a vote FOR this proposal.
The Company has determined that substantial equity participation for
employees is critically important to creating an organization in which employees
will remain employed for long periods of time, and the 1996 Plan is designed to
contribute toward this goal.
Since the 1996 Plan was adopted in August 1996, the number of shares
that have been available for issuance (after adjustments to give effect to the 2
for 1 stock splits in December 1997 and 1999), is as follows: on adoption,
14,000,000 shares which was increased to 29,000,000 shares in 1997, to
44,000,000 shares in 1998, to 56,000,000 shares in 1999, to 68,000,000 shares in
2000, to 81,200,000 shares in 2001, to 95,200,000 shares in 2002, and to
104,600,000 shares in 2003 (including the Increase).
Prior to adoption of the 1996 Plan, the ESP Plan shared in the common
pool of shares available for the stock option plans that were superseded by the
1996 Plan. The total pool for all those plans, including the ESP Plan, was
182,240,000 shares at the time of adoption of the superseding 1996 Plan.
As of June 28, 2003, 98,234,879 stock options remain outstanding under
of the Company's 1996 Plan, of which 40,797,090 options were vested and
exercisable, while the remaining 57,437,789 options vest over the next ten years
as follows:
Year Ending June 30 Number of Options to Vest
------------------- -------------------------
2004 11,969,125
2005 12,780,815
2006 11,928,606
2007 10,705,764
2008 8,048,439
2009 1,818,530
2010 90,534
2011 22,135
2012 35,966
2013 37,875
The principal uses for the Increase are to provide for option grants
under the 1996 Plan for recruiting employees by offering a means by which their
creativity and dedicated efforts will allow them to participate in increased
stockholder value; and for grants to existing employees generally for periods
vesting beyond 2007, by adding option grants at the end of an employee's current
vesting period. The Board believes that the attraction, retention and motivation
of highly qualified
15
personnel are essential to the Company's continued growth and success and that
incentive plans, such as the 1996 Plan, are necessary for the Company to remain
competitive in its compensation practices.
As of June 28, 2003, options outstanding under the 1996 Plan had
exercise prices ranging from $7.0625 to $87.0625 and expiration dates ranging
from October 12, 2003 to June 27, 2013.
Amended Plan Benefits. As of the date of this Proxy Statement, no
executive officer, employee or director, and no associate of any executive
officer or director, has been granted any options subject to stockholder
approval of the proposed amendment. In addition, no executive officer or
employee of the Company has been granted any rights to purchase stock pursuant
to the ESP Plan subject to stockholder approval of the proposed amendment. The
benefits to be received by the Company's directors, executive officers and
employees pursuant to the 1996 Plan amendment are not determinable at this time.
The material features of the 1996 Plan are as follows:
Purpose. The purpose of the 1996 Plan is to increase stockholder value,
which is accomplished largely as a result of the Company's successful, on-going
stock option programs in which 4,815 employees (approximately 77% of all
employees) currently participate. The Company believes that Maxim's long-term
commitment to employee ownership of Maxim stock has significantly contributed
both to successful recruiting and to limiting turnover among employees. The
Company also strongly believes that the employee ownership of Maxim is largely
responsible for Maxim's success.
The 1996 Plan originally authorized the granting of incentive stock
options and non-qualified stock options with respect to an aggregate of
14,000,000 shares of the Company's Common Stock, and has been amended by the
Board to authorize the granting of options with respect to an additional
90,600,000 shares. The 1996 Plan replaced the Company's 1987 Supplemental Stock
Option Plan, which expired on June 1, 1997, and the Company's Incentive Stock
Option Plan and Supplemental Non-employee Stock Option Plan, which both expired
on August 12, 2002. Any shares or options returned to the expired option plans
will increase the number of shares available for options (other than incentive
stock options) under the 1996 Plan. At June 28, 2003, the 1,544,651 shares
available for grant under the 1996 Plan equaled approximately 1% of the
Company's outstanding shares. The closing price of the Company's Common Stock on
the Nasdaq National Market on September 15, 2003 was $41.26.
The Common Stock covered by the 1996 Plan may be either authorized but
unissued shares or treasury shares. If there is a lapse, expiration, termination
or cancellation of any option granted under the 1996 Plan without the issuance
of shares or payment of cash thereunder, or if shares are issued under any
option under the 1996 Plan and thereafter are reacquired at their original
purchase price by the Company pursuant to rights reserved upon the issuance
thereof, or pursuant to the payment of the purchase price of shares under
options by delivery of other Common Stock of the Company, the shares subject to
or reserved for such option, or so reacquired, may again be used for new options
under the 1996 Plan. However, the Common Stock issued under the 1996 Plan that
is not reacquired by the Company pursuant to rights reserved upon the issuance
thereof or pursuant to payment of the purchase price of shares under options by
delivery of other Common Stock of the Company may not exceed the total number of
shares reserved for issuance under the 1996 Plan.
The following summary of certain provisions of the 1996 Plan is
qualified in its entirety by reference to the 1996 Plan, as amended, a copy of
which is attached as Appendix A to this Proxy Statement. Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the 1996
Plan.
Administration. The 1996 Plan provides that grants of options and other
determinations under the 1996 Plan shall be made by (i) the Board or (ii) a
Committee designated by the Board (the "Administrator") which, in case of grants
of options to employees who are officers of the Company, is constituted in a
manner to permit the grants and related transactions under the 1996 Plan to be
exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3 of
the Exchange Act and which, in the case of grants to "covered employees," is
intended to constitute "performance-based compensation," is made up solely of
two or more "outside directors" as such terms are defined under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"). The administrator
has the authority to select employees, directors and consultants to whom options
may be granted; to determine the number of shares to be covered by each option;
and to determine the terms and conditions of any option granted under the 1996
Plan.`
Performance Based Compensation. Section 162(m) of the Code limits to $1
million annually the deduction a public corporation may claim for compensation
paid to any of its top five executive officers, except in limited circumstances.
One such exception is for "performance-based compensation," which is defined as
compensation paid solely on account of the attainment of one or more performance
goals, but only (1) if the goals are determined by a compensation committee of
the Board comprised of two or more outside directors, (2) the performance goals
are disclosed to stockholders and approved by a majority vote before the
remuneration is paid, and (3) before the remuneration is paid, the compensation
committee certifies that the performance goals and any other material terms were
in fact satisfied.
Internal Revenue Service regulations provide that compensation
attributable to a stock option will be deemed to satisfy the requirement that
performance goals be pre-established if the grant of the option is made by the
compensation committee; the plan under which the option is granted states the
maximum number of shares with respect to which options or
16
rights may be granted during a specified period to any employee; and, under the
terms of the option, the amount of compensation the employee could receive is
based solely on an increase in the value of the stock after the date of grant.
The 1996 Plan includes features intended to permit the Administrator to
grant options to employees that will qualify as performance-based compensation.
The 1996 Plan limits the number of shares with respect to which incentive stock
options and non-qualified stock options may be granted in any one fiscal year of
the Company to any one participant to 4,000,000 shares.
Eligibility. Selected employees, directors, service providers,
advisors, independent contractors, vendors, customers and others having a past,
current or prospective business relationship with the Company and any parent or
subsidiaries will be eligible to receive options under the 1996 Plan. Options
may be granted to eligible persons residing in foreign jurisdictions under
additional terms and conditions to accommodate local laws and to provide such
eligible persons favorable treatment under local laws, provided that no such
terms are inconsistent with the 1996 Plan.
Duration. The 1996 Plan will continue in effect until terminated by the
Board, except that no option may be granted more than ten years after the date
of adoption of the 1996 Plan by the Board.
Adjustments upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan, as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Option.
Corporate Transactions/Changes in Control/Subsidiary Dispositions. The
Administrator shall have the authority, exercisable either in advance of any
actual or anticipated or at the time of an actual Corporate Transaction, Change
in Control or Subsidiary Disposition and exercisable at the time of the grant of
an Option under the 1996 Plan or any time while an Option remains outstanding,
to provide for the full automatic vesting and exercisability of one or more
outstanding unvested Options under the 1996 Plan and the release from
restrictions on transfer and repurchase or forfeiture rights of such Options in
connection with a Corporate Transaction, Change in Control or Subsidiary
Disposition, on such terms and conditions as the Administrator may specify. The
Administrator also shall have the authority to condition any such Option vesting
and exercisability or release from such limitations upon the subsequent
termination of the Continuous Status as an Employee or Consultant of the Grantee
within a specified period following the effective date of the Change in Control
or Subsidiary Disposition. The Administrator may provide that any Options so
vested or released from such limitations in connection with a Change in Control
or Subsidiary Disposition, shall remain fully exercisable until the expiration
or sooner termination of the Option. Effective upon the consummation of a
Corporate Transaction, all outstanding Options under the 1996 Plan shall
terminate unless assumed by the successor company or its Parent.
Options. The 1996 Plan provides that the purchase price of any
incentive stock option shall be at least 100% of the fair market value of the
Common Stock at the time the option is granted. The 1996 Plan further provides
that the purchase price of any non-qualified stock option shall be not less than
85% of fair market value at the time the option is granted unless otherwise
determined by the Administrator, provided that the exercise price may be less
than 100% of fair market value only if the Administrator determines in writing
in good faith that (i) such grants are made infrequently, (ii) there is a good
business reason for the grant that outweighs the normal presumption of per share
exercise price of not less than 100% of the fair market value per share on the
date of grant, and (iii) the aggregate number of shares subject to such option
does not exceed 5% of the total number of shares identified in the 1996 Plan as
amended from time to time (currently 104,600,000). The 1996 Plan provides that
the aggregate fair market value (determined as of the time the option is
granted) of the Common Stock with respect to which incentive stock options may
become exercisable for the first time by any individual during any calendar year
may not exceed $100,000. The Administrator may provide for the payment of the
purchase price in cash, by delivery of other Common Stock of the Company having
a market value equal to the purchase price of such shares, or by any other
method, such as delivery of promissory notes. A participant may pay the purchase
price by delivery of an exercise notice accompanied by a copy of irrevocable
instructions to a broker to deliver promptly to the Company sale or loan
proceeds to pay the purchase price.
The Administrator may permit or require a participant to pay all or a
portion of the federal, state and local taxes, including FICA and Medicare
withholding tax, arising in connection with the exercise of a non-qualified
stock option, by having the Company withhold shares or by delivering shares
received in connection with the option or previously acquired, having a fair
market value approximating the amount to be withheld.
The maximum term of any option will be ten years from the date it is
granted, except that the maximum term for options granted to non-employee
directors shall be five years. Options are generally exercisable for a period of
90 days after termination or retirement, 547 days after termination due to
death, or 365 days after termination due to disability.
17
Amendments and Discontinuance. The Plan is subject to amendment or
termination by the Board without stockholder approval as deemed in the best
interests of the Company. However, no such amendment shall, without the consent
of the holder, reduce the amount of any option or adversely change the terms and
conditions thereof.
The terms and conditions applicable to any options granted and
outstanding may at any time be amended or modified in any lawful way or canceled
by mutual agreement between the Administrator and the participant, so long as
any amendment or modification does not increase the number of shares of Common
Stock issuable under the 1996 Plan and subject to the provisions regarding
"repricing" described below.
"Repricing" Options. The Administrator does not have the authority to
"reprice" any outstanding option. For these purposes, to "reprice" an
outstanding option means to amend any outstanding option to reduce the exercise
price.
Federal Income Tax Consequences. In fiscal year 2003, exercises of
employee stock options resulted in approximately $113.4 million of cash savings
as a result of tax deductions for the Company and in $83.7 million of cash to
the Company from stock option exercises, for total cash generated of
approximately $197.1 million, a significant contribution to the strength of the
Company's balance sheet.
Under existing law and regulations, the grant of non-qualified stock
options will not result in income taxable to the employee or provide a deduction
to the Company. However, the exercise of a non-qualified stock option results in
taxable income to the holder, and the Company is entitled to a corresponding
deduction. At the time of the exercise of a non-qualified stock option, the
amount so taxable and so deductible will be the difference between the fair
market value of the shares purchased and the exercise price.
An optionee recognizes no income when an incentive stock option is
granted or exercised. However, the difference between the fair market value of
the shares at exercise and the exercise price is classified as an item of
adjustment in the year of exercise for purposes of the optionee's alternative
minimum tax. If the holder holds the shares received on exercise of an incentive
stock option for at least two years from the date of grant and one year from the
date of receipt of the optioned stock, any gain realized by the holder on the
disposition of the stock will be accorded long-term capital gain treatment, and
no deduction will be allowed to the Company. If the holding period requirements
are not satisfied, the employee will recognize ordinary income at the time of
disposition equal to the lesser of (i) the gain realized on the disposition, or
(ii) the difference between the option price and the fair market value of the
shares on the date of exercise. Any additional gain on the disposition not
reflected above would be long-term or short-term capital gain, depending upon
the length of time the shares are held. The Company will be entitled to an
income tax deduction equal to the amount of ordinary income recognized by the
employee.
The foregoing discussion is not a complete description of the federal
income tax aspects of options under the 1996 Plan. In addition, administrative
and judicial interpretations of the application of the federal income tax laws
are subject to change. Furthermore, no information is given with respect to
state or local taxes that may be applicable to any options. Participants in the
1996 Plan who are residents of or are employed in a country other than the
United States may be subject to taxation in accordance with the tax laws of that
particular country in addition to or in lieu of United States federal income
taxes.
18
PROPOSAL NO. 3
RATIFICATION AND APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1987 EMPLOYEE
STOCK PARTICIPATION PLAN, AS AMENDED, INCREASING THE NUMBER
OF SHARES AVAILABLE FOR ISSUANCE THEREUNDER BY 400,000 BY
FROM 14,651,567 TO 15,051,567 SHARES
The Company's stockholders are being asked to act upon a proposal to
ratify and approve an amendment to the Company's 1987 Employee Stock
Participation Plan (the "ESP Plan"), as amended, increasing the number of shares
available for issuance thereunder by 400,000 from 14,651,567 shares to
15,051,567 shares. In August 2003, the Company's Board amended the ESP Plan to
increase the pool of shares of Common Stock issuable under the ESP PLAN by
400,000 shares (the "ESP Increase") from 14,651,567 shares to 15,051,567 shares.
Ratification and approval of the ESP Increase requires the approval of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting.
A general description of the principal terms of the ESP Plan, the ESP
Increase approved by the Board and the purpose of such ESP Increase is set forth
below. Unless otherwise marked, all properly signed and returned proxies will be
voted FOR Proposal No. 3.
The Board recommends a vote FOR this proposal.
The Company has determined that substantial equity participation for
employees is critically important to creating an organization in which employees
will remain employed for long periods of time, and the ESP Plan is designed to
contribute toward this goal.
Prior to adoption of the 1996 Plan, the ESP Plan shared in the common
pool of shares available for the stock option plans that were superseded by the
1996 Plan. The total pool for all those plans, including the ESP Plan, was
182,240,000 shares at the time of adoption of the superseding 1996 Plan.
The ESP Increase will be available for the ESP Plan to offer incentive
to eligible employees to contribute to increases in stock values. The Board
believes that the attraction, retention and motivation of highly qualified
personnel are essential to the Company's continued growth and success and that
incentive plans, such as the ESP Plan, are necessary for the Company to remain
competitive in its compensation practices.
As of June 28, 2003, rights outstanding under the ESP Plan had an
exercise price of $30.41 (or 85% of the fair market value of the Company's
Common Stock on the exercise date, if less), and an expiration date of December
31, 2003.
As of June 28, 2003, 13,456,521 shares of Common Stock had been sold
pursuant to the ESP Plan at a weighted average price of $7.55 per share, with
1,195,046 shares available for future issuance under the ESP Plan.
Amended Plan Benefits. As of the date of this Proxy Statement, no
executive officer, employee or director, and no associate of any executive
officer or director, has been granted any options subject to stockholder
approval of the proposed amendment. In addition, no executive officer or
employee of the Company has been granted any rights to purchase stock pursuant
to the ESP Plan subject to stockholder approval of the proposed amendment. The
benefits to be received by the Company's directors, executive officers and
employees pursuant to the ESP Plan amendment are not determinable at this time.
The material features of the ESP Plan are as follows:
Under the ESP Plan, any person who is customarily employed at least 20
hours per week and five months per calendar year by the Company on the first day
of each Purchase Period (as defined in "Terms of Rights Under the Plans, ESP"
below) is eligible to participate, provided such employee has been in the
continuous employ of the Company for a specified period preceding the first day
of the purchase period as determined by the Board. The number of eligible
employees was approximately 5,725 as of June 28, 2003. Employees of an affiliate
of the Company designated by the Board are eligible to participate in the ESP
Plan, provided they meet the same employment requirements.
Directors and officers of the Company or an affiliate who are highly
compensated (as defined in the Code) are not eligible to be granted rights under
the ESP Plan.
Notwithstanding the foregoing, no employee shall be eligible for the
grant of any rights under the ESP Plan if, immediately after such grant, that
employee would own stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of any affiliate
(including any stock which such employee may purchase under all outstanding
rights and options), nor can any employee be granted rights under the ESP Plan
that would permit that employee to buy more than $11,500 worth of stock
(determined at the fair market value of the shares at the time such rights
19
are granted) under all Employee Stock Participation Plans of the Company and its
affiliates as defined in Section 423 of the Code in any calendar year.
The following summary of certain provisions of the ESP Plan is
qualified in its entirety by reference to the ESP Plan, as amended, a copy of
which is attached as Appendix B to this Proxy Statement. Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the ESP
Plan.
The Board has the power from time to time to grant or provide for the
grant of rights to purchase stock of the Company under the ESP Plan to eligible
employees (an "Offering") on a date or dates (the "Offering Date(s)") selected
by the Board. Each Offering will be in such form and will contain such terms and
conditions as the Board deems appropriate, except that each Offering must
include the substance of the required provisions of the ESP Plan, which are
described below. The provisions of separate Offerings need not be identical.
Each Offering can be no longer than 27 months (the "Purchase Period"). Offerings
are expected to be of approximately 12 months' duration.
Participation. An eligible employee becomes a participant in an
Offering by delivering an agreement to the Company, within the time specified in
each Offering, authorizing payroll deductions of up to 20% of his or her
compensation (as defined in the ESP Plan) during the Purchase Period. All
payroll deductions made for a participant are credited to his or her account
under the ESP Plan and are deposited with the general funds of the Company. If
specifically allowed pursuant to the terms of the Offering, a participant may
make direct payments into his or her account to the extent such participant has
not had the maximum amount withheld during the Purchase Period. The purchase
price of the shares is accumulated by payroll deductions (or direct payments)
over the Purchase Period. At any time during the Purchase Period, a participant
may terminate his or her payroll deductions, but a participant may increase,
reduce or begin such payroll deductions after the beginning of any Purchase
Period only as provided for in the Offering.
Number of Shares in an Offering. In connection with each Offering, the
Board will specify a maximum number of shares any employee may be granted the
right to purchase and the maximum aggregate number of shares that may be
purchased pursuant to such Offering by all participants. If the aggregate number
of shares purchased upon exercise of rights granted in the Offering would exceed
the maximum aggregate number, the Board will make a pro rata allocation of the
shares available in as nearly a uniform manner as practicable and as it shall
deem to be equitable. Unless the employee's right to purchase shares will be
exercised automatically on a date or dates specified in each Offering (an
"Exercise Date") at the applicable price, it is expected that Exercise Dates
will occur on the last day of each calendar quarter of each calendar year within
a Purchase Period.
Purchase of Stock. On each Exercise Date, the balance in each
participant's account will be applied to the purchase of whole shares of stock
of the Company. No fractional shares shall be issued upon the exercise of rights
granted under the ESP Plan. The amount remaining in each participant's account
after the purchase of shares that is less than the amount required to purchase
one share of stock on the final Exercise Date of an Offering shall be held in
each such participant's account for the purchase of shares under the next
Offering under the ESP Plan, unless such participant withdraws from the next
Offering or is no longer eligible to be granted rights under the ESP Plan, in
which case such amount is distributed to the participant after the Exercise
Date, without interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares that is
equal to the amount required to purchase whole shares of stock on the final
Exercise Date of an Offering is distributed in full to the participant after
such Exercise Date, without interest.
Purchase Price. The purchase price per share of stock acquired pursuant
to the ESP Plan will not be less than the lesser of: (i) an amount equal to 85%
of the fair market value of a share of Common Stock on the Offering Date; or
(ii) an amount equal to 85% of the fair market value of a share of Common Stock
on the Exercise Date.
Withdrawal. While each participant in the ESP Plan is required to sign
an agreement authorizing payroll deductions, the participant may withdraw from a
given Offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Offering. Such withdrawal may be
elected at any time prior to the end of the applicable Purchase Period. Upon any
withdrawal from an Offering by the employee, the Company will distribute to the
employee his or her accumulated payroll deductions (reduced for prior purchases)
without interest, and such employee's interest in the Offering will be
automatically terminated. The employee is not entitled to participate again in
that Offering. An employee's withdrawal from an Offering will not have any
effect upon that employee's eligibility to participate in subsequent Offerings
under the ESP Plan, but such employee is required to submit a new participation
agreement.
Termination of Employment. Rights granted pursuant to any Offering
under the ESP Plan shall terminate immediately upon cessation of an employee's
employment for any reason, and the Company shall distribute to such employee all
of his or her accumulated payroll deductions (reduced for prior purchases),
without interest.
No transferability. Rights granted under the ESP Plan are not
transferable and can only be exercised by the person to whom such rights are
granted.
Adjustments upon Changes in Stock. If any change is made in the stock
subject to the ESP Plan or subject to any rights granted under the ESP Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend
20
in property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the ESP
Plan and outstanding rights granted pursuant to the ESP Plan will be
appropriately adjusted in the class(as) and the maximum number of shares subject
to the ESP Plan and the class(as) and the number of shares and price per share
of stock subject to outstanding rights under the ESP Plan.
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than 50% of the shares of the Company entitled to vote are
exchanged, then, pursuant to the Employee Stock Plans, at the sole discretion of
the Board, (1) any surviving corporation shall assume outstanding rights or
shall substitute similar rights for those under the ESP Plan, such rights shall
continue in full force and effect, or such rights shall be exercised immediately
prior to such event.
Federal Income Tax Consequences. The following summarizes only the
federal income tax consequences of participation under the ESP Plan. State and
local tax consequences may differ.
The ESP Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of shares. Upon disposition of
the shares, the participant will generally be subject to tax, the amount of
which will depend upon the participant's holding period. If the participant
disposes of his or her shares more than two years after the date of option grant
and more than one year after the purchase of the shares, the lesser of (i) 15%
of the fair market value of the shares on the date the option was granted or
(ii) the excess (or zero if there is no excess) of the fair market value of the
shares on the date of the disposition of the shares over the purchase price will
be treated as ordinary income, and any further gain will be treated as long-term
capital gain. If the participant disposes of the shares before the expiration of
these holding periods, the excess of the fair market value of the shares on the
exercise date over the purchase price will be treated as ordinary income, and
any further gain or loss on such disposition will be long-term or short-term
capital gain or loss, depending on the holding period. The Company is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent of ordinary income reported by participants
upon disposition of shares within two years from date of grant or within one tax
year of the date of purchase.
Equity Compensation Plan Information
The following table gives information about the Company's common stock
that may be issued upon the exercise of options, warrants and rights under all
of the Company's existing equity compensation plans as of June 28, 2003 and the
option agreements assumed by the Company pursuant to the terms of the Dallas
acquisition.
----------------------------------------------------------------------------------------------------------
(c)
Number of securities
(a) (b) remaining available for
Number of securities Weighted-average future issuance under
to be issued upon exercise price of equity compensation
exercise of outstanding plans (excluding
outstanding options, options, warrants, securities reflected in
Plan Category warrants, and rights and rights column (a))
----------------------------------------------------------------------------------------------------------
Equity compensation plans approved 94,711,497(1) $29.18 2,739,697(2)
by security holders (1)
----------------------------------------------------------------------------------------------------------
Equity compensation plans not 3,523,382 $32.58
approved by security holders (3) 0
----------------------------------------------------------------------------------------------------------
Total 98,234,879 $29.30 2,739,697
----------------------------------------------------------------------------------------------------------
(1) Represents common stock issuable upon the exercise of options granted under
the Company's existing stockholder approved equity compensation plans.
Excludes purchase rights accruing under the ESP Plan because the number of
shares and weighted average exercise price cannot be determined. Under
these plans, each eligible employee may purchase shares of common stock
with accumulated payroll deductions (in an amount not to exceed 20% of the
employee's eligible compensation, or more than $10,000) on March 31, June
30, October 31 and December 31 each year at a purchase price per share
equal to 85% of the lower of (i) the closing selling price per share of our
common stock on the employee's entry date into the one-year offering period
in which that quarterly purchase date occurs or (ii) the closing selling
price per share on the quarterly purchase date.
21
(2) Includes 1,544,651 shares of common stock available for issuance under the
1996 Plan; and (ii) 1,195,046 shares of common stock available for issuance
under the Company's ESP Plan.
(3) Represents shares of the Company's Common Stock issuable pursuant to option
agreements assumed pursuant to the Dallas Acquisition. The option
agreements were originally issued by Dallas under the Dallas Semiconductor
1984 Stock Option Plan, the Dallas Semiconductor Corporation 1987 Stock
Option Plan and the Dallas Semiconductor 1993 Officer and Director Stock
Option Plan (collectively, the "Dallas Plans"), which are described below.
Pursuant to the Dallas Acquisition, the Company assumed the option
agreements then outstanding under Dallas Plans (the "Assumed Options"). The
Assumed Options are governed by the terms of the respective Dallas Plan
under which they were originally issued and no further options will be
issued under the Dallas Plans. Options governed by the terms of the Dallas
Plans generally are nontransferable and expire no later than ten years from
date of grant. Options generally are exercisable upon grant. Shares of
common stock issuable and/or exercised under the Dallas Plans vest based
upon years of service, generally four years. Upon termination of a
participant's employment, the Company reserves the right to repurchase the
nonvested portion of the stock held by the employee, at the original option
price. The Dallas Plans were duly approved by the stockholders of Dallas
prior to the Dallas Acquisition.
22
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has approved the appointment of Ernst & Young LLP
as the Company's independent auditors for the year ending June 26, 2004, and has
further recommended to the Board that it submit the appointment of independent
auditors for ratification by the stockholders at the Annual Meeting. Fees for
the last annual audit were $340,000 and all other fees were $410,091, including
audit related services of $157,478 and nonaudit services of $252,613. Audit
related services generally include fees for pension and statutory audits,
business acquisitions, accounting consultations, internal audit and SEC
registration statements. As of the effective date of the New Law, the Audit
Committee must approve audit and non-audit services in advance. The Company
expects representatives of Ernst & Young LLP to be present at the Annual
Meeting. Those representatives will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Company is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. In
the event the stockholders fail to ratify the selection, the Audit Committee
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the appointment of
different independent auditors at any time during the year if the Audit
Committee determines that such a change would be in the best interests of the
Company and its stockholders.
In order to be adopted, this proposal requires the affirmative vote of
a majority of the shares represented in person or by proxy and voting at the
Annual Meeting.
The Board and the Audit Committee recommend a vote FOR this proposal.
23
OTHER MATTERS
The Board knows of no other matters that may come before the meeting.
However, if any other matters are properly presented to the meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
to act, in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS -- 2004 ANNUAL MEETING
Requirements for Stockholder Proposals to be Considered for Inclusion
in the Company's Proxy Materials. Pursuant to Rule 14a-8 of the Exchange Act,
the Company must receive a stockholder proposal no later than June 8, 2004 to be
considered for inclusion in the Company's proxy materials for the 2004 Annual
Meeting.
Requirements for Stockholder Proposals to be Brought Before the Annual
Meeting. For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
in writing to the Company. To be timely for the 2004 Annual Meeting, a
stockholder's notice must be delivered to or mailed and received by the Company
at the principal executive offices of the Company not less than 30 days nor more
than 60 days prior to the meeting; provided, however, that in the event less
than 40 days notice or prior public disclosure of the date of the meeting is
made or given to the stockholders, notice by the stockholder to be on time must
be received not later than the close of business on the tenth day following the
day on which such notice of the meeting was mailed or such public disclosure was
made. A stockholder's notice to the Company must set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address of
the stockholder proposing such business, (iii) the class and number of shares of
the Company beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business. If a stockholder intends to
present a proposal at the 2004 Annual Meeting that is submitted outside the
requirements of Rule 14a-8 of the Exchange Act, and does not notify the Company
of such proposal on or before August 22, 2004, then management proxies will be
permitted to use their discretionary voting authority to vote on the proposal if
the proposal is raised at the 2004 Annual Meeting of Stockholders.
/s/ John F. Gifford
-------------------
John F. Gifford
President, Chief Executive Officer and
Chairman of the Board
October 7, 2003
THE BOARD HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE
THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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Appendix A
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MAXIM INTEGRATED PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
Adopted August 16, 1996
Approved by Stockholders November 14, 1996
As further amended by the Board of Directors on April 16, 1997 and May 15, 1997
Approved by Stockholders November 13, 1997
As further amended by the Board of Directors on March 10, 1998,
May 14, 1998, and August 13, 1998
Approved by Stockholders November 19, 1998
As further amended by the Board of Directors on August 12, 1999
Approved by Stockholders November 18, 1999
As further amended by the Board of Directors on
June 8, 2000, and August 17, 2000
Approved by Stockholders November 16, 2000
As further amended by the Board of Directors on August 23, 2001
Approved by Stockholders November 15, 2001
As further amended by the Board of Directors on
August 29, 2002 and September 10, 2002
Approved by Stockholders on November 14, 2002
As further amended by the Board of Directors on August 21, 2003
1. Purposes of the Plan. The purposes of this Stock Incentive Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees,
Directors and Consultants of the Company and its Subsidiaries and to promote the
success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Options granted to residents therein.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
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(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means any committee appointed by the Board to
administer the Plan.
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means Maxim Integrated Products, Inc., a Delaware
corporation.
(j) "Consultant" means any person who is a consultant, advisor,
independent contractor, vendor, customer or other person having a past, current
or prospective business relationship with the Company or any Parent or
Subsidiary.
(k) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.
(l) "Continuous Status as an Employee, Director or Consultant" means
that the employment, director or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee, Director or Consultant shall not be considered interrupted in the case
of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
(m) "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with complete liquidation
or dissolution of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.
(n) "Covered Employee" means any person who is a "covered employee"
under Section 162(m)(3) of the Code.
(o) "Director" means a member of the Board.
(p) "Employee" means any person, including an Officer or Director,
who is an employee of the Company or any Parent or Subsidiary of the Company for
purposes of Section 422 of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
Except for purposes of grants of Incentive Stock Options, "Employee" also
includes any person whom an officer identifies as a prospective employee of the
Company or any Parent or Subsidiary of the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(r) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value of a share of Common Stock shall be (A) the closing sale price
of the Common Stock for the last market trading day prior to the date of the
determination or on the date of the determination, as determined by the
Administrator at the time of the
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determination (or, if no sales were reported on either such date, on the last
trading date on which sales were reported) on the stock exchange determined by
the Administrator to be the primary market for the Common Stock or the Nasdaq
National Market, whichever is applicable or (B) if the Common Stock is not
traded on any such exchange or national market system, the closing price of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such price was reported on that date, on the last date
on which such price was reported), in each case, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market of the type
described in (i), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith.
(s) "Grantee" means an Employee, Director or Consultant who receives
an Option under the Plan.
(t) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(u) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(w) "Option" means a stock option granted pursuant to the Plan.
(x) "Option Agreement" means the written agreement evidencing the
grant of an Option executed by the Company and the Grantee, including any
amendments thereto.
(y) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(z) "Performance-Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
(aa) "Plan" means this 1996 Stock Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.
(cc) "Share" means a share of the Common Stock.
(dd) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ee) "Subsidiary Disposition" means the disposition by the Company of
its equity holdings in any subsidiary corporation effected by a merger or
consolidation involving that subsidiary corporation, the sale of all or
substantially all of the assets of that subsidiary corporation or the Company's
sale or distribution of substantially all of the outstanding capital stock of
such subsidiary corporation.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10 below, the maximum
aggregate number of Shares which may be issued pursuant to this Plan is
104,600,000 Shares [adjusted to reflect the stock dividend effective December 5,
1997, and November 30, 1999]; provided, however, that such maximum aggregate
number of Shares shall be increased by the number of Shares or options returned
to the Company's Incentive Stock Option Plan, 1987 Employee Stock Participation
Plan, and Supplemental Nonemployee Stock Option Plan. Notwithstanding the
foregoing, the maximum aggregate number of Shares available for grant of
Incentive Stock Options shall be 104,600,000 Shares, and such number shall not
be subject to increase as a result of return of Shares or options to the
Company's Incentive Stock Option Plan, 1987 Employee Stock Participation Plan,
and 1987 Supplemental Nonemployee Stock Option Plan. The Shares to be issued
pursuant to the Plan may be authorized, but unissued, or reacquired Common
Stock.
(b) If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option exchange program, or
if any unissued Shares are retained by the Company upon exercise of an Option in
order to satisfy the exercise price for such Option or any withholding taxes due
with respect to such Option,
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such unissued or retained Shares shall become available for future grant under
the Plan (unless the Plan has terminated). Shares that actually have been issued
under the Plan pursuant to an Option shall not be returned to the Plan and shall
not become available for future distribution under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers. With
respect to grants of Options to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Options and may limit such authority by requiring that
such Options must be reported to and ratified by the Board or a Committee within
six (6) months of the grant date, and if so ratified, shall be effective as of
the grant date.
(iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Options to any Covered Employee
intended to qualify as Performance-Based Compensation shall be made only by a
Committee (or subcommittee of a Committee) which is comprised solely of two or
more Directors eligible to serve on a committee making Options qualifying as
Performance-Based Compensation. In the case of such Options granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.
(iv) Administration Errors. In the event an Option is granted in
a manner inconsistent with the provisions of this subsection (a), such Option
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Options may be granted from time to time hereunder;
(ii) to determine whether and to what extent Options are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Option granted hereunder;
(iv) to determine the Fair Market Value of the Common Stock in
accordance with Section 2(r) of the Plan;
(v) to approve forms of Option Agreement for use under the
Plan;
(vi) to determine the terms and conditions of any Option granted
hereunder;
(vii) to amend the terms of any outstanding Option granted under
the Plan in any lawful way, provided that any amendment that would adversely
affect the Grantee's rights under an outstanding Option shall not be made
without the Grantee's written consent and provided, further, that any provision
of the Plan to the contrary notwithstanding, the Administrator shall not have
the authority to reprice any outstanding option, it being understood that
"reprice" shall mean to amend any outstanding Option to reduce the exercise
price;
(viii) to construe and interpret the terms of the Plan and
Options granted pursuant to the Plan;
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(ix) Notwithstanding any provision of the Plan to the contrary,
in order to facilitate compliance with the tax, securities, foreign exchange,
probate or other applicable provisions of the laws in other countries in which
the Company or its Affiliates operate or have key employees or non-employee
directors, the Committee, in its discretion, shall have the power and authority
to (A) determine which (if any) Employees, Directors, and/or Consultants
rendering services or employed outside the U.S. are eligible to participate in
the Plan or to receive any type of award hereunder; (B) determine which
non-U.S.-based Affiliates or operations (e.g., branches, representative offices)
participate in the Plan or any type of award hereunder; (C) modify the terms and
conditions of any awards made to such Employees, Directors, and/or Consultants,
or with respect to such non-U.S.-based Affiliates or operations; and (D)
establish sub-plans, modify methods of exercise, modify payment restrictions on
sale or transfer of shares and other terms and procedures to the extent deemed
necessary or desirable by the Committee to comply with applicable laws of the
non-U.S. jurisdiction. The Committee shall not, however, have the power or
authority to amend the Plan with respect to the maximum aggregate number of
Shares that may be issued under the Plan as set forth in Section 3.(a); increase
the Individual Option Limit as set forth in Section 6.(c); or lengthen the Term
of the Option set forth in Section 6.(d). and
(x) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility. Non-Qualified Stock Options may be granted to Employees,
Directors and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee, Director or Consultant who has been granted an Option
may, if otherwise eligible, be granted additional Options. Options may be
granted to such Employees of the Company and its subsidiaries who are residing
in foreign jurisdictions as the Administrator may determine from time to time.
6. Terms and Conditions of Options.
(a) Designation of Option. Each Option shall be designated in the
Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as Incentive
Stock Options which become exercisable for the first time by a Grantee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the date the Option with respect to such
Shares is granted.
(b) Conditions of Option. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms and conditions of each
Option including, but not limited to, the Option vesting schedule, form of
payment upon exercise of the Option and satisfaction of any performance
criteria.
(c) Individual Option Limit. The maximum number of Shares with
respect to which Options may be granted to any individual in any fiscal year of
the Company shall be 4,000,000. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization
pursuant to Section 10, below. To the extent required by Section 162(m) of the
Code or the regulations thereunder, in applying the foregoing limitation with
respect to an individual, if any Option is canceled, the canceled Option shall
continue to count against the maximum number of Shares with respect to which
Options may be granted to the individual. For this purpose, the repricing of an
Option shall be treated as the cancellation of the existing Option and the grant
of a new Option.
(d) Term of Option. The term of each Option shall be ten (10) years
from the date of grant for all Grantees other than Directors who are not
Employees, in whose case the term shall be five (5) years from the date of
grant. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
(e) Transferability of Options. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution, and may be
exercised during the lifetime of the Grantee only by the Grantee. Non-Qualified
Stock Options shall be transferable to the extent provided in the Option
Agreement.
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(f) Time of Granting Options. The date of grant of an Option shall
for all purposes be the date on which the Administrator makes the determination
to grant such Option, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
(g) Vesting During Leave of Absence. During any leave of absence from
employment, directorship or consulting arrangement with the Company or any
Parent or Subsidiary, vesting of such Grantee's Options shall cease, and shall
resume upon the Grantee's return to his or her relationship with the Company,
Parent or Subsidiary. The dates on which such Grantee's Options vest shall
thereafter be adjusted by the duration of the leave of absence.
7. Option Exercise Price, Consideration and Taxes.
(a) Exercise Price. The exercise price for an Option shall be as
follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator; provided, however, that in the case the per Share exercise price
is less than one hundred percent (100%) of the Fair Market Value per Share on
the date of the grant, the Administrator determines in writing and in good faith
that (A) such grants are made infrequently, (B) there is a good business reason
for the grant that outweighs the normal presumption of a per Share exercise
price of not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant, and (C) the aggregate number of Shares subject to
such Options does not exceed five percent (5%) of the aggregate maximum number
of Shares under Section 3(a), above, as amended from time to time.
(iii) In the case of Options intended to qualify as
Performance-Based Compensation, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.
(b) Consideration. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise of an Option including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) surrender of Shares (including withholding of Shares
otherwise deliverable upon exercise of the Option) which have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised (but only to the extent that
such exercise of the Option would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless
otherwise determined by the Administrator);
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
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(vi) any combination of the foregoing methods of payment.
(c) Taxes. In connection with each option granted pursuant to this
Plan, at any time when the Company could have any withholding obligation
(whether for Federal, state, local or foreign income, disability, Medicare,
employment or other taxes or otherwise) as a result of exercise of an option,
the lapse of any substantial risk of forfeiture to which the shares are subject
at the time of exercise, or the disposition of shares acquired upon such
exercise, the Company shall have no obligation to permit exercise of such option
or to issue any shares upon exercise of the option unless and until either the
exercise of the option is accompanied by sufficient payment, as determined by
the Company in its absolute discretion, to meet those withholding obligations on
such exercise, lapse or disposition or other arrangements are made that are
satisfactory to the Company in its absolute discretion to provide otherwise for
such payment. The Company shall have no liability to any optionee or transferee
for exercising the foregoing right not to permit exercise or issue shares.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Option Agreement.
(ii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to Shares subject to an Option, notwithstanding the exercise of an Option. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in the Option Agreement or Section 10, below.
(b) Exercise of Option Following Termination of Employment, Director
or Consulting Relationship.
(i) An Option may not be exercised after the termination date
of such Option set forth in the Option Agreement and may be exercised following
the termination of a Grantee's Continuous Status as an Employee, Director or
Consultant only to the extent that the Grantee was entitled to exercise it at
the date of such termination (but in no event later than the expiration of the
term of such option as set forth in the Option Agreement). Options shall be
exercisable for a period of ninety (90) days following termination generally,
and for a period of five hundred forty-seven (547) days following termination
due to death of the Grantee or three hundred sixty-five (365) days following
termination due to the disability of the Grantee (or, in each case, such other
period of time as is determined by the Administrator, which such determination
in the case of an Incentive Stock Option shall be made at the time of grant of
the Option).
(ii) All Options shall terminate to the extent not exercised on
the last day of the period specified in paragraph (i) above or the last day of
the original term of the Option, whichever occurs first.
(iii) Any Option designated as an Incentive Stock Option to the
extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Status as an Employee, Director or Consultant shall convert automatically to a
Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Option
Agreement.
(c) Exercise of Option Following Termination of Employment, Director
or Consulting Relationship. In the event of termination of a Grantee's
Continuous Status as an Employee, Director or Consultant with the Company for
any reason other than disability or death (but not in the event of an Grantee's
change of status from Employee to Consultant or from Consultant to Employee),
such Grantee may, but only within ninety (90) days after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Grantee was entitled to exercise it at the date of such
termination or to such other extent as may be determined by the Administrator.
If the Grantee should die within ninety (90) days after the date of such
termination, the Grantee's estate or the person who acquired the right to
exercise the Option by bequest or inheritance may exercise the Option to the
extent that the Grantee was entitled to exercise it at the date of such
termination within five hundred forty-seven (547) days of the Grantee's date of
death, but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement. In the event of an Grantee's change of
status from Employee to Consultant, an Employee's Incentive Stock Option shall
convert automatically to a Non-Qualified Stock Option on the ninety-first (91st)
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day following such change of status. If the Grantee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(d) Disability of Grantee. In the event of termination of a Grantee's
Continuous Status as an Employee, Director or Consultant as a result of his or
her disability, Grantee may, but only within three hundred sixty-five (365) days
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Non-Qualified Stock Option on the day three (3) months and one day
following such termination. To the extent that Grantee is not entitled to
exercise the Option at the date of termination, or if Grantee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Death of Grantee. In the event of the death of a Grantee, the
Option may be exercised at any time within five hundred forty-seven (547) days
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), by the Grantee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Grantee was entitled to exercise
the Option at the date of death. If, at the time of death, the Grantee was not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Grantee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance does not exercise the Option within the
time specified herein, the Option shall terminate.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan, as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Option.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change in Control or
Subsidiary Disposition or at the time of an actual Corporate Transaction, Change
in Control or Subsidiary Disposition and exercisable at the time of the grant of
an Option under the Plan or any time while an Option remains outstanding, to
provide for the full automatic vesting and exercisability of one or more
outstanding unvested Options under the Plan and the release from restrictions on
transfer and repurchase or forfeiture rights of such Options in connection with
a Corporate Transaction, Change in Control or Subsidiary Disposition, on such
terms and conditions as the Administrator may specify. The Administrator also
shall have the authority to condition any such Option vesting and exercisability
or release from such limitations upon the subsequent termination of the
Continuous Status as an Employee or Consultant of the Grantee within a specified
period following the effective date of the Change in Control or Subsidiary
Disposition. The Administrator may provide that any Options so vested or
released from such limitations in connection with a Change in Control or
Subsidiary Disposition, shall remain fully exercisable until the expiration or
sooner
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termination of the Option. Effective upon the consummation of a Corporate
Transaction, all outstanding Options under the Plan shall terminate unless
assumed by the successor company or its Parent.
(b) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan.
To the extent required to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such manner and to such a degree
as required.
(b) No Option may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan shall not
affect Options already granted, and such Options shall remain in full force and
effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon
any Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
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Appendix B
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MAXIM INTEGRATED PRODUCTS, INC.
1987 EMPLOYEE STOCK PARTICIPATION PLAN
Adopted August 26, 1987
Approved by Shareholders on October 19, 1987
Amended January 29 and August 23, 1988
Approved by Stockholders on October 26, 1988
Amended August 24, 1989
Approved by Stockholders on November 3, 1989
Amended August 9, 1990
Approved by Stockholders on October 26, 1990
Amended May 8, 1991
Approved by Stockholders on November 7, 1991
Amended August 13, 1992
Approved by Stockholders on November 5, 1992
Amended August 25, 1993
Approved by Stockholders on November 5, 1993
Amended February 17, 1994, March 23, 1994,
April 21, 1994, and May 12, 1994
Approved by Stockholders on November 10, 1994
Amended November 10, 1994
Amended August 10, 1995
Approved by Stockholders on November 16, 1995
Amended August 16, 1996
Approved by Stockholders on November 14, 1996
Amended April 16, 1997 and May 15, 1997
Approved by Stockholders November 13, 1997
Amended August 13, 1998
Approved by Stockholders on November 19, 1998
Amended August 12, 1999
Approved by Stockholders on November 18, 1999
Amended August 17, 2000
Approved by Stockholders on November, 16 2000
Amended August 23, 2001
Approved by Stockholders on November 15, 2001
Amended August 29, 2002
Approved by Stockholders on November 14, 2002
Amended August 21, 2003
PURPOSE
(a) The purpose of the Plan is to provide a means by which employees
of Maxim Integrated Products, Inc., a Delaware corporation (the "Company"), and
its Affiliates, as defined in subparagraph 1(b), which are designated as
provided in subparagraph 2(b), may be given an opportunity to purchase stock of
the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services
of its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
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2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical). (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan. (iii) To construe and
interpret the Plan and rights granted under it, and to establish, amend and
revoke rules and regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency in the Plan, in
a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective. (iv) To amend the Plan as provided in paragraph 13 (v)
Generally, to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than three (3) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate two hundred and seventy-seven million
four hundred and forty thousand (287,240,000) shares (adjusted to reflect the
stock dividend effective November 23, 1994, November 29, 1995, December 5, 1997,
and November, 30 1999) of the Company's $.001 par value common stock (the
"Common Stock"); provided, however, that such aggregate number of shares shall
be reduced to reflect the number of shares of the Company's Common Stock which
has been sold under, or may be sold pursuant to outstanding options granted
under, the 1996 Stock Incentive Plan, the Incentive Stock Option Plan, 1987
Supplemental Stock Option Plan and Supplemental Nonemployee Stock Option Plan to
the same extent as if such sales had been made or options had been granted
pursuant to this Plan. If any right granted under the Plan shall for any reason
terminate without having been exercised, the Common Stock not purchased under
such right shall again become available for the Plan.
4. GRANT OF RIGHTS; OFFERING
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
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5. ELIGIBILITY
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is at least twenty (20) hours per week and at least five (5) months
per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the Purchase Period (as defined below) for such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Purchase Period (as defined below) for such Offering, he or she will not
receive any right under that Offering.
(c) Directors and executive officers of the Company or an Affiliate who
are highly compensated employees within the meaning of Section 423(b)(4)(D) of
the Code are not eligible to be granted rights under the Plan.
(d) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(d), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(e) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
6. RIGHTS; PURCHASE PRICE
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase the number of shares
of Common Stock of the Company purchasable with up to twenty percent (20%) of
such employee's Compensation (as defined in Section 7(a)) during the period
which begins on the Offering Date (or such later date as the Board determines
for a particular Offering) and ends on the date stated in the Offering, which
date shall be no more than twenty-seven (27) months after the Offering Date (the
"Purchase Period"). In connection with each Offering made under this Plan, the
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each such Offering, the Board or the Committee may
specify the maximum fair market value of Common Stock which may be purchased by
any employee pursuant to such Offering as well as a maximum aggregate number of
shares which may be purchased by all eligible employees on any given Exercise
Date (as defined in the Offering) under the Offering. If the aggregate purchase
of shares upon exercise of rights granted under the Offering would exceed any
such maximum aggregate number, the Board or the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as shall be
practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
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(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Exercise Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION
(a) An eligible employee may become a participant in an Offering by
delivering an agreement to the Company within the time specified in the
Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to twenty percent (20%) of such employee's
Compensation during the Purchase Period. Compensation is defined as total cash
compensation, including commissions, bonuses, overtime and other cash
compensation, and amounts elected to be deferred by the employee (that would
otherwise have been paid) under the Company's Cash or Deferred Savings Plan. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. At any time during the Purchase Period a participant may terminate
his or her payroll deductions. A participant may reduce, increase or begin such
payroll deductions after the beginning of any Purchase Period only as provided
for in the Offering. If specifically allowed pursuant to the terms of an
Offering, a participant may make direct payments into his or her account to the
extent that such participant has not had the maximum amount withheld during the
Purchase Period.
(b) If a participant terminates his or her payroll deductions, such
participant may withdraw from the Offering by delivering to the Company a notice
of withdrawal in such form as the Company provides. Such withdrawal may be
elected at any time prior to the end of the Purchase Period. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in other Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company or an Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), without interest.
(d) Rights granted under the Plan shall not be transferable, and shall be
exercisable only by the person to whom such rights are granted.
8. EXERCISE
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Exercise Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
such participant after such Exercise Date, without interest. The amount, if any,
of accumulated payroll deductions remaining in any participant's account after
the purchase of shares which is equal to the amount required to purchase whole
shares of stock on the final Exercise Date of an Offering shall be distributed
in full to such participant after such Exercise Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If, on an Exercise Date of any Offering hereunder, the Plan
is not so registered, no rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Purchase Period
(reduced to the extent, if any, such deductions have been used to acquire stock
for the participants) shall be distributed to the participants, without
interest.
9. COVENANTS OF THE COMPANY
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock
required to satisfy such rights.
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(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall have
been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and the maximum number of
shares subject to the Plan and the class(es) and the number of shares and price
per share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion, any
surviving corporation shall assume outstanding rights or substitute similar
rights for those under the Plan, such rights shall continue in full force and
effect, or such rights shall be exercised immediately prior to such event.
13. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the shares of the Company represented and voting at a duly held
meeting within 12 months before or after the adoption of the amendment, where
the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code. It is expressly contemplated that
the Board may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible employees with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations promulgated
thereunder relating to employee stock purchase plans and/or to bring the Plan
and/or rights granted under it into compliance therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted.
14. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on August 25, 2007 is adopted by the Board.
No rights may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom such rights were granted.
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15. EFFECTIVE DATE OF PLAN
The Plan as amended and restated herein shall become effective as
determined by the Board, but no rights granted after the date of this amendment
and restatement of the Plan shall be exercised unless and until this amended and
restated Plan has been approved by the vote of the holders of a majority of the
outstanding shares of the Company entitled to vote or by the written consent of
the holders of the outstanding shares of the Company entitled to vote to the
extent necessary to obtain employee stock purchase plan treatment under Section
423 of the Code, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
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