-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ExYa39f7SyDB+HgrOaggy6ho5+CKqA/M2LPksOkA4grNSeQuAuWfmeykVA5AMhnC FJngbkc84lJCYqopT1SD7A== 0001095811-01-000904.txt : 20010212 0001095811-01-000904.hdr.sgml : 20010212 ACCESSION NUMBER: 0001095811-01-000904 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXIM INTEGRATED PRODUCTS INC CENTRAL INDEX KEY: 0000743316 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 942896096 STATE OF INCORPORATION: DE FISCAL YEAR END: 0626 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16538 FILM NUMBER: 1530019 BUSINESS ADDRESS: STREET 1: 120 SAN GABRIEL DR CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4087377600 MAIL ADDRESS: STREET 1: 120 SAN GABRIEL DR CITY: SUNNYVALE STATE: CA ZIP: 94086 10-Q 1 f69301e10-q.txt FORM 10-Q PERIOD ENDED DECEMBER 30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NO. 0-16538 MAXIM INTEGRATED PRODUCTS, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-2896096 (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) Incorporation or Organization)
120 SAN GABRIEL DRIVE, SUNNYVALE, CA 94086 (Address of Principal Executives Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (408) 737-7600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days: YES [X] NO[ ] CLASS: COMMON STOCK, OUTSTANDING AT JANUARY 29, 2001 $.001 PAR VALUE 283,147,553 SHARES
2 MAXIM INTEGRATED PRODUCTS, INC. INDEX - -----
PART I. FINANCIAL INFORMATION PAGE ITEM 1. Financial Statements Consolidated Balance Sheets 3 As of December 30, 2000 and June 24, 2000 Consolidated Statements of Income 4 for the three and six months ended December 30, 2000 and December 25, 1999 Consolidated Statements of Cash Flows 5 for the six months ended December 30, 2000 and December 25, 1999 Notes to Consolidated Financial Statements 6-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-14 ITEM 3. Quantitative and Qualitative Disclosures About 14 Market Risk PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security 14 Holders ITEM 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15
2 3 CONSOLIDATED BALANCE SHEETS MAXIM INTEGRATED PRODUCTS, INC.
- ------------------------------------------------------------------------------------------------ December 30, June 24, 2000 2000 (Amounts in thousands) (unaudited) ================================================================================================ ASSETS Current assets: Cash and cash equivalents $ 59,702 $ 53,057 Short-term investments 697,569 587,889 - ------------------------------------------------------------------------------------------------ Total cash, cash equivalents and short-term investments 757,271 640,946 - ------------------------------------------------------------------------------------------------ Accounts receivable, net 127,420 147,184 Inventories 63,451 58,593 Deferred tax assets 51,393 67,500 Income tax refund receivable 6,500 5,186 Other current assets 5,231 12,010 - ------------------------------------------------------------------------------------------------ Total current assets 1,011,266 931,419 - ------------------------------------------------------------------------------------------------ Property, plant and equipment, at cost, less accumulated depreciation 486,534 411,342 Other assets 6,214 7,022 - ------------------------------------------------------------------------------------------------ TOTAL ASSETS $ 1,504,014 $ 1,349,783 ================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 81,197 $ 54,318 Income taxes payable 8,555 9,503 Accrued salaries 42,719 41,450 Accrued expenses 73,195 86,256 Deferred income on shipments to distributors 24,904 16,924 - ------------------------------------------------------------------------------------------------ Total current liabilities 230,570 208,451 - ------------------------------------------------------------------------------------------------ Other liabilities 4,000 4,000 Deferred tax liabilities 19,500 19,500 - ------------------------------------------------------------------------------------------------ Total liabilities 254,070 231,951 - ------------------------------------------------------------------------------------------------ Stockholders' equity: Common stock 286 283 Additional paid-in capital 30,103 90,364 Retained earnings 1,221,025 1,028,655 Accumulated other comprehensive income (1,470) (1,470) - ------------------------------------------------------------------------------------------------ Total stockholders' equity 1,249,944 1,117,832 - ------------------------------------------------------------------------------------------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,504,014 $ 1,349,783 ================================================================================================
See accompanying Notes to Consolidated Financial Statements. 3 4 CONSOLIDATED STATEMENTS OF INCOME MAXIM INTEGRATED PRODUCTS, INC.
- ------------------------------------------------------------------------------------------------------------------------ (Amounts in thousands, except per share data) Three months ended Six months ended - ------------------------------------------------------------------------------------------------------------------------ (Unaudited) December 30, 2000 December 25, 1999 December 30, 2000 December 25, 1999 ======================================================================================================================== Net revenues $ 305,104 $ 201,728 $ 590,199 $ 381,774 Cost of goods sold 89,768 60,912 173,789 115,394 - ------------------------------------------------------------------------------------------------------------------------ Gross margin 215,336 140,816 416,410 266,380 - ------------------------------------------------------------------------------------------------------------------------ Operating expenses: Research and development 51,341 32,250 97,997 60,559 Selling, general and administrative 24,816 17,268 47,867 32,563 - ------------------------------------------------------------------------------------------------------------------------ Total operating expenses 76,157 49,518 145,864 93,122 - ------------------------------------------------------------------------------------------------------------------------ Operating income 139,179 91,298 270,546 173,258 Interest income and other, net 10,968 6,628 20,924 13,083 - ------------------------------------------------------------------------------------------------------------------------ Income before provision for income taxes 150,147 97,926 291,470 186,341 Provision for income taxes 51,050 33,295 99,100 63,356 - ------------------------------------------------------------------------------------------------------------------------ Net income $99,097 $64,631 $192,370 $122,985 ======================================================================================================================== Earnings per share: Basic $ 0.35 $ 0.23 $ 0.68 $ 0.45 Diluted $ 0.31 $ 0.20 $ 0.60 $ 0.39 ======================================================================================================================== Shares used in the calculation of earnings per share: Basic 284,947 275,528 284,274 274,557 Diluted 319,920 315,711 321,298 314,799 ========================================================================================================================
See accompanying Notes to Consolidated Financial Statements. 4 5 CONSOLIDATED STATEMENTS OF CASH FLOWS MAXIM INTEGRATED PRODUCTS, INC.
============================================================================================== For the six months ended (Amounts in thousands)(Unaudited) December 30, December 25, Increase (decrease) in cash and cash equivalents 2000 1999 ============================================================================================== Cash flows from operating activities: Net income $ 192,370 $ 122,985 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other 16,409 9,606 Reduction of equipment value 31,865 6,400 Changes in assets and liabilities: Accounts receivable 19,764 (24,076) Inventories (4,858) 892 Deferred taxes 16,107 - - Income tax refund receivable (1,314) 12,483 Other current assets 6,779 (1,269) Accounts payable 26,879 5,812 Income taxes payable 92,577 59,173 Deferred income on shipments to distributors 7,980 (697) All other accrued liabilities (11,792) 10,257 - ---------------------------------------------------------------------------------------------- Net cash provided by operating activities 392,766 201,566 - ---------------------------------------------------------------------------------------------- Cash flows from investing activities: Additions to property, plant and equipment (123,466) (68,993) Other assets 808 (4,810) Purchases of available-for-sale securities (313,929) (145,534) Proceeds from sales/maturities of available-for-sale securities 204,249 81,202 - ---------------------------------------------------------------------------------------------- Net cash used in investing activities (232,338) (138,135) - ---------------------------------------------------------------------------------------------- Cash flows from financing activities: Issuance of common stock 44,760 35,495 Repurchase of common stock (198,543) (104,891) - ---------------------------------------------------------------------------------------------- Net cash used in financing activities (153,783) (69,396) - ---------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 6,645 (5,965) Cash and cash equivalents: Beginning of year 53,057 34,126 - ---------------------------------------------------------------------------------------------- End of period $ 59,702 $ 28,161 ==============================================================================================
See accompanying Notes to Consolidated Financial Statements. 5 6 MAXIM INTEGRATED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended December 30, 2000 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended June 24, 2000, and the Form 8K and Forms 425 filed in connection with the transaction discussed in Note 8 in these Notes to Consolidated Financial Statements. The Company has a 52-to-53-week fiscal year that ends on the last Saturday in June. Accordingly, every sixth or seventh fiscal year will be a 53-week fiscal year. Fiscal year 2001 is a 53-week fiscal year. The three months ended December 30, 2000 consisted of 14 weeks. The impact of the extra week on the Company's operating results for the three months ended December 30, 2000 consisted primarily of additional salary related expenses. These additional expenses were not material. NOTE 2: INVENTORIES Inventories consist of (in thousands):
December 30, June 24, ------------ -------- 2000 2000 ---- ---- (unaudited) Raw materials $ 7,429 $ 5,246 Work-in-process 25,089 24,980 Finished goods 30,933 28,367 -------- -------- $ 63,451 $ 58,593 ======== ========
6 7 MAXIM INTEGRATED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) NOTE 3: EARNINGS PER SHARE Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options and other potentially dilutive securities. The number of incremental shares from the assumed issuance of stock options and other potentially dilutive securities is calculated applying the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share.
- -------------------------------------------------------------------------------------------------------------------------- (Amounts in thousands, except per share data) Three months ended Six months ended - -------------------------------------------------------------------------------------------------------------------------- (Unaudited) December 30, 2000 December 25, 1999 December 30,2000 December 25, 1999 =========================================================================================================================== Numerator for basic earnings per share and diluted earnings per share Net income $99,097 $64,631 $192,370 $122,985 =================================================================================== Denominator for basic earnings per 284,947 275,528 284,274 274,557 share Effect of dilutive securities: stock options and warrants 34,973 40,183 37,024 40,242 ------------------------------------------------------------------------------------ Denominator for diluted earnings 319,920 315,711 321,298 314,799 per share =================================================================================== Earnings per share: Basic $ 0.35 $ 0.23 $ 0.68 $ 0.45 Diluted $ 0.31 $ 0.20 $ 0.60 $ 0.39 ===================================================================================
7 8 MAXIM INTEGRATED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) NOTE 4: SHORT-TERM INVESTMENTS All short-term investments at December 30, 2000 are classified as available-for-sale and consist of U.S. Treasury and Federal Agency debt securities maturing within one year. Unrealized gains and losses, net of tax, on securities in this category are reportable as a separate component of stockholders' equity. Because of the short term to maturity and relative price insensitivity to changes in market interest rates, amortized cost approximates fair market value and no unrealized gains or losses have been recorded at December 30, 2000. The cost of securities sold is based on the specific identification method. Interest earned on securities is included in interest income and other, net in the consolidated statements of income. NOTE 5: SEGMENT INFORMATION The Company operates and tracks its results in one operating segment. The Company designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by Statement of Financial Accounting Standard No. 131 (SFAS131), "Disclosures about Segments of an Enterprise and Related Information." Enterprise-wide information is provided in accordance with SFAS 131. Geographical revenue information is based on the customer's ship-to location. Long-lived assets consist of property, plant and equipment. Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal period. Net revenues from unaffiliated customers by geographic region were as follows:
Three months ended Six months ended - ---------------------------------------------------------------------------------------------------------- (Amounts in thousands) December 30, 2000 December 25, 1999 December 30, 2000 December 25, 1999 ========================================================================================================== United States $121,027 $86,767 $241,674 $166,905 Europe 77,882 42,935 148,167 83,317 Pacific Rim 99,771 68,252 188,827 125,294 Rest of World 6,424 3,774 11,531 6,258 - ---------------------------------------------------------------------------------------------------------- $305,104 $201,728 $590,199 $381,774 ==========================================================================================================
Net long-lived assets by geographic region were as follows:
(Amounts in thousands) December 30, 2000 June 24, 2000 - ------------------------------------------------------------------- United States $449,358 $376,819 Rest of World 37,176 34,523 - ------------------------------------------------------------------- $486,534 $411,342 ===================================================================
8 9 NOTE 6: STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 (SFAS 133), "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" At the beginning of fiscal year 2001, the Company adopted SFAS 133. This standard requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or be recognized in other comprehensive income until the hedged item is recognized in earnings. The change in a derivative's fair value related to the ineffective portion of a hedge, if any, will be immediately recognized in earnings. The Company uses foreign currency exchange contracts to offset the effect of foreign currency exchange fluctuations from its foreign currency revenue and does not speculate in derivatives or leveraged financial products. The effect of adopting SFAS 133 did not have and is not expected to have a material effect on the Company's financial position or results of operations. NOTE 7: RECENT ACCOUNTING DEVELOPMENTS The Securities and Exchange Commission (SEC) issued in December 1999 SEC Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 addresses the SEC's views and provides guidance in applying generally accepted accounting principles to revenue recognition in financial statements and must be adopted by the Company in the fourth quarter of fiscal 2001. The effect of adopting SAB 101 is not expected to have a material effect on the Company's financial position or results of operations. NOTE 8: SUBSEQUENT EVENT On January 29, 2001, the Company and Dallas Semiconductor Corporation (Dallas Semiconductor) announced an agreement under which the Company would acquire all of the outstanding common stock and stock options of Dallas Semiconductor, a leading provider of specialty semiconductors. The transaction is intended to be accounted for as a pooling-of-interests and qualify as a tax-free reorganization. The exchange ratio will be determined by dividing a number of Maxim share equivalents by the number of outstanding Dallas Semiconductor share equivalents at closing (calculated using the treasury method). The number of Maxim share equivalents will range linearly from 40 million share equivalents (if Maxim's average closing price during a 10-day trading period ending two days prior to closing is $61 per share or more) to 42 million share equivalents (if Maxim's average closing price during the relevant trading period is $52 or less). Based on the Company's common stock closing price on Friday, January 26, 2001 and the exchange ratio as defined in the merger agreement, each outstanding share of common stock of Dallas Semiconductor would be exchanged for 0.6163 of a share of the Company's common stock. Based on the exchange ratio noted above, all of the outstanding common stock and stock options of Dallas Semiconductor would be exchanged for Company common stock and stock options representing between 40-42 million shares of the Company's common stock calculated using the treasury stock method and an implied tax rate of 35%. The exact number of shares of the Company's common stock to be issued upon consummation of the transaction as well as the actual exchange ratio are subject to fluctuation and will be determined based on the merger agreement. The merger agreement has been filed with the SEC on Form 8K. The acquisition is anticipated to be consummated during the Company's fourth quarter of fiscal 2001 and is subject to approval by Dallas Semiconductor's stockholders and must be in compliance with the regulatory requirements. In connection with this transaction, the Company will file a Registration Statement with the SEC on Form S-4 during the third quarter of fiscal 2001. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NET REVENUES Net revenues were $305.1 million and $201.7 million for the three months ended December 30, 2000 and December 25, 1999, respectively, an increase of 51.2%. Net revenues were $590.2 million and $381.8 million for the six months ended December 30, 2000 and December 25, 1999, respectively, an increase of 54.6%. The increases in net revenues are primarily attributable to higher unit shipments resulting from continued introduction of new proprietary products, increased market acceptance of the Company's proprietary and second-source products, and an increase in market demand for analog semiconductor products in general. During the three and six months ended December 30, 2000, approximately 60% and 59%, respectively, of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in US dollars, the Company enters into foreign currency forward contracts to mitigate its risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on revenue and the Company's results of operations for the three and six months ended December 30, 2000 was immaterial. GROSS MARGIN Gross margin was 70.6% and 69.8% for the three months ended December 30, 2000 and December 25, 1999, respectively. The increase in gross margin for the three months ended December 30, 2000 is primarily attributable to production efficiencies obtained through economies of scale and cost reductions. The increase in gross margin in the three months ended December 30, 2000 was partially offset by an increase in inventory reserves of $14.3 million and $11.6 million recorded to write down the carrying value of certain manufacturing equipment to net realizable value. During the three months ended December 25, 1999, the Company recorded $3.8 million to write down the carrying value of certain manufacturing equipment to net realizable value. Gross margin was 70.6% and 69.8% for the six months ended December 30, 2000 and December 25, 1999, respectively. The increase in gross margin for the six months ended December 30, 2000 is primarily attributable to production efficiencies obtained through economies of scale and cost reductions. The increase in gross margin for the six months ended December 30, 2000 was partially offset by $26.5 million recorded to write down the carrying value of certain manufacturing equipment to net realizable value and an increase of inventory reserves by $16.9 million. During the six months ended December 25, 1999, the Company recorded $6.3 million to write down the carrying value of certain manufacturing equipment to net realizable value and increased inventory reserves by $1.8 million. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D) RESEARCH AND DEVELOPMENT Research and development expenses were $51.3 million and $32.3 million for the three months ended December 30, 2000, and December 25, 1999, respectively, which represented 16.8% and 16.0% of net revenues, respectively. Research and development expenses were $98.0 million and $60.6 million for the six months ended December 30, 2000, and December 25, 1999, respectively, which represented 16.6% and 15.9% of net revenues, respectively. The increases in research and development expenses for both the three months and six months ended December 30, 2000 as compared to the same periods in the prior year are due primarily to increased headcount and related employee expenses to continue development of new products to support revenue growth, and increased wafer and mask expenses to support new product development. During the three and six month periods ended December 30, 2000, the Company recorded $3.6 million and $7.1 million, respectively, to write down certain equipment to net realizable value. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses were $24.8 million and $17.3 million for the three months ended December 30, 2000, and December 25, 1999, respectively, which represented 8.1% and 8.6% of net revenues, respectively. The increase in selling, general, and administrative expenses of $7.5 million is primarily due to increased headcount and related employee expenses to support the Company's higher revenues and a $4.0 million charge recorded primarily for technology licensing. During the three month ended December 25, 1999, the Company recorded a charge of $3.0 million for technology licensing. Selling, general and administrative expenses were $47.9 million and $32.6 million for the six months ended December 30, 2000, and December 25, 1999, respectively, which represented 8.1% and 8.5% of net revenues, respectively. The increase in selling, general, and administrative expenses of $15.3 million is primarily due to increased headcount and related employee expenses to support the Company's higher revenues and charges of $7.0 million recorded primarily for technology licensing. During the six months ended December 25, 1999, the Company recorded charges of $4.5 million for technology licensing. INTEREST INCOME AND OTHER, NET Interest income and other, net was $11.0 million and $20.9 million in the three and six months ended December 30, 2000, respectively, compared to $6.6 million and $13.1 million in the three and six months ended December 25, 1999, respectively. The increase in interest income and other, net for both the three and six months ended December 30, 2000 is a result of higher levels of invested cash, cash equivalents and short-term investments and increased interest rates on invested amounts. INCOME TAXES The effective income tax rate for both the three months ended December 30, 2000 and December 25, 1999 was 34%. This rate differs from the federal statutory rate primarily due to state income taxes and tax exempt earnings of the Company's Foreign Sales Corporation. 11 12 OUTLOOK End market bookings in the second quarter of fiscal 2001 were $332 million, down slightly (5%) from the first quarter end market bookings of $348 million. U.S. distributor bookings on the Company were 28% below bookings received from their customers. This was in part due to the Company encouraging the distributors to manage inventory of the Company's products at their locations. As a result, second quarter fiscal 2001 bookings on the Company were $308 million, compared to $339 million for the first quarter of the fiscal year. The Company believes that end market consumption remains in line with its projection for the fiscal year. Turns orders received in the second quarter of fiscal 2001 were $58 million, compared to $98 million received in the prior quarter. Turns orders are customer orders that are for delivery within the same quarter and may result in revenue within the same quarter if the Company has available inventory that matches those orders. End market bookings decreased in the U.S. and Pacific Rim, but increased in both Europe and Japan. Bookings were lower in the notebook and cell phone end markets, where there appears to be an inventory correction underway. Second quarter ending backlog shippable within the next 12 months was approximately $431 million, including approximately $330 million requested for shipment in the third quarter of fiscal 2001. The Company's first quarter ending backlog shippable within the next 12 months was approximately $443 million, including approximately $353 million that was requested for shipment in the second quarter of fiscal 2001. All backlog numbers have been adjusted to be net of cancellations and estimated future U.S. distribution ship and debit pricing adjustments. The Company believes bookings for the second quarter of fiscal 2001 continued to moderate as customers and distributors, primarily in the U.S. and Pacific Rim, adjusted their ordering patterns. The Company believes that this trend may continue through the third quarter of fiscal 2001; however, management believes that end market consumption for the Company's products will continue to support the revenue and earnings outlook for the fiscal year. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds for the six months ended December 30, 2000 were net cash generated from operating activities of $392.8 million, and proceeds from the issuance of common stock of $44.8 million associated with the Company's stock option programs. The principal uses of funds were the repurchase of $198.5 million of common stock, the purchase of $123.5 million in property, plant and equipment and $109.7 million of net investment activities. The Company believes that it possesses sufficient liquidity and capital resources to fund its property, plant and equipment purchases and operations for the next twelve months. It has been the Company's policy to reduce the dilution effect from stock options by repurchasing its common stock from time to time in amounts based on estimates of proceeds from stock option exercises and of tax benefits related to such exercises. Due to the intended accounting treatment of the Company's acquisition of all of the outstanding common stock and stock options of Dallas Semiconductor (see Note 8 of Notes to Consolidated Financial Statements), the Company will be required to rescind its existing common stock repurchase program prior to consummation of the transaction. 12 13 FORWARD-LOOKING INFORMATION AND RISK FACTORS This Report on Form 10-Q contains forward-looking statements, including statements regarding or implicating the Company's expectations, intentions, plans, goals and hopes regarding the future. Forward-looking statements in this report, including this Management's Discussion and Analysis section, involve risk and uncertainty. Such statements include, among others, the Company's expectations regarding the trend of bookings, estimates of end-market and customer consumption of the Company's products; expectations for future revenue and earnings growth; and statements regarding capital spending, the sufficiency of capital resources and liquidity, the Company's stock repurchase policy and the pending Dallas Semiconductor transaction. There are numerous factors that could cause the Company's actual results to differ materially from results predicted or implied in this report. Such factors include the Company incorrectly assessing customer and end-user demand; technical difficulties in bringing new products and processes to market in a timely manner; market developments that could adversely affect the growth of the mixed-signal analog market such as declines in customer forecasts or earlier than expected cyclical downturns within the mixed-signal analog segment of the semiconductor market or possible effects of capacity constraints affecting other suppliers to equipment manufacturers; significant interruptions or shortages of electric power; and the Company being unable to sustain its successes in the markets into which its products are introduced. Additional factors include whether, and the extent to which, demand for the Company's products increases and reflects real end-user demand; whether customer cancellations and delays of outstanding orders increase; whether the Company is able to manufacture in a correct mix to respond to orders on hand and new orders received in the future; whether the Company is able to achieve its new product development and introduction goals, including, without limitation, goals for recruiting, retaining, training, and motivating engineers, particularly design engineers, and goals for conceiving and introducing timely new products that are well received in the marketplace; whether the Company is able to effectively and successfully expand manufacturing operations to meet increased demand for the Company's products; and whether the Company is able to successfully commercialize its new technologies, such as its next-generation high-frequency technologies, that it has been investing in by designing and introducing new products based on these new technologies. In addition to the above, there are certain risks and uncertainties related to the Company's acquisition of Dallas Semiconductor (see Note 8 of Notes to Consolidated Financial Statements), including risks associated with acquisition, such as the risk that the closing conditions will not be satisfied, including the inability to obtain the approval of Dallas Semiconductor's stockholders, matters arising in connection with the parties' efforts to comply with applicable regulatory requirements relating to the transaction and the risk that the merger will not be consummated. Other important factors that could cause actual results to differ materially from those predicted or implied in this report include overall worldwide economic conditions; demand for electronic products and semiconductors generally; demand for the end-user products for which the Company's semiconductors are suited; timely availability of raw materials, equipment, supplies and services; unanticipated manufacturing problems; technological and product development risks; competitors that may outperform the Company; merger related costs associated with the Company's proposed acquisition of Dallas Semiconductor being greater than anticipated; and other risk factors described in the Company's filings with the Securities and Exchange Commission and in particular its report on Form 10-K for the year ended June 24, 2000. All forward-looking statements included in this document are made as of the date hereof, based on the information available to the Company as of the date 13 14 hereof, and the Company assumes no obligation to update any forward-looking statement, whether as a result of new information relating to existing conditions, future events or otherwise. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk has not changed significantly from the risks disclosed in Item 7A of the Company's Annual Report on Form 10-K for the year ended June 24, 2000. PART II. OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on November 16, 2000. The following proposals were voted on by the Company Stockholders' and results obtained thereon: PROPOSAL 1: ELECTION OF DIRECTORS The following directors were elected as directors by the votes indicated:
Nominee Votes in Favor Votes Withheld James R. Bergman 258,260,577 955,481 John F. Gifford 258,253,716 962,342 B. Kipling Hagopian 258,259,834 956,224 A.R. Frank Wazzan 258,248,980 967,078 Eric C. Karros 257,418,975 1,797,083
PROPOSAL 2: RATIFICATION AND APPROVAL OF AMENDMENTS TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE COMPANY'S 1996 STOCK INCENTIVE PLAN, AS AMENDED, AND 1987 EMPLOYEE STOCK PARTICIPATION PLAN, AS AMENDED The increase in the number of shares of common stock under the above stock plans was ratified and approved with 182,637,342 votes in favor, 75,900,723 against, 677,993 abstentions. PROPOSAL 3: AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE 480 MILLION ADDITIONAL SHARES OF COMMON STOCK The amendment of restated certificate of incorporation as noted above was ratified and approved with 243,466,148 votes in favor, 15,098,867 against and 651,043 abstentions. PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS Ernst & Young LLP was ratified as the Company's independent auditors for fiscal 2001 with 258,363,885 votes in favor, 224,380 votes against, and 627,793 abstentions. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.3 Amendment to Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on November 15, 2000. 10.14 Amended 1987 Employee Stock Participation Plan 10.16 Amended 1996 Stock Incentive Plan (b) No Reports on Form 8-K were filed during the quarter ended December 30, 2000. ITEMS 1, 2, 3 AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FEBRUARY 9, 2001 MAXIM INTEGRATED PRODUCTS, INC. - ----------------- ------------------------------- (Date) (Registrant) /s/ Carl W. Jasper ------------------------------- CARL W. JASPER Vice President and Chief Financial Officer (For the Registrant and as Principal Financial Officer) /s/ Sharon E. Smith-Lenox ------------------------------- SHARON E. SMITH-LENOX Corporate Controller (Principal Accounting Officer) 15 16 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 3.3 Amendment to Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on November 15, 2000. 10.14 Amended 1987 Employee Stock Participation Plan 10.16 Amended 1996 Stock Incentive Plan
EX-3.3 2 f69301ex3-3.txt EXHIBIT 3.3 1 EXHIBIT 3.3 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF MAXIM INTEGRATED PRODUCTS, INC. John F. Gifford and Anthony C. Gilbert each hereby certifies that: 1. They are the President and Secretary, respectively, of Maxim Integrated Products, Inc. (the "Corporation"), a Delaware corporation, the original Restated Certificate of Incorporation of which was filed with the Secretary of State of the State of Delaware on September 21, 1995 and amendment thereto were filed on December 3, 1997 and November 19, 1999. 2. At a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment of the Restated Certificate of Incorporation of the Corporation, declaring that amendment to be advisable and directing that the amendment proposed be considered at the next annual meeting of the stockholders. The resolution setting forth the proposed amendment is as follows: RESOLVED that the second and third sentences of Section A of Article FOURTH of the Restated Certificate of Incorporation, as amended, of this Corporation are hereby amended to read in full as follows: "The total number of shares of all classes of stock which the Corporation has the authority to issue is 962,000,000 shares. The number of shares of Common Stock which the Corporation is authorized to issue is 960,000,000 and the number of shares of Preferred Stock which the Corporation is authorized to issue is 2,000,000. Each share of Common Stock shall have a par value of $0.001, and each share of Preferred Stock shall have a par value of $0.001" 3. Thereafter, the annual meeting of stockholders of the Corporation was called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware. At that annual meeting a vote of the stockholders entitled to vote thereon was taken for and against the proposed amendment. A majority of the outstanding Common Stock, being the only class of stock outstanding, entitled to vote thereon was voted in favor of the proposed amendment. 4. This Certificate of Amendment of Restated Certificate of Incorporation has been duly adopted, in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Amendment of Restated Certificate of Incorporation this 16th day of November, 2000. /s/ John F. Gifford --------------------------------- John F. Gifford, President ATTEST: /s/ Anthony C. Gilbert - -------------------------------- Anthony C. Gilbert, Secretary EX-10.14 3 f69301ex10-14.txt EXHIBIT 10.14 1 EXHIBIT 10.14 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 1. 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. 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: 2 (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 one hundred and thirteen million one hundred and twenty thousand (250,240,000) 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. 5. ELIGIBILITY 2 3 (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. 3 4 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 (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. 4 5 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. (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 5 6 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. 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. 7 EX-10.16 4 f69301ex10-16.txt EXHIBIT 10.16 1 EXHIBIT 10.16 MAXIM INTEGRATED PRODUCTS, INC. 1996 STOCK INCENTIVE PLAN Adopted August 16, 1996 Approved by Shareholders November 14, 1996 As further amended by the Board of Directors on April 16, 1997 and May 15, 1997 Approved by Shareholders November 13, 1997 As further amended by the Board of Directors on March 10, 1998, May 14, 1998, and August 13, 1998 Approved by Shareholders November 19, 1998 As further amended by the Board of Directors on August 12, 1999. Approved by Shareholders November 18, 1999 As further amended by the Board of Directors on August 17, 2000. Approved by Shareholders November 16, 2000 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 2 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 (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, 2 3 (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 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. 3 4 (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 68,000,000 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 68,000,000 Shares, and such number shall not be subject to adjustment as described above. 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 4 5 price for such Option or any withholding taxes due with respect to such Option, 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; 5 6 (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, 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; (viii) to reduce the exercise price of any Option to reflect a reduction in the Fair Market Value of the Common Stock since the grant date of the Option without a material adverse impact on the Grantee; provided, however, that (A) such reductions in the aggregate do not apply to Options covering more than five percent (5%) of the maximum aggregate number of Shares available under Section 3((a)), above (as amended from time to time), in any twelve (12) month period, (B) such reduction is approved by a majority of the members of the Administrator, and (C) the Administrator determines in good faith and in writing that such reductions occur only infrequently and principally in response to conditions other than poor operating performance by the Company. For purposes of this subsection ((viii)), the issuance of an Option in replacement of an existing Option with a lower exercise price (or a lower base amount on which appreciation is measured) without a material adverse impact on the Grantee shall be deemed to be a reduction in the exercise price of the earlier granted Option; (ix) to construe and interpret the terms of the Plan and Options granted pursuant to the Plan; (x) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such laws; provided, however, that no Option shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and (xi) 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 6 7 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 12,000,000 [adjusted to reflect the stock dividend effective December 5, 1997 and November 30, 1999]. 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. (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 7 8 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; 8 9 (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 (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 9 10 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) 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. 10 11 (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 11 12 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 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 12 13 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. 13 -----END PRIVACY-ENHANCED MESSAGE-----