0001095811-01-505842.txt : 20011030
0001095811-01-505842.hdr.sgml : 20011030
ACCESSION NUMBER: 0001095811-01-505842
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011210
FILED AS OF DATE: 20011026
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TRIDENT MICROSYSTEMS INC
CENTRAL INDEX KEY: 0000859475
STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674]
IRS NUMBER: 770156584
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20784
FILM NUMBER: 1767688
BUSINESS ADDRESS:
STREET 1: 2450 WALSH AVENUE
CITY: SANTA CLARA
STATE: CA
ZIP: 95051-1303
BUSINESS PHONE: 4084961085
MAIL ADDRESS:
STREET 1: 2450 WALSH AVENUE
CITY: SANTAL CLARA
STATE: CA
ZIP: 95051
DEF 14A
1
f76501dedef14a.txt
DEFINITIVE PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TRIDENT MICROSYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------
[TRIDENT LOGO]
November 2, 2001
Dear Stockholder:
This year's annual meeting of stockholders will be held on Monday, December
10, 2001 at 9:00 a.m. local time, at Trident Microsystems, Inc., 1090 East
Arques Avenue, Sunnyvale, California 94085. You are cordially invited to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, follow this letter.
After reading the Proxy Statement, please promptly mark, sign, and return
the enclosed proxy in the prepaid envelope to assure that your shares will be
represented. Your shares cannot be voted unless you date, sign, and return the
enclosed proxy or attend the annual meeting and vote in person. Regardless of
the number of shares you own, your careful consideration of, and vote on, the
matters before our stockholders are important.
A copy of the Company's 2001 Form 10-K is also enclosed.
The Board of Directors and management look forward to seeing you at the
annual meeting.
Very truly yours,
/s/ FRANK C. LIN
FRANK C. LIN
Chairman of the Board of Directors,
President and Chief Executive Officer
TRIDENT MICROSYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 10, 2001
To The Stockholders:
Please take notice that the annual meeting of the stockholders of Trident
Microsystems, Inc. (the "Company"), will be held on December 10, 2001, at 9:00
a.m. at Trident Microsystems, Inc., 1090 East Arques Avenue, Sunnyvale,
California 94085, for the following purposes:
1. To elect two Class III directors to hold office for a three-year
term and until their respective successors are elected and qualified.
2. To consider a proposal to amend the Company's 1994 Outside
Directors Stock Option Plan to increase the number of shares reserved for
issuance thereunder by 110,000.
3. To approve the Company's 2001 Employee Stock Purchase Plan.
4. To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants
for the fiscal year ending June 30, 2002.
5. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on October 17, 2001 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at Company's principal offices.
By order of the Board of Directors,
/s/ FRANK C. LIN
FRANK C. LIN
Chairman of the Board of Directors,
President and Chief Executive Officer
Sunnyvale, California
November 2, 2001
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING POST-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
TABLE OF CONTENTS
PAGE
----
SOLICITATION AND VOTING OF PROXIES.......................... 1
INFORMATION ABOUT TRIDENT MICROSYSTEMS, INC. ............... 1
Stock Ownership of Certain Beneficial Owners and
Management............................................ 1
Management............................................. 3
EXECUTIVE COMPENSATION AND OTHER MATTERS.................... 5
Summary Compensation Table............................. 5
Option Grants In Last Fiscal Year...................... 6
Option Exercises and Fiscal 2001 Year-End Value........ 7
Aggregate Option Exercises in Last Fiscal Year And
Fiscal Year-End Values................................ 7
Compensation of Directors.............................. 7
Change in Control Arrangement.......................... 7
Certain Relationships and Related Transactions......... 8
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 8
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION.............................................. 8
Compensation Committee................................. 8
Compensation Philosophy................................ 8
Forms of Compensation.................................. 9
REPORT OF THE AUDIT COMMITTEE............................... 10
COMPARISON OF STOCKHOLDER RETURN............................ 12
Comparison of Cumulative Total Return From June 30,
1996 through June 30, 2001............................ 12
ELECTION OF DIRECTORS....................................... 13
APPROVAL OF AMENDMENT TO THE TRIDENT MICROSYSTEMS, INC. 1994
OUTSIDE DIRECTORS STOCK OPTION PLAN....................... 13
General Information.................................... 13
Summary of the Provisions of the Directors Plan........ 13
Summary of United States Federal Income Tax
Consequences of the Directors Plan.................... 15
Amended Plan Benefits and Additional Information....... 16
Vote Required and Board of Directors Recommendation.... 16
APPROVAL OF THE COMPANY'S 2001 EMPLOYEE STOCK PURCHASE
PLAN...................................................... 16
Summary of the Provisions of the Purchase Plan......... 17
Summary of United States Federal Income Tax
Consequences of the Option Plan....................... 19
New Plan Benefits...................................... 19
Vote Required and Board of Directors Recommendation.... 20
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 20
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL
MEETING................................................... 20
TRANSACTION OF OTHER BUSINESS............................... 21
TRIDENT MICROSYSTEMS, INC.
1090 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94085
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of Trident
Microsystems, Inc., a Delaware corporation ("Trident" or the "Company"), for use
at the Annual Meeting of Stockholders to be held December 10, 2001, or any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. The date of this Proxy Statement is November 2, 2001, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to stockholders.
SOLICITATION AND VOTING OF PROXIES
Solicitation of Proxies. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting stockholders by mail through its regular
employees, the Company will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation.
Voting Securities. Only stockholders of record as of the close of business
on October 17, 2001, will be entitled to vote at the meeting and any adjournment
thereof. As of that date, there were 13,335,593 shares of common stock of the
Company, par value $.001 per share ("Common Stock"), issued and outstanding.
Stockholders may vote in person or by proxy. Each holder of shares of Common
Stock is entitled to one (1) vote for each share of stock held on the proposals
presented at the meeting. The Company's By-Laws provide that a majority of all
of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the meeting. Votes for and against and "broker non-votes" will each be
counted as present for purposes of determining the presence of a quorum.
Voting of Proxies. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with that specification. If no
choice is indicated on the proxy, the shares will be voted in favor of the
proposal. A stockholder giving a proxy has the power to revoke his or her proxy,
at any time prior to the time it is voted, by delivering to the Secretary of the
Company a written instrument revoking the proxy or a duly executed proxy with a
later date, or by attending the meeting and voting in person.
INFORMATION ABOUT TRIDENT MICROSYSTEMS, INC.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of October 15, 2001,
with respect to the beneficial ownership of the Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock, (ii) each director and director-nominee of the
Company, (iii) the Chief Executive Officer and the two other most highly
compensated executive officers of the Company as of June 30, 2001, whose salary
and incentive compensation for the fiscal year ended June 30,
2001 exceeded $100,000 ("Named Executive Officers"), and (iv) all executive
officers and directors of the Company as a group.
SHARES OWNED(1)(2)(3)
----------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNERS SHARES OF CLASS
------------------------------------- --------- ----------
Beneficial Owners of in Excess of 5% (other than directors
and named executive officers)
Dimensional Fund Advisors, Inc.(4).......................... 952,800 7.14%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Named Executive Officers and directors(5)
Glen M. Antle(6)............................................ 66,584 *
Yasushi Chikagami(7)........................................ 30,544 *
Frank C. Lin(8)............................................. 2,040,109 15.30%
John Luke(9)................................................ 13,334 *
Millard Phelps(10).......................................... 22,256 *
Jung-Herng Chang(11)........................................ 301,547 2.26%
Peter Jen(12)............................................... 269,470 2.02%
Executive officers and directors as a group (7
persons)(13).............................................. 2,743,844 20.58%
---------------
* Less than 1%
(1) Except as otherwise noted, the persons named in the table have the sole
voting and investment power with respect to all shares shown as
beneficially owned by them, subject to the information contained in the
footnotes to this table. The number of shares indicated includes in each
case the number of shares of Common Stock issuable upon exercise of stock
options to the extent such options are currently exercisable for purposes
of this table. Options and warranties are deemed to be "currently
exercisable" if they may be exercised within 60 days of October 15, 2001.
(2) The Board has approved the sale of 4,231,312 shares to certain potential
investors. At the date of this Proxy Statement, the closing conditions for
such transaction have not occurred. In particular, regulatory approvals
have not been obtained. The Company is reviewing the alternatives available
to it, but it is possible that such transaction may not close, or may be
renegotiated.
(3) Calculated on the basis of 13,335,593 shares of Common Stock outstanding as
of October 15, 2001 provided that any additional shares of Common Stock
that a stockholder has the right to acquire within 60 days after October
15, 2001 are deemed to be outstanding for the purpose of calculating that
stockholder's percentage beneficial ownership.
(4) Based on a Schedule 13G filed on February 2, 2001 by Dimensional Fund
Advisors, Inc.
(5) The address of the executive officers and directors is c/o Trident
Microsystems, Inc., 1090 East Arques Avenue, Sunnyvale, CA 94085.
(6) Includes 54,584 shares subject to options exercisable by Mr. Antle within
sixty days of October 15, 2001.
(7) Includes 1,000 shares held by a joint tenant account for Mr. Chikagami's
wife, son and daughter. Also includes 29,544 shares subject to options
exercisable by Mr. Chikagami within sixty days of October 15, 2001.
(8) Includes 445,000 shares subject to options exercisable by Mr. Lin within
sixty days of October 15, 2001. Also includes 10,500 shares held by Mr.
Lin's wife, 20,548 shares held by Mr. Lin's son and 20,548 shares held by a
custodian for the benefit of Mr. Lin's child.
(9) Includes 13,334 shares subject to options exercisable by Mr. Luke within
sixty days of October 15, 2001.
(10) Includes 21,301 shares subject to options exercisable by Mr. Phelps within
sixty days of October 15, 2001.
2
(11) Includes 260,000 shares subject to options exercisable by Mr. Chang within
sixty days of October 15, 2001.
(12) Includes 225,000 shares subject to options exercisable by Mr. Jen within
sixty days of October 15, 2001.
(13) Includes 1,048,763 shares subject to options exercisable within sixty days
of October 15, 2001.
MANAGEMENT
DIRECTORS. This section sets forth the ages and backgrounds of the
Company's current directors, including the Class III nominees to be elected at
this meeting.
DIRECTOR
NAME AGE POSITIONS WITH THE COMPANY SINCE
---- --- -------------------------- --------
Class III Directors nominated for election at the 2001 Annual Meeting of Stockholders:
Frank C. Lin.......................... 56 President, Chief Executive Officer and 1987
Chairman of the Board of Directors
Glen M. Antle......................... 63 Director 1992
Class I Director whose terms expire at the 2002 Annual Meeting of Stockholders:
Yasushi Chikagami..................... 62 Director 1994
Class II Directors whose terms expire at the 2003 Annual Meeting of Stockholders:
Millard Phelps........................ 73 Director 1995
John Luke............................. 69 Director 1999
Mr. Lin founded the Company and has served as President, Chief Executive
Officer and Chairman of the Board of Directors of the Company since July 1987.
His career spans 26 years in the computer and communications industries. From
June 1984 to July 1987, he was Vice President of Engineering at Genoa Systems,
Inc., a graphics and storage product company that he co-founded. From 1982 to
1984, Mr. Lin was a senior manager at Olivetti Advanced Technical Center, a PC
peripheral equipment design company. Prior to Olivetti Mr. Lin worked for
IBM-Rolm, GTE and Exxon Office System in various engineering positions.
Mr. Antle has served as a director of the Company since July 1992. From
July 1996 to August 1997 Mr. Antle was a director of Compass Design Automation,
a company providing EDA tools and libraries. From February 1991 to June 1993, he
served as Chairman of the Board of Directors of PiE Design Systems, an
electronic design automation company, and from August 1992 to June 1993 as its
Chief Executive Officer. In June 1993, PiE merged into Quickturn Design Systems,
Inc., also an electronic design automation company, and Mr. Antle served as
Chairman of the Board of Directors of Quickturn from June 1993 to June 1999.
From June 1989 to February 1991 Mr. Antle was retired. Mr. Antle was a
co-founder of ECAD, Inc., now Cadence Design Systems, Inc., and served as its
Co-Chairman of the Board of Directors from May 1988 to June 1989 and as its
Chairman of the Board of Directors and Chief Executive Officer from August 1982
to May 1988.
Mr. Chikagami has served as a director of the Company since April 1994.
From 1974 to January 1996, Mr. Chikagami served as Chairman of the EI-EN Group,
a group of private companies located in Asia engaged in the electronics
components and computer peripherals business. Since January 1996, Mr. Chikagami
has served as Chairman of KEIAN Corporation, a computer and communications
component company, operating in Japan. Mr. Chikagami has also served as Vice
Chairman of Eastern Computer Group Co. in China since 1988. He was also a
founder of GVC Corporation, a publicly held Taiwanese company engaged in
activities including the manufacture of electronics components and computer
peripherals. Mr. Chikagami is also a director of Silicon Storage Technology,
Inc.
Mr. Phelps has served as a director of the Company since September 1995.
From September 1984 to May 1994, he served as a senior technology analyst for
Hambrecht & Quist, an investment banking firm and from May 1994 to July 1994,
Mr. Phelps served as an advisory director of Hambrecht & Quist when he retired.
3
Prior to that Mr. Phelps spent 23 years in the semiconductor industry in various
executive positions. Mr. Phelps is also a director of Pericom, a semiconductor
corporation, and two private semiconductor companies.
Mr. Luke has served as a director of the Company since January 1999. From
May 1989 to September 1997, Mr. Luke served as President of TSMC, USA and had
been President Emeritus until 1999. Prior to that, from 1982 to 1989, Mr. Luke
served as Vice President of Sales for Monsanto Electronic Materials, Inc.; from
1978 to 1982, as Vice President of Worldwide Sales at Signetics Corporation;
from 1976 to 1978, as Vice President of Marketing and International Sales for
American Microsystems, Inc.; from 1974 to 1976, as Vice President of Marketing
and Sales for Monolithic Memories and from 1971 to 1974, as Vice President of
Sales at Fairchild. Mr. Luke also spent 10 years at Texas Instruments in sales
management positions.
Management's nominees for election at the Annual Meeting of Stockholders to
Class III of the Board of Directors are Frank C. Lin and Glen M. Antle, current
Class III Directors.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES. During the fiscal year
ended June 30, 2001, the Board of Directors held four (4) meetings. The Company
has an Audit Committee, a Compensation Committee and a Nominating Committee. All
directors attended at least 75% of the aggregate of the number of meetings of
the Board of Directors and of the committees of the Board of Directors on which
such director served during fiscal 2001.
THE AUDIT COMMITTEE was composed of two independent, non-employee directors
of the Company, Glen M. Antle and Millard Phelps during the first half of fiscal
2001. On January 16, 2001, John Luke, an independent, non-employee director of
the Company, was also appointed to the Audit Committee. The Audit Committee has
adopted a formal charter on June 13, 2000. The Audit Committee's function is to
review, with the Company's independent public accountants, management and the
Board of Directors, the Company's financial reporting processes and internal
financial controls and reviews the independence of the Company's independent
public accountants. The Audit Committee reviews and discusses with management
the results of the examination of the Company's financial statements by the
independent public accountants and the independent public accountants' opinion.
The Audit Committee also discusses with the independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on Auditory
Standards No. 380). The Audit Committee also approves all professional services
performed by the independent public accountants, recommends the retention of the
independent public accountants to the Board of Directors, subject to
ratification by the stockholders. The Audit Committee held four (4) meetings
during the fiscal year ended June 30, 2001.
THE COMPENSATION COMMITTEE consists of two members. During the last fiscal
year, John Luke and Yasushi Chikagami were the members of the Compensation
Committee. The Compensation Committee held one meeting during the fiscal year
ended June 30, 2001. The Compensation Committee's primary function is to review
and recommend salary levels of, to approve bonus plans for and stock option
grants to executive officers, and to set the compensation of the Chief Executive
Officer.
THE NOMINATING COMMITTEE was established on October 15, 2001. The members
of the Nominating Committee change annually such that its members shall consist
of those directors who are not standing for election. The Nominating Committee
currently consists of Millard Phepps, John Luke and Yasushi Chikagami. The
Nominating Committee considers qualified candidates for appointment and
nomination for election to the Board of Directors and makes recommendations
concerning such candidates. The Nominating Committee did not meet during the
fiscal year ended June 30, 2001 but met on October 15, 2001 and nominated Mr.
Lin and Mr. Antle for election as Class III directors at the annual meeting.
Stockholders may nominate one or more persons for election as directors at a
meeting only if timely notice of such nomination(s) has been given in writing to
the Secretary of the Company in accordance with the Company's bylaws.
Nominations of stockholders intended to be presented at the next annual meeting
of stockholders of the Company must be received by the Company at its offices at
1090 East Arques Avenue, Sunnyvale, California 94085, no later than July 1,
2002.
4
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation
during the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 of
the Chief Executive Officer of the Company and the two most highly compensated
executive officers of the Company as of June 30, 2001, whose salary and bonus
for the fiscal year ended June 30, 2001 exceeded $100,000. Amounts under the
caption "Bonus" are amounts earned for performance during the fiscal year
including amounts paid after the end of the fiscal year.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#)
--------------------------- ---- -------- -------- ------------ ------------
Frank C. Lin............................ 2001 $451,360 $251,452 $ 59,890(1) 100,000
President and Chief Executive Officer 2000 $391,123 $469,414(2) $112,125(3) 60,000
1999 $360,430 $ 68,364(1) 385,000(4)
Jung-Herng Chang........................ 2001 $244,000 $117,302 $ 0 50,000
President, Digital Media Business Unit 2000 $211,200 $206,800(5) $ 36,800(6) 35,000
1999 $192,575 $ 0 $ 8,740(1) 225,000(7)
Peter Jen............................... 2001 $241,000 $115,805 $ 0 50,000
Sr. Vice President, Asia Operations
and 2000 $209,250 $204,160(8) $134,097(9) 25,000
Chief Accounting Officer 1999 $190,750 $ 0 $ 23,885(1) 200,000(10)
---------------
(1) Accrued vacation pay-out.
(2) Reflects a bonus of $469,414.00 earned by Mr. Lin during the fiscal year
ended June 30, 2000 but not paid until October 2000.
(3) Includes $38,750.00 representing accrued vacation pay-out and $73,375.00
representing retroactive pay and monetary compensation for lost wages since
the 10% executive salary reduction starting from August 1998.
(4) Includes an option to purchase 80,000 shares granted on October 12, 1998 in
consideration for the cancellation of an option for an identical number of
shares granted in fiscal 1994. Also includes option to purchase 50,000
shares granted on October 12, 1998 in consideration for the cancellation of
an option for an identical number of shares granted in fiscal 1995. Also
includes option to purchase 50,000 shares granted on October 12, 1998, in
consideration for the cancellation of an option for an identical number of
shares granted in fiscal 1997. Also includes option to purchase 160,000
shares granted on October 12, 1998, in consideration for the cancellation
of an option for an identical number of shares granted in fiscal 1998.
(5) Reflects a bonus of $206,800.00 earned by Mr. Chang during the fiscal year
ended June 30, 2000 but not paid until October 2000.
(6) Representing retroactive pay and monetary compensation for lost wages since
the 10% executive salary reduction starting from August 1998.
(7) Includes an option to purchase 70,000 shares granted on October 12, 1998,
in consideration for the cancellation of an option for an identical number
of shares granted in fiscal 1993. Also includes an option to purchase
10,000 shares granted on October 12, 1998, in consideration for the
cancellation of an option for an identical number of shares granted in
fiscal 1994. Also includes an option to purchase 30,000 shares granted on
October 12, 1998, in consideration for the cancellation of an option for an
identical number of shares granted in fiscal 1995. Also includes an option
to purchase 20,000 shares granted on October 12, 1998, in consideration for
the cancellation of an option for an identical number of shares granted in
fiscal 1997. Also includes an option to purchase 70,000 shares granted on
October 12, 1998, in consideration for the cancellation of an option for an
identical number of shares granted in fiscal 1998.
5
(8) Reflects a bonus of $204,160.00 earned by Mr. Jen during the fiscal year
ended June 30, 2000 but not paid until October 2000.
(9) Includes $77,443.00 representing commission earned, $19,903.80 representing
accrued vacation pay-out and $36,750.00 representing retroactive pay and
monetary compensation for loss wages since the 10% executive salary
reduction starting from August 1998.
(10) Includes an option to purchase 40,000 shares granted on October 12, 1998,
in consideration for the cancellation of an option for an identical number
of shares granted in fiscal 1994. Also includes an option to purchase
15,000 shares granted on October 12, 1998, in consideration for the
cancellation of an option for an identical number of shares granted in
fiscal 1995. Also includes an option to purchase 50,000 shares granted on
October 12, 1998, in consideration for the cancellation of an option for an
identical number of shares granted in fiscal 1997. Also includes an option
to purchase 70,000 shares granted on October 12, 1998, in consideration for
the cancellation of an option for an identical number of shares granted in
fiscal 1998.
STOCK OPTIONS GRANTED DURING LAST FISCAL YEAR
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
June 30, 2001 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION -----------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ---------- ---------- ----------- ---------- ------------- -------------
Frank C. Lin............ 100,000 9.8474% $4.3125 12/20/10 $271,210.81 $687,301.44
Jung-Herng Chang........ 50,000 4.9237% $4.3125 12/20/10 $135,605.40 $343,650.72
Peter Jen............... 50,000 4.9237% $4.3125 12/20/10 $135,605.40 $343,650.72
---------------
(1) Generally, the right to exercise an option under the Company's 1992 Stock
Option Plan (the "Option Plan") vests as to one-fourth of the shares subject
to the option on each anniversary of the date of grant. The Option Plan
permits the grant of both incentive stock options within the meaning of
Section 422 of the Internal Revenue Code, as amended (the "Code"), and
nonstatutory stock options. The exercise price of incentive stock options
must at least equal the fair market value of the Common Stock on the date of
grant. The exercise price of nonstatutory stock options must equal at least
85% of the fair market value of the Common Stock on the date of grant. The
exercise price of incentive stock options granted to any person who at the
time of grant owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any parent or subsidiary corporations
must be at least 110% of the fair market value of the Common Stock on the
date of grant and the term of such options cannot exceed five years. Under
the Option Plan, the Compensation Committee retains discretion to modify the
terms, including the exercise price, of outstanding options. See "CHANGE IN
CONTROL ARRANGEMENTS."
(2) All options were granted at or above market value on the date of grant as
determined by the Compensation Committee.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, overall market conditions and the option-holders'
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved.
6
OPTION EXERCISES AND FISCAL 2001 YEAR-END VALUES
The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock in the fiscal year ended June
30, 2001, and unexercised options held as of June 30, 2001, by the persons named
in the Summary Compensation Table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
SHARES UNEXERCISED OPTIONS AT FY-END FY-END(2)
ACQUIRED ON VALUE -------------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- -------- --------------- -------------- ----------- -------------
Frank Lin............ 0 $0 385,000 160,000 $202,550.00 $18,675.00
Jung-Herng Chang..... 0 $0 226,667 83,333 $119,216.89 $ 9,908.10
Peter Jen............ 0 $0 204,167 78,333 $127,791.89 $ 9,908.10
---------------
(1) Company stock options generally become exercisable as to 25% on the first
anniversary of the date of grant and 25% per year thereafter.
(2) The value of the unexercised in-the-money options is based on the closing
price of the Company's Common Stock on June 30, 2001 ($4.06 per share) and
is net of the exercise price of such options.
COMPENSATION OF DIRECTORS
Board members other than the Company's outside directors receive no
compensation for attending Board meetings, except for reimbursement of certain
expenses in connection with attendance at Board meetings and Committee meetings.
The Company's outside directors receive $20,000 per year as an annual retainer.
In addition, each outside director receives $1,500 for each Board or Committee
meeting attended in person, and $1,000 for each Board or Committee meeting
attended by phone.
The Company's 1994 Outside Directors Stock Option Plan (the "Directors
Plan") provides that on the day immediately following the initial election or
appointment of each new non-employee director (an "Outside Director"), such
Outside Director will automatically receive an option to purchase 20,000 shares
of the Company's Common Stock and will receive an additional option to purchase
20,000 shares of the Company's Common Stock on the date of the first annual
meeting of the stockholders following the third anniversary of his or her
previous Directors Plan option grant, provided that he or she remains in office.
Furthermore, each Outside Director currently in office who previously was
granted an option under the Directors Plan will automatically receive an
additional option to purchase 20,000 shares of the Company's Common Stock on the
day immediately following each third annual meeting of the stockholders of the
Company subsequent to the date of the prior option grant after which the
individual remains in office. Each option granted under the Directors Plan
becomes exercisable in three annual installments, subject to the Outside
Director's continued Board service. (See "PROPOSAL NO. 2 -- APPROVAL OF
AMENDMENT TO THE 1994 OUTSIDE DIRECTORS STOCK OPTION PLAN.")
CHANGE IN CONTROL ARRANGEMENTS
The Company's 1992 Stock Option Plan (the "Option Plan") provides that in
the event of a merger of the Company with or into another corporation, unless
the successor corporation assumes or substitutes equivalent options for options
granted under the Option Plan, the Board of Directors shall provide that all
outstanding options under the Option Plan will be fully exercisable prior to the
merger. Options which are neither assumed or substituted for by the successor
corporation nor exercised prior to the expiration of a 15-day notice period will
terminate upon the expiration of such period.
All shares subject to options granted under the Directors Plan will become
fully vested and exercisable as of the date 15 days prior to a change in control
of the Company as defined in the Directors Plan unless the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "Acquiring Corporation"), either assumes or substitutes
Acquiring Corporation options for options
7
outstanding under the Directors Plan. Any such options which are neither assumed
or substituted for by the Acquiring Corporation nor exercised will terminate as
of the date of the change in control.
The Company entered into a change in control agreement, effective September
25, 2001, with Frank Lin, the Chairman, CEO and President of the Company. The
agreement provides for severance and other benefits to be paid to Mr. Lin in the
event of Mr. Lin's termination following a "change in control" of the Company.
The agreement defines a "change in control" as a merger or consolidation or the
sale, or exchange by the stockholders of the Company of 40% or more of the
capital stock of the Company, or the sale or exchange of 40% or more of the
Company's assets. The agreement provides that in the event of Mr. Lin's
involuntary termination, constructive termination, death or disability within 36
months following a change in control, Mr. Lin will be entitled to receive: (1)
severance in the amount of 36 months of Mr. Lin's annual base salary then in
effect, (2) three times Mr. Lin's potential annual bonus then in effect, (3)
acceleration in vesting of up to 1,000,000 of Mr. Lin's options, and (4)
continued group insurance coverage of medical, dental, prescription drug, vision
care and life insurance for 36 months following Mr. Lin's termination.
The Board of Directors believes that the agreement is in the best interests
of the Company in order to ensure the continued dedication and objectivity of
Mr. Lin, notwithstanding the possibility of a "change in control."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1998, the Board approved a loan to Frank Lin pursuant to which
Mr. Lin could borrow $500,000 from the Company. On April 27, 2000, the Company
and Mr. Lin entered into a loan agreement pursuant to which Mr. Lin borrowed
$500,000 from the Company, payable on April 27, 2002 together with interest at a
rate of 6.46% per annum.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that, during fiscal 2001, all filing requirements applicable to the Company's
executive officers, directors and more than 10% stockholders were met, except
that one statement of changes in beneficial ownership timely filed by Mr.
Chikagami was amended to include two inadvertently omitted transactions by
family members.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee was composed of two independent, non-employee
directors of the Company during the 2001 fiscal year. No such persons were
former employees of the Company. During fiscal 2001, the Compensation Committee
members were John Luke and Yasushi Chikagami. The Compensation Committee's
primary function is to review and recommend salary levels of, to approve bonus
plans for and stock option grants to executive officers, and to set the
compensation of the Chief Executive Officer. During fiscal 2001, the
Compensation Committee met once.
COMPENSATION PHILOSOPHY
The Compensation Committee seeks to align executive compensation with the
value achieved by the executive team for the Company's stockholders. Toward that
goal, the Company's compensation program emphasizes both short- and long-term
incentives designed to attract, motivate, and retain highly qualified
8
executives who will effectively manage the Company and maximize stockholder
value. The Company uses salary, executive officer bonuses and stock options to
motivate executive officers to achieve the Company's business objectives and to
align the incentives of officers with the long-term interests of stockholders.
The Compensation Committee reviews and evaluates each executive officer's base
and variable compensation annually relative to corporate performance and
comparative market information.
In setting total compensation, the Compensation Committee considers
individual and Company performance, as well as market information in the form of
published survey data provided to the Compensation Committee by the Company's
human resources staff. The market data consists primarily of base salary and
total cash compensation rates, as well as incentive bonus and stock programs, of
companies considered by the Compensation Committee to be comparable technology
companies as well as companies in the semiconductor design industry. The
Compensation Committee's policy is generally to target levels of cash and equity
compensation paid to its executive officers so that such compensation is
competitive with that paid by such comparable companies.
In preparing the performance graph for this Proxy Statement, the Company
has selected the H&Q Semiconductors Sector Index, and the Nasdaq Stock
Market-U.S. Index as its peer groups. The companies that the Company included in
its stratified salary surveys are not necessarily those included in the indices,
as such companies may not be competitive with the Company for executive talent,
particularly those companies located outside the Silicon Valley, where
competition for employees has been intense.
The Company has considered the potential impact of Section 162(m) of the
Internal Revenue Code ("Section 162(m)") adopted under the federal Revenue
Reconciliation Act of 1993. Section 162(m) disallows a tax deduction to any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year paid to the chief executive officers or any of the four other
most highly compensated executive officers, unless the compensation is
commission or performance-based. The Company's policy is to qualify to the
extent reasonable its executive officers' compensation for deductibility under
applicable tax laws. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and the Compensation
Committee believes that compensation attributable to any options granted under
the Company's 1992 Stock Option Plan during the fiscal year ended June 30, 2001
will qualify as performance-based compensation in accordance with the
regulations under Section 162(m), the Compensation Committee believes that
Section 162(m) will not reduce the tax deductibility of such compensation by the
Company.
FORMS OF COMPENSATION
Salary. The Company strives to offer executive officers salaries that are
competitive with comparable companies in the technology sector generally and in
the semiconductor design industry. Frank C. Lin, President and Chief Executive
Officer of the Company, approves executive salaries at the time executives join
the Company, which are subject to review and approval by the Compensation
Committee. Thereafter, Mr. Lin periodically reviews salaries of the executive
officers and recommends adjustments to the base salaries of those officers which
are subject to review and approval by the Compensation Committee. The
Compensation Committee reviews Mr. Lin's performance and makes adjustments to
his salary. Adjustments made by Mr. Lin and the Compensation Committee are based
on individual executive officer performance, cost of living increases, Company
performance, and adjustments to retain qualified personnel. Mr. Lin's base
salary is reviewed annually by the Compensation Committee and reflects his
position, duties, and responsibilities.
Incentive Compensation. The Board of Directors reviews and approves an
executive bonus plan ("Plan") based upon Company and individual performance. The
Compensation Committee believes that significant bonus incentives based on
performance of the Company provide substantial motivations to achieve corporate
goals. Under the Plan for fiscal 2002, Company performance is measured for the
fiscal year on a basis of achieving revenue targets and on actual net profit as
compared with budgeted net profit. Each executive's incentive bonus will
increase if the Company's performance exceeds goals, but is subject to overall
limitations on amount. For fiscal 2001, bonuses were determined after the fiscal
year end based upon Company performance. The Plan is approved by the
Compensation Committee with the Compensation
9
Committee reviewing the calculations of amounts based upon the Plan. The
Compensation Committee believes the incentives paid to the Company's executives
on a basis of Company performance and individual performance are comparable to
those paid under industry standard incentive compensation programs.
Stock Options. The Compensation Committee strives to maintain the equity
position of all executive officers at levels competitive with comparable
companies. The Compensation Committee believes that equity ownership provides
significant additional motivation to executive officers to maximize value for
the Company's stockholders, and therefore grants stock options under the
Company's 1992 Stock Option Plan at the commencement of an executive officer's
employment and, depending on that officer's performance and the appropriateness
of additional awards to retain key employees, periodically thereafter. Stock
options are granted at the prevailing market price, vest over a period of years
and will only have value if the Company's stock price increases over the
exercise price. Therefore, the Compensation Committee believes that stock
options serve to align the interests of executive officers closely with other
stockholders because of the direct benefit executive officers receive through
improved stock price performance.
In December 20, 2000, the Compensation Committee granted options to
executive officers, including Mr. Lin. Mr. Lin received a grant of 100,000
shares with an exercise price of $4.3125. The grant is based on Mr. Lin's senior
position, his responsibilities, and his past and expected contributions to the
Company's future success and was intended to provide competitive equity
compensation to Mr. Lin for the Company's 2001 fiscal year.
2001 COMPENSATION COMMITTEE
John Luke
Yasushi Chikagami
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including internal control
systems. PriceWaterhouseCoopers, LLP is responsible for expressing an opinion as
to the conformity of our audited financial statements with generally accepted
accounting principles.
The Audit Committee consists of three directors each of whom, in the
judgment of the Board, is an "independent director" as defined in the listing
standards for The Nasdaq Stock Market. The Audit Committee acts pursuant to a
written charter that has been adopted by the Board of Directors. A copy of this
charter is attached to this Proxy Statement as Appendix A.
The Committee has discussed and reviewed with the auditors all matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Committee has met with
PriceWaterhouseCoopers, LLP, with and without management present, to discuss the
overall scope of PriceWaterhouseCoopers, LLP's audit, the results of its
examinations, its evaluations of the Company's internal controls and the overall
quality of its financial reporting.
The Audit Committee has received from the auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), discussed
with the auditors any relationships that may impact their objectivity and
independence, and satisfied itself as to the auditors' independence.
10
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001.
AUDIT COMMITTEE
Glen M. Antle
Millard Phelps
John Luke
11
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the JP Morgan H&Q Semiconductors Sector Index ("JP Morgan H&Q
Semiconductors Index") and the Nasdaq Stock Market Index (U.S. Companies)
("Nasdaq US") for the period commencing on June 30, 1996 and ending on June 30,
2001.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
JUNE 30, 1996 THROUGH JUNE 30, 2001(1)
TRIDENT MICROSYSTEMS, INC., HAMBRECHT & QUIST SEMICONDUCTORS SECTOR INDEX AND
THE NASDAQ STOCK MARKET (U.S. COMPANIES)
(PERFORMANCE GRAPH)
----------------------------------------------------------------------------------------------
JUN-96 JUN-97 JUN-98 JUN-99 JUN-00 JUN-01
----------------------------------------------------------------------------------------------
Nasdaq US $100.00 $121.60 $160.06 $230.22 $340.39 $ 184.52
----------------------------------------------------------------------------------------------
Trident Microsystems $100.00 $ 89.11 $ 42.08 $ 72.77 $ 71.29 $ 32.16
----------------------------------------------------------------------------------------------
JP Morgan H&Q Semiconductors
Index $100.00 $181.35 $148.65 $315.09 $811.20 $ 447.50
----------------------------------------------------------------------------------------------
---------------
(1) Assumes that $100.00 was invested on June 30, 1996 in the Company's Common
Stock and each index, and that all dividends were reinvested. No dividends
have been declared on the Company's Common Stock. Stockholder returns over
the indicated period should not be considered indicative of future
stockholder returns.
12
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company has a classified Board of Directors currently consisting of one
Class I director (Yasushi Chikagami), two Class II directors (Millard Phelps and
John Luke) and two Class III directors (Frank C. Lin and Glen M. Antle), who
will serve until the annual meetings of stockholders to be held in 2002, 2003
and 2001, respectively, and until their respective successors are duly elected
and qualified. At each annual meeting of stockholders, directors are elected for
a full term of three years to succeed those directors whose terms expire on the
annual meeting dates. Vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by vote of the stockholders) may be filled by a majority vote of the
directors then in office, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires.
The terms of the Class III directors will expire on the date of the
upcoming annual meeting. Two people are to be elected to serve as Class III
directors of the Board of Directors at that meeting. Management's nominees for
election by the stockholders to these positions are Frank C. Lin and Glen M.
Antle, the current Class III members of the Board of Directors.
If elected, Management's nominees will serve as directors until the
Company's annual meeting of stockholders in 2004, and until their successors are
elected and qualified. If any of the nominees decline to serve, the proxies may
be voted for such substitute nominees as the Company may designate. Proxies may
not be voted for more than two nominees.
If a quorum is present and voting, the two nominees for Class III directors
receiving the highest number of votes will be elected as Class III directors.
Abstentions and shares held by brokers that are present, but not voted because
the brokers were prohibited from exercising discretionary authority, i.e.,
"broker non-votes," will be counted as present for purposes of determining if a
quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
MESSRS. LIN AND ANTLE.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
GENERAL
The Trident Microsystems, Inc. 1994 Outside Directors Stock Option Plan
(the "Directors Plan") was adopted by the Board of directors of the Company in
January 1994 and approved by the stockholders in December 1994. A total of
200,000 shares of the company's Common Stock are currently reserved for issuance
under the Directors Plan, of which options to purchase an aggregate of 114,177
shares were outstanding as of October 17, 2001 and 54,155 shares remained
available for future option grants. The Board of Directors believes that the
limited number of shares remaining is insufficient to continue the existing
stockholder-approved automatic grant program for the remaining two-year term of
the Directors Plan and maintain a competitive director equity program to assist
the Company to recruit and retain capable directors essential to the Company's
long-term success. Accordingly, the Board of Directors has amended the Directors
Plan, subject to stockholder approval, to increase by 110,000 to a total of
310,000 the maximum number of shares that may be issued under the Directors
Plan. The Board of Directors believes that approval of this amendment to the
Directors Plan is in the best interests of the Company and its stockholders.
SUMMARY OF THE PROVISIONS OF THE DIRECTORS PLAN
The following summary of the Directors Plan is qualified in its entirety by
the specific language of the Directors Plan, a copy of which is available to any
stockholder upon request.
13
General. The Directors Plan provides for the automatic grant of
nonstatutory stock options to Outside Directors of the Company and is intended
to qualify as a "formula plan" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Shares Subject to Plan. Subject to stockholder approval of this proposal,
a maximum of 310,000 of the authorized but unissued or treasury shares of the
Common Stock of the Company may be issued upon the exercise of options granted
under the Directors Plan. Upon any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments will be made to the
shares subject to the Directors Plan, to the terms of the automatic grant of
options described below, and to outstanding options. To the extent that any
outstanding option under the Directors Plan expires or terminates prior to
exercise in full or if shares issued upon the exercise of an option are
repurchased by the company, the shares of Common Stock for which such option is
not exercised or the repurchased shares are returned to the plan and again
become available for grant.
Administration. The Directors Plan is intended to operate automatically
without discretionary administration. To the extent administration is necessary,
it will be performed by the Board of Directors or a duly appointed committee of
the Board (hereinafter referred to as the "Board"). However, the Board has no
discretion to select the Outside Directors of the company who are granted
options under the Directors Plan, to set the exercise price of such options, to
determine the number of shares for which or the time at which particular options
are granted or to establish the duration of such options. The Board is
authorized to interpret the Directors Plan and options granted thereunder, and
all determinations of the Board will be final and binding on all persons having
an interest in the Directors Plan or any option.
Eligibility. Only directors of the Company who, at the time of grant, are
not employees of the Company or of any parent or subsidiary corporation of the
Company ("Outside Directors") are eligible to participate in the Directors Plan.
Currently, the Company has four Outside Directors.
Automatic Grant of Options. The Directors Plan provides that each person
who is newly elected or appointed as an Outside Director will automatically be
granted an option for 20,000 shares of the Company's Common Stock on the day of
his or her initial election or appointment and, provided that he or she remains
in office, on the date of the first annual meeting of the stockholders following
the third anniversary of his or her initial grant under the Directors Plan and
on the date of each third annual meeting of the stockholders thereafter. In
addition, the Directors Plan provides that each Outside Director currently in
office who was previously granted an option under the Directors Plan will
automatically be granted an additional option to purchase 20,000 shares of the
Company's Common Stock on the day immediately following each third annual
meeting of the stockholders of the Company subsequent to the date of the prior
option grant after which the individual remains in office.
Terms and Conditions of Options. Each option granted under the Directors
Plan is evidenced by a written agreement between the company and the Outside
Director specifying the number of shares subject to the option and the other
terms and conditions of the option, consistent with the requirements of the
Directors Plan. The exercise price per share of any option granted under the
Directors Plan must equal the fair market value, as determined pursuant to the
plan, of a share of the Company's Common Stock on the date of grant. Generally,
the fair market value of the Common Stock will be the closing price per share on
the date of grant as reported on the Nasdaq National Market. The exercise price
may be paid in cash, by check, or in cash equivalent, by the assignment of the
proceeds of a sale of some or all of the shares of Common Stock being acquired
upon the exercise of the option, or by any combination of these.
Each option granted on the date of an annual meeting of the stockholders
will become exercisable in substantially equal annual installments on the days
immediately preceding each of the first three annual meetings following the date
of grant, provided that the Outside Director remains in office. An option
granted other than on the day of an annual meeting of the stockholders will
become exercisable in substantially equal annual installments on each of the
first three anniversaries of the date of grant, provided that the Outside
Director remains in office.
14
In general, during the lifetime of the optionee, the option may be
exercised only by the optionee and may not be transferred or assigned, except by
will or the laws of descent and distribution. However, with the consent of the
Board, the optionee may transfer all or a portion of the option to (i) an
immediate family member, (ii) a trust for the exclusive benefit of the optionee
and/or one or more immediate family members, (iii) a partnership in which the
optionee and/or one or more immediate family members are the only partners, or
(iv) such other person or entity as the Board permits. For this purpose,
"immediate family member" means the optionee's spouse, former spouse, and
children or grandchildren, whether natural or adopted.
Change in Control. The Directors Plan provides that in the event of (i) a
merger or consolidation in which the Company is not the surviving corporation or
in which the stockholders of the Company before such transaction do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Company. (ii) the sale, exchange or transfer of all or
substantially all of the assets of the Company other than to one or more
subsidiary corporations, (iii) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the stock of the
Company where the stockholder of the Company before such transaction do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Company, or (iv) a liquidation or dissolution of the
Company (a "Change in Control"), then all options outstanding under the
Directors Plan will become immediately exercisable and vested in full as of the
date 15 days prior to the Change in Control unless the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof either
assumes or substitutes new options for the options outstanding under the
Directors Plan. To the extent that the options outstanding under the Directors
Plan are not assumed, substituted for, or exercised prior to the Change in
Control, they will terminate.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE DIRECTORS PLAN.
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law with respect to
participation in the Directors Plan and does not attempt to describe all
possible federal or other tax consequences of such participation. Furthermore,
the tax consequences of options are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
Options granted under the Directors Plan are nonstatutory stock options,
that is, options that do not qualify as incentive stock options under section
422 of the Code. Nonstatutory stock options have no special tax status. An
optionee generally recognizes no taxable income as the result of the grant of
such an option. Upon exercise of a nonstatutory stock option granted under the
Directors Plan, the optionee normally recognizes ordinary income in the amount
of the difference between the option exercise price and the fair market value of
the shares on the date of exercise. Upon the sales of stock acquired by the
exercise of a nonstatutory stock option, any gain or loss, based on the
difference between the sale price and the fair market value on the date of
option exercise, will be taxed as capital gain or loss. A capital gain or loss
will be long-term if the optionee's holding period following the date of
exercise is more than 12 months. No tax deduction is available to the Company
with respect to the grant of a nonstatutory stock option or the sale of the
stock acquired pursuant to such grant. The Company generally should be entitled
to a deduction equal to the amount of ordinary income recognized by the optionee
as a result of the exercise of a nonstatutory stock option, except to the extent
such deduction is limited by applicable provisions of the Code or the
regulations thereunder.
15
AMENDED PLAN BENEFITS AND ADDITIONAL INFORMATION
The following table sets forth options that will be granted automatically
during the current fiscal year, assuming that Mr. Antle is elected at the annual
meeting and that no other change in the composition of the Board of Directors
occurs during the fiscal year:
NUMBER OF
NAME AND POSITION SHARES(1)
----------------- ---------
Frank C. Lin, President and Chief Executive Officer......... 0
Jung-Herng Chang, President, Digital Media Business Unit.... 0
Peter Jen, Sr. Vice President, Asia Operations and Chief
Accounting Officer........................................ 0
Executive Group (3 persons)................................. 0
Non-Executive Director Group (4 persons).................... 80,000
Non-Executive Officer Employee Group........................ 0
---------------
(1) Only non-employee directors receive automatic grants under the Directors
Plan.
Since the inception of the Directors Plan, (i) Messrs. Antle, Chikagami,
Luke and Phelps were automatically granted options to purchase 35,000 shares,
42,877 shares, 20,000 shares, and 36,301 shares, respectively. Since its
inception, no options have been granted under the Directors Plan to any of the
persons named in the Summary Compensation Table, to any other executive officer,
to any associate of any director, executive officer or Board nominee of the
Company, or to any employee of the Company.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present and entitled to
vote at the Annual Meeting of Stockholders, at which a quorum representing a
majority of all outstanding shares of Common Stock of the Company is present and
voting, either in person or by proxy, is required for approval of this proposal.
Abstentions and "broker non-votes" will each be counted as present for purposes
of determining the presence of a quorum. Abstentions will have the same effect
as a negative vote on this proposal. "Broker non-votes" will have no effect on
the outcome of this vote.
The Board of Directors believes that the increase in the share reserve of
the Directors Plan by 110,000 shares is in the best interests of the
stockholders and the Company for the reasons stated above. THEREFORE, THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN THE
SHARE RESERVE OF THE DIRECTORS PLAN BY 110,000 SHARES FROM 200,000 TO 310,000
SHARES.
PROPOSAL NO. 3
APPROVAL OF THE 2001 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders will be asked to approve the
Trident Microsystems, Inc. 2001 Employee Stock Purchase Plan (the "Purchase
Plan"). The Purchase Plan authorizes the issuance of up to 500,000 shares of the
Company's Common Stock (subject to adjustment for certain changes in the capital
structure of the Company).
The Purchase Plan is intended to replace the Company's 1998 Employee Stock
Purchase Plan (the "1998 Plan"). As of April 30, 2001, the most recent purchase
date under the 1998 Plan, of the aggregate of 500,000 shares of Common Stock
authorized for issuance under the 1998 Plan, a total of 399,946 shares had been
issued and up to 100,054 shares remained available for employee purchases on
October 31, 2001, the final purchase date under the 1998 Plan. The Board of
Directors has elected to terminate the 1998 Plan immediately following the
October 31, 2001 purchase date.
The Board of Directors believes that the Purchase Plan benefits the company
and its stockholders by providing its employees with an opportunity through
payroll deductions to purchase shares of Common Stock
16
that is helpful in attracting, retaining, and motivating valued employees. To
provide an adequate reserve of shares to permit the company to continue offering
employees a stock purchase opportunity, the Board of Directors has adopted the
Purchase Plan, subject to and effective upon the date (the "Effective Date") of
stockholder approval.
SUMMARY OF THE PURCHASE PLAN
The following summary of the Purchase Plan is qualified in its entirety by
the specific language of the Purchase Plan, a copy of which is available to any
stockholder upon request.
General. The Purchase Plan is intended to qualify as an "employee stock
purchase plan" under section 423 of the Code. Each participant in the Purchase
Plan is granted at the beginning of each offering under the plan (an "Offering")
the right to purchase (a "Purchase Right") through accumulated payroll
deductions up to a number of shares of the Common Stock of the Company
determined on the first day of the Offering. The Purchase Right is automatically
exercised on each purchase date during the Offering unless the participant has
withdrawn from participation in the Purchase Plan prior to such date.
Shares Subject to Plan. A maximum of 500,000 of the Company's authorized
but unissued or reacquired shares of Common Stock may be issued under the
Purchase Plan, subject to appropriate adjustment in the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company, or
in the event of any merger, sale of assets or other reorganization of the
Company. If any Purchase Right expires or terminates, the shares subject to the
unexercised portion of such Purchase Right will again be available for issuance
under the Purchase Plan.
Administration. The Purchase Plan is administered by the Board of
Directors or a duly appointed committee of the Board (hereinafter referred to as
the "Board"). Subject to the provisions of the Purchase Plan, the Board
determines the terms and conditions of Purchase Rights granted under the plan.
The Board will interpret the Purchase Plan and Purchase Rights granted
thereunder, and all determinations of the Board will be final and binding on all
persons having an interest in the Purchase Plan or any Purchase Right. The
Purchase Plan provides, subject to certain limitations, for indemnification by
the Company of any director, officer or employee against all reasonable
expenses, including attorneys' fees, incurred in connection with any legal
action arising from such person's action or failure to act in administering the
plan.
Eligibility. Any employee of the Company or any present or future parent
or subsidiary corporation of the Company designated by the Board for inclusion
in the Purchase Plan is eligible to participate in an Offering under the plan so
long as the employee is customarily employed for more than 20 hours per week and
has completed at least six months of continuous employment. However, no employee
who owns or holds options to purchase, or who, as a result of participation in
the Purchase Plan, would own or hold options to purchase, five percent or more
of the total combined voting power or value of all classes of stock of the
Company or of any parent or subsidiary corporation of the Company is eligible to
participate in the Purchase Plan. As of October 17, 2001, approximately 137
employees, including 2 executive officers, would be eligible to participate in
the Purchase Plan were it then in effect.
Offerings. Generally, each Offering under the Purchase Plan will be for a
period of six months (an "Offering Period") commencing on or about May 1 and
November 1 of each year. However, if the Purchase Plan is approved by the
stockholders, the first Offering Period will commence on the Effective Date and
end on or about April 30, 2002. The Board may establish a different term for one
or more Offerings, not to exceed 27 months, or different commencement or ending
dates for any Offering Period.
Participation and Purchase of Shares. Participation in an Offering under
the Purchase Plan is limited to eligible employees who authorize payroll
deductions prior to the first day of an Offering Period (the "Offering Date").
Payroll deductions may not exceed 10% (or such other rate as the Board
determines) of an employee's compensation on any payday during the Offering
Period. An employee who becomes a participant in the Purchase Plan will
automatically participate in each subsequent Offering Period beginning
immediately
17
after the last day of the Offering Period in which he or she is a participant
until the employee withdraws from the Purchase Plan, becomes ineligible to
participate, or terminates employment.
Subject to any uniform limitations or notice requirements imposed by the
Company, a participant may increase or decrease his or her rate of payroll
deductions or withdraw from the Purchase Plan at any time during an Offering.
Upon withdrawal, the Company will refund without interest the participant's
accumulated payroll deductions not previously applied to the purchase of shares.
Once a participant withdraws from an Offering, that participant may not again
participate in the same Offering.
Subject to certain limitations, each participant in an Offering is granted
a Purchase Right equal to the lesser of a number of whole shares determined by
dividing $12,500 by the fair market value of a share of common Stock on the
Offering Date or 1,500 shares. These dollar and share amounts will be prorated
if the Board establishes an Offering Period of other than six months. However,
no participant may purchase shares of Common Stock under the Purchase Plan or
any other employee stock purchase plan of the Company having a fair market value
(measured on the first day of the Offering Period in which the shares are
purchased) exceeding $25,000 for each calendar year in which a Purchase Right is
outstanding at any time. Purchase Rights are nontransferable and may only be
exercised by the participant.
On the last day of each Offering Period (a "Purchase Date"), the Company
issues to each participant in the Offering the number of shares of the Company's
Common Stock determined by dividing the amount of payroll deductions accumulated
for the participant during the Offering Period by the purchase price, limited in
any case by the number of shares subject to the participant's Purchase Right for
that Offering. The price at which shares are sold under the Purchase Plan is
established by the Board but may not be less than 85% of the lesser of the fair
market value per share of Common Stock on the Offering Date or on the Purchase
date. The fair market value of the Common Stock on any relevant date generally
will be the closing price per share as reported on the Nasdaq National Market.
On October 17, 2001, the closing price per share of Common Stock was $4.31. Any
payroll deductions under the Purchase Plan not applied to the purchase of shares
will be returned to the participant without interest, unless the amount
remaining is less than the amount necessary to purchase a whole share of Common
Stock, in which case the remaining amount may be applied to the next Offering
Period.
Change in Control. The Purchase Plan defines a "Change in Control" of the
Company as any of the following events upon which the stockholders of the
company immediately before the event do not retain immediately after the event,
in substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before the event, direct or indirect
beneficial ownership of more than 50% of the total combined voting power of the
stock of the Company, its successor, or the corporation to which the assets of
the Company were transferred: (i) a sale or exchange by the stockholders in a
single or series of related transactions of more than 50% of the Company's
voting stock, (ii) a merger or consolidation in which the Company is a party,
(iii) the sale, exchange or transfer of all or substantially all of the assets
of the Company, or (v) a liquidation or dissolution of the Company. If a Change
in Control occurs, the surviving, continuing, successor or purchasing
corporation or parent corporation thereof may assume the Company's rights and
obligations under the Purchase Plan. However, if such corporation elects not to
assume the outstanding Purchase Rights, the Purchase Date of the then current
Offering Period will be accelerated to a date before the Change in Control
specified by the Board. Any Purchase Rights that are not assumed or exercised
prior to the Change in Control will terminate.
Termination or Amendment. The Purchase Plan will continue until terminated
by the Board or until all of the shares reserved for issuance under the plan
have been issued. The Board may at any time amend or terminate the Purchase
Plan, except that the approval of the Company's stockholders is required within
twelve months of the adoption of any amendment increasing the number of shares
authorized for issuance under the Purchase Plan, or changing the definition of
the corporations which may be designated by the Board as corporations the
employees of which may participate in the Purchase Plan.
18
SUMMARY OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Purchase Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Generally, there are no tax consequences to an employee of either becoming
a participant in the Purchase Plan or purchasing shares under the Purchase Plan.
The tax consequences of a disposition of shares vary depending on the period
such stock is held before its disposition. If a participant disposes of shares
within two years after the Offering Date or within one year after the Purchase
Date on which the shares are acquired (a "disqualifying disposition"), the
participant recognizes ordinary income in the year of disposition in an amount
equal to the difference between the fair market value of the shares on the
Purchase Date and the purchase price. Such income may be subject to withholding
of tax. Any additional gain or resulting loss recognized by the participant from
the disposition of the shares is a capital gain or loss. If the participant
disposes of shares at least two years after the Offering Date and at least one
year after the Purchase Date on which the shares are acquired, the participant
recognizes ordinary income in the year of disposition in an amount equal to the
lesser of (i) the difference between the fair market value of the shares on the
date of disposition and the purchase price or (ii) the difference between the
fair market value of the shares on the Offering Date and purchase price
(determined as if the Purchase Right were exercised on the Offering Date). Any
additional gain recognized by the participant on the disposition of the shares
is a capital gain. If the fair market value of the shares on the date of
disposition is less than the purchase price, there is no ordinary income, and
the loss recognized is a capital loss. If the participant owns the shares at the
time of the participant's death, the lesser of (i) the difference between the
fair market value of the shares on the date of death and the purchase price or
(ii) the difference between the fair market value of the shares on the Offering
Date and the purchase price (determined as if the Purchase Right were exercised
on the Offering Date) is recognized as ordinary income in the year of the
participant's death.
If the exercise of a Purchase Right does not constitute an exercise
pursuant to an "employee stock purchase plan" under section 423 of the Code, the
exercise of the Purchase Right will be treated as the exercise of a nonstatutory
stock option. The participant would therefore recognize ordinary income on the
Purchase Date equal to the excess of the fair market value of the shares
acquired over the purchase price. Such income is subject to withholding of
income and employment taxes. Any gain or loss recognized on a subsequent sale of
the shares, as measured by the difference between the sale proceeds and the sum
of (i) the purchase price for such shares and (ii) the amount of ordinary income
recognized on the exercise of the Purchase Right, will be treated as a capital
gain or loss, as the case may be.
A capital gain or loss will be long-term if the participant holds the
shares for more than 12 months and short-term if the participant holds the
shares for 12 months or less. Currently, long-term capital gains are generally
subject to a maximum rate of 20%.
If the participant disposes of the shares in a disqualifying disposition
the Company should be entitled to a deduction equal to the amount of ordinary
income recognized by the participant as a result of the disposition, except to
the extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder. In all other cases, no deduction is allowed for the
Company.
NEW PLAN BENEFITS
Because benefits under the Purchase Plan will depend on employees'
elections to participate and the fair market value of the Company's Common Stock
at various future dates, it is not possible to determine the benefits that will
be received by executive officers and other employees if the Purchase Plan is
approved by the stockholders. Non-employee directors are not eligible to
participate in the Purchase Plan.
19
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of this proposal requires a number of votes "For" the proposal
that exceeds the number of votes "Against" the proposal, provided a quorum
representing a majority of all outstanding shares of Common Stock is present or
represented by proxy and voting "For" or "Against" the proposal. Abstentions and
broker non-votes will be disregarded for purpose of determining whether a quorum
is voting on the proposal but otherwise will have no effect on the outcome of
the vote.
The Board of Directors believes that the opportunity to purchase shares
under the Purchase Plan is important to attracting and retaining qualified
employees essential to the success of the Company, and that stock ownership is
important to providing such person with an incentive to perform in the best
interest of the Company and its stockholders. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE PURCHASE PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP as independent public accountants to audit the financial statements of the
Company for the fiscal year ending June 30, 2002. PricewaterhouseCoopers LLP has
acted in such capacity since its appointment during the fiscal year ending June
30, 1991. A representative of PricewaterhouseCoopers LLP is expected to be
present at the annual meeting with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.
The affirmative vote of a majority of the votes cast at the annual meeting
of stockholders at which a quorum representing a majority of all outstanding
shares of Common Stock is present and voting, either in person or by proxy, is
required for approval of this proposal. Abstentions and "broker non-votes" will
each be counted as present for purposes of determining the presence of a quorum,
but will not be counted as having been voted on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
FOR THE FISCAL YEAR ENDING JUNE 30, 2002.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
The Company has an advance notice provision under its bylaws for
stockholder business to be presented at meetings of stockholders. Such provision
states that in order for stockholder business to be properly brought before a
meeting by a stockholder, such stockholder must have given timely notice thereof
in writing to the Secretary of the Company. A stockholder proposal to be timely
must be received at the Company's principal executive offices not less than 120
calendar days in advance of the one year anniversary of the date the Company's
proxy statements was released to stockholders in connection with the previous
year's annual meeting of stockholders; except that (i) if no annual meeting was
held in the previous year, (ii) if the date of the annual meeting has been
changed by more than thirty (30) calendar days from the date contemplated at the
time of the previous year's proxy statement or (iii) in the event of a special
meeting, then notice must be received not later than the close of business on
the tenth day following the day on which notice of the date of the meeting was
mailed or public disclosure of the meeting date was made.
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must be received by the Company at
its offices at 1090 East Arques Avenue, Sunnyvale, California 94085, no later
than July 1, 2002, and satisfy the conditions established by the Securities and
Exchange Commission for stockholder proposals to be included in the Company's
proxy statement for that meeting.
20
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
By Order of the Board of Directors
/s/ FRANK C. LIN
FRANK C. LIN
Chairman of the Board of Directors,
President and Chief Executive Officer
November 2, 2001
21
TRIDENT MICROSYSTEMS, INC.
1994 OUTSIDE DIRECTORS STOCK OPTION PLAN
(As Amended Through October 15, 2001)
1. Purpose. The Trident Microsystems, Inc. 1994 Outside Directors Stock
Option Plan (the "PLAN") is established effective as of January 13, 1994, (the
"EFFECTIVE DATE") to create additional incentive for the non-employee directors
of Trident Microsystems, Inc., a Delaware corporation, and any successor
corporation thereto (collectively referred to as the "COMPANY") to promote the
financial success and progress of the Company and any present or future parent
and/or subsidiary corporations of the Company. For purposes of the Plan, a
parent corporation and a subsidiary corporation shall be as defined in sections
424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the "CODE").
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "BOARD") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. The Board shall have no authority, discretion, or
power to select the non-employee directors of the Company who will receive
options under the Plan, to set the exercise price of the options granted under
the Plan, to determine the number of shares of common stock to be granted under
option or the time at which such options are to be granted, to establish the
duration of option grants, or alter any other terms or conditions specified in
the Plan, except in the sense of administering the Plan subject to the
provisions of the Plan. All questions of interpretation of the Plan or of any
options granted under the Plan (an "OPTION") shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan and/or any Option. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
3. Eligibility and Type of Option. Options may be granted only to
directors of the Company who are not at the time of such grant employees of the
Company or of any parent or subsidiary corporation of the Company ("OUTSIDE
DIRECTORS"). Options granted to Outside Directors shall be nonqualified stock
options; that is, options which are not treated as having been granted under
section 422(b) of the Code. A person granted an Option is hereinafter referred
to as an "OPTIONEE."
4. Shares Subject to Option. Options shall be for the purchase of
shares of the authorized but unissued common stock or treasury shares of common
stock of the Company (the
"STOCK"), subject to adjustment as provided in paragraph 8 below. The maximum
number of shares of Stock which may be issued under the Plan shall be Three
Hundred Ten Thousand (310,000) shares. In the event that any outstanding Option
for any reason expires or is terminated and/or shares of Stock subject to
repurchase are repurchased by the Company, the shares allocable to the
unexercised portion of such Option, or such repurchased shares, may again be
subject to an Option grant.
5. Time for Granting Options. All Options shall be granted, if at all,
within ten (10) years from the Effective Date.
6. Terms, Conditions and Form of Options. Options granted pursuant to
the Plan shall be evidenced by written agreements specifying the number of
shares of Stock covered thereby, in substantially the form attached hereto as
Exhibit A (the "OPTION AGREEMENT"), which written agreement may incorporate all
or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
(a) Automatic Grant of Options. Subject to execution by an Outside
Director of an appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as set forth below.
(i) Prior to 1998 Annual Stockholders Meeting. Prior to the
annual meeting of the stockholders of the Company scheduled to be held on
December 17, 1998, or if the amendment to the Plan set forth in subparagraph
(ii) below is not approved by the stockholders at such annual meeting, Options
shall be granted as follows:
(A) On the Effective Date, each Outside Director holding
office on the Effective Date who does not then hold an option to acquire shares
of Stock shall be granted an Option to purchase Five Thousand (5,000) shares of
Stock.
(B) Each Outside Director holding office on the Effective
Date who has previously been granted one or more options to acquire shares of
Stock shall be granted, on the day immediately following the first annual
meeting of the stockholders of the Company subsequent to the Effective Date at
which such Outside Director is reelected to the Board, an Option to purchase
Five Thousand (5,000) shares of Stock.
(C) Each person who is newly elected or appointed as an
Outside Director after the Effective Date shall be granted an Option on the day
immediately following such initial election or appointment. If elected at an
annual meeting of the stockholders of the Company, such Option shall be for Five
Thousand (5,000) shares of Stock. If appointed to fill a vacancy on the Board,
such Option shall be for a number of shares of Stock (rounded to the nearest
whole share) determined by multiplying Five Thousand (5,000) by a ratio, the
numerator of which is the number days from the date of appointment through the
date of the first annual meeting of the stockholders of the Company following
such appointment, inclusive, and the denominator of which is Three Hundred
Sixty-Five (365). However, if as of the date of such appointment the date of the
next annual meeting of the stockholders has not yet been
established, the numerator of the ratio set forth in the preceding sentence
shall be the number days from the date of appointment through the following
November 15, inclusive.
(D) Each Outside Director previously granted an Option
pursuant to the Plan shall be granted, on the day immediately following each
annual meeting of the stockholders of the Company following which such person
remains an Outside Director, an Option to purchase Five Thousand (5,000) shares
of Stock.
(ii) Following 1998 Annual Stockholders Meeting. Subject to
the approval by the stockholders of the Company, at the annual meeting of the
stockholders scheduled to be held on December 17, 1998 or any adjournment
thereof (the "1998 ANNUAL MEETING"), of the amendment to the Plan set forth in
this subparagraph (ii), Options shall be granted as follows:
(A) On the date of the 1998 Annual Meeting, each Outside
Director holding office immediately following such meeting shall be granted an
Option to purchase Twenty Thousand (20,000) shares of Stock.
(B) Each person who is newly elected or appointed as an
Outside Director after the date of the 1998 Annual Meeting shall be granted on
the day of such initial election or appointment an Option to purchase Twenty
Thousand (20,000) shares of Stock.
(C) Each Outside Director previously granted an Option
under the Plan on or after the date of the 1998 Annual Meeting pursuant to this
subparagraph (ii) shall be granted, on the day of the first annual meeting of
the stockholders of the Company immediately following the final vesting date of
such Option (as provided in paragraph 6(c)(ii) below) following which such
person remains an Outside Director, an Option to purchase Twenty Thousand
(20,000) shares of Stock.
(iii) Notwithstanding the foregoing, any Outside Director may
elect not to receive an Option granted pursuant to this paragraph 6(a) by
delivering written notice of such election to the Board (1) in the case of an
initial Option grant, no later than the Effective Date or the date upon which
such Outside Director is appointed or elected to the Board, or (2) in the case
of a subsequent Option grant, no later than six (6) months prior to the date
upon which such Option would otherwise be granted.
(iv) Notwithstanding any other provision of the Plan to the
contrary, no Option shall be granted to any individual on a day when he or she
is no longer serving as an Outside Director of the Company.
(b) Option Exercise Price. The exercise price per share of Stock
subject to an Option shall be the fair market value of a share of the common
stock of the Company on the date of the granting of the Option. Where there is a
public market for the common stock of the Company, the fair market value per
share of Stock shall be the mean of the bid and asked prices of the common stock
of the Company on the date of the granting of the Option, as reported in the
Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the common stock of the Company is listed on the NASDAQ
National Market System or a national or regional securities exchange, the fair
market value per share of Stock shall be the closing price on such National
Market System or exchange on the date of the granting of the Option, as reported
in the Wall Street Journal. If the date of the granting of an Option does not
fall on a day on which the common stock of the Company is trading on NASDAQ, the
NASDAQ National Market System or other national or regional securities exchange,
the date on which the Option exercise price per share shall be established shall
be the last day on which the common stock of the Company was so traded prior to
the date of the granting of the Option. If there is no public market for the
common stock of the Company, the fair market value per share of Stock on any
relevant date shall be as determined by the Board.
(c) Exercise Period and Exercisability of Options. An Option
granted pursuant to the Plan shall have a term of ten (10) years from the date
of grant, unless earlier terminated pursuant to the terms of the Plan or the
Option Agreement. Options granted pursuant to the Plan shall vest and become
exercisable as follows:
(i) Options Granted Prior to 1998 Annual Meeting. Each Option
granted prior to the date of the 1998 Annual Meeting (or otherwise granted
pursuant to paragraph 6(a)(i) above if the amendment to the Plan set forth in
paragraph 6(a)(ii) is not approved by the stockholders) shall become fully
vested and exercisable in full or in part commencing on the day (the "INITIAL
EXERCISE DATE") which immediately precedes the day of the first annual meeting
of the stockholders of the Company next following the date on which the Option
was granted, provided the Optionee has continuously served as a director of the
Company from the date on which the Option was granted until the Initial Exercise
Date.
(ii) Options Granted After 1998 Annual Meeting. Each Option
granted on or after the date of the 1998 Annual Meeting pursuant to paragraph
6(a)(ii) shall vest and become exercisable as follows:
(A) If the Option is granted on the day of an annual
meeting of the stockholders of the Company, the Option shall vest and become
exercisable in three substantially equal installments on the days immediately
preceding each of the first three annual meetings of the stockholders following
the date of grant of the Option, provided the Optionee has continuously served
as a director of the Company from the date on which the Option was granted until
the relevant date.
(B) If the Option is granted other than on the day of an
annual meeting of the stockholders of the Company, the Option shall vest an
become exercisable in three substantially equal installments on each of the
first three anniversaries of the date of grant of the Option, provided the
Optionee has continuously served as a director of the Company from the date on
which the Option was granted until the relevant date.
(d) Payment of Option Exercise Price. Payment of the exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or in cash equivalent, (ii) by the
assignment of the proceeds of a sale of some or all of the shares being acquired
upon the exercise of an Option (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System), or (iii) by
any combination thereof. The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedure for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
(e) Transfer of Control. A "TRANSFER OF CONTROL" shall be deemed
to have occurred in the event any of the following occurs with respect to the
Company:
(i) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the stock of the
Company where the stockholders of the Company before such sale or exchange do
not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such sale or exchange;
(ii) a merger or consolidation in which the Company is not the
surviving corporation;
(iii) a merger or consolidation in which the Company is the
surviving corporation where the stockholders of the Company before such merger
or consolidation do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Company after such merger or
consolidation;
(iv) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations (as defined in paragraph 1 above) of the
Company; or
(v) a liquidation or dissolution of the Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "ACQUIRING CORPORATION"), shall either assume the Company's rights
and obligations under outstanding Options or substitute options for the
Acquiring Corporation's stock for such outstanding Options. In the event the
Acquiring Corporation elects not to assume or substitute for such outstanding
Options in connection with the Transfer of Control, the Board shall provide that
any unexercisable and/or unvested portion of the outstanding Options shall be
immediately exercisable and vested as of the date fifteen (15) days prior to the
date of the Transfer of Control. The exercise and/or vesting of any Option that
was permissible solely by reason of this paragraph 6(e) shall be conditioned
upon the consummation of the Transfer of Control. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor
exercised as of the date of the Transfer of Control shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control.
(f) Stockholder Approval. Any Option granted pursuant to the Plan
shall be subject to obtaining stockholder approval of the Plan at the first
annual meeting of the stockholders of the Company after the Effective Date.
Notwithstanding the foregoing, stockholder approval shall not be necessary in
order to grant any Option granted on the Effective Date; provided, however, that
the exercise of any such Option shall be subject to obtaining stockholder
approval of the Plan.
7. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the Option Agreement either in connection with
the grant of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
such revised or amended standard form or forms of stock option agreement shall
be in accordance with the terms of the Plan. Such authority shall include, but
not by way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by the Optionee on exercise of an Option in the event such
Optionee's service as a director of the Company is terminated for any reason.
8. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan,
the number of shares of Stock to be granted automatically pursuant to an Option
as set forth in paragraph 6(a), and to any outstanding Options and in the Option
exercise price of any outstanding Options in the event of a stock dividend,
stock split, reverse stock split, recapitalization, combination,
reclassification, or like change in the capital structure of the Company.
9. Transferability of Option.
(a) Except as provided in paragraph 9(b) below, an Option may be
exercised during the lifetime of the Optionee only by the Optionee or the
Optionee's guardian or legal representative and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
(b) Notwithstanding the foregoing, with the consent of the Board,
in its sole discretion, an Optionee may transfer all or a portion of the Option
to: (i) an Immediate Family Member (as defined below), (ii) a trust for the
exclusive benefit of the Optionee and/or one or more Immediate Family Members,
(iii) a partnership in which the Optionee and/or one or more Immediate Family
Members are the only partners, or (iv) such other person or entity as the Board
may permit (individually, a "PERMITTED TRANSFEREE"). For purposes of this
paragraph 9(b), "Immediate Family Members" shall mean the Optionee's spouse,
former spouse, children or grandchildren, whether natural or adopted. As a
condition to such transfer, each Permitted Transferee to whom the Option or any
interest therein is transferred shall agree in writing (in a form satisfactory
to the Company) to be bound by all of the terms and conditions of the Option
Agreement evidencing such Option and any additional restrictions or conditions
as the Company
may require. Following the transfer of an Option, the term "Optionee" shall
refer to the Permitted Transferee, except that, with respect to any requirements
of continued service or provision for the Company's tax withholding obligations,
such term shall refer to the original Optionee. The Company shall have no
obligation to notify a Permitted Transferee of any termination of the
transferred Option, including an early termination resulting from the
termination of service of the original Optionee. A Permitted Transferee shall be
prohibited from making a subsequent transfer of a transferred Option except to
the original Optionee or to another Permitted Transferee or as provided in
paragraph 9(a).
10. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the stockholders of the Company,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 8 above) and (b) no
expansion in the class of persons eligible to receive Options. In any event, no
amendment may adversely affect any then outstanding Option, or any unexercised
portion thereof, without the consent of the Optionee.
TRIDENT MICROSYSTEMS, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
I. STATEMENT OF POLICY
This Charter specifies the scope of the responsibilities of the Audit
Committee of the Board of Directors of Trident Microsystems, Inc. (the
"Company"), and how the Committee carries out those responsibilities, including
the structure, processes, and membership requirements. The primary function of
the Committee is to assist the Board of Directors in fulfilling its financial
oversight responsibilities by reviewing and reporting to the Board upon (i) the
financial reports and other financial information provided by the Company to any
governmental body or to the public, (ii) the Company's systems of internal and
external controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established and (iii) the Company's auditing,
accounting and financial reporting processes in general. Consistent with this
function, the Committee should encourage continuous improvement of, and should
foster adherence to, the Company's financial policies, procedures and practices
at all levels. The Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
systems.
o Review and appraise the audit efforts and independence of the
Company's auditors.
o Provide an open avenue of communication among the independent
auditors, financial and senior management, and the Board.
The Committee will primarily fulfill these responsibilities, and others as may
be prescribed by the Board from time to time, by carrying out the activities
enumerated in Section IV of this Charter.
II. ORGANIZATION AND MEMBERSHIP REQUIREMENTS
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee. A
member of the Committee shall be considered independent if, among other things,
such Director:
o is not an employee of the Company or its affiliates and has not
been employed by the Company or its affiliates within the past
three years;
o is not a member of the immediate family of an executive officer of
the Company or its affiliates who currently serves in that role or
did so during the past three years;
o has not accepted more than $60,000 in compensation from the
Company during the previous fiscal year (excluding compensation
and the related benefits for Board service, retirement plan
benefits or non-discretionary compensation);
o has not been a partner, controlling shareholder or an executive
officer of any for-profit business to which the Company made, or
from which it received, payments (other than those which arise
solely from investments in the Company's securities) that exceed
5% of the Company's consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three years; and
o is not an executive of another entity on whose Compensation
Committee any of the Company's current executives serves.
All members of the Committee must be able to read and understand
fundamental financial statements, including a balance sheet, income statement,
and cash flow statement. In addition, at least one member must have past
employment experience in finance or accounting, professional certification in
accounting, or other comparable experience or background resulting in the
individual's financial sophistication, including being or having been a chief
executive, chief financial, or other senior officer with financial oversight
responsibilities.
The members of the Committee shall be elected by the Board and shall
serve until their successors shall be duly elected and qualified. Unless a
chairman is elected by the full Board, the members of the Committee may
designate a chairman by majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least annually with management and the
independent auditors in separate executive sessions to discuss any matters that
the Committee or each of these groups believe should be discussed privately. In
addition, the Committee should meet with the independent auditors and management
on a quarterly basis to review the Company's financial statements consistent
with Section IV.A.5. below.
IV. PROCESSES
To fulfill its responsibilities and duties the Committee shall:
A. DOCUMENTS/REPORTS TO REVIEW
1. Review and reassess the Charter's adequacy periodically, as
conditions dictate.
2. Review the organization's annual audited financial statements
and any reports or other financial information submitted to
any governmental body, or the public, including any
certification, report, opinion, or review rendered by the
independent auditors.
3. Review the regular Management Letter to management prepared by
the independent auditors and management's response.
4. Review related party transactions for potential conflicts of
interests.
5. Review the interim financial statements with financial
management and the independent auditors prior to the filing of
the Company's Form 10-Ks and Form 10-Qs. These meetings should
include a discussion of the independent auditors, judgment of
the quality of the Company's accounting and any uncorrected
misstatements as a result of the auditors quarterly review.
6. Maintain written minutes of its meetings, which minutes will
be filed with the minutes of the meetings of the Board. The
Committee will also record its summaries of recommendations to
the Board in written form that will be incorporated as part of
the minutes of the Board meeting at which those
recommendations are presented.
B. INDEPENDENT AUDITORS
1. Recommend to the Board the selection of the independent
auditors, considering independence and effectiveness.
2. Obtain from the independent auditors a formal written
statement delineating all relationships between the auditor
and the Company, and discussing with the auditor any disclosed
relationships or services that may impact auditor objectivity
and independence (consistent with Independence Standards Board
Standard No. 1).
3. Take, or recommend that the Board take, appropriate action to
oversee the independence of the outside auditor.
4. Review the performance of the independent auditors and approve
any proposed discharge of the independent auditors when
circumstances warrant.
5. Periodically consult with the independent auditors out of the
presence of management about internal controls and the
fullness and accuracy of the Company's financial statements.
C. FINANCIAL REPORTING PROCESSES
1. In consultation with the independent auditors, review the
integrity of the Company's financial reporting processes, both
internal and external.
2. Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
3. Consider and approve, if appropriate, changes to the Company's
auditing and accounting principles and practices as suggested
by the independent auditors or management.
D. PROCESS IMPROVEMENT
1. Review with management and the independent auditors any
significant judgments made in management's preparation of the
financial statements and the view of each as to
appropriateness of such judgments.
2. Review with management and the independent auditors any
significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or
access to required information.
3. Review any significant disagreement among management and the
independent auditors in connection with the preparation of the
financial statements.
4. Review with the independent auditors and management the extent
to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been
implemented.
5. Provide oversight and review the Company's asset management
policies, including an annual review of the Company's
investment policies and performance for cash and short-term
investments.
E. ETHICAL AND LEGAL COMPLIANCE
1. Ensure that management has set an appropriate corporate "tone"
for quality financial reporting, sound business practices and
ethical behavior.
2. Ensure that management has the proper review system in place
to ensure that the Company's financial statements, reports and
other financial information disseminated to governmental
organizations and the public satisfy legal requirements.
3. Review management's monitoring of compliance with the Foreign
Corrupt Practices Act.
4. Review, with the Company's counsel, legal compliance matters
including corporate securities trading policies.
5. Review, with the Company's counsel, any legal matter that
could have a significant impact on the Company's financial
statements.
6. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the
Board deems necessary or appropriate.
7. If necessary, initiate special investigations, and if
appropriate, hire special counsel or experts to assist the
Committee.
TRIDENT MICROSYSTEMS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Trident Microsystems, Inc. 2001 Employee
Stock Purchase Plan (the "PLAN") is hereby established effective as of the date
on which it is approved by the stockholders of the Company (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests
of Company and its stockholders by providing an incentive to attract, retain and
reward Eligible Employees of the Participating Company Group and by motivating
such persons to contribute to the growth and profitability of the Participating
Company Group. The Plan provides Eligible Employees with an opportunity to
acquire a proprietary interest in the Company through the purchase of Stock. The
Company intends that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly appointed
to administer the Plan and having such powers as specified by the Board. Unless
the powers of the Committee have been specifically limited, the Committee shall
have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means Trident Microsystems, Inc., a Delaware
corporation, or any successor corporation thereto.
1
(e) "COMPENSATION" means, with respect to any Offering Period
and except as otherwise provided below, all amounts payable to a Participant in
cash and includable as "wages" subject to tax under Section 3101(a) of the Code
without applying the dollar limitation of Section 3121(a) of the Code and prior
to deduction of any such amount deferred under any program or plan maintained by
a Participating Company, including, without limitation, pursuant to Section
401(k) or Section 125 of the Code. For Participants who are not liable for
payment of U.S. individual income tax, this definition of Compensation shall be
applied as if such Participants are subject to such taxes. Compensation shall
not include reimbursements of expenses, allowances, long-term disability
payments, workers' compensation, or any amounts directly or indirectly paid
pursuant to the Plan or any other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means a person treated as an employee of a
Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while on any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less. If an individual's leave of absence exceeds ninety
(90) days, the individual shall be deemed to have ceased to be an Employee on
the ninety-first (91st) day of such leave unless the individual's right to
reemployment with the Participating Company Group is guaranteed either by
statute or by contract. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an individual's
participation in or other rights, if any, under the Plan as of the time of the
Company's determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any governmental
agency subsequently makes a contrary determination.
(h) "FAIR MARKET VALUE" means, as of any date if on such date
the Stock is listed on a national or regional securities exchange or market
system, the closing sale price of a share of Stock (or the mean of the closing
bid and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other
national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in the Wall Street Journal or such
other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value is established shall be the last
day on which the Stock was so traded prior to the relevant date, or such other
appropriate day as determined by the Board, in its discretion. If, on the
relevant date, there is no public market for the Stock, the Fair Market Value of
a share of Stock shall be as determined by the Board.
(i) "OFFERING" means an offering of Stock as provided in
Section 6.
2
(j) "OFFERING DATE" means, for any Offering, the first day of
the Offering Period.
(k) "OFFERING PERIOD" means a period established in accordance
with Section 6.1.
(l) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has become a
participant in an Offering Period in accordance with Section 7 and remains a
participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board as a corporation
the Employees of which may, if Eligible Employees, participate in the Plan. The
Board shall have the sole and absolute discretion to determine from time to time
which Parent Corporations or Subsidiary Corporations shall be Participating
Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in time,
the Company and all other corporations collectively which are then Participating
Companies.
(p) "PURCHASE DATE" means, for any Offering, the last day of
the Offering Period; provided, however, that the Board in its discretion may
establish one or more additional Purchase Dates during any Offering Period.
(q) "PURCHASE PRICE" means the price at which a share of Stock
may be purchased under the Plan, as determined in accordance with Section 9.
(r) "PURCHASE RIGHT" means an option granted to a Participant
pursuant to the Plan to purchase such shares of Stock as provided in Section 8,
which the Participant may or may not exercise during the Offering Period in
which such option is outstanding. Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.
(s) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
(t) "SUBSCRIPTION AGREEMENT" means a written agreement in such
form as specified by the Company, stating an Employee's election to participate
in the Plan and authorizing payroll deductions under the Plan from the
Employee's Compensation.
3
(u) "SUBSCRIPTION DATE" means the last business day prior to
the Offering Date of an Offering Period or such earlier date as the Company
shall establish.
(v) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan, of any form of agreement
or other document employed by the Company in the administration of the Plan, or
of any Purchase Right shall be determined by the Board and shall be final and
binding upon all persons having an interest in the Plan or the Purchase Right.
Subject to the provisions of the Plan, the Board shall determine all of the
relevant terms and conditions of Purchase Rights; provided, however, that all
Participants granted Purchase Rights shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The
Company may, from time to time, consistent with the Plan and the requirements of
Section 423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Company, in its discretion, for the proper administration of the Plan,
including, without limitation, (a) a minimum payroll deduction amount required
for participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan.
4
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be five hundred thousand (500,000) and shall
consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of that Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan and each Purchase
Right and in the Purchase Price. If a majority of the shares of the same class
as the shares subject to outstanding Purchase Rights are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the outstanding Purchase Rights to provide that such Purchase
Rights are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the Purchase Price of, the outstanding Purchase
Rights shall be adjusted in a fair and equitable manner, as determined by the
Board, in its discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down
to the nearest whole number, and in no event may the Purchase Price be decreased
to an amount less than the par value, if any, of the stock subject to the
Purchase Right. The adjustments determined by the Board pursuant to this Section
4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee, except the following:
(a) Any Employee who has not completed at least six (6) months
of continuous employment with the Participating Company Group as of the
commencement of the applicable Offering Period; or
(b) Any Employee who is customarily employed by the
Participating Company Group for twenty (20) hours or less per week.
5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, the Employee would own or
hold options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%)
5
or more of the total combined voting power or value of all classes of stock of
such corporation, as determined in accordance with Section 423(b)(3) of the
Code. For purposes of this Section 5.2, the attribution rules of Section 424(d)
of the Code shall apply in determining the stock ownership of such Employee.
6. OFFERINGS.
The Plan shall be implemented on and after the Effective Date by
sequential Offerings of approximately six (6) months duration or such other
duration as the Board shall determine (an "OFFERING PERIOD"); provided, however,
that the first Offering Period (the "INITIAL OFFERING PERIOD") shall commence on
the Effective Date and end on or about April 30, 2002. Subsequent Offering
Periods shall commence on or about May 1 and November 1 of each year and end on
or about the last days of the next October and April, respectively, occurring
thereafter. Notwithstanding the foregoing, the Board may establish a different
duration effective for one or more future Offering Periods or different
commencing or ending dates for such Offering Periods; provided, however, that no
Offering Period may have a duration exceeding twenty-seven (27) months. If the
first or last day of an Offering Period is not a day on which the national
securities exchanges or Nasdaq Stock Market are open for trading, the Company
shall specify the trading day that will be deemed the first or last day, as the
case may be, of the Offering Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the Subscription Date established by
the Company for such Offering Period. An Eligible Employee who does not deliver
a properly completed Subscription Agreement to the Company's designated office
on or before the Subscription Date for an Offering Period shall not participate
in the Plan for that Offering Period or for any subsequent Offering Period
unless the Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in that Offering Period but may participate in any
subsequent Offering Period provided the Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the
Purchase Date of each Offering Period in which the Participant participates
provided that the Participant remains an Eligible Employee on the Offering Date
of the new Offering Period and has not either (a) withdrawn from the Plan
pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may
6
deliver a new Subscription Agreement for a subsequent Offering Period in
accordance with the procedures set forth in Section 7.1 if the Participant
desires to change any of the elections contained in the Participant's then
effective Subscription Agreement. In the event that the Board establishes
concurrent Offerings, Eligible Employees may not participate simultaneously in
more than one Offering.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on the
Offering Date of each Offering Period, each Participant in that Offering Period
shall be granted automatically a Purchase Right consisting of an option to
purchase the lesser of (a) that number of whole shares of Stock determined by
dividing Twelve Thousand Five Hundred Dollars ($12,500) by the Fair Market Value
of a share of Stock on such Offering Date or (b) one thousand five hundred
(1,500) shares of Stock. No Purchase Right shall be granted on an Offering Date
to any person who is not, on such Offering Date, an Eligible Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
provisions of Section 8.1, if the Board establishes an Offering Period (other
than the Initial Offering Period) of any duration other than six months, then
(a) the dollar amount in Section 8.1 shall be determined by multiplying
$2,083.33 by the number of months (rounded to the nearest whole month) in the
Offering Period and rounding to the nearest whole dollar, and (b) the share
amount in Section 8.1 shall be determined by multiplying 250 shares by the
number of months (rounded to the nearest whole month) in the Offering Period and
rounding to the nearest whole share.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Participant shall be granted a
Purchase Right which permits his or her right to purchase shares of Stock under
the Plan to accrue at a rate which, when aggregated with such Participant's
rights to purchase shares under all other employee stock purchase plans of a
Participating Company intended to meet the requirements of Section 423 of the
Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or
such other limit, if any, as may be imposed by the Code) for each calendar year
in which such Purchase Right is outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
Period. The limitation described in this Section shall be applied in conformance
with applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired in
an Offering Period upon the exercise of all or any portion of a Purchase Right
shall be established by the Board; provided, however, that the Purchase Price
shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair
Market Value of a share of Stock on the Offering Date of the Offering Period or
(b) the Fair Market Value of a share of Stock on the Purchase Date. Unless
otherwise provided by the Board prior to the commencement of an Offering Period,
the Purchase
7
Price for that Offering Period shall be eighty-five percent (85%) of the lesser
of (a) the Fair Market Value of a share of Stock on the Offering Date of the
Offering Period, or (b) the Fair Market Value of a share of Stock on the
Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided
herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set forth
the percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions effective following the first payday during an Offering) or more than
ten percent (10%). The Board may change the foregoing limits on payroll
deductions effective as of any future Offering Date. Amounts deducted shall be
reduced by any amounts contributed by the Participant and applied to the
purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under Section 423 of the Code.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the Change Notice Date, as defined below. A Participant who elects,
effective following the first payday of an Offering Period, to decrease the rate
of his or her payroll deductions to zero percent (0%) shall nevertheless remain
a Participant in the current Offering Period unless such Participant withdraws
from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be a
date prior to the beginning of the first pay period for which such election is
to be effective as established by the Company from time to time and announced to
the Participants. Unless otherwise established by the Company, the Change Notice
Date shall be the seventh (7th) day prior to the end of the first pay period for
which such election is to be effective.
10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company
may, in its sole discretion, suspend a Participant's payroll deductions under
the Plan as the Company deems advisable to avoid accumulating payroll deductions
in excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted (a) under the Participant's Purchase
Right or (b) during a calendar year under the limit set forth
8
in Section 8.3. Payroll deductions shall be resumed at the rate specified in the
Participant's then effective Subscription Agreement at the beginning,
respectively, of (a) the next Offering Period, provided that the individual is a
Participant in such Offering Period or (b) the next Offering Period the Purchase
Date of which falls in the following calendar year.
10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall
be maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.
10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted
from a Participant's Compensation pursuant to the Plan.
10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may
withdraw all or any portion of the payroll deductions credited to his or her
Plan account and not previously applied toward the purchase of Stock by
delivering to the Company's designated office a written notice on a form
provided by the Company for such purpose. A Participant who withdraws the entire
remaining balance credited to his or her Plan account shall be deemed to have
withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn shall
be returned to the Participant as soon as practicable after the notice of
withdrawal and may not be applied to the purchase of shares in any Offering
under the Plan. The Company may from time to time establish or change
limitations on the frequency of withdrawals permitted under this Section,
establish a minimum dollar amount that must be retained in the Participant's
Plan account, or terminate the withdrawal right provided by this Section.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On the Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not terminated before such Purchase Date shall
automatically acquire pursuant to the exercise of the Participant's Purchase
Right the number of whole shares of Stock determined by dividing (a) the total
amount of the Participant's payroll deductions accumulated in the Participant's
Plan account during the Offering Period and not previously applied toward the
purchase of Stock by (b) the Purchase Price. However, in no event shall the
number of shares purchased by the Participant during an Offering Period exceed
the number of shares subject to the Participant's Purchase Right. No shares of
Stock shall be purchased on a Purchase Date on behalf of a Participant whose
participation in the Offering or the Plan has terminated before such Purchase
Date.
11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares of
Stock which might be purchased by all Participants in the Plan on a Purchase
Date exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as practicable and as the Company
9
determines to be equitable. Any fractional share resulting from such pro rata
allocation to any Participant shall be disregarded.
11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each
Purchase Date, the Company shall arrange the delivery to each Participant of a
certificate representing the shares acquired by the Participant on such Purchase
Date; provided that the Company may deliver such shares to a broker designated
by the Company that will hold such shares for the benefit of the Participant.
Shares to be delivered to a Participant under the Plan shall be registered in
the name of the Participant, or, if requested by the Participant, in the name of
the Participant and his or her spouse, or, if applicable, in the names of the
heirs of the Participant.
11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash balance to be returned to a Participant pursuant to the preceding sentence
is less than the amount that would have been necessary to purchase an additional
whole share of Stock on such Purchase Date, the Company may retain the cash
balance in the Participant's Plan account to be applied toward the purchase of
shares in the subsequent Offering Period.
11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right
is exercised, in whole or in part, or at the time a Participant disposes of some
or all of the shares he or she acquires under the Plan, the Participant shall
make adequate provision for the federal, state, local and foreign tax
withholding obligations, if any, of the Participating Company Group which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which the Purchase Right relates shall expire immediately upon the end of the
Offering Period.
11.7 REPORTS AND STOCKHOLDER INFORMATION TO PARTICIPANTS. Each
Participant who has exercised all or part of his or her Purchase Right shall
receive, as soon as practicable after the Purchase Date, a report of such
Participant's Plan account setting forth the total payroll deductions
accumulated prior to such exercise, the number of shares purchased, the Purchase
Price for such shares, the date of purchase and the cash balance, if any,
remaining immediately after such purchase that is to be refunded or retained in
the Participant's Plan account pursuant to Section 11.4. The report required by
this Section may be delivered in such form and by such means, including by
electronic transmission, as the Company may determine. In addition, each
Participant shall be provided information concerning the Company equivalent to
that information generally made available to the Company's common stockholders.
10
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may
withdraw from the Plan by signing and delivering to the Company's designated
office a written notice of withdrawal on a form provided by the Company for this
purpose. Such withdrawal may be elected at any time prior to the end of an
Offering Period; provided, however, that if a Participant withdraws from the
Plan after a Purchase Date, the withdrawal shall not affect shares acquired by
the Participant on such Purchase Date. A Participant who voluntarily withdraws
from the Plan is prohibited from resuming participation in the Plan in the same
Offering from which he or she withdrew, but may participate in any subsequent
Offering by again satisfying the requirements of Sections 5 and 7.1. The Company
may impose, from time to time, a requirement that the notice of withdrawal from
the Plan be on file with the Company's designated office for a reasonable period
prior to the effectiveness of the Participant's withdrawal.
12.2 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary
withdrawal from the Plan pursuant to Section 12.1, the Participant's accumulated
payroll deductions which have not been applied toward the purchase of shares
shall be refunded to the Participant as soon as practicable after the
withdrawal, without the payment of any interest, and the Participant's interest
in the Plan shall terminate. Such accumulated payroll deductions to be refunded
in accordance with this Section may not be applied to any other Offering under
the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or upon the failure of a Participant to remain
an Eligible Employee, the Participant's participation in the Plan shall
terminate immediately. In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the Participant's
death, to the Participant's legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned pursuant to this Section 13. A Participant whose participation has been
so terminated may again become eligible to participate in the Plan by satisfying
the requirements of Sections 5 and 7.1.
14. CHANGE IN CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
11
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event
of a Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may assume the Company's rights and obligations under the Plan.
If the Acquiring Corporation elects not to assume the Company's rights and
obligations under outstanding Purchase Rights, the Purchase Date of the then
current Offering Period shall be accelerated to a date before the date of the
Change in Control specified by the Board, but the number of shares of Stock
subject to outstanding Purchase Rights shall not be adjusted. All Purchase
Rights which are neither assumed by the Acquiring Corporation in connection with
the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS.
A Purchase Right may not be transferred in any manner otherwise
than by will or the laws of descent and distribution and shall be exercisable
during the lifetime of the Participant only by the Participant.
16. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to
compliance with all applicable requirements of federal, state and foreign law
with respect to such securities. A Purchase Right may not be exercised if the
issuance of shares upon such exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any securities exchange or market system upon which the
Stock may then be listed. In addition, no Purchase Right may be exercised unless
(a) a registration statement under the Securities Act of 1933, as amended, shall
at the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the
12
Purchase Right, or (b) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Purchase Right may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
said Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares under the Plan 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.
As a condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company.
17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of
the Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
18. LEGENDS.
The Company may at any time place legends or other identifying
symbols referencing any applicable federal, state or foreign securities law
restrictions or any provision convenient in the administration of the Plan on
some or all of the certificates representing shares issued under the Plan. The
Participant shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include but shall not be limited to the
following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY
NOMINEE)."
13
19. NOTIFICATION OF SALE OF SHARES.
The Company may require the Participant to give the Company prompt
notice of any disposition of shares acquired by exercise of a Purchase Right
within two years from the date of granting such Purchase Right or one year from
the date of exercise of such Purchase Right. The Company may require that until
such time as a Participant disposes of shares acquired upon exercise of a
Purchase Right, the Participant shall hold all such shares in the Participant's
name (or, if elected by the Participant, in the name of the Participant and his
or her spouse but not in the name of any nominee) until the lapse of the time
periods with respect to such Purchase Right referred to in the preceding
sentence. The Company may direct that the certificates evidencing shares
acquired by exercise of a Purchase Right refer to such requirement to give
prompt notice of disposition.
20. NOTICES.
All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. INDEMNIFICATION.
In addition to such other rights of indemnification as they may
have as members of the Board or officers or employees of the Participating
Company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
22. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except that
(a) such termination shall not affect Purchase Rights previously granted under
the Plan, except as permitted under the Plan, and (b) no amendment may adversely
affect a Purchase Right previously granted under the Plan (except to the extent
permitted by the Plan or as may be necessary to qualify the Plan as an employee
stock purchase plan pursuant to Section 423 of the
14
Code or to obtain qualification or registration of the shares of Stock under
applicable federal, state or foreign securities laws). In addition, an amendment
to the Plan must be approved by the stockholders of the Company within twelve
(12) months of the adoption of such amendment if such amendment would authorize
the sale of more shares than are authorized for issuance under the Plan or would
change the definition of the corporations that may be designated by the Board as
Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Trident Microsystems, Inc. 2001 Employee Stock Purchase Plan
was duly adopted by the Board of Directors of the Company on October 15, 2001.
------------------------------------
Secretary
15
PLAN HISTORY
October 15, 2001 Board adopts Plan with a share reserve of 500,000 shares.
December 10, 2001 Stockholders approve Plan with a share reserve of 500,000 shares.
1
TRIDENT MICROSYSTEMS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NAME (Please print):
----------------------------------------------------------------------------------------
(Last) (First) (Middle)
(TM) Original application for the Offering Period beginning (date):
----------------------------------------
(TM) Change in payroll deduction rate effective with the pay period ending (date):
-------------------------
I. SUBSCRIPTION
I elect to participate in the 2001 Employee Stock Purchase Plan (the
"PLAN") of Trident Microsystems, Inc. (the "COMPANY") and to subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
I authorize payroll deductions of __________ percent (in whole
percentages not less than 1%, unless an election to stop deductions is being
made, or more than 10%) of my "COMPENSATION" on each payday throughout the
"OFFERING PERIOD" in accordance with the Plan. I understand that these payroll
deductions will be accumulated for the purchase of shares of Common Stock at the
applicable purchase price determined in accordance with the Plan. Except as
otherwise provided by the Plan, I will automatically purchase shares on each
"PURCHASE DATE" unless I withdraw from the Plan by giving written notice on a
form provided by the Company or unless my eligibility or employment terminates.
I understand that I will automatically participate in each subsequent
Offering that commences immediately after the last day of an Offering in which I
am participating until I withdraw from the Plan by giving written notice on a
form provided by the Company or my eligibility or employment terminates.
Shares I purchase under the Plan should be issued in the name(s) set
forth below. (Shares may be issued in the participant's name alone or together
with the participant's spouse as community property or in joint tenancy.)
NAME(S) (please print):
-----------------------------------------------
ADDRESS:
--------------------------------------------------------------
MY SOCIAL SECURITY NUMBER:
--------------------------------------------
I agree to make adequate provision for the federal, state, local and
foreign tax withholding obligations, if any, which arise upon my purchase of
shares under the Plan and/or my disposition of shares. The Company may withhold
from my compensation the amount necessary to meet such withholding obligations.
I agree that, unless otherwise permitted by the Company, until I
dispose of shares I purchase under the Plan, I will hold such shares in the
name(s) entered above (and not in the name of any nominee) until the later of
(i) two years after the first day of the Offering Period in which I purchased
the shares and (ii) one year after the Purchase Date on which I purchased the
shares.
I AGREE THAT I WILL NOTIFY THE CHIEF FINANCIAL OFFICER OF THE COMPANY
IN WRITING WITHIN 30 DAYS AFTER ANY SALE, GIFT, TRANSFER OR OTHER DISPOSITION OF
ANY KIND PRIOR TO THE END OF THE PERIODS REFERRED TO IN THE PRECEDING PARAGRAPH
(A "DISQUALIFYING DISPOSITION") OF ANY SHARES I PURCHASED UNDER THE PLAN. IF I
DO NOT RESPOND WITHIN 30 DAYS OF THE DATE OF A DISQUALIFYING DISPOSITION SURVEY
DELIVERED TO ME BY CERTIFIED MAIL, THE COMPANY IS AUTHORIZED TO TREAT MY
NONRESPONSE AS
1
MY NOTICE TO THE COMPANY OF A DISQUALIFYING DISPOSITION AND TO COMPUTE AND
REPORT TO THE INTERNAL REVENUE SERVICE THE ORDINARY INCOME I MUST RECOGNIZE UPON
SUCH DISQUALIFYING DISPOSITION.
II. PARTICIPANT DECLARATION
Any election I have made on this form revokes all prior elections with
regard to this form.
I am familiar with the provisions of the Plan and agree to participate
in the Plan subject to all of its provisions. I understand that the Board of
Directors of the Company reserves the right to terminate the Plan or to amend
the Plan and my right to purchase stock under the Plan to the extent provided by
the Plan. I understand that the effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Plan.
Date:
-------------------------- -------------------------------------
Signature of Participant
2
TRIDENT MICROSYSTEMS, INC.
2001 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
NAME (Please print):
----------------------------------------------------------------------------------------
(Last) (First) (Middle)
(TM) Withdrawal from Plan in full.
(TM) Partial withdrawal of payroll deductions from Plan account.
I. WITHDRAWAL IN FULL
I elect to withdraw from the Trident Microsystems, Inc. 2001 Employee
Stock Purchase Plan (the "PLAN") and the Offering which began on (date)
____________________ and in which I am participating (the "CURRENT Offering").
ELECT EITHER A OR B BELOW:
(TM) A. IMMEDIATE TERMINATION. I elect to terminate immediately my
participation in the Current Offering and the Plan. I request
that the Company cease all further payroll deductions under
the Plan (provided I have given sufficient notice before the
next payday). My payroll deductions not previously used to
purchase shares should not be used to purchase shares in the
Current Offering. Instead, I request that all such amounts be
paid to me as soon as practicable. I understand that this
election immediately terminates my interest in the Current
Offering and in the Plan.
(TM) B. TERMINATION AFTER NEXT PURCHASE. I elect to terminate my
participation in the Plan following my purchase of shares on the
next Purchase Date of the Current Offering. I request that the
Company cease all further payroll deductions under the Plan
(provided I have given sufficient notice before the next payday).
All payroll deductions credited to my Plan account should be used
to purchase shares on the next Purchase Date of the Current
Offering to the extent permitted by the Plan. I understand that
this election will terminate my interest in the Plan immediately
following such purchase. I request that any cash balance remaining
in my Plan account after my purchase of shares be paid to me as
soon as practicable.
I understand that I am terminating my interest in the Plan and that no
further payroll deductions will be made (provided I have given sufficient notice
before the next payday), unless I elect to become a participant in another
Offering by filing a new Subscription Agreement with the Company. I understand
that I will receive no interest on the amounts paid to me from my Plan account,
and that I may not apply such amounts to any other Offering under the Plan or
any other employee stock purchase plan of the Company.
II. PARTIAL WITHDRAWAL OF PAYROLL DEDUCTIONS
Amount of withdrawal requested: $
----------------------------
I request that the above amount not previously used to purchase shares
under the Plan be withdrawn from my Plan account and paid to me as soon as
practicable. If the amount requested constitutes the entire balance of my Plan
account, I understand that I will be treated as having elected to withdraw in
full from the Plan in accordance with alternative A above. I understand that I
will receive no interest on the amounts paid to me from my Plan account, and
that I may not apply such amounts to any other Offering under the Plan or any
other employee stock purchase plan of the Company.
Date: Signature:
----------------------- --------------------------------
PROXY
TRIDENT MICROSYSTEMS, INC.
Proxy for the Annual Meeting of Stockholders
To be held on December 10, 2001
The undersigned hereby appoints Frank C. Lin and Peter Jen, and each of
them, with full power of substitution to represent the undersigned and to vote
all of the shares of stock in Trident Microsystems, Inc., a Delaware corporation
(the "Company"), which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at the Company, 1090 East Arques
Avenue, Sunnyvale, California, on December 10, 2001 at 9:00 a.m. local time, and
at any adjournment or postponement thereof (1) as hereinafter specified upon the
proposals listed on the reverse side and as more particularly described in the
Proxy Statement of the Company dated November 2, 2001 (the "Proxy Statement"),
receipt of which is hereby acknowledged, and (2) in his discretion upon such
other matters as may properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Please mark
your votes as [X]
indicated in
this example.
A VOTE FOR THE FOLLOWING PROPOSALS IS FOR all nominees
RECOMMENDED BY THE BOARD OF DIRECTORS: listed (except as WITHHOLD AUTHORITY
marked to the to vote for nominees
contrary below.) listed below.
1. To elect the following two (2) [ ] [ ]
persons as Class III directors to
hold office for a three-year term and
until their respective successors are
elected and qualified.
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
(1) Frank C. Lin and (2) Glen M. Antle
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's 1994 [ ] [ ] [ ]
Outside Directors Stock Option Plan to
increase the number of shares reserved for
issuance thereunder by 110,000 shares.
3. To approve the Company's 2001 Employee Stock [ ] [ ] [ ]
Purchase Plan.
4. To ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal
year ending June 30, 2002.
MARK HERE FOR ADDRESS [ ] MARK HERE IF YOU PLAN [ ]
CHANGE AND NOTE AT LEFT TO ATTEND THE MEETING
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. Please date the
Proxy.
Signature(s) Date
-------------------------------------------- ------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -