-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kfjxq/gHQshtfsW6BEzB3Pq8ATCWZxYSV5rsMvGzirULDTq1YwrpaUFhl9KGbRhR wvh6yxPvb7JYu991DnuMNQ== 0000930661-96-001624.txt : 19961118 0000930661-96-001624.hdr.sgml : 19961118 ACCESSION NUMBER: 0000930661-96-001624 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BENCHMARQ MICROELECTRONICS INC CENTRAL INDEX KEY: 0000872918 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 742532442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27232 FILM NUMBER: 96664495 BUSINESS ADDRESS: STREET 1: 17919 WATERVIEW PKWY CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 2144379195 MAIL ADDRESS: STREET 1: 17919 WATERVIEW PARKWAY CITY: DALLAS STATE: TX ZIP: 75252 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - ------------------------------------------------------------------------------- FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ______________ COMMISSION FILE NO. 0-27232 BENCHMARQ MICROELECTRONICS, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2532442 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17919 WATERVIEW PARKWAY DALLAS, TEXAS 75252 (Address of principal executive offices) (Zip code) (972) 437-9195 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---------- ---------- As of November 8, 1996, there were 6,692,726 shares of the registrant's common stock outstanding. CAUTIONARY STATEMENT The Company wishes to caution readers that the following important factors, in addition to others noted throughout this Form 10-Q, in some cases have affected, and in the future could affect, the Company's actual results and could cause the Company's actual results for the fourth quarter of 1996, and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company, including, without limitation, statements made regarding future product sales contained in Part I, Item 2, in the section entitled "Overview", gross margins contained in Part I, Item 2, in the section -------- entitled "Results of Operations-Gross Margin", research and development expenses ---------------------------------- contained in Part I, Item 2, in the section entitled "Results of Operations- --------------------- Research and Development", selling, general and administrative expenses - ------------------------ contained in Part I, Item 2, in the section entitled "Results of Operations- --------------------- Selling, General and Administrative", and capital expenditures and cash - ----------------------------------- requirements contained in Part I, Item 2, in the section entitled "Liquidity and ------------- Capital Resources": - ----------------- --an accelerated decline in the average selling prices for the Company's battery management products, NVSRAM (as defined herein) products and RTC (as defined herein) products; --insufficient expansion of the Company's production capacity to meet the sales demand for battery management products; --slower or declining acceptance of battery management products, NVSRAM products or RTC products; --increases in the prices of materials and components, especially, wafers, SRAMs (as defined herein) and batteries; --timing or delay of new product introductions by the Company or its competitors; --loss of key personnel; --excess production capacity; --inability to achieve acceptable margins on the non-proprietary components included in certain battery management products; --timing and size of significant orders; --changes in product mix; --advances in technologies; --growth of selling, general and administrative expense at a rate faster than that of sales and revenues; --adverse rulings in patent infringement and product liability litigation; --labor disputes; and --failure to comply with government regulations. In addition, the Company refers readers to the discussion of certain risk factors pertaining to the Company contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and in the Company's Registration Statement on Form S-1 (Registration No. 33-06896) filed with the Securities and Exchange Commission on September 13, 1995. 2 BENCHMARQ MICROELECTRONICS, INC. INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Balance Sheets at September 30, 1996 (unaudited) and December 31, 1995............................................. 4 Statements of Income for the Three and Nine Months Ended September 30, 1996 and 1995 (unaudited) except for the Nine Months Ended September 30, 1995)......................... 5 Statements of Cash Flows for the Nine Months Ended September 30, 1996 (unaudited) and 1995....................... 6 Notes to Financial Statements (unaudited)......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................. 16 Signatures................................................................. 17 3 BENCHMARQ MICROELECTRONICS, INC. BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---------------------------- (unaudited) ASSETS Current assets: Cash and cash equivalents.......................................... $ 1,920,965 $12,653,260 Short-term investments............................................. 12,146,063 - Receivables, net of allowance for doubtful accounts and returns of $8,570 and $179,923 at September 30, 1996 and December 31, 1995.. 4,441,203 4,156,598 Inventories........................................................ 4,168,245 3,150,594 Other current assets............................................... 570,427 161,840 ---------------------------- Total current assets........................................... 23,246,903 20,122,292 Property and equipment, at cost: Furniture and fixtures............................................. 740,212 578,453 Equipment.......................................................... 3,717,869 2,366,890 Computer software.................................................. 410,224 342,404 ---------------------------- 4,868,305 3,287,747 Accumulated depreciation........................................... 2,445,492 1,629,890 ---------------------------- 2,422,813 1,657,857 Equipment under capital lease obligations............................. 4,315,636 2,704,511 Accumulated amortization........................................... 965,824 638,820 ---------------------------- 3,349,812 2,065,691 Prepayment for product purchases...................................... 5,880,000 - Other assets.......................................................... 21,756 39,181 ---------------------------- Total assets................................................... $34,921,284 $23,885,021 ============================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................................... $ 2,271,387 $ 2,403,842 Note payable....................................................... 3,380,000 - Payroll and related benefits....................................... 402,317 257,000 Income taxes payable............................................... 426,361 107,931 Other accrued liabilities.......................................... 649,858 485,194 Deferred income on shipments to distributors....................... 1,537,709 670,336 Current obligations under capital leases........................... 1,334,914 814,869 ---------------------------- Total current liabilities...................................... 10,002,546 4,739,172 Obligations under capital leases, less current obligations............ 1,448,407 890,540 Stockholders' equity.................................................. Common stock, $ .001 par value,50,000,000 shares authorized; 6,744,315 and 6,500,496 shares issued at September 30, 1996 and December 31, 1995, respectively.................................. 6,744 6,501 Additional paid-in capital......................................... 24,728,114 23,931,866 Accumulated deficit................................................ (1,248,275) (5,670,258) Unrealized loss on short-term investments, net..................... (3,452) - Treasury stock, 64,000 common shares, at cost...................... (12,800) (12,800) ---------------------------- Total stockholders' equity..................................... 23,470,331 18,255,309 ---------------------------- Total liabilities and stockholders' equity..................... $34,921,284 $23,885,021 ============================
SEE ACCOMPANYING NOTES 4 BENCHMARQ MICROELECTRONICS, INC. STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ------------------------ ------------------------- (unaudited) (unaudited) Net revenues.............................. $10,519,122 $7,229,458 $28,061,885 $21,067,187 Cost of sales............................. 5,677,989 4,244,440 15,811,719 11,939,382 ------------------------ ------------------------- Gross margin.............................. 4,841,133 2,985,018 12,250,166 9,127,805 Operating expenses: Research and development............... 754,481 525,986 2,044,708 1,594,003 Selling, general, and administrative... 2,121,534 1,571,894 5,967,486 4,470,075 ------------------------ ------------------------- Total operating expenses............... 2,876,015 2,097,880 8,012,194 6,064,078 ------------------------ ------------------------- Income from operations.................... 1,965,118 887,138 4,237,972 3,063,727 Other income (expense): Interest income........................ 171,555 100,413 513,609 290,635 Interest expense....................... (57,464) (91,984) (151,599) (268,957) Other.................................. - 199 (37,999) 1,481 ------------------------ ------------------------- Income before provision for income taxes.. 2,079,209 895,766 4,561,983 3,086,886 Income tax provision (benefit)............ (26,300) 64,150 140,000 234,550 ------------------------ ------------------------- Net income................................ $ 2,105,509 $ 831,616 $ 4,421,983 $ 2,852,336 ======================== ========================= Net income per common and common equivalent share................ $ 0.29 $ 0.14 $ 0.61 $ 0.46 ======================== ========================= Shares used in computing net income per common and common equivalent share..... 7,333,755 6,470,873 7,299,261 6,408,744 ======================== =========================
SEE ACCOMPANYING NOTES. 5 BENCHMARQ MICROELECTRONICS, INC. STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 -------------------------- (unaudited) Operating Activities: Net income........................................................... $ 4,421,983 $ 2,852,336 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................. 1,180,568 723,585 Loss on disposition of fixed assets............................ 37,999 - Deferred income taxes.......................................... (494,985) - Changes in operating assets and liabilities: Receivables................................................ (284,605) 745,526 Inventories................................................ (1,017,651) (1,305,253) Prepaid expenses and other assets.......................... 103,823 (392,828) Accounts payable........................................... (132,455) (25,497) Income taxes payable....................................... 465,882 34,806 Deferred income on shipments to distributors............... 867,373 93,127 Accrued liabilities........................................ 309,981 (2,049) -------------------------- Net cash provided by operating activities............................ 5,457,913 2,723,753 Investing Activities: Prepayment for product purchases..................................... (2,500,000) - Investment in short-term investments................................. (30,042,645) - Maturities of short-term investments................................. 17,893,130 - Capital expenditures................................................. (1,201,123) (1,092,687) -------------------------- Net cash used by investing activities................................ (15,850,638) (1,092,687) Financing Activities: Proceeds from issuance of common stock upon exercise of options...... 64,655 16,303 Proceeds from issuance of common stock, net of offering costs........ 584,384 - Principal payments under capital lease obligations................... (988,609) (595,901) Principal payments on notes payable.................................. - (8,271) -------------------------- Net cash used by financing activities................................ (339,570) (587,869) -------------------------- Net change in cash and cash equivalents.............................. (10,732,295) 1,043,197 Cash and cash equivalents at beginning of period..................... 12,653,260 5,599,090 -------------------------- Cash and cash equivalents at end of period........................... $ 1,920,965 $ 6,642,287 ========================== Supplemental Cash Flows Information Cash paid for interest......................................... $ 151,599 $ 268,957 ========================== Cash paid for income taxes..................................... $ 169,103 $ 199,744 ==========================
SEE ACCOMPANYING NOTES. 6 BENCHMARQ MICROELECTRONICS, INC. NOTES TO FINANCIAL STATEMENTS THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (unaudited) 1. INTERIM FINANCIAL INFORMATION The accompanying unaudited financial statements have been prepared by BENCHMARQ Microelectronics, Inc. (the "Company" or "BENCHMARQ") in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the three and nine-month periods ended September 30, 1996, are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the financial statements and the footnotes thereto included in the BENCHMARQ Microelectronics, Inc. annual report on Form 10-K for the year ended December 31, 1995. 2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net income per share amounts are computed using the weighted average number of common and common equivalent shares. For the three and nine-month periods ended September 30, 1996, common equivalent shares consisted of stock options and warrants (using the treasury stock method). For the three and nine-month periods ended September 30, 1995, common equivalent shares consisted of convertible preferred stock (using the if converted method) and stock options and warrants (using the modified treasury stock method). 3. SHORT-TERM INVESTMENTS Short-term investments consist of U. S. government debt securities (carrying value of $1,980,931 at September 30, 1996), state and municipal debt securities (carrying value of $3,120,038 at September 30, 1996) and corporate debt securities (carrying value of $7,045,094 at September 30, 1996). At September 30, 1996, all of these securities were classified as available for sale. Accordingly, these securities are stated at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. Interest on all securities is included in interest income. The Company's Board of Directors has approved investment guidelines with regard to diversification, quality, maturities and allowed investments. At the time of purchase there can be no more than 10% of the portfolio invested per issuer or guarantor with the exception of U. S. government backed securities, and all securities must meet minimum investment grade standards. 7 BENCHMARQ MICROELECTRONICS, INC. NOTES TO FINANCIAL STATEMENTS THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (unaudited) 4. INVENTORIES Inventories are stated at the lower of standard cost, which approximates actual cost determined on a first-in, first-out basis, or market. Inventories, net, consist of the following:
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---------- ----------- Finished goods................................. $1,299,288 $ 690,491 Work-in-process................................ 1,839,651 1,232,253 Raw materials.................................. 1,029,306 1,227,850 ---------- ----------- $4,168,245 $ 3,150,594 ========== ===========
5. INCOME TAXES The Company's effective tax rate for the nine months ended September 30, 1996 reflects the realization of a net deferred tax asset of approximately $495,000. The realization of the net deferred tax asset is based on the Company's revised estimated effective tax rate for the year ended December 31, 1996. 6. COMMITMENTS In May 1996, the Company entered into an Option Agreement with Taiwan Semiconductor Manufacturing Co., Ltd. ("TSMC") (the "Option Agreement"). Pursuant to the Option Agreement, the Company agreed to pay $5,880,000 as an advance payment for certain quantities of wafers, of which $2,500,000 was paid in May 1996 and the Company issued a promissory note due March 31, 1997 for the remaining $3,380,000. Under the terms of the Option Agreement, which is essentially a take or pay arrangement, the Company has committed to purchase from TSMC and TSMC has committed to provide to the Company certain quantities of wafers through 2000. Additionally, in July 1996, the Company entered into a Wafer Production Agreement (the "Wafer Agreement") with TSMC which primarily governs the production and supply process relating to the wafers to be purchased under the Option Agreement. 7. COMMON STOCK In December 1995, the Company sold 1,000,000 shares of its common stock pursuant to an initial public offering ("IPO"). In January 1996, the underwriters of the Company's IPO purchased an additional 85,000 shares of the Company's common stock to cover over-allotments on the same terms and conditions as set forth in the prospectus for the IPO dated December 1, 1995. The Company received net proceeds of $584,384 from the sale of the additional shares. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW BENCHMARQ was incorporated in 1989 and is engaged in the design, development and marketing of mixed-signal integrated circuits ("ICs") and electronic modules for portable and power-sensitive electronic systems. The Company introduced its first products in October 1990, and made its first shipments, principally of nonvolatile static random access memory ("NVSRAM") modules, in December 1990. In August 1991, the Company shipped its initial battery management product and in December 1991 shipped its first real-time- clock ("RTC") product. BENCHMARQ currently is directing the majority of its research and development efforts to the development of battery management products, which are its strategic focus. Currently, the Company's battery management product line is comprised of: ICs that measure and report the charge capacity of a battery ("Gas Gauge ICs"); ICs that control battery charging ("Charger ICs"); and ICs that protect against excessive charging and discharging of Lithium Ion batteries. In addition, the Company's battery management product line includes modules that measure and report the charge capacity of a battery and modules that control battery charging. The Company's objective is to continue to grow sales of battery management products, which have been the Company's largest revenue product line for the last four consecutive quarters, to a more dominant position within the Company's revenue structure. Ongoing efforts to develop NVSRAM and RTC products have been selective and relatively modest. The Company believes that its revenues from RTC products and NVSRAM products will not increase materially over the long-term and may decline due to competitive pressure. Accordingly, the Company expects that favorable future operating results will be substantially dependent upon its ability to expand sales of battery management products. The Company has experienced significant growth in sales of battery management products in the last four quarters primarily due to increased sales of Gas Gauge ICs into portable PC applications. Battery management revenues as a percentage of total revenues grew from 36% in first quarter 1996 to 45% in second quarter 1996 and 51% in third quarter 1996. There can be no assurance that the Company will be successful in substantially increasing sales of battery management products, or that sales of RTC products or NVSRAM products will not decline more rapidly than anticipated. RESULTS OF OPERATIONS Three Months Ended September 30, 1996, Compared with Three Months Ended September 30, 1995 Net Revenues. Total net revenues in third quarter 1996 were approximately $10.5 million, a 46% increase over the same period in 1995. This increase was due principally to increased sales of Gas Gauge ICs into the portable PC market, and to a lesser extent increased sales of Charger 9 IC devices, which are sold into cellular, consumer, power tool and portable computer applications, and sales of RTC IC devices and modules into the PC market. Revenues from battery management product sales exceeded 50% of total Company revenues for the first time in third quarter 1996. Revenues from the sale of Gas Gauge ICs represented a majority of battery management revenues in third quarter 1996 and a majority of battery management revenue growth from third quarter 1995. Most of the increased demand for Gas Gauge ICs came from the portable PC market, and the Gas Gauge IC designed for use with the newer Lithium Ion rechargeable batteries was a significant factor in this growth. The Company entered third quarter 1996 with uncharacteristically high levels of RTC module finished goods inventory due to soft demand in second quarter 1996. Demand for RTC modules, primarily in desktop PC applications, increased in third quarter 1996 and the unit sales growth as compared to third quarter 1995 was primarily provided by this inventory. The Company does not, however, anticipate a significant increase in RTC module production rates. The markets for the RTC ICs and modules are very competitive. The Company experienced lower sales of NVSRAM products in third quarter 1996 compared with third quarter 1995 in large part due to weak demand from the networking and telecom markets. The Company believes this weak demand is principally the result of efforts by end customers to lower their inventory levels. Competitive pressures are a significant factor in these markets. Revenue generated from RTC royalties and other miscellaneous sources was 0.4% of total revenue in third quarter 1996, compared with 5.1% in third quarter 1995. This reduction is due principally to the fourth quarter 1995 termination of a third party design contract and significantly lower third party shipments of products that incorporate the Company's RTC technology under license agreement. The following table sets forth for the periods indicated the amount (in thousands) and percentage of total net revenues by type of product:
THREE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 --------------- --------------- Battery Management Products $ 5,384 51.2% $1,768 24.5% NVSRAM Products 2,125 20.2 2,688 37.2 RTC Products 2,967 28.2 2,397 33.2 RTC Royalties/Other 43 0.4 376 5.1 --------------- -------------- Total Net Revenue $10,519 100.0% $7,229 100.0% =============== ==============
10 The Company's revenues from international customers accounted for approximately $7.7 million, or 73% of total net revenues, for the quarter ended September 30, 1996, compared to $3.4 million, or 47% of total net revenues, for the comparable period in 1995. During the third quarter of 1996, approximately 65% of the Company's total net revenues was derived from customers in the Asia- Pacific region. The Company's distributor in Taiwan accounted for approximately $2.7 million, or 26%, of total net revenues in the third quarter of 1996. No other customer directly accounted for greater than 10% of the total net revenues. Export sales are subject to a variety of risks, including those arising from fluctuations in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements, longer accounts receivable payment cycles, potentially adverse tax consequences and export license requirements. Because the Company's international sales have to date been denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price in local currencies of the Company's products in foreign markets and make the Company's products relatively more expensive than competitors' products that are denominated in local currencies. Gross Margin. The Company's gross margin represented 46% of total net revenues for the three month period ended September 30, 1996 and 41% for the comparable period in 1995. Gross margin increased approximately $1,856,000, or 62%, to approximately $4.8 million for the third quarter 1996, compared to $3.0 million in the third quarter 1995. Much of the improvement in gross margin as a percentage of revenues was due to growth in revenues from battery management product sales. Additionally, the Company's purchase costs for wafers and static random access memory ("SRAMs") were generally lower in third quarter 1996 than the same period in 1995. However, lower average selling prices on certain products and the downward revision of inventory standard costs offset some of the gross margin improvement. The Company expects that average selling prices, primarily with respect to its RTC and NVSRAM products will continue to decline. The Company believes that its ability to maintain or increase its gross margin over the long-term will primarily require it to increase its sales of battery management products. There can be no assurance, however, that the Company will be able to achieve these objectives. Research and Development. The Company's research and development expense increased approximately 43% to $754,000 in the third quarter 1996, compared to $526,000 in third quarter 1995. This increase was due primarily to increased compensation and payroll related expenses and product tooling. As a percentage of total revenues, research and development expense decreased to approximately 7.2% in third quarter 1996 from 7.3% in third quarter 1995. The Company intends to continue to make a significant investment in research and development, particularly with respect to battery management product opportunities, and believes that research and development expense will therefore increase in absolute dollars. 11 Selling, General and Administrative. Selling, general and administrative expense increased approximately $550,000 to $2.1 million in third quarter 1996 as compared to the same period in 1995. This increase was due primarily to increases in compensation, external sales commissions, general marketing and other general expenses. Selling, general and administrative expense represented approximately 20.2% and 21.7% of total net revenues in third quarter 1996 and 1995, respectively. Selling, general and administrative expense in absolute dollars is expected to continue to increase as the Company expands its business. Other Income (Expense). Other income (expense), consists primarily of interest earned on short-term investments, net of interest expense on capital lease obligations, and a $2.0 million subordinated note payable in 1995. In third quarter 1996, the Company realized net other income of approximately $114,000, compared to $9,000 in third quarter 1995. This improvement primarily reflects higher average balances of invested funds and the retirement of the $2.0 million subordinated note payable in December 1995. Proceeds from the Company's IPO contributed significantly to the increase in funds available for investment. Provision for Income Taxes. The Company generated pre-tax income during the third quarter 1996 and 1995, which was substantially offset by net operating loss carryforwards from prior operating periods. The Company also recognized a net deferred tax asset in the third quarter 1996 based on its estimated effective tax rate for the year ended December 31, 1996. This resulted in a net income tax benefit of $26,300 in the third quarter 1996. A provision for income tax of $64,150 was recorded in the three months ended September 30, 1995, consisting of alternative minimum tax and state income tax. Nine Months Ended September 30, 1996, Compared with Nine Months Ended September 30, 1995 Net Revenues. Total net revenues for the nine months ended September 30, 1996 were approximately $28.1 million, a 33% increase over the same period in 1995. This increase was due principally to increased sales of Gas Gauge ICs into the portable PC market, and to a lesser extent increased sales of Charger IC devices, which are sold into cellular, consumer, power tool and portable computer applications, and sales of RTC IC devices into the PC market. Revenues from battery management product sales represented approximately 45% of total revenues for the nine months ended September 30, 1996, compared to 25% for the comparable period in 1995. Revenue generated from RTC royalties and other miscellaneous sources was 1.0% of total revenue for the nine months ended September 30, 1996, compared with 6.7% for the nine months ended September 30, 1995. 12 The following table sets forth for the periods indicated the amount (in thousands) and percentage of total net revenues by type of product:
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 --------------- --------------- Battery Management Products $12,572 44.8% $ 5,305 25.2% NVSRAM Products 7,422 26.4 6,962 33.1 RTC Products 7,791 27.8 7,379 35.0 RTC Royalties/Other 277 1.0 1,421 6.7 --------------- --------------- Total Net Revenue $28,062 100.0% $21,067 100.0% =============== ===============
The Company's revenues from international customers accounted for approximately $18.7 million, or 67% of total net revenues, for the nine months ended September 30, 1996, compared to $10.9 million, or 52% of total net revenues, for the comparable period in 1995. During the nine months ended September 30, 1996, approximately 60% of the Company's total net revenues was derived from customers in the Asia-Pacific region. The Company's distributor in Taiwan accounted for approximately $5.8 million, or 21%, of total net revenues for the nine months ended September 30, 1996. No other customer directly accounted for greater than 10% of the total net revenues. Gross Margin. The Company's gross margin represented 44% and 43% of total net revenues for the nine month periods ended September 30, 1996 and 1995, respectively. Gross margin increased approximately $3.1 million, or 34%, to approximately $12.3 million for the nine-month period ended September 30, 1996, compared to $9.1 million for the nine-month period ended September 30, 1995. Excluding the impact of royalties and design fees, the gross margin percentage would have been approximately 43% and 40% for the nine months ended September 30, 1996 and 1995, respectively. Much of this improvement in gross margin as a percentage of revenues is due to the growth in revenues from battery management product sales. Battery management products are the Company's highest gross margin percentage product line and its strategic focus. Research and Development. The Company's research and development expense increased approximately 28% to $2.0 million for the nine months ended September 30, 1996 as compared to approximately $1.6 million for the nine months ended September 30, 1995. This increase was due primarily to increased compensation and payroll related expenses and product tooling. As a percentage of total revenues, research and development expense decreased to approximately 7.3% for the nine months ended September 30, 1996 from 7.6% for the comparable period in 1995. Selling, General and Administrative. Selling, general and administrative expense increased approximately $1.5 million to $6.0 million for the nine months ended September 30, 1996 as compared to the same period in 1995. This increase was due primarily to increases in compensation, external sales commissions, depreciation, legal, and other general expenses. Much 13 of the increase in legal expenses was due to a declaratory judgment proceeding brought by the Company against Dallas Semiconductor Corporation, in which the Company sought a ruling that the Company's products did not infringe upon certain patents held by Dallas Semiconductor Corporation. Such legal proceedings were dismissed by the Court in June 1996. Selling, general and administrative expense represented approximately 21.3% and 21.2% of total net revenues for the nine months ended September 30, 1996 and 1995, respectively. Other Income (Expense). Other income (expense), consists primarily of interest earned on short-term investments, net of interest expense on capital lease obligations and a $2.0 million subordinated note payable in 1995. For the nine months ended September 30, 1996, the Company realized net other income of approximately $324,000, compared to $23,000 for the same period in 1995. This improvement primarily reflects higher average balances of invested funds and the retirement of the $2.0 million subordinated note payable in December 1995. Proceeds from the Company's IPO contributed significantly to the increase in funds available for investment. Provision for Income Taxes. The Company generated pre-tax income during the nine-month periods ended September 30, 1996 and 1995, which was substantially offset by net operating loss carryforwards from prior operating periods. The Company also recognized a net deferred tax asset in the third quarter 1996 based on its estimated effective tax rate for the year ended December 31, 1996. This resulted in provisions for income taxes of $140,000 and $235,000 for the nine months ended September 30, 1996 and 1995, respectively, consisting of alternative minimum tax and state income tax. LIQUIDITY AND CAPITAL RESOURCES The Company's principal capital needs are to finance accounts receivable, inventories and additions of capital assets. Approximately $5.5 million of cash was generated by operating activities during the nine-month period ended September 30, 1996 as compared to $2.7 million in the comparable period in 1995. Net cash used in investing activities of approximately $15.9 million during the nine-month period ended September 30, 1996 was attributable primarily to the investment of much of the Company's cash equivalents into short-term investments with higher expected yields. In addition, approximately $2.5 million was used to prepay certain quantities of wafers pursuant to the Option Agreement under which TSMC is committed to supply and the Company is committed to purchase wafers. Finally, approximately $1.2 million was used for capital expenditures consisting primarily of assembly and test capacity expansion. Comparatively, net cash used in investing activities during the nine-month period ended September 30, 1995 amounted to approximately $1.1 million and consisted of capital expenditures. Financing activities have consisted primarily of the issuance of equity and payments under capital lease obligations. Financing activities used cash during the nine-month period ended September 30, 1996 of approximately $340,000, which consisted of proceeds of approximately 14 $649,000 from issuances of stock and payments of approximately $989,000 under capital lease obligations. During the comparable nine-month period ended September 30, 1995, financing activities used net cash of approximately $588,000, primarily due to payments under capital lease obligations. The Company's principal sources of liquidity are cash generated from operations as well as cash and cash equivalents and short-term investments of approximately $14.1 million at September 30, 1996. The Company's short-term investments are primarily in government debt securities and corporate debt securities. In addition, the Company has a lease line of credit with BancBoston Leasing, Inc. During the nine month period ended September 30, 1996, the Company used approximately $2.1 million of credit under its outstanding lease line primarily for additions of assembly and test equipment. As of October 31, 1996, approximately $1.2 million was available under the lease line for additional acquisitions of equipment. However, as of such date, equipment purchase orders totaling approximately $236,000 were outstanding against the available lease line of credit. The Company anticipates capital asset additions to exceed $500,000 for the remainder of 1996, primarily to expand test capacity for certain of its battery management products, a portion of which may be financed under the Company's lease line. The Company believes that existing cash balances and other capital resources will be sufficient to meet the Company's cash requirements at least through 1996. However, the Company may also seek to establish additional lines of credit to augment its funding of operating activities. There can be no assurance that such additional financing, if required, will be available on terms acceptable to the Company, if at all. In addition, the Company may, from time to time, as market and business conditions warrant, invest in or acquire complementary businesses, products, technologies and additional sources of wafer supply. The Company also may seek additional equity or debt financing to fund such activities. The sale of additional equity or convertible debt securities could result in dilution to the Company's stockholders. There can be no assurance that such additional financing, if required, will be available on terms acceptable to the Company, if at all. 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- The exhibits filed as a part of this report are listed below. Exhibit No. Description ----------- ----------------------------------------------------- 10.1 The 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan (Amended and Restated as of April 1, 1996) 10.2 The BENCHMARQ Microelectronics, Inc. Profit Sharing Plan (Amended and Restated as of April 1, 1996) 10.3 The BENCHMARQ Microelectronics, Inc. 1989 Stock Option Plan (Amended and Restated as of September 18, 1996) 10.4 The BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan (Amended and Restated as of September 18,1996) 11 Statement Regarding Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed by the Company during the quarter ended September 30, 1996. 16 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. BENCHMARQ MICROELECTRONICS, INC. NOVEMBER 13, 1996 /S/ DERRELL C. COKER ------------------------------- DERRELL C. COKER PRESIDENT AND CHIEF EXECUTIVE OFFICER NOVEMBER 13, 1996 /S/ REGINALD B. MCHONE ------------------------------- REGINALD B. MCHONE VICE PRESIDENT, FINANCE AND ADMINISTRATION, CHIEF FINANCIAL OFFICER AND SECRETARY (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 17 EX-10.1 2 THE 1995 BENCHMARQ BONUS PLAN EXHIBIT 10.1 ------------ THE 1995 BENCHMARQ MICROELECTRONICS, INC. BONUS PLAN ---------------------------------------------------- (AMENDED AND RESTATED AS OF APRIL 1, 1996) ARTICLE 1 - OBJECTIVE The 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan (the "Bonus Plan") is intended to allow BENCHMARQ Microelectronics, Inc. (the "Company") to attract and retain the services of key employees. The principle objectives of the Bonus Plan are to ensure that key employees are fairly compensated relative to industry standards and that they are rewarded for the achievement of certain specified operating objectives. The Bonus Plan relates to salary rates, annual bonuses, and stock options. ARTICLE 2 - PLAN YEAR AND EFFECTIVE DATE The Bonus Plan shall be maintained on the basis of a calendar year (the "Plan Year"), unless otherwise indicated herein. The Bonus Plan shall first be effective July 1, 1995, and the first Plan Year shall be a short Plan Year commencing on such date and ending December 31, 1995. ARTICLE 3 - PARTICIPATION The following six (6) groups of employees of the Company (the "Participant Groups") shall be eligible for bonuses under the Bonus Plan: Group 1. The Chief Executive Officer ("CEO"). Group 2. The President and all Vice Presidents (along with the CEO, these individuals shall be referred to herein as "Executive Officers"). Group 3. The Corporate Controller, the Treasurer, and the Assistant Vice Presidents (hereinafter referred to as "Officers"). Group 4. The Department Managers of Marketing, Product & Test, Assembly Manufacturing, Product Testing, Purchasing & Materials, and Applications. Group 5. Senior Members of the Technical Staff (as designated by the CEO and Chief Technical Officer of the Company ("CTO")). Each Plan Year, the CEO and CTO may appoint up to two employees to become members of Participant Group 5 ("SMTS"). To be appointed to the SMTS, an individual must be a full-time employee of the Company and hold an engineering position in one of the following departments: Design, Product & Test, or Applications Engineering. Department Managers, Officers, and Executive Officers are eligible to become members of the SMTS, but they will not be eligible for a Group 5 bonus, as determined pursuant to Article 6 hereof. In addition, SMTS members will not be eligible for a Group 6 bonus, as determined pursuant to Article 6 hereof. Group 6. Key employees, not otherwise described above, who are nominated by an Executive Officer for a particular Plan Year and whose nominations are approved by the Compensation Committee of the Board of Directors of the Company ("Compensation Committee"). Each Executive Officer may nominate up to three (3) employees for Group 6 status to the Compensation Committee each Plan Year; such nominations must be supported by a written description of the nominees' contributions to the success of the Company. Whether a particular employee is included within one or more of the six (6) Participant Groups described above shall be determined by the Compensation Committee in its sole discretion. The Compensation Committee may, in its sole discretion, change the coverage of each Participant Group at any time. For purposes of bonuses under Article 6 hereof, if an individual would otherwise be eligible for inclusion in two (2) Participant Groups described above (for example, because he or she held two positions with the Company), such individual shall be included only in the highest ranking Participant Group for which he or she is eligible, with Group 1 being the highest ranking Participant Group. ARTICLE 4 - SALARY RATES As part of the Company's annual review process, the CEO will recommend to the Compensation Committee salary rates for the upcoming year for all personnel in Participant Groups 1 through 5. The Compensation Committee may use whatever resources it deems appropriate, including external sources, to confirm industry standard salary rates. Salary rates approved by the Compensation Committee will be implemented by the Human Resources Department. ARTICLE 5 - STOCK OPTION GRANTS At various times and in compliance with the terms of the BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan, the Compensation Committee may grant stock options to personnel in any of the six (6) Participant Groups. These stock options may be either incentive stock options or nonqualified options. ARTICLE 6 - BONUSES Section 6.1 - Bonus Criteria. As part of the Company's annual planning ---------------------------- process, the CEO and Chief Financial Officer of the Company ("CFO") will, concurrently with their recommendation of an annual budget/plan, recommend to the Compensation Committee performance objectives for the Company. The Compensation Committee will then establish specific target performance objectives for the Company concurrently with their approval of the annual budget/plan. Performance objectives approved by the Compensation Committee will be communicated by the CFO to all personnel in Participant Groups 1 through 5. Each Group 6 participant's bonus for a Plan Year shall be that percentage of such employee's base annual salary (not to exceed 5%) as is approved by the Compensation Committee for such Plan Year. The remainder of this Section 6.1 describes the criteria that will generally be used to determine bonuses for employees in Participant Groups 1 through 5. Actual bonus criteria for a particular Plan Year will be determined in accordance with the procedures described in the preceding paragraph. Bonuses will be based on the Company's degree of achievement of certain performance objectives, referred to as Cash Bonus Payment Parameters ("CBPP"). The degree of CBPP achievement (the "CBPP Factor") will be determined by dividing the Company's actual CBPP performance by its budgeted CBPP objective. Participant Groups 1 & 2. Each member of Participant Groups 1 and 2 will ------------------------ be assigned three (3) CBPPs. For each full percentage point that each CBPP Factor assigned to a participant is above a minimum of 85%, up to 105%, such participant will receive 5% of one-third (1/3) of his or her Potential Cash Bonus ("PCB"). Each participant's PCB will be represented as a percentage of such participant's base annual salary, such percentage to be determined annually by the Compensation Committee. -2- Participant Groups 3 & 4. Each member of Participant Groups 3 and 4 will ------------------------ be assigned two (2) CBPPs. For each full percentage point that each CBPP Factor assigned to a participant is above a minimum of 85%, up to 105%, such participant will receive 5% of one-third (1/3) of his or her PCB. Payment of the remaining one-third (1/3) of his or her PCB, or any portion thereof, is in the discretion of the participant's supervising Executive Officer. This discretionary bonus component must be justified in writing by the participant's supervising Executive Officer and submitted to the Compensation Committee for authorization. Each participant's PCB will be represented as a percentage of such participant's base annual salary, such percentage to be determined annually by the Compensation Committee. Participant Group 5. Each member of Participant Group 5 will be assigned ------------------- one (1) CBPP. For each full percentage point that his or her CBPP Factor is above a minimum of 85%, up to 105%, such participant will receive 5% of one- third (1/3) of his or her PCB. The remaining two-thirds (2/3) of each Group 5 participant's PCB will be based on such participant's performance, measured against technical and project objectives negotiated with his or her cost center supervisor and supervising Executive Officer. These negotiated objectives will be submitted to the Compensation Committee by the CEO in January of each Plan Year. A written assessment of performance, along with a determination of the percentage of objectives achieved, will be submitted in writing to the Compensation Committee by the participant's supervising Executive Officer during the following January. The Compensation Committee will review the written assessment and determination of the percentage of objectives achieved, and will authorize an achievement factor, which will be multiplied by two-thirds (2/3) of the participant's PCB to determine his or her remaining bonus. Each participant's PCB will be represented as a percentage of such participant's base annual salary, such percentage to be determined annually by the Compensation Committee. Section 6.2 - Bonus Payments and Procedures. Bonus payments will generally ------------------------------------------- be made quarterly and/or annually at the discretion of the compensation committee, but in no case later than the first payroll date immediately following the completion of the Company's annual audit by the Company's independent auditors. The Compensation Committee may postpone, eliminate, or adjust any bonus payment at any time prior to payment hereunder if such payment would require material and adverse adjustments to the Company's financial statements or if the Company's independent auditors would otherwise issue a qualified opinion on the Company's financial statements. Section 6.3 - Bonus Amounts and Cap. Amounts necessary to pay bonuses ----------------------------------- shall be accrued quarterly and shall be paid as described above. Notwithstanding anything herein to the contrary, the total amount payable hereunder for any Plan Year shall be capped at seven percent (7%) of the Company's pre-tax income for such Plan Year, determined without regard to accruals for bonus payments hereunder and accruals for profit sharing program bonuses under The BENCHMARQ Microelectronics, Inc. Profit Sharing Program. To the extent this 7% cap limits the bonuses otherwise payable hereunder, each participant's bonus shall accordingly be limited in a pro rata manner such that each participant has the same percentage reduction in his or her bonus. ARTICLE 7 - ADMINISTRATION Unless otherwise indicated herein, the Compensation Committee shall administer and interpret the Bonus Plan in its sole and absolute discretion. Any determinations made by the Compensation Committee under the Bonus Plan shall be final and binding on participants and all other parties concerned. The Compensation Committee is authorized to amend or terminate the Bonus Plan in any manner it deems appropriate (including retroactive amendments) by a written instrument executed by the Compensation Committee or a member of the Compensation Committee who is authorized to execute such instrument on behalf of the Compensation Committee. -3- EX-10.2 3 THE BENCHMARQ PROFIT SHARING PLAN EXHIBIT 10.2 ------------ THE BENCHMARQ MICROELECTRONICS, INC. PROFIT SHARING PROGRAM ----------------------------------------------------------- (AMENDED AND RESTATED AS OF APRIL 1, 1996) ARTICLE 1 - OBJECTIVE The BENCHMARQ Microelectronics, Inc. Profit Sharing Program ("Profit Sharing Program" or "Program") is intended to allow BENCHMARQ Microelectronics, Inc. (the "Company") to provide financial incentives and rewards to all eligible employees of the Company for excellent financial performance by the Company. The Program shall first be effective for the Company's fiscal quarter commencing July 1, 1995. ARTICLE 2 - PARTICIPATION To be eligible for the Profit Sharing Program for a particular fiscal quarter of the Company, an employee must both (1) be in continuous full-time employment with the Company from the first day of the applicable fiscal quarter to the last day of such fiscal quarter, and (2) be a full-time employee of the Company on the payment date of the Profit Sharing Program bonus for such fiscal quarter. The Committee (as defined below) shall, in its sole and absolute discretion, determine whether an employee is a full-time employee for this purpose. ARTICLE 3 - PROFIT SHARING PROGRAM BONUS PAYMENTS Profit Sharing Program bonuses shall generally be accrued each quarter of the Company's fiscal year. Profit Sharing Program bonus payments for the first three quarters of the Company's fiscal year shall generally be made on the payroll date immediately following the Company's public release of earnings. Fourth quarter Profit Sharing Program bonus payments shall generally be made on the pay date immediately following the completion of the Company's annual audit by its independent auditors. ARTICLE 4 - PROFIT SHARING PROGRAM BONUS AMOUNTS In order for a Profit Sharing Program bonus amount to accrue during a quarter, the Company must achieve a pre-tax income, determined without regard to accruals hereunder and accruals for bonus payments under The 1995 BENCHMARQ Microelectronics, Inc. Bonus Plan ("PTIB"), return on net revenue of 12% ("ROR"). If this target is achieved, the Profit Sharing Program bonus pool shall accrue at 3.5% of the particular fiscal quarter's PTIB. ARTICLE 5 - ALLOCATION OF BONUS AMOUNTS To determine an employee's proportionate share of the Profit Sharing Program bonus pool for a particular fiscal quarter of the Company, the following steps shall be undertaken: Step 1: The Program accruals for the quarter shall be divided by the ------ aggregate base wages and salaries for the quarter of all employees eligible for a Program bonus ("PSP Percentage"). Step 2: The PSP Percentage shall then be multiplied by each eligible ------ "indirect employee's" base wage or salary for the quarter to determine such employee's bonus amount for the quarter. Step 3: The remaining portion of the Program accruals for the quarter ------ shall be divided equally, as a flat dollar amount, among the eligible "direct employees." The Committee shall determine whether an employee is a "indirect employee" or a "direct employee" in its sole and absolute discretion. If an eligible employee's pay rate changes during a quarter, the rate in effect at the end of such quarter shall be used for Program calculations. In addition, base wages and salaries shall exclude sales commissions, bonuses, overtime premiums, and such other forms of compensation as determined by the Committee. ARTICLE 6 - ADMINISTRATION The Board of Directors of the Company (the "Board") shall appoint a committee (the "Committee") of at least two individuals to administer the Profit Sharing Program; provided, however, if the Board does not appoint such individuals, the Compensation Committee of the Board shall serve as the Committee hereunder. The Committee shall administer and interpret the Profit Sharing Program in its sole and absolute discretion. Any determinations made by the Committee under the Profit Sharing Program shall be final and binding on participants and all other parties concerned. The Committee is authorized to amend or terminate the Profit Sharing Program in any manner it deems appropriate (including retroactive amendments) by a written instrument executed by the Committee or a member of the Committee who is authorized to execute such instrument on behalf of the Committee. ARTICLE 7 - MATCHING CONTRIBUTIONS In addition, upon achievement of the 15% pre-tax return on sales goal for a fiscal year, the PSP authorizes the Compensation Committee of the Board of Directors to, at its discretion, fund a 401(k) matching contribution pool of up to 2.5% of PTIB. Discretionary matching contributions, if any, will be made annually. 2 EX-10.3 4 THE BENCHMARQ 1989 STOCK OPTION PLAN EXHIBIT 10.3 ------------ BENCHMARQ Microelectronics, Inc. 1989 STOCK OPTION PLAN (Amended and Restated as of September 18, 1996) 1. Purposes of the Plan. The purposes of the Plan are to attract and -------------------- retain the best available personnel for positions of substantial responsibility, to provide additional incentives to all the Employees and Consultants of the Company and to promote the success of the Company's business. It is intended that each option granted hereunder will either qualify as an "incentive stock option", as defined in Section 422A(b) of the Code, or be a "non-statutory stock option." 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "Board" shall mean the Committee, if one has been appointed, or the ----- Board of Directors of the Company, if no Committee has been appointed. (b) "Book Value" means the excess of the value of the assets of an entity ---------- over the liabilities of such entity (determined in accordance with United States generally accepted accounting principles, consistently applied). (c) "Change in Control" shall mean, (i) the occurrence of an event of a ----------------- nature that would be required to be reported by the Company in response to Item 1 of a Current Report on Form 8-K (or any successor to such form) promulgated pursuant to the Exchange Act; provided, without limitation, such a Change in Control shall be deemed to have occurred if (A) any Person or Group (other than (I) the Company, (II) any wholly-owned Subsidiary of the Company, (III) any employee benefit plan, including, without limitation, an employee stock ownership plan, established by the Company or any wholly-owned Subsidiary of the Company or (IV) any trustee or other fiduciary holding securities under any employee benefit plan established by the Company or any wholly-owned Subsidiary of the Company), becomes the "beneficial owner" (as defined in Rule 13d-3 (or any successor to such rule) promulgated under the Exchange Act), directly or indirectly, of securities of the Company or any Material Subsidiary of the Company representing fifty percent (50%) or more of the combined voting power of the Company's or such Material Subsidiary's then outstanding securities or (b) during any period of twenty-four (24) months, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election by the Board or the nomination for election by the Company's stockholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of such twenty-four (24) month period or whose election or nomination for election was previously so approved; (ii) a merger, consolidation or conversion involving the Company is consummated, other than a merger, consolidation or conversion that would result in the holders of voting securities of the Company outstanding immediately prior thereto owning (directly or indirectly) not less than fifty percent (50%) of the combined voting power of the voting securities of the surviving or resulting entity outstanding immediately after such merger, consolidation or conversion, (iii) the stockholders of the Company approve a plan of complete liquidation of the Company (iv) an agreement for the sale or other disposition of all or substantially all of the Company's assets (evaluated on a consolidated basis, without regard to whether the sale or disposition is effected via a sale or disposition of assets of the Company, the sale or disposition of the securities of one or more Subsidiaries of the Company or the sale or disposition of the assets of one or more Subsidiaries of the Company) is consummated, (v) the Company issues securities in an exchange of securities, other than an exchange of securities (including all related exchanges of securities) that would result in the holders of voting securities of the Company outstanding immediately prior thereto continuing to own not less than fifty percent (50%) of the combined voting power of the voting securities of the Company to be outstanding immediately subsequent to such exchange of securities or (vi) the stockholders of the Company are issued securities in an exchange of securities, other than an exchange of securities (including all related exchanges of securities) that would result in the holders of voting securities of the Company outstanding immediately prior thereto owning not less than fifty percent (50%) of the combined voting power of the voting securities (which are to be outstanding immediately subsequent to such exchange of securities) of the issuer of the securities issued in such exchange of securities. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and ---- any successor legislation thereto. (e) "Committee" shall mean the Committee appointed by the Board of --------- Directors in accordance with Section 4(a) of the Plan, if one is appointed. (f) "Common Stock" shall mean the common stock, par value $0.001 per ------------ share, of the Company. (g) "Company" shall mean BENCHMARQ Microelectronics, Inc., a Delaware ------- corporation. (h) "Consultant" shall mean any Person who or which is engaged by the ---------- Company or any Parent or Subsidiary of the Company to render consulting services and is compensated for such consulting services. (i) "Continuous Status as an Employee" shall mean the absence of any -------------------------------- interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted while an Employee is on sick leave, military leave or any other leave of absence approved by the Board, if the period of such leave does not exceed 90 days, or, if longer, so long as the Employee's right to reemployment with the Company or any Parent or Subsidiary is guaranteed either by statute or contract. (j) "Corporate Transaction" shall mean any recapitalization (other than a --------------------- transaction within the scope of Section 11(a)), merger, consolidation or conversion involving the Company or any exchange of shares involving the Common Stock. (k) "Corporate Transaction Consideration" shall have the meaning set ----------------------------------- forth in Section 11(c) of the Plan. (l) "Employee" shall mean any individual, including an officer or -------- director, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended, and any successor legislation thereto. (n) "Expiration Date" shall mean the date on which the term of an Option --------------- expires. (o) "Group" shall have the meaning ascribed to such term in Section 13(d) ----- of the Exchange Act. (p) "Incentive Stock Option" shall mean an option granted under the Plan ---------------------- that is intended to qualify as an incentive stock option within the meaning of Section 422A(b) of the Code. -2- (q) "Material Subsidiary" shall mean any Subsidiary of which the Book ------------------- Value or fair market value (whichever is greater) constitute fifty percent (50%) or more of the Book Value of the Company. The fair market value of a Subsidiary will be determined in good faith by the Board. (r) "Non-Statutory Stock Option" shall mean an option granted under the -------------------------- Plan that does not (whether at the time of grant or thereafter) qualify as an Incentive Stock Option. (s) "Option" shall mean an option which is granted pursuant to the Plan to ------ purchase Shares. (t) "Optioned Stock" shall mean the Shares subject to an Option. -------------- (u) "Optionee" shall mean an Employee or Consultant to whom an Option has -------- been granted. (v) "Parent" shall mean a "parent corporation", whether now or hereafter ------ existing, as defined in Section 425(e) of the Code. (w) "Person" shall mean any individual, employee benefit plan, ------ corporation, trust, partnership, joint venture, limited liability company or other business entity. (x) "Permitted Modification" shall be deemed to be any modification of an ---------------------- Option which is made in connection with a Corporate Transaction and which provides that subsequent to the consummation of the Corporate Transaction (A) the exercise price of such Option will be proportionately adjusted to reflect the exchange ratio applicable to the particular Corporate Transaction and/or (B) the nature and amount of consideration to be received upon exercise of the Option will be the same (on a per share basis) as was received by persons who were holders of Shares immediately prior to the consummation of the Corporate Transaction. (y) "Plan" shall mean this 1989 Stock Option Plan. ---- (z) "Share" shall mean a share of Common Stock. ----- (aa) "Subsidiary" shall mean a "subsidiary corporation", whether now or ---------- hereafter existing, as defined in Section 425(f) of the Code. 3. Stock Subject to the Plan. Subject to provisions of Section 11 of the ------------------------- Plan, the aggregate number of Shares which may be optioned and sold under the Plan is 823,232 (after giving effect to all exercises of Options prior to September 18, 1996). The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grants under the Plan. -3- 4. Administration of the Plan. -------------------------- (a) Procedure. The Plan shall be administered by the Board of Directors --------- of the Company; provided, however, the Board of Directors may appoint a Committee consisting of not less than three members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. Once appointed, the Committee shall continue to serve until otherwise directed by the Board of Directors. From time to time the Board of Directors may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause), and appoint new members in substitution therefor, fill vacancies however caused and remove all members of the Committee, and thereafter directly administer the Plan. Members of the Board who are either eligible for Options or have been granted Options may vote on any matters affecting the administration of the Plan or the grant of any Options pursuant to the Plan, except that no such member shall act upon the granting of an Option to himself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting of Options to him. So long as the Company has equity securities registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in accordance with the requirements of Rule 16b-3 promulgated under the Exchange Act. (b) Powers of the Board. Subject to the provisions of the Plan, the Board ------------------- shall have the authority, in its discretion: (i) to grant Options; (ii) to determine, in accordance with Section 8(b) of the Plan, the fair market value per Share of the Common Stock; (iii) to determine, in accordance with Section 8(a) of the Plan, the exercise price per Share at which Options may be exercised; (iv) to determine the Employees and Consultants to whom, and the time or times at which, Options shall be granted, the number of Shares to be represented by each Option and whether such Options shall be Incentive Stock Options, Non-Statutory Stock Options or any combination thereof; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations relating to the Plan; (vii) to determine the terms and provisions of each Option granted (which need not be identical) and, with the consent of the holder thereof, to modify or amend any outstanding Option; (viii) to accelerate or defer (with the consent of the Optionee) the exercise date of any outstanding option; (ix) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Board; and (x) to make all other determinations deemed necessary or advisable for the administration of the Plan. (c) Effect of Board's Decision. All decisions, determinations and -------------------------- interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. 5. Eligibility. ----------- (a) Grant of Options. Incentive Stock Options may be granted only to ---------------- Employees. Non-Statutory Stock Options may be granted to either Employees or Consultants. An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options. (b) No Right of Employment. The Plan shall not confer upon any Optionee ---------------------- any right with respect to continuation of employment by, or consulting relationship with, the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time. (c) Limitation Upon Incentive Stock Options. Subject to the provisions of --------------------------------------- this Section 5, to the extent that the aggregate fair market value of Shares with respect to which Incentive Stock Options (determined without regard to the provisions of this Section 5) are exercisable for the first time -4- by any Employee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such Options shall be treated as Options that are Non-Statutory Stock Options. For purposes of this Section 5(c), which shall be applied by taking Options into account in the order in which they were granted, the fair market value of any Shares shall be determined as of the time the Option with respect to such Shares is granted. 6. Term of Plan. The Plan shall become effective upon the date of its ------------ adoption by the Board of Directors or, if earlier, the date of its approval by vote of the holders of a majority of the outstanding Shares entitled to vote on the adoption of the Plan. It shall continue in effect for a term of ten (10) years from such date, unless sooner terminated under Section 12 of the Plan. 7. Term of Option. The term of each Option shall be ten (10) years from -------------- the date of grant thereof or such shorter term as may be determined by the Board. However, in the case of any Incentive Stock Option granted to an Employee who, at the time of grant, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of such Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter time as may be determined by the Board. 8. Exercise Price and Method of Payment. ------------------------------------ (a) Exercise Price. The per Share exercise price for the Shares to be -------------- issued pursuant to exercise of an Option shall be such price as is determined by the Board, but in the case of an Incentive Stock Option, such price shall not be less than 100% (or, in the case of an Incentive Stock Option granted to an Employee who, at the time of grant, owns stock representing more than ten (10%) percent of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, 110%) of the fair market value per Share on the date such Option was granted. (b) Fair Market Value. For purposes of the Plan, the term "fair market ----------------- value" on any date shall mean (i) if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of the Common Stock on the composite tape, as published in the Wall Street Journal, of the principal national securities exchange on which the Common Stock is so listed or admitted to trade, on such date or, if there is no trading in Shares on such date, then the closing price of the Common Stock as quoted on such composite tape on the next preceding date on which there was trading in such Shares; (ii) if the Common Stock is not listed or admitted to trade on a national securities exchange, then the closing price of the Common Stock as quoted on the National Market System of the National Association of Securities Dealers, Inc. ("NASD"); (iii) if the Common Stock is not listed or admitted to trade on a national securities exchange or the National Market System of the NASD, the mean between the bid and asked price for the Common Stock on such date, as furnished by the NASD through NASDAQ or a similar organization if NASDAQ is no longer reporting such information; or (iv) if the Common Stock is not listed or admitted to trade on a national securities exchange or the National Market System of the NASD and if bid and asked prices for the Common Stock are not so furnished by the NASD or a similar organization, the values established by the Board for purposes of granting Options under the Plan. Fair market value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. (c) Payment. Payment for Shares issuable upon exercise of an Option shall ------- be made in cash, or by check, promissory note, or if authorized by the Board, by delivery of other Shares having a fair market value on the date of delivery equal to the aggregate exercise price of the Shares as to which said Option is being exercised, or by any combination of such methods of payment or by any other method of payment as may be permitted under applicable law and as may be authorized by the Board. -5- 9. Exercise of Option. ------------------ (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted ----------------------------------------------- hereunder shall be exercisable at such times under such conditions as shall be determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any form of consideration and method of payment allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date as of which the stock certificate is issued, except as provided in Section 11 of the Plan. Each exercise of an Option shall reduce, pro tanto, the total number of Shares that may thereafter be purchased under such Option. Subject to the provisions of Section 5(c), in no event shall the exercise of an Incentive Stock Option by an Employee have any effect on the exercise of any Non-Statutory Stock Options granted to such Employee, nor shall the exercise of a Non-Statutory Stock Option have any effect on the exercise of any Incentive Stock Options granted to such Employee. (b) Termination of Status as an Employee. If an Optionee ceases to be an ------------------------------------ Employee, he may, but only prior to the earlier of (i) the close of business on the Expiration Date or (ii) the close of business on the last day of the period ending thirty (30) days after the date he ceases to be an Employee, exercise his Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at such date, or does not exercise it within the time specified herein, the option shall terminate. (c) Disability of Employee. Notwithstanding the provisions of Section ---------------------- 9(b) above, in the event an Employee is unable to continue his employment with the Company as a result of his permanent and total disability (as defined in Section 22(e)(3) of the Code), he may, but only prior to the earlier of (i) the close of business on the Expiration Date or (ii) the close of business on the last day of the period ending twelve (12) months from the date of termination, exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at such date, or if he does not exercise it within the time specified herein, the Option shall terminate. (d) Death of Employee. Notwithstanding the provisions of Section 9(b) ----------------- above, upon the death of an Employee, any Option held by him shall terminate and be of no further effect, except as provided below: (i) If the Employee's death occurs during the term of the Option and, at the time of his death, the Employee was an Employee of the Company and had been in Continuous Status as an Employee since the date of grant of the Option, the Option may be exercised, at any time prior to the earlier of (A) the close of business on the Expiration Date or (B) the close of business on the last day of the period ending twelve (12) months following the date of the Employee's death, by the Employee's estate or by the person who acquired the right to exercise the Option by bequest or inheritance, but only as to the number of Shares subject to the Option as to which the right to exercise had accrued to the Employee at the date of death. -6- (ii) If the Employee's death occurs within thirty (30) days after the termination of his Continuous Status as an Employee, the Option may be exercised, at any time prior to the earlier of (A) the close of business on the Expiration Date or (B) the close of business on the last day of the period ending three (3) months following the date of the Employee's death, by the Employee's estate or by a person who acquired the right to exercise the option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. (e) Death, Disability or Termination of Consultants. Options granted ----------------------------------------------- under the Plan to Consultants may contain such terms and conditions with respect to the death or disability of a Consultant or the termination of a Consultant's consulting relationship with the Company as the Board deems necessary or appropriate. Such terms and conditions will be set forth in the option agreement referenced in Section 15 of the Plan. (f) Vesting and Exercise of Vested Options. Each Option granted pursuant -------------------------------------- to the Plan may only be exercised to the extent that the Optionee is vested in such Option. Each Option shall vest separately in accordance with the option vesting schedule determined by the Board, which will be incorporated into the option agreement entered into between the Company and such Optionee. The option vesting schedule may be accelerated if, in the sole discretion of the Board, the acceleration of the option vesting schedule would be in the best interests the Company. Upon the occurrence of a Change in Control, all Options which have not previously been terminated, exercised or cancelled shall become fully vested and immediately exercisable. 10. Non-Transferability of Options. No Option granted hereunder may be ------------------------------ sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. Any Option granted hereunder may be exercised, during the lifetime of the Optionee, only by the Optionee. 11. Adjustments Upon Changes in Capitalization or Merger. ---------------------------------------------------- (a) Reorganizations. Subject to any required action by the stockholders --------------- of the Company, the number of Shares covered by each outstanding Option, and the aggregate number of Shares which have been authorized for issuance under the Plan, as well as the exercise price per Share covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split or the payment of a stock dividend with respect to the Common Stock or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. (b) Dissolution/Liquidation. In the event of the dissolution or ----------------------- liquidation of the Company, each Option shall terminate as of a date to be fixed by the Board; provided, however, that not less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee. During such period each Option which has not previously been terminated, exercised or cancelled will fully vest and become exercisable (subject to the expiration of the term of such Option), notwithstanding the vesting schedule set forth in the option agreement evidencing the grant of such Option or any performance based restrictions. Upon the date fixed by the Board, any unexercised Option shall terminate and be of no further effect. -7- (c) Corporate Transactions in which the Common Stock Remains Outstanding. -------------------------------------------------------------------- If a Corporate Transaction is consummated and immediately following the consummation of such Corporate Transaction the Persons who were holders of Shares immediately prior to the consummation of such Corporate Transaction do not receive any securities or other property ("Corporate Transaction Consideration") as a result of such Corporate Transaction and continue to hold solely the shares of Common Stock held by them immediately prior to the consummation of such Corporate Transaction, the Options will remain outstanding and will continue in full force and effect (without any modification) following the consummation of such Corporate Transaction. (d) Corporate Transactions in which the Common Stock Does Not Remain ---------------------------------------------------------------- Outstanding. If a Corporate Transaction is consummated and immediately - ----------- following the consummation of such Corporate Transaction, the Persons who were holders of Shares immediately prior to the consummation of such Corporate Transaction do receive Corporate Transaction Consideration as a result of such Corporate Transaction or do not continue to hold solely the shares of Common Stock held by them immediately prior to the consummation of such Corporate Transaction, the terms and conditions of the Options will be modified as follows: (i) If the documentation pursuant to which a Corporate Transaction will be consummated provides for the assumption by the entity issuing Corporate Transaction Consideration to the Persons who were the holders of Shares immediately prior to the consummation of such Corporate Transaction of the Options granted pursuant to the Plan without any modification or amendment (other than Permitted Modifications), such Options will remain outstanding and will continue in full force and effect, subject to the Permitted Modifications, following the consummation of such Corporate Transaction. (ii) If the documentation pursuant to which a Corporate Transaction will be consummated does not provide for the assumption by the entity issuing Corporate Transaction Consideration to the Persons who were the holders of Shares immediately prior to the consummation of such Corporate Transaction of the Options granted pursuant to the Plan without any modification or amendment (other than Permitted Modifications), all vesting restrictions (performance based or otherwise) will accelerate and the holders of such Options may (subject to the expiration of the term of such Options) exercise such Options without regard to such vesting restrictions during the ten (10) day period immediately preceding the consummation of such Corporate Transaction. For purposes of the immediately preceding sentence, all performance based goals will be deemed to have been satisfied in full. The Company will provide each Optionee with reasonable notice of the termination of such vesting restrictions and the impending termination of such Options. Upon the consummation of such a Corporate Transaction, all unexercised Options will automatically terminate and cease to be outstanding. 12. Amendment and Termination of the Plan. ------------------------------------- (a) Amendment and Termination. The Board may terminate the Plan at any ------------------------- time. The Board may amend the Plan at any time in such respects as the Board may deem advisable; provided, that the following amendments shall require approval of the holders of a majority of the outstanding shares of the Company entitled to vote: (i) any change in the aggregate number of Shares which may be optioned and sold under the Plan, other than in connection with an adjustment under Section 11 of the Plan; (ii) any change in the designation of the class of Employees eligible to be granted Incentive Stock Options; or -8- (iii) if the Company has a class of equity security registered under Section 12 of the Exchange Act at the time of such amendment, any change in the Plan which would materially increase the benefits accruing to participants under the Plan. (b) Effect of Amendment or Termination. The amendment or termination of ---------------------------------- the Plan shall not change in any way the rights and obligations under any Option which was granted to an Optionee prior to such amendment or termination, unless the Optionee shall have consented to such change in writing. 13. Conditions Upon Issuance of Shares. No Options granted hereunder may ---------------------------------- be exercised and no Shares issuable upon exercise of such Options may be transferred unless and until the Board determines that such exercise/transfer will be made in compliance with all applicable laws, rules and regulations, including, without limitation, applicable securities laws, rules and regulations and the rules and regulations of any securities exchange or automated transaction reporting system on which the securities of the Company are listed or admitted to trading. The Company does not have any obligation to take any action to register or qualify Shares pursuant to applicable securities laws or to perfect an exemption from such registration/qualification requirements. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. 14. Reservation of Shares. The Company, during the term of the Plan and --------------------- each Option, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan and such Options. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 15. Option Agreement. Options shall be evidenced by written option ---------------- agreements in such form as the Board shall approve, and shall contain, in the case of Incentive Stock Options, such provisions as shall be necessary for the Options to which such option agreements relate to qualify as to Incentive Stock Options. 16. Stockholder Approval. If the Plan is adopted by action of the Board -------------------- of Directors prior to approval by the Company's stockholders, continuance of the Plan shall be subject to approval of the Plan by the stockholders of the Company within 12 months after the date on which the Plan is so adopted. With respect to any amendment of the Plan requiring approval of the Company's stockholders, such approval shall be obtained within 12 months before or after the date such amendment is adopted; provided, that if the Company has a class of equity security registered under Section 12 of the Exchange Act at the time of such amendment, such amendment shall not become effective until such approval has been obtained. If, after the Plan has been adopted, the Company registers any class of any equity security pursuant to Section 12 of the Exchange Act, the Plan and all amendments thereto since the Plan's adoption shall be submitted to the stockholders of the Company for their approval. Such approval shall be obtained at or prior to the first annual meeting of stockholders held subsequent to the first such registration of securities. Such approval of the stockholders, and their approval of any subsequent amendment to the Plan requiring their approval, shall be solicited: (i) substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder; or (ii) after the Company has furnished in writing to the stockholders entitled to vote substantially the same information concerning the Plan as that which would be required by the rules and regulations then in effect under Section 14(a). -9- EX-10.4 5 THE BENCHMARQ 1995 FLEXIBLE STOCK OPTION PLAN EXHIBIT 10.4 ------------ BENCHMARQ MICROELECTRONICS, INC. 1995 FLEXIBLE STOCK OPTION PLAN (Amended and Restated as of September 18, 1996) I Purpose of Plan; Administration ------------------------------- I.1 Purpose. The purpose of the BENCHMARQ Microelectronics, Inc. 1995 ------- Flexible Stock Option Plan (the "Plan") is to strengthen BENCHMARQ Microelectronics, Inc. (the "Company") by providing a means of retaining and attracting competent personnel by extending to participating officers, employees, directors and consultants (as defined in Section 1.3) of the Company, or of a Parent or Subsidiary (as defined herein) of the Company, added long-term incentives for high levels of performance and for unusual efforts designed to improve the financial performance of the Company. It is intended that this purpose be achieved through the opportunity for ownership of shares of the common stock, par value $.001 per share, of the Company (the "Stock") and the benefits of stock appreciation offered under the Plan. It is further intended that pursuant to this Plan the Committee (as defined in Section 1.2) may grant either incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options. As used herein, the term "Parent" will be deemed to have the meaning set forth in Section 424(e) of the Code and the term "Subsidiary" will be deemed to have the meaning set forth in Section 424(f) of the Code. I.2 Administration. The Plan shall be administered by the -------------- Compensation Committee (the "Committee") established by the Board of Directors of the Company (the "Board"). Such Committee shall be comprised of two (2) or more directors, each of whom shall be "non-employee directors," as defined in Rule 16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the express provisions of the Plan, the Committee shall have the authority to construe and interpret the Plan, to define the terms used in the Plan, to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, to determine the duration and purposes of leaves of absence which may be granted to participants without constituting a termination of their employment or other service for purposes of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The determinations of the Committee on all matters referred to in this Plan shall be conclusive. No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to the Plan or any transaction under the Plan. Subject to the express provisions of the Plan, the Committee shall determine from the eligible class those individuals to whom incentive stock options or nonqualified stock options under the Plan shall be granted (the "Optionees"), the terms and provisions (which need not be identical) of the respective agreements (the "Option Agreements") evidencing such options, the time at which options shall be granted, and the number of shares of Stock subject to each option. I.3 Participation. Officers, employees, directors and consultants of ------------- the Company or any Parent or Subsidiary of the Company shall be eligible for selection to participate in the Plan upon approval by the Committee; provided, however, that only those individuals who are employed by the Company or a Parent or Subsidiary of the Company shall be eligible to receive incentive stock options. For purposes of the Plan, the term "consultant" shall mean any person or entity who or which is engaged by the Company or a Parent or Subsidiary of the Company to render consulting services and is compensated for such consulting services. -1- I.4 Stock Subject to the Plan. Subject to adjustment as provided in ------------------------- Section 3.1 hereof, the shares to be offered under the Plan shall be treasury shares or shares of the Company's authorized but unissued Stock. The aggregate number of shares of Stock to be issued upon exercise of all options granted under the Plan shall not exceed 500,000 shares (after giving effect to all exercises of options prior to September 18, 1996), subject to adjustment as set forth in Sections 3.1 hereof. The aggregate number of shares of Stock to be issued to any individual within any calendar year shall not exceed 100,000 shares. If any option granted hereunder shall lapse or terminate for any reason without having been fully exercised, the shares subject thereto shall again be available for purposes of the Plan. I.5 Restrictions on Exercise. No options granted hereunder may be ------------------------ exercised and no shares of Stock issuable upon exercise of such options may be transferred unless and until the Committee determines that such exercise/transfer will be made in compliance with all applicable laws, rules and regulations, including, without limitation, applicable securities laws, rules and regulations and the rules and regulations of any securities exchange or automated transaction reporting system on which the securities of the Company are listed or admitted to trading. The Company does not have any obligation to take any action to register or qualify shares of Stock pursuant to applicable securities laws or to perfect an exemption from such registration/qualification requirements. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares of Stock are being purchased only for investment and without any present intention to sell or distribute such shares of Stock if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. II Stock Options ------------- II.1 Grant and Option Price. The Committee may grant one or more ---------------------- options to any eligible individual. Options granted under the Plan shall be granted within ten (10) years from the earlier of the date the Plan is adopted by the Board or approved by the stockholders of the Company, and such options may be intended to qualify as Incentive Stock Options (as hereinafter defined), or the Committee may in its discretion grant nonqualified stock options under the Plan. All options shall be subject to the terms and conditions set forth in the Plan and such other terms and conditions established by the Committee as are not inconsistent with the purposes and provisions of the Plan. Except as otherwise provided herein, the purchase price of the Stock covered by each option shall be determined by the Committee and set forth in the Option Agreement, but as to Stock covered by an Incentive Stock Option the purchase price shall not be less than 100% of the Fair Market Value (as such term is defined in this Section 2.1) of such Stock on the date of the grant of the option. Notwithstanding the foregoing, the purchase price of Stock covered by an Incentive Stock Option granted to any individual who owns or is deemed to own more than 10% of the total combined voting power and value of all classes of stock of the Company, its Parent, if any, or a Subsidiary, shall not be less than 110% of the Fair Market Value (as such term is defined in this Section 2.1) of such Stock on the date of the grant of the option. For purposes of the Plan, the term "Fair Market Value" on any date shall mean (i) if the Stock is listed or admitted to trade on a national securities exchange, the closing price of the Stock on the Composite Tape, as published in the Wall Street Journal, of the principal national securities exchange on which the Stock is so listed or admitted to trade, on such date or, if there is no trading of the Stock on such date, then the closing price of the Stock as quoted on such Composite Tape on the next preceding date on which there was trading in such shares; (ii) if the Stock is not listed or admitted to trade or a national securities exchange, then the closing price of the Stock as quoted on the National Market System of the National Association of Securities Dealers, Inc. ("NASD"); (iii) if the Stock is not listed or admitted to trade on a national securities exchange or the -2- National Market System of the NASD, the mean between the bid and asked price for the Stock on such date, as furnished by the NASD through NASDAQ or a similar organization if NASDAQ is no longer reporting such information; or (iv) if the Stock is not listed or admitted to trade on a national securities exchange or the National Market System of the NASD and if bid and asked prices for the Stock are not so furnished by the NASD or a similar organization, the values established by the Committee for purposes of granting options under the Plan. In addition to the above rules, Fair Market Value shall be determined without regard to any restriction other than a restriction which, by its terms, will never lapse. II.2 Stock Option Agreement. Subject to the provisions of Section 1.2 ---------------------- hereof, each option granted pursuant to the Plan shall be evidenced by a Stock Option Agreement in substantially the form of Exhibit "A" or "B" attached hereto and incorporated fully herein by reference (each, an "Option Agreement"). Exhibit "A" shall be used whenever such option is intended to be an "incentive stock option" within the meaning of Section 422 of the Code ("Incentive Stock Option"). Exhibit "B" shall be used whenever such option is intended to be a nonqualified stock option, as determined in the sole and absolute discretion of the Committee. II.3 Option Period. Except as otherwise provided herein, each option ------------- and all rights or obligations thereunder shall expire on such date as the Committee shall determine (the "Expiration Date"), but not later than the tenth anniversary of the date on which the option is granted, and shall be subject to earlier termination as hereinafter provided. Notwithstanding the foregoing, the Expiration Date of an Incentive Stock Option granted to any individual who owns or is deemed to own more than 10% of the total combined voting power and value of all classes of stock of the Company, its Parent, if any, or a Subsidiary, shall be a date which is not later than the fifth anniversary of the date on which the option is granted, and shall be subject to earlier termination as hereinafter provided. II.4 Terms of Options. Each option granted under this Plan by its ---------------- terms shall require the officer, employee, director or consultant granted such option to remain in the continuous employ or service of the Company or of a Parent or Subsidiary of the Company for such period of time, if any, from the date of grant of such option before the right to exercise any part of the option will accrue as the Committee may determine at the time of granting such option. II.5 Exercise of Options. Each option shall become exercisable and the ------------------- total number of shares of Stock subject thereto shall be as the Committee shall determine, as set forth in the Option Agreement evidencing such option. The purchase price of the Stock purchased upon exercise of an option shall be paid in full in cash or by check at the time of each exercise of an option or by such other consideration as may be provided for in the Option Agreement by the Committee; provided, however, that if the Option Agreement so provides and upon receipt of all regulatory approvals, the person exercising the option may deliver, in payment of a portion or all of the purchase price, shares of Stock, including a multiple series of exchanges of such Stock, which shall be valued at the Fair Market Value of such Stock on the date of exercise of the option. No options shall be exercisable except in respect of whole shares of Stock. II.6 Nontransferability of Options. An option granted under the Plan ----------------------------- shall, by its terms, be nontransferable by the Optionee other than by will or by the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee or by the Optionee's duly appointed guardian or personal representative. -3- II.7 Termination of Relationship. --------------------------- (a) If the employment or other service of the Optionee is terminated for any reason other than (i) Disability (as hereinafter defined) of the Optionee, or (ii) death of the Optionee, an option (to the extent otherwise exercisable on the date of such termination) shall be exercisable by the Optionee at any time prior to the Expiration Date of the option or within thirty (30) days after the date of such termination of employment or other service, whichever is the shorter period. (b) If the Optionee's employment or other service is terminated by reason of the Optionee's Disability, an option (to the extent otherwise exercisable on the date of the Optionee's termination of employment or other service by reason of Disability) shall be exercisable by the Optionee at any time prior to the Expiration Date of the option or within twelve (12) months after the date of such termination, whichever is the shorter period. As used herein, the term "Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. The determination of whether or not an Optionee's employment or service is terminated by reason of Disability shall be in the sole and absolute discretion of the Committee. An individual shall not be considered Disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Committee may require. (c) If an Optionee dies while in the employ or other service of the Company or of a Parent of Subsidiary of the Company, the option shall be exercisable (to the extent otherwise exercisable on the date of the death of such Optionee) by the person or persons entitled to do so under the Optionee's will, or, if the Optionee shall fail to make testamentary disposition of said option or shall die intestate, by the Optionee's legal representative or representatives, at any time prior to the Expiration Date of the option or within twelve (12) months after the date of such death, whichever is the shorter period. (d) If an Optionee dies within thirty (30) days after his termination of employment or other service, or within the twelve-month period described in subsection (b) above, an option shall be exercisable (to the extent otherwise exercisable on the date of such termination) by the person or persons entitled to do so under the Optionee's will, or, if the Optionee shall fail to make testamentary disposition of said option or shall die intestate, by the Optionee's legal representative or representatives, at any time prior to the Expiration Date of the option or within three (3) months after the date of death, whichever is the shorter period. II.8 Issuance of Stock Certificates. Upon exercise of an option, but ------------------------------ subject to the provisions of Section 3.6 of this Plan, the person exercising the option shall be entitled to one (1) stock certificate evidencing the shares of Stock acquired upon such exercise; provided, however, that any person who tenders shares of Stock in payment of a portion or all of the purchase price of Stock purchased upon exercise of the option shall be entitled to receive a separate certificate representing the number of shares purchased in consideration of the tender of such Stock. II.9 Limitation on Grant of Incentive Stock Options. The aggregate Fair ---------------------------------------------- Market Value (determined at the time the option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year (under all such plans of the individual's employer and its Parent or Subsidiary) shall not exceed $100,000. In the event the limits of this Section 2.9 would otherwise be exceeded, the Optionee may still exercise his option, but such option, to the extent of such excess, shall be deemed to be a nonqualified stock option. -4- II.10 Other Limitations. The Board shall impose any other limitations on ----------------- the terms and conditions of Incentive Stock Options granted under the Plan required in order that such options qualify as Incentive Stock Options as that term is defined in Section 422 of the Code. II.11 "Stand-Off" Agreement. By exercising an option granted under the --------------------- Plan, each Optionee will be deemed to have agreed for a period of time (not to exceed 90 days, but up to 270 days if approved by a majority of the Board) from the effective date of any registration (other than a registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"), is applicable) of securities of the Company (upon request of the Company or of the underwriters managing any underwritten offering of the Company's securities) not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Stock received upon exercise of an option or any shares of Stock covered by an option granted under the Plan, other than shares of Stock included in the registration, without the prior written consent of the Company or such underwriters, as the case may be. III Other Provisions ---------------- III.1 Adjustments Upon Changes in Capitalization or Merger. Subject to any ---------------------------------------------------- required action by the stockholders of the Company, the number of shares of Stock covered by each outstanding option, and the aggregate number of shares of Stock which have been authorized for issuance under the Plan, as well as the exercise price per share of Stock covered by each such outstanding option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a stock split or the payment of a stock dividend with respect to the Stock or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to an option. In the event of the dissolution or liquidation of the Company, each Option shall terminate as of a date to be fixed by the Committee; provided, however, that not less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee. During such period each option which has not previously been terminated, exercised or canceled will fully vest and become exercisable (subject to the expiration of the term of such option), notwithstanding the vesting schedule set forth in the Option Agreement evidencing the grant of such option or any performance based restriction. Upon the date fixed by the Committee, any unexercised option shall terminate and be of no further effect. If a Corporate Transaction (as hereinafter defined) is consummated and immediately following the consummation of such Corporate Transaction the persons who were holders of shares of Stock immediately prior to the consummation of such Corporate Transaction do not receive any securities or other property ("Corporate Transaction Consideration") as a result of such Corporate Transaction and continue to hold solely the shares of Stock held by them immediately prior to the consummation of such Corporate Transaction, the options will remain outstanding and will continue in full force and effect (without any modification) following the consummation of such Corporate Transaction. If a Corporate Transaction is consummated and immediately following the consummation of such Corporate Transaction the persons who were holders of shares of Stock immediately prior to the consummation of such Corporate Transaction do receive Corporate Transaction Consideration as a -5- result of such Corporate Transaction or do not continue to hold solely the shares of Stock held by them immediately prior to the consummation of such Corporate Transaction, the terms and conditions of the options will be modified as follows: (i) If the documentation pursuant to which a Corporate Transaction will be consummated provides for the assumption by the entity issuing Corporate Transaction Consideration to the persons who were the holders of shares of Stock immediately prior to the consummation of such Corporate Transaction of the options granted pursuant to the Plan without any modification or amendment (other than Permitted Modifications (as hereinafter defined)), such options will remain outstanding and will continue in full force and effect, subject to the Permitted Modifications, following the consummation of such Corporate Transaction. (ii) If the documentation pursuant to which a Corporate Transaction will be consummated does not provide for the assumption by the entity issuing Corporate Transaction Consideration to the persons who were the holders of shares of Stock immediately prior to the consummation of such Corporate Transaction of the options granted pursuant to the Plan without any modification or amendment (other than Permitted Modifications), all vesting restrictions (performance based or otherwise) will accelerate and the holders of such options may (subject to the expiration of the term of such options) exercise such options without regard to such vesting restrictions during the ten (10) day period immediately preceding the consummation of such Corporate Transaction. For purposes of the immediately preceding sentence, all performance based goals will be deemed to have been satisfied in full. The Company will provide each Optionee with reasonable notice of the termination of such vesting restrictions and the impending termination of such options. Upon the consummation of such a Corporate Transaction, all unexercised options will automatically terminate and cease to be outstanding. As used herein, the term "Corporate Transaction" will be deemed to mean any sale of all or substantially all of the assets of the Company or the merger of the Company with or into another corporation. As used herein, the term "Permitted Modifications" will be deemed to mean any modification of an option which is made in connection with a Corporate Transaction and which provides that subsequent to the consummation of the Corporate Transaction (i) the exercise price of such option will be proportionately adjusted to reflect the exchange ratio applicable to the particular Corporate Transaction and/or (ii) the nature and amount of consideration to be received upon exercise of the option will be the same (on a per share basis) as was received by persons who were holders of shares of Stock immediately prior to the consummation of the Corporate Transaction. Notwithstanding the foregoing, in the event of the consummation of a Corporate Transaction in which a Change in Control (as hereinafter defined) occurs, all vesting restrictions (performance based or otherwise) applicable to options will accelerate and the holders of such options may (subject to the expiration of the term of such options) exercise such options without regard to such vesting restrictions. For purposes of the immediately preceding sentence, all performance based goals will be deemed to have been satisfied in full. As used herein, the term "Change in Control" will be deemed to mean (i) a merger of the Company with or into another corporation is consummated, other than a merger that would result in the holders of voting securities of the Company outstanding immediately prior thereto owning (directly or indirectly) not less than fifty percent (50%) of the combined voting power of the voting securities of the surviving or resulting entity outstanding immediately after such merger or (ii) an agreement for the sale or other disposition of all or substantially all of the Company's assets (evaluated on a consolidated basis, without regard to whether the sale or disposition is effected via a sale or disposition of assets of the Company, the sale or disposition of the securities of one or more Subsidiaries of the Company or the sale or disposition of the assets of one or more Subsidiaries of the Company) is consummated. -6- III.2 Continuation of Employment. Nothing contained in the Plan (or in -------------------------- any option granted pursuant to the Plan) shall confer upon any Optionee any right to continue in the employ or other service of the Company or any Parent or Subsidiary or constitute any contract or agreement of employment or interfere in any way with the right of the Company or any Parent or Subsidiary to reduce any person's compensation from the rate in existence at the time of the granting of an option or to terminate such person's employment or other service. Nothing contained herein or in any Option Agreement shall affect any other contractual rights of an employee. III.3 Withholding. The Company or the Parent or any Subsidiary of the ----------- Company shall have the right to deduct any sums that the Committee reasonably determines that federal, state or local tax law requires to be withheld with respect to the exercise of any option or as otherwise may be required by those laws. The Company or the Parent or any Subsidiary of the Company may require as a condition to issuing shares of Stock upon exercise of an option that the Optionee or other person exercising the option pay any sums that federal, state or local tax law requires to be withheld with respect to the exercise. Neither the Company nor the Parent or any Subsidiary of the Company shall be obligated to advise any Optionee of the existence of the tax or the amount which the employer corporation will be so required to withhold. Upon the exercise of a nonqualified stock option, if tax withholding is required, an Optionee may, with the consent of the Committee, have shares of Stock withheld ("Share Withholding") by the Company from the shares of Stock otherwise to be received; provided, that if the Optionee is subject to the provisions of Section 16 under - -------- the Exchange Act, no Share Withholding shall be permitted unless such transaction complies with the requirements of Rule 16b-3 promulgated under the Exchange Act. The number of shares so withheld should have an aggregate Fair Market Value on the date of exercise sufficient to satisfy the applicable withholding taxes. III.4 Amendment and Termination. The Board may at any time suspend or ------------------------- terminate the Plan and may, with the consent of the holder of an option, make such modifications of the terms and conditions of such holder's option as it shall deem advisable. No option may be granted during any suspension of the Plan or after such termination. The amendment, suspension or termination of the Plan shall not, without the consent of the Optionee, alter or impair any rights or obligations under any option theretofore granted under the Plan. The Board may at any time amend the Plan as it shall deem advisable without further action on the part of the stockholders of the Company; provided, that -------- the Board may not amend any provision of the Plan relating to the amount and price of Stock subject to the option granted hereunder or the timing of grants hereunder more than once every six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder; and provided further, that any amendment to the Plan must be -------- ------- approved by the stockholders of the Company, if the amendment would (i) increase the aggregate number of shares of Stock which may be issued pursuant to options granted under the Plan; (ii) change the minimum option price; (iii) increase the maximum terms of options provided for herein; (iv) materially modify the requirements as to eligibility for participation in the Plan; (v) remove the administration of the Plan from the Committee; or (vi) materially increase the benefits accruing to holders of options under the Plan. Notwithstanding the above, the Committee may grant to an Optionee, if he is otherwise eligible, additional options or, with the consent of the Optionee, may grant a new option in lieu of an outstanding option, at a price and for a term which in any respect is greater or less than that of the earlier option, subject to the general limitations of Article II hereof. III.5 Time of Grant and Exercise. The granting of an option pursuant to -------------------------- the Plan shall take place at the time of the Committee's action, as described in Section 2.1 hereof; provided, however, that if the appropriate resolutions of the Committee indicate that an option is to be granted as of and at -7- some future date, the date of grant shall be such future date. In the event action by the Committee is taken by written consent of its members, the action by the Committee shall be deemed to have been taken at the time the last member required for a valid action of the Committee signs the consent. An option shall be deemed to be exercised when the Secretary of the Company receives written notice of such exercise from the person entitled to exercise the option together with payment of the purchase price made in accordance with Section 2.5 of this Plan. III.6 Privileges of Stock Ownership; Non-Distributive Intent. The holder ------------------------------------------------------ of an option shall not be entitled to the privileges of ownership as to any shares of Stock not actually issued and delivered to the holder. Upon exercise of an option for Stock at a time when there is not in effect under the Act a registration statement relating to the shares of Stock issuable upon exercise thereof or not available for delivery a prospectus, the holder of the option shall represent and warrant in writing to the Company that, inter alia, the ----- ---- shares of Stock purchased are being acquired for investment and not with a view to the resale or distribution thereof. No shares of Stock shall be issued upon the exercise of any option unless and until there shall have been compliance with any then applicable requirements of the Securities and Exchange Commission (the "Commission"), other regulatory agencies having jurisdiction and any exchanges or automated quotation systems upon which securities subject to the option may be listed or admitted to trading. III.7 Effective Date of the Plan. The Plan shall be effective upon -------------------------- approval by the affirmative vote of the holders of a majority of the outstanding shares of Stock present and entitled to vote at a meeting duly held or by the written consent of the holders of a majority of the shares of Stock entitled to vote. III.8 Expiration. Unless previously terminated by the Board, the Plan ---------- shall expire at the close of business on the date which is the last day of the ten (10) year period beginning on the date on which the stockholders approve the Plan, and no option shall be granted under it thereafter, but such expiration shall not affect any option theretofore granted. III.9 Governing Law. The Plan and the options issued hereunder shall be ------------- governed by, and construed and enforced in accordance with, the laws of the State of Delaware applicable to contracts made and performed within that State. III.10 No Liability for Good Faith Determinations. Neither the members of ------------------------------------------ the Board nor any member of the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any option granted under it. III.11 Execution of Receipts and Releases. Any payment or any issuance or ---------------------------------- transfer of shares of Stock to the Optionee, or to his legal representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board may require any Optionee, legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. III.12 Company Records. Records of the Company or any Parent or Subsidiary --------------- of the Company regarding the Optionee's period of employment or other service, termination of employment or other service and the reason therefor, leaves of absence, re-employment and other matters shall be conclusive for all purposes hereunder, unless determined by the Board to be incorrect. -8- III.13 Information. The Company or any Parent or Subsidiary of the Company ----------- shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished all of the information or documentation which is necessary or required by the Board or the Committee to perform its duties and functions under the Plan. III.14 No Liability of Company. The Company assumes no obligation or ----------------------- responsibility to the Optionee or his personal representatives, heirs, legatees or distributees for any act of, or failure to act on the part of, the Board or the Committee. III.15 Company Action. Any action required of the Company shall be by -------------- resolution of its Board or by a person authorized to act by Board resolution. III.16 Severability. In the event any provision of this Plan shall be held ------------ to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but shall be fully severable and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein. III.17 Notice. Whenever any notice is required or permitted hereunder, ------ such notice must be in writing and personally delivered or sent by mail. Except as otherwise provided in Section 3.5 of this Plan, any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered or, whether actually received or not, on the third (3rd) business day after it is deposited in the United States mail, certified or registered, postage pre-paid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Company or an Optionee may change, at any time and from time to time, by written notice to the other, the address which it or he had theretofore specified for receiving notices. Until it is changed in accordance herewith, the Company and each Optionee shall specify as its and his address for receiving notices the address set forth in the Option Agreement pertaining to the shares to which such notice relates. III.18 Waiver of Notices. Any person entitled to notice hereunder may ----------------- waive such notice. III.19 Successors. The Plan shall be binding upon the Optionee, his heirs, ---------- legatees and legal representatives, upon the Company, its successors and assigns and upon the Board and its successors. III.20 Headings. The titles and headings of sections and paragraphs are -------- included for convenience of reference only and are not to be considered in construction of the provisions hereof. III.21 Word Usage. Words used in the masculine shall apply to the feminine ---------- where applicable and, wherever the context of this Plan dictates, the plural shall be read as the singular and the singular as the plural. -9- EX-11 6 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 BENCHMARQ MICROELECTRONICS, INC. COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ----------------- 1996 1995 1996 1995 ------------------- ----------------- Earnings: Net income....................................... $ 2,105 $ 831 $ 4,422 $ 2,852 Add: Interest expense, net of tax effect, on subordinated promissory notes assumed retired - 34 - 69 ------------------- ----------------- Adjusted net income.............................. $ 2,105 $ 865 $ 4,422 $ 2,921 =================== ================= Shares: Weighted average common shares outstanding....... 6,671 276 6,610 256 Weighted average common equivalent shares: Add: Common shares issued upon assumed conversion of preferred stock........... - 5,106 - 5,106 Common shares issued on assumed exercise of stock options and warrants.. 1,242 1,211 1,137 1,170 Less: Shares assumed repurchased.............. 579 122 448 123 ------------------- ----------------- Weighted average common and common equivalent shares........................................... 7,334 6,471 7,299 6,409 =================== ================= Earnings per common and common equivalent share.... $ 0.29 $ 0.14 $ 0.61 $ 0.46 =================== =================
EX-27 7 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the September 30, 1996 Balance Sheet and the Statement of Income for the nine months ended September 30, 1996 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,920,965 12,146,063 4,449,773 8,570 4,168,245 23,246,903 9,183,941 3,411,316 34,921,284 10,002,546 0 0 0 6,744 23,463,587 34,921,284 28,061,885 28,061,885 15,811,719 23,823,913 37,999 0 151,599 4,561,983 140,000 4,421,983 0 0 0 4,421,983 0.61 0.61
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