1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive addition materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CATALYST SEMICONDUCTOR, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CATALYST SEMICONDUCTOR, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
- - -----------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
2
CATALYST SEMICONDUCTOR, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 2, 1996
TO THE STOCKHOLDERS OF CATALYST SEMICONDUCTOR, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Catalyst Semiconductor, Inc., a Delaware corporation (the "Company"), will be
held on Friday, August 2, 1996 at 10:00 a.m., local time, at the Company's
principal executive offices in Sunnyvale, California for the following purposes:
1. To elect two Class I directors to serve for a three-year term
expiring upon the 1999 Annual Meeting of Stockholders or until
such directors' successors are duly elected and qualified.
2. To approve an amendment to the Company's Stock Option Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder by 830,000 shares.
3. To approve an amendment to the Company's 1993 Director Stock
Option Plan to increase the number of shares of Common Stock
reserved for issuance hereunder by 50,000 shares.
4. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending April 30,
1997.
5. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 28, 1996
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
3
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
FOR THE BOARD OF DIRECTORS
PETER COHN
Secretary
Santa Clara, California
July 3, 1996
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.
-2-
4
CATALYST SEMICONDUCTOR, INC.
----------------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Catalyst Semiconductor, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held on Friday, August 2, 1996 at 10:00 a.m., local time, or
at any adjournment thereof (the "Annual Meeting"), for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's principal executive offices at 1250
Borregas Avenue, Sunnyvale, California 94089. The telephone number of the
Company's principal offices is (408) 748-7700.
These proxy solicitation materials and the Company's Annual Report on
Form 10-K for the year ended April 30, 1996, including financial statements,
were mailed on or about July 3, 1996 to all stockholders entitled to vote at the
meeting.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on June 28, 1996
(the "Record Date") are entitled to notice of and to vote at the meeting. As of
May 25, 1996, 7,822,155 shares of the Company's Common Stock, $.001 par value,
were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock
on all matters presented at the Annual Meeting. Stockholders do not have the
right to cumulate their votes in the election of directors.
The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Solicitation of proxies by mail may be supplemented by
telephone, telegram, facsimile or personal solicitation by directors, officers,
regular employees or agents of the Company. No additional compensation will be
paid to such persons for such services.
5
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. Shares that are voted
"FOR," "AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the presence
or absence of a quorum for the transaction of business and (ii) the total number
of Votes Cast with respect to a proposal (other than the election of directors).
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes should
be counted for purposes of determining the presence or absence of a quorum for
the transaction of business, broker non-votes should not be counted for purposes
of determining the number of Votes Cast with respect to the particular proposal
on which the broker has expressly not voted. Accordingly, the Company intends to
treat broker non-votes in this manner. Thus, a broker non-vote will not affect
the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting must be
received by the Company no later than March 5, 1997 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors shall be
established by the Board or the stockholders of the Company. The number
currently fixed by the Board is five (5). The Company's Certificate of
Incorporation provides that the directors shall be divided into three (3)
classes, with the classes serving for staggered, three (3) year terms. Currently
there are two (2) directors in Class I, one (1) director in Class II and two (2)
directors in Class III. The Class I directors are up for election at the Annual
Meeting and accordingly, two (2) Class I directors are to be elected at the
Annual Meeting. Each Class I director will hold office until the 1999 Annual
Meeting or until his successor has been duly elected and qualified. The term of
the Class II director will expire at the Annual Meeting of Stockholders in 1997,
and the term of each Class III director will expire at the Annual Meeting of
Stockholders in 1998.
-2-
6
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominee named below each of whom currently is
a director of the Company. In the event that a nominee of the Company becomes
unable or declines to serve as director at the time of the Annual Meeting, the
proxy holders will vote the proxies for any substitute nominee who is designated
by the current Board of Directors to fill such vacancy. It is not expected that
the nominees listed below will be unable or will decline to serve as a director.
INFORMATION WITH RESPECT TO NOMINEES AND CONTINUING DIRECTORS
Set forth below are the names of, and certain information as of July 3,
1996 about, the nominees for Class I director as well as the current Class II
and Class III directors with unexpired terms.
NAME AGE PRINCIPAL OCCUPATION
- - ----------------------------------------- --- -----------------------------------------------
NOMINEES FOR AND CURRENT CLASS I DIRECTOR
Radu M. Vanco 46 Executive Vice President and Chief Operating
Officer of Catalyst Semiconductor, Inc.
Hideyuki Tanigami 46 President and Chief Executive Officer of
Marubun USA Corporation
CONTINUING CLASS II DIRECTOR
Patrick Verderico 52 Executive Vice President and Chief Operating
Officer of Maxtor Corporation
CONTINUING CLASS III DIRECTORS
C. Michael Powell 45 Chairman, President, Chief Executive Officer
and Chief Financial Officer of Catalyst
Semiconductor, Inc.
Lionel M. Allan 52 President and Chief Executive Officer of Allan
Advisors, Inc.
Except as indicated below, each nominee or incumbent director has been
engaged in the principal occupation set forth above during the past five years.
There are no family relationships between any directors or executive officers of
the Company.
C. Michael Powell joined the Company in August 1993. Mr. Powell has
served as Chairman since August 1995, as Chief Financial Officer since October
1995, as Chief Executive Officer and a director of the Company since July 1994
and as President of the Company since August 1993. From August 1993 to July
1994, Mr. Powell served as Chief Operating Officer of the Company. From April
1990 to July 1993, Mr. Powell served as Vice President of Product
-3-
7
Lines at Cypress Semiconductor Corporation, a semiconductor company. From July
1988 to March 1990, Mr. Powell served as the Vice President, General Manager of
the Memory Division of SEEQ Technology, Inc.. Prior to joining SEEQ, Mr. Powell
held various management positions with Fairchild Semiconductor, Telmoss and
Hewlett Packard. Mr. Powell holds Bachelors and Masters degrees in Physics from
Georgia Institute of Technology as well as M.S.E.E. and MBA degrees from
Stanford University.
Radu M. Vanco joined the Company in November 1992. Mr. Vanco has served
the Company as a director since November 1995, as Executive Vice President and
Chief Operating Officer since October 1995 and as Vice President, Engineering,
from November 1992 to October 1995. From 1991 to 1992, Mr. Vanco served as
director of engineering of Cypress Semiconductor. From 1985 to 1991, Mr. Vanco
held various positions at SEEQ Technology, Inc. Mr. Vanco holds an M.S. in
Electrical Engineering from the Polytechnical Institute, Bucharest, Romania.
Lionel M. Allan has served as a director of the Company since August
1995. Mr. Allan is President and Chief Executive Officer of Allan Advisors,
Inc., a legal consulting firm that he founded in 1992. Previously, and for more
than 20 years, Mr. Allan was in private law practice with Hopkins & Carley. Mr.
Allan is also a director and past Chairman of the Board of KTEH Public
Television Channel 54, in San Jose, California, a director of Accom, Inc., a
digital video systems company, and a director of Custom Chrome, Inc., a
motorcycle parts company.
Hideyuki Tanigami has served as a director of the Company since
February 1996. From 1985 to April 1994, Mr. Tanigami served as Vice President,
Corporate Development, of the Company. From January 1996 to present, he has
served as President and Chief Executive Officer of Marubun USA Corporation, an
electronics distribution company. From June 1994 to present, he has also served
as President of Technology Matrix, Inc., and since 1985 has been President of
Tanigami Associates, an international consulting firm.
Patrick Verderico has served as a director of the Company since April
1996. From April 1996 to present, Mr. Verderico has served as Executive Vice
President and Chief Operating Officer of Maxtor Corporation, a hard disk drive
company. From 1994 to March 1996, he served as Chief Financial Officer and Vice
President, Finance and Administration, of Creative Technology, a multimedia
products manufacturer. From 1992 to 1994, he served as Chief Financial Officer
and Vice President, Finance and Administration, of Cypress Semiconductor, and
from 1989 to 1992, served as Partner in Charge, West Region Manufacturing
Consulting of Coopers & Lybrand, an independent public accounting and consulting
firm. Prior thereto he held various positions with Phillips Semiconductors,
National Semiconductor and Fairchild Semiconductor.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eleven (11)
meetings during the period from April 1, 1995 to April 30, 1996 ("Fiscal Year
1996"), none of which were telephonic meetings. The Board of Directors has an
Audit Committee and a Compensation Committee. The Board of Directors has no
nominating committee or any committee performing similar functions.
-4-
8
The Audit Committee currently consists of Messrs. Tanigami and
Verderico. The Audit Committee is charged with reviewing the Company's annual
audit and meeting with the Company's independent accountants to review the
Company's internal controls and financial management practices. The Audit
Committee held two (2) meetings during the last fiscal year.
The Compensation Committee currently consists of Messrs. Tanigami and
Verderico. The Compensation Committee is responsible for reviewing and approving
the Company's compensation policies and the compensation paid to executive
officers. The Compensation Committee held nine (9) meetings during the last
fiscal year.
No incumbent director attended fewer than 75% of the meetings of the
Board of Directors and of the committees on which such director served and that
were held during the period such individual was a director during the Fiscal
Year 1996.
COMPENSATION OF DIRECTORS
The Company's non-employee directors, currently consisting of Messrs.
Allan, Tanigami and Verderico, receive cash compensation in the amount of $3,600
for each quarter in which they attend one or more meetings of the Board of
Directors. In addition, directors are reimbursed for reasonable out-of-pocket
expenses incurred in connection with attendance at such meetings.
Each non-employee director of the Company is entitled to participate in
the Company's 1993 Director Stock Option Plan (the "Director Option Plan") by
receiving automatic grants of Common Stock of the Company. Initial grants under
the Director Option Plan of options to purchase 20,000 shares each were made to
Messrs. Allan, Tanigami and Verderico on August 14, 1995, February 10, 1996 and
April 4, 1996, respectively, at exercise prices of $5.125, $6.00 and $5.00 per
share, respectively. On April 1, 1996, Mr. Allan was granted options under the
Director Option Plan to purchase 7,500 shares of Common Stock at an exercise
price of $5.00 per share. Each option expires five years from the date of grant.
All options which have been granted under the Director Option Plan are subject
to cumulative yearly vesting over a three-year period commencing one year after
the date of grant, and terminating five (5) years from the date of grant unless
terminated sooner upon termination of the optionee's status as a director or
otherwise pursuant to the Director Option Plan.
VOTE REQUIRED
The two (2) nominees receiving the highest number of affirmative votes
of the Votes Cast shall be elected as Class I directors. Votes withheld from the
director will be counted for purposes of determining the presence or absence of
a quorum but are not counted as affirmative votes. A broker non-vote will be
counted for purposes of determining the presence or absence of a quorum, but,
under Delaware law, will have no other legal effect upon the election of
directors.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE NOMINEES SET FORTH HEREIN.
-5-
9
PROPOSAL 2
APPROVAL OF AMENDMENT OF THE STOCK OPTION PLAN
At the Annual Meeting, stockholders are being asked to approve an
amendment (the "Option Plan Amendment") to the Catalyst Semiconductor, Inc.
Stock Option Plan (the "Option Plan") that would increase the shares reserved
for issuance thereunder by 830,000 shares of Common Stock.
GENERAL
The Option Plan provides for the grant of options, stock purchase
rights, stock appreciation rights ("SARs") and long-term performance awards to
officers, employees and consultants of the Company. The aggregate number of
shares reserved for issuance under the Option Plan includes options previously
granted and exercised under the Option Plan. The increase in shares reserved for
issuance under the Option Plan has been necessitated by the hiring of new
employees and the grant of additional stock options to current employees as
previously granted options vest and become exercisable. The increase will
provide additional stock to continue the Company's policy of equity ownership by
employees and consultants as an incentive to contribute to the Company's
success.
The Option Plan was adopted by the Board of Directors and approved by
the stockholders in 1989. An amendment and restatement of the Option Plan to
comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to comply with Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), to allow for cashless exercises and to
increase the number of shares available for issuance thereunder was approved by
the Board of Directors in March 1993 and by the stockholders in May 1993.
Amendments to the Option Plan to increase the number of shares
available for issuance thereunder and to limit the number of options, SARs and
stock purchase rights an employee may be granted under the Option Plan in any
fiscal year of the Company were approved by the Board of Directors in June 1995
and by the stockholders in July 1995. On May 30, 1996, the Board of Directors
approved the Option Plan Amendment subject to approval of the Company's
stockholders. The stockholders are being asked to approve the Option Plan
Amendment at the Annual Meeting.
Options granted under the Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Code or nonstatutory stock
options at the discretion of the Board of Directors and as reflected in the
terms of the written option agreement. The Option Plan is not a qualified
deferred compensation plan under Section 401(a) of the Code, and is not subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
A total of 3,330,000 shares of Common Stock have been reserved for
issuance over the term of the Option Plan, including the 830,000-share increase
for which stockholder approval is sought under this Proposal 2. As of April 30,
1996 and after giving effect to the Option Plan Amendment, 685,000 shares had
been issued upon exercise of options granted under the Option Plan, options for
2,286,000 shares were outstanding under the Option Plan (including options for
471,000 shares subject to stockholder approval at the Annual Meeting) and
359,000 shares
-6-
10
remained available for future grants (subject to stockholder approval at the
Annual Meeting). As of April 26, 1996, the fair market value of shares
underlying outstanding options was approximately $6.6875 per share based upon
the closing price of the Common Stock as reported on the Nasdaq National Market
on such date.
The Company cannot now determine the exact number of options to be
granted in the future to the Named Officers, all current executive officers as a
group or all employees (excluding executive officers). See "Additional
Information -- Employee Benefit Plans -- Option Grants in Fiscal Year 1996" for
the number of stock options granted to the Named Officers in Fiscal Year 1996.
During Fiscal Year 1996, (i) options to purchase 405,000 shares of Common Stock
were granted under the Option Plan to all Named Officers, (ii) options to
purchase 575,000 shares of Common Stock were granted under the Option Plan to
the current executive officers as a group (5 persons), (iii) options to purchase
50,000 shares of Common Stock were granted under the Option Plan to current
directors who are not executive officers as a group and (iv) options to purchase
725,000 shares of Common Stock were granted under the Option Plan to all
employees including current officers who are not executive officers, as a group.
PURPOSE
The purpose of the Option Plan is to provide incentive to eligible
employees, consultants and officers whose present and potential contributions
are important to the continued success of the Company, to afford these
individuals the opportunity to acquire a proprietary interest in the Company,
and to enable the Company to enlist and retain qualified personnel for the
successful conduct of its business.
ADMINISTRATION
The Option Plan may be administered by the Board of Directors or by a
committee of the Board of Directors and shall be administered in a manner that
complies with Rule 16b-3 under the Exchange Act. Currently the Option Plan is
administered by the Compensation Committee of the Board of Directors. Members of
the Board of Directors receive no additional compensation for their services in
connection with the administration of the Option Plan. All questions of
interpretation of the Option Plan are determined by the Board of Directors or
its committee and its decisions are final and binding upon all participants.
ELIGIBILITY
The Option Plan provides that either incentive stock options or
nonstatutory options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the Option Plan provides that nonstatutory options may be granted to
consultants (not including directors who are not compensated for their services
or are paid only a director's fee by the Company) of the Company or any of its
subsidiaries. The Board of Directors or its committee selects the optionees and
determines the number of shares to be subject to each option. In making such
determination, there are taken into account the duties and responsibilities of
the optionee, the value of the optionee's services, the optionee's present and
potential contribution to the success of the Company, and other relevant
factors.
-7-
11
The Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options (or rights) to any one employee during
any fiscal year shall be 750,000, provided that the Company may make an
additional one time grant of options (or rights) for 250,000 shares for any
newly hired employee. This limitation is intended to preserve the Company's
ability to deduct for federal income tax purposes any compensation expense
relating to stock options granted to certain executive officers under the Option
Plan. Without this limitation, federal tax legislation enacted in 1993 might not
allow the Company to deduct such compensation expense.
In addition to the foregoing limitation on discretion for certain
grants, there is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the
Company and the optionee. Each option is subject to the following additional
principal terms and conditions:
(a) Exercise of the Option. The Board of Directors or its committee
determines when options may be exercised. In general, such options become
exercisable on a ratable basis over four years. An option is exercised by giving
written notice of exercise to the Company specifying the number of full shares
of Common Stock to be purchased and by tendering of payment of the purchase
price. The option exercise price may be paid in cash, promissory note, shares of
the Company's Common Stock, or through a broker-dealer sale and remittance
procedure which will allow the optionee to exercise the option and sell the
purchased shares on the same day, with the sale proceeds used to satisfy the
option price payable for the purchased shares.
(b) Exercise Price. The exercise price of each option granted under the
Option Plan is determined by the Board of Directors or its committee and, in the
case of an incentive stock option, may not be less than 100% of the fair market
value of the Common Stock on the date the option is granted. The fair market
value per share is equal to the closing price of the Company's Common Stock on
the Nasdaq National Market on the last market trading day prior to the date of
grant. In the case of an incentive stock option granted to an optionee who owns
more than 10% of the voting power of all classes of stock of the Company, its
parent or subsidiaries, the exercise price must not be less than 110% of the
fair market value on the date of the grant.
(c) Termination of Employment. Currently, the Option Plan provides that
if the optionee's employment or consulting relationship terminates for any
reason other than disability or death, options under the Option Plan may be
exercised the period of time determined by the Board or Committee at the date of
grant but not later than six months (three months in the case of an incentive
stock option) after such termination and may be exercised only to the extent the
option was exercisable on the date of termination. In no event (either under the
current terms of the Option Plan or under the proposed amendments thereto) may
an option be exercised by any person after the expiration of its term.
-8-
12
(d) Disability. If an optionee is unable to continue his or her
employment or consulting relationship with the Company as a result of his total
and permanent disability, options may be exercised within six months of
termination and may be exercised only to the extent the option was exercisable
on the date of termination, but in no event may an option be exercised after its
expiration date.
(e) Death. Under the Option Plan, if an optionee should die while
employed or retained by the Company, options may be exercised within six months
after the date of death (or such other period of time not exceeding twelve
months as is determined by the Board or its committee and specified in the
option agreement) to the extent the options would have been exercisable on the
date of death. In no event may an option be exercised after its expiration date.
(f) Term of Options. The Option Plan provides that options granted
under the Option Plan shall be exercisable during the period of time specified
by the Board of Directors or its committee as provided in the option agreement
but as to incentive stock options, no later than ten years from the date of
grant. In general, these agreements provide for a term of ten years. Incentive
stock options granted to an optionee who, immediately before the grant of such
option, owned more than 10% of the total combined voting power of all classes of
stock of the Company, its parents or subsidiaries, may not in any case have a
term of more than five years. No option may be exercised by any person after its
expiration date.
(g) Option Not Transferable. An option is not transferable by the
optionee other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime and in the event of
the optionee's death by a person who acquires the right to exercise the option
by bequest or inheritance or by reason of the optionee's death.
(h) Acceleration of Options. In the event of a merger of the Company
with or into another corporation or a sale of substantially all of the Company's
assets, each option will be assumed or an equivalent option substituted by the
successor corporation. In the event that the successor corporation does not
assume the option or substitute an equivalent option, the Board shall provide
that the exercisability of all outstanding options shall be automatically
accelerated and that the options shall be exercisable for a period of not less
than fifteen (15) days following the date notice of such acceleration is given.
(i) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board of Directors or its committee.
OTHER AWARDS
The Option Plan also allows the Company to grant SARs, stock purchase
rights and long-term performance awards. SARs may be granted in connection with
or independent of options and entitle the holder thereof to receive an amount,
in cash or Common Stock, at the Company's discretion, equal to the excess of the
fair market value of the shares subject to the SAR on the date of its exercise
over the fair market value on the date of grant. Stock purchase rights allow an
offeree to purchase stock, subject to a right of the Company to repurchase
unvested shares in the event of termination of employment. Shares purchased
pursuant to stock purchase rights vest
-9-
13
over time, based on continued employment. Long-term performance awards are cash
or stock bonus awards which may be earned over a specified period after grant,
based upon performance or employment factors. No SARs, stock purchase rights or
long-term performance awards have been granted under the Option Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization upon
any stock split, reverse stock split, stock dividend, combination or
reclassification of Common Stock or any other increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the Option Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Board of Directors or its committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Option Plan at any time or from
time to time or may terminate it without approval of the stockholders; provided,
however, that stockholder approval is required for any amendment to the Option
Plan that increases the number of shares that may be issued under the Option
Plan, modifies the standards of eligibility, modifies the limitation on grants
to employees described in the Option Plan or results in other changes which
would require stockholder approval to qualify options granted under the Option
Plan as performance-based compensation under Section 162(m) of the Code, or so
long as the Company has a class of equity securities registered under Section 12
of the Exchange Act, materially increases the benefits to participants that may
accrue under the Option Plan. However, no action by the Board of Directors or
stockholders may alter or impair any option previously granted under the Option
Plan. Unless sooner terminated, the Option Plan will terminate on December 31,
2002, provided that any outstanding option, SAR, stock purchase right or long
term performance award under the Option Plan shall remain outstanding until they
expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE OPTION PLAN
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.
If an option granted under the Option Plan is an incentive stock
option, under U.S. tax laws the optionee will recognize no income upon grant of
the incentive stock option and incur no tax liability due to the exercise.
However, the excess of the value of the stock subject to the option over the
exercise price will be an item of alternative minimum taxable income which could
result in the optionee being subject to the alternative minimum tax for the year
of exercise. The Company will not be allowed a deduction for federal income tax
purposes as a result of the exercise of an incentive stock option regardless of
the applicability of the alternative minimum tax. Upon the sale or exchange of
the shares at least two years after grant of the option and one year after
receipt of the shares by the optionee, any gain will be treated as long-term
capital gain under
-10-
14
U.S. tax laws. If these holding periods are not satisfied, the optionee will
recognize ordinary income equal to the difference between the exercise price and
the lower of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain recognized on such a premature disposition of the shares
in excess of the amount treated as ordinary income will be characterized under
U.S. tax laws as long-term capital gain if the sale occurs more than one year
after exercise of the option or as short-term capital gain if the sale is made
earlier. Under current U.S. tax laws, the tax rate on long-term capital gains
under U.S. tax laws is capped at 28%. Capital losses are allowed under U.S. tax
laws in full against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income under U.S. tax laws at the time he or she is granted a nonstatutory
option. However, upon its exercise, under U.S. tax laws the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or 10% stockholder
of the Company, the date of taxation may be deferred unless the optionee files
an election with the Internal Revenue Service under Section 83(b) of the Code.
The income recognized by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company by payment in cash or out of the
current earnings paid to the optionee. Upon resale of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated
under U.S. tax laws as capital gain or loss, and will qualify for long-term
capital gain or loss treatment if the shares have been held for more than one
year.
Stock purchases, stock appreciation rights and long-term performance
awards will generally be taxed in the same manner as the exercise of a
nonstatutory stock option.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT
OF FEDERAL INCOME TAXATION UPON HOLDERS OF OPTIONS OR UPON THE COMPANY. IT ALSO
DOES NOT REFLECT PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast shall be required
to approve the proposed amendments to the Option Plan. If an insufficient number
of affirmative votes are obtained, the amendments to the Option Plan will not be
implemented.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE PROPOSED AMENDMENT TO THE OPTION PLAN.
-11-
15
PROPOSAL 3
APPROVAL OF AMENDMENT OF THE 1993 DIRECTOR STOCK OPTION PLAN
At the Annual Meeting, stockholders are being asked to approve an
amendment (the "Director Plan Amendment") to the Catalyst Semiconductor, Inc.
1993 Director Stock Option Plan (the "Director Option Plan") that would increase
the shares reserved for issuance thereunder by 50,000 shares of Common Stock.
GENERAL
The Director Option Plan provides for the grant of options to directors
who are not employees of the Company. The aggregate number of shares reserved
for issuance under the Director Option Plan includes options previously granted
and exercised under the Director Option Plan. The increase in shares reserved
for issuance under the Director Option Plan has been necessitated by the grant
of additional stock options to current directors as previously granted options
vest and become excercisable. The increase will provide sufficient additional
stock to continue the Company's policy of attracting and retaining highly
qualified personnel to serve as outside directors of the Company.
The Director Option Plan was adopted by the Board of Directors in
October 1991 and approved by the stockholders in May 1993. On May 30, 1996 the
Board of Directors approved the Director Plan Amendment, subject to approval of
the Company's stockholders. The stockholders are being asked to approve the
Director Plan Amendment at the Annual Meeting.
A total of 220,000 shares of Common Stock have been reserved for
issuance over the term of the Director Option Plan, including the 50,000-share
increase for which stockholder approval is sought in this Proposal 3. As of
April 30, 1996, and after giving effect to the Director Plan Amendment, 39,000
shares had been issued upon exercise of options granted under the Director
Option Plan, options for 88,332 shares were outstanding under the Director
Option Plan and 42,500 shares remained available for future grants. As of the
date hereof, an additional 50,000 shares are available for grant subject to
stockholder approval at the Annual Meeting. Shares not purchased under an option
prior to its expiration will be available for future option grants under the
Director Option Plan. As of April 30, 1996, the fair market value of shares
subject to outstanding options was approximately 6.6875 per share, based upon
the closing price of the Common Stock as reported on the Nasdaq National Market
on such date.
Employees and employee directors are ineligible to participate in the
Director Option Plan (other than with respect to options granted to them under
the Director Option Plan prior to commencement of employment with the Company).
The Company cannot now determine the exact number of options to be granted in
the future under the Director Option Plan. See "Proposal 1--Election of
Directors--Director Compensation" for the number of stock options granted to the
three current directors who are not employees of the Company during Fiscal Year
1996. See "--Eligibility" for a description of the basis upon which stock
options are granted under the Director Option Plan.
-12-
16
PURPOSE
The purpose of the Director Option Plan is to attract and retain highly
qualified personnel to serve as outside directors of the Company.
ADMINISTRATION
The Director Option Plan is designed to work automatically and not to
require administration. However, to the extent administration is necessary, it
will be provided by the Board of Directors. No discretion concerning decisions
regarding the Director Option Plan shall be afforded to any person who is not a
"disinterested" person under Rule 16b-3 promulgated under the Exchange Act. The
interpretation and construction of any provisions of the Director Option Plan by
the Board of Directors shall be final and conclusive. Members of the Board
receive no additional compensation for their services in connection with the
administration of the Director Option Plan.
ELIGIBILITY
The Director Option Plan currently provides for the grant of
nonstatutory options to non-employee directors of the Company. As currently in
effect, each such director is granted an option to purchase 20,000 shares of
Common Stock (the "Initial Option") on the date on which such person first
becomes a director, whether through election by the stockholders of the Company
or appointment by the Board of Directors to fill a vacancy or termination of
employment by the Company while remaining as a director. Thereafter, on April 1
of each year, each non-employee director is granted an option to purchase 7,500
shares of Common Stock (the "Subsequent Option") if, on such date, he or she has
served on the Company's Board for at least six months.
Except for automatic option grants under the Director Option Plan,
non-employee directors will not be eligible to receive any additional option
grants or stock issuances under the Director Option Plan. The Director Option
Plan provides for neither a maximum nor a minimum number of shares subject to
options that may be granted to any one non-employee director, but does provide
for the number of shares which may be included in any grant and the method of
making a grant. The Company currently has three non-employee directors.
TERMS OF OPTIONS
Options granted under the Director Option Plan have a term of five
years. Each option is evidenced by an option agreement between the Company and
the director to whom such option is granted and is subject to the following
additional terms and conditions:
(a) Rule 16b-3. Options granted to directors must comply with the
applicable provisions of Rule 16b-3, or any successor thereto, and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Director Option Plan transactions.
-13-
17
(b) Exercise of the Option: Currently, the Director Option Plan
provides that each option becomes exercisable cumulatively to the extent of 1/3
of the shares subject to the option on each of the first three anniversaries of
the date of grant. In either case, options granted under the Director Option
Plan are exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased and
tendering payment to the Company of the purchase price. Payment for shares
issued upon exercise of an option may consist of cash, check, promissory note,
an exchange of shares of the Company's Common Stock, which have been held for at
least six months, through a broker-dealer sale and remittance procedure which
will allow the optionee to exercise the option and sell the purchased shares
with sale proceeds used to satisfy the option price payable for the purchased
shares, delivery of an irrevocable subscription agreement for the shares which
irrevocably obligates the optionee to take and pay for the shares not more than
12 months after the date of delivery of the subscription agreement, or a
combination thereof.
(c) Option Price: The option price is determined by the Board of
Directors and under the Director Option Plan is 100% of the fair market value of
the Company's Common Stock on the date of grant. The Board of Directors
determines such fair market value based upon the closing sales price of the
Company's Common Stock on the Nasdaq National Market on the date of grant, or if
not a market trading day, on the last market trading day prior to the date of
grant.
(d) Termination of Status as a Director: The Director Option Plan
provides that if an optionee ceases to serve as a director of the Company for
any reason other than death or disability, options may be exercised within six
months after the date he or she ceases to be a director as to all or part of the
shares that the optionee was entitled to exercise at the date of such
termination but in no event may an option be exercised after its expiration
date.
(e) Death: If an optionee should die while serving as a director of the
Company, the option may be exercised at any time within one year after death but
only to the extent that the options were exercisable as of the date of death but
in no event after the expiration date of the option.
(f) Disability: If an optionee is unable to continue his or her service
as a director of the Company as a result of his or her total and permanent
disability, the option may be exercised at any time within six months of his or
her termination, but only to the extent he or she was entitled to exercise it at
the date of such termination. In no event may an option be exercised after its
termination date.
(g) Termination of Options: No option is exercisable by any person
after the expiration of five years from the date the option was granted.
(h) Nontransferability of Options: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order, and is exercisable only by the optionee
or a permitted transferee during his or her lifetime or, in the event of death,
by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
-14-
18
(i) Acceleration of Options: In the event of a merger or consolidation
of the Company with or into another corporation involving a change of control of
the Company, sale of all or substantially all of the assets of the Company, or
change of half of the incumbent directors following a meeting of stockholders,
the exercisability of the outstanding options shall be automatically accelerated
and each option shall be assumed by the successor corporation and remain
exercisable for a period of at least 90 days.
(j) Other Provisions: The option agreement may contain such other
terms, provisions and conditions not inconsistent with the Director Option Plan
as may be determined by the Board of Directors.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization such as
a stock split, reverse stock split, recapitalization, stock dividend or other
change in capital structure, an appropriate adjustment shall be made in the
number and class of shares of stock subject to the Director Option Plan, the
option price and in the number of shares subject to each option.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Director Option Plan from time to
time or may terminate it without approval of the stockholders, but no amendment
or termination shall be made that would impair the rights of any optionee under
any prior grant without his or her consent. In addition, the Company shall
obtain stockholder approval of any amendment to the Director Option Plan in such
a manner and to the extent necessary to comply with Rule 16b-3 under the
Exchange Act, the provisions of the Code, or any other applicable law or
regulation. Further, the provisions of the Director Option Plan concerning the
grants of options under the Director Option Plan may not be amended more than
once every six months. In any event, the Director Option Plan will terminate on
April 30, 2003.
TAX INFORMATION
Options granted under the Director Option Plan are nonstatutory stock
options. Under U.S. tax laws an optionee will not recognize any taxable income
at the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the then fair market value of the shares over the option price.
Because the optionee is a director of the Company, the date of taxation under
U.S. tax laws (and the date of measurement of taxable ordinary income) may be
deferred in certain circumstances unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Code. Upon resale of such
shares by the optionee, any difference between the sales price and the exercise
price, to the extent not recognized as ordinary income as provided above, will
be treated as capital gain (or loss). Under U.S. tax laws capital gain is fully
included in gross income. Capital losses are allowed in full against capital
gains plus $3,000 of other income. The Company will be entitled to a tax
deduction in the amount and at the time that the optionee recognizes ordinary
income under U.S. tax laws with respect to shares acquired upon exercise of a
nonstatutory option.
-15-
19
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT
OF FEDERAL INCOME TAXATION UPON HOLDERS OF OPTIONS OR UPON THE COMPANY. IT ALSO
DOES NOT REFLECT PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast shall be required
to approve the proposed amendment to the Director Option Plan. If an
insufficient number of affirmative votes are obtained, the amendment to the
Director Option Plan will not be implemented.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE PROPOSED AMENDMENT TO THE OPTION PLAN.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the year
ending April 30, 1997, and recommends that the stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Representatives of Price Waterhouse LLP are expected to be present at the Annual
Meeting of Stockholders and will have the opportunity to make a statement if
they so desire. The representatives also are expected to be available to respond
to appropriate questions from stockholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING APRIL 30, 1997.
-16-
20
ADDITIONAL INFORMATION
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company in
Fiscal Years 1996, 1995 and 1994 to (i) the Company's Chief Executive Officer,
(ii) the four most highly compensated officers other than the Chief Executive
Officer who served as executive officers at April 30, 1996, and (iii) two highly
compensated individuals who would have qualified under (ii) above except they
were not serving as executive officers at April 30, 1996 (collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ ------------------------------------
AWARDS PAYOUTS
------------------------- ----------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK UNDERLYING LTIP COMPENSA- FISCAL
POSITION SALARY($) BONUS($) SATION($) AWARDS($) OPTIONS(#)(1) PAYOUTS($) TION($)(2) YEAR
- - -------------------------- --------- -------- --------- ---------- ------------- ---------- ---------- ------
C. Michael Powell............ $331,501 $ 38,210 -- 150,000 $13,577 1996
President, Chief $259,519 $ 30,000 -- -- 350,000 -- $16,344 1995
Executive Officer and $149,038 $100,000 -- -- -- -- $12,596 1994
Chief Financial Officer
Radu M. Vanco................ $222,270 $ 9,334 155,000 $513 1996
Executive Vice President $188,808 $ 20,000 -- -- 169,166 -- -- 1995
and Chief Operating Officer $155,558 -- -- -- -- -- -- 1994
Alan L. Renninger............ $142,847 -- -- -- 20,000 -- $478 1996
Vice President, $127,452 -- -- -- 40,000 -- $432 1995
Technology Development $ 69,712 -- -- -- -- -- $58 1994
Chris Carstens............... $134,770 -- -- -- 50,000 -- $261 1996
Vice President, Quality $118,808 $ 10,000 -- -- 75,000 -- $232 1995
and Reliability $ 30,077 -- -- -- -- -- -- 1994
Donald B. Witmer(3).......... $217,367 -- -- -- 30,000 -- $211 1996
Vice President of Finance $179,760 $ 17,500 -- -- 168,223 -- -- 1995
and Administration $163,846 $ 40,000 -- -- -- -- -- 1994
Bharat Kumar (B.K.) Marya(4). $137,500 -- -- -- -- -- $35,688 1996
Chairman of the Board of $210,577 -- -- -- 223,333 -- $35,513 1995
Directors and Chief $257,855 -- -- -- -- -- $34,451 1994
Executive Officer
- - --------------
(1) The options listed with respect to Fiscal Year 1995 long-term
compensation awards include options granted upon the repricing (and
consequent cancellation) of previously granted options. Options to
purchase the following number of shares granted to the following
persons in Fiscal Year 1995 were issued as a result of the repricing on
May 14, 1994 of previously granted options: Mr. Powell - 250,000 (all
of which were originally granted in Fiscal Year 1994); Mr. Vanco -
121,666 (69,445 of which were originally granted in Fiscal Year 1994
and 52,221 of which were originally granted in Fiscal Year 1993); Mr.
Renninger - 30,000 (all of which were originally granted in Fiscal Year
1994); Mr. Carstens - 30,000 (all of which were originally granted in
Fiscal Year 1994); Mr. Witmer - 117,222 (100,556 of which were
originally granted in Fiscal Year 1994 and 16,666 of which were
originally granted in Fiscal Year 1993);; and Mr. Marya - 183,333
(100,000 of which were originally granted in Fiscal Year 1994 and
83,333 of which were originally granted in Fiscal Year 1993);. Such
repriced options have not been reflected as grants in prior Fiscal Year
long-term compensation awards. The repriced options retain the same
term and vesting schedule as the options that were replaced.
(2) The amount included under "All Other Compensation" represents the
dollar value of term life insurance premiums paid by the Company for
the benefit of such Named Officer.
(3) Mr. Witmer terminated his employment with the Company on September 29,
1995. Of the salary paid in Fiscal Year 1996, $106,425 constituted
consulting fees paid subsequent to his termination. See "Certain
Relationships and Related Transactions."
(4) Mr. Marya terminated his employment with the Company on July 13, 1994.
All salary referenced above following Mr. Marya's termination of
employment in Fiscal Year 1995 and in Fiscal Year 1996 constituted
payment pursuant to a severance and consulting agreement with Mr.
Marya. See "Certain Relationships and Related Transactions."
-17-
21
EMPLOYEE BENEFIT PLANS
Each current Named Officer is entitled to participate in the Option
Plan. The Option Plan provides for the grant of options, stock purchase rights,
SARs and long-term performance awards. For a description of the Option Plan see
"Proposal 2 -- Approval of Amendment to Stock Option Plan."
The following table sets forth certain information with respect to
stock option granted during Fiscal Year 1996 to the Named Officers. No SARs were
granted in Fiscal Year 1996. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over the
term of the option (the period from the grant date to the expiration date) based
on assumed rates of stock appreciation from the option exercise price of 5% and
10%, compounded annually. These amounts are based on certain assumed rates of
appreciation and do not represent the Company's estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of the Common Stock.
OPTION GRANTS IN FISCAL YEAR 1996
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
------------------------------------------------------------ ASSUMED ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF TOTAL PRICE APPRECIATION FOR OPTION TERM
SECURITIES OPTIONS GRANTED EXERCISE ----------------------------------
UNDERLYING TO EMPLOYEES IN OR BASE EXPIRATION
NAME OPTIONS GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5% ($) 10% ($)
- - --------------------------- ------------------ ---------------- ----------- ---------- -------- --------
C. Michael Powell.......... 50,000 3.7% $5.25 07/17/05 $165,085 $418,357
100,000 7.4% $6.00 02/10/06 $377,337 $956,245
Radu M. Vanco.............. 50,000 3.7% $5.25 07/17/05 $165,085 $418,357
50,000 3.7% $7.25 11/18/05 $227,974 $577,732
55,000 4.1% $6.00 02/10/06 $207,535 $525,935
Alan L. Renninger.......... 10,000 0.7% $7.25 11/18/05 $45,595 $115,546
10,000 0.7% $6.00 02/10/06 $37,734 $95,625
Chris Carstens............. 25,000 1.9% $5.25 07/17/05 $82,542 $209,179
25,000 1.9% $6.00 02/10/06 $94,334 $239,061
Donald B. Witmer........... 30,000 2.2% $5.25 07/17/05 $99,051 $251,014
The following table sets forth information with respect to options
exercised in Fiscal Year 1996 by the Named Officers and the value of unexercised
options at April 30, 1996.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
APRIL 30, 1996 ($) APRIL 30, 1996 (#)(1)
SHARES ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE (#) RECEIVED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- --------------- ------------ ----------- ------------- ----------- -------------
C. Michael Powell......... 25,000 $102,190 156,250 318,750 $742,209 $942,214
Radu M. Vanco............. 48,500 $119,558 44,990 230,676 $213,708 $726,036
Alan L. Renninger......... 11,500 $34,595 8,792 39,708 $41,763 $167,366
Chris Carstens............ 0 $0 32,645 92,355 $147,271 $242,417
Donald B. Witmer.......... 115,724 $556,408 63,500 0 $202,250 $0
B.K. Marya................ 0 $0 310,774 0 $1,445,700 $0
- - ----------------
(1) The fair market value of the Company's Common Stock at the close of business
on April 26, 1996 was $6.6875.
-18-
22
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Compensation
Committee Report and the Performance Graph shall not be incorporated by
reference into any such filings.
COMPENSATION COMMITTEE REPORT
The following is a report of the Compensation Committee of the Board of
Directors of the Company (the "Committee") describing the compensation
philosophy and parameters applicable to the Company's executive officers with
respect to the compensation paid to such officers during Fiscal Year 1996. The
actual compensation paid to the Named Officers during fiscal year 1996 is shown
in the "Summary Compensation Table."
The Committee is responsible for reviewing and approving the Company's
compensation policies and the actual compensation paid to the Company's
executive officers. At the end of Fiscal Year 1996, the Committee was comprised
of two (2) of the non-employee directors, Hideyuki Tanigami and Patrick
Verderico.
Compensation Philosophy. The general philosophy of the Company's
compensation program is to offer the Company's Chief Executive Officer and other
executive officers competitive compensation packages based upon both the
Company's performance as well as the individual's performance and contributions.
The Company's compensation policies are intended to motivate and reward highly
qualified executives for long-term strategic management and the enhancement of
stockholder value, to support a performance-oriented environment that rewards
achievement of specific internal Company goals and to attract and retain
executives whose abilities are critical to the long-term success and
competitiveness of the Company. The Company's compensation program is comprised
of three main components, Base Salary, Bonus Plan and Stock Options.
Base Salary. Base salary for executive officers is set annually by
reviewing the competitive pay practices of comparable companies, the skills and
performance level of the individual executives and the needs of the Company.
Bonus Plan. The Company's officers are eligible for bonuses under the
terms of individual bonus arrangements. When bonuses are given, they are based
upon the individual's achievement of specific corporate goals as well as the
individual's experience and contributions to the success of the Company.
During Fiscal Year 1996, the following executive officers received
bonuses: C. Michael Powell and Radu M. Vanco. No other executive officer
received a bonus during Fiscal Year 1996. See "Certain Relationships and Related
Transactions."
Stock Options. The Committee believes that stock options provide
additional incentives to officers to work toward maximizing stockholder value.
The Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of
-19-
23
hire and through subsequent periodic grants based upon performance and
promotions, as well as additional grants to provide continuing motivation as
earlier grants vest in full. Options granted by the Company to its executive
officers and other employees have exercise prices equal to fair market value at
the time of grant and, generally, vest over a four-year period.
Severance Arrangements. See "Certain Relationships and Related
Transactions" for a description of severance arrangements for certain executive
officers.
Compensation for the Chief Executive Officer. Mr. Powell's base salary
was established at a level which the Committee determined to be similar to the
amounts paid by comparably sized companies. Mr. Powell received a bonus of
$38,210 in Fiscal Year 1996 which equaled the principal and accrued interest due
and payable on a loan owed to the Company, and a tax gross-up for such payment
pursuant to the agreement entered into between Mr. Powell and the Company. See
"Certain Relationships and Related Transactions."
The Committee considers equity based compensation, in the form of stock
options, to be an important component of a Chief Executive Officer's
compensation. These grants are intended to motivate leadership for long-term
Company growth and profitability. During Fiscal Year 1996, Mr. Powell was
granted options to purchase 50,000 shares and 100,000 shares of the Company's
Common Stock at prices of $5.25 and $6.00 per share, respectively.
Tax Deductibility of Executive Compensation. The Committee has
considered the potential impact of Section 162(m) of the Internal Revenue Code
adopted under the federal Revenue Reconciliation Act of 1993. This Section
disallows a tax deduction for any publicly-held corporation for individual
compensation exceeding $1,000,000 in any taxable year for any of the executive
officers named in the Proxy Statement, unless compensation is performance-based.
The Committee has studied the impact of Section 162(m) on the Company's Option
Plan.
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Hideyuki Tanigami
Patrick Verderico
-20-
24
PERFORMANCE GRAPH
The following line graph compares the annual percentage change in the
cumulative total stockholder return for the Company's Common Stock with the S&P
500 Index and the S&P Electronics (Semi/Components) Index for the period
commencing May 11, 1993 (the date the Company's Common Stock first traded on the
NASDAQ National Market) and ending on May 1, 1996. The graph assumes that $100
was invested on May 11, 1993, the date of the Company's initial public offering,
and that all dividends are reinvested. Historic stock price performance should
not necessarily be considered indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CATALYST SEMICONDUCTOR, INC., THE S & P 500 INDEX
AND THE S & P ELECTRONICS (SEMICONDUCTORS) INDEX
[GRAPH]
5/11/93 3/94 3/95 4/96
Catalyst Semiconductor, Inc. $100.00 $41.00 $37.00 $50.00
S & P 500 $100.00 $104.00 $120.00 $161.00
S & P Electronics (Semiconductors) $100.00 $140.00 $168.00 $217.00
-21-
25
SECURITY OWNERSHIP
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of May 25,
1996 by (i) each beneficial owner of more than 5% of the Company's Common Stock,
(ii) each director, (iii) each Named Officer and (iv) all directors and
executive officers as a group. Except as otherwise indicated, each person has
sole voting and investment power with respect to all shares shown as
beneficially owned, subject to community property laws where applicable.
SHARES BENEFICIALLY OWNED
---------------------------
NUMBER PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES TOTAL
- - ------------------------------------ --------- ----------
United Microelectronics Corp........ 650,000 8.3%
No. 13, Innovation Road I
Science-Based Industrial Park
Hsin-Chei City, Taiwan R.O.C.
Bharat Kumar (B.K.) Marya(1)........ 465,554 5.7%
P.O. Box 250
Los Altos, California 94023
C. Michael Powell(2)................ 209,498 2.6%
Radu M. Vanco(2).................... 66,537 *
Lionel M. Allan(2).................. 2,783 *
Hideyuki Tanigami(2)................ 27,150 *
Patrick Verderico................... 0 *
Chris Carstens(2)................... 43,207 *
Alan L. Renninger(2)................ 10,916 *
Donald B. Witmer(3)................. 63,500 *
All current directors and executive
officers as a group (7 persons) 360,091 4.4%
(2).................................
- - -----------------
* Percentage of shares beneficially owned is less than one percent of
total.
(1) Includes shares issuable upon exercise of stock options as of May 25,
1996 or within 60 days thereafter as follows: 87,441 shares at $1.8000;
183,333 shares at $1.9375; and 40,000 shares at $3.00. Includes shares
held by the B.K. Marya Revocable Living Trust and by Kamlesh Kumari,
the mother-in-law of Mr. Marya (including shares held by Ms. Kumari as
trustee of certain trusts for Mr. Marya's children. Mr. Marya disclaims
beneficial ownership of such shares.
(2) Includes shares issuable upon exercise of stock options as of May 25,
1996 or within 60 days thereafter as follows:
C. Michael Powell....................... 126,602 shares at $1.9375
48,396 shares at $1.9370
12,500 shares at $5.2500
-22-
26
Radu M. Vanco........................... 40,143 shares at $1.9375
13,894 shares at $1.9370
12,500 shares at $5.2500
Lionel M Allan.......................... 2,783 shares at $1.9375
Hideyuki Tanigami....................... 5,276 shares at $1.9375
21,874 shares at $1.9370
Chris Carstens.......................... 20,916 shares at $1.9375
16,041 shares at $2.5000
6,250 shares at $6.0000
Alan L. Renninger....................... 8,000 shares at $1.9375
2,916 shares at $1.9375
(3) Mr. Witmer's employment with the Company terminated on September 29,
1995. Includes shares issuable upon exercise of stock options as of May
25, 1996 or within 60 days thereafter as follows: 33,500 shares at
$1.9375; 30,000 shares at $5.25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with his termination as Chairman of the Board of
Directors, the Company entered into a severance and consulting agreement with
B.K. Marya dated August 14, 1995 pursuant to which Mr. Marya agreed to provide
consulting services for a one year period and in exchange would receive 12
monthly payments of $12,500 through August 1996.
In connection with his termination as Vice President, Finance and
Administration and Chief Financial Officer, the Company entered into a severance
and consulting agreement with Donald B. Witmer dated August 30, 1995 pursuant to
which Mr. Witmer agreed to provide consulting services for a six-month period
and in exchange would receive twelve bi-monthly payments of $7,812.50 through
March 1996, and further accelerated the vesting of options to purchase 118,286
shares of the Company's Common Stock, such options to terminate March 31, 1998.
In March 1994, the Company loaned Radu M. Vanco, then Vice President
Engineering and, since October 1995, Executive Vice President and Chief
Operating Officer, $100,000 payable in two years with interest at 6% per annum.
The loan proceeds were used by Mr. Vanco for his home. On March 12, 1996, the
Company and Mr. Vanco agreed to a bonus arrangement which has the effect of (a)
forgiving the principal and accrued interest on the note on a monthly basis over
two years commencing March 16, 1996 as long as he remains employed by the
Company and (b) forgiving the principal and accrued interest immediately if he
is terminated without cause or in the event of a change of control. The
principal and accrued interest on the note becomes immediately due and payable
if he voluntarily resigns or is terminated for cause. At the end of Fiscal Year
1996, $102,667 in principal and accrued interest were outstanding on the note.
In September 1995, the Company loaned C. Michael Powell, Chairman,
Chief Executive Officer, President and Chief Financial Officer of the Company,
$200,000 payable in five years with interest at 7% per annum. The loan proceeds
were used by Mr. Powell for his home. The agreement between the parties provides
for a bonus arrangement which has the effect of (a) forgiving the principal and
accrued interest on the note over five years on a monthly basis commencing
October 7, 1995 as long as he remains employed by the Company and (b) forgiving
the principal and accrued interest immediately if he is terminated without cause
or in the event of a change of control. In addition he receives an amount equal
to any federal or state taxes payable
-23-
27
with respect to such bonuses. The principal and accrued interest on the note
becomes immediately due and payable if he voluntarily resigns or is terminated
for cause. At the end of Fiscal Year 1996, $180,099 in principal and accrued
interest were outstanding on the note.
The Company entered into employment agreements with Messrs. Powell,
Vanco and Carstens in August, October and April 1995, respectively, which
entitle such officers to a one-time severance payment upon any involuntary
termination by the Company without cause. Pursuant to the terms and conditions
of said agreements, for terminations resulting from a merger, sale or change in
ownership of the Company, severance payments shall be as follows: Mr. Powell
will receive to 2, 1 1/2, 1 and 1/2 times his salary if terminated within one,
two, three or more than three years, respectively, of his agreement; Mr. Vanco
will receive 1 1/2, 1 and 1/2 times his salary if terminated within one, two or
more than two years, respectively, of his Agreement; and Mr. Carstens will
receive one-half his salary if so terminated. If involuntary termination without
cause should occur in the absence of a merger, sale or change in control of the
Company, then the severance payment for Messrs. Powell, Vanco and Carstens shall
equal 1, 1/2 and 1/4 times their respective annual salaries. For the purposes of
determining the severance payments described above, salary is defined as the
salary payable to an officer for the fiscal year in which such officer's
termination occurs.
The Company has entered into separate indemnification agreements with
each of its directors and executive officers that may require the Company, among
other things, to indemnify them against certain liabilities that may arise by
reason of their status or service as directors or officers and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.
Hideyuki Tanigami, a director of the Company, is President of Marubun
USA Corporation, a wholly owned subsidiary of Marubun Japan. Marubun Japan is a
distributor of the Company's products in Japan and accounted for approximately
12% of the Company's net revenues in Fiscal Year 1996.
In connection with the sale by the Company and the purchase by United
Microelectronics Corporation, a corporation organized and existing under the
laws of the Republic of China ("UMC"), of 650,000 shares of Common Stock in
February 1996, UMC agreed to provide the Company with specified levels of wafer
supplies and UMC and the Company entered into certain mutual licensing
arrangements. UMC also obtained certain registration rights relating to the
Common Stock purchased.
The terms of the transactions described above were negotiated at arms
length such that the terms were as favorable to the Company as could have been
obtained from an unaffiliated third party.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange
-24-
28
Commission (the "SEC") and the National Association of Securities Dealers, Inc.
Executive officers, directors and greater than ten percent stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on its review of copies of such forms received by
it, the Company believes that during Fiscal Year 1996 the following reports were
not filed on a timely basis: one Form 4 for Radu M. Vanco to report four
exercises of derivative securities and sales of the underlying securities; one
Form 4 for Henry C. Montgomery to report a gift by him of Common Stock; one Form
4 for Donald B. Witmer to report two exercises of derivative securities and
dispositions of the underlying securities.; one Form 3 for Daryl E. Stemm to
report that he became reporting person; one Form 3 for Patrick Verderico to
report that he became a director. Other than these late filings, again based
solely on its review of copies of such forms received by it, the Company
believes that all other filing requirements applicable to its officers,
directors and ten percent stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
FOR THE BOARD OF DIRECTORS
PETER COHN
Secretary
Dated: July 3, 1996
-25-
29
CATALYST SEMICONDUCTOR, INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED ON MAY 30, 1996
This Stock Option Plan is an amendment and restatement of the Catalyst
Semiconductor, Inc., Founders' Stock Option Plan.
1. Purpose of the Plan. The purpose of this Stock Option Plan is to
enable the Company to provide incentive to eligible employees, consultants and
officers whose present and potential contributions are important to the
continued success of the Company, to afford these individuals the opportunity to
acquire a proprietary interest in the Company, and to enable the Company to
enlist and retain in its employment qualified personnel for the successful
conduct of its business. It is intended that this purpose will be effected
through the granting of (a) stock options, (b) stock purchase rights, (c) stock
appreciation rights, and (d) long-term performance awards.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or such of its Committees
as shall be administering the Plan, in accordance with Section 8 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under applicable securities laws,
Delaware corporate law and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 9 of the Plan.
(f) "Common Stock" means the Common Stock, $.001 par value, of
the Company.
(g) "Company" means Catalyst Semiconductor, Inc., a Delaware
corporation, and its predecessor Catalyst Semiconductor, Inc., a California
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship is not interrupted or terminated
by the Company, or any
30
Parent or Subsidiary. Continuous Status as an Employee or Consultant shall not
be considered interrupted in the case of: (i) any leave of absence approved by
the Administrator, including sick leave, military leave, or any other personal
leave; provided, however, that for purposes of Continuous Status as an Employee
or Consultant, no such leave may exceed ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract (including written
Company policies) or statute or unless (in the case of Options and Rights other
than Incentive Stock Options) the Administrator has expressly designated a
longer leave period during which (for purposes of such Options or Rights)
Continuous Status as an Employee or Consultant shall continue; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor; and provided further that any vesting or lapsing
of the Company's right to repurchase Shares at their original purchase price
shall cease on the ninety-first (91st) consecutive day of any leave of absence
approved by the Administrator and shall not recommence until such date, if any,
upon which the Consultant or Optionee resumes his or her service with the
Company.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
-2-
31
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(p) "Long-Term Performance Award" means an award under Section
8 below. A Long-Term Performance Award shall permit the recipient to receive a
cash or stock bonus (as determined by the Administrator) upon satisfaction of
such performance factors as are set out in the recipient's individual grant.
Long-term Performance Awards will be based upon the achievement of Company,
Subsidiary and/or individual performance factors or upon such other criteria as
the Administrator may deem appropriate.
(q) "Long-Term Performance Award Agreement" means a written
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Long-Term Performance Award grant. The Long-Term
Performance Award Agreement is subject to the terms and conditions of the Plan.
(r) "Nonstatutory Stock Option" means any Option that is not
an Incentive Stock Option.
(s) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option, Stock Purchase Right, SAR
or Long-Term Performance Award grant. The Notice of Grant is part of the Option
Agreement, the SAR Agreement and the Long-Term Performance Award Agreement.
(t) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "Option" means a stock option granted pursuant to the
Plan.
(v) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(w) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(x) "Optioned Stock" means the Common Stock subject to an
Option or Right.
(y) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(aa) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
-3-
32
(bb) "Plan" means this Stock Option Plan, formerly the
Founders' Stock Option Plan.
(cc) "Restricted Stock" means shares of Common Stock subject
to a Restricted Stock Purchase Agreement acquired pursuant to a grant of Stock
Purchase Rights under Section 6 below.
(dd) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(ee) "Right" means and includes SARs, Long-Term Performance
Awards and Stock Purchase Rights granted pursuant to the Plan.
(ff) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor rule thereto, as in effect when discretion is being exercised with
respect to the Plan.
(gg) "SAR" means a stock appreciation right granted pursuant
to Section 5 of the Plan.
(hh) "SAR Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual SAR
grant. The SAR Agreement is subject to the terms and conditions of the Plan.
(ii) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(jj) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 7 of the Plan, as evidenced by a Notice of Grant.
(kk) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Shares Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the total number of Shares reserved and available for distribution
under the Plan is 3,300,000 Shares. Subject to Section 11 of the Plan, if any
Shares that have been optioned under an Option cease to be subject to such
Option (other than through exercise of the Option), or if any Option or Right
granted hereunder is forfeited or any such award otherwise terminates prior to
the issuance of Common Stock to the participant, the shares that were subject to
such Option or Right shall again be available for distribution in connection
with future Option or right grants under the Plan; provided, however, that
Shares that have actually been issued under the Plan, whether upon exercise of
an Option or Right, shall not in any event be returned to the Plan and shall not
become available for future distribution under the Plan.
4. Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise
-4-
33
eligible, an Employee or Consultant who has been granted an Option or Right may
be granted additional Options or Rights.
5. Limitation on Grants to Employees. Subject to adjustment as provided
in this Plan, the maximum number of Shares which may be subject to Options or
Rights granted to any one Employee under this Plan for any fiscal year of the
Company shall be 750,000. In connection with his or her initial employment, an
Employee may be granted up to an additional 250,000 Shares, which Shares do not
count against the 750,000 limitation.
6. Options and SARs.
(a) Options. The Administrator, in its discretion, may grant
Options to eligible participants and shall determine whether such Options shall
be Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a Notice of Grant which shall expressly identify the Options as
Incentive Stock Options or as Nonstatutory Stock Options, and be in such form
and contain such provisions as the Administrator shall from time to time deem
appropriate. Without limiting the foregoing, the Administrator may at any time
authorize the Company, with the consent of the respective recipients, to issue
new Options or Rights in exchange for the surrender and cancellation of
outstanding Options or Rights. Option agreements shall contain the following
terms and conditions:
(i) Exercise Price; Number of Shares. The per Share
exercise price for the Shares issuable pursuant to an Option shall be such price
as is determined by the Administrator; provided, however, that in the case of an
Incentive Stock Option, the price shall be no less than 100% of the Fair Market
Value of the Common Stock on the date the Option is granted, subject to any
additional conditions set out in Section 6(a)(iv) below.
The Notice of Grant shall specify the number of
Shares to which it pertains.
(ii) Waiting Period and Exercise Dates. At the time
an Option is granted, the Administrator will determine the terms and conditions
to be satisfied before Shares may be purchased, including the dates on which
Shares subject to the Option may first be purchased. The Administrator may
specify that an Option may not be exercised until the completion of the service
period specified at the time of grant. (Any such period is referred to herein as
the "waiting period.") At the time an Option is granted, the Administrator shall
fix the period within which the Option may be exercised, which shall not be
earlier than the end of the waiting period, if any, nor, in the case of an
Incentive Stock Option, later than ten (10) years, from the date of grant.
(iii) Form of Payment. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of:
(1) cash;
(2) check;
-5-
34
(3) promissory note;
(4) other Shares which (1) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six months on the date of surrender, and (2) have a Fair Market Value
on the date of surrender not greater than the aggregate exercise price of the
Shares as to which said Option shall be exercised;
(5) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and any
broker approved by the Company, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price;
(6) any combination of the foregoing methods
of payment; or
(7) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
(iv) Special Incentive Stock Option Provisions. In
addition to the foregoing, Options granted under the Plan which are intended to
be Incentive Stock Options under Section 422 of the Code shall be subject to the
following terms and conditions:
(1) Dollar Limitation. To the extent that
the aggregate Fair Market Value of (a) the Shares with respect to which Options
designated as Incentive Stock Options plus (b) the shares of stock of the
Company, Parent and any Subsidiary with respect to which other incentive stock
options are exercisable for the first time by an Optionee during any calendar
year under all plans of the Company and any Parent and Subsidiary exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of the preceding sentence, (a) Options shall be taken into account in
the order in which they were granted, and (b) the Fair Market Value of the
Shares shall be determined as of the time the Option or other incentive stock
option is granted.
(2) 10% Stockholder. If any Optionee to whom
an Incentive Stock Option is to be granted pursuant to the provisions of the
Plan is, on the date of grant, the owner of Common Stock (as determined under
Section 424(d) of the Code) possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary
of the Company, then the following special provisions shall be applicable to the
Option granted to such individual:
(a) The per Share Option price of
Shares subject to such Incentive Stock Option shall not be less than 110% of the
Fair Market Value of Common Stock on the date of grant; and
(b) The Option shall not have a
term in excess of five (5) years from the date of grant.
-6-
35
Except as modified by the preceding provisions of this subsection 6(a) (iv) and
except as otherwise limited by Section 422 of the Code, all of the provisions of
the Plan shall be applicable to the Incentive Stock Options granted hereunder.
(v) Other Provisions. Each Option granted under the
Plan may contain such other terms, provisions, and conditions not inconsistent
with the Plan as may be determined by the Administrator.
(vi) Buyout Provisions. The Administrator may at any
time offer to buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is made.
(b) SARs.
(i) In Connection with Options. At the sole
discretion of the Administrator, SARs may be granted in connection with all or
any part of an Option, either concurrently with the grant of the Option or at
any time thereafter during the term of the Option. The following provisions
apply to SARs that are granted in connection with Options:
(1) The SAR shall entitle the Optionee to
exercise the SAR by surrendering to the Company unexercised a portion of the
related Option. The Optionee shall receive in Exchange from the Company an
amount equal to the excess of (1) the Fair Market Value on the date of exercise
of the SAR of the Common Stock covered by the surrendered portion of the related
Option over (2) the exercise price of the Common Stock covered by the
surrendered portion of the related Option. Notwithstanding the foregoing, the
Administrator may place limits on the amount that may be paid upon exercise of
an SAR; provided, however, that such limit shall not restrict the exercisability
of the related Option.
(2) When an SAR is exercised, the related
Option, to the extent surrendered, shall cease to be exercisable.
(3) An SAR shall be exercisable only when
and to the extent that the related Option is exercisable and shall expire no
later than the date on which the related Option expires.
(4) An SAR may only be exercised at a time
when the Fair Market Value of the Common Stock covered by the related Option
exceeds the exercise price of the Common Stock covered by the related Option.
(ii) Independent of Options. At the sole discretion
of the Administrator, SARs may be granted without related Options. The following
provisions apply to SARs that are not granted in connection with Options:
(1) The SAR shall entitle the Optionee, by
exercising the SAR, to receive from the Company an amount equal to the excess of
(1) the Fair Market Value of the Common Stock covered by the exercised portion
of the SAR, as of the date of such exercise, over
-7-
36
(2) the Fair Market Value of the Common Stock covered by the exercised portion
of the SAR, as of the last market trading date prior to the date on which the
SAR was granted; provided, however, that the Administrator may place limits on
the aggregate amount that may be paid upon exercise of an SAR.
(2) SARs shall be exercisable, in whole or
in part, at such times as the Administrator shall specify in the Optionee's SAR
agreement.
(iii) Form of Payment. The Company's obligation
arising upon the exercise of an SAR may be paid in Common Stock or in cash, or
in any combination of Common Stock and cash, as the Administrator, in its sole
discretion, may determine. Shares issued upon the exercise of an SAR shall be
valued at their Fair Market Value as of the date of exercise.
(c) Method of Exercise.
(i) Procedure for Exercise; Rights as a
Stockholder. Any Option or SAR granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator 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 or SAR 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 or SAR by the person entitled to exercise the Option or
SAR 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 Administrator (and, in the case of an Incentive Stock Option, determined at
the time of grant) and permitted by the Option Agreement consist of any
consideration and method of payment allowable under subsection 6(a)(iii) 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 the stock
certificate is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised. Exercise of an SAR in any manner shall, to the
extent the SAR is exercised, result in a decrease in the number of Shares which
thereafter shall be available for purposes of the Plan, and the SAR shall cease
to be exercisable to the extent it has been exercised.
(ii) Rule 16b-3. Options and SARs granted to
individuals subject to Section 16 of the Exchange Act ("Insiders") must comply
with the applicable provisions of Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required
-8-
37
thereunder to qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
(iii) Termination of Employment or Consulting
Relationship. In the event an Optionee's Continuous Status as an Employee or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option or SAR, but only within such period of
time as is determined by the Administrator at the time of grant, not to exceed
six (6) months (three (3) months in the case of an Incentive Stock Option) from
the date of such termination, and only to the extent that the Optionee was
entitled to exercise it at the date of such termination (but in no event later
than the expiration of the term of such Option or SAR as set forth in the Option
or SAR Agreement). To the extent that Optionee was not entitled to exercise an
Option or SAR at the date of such termination, and to the extent that the
Optionee does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.
(iv) Disability of Optionee. In the event an
Optionee's Continuous Status as an Employee or Consultant terminates as a result
of the Optionee's Disability, the Optionee may exercise his or her Option or
SAR, but only within six (6) months from the date of such termination, and only
to the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option or SAR as set forth in the Option or SAR Agreement). To the extent that
Optionee was not entitled to exercise an Option or SAR at the date of such
termination, and to the extent that the Optionee does not exercise such Option
or SAR (to the extent otherwise so entitled) within the time specified herein,
the Option or SAR shall terminate.
(v) Death of Optionee. Notwithstanding Sections
5(c)(iii) and 5(c)(iv) above, in the event of an Optionee's death during
Optionee's Continuous Status as an Employee or Consultant, the Optionee's estate
or a person who acquired the right to exercise the deceased Optionee's Option or
SAR by bequest or inheritance may exercise the Option or SAR, but only within
six (6) months (or such lesser period as the Option or SAR Agreement may
provide, or such longer period, not to exceed twelve (12) months, as the Option
or SAR Agreement may provide) following the date of death, and only to the
extent that the Optionee was entitled to exercise it at the date of death (but
in no event later than the expiration of the full term of such Option or SAR as
set forth in the Option or SAR Agreement). To the extent that Optionee was not
entitled to exercise an Option or SAR at the date of death, and to the extent
that the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.
7. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that the offeree shall be entitled
to purchase,
-9-
38
the price to be paid, and the time within which the offeree must accept such
offer, which shall in no event exceed thirty (30) days from the date upon which
the Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 10
of the Plan.
8. Long-Term Performance Awards.
(a) Administration. Long-Term Performance Awards are cash or
stock bonus awards that may be granted either alone or in addition to other
awards granted under the Plan. Such awards shall be granted for no cash
consideration. The Administrator shall determine the nature, length and starting
date of any performance period (the "Performance Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors, if
any, to be used in the determination of Long-Term Performance Awards and the
extent to which such Long-Term Performance Awards are valued or have been
earned. Long-Term Performance Awards may vary from participant to participant
and between groups of participants and shall be based upon the achievement of
Company, Subsidiary, Parent and/or individual performance factors or upon such
other criteria as the Administrator may deem appropriate. Performance Periods
may overlap and participants may participate simultaneously with respect to
Long-Term Performance Awards that are subject to different Performance Periods
and different performance
-10-
39
factors and criteria. Long-Term Performance Awards shall be confirmed by, and be
subject to the terms of, a Long-Term Performance Award agreement. The terms of
such awards need not be the same with respect to each participant.
At the beginning of each Performance Period, the Administrator
may determine for each Long-Term Performance Award subject to such Performance
Period the range of dollar values or number of shares of Common Stock to be
awarded to the participant at the end of the Performance Period if and to the
extent that the relevant measures of performance for such Long-Term Performance
Award are met. Such dollar values or number of shares of Common Stock may be
fixed or may vary in accordance with such performance or other criteria as may
be determined by the Administrator.
(b) Adjustment of Awards. The Administrator may adjust the
performance factors applicable to the Long-Term Performance Awards to take into
account changes in legal, accounting and tax rules and to make such adjustments
as the Administrator deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships.
9. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3 and Applicable Laws, the Plan may (but need not) be administered by
different administrative bodies with respect to (A) Directors who are employees,
(B) Officers who are not Directors and (C) Employees who are neither Directors
nor Officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options and Rights to eligible participants
who are Officers or Directors of the Company, the Plan shall be administered by
(A) the Board, if the Board may administer the Plan in compliance with Rule
16b-3 as it applies to a plan intended to qualify thereunder as a discretionary
grant or award plan, or (B) a Committee designated by the Board to administer
the Plan, which Committee shall be constituted (1) in such a manner as to permit
the Plan to comply with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary grant or award plan and (2) in such a manner as to
satisfy the Applicable Laws.
(iii) Administration with Respect to Other Persons.
With respect to grants of Options to eligible participants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 9(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies (however caused)
and
-11-
40
remove all members of a Committee and thereafter directly administer the Plan,
all to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary grant
or award plan.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Rights may be granted hereunder;
(iii) to determine whether and to what extent Options
and Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Right or
the shares of Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the
Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) to determine whether and under what
circumstances an Option or Right may be settled in cash instead of Common Stock
or Common Stock instead of cash;
(x) to reduce the exercise price of any Option or
Right;
(xi) to modify or amend each Option or Right (subject
to Section 16 of the Plan);
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Right
previously granted by the Administrator;
-12-
41
(xiii) to institute an Option Exchange Program;
(xiv) to determine the terms and restrictions
applicable to Options and Rights and any Restricted Stock; and
(xv) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
10. Non-Transferability of Options. Options and Rights may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options or Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Right, the maximum number of
Shares of Common Stock for which Options and Rights to any Employee under
Section 5 of the Plan as well as the price per share of Common Stock covered by
each such outstanding Option or Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common 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 Common Stock subject to an Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Right
has not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option or Right shall terminate
as of a date fixed by the Board and give each Optionee the right to exercise his
or her Option or Right as to all or any part of the Optioned Stock, including
Shares as to which the Option or Right would not otherwise be exercisable.
-13-
42
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Right shall be assumed or
an equivalent Option or Right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, the Administrator shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
or Right as to all or a portion of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If the Administrator makes an
Option or Right exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee that
the Option or Right shall be exercisable for a period of not less than fifteen
(15) days from the date of such notice, and the Option or Right will terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option or Right shall be considered assumed if, immediately following the merger
or sale of assets, the Option or Right confers the right to purchase, for each
Share of Optioned Stock subject to the Option or Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets was
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
the Option or Right, for each Share of Optioned Stock subject to the Option or
Right, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
12. Date of Grant. The date of grant of an Option or Right shall be,
for all purposes, the date on which the Administrator makes the determination
granting such Option or Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Right unless the exercise of such Option or Right
and the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
of an Option or Right, the Company may require the person exercising such Option
or Right 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.
-14-
43
14. Liability of Company.
(a) Inability to Obtain Authority. 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.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional stockholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless stockholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 16(b) of the Plan.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
17. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 162(m) or 422 of the Code (or any successor rule
or statute or other applicable law, rule or regulation, including the
requirements of any exchange or quotation system on which the Common Stock is
listed or quoted). Such stockholder approval, if required, shall be obtained in
such a manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
18. Taxation Upon Exercise of Option or Right. At the discretion of the
Administrator, Optionees may satisfy withholding obligations as provided in this
Section 18. When an Optionee incurs tax liability in connection with an Option
or Right, which tax liability is subject to withholding under applicable tax
laws, the Optionee may satisfy the tax withholding obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, or (c) by surrendering to the Company Shares
which (i) in
-15-
44
the case of Shares previously acquired from the Company, have been owned by the
Optionee for more than six months on the date of surrender, and (ii) have a fair
market value on the date of surrender equal to or less than Optionee's marginal
tax rate times the ordinary income recognized, or (d) by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option or
Right that number of Shares having a fair market value equal to the amount
required to be withheld. For this purpose, the fair market value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date").
If the Optionee is an Insider, any surrender of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is an Insider, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
19. Term of the Plan. The Plan shall expire, and no further Options
shall be granted pursuant to the Plan, on December 31, 2002.
-16-
45
CATALYST SEMICONDUCTOR, INC.
1993 DIRECTOR STOCK OPTION PLAN
AS AMENDED AND RESTATED ON MAY 30, 1996
1. Purpose of the Plan. The purpose of this 1993 Director Stock Option
Plan is to attract and retain highly qualified personnel to serve as Outside
Directors of the Company.
All options granted hereunder shall be "non-statutory stock
options."
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Catalyst Semiconductor, Inc., a Delaware
corporation, and its predecessor corporation Catalyst Semiconductor, Inc., a
California corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and
Directors, 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 in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
determination, or, if not a market trading day, on the last market trading day
prior to the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be
46
the mean between the high bid and low asked prices for the Common Stock on the
date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means an Outside Director who receives an
Option.
(m) "Outside Director" means a Director who is not an
Employee.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1993 Director Stock Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 220,000 Shares (the "Pool") of Common Stock (which number
gives effect to a one-for-nine reverse stock split of the Shares approved by the
Board on March ___, 1993 ("Post-Split")). 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 grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the
Plan shall be administered by the Board.
(b) Procedure for Grants. The provisions set forth in this
Section 4(b) shall not be amended more than once every six months, other than to
comply with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options hereunder shall
be automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
-2-
47
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each new Outside Director who shall first join
the Board on or after March 1, 1993 (including any new Outside Director who
shall have first joined the Board of Catalyst Semiconductor, Inc., a California
corporation, subsequent to March 1, 1993), shall automatically be granted an
Option to purchase 20,000 Post-Split Shares upon the date on which such person
first becomes an Outside Director, whether through election by the stockholders
of the Company, appointment by the Board to fill a vacancy, or termination of
employment by the Company while remaining as a Director (a "One-Time Grant"). In
addition, on April 1, 1994, and on each April 1 thereafter during the term of
this Plan, each Outside Director who shall have been an Outside Director for at
least six (6) months as of such date shall automatically receive an Option to
purchase 7,500 Post-Split Shares (an "Annual Grant").
(iii) The terms of each Option granted hereunder
shall be as follows:
(A) the term of the Option shall be five (5)
years;
(B) the Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Section 8 hereof;
(C) the exercise price per Share shall be
100% of the Fair Market Value per Share on the date of grant of the Option;
(D) each Annual Grant and One-Time Grant
shall become exercisable in installments cumulatively as to one-third of the
Optioned Stock on each anniversary of the date of grant, so that 100% of the
Optioned Stock granted under any such grant shall be exercisable in full three
(3) years after the date of grant of the Option, assuming in each case
Continuous Status as a Director.
(iv) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased upon exercise of Options to exceed the
Pool, then each such automatic grant shall be for that number of Shares
determined by dividing the total number of Shares remaining available for grant
by the number of Outside Directors entitled to receive Options on the grant
date. No further grants shall be made until such time, if any, as additional
Shares become available for grant under the Plan through action of the
shareholders to increase the number of Shares which may be issued under the Plan
or through cancellation or expiration of Options previously granted hereunder.
(c) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 2(i) of the Plan, the Fair Market Value of the Common Stock; (ii) to
interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan; (iv) to authorize any person to execute on behalf of the
Company
-3-
48
any instrument required to effectuate the grant of an Option previously granted
hereunder; and (v) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect
until April 30, 2003, unless sooner terminated under Section 11 of the Plan.
7. Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash, (ii) check, (iii)
promissory note, (iv) other shares which have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised and which, in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than 12 months
on the date of surrender, (v) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(vi) delivery of an irrevocable subscription agreement for the Shares which
irrevocably obligates the Optionee to take and pay for the Shares not more than
12 months after the date of delivery of the subscription agreement, (vii) any
combination of the foregoing methods of payment, or (viii) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 16 hereof has
been obtained.
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
-4-
49
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 consist
of any consideration and method of payment allowable under Section 7 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. A share certificate for the number
of Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. In the
event an Optionee's Continuous Status as a Director terminates (other than upon
the Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within 90 days from the date of such termination, and only to the extent that
the Optionee was entitled to exercise it at the date of such termination (but in
no event later than the expiration of its five-year term). To the extent that
the Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within six months from the date of such termination, and
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of its five-year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death
while a Director, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance may exercise the Option, but only
within one year following the date of death, and only to the extent that the
Optionee was entitled to exercise it at the date of death (but in no event later
than the expiration of its five-year term). To the extent that the Optionee was
not entitled to exercise an Option at the date of death, and to the extent that
the Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will, by the laws of descent
-5-
50
or distribution or pursuant to a qualified domestic relations order, and may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
permitted transferee.
10. Adjustments.
(a) Changes in Capitalization. In the event that the stock of
the Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization, or in the event that the outstanding number of
shares of stock of the Company is increased through payment of a stock dividend,
appropriate proportionate adjustments shall be made in the number and class of
shares of stock subject to the Plan, the number and class of shares subject to
any Option outstanding under the Plan, and the exercise price of any such
outstanding Option; provided, however, that the Company shall not be required to
issue fractional shares as a result of any such adjustment. Any such adjustment
shall be made upon approval by the Board, whose determination shall be
conclusive. If there is any other change in the number or type of the
outstanding shares of stock of the Company, or of any other security into which
such stock shall have been changed or for which it shall have been exchanged,
and if the Board in its sole discretion determines that such change equitably
requires an adjustment in the Options then outstanding under the Plan, such
adjustment shall be made in accordance with the determination of the Board. No
adjustments shall be required by reason of the issuance or sale by the Company
for cash or other consideration of additional shares of its stock or securities
convertible into or exchangeable for shares of its stock.
(b) Change in Control. In the event of a "Change in Control"
of the Company, as defined in paragraph (c) below, then the following provisions
shall apply:
(i) Any Option outstanding on the date of such
Change in Control ("Outstanding Option") that is not yet exercisable and vested
on such date shall become fully exercisable and vested;
(ii) Each Outstanding Option shall be assumed by the
successor corporation (if any) or by a Parent or Subsidiary of the successor
corporation (if any);
(iii) Each Outstanding Option shall remain
exercisable by the Optionee for a period of at least ninety (90) days from the
date of the Change in Control; and
(iv) Each Optionee with an Outstanding Option shall
be provided with written notice of the period of exercisability provided for in
subsection (b)(iii) above promptly after the date of the Change in Control by
the Company or by the entity surviving after the Change in Control.
(c) Definition of "Change in Control". For purposes of this
Section 10, a "Change in Control" means the happening of any of the following:
(i) when any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including any trustee of such
plan acting as trustee), is or becomes the "beneficial owner" (as
-6-
51
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty (50%) of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of directors; or
(ii) a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iii) the stockholders of the Company approve an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets; or
(iv) a change in the composition of the Board
occurring as a result of any one meeting of the stockholders of the Company, as
a result of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who either are (A)
directors of the Company as of the date the Plan is approved by the
stockholders, or (B) elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act (or any other applicable law or regulation), the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations
-7-
52
promulgated thereunder, state securities laws and the requirements of any stock
exchange or market system upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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.
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.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the first granting of an Option
hereunder. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law.
-8-
53
DETACH HERE
/X/ Please mark votes as in this example.
1. To elect two Class I directors to serve for a three-year term expiring upon
the 1999 Annual Meeting of Stockholders or until such directors' successors
are duly elected and qualified.
Nominees: Radu M. Vanco, Hideyuki Tanigami
FOR WITHHELD
/ / / /
/ / ___________________________________
For both nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
2. To approve an amendment to the Company's Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by 830,000
shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve an amendment to the Company's 1993 Director Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 50,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
4. To ratify the appointment of Price Waterhouse LLP as independent accounts of
the Company for the fiscal year ending April 30, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
5. To transact such other business as may properly come before the meeting and
any adjournment or postponement thereof.
Please sign exactly as name appears on your stock certificate. If the stock is
registered in the names of two or more persons, both should sign. Executives,
administrators, trustees, guardians, attorneys and corporate affiliates
should insert their titles.
Signature _______________________________________ Date _______________
Signature _______________________________________ Date _______________
54
DETACH HERE
CATALYST SEMICONDUCTOR, INC.
Proxy for Annual Meeting of Stockholders
To be Held August 2, 1996
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R The undersigned stockholder of CATALYST SEMICONDUCTOR, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
O Stockholders and Proxy Statement, each dated July 3, 1996, and hereby
appoints C. Michael Powell and Daryl E. Stemm, and each of them, proxies and
X attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual
Y Meeting of Stockholders of CATALYST SEMICONDUCTOR, INC. to be held on August
2, 1996 at 10:00 a.m., local time, at the Company's principal executive
offices in Sunnyvale, California 94089, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock that the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth below.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE IF NO SPECIFICATION IS INDICATED. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PERSONS AND
PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE