SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
RF MICRO DEVICES, INC.
------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
RF MICRO DEVICES, INC.
7628 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 22, 2003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS:
We hereby give notice that the Annual Meeting of Shareholders of RF
Micro Devices, Inc. will be held on Tuesday, July 22, 2003 at 10:00 a.m. local
time, at The Greensboro-High Point Marriott, One Marriott Drive, Greensboro,
North Carolina, for the following purposes:
(1) To elect eight directors for one-year terms and until their
successors are duly elected and qualified;
(2) To approve the adoption of the 2003 Stock Incentive Plan;
(3) To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
March 31, 2004; and
(4) To transact such other business as may properly come before
the meeting.
Under North Carolina law, only shareholders of record at the close of
business on the record date, which is May 30, 2003, are entitled to notice of
and to vote at the annual meeting or any adjournment. It is important that your
shares of common stock be represented at this meeting so that the presence of a
quorum is assured.
A copy of our 2003 Annual Report containing our financial statements
for the fiscal year ended March 31, 2003 is enclosed.
By Order of the Board of Directors
/s/ Powell T. Seymour
----------------------------------
Powell T. Seymour
Secretary
June 16, 2003
Your vote is important. Even if you plan to attend the meeting in
person, please date and execute the enclosed proxy and mail it promptly. If you
attend the meeting, you may revoke your proxy and vote your shares in person. A
postage-paid, return-addressed envelope is enclosed.
RF MICRO DEVICES, INC.
7628 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
PROXY STATEMENT
GENERAL INFORMATION
SOLICITATION OF PROXIES
The enclosed proxy, for use at the Annual Meeting of Shareholders to be
held July 22, 2003, at 10:00 a.m. local time at The Greensboro-High Point
Marriott, One Marriott Drive, Greensboro, North Carolina, and any adjournment
thereof (the "annual meeting" or the "meeting"), is solicited on behalf of the
Board of Directors of RF Micro Devices, Inc. (the "Company"). The approximate
date that we are first sending these proxy materials to shareholders is June 17,
2003. This solicitation is being made by mail and may also be made in person or
by fax, telephone or Internet by our officers or employees. We will pay all
expenses incurred in this solicitation. We will request banks, brokerage houses
and other institutions, nominees and fiduciaries to forward the soliciting
material to beneficial owners and to obtain authorization for the execution of
proxies. We will, upon request, reimburse these parties for their reasonable
expenses in forwarding proxy materials to beneficial owners.
The accompanying proxy is for use at the meeting if a shareholder
either will be unable to attend in person or will attend but wishes to vote by
proxy. The proxy may be revoked by the shareholder at any time before it is
exercised by filing with our corporate secretary an instrument revoking it,
filing a duly executed proxy bearing a later date or by attending the meeting
and electing to vote in person. All shares of the Company's common stock
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein. If no specification is made, the proxies will be voted in favor of
electing the eight nominees for directors named herein (or their substitutes)
for one-year terms expiring at the 2004 annual meeting of shareholders, for
adoption of the 2003 Stock Incentive Plan and for ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for the
fiscal year ending March 31, 2004.
The presence in person or by proxy of a majority of the shares of
common stock outstanding on the record date constitutes a quorum for purposes of
voting on a particular matter and conducting business at the meeting. Once a
share is represented for any purpose at a meeting, it is deemed present for
quorum purposes for the remainder of the meeting. Abstentions and shares that
are withheld as to voting with respect to one or more of the nominees for
director will be counted in determining the existence of a quorum, but shares
held by a broker, as nominee, and not voted on any matter will not be counted
for such purpose.
Assuming the existence of a quorum, the persons receiving a plurality
of the votes cast by the shares entitled to vote will be elected as directors.
The proposals to adopt the 2003 Stock Incentive Plan and to ratify the
appointment of Ernst & Young LLP as the Company's independent auditors will be
approved if the votes cast in favor of each proposal exceed the votes cast
against it. Abstentions, shares which are withheld as to voting with respect to
nominees for director and shares held of record by a broker, as nominee, that
are not voted with respect to a proposal will not be counted as a vote in favor
of or against the proposal and, therefore, will have no effect on any of the
proposals presented at the meeting.
VOTING SECURITIES OUTSTANDING
In accordance with North Carolina law, May 30, 2003 has been fixed as
the record date for determining holders of common stock entitled to notice of
and to vote at the meeting. Each share of our common stock issued and
outstanding on May 30, 2003 is entitled to one vote on all proposals at the
meeting, except that shares we hold in a fiduciary capacity may be voted only in
accordance with the instruments creating the fiduciary capacity. Holders of
shares of common stock vote together as a voting group on all proposals. At the
close of business on May 30, 2003, there were 184,241,106 shares of our common
stock outstanding and entitled to vote.
Where appropriate, we have adjusted references in this proxy statement
to prices and share numbers of our common stock to reflect three two-for-one
stock splits, each effected in the form of a 100% share dividend. The first was
payable on March 31, 1999 to record holders of common stock on March 17, 1999;
the second was payable on
August 18, 1999 to record holders on August 2, 1999; and the third was payable
on August 25, 2000 to record holders on August 8, 2000.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES FOR ELECTION OF DIRECTORS
Under our bylaws, the Board of Directors consists of seven to nine
members, as determined by the Board or the shareholders from time to time. The
Board has determined that the number of directors within the range shall be
eight. Directors are elected annually to serve for one-year terms and until
their successors are duly elected and qualified. All nominees presently serve as
directors. There are no family relationships among any of our directors or
officers. We intend that the proxyholders named in the accompanying form of
proxy will vote properly returned proxies to elect the eight nominees listed
below as directors, unless the authority to vote is withheld. Although we expect
that each of the nominees will be available for election, if any vacancy in the
slate of nominees occurs, we expect that shares of common stock represented by
proxies will be voted for the election of a substitute nominee or nominees
recommended by management or for the election of the remaining nominees
recommended by management.
The names of the nominees for election to the Board, their principal
occupations and certain other information follows:
ROBERT A. BRUGGEWORTH AGE 42
Mr. Bruggeworth became President in June 2002 and Chief Executive
Officer in January 2003. He was appointed to the Board of Directors in January
2003. He was Vice President of Wireless Products from September 1999 to January
2002 and President of Wireless Products from January 2002 to June 2002. Mr.
Bruggeworth was employed at AMP Inc. (now Tyco Electronics), a supplier of
electrical and electronic connection devices, from July 1983 to April 1999. He
held a number of manufacturing and engineering management positions from July
1983 to July 1998. From July 1998 to April 1999, Mr. Bruggeworth served first as
AMP Inc.'s Divisional Vice President and Area Director of Asia Pacific, then as
Vice President of Asia Pacific Operations and then as Divisional Vice President
of Global Computer and Consumer Electronics based in Hong Kong, China. Mr.
Bruggeworth is a member of the Board of Directors of LightPath Technologies,
Inc., a publicly traded manufacturer of families of high performance fiber-optic
components for the telecommunications industry.
DAVID A. NORBURY AGE 52
Mr. Norbury retired from the Company effective January 10, 2003. He has
been a director of the Company since 1992. Mr. Norbury served as Chief Executive
Officer from September 1992 to January 2003 and as President from September 1992
to June 2002. Mr. Norbury served as President and Chief Executive Officer of
Polylythics, Inc., a developer of semiconductor technology based in Santa Clara,
California, from August 1989 to March 1991.
WILLIAM J. PRATT AGE 60
Mr. Pratt, a founder of the Company, served as President from February
1991 to September 1992 and served as Chairman from September 1992 to August
2002. Mr. Pratt has served as Chief Technical Officer and as Corporate Vice
President since September 1992. He has also been a director of the Company since
its inception in 1991. Prior to such time, Mr. Pratt was employed for 13 years
with Analog Devices, Inc., an integrated circuit manufacturer, as Engineering
Manager and General Manager.
DANIEL A. DILEO AGE 55
Mr. DiLeo was elected to the Board in August 2002. Mr. DiLeo was an
Executive Vice President of Agere Systems, Inc., a manufacturer of semiconductor
components and optoelectronics, from March 2001 to March 2002. He is currently
the principal of Dan DiLeo, LLC, which he founded in March 2002. He served as
President of the Optoelectronics Division of Lucent Technologies, a manufacturer
of semiconductor components and optoelectronics, from November 1999 to February
2001, Vice President and Chief Operating Officer from June 1998 to October 1999
and Vice President of the wireless business unit from January 1995 to May 1998.
Mr. DiLeo is a director of Data I/O Corporation, which designs and manufactures
equipment to program devices in original equipment manufacturers (OEMs).
DR. FREDERICK J. LEONBERGER AGE 55
Dr. Leonberger was elected to the Board in September 2002. He has
served as Senior Vice President and Vice President and Chief Technology Officer
of JDS Uniphase Corp., an optical component supplier, since July 1999, and held
the same position with Uniphase Corp., an optical components supplier, from 1997
to 1999 prior to its merger with JDS Fitel Corporation. He was co-founder and
general manager of United Technologies Photonics Corp. (UTP) a optical modulator
supplier, which was acquired by Uniphase in 1995. Dr. Leonberger has also held
management and staff positions at United Technologies Research Center and MIT
Lincoln Laboratory.
DR. ALBERT E. PALADINO AGE 70
Dr. Paladino was elected Chairman of the Board of Directors of the
Company in August 2002 and has served as a director since 1992. He was a general
partner of Advanced Technology Ventures, a venture capital firm, from 1981
through 1998. Prior to joining Advanced Technology Ventures, he held senior
positions with Raytheon Company, GTE Laboratories, the National Institute of
Standards and Technology and the Congressional Office of Technology Assessment.
Dr. Paladino is also a member of the Board of Directors of TranSwitch
Corporation, a publicly traded developer of highly integrated digital and mixed
signal semiconductor solutions for the telecommunications and data
communications markets.
ERIK H. VAN DER KAAY AGE 63
Mr. van der Kaay joined the Board in July 1996. He has been Chairman of
the Board of Symmetricom Inc., a publicly traded synchronization products
company based in Irvine, California, since November 2002, and served as
President and Chief Executive Officer of Datum Inc. (which merged with
Symmetricom in October 2002) from April 1998 to October 2002. Mr. van der Kaay
was employed with Allen Telecom, a telecommunications company based in
Beachwood, Ohio, from June 1990 to March 1998, and last served as its Executive
Vice President. He is also a director of Comarco, Inc., a provider of advanced
wireless technology tools and engineering services, and TranSwitch Corporation.
WALTER H. WILKINSON, JR. AGE 57
Mr. Wilkinson has served as a director of the Company since 1992. He is
the founder and a general partner of Kitty Hawk Capital, Inc., a venture capital
firm based in Charlotte, North Carolina, established in 1980.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
LISTED ABOVE.
CORPORATE GOVERNANCE
Our Board of Directors has three standing committees: the Compensation
Committee, the Audit Committee and the Governance and Nominating Committee. The
Compensation Committee operates under a written charter, adopted in June 2003,
which is attached to this proxy statement as Appendix A. The Compensation
Committee is appointed by the Board of Directors to exercise the Board's
authority concerning compensation of the Company's officers, as well as
stock-based and incentive compensation paid to the Company's employees and
service providers. In fulfilling its duties, the Committee has the authority to
(a) evaluate and fix the compensation of the officers of the Company and its
subsidiaries; (b) prepare the report on executive compensation that the rules of
the Securities and Exchange Commission (the "SEC") require to be included in the
Company's annual proxy statement; (c) evaluate and make recommendations to the
Board concerning compensation of directors; and (d) discharge certain
responsibilities relating to the Company's incentive and employee benefit plans.
The members of the Compensation Committee are Messrs. DiLeo, Leonberger,
Paladino, van der Kaay, and Wilkinson (Chairman), none of whom is an employee of
the Company and each of whom is independent under existing and proposed Nasdaq
requirements. See "Executive Compensation--Report of the Compensation
Committee," below.
The Audit Committee operates under a written charter adopted in May
2000 and amended in June 2003, a copy of which is attached to this proxy
statement as Appendix B. The Audit Committee is appointed by the Board of
Directors to assist the Board in its duty to oversee the Company's accounting,
financial reporting and internal control functions and the audit of the
Company's financial statements. The Committee's responsibilities include, among
others, direct responsibility for hiring, firing, overseeing the work of and
determining the compensation for the Company's independent auditors, who report
directly to the Audit Committee. The members of the Audit Committee are Messrs.
DiLeo, Paladino, van der Kaay (Chairman), and Wilkinson, none of whom is an
employee of the Company and each of whom is independent under existing and
proposed Nasdaq requirements. Erik van der Kaay has been designated the audit
committee financial expert serving on the Audit Committee. See "Report of the
Audit Committee," below.
The Governance and Nominating Committee operates under a written
charter adopted in April 2003, a copy of which is attached to this proxy
statement as Appendix C. The Committee is appointed by the Board of Directors to
(a) assist the Board in identifying individuals qualified to become Board
members and to recommend to the Board the director nominees; (b) recommend to
the Board the corporate governance, conflicts of interest and other policies,
principles and guidelines applicable to the Company; and (c) lead the Board in
its annual review of the Board's performance. The members of the Governance and
Nominating Committee are Messrs. DiLeo, Leonberger, Paladino (Chairman), van der
Kaay, and Wilkinson, none of whom is an employee of the Company and each of whom
is independent under existing and proposed Nasdaq requirements. The Governance
and Nominating Committee will consider written nominations of candidates for
election to the Board properly submitted by shareholders. For information
regarding shareholder nominations to the Board, see "Proposals for 2004 Annual
Meeting," below.
All directors attended at least 75% of the Board meetings and assigned
committee meetings during the fiscal year ended March 31, 2003. The Board held
six meetings during the year, the Compensation Committee held seven meetings,
the Audit Committee held eight meetings, and the Governance and Nominating
Committee held one meeting during fiscal 2003.
COMPENSATION OF DIRECTORS
During fiscal 2003, each non-employee director of the Company received
a $12,000 per year retainer for their services as a member of the Board, except
for the Chairman of the Board, who received a $50,000 per year retainer. All
non-employee members of the Board received $1,000 per Board meeting attended and
$2,000 per year for service on each committee of the Board on which he served.
In addition, all directors were reimbursed for expenses incurred in their
capacity as directors.
Beginning with fiscal 2004, each non-employee director of the Company
is eligible to receive a $20,000 per year retainer for services as a member of
the Board, except for the Chairman of the Board, who receives a $75,000 per year
retainer. All non-employee members of the Board receive $2,500 per Board meeting
attended. All non-employee members of the Board, excluding the Chairman of the
Board, receive $1,000 per meeting attended for their services on the
Compensation Committee and $1,500 per meeting attended for their services on the
Audit Committee. The Chairmen of the Audit and Compensation Committees receive
$5,000 and $3,000 per year, respectively, for their services as chairmen in
addition to the applicable meeting fees. In addition, all directors are
reimbursed for expenses incurred in their capacity as directors.
Under our Non-Employee Directors' Option Plan, as amended, each
non-employee director who is first elected or appointed to the Board is eligible
to receive an option to purchase 20,000 shares of our common stock at the market
price of the stock at the time of grant. Each participating non-employee
director who is reelected receives an annual option grant for 20,000 shares of
common stock with an exercise price equal to the market price at the time of
grant. The options have a 10-year term and generally vest in three installments
over two years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of our common stock as of May 30, 2003 by (a) each person known by us
to own beneficially five percent or more of our outstanding shares of common
stock, (b) each director and nominee for director, (c) the Named Executives (as
defined in "Summary Compensation Table," below), and (d) all current directors
and executive officers as a group. Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or that are or may become exercisable within 60 days
of May 30, 2003 are deemed outstanding. These shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Except as indicated in the footnotes to this table and under applicable
community property laws, each shareholder named in the table has sole voting and
dispositive power with respect to the shares set forth opposite the
shareholder's name.
BENEFICIAL OWNERSHIP
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------ ---------------- -----------------
Robert A. Bruggeworth (1)........................... 151,331 *
Daniel A. DiLeo (2)................................. 6,666 *
Dr. Arthur E. Geiss (3)............................. 13,600 *
Dr. Frederick J. Leonberger (4)..................... 7,566 *
Jerry D. Neal (5)................................... 821,067 *
David A. Norbury (6)................................ 848,388 *
Dr. Albert E. Paladino (7).......................... 220,001 *
William J. Pratt (8)................................ 1,591,266 *
William A. Priddy, Jr. (9).......................... 324,182 *
Powell T. Seymour (10).............................. 948,947 *
Erik H. van der Kaay (11)........................... 227,999 *
Walter H. Wilkinson, Jr. (12)....................... 372,891 *
Directors and executive officers as a group (15 5,972,219 3.20%
persons) (13).....................................
<FN>
- --------------
* Indicates less than one percent
(1) Includes 147,456 shares of common stock issuable upon the exercise of
stock options.
(2) Includes 6,666 shares of common stock issuable upon the exercise of
stock options.
(3) Includes 0 shares of common stock issuable upon the exercise of stock
options.
(4) Includes 6,666 shares of common stock issuable upon the exercise of
stock options.
(5) Includes 719,908 shares of common stock issuable upon the exercise of
stock options.
(6) Includes 6,666 shares of common stock issuable upon the exercise of
stock options.
(7) Includes 80,001 shares of common stock issuable upon the exercise of
stock options.
(8) Includes (a) 172,769 shares of common stock issuable upon the exercise
of stock options, (b) 73,164 shares held by the William John Pratt 2001
Grantor Retained Annuity Trust, as to which Mr. Pratt shares voting and
dispositive power and (c) 16,000 shares held by Mr. Pratt's spouse, as
to which Mr. Pratt disclaims beneficial ownership.
(9) Includes 227,907 shares of common stock issuable upon the exercise of
stock options.
(10) Includes 147,493 shares of common stock issuable upon the exercise of
stock options.
(11) Includes 179,999 shares of common stock issuable upon the exercise of
stock options.
(12) Includes 239,999 shares of common stock issuable upon the exercise of
stock options.
(13) Includes 2,278,589 shares of common stock issuable upon the exercise of
stock options.
</FN>
EXECUTIVE OFFICERS
Our current executive officers are as follows:
NAME AGE TITLE
- --------- --- ------
Robert A. Bruggeworth............ 42 President and Chief Executive Officer
William J. Pratt................. 60 Chief Technical Officer and Corporate Vice President
Powell T. Seymour................ 60 Corporate Vice President of Strategic Operations and Secretary
Jerry D. Neal.................... 58 Executive Vice President of Marketing and Strategic Development
William A. Priddy, Jr............ 42 Chief Financial Officer and Corporate Vice President of Administration
Gary J. Grant.................... 47 Corporate Vice President of Quality Assurance
J. Forrest Moore ................ 55 Chief Information Officer and Corporate Vice President of Information Technology
Steven E. Creviston.............. 39 Corporate Vice President of Wireless Products
Set forth below is certain information with respect to our executive
officers. Officers are appointed to serve at the discretion of the Board of
Directors. Information regarding Messrs. Bruggeworth and Pratt is included in
the director profiles above.
POWELL T. SEYMOUR, a founder of the Company, has been Corporate Vice
President of Strategic Operations since January 2002 and Secretary since the
Company's inception in February 1991. Mr. Seymour was Vice President of
Operations from February 1991 to January 2002. Prior to joining the Company, Mr.
Seymour was employed for 11 years with Analog Devices, Inc. as Manufacturing
Engineer and Manufacturing Engineer Manager. Mr. Seymour served as a director of
the Company from February 1992 to July 1993.
JERRY D. NEAL, a founder of the Company, served as Vice President of
Marketing from May 1991 to January 2000 and was Executive Vice President of
Sales, Marketing and Strategic Development from January 2000 to January 2002. In
January 2002, Mr. Neal became Executive Vice President of Marketing and
Strategic Development. Prior to joining the Company, Mr. Neal was employed for
10 years with Analog Devices, Inc. as Marketing Engineer, Marketing Manager and
Business Development Manager. Mr. Neal served as a director of the Company from
February 1992 to July 1993.
WILLIAM A. PRIDDY, JR. became Chief Financial Officer and Corporate
Vice President of Administration in July 1997. He was Controller from December
1991 to December 1993, Treasurer from December 1993 to May 1999, and Vice
President of Finance from December 1994 to July 1997. Prior to joining the
Company, Mr. Priddy was employed for five years with Analog Devices, Inc. in
increasingly responsible positions in finance and marketing.
GARY J. GRANT has served as Corporate Vice President of Quality
Assurance since November 1998. From April 1995 to November 1998, Mr. Grant was
employed with ST Microelectronics, Inc., a broad-ranged manufacturer of
integrated circuits, as Director of Quality and Facilities. From July 1980 to
April 1994, Mr. Grant was employed with Texas Instruments Inc. as Fab Process
Engineer, Product Engineering Manager and Total Quality Manager.
J. FORREST MOORE became Chief Information Officer and Corporate Vice
President of Information Technology in June 2000. He was the Director of
Information Technology from February 1997 to June 2000. Mr. Moore was employed
with IBM as Project Manager from July 1996 to February 1997.
STEVEN E. CREVISTON began his employment with the Company in December
1994. From May 1997 to May 1999, Mr. Creviston was Director Account Management,
from June 1999 to April 2001, he was Product Line Director, from May 2001 to May
2002, he was Divisional Vice President and since May 2002 he has been the
Corporate Vice President of Wireless Products.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The objectives of the Company's compensation program are to enhance the
Company's ability to recruit and retain qualified management, motivate
executives and other employees to achieve established performance goals and
ensure an element of congruity between the financial interests of the Company's
management and its shareholders.
The Compensation Committee considers the following factors in setting
the compensation of the Chief Executive Officer and the other executive officers
of the Company:
o The overall performance of the Company during the previous
fiscal year;
o Individual performance appraisals of the executive officers
and their contributions toward the Company's performance goals
and other objectives as established by the Board of Directors
and the Compensation Committee;
o The compensation packages for executives at other publicly
held U.S. manufacturers of integrated circuits with similar
positions and levels of responsibility; and
o The overall compensation level of all employees of the
Company.
Compensation arrangements adopted by the Compensation Committee include
up to four components: (a) a base salary; (b) a discretionary cash bonus program
pursuant to which bonuses may be awarded annually to executive officers in
amounts based both on objective criteria established by the Compensation
Committee, which include growth of revenues over that of the previous year, the
level of operating profit and certain strategic accomplishments, and subjective
criteria applied by the Compensation Committee; (c) the grant of equity
incentives in the form of stock options and/or restricted stock based on similar
objective and subjective criteria; and (d) other compensation and employee
benefits generally available to all employees of the Company, such as health
insurance and participation in the Company's 401(k) plan. The Company has also
entered into change in control agreements with certain senior officers of the
Company, including each of the Named Executives. See "Key Employee Retention
Arrangements," below.
The Chief Executive Officer's salary, bonus and equity incentive awards
are established by the Compensation Committee. Recommendations regarding the
base salary, bonuses and stock option or other awards of the Company's executive
officers, other than Mr. Bruggeworth, are made to the Compensation Committee by
Mr. Bruggeworth and are subject to its approval. The Company is a member of one
or more human resources-focused industry groups which accumulate detailed data
regarding position descriptions, responsibilities, and compensation for all
levels of employees within the technology industries. The Company uses a subset
of this data that is most applicable to the Company, given its size and certain
other industry reporting characteristics. This information is one of the factors
applied in setting the overall base salary, bonus and other performance-based
compensation levels for all Company senior executives. The amount of bonuses and
stock option or other equity-based awards, if any, which an executive officer,
including the Chief Executive Officer, may be eligible to receive are based in
part on the attainment of specified corporate performance factors. The relevant
corporate performance factors for the last fiscal year included growth in
revenues over that of the previous year, the level of operating profit and
certain strategic accomplishments.
The Compensation Committee believes that substantial equity ownership
encourages management to take action favorable to the long-term interests of the
Company and its shareholders. Accordingly, equity-based compensation makes up a
significant portion of the overall compensation of the Named Executives and
other executive officers. The Company grants unvested equity-based awards to
most of its newly hired, full-time employees, and employees are periodically
eligible thereafter for additional awards based on management's evaluation of
their performance. During fiscal 2003, the Company granted equity-based awards
in the form of stock options and restricted stock awards to approximately 1,460
employees, including the Named Executives. Stock options and restricted stock
awards granted to the Named Executives in fiscal 2003 are included under the
headings "Summary Compensation Table" and "Option Grants in Last Fiscal Year,"
below. The Company allows its employees the opportunity to purchase the
Company's common stock through an Employee Stock Purchase Plan. See "Employee
Benefit Plans," below.
During fiscal 2003, Mr. Bruggeworth earned a base salary of $298,000
and a cash bonus of $129,000. Mr. Bruggeworth was awarded stock options and
restricted stock awards as detailed under the headings "Summary Compensation
Table," and "Option Grants in Last Fiscal Year," below. The Compensation
Committee believes that the adjustments in Mr. Bruggeworth's base salary, stock
options and restricted stock awards for fiscal 2003 were justified by the
increased responsibilities he assumed in transitioning from the position of
President of the Wireless Product Group to President and Chief Executive Officer
of the Company. The Compensation Committee believes, based on its review of
publicly available information concerning the Company's competitors, as well as
the use of the extensive data available from the salary surveys described above,
that Mr. Bruggeworth's compensation is well within the range of compensation
provided to executives of similar rank and responsibility in the Company's
industry. The Committee believes that competition for qualified executives in
the integrated circuit industry is extremely strong, and that to attract and
retain such persons the Company must maintain an overall compensation package
similar to those offered by its peer companies.
In general, compensation in excess of $1,000,000 paid to any of the
Named Executives may be subject to limitations on deductibility by the Company
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The limits on deduction do not apply to performance-based compensation
that satisfies certain requirements. The Compensation Committee has not adopted
any specific policies with respect to Section 162(m), although the 1999 Stock
Incentive Plan, which was adopted by shareholders at the 1999 annual meeting, is
structured to comply with Section 162(m) to the extent practicable, and the
proposed 2003 Stock Incentive Plan, which is subject to shareholder approval at
the annual meeting, is also structured to comply with Section 162(m) to the
extent practicable. See "Proposal 2 - Adoption of 2003 Stock Incentive Plan,"
below.
This report has been prepared by members of the Compensation Committee.
Members of this committee are:
Walter H. Wilkinson, Jr. (Chairman)
Daniel A. DiLeo
Dr. Frederick J. Leonberger
Dr. Albert E. Paladino
Erik H. van der Kaay
SUMMARY COMPENSATION TABLE
The following table presents information relating to total compensation
during fiscal years 2003, 2002 and 2001, of the current and former Chief
Executive Officers, one recently departed executive officer and our four next
most highly compensated executive officers (the "Named Executives").
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
RESTRICTED SECURITIES ALL OTHER
NAME AND YEAR STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITIONS (1) SALARY ($) BONUS ($)(2) AWARDS ($)(3) OPTIONS (#) ($)(4)
------------------- --- ---------- ------------ ------------- -------------- -----------
David A. Norbury 2003 304,863 119,652 174,440 172,000 3,660
FORMER CHIEF 2002 312,000 199,000 275,275 101,000 5,339
EXECUTIVE OFFICER (5) 2001 297,115 0 320,625 93,040 5,949
Robert A. Bruggeworth 2003 297,692 129,496 287,100 372,000 6,058
PRESIDENT AND CHIEF 2002 232,654 144,900 583,350 211,000 5,420
EXECUTIVE OFFICER (6) 2001 219,808 0 427,500 73,260 5,495
William J. Pratt 2003 264,292 114,967 100,800 127,000 0
CHIEF TECHNICAL OFFICER 2002 260,000 165,600 196,625 71,000 0
AND CORPORATE VICE 2001 258,674 0 213,750 83,736 0
PRESIDENT
Jerry D. Neal 2003 259,292 112,792 100,800 127,000 4,787
EXECUTIVE VICE PRESIDENT OF 2002 255,000 162,400 275,275 91,000 4,583
MARKETING AND STRATEGIC 2001 246,634 0 249,375 74,432 4,997
DEVELOPMENT
Arthur E. Geiss
FORMER VICE PRESIDENT OF 2003 219,868 49,796 94,080 123,123 3,081
WAFER FABRICATION 2002 236,250 150,400 314,600 91,000 4,595
OPERATIONS (7) 2001 227,015 0 320,625 74,432 4,959
William A. Priddy, Jr. 2003 219,538 95,499 134,400 135,000 4,806
CHIEF FINANCIAL OFFICER 2002 209,999 133,728 314,600 91,000 4,617
AND CORPORATE VICE 2001 186,654 0 320,625 55,824 4,974
PRESIDENT OF ADMINISTRATION
Powell T. Seymour 2003 190,338 82,797 61,600 96,000 5,494
CORPORATE VICE PRESIDENT OF 2002 187,000 119,400 196,625 71,000 5,307
STRATEGIC OPERATIONS AND 2001 182,308 0 213,750 55,824 5,469
SECRETARY
<FN>
- ---------------
(1) The Company uses a 52-week or 53-week fiscal year ending on the
Saturday closest to March 31 in each year. Each of the 2002 and 2003
fiscal years was a 52-week year, and the 2001 fiscal year was a 53-week
year. For purposes of this proxy statement, each fiscal year is
described as ending on March 31.
(2) The Compensation Committee has implemented a discretionary bonus
program pursuant to which bonuses may be awarded to our executive
officers from time to time in amounts based on the attainment of
specified performance goals and reflecting the Compensation Committee's
evaluation of each executive officer's contributions. See "Report of
the Compensation Committee," above.
(3) The value shown is the number of restricted shares times the closing
market price of the common stock on the day of grant. Restricted stock
awards generally vest over a period of five years. At fiscal 2003
year-end, the total number and value (based on the closing market price
of the common stock on the last trading day of the fiscal year) of
restricted shares held by the Named Executives was Mr. Norbury, 0; Mr.
Bruggeworth, 101,125 shares worth $630,009; Mr. Pratt, 40,188 shares
worth $250,371; Mr. Neal, 58,311 shares worth $363,278; Dr. Geiss, 0;
Mr. Priddy, 68,341 shares worth $425,764; and Mr. Seymour, 40,537
shares worth $252,546. The values given do not reflect the fact that
the shares are
restricted. Any dividends paid on the common stock would
not be paid on the restricted shares prior to vesting, and the shares
may not be voted prior to vesting.
(4) Reflects amounts contributed by the Company during the applicable
fiscal year to the accounts of the Named Executives under the Company's
401(k) plan.
(5) Mr. Norbury retired from the Company on January 10, 2003. Unvested
restricted stock awards which he held at the time of his retirement
were forfeited in accordance with their terms.
(6) Mr. Bruggeworth was named President in June 2002 and Chief Executive
Officer in January 2003.
(7) Dr. Geiss retired from the Company on January 10, 2003. Unvested
restricted stock awards which he held at the time of his retirement
were forfeited in accordance with their terms.
</FN>
STOCK OPTIONS
The following table provides information concerning options for the
common stock exercised by each of the Named Executives during fiscal year 2003,
and the value of options held by each at the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON REALIZED ------------------------------ -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------- ----------- ---------- ------------ --------------- ----------- -------------
David A. Norbury (3) 510,228 2,289,786 122,466 0 0 0
Robert A. Bruggeworth 0 0 124,054 626,206 0 83,040
William J. Pratt 558,216 3,003,792 118,323 316,413 51,705 313,914
Jerry D. Neal 0 0 663,121 330,311 2,528,439 341,183
Arthur E. Geiss (4) 300,669 2,199,330 100,522 0 0 0
William A. Priddy 39,940 219,384 187,142 300,346 354,704 257,665
Powell T. Seymour 92,000 458,347 112,078 242,746 130,339 221,208
<FN>
- ---------------
(1) Value represents the difference between the option price and the market
value of the common stock on the date of exercise.
(2) Value represents the difference between the option price and the market
value of the common stock at fiscal year-end.
(3) Mr. Norbury retired from the Company on January 10, 2003. His options
generally were subject to a 90-day post-termination exercise period.
The vesting of options for 70,228 shares was accelerated by the Company
in connection with Mr. Norbury's retirement.
(4) Dr. Geiss retired from the Company on January 10, 2003. His options
generally were subject to a 90-day post-termination exercise period.
The vesting of options for 28,469 shares was accelerated by the Company
in connection with Dr. Geiss' retirement.
</FN>
The following table sets forth for each of the Named Executives certain
information concerning stock options granted during fiscal year 2003.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM (1)
GRANTED IN FISCAL BASE PRICE EXPIRATION
NAME (#)(2) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------- ---------------- ------------ ----------- ------------- ---------- -----------
David A. Norbury 108,000 2.13 5.600 10/10/2012(3) 52,920 84,240
64,000 1.26 16.050 05/13/2012(3) 114,528 168,896
Robert A. Bruggeworth 64,000 1.26 16.050 05/13/2012 743,995 1,793,132
100,000 1.98 6.950 09/13/2012 362,153 988,339
108,000 2.13 5.600 10/10/2012 415,540 1,019,920
100,000 1.98 6.080 01/27/2013 356,306 927,496
William J. Pratt 76,000 1.50 5.600 10/10/2012 292,417 717,722
51,000 1.01 16.050 05/13/2012 592,871 1,428,902
Jerry D. Neal 51,000 1.01 16.050 05/13/2012 592,871 1,428,902
76,000 1.50 5.600 10/10/2012 292,417 717,722
Arthur E. Geiss 72,000 1.42 5.600 10/10/2012(3) 14,400 14,400
51,000 1.01 16.050 10/10/2012(3) 91,265 134,589
William A. Priddy 90,000 1.78 5.600 10/10/2012 346,283 849,934
45,000 .89 16.050 05/13/2012 523,121 1,260,796
Powell T. Seymour 58,000 1.15 5.600 10/10/2012 223,160 547,735
38,000 .75 16.050 05/13/2012 441,747 1,064,672
<FN>
- ---------------
(1) The potential realizable value is calculated based on the term of the
option at its time of grant (generally 10 years) and is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the
option and that the option is exercised and sold on the last day of its
term for the appreciated price. The five percent and 10 percent assumed
rates of appreciation are derived from the rules of the SEC and do not
represent our estimate or projection of the future common stock price.
(2) These options have an exercise price equal to the fair market value of
the common stock at the time of grant and generally vest and become
exercisable in four equal installments on the first four anniversaries
of the date of grant.
(3) These options expired in accordance with their terms 90 days after the
optionee's retirement.
</FN>
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of March 31, 2003 relating to the
Company's equity compensation plans, under which grants of stock options,
restricted stock and other rights to acquire shares of our common stock may be
granted from time to time.
(a) (b) (c)
Number of securities remaining
Number of securities to Weighted-average available for future issuance
be issued upon exercise exercise price of under equity compensation plans
of outstanding options, outstanding options, (excluding securities reflected in
PLAN CATEGORY warrants and rights warrants and rights column(a))
- -------------- ------------------------- ----------------------- ------------------------------------
Equity compensation plans approved 21,706,905 $14.54 1,004,057(1)
by security holders
Equity compensation plans not 732,925 $2.69 183,828
approved by security holders (2)
Total 22,439,830 $14.15 1,187,885
<FN>
(1) A total of 288,767 shares may be issued pursuant to restricted stock
awards granted under our 1999 Stock Incentive Plan. The shares shown in
column (c) may be the subject of awards other than options, warrants or
rights granted under the 1999 Stock Incentive Plan.
(2) In connection with our acquisition of RF Nitro Communications, Inc., we
assumed options to purchase an aggregate of 34,767 shares of common
stock and a restricted stock award for 17,356 shares of common stock
under the under the RF Nitro Communications, Inc. 2001 Stock Incentive
Plan. The options have a weighted average exercise price of $7.00. In
connection with our acquisition of Resonext Communications, Inc., we
assumed options to purchase an aggregate of 621,753 shares of common
stock under the Resonext Communication's, Inc. 1999 Stock Plan. These
outstanding options have a weighted average exercise price of $2.53.
</FN>
NON-SHAREHOLDER APPROVED PLANS
INDIVIDUAL OPTION AGREEMENTS WITH CERTAIN NON-EMPLOYEE DIRECTORS. In
October 1998, we granted options to purchase an aggregate of 120,000 shares (as
adjusted for stock splits) to certain directors outside of the Non-Employee
Director's Stock Option Plan. The weighted average exercise price for the
outstanding options is $2.609. These options were granted at an option price
equal to the fair market value at the time of grant, have 10-year terms and
vested in three annual installments.
RF NITRO COMMUNICATIONS, INC. 2001 STOCK OPTION PLAN. In connection
with our acquisition of RF Nitro, we assumed outstanding options and an
outstanding restricted stock award issued under the RF Nitro Communications,
Inc. 2001 Stock Option Plan. The 2001 Stock Option Plan provides for the grant
of incentive, nonqualified and restricted stock awards to key employees,
non-employee directors and consultants. The weighted average exercise price for
the outstanding options is $7.00. The terms may be adjusted upon certain events
affecting our Company's capitalization. No awards may be granted under the plan
after May 29, 2011.
RESONEXT COMMUNICATIONS, INC. 1999 STOCK PLAN. In connection with our
acquisition of Resonext, we assumed outstanding options issued under the
Resonext Communications, Inc. 1999 Stock Option Plan. The 1999 Stock Option Plan
provides for the grant of incentive options and nonqualified options to key
employees and consultants. The weighted average exercise price for the
outstanding options is $2.53. The terms may be adjusted upon certain events
affecting our company's capitalization. No awards may be granted under the plan
after November 23, 2009.
OTHER EMPLOYEE BENEFIT PLANS
The discussion which follows describes the material terms of our
principal equity plans (in addition to those described above).
1999 STOCK INCENTIVE PLAN. The 1999 Stock Incentive Plan, which the
Company's shareholders approved at the 1999 annual meeting of shareholders,
provides for the issuance of a maximum of 16,000,000 shares of common stock (as
adjusted to reflect stock splits) pursuant to awards granted under the plan.
Awards that may be granted under the plan include incentive options and
nonqualified options, stock appreciation rights, and restricted stock awards and
restricted units. The number of shares reserved for issuance under the plan and
the terms of awards may be adjusted upon certain events affecting the Company's
capitalization. No awards may be granted under the plan after June 30, 2009. The
plan is administered by the Compensation Committee upon delegation from the
Board of Directors. Under the terms of the plan, the committee has full and
final authority to take any action with respect to the plan, including selection
of individuals to be granted awards, the types of awards and the number of
shares of common stock subject to an award, and determination of the terms,
conditions, restrictions and limitations of each award. The Company has proposed
to adopt a new stock incentive plan. See "Proposal 2 - Adoption of 2003 Stock
Incentive Plan," below.
1997 KEY EMPLOYEES' STOCK OPTION PLAN. Our 1997 Key Employees' Stock
Option Plan provides for the grant of options to purchase common stock to key
employees and independent contractors in our service. This plan permits the
granting of both incentive options and nonqualified options. The aggregate
number of shares of common stock that may be issued pursuant to options granted
under the plan may not exceed 10,400,000 shares (as adjusted to reflect stock
splits), subject to adjustment upon certain events affecting our capitalization.
This plan is also administered by the Compensation Committee.
As of March 31, 2003, we had granted options to employees, including
the Named Executives, and consultants, for 36,670,687 shares of common stock
under our stock incentive plans, of which options for 13,679,345 shares have
been exercised and options for 2,484,011 shares have been forfeited. The
exercise prices for outstanding options granted to employees under the plans
range from $.0187 to $87.50 per share, with a weighted average of $15.13 per
share. The weighted average of all outstanding options under our stock options
plans (including those that we assumed in the RF Nitro and Resonext mergers) is
$14.15. The Company has also granted a total of 1,914,584 shares of restricted
stock under the 1999 Stock Incentive Plan and the RF Nitro Communications Plan.
EMPLOYEE STOCK PURCHASE PLAN. Our Employee Stock Purchase Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code. This plan is intended to encourage stock ownership through means of
payroll deductions. All of our regular full-time employees (including officers)
and all other employees (except for certain part-time and seasonal employees)
are eligible to participate after being employed for three months. Directors who
are not employees are not eligible to participate. An aggregate of 4,000,000
shares of common stock (as adjusted to reflect stock splits) has been reserved
for offering under the stock purchase plan, subject to anti-dilution adjustments
in the event of certain changes in our capital structure.
We make no cash contributions to the stock purchase plan, but bear the
expenses of its administration. The plan is administered by the Compensation
Committee, which has authority, among other things, to establish the number and
duration of the purchase periods during the term of the plan, and to interpret
the terms of the plan.
RETIREMENT PLAN. Employees are generally eligible to participate in our
qualified 401(k) plan after three months of service. An employee may invest a
maximum of 15% of pretax earnings in the plan. An employee is fully vested in
the employer contribution portion of the plan after completion of five
continuous years of service. Employer contributions to the plan are made at the
discretion of management and the Board of Directors. We made contributions to
the plan of approximately $1,400,000 during the fiscal year ended March 31,
2003.
KEY EMPLOYEE RETENTION ARRANGEMENTS
Effective March 2001, the Company entered into change in control
agreements with certain senior officers of the Company, including the Named
Executives. Effective January 2003, Robert Bruggeworth's change in control
agreement was amended and restated to provide for benefits commensurate with
those benefits provided pursuant to the terms of the existing change in control
agreements entered into with the retiring Chief Executive Officer and other
members of the "top tier" executive group. The terms and conditions of the
change in control agreements are substantially the same, except for certain
differences in Mr. Bruggeworth's and Mr. Priddy's agreements that are described
below. Mr. Norbury's and Dr. Geiss' change in control agreements terminated upon
their retirement from the Company on January 10, 2003. Each change in control
agreement will continue in effect until the earliest of (a) the end of three
years after the effective date of the agreement if no change in control has
occurred, subject to automatic renewal for additional one-year periods unless
the Company gives notice to the Named Executive that it does not wish to extend
the agreement; (b) the termination of the Named Executive's employment with the
Company for any reason prior to the change in control; or (c) the end of a
two-year period following a change in control and the fulfillment by the Company
and the Named Executive of all obligations under the change in control
agreement.
Under the terms of each change in control agreement, if a change in
control of the Company occurs while the Named Executive is an employee of the
Company, and a qualifying termination of his employment with the Company occurs
within the two-year period following the change in control, then the Named
Employee is entitled to certain compensation payments and benefits. A
"qualifying termination" means the Company's termination of the Named
Executive's employment for a reason other than death, disability, retirement or
cause, or the Named Executive's termination of his employment for "good reason"
(which includes a material reduction in duties and responsibilities or salary,
the failure of the Company to continue certain benefits and certain
relocations). A "change in control" is deemed to have taken place upon the
occurrence of certain events, including the acquisition by a person or entity of
51% or more of the outstanding common stock of the Company, the merger or
consolidation of the Company with or into another corporation where the Company
is not the surviving corporation, the sale of all or substantially all of the
assets of the Company or a change in a majority of the Board of Directors of the
Company within a 12-month period.
The change in control agreements for Mr. Bruggeworth and Mr. Priddy
provide that, upon a qualifying termination after a change in control, the
Company will pay a severance benefit in periodic installments over the two years
following the termination equal to the sum of (a) two times the highest annual
rate of base salary during the 12-month period before termination plus (b) two
times the average annual incentive bonus earned under any incentive bonus plan
of the Company during the last three fiscal years before termination. The change
in control agreements for the other Named Executives provide that, upon a
qualifying termination after a change in control, the Company will pay a
severance benefit in periodic installments over the one-year period following
the termination equal to the sum of (a) one times the highest annual rate of
base salary during the 12-month period before termination plus (b) one times the
average annual incentive bonus earned under any incentive bonus plan of the
Company during the last three fiscal years before termination. All of the change
in control agreements also provide that, in the event of a qualifying
termination after a change in control, the Named Executive will receive a
lump-sum cash amount equal to accrued salary and bonus payments, a pro rata
portion of the annual bonus for the year of termination and any accrued vacation
pay.
In addition, the agreements provide that upon a qualifying termination
after a change in control, all Company stock options, stock appreciation rights
or similar stock-based awards held by the Named Executive will be accelerated
and exercisable in full, and all restrictions on any restricted stock,
performance stock or similar stock-based awards granted by the Company will be
removed and such awards will be fully vested. The Named Executives will also
receive "gross-up payments" equal to the amount of excise taxes, income taxes,
interest and penalties if payments owed under a change in control agreement are
deemed excess parachute payments for federal income tax purposes. The change in
control agreements also provide that the Company will continue to provide for
one year (or two years for Mr. Bruggeworth and Mr. Priddy) the same level of
medical, dental, vision, accident, disability and life insurance benefits upon
substantially the same terms and conditions as existed prior to termination and
will provide the Named Executive with one additional year (or two additional
years for Mr. Bruggeworth and Mr. Priddy) of service credit under all
non-qualified retirement plans and excess benefits plans in which the Named
Executive participated at termination.
The change in control agreements also provide that the Named Executives
are subject to certain confidentiality, non-solicitation and non-competition
provisions. In the event the Named Executive fails to comply with any of these
provisions, he will not be entitled to receive any payment or benefits under the
agreement.
SEVERANCE ARRANGEMENTS
In consideration for David Norbury's services to the Company as Chief
Executive Officer, the Compensation Committee accelerated the vesting of stock
options for 70,228 shares in January 2003. In addition, the Company extended Mr.
Norbury's medical insurance benefits for 18 months from the date of his
termination of employment.
In consideration for Arthur Geiss' services to the Company as Vice
President of Wafer Fabrication Operations, the Compensation Committee
accelerated the vesting of stock options for 28,469 shares in January 2003.
PERFORMANCE GRAPH
The graph set forth below compares, for the five-year period beginning
March 27, 1998, the "cumulative total return" to our shareholders as compared
with the return of the Nasdaq Stock Market Index (U.S. Companies) (the "Nasdaq
Market Index") and the Nasdaq Electronic Components Index (the "Electronic
Components index"), our industry index. The graph was prepared using information
provided by the Center of Research Studies in Securities Prices at the
University of Chicago. "Cumulative total return" has been computed assuming an
investment of $100 at the beginning of the period indicated in our common stock
and the stock of the companies included in the Nasdaq Market Index and the
Electronic Components Index, and assuming the reinvestment of dividends.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
The stock price performance graph depicted above shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended (the "Securities Act"), or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The stock price performance depicted in the graph
is not necessarily an indicator of future price performance.
PROPOSAL 2 - ADOPTION OF 2003 STOCK INCENTIVE PLAN
BACKGROUND
Our Board of Directors approved the adoption of the 2003 Stock
Incentive Plan (the "Plan") effective July 22, 2003, in substantially the form
attached hereto as Appendix D subject to the approval of the Plan by the
shareholders at the 2003 Annual Meeting of Shareholders. Awards may be granted
under the Plan on and after its effective date (July 22, 2003), provided the
shareholders approve the Plan, but no later than July 21, 2013. The discussion
that follows is qualified in its entirety by reference to the Plan.
The maximum number of shares that may be issued pursuant to awards
granted under the Plan may not exceed the sum of (a) 9,250,000 shares, plus (b)
any shares of common stock (1) remaining available for issuance as of the
effective date of the Plan under the Company's 1999 Stock Incentive Plan, Key
Employees' 1997 Stock Option Plan, 1992 Stock Option Plan and any other stock
incentive plans maintained by the Company (collectively, the "Prior Plans"),
and/or (2) subject to an award granted under a Prior Plan, which awards are
forfeited, cancelled, terminated, expire or lapse for any reason, and the Board
has reserved such number of shares for this purpose. Of that amount, the maximum
number of shares of common stock that may be issued under the Plan pursuant to
the grant of incentive stock options (described below) is 9,250,000, and no
participant may be granted awards in any 12-month period for more than 800,000
shares of common stock (or the equivalent value thereof based on the fair market
value per share of the common stock on the date of grant of award). The
following will not be included in calculating the share limitations set forth
above: (a) dividends, including dividends paid in shares, or dividend
equivalents paid in cash in connection with outstanding awards, (b) awards which
by their terms are settled in cash, (c) shares and any awards that are granted
through the assumption of, or in substitution for, outstanding awards previously
granted as the result of a merger, consolidation, or acquisition of the
employing company (or an affiliate) pursuant to which it is merged with the
Company or becomes a related entity of the Company, (d) any shares subject to an
award under the Plan which award is forfeited, cancelled, terminated, expires or
lapses for any reason, and (e) any shares surrendered by a participant or
withheld by the Company to pay the option price for an option or used to satisfy
any tax withholding requirement in connection with the exercise, vesting or
earning of an award if, in accordance with the terms of the Plan, a participant
pays such option price or satisfies such tax withholding by either tendering
previously owned shares or having the Company withhold shares.
The number of shares reserved for issuance under the Plan and the terms
of awards may be adjusted in the event of an adjustment in the capital stock
structure of the Company or a related entity (due to a merger, stock split,
stock dividend or similar event). On June 4, 2003, the closing sales price of
the common stock as reported on The Nasdaq National Market was $5.72 per share.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to encourage and enable selected employees,
directors and independent contractors of the Company and related entities to
acquire or increase their holdings of common stock and other proprietary
interests in the Company in order to promote a closer identification of their
interests with those of the Company and its shareholders, thereby further
stimulating their efforts to enhance the Company's efficiency, soundness,
profitability, growth and shareholder value. At this time, approximately 1,870
employees, 8 directors and 0 independent contractors are eligible to participate
in the Plan.
The purpose will be carried out by the granting of benefits ("awards")
to selected participants. Awards which may be granted under the Plan include
incentive stock options ("incentive options") and nonqualified stock options
("nonqualified options") (collectively, "options"); stock appreciation rights
("SARs"); restricted awards ("restricted awards") in the form of restricted
stock awards ("restricted stock awards") and restricted stock units ("restricted
stock units"); and performance awards ("performance awards") in the form of
performance shares ("performance shares") and performance units ("performance
units"). The material terms of each type of award are discussed below. See
"Awards."
ADMINISTRATION; AMENDMENT AND TERMINATION
The Plan will be administered by the Board of Directors, or upon its
delegation, by the Compensation Committee of the Board. The Board of Directors
and the Compensation Committee are referred to in this discussion collectively
as the "Administrator." Under the terms of the Plan, the Administrator has full
and final authority to take any action with respect to the Plan, including,
without limitation, the authority to: (a) determine all matters relating to
awards, including selection of individuals to be granted awards, the types of
awards, the number of shares, if any, of common stock subject to an award, and
the terms, conditions, restrictions and limitations of an award; (b) prescribe
the form or forms of agreements related to awards granted under the Plan; (c)
establish, amend and rescind rules and regulations for the administration of the
Plan; and (d) construe and interpret the Plan, awards and award agreements made
under the Plan, establish and interpret rules and regulations for administering
the Plan and make all other determinations deemed necessary or advisable for
administering the Plan.
In certain circumstances, the Administrator may delegate to one or more
officers of the Company the authority to grant awards, and to make any or all of
the determinations reserved for the Administrator in the Plan with respect to
such awards (subject to any restrictions imposed by applicable laws, rules and
regulations and such terms and conditions as may be established by the
Administrator).
The Plan and awards may be amended or terminated at any time by the
Board of Directors, subject to the following: (a) shareholder approval is
required of any Plan amendment if such approval is required by applicable law,
rule or regulation; and (b) an amendment or termination of an award may not
materially adversely affect the rights of an award participant without the
participant's consent. Notwithstanding clause (a) of the preceding sentence,
except for anti-dilution adjustments made under the Plan, the option price for
any outstanding option or base price of any outstanding SAR granted under the
Plan may not be decreased after the date of grant, nor may any outstanding
option or SAR granted under the Plan be surrendered to the Company as
consideration for the grant of a new option or SAR with a lower exercise or base
price than the original option or SAR, as the case may be, without shareholder
approval of any such action.
The Administrator has the authority to make adjustments of awards upon
the occurrence of certain unusual or nonrecurring events, if the Administrator
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or necessary or appropriate to comply with applicable laws, rules
or regulations. The Administrator may cause any award granted under the Plan to
be canceled in consideration of an alternative award or cash payment of an
equivalent cash value made to the holder of such canceled award.
AWARDS
As noted above, the Plan authorizes the grant of incentive options,
nonqualified options, SARs, restricted awards and performance awards. A summary
of the material terms of each type of award is provided below.
OPTIONS. The Plan authorizes the grant of both incentive options and
nonqualified options, both of which are exercisable for shares of common stock
(although incentive options may only be granted to employees of the Company or a
related corporation). The option price at which an option may be exercised will
be determined by the Administrator at the time of grant and must be at least
100% of the fair market value per share of the common stock on the date of grant
(or 110% of the fair market value with respect to incentive options granted to
an employee who owns stock possessing more than 10% of the total voting power of
all classes of stock of the Company or a related corporation). Unless an
individual award agreement provides otherwise, the option price may be paid in
the form of cash or cash equivalent; in addition, where permitted by the
Administrator and applicable laws, rules and regulations, payment may also be
made: (a) by delivery (by either actual delivery or attestation) of shares of
common stock owned by the participant at the time of exercise for a period of at
least six months and otherwise acceptable to the Administrator; (b) by shares of
common stock withheld upon exercise; (c) by delivery of written notice of
exercise to the Company and delivery to a broker of written notice of exercise
and irrevocable instructions to promptly deliver to the Company the amount of
sale or loan proceeds to pay the option price; (d) by such other payment methods
as may be approved by the Administrator and which are acceptable under
applicable law; or (e) by any combination of these methods. The term of an
option and the period or periods during which, and conditions pursuant to which,
an option may be exercised will be determined by the Administrator at the time
of option grant and, in the case of incentive options, the option term may not
exceed 10 years (or five years with respect to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or a related corporation). Options are also subject to
certain restrictions on exercise if the
participant terminates employment. The Administrator also has authority to
establish other terms and conditions related to options.
STOCK APPRECIATION RIGHTS. Under the terms of the Plan, SARs may be
granted to the holder of an option (a "related option") with respect to all or a
portion of the shares of common stock subject to the related option (a "tandem
SAR") or may be granted separately (a "freestanding SAR"). The consideration to
be received by the holder of an SAR may be paid in cash, shares of common stock
(valued at fair market value on the date of the SAR exercise), or a combination
of cash and shares of common stock, as determined by the Administrator. The
holder of an SAR is entitled to receive from the Company, for each share of
common stock with respect to which the SAR is being exercised, consideration
equal in value to the excess of the fair market value of a share of common stock
on the date of exercise over the base price per share of such SAR. The base
price may be no less than the fair market value per share of the common stock on
the date the SAR is granted. The consideration paid by the Company upon exercise
of an SAR may be paid currently or on a deferred basis.
SARs are exercisable according to the terms established by the
Administrator and stated in the applicable award agreement. Upon the exercise of
a tandem SAR, the related option is deemed to be surrendered to the extent of
the number of shares of common stock for which the tandem SAR is exercised. No
SAR may be exercised more than 10 years after it was granted, or such shorter
period as may apply to related options in the case of tandem SARs. Each award
agreement will set forth the extent to which the holder of an SAR will have the
right to exercise an SAR following termination of the holder's employment or
service with the Company. SARs are subject to certain restrictions on exercise
if the participant terminates employment.
RESTRICTED AWARDS. Subject to the limitations of the Plan, the
Administrator may in its sole discretion grant restricted awards to such
eligible individuals in such numbers, upon such terms and at such times as the
Administrator shall determine. Restricted awards may be in the form of
restricted stock awards and/or restricted stock units that are subject to
certain conditions, which conditions must be met in order for the restricted
award to vest and be earned (in whole or in part) and no longer subject to
forfeiture. Restricted awards may be payable in cash or whole shares of common
stock (including restricted stock), or partly in cash and partly in whole shares
of common stock, in accordance with the terms of the Plan and the discretion of
the Administrator.
The Administrator has authority to determine the nature, length and
starting date of the period during which the restricted award may be earned (the
"restriction period") for each restricted award, and will determine the
conditions that must be met in order for a restricted award to be granted or to
vest or be earned (in whole or in part). These conditions may include (but are
not limited to) attainment of performance objectives, continued service or
employment for a certain period of time (or a combination of attainment of
performance objectives and continued service), retirement, displacement,
disability, death or any combination of conditions. In the case of restricted
awards based upon performance criteria, or a combination of performance criteria
and continued service, the Administrator will determine the performance
objectives to be used in valuing restricted awards, which performance objectives
may vary from participant to participant and between groups of participants and
will be based upon those company, business unit or division and/or individual
performance factors and criteria as the Administrator in its sole discretion may
deem appropriate; provided, however, that, with respect to restricted awards
payable to covered employees which are intended to be eligible for the
compensation deduction limitation exception available under Section 162(m) and
related regulations, such performance factors shall be limited to one or more of
the following: sales goals, earnings per share, return on equity, return on
assets and total return to shareholders, as determined by the Administrator.
The Administrator has authority to determine whether and to what degree
restricted awards have vested and been earned and are payable, as well as to
determine the forms and terms of payment of restricted awards. If a
participant's employment or service is terminated for any reason and all or any
part of a restricted award has not vested or been earned pursuant to the terms
of the Plan and the individual award agreement, the award will be forfeited
(unless the Administrator determines otherwise).
PERFORMANCE AWARDS. Subject to the limitations of the Plan, the
Administrator may in its sole discretion grant performance awards to
participants upon such terms and conditions and at such times as the
Administrator shall determine. Performance awards confer upon a participant the
right to receive shares of common stock or the cash value thereof (or a
combination thereof) based on the attainment of certain performance or other
objectives during specified award periods. Performance awards may be in the form
of performance shares and/or performance units. An award of a performance share
is a grant of a right to receive shares of common stock or the cash value
thereof (or a combination thereof) which is contingent upon the achievement of
performance or other objectives during a specified period and which has a value
on the date of grant equal to the fair market value (as determined in accordance
with the Plan) of a share of common stock. An award of a performance unit is a
grant of a right to receive shares
of common stock or a designated dollar value amount of common stock which is
contingent upon the achievement of performance or other objectives during a
specified period, and which has an initial value established by the
Administrator at the time of grant.
The Administrator has authority to determine the nature, length and
starting date of the period during which a performance award may be earned (the
"performance period"), and will determine the conditions which must be met in
order for a performance award to be granted or to vest or be earned (in whole or
in part). These conditions may include (but are not limited to) specific
performance objectives, continued service or employment for a certain period of
time, or a combination of such conditions. In the case of performance awards
based upon specified performance objectives, the Administrator will determine
the performance objectives to be used in valuing performance awards, which
performance objectives may vary from participant to participant and between
groups of participants and will be based upon those company, business unit or
division and/or individual performance factors and criteria as the Administrator
in its sole discretion may deem appropriate; provided, however, that, with
respect to performance awards payable to covered employees which are intended to
be eligible for the compensation deduction limitation exception available under
Section 162(m) and related regulations, such performance factors shall be
limited to one or more of the following: sales goals, earnings per share, return
on equity, return on assets and total return to shareholders, as determined by
the Administrator.
The Administrator has authority to determine whether and to what degree
performance awards have vested and been earned and are payable, as well as to
determine the forms and terms of payment of performance awards. If a
participant's employment or service is terminated for any reason and all or any
part of a performance award has not been earned pursuant to the terms of the
Plan and the individual award agreement, the award will be forfeited (unless the
Administrator determines otherwise).
CHANGE OF CONTROL
Upon a change of control (as defined in the Plan), and unless an
individual award agreement provides otherwise, the Plan provides that: (a) all
options and SARs outstanding as of the date of the change of control will become
fully exercisable, whether or not then otherwise exercisable; and (b) any
restrictions applicable to any restricted award and any performance award will
be deemed to have been met, and awards will become fully vested, earned and
payable to the fullest extent of the original award. However, the Plan
authorizes the Administrator, in the event of a merger, share exchange,
reorganization or other business combination affecting the Company or a related
entity, to determine that any or all awards will not vest or become exercisable
on an accelerated basis, if the Company or the surviving or acquiring
corporation takes such action (including but not limited to the assumption of
Plan awards or the grant of substitute awards) which, in the opinion of the
Administrator, is equitable or appropriate to protect the rights and interest of
participants under the Plan.
TRANSFERABILITY
Incentive options are not transferable other than by will or the laws
of intestate succession. Nonqualified options and SARs are not transferable
other than by will or the laws of intestate succession, except as permitted by
the Administrator in a manner consistent with the registration provisions of the
Securities Act. Restricted awards that have not vested and performance awards
which have not been earned are not transferable (including by sale, assignment,
pledge or hypothecation) other than by will or the laws of intestate succession,
and participants may not sell, transfer, assign, pledge or otherwise encumber
shares subject to such awards until the restriction period and/or performance
period has expired and until all conditions to vesting and/or earning the award
have been met.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal federal (and
not state and local) income tax consequences of awards granted under the Plan as
of this time. The summary is general in nature and is not intended to cover all
tax consequences that may apply to a particular employee or to the Company. The
provisions of the Code and regulations thereunder relating to these matters are
complicated and their impact in any one case may depend upon the particular
circumstances.
INCENTIVE OPTIONS. Incentive options granted under the Plan are
intended to qualify as incentive stock options under Section 422 of the Code.
Pursuant to Section 422, the grant and exercise of an incentive stock option
will generally not result in taxable income to the participant (with the
possible exception of alternative minimum tax liability) if the participant does
not dispose of shares received upon exercise of such option less than one year
after the date of exercise and two years after the date of grant, and if the
participant has continuously been a Company employee from the date of grant to
three months before the date of exercise (or 12 months in the event of death or
disability). However, the excess of the fair market value of the shares received
upon exercise of the incentive option over the option price for such shares
generally will constitute an item of adjustment in computing the participant's
alternative minimum taxable income for the year of exercise. Thus, certain
participants may increase their federal income tax liability as a result of the
exercise of an incentive option under the alternative minimum tax rules of the
Code.
The Company generally will not be entitled to a deduction for income
tax purposes in connection with the exercise of an incentive option. Upon the
disposition of shares acquired upon exercise of an incentive option, the
participant will be taxed on the amount by which the amount realized upon such
disposition exceeds the option price, and such amount will be treated as capital
gain or loss.
If the holding period requirements for incentive option treatment
described above are not met, the participant will be taxed as if he received
compensation in the year of the disposition. The participant must treat gain
realized in the premature disposition as ordinary income to the extent of the
lesser of: (a) the fair market value of the stock on the date of exercise minus
the option price or (b) the amount realized on disposition of the stock minus
the option price. Any gain in excess of these amounts may be treated as capital
gain. The Company generally is entitled to deduct, as compensation paid, the
amount of ordinary income realized by the participant.
Pursuant to the Code and the terms of the Plan, in no event can there
first become exercisable by a participant in any one calendar year incentive
options granted by the Company with respect to shares having an aggregate fair
market value (determined at the time an option is granted) greater than
$100,000. To the extent an incentive option granted under the Plan exceeds this
limitation, it will be treated as a nonqualified option. In addition, no
incentive option may be granted to an individual who owns, immediately before
the time that the option is granted, stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
unless the option price is equal to or exceeds 110% of the fair market value of
the stock and the option period does not exceed five years.
NONQUALIFIED OPTIONS. If a participant receives a nonqualified option,
the difference between the fair market value of the stock on the date of
exercise and the option price will constitute taxable ordinary income to the
participant on the date of exercise. The Company generally will be entitled to a
deduction in the same year in an amount equal to the income taxable to the
participant. The participant's basis in shares of common stock acquired upon
exercise of an option will equal the option price plus the amount of income
taxable at the time of exercise. Any subsequent disposition of the stock by the
participant will be taxed as a capital gain or loss to the participant, and will
be long-term capital gain or loss if the participant has held the stock for more
than one year at the time of sale.
STOCK APPRECIATION RIGHTS. For federal income tax purposes, the grant
of an SAR will not result in taxable income to a participant or a tax deduction
to the Company. At the time of exercise of an SAR, a participant will forfeit
the right to benefit from any future appreciation of the stock subject to the
SAR. Accordingly, taxable income to the participant is deferred until the SAR is
exercised. Upon exercise, the amount of cash and fair market value of shares
received by the participant, less cash or other consideration paid (if any), is
taxed to the participant as ordinary income and the Company will receive a
corresponding income tax deduction to the extent the amount represents
reasonable compensation and an ordinary and necessary business expense, subject
to any required income tax withholding.
RESTRICTED STOCK SUBJECT TO RESTRICTED AWARDS. Similar to SARs, awards
for restricted stock will not result in taxable income to the participant or a
tax deduction to the Company for federal income tax purposes, unless the
restrictions on the stock do not present a substantial risk of forfeiture as
defined under Section 83 of the Code. In the year that the restricted stock is
no longer subject to a substantial risk of forfeiture, the fair market value of
such shares at such date and any cash amount awarded, less cash or other
consideration paid (if any), will be included in the participant's ordinary
income as compensation, except that, in the case of restricted stock issued at
the beginning of the restriction period, the participant may elect to include in
his ordinary income as compensation at the time the restricted stock is awarded,
the fair market value of such shares at such time, less any amount paid
therefor. The Company will be entitled to a corresponding income tax deduction
to the extent that the amount represents reasonable compensation and an ordinary
and necessary business expense, subject to any required income tax reporting.
RESTRICTED UNITS. The federal income tax consequences of the award of
restricted units will depend on the conditions of the award. Generally, the
transfer of cash or property will result in ordinary income to the participant
and a tax deduction to the Company. If the property transferred is subject to a
substantial risk of forfeiture, as defined under Section 83 of the Code (for
example, because receipt of the property is conditioned upon the
performance of substantial future services), the taxable event is deferred until
the substantial risk of forfeiture lapses. However, the participant may
generally elect to accelerate the taxable event to the date of transfer, even if
the property is subject to a substantial risk of forfeiture. If this election is
made, subsequent appreciation is not taxed until the property is sold or
exchanged (and the lapse of the forfeiture restriction does not create a taxable
event). Generally, any deduction to the Company occurs only when ordinary income
in respect of an award is recognized by the participant (and then the deduction
is subject to reasonable compensation and reporting requirements). Because such
awards will be subject to such conditions as may be determined by the
Administrator, the federal income tax consequences to the participant and to the
Company will depend on the specific conditions of the award.
PERFORMANCE SHARE AWARDS, PERFORMANCE UNIT AWARDS AND DIVIDEND
EQUIVALENTS. The grant of a performance share award, performance unit award or a
dividend equivalent award does not result in taxable income to the participant
or a tax deduction to the Company for federal income tax purposes. However, the
participant will recognize income on account of the settlement of a performance
share award, performance unit award or dividend equivalent award. The income
recognized by the participant at that time will be equal to any cash that is
received and the fair market value of any common stock (determined as of the
date that the shares are not subject to a substantial risk of forfeiture) that
is received in settlement of the award. The Company is entitled to a federal
income tax deduction upon the settlement of a performance share award,
performance unit award or dividend equivalent award equal to the ordinary income
recognized by the participant to the extent that the amount represents
reasonable compensation and an ordinary and necessary business expense.
PERFORMANCE-BASED COMPENSATION -- SECTION 162(M) REQUIREMENTS
The Plan is structured to comply with the requirements imposed by
Section 162(m) of the Code and related regulations in order to preserve, to the
extent practicable, the Company's tax deduction for awards made under the Plan
to covered employees. Section 162(m) of the Code generally denies an employer a
deduction for compensation paid to covered employees (generally, the Named
Executives) of a publicly held corporation in excess of $1,000,000 unless the
compensation is exempt from the $1,000,000 limitation because it is
performance-based compensation.
In order to qualify as performance-based compensation, the compensation
paid under the Plan to covered employees must be paid under pre-established
objective performance goals determined and certified by a committee comprised of
outside directors. In addition to other requirements for the performance-based
exception, shareholders must be advised of, and must approve, the material terms
(or changes in material terms) of the performance goal(s) under which
compensation is to be paid. Material terms include the individuals eligible to
receive compensation, a description of the business criteria on which the
performance goal is based, and either the maximum amount of the compensation to
be paid or the formula used to calculate the amount of compensation if the
performance goal is met.
As proposed, the Plan limits the maximum amount of awards that may be
granted to any employee. In particular, the Plan provides that (subject to
capital adjustments), no participant may be granted awards in any 12-month
period for more than 800,000 shares of the common stock (or the equivalent value
thereof based on the fair market value per share of the common stock on the date
of grant of an award). Further, with respect to performance-based restricted
awards and performance awards payable to covered employees which are intended to
be eligible for the compensation limitation exception available under Section
162(m) and related regulations, the Plan limits performance objectives to one or
more of the following: sales goals, earnings per share, return on equity, return
on assets and total return to shareholders, as determined by the Administrator.
See "Awards - Restricted Awards" and "Awards - Performance Awards," above.
The selection of individuals who will receive awards under the Plan, if
it is approved by the shareholders, and the amount of any such awards is not yet
determinable due to vesting, performance and other requirements. Therefore, it
is not possible to predict the benefits or amounts that will be received by, or
allocated to, particular individuals or groups of employees in fiscal year 2004.
The number of shares of Company common stock subject to options and restricted
stock awards granted in fiscal year 2003 to the Named Executives are set forth
under the headings "Executive Compensation - Summary Compensation Table" and
"Stock Options - Option Grants in Last Fiscal Year."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO ADOPT
THE 2003 STOCK INCENTIVE PLAN IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
APPENDIX D.
PROPOSAL 3 - RAFTIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has reappointed Ernst & Young LLP to audit the
consolidated financial statements of the Company for 2004. Ernst & Young has
served as our independent auditors continuously since 1992. A representative
from Ernst & Young is expected to be present at the meeting with the opportunity
to make a statement if he or she desires to do so and to be available to respond
to appropriate questions.
Although shareholder ratification of the appointment is not required by
law, the Company desires to solicit such ratification. If the appointment of
Ernst & Young is not approved by a majority of the shares represented at the
Annual Meeting, the Company will consider the appointment of other independent
auditors for fiscal 2004.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING MARCH 31, 2004.
INDEPENDENT AUDITOR FEE INFORMATION
The following table shows the fees that the Company paid or accrued for
the audit and other services provided by Ernst & Young, LLP for fiscal years
2003 and 2002.
2003 2002
Audit Fees....................... $ 287,386 $ 227,645
Audit-Related Fees............... $ 194,469 $ 98,320
Tax Fees......................... $ 174,070 $ 127,384
All Other Fees................... $ - $ -
Total............................. $ 655,925 $ 453,349
AUDIT FEES. This category includes fees for the audits of the Company's
annual financial statements, review of financial statements included in the
Company's Form 10-Q Quarterly Reports and services that are normally provided by
the independent auditors in connection with statutory and regulatory filings or
engagements for the relevant fiscal years.
AUDIT-RELATED FEES. This category consists of due diligence in
connection with acquisitions, various accounting consultations, and benefit plan
audits.
TAX FEES. This category consists of professional services rendered by
Ernst & Young for tax compliance, tax planning and tax advice. The services for
the fees disclosed under this category include tax return preparation, research
and technical tax advice.
ALL OTHER FEES. There were no other fees paid to Ernst & Young, LLP in
fiscal years 2003 and 2002.
REPORT OF THE AUDIT COMMITTEE
In the performance of its oversight function, the Audit Committee has
reviewed and discussed the consolidated financial statements with management and
the independent auditors. The Audit Committee has also discussed with the
independent auditors the matters required to be discussed by the Statement on
Auditing Standards Number 61, Communication with Audit Committees, as currently
in effect.
The Audit Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
Number 1, Independence Discussions with Audit Committees, as currently in
effect, and has discussed with the independent auditors that firm's
independence.
Based upon the discussions and review described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended March 31, 2003 to be filed with the SEC.
This report has been prepared by members of the Audit Committee.
Members of this committee are:
Erik H. van der Kaay (Chairman)
Daniel A. DiLeo
Dr. Albert E. Paladino
Walter H. Wilkinson, Jr.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, our directors, officers and beneficial
owners of more than 10 percent of our common stock are required to report their
beneficial ownership of common stock and any changes in that ownership to the
SEC. Specific dates for such reporting have been established, and we are
required to report in this proxy statement any failure to file by the
established dates during the last fiscal year. In the last fiscal year, to our
knowledge, all of these filing requirements were satisfied by our directors,
officers and principal shareholders with the exception of one Form 4 for Mr.
Creviston (with respect to four sales of common stock), one Form 4 for Mr. Neal
(with respect to the exercise of a stock option) and one Form 4 for Mr. Norbury
(with respect to the termination of a restricted stock award).
CERTAIN TRANSACTIONS
JAZZ SEMICONDUCTOR, INC.
On October 15, 2002, we entered into a strategic relationship with Jazz
Semiconductor, Inc. ("Jazz"), a privately-held, radio-frequency and mixed-signal
silicon wafer foundry, for silicon manufacturing and development. Under the
arrangement, we obtained a committed, lower-cost source of supply for wafers
fabricated using Jazz's silicon manufacturing process. In addition, we are
collaborating with Jazz on joint process development projects. As part of this
strategic relationship, we agreed to invest approximately $60 million in Jazz,
$30 million of which was invested in October 2002 and $30 million of which is
payable in the third quarter of fiscal 2004. The investment represents a
minority interest in Jazz operations, and we have one seat on the Jazz Board of
Directors out of nine; however, we do not have the ability to exercise
significant influence in the management of Jazz operations.
Jerry Neal, our Executive Vice President of Marketing and Strategic
Development, serves as our appointed representative to Jazz's Board of
Directors. During our fiscal year ended March 31, 2003, each nonemployee
director of Jazz, including Mr. Neal, was awarded compensation for such
director's service on the Jazz Board, which consisted of a $30,000 annual cash
fee and a nonqualified option to purchase 125,000 shares of Jazz common stock at
the then fair market value $0.20 per share. Mr. Neal exercised the option in
full, and the shares were placed in escrow where they remain subject to annual
vesting provisions over a four-year period. The Governance and Nominating
Committee and Board of Directors unanimously approved Mr. Neal's receipt of this
compensation, subject to a number of conditions designed to protect the
interests of the Company and its shareholders.
PROPOSALS FOR 2004 ANNUAL MEETING
Under SEC regulations, any shareholder desiring to make a proposal to
be acted upon at the 2004 annual meeting of shareholders must present such
proposal to us at our principal office in Greensboro, North Carolina by February
18, 2004 for the proposal to be considered for inclusion in our proxy statement.
In addition to any other applicable requirements, for business
(including director nominations) to be properly brought before the annual
meeting by a shareholder even if the proposal is not to be included in our proxy
statement, our bylaws provide that the shareholder must give timely notice in
writing to our corporate secretary not less than 60 nor more than 90 days prior
to the date one year from the date of the immediately preceding annual meeting.
As to each matter, the notice must contain a written statement of the
shareholder's proposal and the reasons for submitting the proposal and
additional specific information if the proposal relates to director nominations,
all as stated in our bylaws. A proxy may confer discretionary authority to vote
on any matter at an annual meeting if we do not receive proper notice of the
matter within the time frame described above.
FINANCIAL INFORMATION
The Company's Annual Report to Shareholders for the fiscal year ended
March 31, 2003 is enclosed. UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO ANY SHAREHOLDER OF RECORD OR BENEFICIAL OWNER OF COMMON STOCK
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
MARCH 31, 2003 (WITHOUT EXHIBITS), INCLUDING FINANCIAL STATEMENTS, FILED WITH
THE SEC. Any such request should be directed to Doug DeLieto, the Company's
Director of Investor Relations, at 7628 Thorndike Road, Greensboro, North
Carolina 27409.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of
no other matter to come before the annual meeting. However, if any other matter
requiring a vote of the shareholders arises, the persons named in the
accompanying proxy will vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
/s/ Albert E. Paladino
----------------------------------
Albert E. Paladino
Chairman
Dated: June 16, 2003
APPENDIX A
RF MICRO DEVICES, INC.
COMPENSATION COMMITTEE CHARTER
I. COMMITTEE PURPOSE
The Board of Directors has established the Compensation Committee to
exercise the Board's authority concerning compensation of the Company's
officers, as well stock-based and incentive compensation paid to employees and
service providers generally, subject to the limitations and requirements of
Section 55-8-25 of the North Carolina Business Corporation Act (the "NCBCA") and
the provisions of this Charter. The Committee will evaluate the compensation of
the officers of the Company and its subsidiaries and, if applicable, its
controlled affiliates and fix their compensation in accordance with the
Company's compensation philosophy. The Committee will prepare the Committee
report on executive compensation that the rules of the Securities and Exchange
Commission (the "SEC") require be included in the Company's annual proxy
statement. The Committee will evaluate and make recommendations to the Board
concerning compensation of directors. In addition, the Committee will discharge
certain responsibilities relating to the Company's incentive and employee
benefit plans generally. For the purpose of this Charter, the term "officer"
will have the meaning given to it in Rule 16a-1 under the Securities Exchange
Act of 1934.
II. COMMITTEE MEMBERSHIP AND PROCEDURE
The Committee will consist of no fewer than three members. Each member
will meet the independence requirements of The Nasdaq Stock Market and, if
deemed appropriate from time to time, will meet the definition of "non-employee
director" set forth in Rule 16b-3 under the Securities Exchange Act of 1934 and
the definition of "outside director" set forth in Section 162(m) of the Internal
Revenue Code of 1986.
The Board will appoint the members of the Committee annually. The
members will serve until their successors are appointed or until their earlier
death, resignation or removal. The Board will designate the Chairman of the
Committee or, if the Board fails to do so, the members of the Committee will
elect a Chairman by majority vote. The Board will have the power at any time to
change the size and membership of the Committee and to fill vacancies on the
Committee, provided that any new member must satisfy the requirements of this
Charter and any other applicable requirements. The rules and procedures of the
Committee will be governed by the NCBCA and the Company's bylaws and, to the
extent not inconsistent with the NCBCA and the bylaws, this Charter and the
Company's Corporate Governance Guidelines.
The Committee will meet at least once a year and at such other times as
are necessary to carry out the Committee's responsibilities. The Chairman of the
Committee, the Chairman of the Board or the Chief Executive Officer may call
meetings of the Committee.
The Committee will record and maintain minutes of its meetings. The
Chairman of the Committee or a Committee member designated by the Chairman will
make a report to the Board of the Committee's meetings, actions taken at
meetings or by consent, and recommendations made since the most recent Board
meeting, unless the Committee has previously circulated an interim report
addressing the matter or matters.
III. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The authority and responsibilities of the Committee are as follows:
A. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
B. Review from time to time, modify if necessary and approve (1) the
Company's philosophy concerning executive compensation, which will give
appropriate consideration to linking the compensation of the Company's officers
to the long-term interests of the shareholders and (2) the components of
executive compensation to align them with the Company's compensation philosophy
C. Annually evaluate the compensation of the Chief Executive Officer
and determine, at a regularly scheduled meeting of the Committee held in
executive session, the components and amounts of his or her compensation
consistent with the Company's compensation philosophy, and discuss in the
Committee's annual
proxy statement report the factors and criteria applied by the Committee in
determining the compensation of the Chief Executive Officer, including the
relationship of the Company's performance to such compensation (describing each
quantitative and qualitative measure of the Company's performance on which such
compensation was based).
D. Annually evaluate, in conjunction with the Chief Executive Officer,
the compensation of other officers and approve, at a regularly scheduled meeting
of the Committee held in executive session, the components and amounts of
compensation for each officer, and discuss in the Committee's annual proxy
statement report the relationship of the Company's performance to such
compensation. If desired by the Committee, the Chief Executive Officer may
attend the executive session of the Committee held for this purpose, although
the Chief Executive Officer may not vote.
E. Approve revisions to the Company's officer salary structure and
discuss such revisions with the Chief Executive Officer.
F. Periodically evaluate the terms and administration of the Company's
long-term and short-term incentive plans and employee benefit plans, whether
cash or equity based, to ensure they are consistent with the Company's
compensation philosophy, consider the desirability of amending or terminating
existing plans or adopting new plans and determine (based on the advice of legal
counsel) whether to request the Board to approve a proposal to amend or
terminate an existing plan or to adopt a new plan and whether to submit such a
proposal to a vote of the shareholders.
G. Serve as administrator of the Company's stock option and other
employee benefit plans in accordance with their terms.
H. Annually evaluate and if appropriate modify the methodology for
awarding stock-based and other incentive compensation to all non-executive
employees (including new hires) and other service providers, and the levels of
awards.
I. Approve employment agreements, severance agreements or change in
control agreements for the Chief Executive Officer and officers or amendments to
such agreements as, when and if appropriate.
J. Approve annual retainer and meeting fees for the Board and
committees of the Board, including, if applicable, compensatory awards of stock
to directors.
K. Periodically evaluate and make recommendations to the Board
concerning the compensation of directors.
The Committee may condition its approval of any compensation on
ratification by the Board if Board action is required to comply with applicable
law, including the NCBCA or Section 162(m) of the Internal Revenue Code.
IV. ADDITIONAL RESOURCES
The Committee will have the right to use reasonable amounts of time of
the Company's internal audit personnel and independent auditors, other internal
staff and legal counsel and also will have the right to hire and fire
independent compensation experts and other advisers to assist and advise the
Committee in connection with its responsibilities. The Committee will keep the
Company's Chief Financial Officer advised as to the general range of anticipated
expenses for outside consultants and advisers and will obtain Board approval for
expenditures exceeding $25,000 in any one year.
Originally Adopted: June 3, 2003
APPENDIX B
RF MICRO DEVICES, INC.
AUDIT COMMITTEE CHARTER
I. COMMITTEE PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors
in its duty to oversee the Company's accounting, financial reporting and
internal control functions and the audit of the Company's financial statements.
The Committee will accomplish this purpose by performing the responsibilities
enumerated in this Charter, which include among others direct responsibility for
hiring, firing, overseeing the work of and determining the compensation for the
Company's independent auditors. The independent auditors will report directly to
the Audit Committee.
The Committee's responsibilities under this Charter do not relieve the
Company's management of its responsibilities for preparing the Company's
financial statements so that they comply with generally accepted accounting
principles ("GAAP") and fairly present the Company's financial condition,
results of operations and cash flows; issuing financial reports that comply with
the requirements of the Securities and Exchange Commission (the "SEC"); and
establishing and maintaining adequate internal control structures and procedures
for financial reporting.
II. COMMITTEE MEMBERSHIP AND PROCEDURE
The Audit Committee (sometimes referred to in this Charter as the
"Committee") will consist of three or more directors, each of whom must:
A. Be an independent director as defined in Section 10A(m) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
B. Be an independent director as defined in Rule 4200 of The Nasdaq
Stock Market.
C. Not own or control, directly or indirectly, 20% or more of the
Company's voting securities or such lower amount established by rules of the SEC
pursuant to Section 10A(m) of the Exchange Act or be an employee of an entity
that owns or controls such amount.
D. Be able to read and understand fundamental financial statements as
required by Rule 4200(d)(2)(A)(ii) of The Nasdaq Stock Market.
At least one member of the Committee must have, in the judgment of the
Board, employment experience in finance or accounting, requisite professional
certification in accounting or any other comparable experience or background
that results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. In addition, at least one
member of the Committee must be an "audit committee financial expert" as such
term is defined in Item 401 of Regulation S-K, as determined by the Board. Such
member may, but need not be, the Chairman of the Committee.
The Board will appoint the members of the Committee annually. The
members will serve until their successors are appointed or until their earlier
death, resignation or removal. The Board will designate the Chairman of the
Committee or, if it fails to do so, the members of the Committee will elect a
Chairman by majority vote. The Board will have the power at any time to change
the size and membership of the Committee and to fill vacancies on the Committee,
provided that any new member satisfy the requirements of this Charter and any
other applicable requirements. The rules and procedures of the Committee will be
governed by the North Carolina Business Corporation Act and the Company's bylaws
and, to the extent not inconsistent with such Act and the bylaws, this Charter
and the Company's Corporate Governance Guidelines.
The Committee will meet following the end of each fiscal quarter of the
Company prior to the filing of the Company's quarterly report or annual report
with the SEC to review the financial results of the Company for the preceding
fiscal quarter or the preceding fiscal year, as the case may be. Upon the call
of the Chairman of the
Committee or the Chairman of the Board, the Committee will meet at such other
times and for such other purposes as are necessary to carry out the Committee's
responsibilities. During each quarterly meeting, or at such other times (at
least quarterly) as the Committee determines, the Committee will meet separately
with management and the Company's independent auditors in discharge of the
Committee's obligations under Section III of this Charter. If the Company
establishes an internal audit function, the Committee also will meet separately
with the head of such function during each quarterly meeting or at such other
times as the Committee determines.
The Committee will record and maintain minutes of its meetings. The
Chairman of the Committee or a Committee member designated by the Chairman will
make a report to the Board of the Committee's meetings, actions taken at
meetings or by consent, and recommendations made since the most recent Board
meeting, unless the Committee has previously circulated an interim report
addressing the matter or matters.
III. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The authority and responsibilities of the Committee are as follows:
A. Review and reassess annually the adequacy of this Charter and
recommend any changes to the Board. The Chairman of the Committee will confirm
to the Board and management annually that the Committee has reviewed and
reassessed the adequacy of this Charter.
B. Be solely and directly responsible for the appointment (subject to
shareholder ratification, if applicable), compensation, retention and oversight
of the work of the independent auditors engaged to prepare or issue an audit
report or perform other audit, review or attest services, including resolution
of disagreements between the independent auditors and management regarding
financial reporting.
C. Prior to engaging the independent auditors to perform an audit of
the Company's financial statements, (i) obtain from the independent auditors a
formal written statement delineating all relationships between their firm and
the Company, consistent with Independence Standards Board Standard No. 1 or such
other standard as may be promulgated by the Public Company Accounting Oversight
Board; (ii) actively engage in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors; and (iii) take, or
recommend that the Board of Directors take, appropriate action to oversee the
independence of the independent auditors.
D. Review with the independent auditors their proposed audit scope and
approach, including staffing, locations and coordination of independent audit
work with the work of the Company's accounting (and, if applicable, internal
audit) personnel.
E. Approve all audit and permissible non-audit services to be provided
by the independent auditors (and any non-audit service by any other accounting
firm if the cost of the service is reasonably expected to exceed $100,000),
establish a policy for the Committee's pre-approval of audit and non-audit
services to be provided by the independent auditors and annually review and
pre-approve the audit and non-audit services that are to be covered by the
pre-approval policy.
F. Review the Company's hiring policies for, and approve the hiring of,
any employees or former employees of the independent auditors.
G. Discuss with the independent auditors the matters required to be
discussed by SAS No. 61, including the quality and acceptability of the
accounting principles applied in the financial statements and changes in
accounting policies.
H. Confirm with the independent auditors that they are aware of no
violations of Rule 13b2-2 under the Exchange Act relating to improper influence
on the conduct of audits, or any illegal act that would require the independent
auditors to inform management of the Company and the Audit Committee as required
by Section 10A(b) of the Exchange Act.
I. Discuss at least annually with the independent auditors and
management (and with the head of the Company's internal audit function, if the
Company has established one) whether the Company is subject to any material
risks or exposures, how management has attempted to minimize the Company's risk,
and the nature of any unusual transactions.
J. Review any management letters or internal control reports prepared
by the independent auditors or the Company's accounting (and, if applicable,
internal audit) personnel and management's responses to such letters or reports.
K. Following completion of the annual audit and at such other times as
the Committee deems appropriate, review separately with the independent
auditors, and management (and with the head of the Company's internal audit
function, if the Company has established one) any significant difficulties
encountered during the course of the audit.
L. Review quarterly management's analysis of any significant accounting
issues, changes, estimates, judgments or unusual items relating to the financial
statements and the selection, application and effects of critical accounting
policies applied by the Company (including an analysis of the effect of
alternative GAAP methods) and review with the independent auditors the reports
on such subjects delivered pursuant to Section 10A(k) of the Exchange Act.
M. Review, on a quarterly and annual basis, the significant accounting
principles, policies and practices followed by the Company in accounting for and
reporting its financial results of operations in accordance with GAAP.
N. Review the Company's quarterly and annual financial statements and
related disclosures, including the MD&A portion of the Company's SEC reports,
prior to filing with the SEC, and management's certification under Sections 302
and 906 of the Sarbanes-Oxley Act of 2002, including management's disclosure to
the Committee under Section 302, and (based on discussions with management and
the independent auditors) formally recommend to the Board that the audited
financial statements be included in the Company's annual report on Form 10-K.
O. On a quarterly basis, review the Company's system of internal
controls and evaluate the adequacy of the Company's financial reporting systems
and business process controls.
P. Review the Company's significant exposures and the actions
management has taken to monitor and control such exposures, any significant
findings noted by the independent auditors and the accounting (and, if
applicable, internal audit) personnel in the course of their audit work and
management responses to such findings.
Q. After each of the first three fiscal quarters and at year end,
review (which review may be conducted by the Chairman on behalf of the
Committee) with management the financial results, the proposed earnings release
and any formal earnings guidance to be issued by the Company.
R. Respond as it determines to be appropriate (after consulting with
legal counsel selected by the Committee) to any report of evidence of a material
violation of the securities laws that the Committee receives from the Company's
chief legal officer, if any, or from any attorney appearing and practicing
before the SEC in the representation of the Company.
S. Review with the Company's outside counsel legal matters that may
have a material impact on the financial statements and any material reports or
inquiries received from regulators or governmental agencies.
T. Approve all transactions between the Company and a related party and
any other conflict of interest situations, as contemplated by the rules of The
Nasdaq Stock Market.
U. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
V. Engage any professional advisers as the Committee determines are
appropriate to carry out its responsibilities under this Charter.
W. Determine funding for payment of (i) compensation to independent
auditors engaged to prepare or issue an audit report or perform other audit,
review or attest services, (ii) compensation to any adviser engaged by the
Committee as authorized by this Charter and (iii) ordinary administrative
expenses of the Committee that are necessary or appropriate in carrying out its
duties.
X. Prepare the Committee report that the SEC rules require to be
included in the Company's annual proxy statement.
Y. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law as the Committee or the Board deems necessary
or appropriate.
IV. ADDITIONAL RESOURCES
The Committee will have the right to use reasonable amounts of time of
the Company's accounting (and, if applicable, internal audit) personnel and
independent auditors, other internal staff and legal counsel and also will have
the right to hire independent accounting experts, lawyers and other consultants
to assist and advise the Committee in connection with its responsibilities. The
Committee will keep the Company's Chief Financial Officer advised as to the
general range of anticipated expenses for outside consultants.
Amended and Restated: June 3, 2003
APPENDIX C
RF MICRO DEVICES, INC.
GOVERNANCE AND NOMINATING COMMITTEE CHARTER
I. COMMITTEE PURPOSE
The Governance and Nominating Committee is appointed by the Board of Directors
to (1) assist the Board in identifying individuals qualified to become Board
members and to recommend to the Board the director nominees; (2) recommend to
the Board the corporate governance, conflicts of interest and other policies,
principles and guidelines applicable to the Company; and (3) lead the Board in
its annual review of the Board's performance.
II. COMMITTEE MEMBERSHIP AND PROCEDURE
The Governance and Nominating Committee shall consist of no fewer than three
members. Each member of the Governance and Nominating Committee shall meet the
independence requirements of The Nasdaq Stock Market, Inc. and any other
applicable regulatory requirements. The Board shall appoint the members of the
Governance and Nominating Committee. The members of the Governance and
Nominating Committee shall serve until their successors are appointed and
qualify or until their earlier death, resignation or removal. The Board shall
designate the Chairman of the Governance and Nominating Committee or, if it
fails to do so, the members of the Governance and Nominating Committee shall
elect a Chairman by majority vote. The Board shall have the power at any time to
change the size and membership of the Governance and Nominating Committee and to
fill vacancies in it, provided that any new member satisfies the independence
requirements established by The Nasdaq Stock Market, Inc. and any other
applicable regulatory requirements. Except as expressly provided in this
Charter, the bylaws of the Company or any applicable corporate governance
guidelines of the Company, the Governance and Nominating Committee shall fix its
own rules of procedure.
III. COMMITTEE AUTHORITY AND RESPONSIBILITIES
A. NOMINATING. The Governance and Nominating Committee shall:
1. Develop policies on the size and composition of the
Board and qualification criteria for Board members;
2. Actively seek, interview and screen individuals
qualified to become Board members for recommendation
to the Board;
3. Have the authority to retain and terminate any search
firm to be used to identify director candidates and
have the authority to approve the search firm's fees
and other retention terms;
4. Receive suggestions concerning possible candidates
for election to the Board, including
self-nominations, nominations from shareholders and
other third-party nominations;
5. Recommend to the Board individuals for vacancies
occurring from time to time on the Board, including
vacancies resulting from an increase in the size of
the Board; and
6. Recommend the slate of nominees to be proposed for
election at each annual meeting of shareholders.
B. CORPORATE GOVERNANCE. The Governance and Nominating Committee shall:
1. Develop and recommend to the Board a set of corporate
governance, conflicts of interest and business ethics
policies, principles, codes of conduct and guidelines
for the Company and its directors, officers and
employees;
2. Review and reassess at least annually the adequacy of
the Company's corporate governance, conflicts of
interest and business ethics policies, principles,
codes of conduct and guidelines in light of emerging
issues and developments related to corporate
governance and other factors and formulate and
recommend any proposed changes to the Board for
approval;
3. Generally advise the Board as a whole on corporate
governance matters;
4. Review and reassess at least annually the adequacy of
this Charter and recommend any proposed changes to
the Board for approval;
5. Annually review its own performance;
6. Solicit input from all directors and conduct an
annual review of the effectiveness of the Board and
its committees and present its assessment of the
performance of the Board and its committees to the
full Board following the end of each fiscal year; and
7. Periodically review the Company's Shareholders Rights
Plan to determine whether its provisions are in the
best interests of the Company's shareholders.
C. OTHER. The Governance and Nominating Committee:
1. May form and delegate authority to subcommittees in
its sole discretion;
2. Shall make regular reports and recommendations to the
Board;
3. Shall have the authority to request reports from
internal or external sources on matters related to
its authority, its duties as described in this
Charter and on any subject that it deems related to
its responsibilities; and
4. Shall have the authority to retain outside
accountants, legal counsel and other advisors as it
may deem appropriate in its sole discretion and
approve related fees and retention terms.
Originally Adopted: April 29, 2003
APPENDIX D
2003 STOCK INCENTIVE PLAN
OF
RF MICRO DEVICES, INC.
1. PURPOSE
The purpose of the 2003 Stock Incentive Plan of RF Micro Devices, Inc.
(the "PLAN") is to encourage and enable selected employees, directors and
independent contractors of RF Micro Devices, Inc. (RF Micro Devices, Inc.,
together with any successor corporation thereto, being referred to herein as the
"CORPORATION") and its related entities to acquire or to increase their holdings
of common stock of the Corporation (the "COMMON STOCK") and other proprietary
interests in the Corporation in order to promote a closer identification of
their interests with those of the Corporation and its shareholders, thereby
further stimulating their efforts to enhance the efficiency, soundness,
profitability, growth and shareholder value of the Corporation. This purpose
will be carried out through the granting of benefits (collectively referred to
herein as "AWARDS") to selected employees, independent contractors and
directors, including the granting to selected participants of incentive stock
options ("INCENTIVE OPTIONS") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE"), nonqualified stock
options ("NONQUALIFIED OPTIONS"), stock appreciation rights ("SARS"), restricted
awards in the form of restricted stock awards ("RESTRICTED STOCK AWARDS") and
restricted stock units ("RESTRICTED STOCK UNITS"), and performance awards in the
form of performance shares ("PERFORMANCE shares") and performance units
("PERFORMANCE UNITS"). Incentive options and nonqualified options shall be
referred to herein collectively as "OPTIONS." Restricted stock awards and
restricted stock units shall be referred to herein collectively as "RESTRICTED
AWARDS." Performance shares and performance units shall be referred to herein
collectively as "PERFORMANCE AWARDS."
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board of Directors of the
Corporation (the "BOARD" or the "BOARD OF Directors") or, upon its delegation,
by the Compensation Committee of the Board of Directors (the "COMMITTEE").
Unless the Board determines otherwise, the Committee shall be comprised solely
of two or more "NON-EMPLOYEE DIRECTORS," as such term is defined in Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or
as may otherwise be permitted under Rule 16b-3. Further, to the extent required
by Section 162(m) of the Code and related regulations, the Plan shall be
administered by a committee comprised of two or more "OUTSIDE DIRECTORS" (as
such term is defined in Section 162(m) or related regulations) or as may
otherwise be permitted under Section 162(m) and related regulations. For the
purposes herein, the term "ADMINISTRATOR" shall refer to the Board and, upon its
delegation to the Committee of all or part of its authority to administer the
Plan, to the Committee.
(b) In addition to action by meeting in accordance with applicable
laws, any action of the Administrator with respect to the Plan may be taken by a
written instrument signed by all of the members of the Board or Committee, as
appropriate, and any such action so taken by written consent shall be as fully
effective as if it had been taken by a majority of the members at a meeting duly
held and called. Subject to the provisions of the Plan, the Administrator shall
have full and final authority in its discretion to take any action with respect
to the Plan including, without limitation, the authority (i) to determine all
matters relating to awards, including selection of individuals to be granted
awards, the types of awards, the number of shares of the Common Stock, if any,
subject to an award, and all terms, conditions, restrictions and limitations of
an award; (ii) to prescribe the form or forms of the agreements evidencing any
awards granted under the Plan; (iii) to establish, amend and rescind rules and
regulations for the administration of the Plan; and (iv) to construe and
interpret the Plan, awards and award agreements made under the Plan, to
interpret rules and regulations for administering the Plan and to make all other
determinations deemed necessary or advisable for administering the Plan. The
Administrator shall also have authority, in its sole discretion, to accelerate
the date that any award which was not otherwise exercisable, vested or earned
shall become exercisable, vested or earned in whole or in part without any
obligation to accelerate such date with respect to any other award granted to
any recipient. In addition, the Administrator shall have the authority and
discretion to establish terms and conditions of awards (including but not
limited to the establishment of subplans) as the Administrator determines to be
necessary or appropriate to conform to the applicable requirements or practices
of jurisdictions outside of the United States. No member of the Board or
Committee, as applicable, shall be liable while acting as Administrator for any
action or determination made in good faith with respect to the Plan, an award or
an award agreement. The members of the Board or Committee, as applicable, shall
be entitled to indemnification and reimbursement in the manner provided in the
Corporation's articles of incorporation.
(c) Notwithstanding the other provisions of Section 2, the
Administrator may delegate to one or more officers of the Corporation the
authority to grant awards, and to make any or all of the determinations reserved
for the Administrator in the Plan and summarized in Section 2(b) herein with
respect to such awards (subject to any restrictions imposed by applicable laws,
rules and regulations and such terms and conditions as may be established by the
Administrator); provided, however, that, to the extent required by Section 16 of
the Exchange Act or Section 162(m) of the Code, the participant, at the time of
said grant or other determination, (i) is not deemed to be an officer or
director of the Corporation within the meaning of Section 16 of the Exchange
Act; and (ii) is not deemed to be a "covered employee" as defined under Section
162(m) of the Code and related regulations. To the extent that the Administrator
has delegated authority to grant awards pursuant to this Section 2(c) to one or
more officers of the Corporation, references to the Administrator shall include
references to such officer or officers, subject, however, to the requirements of
the Plan, Rule 16b-3, Section 162(m) of the Code and other applicable laws,
rules and regulations.
3. EFFECTIVE DATE
The effective date of the Plan shall be July 22, 2003 (the "EFFECTIVE
DATE"). Awards may be granted under the Plan on and after the Effective Date,
but no awards will be granted after July 21, 2013. Awards which are outstanding
on July 21, 2013 (or such earlier termination date as may be established by the
Board pursuant to Section 16(a) herein) shall continue in accordance with their
terms, unless otherwise provided in the Plan or an award agreement.
4. SHARES OF STOCK SUBJECT TO THE PLAN; AWARD LIMITATIONS
(a) Shares Available for Awards: Subject to adjustments as provided in
this Section 4(c), the aggregate number of shares of Common Stock that may be
issued pursuant to awards granted under the Plan shall not exceed the sum of (i)
9,250,000 shares, plus (ii) any shares of Common Stock (A) remaining available
for issuance as of the Effective Date of the Plan under the Corporation's 1999
Stock Incentive Plan, Key Employees' 1997 Stock Option Plan, 1992 Stock Option
Plan and any other stock incentive plans maintained by the Corporation
(collectively, the "PRIOR PLANS"), and/or (B) subject to an award granted under
a Prior Plan, which award is forfeited, cancelled, terminated, expires or lapses
for any reason. Shares delivered under the Plan shall be authorized but unissued
shares or shares purchased on the open market or by private purchase. The
Corporation hereby reserves sufficient authorized shares of Common Stock to meet
the grant of awards hereunder. Notwithstanding any provision herein to the
contrary, the following limitations shall apply to awards granted under the
Plan, in each case subject to adjustment pursuant to Section 4(c):
(i) The maximum number of shares of Common Stock that may be
issued under the Plan pursuant to the grant of incentive stock options
shall not exceed 9,250,000 shares; and
(ii) No participant may be granted awards in any 12-month
period for more than 800,000 shares of Common Stock (or the equivalent
value thereof based on the fair market value per share of the Common
Stock on the date of grant of an award).
(b) Shares not subject to limitations: The following will not be
applied to the share limitations of Section 4(a) above: (i) dividends, including
dividends paid in shares, or dividend equivalents paid in cash in connection
with outstanding awards, (ii) awards which by their terms are settled in cash,
(iii) shares and any awards that are granted through the assumption of, or in
substitution for, outstanding awards previously granted as the result of a
merger, consolidation, or acquisition of the employing company (or an affiliate)
pursuant to which it is merged with the Corporation or becomes a related entity
of the Corporation, (iv) any shares subject to an award under the Plan which
award is forfeited, cancelled, terminated, expires or lapses for any reason, and
(v) any shares surrendered by a participant or withheld by the Corporation to
pay the option price for an option or used to satisfy any tax withholding
requirement in connection with the exercise, vesting or earning of an award if,
in accordance with the terms of the Plan, a participant pays such option price
or satisfies such tax withholding by either tendering previously owned shares or
having the Corporation withhold shares.
(c) Adjustments: If there is any change in the outstanding shares of
Common Stock because of a merger, consolidation or reorganization involving the
Corporation or a related entity, or if the Board of Directors of the Corporation
declares a stock dividend, stock split distributable in shares of Common Stock,
reverse stock split, combination or reclassification of the Common Stock, or if
there is a similar change in the capital stock structure of the Corporation or a
related entity affecting the Common Stock, the number of shares of Common Stock
reserved for issuance under the Plan shall be correspondingly adjusted, and the
Administrator shall make such adjustments to
awards and to any provisions of this Plan as the Administrator deems equitable
to prevent dilution or enlargement of awards or as may be otherwise advisable.
5. ELIGIBILITY
An award may be granted only to an individual who satisfies the
following eligibility requirements on the date the award is granted:
(a) The individual is either (i) an employee of the Corporation or a
related entity, (ii) a director of the Corporation or a related entity, or (iii)
an independent contractor, consultant or advisor (collectively, "INDEPENDENT
CONTRACTORS") providing services to the Corporation or a related entity. For
this purpose, an individual shall be considered to be an "EMPLOYEE" only if
there exists between the individual and the Corporation or a related entity the
legal and bona fide relationship of employer and employee.
(b) With respect to the grant of incentive options, the individual does
not own, immediately before the time that the incentive option is granted, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Corporation or a related corporation. Notwithstanding the
foregoing, an individual who owns more than 10% of the total combined voting
power of the Corporation or a related corporation may be granted an incentive
option if the option price is at least 110% of the fair market value of the
Common Stock (as defined in Section 6(c)(ii) herein), and the option period (as
defined in Section 6(d)(i) herein) does not exceed five years. For this purpose,
an individual will be deemed to own stock which is attributable to him under
Section 424(d) of the Code.
(c) With respect to the grant of substitute awards or assumption of
awards in connection with a merger, consolidation, acquisition, reorganization
or similar business combination involving the Corporation or a related entity,
the recipient is otherwise eligible to receive the award and the terms of the
award are consistent with the Plan and applicable laws, rules and regulations
(including, to the extent necessary, the federal securities laws registration
provisions and Section 424(a) of the Code).
(d) The individual, being otherwise eligible under this Section 5, is
selected by the Administrator as an individual to whom an award shall be granted
(a "PARTICIPANT").
6. OPTIONS
(a) Grant of Options: Subject to the limitations of the Plan, the
Administrator may in its sole and absolute discretion grant options to such
eligible individuals in such numbers, subject to such terms and conditions, and
at such times as the Administrator shall determine. Both incentive options and
nonqualified options may be granted under the Plan, as determined by the
Administrator; provided, however, that incentive options may only be granted to
employees of the Corporation or a related corporation. To the extent that an
option is designated as an incentive option but does not qualify as such under
Section 422 of the Code, the option (or portion thereof) shall be treated as a
nonqualified option.
(b) Option Price: The price per share at which an option may be
exercised (the "OPTION PRICE") shall be established by the Administrator and
stated in the award agreement evidencing the grant of the option; provided, that
(i) the option price of an option shall be no less than the fair market value
per share of the Common Stock, as determined in accordance with Section 6(c)(ii)
on the date the option is granted (or 110% of the fair market value with respect
to incentive options granted to an employee who owns stock possessing more than
10% of the total voting power of all classes of stock of the Corporation or a
related corporation, as provided in Section 5(b) herein); and (ii) in no event
shall the option price per share of any option be less than the par value per
share, if any, of the Common Stock.
(c) Date of Grant; Fair Market Value
(i) An incentive option shall be considered to be granted on
the date that the Administrator acts to grant the option, or on any
later date specified by the Administrator as the effective date of the
option. A nonqualified option shall be considered to be granted on the
date the Administrator acts to grant the option or any other date
specified by the Administrator as the date of grant of the option.
(ii) For the purposes of the Plan, the fair market value per
share of the Common Stock shall be established in good faith by the
Administrator and, except as may otherwise be determined by the
Administrator, the fair market value shall be determined in accordance
with the following provisions: (A)
if the shares of Common Stock are listed for trading on the New York
Stock Exchange or the American Stock Exchange, the fair market value
shall be the closing sales price per share of the shares on the New
York Stock Exchange or the American Stock Exchange (as applicable) on
the date immediately preceding the date the option is granted or other
determination is made (each, a "VALUATION DATE"), or, if there is no
transaction on such date, then on the trading date nearest preceding
the valuation date for which closing price information is available,
and, provided further, if the shares are quoted on the Nasdaq National
Market or the Nasdaq SmallCap Market of the Nasdaq Stock Market but are
not listed for trading on the New York Stock Exchange or the American
Stock Exchange, the fair market value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as
quoted on such system on the date immediately or nearest preceding the
valuation date for which such information is available; or (B) if the
shares of Common Stock are not listed or reported in any of the
foregoing, then the fair market value shall be determined by the
Administrator in accordance with the applicable provisions of Section
20.2031-2 of the Federal Estate Tax Regulations, or in any other manner
consistent with the Code and accompanying regulations.
(iii) In no event shall there first become exercisable by an
employee in any one calendar year incentive options granted by the
Corporation or any related corporation with respect to shares having an
aggregate fair market value (determined at the time an incentive option
is granted) greater than $100,000.
(d) Option Period and Limitations on the Right to Exercise Options
(i) The term of an option (the "OPTION PERIOD") shall be
determined by the Administrator at the time the option is granted and
shall be stated in the individual award agreement. With respect to
incentive options, the option period shall not extend more than 10
years from the date on which the option is granted (or five years with
respect to incentive options granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or a related corporation, as
provided in Section 5(b) herein). Any option or portion thereof not
exercised before expiration of the option period shall terminate. The
period or periods during which, and conditions pursuant to which, an
option may become exercisable shall be determined by the Administrator
in its discretion, subject to the terms of the Plan.
(ii) An option may be exercised by giving written notice to
the Corporation in form acceptable to the Administrator at such place
and subject to such conditions as may be established by the
Administrator or its designee. Such notice shall specify the number of
shares to be purchased pursuant to an option and the aggregate purchase
price to be paid therefor and shall be accompanied by payment of such
purchase price. Unless an individual award agreement provides
otherwise, such payment shall be in the form of cash or cash
equivalent; provided that, where permitted by the Administrator and
applicable laws, rules and regulations (including but not limited to
Section 402 of the Sarbanes-Oxley Act of 2002), payment may also be
made:
(A) By delivery (by either actual delivery or
attestation) of shares of Common Stock owned by the
participant at the time of exercise for a period of at least
six months and otherwise acceptable to the Administrator;
(B) By shares of Common Stock withheld upon exercise;
(C) By delivery of written notice of exercise to the
Corporation and delivery to a broker of written notice of
exercise and irrevocable instructions to promptly deliver to
the Corporation the amount of sale or loan proceeds to pay the
option price;
(D) By such other payment methods as may be approved
by the Administrator and which are acceptable under applicable
law; or
(E) By any combination of the foregoing methods.
Shares tendered or withheld in payment on the exercise of an option
shall be valued at their fair market value on the date of exercise, as
determined by the Administrator by applying the provisions of Section
6(c)(ii).
(iii) Unless the Administrator determines otherwise, no option
granted to a participant who was an employee at the time of grant shall
be exercised unless the participant is, at
the time of exercise, an employee as described in Section 5(a), and has
been an employee continuously since the date the option was granted,
subject to the following:
(A) An option shall not be affected by any change in
the terms, conditions or status of the participant's
employment, provided that the participant continues to be an
employee of the Corporation or a related entity.
(B) The employment relationship of a participant
shall be treated as continuing intact for any period that the
participant is on military or sick leave or other bona fide
leave of absence, provided that the period of such leave does
not exceed 90 days, or, if longer, as long as the
participant's right to reemployment is guaranteed either by
statute or by contract. The employment relationship of a
participant shall also be treated as continuing intact while
the participant is not in active service because of
disability. The Administrator shall have sole authority to
determine whether a participant is disabled and, if
applicable, the date of a participant's termination of
employment or service for any reason (the "TERMINATION DATE").
(C) Unless the Administrator determines otherwise, if
the employment of a participant is terminated because of
disability or death, the option may be exercised only to the
extent exercisable on the participant's termination date,
except that the Administrator may in its discretion accelerate
the date for exercising all or any part of the option which
was not otherwise exercisable on the termination date. The
option must be exercised, if at all, prior to the first to
occur of the following, whichever shall be applicable: (X) the
close of the period of 12 months next succeeding the
termination date (or such other period stated in the
applicable award agreement); or (Y) the close of the option
period. In the event of the participant's death, such option
shall be exercisable by such person or persons as shall have
acquired the right to exercise the option by will or by the
laws of intestate succession.
(D) Unless the Administrator determines otherwise, if
the employment of the participant is terminated for any reason
other than disability, death or for "cause," his option may be
exercised to the extent exercisable on his termination date,
except that the Administrator may in its discretion accelerate
the date for exercising all or any part of the option which
was not otherwise exercisable on the termination date. The
option must be exercised, if at all, prior to the first to
occur of the following, whichever shall be applicable: (X) the
close of the period of 90 days next succeeding the termination
date (or such other period stated in the applicable award
agreement); or (Y) the close of the option period. If the
participant dies following such termination of employment and
prior to the earlier of the dates specified in (X) or (Y) of
this subparagraph (D), the participant shall be treated as
having died while employed under subparagraph (C) immediately
preceding (treating for this purpose the participant's date of
termination of employment as the termination date). In the
event of the participant's death, such option shall be
exercisable by such person or persons as shall have acquired
the right to exercise the option by will or by the laws of
intestate succession.
(E) Unless the Administrator determines otherwise, if
the employment of the participant is terminated for "CAUSE,"
his option shall lapse and no longer be exercisable as of his
termination date, as determined by the Administrator. For
purposes of the Plan, unless the Administrator determines
otherwise, a participant's termination shall be for "cause" if
such termination results from the participant's (X)
termination for "cause" under the participant's employment,
consulting or other agreement with the Corporation or a
related entity, if any, or (Y) if the participant has not
entered into any such employment, consulting or other
agreement, then the participant's termination shall be for
"cause" if termination results due to the participant's (i)
dishonesty; (ii) refusal to perform his duties for the
Corporation; or (iii) engaging in conduct that could be
materially damaging to the Corporation without a reasonable
good faith belief that such conduct was in the best interest
of the Corporation. The determination of "cause" shall be made
by the Administrator and its determination shall be final and
conclusive.
(F) Notwithstanding the foregoing, the Administrator
may, in its discretion, accelerate the date for exercising all
or any part of an option which was not
otherwise exercisable on the termination date, extend the
period during which an option may be exercised, modify the
terms and conditions to exercise, or any combination of the
foregoing.
(iv) Unless the Administrator determines otherwise, an option
granted to a participant who was a non-employee director of the
Corporation or a related entity at the time of grant may be exercised
only to the extent exercisable on the date of the participant's
termination of service to the Corporation or a related entity (unless
the termination was for cause), and must be exercised, if at all, prior
to the first to occur of the following, as applicable: (X) the close of
the period of 24 months next succeeding the termination date (or such
other period stated in the applicable award agreement); or (Y) the
close of the option period. If the services of such a participant are
terminated for cause (as defined in Section 6(a)(iii)(E) herein), his
option shall lapse and no longer be exercisable as of his termination
date, as determined by the Administrator. Notwithstanding the
foregoing, the Administrator may in its discretion accelerate the date
for exercising all or any part of an option which was not otherwise
exercisable on the termination date, extend the period during which an
option may be exercised, modify the other terms and conditions to
exercise, or any combination of the foregoing.
(v) Unless the Administrator determines otherwise, an option
granted to a participant who was an independent contractor of the
Corporation or a related entity at the time of grant (and who does not
thereafter become an employee, in which case he shall be subject to the
provisions of Section 6(d)(iii) herein) may be exercised only to the
extent exercisable on the date of the participant's termination of
service to the Corporation or a related entity (unless the termination
was for cause), and must be exercised, if at all, prior to the first to
occur of the following, as applicable: (X) the close of the period of
90 days next succeeding the termination date (or such other period
stated in the applicable award agreement); or (Y) the close of the
option period. If the services of such a participant are terminated for
cause (as defined in Section 6(d)(iii)(E) herein), his option shall
lapse and no longer be exercisable as of his termination date, as
determined by the Administrator. Notwithstanding the foregoing, the
Administrator may in its discretion accelerate the date for exercising
all or any part of an option which was not otherwise exercisable on the
termination date, extend the period during which an option may be
exercised, modify the other terms and conditions to exercise, or any
combination of the foregoing.
(vi) A participant or his legal representative, legatees or
distributees shall not be deemed to be the holder of any shares subject
to an option and shall not have any rights of a shareholder unless and
until certificates for such shares have been issued and delivered to
him or them under the Plan. A certificate or certificates for shares of
Common Stock acquired upon exercise of an option shall be issued in the
name of the participant (or his beneficiary) and distributed to the
participant (or his beneficiary) as soon as practicable following
receipt of notice of exercise and payment of the purchase price (except
as may otherwise be determined by the Corporation in the event of
payment of the option price pursuant to Section 6(d)(ii)(C) herein).
(vii) If shares of Common Stock acquired upon exercise of an
incentive option are disposed of within two years following the date of
grant or one year following the transfer of such shares to a
participant upon exercise, the participant shall, promptly following
such disposition, notify the Corporation in writing of the date and
terms of such disposition and provide such other information regarding
the disposition as the Administrator may reasonably require.
(e) Nontransferability of Options: Incentive options shall not be
transferable (including by sale, assignment, pledge or hypothecation) other than
by will or the laws of intestate succession. Nonqualified options shall not be
transferable (including by sale, assignment, pledge or hypothecation) other than
by will or the laws of intestate succession, except as may be permitted by the
Administrator in a manner consistent with the registration provisions of the
Securities Act of 1933, as amended (the "SECURITIES Act"). Except as may be
permitted by the preceding sentence, an option shall be exercisable during the
participant's lifetime only by him or by his guardian or legal representative.
The designation of a beneficiary does not constitute a transfer.
7. STOCK APPRECIATION RIGHTS
(a) Grant of SARs: Subject to the limitations of the Plan, the
Administrator may in its sole and absolute discretion grant SARs to such
eligible individuals, in such numbers, upon such terms and at such times as the
Administrator shall determine. SARs may be granted to the holder of an option
(hereinafter called a "RELATED OPTION") with respect to all or a portion of the
shares of Common Stock subject to the related option (a "TANDEM SAR") or may be
granted separately to an eligible individual (a "FREESTANDING SAR"). Subject to
the limitations of
the Plan, upon the exercise of an SAR, a participant shall be entitled to
receive from the Corporation, for each share of Common Stock with respect to
which the SAR is being exercised, consideration equal in value to the excess of
the fair market value of a share of Common Stock on the date of exercise over
the base price per share of such SAR. The base price per share of an SAR shall
be no less than the fair market value per share of the Common Stock (as
determined in accordance with Section 6(c)(ii)) on the date the SAR is granted.
(b) Tandem SARs: A tandem SAR may be granted either concurrently with
the grant of the related option or (if the related option is a nonqualified
option) at any time thereafter prior to the complete exercise, termination,
expiration or cancellation of such related option. Tandem SARs shall be
exercisable only at the time and to the extent that the related option is
exercisable (and may be subject to such additional limitations on exercisability
as the Administrator may provide in the agreement), and in no event after the
complete termination or full exercise of the related option. For purposes of
determining the number of shares of Common Stock that remain subject to such
related option and for purposes of determining the number of shares of Common
Stock in respect of which other awards may be granted, a related option shall be
considered to have been surrendered upon the exercise of a tandem SAR to the
extent of the number of shares of Common Stock with respect to which such tandem
SAR is exercised. Upon the exercise or termination of a related option, the
tandem SARs with respect thereto shall be canceled automatically to the extent
of the number of shares of Common Stock with respect to which the related option
was so exercised or terminated.
(c) Freestanding SARs: An SAR may be granted without relationship to an
option (as defined above, a "freestanding SAR") and, in such case, will be
exercisable upon such terms and subject to such conditions as may be determined
by the Administrator, subject to the terms of the Plan.
(d) Exercise of SARs:
(i) Subject to the terms of the Plan, SARs shall be
exercisable in whole or in part upon such terms and conditions as may
be established by the Administrator and stated in the applicable award
agreement. The period during which an SAR may be exercisable shall not
exceed 10 years from the date of grant or, in the case of tandem SARs,
such shorter option period as may apply to the related option. Any SAR
or portion thereof not exercised before expiration of the exercise
period established by the Administrator shall terminate.
(ii) SARs may be exercised by giving written notice to the
Corporation in form acceptable to the Administrator at such place and
subject to such terms and conditions as may be established by the
Administrator or its designee. The date of exercise of an SAR shall
mean the date on which the Corporation shall have received proper
notice from the participant of the exercise of such SAR.
(iii) Each participant's award agreement shall set forth the
extent to which the participant shall have the right to exercise an SAR
following termination of the participant's employment or service with
the Corporation. Such provisions shall be determined in the sole
discretion of the Administrator, shall be included in the award
agreement entered into with a participant, need not be uniform among
all SARs issued pursuant to this Section 7, and may reflect
distinctions based on the reasons for termination of employment.
Notwithstanding the foregoing, unless the Administrator determines
otherwise, no SAR may be exercised unless the participant is, at the
time of exercise, an eligible participant, as described in Section 5,
and has been a participant continuously since the date the SAR was
granted, subject to the provisions of Sections 6(d)(iii), (iv) and (v)
herein.
(e) Consideration: The consideration to be received upon the exercise
of the SAR by the participant shall be paid in cash, shares of Common Stock
(valued at fair market value on the date of exercise of such SAR in accordance
with Section 6(c)(ii) herein) or a combination of cash and shares of Common
Stock, as elected by the Administrator. The Corporation's obligation arising
upon the exercise of the SAR may be paid currently or on a deferred basis with
such interest or earnings equivalent, if any, as the Administrator may
determine. A certificate or certificates for shares of Common Stock acquired
upon exercise of an SAR for shares shall be issued in the name of the
participant (or his beneficiary) and distributed to the participant (or his
beneficiary) as soon as practicable following receipt of notice of exercise. A
participant or his legal representative, legatees or distributees shall not be
deemed to be the holder of any shares subject to an SAR and shall not have any
rights as a shareholder unless and until certificates for such shares have been
issued and delivered to him or them under the Plan. No fractional shares of
Common Stock will be issuable upon exercise of the SAR and, unless otherwise
provided in the applicable award agreement, the participant will receive cash in
lieu of fractional shares.
(f) Limitations: The applicable award agreement shall contain such
terms, conditions and limitations consistent with the Plan as may be specified
by the Administrator. Unless otherwise provided in the applicable award
agreement or the Plan, any such terms, conditions or limitations relating to a
tandem SAR shall not restrict the exercisability of the related option.
(g) Nontransferability: Unless the Administrator determines otherwise,
SARs shall not be transferable (including by sale, assignment, pledge or
hypothecation) other than by will or the laws of intestate succession, and SARs
may be exercised during the participant's lifetime only by him or by his
guardian or legal representative. The designation of a beneficiary does not
constitute a transfer.
8. RESTRICTED AWARDS
(a) Grant of Restricted Awards: Subject to the limitations of the Plan,
the Administrator may in its sole and absolute discretion grant restricted
awards to such individuals in such numbers, upon such terms and at such times as
the Administrator shall determine. Such restricted awards may be in the form of
restricted stock awards and/or restricted stock units that are subject to
certain conditions, which conditions must be met in order for the restricted
award to vest and be earned (in whole or in part) and no longer subject to
forfeiture. Restricted awards shall be payable in cash or whole shares of Common
Stock (including restricted stock), or partly in cash and partly in whole shares
of Common Stock, in accordance with the terms of the Plan and the sole and
absolute discretion of the Administrator. The Administrator shall determine the
nature, length and starting date of the period, if any, during which a
restricted award may be earned (the "RESTRICTION PERIOD"), and shall determine
the conditions which must be met in order for a restricted award to be granted
or to vest or be earned (in whole or in part), which conditions may include, but
are not limited to, attainment of performance objectives, continued service or
employment for a certain period of time (or a combination of attainment of
performance objectives and continued service), retirement, displacement,
disability, death, or any combination of such conditions. In the case of
restricted awards based upon performance criteria, or a combination of
performance criteria and continued service, the Administrator shall determine
the performance objectives to be used in valuing restricted awards, which
performance objectives may vary from participant to participant and between
groups of participants and shall be based upon such corporate, business unit or
division and/or individual performance factors and criteria as the Administrator
in its sole discretion may deem appropriate; provided, however, that, with
respect to restricted awards payable to covered employees which are intended to
be eligible for the compensation deduction limitation exception available under
Section 162(m) of the Code and related regulations, such performance factors
shall be limited to one or more of the following (as determined by the
Administrator in its discretion): sales goals, earnings per share, return on
equity, return on assets and total return to shareholders. The Administrator
shall have sole authority to determine whether and to what degree restricted
awards have vested and been earned and are payable and to establish and
interpret the terms and conditions of restricted awards and the provisions
herein. The Administrator shall also determine the form and terms of payment of
restricted awards. The Administrator, in its sole and absolute discretion, may
accelerate the date that any restricted award granted to the participant shall
be deemed to be vested or earned in whole or in part, without any obligation to
accelerate such date with respect to other restricted awards granted to any
participant.
(b) Forfeiture of Restricted Awards: Unless the Administrator
determines otherwise, if the employment or service of a participant shall be
terminated for any reason and all or any part of a restricted award has not
vested or been earned pursuant to the terms of the Plan and the individual award
agreement, such award, to the extent not then vested or earned, shall be
forfeited immediately upon such termination and the participant shall have no
further rights with respect thereto.
(c) Dividend and Voting Rights; Share Certificates: The Administrator
shall have sole discretion to determine whether a participant shall have
dividend rights, voting rights or other rights as a shareholder with respect to
shares subject to a restricted award which has not yet vested or been earned.
Unless the Administrator determines otherwise, a certificate or certificates for
shares of Common Stock subject to a restricted award shall be issued in the name
of the participant (or his beneficiary) and distributed to the participant (or
his beneficiary) as soon as practicable after the shares subject to the award
(or portion thereof) have vested and been earned. Notwithstanding the foregoing,
the Administrator shall have the right to retain custody of certificates
evidencing the shares subject to a restricted award and to require the
participant to deliver to the Corporation a stock power, endorsed in blank, with
respect to such award, until such time as the restricted award vests (or is
forfeited).
(d) Nontransferability: Unless the Administrator determines otherwise,
restricted awards that have not vested shall not be transferable (including by
sale, assignment, pledge or hypothecation) other than by will or the laws of
intestate succession, and the recipient of a restricted award shall not sell,
transfer, assign, pledge or
otherwise encumber shares subject to the award until the restriction period has
expired and until all conditions to vesting have been met.
9. PERFORMANCE AWARDS
(a) Grant of Performance Awards: Subject to the terms of the Plan,
performance awards may be granted to participants upon such terms and conditions
and at such times as shall be determined by the Administrator. Such performance
awards may be in the form of performance shares and/or performance units. An
award of a performance share is a grant of a right to receive shares of Common
Stock or the cash value thereof (or a combination thereof) which is contingent
upon the achievement of performance or other objectives during a specified
period and which has a value on the date of grant equal to the fair market value
(as determined in accordance with Section 6(c)(iii) herein) of a share of Common
Stock. An award of a performance unit is a grant of a right to receive shares of
Common Stock or a designated dollar value amount of Common Stock which is
contingent upon the achievement of performance or other objectives during a
specified period, and which has an initial value established by the
Administrator at the time of grant. Subject to Section 4(a), above, the
Administrator shall have complete discretion in determining the number of
performance units and/or performance shares granted to any participant. The
Administrator shall determine the nature, length and starting date of the period
during which a performance award may be earned (the "PERFORMANCE PERIOD"), and
shall determine the conditions which must be met in order for a performance
award to be granted or to vest or be earned (in whole or in part), which
conditions may include but are not limited to specified performance objectives,
continued service or employment for a certain period of time, or a combination
of such conditions. The Administrator shall determine the performance objectives
to be used in valuing performance awards, which performance objectives may vary
from participant to participant and between groups of participants and shall be
based on such corporate, business unit or division and/or individual performance
factors and criteria as the Administrator in its sole discretion may deem
appropriate; provided, however, that, with respect to performance awards payable
to covered employees which are intended to be eligible for the compensation
deduction limitation exception available under Section 162(m) of the Code and
related regulations, such performance factors shall be limited to one or more of
the following (as determined by the Administrator in its discretion): sales
goals, earnings per share, return on equity, return on assets and total return
to shareholders. The Administrator shall have sole authority to determine
whether and to what degree performance awards have been earned and are payable
and to interpret the terms and conditions of performance awards and the
provisions herein. The Administrator also shall determine the form and terms of
payment of performance awards. The Administrator, in its sole and absolute
discretion, may accelerate the date that any performance award granted to a
participant shall be deemed to be earned in whole or in part, without any
obligation to accelerate such date with respect to other awards granted to any
participant.
(b) Form of Payment: Payment of the amount to which a participant shall
be entitled upon earning a performance award shall be made in cash, shares of
Common Stock, or a combination of cash and shares of Common Stock, as determined
by the Administrator in its sole discretion. Payment may be made in a lump sum
or in installments upon such terms as may be established by the Administrator.
(c) Forfeiture of Performance Awards: Unless the Administrator
determines otherwise, if the employment or service of a participant shall
terminate for any reason and the participant has not earned all or part of a
performance award pursuant to the terms of the Plan and individual award
agreement, such award, to the extent not then earned, shall be forfeited
immediately upon such termination and the participant shall have no further
rights with respect thereto.
(d) Dividend and Voting Rights; Share Certificates: The Administrator
shall have sole discretion to determine whether a participant shall have
dividend rights, voting rights, or other rights as a shareholder with respect to
shares, if any, which are subject to a performance award prior to the time the
performance award has been earned. Unless the Administrator determines
otherwise, a certificate or certificates for shares of Common Stock, if any,
subject to a performance award shall be issued in the name of the participant
(or his beneficiary) and distributed to the participant (or his beneficiary) as
soon as practicable after the award has been earned. Notwithstanding the
foregoing, the Administrator shall have the right to retain custody of
certificates evidencing the shares subject to a performance award and the right
to require the participant to deliver to the Corporation a stock power, endorsed
in blank, with respect to such award, until such time as the award is earned (or
forfeited).
(e) Nontransferability: Unless the Administrator determines otherwise,
performance awards which have not been earned shall not be transferable
(including by sale, assignment, pledge or hypothecation) other than by will or
the laws of intestate succession, and the recipient of a performance award shall
not sell, transfer, assign, pledge or otherwise encumber any shares subject to
the award until the performance period has expired and until the conditions to
earning the award have been met.
10. WITHHOLDING
The Corporation shall withhold all required local, state, federal,
foreign and other taxes from any amount payable in cash with respect to an
award. Prior to the delivery or transfer of any certificate for shares or any
other benefit conferred under the Plan, the Corporation shall require any
recipient of an award to pay to the Corporation in cash the amount of any tax or
other amount required by any governmental authority to be withheld and paid over
by the Corporation to such authority for the account of such recipient.
Notwithstanding the foregoing, the Administrator may establish procedures to
permit a recipient to satisfy such obligation in whole or in part, and any
local, state, federal, foreign or other income tax obligations relating to such
an award, by electing (the "ELECTION") to have the Corporation withhold shares
of Common Stock from the shares to which the recipient is entitled. The number
of shares to be withheld shall have a fair market value as of the date that the
amount of tax to be withheld is determined as nearly equal as possible to (but
not exceeding) the amount of such obligations being satisfied. Each election
must be made in writing to the Administrator in accordance with election
procedures established by the Administrator.
11. DIVIDENDS AND DIVIDEND EQUIVALENTS
The Administrator may, in its sole discretion, provide that the awards
granted under the Plan earn dividends or dividend equivalents. Such dividends or
dividend equivalents may be paid currently or may be credited to a participant's
account. Any crediting of dividends or dividend equivalents may be subject to
such restrictions and conditions as the Administrator may establish, including
reinvestment in additional shares of Common Stock or share equivalents.
12. SECTION 16(B) COMPLIANCE
To the extent that any participants in the Plan are subject to Section
16(b) of the Exchange Act, it is the general intention of the Corporation that
transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act
and that the Plan shall be construed in favor of the Plan transactions meeting
the requirements of Rule 16b-3 or any successor rules thereto. Notwithstanding
anything in the Plan to the contrary, the Administrator, in its sole and
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are officers
or directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
13. CODE SECTION 162(M) PERFORMANCE-BASED COMPENSATION
To the extent to which Section 162(m) of the Code is applicable, the
Corporation intends that compensation paid under the Plan to covered employees
(as such term is defined in Section 162(m) and related regulations) will, to the
extent practicable, constitute qualified "performance-based compensation" within
the meaning of Section 162(m) and related regulations, unless otherwise
determined by the Administrator. Accordingly, the provisions of the Plan shall
be administered and interpreted in a manner consistent with Section 162(m) and
related regulations to the extent practicable to do so.
14. NO RIGHT OR OBLIGATION OF CONTINUED EMPLOYMENT OR SERVICE
Nothing in the Plan shall confer upon the participant any right to
continue in the service of the Corporation or a related entity as an employee,
director or independent contractor or to interfere in any way with the right of
the Corporation or a related entity to terminate the participant's employment or
service at any time. Except as otherwise provided in the Plan or an award
agreement, awards granted under the Plan to employees of the Corporation or a
related entity shall not be affected by any change in the duties or position of
the participant, as long as such individual remains an employee of, or in
service to, the Corporation or a related entity.
15. UNFUNDED PLAN; RETIREMENT PLANS
(a) Neither a participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of the
Corporation or any related entity, including, without limitation, any specific
funds, assets or other property which the Corporation or any related entity, in
their discretion, may set aside in anticipation of a liability under the Plan. A
participant shall have only a contractual right to the Common Stock or amounts,
if any, payable under the Plan, unsecured by any assets of the Corporation or
any related entity. Nothing contained in the Plan shall constitute a guarantee
that the assets of such corporations shall be sufficient to pay any benefits to
any person.
(b) The amount of any compensation deemed to be received by a
participant pursuant to an award shall not constitute compensation with respect
to which any other employee benefits of such participant are determined,
including, without limitation, benefits under any bonus, pension, profit
sharing, life insurance or salary continuation plan, except as otherwise
specifically provided by the terms of such plan or as may be determined by the
Administrator.
(c) The adoption of the Plan shall not affect any other stock incentive
or other compensation plans in effect for the Corporation or any related entity,
nor shall the Plan preclude the Corporation from establishing any other forms of
stock incentive or other compensation for employees or service providers of the
Corporation or any related entity.
16. AMENDMENT AND TERMINATION OF THE PLAN
(a) General: The Plan and any award granted under the Plan may be
amended or terminated at any time by the Board of Directors of the Corporation;
provided, that (i) approval of an amendment to the Plan by the shareholders of
the Corporation shall be required to the extent, if any, that shareholder
approval of such amendment is required by applicable law, rule or regulation;
and (ii) amendment or termination of an award shall not, without the consent of
a recipient of an award, materially adversely affect the rights of the recipient
with respect to an outstanding award. Notwithstanding clause (i) of the
preceding sentence, except for adjustments made pursuant to Section 4(c), the
option price for any outstanding option or base price of any outstanding SAR
granted under the Plan may not be decreased after the date of grant, nor may any
outstanding option or SAR granted under the Plan be surrendered to the
Corporation as consideration for the grant of a new option or SAR with a lower
exercise or base price than the original option or SAR, as the case may be,
without shareholder approval of any such action.
(b) Adjustment of Awards upon the Occurrence of Certain Unusual or
Nonrecurring Events: The Administrator shall have authority to make adjustments
to the terms and conditions of awards in recognition of unusual or nonrecurring
events affecting the Corporation or any related entity, or the financial
statements of the Corporation or any related entity, or of changes in applicable
laws, regulations or accounting principles, if the Administrator determines that
such adjustments are appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan
or necessary or appropriate to comply with applicable laws, rules or
regulations.
(c) Cash Settlement: Notwithstanding any provision of the Plan, an
award or an award agreement to the contrary, the Administrator may cause any
award granted under the Plan to be canceled in consideration of an alternative
award or cash payment of an equivalent cash value, as determined by the
Administrator, made to the holder of such canceled award.
17. RESTRICTIONS ON AWARDS AND SHARES
The Corporation may impose such restrictions on awards and shares
representing awards hereunder as it may deem advisable, including without
limitation restrictions under the federal securities laws, the requirements of
any stock exchange or similar organization and any blue sky or state securities
laws applicable to such securities. Notwithstanding any other Plan provision to
the contrary, the Corporation shall not be obligated to issue, deliver or
transfer shares of Common Stock under the Plan, make any other distribution of
benefits under the Plan, or take any other action, unless such delivery,
distribution or action is in compliance with all applicable laws, rules and
regulations (including but not limited to the requirements of the Securities
Act). The Corporation may cause a restrictive legend to be placed on any
certificate issued pursuant to an award hereunder in such form as may be
prescribed from time to time by applicable laws and regulations or as may be
advised by legal counsel.
18. CHANGE OF CONTROL
(a) Notwithstanding any other provision of the Plan to the contrary,
and unless an individual award agreement provides otherwise, in the event of a
change of control (as defined in Section 18(c) herein):
(i) All options and SARs outstanding as of the date of such
change of control shall become fully exercisable, whether or not then
otherwise exercisable.
(ii) Any restrictions including but not limited to the
restriction period, performance period and/or performance criteria
applicable to any restricted award and any performance award shall be
deemed
to have been met, and such awards shall become fully vested, earned and
payable to the fullest extent of the original grant of the applicable
award.
(b) Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting the Corporation
or a related entity, the Administrator may, in its sole and absolute discretion,
determine that any or all awards granted pursuant to the Plan shall not vest or
become exercisable on an accelerated basis, if the Corporation or the surviving
or acquiring corporation, as the case may be, shall have taken such action,
including but not limited to the assumption of awards granted under the Plan or
the grant of substitute awards (in either case, with substantially similar terms
or equivalent economic benefits as awards granted under the Plan), as in the
opinion of the Administrator is equitable or appropriate to protect the rights
and interests of participants under the Plan. For the purposes herein, if the
Committee is acting as the Administrator authorized to make the determinations
provided for in this Section 18(b), the Committee shall be appointed by the
Board of Directors, two-thirds of the members of which shall have been directors
of the Corporation prior to the merger, share exchange, reorganization or other
business combinations affecting the Corporation or a related entity.
(c) For the purposes herein, a "CHANGE OF CONTROL" shall be deemed to
have occurred on the earliest of the following dates:
(i) The date any entity or person shall have become the
beneficial owner of, or shall have obtained voting control over,
fifty-one percent (51%) or more of the outstanding Common Stock of the
Corporation;
(ii) The date the shareholders of the Corporation approve a
definitive agreement (A) to merge or consolidate the Corporation with
or into another corporation or other business entity (each, a
"corporation"), in which the Corporation is not the continuing or
surviving corporation or pursuant to which any shares of Common Stock
of the Corporation would be converted into cash, securities or other
property of another corporation, other than a merger or consolidation
of the Corporation in which holders of Common Stock immediately prior
to the merger or consolidation have the same proportionate ownership of
Common Stock of the surviving corporation immediately after the merger
as immediately before, or (B) to sell or otherwise dispose of all or
substantially all the assets of the Corporation; or
(iii) The date there shall have been a change in a majority of
the Board of Directors of the Corporation within a 12-month period
unless the nomination for election by the Corporation's shareholders of
each new director was approved by the vote of two-thirds of the
directors then still in office who were in office at the beginning of
the 12-month period.
(For purposes herein, the term "PERSON" shall mean any individual,
corporation, partnership, group, association or other person, as such
term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, other than the Corporation, a subsidiary of the Corporation or any
employee benefit plan(s) sponsored or maintained by the Corporation or
any subsidiary thereof, and the term "BENEFICIAL OWNER" shall have the
meaning given the term in Rule 13d-3 under the Exchange Act.)
19. APPLICABLE LAW
The Plan shall be governed by and construed in accordance with the laws
of the State of North Carolina, without regard to the conflict of laws
provisions of any state.
20. SHAREHOLDER APPROVAL
The Plan is subject to approval by the shareholders of the Corporation,
which approval must occur, if at all, within 12 months of the Effective Date of
the Plan. Awards granted prior to such shareholder approval shall be conditioned
upon and shall be effective only upon approval of the Plan by such shareholders
on or before such date.
21. DEFERRALS
The Administrator may permit or require a participant to defer receipt
of the delivery of shares of Common Stock or other benefit that would otherwise
be due pursuant to the exercise, vesting or earning of an award. If any such
deferral is required or permitted, the Administrator shall, in its discretion,
establish rules and procedures for such deferrals.
22. BENEFICIARY DESIGNATION
The Administrator may permit a participant to designate in writing a
person or persons as beneficiary, which beneficiary shall be entitled to receive
settlement of awards (if any) to which the participant is otherwise entitled in
the event of death. In the absence of such designation by a participant, and in
the event of the participant's death, the estate of the participant shall be
treated as beneficiary for purposes of the Plan, unless the Administrator
determines otherwise. The Administrator shall have sole discretion to approve
and interpret the form or forms of such beneficiary designation.
23. GENDER AND NUMBER
Where the context admits, words in any gender shall include any other
gender, words in the singular shall include the plural and the plural shall
include the singular.
24. SUCCESSORS AND ASSIGNS
The Plan shall be binding upon the Corporation, its successors and
assigns, and participants, their executors, administrators and permitted
transferees and beneficiaries.
25. SEVERABILITY
If any provision of the Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.
26. CERTAIN DEFINITIONS
In addition to other terms defined in the Plan, the following terms
shall have the meaning indicated:
(a) "AWARD AGREEMENT" means any written agreement or agreements between
the Corporation and the recipient of an award pursuant to the Plan relating to
the terms, conditions and restrictions of an award conferred herein. Such award
agreement may also state such other terms, conditions and restrictions,
including but not limited to terms, conditions and restrictions applicable to
shares subject to an award, as may be established by the Administrator.
(b) "COVERED EMPLOYEE" shall have the meaning given the term in Section
162(m) of the Code and the regulations thereunder.
(c) "DISABILITY" shall have the meaning ascribed to the term in any
employment agreement, consulting agreement or other similar agreement, if any,
to which the participant is a party, or, if no such agreement applies,
"disability" shall mean the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death, or which has lasted or can be expected
to last for a continuous period of not less than 12 months.
(d) "DISPLACEMENT" shall have the meaning ascribed to the term in any
employment agreement, consulting agreement or other similar agreement, if any,
to which the participant is a party, or, if no such agreement applies,
"displacement" shall mean the termination of the participant's employment or
service due to the elimination of the participant's job or position without
fault on the part of the participant.
(e) "PARENT" or "PARENT CORPORATION" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation if each corporation other than the Corporation owns stock possessing
50% or more of the total combined voting power of all classes of stock in
another corporation in the chain.
(f) "PREDECESSOR" or "PREDECESSOR CORPORATION" means a corporation
which was a party to a transaction described in Section 424(a) of the Code (or
which would be so described if a substitution or assumption under Section 424(a)
had occurred) with the Corporation, or a corporation which is a parent or
subsidiary of the Corporation, or a predecessor of any such corporation.
(g) "RELATED CORPORATION" means any parent, subsidiary or predecessor
of the Corporation, and "related entity" means any related corporation or any
other business entity which is an affiliate controlled by the
Corporation; provided, however, that the term "related entity" shall be
construed in a manner in accordance with the registration provisions under
applicable federal securities laws.
(h) "RESTRICTED STOCK" shall mean shares of Common Stock which are
subject to restricted awards payable in shares, the vesting of which is subject
to restrictions set forth in the Plan and the applicable award agreement.
(i) "RETIREMENT" shall have the meaning ascribed in any employment
agreement, consulting agreement or other similar agreement, if any, to which the
participant is a party, or, if no such agreement applies, "retirement" shall
mean retirement in accordance with the retirement policies and procedures
established by the Corporation.
(j) "SUBSIDIARY" or "SUBSIDIARY CORPORATION" means any corporation
(other than the Corporation) in an unbroken chain of corporations beginning with
the Corporation if each corporation other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in another corporation in the chain.
IN WITNESS WHEREOF, this 2003 Stock Incentive Plan of RF Micro Devices,
Inc., is, by the authority of the Board of Directors of the Corporation,
executed in behalf of the Corporation, the 6th day of June, 2003.
RF MICRO DEVICES, INC.
By: /s/ William A.Priddy, Jr.
-----------------------------------------
Name: WILLIAM A. PRIDDY, JR.
-----------------------------------------
Title: CHIEF FINANCIAL OFFICER AND CORPORATE
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VICE PRESIDENT OF ADMINISTRATION
-------------------------------------
ATTEST:
/s/ Powell T. Seymour
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Secretary
[Corporate Seal]