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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RF MICRO DEVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
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RF MICRO DEVICES, INC.
7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 27, 1999
TO THE SHAREHOLDERS OF RF MICRO DEVICES, INC.:
We hereby give notice that the Annual Meeting of Shareholders of RF Micro
Devices, Inc. (the "Company") will be held on Tuesday, July 27, 1999 at 10:00
a.m. local time, at our principal executive offices at 7625 Thorndike Road,
Greensboro, North Carolina, for the following purposes:
(1) To elect six directors for one-year terms and until their
successors are duly elected and qualified;
(2) To approve the amendment and restatement of our articles of
incorporation to increase our authorized common stock from 50,000,000
shares to 150,000,000 shares;
(3) To approve the adoption of the 1999 Stock Incentive Plan;
(4) To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending March 31, 2000; and
(5) 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 June 17, 1999, 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 1999 Annual Report containing our financial statements for
the fiscal year ended March 31, 1999 is enclosed.
By Order of the Board of Directors
/s/ Powell T. Seymore
Powell T. Seymour
Secretary
June , 1999
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.
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RF MICRO DEVICES, INC.
7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
PROXY STATEMENT
The enclosed proxy, for use only at the Annual Meeting of Shareholders to
be held July 27, 1999, at 10:00 a.m. local time, and any adjournment thereof, 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 28, 1999. This solicitation is being made by mail and
may be made in person or by fax or telephone 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 material 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 (the "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: (1)
electing the six nominees for directors named herein (or their substitutes) for
one-year terms expiring in 2000; (2) amending and restating our articles of
incorporation to increase our authorized common stock from 50,000,000 shares to
150,000,000 shares; (3) adopting the 1999 Stock Incentive Plan; and (4)
ratifying the appointment of Ernst & Young LLP as our independent auditors for
the fiscal year ending March 31, 2000.
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
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 and for any adjourned meeting. Abstentions and shares which 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.
Under the laws of North Carolina, the persons receiving a plurality of the
votes cast by the shares entitled to vote will be elected as directors. Under
the Company's articles of incorporation, the proposal to amend and restate our
articles of incorporation to increase the number of authorized shares will be
approved if the holders of a majority of the outstanding shares of the Company's
common stock approve the amendment. The proposal to adopt the 1999 Stock
Incentive Plan and the proposal to ratify the appointment of auditors for fiscal
2000 will each be approved if the votes cast in favor of the proposal exceed the
votes cast against it. Abstentions, shares which are withheld as to voting with
respect to nominees for director and shares held as of record by a broker, as
nominee, that are not voted with respect to the proposals will not be counted as
a vote in favor of or against such proposals and, therefore, will have no effect
on the proposal to elect the nominees for directors, the proposal to adopt the
1999 Stock Incentive Plan or the proposal to ratify the appointment of auditors.
VOTING SECURITIES OUTSTANDING
Under North Carolina law, June 17, 1999 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 June 17, 1999
is entitled to one vote on all proposals at the meeting, except that shares we
hold in a fiduciary capacity may only be voted 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
June 17, 1999, there were 39,501,598 shares of our common stock outstanding and
entitled to vote.
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Where appropriate, we have adjusted references in this proxy statement to
prices and share numbers of our common stock to reflect a 2-for-1 stock split
that we effected in the form of a 100% share dividend payable on March 31, 1999
to record holders of common stock on March 17, 1999.
SECURITY OWNERSHIP
The following table sets forth information with respect to the beneficial
ownership of common stock as of June 17, 1999 by (i) each person known by us to
own beneficially five percent or more of our outstanding shares of common stock,
(ii) each director and nominee for director, (iii) the Named Executives (as
defined in "Management Compensation," below), and (iv) all current directors and
executive officers as a group. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission (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 June 17, 1999 are deemed outstanding. These
shares, however, are not deemed outstanding for the 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 investment power with respect to the
shares set forth opposite the shareholder's name.
BENEFICIAL OWNERSHIP
---------------------
NUMBER OF
SHARES PERCENT
---------- --------
TRW Inc.(1)................................................. 9,117,974 23.08%
Bank of America Corporation(2).............................. 4,169,392 10.55%
Pilgrim Baxter & Associates, Ltd.(3)........................ 2,047,200 5.18%
William J. Pratt(4)......................................... 693,929 1.76%
David A. Norbury(5)......................................... 231,444 *
Powell T. Seymour(6)........................................ 223,291 *
Jerry D. Neal(7)............................................ 188,156 *
Walter H. Wilkinson, Jr.(8)................................. 93,231 *
Dr. Albert E. Paladino(9)................................... 73,333 *
Arthur E. Geissberger(10)................................... 37,100 *
Erik H. van der Kaay(11).................................... 35,333 *
Directors and executive officers as a group (11
persons)(12).............................................. 1,626,337 4.1%
- ---------------
* Indicates less than one percent
(1) Terri D. Zinkiewicz, who is a director of the Company, is Controller of
TRW's Space and Electronics Group. Ms. Zinkiewicz does not hold any voting
or investment power over such shares. TRW's address is 1900 Richmond Road,
Cleveland, Ohio 44124.
(2) Based on information included in a Schedule 13-G filed with the SEC on
February 1, 1999. Includes shares held by BankAmerica NTS&A, NB Holdings
Corporation, NationsBanc Capital Corp., NationsBank NA, NationsBanc
Advisors Inc., TradeStreet Investments Associates and NationsBanc
Montgomery Securities LLC, each of which is a direct or indirect subsidiary
of Bank of America Corporation. Bank of America Corporation's address is
100 North Tryon Street, Charlotte, North Carolina 28255.
(3) Based on information included in a Schedule 13-G filed with the SEC on
February 8, 1999. Pilgrim Baxter & Associates, Ltd.'s address is 825
Duportail Road, Wayne, Pennsylvania 19807.
(4) Includes 107,911 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(5) Includes 49,214 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(6) Includes (i) 4,000 shares of common stock held by Christopher M. Seymour,
who is Mr. Seymour's son, and (ii) 30,373 shares of common stock issuable
upon the exercise of stock options. See "Management Compensation," below.
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(7) Includes 81,284 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(8) Includes 23,333 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(9) Includes 23,333 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(10) Represents 37,100 shares of common stock issuable upon the exercise of
stock options. See "Management Compensation," below.
(11) Includes 23,333 shares of common stock issuable upon the exercise of stock
options. See "Management Compensation," below.
(12) Includes 408,597 shares of common stock issuable upon the exercise of stock
options.
PROPOSAL 1 -- 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 seven, as to
which there is currently one vacancy caused by the resignation of one of our
directors. As of yet, a replacement has not been found to fill such vacancy.
Assuming the election of the remaining nominees for director named in the proxy
statement, there will be one vacancy that the Board intends to fill, pursuant to
our bylaws, following identification of a qualified nominee. Directors are
elected annually to serve for one-year terms and until their successors are duly
elected and qualified. There are no family relationships among any of our
directors or officers. All nominees presently serve as directors. We intend that
the proxyholders named in the accompanying form of proxy will vote to elect the
six 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 a 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 selected by the proxyholders.
The names of the nominees for election to the Board, their principal
occupations and certain other information follows:
NOMINEES FOR ELECTION AS DIRECTORS
DIRECTOR OF
THE COMPANY
NAME AGE SINCE
- ---- --- -----------
David A. Norbury............................................ 48 1992
William J. Pratt............................................ 56 1991
Dr. Albert E. Paladino...................................... 66 1992
Erik H. van der Kaay........................................ 59 1996
Walter H. Wilkinson, Jr..................................... 53 1992
Terri D. Zinkiewicz......................................... 44 1997
DAVID A. NORBURY has been President and Chief Executive Officer and a
director since September 1992. Mr. Norbury was employed 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, a founder of the Company, was President from February
1991 to September 1992 and has been Chairman and Chief Technical Officer since
September 1992. He has also been a director since the Company's inception. Prior
to such time, Mr. Pratt was employed for 13 years with Analog Devices, Inc., an
integrated circuit manufacturer ("ADI"), as Engineering Manager and General
Manager.
DR. ALBERT E. PALADINO has been a director since December 1992. He is
Chairman of Millitech Corporation, a manufacturer of broadband wireless
equipment for network access applications. 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 communica-
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tions markets, and Helioss Corporation, a developer of high capacity millimeter
wave communications equipment. He was a general partner of Advanced Technology
Ventures, a venture capital firm, from 1981 through 1998. Prior to joining ATV,
he held senior positions with Raytheon Company, GTE Laboratories, the National
Institute of Standards and Technology and the Congressional Office of Technology
Assessment.
ERIK H. VAN DER KAAY became a director in July 1996. Mr. van der Kaay has
been President and Chief Executive Officer of Datum, Inc., a synchronization
products company based in Irvine, California, since April 1998. He was employed
in various capacities, most recently as Executive Vice President, with Allen
Telecom, a telecommunications company based in Beachwood, Ohio, from August 1992
to March 1998. Mr. van der Kaay is a director of Datum, Inc., and TranSwitch
Corporation.
WALTER H. WILKINSON, JR. became a director in March 1992. Mr. Wilkinson is
a general partner of Kitty Hawk Capital, a venture capital firm based in
Charlotte, North Carolina, that he founded in 1980.
TERRI D. ZINKIEWICZ became a director in February 1997. Ms. Zinkiewicz has
been employed with TRW in various capacities during the past 18 years, most
recently as Controller of the Space and Electronics Group.
BOARD COMMITTEES
Our Board of Directors has two standing committees, a Compensation
Committee and an Audit Committee. The Compensation Committee, upon delegation of
authority by the Board of Directors, has the authority to (i) establish and
implement the cash and non-cash compensation of each officer, salaried employee
and agent of or consultant to the Company (subject to any employment or other
agreement such officer, employee, agent or consultant may have) on an annual,
semi-annual or other periodic basis; and (ii) establish and implement every
personnel policy, collective bargaining agreement, health or dental insurance
plan, retirement plan, profit sharing plan, deferred compensation plan, stock
option or other stock-based benefit plan, bonus plan, incentive or any other
employee benefit plan or agreement that we provide to our employees, officers,
directors or consultants. The members of the Compensation Committee are Messrs.
van der Kaay, Paladino and Wilkinson, none of whom is an employee of the
Company.
The Audit Committee has the authority to (i) nominate an independent public
accounting firm to serve as our external auditor for approval by the Board of
Directors and recommend the compensation of the external auditors to the Board
for its approval; (ii) discuss with our external auditors the scope and timing
of their examination of our financial records, with particular attention to
those areas where either the committee or the external auditors believe special
attention should be directed; (iii) implement, and solicit the advice of
external auditors on, such internal accounting controls, procedures and systems,
including an internal auditor department, as may help to ensure accountability
and the preparation of complete and correct financial statements; (iv) direct,
monitor and discuss with our internal auditors the scope of their examinations,
the effectiveness of internal controls, the revision or establishment of new
controls and the findings of their audits and their recommendations with respect
thereto; (v) direct the internal and external auditors to perform such
supplemental reviews or audits as it in its discretion deems appropriate; and
(vi) review the external auditor's annual findings and recommendations to
management and advise the whole Board with respect thereto. The members of the
Audit Committee are Ms. Zinkiewicz and Mr. Wilkinson, neither of whom is an
employee of the Company.
All directors attended at least 75% of the Board meetings and assigned
committee meetings during the fiscal year ended March 27, 1999. The Board held
six meetings during the year, the Compensation Committee held eight meetings,
and the Audit Committee held two meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, our directors, officers and
beneficial owners of more than 10% of the 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
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principal shareholders, except that David A. Norbury, William J. Pratt, Jerry D.
Neal, Powell T. Seymour, William A. Priddy, Jr., and Arthur E. Geissberger each
failed to report on a timely basis an October 27, 1998 option grant to such
persons.
EXECUTIVE OFFICERS
Our current executive officers are as follows:
NAME AGE POSITION
- ---- --- --------
David A. Norbury................. 48 President, Chief Executive Officer and Director
William J. Pratt................. 56 Chairman of the Board, Chief Technical Officer and Director
Powell T. Seymour................ 56 Vice President of Operations and Secretary
Jerry D. Neal.................... 54 Vice President of Sales and Marketing
William A. Priddy, Jr............ 38 Chief Financial Officer and Vice President of Administration
Arthur E. Geissberger............ 36 Vice President of Wafer Fabrication Operations
Gary J. Grant.................... 43 Vice President of Quality Assurance
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. There are no family relationships between any of our executive
officers or directors. Information regarding Messrs. Norbury and Pratt is
included in the director profiles above.
POWELL T. SEYMOUR, a founder of the Company, has been Vice President of
Operations and Secretary since the Company's inception in February 1991. Prior
to such time, Mr. Seymour was employed for 11 years with ADI as Manufacturing
Engineer and Manufacturing Engineer Manager. Mr. Seymour served as a director
from February 1992 to July 1993.
JERRY D. NEAL, a founder of the Company, has been its Vice President of
Sales and Marketing since May 1991. Prior to such time, Mr. Neal was employed
for 10 years with ADI as Marketing Engineer, Marketing Manager and Business
Development Manager. Mr. Neal served as a director from February 1992 to July
1993.
WILLIAM A. PRIDDY, JR. was the Company's Controller from December 1991 to
December 1993, became Treasurer in December 1993, and was Vice President of
Finance from December 1994 to July 1997. He became Chief Financial Officer and
Vice President of Administration in July 1997. Prior to joining the Company, Mr.
Priddy was employed for five years with ADI as Financial Analyst, Marketing
Analyst and Marketing Services Manager.
ARTHUR E. GEISSBERGER has been the Company's Vice President of Wafer
Fabrication Operations since July 1996. From February 1991 to July 1996, Mr.
Geissberger was employed with Alpha Industries, Inc., a manufacturer of
microwave and millimeter-wave frequency components and subsystems based in
Methuen, Massachusetts, as GaAs Wafer Fabrication Manager and Manager of Foundry
Operations.
GARY J. GRANT has served as 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 as Fab Process Engineer, Product Engineering
Manager and Total Quality Manager.
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MANAGEMENT COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents information relating to total compensation
during the fiscal years ended March 31, 1999, March 31, 1998 and March 31, 1997,
of the Chief Executive Officer and our four next most highly compensated
executive officers (the "Named Executives").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
----------------------
AWARDS
ANNUAL COMPENSATION ----------------------
NAME AND ------------------------- SECURITIES ALL OTHER
PRINCIPAL POSITION YEAR (1) SALARY ($) BONUS ($)(2) UNDERLYING OPTIONS (#) COMPENSATION ($)(3)
- ------------------ -------- ---------- ------------ ---------------------- -------------------
David A. Norbury........... 1999 211,923 220,000 112,500 5,190
President and Chief 1998 179,615 0 0 5,402
Executive Officer 1997 164,615 64,000 50,000 0
William J. Pratt........... 1999 188,403 195,000 101,250 0
Chairman and Chief 1998 159,769 0 0 0
Technical Officer 1997 148,558 49,350 50,000 0
Jerry D. Neal.............. 1999 168,592 175,000 93,000 4,452
Vice President of Sales 1998 140,385 0 0 4,636
and Marketing 1997 125,016 36,000 30,000 0
Arthur Geissberger......... 1999 168,370 175,000 55,626 4,460
Vice President of Wafer 1998 139,200 0 0 4,634
Fabrication Operations 1997 104,616 0 45,000 0
Powell T. Seymour.......... 1999 140,624 145,000 105,500 4,219
Vice President of 1998 120,769 0 0 4,403
Operations
and Secretary 1997 104,616 30,000 20,000 0
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(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 1997, 1998 and 1999 fiscal
years was a 52-week year. For purposes of this Proxy Statement, each fiscal
year is described as ending on March 31.
(2) The Compensation Committee has adopted a discretionary bonus program
pursuant to which bonuses may be awarded to our officers from time to time
in amounts reflecting the Compensation Committee's evaluation of the
officers' contributions. See "Compensation Committee Report on Executive
Compensation" below.
(3) 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.
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The following table provides information concerning options for the common
stock exercised by each of the Named Executives in fiscal 1999, and the value of
options held by each at March 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUED AT MARCH 31, 1999 (#) AT MARCH 31, 1999 ($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ---------- ----------- ------------- ----------- -------------
David A. Norbury............ 36,960 908,842 40,733 133,845 1,575,585 5,139,142
William J. Pratt............ -- -- 100,253 113,553 4,053,740 4,322,299
Jerry D. Neal............... -- -- 73,886 100,402 2,996,046 3,849,330
Powell T. Seymour........... 32,454 170,571 25,865 45,585 1,028,738 1,754,444
Arthur E. Geissberger....... -- -- 36,000 99,500 1,446,400 1,862,381
- ---------------
(1) Value represents the difference between the option price and the market
value of the common stock on the date of exercise.
(2) Value represents the difference between the option price and the market
value of the common stock on March 31, 1999.
The following table sets forth for each of the Named Executives certain
information concerning stock options granted during the year ended March 31,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES FOR OPTION TERM (1)
GRANTED IN FISCAL EXERCISE OR EXPIRATION ---------------------------
NAME (#)(2) YEAR BASE PRICE ($) DATE 5%($) 10%($)
- ---- ----------- ---------- -------------- ------------- ----------- -------------
David A. Norbury.......... 37,500 2.41% $ 6.81 5/14/08 160,663 407,151
75,000 4.82% $10.44 10/27/08 568,661 1,369,183
William J. Pratt.......... 33,750 2.17 $ 6.81 5/14/08 144,597 366,436
67,500 4.33 $10.44 10/27/08 511,795 1,232,265
Jerry D. Neal............. 33,000 2.12 $ 6.81 5/14/08 141,383 358,293
60,000 3.85 $10.44 10/27/08 454,929 1,095,347
Powell T. Seymour......... 10,626 0.96 $ 6.81 5/14/08 64,326 162,958
45,000 2.89 $10.44 10/27/08 341,197 821,510
Arthur E. Geissberger..... 45,500 2.92 $ 6.81 5/14/08 194,938 494,010
60,000 3.85 $10.44 10/27/08 454,929 1,095,347
- ---------------
(1) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years) and is calculated by assuming that the stock
price on the date of grant as determined by the Board of Directors
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 5% and 10% 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 vest and become exercisable in five equal installments on the
first five anniversaries of the date of grant.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The objectives of the Compensation Committee are to enhance the Company's
ability to recruit and retain qualified management, to motivate executives to
achieve established performance goals and to 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:
- The overall performance of the Company during the fiscal year in
question;
- 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;
- The compensation packages for executives at other U.S. manufacturers of
integrated circuits with similar ranks and levels of responsibility; and
- The overall compensation level of all employees of the Company.
Compensation arrangements adopted by the Compensation Committee include up
to four components: (1) a base salary; (2) grant of equity incentives to acquire
shares of common stock; (3) a discretionary cash bonus program pursuant to which
bonuses may be awarded to executive officers from time to time in amounts based
both on objective criteria established by the Compensation Committee, such as
attainment of revenue, profit and gross margin goals, and on the Compensation
Committee's subjective evaluation of such officers' contributions to the
Company; and (4) 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 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 awards of the Company's executive officers
other than Mr. Norbury are made to the Compensation Committee by Mr. Norbury and
are subject to its approval. The amount of bonuses and stock options, if any,
for which an executive officer, including the Chief Executive Officer, may be
eligible to receive are based on the attainment of specified corporate
performance factors. The relevant corporate performance factors for the last
fiscal year included revenues, orders, gross margin percentages, earnings per
share, inventory turns and percentage of revenues represented by the sales of
silicon products.
During fiscal 1999, Mr. Norbury earned a base salary of $211,923, which
represents an 18% increase over his base salary during the preceding fiscal
year. At this level, Mr. Norbury's base salary is approximately 4.7 times the
average Company employee's salary. Mr. Norbury received a bonus of $220,000
during fiscal 1999. In addition, Mr. Norbury was awarded stock options to
purchase 37,500 shares of common stock at an exercise price of $6.81 per share
on May 14, 1998 and stock options to purchase 75,000 shares of common stock at
an exercise price of $10.44 per share on October 27, 1998. These options vest
over a period of five years. The Compensation Committee feels that the
adjustment in Mr. Norbury's base salary for fiscal 1999 was justified by the
results being achieved by the Company -- particularly its steady growth in
revenues and its profitability -- and by other significant developments then
occurring, including the rapid progress in the ramping up of production from the
Company's wafer fabrication facility. The Company believes, based on its review
of publicly available information concerning the Company's competitors, that Mr.
Norbury's compensation is well within the range of compensation provided to
executives of similar rank and responsibility. 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.
The Compensation Committee encourages the Company's employees to commit a
portion of their base salary to the purchase of the Company's common stock
through the Employee Stock Purchase Plan. The Compensation Committee believes
that substantial equity ownership encourages management to take action favorable
to shareholders of the Company.
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In general, compensation in excess of $1 million 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 limits on
deduction do not apply to performance-based compensation that satisfies certain
requirements. No officer of the Company is expected to earn compensation in
excess of $1 million during fiscal 2000, and the Compensation Committee has not
adopted any policies with respect to Section 162(m), although the 1999 Stock
Incentive Plan, proposed to be adopted by shareholders at the Annual Meeting, is
structured to comply with Section 162(m) to the extent practicable.
This report has been prepared by members of the Compensation Committee.
Members of this committee are:
Walter H. Wilkinson, Jr. (Chairman)
Erik H. van der Kaay
Dr. Albert E. Paladino
EMPLOYEE BENEFIT PLANS
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 2,600,000 shares, subject to adjustment in the
event of certain events affecting our capitalization.
The plan is administered by the Compensation Committee of the Board of
Directors, which is authorized, subject to the plan's provisions, to determine
to whom and at what time options may be granted, the designation of an option as
either an incentive option or a nonqualified option, the per share exercise
price, the duration of each option, the number of shares subject to each option,
the rate and manner of exercise, the timing and form of payment and other terms
and conditions of awards.
As of March 31, 1999, we had granted options to employees, including the
Named Executives, for 4,177,306 shares of common stock under this plan and a
predecessor plan, of which options for 871,754 shares have been exercised and
options for 83,976 shares have been forfeited. The exercise prices for
outstanding options granted under the plans range from $.08 to $47.56 per share,
with a weighted average of $7.14 per share. See "Compensation of Executive
Officers," above. In order to continue to provide a competitive equity-based
compensation program for its employees, directors and independent contractors,
the Company has also proposed that the shareholders adopt the 1999 Stock
Incentive Plan, which is discussed under Proposal 2 below.
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 1,000,000 shares
of common stock 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 to establish the number and duration of the
purchase periods during the term of the plan, and to make rulings and
interpretations thereunder.
Retirement Plan. Each employee is 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. Employer contributions to the plan are made
at the discretion of management and the Board of Directors. An employee is fully
vested in the employer contribution portion of the plan after completion of five
continuous years of service. We made contributions to the plan of approximately
$264,700 during the fiscal year ended March 31, 1999.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in March 1994, the
Board of Directors made all determinations with respect to executive officer
compensation. No interlocking relationships exist between our Board or
Compensation Committee and the Board of Directors or Compensation Committee of
any other company. Each of our directors, or an affiliate thereof, has purchased
securities of the Company.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is eligible to receive
$12,000 per year for service as a member of the Board, plus $1,000 per Board
meeting attended, and $2,000 per year for service on each committee of the Board
on which he or she serves. In addition, all directors are reimbursed for
expenses incurred by them in their capacity as directors. Other than the
reimbursement of expenses, directors who are employees of the Company do not
receive additional compensation for service.
Under our Nonemployee Directors' Option Plan, as amended and restated
effective January 26, 1999, each director who was not an employee of the Company
at the time of completion of our initial public offering in June 1997, and each
non-employee director who is first elected to the Board thereafter, received or
will receive options to purchase 20,000 shares of our common stock at the market
price of the stock at the time of grant. Prior to the 1999 Annual Meeting, each
non-employee director (other than Ms. Zinkiewicz, who has elected not to
participate in the plan) received an annual option grant for 10,000 shares of
common stock at the market price at the time of grant. Commencing with the 1999
Annual Meeting, each participating non-employee director who is reelected will
receive an annual option grant for 20,000 shares of common stock at the market
price at the time of grant. Awards granted under the plan vest in three annual
installments.
In October 1998, to further recognize the significant contributions of its
non-employee members of the Board and to promote a closer identification of the
interests of these members with those of the Company, the Board awarded each of
these members (other than Ms. Zinkiewicz, who has elected not to participate in
such option grants) an option outside of the directors' option plan to purchase
10,000 shares of common stock at a price of $10.44 per share, which price was
determined by the Board of Directors to be the fair market value for share at
the time of grant.
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PERFORMANCE GRAPH
The graph set forth below compares, for the period beginning immediately
after our initial public offering on June 3, 1997, the "cumulative shareholder
return" to our shareholders as compared with the return of The Nasdaq Stock
Market Index (U.S. Companies) (the "Nasdaq Market Index") and of the Nasdaq
Electronic Components Index (the "Electronic Components Index"), our industry
index. The two Nasdaq indices were prepared by the Center for Research Studies
in Securities Prices at the University of Chicago. "Cumulative shareholder
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.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG RF MICRO DEVICES, INC.
NASDAQ MARKET INDEX AND ELECTRONIC COMPONENTS INDEX
(PERFORMANCE GRAPH)
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 or under
the Securities Exchange Act of 1934. The stock price performance depicted in the
graph is not necessarily an indicator of future price performance.
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CERTAIN TRANSACTIONS
TRW
On June 6, 1996, we initiated a strategic alliance with TRW and entered
into agreements pursuant to which we issued to TRW (i) 826,446 shares of Class C
Preferred Stock in exchange for $5,000,000 in cash (these shares converted on a
two-for-one basis into common stock upon the closing of our initial public
offering in June 1997); (ii) 5,367,860 shares of common stock in exchange for
the license agreement described below, all of which shares were initially
subject to certain voting and transfer restrictions as described below; (iii) a
convertible note in the maximum principal amount of $10,000,000, convertible
into up to 2,222,222 shares of common stock; and (iv) a warrant for the
purchase, under certain circumstances, of up to 2,000,000 shares of common stock
at $5.00 per share. We also entered into a supply agreement that provides for us
to purchase from TRW certain minimum quantities of GaAs HBT wafers and GaAs
epitaxial wafers during the years 1996 to 2000. In addition, TRW has agreed to
refrain from taking certain actions regarding control of the Company during the
five years following our initial public offering, or through June 2002.
License Agreement
Under the license agreement, TRW granted us fully paid up, royalty-free
worldwide licenses with respect to certain of TRW's existing and future GaAs HBT
patent rights and MBE process patent rights, in each case with accompanying
know-how and technical information, to design, develop and manufacture certain
of our existing products and any product with an emitter with a width of one to
three microns, in either case provided the products are for commercial wireless
communication applications and operate on signals having a frequency of less
than 10 GHz. The license with respect to the GaAs HBT patent rights was
effective immediately, and the MBE patent right license became effective on June
15, 1998, which was the date that our GaAs HBT wafer fabrication facility became
operational. Both licenses are exclusive as to all persons including TRW, except
that TRW has reserved the right to provide to customers on an ongoing basis
certain specified foundry services. At the option of TRW, the license will
become non-exclusive if we fail to meet the following revenue goals, as measured
in accordance with GAAP, following the date on which our GaAs HBT wafer
fabrication facility became operational (June 15, 1998): during the first year,
$30 million; during the second year, $65 million; and during the third year,
$125 million.
TRW also granted us certain non-exclusive licenses and agreed to provide us
with certain technical assistance in connection with the design, construction
and operation of our GaAs HBT wafer fabrication facility. The license agreement
provides that TRW will offer to us, on the same terms as are offered to third
parties, certain non-GaAs HBT process technologies that it develops in the
future for a period of ten years following June 15, 1998. We have agreed to
share with TRW any modifications or improvements and to grant TRW a
non-exclusive, royalty-free license to use such modifications or improvements
outside our field of use.
Restricted Stock Agreement
In connection with its investment in June 1996, TRW had granted to David A.
Norbury, our President and Chief Executive Officer, an irrevocable proxy to vote
5,367,860 of the 9,242,974 shares of common stock then beneficially owned by
TRW. In accordance with its terms, this proxy expired on July 15, 1998, 30 days
after the date on which our wafer fabrication facility became "operational" for
purposes of our agreements with TRW.
Convertible Note
Under the terms of the convertible note, we borrowed $10 million from TRW.
This note, pursuant to its terms, was converted into 2,222,222 shares of common
stock upon completion of our initial public offering in June 1997.
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Warrant
The warrant that we granted to TRW provided for the purchase of up to
2,000,000 shares of common stock at a price of $5.00 per share. The warrant
became exercisable on June 15, 1998, which was the date on which our wafer
fabrication facility became operational, and was exercised on September 14,
1998.
Supply Agreement
Under the terms of our supply agreement, we have agreed to purchase from
TRW, and TRW has agreed to sell to us, certain minimum quantities of three-inch
GaAs HBT processed wafers and four-inch GaAs epitaxial wafer starting material
until December 31, 2000. The estimated minimum annual purchases are $31 million,
$35 million and $23.9 million, in calendar years 1999, 2000 and 2001,
respectively.
Standstill Agreement
TRW has agreed with us and with the holders of preferred stock that we
issued before our initial public offering that, before June 6, 2002 (the fifth
anniversary of the closing of our initial public offering), it will not, and
will cause its affiliates not to:
- acquire, offer to acquire or agree to acquire, directly or indirectly,
any voting securities or rights or options to acquire any of our assets
or voting securities in excess of the lesser of (a) 40% of our equity
securities or (b) the actual maximum percentage of our equity securities
owned by TRW, calculated on a fully diluted basis;
- make any public announcement with respect to, or submit any proposal for,
any extraordinary transaction involving the Company or its securities or
assets;
- make, or in any way participate in, any solicitation of proxies to vote,
or seek to advise or influence any person or entity with respect to the
voting of, any of our voting securities;
- form, join or in any way participate in a "group" within the meaning of
Section 13 of the Securities Exchange Act of 1934 with respect to any of
our voting securities; or
- solicit or encourage any person to propose a business combination or
similar transaction with, or a change in control of, the Company.
If any party were to make a bona fide offer to purchase all of our
outstanding shares, however, TRW would be entitled during the 30-day period
following the offer to make a counterproposal for all of our outstanding shares
on the same or better terms and conditions as provided in the third-party offer.
OTHER TRANSACTIONS
We have given certain holders of preferred stock that we issued before our
initial public offering certain rights to require us to register the sale of the
Company securities held by them, or to include such securities in a registration
that we initiate.
PROPOSAL 2 -- APPROVAL OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED COMMON SHARES
Our Board of Directors proposes that the shareholders approve an amendment
and restatement of our articles of incorporation to increase the number of
authorized shares of common stock from 50,000,000 shares to 150,000,000 shares.
As amended and restated, Article 2(a) of our articles of incorporation would
provide as follows:
The number of shares of stock that the Corporation shall have the
authority to issue is (i) 150,000,000 shares of common stock, no par
value (the "Common Stock") and (ii) 5,000,000 shares of one or more
classes of preferred stock, no par value, to be established by the
Board of
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Directors of the Corporation as provided herein (the "Preferred
Stock") or one or more series within a class so established.
The full text of the proposed amended and restated articles of incorporation is
attached to this Proxy Statement as Exhibit A.
On June 17, 1999, we had 39,501,598 shares of common stock outstanding. On
that date, an additional 9,713,232 shares of common stock were reserved for
issuance pursuant to our stock option and other stock-based incentive plans
(including 4,000,000 shares of common stock reserved for issuance in connection
with the 1999 Stock Incentive Plan, the effectiveness of which is subject to
shareholder approval). See "Proposal 3 -- Adoption of 1999 Stock Incentive
Plan," below.
The additional authorized shares of common stock would be available for
future issuance and would give us flexibility in our corporate planning and in
responding to future business developments, including possible financings and
acquisition transactions, stock splits or dividends, issuances under our
stock-based incentive plans and other general corporate purposes. Our directors
have authorized the issuance of common stock for some of these purposes in the
past; however, they have no present plans to issue additional shares of common
stock, except as noted above.
Under some circumstances, issuance of additional shares of common stock
could dilute the voting rights, equity and earnings per share of existing
shareholders. This increase in authorized but unissued common stock could be
considered an anti-takeover measure because the additional authorized but
unissued shares of common stock could be used by the Board of Directors to make
a change in control of the Company more difficult. The Board of Directors'
purpose in recommending this proposal is not as an anti-takeover measure, but
for the reasons discussed above.
Restating our articles of incorporation will also permit us to eliminate
from the articles lengthy descriptions of the preferences, limitations and
relative rights of several series of preferred stock issued in the past, none of
which shares are currently outstanding.
Authorized shares of common stock may be issued by the Board from time to
time without further shareholder approval, except in situations where
shareholder approval is required by state law or the rules of The Nasdaq
National Market. Our shareholders have no preemptive right to acquire additional
shares of common stock. The Board believes that an increase in the number of
authorized shares is advisable to give us additional flexibility. The proposed
amendment and restatement of our articles of incorporation will be approved if
the holders of a majority of the outstanding shares of the common stock of the
Company voting in person or by proxy vote to approve the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
AMEND AND RESTATE THE ARTICLES OF INCORPORATION.
PROPOSAL 3 -- ADOPTION OF 1999 STOCK INCENTIVE PLAN
BACKGROUND
Our Board of Directors approved the adoption of the 1999 Stock Incentive
Plan (the "Plan") on June , 1999, in substantially the form attached hereto as
Exhibit B, subject to the approval of the Plan by the shareholders at the 1999
Annual Meeting of Shareholders. Awards may be granted under the Plan on and
after the effective date of July 1, 1999, provided the shareholders approve the
Plan, but no later than June 30, 2009. The discussion that follows is qualified
in its entirety by reference to the Plan.
A maximum of 4,000,000 shares of common stock may be issued pursuant to
awards granted under the Plan, and the Board has reserved such number of shares
for this purpose. In addition, the maximum number of shares of common stock that
may be issued under the Plan pursuant to the grant of restricted awards
(described below) is 500,000 shares, and no participant may be granted awards in
any 12-month period for
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more than 100,000 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 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 corporation (due to a merger, stock split,
stock dividend or similar event). On June 17, 1999, the closing sales price of
the common stock as reported on The Nasdaq National Market was $60.375 per
share.
In connection with its consideration of the Plan, the Company engaged
Towers Perrin, an international executive compensation consulting firm, to
analyze the competitive practices of stock-based compensation plans of (i) high
technology companies in general and (ii) a group of 10 publicly-held companies
selected by the Company which are engaged in the semi-conductor or related
industries. In particular, Towers Perrin analyzed the outstanding stock-based
awards plus shares available for future grants as a percentage of shares
outstanding (or "overhang") of the high technology group and selected
competitors group, as compared to the Company (taking into consideration the
number of shares proposed to be authorized for issuance under the Plan, as well
as the number of outstanding stock-based awards and other shares available for
future grants under existing stock-based plans of the Company).
In a report dated June 14, 1999, Towers Perrin concluded that the Company's
share authorization pursuant to the Plan would not result in an uncommonly high
level of potential dilution when contrasted with the practices of either the
selected peer company group or the high technology company group. Towers Perrin
also concluded in the report that the Company's request for approval of the
authorization of 4,000,000 shares under the Plan, plus other outstanding
stock-based awards and shares available for future equity incentive grants, when
expressed as a percentage of the total outstanding shares of common stock,
approximated the median rate of the peer group of 10 selected companies and was
somewhat higher than typical practice among high technology companies. Based on
the Towers Perrin report, as well as the Company's goal of providing competitive
employee equity-based compensation programs and other relevant factors, the
Board of Directors concluded that the Plan should be adopted, subject to
shareholder approval of the Plan at the 1999 Annual Meeting.
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to encourage and enable selected employees,
directors and independent contractors of the Company and related corporations 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, the approximate
number of persons who may be eligible to participate under the Plan includes 497
employees, six directors and no independent contractors.
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 and nonqualified stock options, stock appreciation
rights ("SARs"), and restricted stock awards and restricted units ("restricted
awards"). 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 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: (i) determine all matters relating to awards,
including selection of individuals to be granted awards, the types of awards,
the number of shares of common stock subject to an award, and the terms,
conditions, restrictions and limitations of an award; (ii) prescribe the form or
forms of agreements related to awards granted under the Plan; (iii) establish,
amend and rescind rules and regulations for the administration of the Plan; and
(iv) construe and interpret the Plan and agreements related to awards, establish
and interpret rules and regulations for
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administering the Plan and make all other determinations deemed necessary or
advisable for administering the Plan.
The Plan and awards may be amended or terminated at any time by the Board
of Directors, subject to the following: (i) shareholder approval is required of
any Plan amendment if such approval is required by applicable law, rule or
regulation; and (ii) an amendment or termination of an award may not adversely
affect the rights of an award recipient without the recipient's consent.
AWARDS
As noted above, the Plan authorizes the granting of incentive stock
options, nonqualified stock options, SARs, restricted stock awards and
restricted units. A summary of the material terms of each type of award is
provided below.
Options. The Plan authorizes the grant of both incentive stock options and
nonqualified stock options, both of which are exercisable for shares of common
stock. The option price at which an option may be exercised will be determined
by the Administrator at the time of grant and, in the case incentive options,
the option price must be at least 100% of the fair market value per share of the
common stock on the date of grant. The term of an option and the period or
periods during which an option may be exercised shall 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. 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 an optionee 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
Administrator may establish a maximum value payable for an SAR. 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 stated in the related
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. SAR holders are subject to the same restrictions on exercise during
employment and following termination of employment as optionees.
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. A restricted award may consist of a restricted
stock award or a restricted unit, or both. Restricted stock awards and
restricted units 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, completion of the
restriction period (or a combination of attainment of performance objectives and
completion of the restriction period), 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 and determining the extent to which such
awards have been earned. Performance objectives may vary from participant to
participant and between groups of participants and will be based upon those
company, business unit and/or individual performance factors and criteria as the
Administrator in its
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sole discretion may deem appropriate, including sales goals, earnings per share,
return on equity, return on assets and/or total return to shareholders.
The Administrator has authority to determine whether and to what degree
restricted awards have been earned and are payable, as well as to determine the
forms and terms of restricted awards. If a participant's employment or service
is terminated before the participant has earned all or part of a restricted
award, the unearned portion of the award will be forfeited (unless the
Administrator elects to accelerate vesting of the award).
CHANGE OF CONTROL
The Plan provides that upon a change of control (as defined in the Plan):
(i) 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
(ii) any restrictions applicable to any restricted awards will be deemed to have
expired, and restricted awards will become fully vested 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 corporation, to
determine that any or all awards shall not vest or become exercisable on an
accelerated basis, if the Company or the board of directors of 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.
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 Stock Options. Incentive stock 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 optionee (with the
possible exception of alternative minimum tax liability) if the optionee 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
optionee has continuously been a Company employee from the date of grant to
three months before the date of exercise (or twelve months in the event of death
or disability). The Company generally will not be entitled to a deduction for
income tax purposes in connection with the exercise of an incentive stock
option. Upon the disposition of shares acquired upon exercise of an incentive
stock option, the optionee 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 long-term capital gain or loss. If the holding period requirements
for incentive stock option treatment described above are not met, the option
will be treated as a nonqualified stock option.
Pursuant to the Code and the terms of the Plan, in no event can there first
become exercisable by an optionee in any one calendar year incentive stock
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 stock option granted under the Plan exceeds
the foregoing limitation, it will be treated as a nonqualified stock option. In
addition, no incentive stock 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.
Nonqualified Stock Options. If an optionee receives a nonqualified stock
option, the difference between the market value of the stock on the date of
exercise and the option price will constitute taxable ordinary income to the
optionee on the date of exercise. The Company will be entitled to a deduction in
the same year in an amount equal to the income taxable to the optionee. The
optionee'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
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of exercise. Any subsequent disposition of the stock by the optionee will be
taxed as a capital gain or loss to the optionee, and will be long-term capital
gain or loss if the optionee 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 the holder or a tax deduction to the
Company. At the time of exercise of an SAR, the SAR holder will forfeit the
right to benefit from any future appreciation of the stock subject to the SAR.
Accordingly, taxable income to the SAR holder is deferred until the SAR is
exercised. Upon exercise, the amount of cash and fair market value of shares
received by the SAR holder, less cash or other consideration paid (if any), is
taxed to the SAR holder 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 employee or a tax
deduction to the Company for federal income tax purposes. Upon expiration of the
restricted period applicable to the restricted stock awarded, 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 recipient's ordinary
income as compensation, except that, in the case of restricted stock issued at
the beginning of the restriction period, the recipient 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 withholding.
Restricted Units and Restricted Awards Other Than Restricted Stock. The
federal income tax consequences of the award of restricted units and other
restricted awards other than restricted stock will depend on the conditions of
the award. Generally, the transfer of cash or property will result in ordinary
income to the recipient and a tax deduction to the Company. If there is a
substantial risk that the property transferred will be forfeited (for example,
because receipt of the property is conditioned upon the performance of
substantial future services), the taxable event is deferred until the risk of
forfeiture lapses. However, the recipient 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 employee (and then the deduction is subject to reasonable
compensation and withholding requirements). Because restricted stock awards will
be subject to such conditions as may be determined by the Administrator, the
federal income tax consequences to the recipient and to the Company will depend
on the specific conditions of the award.
PERFORMANCE-BASED COMPENSATION -- SECTION 162(M) REQUIREMENTS
The Plan is intended to preserve the Company's tax deduction for certain
awards paid under the Plan by complying with the terms of Section 162(m) of the
Code and related regulations. Section 162(m) of the Code denies an employer a
deduction for compensation paid to covered employees (generally, the Named
Executives) of a publicly held corporation in excess of $1 million unless the
compensation is exempt from the $1 million limitation because it is
performance-based compensation or paid on a commission basis. Although the $1
million deduction limitation is not applicable at this time to any of the Named
Executives, the Plan is structured to comply with the requirements imposed by
Section 162(m) of the Code in order to preserve, to the extent practicable, the
Company's tax deduction for awards made under the Plan.
In order to qualify as performance-based compensation, the compensation
paid 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 change in material terms) of the performance goal under which compensation
is to be paid. Material terms include the individuals eligible to
18
21
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 calendar year
for more than 100,000 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, the Plan imposes certain performance objectives, such as sales goals,
earnings per share, return on equity, return on assets and/or total return to
shareholders. See "Awards -- Restricted Awards," above.
The amount of compensation that will be paid in the current fiscal year
under the Plan is not yet determinable due to vesting, performance and other
conditions. However, the following table sets forth the number of options
granted in fiscal 1999 under the Company's stock option plans and arrangements
to the Named Executives and certain other groups of individuals:
NEW PLAN BENEFITS
1999 STOCK INCENTIVE PLAN
NAME AND POSITION OPTIONS
- ----------------- ---------
David A. Norbury............................................ 112,500(1)
President and Chief
Executive Officer
William J. Pratt............................................ 101,250(1)
Chairman and Chief
Technical Officer
Jerry D. Neal............................................... 93,000(1)
Vice President of Sales and
Marketing
Arthur Geissberger.......................................... 55,626(1)
Vice President of Wafer
Fabrication Operations
Powell T. Seymour........................................... 105,500(1)
Vice President of Operations
and Secretary
Executive Group............................................. 590,850(1)
Non-Executive Director Group................................ 70,000(2)
Non-Executive Officer Employee Group........................ 1,089,474
- ---------------
(1) Reflects options granted during the last fiscal year to the individual or
group under the Company's 1997 Key Employees' Stock Option Plan.
(2) Awarded pursuant to Nonemployee Directors' Stock Option Plan or individual
director option grants made in October 1998 to certain non-employee
directors. See "Management Compensation" above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
ADOPT THE 1999 STOCK INCENTIVE PLAN IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT B.
PROPOSAL 4 -- RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Audit Committee has appointed the firm of Ernst & Young LLP as
independent auditors to examine our books for the fiscal year ending March 31,
2000, and to report on our consolidated balance sheets, statements of income and
other related statements. Ernst & Young LLP has served as our independent
auditors continuously since 1992. Representatives of Ernst & Young LLP are
expected to be represented at
19
22
the meeting, will have an opportunity to make a statement if they desire to do
so and will be available to respond to questions posed by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING MARCH 31, 2000.
PROPOSALS FOR 2000 ANNUAL MEETING
Under SEC regulations, any shareholder desiring to make a proposal to be
acted upon at the 2000 Annual Meeting of Shareholders must present such proposal
to us at our principal office in Greensboro, North Carolina by February 29, 2000
for the proposal to be considered for inclusion in our proxy statement.
In addition to any other applicable requirements, for business 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.
OTHER BUSINESS
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, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
/s/ William J. Pratt
William J. Pratt
Chairman
Dated: June , 1999
20
23
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
RF MICRO DEVICES, INC.
------------------
Pursuant to Section 55-10-07 of the North Carolina General Statutes, RF
Micro Devices, Inc. (the "Corporation") hereby submits the following for the
purpose of amending and restating its articles of incorporation.
1. The name of the Corporation is RF Micro Devices, Inc.
2. Capitalization.
(a) Authorized Shares. The number of shares of stock that the
Corporation shall have authority to issue is (i) 150,000,000 shares of
Common Stock, no par value (the "Common Stock") and (ii) 5,000,000 shares
of one or more classes of preferred stock, no par value, to be established
by the Board of Directors of the Corporation as provided herein (the
"Preferred Stock") or one or more series within a class so established.
(b) Preferred Stock. The Board of Directors is expressly authorized
to establish one or more classes of Preferred Stock or one or more series
within a class of Preferred Stock by fixing and determining the
preferences, limitations and relative rights, including dividend,
liquidation, conversion, voting, redemption and other rights, preferences
and limitations of the class or series of shares so established, as shall
be stated and expressed in the resolution establishing such class or series
and providing for the issuance thereof adopted by the Board of Directors
pursuant to the authority so to do that is hereby expressly vested in it
including, without limiting the generality of the foregoing, the following:
(i) the designation of such class or series;
(ii) the dividend rate, if any, thereof, the conditions and dates
upon which such dividends shall be payable, the preference or relation
of such dividends to dividends payable on any other class or classes of
capital stock of the Corporation or series within a class, and whether
such dividends shall be cumulative or noncumulative;
(iii) whether the shares of such class or series shall be subject
to redemption by the Corporation, and, if made subject to such
redemption, the times, prices, rates, adjustments and other terms and
conditions of such redemption;
(iv) the terms and amount of any sinking or similar fund provided
for the purchase or redemption of the shares of such class or series;
(v) providing that the shares of such class or series may be
convertible into or exchangeable for shares of capital stock or other
securities of the Corporation or of any other corporation and the times,
prices, rates, adjustments and other terms and conditions of such
conversion or exchange;
(vi) the extent, if any, to which the holders of the shares of such
class or series shall be entitled to vote as a class, series or
otherwise with respect to the election of directors or otherwise;
(vii) the restrictions and conditions, if any, upon the issue or
reissue of any additional Preferred Stock ranking on a parity with or
prior to such shares as to dividends or upon dissolution;
(viii) the rights of the holders of the shares of such class or
series upon the dissolution of, or upon the distribution of assets of,
the Corporation, which rights may be different in the case of voluntary
dissolution than in the case of involuntary dissolution; and
24
(ix) any other preferences, limitations or relative rights of
shares of such class or series consistent with this Article 2 and
applicable law.
3. The address of the registered office of the Corporation in the State of
North Carolina is 7625 Thorndike Road, Greensboro, Guilford County, North
Carolina 27409, and the name of its registered agent at such address is William
J. Pratt.
4. To the fullest extent permitted by applicable law, no person who is
serving or has served as a director of the Corporation shall have any personal
liability arising out of any action whether by or in the right of the
Corporation or otherwise for monetary damages for breach of any duty as
director. This Article 4 shall not impair any right to indemnity from the
Corporation that any director may now or hereafter have. Any repeal or
modification of this Article 4 shall be prospective only and shall not adversely
affect any limitation hereunder on the personal liability of a director with
respect to modification.
5. The following provisions shall govern certain business combinations
involving the Corporation. Capitalized terms used in this Article 5 and not
otherwise defined in these Articles of Incorporation shall have the meanings
ascribed to them in paragraph 5(d) hereof.
(a) Any Business Combination shall require only such affirmative vote,
if any, as is required by law and any other provision of these Articles of
Incorporation if the Business Combination shall have been approved by at
least a majority of the Continuing Directors and, if deemed advisable by a
majority of the Continuing Directors, the Board of Directors shall have
obtained an opinion of a reputable investment banking firm to the effect
that the financial terms of such Business Combination are fair from a
financial point of view to the holders of Voting Shares (other than the
Interested Shareholder).
(b) If the provisions of paragraph 5(a) have not been satisfied, any
Business Combination shall require the affirmative vote, in person or by
proxy, at any meeting called as provided in the Bylaws, of the holders of
at least 60% in interest of the issued and outstanding Voting Shares of the
Corporation held by Persons other than any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified by law or in any agreement
with any national securities exchange or otherwise.
(c) The provisions of paragraphs 5(a) and 5(b) shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law and any
other provision of these Articles of Incorporation, if such Business
Combination constitutes a transaction between the Corporation or any
Subsidiary and any corporation of which a majority of the outstanding
shares of all classes of stock entitled to vote in elections of directors
is owned of record or beneficially by the Corporation or its Subsidiaries;
provided, however, that this paragraph 5(c) shall not apply to any
transaction to which any Affiliate of any Interested Shareholder is a
party.
(d) For the purposes of these Articles of Incorporation:
(i) The term "Business Combination" shall mean any transaction that
is referred to in any one or more of clauses (A) through (F) of this
subparagraph 5(d)(i) and that occurs at any time following the closing
of a Public Offering:
(A) Any merger, share exchange or consolidation of the
Corporation or any Subsidiary with or into (1) any Interested
Shareholder or (2) any other entity (whether or not itself an
Interested Shareholder) that immediately before is, or immediately
after such merger, share exchange or consolidation would be, an
Affiliate of an Interested Shareholder;
(B) Any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Shareholder or any Affiliate
of any Interested Shareholder of any assets of the Corporation or any
Subsidiary when such assets have an aggregate Fair Market Value of
$5,000,000 or more;
A-2
25
(C) The issuance or transfer to any Interested Shareholder or
any Affiliate of any Interested Shareholder by the Corporation or any
Subsidiary (in one transaction or a series of related transactions)
of any equity securities of the Corporation or any Subsidiary where
such equity securities have an aggregate Fair Market Value of
$5,000,000 or more;
(D) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation;
(E) Any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger,
share exchange or consolidation of the Corporation with or into any
of its Subsidiaries or any similar transaction (whether or not with
or into or otherwise involving an Interested Shareholder) that has
the effect, directly or indirectly, of increasing the percentage of
the outstanding shares of any class of equity or convertible
securities of the Corporation or any Subsidiary that is directly or
indirectly owned by any Interested Shareholder or any Affiliate of
any Interested Shareholder; or
(F) Any agreement, contract or other arrangement providing for
any of the transactions described in this definition of "Business
Combination."
(ii) A "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(iii) "Interested Shareholder" shall mean any Person (other than
the Corporation, any Subsidiary or a trustee holding stock for the
benefit of the employees of the Corporation or its Subsidiaries) who or
which, along with any Affiliates and Associates of the Interested
Shareholder:
(A) Is the Beneficial Owner, directly or indirectly, of more
than 15% of the Voting Shares of the Corporation or a Subsidiary; or
(B) Is an assignee of or has otherwise succeeded to any share of
capital stock of the Corporation or a Subsidiary that was at any time
within two years prior thereto beneficially owned by any Interested
Shareholder, and such assignment or succession shall have occurred in
the course of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of 1933.
A Person shall be deemed an Interested Shareholder for the purpose of
this definition if such Person is an Interested Shareholder as of the
record date for the determination of shareholders entitled to notice of
and to vote on any Business Combination, as of the date any definitive
agreement relating to a Business Combination is entered into or amended
so as to make it less favorable to the Corporation or its shareholders
other than the Interested Shareholder, or immediately prior to the
consummation of any such Business Combination.
(iv) A Person shall be the "Beneficial Owner" of any Voting Shares:
(A) As to which such Person or any of its Affiliates and
Associates, pursuant to any agreement, arrangement or understanding,
or otherwise, has or shares, directly or indirectly, voting power,
including the power to vote or direct the voting of such shares, or
investment power, including the power to dispose or to direct the
disposition of such shares, or both;
(B) That such Person or any of its Affiliates or Associates has
(1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise
or (2) the right to vote pursuant to any agreement, arrangement or
understanding; or
(C) That are beneficially owned, directly or indirectly, by any
other Person with which such first-mentioned Person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation or a
Subsidiary, as the case may be.
A-3
26
(v) "Voting Shares" when used with respect to the Corporation or a
Subsidiary shall mean shares of such entity having power to vote on the
election of directors. For the purpose of determining whether a Person
is an Interested Shareholder pursuant to subparagraph 5(d)(iii), the
outstanding Voting Shares shall include shares deemed owned by a
Beneficial Owner through application of subparagraph 5(d)(iv) but shall
not include any other Voting Shares that may be issuable to any other
Person pursuant to any agreement or upon exercise of conversion rights,
warrants or options, or otherwise.
(vi) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1,
1997.
(vii) "Subsidiary" shall mean any entity of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect
on January 1, 1997) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Interested Shareholder set forth in subparagraph 5(d)(iii), the term
"Subsidiary" shall mean only an entity of which a majority of each class
of equity security is owned, directly or indirectly, by the Corporation.
(viii) "Continuing Director" shall mean an individual who was a
member of the Board of Directors of the Corporation on the date a Person
became an Interested Shareholder; provided, however, that each
individual who was elected as a member of the Board of Directors at the
1997 Annual Meeting of the Shareholders of the Corporation shall be
deemed to be a Continuing Director with respect to any Person who was an
Interested Shareholder at or prior to April 10, 1997 notwithstanding the
fact that he or she may have become a member of the Board of Directors
of the Corporation after the date on which such Person became an
Interested Shareholder.
(ix) "Fair Market Value" shall mean (A) in the case of stock, the
highest closing sales price during the 30-day period immediately
preceding the date in question of a share of such stock on the Composite
Tape for New York Stock Exchange -- Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not listed
on any such exchange, as quoted in the National Association of
Securities Dealers, Inc. Automated Quotations System (National Market
System), or, if such stock is not included in such system, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association
of Securities Dealers, Inc. Automated Quotations System or any system
then in use, or, if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined in
good faith by a majority of Continuing Directors, and (B) in the case of
property other than cash or stock, the fair market value of such
property on the date in question as determined in good faith by a
majority of Continuing Directors.
(e) The Continuing Directors, by a majority vote, shall have the power
to determine for the purposes of this Article 5 on the basis of information
known to them (i) the number of Voting Shares beneficially owned by any
Person, (ii) whether a Person is an Affiliate or Associate of another,
(iii) whether a Person has an agreement, arrangement or understanding with
another as to the matters referred to in subparagraph 5(d)(iv), (iv)
whether the assets of the Corporation or any Subsidiary have an aggregate
fair market value of $5,000,000 or more, (v) whether the consideration
received for the issuance or transfer of securities by the Corporation or
any Subsidiary has an aggregate fair market value of $5,000,000 or more and
(vi) such other matters with respect to which a determination is necessary
or appropriate under this Article 5.
(f) Nothing contained in this Article 5 shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
A-4
27
6. Except as otherwise provided herein (and in addition to any other vote
that may be required by law, these Articles of Incorporation or the Bylaws),
following the closing of a Public Offering, the affirmative vote, in person or
by proxy, at any meeting called as provided in the Bylaws, of the holders of at
least 60% in interest of the Voting Shares of the Corporation issued and
outstanding held by Persons other than an Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder shall be required to amend,
alter or repeal Articles 2, 5, 6 or 7 of these Articles of Incorporation or
Section 4 of Article II or Section 2 of Article III of the Bylaws, or to adopt
any new provision inconsistent with such provisions of these Articles of
Incorporation or the Bylaws; provided, however, that if at the time of any such
proposed amendment, alteration, repeal or adoption, (a) there shall exist one or
more Interested Shareholders and at least a majority of the Continuing Directors
approve such proposed amendment, alteration, repeal or adoption, or (b) no such
Interested Shareholder exists, and a majority of the members of the Board of
Directors approve such proposed amendment, alteration, repeal or adoption, then
the affirmative vote, in person or by proxy, at any meeting called as provided
in the Bylaws, of the holders of a majority in interest of the issued and
outstanding Voting Shares of the Corporation shall be required to approve such
amendment, alteration, repeal or adoption. Pursuant to Section 55-10-20(a) of
the North Carolina General Statutes, the Board of Directors may adopt, amend or
repeal the Bylaws generally, including any Bylaw adopted, amended or repealed by
the shareholders of the Corporation.
7. The provisions of Articles 9 and 9A of Chapter 55 of the North Carolina
General Statutes shall not be applicable to the Corporation.
IN WITNESS WHEREOF, these Restated Articles of Incorporation are approved
by the shareholders of the Corporation and executed by the President and Chief
Executive Officer and the Secretary of the Corporation, this 27th day of July,
1999, and supersede and replace all Articles of Incorporation previously filed
on behalf of the Corporation and all amendments thereto.
David A. Norbury, President
and Chief Executive Officer
Powell T. Seymour, Secretary
A-5
28
EXHIBIT B
FORM OF
1999 STOCK INCENTIVE PLAN
OF
RF MICRO DEVICES, INC.
29
1999 STOCK INCENTIVE PLAN
OF
RF MICRO DEVICES, INC.
1. PURPOSE
The purpose of the 1999 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. (the "Corporation") and its related
corporations 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 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 stock awards ("restricted stock awards"), and restricted
units ("restricted units") to such participants. Incentive options and
nonqualified options shall be referred to herein collectively as "options."
Restricted stock awards and restricted units shall be referred to herein
collectively as "restricted 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 "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 "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) 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, and unless
authority is granted to the chief executive officer as provided in Section 2(c),
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 and agreements evidencing awards granted
under the Plan, to establish and 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 or vested shall become exercisable or vested 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 indemnification discretion to establish terms and
conditions of awards as the Administrator determines to be necessary or
appropriate to conform to the applicable requirements or practices of
jurisdictions outside of the United States.
30
(c) Notwithstanding Section 2(b), the Administrator may delegate to the
chief executive officer 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, to any
individual who, 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, (ii) is not deemed to be a covered employee (as
defined in Section 18(b) herein), and (iii) is otherwise eligible under Section
5. To the extent that the Administrator has delegated authority to grant awards
pursuant to this Section 2(c) to the chief executive officer, references to the
Administrator shall include references to such person, subject, however, to the
requirements of the Plan, Rule 16b-3, Section 162(m) of the Code and other
applicable law.
3. EFFECTIVE DATE
The effective date of the Plan shall be July 1, 1999 (the "Effective
Date"). Awards may be granted under the Plan on and after the effective date,
but no awards will be granted after June 30, 2009.
4. SHARES OF STOCK SUBJECT TO THE PLAN; AWARD LIMITATIONS
(a) Subject to adjustments as provided in this Section 4, the number of
shares of Common Stock that may be issued pursuant to awards shall be four
million (4,000,000) shares. Such shares shall be authorized but unissued shares
or shares purchased on the open market or by private purchase. The maximum
number of shares of Common Stock that may be issued under the Plan pursuant to
the grant of restricted awards shall not exceed 500,000 shares. No participant
may be granted awards in any 12-month period for more than 100,000 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) The Corporation hereby reserves sufficient authorized shares of Common
Stock to meet the grant of awards hereunder. Any shares subject to an award
which is subsequently forfeited, expires or is terminated may again be the
subject of an award granted under the Plan. To the extent that any shares of
Common Stock subject to an award are not delivered to a participant (or his
beneficiary) because the award is forfeited, canceled, settled in cash or used
to satisfy applicable tax withholding obligations, such shares shall not be
deemed to have been issued for purposes of determining the maximum number of
shares of Common Stock available for issuance under the Plan. If the purchase
price of an award granted under the Plan is satisfied by tendering shares of
Common Stock, only the number of shares issued net of the shares of Common Stock
tendered shall be deemed issued for purposes of determining the maximum number
of shares of Common Stock available for issuance under the Plan.
(c) 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 corporation, or if the Board of Directors of the Corporation
declares a stock dividend or stock split distributable in shares of Common
Stock, or if there is a similar change in the capital stock structure of the
Corporation or a related corporation 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 or to any provisions of this Plan as the Administrator deems equitable to
prevent dilution or enlargement of awards or as may be 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 corporation, (ii) a director of the Corporation or a related
corporation, or (iii) an independent contractor, consultant or advisor
(collectively, "independent contractors") providing services to the
Corporation or a related corporation. 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 corporation the legal and bona
fide relationship of employer and employee.
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(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) 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, reorganization or similar business
combination involving the Corporation or related corporation, the recipient
is otherwise eligible to receive the award and the terms of the award are
consistent with the Plan and applicable law, 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, upon such terms and at such times as the
Administrator shall determine. Both incentive options and nonqualified options
may be granted under the Plan. 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
agreement evidencing the grant of the option; provided, that (i) in the case of
an incentive option, the option price 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) and (ii) in no event shall the
option price per share of any option be less than the par value per share 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, if there is
no transaction on such date, then on the trading date nearest preceding the
date the option is granted 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 preceding the date the option
is granted 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
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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 stated in the
individual 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. Any option or portion thereof not exercised before expiration of
the option period shall terminate. The period or periods during which an
option may become exercisable shall be determined by the Administrator in a
manner consistent with the terms of the Plan.
(ii) An option may be exercised by giving written notice to the
Corporation at such place as the Corporation or its designee shall direct.
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 the payment of such purchase price. Unless the individual
option agreement provides otherwise, such payment shall be in the form of
(A) cash; (B) delivery (by either actual delivery or attestation) of shares
of Common Stock owned by the participant at the time of exercise and
acceptable to the Administrator; (C) shares of Common Stock withheld upon
exercise; (D) 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; or (E) a 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 an individual option agreement provides 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
corporation.
(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 an individual option agreement provides otherwise, if
the employment of a participant is terminated because of disability, or
if the participant dies while he is an employee, 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 (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.
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(D) Unless an individual option agreement provides 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
(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 an individual option agreement provides 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 this subparagraph (E)
and subparagraph (D), the participant's termination shall be for "cause"
if such termination results from the participant's (X) dishonesty; (Y)
refusal to perform his duties for the Corporation; or (Z) 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 shall have
authority, in its discretion, to extend the period during which an
option may be exercised; provided that, in the event that any such
extension shall cause an incentive option to be designated as a
nonqualified option, no such extension shall be made without the prior
written consent of the participant.
(iv) Unless an individual option agreement provides otherwise, an
option granted to a participant who was a director of the Corporation or a
related corporation 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 corporation (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 one year next
succeeding the termination date; 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 or extend the period
during which an option may be exercised, or both.
(v) Unless an individual option agreement provides otherwise, an
option granted to a participant who was an independent contractor of the
Corporation or a related corporation 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 corporation (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 (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 or extend the period
during which an option may be exercised, or both.
(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 unless and until certificates for such shares are delivered to
him
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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)(D) herein).
(e) Nontransferability of Options
(i) Incentive options shall not be transferable other than by will or
the laws of intestate succession. Nonqualified options shall not be
transferable 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.
(ii) If a participant is subject to Section 16 of the Exchange Act,
shares of Common Stock acquired upon exercise of an option may not, without
the consent of the Administrator, be disposed of by the participant until
the expiration of six months after the date the option was granted.
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 an optionee 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 key employee (a "freestanding SAR").
(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. Subject to the limitations of the Plan, upon the exercise of a
tandem SAR, the participant shall be entitled to receive from the Corporation,
for each share of Common Stock with respect to which the tandem 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 related option price
per share; provided, that the Administrator may establish a maximum value
payable for such SARs.
(c) Freestanding SARs: Unless an individual agreement provides otherwise,
the base price of a freestanding SAR shall be not less than 100% of the fair
market value of the Common Stock (as determined in accordance with Section
6(c)(ii) herein) on the date of grant of the freestanding SAR. Subject to the
limitations of the Plan, upon the exercise of a freestanding SAR, the
participant shall be entitled to receive from the Corporation, for each share of
Common Stock with respect to which the freestanding 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
freestanding SAR; provided, that the Administrator may establish a maximum value
payable for such SARs.
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(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 related 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
at such place as the Administrator or its designee shall direct. 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) 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; Election: 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 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. No
fractional shares of Common Stock will be issuable upon exercise of the SAR and,
unless otherwise provided in the applicable agreement, the participant will
receive cash in lieu of fractional shares.
(f) Limitations: The applicable SAR 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 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:
(i) SARs shall not be transferable other than by will or the laws of
intestate succession, except as may be permitted by the Administrator in a
manner consistent with the Securities Act. Except as may be permitted by
the preceding sentence, 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.
(ii) If the participant is subject to Section 16 of the Exchange Act,
shares of Common Stock acquired upon exercise of an SAR may not, without
the consent of the Administrator, be disposed of by the participant until
the expiration of six months after the date the SAR was granted.
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. A restricted award may consist of a
restricted stock award or a restricted unit, or both. 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, completion of the restriction period (or a combination of attainment
of performance objectives and completion of the restriction period), retirement,
B-7
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displacement, disability or 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 and determine
the extent to which such awards have been earned. Performance objectives may
vary from participant to participant and between groups of participants and
shall be based upon such Corporation, business unit and/or individual
performance factors and criteria as the Administrator in its sole discretion may
deem appropriate, including, but not limited to, sales goals, earnings per
share, return on equity, return on assets or total return to shareholders. The
Administrator shall have sole authority to determine whether and to what degree
restricted awards have been earned and are payable and to interpret the terms
and conditions of restricted awards and the provisions herein. The Administrator
shall also determine the form and terms of payment of 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 earned in whole or in
part, without any obligation to accelerate such date with respect to other
restricted awards.
(b) Forfeiture of Restricted Awards: If the employment or service of a
participant shall be terminated for any reason and the participant has not yet
earned all or part of a restricted award pursuant to the terms of the Plan and
the individual 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.
(c) Dividend and Voting Rights; Share Certificates: Unless an individual
agreement provides otherwise, (i) a participant shall have no dividend rights or
voting rights with respect to shares subject to a restricted award that has not
yet vested; and (ii) a certificate or certificates for shares representing a
restricted award payable in 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 after the shares subject to the award shall
be earned.
(d) Nontransferability:
(i) The recipient of a restricted award shall not sell, transfer,
assign, pledge or otherwise encumber shares subject to the award until all
conditions to vesting have been met.
(ii) Restricted awards shall not be transferable other than by will or
the laws of intestate succession. The designation of a beneficiary does not
constitute a transfer.
(iii) If a participant of a restricted award is subject to Section 16
of the Exchange Act, shares of Common Stock subject to such award may not,
without the consent of the Administrator, be sold or otherwise disposed of
within six months following the date of grant of such award.
9. WITHHOLDING
The Corporation shall withhold all required local, state and federal taxes
from any amount payable in cash with respect to an award. The Corporation shall
require any recipient of an award payable in shares of the Common Stock 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
Corporation may establish procedures to permit a recipient to satisfy such
obligation in whole or in part, and any other local, state or federal 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.
10. SECTION 16(B) COMPLIANCE
It is the general intent of the Corporation that transactions under the
Plan which are subject to Section 16 of the Exchange Act shall comply with Rule
16b-3 under the Exchange Act. 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
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subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other participants.
11. NO RIGHT OR OBLIGATION OF CONTINUED EMPLOYMENT
Nothing in the Plan shall confer upon the participant any right to continue
in the service of the Corporation or a related corporation as an employee,
director, or independent contractor or to interfere in any way with the right of
the Corporation or a related corporation to terminate the participant's
employment or service at any time. Except as otherwise provided in the Plan or
an individual agreement, awards granted under the Plan to employees of the
Corporation or a related corporation 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 corporation.
12. 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 corporation, including, without limitation, any
specific funds, assets or other property which the Corporation or any related
corporation, 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 corporation. 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) In no event shall any amounts accrued, distributable or payable under
the Plan be treated as compensation for the purpose of determining the amount of
contributions or benefits to which any person shall be entitled under any
retirement plan sponsored by the Corporation or a related corporation that is
intended to be a qualified plan within the meaning of Section 401(a) of the
Code.
13. AMENDMENT AND TERMINATION OF THE PLAN
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) such
amendment or termination of an award shall not, without the consent of a
recipient of an award, adversely affect the rights of the recipient with respect
to an outstanding award.
14. RESTRICTIONS ON SHARES
The Corporation may impose such restrictions on any 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 shares. 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 or 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.
15. 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.
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16. 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.
17. CHANGE OF CONTROL
(a) Notwithstanding any other provision of the Plan to the contrary, in the
event of a change of control (as defined in Section 17(b) 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 applicable to any restricted award shall be deemed to have expired,
and such restricted awards shall become fully vested and payable to the
fullest extent of the original grant of the applicable award.
(iii) Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting the
Corporation or a related corporation, 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 board of directors of 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 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 17(a)(iii), 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 corporation.
(b) 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 that is not a shareholder on the
effective date of the Plan 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, 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
B-10
39
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.)
18. CERTAIN DEFINITIONS
In addition to other terms defined in the Plan, the following terms shall
have the meaning indicated:
(a) "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 options, SARs, restricted awards
and any other awards conferred herein.
(b) "Covered employee" shall have the meaning given the term in
Section 162(m) of the Code or the regulations thereunder.
(c) "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death, or which has lasted or
can be expected to last for a continuous period of not less than twelve
months.
(d) "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.
(e) "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.
(f) "Related corporation" means any parent, subsidiary or predecessor
of the Corporation.
(g) "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 or the agreement relating to
such award.
(h) "Retirement" shall mean retirement in accordance with the
retirement policies and procedures established by the Corporation.
(i) "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 1999 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 day of , 1999.
RF MICRO DEVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
-----------------------------------
ATTEST:
- ---------------------------------------------------------
Secretary
[Corporate Seal]
B-11
40
APPENDIX A
PROXY
RF MICRO DEVICES, INC.
JULY 27, 1999 ANNUAL MEETING
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF RF MICRO DEVICES, INC.
The undersigned shareholder of RF Micro Devices, Inc., a North Carolina
corporation (the "Company"), appoints David A. Norbury and William A. Priddy,
Jr., or either of them, with full power to act alone, the true and lawful
attorneys-in-fact of the undersigned, with full power of substitution and
revocation, to vote all shares of stock of the Company which the undersigned is
entitled to vote at the annual meeting of shareholders of the Company to be held
at the Company's principal executive offices at 7625 Thorndike Road, Greensboro,
North Carolina on July 27, 1999 at 10:00 A.M., local time and at any adjournment
thereof, with all powers the undersigned would possess if personally present, as
follows:
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS OF THE UNDERSIGNED SHAREHOLDERS WHEN INSTRUCTIONS ARE GIVEN IN
ACCORDANCE WITH THE PROCEDURES DESCRIBED HEREIN AND THE ACCOMPANYING PROXY
STATEMENT. THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED HEREIN IF NO
INSTRUCTION TO THE CONTRARY IS INDICATED. IF ANY OTHER BUSINESS IS PRESENTED AT
THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS.
FOR ALL NOMINEES
LISTED (EXCEPT AS WITHHOLD
MARKED TO THE AUTHORITY TO VOTE
CONTRARY BELOW) FOR ALL NOMINEES
----------------- -----------------
1. Proposal to elect six directors of the Company for one-year [ ] [ ]
term expiring in 2000
David A. Norbury, William J. Pratt, Dr. Albert E. Paladino, Erik H. van der Kaay, Walter H. Wilkinson,
Jr., Terri D. Zinkiewicz
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN
THE FOLLOWING SPACE. IF AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE IS NOT WITHHELD, THIS PROXY
WILL BE VOTED IN FAVOR OF SUCH NOMINEE.)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
2. Proposal to amend and restate the Articles of Incorporation FOR AGAINST ABSTAIN
to increase the authorized common stock of the Company.
[ ] [ ] [ ]
3. Proposal to adopt the 1999 Stock Incentive Plan. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the appointment of Ernst & Young LLP as FOR AGAINST ABSTAIN
the Company's auditors for the fiscal year ending April 1,
2000. [ ] [ ] [ ]
5. Any other matter that may be submitted to a vote of FOR AGAINST ABSTAIN
shareholders at the Meeting.
[ ] [ ] [ ]
THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS ALL THAT SAID ATTORNEYS-IN-FACT,
OR EITHER OF THEM OR THEIR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF, AND ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE MEETING AND THE
PROXY STATEMENT ACCOMPANYING IT.
Dated this
-------------------------------------------------------
day of
-----------------------------------------------------------------,
1999.
----------------------------------
(SEAL)
----------------------------------
(SEAL)
[INSERT NAME AS IT APPEARS ON
SHAREHOLDER RECORDS.]
PLEASE INSERT DATE OF SIGNING.
SIGN EXACTLY AS NAME APPEARS AT
LEFT. WHERE STOCK IS ISSUED IN TWO
OR MORE NAMES, ALL MUST SIGN. IF
SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR, TRUSTEE
OR GUARDIAN, GIVE FULL TITLE AS
SUCH. A CORPORATION SHOULD SIGN BY
AN AUTHORIZED OFFICER AND AFFIX
SEAL.
(YOU ARE REQUESTED TO COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY.)