EXHIBIT 10.17
ZILOG, INC.
1998 LONG-TERM STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
ARTICLE 1. INTRODUCTION 1
ARTICLE 2. ADMINISTRATION 1
2.1 Committee Composition 1
2.2 Committee Responsibilities 1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS. 2
3.1 Basic Limitation 2
3.2 Additional Shares 2
3.3 Dividend Equivalents 2
ARTICLE 4. ELIGIBILITY 2
4.1 General Rules 2
4.2 Incentive Stock Options 2
ARTICLE 5. OPTIONS 3
5.1 Stock Option Agreement 3
5.2 Number of Shares 3
5.3 Exercise Price 3
5.4 Exercisability and Term 3
5.5 Effect of Change in Control 4
5.6 Modification or Assumption of Options. 4
ARTICLE 6. PAYMENT FOR OPTION SHARES 4
6.1 General Rule 4
6.2 Surrender of Stock 4
6.3 Exercise/Sale 4
6.4 Exercise/Pledge 5
6.5 Promissory Note 5
6.6 Other Forms of Payment 5
ARTICLE 7. STOCK APPRECIATION RIGHTS 5
7.1 SAR Agreement 5
7.2 Number of Shares 5
7.3 Exercise Price 5
7.4 Exercisability and Term 5
7.5 Effect of Change in Control 6
7.6 Exercise of SARs 6
7.7 Modification or Assumption of SARs. 6
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS 6
8.1 Time, Amount and Form of Awards 6
8.2 Payment for Awards 6
8.3 Vesting Conditions 6
8.4 Form and Time of Settlement of Stock Units 7
8.5 Death of Recipient 7
8.6 Creditors' Rights 7
ARTICLE 9. VOTING AND DIVIDEND RIGHTS 7
9.1 Restricted Shares 7
9.2 Stock Units 8
ARTICLE 10. PROTECTION AGAINST DILUTION 8
10.1 Adjustments 8
10.2 Reorganizations 8
ARTICLE 11. AWARDS UNDER OTHER PLANS 9
ARTICLE 12. LIMITATION ON RIGHTS 9
12.1 Retention Rights 9
12.2 Shareholders' Rights 9
12.3 Regulatory Requirements 9
ARTICLE 13. LIMITATION ON PAYMENTS 9
13.1 Basic Rule 9
13.2 Reduction of Payments 10
13.3 Overpayments and Underpayments 10
13.4 Related Corporations 11
ARTICLE 14. WITHHOLDING TAXES 11
14.1 General 11
14.2 Share Withholding 11
ARTICLE 15. ASSIGNMENT OR TRANSFER OF AWARDS 11
15.1 General 11
15.2 Trusts 12
ARTICLE 16. FUTURE OF THE PLAN 12
16.1 Term of the Plan 12
16.2 Amendment or Termination 12
ARTICLE 17. DEFINITIONS 12
ARTICLE 18. EXECUTION 15
ZILOG, INC. 1998 LONG-TERM STOCK INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on August 14, 1998, subject to
approval by the Company's shareholders. The Plan is effective August 14,
1998.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by (a) encouraging Key
Employees to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Key Employees with exceptional qualifications
and (c) linking Key Employees directly to shareholder interests through
increased stock ownership. The Plan seeks to achieve this purpose by
providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute incentive stock options or nonstatutory
stock options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with,
the laws of the State of California (except their choice-of-law
provisions).
ARTICLE 2. ADMINISTRATION.
2.1 Committee Composition. The Plan shall be administered by a
Committee appointed by the Board. Effective with the Company's initial
public offering, the Committee shall consist of two or more directors of
the Company who shall satisfy the requirements of Rule 16b-3 (or its
successor) under the Exchange Act with respect to the grant of Awards to
persons who are officers or directors of the Company under Section 16 of
the Exchange Act or the Board itself.
The Board may also appoint one or more separate committees of the Board,
each composed of one or more directors of the Company who need not
qualify under Rule 16b-3, who may administer the Plan with respect to Key
Employees who are not considered officers or directors of the Company
under Section 16 of the Exchange Act, may grant Awards under the Plan to
such Key Employees and may determine all terms of such Awards.
2.2 Committee Responsibilities. The Committee shall:
(a) select the Key Employees who are to receive Awards
under the Plan;
(b) determine the type, number, vesting requirements
and other features and conditions of such Awards;
(c) interpret the Plan; and
(d) make all other decisions relating to the operation
of the Plan.
The Committee may adopt such rules or guidelines as it deems appropriate
to implement the Plan. The Committee's determinations under the Plan
shall be final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 Basic Limitation. Common Shares issued pursuant to the Plan
shall be authorized but unissued shares or treasury shares. The
aggregate number of Common Shares reserved for award as Restricted
Shares, Stock Units, Options and SARs shall be limited to 2,500,000
Common Shares (after giving effect to the 2-for-1 stock split approved by
the Board of Directors on August 14, 1998) on a fully diluted basis. The
limitation of this Section 3.1 shall be subject to adjustment pursuant to
Article 10.
3.2 Additional Shares. If Stock Units, Options or SARs are
forfeited or if Options or SARs terminate for any other reason before
being exercised, then such Stock Units, Options or SARs shall again
become available for Awards under the Plan. If SARs are exercised, then
only the number of Common Shares (if any) actually issued in settlement
of such SARs shall reduce the number available under Section 3.1 and the
balance shall again become available for Awards under the Plan. If
Restricted Shares are forfeited before any dividends have been paid with
respect to such Restricted Shares, then such Restricted Shares shall
again become available for Awards under the Plan.
3.3 Dividend Equivalents. Any dividend equivalents distributed
under the Plan shall not be applied against the number of Restricted
Shares, Stock Units, Options or SARs available for Awards, whether or not
such dividend equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 General Rules. Only Key Employees (including, without
limitation, independent contractors who are not members of the Board)
shall be eligible for designation as Participants by the Committee.
4.2 Incentive Stock Options. Only Key Employees who are common-
law employees of the Company, a Parent or a Subsidiary shall be eligible
for the grant of ISOs. In addition, a Key Employee who owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries
shall not be eligible for the grant of an ISO unless the requirements set
forth in section 422(c)(5) of the Code are satisfied.
ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the
Plan shall be evidenced by a Stock Option Agreement between the Optionee
and the Company. Such Option shall be subject to all applicable terms of
the Plan and may be subject to any other terms that are not inconsistent
with the Plan. The Stock Option Agreement shall specify whether the
Option is an ISO or an NSO. The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical. A Stock
Option Agreement may provide that new Options will be granted
automatically to the Optionee when he or she exercises the prior Options.
5.2 Number of Shares. Each Stock Option Agreement shall specify
the number of Common Shares subject to the Option and shall provide for
the adjustment of such number in accordance with Article 10.
5.3 Exercise Price. Each Stock Option Agreement shall specify
the Exercise Price; provided that the Exercise Price under an ISO shall
in no event be less than one-hundred percent (100%) of the Fair Market
Value of a Common Share on the date of grant. In the case of an NSO, a
Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding. To
the extent required by applicable law, the exercise price will not be
less than 85% of the Fair Market Value of a Common Share on the date of
grant.
5.4 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. To the extent required by applicable law, Options shall
vest at least as rapidly as 20% annually over a five-year period. The
Stock Option Agreement shall also specify the term of the Option;
provided that the term of an ISO, and to the extent required by
applicable law a NSO, shall in no event exceed ten (10) years from the
date of grant. To the extent required by applicable law, Options shall
be exercisable for a period of six months following termination of
employment due to death or disability and 30 days following termination
of employment (other than terminations for cause, as defined in the
Company's personnel policies). A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death,
disability or retirement or other events and may provide for expiration
prior to the end of its term in the event of the termination of the
Optionee's service. Options may be awarded in combination with SARs, and
such an Award may provide that the Options will not be exercisable unless
the related SARs are forfeited. NSOs may also be awarded in combination
with Restricted Shares or Stock Units, and such an Award may provide that
the NSOs will not be exercisable unless the related Restricted Shares or
Stock Units are forfeited.
5.5 Effect of Change in Control. The Committee may determine, at
the time of granting an Option or thereafter, that such Option shall
become fully exercisable as to all Common Shares subject to such Option
in the event that a Change in Control occurs with respect to the Company.
If the Committee finds that there is a reasonable possibility that,
within the succeeding six months, a Change in Control will occur with
respect to the Company, then the Committee at its sole discretion may
determine that any or all outstanding Options shall become fully
exercisable as to all Common Shares subject to such Options.
5.6 Modification or Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume
outstanding options or may accept the cancellation of outstanding options
(whether granted by the Company or by another issuer) in return for the
grant of new options for the same or a different number of shares and at
the same or a different exercise price. The foregoing notwithstanding,
no modification of an Option shall, without the consent of the Optionee,
alter or impair his or her rights or obligations under such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 General Rule. The entire Exercise Price of Common Shares
issued upon exercise of Options shall be payable in cash at the time when
such Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan,
payment shall be made only pursuant to the express provisions
of the applicable Stock Option Agreement. The Stock Option
Agreement may specify that payment may be made in any form(s)
described in this Article 6.
(b) In the case of an NSO, the Committee may at any
time accept payment in any form(s) described in this Article
6.
6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made
with Common Shares which have already been owned by the Optionee for such
duration as shall be specified by the Committee. Such Common Shares
shall be valued at their Fair Market Value on the date when the new
Common Shares are purchased under the Plan.
6.3 Exercise/Sale. To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by
the Company) of an irrevocable direction to a securities broker approved
by the Company to sell Common Shares and to deliver all or part of the
sales proceeds to the Company in payment of all or part of the Exercise
Price and any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by
the Company) of an irrevocable direction to pledge Common Shares to a
securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.5 Promissory Note. To the extent that this Section 6.5 is
applicable, payment for all or any part of the Exercise Price may be made
with a full-recourse promissory note.
6.6 Other Forms of Payment. To the extent that this Section 6.6
is applicable, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 SAR Agreement. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such
SAR shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various SAR Agreements entered into under the Plan need
not be identical. SARs may be granted in consideration of a reduction in
the Optionee's other compensation.
7.2 Number of Shares. Each SAR Agreement shall specify the
number of Common Shares to which the SAR pertains and shall provide for
the adjustment of such number in accordance with Article 10.
7.3 Exercise Price. Each SAR Agreement shall specify the
Exercise Price. A SAR Agreement may specify an Exercise Price that
varies in accordance with a predetermined formula while the SAR is
outstanding.
7.4 Exercisability and Term. Each SAR Agreement shall specify
the date when all or any installment of the SAR is to become exercisable.
The SAR Agreement shall also specify the term of the SAR. A SAR
Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. SARs may also be awarded in
combination with Options, Restricted Shares or Stock Units, and such an
Award may provide that the SARs will not be exercisable unless the
related Options, Restricted Shares or Stock Units are forfeited. A SAR
may be included in an ISO only at the time of grant but may be included
in an NSO at the time of grant or at any subsequent time, but not later
than six months before the expiration of such NSO. A SAR granted under
the Plan may provide that it will be exercisable only in the event of a
Change in Control.
7.5 Effect of Change in Control. The Committee may determine, at
the time of granting a SAR or thereafter, that such SAR shall become
fully exercisable as to all Common Shares subject to such SAR in the
event that a Change in Control occurs with respect to the Company. If
the Committee finds that there is a reasonable possibility that, within
the succeeding six months, a Change in Control will occur with respect to
the Company, then the Committee at its sole discretion may determine that
any or all outstanding SARs shall become fully exercisable as to all
Common Shares subject to such SARs.
7.6 Exercise of SARs. If, on the date when a SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such
date but any portion of such SAR has not been exercised or surrendered,
then such SAR shall automatically be deemed to be exercised as of such
date with respect to such portion. Upon exercise of a SAR, the Optionee
(or any person having the right to exercise the SAR after his or her
death) shall receive from the Company (a) Common Shares, (b) cash or (c)
a combination of Common Shares and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of Common
Shares received upon exercise of SARs shall, in the aggregate, be equal
to the amount by which the Fair Market Value (on the date of surrender)
of the Common Shares subject to the SARs exceeds the Exercise Price.
7.7 Modification or Assumption of SARs. Within the limitations
of the Plan, the Committee may modify, extend or assume outstanding SARs
or may accept the cancellation of outstanding SARs (whether granted by
the Company or by another issuer) in return for the grant of new SARs for
the same or a different number of shares and at the same or a different
exercise price. The foregoing notwithstanding, no modification of a SAR
shall, without the consent of the Optionee, alter or impair his or her
rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 Time, Amount and Form of Awards. Awards under the Plan may
be granted in the form of Restricted Shares, in the form of Stock Units,
or in any combination of both. Restricted Shares or Stock Units may also
be awarded in combination with NSOs or SARs, and such an Award may
provide that the Restricted Shares or Stock Units will be forfeited in
the event that the related NSOs or SARs are exercised.
8.2 Payment for Awards. No cash consideration shall be required
of the recipients of Awards under this Article 8.
8.3 Vesting Conditions. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction
of the conditions specified in the Stock Award Agreement. A Stock Award
Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The
Committee may determine, at the time of making an Award or thereafter,
that such Award shall become fully vested in the event that a Change in
Control occurs with respect to the Company.
8.4 Form and Time of Settlement of Stock Units. Settlement of
vested Stock Units may be made in the form of (a) cash, (b) Common Shares
or (c) any combination of both. The actual number of Stock Units
eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without
limitation) a method based on the average Fair Market Value of Common
Shares over a series of trading days. Vested Stock Units may be settled
in a lump sum or in installments. The distribution may occur or commence
when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or it may be deferred to any later date. The
amount of a deferred distribution may be increased by an interest factor
or by dividend equivalents. Until an Award of Stock Units is settled,
the number of such Stock Units shall be subject to adjustment pursuant to
Article 10.
8.5 Death of Recipient. Any Stock Units Award that becomes
payable after the recipient's death shall be distributed to the
recipient's beneficiary or beneficiaries. Each recipient of a Stock
Units Award under the Plan shall designate one or more beneficiaries for
this purpose by filing the prescribed form with the Company. A
beneficiary designation may be changed by filing the prescribed form with
the Company at any time before the Award recipient's death. If no
beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's estate.
8.6 Creditors' Rights. A holder of Stock Units shall have no
rights other than those of a general creditor of the Company. Stock
Units represent an unfunded and unsecured obligation of the Company,
subject to the terms and conditions of the applicable Stock Award
Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS.
9.1 Restricted Shares. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as
the Company's other shareholders. A Stock Award Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends
received in additional Restricted Shares. Such additional Restricted
Shares shall be subject to the same conditions and restrictions as the
Award with respect to which the dividends were paid. Such additional
Restricted Shares shall not reduce the number of Common Shares available
under Article 3.
9.2 Stock Units. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with
an amount equal to all cash dividends paid on one Common Share while the
Stock Unit is outstanding. Dividend equivalents may be converted into
additional Stock Units. Settlement of dividend equivalents may be made
in the form of cash, in the form of Common Shares, or in a combination of
both. Prior to distribution, any dividend equivalents which are not paid
shall be subject to the same conditions and restrictions as the Stock
Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 Adjustments. In the event of a subdivision of the
outstanding Common Shares, a declaration of a dividend payable in Common
Shares, a declaration of a dividend payable in a form other than Common
Shares in an amount that has a material effect on the price of Common
Shares, a combination or consolidation of the outstanding Common Shares
(by reclassification or otherwise) into a lesser number of Common Shares,
a recapitalization, a spinoff or a similar occurrence, the Committee
shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of:
(a) the number of Options, SARs, Restricted Shares and
Stock Units available for future Awards under Article 3;
(b) the number of Stock Units included in any prior
Award which has not yet been settled;
(c) the number of Common Shares covered by each
outstanding Option and SAR; or
(d) the Exercise Price under each outstanding Option
and SAR.
Except as provided in this Article 10, a Participant shall have no rights
by reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class.
10.2 Reorganizations. In the event that the Company is a party
to a merger or other reorganization, outstanding Options, SARs,
Restricted Shares and Stock Units shall be subject to the agreement of
merger or reorganization. Such agreement may provide, without
limitation, for the assumption of outstanding Awards by the surviving
corporation or its parent, for their continuation by the Company (if the
Company is a surviving corporation), for accelerated vesting and
accelerated expiration, or for settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Common Shares issued under this
Plan. Such Common Shares shall be treated for all purposes under the
Plan like Common Shares issued in settlement of Stock Units and shall,
when issued, reduce the number of Common Shares available under
Article 3.
ARTICLE 12. LIMITATION ON RIGHTS.
12.1 Retention Rights. Neither the Plan nor any Award granted
under the Plan shall be deemed to give any individual a right to remain
an employee, consultant or director of the Company, a Parent, a
Subsidiary or an Affiliate. The Company and its Parents and Subsidiaries
reserve the right to terminate the service of any employee, consultant or
director at any time, and for any reason, subject to applicable laws, the
Company's certificate of incorporation and by-laws and a written
employment agreement (if any).
12.2 Shareholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a shareholder with respect to
any Common Shares covered by his or her Award prior to the issuance of a
stock certificate for such Common Shares. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to
the date when such certificate is issued, except as expressly provided in
Articles 8, 9 and 10.
12.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares
under the Plan shall be subject to all applicable laws, rules and
regulations and such approval by any regulatory body as may be required.
The Company reserves the right to restrict, in whole or in part, the
delivery of Common Shares pursuant to any Award prior to the satisfaction
of all legal requirements relating to the issuance of such Common Shares,
to their registration, qualification or listing or to an exemption from
registration, qualification or listing.
ARTICLE 13. LIMITATION ON PAYMENTS.
13.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or
transfer by the Company to or for the benefit of a Participant, whether
paid or payable (or transferred or transferable) pursuant to the terms of
this Plan or otherwise (a "Payment"), would be nondeductible by the
Company for federal income tax purposes because of the provisions
concerning "excess parachute payments" in section 280G of the Code, then
the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the
time of making an Award under this Plan or at any time thereafter, may
specify in writing that such Award shall not be so reduced and shall not
be subject to this Article 13. For purposes of this Article 13, the
"Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of section 280G of the
Code.
13.2 Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of
the Code, then the Company shall promptly give the Participant notice to
that effect and a copy of the detailed calculation thereof and of the
Reduced Amount, and the Participant may then elect, in his or her sole
discretion, which and how much of the Payments shall be eliminated or
reduced (as long as after such election the aggregate present value of
the Payments equals the Reduced Amount) and shall advise the Company in
writing of his or her election within ten (10) days of receipt of notice.
If no such election is made by the Participant within such ten (10)-day
period, then the Company may elect which and how much of the Payments
shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and
shall notify the Participant promptly of such election. For purposes of
this Article 13, present value shall be determined in accordance with
section 280G(d)(4) of the Code. All determinations made by the Auditors
under this Article 13 shall be binding upon the Company and the
Participant and shall be made within sixty (60) days of the date when a
Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company
shall pay or transfer to or for the benefit of the Participant such
amounts as are then due to him or her under the Plan and shall promptly
pay or transfer to or for the benefit of the Participant in the future
such amounts as become due to him or her under the Plan.
13.3 Overpayments and Underpayments. As a result of uncertainty
in the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments
will have been made by the Company which should not have been made (an
"Overpayment") or that additional Payments which will not have been made
by the Company could have been made (an "Underpayment"), consistent in
each case with the calculation of the Reduced Amount hereunder. In the
event that the Auditors, based upon the assertion of a deficiency by the
Internal Revenue Service against the Company or the Participant which the
Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all
purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided
in section 7872(f)(2) of the Code; provided, however, that no amount
shall be payable by the Participant to the Company if and to the extent
that such payment would not reduce the amount which is subject to
taxation under section 4999 of the Code. In the event that the Auditors
determine that an Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Company to or for the benefit of
the Participant, together with interest at the applicable federal rate
provided in section 7872(f)(2) of the Code.
13.4 Related Corporations. For purposes of this Article 13, the
term "Company" shall include affiliated corporations to the extent
determined by the Auditors in accordance with section 280G(d)(5) of the
Code.
ARTICLE 14. WITHHOLDING TAXES.
14.1 General. To the extent required by applicable federal,
state, local or foreign law, a Participant or his or her successor shall
make arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Common Shares or make any cash
payment under the Plan until such obligations are satisfied.
14.2 Share Withholding. The Committee may permit a Participant
to satisfy all or part of his or her withholding or income tax
obligations by having the Company withhold all or a portion of any Common
Shares that otherwise would be issued to him or her or by surrendering
all or a portion of any Common Shares that he or she previously acquired.
Such Common Shares shall be valued at their Fair Market Value on the date
when taxes otherwise would be withheld in cash. Any payment of taxes by
assigning Common Shares to the Company may be subject to restrictions,
including any restrictions required by rules of the Securities and
Exchange Commission.
ARTICLE 15. ASSIGNMENT OR TRANSFER OF AWARDS.
15.1 General. Except as provided in Article 14, or in a stock
option agreement, or as required by applicable law, an Award granted
under the Plan shall not be anticipated, assigned, attached, garnished,
optioned, transferred or made subject to any creditor's process, whether
voluntarily, involuntarily or by operation of law. An Option or SAR may
be exercised during the lifetime of the Optionee only by him or her or by
his or her guardian or legal representative. Any act in violation of
this Article 15 shall be void. However, this Article 15 shall not
preclude a Participant from designating a beneficiary who will receive
any outstanding Awards in the event of the Participant's death, nor shall
it preclude a transfer of Awards by will or by the laws of descent and
distribution.
15.2 Trusts. Neither this Article 15 nor any other provision of
the Plan shall preclude a Participant from transferring or assigning
Restricted Shares or Stock Units to (a) the trustee of a trust that is
revocable by such Participant alone, both at the time of the transfer or
assignment and at all times thereafter prior to such Participant's death,
or (b) the trustee of any other trust to the extent approved in advance
by the Committee in writing. A transfer or assignment of Restricted
Shares or Stock Units from such trustee to any person other than such
Participant shall be permitted only to the extent approved in advance by
the Committee in writing, and Restricted Shares or Stock Units held by
such trustee shall be subject to all of the conditions and restrictions
set forth in the Plan and in the applicable Stock Award Agreement, as if
such trustee were a party to such Agreement.
ARTICLE 16. FUTURE OF THE PLAN.
16.1 Term of the Plan. The Plan, as set forth herein, shall
become effective on August 14, 1998, subject to approval by the Company's
shareholders and no Awards shall be exercisable until such approval is
obtained. To the extent required by applicable law, the Plan shall
terminate on August 13, 2008, except that the Plan may be terminated
under Section 16.2; provided, however, that no ISO may be granted after
August 13, 2008.
16.2 Amendment or Termination. The Board may, at any time and
for any reason, amend or terminate the Plan. An amendment of the Plan
shall be subject to the approval of the Company's shareholders only to
the extent required by applicable laws, regulations or rules. No Awards
shall be granted under the Plan after the termination thereof. The
termination of the Plan, or any amendment thereof, shall not affect any
Award previously granted under the Plan.
ARTICLE 17. DEFINITIONS.
17.1 "Affiliate" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of such
entity.
17.2 "Award" means any award of an Option, a SAR, a Restricted
Share or a Stock Unit under the Plan.
17.3 "Board" means the Company's Board of Directors, as
constituted from time to time.
17.4 "Change in Control" means the occurrence of any "person" (as
defined in Section 13(d) of the Exchange Act), other than the Company,
its Parent or Subsidiary or employee benefit plan or trust maintained by
the Company, its Parent or Subsidiary, becoming the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly,
of more than 25% of the Common Shares of the Company outstanding at such
time, without the prior approval of the Board.
17.5 "Code" means the Internal Revenue Code of 1986, as amended.
17.6 "Committee" means a committee of the Board, as described in
Article 2.
17.7 "Common Share" means one share of the common stock of the
Company.
17.8 "Company" means Zilog, Inc., a Delaware corporation.
17.9 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
17.10 "Exercise Price," in the case of an Option, means the amount
for which one Common Share may be purchased upon exercise of such Option,
as specified in the applicable Stock Option Agreement. "Exercise Price,"
in the case of a SAR, means an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common
Share in determining the amount payable upon exercise of such SAR.
17.11 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the
date in question but were not classified as a national market
issue, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices
quoted by the NASDAQ system for such date;
(b) If the Common Shares were traded over-the-counter on the
date in question and were classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction
price quoted by the NASDAQ system for such date;
(c) If the Common Shares were traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite transactions
report for such date; and
(d) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Western Edition of
The Wall Street Journal. Such determination shall be conclusive and
binding on all persons.
17.12 "ISO" means an incentive stock option described in section
422(b) of the Code.
17.13 "Key Employee" means (a) a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate or (b) a consultant or
adviser who provides services to the Company, a Parent, a Subsidiary or
an Affiliate as an independent contractor.
17.14 "NSO" means an employee stock option not described in
section 422 of the Code.
17.15 "Option" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.
17.16 "Optionee" means an individual or estate who holds an Option
or SAR.
17.17 "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. A corporation that
attains the status of a Parent on a date after the adoption of the Plan
shall be considered a Parent commencing as of such date.
17.18 "Participant" means an individual or estate who holds an
Award.
17.19 "Plan" means this Zilog, Inc. 1998 Long-Term Stock Incentive
Plan, as it may be amended from time to time.
17.20 "Restricted Share" means a Common Share awarded under the
Plan.
17.21 "SAR" means a stock appreciation right granted under the
Plan.
17.22 "Share" means one share of the common stock of the Company.
17.23 "SAR Agreement" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions
pertaining to his or her SAR.
17.24 "Stock Award Agreement" means the agreement between the
Company and the recipient of a Restricted Share or Stock Unit which
contains the terms, conditions and restrictions pertaining to such
Restricted Share or Stock Unit.
17.25 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her Option.
17.26 "Stock Unit" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
17.27 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each
of the corporations other than the last corporation in the unbroken chain
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain. A corporation that attains the status of a Subsidiary on a
date after the adoption of the Plan shall be considered a Subsidiary
commencing as of such date.
ARTICLE 18. EXECUTION.
To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to affix the corporate name and seal
hereto.
ZILOG, INC.
By ________________________________
