SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
LSI LOGIC CORPORATION
(Name of Registrant as Specified in its Charter)
----------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
LSI LOGIC CORPORATION
----------------
Notice of Annual Meeting of Stockholders
May 1, 2003
----------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of LSI Logic
Corporation (the "Company"), a Delaware corporation, will be held on Thursday,
May 1, 2003, at 9:00 a.m., local time, at the Fairmont Hotel located at 170
South Market Street, San Jose, CA 95113, for the following purposes:
1. To elect eight directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's Amended 1995 Director Option
Plan to increase the number of shares of common stock reserved for
issuance thereunder by 1,000,000 and to extend the term of the Plan to
April 30, 2013.
3. To approve the adoption of the 2003 Equity Incentive Plan.
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for its 2003 fiscal year.
5. To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on March 7, 2003, are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
date, sign and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she returned a proxy.
Sincerely,
David G. Pursel
Corporate Secretary
Milpitas, California
March 31, 2003
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
mark, sign and date the enclosed proxy card as promptly as possible and return
it in the enclosed envelope (to which no postage need be affixed if mailed in
the United States).
LSI LOGIC CORPORATION
----------------
PROXY STATEMENT
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of LSI Logic Corporation
(referred to as "LSI Logic" or the "Company"), a Delaware corporation, for use
at the Annual Meeting of Stockholders to be held on Thursday, May 1, 2003, at
9:00 a.m., local time, or at any adjournment(s) thereof, for the purposes set
forth in this proxy statement and in the accompanying Notice of Annual Meeting
of Stockholders. The annual meeting will be held at the Fairmont Hotel located
at 170 South Market Street, San Jose, CA 95113. The address of the Company's
principal executive offices is 1621 Barber Lane, Milpitas, California 95035, and
the Company's telephone number is (408) 433-8000.
These proxy solicitation materials were mailed on or about March 31, 2003,
to all stockholders entitled to vote at the meeting.
Record Date; Shares Outstanding
Stockholders of record at the close of business on the record date of March
7, 2003 (the "Record Date") are entitled to notice of and to vote at the
meeting. As of the Record Date, 375,208,474 shares of the Company's common
stock, $0.01 par value, were issued and outstanding. On the Record Date, the
closing price of the Company's common stock on the New York Stock Exchange was
$4.18 per share.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Corporate Secretary of
the Company at the Company's principal executive offices a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
meeting and voting in person.
Voting and Solicitation
On all matters other than the election of directors, each share has one
vote. See "ELECTION OF DIRECTORS -- REQUIRED VOTE." The cost of soliciting
proxies will be borne by the Company. The Company has retained the services of
Georgeson & Company, Inc. to aid in the solicitation of proxies from brokers,
bank nominees and other institutional owners. The Company estimates that it will
pay Georgeson & Company, Inc. a fee not to exceed $10,000 for its services and
will reimburse it for certain out-of-pocket expenses estimated to be $10,000. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may be solicited by
some of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone.
Householding
In an effort to reduce printing costs and postage fees, the Company has
adopted a practice approved by the Securities and Exchange Commission ("SEC")
called "householding." Under this practice, stockholders who have the same
address and last name and do not participate in electronic delivery of proxy
materials will receive only one copy of the Company's proxy materials unless one
or more of these stockholders notifies the
1
Company that they wish to continue receiving individual copies. Stockholders who
participate in householding will continue to receive separate proxy cards.
If you share an address with another stockholder and received only one set
of proxy materials and would like to request a separate copy of these materials,
please send your request to: LSI Logic Corporation, 1621 Barber Lane, MS AD-115,
Milpitas, CA 95035, Attn: Investor Relations, or visit the Company's website at
www.lsilogic.com. You may also contact the Company if you received multiple
copies of the proxy materials and would prefer to receive a single copy in the
future.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the annual meeting
is a majority of the votes eligible to be cast by holders of shares of common
stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as votes cast
at the annual meeting with respect to that matter (the "Votes Cast").
The Company intends to count abstentions for purposes of determining both
the presence and absence of a quorum and the total number of Votes Cast with
respect to any matter (other than the election of directors). Broker non-votes
will be counted for purposes of determining the presence or absence of a quorum
for the transaction of business, but will not be considered to be Votes Cast
with respect to the particular proposal on which the broker has expressly not
voted. Accordingly, broker non-votes will not affect the outcome of the voting
on a proposal that requires a majority of the Votes Cast (such as the approval
of a plan amendment). However, with respect to a proposal that requires a
majority of the outstanding shares (such as an amendment to the certificate of
incorporation), a broker non-vote has the same effect as a vote against the
proposal.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2004 annual meeting and that stockholders
desire to have included in the Company's proxy materials relating to such
meeting must be received by the Company no later than December 2, 2003, which is
120 calendar days prior to the anniversary of this year's mail date, and must be
in compliance with applicable laws and regulations in order to be considered for
possible inclusion in the proxy statement and form of proxy for that meeting.
If a stockholder wishes to present a proposal at the Company's annual
meeting in the year 2004 and the proposal is not intended to be included in the
Company's proxy statement relating to that meeting, the stockholder must give
advance notice to the Company prior to the deadline for such meeting determined
in accordance with the Company's Bylaws (the "Bylaw Deadline"), as described
below in the section entitled "Other Matters." If a stockholder gives notice of
such a proposal after the Bylaw Deadline, the stockholder will not be permitted
to present the proposal to the stockholders for a vote at the meeting.
The SEC rules also establish a different deadline for submission of
stockholder proposals that are not intended to be included in the Company's
proxy statement with respect to discretionary voting (the "Discretionary Vote
Deadline"). The Discretionary Vote Deadline for the year 2004 annual meeting is
February 15, 2004 (45 calendar days prior to the anniversary of the mailing date
of this proxy statement). If a stockholder gives notice of such a proposal after
the Discretionary Vote Deadline, the Company's proxy holders will be allowed to
use their discretionary voting authority to vote against the stockholder
proposal when and if the proposal is raised at the Company's year 2004 annual
meeting. Because the Bylaw Deadline is not capable of being determined until the
Company publicly announces the date for its next annual meeting, it is possible
that the Bylaw Deadline may occur after the Discretionary Vote Deadline. In such
a case, a proposal received after the Discretionary Vote Deadline but before the
Bylaw Deadline would be eligible to be presented at next year's annual meeting
and the Company believes that its proxy holders would be allowed to use the
discretionary authority granted by the proxy card to vote against the proposal
at the meeting without including any disclosure of the proposal in the proxy
statement relating to such meeting.
2
The Company has not been notified by any stockholder of his or her intent
to present a stockholder proposal from the floor at this year's annual meeting.
The enclosed proxy card grants the proxy holders discretionary authority to vote
on any matter properly brought before the annual meeting, including any
stockholder proposals received between the date of this proxy statement and the
Bylaw Deadline for this year's annual meeting, which is April 7, 2003 (the
seventh day after this proxy statement is mailed).
SECURITY OWNERSHIP
Security Ownership
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of the Record Date, by all
persons known to the Company to be beneficial owners of more than five percent
of the Company's common stock, by all directors and executive officers named in
the Summary Compensation Table on page 16 of this proxy statement and by all
current directors and executive officers as a group.
Number Approximate
of Shares Percentage
Name Beneficially Owned Owned
- ---- ------------------- -----------
Citigroup (1) ......................................... 19,585,217 5.2%
Wilfred J. Corrigan (2) ............................... 14,679,470 3.9%
T.Z. Chu (3) .......................................... 236,900 *
Malcolm R. Currie (4) ................................. 291,500 *
James H. Keyes (5) .................................... 230,000 *
R. Douglas Norby (6) .................................. 72,456 *
Matthew J. O'Rourke (7) ............................... 97,500 *
Gregorio Reyes (8) .................................... 42,500 *
Larry W. Sonsini (9) .................................. 65,589 *
Thomas Georgens (10) .................................. 556,052 *
Bryon Look (11) ....................................... 583,915 *
W. Richard Marz (12) .................................. 950,660 *
Joseph M. Zelayeta (13) ............................... 1,211,500 *
All current directors and executive officers as a group
(18 persons (14)) .................................... 21,086,603 5.6%
- ------------
* Less than 1%
(1) As reported in Schedule 13G filed February 14, 2003, with the Commission by
Citigroup Inc. ("Citigroup") and Salomon Smith Barney Holdings Inc. ("SSB
Holdings"). SSB Holdings, which is a partially owned subsidiary of
Citigroup, has shared voting power and shared dispositive power over
19,257,164 shares. Citigroup holds shared voting power and shared
dispositive power over the entire 19,585,217 shares. The address for SSB
Holdings is 388 Greenwich Street, New York, New York 10013 and the address
for Citigroup is 399 Park Avenue, New York, New York 10043.
(2) Includes options held by Mr. Corrigan to purchase 4,700,000 shares, which
are presently exercisable or will become exercisable within 60 days of the
Record Date.
(3) Includes options held by Mr. Chu to purchase 135,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(4) Includes options held by Dr. Currie to purchase 135,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(5) Includes options held by Mr. Keyes to purchase 135,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(6) Includes options held by Mr. Norby to purchase 50,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
3
(7) Includes options held by Mr. O'Rourke to purchase 97,500 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(8) Includes options held by Mr. Reyes to purchase 32,500 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(9) Includes options held by Mr. Sonsini to purchase 65,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(10) Includes options held by Mr. Georgens to purchase 525,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(11) Includes options held by Mr. Look to purchase 560,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(12) Includes options held by Mr. Marz to purchase 930,000 shares, which are
presently exercisable or will become exercisable within 60 days of the
Record Date.
(13) Includes options held by Mr. Zelayeta to purchase 1,052,500 shares, which
are presently exercisable or will become exercisable within 60 days of the
Record Date.
(14) Includes options to purchase an aggregate of 10,412,250 shares held by 11
executive officers and seven outside directors, which are presently
exercisable or will become exercisable within 60 days of the Record Date.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of eight directors is to be elected at the meeting. All directors
are elected annually and serve a one-year term until the next annual meeting or
until his successor has been elected and qualified. The Nominating Committee of
the Board of Directors selected, and the Board of Directors accepted the eight
nominees named below for election to the Board. All nominees are currently
directors of the Company.
The Board of Directors expects all nominees named below to be available to
serve as directors if elected. If any nominee of the Company is unable or
declines to serve as a director at the time of the annual meeting, the proxies
will be voted for a nominee designated by the current Board of Directors to fill
the vacancy. If additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in accordance with
cumulative voting so as to elect as many of the nominees listed below as
possible. In such event, the proxy holders will determine the specific nominees
for whom to vote.
The names of the nominees for election to the Board of Directors, and the
experience and background of each, are set forth below.
Director
Name of Nominee Age Principal Occupation Since
- --------------- --- ---------------------------------------------------- --------
Wilfred J. Corrigan ......... 65 Chairman of the Board of Directors and Chief 1981
Executive Officer of the Company
T.Z. Chu .................... 68 Consultant; Retired President of Hoefer Pharmacia 1992
Biotech, Inc.
Malcolm R. Currie ........... 76 Chief Executive Officer, Currie Technologies, Inc. 1992
James H. Keyes .............. 62 Chairman, Johnson Controls, Inc. 1983
R. Douglas Norby ............ 67 Private Investor 1993
Matthew J. O'Rourke ......... 64 Consultant; Retired Partner, Price Waterhouse LLP 1999
Gregorio Reyes .............. 62 Management Consultant; Former Chairman and 2001
Chief Executive Officer, Sunward Technologies, Inc.
Larry W. Sonsini ............ 62 Chairman and Chief Executive Officer, Wilson 2000
Sonsini Goodrich & Rosati, P.C.
4
There are no family relationships between or among any directors or
executive officers of the Company.
Mr. Corrigan, a founder of the Company, has served as Chief Executive
Officer and a director of the Company since the Company was founded in January
1981. Mr. Corrigan serves on the Board of Directors of FEI Company, a
semiconductor equipment and solutions provider, and also serves on the boards of
directors of several privately held corporations.
Mr. Chu serves as a consultant to various public companies or private
companies and a consultant or director to a number of private companies and
non-profit organizations. Mr. Chu served as President of Hoefer Pharmacia
Biotech, Inc., a biotechnology company, from March 1995 until his retirement in
February 1997.
Dr. Currie has served as Chief Executive Officer of Currie Technologies,
Inc., a manufacturer of electric propulsion systems for bicycles and other light
vehicles, since February 1997. He presently serves on the Board of Directors for
Investment Company of America, ENOVA Systems, Inc., Regal One Corp., Inamed CNP
and Innovative Micro Technologies, and as a member (former Chairman) of the
Board of Trustees of the University of Southern California.
Mr. Keyes has served as Chairman of Johnson Controls, Inc. since October
2002. He served as Chairman and CEO from January 1993 to October 2002. Johnson
Controls, Inc. is a provider of automotive systems, batteries and facility
management and control. Mr. Keyes also serves on the Boards of Directors of
Pitney Bowes Inc., Navistar International Corporation and the Chicago Federal
Reserve Board.
Mr. Norby has been a private investor since March 2003. He served as Vice
President and Chief Financial Officer of Zambeel, Inc., a storage company, from
March 2002 until February 2003. He served as Chief Financial Officer of Novalux,
Inc., an optoelectronics company, from December 2000 to March 2002. Prior to his
tenure with Novalux, Inc., Mr. Norby served as Executive Vice President and
Chief Financial Officer of the Company from November 1996 to November 2000.
Mr. O'Rourke was a partner with the accounting firm Price Waterhouse LLP
from 1972 until his retirement in June 1996. Since his retirement, Mr. O'Rourke
has been engaged as an independent business consultant. Mr. O'Rourke is also a
member of the Board of Directors of Read-Rite Corporation and Infonet Services
Corporation.
Mr. Reyes has been a private investor and management consultant since 1994.
Mr. Reyes serves on the Board of Directors of ARC International (listed on the
London Stock Exchange) and also serves as a director for several privately held
companies.
Mr. Sonsini has been a partner of the law firm of Wilson Sonsini Goodrich &
Rosati, P.C., since 1969 and has served as its Chairman and Chief Executive
Officer for more than the past five years. Mr. Sonsini serves on the Board of
Directors of the following public companies: Brocade Communications Systems,
Inc., Echelon Corporation, Lattice Semiconductor Corporation and PIXAR, Inc.
Board Meetings and Committees
The Board of Directors of the Company held a total of eight meetings during
the fiscal year ended December 31, 2002. The Board of Directors has an Audit
Committee, a Compensation Committee and a Nominating Committee. The Audit,
Compensation and Nominating Committees consist solely of non-employee
independent directors. All committees operate under charters approved by the
Board of Directors. The members and chairmanship of the committees are appointed
by the Board of Directors annually.
The Audit Committee, which consists of Dr. Currie (who serves as its
chairman), Mr. Chu, Mr. Keyes and Mr. O'Rourke, held nine meetings during the
last fiscal year. The Audit Committee reviews the Company's accounting policies
and practices, internal controls, financial reporting practices, contingent
risks and risk management strategies and plans. The Audit Committee selects and
retains the Company's independent accountants to serve the following year to
examine the Company's accounts, and reviews the independence of the independent
accountants as a factor in making these determinations. The Audit Committee
meets alone with the Company's management, independent accountants and the
director of the
5
Company's Audit Department, and grants them free access to the Audit Committee
at any time. All members of the Audit Committee are financially literate, as
such qualification is interpreted by the Company's Board in its business
judgment.
The Compensation Committee, which consists of Mr. Keyes (who serves as its
chairman), Mr. Chu, Dr. Currie, Mr. Reyes and Mr. O'Rourke, held five meetings
during the last fiscal year. At least annually, the Compensation Committee
reviews the goals of the Company's executive officer and director compensation
plans, and amends or recommends that the Board of Directors amend these goals if
the Committee deems it appropriate. The Compensation Committee evaluates and
reviews, at least annually, the performance of the Chairman and Chief Executive
Officer and other executive officers in light of those goals. Based upon such an
evaluation, the Compensation Committee establishes the Company's overall
executive compensation strategy, and, in particular, determines the compensation
structure for the Chairman and Chief Executive Officer and other executive
officers of the Company. The Committee approves any incentive, bonus or similar
plans of the Company based upon the recommendations submitted by the Chairman
and Chief Executive Officer and the Vice President of Human Resources. The
Committee reviews and approves the Company's stock option and other stock
incentive award programs and reviews, as needed (with an independent
consultant), executive compensation matters and significant issues that relate
to executive compensation.
The Nominating Committee, which consists of Mr. Chu (who serves as its
chairman), Dr. Currie, Mr. O'Rourke and Mr. Reyes, held one meeting during the
last fiscal year. The Nominating Committee provides assistance to the Board of
Directors in recommending to the Board of Directors individuals qualified to
serve as directors of the Company and on committees of the Board of Directors,
recommending to the Board of Directors the director nominees for the next annual
meeting of stockholders, advising the Board of Directors with respect to Board
composition, procedures and whether to form or dissolve committees, advising the
Board of Directors with respect to the corporate governance principles
applicable to the Company and developing criteria for oversight of the
evaluation of the Board of Directors and management. The Nominating Committee
will consider nominees to the Board of Directors suggested by stockholders. Any
recommendations should be directed to the Corporate Secretary at the Company's
principal executive offices.
During the fiscal year ended December 31, 2002, all incumbent directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and meetings of the committees of the Board on which they served,
except for Mr. Reyes, who attended 67% of the aggregate number of meetings of
the Board of Directors and the Compensation Committee, of which he is a member.
Compensation of Directors
Members of the Board of Directors who are not employees of the Company
receive an annual fee of $25,000 paid on a prorated basis and $1,500 for each
regular Board meeting they attend, plus reimbursement of expenses for attendance
at regular Board and committee meetings. Special telephonic meetings are held
occasionally for which additional compensation is not paid. The Company's
Amended 1995 Director Option Plan, as adopted by the Board of Directors and
approved by the stockholders, provides for the grant of non-statutory stock
options to non-employee directors of the Company. Under a non-discretionary
formula approved by the stockholders, each non-employee director is granted an
initial option to purchase 30,000 shares of common stock on the date on which he
or she first becomes a director. In addition, on April 1 of each year, each
non-employee director is automatically granted a subsequent option to purchase
25,000 shares of common stock of the Company, if on the date of grant he or she
has served on the Board of Directors for at least six months. The vesting
schedule for initial options granted under the Amended 1995 Director Option Plan
is set at 25% on each of the first four anniversaries of the grant date.
Subsequent option grants become exercisable in full six months after the date of
grant. Options may be exercised only while the optionee is a director of the
Company, within 12 months after death or within three months after the optionee
ceases to serve as a director of the Company, but in no event after the ten-year
term of the option has expired. As of the Record Date, a total of 1,000,000
shares have been reserved for issuance under the 1995 Amended Director Option
Plan, of which 695,000 shares are subject to outstanding options, 15,000 shares
have been issued upon exercise of options, and 290,000 shares remain available
for grant. During fiscal 2002, an option
6
to purchase 25,000 shares was granted to each of Directors Chu, Currie, Keyes,
Norby, O'Rourke, Reyes and Sonsini having a weighted average exercise price of
$17.35 per share.
Required Vote
Directors shall be elected by a plurality vote. The eight nominees for
director receiving the highest number of affirmative votes of the shares
entitled to be voted for them shall be elected as directors. Votes against,
votes withheld and broker non-votes have no legal effect on the election of
directors due to the fact that such elections are by a plurality.
Every stockholder voting in the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected (eight) multiplied by the number of votes to which
the stockholder's shares are entitled, or may distribute the stockholder's votes
on the same principle among as many candidates as the stockholder thinks fit,
provided that votes cannot be cast for more than eight candidates. However, no
stockholder shall be entitled to cumulate votes for a candidate unless the
candidate's name has been properly placed in nomination in accordance with the
Company's Bylaws prior to the meeting, and the stockholder, or any other
stockholder, has given notice at the meeting prior to the voting of the
stockholder's intention to cumulate votes. The proxy holders will exercise
discretionary authority to cumulate votes in the event that additional persons
are nominated for election as directors.
Under the Company's Bylaws, in order for stockholder nominees for director
to be deemed properly placed in nomination, notice must be delivered to the
Corporate Secretary of the Company at the principal executive offices of the
Company no less than 60 days nor more than 90 days prior to the annual meeting;
provided, however, if less than 65 days notice of the date of the annual meeting
has been given to stockholders, notice by the stockholder to be timely must be
delivered to the Company not later than the close of business on the seventh day
following the day on which such notice of the annual meeting was mailed. The
stockholder's notice must set forth: (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) the name and address of the stockholder
as they appear on the Company's books, or the name of the beneficial holder or
other party on whose behalf the nomination is made; and (c) the class and number
of shares of the Company owned by the stockholder or beneficial holder or other
party on whose behalf the nomination is made.
Board Recommendation
The Board of Directors unanimously recommends a vote "FOR" the proposed
slate of directors for the current year.
7
PROPOSAL TWO
AMENDMENT TO THE 1995 AMENDED DIRECTOR OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER AND TO EXTEND THE TERM OF THE PLAN
General
The Amended 1995 Director Option Plan ("DOP") was adopted by the Board of
Directors and approved by the stockholders in May 1995, and a total of 250,000
shares of common stock were initially reserved for issuance thereunder.
Two-for-one common stock splits in 1995 and 2000 increased the aggregate number
of shares authorized under the DOP to 1,000,000.
As of the Record Date, 695,000 shares of common stock are subject to
outstanding options, 15,000 shares have been issued upon exercise of options,
and 290,000 shares remain available for future grant. The Company will grant a
substantial portion of the 290,000 remaining shares of common stock on April 1,
2003 (the date on which each non-employee director is automatically granted an
option to purchase 25,000 shares of common stock), leaving an inadequate number
of shares available for issuance thereafter.
Proposed Amendment to the DOP
Stockholder approval is hereby sought for an amendment approved by the
Board of Directors on March 14, 2003, to increase the number of shares of common
stock reserved for issuance under the DOP by 1,000,000 and to extend the term of
the DOP. If the proposed amendment is approved, the total number of shares of
common stock reserved since the inception of the DOP for issuance will be
2,000,000 and the DOP will terminate on April 30, 2013. The Company believes
that the ability to grant options to non-employee directors is crucial in order
to attract the best available personnel for service as directors, to provide
additional incentive to non-employee directors and to encourage their continued
service.
Required Vote
The affirmative vote of a majority of the Votes Cast at the annual meeting
will be required to approve PROPOSAL TWO.
Summary of DOP
The essential features of the DOP are outlined below.
Purpose
The purposes of the DOP are to attract and retain the best available
personnel for service as directors of the Company and to provide additional
incentive to non-employee directors.
Administration
The DOP is designed to work automatically and without administration.
However, to the extent administration is necessary, it is provided by the Board
of Directors of the Company. Members of the Board of Directors receive no
additional compensation for their services in connection with the administration
of the DOP.
Eligibility
The DOP provides for the grant of nonstatutory stock options to
non-employee directors of the Company. Each non-employee director is granted an
option to purchase 30,000 shares of common stock on the date on which he or she
first becomes a non-employee director. In addition, on April 1 of each year,
each non-employee director is automatically granted an option to purchase 25,000
shares of common stock of the Company, if on such date he or she has served on
the Board of Directors for at least six months. The options fully vest six
months after the date of grant. The DOP provides for neither a maximum nor a
minimum
8
number of option shares that may be granted to any one non-employee director,
but does provide for the number of shares that may be included in any grant and
the method of making a grant.
Of the eight seats currently on the Board of Directors of the Company,
seven are occupied by non-employee directors, each of whom is eligible to
participate in the Plan.
Terms of Options
Options granted under the DOP have a term of ten years. Each option is
evidenced by a stock option agreement between the Company and the director to
whom such option is granted and is subject to the following additional terms and
conditions.
(a) Exercise of the Option. A non-employee director's initial option grants
become exercisable cumulatively at the rate of 25% of the shares subject to the
option on each of the first four anniversaries of the date of grant. Subsequent
option grants become exercisable in full six months after the date of grant. An
option is exercised by giving written notice of exercise to the Company
specifying the number of full shares of common stock to be purchased and
tendering payment to the Company of the purchase price. Payment for shares
issued upon exercise of an option may consist of any of the following, or any
combination of them: (i) cash, (ii) check, (iii) other shares (which, in the
case of shares acquired upon exercise of an option, shall have been owned by the
optionee for more than six months on the date of surrender and have a fair
market value on the date of surrender equal to the aggregate exercise price of
the shares as to the options shall be exercised), (iv) provided it does not
result in a compensation charge to the Company, delivery of an irrevocable
written election to have the Company withhold shares having a fair market value
on the date of exercise equal to the aggregate exercise price of the shares
being exercised, including the amount required to be withheld, if any, to
satisfy federal, state, and local withholding tax requirements, (v) delivery of
a properly executed exercise notice that shall require delivery of the sale or
loan proceeds required to pay the exercise price, (vi) any other consideration
or method of payment permitted by law or (vii) any combination of the foregoing
methods of payment.
(b) Option Price. The exercise price of each option is the fair market
value of the stock covered by the option, calculated on the grant date. The
Board of Directors determines such fair market value based upon the closing
price of the common stock on the New York Stock Exchange on the date of grant.
If the date of grant is not a trading day, the price shall be determined as of
the next trading day immediately following the date of grant.
(c) Termination of Status as a Director. The DOP provides that if there is
any break in continuous service of an optionee as a director (other than as a
result of death or total and permanent disability), the optionee may exercise
his or her options to the extent otherwise exercisable under the DOP, but only
within three months after he or she ceases to be a director. Notwithstanding the
foregoing, in no event may an option be exercised after its ten-year term has
expired.
(d) Death. If an optionee should die while serving as a director of the
Company, the optionee's estate or a person who acquired the right to exercise
the option by bequest or inheritance may exercise his or her options to the
extent otherwise exercisable under the DOP, but only within 12 months following
the date of the optionee's death. Notwithstanding the foregoing, in no event may
an option be exercised after its ten-year term has expired.
(e) Disability. If an Optionee's continuous service as a director
terminates as a result of total and permanent disability, the optionee may
exercise his or her options to the extent otherwise exercisable under the DOP,
but only within 12 months following the date he or she ceases to be a director.
Notwithstanding the foregoing, in no event may an option be exercised after its
ten-year term has expired.
(f) Non-transferability of Options. An option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or the laws of descent or distribution and may be exercised during the
lifetime of the optionee only by the optionee.
9
Adjustment Upon Changes in Capitalization and Other Events
Subject to any required action by the stockholders of the Company, the
number of shares covered by each outstanding option, the number of shares that
have been authorized for issuance under the DOP but as to which no options have
yet been granted, as well as the price per share covered by each such
outstanding option, and the number of shares issuable on exercise of options
previously granted pursuant to the automatic grant provisions of the DOP shall
be proportionately adjusted for any increase or decrease in the number of issued
shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the common stock, or any other increase or
decrease in the number of issued shares effected without receipt of
consideration by the Company (excluding conversion of any convertible
securities). In the event of the proposed dissolution or liquidation of the
Company, to the extent that an option has not been previously exercised, it
shall terminate immediately prior to the consummation of such proposed action.
Amendment and Termination
The Board of Directors may at any time amend, alter, suspend or discontinue
the DOP; provided, however, that the DOP may not be amended more than once every
six months, other than to comply with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder. In
addition, the Company shall obtain stockholder approval of any amendment to the
DOP to the extent necessary and desirable to comply with Rule 16b-3 under the
Securities Exchange Act of 1934. No action by the Board of Directors or
stockholders, however, may alter or impair any option previously granted under
the DOP without the consent of the optionee. In any event, the DOP is currently
scheduled to terminate in 2005. If the proposed amendment is approved, the DOP
will terminate on April 30, 2013.
Certain United States Federal Income Tax Information
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the DOP, does not purport to be complete and does not discuss the
income tax laws of any municipality, state or foreign country in which an
optionee may reside.
Options granted under the DOP are nonstatutory options ("NSOs"). An
optionee will not recognize any taxable income at the time he or she is granted
an NSO. However, upon the exercise of an NSO, the optionee will recognize
ordinary income measured by the excess of the then fair market value of the
shares over the option exercise price. Upon disposition of such shares by the
optionee, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated as
capital gain (or loss). The Company will be entitled to a tax deduction in the
same amount as the ordinary income recognized by the optionee with respect to
shares acquired upon exercise of an NSO.
Participation in the DOP
The grant of options under the DOP to non-employee directors is subject to
the terms of the DOP and can only be determined at the time of election or
appointment to the Board of Directors and on the first day of April of each year
thereafter. Accordingly, future awards are not determinable. No executive
officers or employees are eligible to participate in the DOP. During the last
fiscal year, a total of 175,000 stock options were granted to the seven
non-employee directors having a weighted average exercise price of $17.35 per
share.
Board Recommendation
The Board of Directors recommends a vote "FOR" the approval of the
amendment to the Amended 1995 Director Option Plan. Unless you indicate
otherwise, your proxy will vote "FOR" the proposal.
10
PROPOSAL THREE
ADOPTION OF THE 2003 EQUITY INCENTIVE PLAN
General
The Board of Directors adopted the 2003 Equity Incentive Plan (the "Plan")
in March 2003. In light of anticipated changes in accounting and regulatory
requirements, the Company is proposing a plan requiring stockholder approval
that allows more flexibility if and when option expensing is required and is
available for broad-based participation. The Company seeks to preserve its
ability to offer a competitive compensation program. A total of 11,000,000
shares have been reserved for issuance under the Plan. Stockholder approval is
hereby sought to approve the Plan and the number of shares that have been
reserved for issuance under the Plan.
Required Vote
The affirmative vote of the majority of the Votes Cast at the annual
meeting will be required to approve PROPOSAL THREE.
Summary of the Plan
The essential features of the Plan are outlined below.
Purpose
The Plan is intended to attract, motivate and retain employees of the
Company and its affiliates, as defined below. The Plan also is designed to
encourage stock ownership by participants, thereby aligning their interests with
those of the Company's stockholders and to permit the payment of compensation
that qualifies as performance-based compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Administration
The Plan shall be administered by a committee (the "Committee"). The
Committee shall consist of at least two directors who shall be appointed from
time to time by, and shall serve at the pleasure of, the Board of Directors. The
Committee shall be comprised solely of directors who are both (a) "non-employee
directors" under Rule 16b-3, and (b) "outside directors" under Section 162(m) of
the Code. Members of the Committee receive no additional compensation for their
services in connection with the administration of the Plan. Subject to the terms
of the Plan, the Committee has the sole discretion to determine the employees
who shall be granted awards, the size and types of such awards and the terms and
conditions of such awards. The Committee may delegate its authority to grant and
administer awards to a separate committee appointed by the Committee, but only
the Committee can make awards to participants who are executive officers of the
Company.
Eligibility
Any person who is an employee of the Company or its affiliates is eligible
to participate in the Plan. An affiliate means any corporation or any other
entity (including, but not limited to, partnerships and joint ventures)
controlling, controlled by, or under common control with the Company. As of the
Record Date, there were a total of 5,388 employees who were eligible to
participate in the Plan.
Reserved Shares
A total of 11,000,000 shares will be reserved under the Plan. If an award
expires or is cancelled without having been fully exercised or vested, the
unvested or cancelled shares generally will be returned to the available pool of
shares reserved for issuance under the Plan. Also, if the Company experiences a
stock dividend, reorganization or other change in its capital structure, the
Committee has discretion to adjust the number of shares available for issuance
under the Plan, the outstanding awards and the per-person limits on awards, as
appropriate to reflect the stock dividend or other change.
11
Stock Options
The Plan provides for the grant of both non-qualified stock options and
incentive stock options ("ISOs"). The Committee fixes the term of each option at
the time of the grant, generally at ten years from the date of the grant, or
such term as set forth in an award agreement. The Committee also determines the
vesting schedule for each option grant. The Committee's current practice is to
grant options that vest 25% on each of the first four anniversaries of the date
of grant (assuming continued employment).
The exercise price for each option may not be less than 100% of the fair
market value of a share of common stock on the date of the option grant (or not
less than 110% of such fair market value in the case of grants of ISOs to 10%
stockholders). During any fiscal year, no participant shall be granted options
covering more than 2,000,000 shares.
The exercise price of options granted under the Plan, including applicable
tax withholding, if any, must be paid in full at the time of exercise. The
method of payment is determined by the Committee, and may be in cash, cash
equivalent, other shares of common stock or any other means as is considered
legal consideration for the shares and is permitted under the Delaware General
Corporation Law.
Without stockholder approval, the Committee may not reprice or otherwise
lower the exercise price of options previously granted (except as required to
reflect stock dividends or other similar events).
The Committee has discretion to determine the length of time an option may
be exercised after termination of employment and termination of service due to
death and disability. No ISO may be exercised more than three months after a
participant's termination of service for any reason other than death or
disability. No ISO may be exercised more than one year after a participant's
termination of service on account of death or disability, unless the award
agreement and the Committee permit later exercise.
Substituted Options
In the event that the Company consummates a transaction described in
Section 424(a) of the Code (e.g., the acquisition of property or stock from an
unrelated corporation), persons who become employees on account of such a
transaction may be granted options in substitution for options granted by their
former employer. If such substitute options are granted, the Committee may
determine that such options will have an exercise price less than 100% of the
fair market value of the shares on the date of grant.
Restricted Stock
The Plan also provides for the issuance of restricted stock awards.
Restricted stock awards will vest in accordance with terms and conditions
established by the Committee. The Committee will determine the number of shares
of restricted stock granted to any employee. No participant may be granted more
than 500,000 shares of restricted stock in any year.
In determining whether an award of restricted stock should be made, and/or
the vesting schedule for an award, the Committee may impose whatever conditions
to vesting as it determines to be appropriate. For purposes of qualifying awards
of restricted stock as performance-based compensation under Section 162(m) of
the Code, the Committee may choose to require achievement of one or more of the
following targets: (a) cash flow, (b) earnings per share, (c) profit after tax,
(d) profit before tax, (e) return on capital, (f) return on equity, (g) return
on sales, (h) revenue and (i) total shareholder return.
Amendment and Termination of the Plan
The Committee may amend, alter, suspend or discontinue the Plan at any
time, but such amendment, alteration, suspension or discontinuation may not
impair the rights of any participant in the Plan without the participant's
consent. In addition, without further stockholder approval, no ISO may be
granted under the Plan after March 19, 2013.
12
Participation in the Plan
The number of awards that an employee may receive under the Plan is in the
discretion of the Committee and therefore cannot be determined in advance. The
following table sets forth (a) the aggregate number of shares subject to options
granted during the last fiscal year under the Company's other option plans and
(b) the weighted average per share exercise price of such options.
Weighted
Number of Average Per
Options Share
Granted Exercise Price
Name of Individual or Identity of Group and Position (#) ($/sh)
- ---------------------------------------------------- --------- --------------
Wilfred J. Corrigan .................................................. 0 N/A
Thomas Georgens ...................................................... 100,000 $16.50
Bryon Look ........................................................... 0 N/A
W. Richard Marz ...................................................... 300,000 $16.50
Joseph Zelayeta ...................................................... 150,000 $16.50
All executive officers, as a group (11 persons) ...................... 880,000 $14.72
All directors who are not executive officers, as a group (1) ......... 175,000 $17.35
All employees who are not executive officers, as a group ............. 7,369,660 $14.08
- ------------
(1) Non-employees directors are issued options under the Amended 1995 Director
Option Plan.
Certain United States Federal Income Tax Information
A recipient of a stock option will not have taxable income upon the grant
of the option. For options other than ISOs, the participant will recognize
ordinary income on the date of exercise measured by the excess of the then fair
market value of the shares over the option exercise price. Any gain or loss
recognized upon any later disposition of the shares generally will be capital
gain income.
Purchase of shares upon exercise of an ISO option will not result in any
taxable income to the participant, except for purposes of the alternative
minimum tax. Gain or loss recognized by the participant on a later sale or other
disposition will either be long-term capital gain or loss or ordinary income
depending upon whether the participant holds the shares transferred upon the
exercise for a specified period. Any ordinary income recognized will be in the
amount, if any, by which the lesser of the fair market value of such shares on
the date of exercise or the amount realized from the sale exceeds the aggregate
option exercise price.
Unless the participant elects to be taxed at the time of receipt of
restricted stock, the participant will not have taxable income upon the receipt
of the award, but upon vesting will recognize ordinary income equal to the
excess of the fair market value of the shares at the time of vesting over the
price paid for the restricted stock.
At the discretion of the Committee, the Plan allows a participant to
satisfy tax withholding requirements under federal and state tax laws in
connection with the exercise or receipt of an award by electing to have shares
of common stock withheld, or by delivering to the Company already-owned shares,
having a fair market value equal to the amount required to be withheld.
The Company will be entitled to a tax deduction in connection with an award
under the Plan only in an amount equal to the ordinary income realized by the
participant and at the time the participant recognizes such income. In addition,
Section 162(m) of the Code contains special rules regarding the federal income
tax deductibility of compensation paid to the Company's Chief Executive Officer
and to each of the other four most highly compensated executive officers. The
general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed
$1,000,000. However, the Company can preserve the deductibility of certain
compensation in excess of $1,000,000 if it complies with conditions imposed by
the rules, including the establishment of a maximum number of shares with
respect to which awards may be granted to any one employee during one year, and,
if for restricted stock, if the Plan sets forth performance goals that must be
achieved prior to payment of the awards. The Plan has been designed to permit
the Committee to
13
grant awards that satisfy the requirements of Section 162(m), thereby permitting
the Company to continue to receive a federal income tax deduction in connection
with such awards.
Board Recommendation
The Board of Directors recommends a vote "FOR" approval of the 2003 Equity
Incentive Plan. Unless you indicate otherwise, your proxy will vote "FOR" the
proposal.
EQUITY COMPENSATION PLAN INFORMATION
Equity Compensation Plan Information
As of December 31, 2002
(a) (b) (c)
Number of securities
remaining available for
future issuance under
Number of securities to Weighted-average equity compensation
be issued upon exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
Plan category warrants and rights warrants and rights column (a))
- ------------- -------------------------- -------------------- -----------------------
Equity compensation plans approved by
security holders (1) ................ 31,324,443 $18.05 45,510,234
Equity compensation plans not approved
by security holders (2) ............. 25,740,150 $18.47 35,207,671
---------- ------ ----------
Total ............................. 57,064,593 $18.24 80,717,905
========== ====== ==========
- ------------
(1) Equity compensation plans approved by security holders include the
following:
(i) The Amended and Restated Employee Stock Purchase Plan ("US ESPP"),
under which rights are granted to LSI Logic employees in the United
States to purchase shares of common stock at 85% of the lesser of
the fair market value of such shares at the beginning of a 12-month
offering period or the end of each six-month purchase period within
such an offering period. There are 15,483,636 shares remaining
available for future issuance under this plan. The US ESPP includes
an annual replenishment calculated as 1.15% of the Company's common
stock issued and outstanding at the fiscal year end less the number
of shares available for future grants under the US ESPP.
(ii) The 1991 Equity Incentive Plan, under which the Company may grant
stock options to employees, officers and consultants, with an
exercise price that is no less than the fair market value of the
stock on the date of grant. The term of each option is determined by
the Board of Directors and is generally ten years. Options generally
vest in annual increments of 25% per year commencing one year from
the date of grant.
(iii) The 1995 Amended Director Option Plan (excluding the shares for
which stockholder approval is being sought at this annual meeting)
under which new directors receive an initial grant of 30,000 options
to purchase shares of common stock and directors receive subsequent
automatic grants of 25,000 options to purchase shares of common
stock each year thereafter. The initial grants vest in annual
increments of 25% per year, commencing one year from the date of
grant. Subsequent option grants become exercisable in full six
months after the grant date. The exercise price of the options
granted is equal to the fair market value of the stock on the date
of grant.
(2) Equity compensation plans not approved by security holders include the
following:
(i) An aggregate of 10,401,017 options with a weighted-average exercise
price of $12.93 per share are outstanding that were assumed in
acquisitions. No further options may be granted under these assumed
plans.
14
(ii) A total of 316,042 shares of common stock are reserved under the
2001 Supplemental Stock Issuance Plan, of which 152,922 shares
remain available for future issuance. Shares of common stock may be
issued under this plan pursuant to share right awards, which entitle
the recipients to receive those shares upon the satisfaction of the
following service requirements: 20% of the shares subject to an
award will be issued upon completion of three months of continuous
service measured from the award date, an additional 30% of the
shares will be issued upon completion of 12 months of continuous
service measured from the award date and the remaining 50% of the
shares will be issued upon completion of 24 months of continuous
service measured from the award date.
(iii) The 1999 Nonstatutory Stock Option Plan, under which the Company may
grant stock options to its employees, excluding officers, with an
exercise price that is no less than the fair market value of the
stock on the date of grant. The term of each option is determined by
the Board of Directors and is generally ten years. Options generally
vest in annual increments of 25% per year commencing one year from
the date of grant.
(iv) The International Employee Stock Purchase Plan, under which rights
are granted to LSI Logic employees (excluding executive officers)
outside of the United States to purchase shares of common stock at
85% of the lesser of the fair market value of such shares at the
beginning of a 12-month offering period or the end of each six-month
purchase period within such an offering period. There are 1,412,567
shares remaining available for future issuance under this plan.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the consolidated financial statements of the Company for
its 2003 fiscal year and recommends that the stockholders vote for ratification
of such appointment. If there is a negative vote on such ratification, the Audit
Committee will reconsider its selection, but the Audit Committee has the
ultimate authority to retain and terminate auditors. PricewaterhouseCoopers LLP
(or its predecessor) has audited the Company's consolidated financial statements
since the fiscal year ended December 31, 1981. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the annual meeting with
the opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
Board Recommendation
The Board of Directors recommends a vote "FOR" ratification of the
appointment of PricewaterhouseCoopers LLP as the independent accountants for the
2003 fiscal year. Unless you indicate otherwise, your proxy will vote "FOR" the
proposal.
15
EXECUTIVE COMPENSATION
Summary of Compensation
The following table shows, as to (i) the Chief Executive Officer and (ii)
each of the four other most highly compensated executive officers who were
serving as such at fiscal year end and whose salary plus bonus exceeded $100,000
during fiscal year ended December 31, 2002 (all persons listed in the table are
collectively referred to as the "Named Executive Officers"), information
concerning all reportable compensation awarded to, earned by or paid to each for
services to the Company in all capacities during 2002, as well as such
compensation for each such individual for the previous two fiscal years (if such
person was an executive officer during any part of such previous fiscal year).
SUMMARY COMPENSATION TABLE
Long-Term
Compensation(2)
Awards
---------------
Annual Compensation Securities All Other
--------------------------- Underlying Compensation
Name and Principal Position Year Salary ($)(1) Bonus ($) Options (#) ($)(3)
- --------------------------- ---- ------------- --------- --------------- ------------
Wilfred J. Corrigan ......... 2002 793,858 0 0 5,544
Chairman and Chief 2001 793,858 0 1,500,000 5,544
Executive Officer 2000 848,478 1,200,000 0 5,544
Thomas Georgens ............. 2002 323,090 210,000 100,000 840
Executive Vice President 2001 323,090 0 150,000 840
Storage Systems 2000 319,048 325,000 250,000 840
Bryon Look (4) .............. 2002 323,090 122,500 0 1,260
Executive Vice President and 2001 323,090 0 200,000 1,260
Chief Financial Officer 2000 254,642 265,000 450,000 1,260
W. Richard Marz ............. 2002 360,000 58,500 300,000 3,612
Executive Vice President 2001 360,000 0 275,000 3,612
Communications and ASIC 2000 386,156 300,000 75,000 3,612
Technology
Joseph Zelayeta ............. 2002 383,082 103,750 150,000 3,612
Executive Vice President 2001 383,082 0 300,000 3,612
Worldwide Operations 2000 409,618 300,000 200,000 1,932
- ------------
(1) This amount reflects a ten percent voluntary reduction in pay taken by the
Named Executive Officers from March 6, 2001, until September 30, 2002. The
reduction in pay was reversed effective October 1, 2002, at which point the
base salaries of the Named Executive Officers were reinstated to their
previous levels.
(2) The Company has not granted any stock appreciation rights, restricted stock
awards or long-term incentive plan awards to executive officers.
(3) "All Other Compensation" for 2002 consists solely of group life insurance.
(4) Mr. Look was named an executive officer of the Company in November 2000.
16
Change-in-Control and Employment Agreements
The Company has entered into change-in-control agreements with each of the
Named Executive Officers, except Mr. Corrigan, to help ensure the continued
services of management to the Company. Mr. Corrigan's employment agreement dated
September 2001 is discussed in this proxy statement in the section entitled "CEO
Employment Agreement," below.
For purposes of the change-in-control agreements made with the Named
Executive Officers, benefits are payable only upon a change-in-control of the
Company, which is deemed to have occurred in the event of (1) the consummation
by the Company of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent more than 50% of the total voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; (2) the approval by the
shareholders of the Company of a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets or (3) any person becoming the beneficial owner,
directly or indirectly, of securities of the Company representing 50% or more of
the total voting power represented by the Company's then outstanding voting
securities.
Under the change-in-control agreements, if the executive officer's
employment is terminated involuntarily at any time within 12 months after a
change of control, the executive officer will receive a lump sum payment equal
to the sum of two years' base salary plus 200% of the executive officer's target
bonus for the year in which the change of control occurs, and continued
health-care benefits during the two years following the termination. In
addition, the vesting and exercisability of all options that were granted at
least six months prior to the change of control shall be automatically
accelerated and fully vested and exercisable at the date of the involuntary
termination. These agreements shall terminate in November 2003, unless a change
of control occurs, in which case, the agreements shall terminate upon the date
that all obligations of the parties have been satisfied.
CEO Employment Agreement
In September 2001, the Company entered into an employment agreement (the
"Agreement") with Wilfred J. Corrigan, the Company's Chairman of the Board and
Chief Executive Officer ("CEO"). The Agreement provides for Mr. Corrigan to
continue to serve as CEO and Chairman of the Company's Board of Directors, and
further provides for an annual base salary as determined by the Board and an
annual bonus based on performance goals determined by the Compensation Committee
of the Board.
If the Company terminates Mr. Corrigan's employment other than for cause,
or his employment terminates as a result of death or disability, Mr. Corrigan
will receive 36 months base salary, 300% of his target bonus for the immediate
year, 24 months of health, dental and vision benefits, 18 months of life
insurance benefits and vesting of unexpired options granted in November 1999,
April 2001 and after September 2001. With respect to each such option, Mr.
Corrigan will have the full term of each option to exercise the vested part of
the option. An additional payment will be made to Mr. Corrigan in order to
offset the effect of any federal excise taxes on payments made under the
Agreement. If Mr. Corrigan voluntarily terminates his employment as CEO for any
reason other than death or disability and the Company does not ask him to remain
as the employee Chairman of the Board, Mr. Corrigan will receive all of the
payments and benefits described above. If Mr. Corrigan voluntarily resigns for
any reason other than death or disability and the Company asks Mr. Corrigan to
remain as the employee Chairman of the Board and he agrees to do so, Mr.
Corrigan will receive the payments and benefits describe above except for the
accelerated option vesting. Instead, unexpired options from grants after
September 2001 and from the two option grants made in November 1999 and April
2001, respectively, will be converted to a monthly vesting schedule such that
all such options will vest within 36 months of the resignation date. If Mr.
Corrigan is terminated for cause or if he voluntarily resigns and does not
remain as the employee Chairman of the Board following a Company request to do
so, he will not receive any of the payments or benefits described above and
instead, will receive only salary and other benefits that accrued prior to his
termination of employment or as may be required by law.
17
Stock Option Grants and Exercises
The following tables set forth information with respect to the stock
options granted to the Named Executive Officers under the Company's stock option
plans during the fiscal year ended December 31, 2002, the options exercised by
such Named Executive Officers during such fiscal year and the options held by
the Named Executive Officers at December 31, 2002.
The Option Grants Table sets forth hypothetical gains or "option spreads"
for the options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the SEC. Each gain is based on an arbitrarily
assumed annualized rate of compound appreciation of the market price of 5% or
10% from the date the option was granted to the end of the option term and does
not represent the Company's projection of future stock price performance. Actual
gains, if any, on option exercises are dependent on the future performance of
the Company's common stock and overall market conditions.
OPTION (1) GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term(4)
Options Employees in Price Expiration ----------------------------
Name Granted (#)(2) Fiscal Year(3) ($/share) Date 5%($) 10%($)
- ---- -------------- -------------- --------- ---------- ------------- -------------
Wilfred J. Corrigan ......... 0 N/A N/A N/A N/A N/A
Thomas Georgens ............. 100,000 1.2 $16.50 2/14/12 $1,037,676 $2,629,675
Bryon Look .................. 0 N/A N/A N/A N/A N/A
W. Richard Marz ............. 300,000 3.6 $16.50 2/14/12 3,113,028 7,889,025
Joseph M. Zelayeta .......... 150,000 1.8 $16.50 2/14/12 1,556,514 3,944,513
- ------------
(1) The Company has not granted any stock appreciation rights.
(2) All options shown in the table were granted under the 1991 Equity Incentive
Plan. The material terms of the options are as follows: (a) The exercise
price of the options is the fair market value of the common stock as of the
date of grant; (b) The options vest cumulatively in equal 25% increments on
each of the first four anniversaries of the date of grant; (c) To the
extent unexercised, the options lapse after ten years; (d) The options are
non-transferable and are only exercisable during the period of employment
of the optionee (or within 90 days following termination of employment),
subject to limited exceptions in the cases of certain terminations, death
or permanent disability of the optionee. These options are subject to
acceleration of exercisability in certain events. See "Change-in-Control
and Employment Agreements" above.
(3) Based on options granted to all employees in 2002 to purchase an aggregate
of 8,249,660 shares.
(4) These assumed rates of annual appreciation are specified by the SEC and do
not represent the Company's estimate of future stock prices.
18
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value(1) of Unexercised
Unexercised Options In-the-Money Options
Shares at Fiscal Year End (#) at Fiscal Year End ($)
Acquired on Value --------------------------- ---------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Wilfred J. Corrigan ......... 0 0 4,325,000 1,375,000 0 0
Thomas Georgens ............. 0 0 412,500 400,000 0 0
Bryon Look .................. 0 0 535,000 405,000 0 0
W. Richard Marz ............. 0 0 786,250 581,250 0 0
Joseph M. Zelayeta .......... 88,000 $888,100 930,000 550,000 $136,600 0
- ------------
(1) Value of unexercised options is based on the difference between the fair
market value of Company's common stock of $5.77 per share as of December
31, 2002 (the last day of the last completed fiscal year), and the exercise
price of the unexercised in-the-money options.
Certain Transactions
Mr. Larry W. Sonsini, a director of the Company, is Chairman and Chief
Executive Officer of Wilson Sonsini Goodrich & Rosati, P.C., a law firm that
performed legal services for the Company during fiscal year 2002 and that is
expected to perform legal services for the Company in the future.
BOARD COMPENSATION COMMITTEE REPORT ON CEO AND OTHER
EXECUTIVE OFFICER COMPENSATION FOR LSI LOGIC CORPORATION
Overview and Philosophy
The Compensation Committee of the Board of Directors (the "Compensation
Committee") establishes the overall executive compensation strategies of the
Company and approves compensation elements for the chief executive officer and
other executive officers. The Compensation Committee periodically reviews its
approach to executive compensation.
The Compensation Committee is currently comprised of five non-employee,
independent members of the Board of Directors, none of whom has any interlocking
relationships as defined by the SEC. The Compensation Committee has available to
it such external compensation advice and data as the Committee deems appropriate
to obtain.
The philosophy of the Compensation Committee is to provide a comprehensive
compensation package for each executive officer that is well suited to support
accomplishment of the Company's business strategies, objectives and initiatives.
For incentive-based compensation, the Compensation Committee considers the
desirability to qualify such compensation for deductibility by the Company under
Section 162(m) of the Code, but does not consider it to be an overriding or
controlling factor. Options granted under the Company's option plans qualify as
"performance-based" compensation that are not subject to the limitations on
deductibility of certain executive compensation under Section 162(m). The
Company's cash bonus plans do not qualify as "performance-based" compensation
under Section 162(m). As the Compensation Committee applies this compensation
philosophy in determining appropriate executive compensation levels and other
compensation factors, the Committee reaches its decisions with a view towards
the Company's overall financial performance.
19
EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's approach to executive officer compensation is
based upon a belief that a substantial portion of aggregate annual cash
compensation for executive officers should be contingent upon the Company's
performance and an individual's contribution to the Company's success. In
addition, the Compensation Committee strives to align the interests of the
Company's executive officers with the long-term interests of stockholders
through stock option grants that can result in ownership of the Company's common
stock. The Compensation Committee endeavors to structure each executive
officer's overall compensation package to be consistent with this approach and
to enable the Company to attract, retain and reward individuals who contribute
to the success of the Company.
The Company's compensation program for executive officers is based on the
following guidelines:
o Establishment of base salary levels and participation in generally
available employee benefit programs based on competitive compensation
package practices.
o Utilization of a performance-based, cash incentive plan.
o Inclusion of equity opportunities that create long-term incentives
based upon increases in stockholder return.
The Compensation Committee reviews compensation levels for the executive
officers utilizing information provided by an independent consulting firm
engaged by the Company to benchmark the Company's executive pay practices
against industry norms. The Company's 2002 benchmark study included the 25
best-performing high technology companies, including semiconductor, storage
systems, storage components and networking companies.
The Company had a cash incentive plan during the third and fourth quarters
of 2002 that provided for bonus awards to be made to the executive officers
(other than the CEO) and other members of senior management subject to an
aggregate budget for all awards under the plan. The plan established a minimum
level of operating income to be achieved by the Company for the third and fourth
quarters of 2002 before any payments would be made under the plan. The plan also
permitted upward adjustments in awards to be made if the minimum established
targets were exceeded. In addition, the plan provided for the CEO to determine
individual bonus award amounts pursuant to his judgment of each participant's
personal contributions to the Company's performance for the year, subject to the
approval of the Committee. The Compensation Committee approved a discretionary
bonus pool to award certain individuals in the second half of the year, with the
expectation that bonus awards would demonstrate substantial differentiation and
be highly selective.
Due to the economic downturn and the Company's financial performance, the
chief executive officer and ten executive officers voluntarily imposed upon
themselves a temporary ten percent cut in base salary effective March 6, 2001.
In October 2002, after consultation with the Compensation Committee, salaries
effective prior to March 2001 were reinstated. The Company's benchmark analysis
discussed above confirmed that, with the restoration of the normal salary
levels, the base salaries for the executive officers are, on average, within
competitive range of the Company's market target of the 60th percentile.
The Company maintains a set of guidelines for use in making recommendations
to the Committee on individual grants to executive officers of options to
purchase common stock of the Company. These guidelines are based on the
responsibility levels of each position within the Company and in other
companies, as determined by the 2002 benchmark study. The Compensation Committee
believes that this benchmark study fairly reflects the competitive environment
in which the Company operates and is consistent with the compensation principles
above. Stock option grants were made to certain executive officers during 2002
in accordance with the guidelines.
20
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Corrigan has been Chairman of the Board and Chief Executive Officer
("CEO") of the Company since its founding in 1981. In September 2001, the
Company entered into an employment agreement (the "Agreement") with Mr.
Corrigan. A summary of the Agreement is set forth in the section on "CEO
Employment Agreement." Effective March 6, 2001, Mr. Corrigan voluntarily imposed
upon himself a temporary ten percent decrease in base salary, reducing his
annual base salary to $774,000. During 2002, the Committee considered
information regarding competitive compensation practices and levels for chief
executive officers. In October 2002, after consulting with the Committee, the
ten percent decrease in base salary was reversed, returning Mr. Corrigan's base
salary to the 2001 level of $860,000. The current base salary for Mr. Corrigan,
established by the Compensation Committee, falls in the median of the range of
such information used for competitive comparisons.
Mr. Corrigan was also eligible for a performance-based bonus compensation
plan for the Company's CEO that is based on the CEO's performance, operating
income objectives for the Company and on the overall performance of the Company.
Mr. Corrigan did not receive a bonus with respect to fiscal year 2002. In
addition, while the executive compensation benchmark analysis indicated that Mr.
Corrigan's stock position fell below competitive norms, the Compensation
Committee concluded that stock option grants would not be considered for Mr.
Corrigan until 2003.
MEMBERS OF THE COMPENSATION COMMITTEE
James H. Keyes, Chairman
T.Z. Chu
Dr. Malcolm R. Currie
Matthew J. O'Rourke
Gregorio Reyes
February 13, 2003
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of LSI Logic Corporation
("Audit Committee") assists the Board in executing its responsibilities. The
Audit Committee is responsible for, among other things, retention and
termination of the Company's independent accountants, determining the
compensation of the independent accountants and monitoring the integrity and
adequacy of the Company's financial information, control systems and reporting
practices.
The Audit Committee is composed of four non-employee members, each of whom
is independent as defined by the New York Stock Exchange listing rules and
operates under a charter approved by the Board of Directors.
The Company's independent accountants, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), are responsible for expressing an opinion on the
conformity of the Company's audited financial statements to generally accepted
accounting principles.
The Audit Committee has reviewed and discussed the audited financial
statements with the Company's management. The Audit Committee has discussed with
PricewaterhouseCoopers certain matters required under Statement on Auditing
Standard No. 61 and has received written disclosures and the letter required by
Independent Standards Board Standard No.1 from the outside accountants and has
discussed with them their independence.
Audit Fees: The aggregate fees for professional services rendered by
PricewaterhouseCoopers in connection with its audit of the Company's
consolidated financial statements as of and for the year ended December 31, 2002
and its limited reviews of the Company's unaudited condensed consolidated
interim financial statements were $1.0 million.
Financial Information Systems Design and Implementation Fees: During the
year ended December 31, 2002, PricewaterhouseCoopers rendered no professional
services to the Company in connection with the
21
design and implementation of financial information systems as described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR 210.2-01
(c)(4)(ii)).
All Other Fees: Aggregate fees billed for all other services rendered by
PricewaterhouseCoopers, other than the services covered in the two previous
paragraphs, for the year ended December 31, 2002 were $1.8 million, primarily
for the following professional services (in millions):
Audit-related services(1) .............................. $0.6
Income tax compliance and related tax services ......... $1.2
Other .................................................. $ 0
- ------------
(1) Audit-related service fees include fees for issuance of consents and
comfort letters, audit and accounting assistance with respect to
restructuring activities, leasing transactions and acquisitions during the
year.
The Audit Committee has considered whether the non-audit services provided
by PricewaterhouseCoopers are compatible with maintaining the independence of
PricewaterhouseCoopers and has concluded that the independence of
PricewaterhouseCoopers is maintained and is not compromised by the services
provided.
Based on the review and discussion referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors approved, that
the audited financial statements be included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2002, for filing with the SEC.
The Audit Committee also selected PricewaterhouseCoopers to audit the
Company's consolidated financial statements for the 2003 fiscal year.
MEMBERS OF THE AUDIT COMMITTEE
Dr. Malcolm R. Currie, Chairman
T.Z. Chu
James H. Keyes
Matthew J. O'Rourke
March 14, 2003
22
PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return
Among LSI Logic Corporation*, S&P 500 Index
and the Philadelphia Semiconductor Index
The stock price performance shown on the graph following is not necessarily
indicative of future price performance.
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
------ ------ ------ ------ ------ ------
LSI Logic Corp. ........................... $100 $ 82 $344 $174 $161 $ 59
S&P 500 ................................... $100 $129 $156 $141 $125 $ 97
Philadelphia Semiconductor Index .......... $100 $133 $267 $219 $198 $110
- ------------
* During 1997, the Company changed its fiscal year to a straight calendar
year from a 52/53-week fiscal year that ended on the Sunday closest to
December 31. Prior to the change, the Company's last trading day of its
fiscal year may have varied. For consistent presentation and comparison to
the industry indices shown herein, the Company has calculated its stock
performance graph assuming a December 31 year-end.
23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and beneficial
owners of more than 10% of the Company's common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Based solely on its review of the
copies of such reports received by it, or written representations from reporting
persons, the Company believes that during the fiscal year ended December 31,
2002, its officers, directors and holders of more than 10% of the Company's
common stock complied with all Section 16(a) filing requirements, except for the
following: a Form 4 for Mr. Wilfred J. Corrigan, Chairman of the Board and Chief
Executive Officer, reporting one transaction, was filed late.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend. Under the Company's Bylaws, in order to be
deemed properly presented, notice must be delivered to the Corporate Secretary
of the Company at the principal executive offices of the Company no less than 60
days nor more than 90 days prior to the annual meeting; provided, however, if
less than 65 days notice of the date of the annual meeting has been given to
stockholders, notice by the stockholder to be timely must be delivered to the
Company not later than the close of business on the seventh day following the
day on which such notice of the annual meeting was mailed. The stockholder's
notice must set forth, as to each proposed matter: (a) a reasonably detailed
description of the business and reason for conducting such business at the
meeting; (b) the name and address as they appear on the Company's books of the
stockholder proposing such business, or the name of the beneficial holder or
other party on whose behalf the proposal is made; (c) the class and number of
shares of the Company owned by the stockholder or beneficial holder or other
party on whose behalf the proposal is made and (d) any material interest of the
stockholder or beneficial holder or other party on whose behalf the proposal is
made in such business.
THE BOARD OF DIRECTORS
March 14, 2003
24
[LSI LOGIC LOGO]
1621 BARBER LANE
MILPITAS, CA 95035
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
meeting date. Have your proxy card in hand when you access the web site. You
will be prompted to enter your 12-digit Control Number, which is located below,
to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the meeting date. Have your proxy card in hand
when you call. You will be prompted to enter your 12-digit Control Number, which
is located below, and then follow the simple instructions the Vote Voice
provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to LSI Logic Corporation, c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE
OR BLACK INK AS FOLLOWS: LSILG1 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
LSI LOGIC CORPORATION
Vote On Directors
1. Election of Directors
NOMINEES:
01) T.Z. Chu 05) R. Douglas Norby For Withhold For All
02) Wilfred J. Corrigan 06) Matthew J. O'Rourke All All Except
03) Malcolm R. Currie 07) Gregorio Reyes
04) James H. Keyes 08) Larry W. Sonsini ( ) ( ) ( )
To withhold authority to vote for a particular
nominee, mark "For All Except" and write the
nominee's number on the line below.
- --------------------------------------------------------
Vote On Proposals For Against Abstain
2. To approve an amendment to the Company's Amended
1995 Director Option Plan to increase the number of
shares of common stock reserved for issuance
thereunder by 1,000,000 and to extend the term of
the Plan to 2013. ( ) ( ) ( )
3. To approve the adoption of the 2003 Equity Incentive
Plan. ( ) ( ) ( )
4. To ratify the appointment of PricewaterhouseCoopers
LLP as independent accountants of the Company for
its 2003 fiscal year. ( ) ( ) ( )
To transact such other business as may properly come
before the meeting and any adjournment or postponement
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION
OF DIRECTORS AND FOR PROPOSALS 2, 3, AND 4, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
For address changes and/or comments, please check this
box and write them on the other side of this proxy card
where indicated. ( )
Yes No
Please indicate if you plan to attend this meeting. ( ) ( )
HOUSEHOLDING ELECTION - Please indicate if you consent
to receive certain future investor communications in a
single package per household. ( ) ( )
- ------------------------------------------- ---------------------------------
- ------------------------------------------- ---------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
- --------------------------------------------------------------------------------
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
LSI LOGIC CORPORATION
2003 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of LSI Logic Corporation, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated March 31, 2003, and hereby appoints Wilfred J.
Corrigan and David G. Pursel, or either of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2003 Annual Meeting of
Stockholders of LSI Logic Corporation to be held on May 1, 2003, at 9:00 a.m.,
local time, at the Fairmont Hotel located at 170 South Market Street, San Jose,
CA 95113 and at any adjournment(s) thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side.
--------------------------------------------------------------------
Address Changes/Comments:___________________________________________
____________________________________________________________________
____________________________________________________________________
--------------------------------------------------------------------
(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
Exhibit 1
LSI LOGIC CORPORATION
AMENDED 1995 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this Amended 1995 Director
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board. The Plan, once approved by
stockholders, replaced the 1986 Directors' Stock Option Plan.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means LSI Logic Corporation, a Delaware corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Effective Date" means June 1, 1995, with stockholder approval.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the New York
Stock Exchange, the Fair Market Value of a Share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable;
1
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the day of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Option" means a stock option granted pursuant to the Plan.
(l) "Optioned Stock" means the Common Stock subject to an Option.
(m) "Optionee" means an Outside Director who receives an Option.
(n) "Outside Director" means a Director who is not an Employee.
(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1995 Director Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan and subject to the shareholder approval of the maximum aggregate number
of Shares which may be optioned and sold under the Plan is 2,000,000 Shares of
Common Stock (the "Pool"), subject to stockholder approval at the 2003 Annual
Meeting of Stockholders.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in this Section
4(a) shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. All grants
2
of Options to Outside Directors under this Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 30,000 Shares (the "First Option") on the date on which he or
she first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy.
However, no First Option shall be granted to an Outside Director who was an
Outside Director immediately prior to the effective date of this Plan or who,
immediately prior to becoming an Outside Director, was a Director.
(iii) Each Outside Director shall automatically be granted an
Option to purchase 25,000 Shares (a "Subsequent Option") on April 1 of each
year, if on such date he or she shall have served on the Board for at least six
(6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof.
(C) the exercise price per Share shall be the Fair Market
Value per Share on the date of grant of the First Option. In the event that the
date of grant of the First Option is not a trading day, the exercise price per
Share shall be the Fair Market Value on the next trading day immediately
following the date of grant of the First Option.
(D) the First Option shall become exercisable as to
twenty-five percent (25%) of the Shares subject to the First Option on each
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
3
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof.
(C) the exercise price per Share shall be the Fair Market
Value per Share on the date of grant of the Subsequent Option. In the event that
the date of grant of the Subsequent Option is not a trading day, the exercise
price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the Subsequent Option.
(D) the Subsequent Option shall become exercisable in full
six months after its date of grant, provided that the Optionee continues to
serve as a Director on such date.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the stockholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. An Outside Director who has been granted an Option may, if he
or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan. Upon approval by the stockholders of the Company, the
Plan shall become effective upon the Effective Date. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 11 of the
Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, (iv) provided that it will not result
in a compensation charge to the Company, delivery of an irrevocable written
election to have the Company withhold from the Shares to be issued that number
of Shares having a Fair Market Value on the date of exercise equal to the
aggregate exercise price of the Shares as to which said Option is being
exercised, including, at the Director's option, the amount required to be
withheld, if any, to satisfy federal, state, and local withholding tax
requirements, (v) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise
4
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, (vi) such other consideration and method of payment
for the issuance of Shares to the extent permitted by applicable laws, or (vii)
any combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions, and
other transactions by Outside Directors that otherwise could be matched with
Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.
(c) Termination of Continuous Status as a Director. In the event an
Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three (3) months following the date of such termination, and only to the
extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
5
(d) Disability of Optionee. In the event Optionee's Continuous Status
as a Director terminates as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee is entitled to exercise it
on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee is not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee is
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee is not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
6
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
may be substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation does not
agree to assume such Options or to substitute equivalent options, each
outstanding Option shall terminate as of the closing date of the transaction.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the Option confers the right to receive
or purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
7
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
8
Exhibit 2
LSI LOGIC CORPORATION
2003 EQUITY INCENTIVE PLAN
(Effective March 20, 2003)
TABLE OF CONTENTS
Page
----
SECTION 1 BACKGROUND AND PURPOSE...............................................1
1.1 Background and Effective Date................................1
1.2 Purpose of the Plan..........................................1
SECTION 2 DEFINITIONS..........................................................1
2.1 1934 Act.....................................................1
2.2 Affiliate....................................................1
2.3 Award........................................................1
2.4 Award Agreement..............................................1
2.5 Board or Board of Directors..................................1
2.6 Cash Flow....................................................1
2.7 Code.........................................................2
2.8 Committee....................................................2
2.9 Company......................................................2
2.10 Director.....................................................2
2.11 Disability...................................................2
2.12 Earnings Per Share...........................................2
2.13 Employee.....................................................2
2.14 Exchange Program.............................................2
2.15 Exercise Price...............................................2
2.16 Fair Market Value............................................2
2.17 Fiscal Year..................................................2
2.18 Grant Date...................................................3
2.19 Incentive Stock Option.......................................3
2.20 Nonemployee Director.........................................3
2.21 Nonqualified Stock Option....................................3
2.22 Option.......................................................3
2.23 Participant..................................................3
2.24 Performance Goals............................................3
2.25 Period of Restriction........................................3
2.26 Plan.........................................................3
2.27 Profit After Tax.............................................3
2.28 Profit Before Tax............................................3
2.29 Restricted Stock.............................................3
2.30 Retirement...................................................4
2.31 Return on Capital............................................4
2.32 Return on Equity.............................................4
2.33 Return on Sales..............................................4
2.34 Revenue......................................................4
2.35 Rule 16b-3...................................................4
2.36 Section 16 Person............................................4
2.37 Shares.......................................................4
2.38 Subsidiary...................................................4
-i-
TABLE OF CONTENTS
(continued)
Page
----
2.39 Termination of Service.......................................4
2.40 Total Shareholder Return.....................................4
SECTION 3 ADMINISTRATION.......................................................5
3.1 The Committee................................................5
3.2 Authority of the Committee...................................5
3.3 Delegation by the Committee..................................5
3.4 Decisions Binding............................................5
SECTION 4 SHARES SUBJECT TO THE PLAN...........................................5
4.1 Number of Shares.............................................5
4.2 Lapsed Awards................................................5
4.3 Adjustments in Awards and Authorized Shares..................6
SECTION 5 STOCK OPTIONS........................................................6
5.1 Grant of Options.............................................6
5.2 Award Agreement..............................................6
5.3 Exercise Price...............................................6
5.4 Expiration of Options........................................7
5.5 Exercisability of Options....................................7
5.6 Payment......................................................7
5.7 Restrictions on Share Transferability........................8
5.8 Certain Additional Provisions for Incentive Stock Options....8
SECTION 6 RESTRICTED STOCK.....................................................8
6.1 Grant of Restricted Stock....................................8
6.2 Restricted Stock Agreement...................................9
6.3 Transferability..............................................9
6.4 Other Restrictions...........................................9
6.5 Removal of Restrictions......................................9
6.6 Voting Rights................................................9
6.7 Dividends and Other Distributions...........................10
6.8 Return of Restricted Stock to Company.......................10
SECTION 7 MISCELLANEOUS.......................................................10
7.1 Deferrals...................................................10
7.2 No Effect on Employment or Service..........................10
7.3 Participation...............................................10
7.4 Indemnification.............................................10
7.5 Successors..................................................10
7.6 Beneficiary Designations....................................11
7.7 Limited Transferability of Awards...........................11
7.8 No Rights as Stockholder....................................11
-ii-
TABLE OF CONTENTS
(continued)
Page
----
SECTION 8 AMENDMENT, TERMINATION, AND DURATION................................11
8.1 Amendment, Suspension, or Termination.......................11
8.2 Duration of the Plan........................................12
SECTION 9 TAX WITHHOLDING.....................................................12
9.1 Withholding Requirements....................................12
9.2 Withholding Arrangements....................................12
SECTION 10 LEGAL CONSTRUCTION.................................................12
10.1 Gender and Number...........................................12
10.2 Severability................................................12
10.3 Requirements of Law.........................................12
10.4 Securities Law Compliance...................................12
10.5 Governing Law...............................................13
10.6 Captions....................................................13
EXECUTION.....................................................................12
-iii-
LSI LOGIC CORPORATION
2003 EQUITY INCENTIVE PLAN
SECTION 1
BACKGROUND AND PURPOSE
1.1 Background and Effective Date. The Plan permits the grant of
Nonqualified Stock Options, Incentive Stock Options, and Restricted Stock. The
Plan is effective as of March 20, 2003, subject to ratification by an
affirmative vote of the holders of a majority of the Shares that are present in
person or by proxy and entitled to vote at the 2003 Annual Meeting of
Stockholders of the Company.
1.2 Purpose of the Plan. The Plan is intended to attract, motivate, and
retain employees of the Company and its Affiliates. The Plan also is designed to
encourage stock ownership by Participants, thereby aligning their interests with
those of the Company's shareholders and to permit the payment of compensation
that qualifies as performance-based compensation under section 162(m) of the
Code.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended.
Reference to a specific section of the 1934 Act or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
2.2 "Affiliate" means any corporation or any other entity (including, but
not limited to, partnerships and joint ventures) controlling, controlled by, or
under common control with the Company.
2.3 "Award" means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, and/or Restricted Stock.
2.4 "Award Agreement" means the written agreement setting forth the terms
and provisions applicable to each Award granted under the Plan.
2.5 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.6 "Cash Flow" means the Company's or a business unit's sum of Profit
After Tax plus depreciation and amortization less capital expenditures plus
changes in working capital comprised of accounts receivable, inventories, other
current assets, trade accounts payable, accrued expenses,
-1-
product warranty, advance payments from customers and long-term accrued
expenses, determined in accordance with generally acceptable accounting
principles.
2.7 "Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code or regulation thereunder shall include such
section or regulation, any valid regulation promulgated under such section, and
any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
2.8 "Committee" means the committee appointed by the Board (pursuant to
Section 3.1) to administer the Plan.
2.9 "Company" means LSI Logic Corporation, a Delaware corporation, or any
successor thereto.
2.10 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.11 "Disability" means a permanent and total disability determined in
accordance with uniform and nondiscriminatory standards adopted by the Committee
from time to time.
2.12 "Earnings Per Share" means the Company's or a business unit's Profit
After Tax, divided by a weighted average number of common shares outstanding and
dilutive common equivalent shares deemed outstanding, determined in accordance
with generally accepted accounting principles.
2.13 "Employee" means any employee of the Company or of an Affiliate,
whether such employee is so employed at the time the Plan is adopted or becomes
so employed subsequent to the adoption of the Plan.
2.14 "Exchange Program" means a program established by the Committee under
which outstanding Awards are amended to provide for a lower Exercise Price or
surrendered or cancelled in exchange for (a) Awards with a different Exercise
Price, (b) a different type of Award, (c) cash, or (d) a combination of (a), (b)
and/or (c).
2.15 "Exercise Price" means the price at which a Share may be purchased by
a Participant pursuant to the exercise of an Option.
2.16 "Fair Market Value" means the closing price per Share on the New York
Stock Exchange on the relevant date, or if there were no sales on such date, the
arithmetic mean of the closing price per Share on the nearest day before and the
nearest day after the relevant date, as determined by the Committee.
Notwithstanding the preceding, for federal, state, and local income tax
reporting purposes, fair market value shall be determined by the Committee (or
its delegate) in accordance with uniform and nondiscriminatory standards adopted
by it from time to time.
2.17 "Fiscal Year" means the fiscal year of the Company.
-2-
2.18 "Grant Date" means, with respect to an Award, the date that the Award
was granted.
2.19 "Incentive Stock Option" means an Option to purchase Shares that is
designated as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.
2.20 "Nonemployee Director" means a Director who is an employee of neither
the Company nor of any Affiliate.
2.21 "Nonqualified Stock Option" means an option to purchase Shares that is
not intended to be an Incentive Stock Option.
2.22 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.23 "Participant" means an Employee or Nonemployee Director who has an
outstanding Award.
2.24 "Performance Goals" means the goal(s) (or combined goal(s)) determined
by the Committee (in its discretion) to be applicable to a Participant with
respect to an Award. As determined by the Committee, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement
using one or more of the following measures: (a) Cash Flow, (b) Earnings per
Share, (c) Profit After Tax, and (d) Profit Before Tax, (e) Return on Capital,
(f) Return on Equity, (g) Return on Sales, (h) Revenue, (i) Total Shareholder
Return. The Performance Goals may differ from Participant to Participant and
from Award to Award. Prior to the Determination Date, the Committee shall
determine whether any significant element(s) shall be included in or excluded
from the calculation of any Performance Goal with respect to any Participants.
2.25 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and therefore, the Shares
are subject to a substantial risk of forfeiture. As provided in Section 6, such
restrictions may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events or conditions, as
determined by the Committee, in its discretion.
2.26 "Plan" means the LSI Logic Corporation 2003 Equity Incentive Plan, as
set forth in this instrument and as hereafter amended from time to time.
2.27 "Profit After Tax" means the Company's or a business unit's income
after taxes, determined in accordance with generally accepted accounting
principles.
2.28 "Profit Before Tax" means the Company's or a business unit's income
before taxes, determined in accordance with generally accepted accounting
principles.
2.29 "Restricted Stock" means an Award granted to a Participant pursuant to
Section 6.
-3-
2.30 "Retirement" means a Termination of Service occurring on or after the
earlier of (a) age sixty-five (65), or (b) age fifty-five (55) and the
completion of ten (10) years of service with the Company or an Affiliate.
2.31 "Return on Capital" means the Company's or a business unit's Profit
After Tax divided by Company's or business unit's, as applicable, average
invested capital, determined in accordance with generally accepted accounting
principles.
2.32 "Return on Equity" means the percentage equal to the Company's Profit
After Tax divided by average stockholder's equity, determined in accordance with
generally accepted accounting principles.
2.33 "Return on Sales" means the percentage equal to the Company's or a
business unit's Profit After Tax, divided by the Company's or the business
unit's, as applicable, Revenue, determined in accordance with generally accepted
accounting principles.
2.34 "Revenue" means the Company's or business unit's net sales, determined
in accordance with generally accepted accounting principles.
2.35 "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.
2.36 "Section 16 Person" means a person who, with respect to the Shares, is
subject to Section 16 of the 1934 Act.
2.37 "Shares" means the shares of common stock of the Company.
2.38 "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then 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.
2.39 "Termination of Service" means (a) in the case of an Employee, a
cessation of the employee-employer relationship between the Employee and the
Company or an Affiliate for any reason, including, but not by way of limitation,
a termination by resignation, discharge, death, Disability, Retirement, or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous reemployment by the Company or an Affiliate; and (b) in the
case of a Nonemployee Director, a cessation of the Director's service on the
Board for any reason, including, but not by way of limitation, a termination by
resignation, death, Disability, Retirement or non-reelection to the Board.
2.40 "Total Shareholder Return" means the total return (change in share
price plus reinvestment of any dividends) of a Share.
-4-
SECTION 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors who shall be
appointed from time to time by, and shall serve at the pleasure of, the Board of
Directors. The Committee shall be comprised solely of Directors who both are (a)
"non-employee directors" under Rule 16b-3, and (b) "outside directors" under
Section 162(m) of the Code.
3.2 Authority of the Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan's provisions. The Committee
shall have all powers and discretion necessary or appropriate to administer the
Plan and to control its operation, including, but not limited to, the power to
(a) determine which Employees (including Employees who also are Directors) shall
be granted Awards, (b) prescribe the terms and conditions of the Awards, (c)
interpret the Plan and the Awards, (d) adopt such procedures and subplans as are
necessary or appropriate to permit participation in the Plan by Employees
(including Employees who also are Directors) who are foreign nationals or
employed outside of the United States, (e) adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith and (f)
interpret, amend or revoke any such rules. Notwithstanding any contrary
provision of the Plan, the Committee shall not have the authority to implement
an Exchange Program without the approval of the Company's stockholders.
3.3 Delegation by the Committee. The Committee, in its sole discretion and
on such terms and conditions as it may provide, may delegate all or any part of
its authority and powers under the Plan to one or more Directors or officers of
the Company; provided, however, that the Committee may not delegate its
authority and powers (a) with respect to Section 16 Persons, or (b) in any way
which would jeopardize the Plan's qualification under Section 162(m) of the Code
or Rule 16b-3.
3.4 Decisions Binding. All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the
total number of Shares available for grant under the Plan shall not exceed
10,000,000. Shares granted under the Plan may be either authorized but unissued
Shares or treasury Shares.
4.2 Lapsed Awards. If an Award is cancelled, terminates, expires, or lapses
for any reason, any Shares subject to such Award again shall be available to be
the subject of an Award, except as determined by the Committee.
-5-
4.3 Adjustments in Awards and Authorized Shares. In the event that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares such that
an adjustment is determined by the Committee (in its sole discretion) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust the number and
class of Shares that may be delivered under the Plan, the number, class, and
price of Shares subject to outstanding Awards, and the numerical limits of
Sections 5.1 and 6.1. Notwithstanding the preceding, the number of Shares
subject to any Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Employees at any time and from time to time as
determined by the Committee in its sole discretion. The Committee, in its sole
discretion, shall determine the number of Shares subject to each Option,
provided that during any Fiscal Year, no Participant shall be granted Options
covering more than 2,000,000 Shares. The Committee may grant Incentive Stock
Options, Nonqualified Stock Options, or a combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option, and such other terms and conditions as the Committee, in its discretion,
shall determine. The Award Agreement shall also specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price for each Option shall be determined by the Committee in its sole
discretion.
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock
Option, the Exercise Price shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share on the Grant Date.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price shall be not less than one hundred percent (100%) of
the Fair Market Value of a Share on the Grant Date; provided, however, that if
on the Grant Date, the Employee (together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code) owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, the Exercise Price shall be not
less than one hundred and ten percent (110%) of the Fair Market Value of a Share
on the Grant Date.
-6-
5.3.3 Substitute Options. Notwithstanding the provisions of Sections
5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates a
transaction described in Section 424(a) of the Code (e.g., the acquisition of
property or stock from an unrelated corporation), persons who become Employees
or Nonemployee Directors on account of such transaction may be granted Options
in substitution for options granted by their former employer. If such substitute
Options are granted, the Committee, in its sole discretion and consistent with
Section 424(a) of the Code, may determine that such substitute Options shall
have an exercise price less than one hundred percent (100%) of the Fair Market
Value of the Shares on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate no later than the
first to occur of the following events:
(a) The date for termination of the Option set forth in the
written Award Agreement; or
(b) The expiration of ten (10) years from the Grant Date.
5.4.2 Death of Participant. Notwithstanding Section 5.4.1, if a
Participant dies prior to the expiration of his or her Options, the Committee,
in its discretion, may provide that his or her Options shall be exercisable for
up to three (3) years after the date of death.
5.4.3 Committee Discretion. Subject to the limits of Sections 5.4.1
and 5.4.2, the Committee, in its sole discretion, (a) shall provide in each
Award Agreement when each Option expires and becomes unexercisable, and (b) may,
after an Option is granted, extend the maximum term of the Option (subject to
Section 5.8.4 regarding Incentive Stock Options).
5.5 Exercisability of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option.
5.6 Payment. Options shall be exercised by the Participant's delivery of a
notice of exercise to the Corporate Secretary of the Company (or its designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares. The notice shall be given
in the form and manner specified by the Company from time to time.
Upon the exercise of any Option, the Exercise Price shall be payable to the
Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan. As soon as practicable after
receipt of a written notification of exercise and
-7-
full payment for the Shares purchased, the Company shall deliver to the
Participant (or the Participant's designated broker), Share certificates (which
may be in book entry form) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable, including, but not limited to, restrictions related to
applicable federal securities laws, the requirements of any national securities
exchange or system upon which Shares are then listed or traded, or any blue sky
or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Exercisability. The aggregate Fair Market Value (determined on
the Grant Date(s)) of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by any Employee during any calendar year
(under all plans of the Company and its Subsidiaries) shall not exceed $100,000.
5.8.2 Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's Termination of
Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award Agreement or
the Committee permits later exercise. No Incentive Stock Option may be exercised
more than one (1) year after the Participant's Termination of Service on account
of Disability, unless (a) the Participant dies during such one-year period, and
(b) the Award Agreement or the Committee permit later exercise.
5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be
granted only to persons who are employees of the Company or a Subsidiary on the
Grant Date.
5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that if the
Option is granted to an Employee who, together with persons whose stock
ownership is attributed to the Employee pursuant to Section 424(d) of the Code,
owns stock possessing more than 10% of the total combined voting power of all
classes of the stock of the Company or any of its Subsidiaries, the Option may
not be exercised after the expiration of five (5) years from the Grant Date.
SECTION 6
RESTRICTED STOCK
6.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock to Employees in such amounts as the Committee, in its sole
discretion, shall determine. The Committee, in its sole discretion, shall
determine the number of Shares to be granted to each Participant as Restricted
Stock, provided that during any Fiscal Year, no Participant shall receive more
than 500,000 shares of Restricted Stock.
-8-
6.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee
determines otherwise, shares of Restricted Stock shall be held by the Company as
escrow agent until the restrictions on such Shares have lapsed.
6.3 Transferability. Except as provided in this Section 6, shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction.
6.4 Other Restrictions. The Committee, in its sole discretion, may impose
such other restrictions on shares of Restricted Stock as it may deem advisable
or appropriate, in accordance with this Section 6.4.
6.4.1 General Restrictions. The Committee may set restrictions based
upon the achievement of specific performance objectives (Company-wide,
divisional, or individual), applicable federal or state securities laws, or any
other basis determined by the Committee in its discretion.
6.4.2 Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation" under
Section 162(m) of the Code, the Committee, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Committee on or before the latest date permissible to
enable the Restricted Stock to qualify as "performance-based compensation" under
Section 162(m) of the Code. In granting Restricted Stock that is intended to
qualify under Section 162(m) of the Code, the Committee shall follow any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Restricted Stock under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
6.4.3 Legend on Certificates. The Committee, in its discretion, may
legend the certificates representing Restricted Stock to give appropriate notice
of such restrictions.
6.5 Removal of Restrictions. Except as otherwise provided in this Section
6, Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan shall be released from escrow as soon as practicable after the last day
of the Period of Restriction. The Committee, in its discretion, may accelerate
the time at which any restrictions shall lapse or be removed. After the
restrictions have lapsed, the Participant shall be entitled to have any legend
or legends under Section 6.4.3 removed from his or her Share certificate, and
the Shares shall be freely transferable by the Participant.
6.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the Committee determines otherwise.
-9-
6.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
6.8 Return of Restricted Stock to Company. On the date set forth in the
Award Agreement, the Restricted Stock for which restrictions have not lapsed
shall revert to the Company and again shall become available for grant under the
Plan.
SECTION 7
MISCELLANEOUS
7.1 Deferrals. The Committee, in its sole discretion, may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant under an Award. Any such
deferral elections shall be subject to such rules and procedures as shall be
determined by the Committee in its sole discretion.
7.2 No Effect on Employment or Service. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate any Participant's
employment or service at any time, with or without cause. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Affiliates (or between Affiliates) shall not be deemed a Termination of
Service. Employment with the Company and its Affiliates is on an at-will basis
only.
7.3 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
7.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or
failure to act under the Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.
7.5 Successors. All obligations of the Company under the Plan, with respect
to Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such
-10-
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business or assets of the
Company.
7.6 Limited Transferability of Awards. No Award granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution. All rights with
respect to an Award granted to a Participant shall be available during his or
her lifetime only to the Participant. Notwithstanding the foregoing, after the
Plan becomes effective, the Committee (in its sole discretion) may determine
that a Participant may, in a manner specified by the Committee, (a) transfer a
Nonqualified Stock Option to a Participant's spouse, former spouse or dependent
pursuant to a court-approved domestic relations order which relates to the
provision of child support, alimony payments or marital property rights, and (b)
transfer a Nonqualified Stock Option by bona fide gift and not for any
consideration, to (i) a member or members of the Participant's immediate family,
(ii) a trust established for the exclusive benefit of the Participant and/or
member(s) of the Participant's immediate family, (iii) a partnership, limited
liability company of other entity whose only partners or members are the
Participant and/or member(s) of the Participant's immediate family, or (iv) a
foundation in which the Participant an/or member(s) of the Participant's
immediate family control the management of the foundation's assets. The
transferability provisions provided in the preceding sentence shall be effective
only if expressly determined by the Committee after the effective date of the
Plan.
7.7 Beneficiary Designations. Notwithstanding any contrary provisions of
Section 7.6, after the Plan becomes effective, the Committee (in its sole
discretion) may determine that a Participant under the Plan may name a
beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid
in the event of the Participant's death. Each such designation shall revoke all
prior designations by the Participant and shall be effective only if given in a
form and manner acceptable to the Committee. In the absence of any such
designation, any vested benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate and, subject to the terms of the Plan
and of the applicable Award Agreement, any unexercised vested Award may be
exercised by the administrator or executor of the Participant's estate. The
provisions of this Section 7.7 shall be effective only if expressly determined
by the Committee after the effective date of the Plan.
7.8 No Rights as Stockholder. Except to the limited extent provided in
Sections 6.6 and 6.7, no Participant (nor any beneficiary) shall have any of the
rights or privileges of a stockholder of the Company with respect to any Shares
issuable pursuant to an Award (or exercise thereof), unless and until
certificates representing such Shares shall have been issued, recorded on the
records of the Company or its transfer agents or registrars, and delivered to
the Participant (or beneficiary).
SECTION 8
AMENDMENT, TERMINATION, AND DURATION
8.1 Amendment, Suspension, or Termination. The Board, in its sole
discretion, may amend, suspend or terminate the Plan, or any part thereof, at
any time and for any reason. The amendment, suspension, or termination of the
Plan shall not, without the consent of the Participant,
-11-
alter or impair any rights or obligations under any Award theretofore granted to
such Participant. No Award may be granted during any period of suspension or
after termination of the Plan.
8.2 Duration of the Plan. The Plan shall be effective as of March 20, 2003,
and subject to Section 8.1 (regarding the Board's right to amend or terminate
the Plan), shall remain in effect thereafter. However, without further
stockholder approval, no Incentive Stock Option may be granted under the Plan
after March 19, 2013.
SECTION 9
TAX WITHHOLDING
9.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant's FICA obligation) required to be withheld with
respect to such Award (or exercise thereof).
9.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by
(a) electing to have the Company withhold otherwise deliverable Shares, or (b)
delivering to the Company already-owned Shares having a Fair Market Value equal
to the minimum amount required to be withheld.
SECTION 10
LEGAL CONSTRUCTION
10.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
10.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
10.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
10.4 Securities Law Compliance. With respect to Section 16 Persons,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan, Award
Agreement or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
-12-
10.5 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California.
10.6 Captions. Captions are provided herein for convenience only, and shall
not serve as a basis for interpretation or construction of the Plan. Title:
-13-