<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TELEVIDEO SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 the 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:
<PAGE> 2
TELEVIDEO SYSTEMS, INC.
2345 HARRIS WAY
SAN JOSE, CALIFORNIA 95131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, MARCH 24, 1997
TO TELEVIDEO STOCKHOLDERS:
The Annual Meeting of Stockholders of TeleVideo Systems, Inc., a Delaware
corporation (the "Company"), will be held at Sheraton San Jose Hotel located at
1801 Barber Lane, Milpitas, California 95035, on Monday, March 24, 1997, at 9:30
a.m. California time, for the following purposes:
1. To elect four Directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's Certificate of Incorporation
to change the corporate name from TeleVideo Systems, Inc. to TeleVideo,
Inc.
3. To ratify the selection of Grant Thornton LLP as the independent public
accountant of the Company for the 1997 fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on February 4, 1997, are
entitled to notice of, and to vote at, the meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. TO
ASSURE REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE.
By Order of the Board of Directors
K. David Kim
Chief Financial Officer
San Jose, California
March 3, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, POSTAGE
PREPAID, IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. YOUR GIVING OF SUCH PROXY DOES NOT
PRECLUDE YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 3
TELEVIDEO SYSTEMS, INC.
2345 HARRIS WAY
SAN JOSE, CALIFORNIA 95131
March 3, 1997
TO THE STOCKHOLDERS OF TELEVIDEO SYSTEMS, INC.
The Annual Meeting of Stockholders of TeleVideo Systems, Inc. will be
held at Sheraton San Jose Hotel, 1801 Barber Lane, Milpitas, California, on
Monday, March 24, 1997, at 9:30 a.m. California time.
The Annual Report for fiscal 1996 is enclosed herewith. At the
stockholders' meeting, we will discuss in more detail the subjects covered in
the Annual Report as well as other matters of interest to stockholders.
The enclosed proxy statement explains the items of business to come
formally before the Annual Meeting. As a stockholder, it is in your best
interest to express your views regarding these matters by signing and returning
your proxy. This will ensure the voting of your shares if you do not attend the
Annual Meeting.
Your vote is important regardless of the number of shares of the
Company's Stock you own, and all stockholders are cordially invited to attend
the Annual Meeting. To ensure your representation at the Annual Meeting, please
mark, sign, date and mail the enclosed proxy promptly in the return envelope
provided, which requires no postage if mailed in the United States. The giving
of a proxy will not affect your right to vote in person if you attend the Annual
Meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the Annual Meeting, you
must obtain from the record holder a proxy issued in your name.
Sincerely yours,
Dr. K. Philip Hwang
Chairman and Chief Executive Officer
<PAGE> 4
TELEVIDEO SYSTEMS, INC.
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
MARCH 24, 1997
GENERAL
This Proxy Statement is furnished in connection with the solicitation of the
enclosed proxy by the Board of Directors of TeleVideo Systems, Inc., a Delaware
corporation (the "Company"), for use at its Annual Meeting of Stockholders to be
held on March 24, 1997, and at any adjournments or postponements of that
meeting. All proxies will be voted in accordance with the instructions contained
in the proxy, and if no choice is specified, the proxies will be voted in favor
of the proposals set forth in the Notice of Annual Meeting. The Annual Meeting
will be held at Sheraton San Jose Hotel located at 1801 Barber Lane, Milpitas,
California 95035, at 9:30 a.m. California time.
The Company's principal executive offices are located at 2345 Harris Way, San
Jose, California 95131.
VOTING RIGHTS AND OUTSTANDING SHARES
The Board of Directors (the "Board") has fixed February 4, 1997, as the record
date of determination of stockholders entitled to vote at the Annual Meeting
(the "Record Date"). At the close of business on February 4, 1997, there were
outstanding and entitled to vote 45,404,745 shares of Common Stock of the
Company.
On each matter that may come before the Annual Meeting, each stockholder is
entitled to one vote for each share of Common Stock.
Under California law, a corporation incorporated in a state other than
California may nevertheless be treated for some purposes as though it is a
California corporation, if certain conditions are satisfied that establish that
the company has significant contacts with California. Those conditions relate to
the amount of property, payroll, sales and stock ownership in California. As of
the end of its last fiscal year, the Company met the applicable tests and
therefore, is subject to certain provisions of the California Corporations Code.
Among the California provisions application to the Company is the requirement
that cumulative voting be available in the election of directors. Under
cumulative voting rules, every stockholder voting in the election of directors
may cumulative such stockholder's votes and give one candidate a number of votes
equal to the number of directors to be elected, multiplied by the number of
votes to which the stockholder's shares are entitled, or 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 candidates
than are provided for by the By-laws at the time of voting. However, no
stockholder will be entitled to cumulate votes unless the name of the candidate
or candidates for whom such votes would be cast has been placed in nomination
prior to the voting and any stockholder has given notice, at the Annual Meeting
and prior to the commencement of voting, of such stockholder's intention to
cumulate votes. The candidates receiving the highest number of votes, up to the
number of directors to be elected, shall be elected.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
Inspector of Elections (the "Inspector"). The Inspector will also determine
whether or not a quorum is present. The Inspector will separately tabulate
affirmative and negative votes, abstentions and broker-non-votes.
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The presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting will
constitute a quorum for the purpose of transacting business at the Annual
Meeting. Abstentions and broker-non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of votes cast on proposals presented to
stockholders, and therefore will have the effect of a negative vote.
Broker-non-votes are not counted for purposes of determining whether a proposal
has been approved. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. A blank space is provided on
the proxy card for stockholders to mark if they wish either to abstain on the
proposal or to withhold authority to vote for one or more nominees for director.
Votes withheld in connection with the election of one or more of the nominees
for director will not be counted as votes cast for such individuals. Any proxy
which is returned using the form of proxy enclosed and which is not marked as to
a particular item will be voted for the proposals described herein as the proxy
holders deem advisable, on other matters that may come before the meeting, as
the case may be with respect to the item not marked. If a broker indicates on
the enclosed proxy or its substitute that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares will
not be considered as present with respect to that matter. The Company believes
that the tabulation procedures to be followed by the Inspector are consistent
with the general statutory requirements in Delaware concerning voting of shares
and determination of a quorum.
REVOCABILITY OF PROXIES
At the Annual Meeting, valid proxies will be voted as specified by the
stockholder. Any stockholder giving a proxy in the accompanying form retains the
power to revoke it at any time prior to the exercise of the powers conferred in
the proxy and may do so by taking any of the following actions: (i) delivering
written notice to the Secretary of the Company, (ii) delivering to the Secretary
of the Company a duly executed proxy bearing a later date or (iii) personally
attending the Annual Meeting and revoking the proxy. A stockholder's attendance
at the Annual Meeting will not revoke the stockholder's proxy unless the
stockholder affirmatively indicates at the Annual Meeting the intention to vote
the stockholder's shares in person. If a stockholder's shares are held of record
by a broker, bank or other nominee and such stockholder wishes to vote in person
at the Annual Meeting, the stockholder must obtain from the record holder a
proxy issued in the name of the stockholder.
SOLICITATION
The Company will bear the cost of solicitation of proxies. In addition, the
Company will reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and employees, without additional compensation, personally
or by telephone or telegram. The Company has retained Beacon Hill Partners,
Inc., 90 Broad Street, New York, NY 10004, to solicit proxies from brokers and
nominees for a fee of $3,250, plus out-of-pocket expenses.
The Company intends to mail this Proxy Statement and proxy card on or about
March 3, 1997 to stockholders of record as of the Record Date.
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<PAGE> 6
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-laws of the Company provide for three or more Directors, and the
currently authorized number of Directors is four. Four Directors are to be
elected at the meeting. Each Director to be elected will hold office until the
next Annual Meeting of Stockholders and until his successor is elected, or until
the death, resignation or removal of such Director.
The four nominees are currently Directors of the Company. The four nominees, Dr.
K. Philip Hwang, Mr. Stephen S. Kahng, Ms. Kristine Kim and Dr. Robert E.
Larson, were re-elected to the Board by the stockholders at the 1996 Annual
Meeting.
Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve. In
the event that any nominee is unable to serve as a Director at the time of the
Annual Meeting, the proxies may be voted for such substitute nominee as the
proxy holder may determine. Shares represented by the accompanying proxy will be
voted for the election of the four nominees recommended by the Board, unless the
proxy is marked in such a manner as to withhold authority to vote or as to vote
for one or more alternate candidates. The proxies solicited by this Proxy
Statement may not be voted for more than four nominees.
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes present and in person or
represented by proxy and entitled to vote on the proposal. Votes may be cast in
favor or withheld; votes that are withheld will be excluded entirely from the
vote and will have no effect. A broker-non-vote will not be treated as entitled
to vote on this matter.
The Board recommends a vote FOR the re-election of each of the nominees.
NOMINEES
The names of the nominees, and certain information about them, as of February
20, 1997, is set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION SINCE
--------------- --- -------- -----
<S> <C> <C> <C>
Dr. K. Philip Hwang 60 Chairman and Chief Executive Officer 1976
TeleVideo Systems, Inc.
Mr. Stephen S. Kahng(1) 47 President and Chief Executive Officer 1994
Power Computing Corporation
Ms. Kristine Kim 32 Vice President of Sales 1996
TeleVideo Systems, Inc.
Dr. Robert E. Larson(1) 58 Chairman and Chief Executive Officer 1989
Expert-EASE Systems, Inc.
</TABLE>
- ------------------------------ ------
(1) Member of the Audit Committee
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There is no family relationship between any Director or Executive Officer of the
Company.
Dr. K. Philip Hwang is the founder of the Company and has been Chairman of the
Board and Chief Executive Officer since October 1976. From August 1990 to April
1991, he served as the Acting Chief Financial Officer. Since 1992, Dr. Hwang has
also served as Chairman of AdMOS (Advanced MOS Systems), an engineering firm
specializing in ASIC chip design. AdMOS is a private corporation in which
TeleVideo holds a 20% interest.
Mr. Stephen S. Kahng joined the Company as a member of the Board of Directors
effective November 1994. Since November 1993, Mr. Kahng has been the President
and Chief Executive Officer of Power Computing Corporation which manufactures
Power PC-based workstations. From December 1991 to November 1993, he served as
the President of Up To Date Technology, Inc. which is a system design consulting
company to the personal computer industry.
Ms. Kristine Kim has been serving TeleVideo since January 1988 and has
successfully managed various Sales and Marketing Departments. She was promoted
to Vice President of Sales and was elected as a member of the Board in February
1996. Ms. Kim has a BA degree in Economics and International Relations from UC
Davis and a MBA degree in International Corporate Management and Professional
Export Management at Golden Gate University in California.
Dr. Robert E. Larson joined the Company as a member of the Board of Directors
effective December 1989. Since September 1983, he has served as General Partner
of Woodside Fund, a venture capital fund, and since September 1985, he has been
a member of the Board of Directors of Skye Investment Advisers, a registered
investment adviser firm. Since 1973, Dr. Larson has been a Consulting Professor
in the Engineering-Economic Systems Department at Stanford University.
EXECUTIVE OFFICERS
The names of the Company's Executive Officers who are not Directors and certain
information about each of them are as follows:
Mr. David Kim rejoined the Company in January 1991 as Vice President, Business
Development, and since April 1991, he has served as the Company's Chief
Financial Officer. Mr. Kim was with the Company from 1981 to 1987 as Director of
Terminal Manufacturing Operations and in 1988, he was appointed as Vice
President, International Operations. From July 1988 to January 1991, Mr. Kim was
Executive Vice President of Kabil Electronics Co., Ltd., a TeleVideo OEM of CRT
terminals and personal computers in Seoul, Korea.
Mr. Anthony Thia joined TeleVideo as VP of Marketing in August 1996. Prior to
coming to TeleVideo, Mr. Thia was the Director of Marketing at ASI (Asia Source
Inc.), a national PC distributor headquartered in California, from 1994 to 1996.
From 1990 to 1994, Mr. Thia was the Sales and Marketing Manager at ASI. Mr. Thia
holds a B.S. in Computer Science from Iowa State University.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires the Company's executive officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities registered under the Exchange Act, to file with the Commission
reports of ownership and changes in ownership of Common Stock and other equity
securities of the Company. Executive officers, directors and greater than ten
percent stockholders are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on review
of this information, including written representations that no other reports
were required, the Company believes that during the fiscal year ended October
31, 1996, each of the Company's
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<PAGE> 8
executive officers, directors and holders of ten percent or more of the
Company's Common Stock timely filed all reports required to be filed pursuant to
Section 16(a) of the Exchange Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of the Company's Common Stock as of February 4, 1997: (i) all those known to the
Company to be beneficial owners of more than five percent (5%) of its Common
Stock; (ii) each Director and Director nominee of the Company; (iii) each person
named in the Summary Compensation Table; and (iv) all Executive Officers and
Directors of the Company as a group. The Company knows of no arrangements that
will result in a change in control subsequent to the date hereof. Except as
otherwise indicated, each person has sole investment and voting power with
respect to the shares shown, subject to community property laws, where
applicable.
<TABLE>
<CAPTION>
DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS BENEFICIAL OWNERSHIP
- ---------------------------------------------- --------------------
PERCENT
NAME SHARES OF TOTAL
- ---- ------ --------
<S> <C> <C>
K. Philip Hwang 28,214,092 62.1%(1)
2345 Harris Way, San Jose, California 95131
Stephen S. Kahng 50,000(2) (3)
2555 North IH-35, Round Rock, Texas 78664
Kristine Kim 90,000(4) (3)
2345 Harris Way, San Jose, California 95131
Robert E. Larson 150,000(5) (3)
850 Woodside Drive, Woodside, California 94062
All present Executive Officers and Directors as a Group
(6 persons) 28,563,092(6) 62.9%
</TABLE>
- --------------------------------------------------------------
(1) Includes an aggregate of 303,934 shares held in trust for Dr. Hwang's
children, 90,000 shares held of record by the Kyupin Philip and C.
Gemma Hwang Foundation, and the 27,820,158 shares held of record by Dr.
Hwang and his spouse.
(2) Includes 50,000 shares Mr. Kahng may acquire within 60 days of the date
of this table pursuant to the exercise of stock options.
(3) Represents less than one percent (1%).
(4) Includes 90,000 shares Ms. Kim may acquire within 60 days of the date
of this table pursuant to the exercise of stock options.
(5) Includes 150,000 shares Dr. Larson may acquire within 60 days of the
date of this table pursuant to the exercise of stock options.
(6) Includes: (i) 34,000 shares of Common Stock certain officers (not named
in the table) owned as of February 4, 1997, (ii) 25,000 shares of
Common Stock certain officers (not named in the table) may acquire
within 60 days of the date of this table pursuant to the exercise of
stock options, and (iii) the shares of Common Stock referred to in
notes 1 to 5 above.
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<PAGE> 9
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended October 31, 1996, the Board held five meetings.
Each member of the Board attended all meetings held during the 1996 fiscal year.
The Company's Audit Committee, consisting of Dr. Larson and Mr. Kahng, met five
times during fiscal 1996. This Committee reviews the independence of the
Company's independent certified public accountants, recommends the engagement
and discharge of independent accountants and reviews accounting policies,
internal accounting controls and results of audit engagements. During fiscal
1996, neither the Board of Directors nor the Company's independent certified
public accountants raised any issues with respect to matters which required
formal review.
The Company does not have any executive, compensation, nominating or other
committees.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not separately compensated for
their services as directors or as members of committees of the Board of
Directors. During fiscal 1996, directors who were not employees of the Company
received $500 for each board meeting attended and were reimbursed for reasonable
travel and other expenses. No compensation is paid for attendance at meetings of
committees of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended October 31, 1996, the Company did not have a
Compensation Committee. The full Board of Directors serves the function of the
Compensation Committees. None of the Board members or Executive Officers has,
during fiscal 1996, served on the board of directors or compensation committee
of any other entity, any of whose officers or directors served on the Board of
Directors of the Company.
COMPENSATION COMMITTEE REPORT
The Board of Directors as a whole serves the function of a Compensation
Committee since the Company has no formal Compensation Committee. The Company's
executive compensation philosophy is to attract and retain executive officers
capable of leading the Company to fulfillment of its business objectives by
offering competitive compensation opportunities that in large part reward
individual contributions as well as including a component that recognizes
overall corporate performance. In addition, long-term equity compensation is
awarded to align the interests of management and stockholders. The Company
provides Executive Officers (and key employees) of the Company with a
substantial economic interest in the long-term appreciation of the Company's
stock through the grant of stock options and participation in the Employee Stock
Options Plan, subject to vesting restrictions.
To further these objectives, compensation program for Executive Officers
generally consist of four components: (i) base cash salaries, (ii) management
bonus plan, (iii) stock options, and (iv) employee retirement plan. Total
compensation paid by the Company to its Executive Officers is designed to be
competitive with the compensation packages paid to the management of comparable
companies in the electronic manufacturing industry. The Board generally
evaluates corporate and individual performance based on factors such as
achieving profitability, increasing stockholders' value and continued growth. As
a result, a significant component of the evaluation involves a subjective
assessment of qualitative factors. Moreover, the Board does not base its
considerations on any single performance factor, nor does it
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specifically assign relative weight to factors, but rather considers a mix of
factors and evaluates the Company and individual performance against that mix.
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company to a
deduction for federal income tax purposes of no more than $1,000,000 of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1,000,000 may be deducted if it is "performance-based
compensation" within the meaning of the Code. The statute containing this law
and the applicable proposed Treasury regulations offer a number of transitional
exceptions to this deduction limit for pre-existing compensation plans,
arrangements and binding contracts. As a result, the Board believes that at the
present time it is quite unlikely that the compensation paid to any Named
Executive Officer in a taxable year which is subject to the deduction limit will
exceed $1,000,000. Therefore, the Board has not yet established a policy for
determining which forms of incentive compensation awarded to its Named Executive
Officers shall be designed to qualify as "performance-based compensation." The
Board intends to continue to evaluate the effects of the statue and any final
Treasury regulations and to comply with Code Section 162(m) in the future to the
extent consistent with the best interests of the Company.
Base Salaries
The Board approves salary changes for Executive Officers in accordance with the
salary administrative policy. Salary adjustments are generally made following
the anniversary of the Executive Officers. The salary administrative policy is a
long-standing one that is periodically reviewed by the Board. The policy sets
ranges for various positions, based on job evaluation and competitive salary
data of other companies. Within the ranges, adjustments are recommended on the
basis of position within the range, individual performance and an overall
corporate merit salary percentage factor, which is established by the Board.
Management Bonus Plan
In fiscal 1984, the Board adopted a Management Bonus Plan that provides for
annual or semi-annual cash awards to officers and other key employees as
determined annually by the Board (or by the standing Compensation Committee of
the Board, if any) based on the achievement of corporate and individual goals
set by the Board, as well as the financial condition and prospects for the
Company. The plan provides that the maximum amount that may be awarded to any
person is equal to 45% of such person's salary and the allocation of individual
bonuses is determined by the person's position, individual performance within
certain ranges, and the Company's performance. For fiscal year 1996, no cash was
paid under this plan.
Stock Options
Long-term equity incentives are granted to executive officers and other selected
employees from time to time on a discretionary basis. All options granted to
date have been for four year terms, with an exercise price equal to the Common
Stock's market value on the date of grant, and generally become incrementally
exercisable after one year of continued employment following the grant date.
Options are granted based upon recommendations of management as to the grantees,
number of options that should be granted and other terms. Options are granted to
key employees, including the executive officers, based on current performance,
anticipated future contribution based on the performance and ability to impact
corporate and/or business results.
Employee Retirement Plan
Effective January 1996, the Board adopted the TeleVideo Systems, Inc. Employee
Savings and Retirement Plan and Trust (the "401(k) Plan") pursuant to which
employees may defer compensation for income tax purposes under Section 401(a)
and 401(k) of the Code. All domestic employees of the Company, including
officers, who have completed three months of service are eligible to participate
in the 401(k) Plan.
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The Plan provides that from time to time eligible employees may contribute to
their account up to 15% of their cash compensation through payroll deductions,
subject to statutory limitations. The Company may make a discretionary matching
contribution equal to a specified percentage (determined annually by the Board,
but not exceeding 25%) of the first four percent of the compensation contributed
by the employee. Employee contributions in calendar 1996 could not exceed $
9,500. In addition, contributions of "highly compensated" employees (as defined
in the Code) may be further limited by anti-discrimination rules governing
401(k) plans.
Employees have a 100% vested interest in their contributions to the 401(k) Plan
and the earnings thereon at all times. An employee's interest in the Company's
matching discretionary contributions and the earnings thereon vest at a rate of
33.33% per year for each year of the employee's service after 1986, except that
such interest will be fully vested as the result of the disability, death or
retirement of the employee or the termination of the Plan. All contributions are
held by a trustee under a written trust agreement. Participants may direct the
investment of their accounts among certain specified alternatives. Such
alternatives do not include an investment in the Company's Common Stock.
Chief Executive Officer Compensation
The Company's policy is to compensate its officers, including the Chief
Executive Officer, with salary commensurate with the base compensation paid by
competitive employers, supplemented by compensation in recognition of
performance. Dr. Hwang was named Chief Executive Officer effective October 1976.
He is entitled to a salary at an annual rate of $200,000 which, in fiscal 1990,
he agreed to temporarily reduce by 30%. Dr. Hwang's base salary in fiscal 1996,
therefore, was set at $140,000 which was the same as the previous years.. He is
also entitled to participate in the Management Bonus Plan. Dr. Hwang did not
receive a bonus under the annual bonus plan and was awarded no stock options
during the fiscal year ended October 31, 1996. The Board based this compensation
package on an assessment of various factors related to the Company's
profitability and cash position. As in previous years, in making its
compensation decisions the Board also took into consideration executive
compensation information from other companies in the industry, including
industry surveys, publicly available information and reports from compensation
consulting firms. The Board has approved no change in base salary for Dr. Hwang
for fiscal 1997.
Board of Directors
K. Philip Hwang
Stephen S. Kahng
Kristine Kim
Robert E. Larson
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EXECUTIVE COMPENSATION
The following table shows executive compensation paid or accrued by the Company
for services rendered to the Company or its subsidiaries in all capacities
during the three fiscal years ended October 31, 1996, to the Company's Chief
Executive Officer and each of the Company's other Executive Officers (the "Named
Executive Officers") whose total annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
OTHER ANNUAL OPTIONS/ OTHER
NAME AND PRINCIPAL COMPENSATION RESTRICTED SARS LTIP COMPEN-
POSITION YEAR SALARY($) ($) STOCK (SHARES) PAYOUTS SATION
- -------- ---- --------- --- ----- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
K. Philip Hwang 1996 140,000 0 0 0 0 0
Chief Executive Officer 1995 140,000 0 0 0 0 0
1994 140,000 0 0 0 0 0
</TABLE>
OTHER COMPENSATION
Stock Option Grants in Last Fiscal Year
The following table provides information with respect to options granted in the
Last Fiscal Year to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------
NAME GRANTED(1) YEAR(2) ($/SH) DATE 5%($)(3) 10%($)(3)
- ---- ----------- ---------- ------ ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
K. Philip Hwang - - - -
Kristine Kim 100,000 12.36% $0.66 02/09/06 $41,507 $105,187
</TABLE>
(1) All options were granted under the 1991 Incentive Stock Option Plan and
have exercise prices equal to the fair market value of the Company's
Common Stock on the date of grant.
(2) Based on 809,000 options granted under all option plans to employees
during the Last Fiscal Year.
(3) Potential realizable value is based on an assumption that the market
price of the stock appreciates at the stated rate, compounded annually,
from the date of grant until the end of the 10-year term of the option.
These values are calculated based on requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate or projection of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of
the Common Stock.
10
<PAGE> 13
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information with respect to option exercises in the
Last Fiscal Year by the Named Executive Officers and the value of their
unexercised options at Fiscal Year End.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
SHARES AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE END(#)(2) FISCAL YEAR END($)(2)(3)
ON REALIZED ----------- ---------------------------
NAME EXERCISE(#) ($)(1) VESTED UNVESTED VESTED UNVESTED
- ---- ------------ ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
K. Philip Hwang -- -- -- -- -- --
Kristine Kim 2,500 $1,025 40,000 50,000 $ 1,050 $ 1,313
10,000 $2,500 -- 100,000 -- $(25,375)
</TABLE>
(1) Market value of the shares on date of exercise, less the exercise
price.
(2) All options are immediately exercisable, but shares issued upon
exercise are subject to vesting restrictions. Accordingly, there were
no unexercisable options outstanding at fiscal year end.
(3) Value is based on fair market value of the Company's common stock of
$0.40625 per share on October 31, 1996 (the last trading day of the
Last Fiscal Year), less the exercise price.
Long Term Incentive Plan Awards: No long term incentive awards were made by the
Company during fiscal 1996. Accordingly, a table setting forth such awards has
not been included.
EMPLOYEE BENEFIT PLANS
TeleVideo Systems, Inc. 1991 Incentive Stock Option Plan
On November 12, 1991, the Board adopted the TeleVideo Systems, Inc. 1991
Incentive Stock Option Plan (the "1991 ISO Plan"), which was approved by the
stockholders of the Company at the 1992 Annual Meeting. This plan authorizes
4,000,000 shares of Common Stock for options to be granted to employees of the
Company including officers. Options granted under the 1991 ISO Plan are intended
to qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). A total of 250,000
shares of stock options were granted to the Company Officers and members of the
Board during the 1996 fiscal year.
CASH PROFIT SHARING PLAN
Effective May 1984, the Board approved a Cash Profit Sharing Plan for employees
(other than Executive Officers, Directors, and sales persons covered by the
sales incentive plan) that provides for semi-annual cash payments to eligible
employees who complete six months of service with the Company. The cash payment
is determined by a formula based upon the Company's contribution of a percentage
of the after-tax profits of the Company and the ratio that each eligible
employee's compensation bears to the eligible compensation of all employees in
the plan. For fiscal year 1996, no amount was paid under this plan.
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the two fiscal years ended October 31, 1996, there were no Company
transactions exceeding $60,000 in which any Director or Executive Officer,
Director nominee, principal stockholder or member of any such person's immediate
family had a direct or indirect material interest. Similarly, there are no such
proposed transactions pending.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative stockholder returns on the Company's
Common Stock, the Standard & Poor's 500 and the S & P High Tech Composite
Indexes. The graph covers the five-year period from December 31, 1991 through
December 31, 1996, and assumes a $100 investment made on December 31, 1991. Each
of the three measures of cumulative total return assumes reinvestment of
dividends. The stock performance shown on the graph below is not necessarily
indicative of future performance.
[GRAPH OF TOTAL RETURN OF INDEXES]
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
TeleVideo Systems, Inc. 100 240 240 221 441 221
Standard & Poor's 500 100 104 112 110 148 178
Peer Group(1) 100 102 122 142 202 286
</TABLE>
- ----------------------------
(1) The Peer Group Index is based on the Standard & Poor's High Tech
Composite Index.
12
<PAGE> 15
PROPOSAL NO. 2
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO
TELEVIDEO, INC.
The Board of Directors has approved a change in the name of the Company to
TeleVideo, Inc. The Board considered the name change to be advisable and
appropriate in order to better reflect the Company's existing lines of business.
The Board believes the current name could be considered too restrictive for a
company that primarily designs and markets monitors, terminals and multimedia
products. The Board also believes that the change in the Company's name will not
cause confusion in the marketplace with existing customers since it is
substantially similar to the corporate name since inception.
To effect this change, the stockholders must approve an amendment to the
Certificate of Incorporation to amend Article I of the Company's Certificate of
Incorporation. The amendment will make no other changes to the Certificate of
Incorporation. The name change will become effective upon the filing of a
Certificate of Amendment of Certificate of Incorporation in the Office of the
Delaware Secretary of State. The Company expects that the appropriate filing
will be made with the Delaware Secretary of State promptly upon approval by the
stockholders of this proposal.
VOTING REQUIREMENTS
The affirmative vote of the holders of a majority of the outstanding shares
entitled to vote thereon will be required to approve the amendment of the
Certificate of Incorporation to change the Company's name to TeleVideo, Inc.
The Board of Directors recommends a vote FOR the approval of the amendment to
the Certificate of Incorporation to effect the name change to TeleVideo, Inc.
13
<PAGE> 16
PROPOSAL NO. 3
RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP as the Company's
independent auditors for the fiscal year ending October 31, 1997 and has further
directed that management subject the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Grant Thornton LLP has
audited the Company's financial statements since 1991. Representatives of Grant
Thornton LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Grant Thornton LLP as the Company's
independent auditors is not required by the Company's By-laws or otherwise.
However, the Board is submitting the selection of Grant Thornton LLP to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Board will reconsider whether or
not to retain that firm. Even if the selection is ratified, the Board, in its
discretion, may direct the appointment of a different independent accounting
firm at any time during the year if the directors determine that such a change
would be in the best interests of the Company and its stockholders.
VOTING REQUIREMENTS
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Grant Thornton LLP.
The Board of Directors recommends a vote FOR the ratification of the appointment
of Grant Thornton LLP as the Company's independent auditors for the fiscal year
ending October 31, 1997.
14
<PAGE> 17
REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for fiscal year 1996, which contains
the Consolidated Financial Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations, is being mailed with this
Proxy Statement to stockholders entitled to notice of the Annual Meeting.
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 Annual Meeting to be held in 1998 must be
received by the Company no later than October 31, 1997, in order for them to be
considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting. It is recommended that stockholders submitting
proposals direct them to the Secretary of the Company and use "certified mail,
return receipt requested" in order to provide proof of timely receipt. No such
proposals were received with respect to the Annual Meeting scheduled for March
24, 1997.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. However,
if any other matters are properly presented to the meeting, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
STOCKHOLDERS PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
Annual Meeting of Stockholders to be held in 1998 must be received by the
Company no later than October 31, 1997, in order to be included in the Proxy
Statement and proxy relating to that meeting.
By Order of the Board of Directors
K. David Kim
Chief Financial Officer
The Board of Directors hopes that stockholders will attend the meeting. Whether
or not you plan to attend, you are urged to complete, sign and return the
enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
March 3, 1997
15
<PAGE> 18
TELEVIDEO SYSTEMS, INC.
2345 HARRIS WAY, SAN JOSE, CALIFORNIA 95131
PROXY SOLICITED BY BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
MARCH 24, 1997
KATHY CLEVELAND and JOYCE YAU, or each of them, each with the power of
substitution and revocation, are hereby authorized to represent the undersigned,
with all powers which the undersigned would possess if personally present, and
to vote the TeleVideo Systems, Inc. Common Stock of the undersigned at the 1997
Annual Meeting of Stockholders of TeleVideo Systems, Inc., which is being held
at Sheraton San Jose Hotel, 1801 Barber Lane, Milpitas, California 95035, on
Monday, March 24, 1997, at 9:30 a.m. California time, and at any postponements
or adjournments of that meeting, as set forth below, and, in their discretion,
upon any other business that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW:
1. To elect directors to serve for the ensuing year and until their successors
are elected.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked below) to vote for all nominees listed below
K. PHILIP HWANG, STEPHEN S. KAHNG, KRISTINE KIM, ROBERT E. LARSON
(INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name below:)
- --------------------------------------------------------------------------------
<PAGE> 19
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
2. To approve the amendment of the Company's Certificate of Incorporation
to change the corporate name from TeleVideo Systems, Inc. To TeleVideo,
Inc.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the selection of Grant Thornton LLP as the independent public
accountant of TeleVideo Systems, Inc. for the 1997 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion with respect to any other matters that may properly
come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAME AND FOR PROPOSALS 2 AND 3
SPECIFIED HEREIN.
Dated: ____________________________, 1997
_________________________________________
If shares are issued in the names of two
or more persons, each of you should sign
the proxy. If the proxy is executed by a
corporation, it should be signed in the
corporate name by an authorized officer.
When signing as attorney, executor,
administrator, trustee, or guardian, or
in any representative capacity, give full
title as such.
