SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GenRad, Inc.
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(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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GenRad, Inc.
7 Technology Park Drive
Westford, Massachusetts 01886-0033
Notice of Annual Meeting of Shareholders
to be held on May 13, 1999
The Annual Meeting of Shareholders of GenRad, Inc. (the "Company") will be
held on Thursday, May 13, 1999 at 11:00 a.m. at the BankBoston Auditorium, 100
Federal Street, Boston, Massachusetts, for the following purposes:
1. To elect two Class III Directors to serve for three-year terms and until
their successors are duly elected and qualified.
2. To consider and act upon a proposal to amend the Company's 1991 Equity
Incentive Plan.
3. To consider and act upon such other business as may properly come before
said Annual Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 25, 1999 will be
entitled to notice of and to vote at said Annual Meeting.
By Order of the Board of Directors
WALTER A. SHEPHARD, CLERK
April 27, 1999
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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 TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED
IN THE UNITED STATES.
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<PAGE>
GenRad, Inc.
7 Technology Park Drive
Westford, Massachusetts 01886-0033
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 13, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of GenRad, Inc. ("GenRad" or the "Company"), 7
Technology Park Drive, Westford, Massachusetts 01886-0033, of proxies in the
enclosed form to be voted at the Annual Meeting of Shareholders of GenRad, to
be held on Thursday, May 13, 1999 at 11:00 a.m. at the BankBoston Auditorium,
100 Federal Street, Boston, Massachusetts, and at any adjournment thereof (the
"Meeting"), for the purposes stated in the accompanying Notice of Meeting.
Any person giving a Proxy may revoke it at any time prior to its being
voted by filing written notice with the Clerk of GenRad, by executing and
delivering a Proxy bearing a later date, or by attending the Meeting and voting
in person. If the Proxy is properly executed and is not revoked, it will be
voted at the Meeting in the manner specified. If no instructions are specified,
the shares represented by the Proxy will be voted for the election of the
nominees to the Board of Directors listed below and for the approval of Item 2
in the Notice of Meeting.
The Annual Report of GenRad for the fiscal year ended January 2, 1999 and
this Proxy Statement were first distributed or mailed to shareholders on or
about April 27, 1999.
Voting Securities
GenRad's Common Stock, $1.00 par value per share, is the only class of
voting securities outstanding and entitled to be voted at the Meeting. The
Board of Directors has fixed March 25, 1999 as the record date for determining
shareholders who are entitled to notice of and to vote at the Meeting. At the
close of business on such record date, there were outstanding 29,306,183 shares
of Common Stock. Each share is entitled to one vote. A majority of the issued
and outstanding shares constitutes a quorum.
<PAGE>
Certain Shareholders
The following table sets forth, as of March 25, 1999, certain information
regarding the beneficial ownership of the Company's outstanding Common Stock by
(i) each person known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each executive officer named in the
Summary Compensation Table below and (iii) all directors and executive officers
as a group. All information with respect to beneficial ownership by the
Company's directors, officers or beneficial owners has been furnished by the
respective director, officer or beneficial owner, as the case may be. The
number of shares set forth below includes shares beneficially owned by spouses
and minor children; the named persons disclaim any beneficial interest in the
shares so included.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent
Name of Beneficial Owner Beneficially Owned (1) of Class
- --------------------------------------------------------- ------------------------ ---------
<S> <C> <C>
Basil P. Regan .......................................... 4,232,650(2) 14.4%
Regan Partners, L.P.
6 East 43rd Street
New York, New York 10017
Morgan Stanley Dean Witter & Co. ........................ 3,506,192(3) 12.0%
1585 Broadway
New York, New York 10036
Munn, Bernhard & Associates, Inc. ....................... 1,971,865(4) 6.7%
6 East 43rd Street
New York, New York 10017
James F. Lyons .......................................... 1,058,390(5) 3.6%
Sarah H. Lucas .......................................... 224,691(6) *
Paul H. Geere ........................................... 126,180(7) *
Michael W. Schraeder .................................... 162,500(8) *
Paul Pronsky, Jr. ....................................... 11,846(9) *
All Directors and Executive Officers as a Group ......... 1,657,886(10) 5.7%
</TABLE>
- ------------
* Less than 1%.
(1) The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission ("SEC"), and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within 60 days of March 25, 1999 through the exercise of any stock option
or other right. The inclusion herein of such shares, however, does not
constitute an admission that the named shareholder has a direct or
indirect pecuniary interest in such shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with
respect to all shares of Common Stock listed as owned by such person or
entity.
(2) The information reported is based on an amended Schedule 13G, dated
February 9, 1999, filed with the SEC by Basil P. Regan ("Regan") and Regan
Partners, L.P. ("Regan Partners"). Regan is the general partner of Regan
Partners. Regan shares dispositive and voting power with respect to
4,130,200 shares of Common Stock. Regan Partners shares dispositive and
voting power with respect to 1,987,800 shares of Common Stock.
(3) The information reported is based on an amended Schedule 13G, dated
January 10, 1999, filed with the SEC by Morgan Stanley Dean Witter & Co.
("Morgan Stanley") and Morgan Stanley Dean Witter Investment Management
Limited ("Morgan Stanley Management"). Morgan Stanley is a parent holding
company of Morgan Stanley Management. Morgan Stanley and Morgan Stanley
Management are each registered investment advisors. Morgan Stanley shares
dispositive power with respect to 3,506,192 shares of Common Stock and
shares voting power with respect to 2,875,642 shares of Common Stock.
Morgan Stanley Management shares dispositive power with respect to
3,041,068 shares of Common and shares voting power with respect to
2,412,018 shares of Common Stock.
2
<PAGE>
(4) The information reported is based on an amended Schedule 13G, dated
February 12, 1999, filed with the SEC by Munn, Bernhard & Associates,
Inc., a registered investment adviser ("MBA"), which has shared
dispositive power, but no voting power, with respect to the indicated
shares. Amount set forth does not include shares of Common Stock held by
certain individuals affiliated with MBA who disclaim membership in a group
with MBA.
(5) Amount shown includes options to purchase 833,334 shares of Common Stock.
(6) Amount shown includes options to purchase 216,350 shares of Common Stock.
On March 3, 1999, Ms. Lucas resigned as an executive officer of the
Company, and on April 23, 1999, her employment with the Company
terminated.
(7) Amount shown includes options to purchase 125,000 shares of Common Stock.
(8) Amount shown is comprised of options to purchase shares of Common Stock.
(9) On January 28, 1999, Mr. Pronsky's employment with the Company terminated.
(10) Amount shown includes options to purchase 105,800 shares of Common Stock
held by executive officers not named in the Summary Compensation Table
below. Also includes the options referenced in notes (5), (7) and (8)
above and the options and restricted stock referenced in notes (2) and (3)
on page 6.
Solicitation
GenRad will bear the entire cost of preparing, assembling, printing and
mailing this Proxy Statement, the enclosed Proxy and any additional material
which may be furnished to shareholders. Further solicitation of Proxies may be
made by telephone or other communication. Brokers, custodians and fiduciaries
in whose names Common Stock is held will be requested to forward Proxy
soliciting material to the beneficial owners of such stock and GenRad will
reimburse them for this service. GenRad has retained Georgeson & Company Inc.
as proxy solicitor to aid in the solicitation of Proxies at an estimated cost
of $6,000.
Votes Required
As long as a quorum is present, the vote of a plurality of the votes cast
by the stockholders entitled to vote on the election of Directors is necessary
for the election of the Class III Directors. The affirmative vote of a majority
of the votes cast on the proposal is required for approval of the amendment to
the Company's 1991 Equity Incentive Plan, provided that the total votes cast on
the proposal represents over 50% in interest of all securities entitled to vote
on the proposal. Votes may be cast in favor of the election of each of the
nominees for Class III Directors or withheld; votes that are withheld will have
no effect on the outcome of the election of the Class III Directors. For
purposes of the vote on the amendment to the Company's 1991 Equity Incentive
Plan, an abstention or a broker non-vote will have the effect of a vote against
the proposal unless holders of more than 50% in interest of all securities
entitled to vote on the proposal cast votes, in which event neither an
abstention nor a broker non-vote will have any effect on the result of the
vote.
ITEM 1.
ELECTION OF DIRECTORS
Pursuant to Section 50A of Massachusetts General Laws Chapter 156B, the
Company has a classified Board of Directors consisting of three Class I
Directors, three Class II Directors and two Class III Directors. The Class I,
Class II and Class III Directors will serve until the Annual Meetings of
Shareholders to be held in 2000, 2001 and 1999, respectively, and until their
respective successors are duly elected and qualified. Under Massachusetts law,
the Board of Directors may be expanded, and vacancies and newly created
directorships may be filled, only by a majority vote of the remaining
directors. At each Annual Meeting of Shareholders, directors are elected for a
full term of three years to succeed those whose terms are expiring. At the
Meeting, the shareholders will elect two Class III Directors, whose terms will
extend until the 2002 Annual Meeting.
The nominees for Class III Directors, Russell A. Gullotti and William G.
Sheerer, were nominated by the Board of Directors in January 1999.
Shares represented by all Proxies received by the Board of Directors and
not so marked as to withhold authority to vote for any individual nominee will
be voted (unless one or more nominees are unable or unwilling to serve)
3
<PAGE>
for the election of the two nominees for Class III Directors. The Board of
Directors knows of no reason why any such nominee should be unable or unwilling
to serve, but if such should be the case, the persons named in the Proxy may
vote the Proxy for the election of a substitute.
Nominees for Director and Continuing Directors
The following table sets forth certain information about each nominee for
Director who will serve (if elected) until 2002 and each member of the Board of
Directors whose term expires in 2000 or 2001.
<TABLE>
<CAPTION>
Number of
Shares of
Year Became Common Stock
a Director Beneficially Percent
Biographical Summaries of Nominees and Directors of the Company Owned (1) of Class
- --------------------------------------------------------------------------- ---------------- --------------------- ---------
<S> <C> <C> <C>
Nominees for Directors Whose Terms Will Expire in 2002
(Class III Directors)
William G. Scheerer, 61, Vice-President, Kalman Saffran Associates, Inc.
and President, Performance Quest, LLC, Morganville, New Jersey ........... 1988 24,850(2)(3) *
Mr. Scheerer has been Vice-President of Kalman Saffran
Associates, Inc. since January, 1998. Since January 1997, Mr.
Scheerer has been President of Performance Quest, LLC,
Morganville, New Jersey. From February 1996 to September
1996 he was Infrastructure Operations Vice President at Lucent
Technologies. From January 1994 to February 1996 he was
Quality, Engineering, Software & Technologies (QUEST
Partnership) Vice President at AT&T Bell Laboratories. From
January 1993 to January 1994 he was the Executive Director,
Quality, Engineering, Software & Technologies at AT&T Bell
Laboratories. Mr. Scheerer is a director of LeCroy Corp.
Russell A. Gullotti, 56, Chairman, President and Chief Executive
Officer, National Computer Systems, Inc., Eden Prairie, Minnesota . 1995 28,000(2)(3) *
Mr. Gullotti has been President and Chief Executive Officer of
National Computer Systems, Inc. since October 1994 and
Chairman of the Board of Directors since May 1995. From
January 1994 until October 1994, he was President, Americas
Area, at Digital Equipment Corporation. From 1982 to January
1994, Mr. Gullotti held senior executive positions in sales and
marketing services and administration at Digital Equipment
Corporation. Mr. Gullotti is a director of MTS Systems
Corporation.
Directors Whose Terms Will Expire in 2001
(Class II Directors)
William S. Antle III, 54, Chairman, President and Chief Executive
Officer, Oak Industries Inc., Waltham, Massachusetts ..................... 1995 28,000(2)(3) *
Mr. Antle has been President and Chief Executive Officer of Oak
Industries Inc., a manufacturer of components for leading
manufacturers in the telecommunications industry, since
December 1989. He became Chairman of the Board in 1996. Mr.
Antle is a director of Nvest Companies, L.P. and ESCO
Corporation. ..........................................................
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of
Year Became Common Stock
a Director Beneficially Percent
Biographical Summaries of Nominees and Directors of the Company Owned (1) of Class
- -------------------------------------------------------------------- ---------------- ----------------------- ---------
<S> <C> <C> <C>
Richard G. Rogers, 66, Internal Consultant, Tokyo Electron Limited,
Tokyo, Japan ...................................................... 1995 32,000(2)(3) *
Mr. Rogers has been an Internal Consultant with Tokyo Electron
Limited, located in Tokyo, Japan, a company that designs,
manufactures, sells and services semiconductor manufacturing
equipment, since January 1999. From September 1997 to
December 1998, Mr. Rogers was President of Tokyo Electron
Massachusetts. From March 1994 to August 1997, Mr. Rogers
was President of Tokyo Electron America in Austin, Texas, a
company that sells and services products imported from Tokyo
Electron Limited.
Ed Zschau, 59, Professor of Management, Harvard University,
Cambridge, Massachusetts and Visiting Professor, Princeton
University, Princeton, New Jersey ................................. 1995 26,500(2)(3) *
Mr. Zschau has been Professor of Management at Harvard
University since May 1997 and on the Harvard faculty since
February, 1996. Mr. Zschau has been a Visiting Professor at
Princeton University from September 1997 to February 1998 and
from September 1998 to present. From April 1993 to July 1995,
Mr. Zschau was General Manager, Storage Systems Division at
IBM Corporation. Mr. Zschau is a director of The Reader's Digest
Association, Inc. and StarTek, Inc.
Directors Whose Terms Will Expire in 2000
(Class I Directors)
James F. Lyons, 64, President and Chief Executive Officer, GenRad,
Inc., Westford, Massachusetts ..................................... 1993 1,058,381(4) 3.6%
Mr. Lyons has been President and Chief Executive Officer of the
Company since July 1993.
Adriana Stadecker, 52, Director, Human Resources, BTR plc, London,
England ........................................................... 1994 29,500(2)(3) *
Ms. Stadecker has been the Director of Human Resources at BTR
plc since July 1997. From July 1994 until June 1997 Ms.
Stadecker was Founder and President of EPIC International.
From October 1992 through June 1994, Ms. Stadecker was
employed by Digital Equipment Corporation, and, in January
1993, she became Vice President of Executive Operations for
Digital Equipment Corporation.
Lowell B. Hawkinson, 56, Chairman of the Board and Chief Executive
Officer, Gensym Corporation, Cambridge, Massachusetts ............. 1995 28,000(2)(3) *
Mr. Hawkinson has been Chief Executive Officer and Chairman of
the Board of Directors of Gensym Corporation, a software
company, since September 1986.
</TABLE>
5
<PAGE>
- ------------
* Less than 1%.
(1) The number of shares beneficially owned by each director is determined
under rules promulgated by the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares
which the individual has the right to acquire within 60 days of March 25,
1999 through the exercise of any stock option or other right. The
inclusion herein of such shares, however, does not constitute an admission
that the named shareholder has a direct or indirect pecuniary interest in
such shares. Unless otherwise indicated, each person named in the table
has sole voting power and investment power (or shares such power with his
or her spouse) with respect to all shares of Common Stock listed as owned
by such person.
(2) Includes for the following persons options to purchase the indicated number
of shares of Common Stock: Ms. Stadecker (7,500 shares), Mr. Antle (10,000
shares), Mr. Gullotti (20,000 shares), Mr. Hawkinson (20,000 shares), Mr.
Rogers (20,000 shares), Mr. Zschau (20,000 shares) and Mr. Scheerer
(10,000 shares).
(3) Includes 1,500 shares of restricted stock issued on August 30, 1996 and
2,500 shares of restricted stock issued on each of August 29, 1997 and
August 31, 1998 to each of Mr. Scheerer and Ms. Stadecker, 1,500 shares of
restricted stock issued on August 30, 1996 and 2,500 shares of restricted
stock issued on each of August 29, 1997 and August 31, 1998 to each of
Messrs. Antle, Gullotti, Hawkinson and Rogers and 1,500 shares of
restricted stock issued on August 30, 1996 and 2,500 shares of restricted
stock issued on each of August 29, 1997and August 31, 1998 to Mr. Zschau.
These shares may not be transferred prior to the earlier to occur of (i)
the first, second and third anniversaries of the respective dates of
grant, each with respect to one-third of the shares, (ii) the resignation
of the director from the Board of Directors with the consent of the
majority of the members of the Board, or the death or disability of the
director, or (iii) a change in control of the Company. Further, if a
director resigns from the Board of Directors or refuses to stand for
re-election without the consent of the majority of the members of the
Board prior to the date upon which the restrictions on transfer lapse, the
director forfeits to the Company all shares of restricted stock issued to
such director during the year preceding such resignation or refusal.
(4) Amount shown includes options to purchase 833,334 shares of Common Stock.
Further Information Regarding the Board of Directors and Certain Executive
Officers
The Compensation Committee of the Board reviews and makes recommendations
to the Board on matters relating to employee compensation and benefits,
determines the compensation of officers and other key employees and administers
the Company's 1982 Stock Option Plan, 1991 Equity Incentive Plan, Employee
Stock Purchase Plan and the Company's Non-Qualified Stock Option Plan. The
members are Ed Zschau (Chair), William S. Antle III, Lowell B. Hawkinson and
Richard Rogers. The Corporate Governance Committee of the Board articulates
matters which should be raised to the Board and defines the Board's
accountability. The members are William G. Scheerer (Chair), Adriana Stadecker
and Russell A. Gullotti. The Audit Committee of the Board reviews and monitors
the Company's financial reporting and accounting practices, and works with
representatives of the Company's independent accountants in establishing the
scope of the audit and conducting an independent review of the audit after its
completion. The members are Russell A. Gullotti (Chair), William S. Antle III,
Adriana Stadecker and Richard G. Rogers. The Technology and Quality Committee
of the Board periodically reviews issues concerning product technology with the
Company's technical management and reports its assessments to the Board. The
members are Lowell B. Hawkinson (Chair), William G. Scheerer and Ed Zschau.
In 1998 the Board of Directors met 9 times and acted twice by unanimous
written consent, its Audit Committee met 8 times and its Compensation Committee
met once. All directors attended at least 75% of the meetings of the Board and
of all meetings of the committees of the Board on which they served.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership
6
<PAGE>
of Common Stock and other equity securities of the Company. Officers, directors
and greater than ten percent beneficial owners are required to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 2, 1999, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent beneficial owners were satisfied. On
March 16, 1999, Paul Pronsky, Jr. filed a Form 4 with the Securities and
Exchange Commission with respect to transactions executed during February,
1999.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information for the past three
fiscal years with respect to the annual and long-term compensation of the
Company's Chief Executive Officer and certain other highly compensated
executive officers of the Company during the most recent fiscal year (such
executive officers are sometimes collectively referred to in this Proxy
Statement as the "named executive officers"):
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------- -------------
Other Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
Name and Principal Position(a) Year ($)(b) ($) ($)(c) Options (#) ($) (d)
- ------------------------------------ ------ ----------- ---------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Lyons ..................... 1998 $453,573 $-- $4,412 -- $32,154
President, Chief Executive Officer 1997 432,504 359,502 4,412 350,000 4,750
1996 357,504 230,752 1,378 -- 8,750
Paul H. Geere ...................... 1998 240,303 -- 1,659 -- 35,613
President, Managing Director 1997 196,689 246,320 697 -- 55,116
Advanced Diagnostic Solutions 1996 161,128 115,187 -- 250,000 32,524
Sarah H. Lucas ..................... 1998 201,618 -- 2,625 100,000 --
Vice President, Chief Strategic 1997 200,004 150,000 3,526 -- 4,750
Officer 1996 191,664 100,000 3,367 150,000 8,750
Michael W. Schraeder ............... 1998 276,035 -- 4,091 100,000 6,613
President, Electronic Manufacturing 1997 200,004 313,396 3,526 155,000 25,027
Solutions 1996 158,334 131,483 -- 4,750
Paul Pronsky, Jr. .................. 1998 194,887 -- 1,376 -- --
Vice President, Chief Financial 1997 200,004 120,000 -- -- 14,994
Officer 1996 16,667 -- -- -- --
</TABLE>
- ------------
(a) Mr. Pronsky joined the Company in December, 1996, as Vice President and
Chief Financial Officer. On January 28, 1999, Mr. Pronsky's employment
with the Company terminated. On March 3, 1999, Ms. Lucas resigned as an
executive officer of the Company, and on April 23, 1999, her employment
with the Company terminated.
(b) Mr. Geere's salary is calculated on the basis of an annual average
conversion rate of [British pound]1.00\$1.657085 between the British pound
and U.S. dollar during the 1998 fiscal year.
(c) The amounts shown represent the dollar value of the difference between the
price paid by the named executive officer for Common Stock under the
Company's Employee Stock Purchase Plan and the fair market value of such
stock on the date of purchase.
(d) For Mr. Lyons, the amount shown for 1998 constitutes payments by the
Company for housing allowance. The amount shown for Mr. Geere in 1998 is
comprised of payments of $20,055 under the Company's defined contribution
plan and $15,558 for automobile allowance. The amount shown for Mr.
Schraeder in 1998 is comprised of payments for automobile allowance.
Severance Agreements
The Company entered into severance agreements (each a "Severance
Agreement") with Messrs. Pronsky, Geere, Schraeder and Ms. Lucas (each a "Named
Executive") effective as of May 9, 1997. Under each Severance Agreement the
Named Executive is entitled to a base salary, all benefits generally made
available to officers of the Company and is eligible for an annual performance
bonus. Each Severance Agreement will terminate two years from the date the
Company notifies the Named Executive that it is terminating the Severance
Agreement. Each Severance Agreement provides that either party may terminate
such Named Executive's employment with the Company upon 30 days' notice to the
other party; provided, however, if (i) the Company terminates the Named
Executive's employment without cause; (ii) the Named Executive dies or becomes
disabled; or (iii) the Named Executive terminates his or her employment with
the Company for good reason, then the Company will pay to the Named Executive a
lump-sum cash amount equal to one hundred percent of the Named Executive's base
salary and will continue to provide benefits to the Named Executive for a
period of one year from the date of the
8
<PAGE>
termination. In addition, all options to purchase Company stock held by the
Named Executive will immediately become exercisable. In the event of a change
in control of the Company, if the Named Executive is terminated within three
years of the date of the change in control, then the Company will pay to the
Named Executive a lump-sum cash amount equal to two hundred percent of the sum
of (a) the Named Executive's base salary and (b) an amount equal to the bonus
earned by the Named Executive for the prior fiscal year. In addition, the
Company will pay to the Named Executive the pro-rata portion of the Named
Executive's target bonus for the year of termination and will continue to
provide benefits to the Named Executive for a period of three years from the
date of termination. Moreover, all options to purchase Company stock held by
the Named Executive will become immediately exercisable. However, the payments
and benefits to which each Named Executive will be entitled under each
Severance Agreement will be reduced to the extent necessary to prevent the
Named Executive from becoming liable for the excise tax levied on certain
"excess parachute payments" under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"). Each Severance Agreement imposes certain
confidentiality and non-competition obligations on the Named Executive and
provides each Named Executive with indemnification rights.
In addition to the Severance Agreements described above, the Company
entered into a severance agreement with Mr. Lyons (the "Executive") effective
as of May 9, 1997 which provides that either the Company or the Executive may
at any time terminate the Executive's employment with the Company upon 30 days'
notice to the other party; provided, however, if (i) the Company terminates the
Executive's employment without cause; (ii) the Executive dies or becomes
disabled; or (iii) if the Executive terminates his employment with the Company
for good reason, then the Company will pay to the Executive a lump-sum cash
amount equal to three hundred percent of the sum of (a) the Executive's current
base salary and (b) the bonus for the previous year. In addition, the Company
will continue to provide benefits to the Executive for a period of three years
from the date of termination. Moreover, all options to purchase Company stock
held by the Executive will become immediately exercisable. However, the
payments and benefits to which the Executive will be entitled under the
agreement will be reduced to the extent necessary to prevent the Executive from
becoming liable for the excise tax levied on certain "excess parachute
payments" under Section 4999 of the Code.
On January 28, 1999, Mr. Pronsky's employment with the Company terminated.
Upon such termination, Mr. Pronsky became entitled to receive severance
payments and other benefits under his Severance Agreement with the Company.
On March 3, 1999, Ms. Lucas resigned as an executive officer of the
Company, and on April 23, 1999 her employment with the Company terminated. Upon
such termination, Ms. Lucas became entitled to receive the severance payments
and other benefits under her Severance Agreement with the Company.
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding options
granted during the fiscal year ended January 2, 1999 by the Company to each of
the named executive officers:
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Rates of
Stock Price Appreciation
Individual Grants for Option Term(a)
---------------------------------------------------------------------- -------------------------
Number of Securities % of Total Options Exercise or
Underlying Options Granted to Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
- ------------------------------ ---------------------- ---------------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James F. Lyons ............... -- -- -- -- -- --
Paul H. Geere ................ -- -- -- -- -- --
Sarah H. Lucas ............... 50,000 2.35% $ 15.94 10/23/08 501,229 1,270,212
50,000 2.35% $ 30.00 10/23/08 943,342 2,390,613
Michael W. Schraeder ......... 100,000 4.7% $ 30.00 6/5/08 1,886,684 4,781,227
Paul Pronsky Jr. ............. -- -- -- -- -- --
</TABLE>
- ------------
(a) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock appreciation exercises
will depend on the future performance of the Common Stock and the date on
which the options are exercised. Amounts shown assume that all options
vest in accordance with the terms of each executive officer's own stock
option agreement. The Company has not granted stock appreciation rights to
date.
9
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the aggregate dollar value of all options
exercised during the last fiscal year and the total number and value of
unexercised options held on January 2, 1999 by each of the named executive
officers:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year End(#) In-the-Money Options
(b) at Fiscal Year End($) (c)
----------------------------- ----------------------------
Shares Acquired Value Realized
Name on Exercise(#) ($) (a) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ----------------- --------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
James F. Lyons ........... -- $ -- 716,667 233,334 $5,687,500 $ --
Paul H. Geere ............ -- -- 62,500 125,000 203,125 406,250
Sarah H. Lucas ........... -- -- 222,150 175,000 1,743,000 243,750
Michael W. Schraeder ..... -- -- 137,500 252,500 368,750 56,250
Paul Pronsky, Jr. ........ 25,000 78,563 -- 175,000 -- 240,625
</TABLE>
- ------------
(a) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise multiplied by the number of shares to which the exercise relates.
(b) While the figures are set forth as of the fiscal year-end, upon the
termination of Mr. Pronsky's employment with the Company on January 28,
1999 and Ms. Lucas' employment with the Company on April 23, 1999, all
options held by each of Mr. Pronsky and Ms. Lucas became immediately
exercisable.
(c) The closing price for the Company's Common Stock on the New York Stock
Exchange on December 31, 1998, the last business day of fiscal 1998, was
$15.75. Value is calculated on the basis of the positive difference
between the option exercise price and $15.75 multiplied by the number of
shares of Common Stock underlying the option. On April 19, 1999, the
closing price for the Company's Common Stock on the New York Stock
Exchange was $14.0.
Pension Plan
GenRad has a defined benefit pension plan designed to provide retirement
benefits for employees in the United States and incidental benefits to their
beneficiaries. On January 31, 1995, the Company closed the Pension Plan to new
participants and ceased all benefit accruals. Only two executive officers,
Messrs. Lyons and Schraeder, qualify for participation in the Pension Plan
based upon at least one qualified year of service prior to January 31, 1995.
Their annual benefits under the plan have been frozen at approximately $120 and
$15,452, respectively, assuming retirement at age 65.
Compensation of Directors
Directors who are not employees of GenRad currently receive an annual
grant of 2,500 restricted shares of the Company's Common Stock. Directors who
are not employees of GenRad also receive a fee of $750 for each directors'
meeting attended. Non-employee directors who serve as committee chair of the
Audit Committee, the Compensation Committee, the Corporate Governance Committee
or the Technology and Quality Committee receive a fee of $1,000 for attending
each committee meeting. Non-employee directors who are members of the Audit
Committee, the Compensation Committee, the Corporate Governance Committee and
the Technology and Quality Committee receive a fee of $750 for attending each
committee meeting. Directors are also reimbursed for any expenses attendant to
Board membership.
Pursuant to the Company's 1991 Directors' Stock Option Plan, each
non-employee director is granted an option to purchase 2,500 shares of the
Company's Common Stock each year on the fifth business day following the
release of annual earnings. The option exercise price for options granted under
the 1991 Directors' Stock Option Plan is equal to the closing price per share
of the Company's Common Stock on the date of grant ($26.75 in 1998). Each
option may be exercised at any time, in whole or in part, prior to the fifth
anniversary of the date of grant. Also pursuant to the 1991 Directors' Stock
Option Plan, each non-employee who becomes a director is granted options to
purchase 10,000 shares of the Company's Common Stock on the day that he or she
becomes a director. The option exercise price for these options is equal to the
closing price per share of the Company's Common Stock on the date of grant.
Each option may be exercised at any time, in whole or in part, prior to the
fifth anniversary of the date of grant.
10
<PAGE>
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the
Company's executive officers, including the Chief Executive Officer and the
other named executive officers, and setting the compensation for these
individuals. The Compensation Committee consists of the four non-employee
directors listed below.
The Compensation Committee seeks to achieve three broad goals in
connection with the Company's executive compensation programs and decisions
regarding individual compensation. First, the Compensation Committee structures
executive compensation programs in a manner that the Committee believes will
enable the Company to attract and retain key executives. Second, the
Compensation Committee establishes compensation programs that are designed to
reward executives for the achievement of specified business objectives of the
Company. By tying compensation in part to particular goals, the Compensation
Committee believes that a performance-oriented environment is created for the
Company's executives. Finally, the Company's executive compensation programs
are intended to provide executives with an equity interest in the Company so as
to link a portion of the compensation of the Company's executives with the
performance of the Company's Common Stock.
The compensation programs for the Company's executives established by the
Compensation Committee consist of three elements tied to the foregoing
objectives: base salary; annual cash bonus; and stock-based equity incentives,
primarily participation in the Company's 1991 Equity Incentive Plan. In
establishing base salaries for executives, the Compensation Committee monitors
standards at comparable companies, particularly those that are in the same
industry as the Company or related industries and/or are located in the same
general geographical area as the Company, considers historic salary levels of
the individual and the nature of the individual's responsibilities, and
compares the individual's base salary with that of other executives of the
Company. To the extent determined appropriate, the Compensation Committee also
considers general conditions and the Company's financial performance in
establishing base salaries of executives. In deciding to award options, the
Compensation Committee also considers the number of options outstanding or
previously granted and the aggregate size of current awards.
On July 7, 1993, Mr. Lyons became the Company's Chief Executive Officer.
Mr. Lyons' compensation arrangements were last determined in 1997. In
determining such compensation arrangements, the Compensation Committee has
followed the policies set forth above. First, Mr. Lyons' base compensation was
established to match median levels for Chief Executive Officers of electronics
companies of comparable size. His base salary was maintained at the same level
in 1996 as compared to 1995 and increased 14.5% in 1997 as compared to 1996.
Mr. Lyons' base salary was not materially adjusted from 1997 to 1998. Second,
consistent with the goal of rewarding for the accomplishment of Company
objectives, Mr. Lyons received incentive compensation equal to 65% of his base
compensation in 1996 and 83% of his base compensation in 1997 as a result of
the Company's achievement of its objectives. Mr. Lyons received no incentive
compensation in 1998. Finally, the grant of stock options to Mr. Lyons in 1997
was intended to link the rewards of the Chief Executive Officer with those of
the Company's shareholders. The stock options granted to Mr. Lyons in 1997 are
exercisable on a cumulative basis with respect to 25% of the shares after one
year from the date of grant and an additional 25% per year thereafter. Mr.
Lyons received no stock option grants during 1998.
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and its four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. Where
possible, the Company tries to maintain the deductibility of compensation paid
to the Company's executive officers.
Ed Zschau, Chair
Richard G. Rogers
Lowell Hawkinson
William S. Antle III
11
<PAGE>
Stock Performance Chart
The following chart and table compare the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
five years ended December 31, 1998 with the total return on the S&P Technology
Sector Index and the S&P 500 Composite Index. The comparison assumes $100 was
invested on December 31, 1993 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG GENRAD, INC., THE S&P 500 COMPOSITE INDEX
AND THE S&P TECHNOLOGY SECTOR INDEX
[line graph representing the table below]
<TABLE>
<CAPTION>
Company/Index 1993 1994 1995 1996 1997 1998
- ----------------------------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
GenRad, Inc. $100 $ 96 $156 $372 $483 $252
S&P Technology Sector Index 100 117 168 238 300 519
S&P 500 Composite Index 100 101 139 171 229 294
</TABLE>
ITEM 2
PROPOSAL TO AMEND THE 1991 EQUITY INCENTIVE PLAN
The 1991 Equity Incentive Plan (the "Incentive Plan") provides for the
award of up to 8,750,000 shares of Common Stock in the form of incentive stock
options, non-qualified stock options and restricted stock. At March 25, 1999,
568,835 shares were still available for awards under the Incentive Plan. On
that date, approximately 154 persons holding options to purchase 4,069,410
shares of Common Stock were participating in the Incentive Plan. The Company
also maintains a 1997 Non-Qualified Employee Stock Option Plan in which
officers and Directors of the Company may not participate. At March 25, 1999,
7,000 shares were available for awards under this plan.
The Board of Directors has approved an amendment to the Incentive Plan,
subject to shareholder approval, increasing the maximum number of shares of
Common Stock which may be issued under the Incentive Plan by 500,000 shares
(the "Incentive Plan Amendment"). To minimize ownership dilution to existing
shareholders if the shares added to the Incentive Plan are issued, the Company
intends to repurchase up to an additional 500,000 shares of its Common Stock
under its share repurchase program. From June 16, 1998, the inception date of
the repurchase program, through March 25, 1999, the Company repurchased
1,225,600 shares of its Common Stock under the program.
The Board believes that increasing the shares available under the
Incentive Plan is a necessary factor in allowing the Company to attract and
retain those highly competent individuals upon whose judgment, initiative and
leadership the Company's continuing success in large measure depends.
12
<PAGE>
Future issuances under the Incentive Plan are subject to the discretion of
the Compensation Committee. Therefore, it is impossible to indicate the
specific awards that will be granted to or benefits that will be received by
any individual participant or any group of participants under the Incentive
Plan. The following table, however, provides certain information about issuance
of options under the Incentive Plan to the named executive officers, all
current executive officers as a group, all current directors who are not
executive officers as a group and all employees who are not executive officers,
as a group during the fiscal year ended January 2, 1999.
1991 EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
Dollar Value Number of Shares
Name and Position ($)(a) of Common Stock
- -------------------------------------------------------------------------- -------------- -----------------
<S> <C> <C>
James F. Lyons, President, Chief Executive Officer ....................... $-- --
Paul Pronsky, Jr., Vice President, Chief Financial Officer ............... -- --
Paul H. Geere, President, Managing Director
Advanced Diagnostic Solutions ........................................... -- --
Sara H. Lucas, Vice President, Chief Strategic Officer ................... $ 0 100,000
Michael W. Schraeder, President, Electronic Manufacturing Solutions ...... $ 0 100,000
Executive Officer Group (seven persons) .................................. $ 0 224,000
Non-Executive Officer Director Group ..................................... -- --
Non-Executive Officer Employees .......................................... -- --
</TABLE>
- ------------
(a) Value is calculated on the basis of the positive difference between the
option exercise price and $15.0625, the closing price for the Company's
Common Stock on the New York Stock Exchange on March 25, 1999, multiplied
by the number of option shares. Because the exercise price for each option
granted exceeds the closing price of the Company's Common Stock on March
25, 1999, the value is expressed as zero.
The following is a summary of the material provisions of the Incentive
Plan and is qualified in its entirety by reference to the complete text of the
Incentive Plan which has been filed with the SEC and is available from the
Company upon request to the Clerk of the Company:
Eligibility
All key employees of the Company are eligible to receive incentive stock
options, non-statutory stock options and awards of restricted stock under the
Incentive Plan. Outside consultants and advisors to the Company are eligible to
receive non-statutory options and awards of restricted stock. Under the terms
of the Incentive Plan, eligible participants are not entitled to receive an
award or grant constituting more than 500,000 shares of Common Stock in any one
calendar year.
Administration
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors.
Stock Options
The Compensation Committee designates the optionee, date of grant and term
of each option, except that no incentive stock option can have a term exceeding
10 years (five years in the case of a 10% shareholder). The exercise price of
options is determined by the Compensation Committee, but may not be less than
100% (110% in the case of a 10% shareholder) of the fair market value on the
date of grant for incentive stock options. Payment of the option exercise price
may be made in cash, shares of Common Stock, a combination of cash or stock or
by any other method (including delivery of a promissory note payable on terms
specified by the Compensation Committee) approved by the Compensation
Committee. While the Company may grant options which are exercisable at
different times or within different periods, it is anticipated that options
granted generally will be exercisable on a cumulative basis with respect to 25%
of the shares after one year from the date of grant and an additional 25% per
year thereafter. Options are not generally assignable or transferable except by
will or the laws of descent and distribution or, in the case of non-statutory
options, pursuant to a qualified domestic relations order. The Compensation
Committee, however, may permit an optionee to transfer the option to members of
the optionee's family, to trusts or to other entities primarily for the benefit
of the optionee or the optionee's immediate family. The Compensation Committee
will determine the length of time during which an optionee may exercise his or
her option following the termination of employment (which may not exceed three
months in the case of incentive stock options) and upon death or disability
(which may not exceed one year in the case of incentive stock options).
13
<PAGE>
The Compensation Committee, in its sole discretion, may include additional
provisions in any option granted under the Incentive Plan, including without
limitation restrictions on transfer, repurchase rights, commitments to pay cash
bonuses, to make, arrange for or guaranty loans or to transfer other property
to optionees upon exercise of options, or such other provisions as shall be
determined by the Compensation Committee so long as not inconsistent with the
Incentive Plan. The Compensation Committee generally, in its sole discretion,
may also accelerate or extend the date or dates on which all or any particular
option or options granted under the Incentive Plan may be exercised.
Restricted Stock Awards
Restricted stock awards entitle the recipient to purchase Common Stock
from the Company under terms which provide for vesting over a period of time
and a right by the Company to repurchase unvested stock when the recipient's
relationship with the Company terminates. The Compensation Committee selects
the recipients of restricted stock awards and determines (i) the number of
shares of Common Stock to be issued and sold to the recipient, (ii) the price
of the stock, which can be less than the fair market value, and (iii) the
vesting schedule for such shares. While the Company may make awards of
restricted stock which vest at different times or within different periods, it
is anticipated that awards generally will vest on a cumulative basis with
respect to 33% of the shares after one year from the date of award and an
additional 33% per year thereafter. The recipient may not sell, transfer or
otherwise dispose of such stock until it vests. Upon termination of the
recipient's relationship with the Company, the Company will be entitled to
repurchase those shares which are not vested on the termination date at a price
equal to their original purchase price.
Mergers and Change in Control
In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company, the Compensation Committee, in its
discretion, may take one or more of the following actions: (i) provide that
outstanding options shall be assumed, or equivalent options shall be
substituted, by the acquiring corporation, (ii) upon written notice to
optionees, provide that all unexercised options will terminate unless exercised
within a specific time, (iii) in the event of a merger in which cash payments
are paid to shareholders, make or provide for a cash payment to optionees equal
to the difference between the cash payment payable in the merger per share of
Common Stock and the exercise price per share, multiplied by the number of
shares subject to each outstanding option, and (iv) provide that all or any
outstanding options shall become exercisable in full and all restrictions on
outstanding awards of restricted stock shall terminate.
Notwithstanding any other provision of the Incentive Plan, in the event of
a "Change in Control of the Company," as defined in the Incentive Plan, the
exercise dates of all options then outstanding shall be accelerated in full,
any restrictions on exercising outstanding options issued pursuant to the
Incentive Plan shall terminate and any restrictions on and rights of the
Company to repurchase shares covered by outstanding awards of restricted stock
issued pursuant to the Incentive Plan shall terminate.
Amendments and Termination
The Compensation Committee at any time may amend or modify the terms of
the Incentive Plan in any respect except that the Compensation Committee may
not adopt any amendment requiring shareholder approval under Section 422 of the
Code without the approval of the shareholders of the Company.
Withholding Taxes
Subject to the approval of the Company, a participant may elect to satisfy
federal, state or local withholding tax requirements incurred in connection
with the exercise of an option or purchase of shares subject to a restricted
stock award, in whole or in part, by (i) causing the Company to withhold shares
of Common Stock which would otherwise be issued pursuant to the exercise of an
option or the purchase of shares subject to an award, or (ii) delivering to the
Company shares of Common Stock already owned by the optionee.
Federal Income Tax Consequences
The following is a summary of the federal income tax treatment of
incentive stock and non-statutory options and restricted stock awards.
14
<PAGE>
Non-Statutory Stock Options. No taxable income is recognized by the
optionee upon the grant of a non-statutory stock option. The optionee must
recognize as ordinary income in the year in which the option is exercised the
amount by which the fair market value of the purchased shares on the date of
exercise exceeds the option price. However, special rules may apply to persons
required to file reports under Section 16(a) of the Securities Exchange Act of
1934 as a consequence of the interaction of Section 83 of the Code and Rule
16b-3. Subject to Section 162(m) of the Code, the Company will be entitled to a
business expense deduction equal to the amount of ordinary income recognized by
the optionee. Any additional gain or any loss recognized by the optionee upon
the subsequent disposition of the purchased shares will be a capital gain or
loss, and will be a long-term gain or loss if the shares are held for more than
one year. Effective for tax years beginning after December 31, 1997, any
long-term capital gain will be taxed at a rate of 20%.
Incentive Stock Options. As in the case of non-statutory options, no
taxable income is recognized by the optionee upon the grant of an incentive
stock option. However, unlike non-statutory options, no taxable income is
recognized by the optionee upon the exercise of an incentive stock option, and
no corresponding expense deduction is available to the Company. Generally, if
an optionee holds shares acquired upon the exercise of an incentive stock
option until the later of (i) two years from the grant of the option or (ii)
one year from the date of transfer of the purchased shares to him or her (the
"Statutory Holding Period"), any gain recognized by the optionee on a
subsequent sale of the shares will be treated as long-term capital gain.
Effective for tax years beginning after December 31, 1997, any long-term
capital gain will be taxed at a rate of 20%. The federal income tax effect on
the holder of incentive stock options is to defer, until the purchased shares
are sold, taxation of any increase in the shares' value from the time of grant
to the time of exercise.
If the optionee sells shares acquired upon the exercise of an incentive
stock option prior to the expiration of the Statutory Holding Period, he or she
will recognize taxable income at ordinary income tax rates in an amount equal
to the lesser of (i) the fair market value of the shares on the date of
exercise less the option price; or (ii) the amount realized on the date of sale
less the option price. Subject to Section 162(m) of the Code, the Company will
be entitled to a corresponding business expense deduction. Any excess of amount
realized by the optionee on disposition over the fair market value of the
shares at the time of exercise will be treated as short-term capital gain, and
taxed at ordinary rates.
For purposes of the "alternative minimum tax" applicable to individuals,
the exercise of an incentive stock option is treated in the same manner as the
exercise of a non-statutory stock option. Thus, in the year of option exercise
an optionee must generally include in his or her alternative minimum taxable
income the difference between the exercise price and the fair market value of
the purchased shares on the date of exercise. The alternative minimum tax is
imposed upon an individual's alternative minimum taxable income at rates of 26%
to 28%, but only to the extent that such tax exceeds the taxpayer's regular
income tax liability for the taxable year. However, the amount of adjusted net
alternative minimum tax paid in any taxable year is available as a credit
against regular tax in future years.
Restricted Stock Awards. If a restricted stock award is subject to
forfeiture provisions and restrictions on transfer (a "Restricted Award"),
neither the Company nor the recipient of the award will realize any federal tax
consequences at the time such award is made under the Incentive Plan unless the
recipient makes an election under Section 83(b) of the Code. If the recipient
of a Restricted Award makes a Section 83(b) election within 30 days of the date
of the award, or if the recipient receives an award that is not subject to
forfeiture provisions and restrictions on transfer, he or she will recognize
ordinary income, for the year in which the award is received, in an amount
equal to the difference between the fair market value of the Common Stock at
the time the award is made and the purchase price paid for the Common Stock. If
such election is made and the recipient subsequently forfeits some or all of
the Common Stock, he or she will not be entitled to any tax refund. However,
the recipient is allowed a capital loss if the amount paid for the Common Stock
is not fully restored on forfeiture. If a Section 83(b) election is not made
with respect to a Restricted Award, the recipient will recognize ordinary
income in the first taxable year in which the rights of the recipient are
either transferable or are not subject to a substantial risk of forfeiture, in
an amount equal to the difference between the fair market value of the Common
Stock at that time and the original purchase price for the shares. Subject to
Section 162(m) of the Code and satisfaction of the applicable reporting
requirements, the Company will be entitled to deduct, as compensation expense,
the same amount as the recipient must include as ordinary income. Such
deduction will be allowed in the Company's tax year which includes the last day
(generally December 31) of the recipient's tax year in which the recipient is
required to include the amount in income. When the recipient sells the shares,
he or she will recognize capital gain at the
15
<PAGE>
time of sale equal to the difference between his or her basis (the price paid
for the shares plus any taxed amount) and the sale price. The capital gain
recognized on the disposition of such shares by the recipient will be
short-term capital gain to the extent such shares are held by the recipient for
12 months or less and long-term capital gain to the extent such shares are held
by the recipient for more than 12 months. Effective for tax years beginning
after December 31, 1997, any long-term capital gain will be taxed at a rate of
20%.
Compensation Deduction. Section 162(m) of the Code provides a $1 million
limit for deductions of the Company with respect to compensation of the
Company's Chief Executive Officer and four other most highly compensated
executive officers. Stock options (whether qualified or non-qualified) will be
excluded from this limitation provided that the exercise price of the option is
equal to the fair market value of the Company's shares subject to the option on
the date of grant and further provided that certain other requirement relating
to the composition of the Compensation Committee and shareholder approval of
the Incentive Plan are met. Further, the compensation element of grants of
restricted stock is not excluded from this limitation. Therefore, it is
possible that at a future point in time the Company's deduction for executive
compensation could be subject to the $1 million limitation. Moreover, the $1
million limit on deductions under Section 162(m) of the Code is further reduced
by the amount of any compensation not deductible by the Company under Section
280G of the Code (i.e., any parachute payment). See "Mergers and Change of
Control" above.
Board Recommendation
The Board of Directors believes that approval of the proposed Incentive
Plan Amendment is in the best interest of the Company and its shareholders and
recommends a vote "FOR" the proposal.
SELECTION OF AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent public accountants, as independent auditors of GenRad for the
fiscal year ending January 1, 2000. GenRad has been advised by
PricewaterhouseCoopers LLP that representatives will be present at the Meeting,
and will have the opportunity to make a statement if they so desire as well as
be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders must be received by the Company at its principal
executive offices by December 29, 1999 if the proposal is to be included in the
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Meeting. If
any other business properly comes before the Meeting, it is the intention of
the persons named in the enclosed Proxy to vote or otherwise act in accordance
with their judgment on such matters.
WALTER A. SHEPHARD, Clerk
April 27, 1999
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SEND IN YOUR
PROXY WITHOUT DELAY. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED. ANY SHAREHOLDER GIVING A PROXY MAY REVOKE IT AT ANY TIME IF IT
HAS NOT BEEN VOTED.
- --------------------------------------------------------------------------------
16
<PAGE>
838-PS-99
<PAGE>
Appendix A
GenRad, Inc.
1991 EQUITY INCENTIVE PLAN
March 29, 1991
as proposed to be amended through May 13, 1999
1. Purpose.
The purpose of this plan (the "Plan") is to secure for GenRad, Inc. (the
"Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and employee directors of, and consultants or
advisors to, the Company who are expected to contribute to the Company's future
growth and success. Except where the context otherwise requires, the term
"Company" shall include all present and future subsidiaries of the Company as
defined in Sections 424(c) and 424(f) of the Internal Revenue Code of 1986, as
amended or replaced from time to time (the "Code").
2. Type of Options and Awards; Administration.
(a) Types of Options and Awards. Options granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code. Awards granted pursuant to the Plan
shall be authorized by action of the Board of Directors of the Company (or a
Committee designated by the Board of Directors) and shall meet the requirements
of Section 13 of the Plan.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms
and provisions of the Plan shall be final and conclusive. The Board of
Directors may in its sole discretion (i) grant options to purchase shares of
the Company's Common Stock, $1.00 par value ("Common Stock"), and issue shares
upon exercise of such options as provided in the Plan and (ii) make awards for
the purchase to the express provisions of the Plan, to construe the respective
option agreements, wards and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and provisions of
the respective option agreements and awards, which need not be identical, and
to make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The Board of
Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement or award in the manner and
to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. No director or person
acting pursuant to authority delegated by the Board of Directors shall be
liable for any action or determination made in good faith. The Board of
Directors may, to the full extent permitted by or consistent with applicable
laws or regulations (including, without limitation, applicable law and Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), or any successor rule ("Rule 16b-3")), delegate any or all of its powers
under the Plan to a committee (the "Committee") appointed by the Board of
Directors, and if the Committee is so appointed all references to the Board of
Directors in the Plan shall mean and relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply only to such persons as are
required to file reports under Section 16(a) of the Exchange Act (a "Reporting
Person").
3. Eligibility.
(a) General. Options and awards may be granted or made to persons who are,
at the time of grant, key employees, officers or directors (so long as such
directors are also employees) of, or consultants or advisors to, the Company;
provided, that the class of persons to whom Incentive Stock Options may be
granted shall be limited to all employees of the Company; and provided further
that non-employee directors of the Company are not eligible to receive options
or awards of restricted stock under the Plan. A person who has been granted an
option or award may, if he or she is otherwise eligible, be granted additional
options or awards if the Board of Directors shall so determine.
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(b) Grant of Options to Directors and Officers. The selection of a
director or an officer (as the terms "director" and "officer" are defined for
purposes of Rule 16b-3) as a participant, the timing of the option grant or
award, the exercise price of the option or the sale price of the award and the
number of shares for which an option or award may be granted to such director
or officer shall be determined either (i) by the Board of Directors, of which
all members shall be "disinterested persons" (as hereinafter defined), or (ii)
by a committee of two or more directors having full authority to act in the
matter, of which all members shall be "disinterested persons." For the purposes
of the Plan, a director shall be deemed to be "disinterested" only if such
person qualifies as a "disinterested person" within the meaning of Rule 16b-3,
as such term is interpreted from time to time.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 16 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 9,250,000 shares. In addition, in no event shall any eligible recipient
of an option or an award receive in any calendar year an award or grant under
the Plan for more than 500,000 shares of Common Stock. If an option or award
granted under the Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such option or award
shall again be available for subsequent option grants or awards under the Plan.
If shares issued upon exercise of an option or award under the Plan are
tendered to the Company in payment of the exercise price of an option or award
granted under the Plan, such tendered shares shall again be available for
subsequent option grants or awards under the Plan; provided, that in no event
shall (i) the total number of shares issued pursuant to the exercise of
Incentive Stock Options under the Plan, on a cumulative basis, exceed the
maximum number of shares authorized for issuance under the Plan exclusive of
shares made available for issuance pursuant to this sentence of (ii) the total
number of shares issued pursuant to the exercise of options by Reporting
Persons, on a cumulative basis, exceed the maximum number of shares authorized
for issuance under the Plan exclusive of shares made available for issuance
pursuant to this sentence.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price Upon Exercise of Options.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors, provided,
however, that in the case of an Incentive Stock Option, the exercise price
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of
the options being exercised, (ii) by any other means (including without
limitation by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Rule 16b-3
and Regulation T promulgated by the Federal Reserve Board) or (iii) by any
combination of such methods of payment. The fair market value of any shares of
the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined in such manner as may
be prescribed by the Board of Directors.
7. Option Period.
Each option and all rights thereunder shall expire on such date as shall
be set forth in the applicable option agreement, except that such date, in the
case of an Incentive Stock Option, shall in no case be later than ten years
after the date on which the option is granted.
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8. Exercise of Option.
Each option granted under the Plan shall be exercisable in full or in
installments at such time or times and during such period as shall be set forth
in the agreement evidencing such option, subject to the provisions of the Plan.
9. Nontransferability of Options.
Incentive Stock Options, and all options granted to Reporting Persons,
shall not be assignable or transferable by the person to whom it is granted,
either voluntarily or by operation of law, except by will or the laws of
descent and distribution, and, during the life of the optionee, shall be
exercisable only by the optionee; provided, however, that non-statutory options
may be transferred pursuant to a qualified domestic relations order (as defined
in Rule 16b-3); and provided further, that the Board, at the time any option is
granted or thereafter, may permit the optionee to transfer the option to
members of his or her family or to trusts or other entities primarily for the
benefit of the optionee and/or members of his or her immediate family.
10. Effect of Termination of Employment or Other Relationship.
The Board of Directors shall determine the period of time during which an
optionee may exercise an option following (i) the termination of the optionee's
employment or other relationship with the Company or (ii) the death or
disability of the optionee. Such periods shall be set forth in the agreement
evidencing such option.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options,
in the aggregate, become exercisable for the first time in any one calendar
year for the shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option,
employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan.
(ii) if the optionee dies while in the employ of the Company, or within
three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
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(iii) if the optionee becomes disabled (within the meaning of Section
2(e)(3) of the Code or any successor provision thereto) while in the employ
of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
For all purposes of the Plan and any option or award granted hereunder,
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
Notwithstanding the foregoing provisions, no Incentive Stock Option may be
exercised after its expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; provided, that
such additional provisions shall not be inconsistent with any other term or
condition of the Plan.
(b) Acceleration, Extension, etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3.
13. Awards.
A restricted stock award ("award") shall consist of the sale and issuance
by the Company of shares of Common Stock, and purchase by the recipient of such
shares, subject to the terms, conditions and restrictions described in the
document evidencing the award and in this Section 13 and elsewhere in the Plan.
(a) Execution of Restricted Stock Award Agreement. As a condition to an
award under the Plan, each recipient of an award shall execute an agreement in
such form, which may differ among recipients, as shall be specified by the
Board of Directors at the time of such award.
(b) Price. The Board of Directors shall determine the price at which
shares of Common Stock shall be sold to recipients of awards under the Plan.
The Board of Directors may, in its discretion, issue shares pursuant to awards
without the payment of any cash purchase price by the recipients or issue
shares pursuant to awards at a purchase price below the then fair market value
of the Common Stock. If a purchase price is required to be paid, it shall be
paid in cash or by check payable to the order of the Company at the time that
the award is accepted by the recipient.
(c) Number of Shares. The award shall specify the number of shares of
Common Stock granted thereunder.
(d) Restrictions on Transfer. In addition to such other terms, conditions
and restrictions upon awards as shall be imposed by the Board of Directors, all
shares issued pursuant to an award shall be subject to the following
restrictions:
(i) All shares of Common Stock subject to an award (including any
shares issued pursuant to paragraph (e) of this Section) shall be subject
to certain restrictions on disposition and obligations of resale to the
Company as provided in subparagraph (ii) below for the period specified in
the document evidencing the award, and shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until such
restrictions lapse. The period during which such restrictions are
applicable is referred to as the "Restricted Period."
(ii) In the event that a recipient's employment with the Company (or
consultancy or advisory relationship, as the case may be) is terminated
within the Restricted Period, whether such termination is voluntary or
involuntary, with or without cause, or because of the death or disability
of the recipient, the Company shall have the right and option for a period
of three months following such termination to buy for cash that number of
the shares of Common Stock purchased under the award as to which the
restrictions on transfer and the forfeiture provisions contained in the
award have not then lapsed, at a price equal to the price per share
originally paid by the recipient. If such termination occurs within the
last three months of the applicable
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restrictions, the restrictions and repurchase rights of the Company shall
continue to apply until the expiration of the Company's three-month option
period.
(iii) Notwithstanding subparagraphs (i) and (ii) above, the Board of
Directors may, in its discretion, either at the time that an award is made
or at any time thereafter, waive its right to repurchase shares of Common
Stock upon the occurrence of any of the events described in this paragraph
(d) or remove or modify any part or all of the restrictions. In addition,
the Board of Directors may, in its discretion, impose upon the recipient of
an award at the time of such award such other restrictions on any shares of
Common Stock issued pursuant to such awards at the Board of Directors may
deem advisable.
(e) Additional Shares. Any shares received by a recipient of an award as a
stock dividend on, or as a result of stock splits, combinations, exchanges of
shares, reorganizations, mergers, consolidations or otherwise with respect to,
shares of Common Stock received pursuant to such award shall have the same
status and shall bear the same restrictions, all on a proportionate basis, as
the shares initially purchased pursuant to such award.
(f) Transfers in Breach of Award. If any transfer of shares purchased
pursuant to an award is made or attempted contrary to the terms of the Plan and
of such award, the Board of Directors shall have the right to purchase for the
account of the Company, from the owner thereof or his or her transferee at any
time before or after the transfer, that number of the shares of Common Stock as
to which the restrictions on transfer and forfeiture provisions have not then
lapsed at the price paid for such shares by the person to whom they were
awarded under the Plan. In addition to any other legal or equitable remedies
which it may have, the Company may enforce its rights by specific performance
to the extent permitted by law. The Company may refuse for any purpose to
recognize as a shareholder of the Company any transferee who receives any
shares contrary to the provisions of the Plan and the applicable award, and the
Company may retain and/or recover all dividends on such shares which were paid
or payable subsequent to the date on which the prohibited transfer was made or
attempted.
(g) Additional Award Provisions. The Board of Directors may, it its sole
discretion, include additional provisions in any award granted under the Plan,
including without limitation commitments to pay cash bonuses, make, arrange for
or guarantee loans or transfer other property to recipients upon the grant of
awards, or such other provisions as shall be determined by the Board of
Directors.
14. General Restrictions.
(a) Investment Representations. The Company may require any person to whom
an option or award is granted, as a condition of exercising such option or
purchasing the shares subject to the award, to give written assurances in
substance and form satisfactory to the Company to the effect that such person
is acquiring the Common Stock subject to the option or award for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
(b) Compliance with Securities Laws. Each option and award shall be
subject to the requirement that if, at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such option or award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option or award may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification, or to satisfy such condition.
15. Rights as a Shareholder.
The holder of an option or recipient of an award shall have no rights as a
shareholder with respect to any shares covered by the option or award
(including, without limitation, any rights to receive dividends or non-cash
distributions with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
16. Adjustment Provisions for Recapitalization and Related Transactions.
(a) General. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged
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for a different number or kind of shares or other securities of the Company, or
(ii) additional shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect to such shares of
Common Stock or other securities, an appropriate and proportionate adjustment
may be made in (x) the maximum number and kind of shares reserved for issuance
under the Plan, (y) the number and kind of shares or other securities subject
to then outstanding options under the Plan, and (z) the price for each share
subject to any then outstanding options under the Plan, without changing the
aggregate purchase price as to which such options remain exercisable, provided
that no adjustment shall be made pursuant to this Section 16 if such adjustment
would cause the Plan to fail to comply with Section 422 of the Code or with
Rule 16b-3.
(b) Board Authority to Make Adjustments. Any adjustments under this
Section 16 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
17. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options and
awards: (i) provide that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), provided that any such options substituted for Incentive
Stock Options shall meet the requirements of Section 424(a) of the Code, (ii)
upon written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such transaction unless
exercised by the optionee within a specified period following the date of such
notice, (iii) in the event of a merger under the terms of which holders of the
Common Stock of the Company will receive upon consummation thereof a cash
payment for each share surrendered in the merger (the "Merger Price"), make or
provide for a cash payment to the optionee equal to the difference between (A)
the Merger Price times the number of shares of Common Stock subject to such
outstanding options (to the extent then exercisable at prices not in excess of
the Merger Price) and (B) the aggregate exercise price of all such outstanding
options in exchange for the termination of such options, and (iv) provide that
all or any outstanding options shall become exercisable in full and all
restrictions on outstanding awards shall terminate immediately prior to such
event.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the
circumstances.
18. Change in Control.
Notwithstanding any other provision of the Plan and except as otherwise
provided in the relevant option or award agreement, in the event of a "Change
in Control of the Company" (as defined below), the exercise dates of all
options then outstanding shall be accelerated in full, any restrictions on
exercising outstanding options issued pursuant to the Plan prior to any given
date shall terminate and any restrictions on and rights of the Company to
repurchase shares covered by outstanding awards issued pursuant to the Plan
shall terminate. For purposes of the Plan, a "Change in Control of the Company"
shall occur or deemed to have occurred only if (i) any "person," as such term
is used in Section 13(d) and 14(d) of the Exchange Act (other than the Company,
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, or any corporation owned directly or indirectly by the
shareholder of the Company in substantially the same proportion as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; (ii) during any period of two
consecutive years ending during the term of the Plan (not including any period
prior to the adoption of the Plan), individuals who at the beginning of such
period constitute the Board of Directors of the Company, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect any transaction described in clause (i), (iii) or
(iv)
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of this Section 18) whose election by the Board of Directors or nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who were either directors at
the beginning of the period or whose election or whose nomination for election
was previously so approved (collectively, the "Disinterested Directors"), cease
for any reason to constitute a majority of the Board of Directors; (iii) the
shareholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or (iv) the shareholders of the Company approve 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
which, in either case, has not previously been approved by a majority of the
Disinterested Directors.
19. No Special Employment Rights.
Nothing contained in the Plan or in any option or award shall confer upon
any recipient of an award or optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the optionee.
20. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be received by
an employee as a result of the exercise of an option or the sale of shares
received upon such exercise nor the value of an award granted to an employee
will constitute compensation with respect to which any other employee benefits
of such employee are determined, including, without limitation, benefits under
any bonus, pension, profitsharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board of Directors.
21. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of
the shareholders of the Company is required as to such modification or
amendment under Section 422 of the Code or any successor provision with respect
to Incentive Stock Options or under Rule 16b-3 with respect to options held by
or awards made to Reporting Persons, the Board of Directors may not effect such
modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee or recipient of an award, affect his or
her rights under an option or award previously granted to him or her. With the
consent of the optionee or recipient of the award affected, the Board of
Directors may amend outstanding option agreements or awards in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions
of the Plan and of any outstanding option or award to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3 or any successor rule.
22. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee or recipient of an award any federal, state or
local taxes of any kind required by law to be withheld with respect to any
shares issued upon exercise of options under the Plan or the purchase of shares
subject to the award. Subject to the prior approval of the Company, which may
be withheld by the Company in its sole discretion, the optionee or recipient of
an award may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or the purchase of shares subject to an
award or (ii) by delivering to the Company shares of Common Stock already owned
by the optionee
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or award recipient. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee or award recipient who has made an election pursuant to
this Section 22(a) may only satisfy his or her withholding obligation with
shares of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
(c) If the recipient of an award under the Plan elects, in accordance with
Section 83(b) of the Code, to recognize ordinary income in the year of
acquisition of any shares awarded under the Plan, the Company will require at
the time of such election an additional payment for withholding tax purposes
based on the difference, if any, between the purchase price of such shares and
the fair market value of such shares as of the date immediately preceding the
date of the award.
23. Cancellation and New Grant of Options, etc.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different number of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then current exercise price per share of such
outstanding options.
24. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 21) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option issued after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
and awards may be granted under the Plan at any time after the effective date
and before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 17,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options or the final vesting
of awards granted under the Plan. Unless sooner terminated in accordance with
Section 17, the Plan shall terminate with respect to options which are not
Incentive Stock Options and awards on the date specified in (ii) above. If the
date of termination is determined under (i) above, then options outstanding on
such date shall continue to have force and effect in accordance with the
provisions of the instruments evidencing such options.
8
<PAGE>
25. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in law, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities,
currency, employee benefit or other matters.
Adopted by the Board of Directors on
March 29, 1991, as proposed to be
amended through May 13, 1999
9
<PAGE>
NOTICE TO PARTICIPANTS IN THE GENRAD CHOICE INVESTMENT PLAN
OF THE ANNUAL MEETING OF GENRAD SHAREHOLDERS
The GenRad Choice Investment Plan ("ChIP") provides that The Vanguard Group of
Investment Companies, as Trustee of the ChIP, will follow the voting
instructions of the ChIP participants with respect to any voting rights
pertaining to their respective interests in shares of GenRad, Inc. Common Stock
held in ChIP Parts I and II. The enclosed Proxy identifies the number of shares
of GenRad Common Stock that you may direct the Trustee to vote.
Please complete, date and sign the Proxy and return it to Proxy Services,
Boston EquiServe, P.O. Box 9381, Boston, Massachusetts 02205-9956. All ChIP
Participants must return the completed Proxy on or before May 12, 1999 in the
envelope provided. The Trustee has provided EquiServe with a ballot executed in
blank. EquiServe will tabulate the total from the Proxies it receives and will
enter these totals on the ballot. This ballot will then be tabulated by
EquiServe with all other ballots cast at the Meeting.
For ChIP participants, the number of shares indicated on the enclosed Proxy is
the total number represented by your allocations to the GenRad Stock Fund in
ChIP Part I (Profit Sharing Trust account) and Part II (employee contribution
account). If you have any questions about the manner in which this number was
computed, or about any other matter in this notice, please contact GenRad's
Human Resources Department at (978) 589-7331.
All ChIP participants are extended a cordial invitation to attend the Meeting.
GenRad, Inc.
By: Walter A. Shephard, Clerk
April 27, 1999
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED.
838-LTR-99
<PAGE>
GEN22B DETACH HERE
- --------------------------------------------------------------------------------
PROXY
GenRad, Inc.
7 Technology Park Drive, Westford, MA 01886
This Proxy Is Solicited on Behalf of the Board of Directors
The undersigned appoints James F. Lyons and Walter A. Shephard, and each or
any of them as proxies with full power of substitution to vote as designated
herein all shares of stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders of GenRad, Inc. to be
held on Thursday, May 13, 1999 at 11:00 a.m. at the BankBoston Auditorium, 100
Federal Street, Boston, Massachusetts, and any adjournment or adjournments
thereof (the "Meeting"). The undersigned acknowledges receipt of the Company's
Proxy Statement dated April 27, 1999 (the "Proxy Statement"). The proxies are
further authorized to vote, in their discretion, upon such other business as may
properly come before the Meeting, including any matters for which the Company
did not receive proper notice prior to February 24, 1999.
Please return this card in the enclosed postage paid envelope to EquiServe,
P.O. Box 9381, Boston, Massachusetts 02205-9956.
- --------------- ---------------
SEE REVERSE SEE REVERSE
SIDE (Continued, and to be Signed on Reverse Side) SIDE
- --------------- ---------------
<PAGE>
GEN22A DETACH HERE
- --------------------------------------------------------------------------------
[X] Please mark -----
votes as in |
this example. |
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS SET
FORTH BELOW.
1. To elect William G. Scheerer amd Russell A. Gullotti to the Board of
Directors to serve as Class III Directors for three-year terms.
FOR WITHHELD
------ ------
| | | |
| | | |
------ ------
- ------
| |
| |
- ------ __________________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To consider and act upon a proposal ------ ------ ------
by the Board of Directors of the | | | | | |
Company to amend the Company's | | | | | |
1991 Equity Incentive Plan (the ------ ------ ------
"Incentive Plan") by increasing the
number of shares of Common Stock
available for issuance under the
Incentive Plan by 500,000 shares.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT ------
| |
| |
------
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
Signature: ________________________ Date: _______
Signature: ________________________ Date: _______
