<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CONVEX COMPUTER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CONVEX COMPUTER CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[CONVEX LOGO]
CONVEX COMPUTER CORPORATION
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1994
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1994 Annual Meeting of Stockholders of
Convex Computer Corporation (the "Company"), a Delaware corporation, will be
held on Thursday, May 12, 1994, at 10:00 a.m., local time, at the UTD Conference
Center Auditorium, 2601 North Floyd Road, Richardson, Texas, for the following
purposes as more fully described in the Proxy Statement accompanying this
Notice:
1. To elect six directors to serve for the ensuing year and until their
successors are elected.
2. To approve and ratify an amendment to the 1991 Stock Option Plan
that would increase the number of shares reserved for issuance from
3,760,000 to 4,960,000.
3. To ratify the appointment of Ernst & Young as the Company's
independent public accountants for the 1994 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 18, 1994, are
entitled to receive notice of and vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Stockholders attending the
meeting may vote in person even if they have returned a proxy.
Sincerely,
PHILIP N. CARDMAN
SECRETARY
Richardson, Texas
April 8, 1994
<PAGE>
CONVEX COMPUTER CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Convex Computer Corporation
(the "Company") for use at its 1994 Annual Meeting of Stockholders to be held
Thursday, May 12, 1994, at 10:00 a.m., local time, or at any adjournments or
postponements thereof, for the purposes set forth in this Proxy Statement and in
the accompanying Notice of Annual Meeting of Stockholders. The Meeting will be
held at the UTD Conference Center Auditorium, 2601 North Floyd Road, Richardson,
Texas. The Company's principal executive offices are located at 3000 Waterview
Parkway, Richardson, Texas 75080. The Company's telephone number is (214)
497-4000.
These proxy solicitation materials were mailed on or about April 8, 1994 to
all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on March 18, 1994 (the
"Record Date"), are entitled to receive notice of and vote at the Meeting. On
the Record Date, 25,711,074 shares of the Company's Common Stock, $.01 par
value, were issued and outstanding. For information regarding holders of more
than five percent of the outstanding Common Stock, see "Election of Directors --
Security Ownership."
REVOCABILITY OF PROXIES
Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written notice
of revocation to the Company or by duly executing a proxy bearing a later date.
Revocation will also occur if the individual attends the Meeting and votes in
person.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the Meeting. In the
election of directors, each stockholder will be entitled to vote for six
nominees and the six nominees with the greatest number of votes will be elected.
The cost of this solicitation will be borne by the Company. The Company may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material to beneficial
owners. Proxies may be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally, by telephone
or by telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the Company's
Annual Meeting of Stockholders for fiscal 1994 must be received by the Company
no later than December 1, 1994, in order that they may be included in the proxy
statement and form of proxy for that meeting.
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's six nominees named below, all of whom are presently directors of the
Company. If any nominee of the Company is unable or declines to serve as a
director at the time of the Meeting, the proxies will be voted for any nominee
who is designated by the present Board of Directors to fill the vacancy. It is
not expected that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a director will continue
until the next Annual Meeting of Stockholders or until his successor has been
elected and qualified.
The names of the nominees, and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ----------------------------------- --- ---------------------------------------------------- -----------
<S> <C> <C> <C>
Robert J. Paluck(1)................ 46 Chairman of the Board and Chief Executive Officer of 1982
the Company
Erich Bloch(1)(3).................. 69 Distinguished Fellow, Council on Competitiveness 1992
H. Berry Cash(1)................... 55 General Partner of InterWest Partners, a venture 1993
capital limited partnership, and General Partner
of Berry Cash Southwest Partners
Sam K. Smith(2)(3)................. 61 Chairman of the Board of Merit Technology, Inc., a 1985
military systems analysis and simulation company
Steven J. Wallach(1)............... 48 Senior Vice President, Technology of the Company 1982
Howard W. Wolfe(2)(3).............. 52 Special Partner of New Enterprise Associates and 1982
Managing General Partner of New Venture Partners,
venture capital limited partnerships
There is no family relationship between any director or executive officer of the Company.
<FN>
- ------------------------
(1) Member of Nominating Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
</TABLE>
Each of the nominees has been engaged in his principal occupation set forth
above during the past five years. In addition:
Mr. Bloch is also a director of Motorola, Inc.
Mr. Cash is also a director of Cirrus Logic, ProNet, Cyrix Corporation and
Aurora Electronics.
Mr. Smith is also a director of Landmark Graphics.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of the Record Date (a) by each director, (b) by the executive
officers named in the summary compensation table, (c) by all persons known to
the Company to be the beneficial owners of more than five percent of the
Company's Common Stock and (d) all directors and executive officers as a group:
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE OF
NAME OF PERSON NUMBER OF TOTAL VOTING
OR IDENTITY OF GROUP SHARES(1) POWER
- ------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Merrill Lynch & Co., Inc. (2)............................................ 2,201,700 8.0%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
Citibank, N.A............................................................ 1,690,300 6.2
399 Park Avenue
New York, NY 10043
Robert J. Paluck(3)...................................................... 881,056 3.2
Steven J. Wallach(3)..................................................... 892,228 3.3
Terrence L. Rock(3)...................................................... 270,462 1.0
William G. Bock(3)....................................................... 234,998 *
Philip N. Cardman(3)..................................................... 120,039 *
Howard D. Wolfe(3)....................................................... 59,639 *
Sam K. Smith(3).......................................................... 54,000 *
H. Berry Cash(3)......................................................... 36,500 *
Erich Bloch(3)........................................................... 21,000 *
All directors and executive officers as a group (14 persons)(3).......... 3,038,458 11.1
<FN>
- ------------------------
* Represents less than 1%.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in this table.
(2) Represents shares beneficially owned by affiliates of Merrill Lynch & Co.,
Inc.
(3) Includes shares issuable upon exercise of options which are exercisable at
or within 60 days of the Record Date, the total of which for all executive
officers and directors is 1,658,500 shares.
</TABLE>
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 7 meetings during the
fiscal year ended December 31, 1993.
The Audit Committee met 2 times during the fiscal year. This Committee
recommends engagement of the Company's independent public accountants. It is
primarily responsible for approving the services performed by the independent
public accountants and for overseeing the Company's accounting principles and
its system of internal accounting controls.
The Compensation Committee met 1 time during the fiscal year. This Committee
defines and oversees the Company's compensation and benefit programs.
The Nominating Committee met 1 time during the fiscal year. This Committee
recommends nominees for election to the Board of Directors and the committees of
the Board of Directors. The Nominating Committee will consider nominees
recommended by security holders if submitted in writing to the Nominating
Committee. Security holders should send names of nominees to the Secretary of
the Company, who will forward the recommendations to the Nominating Committee.
The Nominating Committee also makes recommendations to the Board of Directors
with regard to the appointment of the Company's officers.
During the fiscal year ended December 31, 1993, no director attended fewer
than 75% of all meetings of the Board of Directors and the committees, if any,
upon which the director served.
COMPENSATION OF DIRECTORS
Outside directors are paid $10,000 per year, plus $1,000 for each Board of
Directors' meeting they attend. In addition, under the Company's 1991 Stock
Option Plan, outside directors are automatically granted options to purchase
5,000 shares of the Company's Common Stock on an annual basis. Accordingly,
during 1993 each outside director was granted an option to purchase 5,000 shares
of the Company's Common Stock.
Employee directors receive no compensation for services rendered as a
director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, Regis P. McKenna, Sam K. Smith and Howard W. Wolfe, all outside
directors, served as members of the Compensation Committee. Mr. McKenna retired
as a director on December 9, 1993.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of the individuals listed below this report, all of whom are outside
directors of the Company. The Committee is responsible for administering the
Company's compensation and benefits programs. The Committee sets executive
salary levels and determines the amounts to be awarded to executives under the
Company's bonus and stock option programs.
The Company's executive compensation program has been designed to align the
interests of executives with the interest of the stockholders by creating a
performance-oriented environment that
4
<PAGE>
rewards performance related to the goals of the Company. The program is also
designed to ensure the competitiveness of executive compensation to enable the
Company to attract and retain key executives critical to the long-term success
of the Company.
The level of compensation provided to the Chief Executive Officer ("CEO")
and other executive officers is tied to the achievement of key corporate and
individual objectives, as well as progress made towards the achievement of
strategic plan milestones. At the beginning of each year, each officer develops
a set of individual objectives. The Committee reviews these objectives with the
CEO and the President to ensure congruence with corporate objectives. Individual
objectives may be more subjective than corporate objectives and may not be
measureable by financial results at the corporate level. In that respect, the
Committee exercises significant judgment in measuring the achievement of, or
progress toward the achievement of these objectives. After approval of these
objectives by the Committee, each officer submits a quarterly progress report to
the President.
The key components of the compensation program are base salary, annual
incentive award, and equity participation through stock option awards. If all
annual objectives are met, total cash compensation for executives is targeted to
be competitive at the 75th percentile with that of executives holding similar
positions with other companies in the computer industry that are similar in size
to Convex. In 1992 executive compensation comparisons were made with six
specific companies the Committee judged to be comparable to Convex based on
factors including their technology, the markets in which the companies operate
and their potential competition with the Company for qualified employees. In
addition, executive compensation was compared to the 777 Executive Compensation
survey conducted by Hewitt and Associates which reports on 16 U.S. computer
companies, including two of the six specific companies judged to be comparable
to Convex as described above. The 777 Executive Compensation survey includes
nine of the eleven companies comprising the S&P Computer index shown in the
performance graph. Based on both these comparisons, the Committee concluded the
base salaries of Convex officers were slightly below the average base salaries
for equivalent positions, and in mid-1992 increased the annual base salary for a
number of executive officers, including the CEO. No new comparisons were
conducted in 1993 and no base salary adjustments were granted for executive
officers in 1993.
Annual incentive awards are designed to provide a direct link between an
executive's compensation and the executive's attainment of annually-defined
corporate and individual objectives. Based on the same survey data and the
judgment of the Committee, a total targeted annual incentive award is developed
for each executive with 50% of that award being tied to the achievement of
specific corporate objectives, which may include earnings or revenue targets.
The remaining 50% is tied to the achievement of the executive's individual
objectives. Annual incentives may also be related to short-term objectives that
improve the competitive posture or profitability of the Company and may include
order targets, operating margin percentage targets or progress towards desirable
levels of performance. If an executive's performance significantly exceeds
expectations, the Committee may increase that executive's incentive award over
the targeted level. If an executive's performance falls below approximately 80%
of targeted levels, no incentive award is paid.
In 1993 no incentive awards were given for the attainment of corporate
objectives. Although there are no minimum levels of corporate performance which
must be met before any bonuses are paid, with the Company's revenue and
profitability well below expectations, the Committee canceled all executive
officer incentive awards for achievement of individual objectives.
5
<PAGE>
The Company uses stock option grants as its long-term incentive mechanism.
These grants are intended to strengthen the link between executive compensation
and long-term Company performance by encouraging executives to obtain and hold
the Company's common stock. Stock options are granted at 100% of fair market
value on the date of grant and generally have a 10 year term. Stock options vest
over a four year period. In determining the number of stock options to be
awarded, the Committee considers the executive's performance in meeting annual
individual and corporate objectives, the executive's expected contributions to
the Company in the future, and comparisons to the companies in the surveys
discussed above.
Options are normally granted once a year, at or near the end of each year.
However, two grants were made in 1993 for contributions based in two separate
fiscal years. In January, options were granted based on contribution and
performance evaluations for 1992. In December 1993, the Committee granted
options to all employees, including the CEO and the executive officers, based on
progress in the development of the Company's two new product families, the
development of the data management and software business initiatives and the
implementation of a restructuring program designed to position the Company for
long-term competitiveness. For the CEO and the three highest paid executive
officers, option grants for 1993 contributions were below the levels granted for
1992. In addition, the Company repriced options in July 1993 as described in the
Compensation Committee Report on Repricing of Options.
CEO COMPENSATION
In 1993 Mr. Paluck's annual base salary of $240,000 was unchanged from the
previous year.
The Company's financial performance in 1993 was below expectations and no
annual incentive awards related to the achievement of corporate objectives were
paid to Mr. Paluck or any other officer of the Company. In addition, Mr. Paluck
received no awards for the achievement of individual objectives.
In 1993, the CEO received two option grants. In January an option for 50,000
shares was granted as a long-term incentive based on 1992 contributions. In
December an option for 40,000 shares was granted based on progress in the
development of the Company's two new product families, the development of the
data management and software business initiatives and the implementation of a
restructuring program designed to position the Company for long-term
competitiveness. Mr. Paluck's options will vest over a four year period from the
date of grant. In addition, the Company repriced options, including the CEO's,
in July 1993 as described in the Compensation Committee Report on Repricing of
Options.
COMPENSATION COMMITTEE
Regis P. McKenna Sam K. Smith Howard W. Wolfe
Regis P. McKenna served as a member of the Committee during the year,
however, he retired as a director on December 9, 1993.
6
<PAGE>
PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative total
stockholder return on its common stock with the Standard and Poor's 500 Stock
Index and the Standard and Poor's Computers Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Convex Computer........................................ 100 153.75 111.25 107.50 80.00 55.00
S&P 500................................................ 100 131.69 127.60 166.47 179.15 197.21
S&P Computers.......................................... 100 83.00 93.00 82.65 60.67 62.97
</TABLE>
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes compensation earned in 1993, 1992 and 1991 by
the Chief Executive Officer and the four other most highly compensated executive
officers in 1993.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION:
ANNUAL COMPENSATION STOCK
------------------------------------- OPTIONS
OTHER ANNUAL (IN
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) SHARES)
- ----------------------------------------------- ---- ----------- ------ --------------- ----------
<S> <C> <C> <C> <C> <C>
Robert J. Paluck............................... 1993 $ 240,000 $ 0 $ 0 320,000(2)
Chairman and 1992 227,692 45,000 13,853 230,000(3)
Chief Executive 1991 200,000 0 5,463 0
Officer
Terrence L. Rock............................... 1993 $ 190,000 $ 0 $ 2,917 230,000(4)
President 1992 175,769 60,000 8,353 140,000(5)
1991 150,000 0 0 0
Steven J. Wallach.............................. 1993 $ 190,000 $ 0 $ 2,345 320,000(2)
Senior Vice President, 1992 186,538 45,000 0 230,000(3)
Technology 1991 170,000 0 3,446 0
Director
William G. Bock................................ 1993 $ 170,000 $ 0 $ 0 185,500(6)
Senior Vice President, 1992 165,769 60,000 4,832 110,500(7)
Worldwide Sales 1991 150,000 0 0 0
Philip N. Cardman.............................. 1993 $ 138,000 $ 0 $ 0 112,500(8)
Vice President, 1992 136,659 20,000 0 80,500(9)
General Counsel, 1991 125,652 0 0 0
and Secretary
<FN>
- ------------------------
(1) Represents imputed value of costs associated with attendance of annual
employee recognition events.
(2) Includes 230,000 options granted in previous years that were repriced in
the current year.
(3) Includes 180,000 options granted in previous years that were repriced in
the current year.
(4) Includes 140,000 options granted in previous years that were repriced in
the current year.
(5) Includes 110,000 options granted in previous years that were repriced in
the current year.
(6) Includes 110,500 options granted in previous years that were repriced in
the current year.
(7) Includes 80,500 options granted in previous years that were repriced in
the current year.
(8) Includes 80,000 options granted in previous years that were repriced in
the current year.
(9) Includes 65,000 options granted in previous years that were repriced in
the current year.
</TABLE>
8
<PAGE>
TABLE OF OPTION GRANTS IN 1993
The following table sets forth details regarding stock options granted to
the named executive officers in 1993. In addition, there are shown hypothetical
gains that would exist for the respective options.
<TABLE>
<CAPTION>
POTENTIAL GAIN AT
ASSUMED RATES OF
STOCK PRICE
OPTIONS % OF TOTAL APPRECIATION FOR
GRANTED(1) OPTIONS GRANTED EXERCISE OPTION TERM(3)
(IN TO EMPLOYEES PRICE EXPIRATION ------------------
NAME SHARES) IN 1993 PER SHARE DATE 5% 10%
- ------------------------------------------ --------- --------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Paluck.......................... 40,000 0.6 % $5.250 12/09/03 $132,068 $334,686
50,000 0.8 % 4.000 01/28/03 116,931 291,581
50,000(2) 0.8 % 4.000 01/02/02 100,791 243,868
50,000(2) 0.8 % 4.000 12/13/00 85,703 201,415
50,000(2) 0.8 % 4.000 12/14/99 73,009 167,313
50,000(2) 0.8 % 4.000 12/15/98 60,043 134,008
30,000(2) 0.5 % 4.000 02/26/98 30,053 65,692
Terrence L. Rock.......................... 40,000 0.6 % $5.250 12/09/03 $132,068 $334,686
50,000 0.8 % 4.000 01/28/03 116,931 291,581
30,000(2) 0.5 % 4.000 01/02/02 60,475 146,321
30,000(2) 0.5 % 4.000 12/13/00 51,422 120,849
30,000(2) 0.5 % 4.000 12/14/99 43,805 100,388
30,000(2) 0.5 % 4.000 12/15/98 36,026 80,405
20,000(2) 0.3 % 4.000 02/26/98 20,036 43,795
Steven J. Wallach......................... 40,000 0.6 % $5.250 12/09/03 $132,068 $334,686
50,000 0.8 % 4.000 01/28/03 116,931 291,581
50,000(2) 0.8 % 4.000 01/02/02 100,791 243,868
50,000(2) 0.8 % 4.000 12/13/00 85,703 201,415
50,000(2) 0.8 % 4.000 12/14/99 73,009 167,313
50,000(2) 0.8 % 4.000 12/15/98 60,043 134,008
30,000(2) 0.5 % 4.000 02/26/98 30,053 65,692
William G. Bock........................... 35,000 0.5 % $5.250 12/09/03 $115,559 $292,850
40,000 0.6 % 4.000 01/28/03 93,544 233,265
30,000(2) 0.5 % 4.000 01/02/02 60,475 146,321
30,000(2) 0.5 % 4.000 12/13/00 51,422 120,849
30,000(2) 0.5 % 4.000 12/14/99 43,805 100,388
20,000(2) 0.3 % 4.000 12/15/98 24,017 53,603
500(2) * 4.000 02/26/98 501 1,095
Philip N. Cardman......................... 17,500 0.3 % $5.250 12/09/03 $57,780 $146,425
15,000 0.2 % 4.000 01/28/03 35,079 87,474
15,000(2) 0.2 % 4.000 01/02/02 30,237 73,161
15,000(2) 0.2 % 4.000 12/13/00 25,711 60,424
10,000(2) 0.2 % 4.000 12/14/99 14,602 33,463
40,000(2) 0.6 % 4.000 07/26/99 54,329 123,228
<FN>
- --------------------------
*Less than 0.1%
(1) Material terms of these grants: Options have a term of 10 years from the
date of grant except the termination date has not been changed for any
repriced options; Options vest over a four year period and are
non-transferrable; Options are exercisable no sooner than six months after
the grant date as long as the executive officer remains employed by the
Company, or within 30 days after termination; The Company retains the right
to repurchase unvested shares in the event of termination.
(2) Represents options granted in prior years that were repriced in July 1993.
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by the SEC and, therefore, are not intended
to forecast possible future appreciation of the stock price.
</TABLE>
9
<PAGE>
TABLE OF OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during 1993, and
unexercised options held as of December 31, 1993.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1993(1) AT DECEMBER 31, 1993(2)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Paluck.............. -0- $0 180,000 140,000 $ 270,000 $ 160,000
Terrence L. Rock.............. -0- $0 110,000 120,000 $ 165,000 $ 130,000
Steven J. Wallach............. -0- $0 180,000 140,000 $ 270,000 $ 160,000
William G. Bock............... -0- $0 80,500 105,000 $ 120,750 $ 113,750
Philip N. Cardman............. -0- $0 65,000 47,500 $ 97,500 $ 49,375
<FN>
- ------------------------
(1) Options granted pursuant to the 1991 Option Plan are generally exercisable
by the optionee ahead of vesting. Unvested shares purchased on exercise of
an option are subject to a repurchase right of the Company, and may not be
sold by an optionee, until the shares vest. Options indicated in this
table as "Exercisable" are those options which were vested and exercisable
as of December 31, 1993. All other options are indicated as
"Unexercisable."
(2) Based on a share price of $5.50 at December 31, 1993.
</TABLE>
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON REPRICING OF OPTIONS
In July 1993, following the announcement and implementation of a
restructuring plan that reduced the number of employees by approximately 16%,
stock options for all remaining employees, including all executive officers,
were repriced to the then current market price. The Board of Directors and the
Committee took this action to maintain morale across the Company, to help
maintain momentum in the development projects and to retain key contributors in
all areas of the Company, including the executive officers. There was no
separate analysis of the impact of the repricing on the overall compensation of
the executive officers or any other employee.
While the Committee has no intention to reprice options in the future, the
Company has repriced options in the past as noted in the Table of Ten-Year
Option Repricings which follows this report.
<TABLE>
<S> <C> <C>
Regis P. McKenna Sam K. Smith Howard W. Wolfe
</TABLE>
The following table sets forth the option repricings for the last ten years
for all executive officers.
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
EXERCISE
PRICE AT
NUMBER OF MARKET PRICE TIME OF LENGTH OF ORIGINAL
OPTIONS/ OF STOCK AT REPRICING OPTION TERM
SARS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) PRICE ($) AMENDMENT(YRS)
- ------------------------------ ---------- ------------ ------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Paluck.............. 07/30/93 50,000 $ 4.000 $ 7.000 $ 4.000 9.4
Chairman and 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 8.4
Chief Executive 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 7.3
Officer 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 50,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 50,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 50,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 50,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 30,000 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 50,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 50,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 30,000 $ 6.500 $ 12.310 $ 6.500 4.3
Terrence L. Rock.............. 07/30/93 50,000 $ 4.000 $ 7.000 $ 4.000 9.4
President 07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 8.4
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 20,000 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 30,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 30,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 30,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 30,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 20,000 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 30,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 30,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 20,000 $ 6.500 $ 12.310 $ 6.500 4.3
</TABLE>
11
<PAGE>
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
EXERCISE
PRICE AT
NUMBER OF MARKET PRICE TIME OF LENGTH OF ORIGINAL
OPTIONS/ OF STOCK AT REPRICING OPTION TERM
SARS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) PRICE ($) AMENDMENT(YRS)
- ------------------------------ ---------- ------------ ------------- ----------- ----------- -------------------
Steven J. Wallach............. 07/30/93 50,000 $ 4.000 $ 7.000 $ 4.000 9.4
<S> <C> <C> <C> <C> <C> <C>
Senior Vice President, 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 8.4
Technology 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 7.3
Director 07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 50,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 50,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 50,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 50,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 50,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 30,000 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 50,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 50,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 30,000 $ 6.500 $ 12.310 $ 6.500 4.3
William G. Bock............... 07/30/93 40,000 $ 4.000 $ 7.000 $ 4.000 9.4
Senior Vice President, 07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 8.4
Worldwide Sales 07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 20,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 500 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 30,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 30,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 30,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 20,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 500 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 30,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 30,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 20,000 $ 6.500 $ 12.310 $ 6.500 4.3
Philip N. Cardman............. 07/30/93 15,000 $ 4.000 $ 7.000 $ 4.000 9.4
Vice President, 07/30/93 15,000 $ 4.000 $ 6.125 $ 4.000 8.4
General Counsel, 07/30/93 15,000 $ 4.000 $ 6.125 $ 4.000 7.3
and Secretary 07/30/93 10,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 40,000 $ 4.000 $ 6.125 $ 4.000 6.0
07/23/92 15,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 15,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 10,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 40,000 $ 6.125 $ 8.500 $ 6.125 7.0
11/08/90 10,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 40,000 $ 8.500 $ 13.875 $ 8.500 3.7
</TABLE>
12
<PAGE>
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
EXERCISE
PRICE AT
NUMBER OF MARKET PRICE TIME OF LENGTH OF ORIGINAL
OPTIONS/ OF STOCK AT REPRICING OPTION TERM
SARS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) PRICE ($) AMENDMENT(YRS)
- ------------------------------ ---------- ------------ ------------- ----------- ----------- -------------------
James A. Balthazar............ 07/30/93 15,000 $ 4.000 $ 7.000 $ 4.000 9.4
<S> <C> <C> <C> <C> <C> <C>
Vice President, 07/30/93 15,000 $ 4.000 $ 6.125 $ 4.000 8.4
Marketing 07/30/93 40,000 $ 4.000 $ 6.125 $ 4.000 7.4
07/30/93 10,000 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 2,500 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 4,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 4,000 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 15,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 40,000 $ 6.125 $ 13.000 $ 6.125 8.4
07/23/92 10,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 2,500 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 4,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 4,000 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 2,500 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 4,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 3,000 $ 6.500 $ 12.310 $ 6.500 4.3
Matthew S. Blanton............ 07/30/93 20,000 $ 4.000 $ 7.000 $ 4.000 9.4
Vice President, 07/30/93 5,000 $ 4.000 $ 6.125 $ 4.000 8.4
Advanced Development 07/30/93 3,750 $ 4.000 $ 6.125 $ 4.000 7.3
07/23/92 5,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 3,750 $ 6.125 $ 11.250 $ 6.125 8.3
Thomas M. Jones............... 07/30/93 20,000 $ 4.000 $ 7.000 $ 4.000 9.4
Vice President, 07/30/93 20,000 $ 4.000 $ 6.125 $ 4.000 8.4
Data Management 07/30/93 20,000 $ 4.000 $ 6.125 $ 4.000 7.3
Systems 07/30/93 25,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 25,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 5,000 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 20,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 20,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 25,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 25,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 5,000 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 25,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 25,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 3,000 $ 6.500 $ 12.310 $ 6.500 4.3
</TABLE>
13
<PAGE>
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
EXERCISE
PRICE AT
NUMBER OF MARKET PRICE TIME OF LENGTH OF ORIGINAL
OPTIONS/ OF STOCK AT REPRICING OPTION TERM
SARS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) PRICE ($) AMENDMENT(YRS)
- ------------------------------ ---------- ------------ ------------- ----------- ----------- -------------------
J. Cameron McMartin........... 07/30/93 10,000 $ 4.000 $ 5.375 $ 4.000 9.6
<S> <C> <C> <C> <C> <C> <C>
Vice President, 07/30/93 8,000 $ 4.000 $ 7.000 $ 4.000 9.4
Finance, Chief 07/30/93 8,000 $ 4.000 $ 6.125 $ 4.000 8.4
Financial Officer 07/30/93 2,500 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 1,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 5,000 $ 4.000 $ 6.125 $ 4.000 5.8
07/23/92 8,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 2,500 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 1,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 5,000 $ 6.125 $ 8.500 $ 6.125 6.8
11/08/90 1,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 5,000 $ 8.500 $ 12.750 $ 8.500 3.5
Daniel M. McQuay.............. 07/30/93 20,000 $ 4.000 $ 7.000 $ 4.000 9.4
Vice President, 07/30/93 10,000 $ 4.000 $ 6.125 $ 4.000 8.4
Manufacturing 07/30/93 10,000 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 4,000 $ 4.000 $ 6.125 $ 4.000 6.4
07/30/93 4,000 $ 4.000 $ 6.125 $ 4.000 5.4
07/30/93 1,250 $ 4.000 $ 6.125 $ 4.000 4.6
07/23/92 10,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 10,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 4,000 $ 6.125 $ 8.500 $ 6.125 7.4
07/23/92 4,000 $ 6.125 $ 8.500 $ 6.125 6.4
07/23/92 1,250 $ 6.125 $ 8.000 $ 6.125 0.6
11/08/90 4,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 4,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 4,000 $ 6.500 $ 12.310 $ 6.500 4.3
Phillip M. Struve............. 07/30/93 20,000 $ 4.000 $ 7.000 $ 4.000 9.4
Vice President, 07/30/93 20,000 $ 4.000 $ 6.125 $ 4.000 8.4
CXSOFT 07/30/93 10,000 $ 4.000 $ 6.125 $ 4.000 7.3
07/30/93 30,000 $ 4.000 $ 6.125 $ 4.000 7.1
07/23/92 20,000 $ 6.125 $ 10.625 $ 6.125 9.4
07/23/92 10,000 $ 6.125 $ 11.250 $ 6.125 8.3
07/23/92 30,000 $ 6.125 $ 8.500 $ 6.125 8.1
11/08/90 30,000 $ 8.500 $ 13.000 $ 8.500 9.8
Frank J. Marshall............. 11/08/90 30,000 $ 8.500 $ 14.125 $ 8.500 9.1
Former Senior 11/08/90 30,000 $ 8.500 $ 9.625 $ 8.500 3.1
Vice President, 10/26/87 20,000 $ 6.500 $ 12.310 $ 6.500 4.3
Engineering
Frank P. Vince 11/08/90 10,000 $ 8.500 $ 14.125 $ 8.500 9.1
Former 11/08/90 15,000 $ 8.500 $ 9.62 $ 8.500 3.1
Vice President, 10/26/87 100,000 $ 6.500 $ 19.500 $ 6.500 4.6
Marketing
</TABLE>
14
<PAGE>
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
EXERCISE
PRICE AT
NUMBER OF MARKET PRICE TIME OF LENGTH OF ORIGINAL
OPTIONS/ OF STOCK AT REPRICING OPTION TERM
SARS TIME OF OR NEW REMAINING AT DATE
REPRICED OR REPRICING OR AMENDMENT EXERCISE OF REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) PRICE ($) AMENDMENT(YRS)
- ------------------------------ ---------- ------------ ------------- ----------- ----------- -------------------
J. Adrian Wise 07/14/92 30,000 $ 6.375 $ 10.625 $ 6.375 9.4
<S> <C> <C> <C> <C> <C> <C>
Former Senior 07/14/92 30,000 $ 6.375 $ 11.250 $ 6.375 8.4
Vice President 07/14/92 30,000 $ 6.375 $ 8.500 $ 6.375 7.4
Sales, Service 07/14/92 30,000 $ 6.375 $ 8.500 $ 6.375 6.4
and Marketing 07/14/92 75,000 $ 6.375 $ 8.000 $ 6.375 0.6
11/08/90 30,000 $ 8.500 $ 14.125 $ 8.500 9.1
11/08/90 30,000 $ 8.500 $ 9.625 $ 8.500 3.1
10/26/87 5,000 $ 6.500 $ 12.310 $ 6.500 4.3
</TABLE>
15
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission (the "SEC"). Such officers, directors and
ten-percent shareholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
required for such persons, the Company believes that, during the fiscal year
ended December 31, 1993, the Company's officers, directors and ten-percent
shareholders complied with all applicable Section 16(a) filing requirements.
AMENDMENT OF THE 1991 STOCK OPTION PLAN
In January 1994, the Board of Directors authorized an amendment to the 1991
Option Plan to increase the shares reserved for issuance by 1,200,000. This
would bring the total number of shares issuable under the 1991 Option Plan to
4,960,000. Before giving effect to this proposed amendment, 239,383 shares are
available for issuance under the 1991 Option Plan.
At the Annual Meeting, the stockholders are being asked to approve this
amendment to the 1991 Option Plan. The affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present or represented and
voting at the Meeting will be required to approve the amendment. The essential
features of the 1991 Option Plan are outlined below.
GENERAL
Options granted under the 1991 Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory stock options.
SEE "Tax Information" below for information concerning the tax treatment of both
incentive stock options and nonstatutory stock options. Generally, options
granted by the Company are nonstatutory stock options.
PURPOSE
The purposes of the 1991 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentives to employees, consultants and directors of the Company and
its subsidiaries and to promote the success of the Company's business.
ADMINISTRATION
The 1991 Option Plan is administered by the Board of Directors or by a
committee appointed by the Board of Directors of at least two persons. The
interpretation and construction of the 1991 Option Plan by the Board is final
and conclusive. Members of the Board of Directors receive no remuneration for
their services in connection with the administration of the 1991 Option Plan.
ELIGIBILITY
The 1991 Option Plan provides that options may be granted to employees
(including officers, consultants and directors of the Company and its
majority-owned subsidiaries), all of whom are eligible to participate in the
1991 Option Plan. Subject to special provisions relating to non-employee
directors ("Outside Directors"), the Board of Directors selects the optionees
and determines the number of shares to be subject to each option. In making this
determination, the Board of Directors
16
<PAGE>
takes into account the duties and responsibilities of the optionee, the value of
the optionee's services, the optionee's present and potential contributions to
the success of the Company, the anticipated years of future service of the
employee and other relevant factors.
OUTSIDE DIRECTORS' OPTIONS
Options may be granted to Outside Directors under the 1991 Option Plan only
in accordance with an automatic, non-discretionary grant mechanism. The 1991
Option Plan provides that, on December 1 of each year in which the 1991 Option
Plan is in effect, each Outside Director will automatically be granted an option
to purchase 5,000 shares of the Company's Common Stock. The terms of options
granted to Outside Directors are as follows: (a) the term of the option is ten
years; (b) the option can be exercised only while the Outside Director remains a
director or within three months after termination; (c) the exercise price per
share of Common Stock is 100% of the fair market value on the date the option is
granted; and (d) the option vests over a four-year period at the rate of 1/4 of
the shares subject to the option at the end of each year. The 1991 Option Plan
provides that the provisions relating to grants of options to Outside Directors
may not be amended more than once every six months.
TERMS OF OPTIONS
Subject to the provisions relating to option grants to Outside Directors,
the term of options granted under the 1991 Option Plan are determined by the
Board of Directors. Each option is evidenced by a stock option agreement between
the Company and the employee receiving the option, and is subject to the
following additional terms:
(a) EXERCISE. The Board of Directors has the discretion to determine when
options can be exercised. Generally, options granted to employees, but not to
directors, may be exercised at any time before expiration so long as the
optionee remains employed by the Company and enters into a Stock Restriction
Agreement that grants the Company the right to repurchase, at the original
exercise price, any shares that are not vested at the time the optionee's
employment is terminated. Generally, options vest over a four-year period at the
rate of 1/4 of the shares subject to the option at the end of each of the first
two years and as to 1/48 of the shares at the end of each calendar month
thereafter. An option is exercised by giving written notice to the Company,
specifying the number of full shares to be purchased, and by tendering payment
of the purchase price. Payment for shares issued upon exercise of an option may
consist of cash, check, other shares of Common Stock or such other consideration
as determined by the Board of Directors.
(b) EXERCISE PRICE. The exercise price of options is determined by the
Board but may in no event be less than the fair market value of the Company's
Common Stock on the date the option is granted, in the case of incentive stock
options, and not less than 85% of fair market value of the Company's Common
Stock on the date the option is granted, in the case of nonstatutory stock
options. Incentive stock options granted to 10% stockholders are subject to the
additional restriction that the exercise price be at least 110% of fair market
value on the date of grant.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment by the Company
is terminated for any reason other than death, the option may be exercised
within 30 days after termination (or such other period as is determined by the
Board of Directors, which determination, in the case of an incentive stock
option, is made at the time of grant and will not exceed 90 days) and may be
exercised to the extent the option could have been exercised on the date of
termination.
(d) DEATH. If an optionee dies while employed by the Company, his options
may be exercised at any time within six months after death, but only to the
extent the options could have been exercised
17
<PAGE>
had the optionee not died but continued his employment for another six months.
If any optionee dies within one month after termination of employment, his
options may be exercised within six months after death to the extent the options
could have been exercised on the date of termination.
(e) TERM. All options have a maximum term of ten years from the date of
grant, unless a lesser period is provided for in the option agreement. No option
may be exercised by any person after its expiration.
(f) NONTRANSFERABILITY. An option cannot be transferred by the optionee,
other than by will or the laws of descent and distribution, and can be exercised
only by him during his lifetime or, if he dies, by a person who acquires the
right to exercise the option by bequest or inheritance or otherwise by reason of
the optionee's death.
(g) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1991 Option Plan as may be
determined by the Board of Directors.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
If a change is made in the Company's capitalization, such as a stock split,
which results in an exchange of the Company's Common Stock for a greater or
lesser number of shares, appropriate adjustment will be made in the option price
and in the number of shares subject to the option. If there is a stock dividend,
each optionee will be entitled to receive, upon exercise of his option, the
equivalent of any stock dividend which he would have received had he been the
holder of record of the shares being purchased. If a dissolution, liquidation,
merger or sale of substantially all of the assets of the Company is proposed,
all outstanding options automatically terminate unless otherwise provided by the
Board of Directors or unless assumed by the acquiror in the case of a merger or
sale. In this event, the Board of Directors may, in its discretion, make
provision for accelerating the ability to exercise shares subject to option.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, from time to time, amend the 1991 Option Plan or terminate it
without approval of the stockholders; provided, however, that the approval of
the holders of a majority of the outstanding shares of the Company entitled to
vote is required for any amendment which increases the number of shares for
which options may be granted, materially changes the standards of eligibility or
constitutes an amendment for which stockholder approval is required to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any
successor rule ("Rule 16b-3"). However, no such action by the Board of Directors
or the stockholders may unilaterally alter or impair options previously granted
without the consent of the optionee. In all events, the 1991 Option Plan will
terminate in March 2001.
TAX INFORMATION
Options granted under the 1991 Option Plan may be either "incentive stock
options," as defined in Section 442 of the Code, or nonstatutory stock options.
If an option granted under the 1991 Option Plan is an incentive stock
option, the optionee will recognize no income upon grant of the option and incur
no tax liability due to its exercise unless the optionee is subject to the
alternative minimum tax. The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an incentive stock option
regardless of the applicability of the alternative minimum tax. A gain on a sale
or exchange of shares will be treated as a long-term capital gain if it is
realized at least two years after the option is granted and one year after the
18
<PAGE>
option is exercised. If these holding periods are not satisfied at the time of
sale, the optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value of the stock
on the date of exercise or the sale price of the stock. A different rule for
measuring ordinary income upon a premature disposition may apply if the optionee
is also an officer, director or 10% stockholder of the Company. The Company will
be entitled to a deduction in the same amount as the ordinary income recognized
by the optionee. Any gain recognized on a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term capital gain.
All options which do not qualify as incentive stock options are referred to
as nonstatutory options. An optionee will not recognize taxable income at the
time he is granted a nonstatutory option. However, upon exercise, the optionee
will recognize ordinary income for tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. A different
rule for measuring ordinary income upon option exercise may apply if the
optionee is also an officer, director or 10% stockholder of the Company. The
income recognized by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company, either in cash or out of the current
earnings paid to the optionee. Upon resale of the shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income, will be treated as a capital gain or loss.
VOTE REQUIRED
The affirmative votes of the holders of a majority of the shares of Common
Stock present or represented and "voting" on the proposed amendment (the "Voting
Shares") will be required to approve the increase in shares reserved under the
1991 Option Plan. Votes that are cast against the proposal are counted for
purposes of determining the total number of Voting Shares with respect to this
proposal. While there is no definitive statutory authority or case law in
Delaware as to the proper treatment of abstentions, the Company believes that
abstentions should also be counted for purposes of determining the number of
Voting Shares with respect to the proposal. In the absence of controlling
precedent to the contrary, the Company intends to treat abstentions on this
proposal in this manner. With respect to broker non-votes, there is Delaware
case law to the effect that, while such shares may be counted for determining
the presence or absence of a quorum for the transaction of business at a
meeting, broker non-votes should not be counted for purposes of determining the
number of shares voting with respect to the particular proposal(s) on which the
broker has expressly not voted. Accordingly, broker non-votes will not be
counted as Voting Shares with respect to this propsal. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE AMENDMENT TO THE 1991 OPTION PLAN.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young, independent public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1994. Representatives of Ernst & Young are expected to
be present at the meeting with the opportunity to make a statement, if they
desire to do so, and are expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS.
19
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 8, 1994
20
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CONVEX COMPUTER CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MAY 12, 1994
The undersigned stockholder of CONVEX COMPUTER CORPORATION, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 8, 1994, and hereby appoints
Robert J. Paluck, J. Cameron McMartin and Philip N. Cardman, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1994 Annual Meeting of Stockholders of CONVEX COMPUTER CORPORATION to be held on
May 12, 1994 at 10:00 a.m. local time, at the UTD Conference Center Auditorium
at 2601 North Floyd Road, Richardson, Texas, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
A majority of such attorneys or substitutes as shall be present and shall
act at said meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
/X/ Please mark
votes as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE
1991 STOCK OPTION PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
AS INDEPENDENT PUBLIC ACCOUNTANTS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS
NOMINEES: Robert J. Paluck; Steven J. Wallach; Erich
Bloch; Sam K. Smith; Howard D. Wolfe; H. Berry Cash
</TABLE>
/ / ___________________________________________________________________________
For all nominees except as noted above
<TABLE>
<S> <C> <C> <C>
2. PROPOSAL TO AMEND THE 1991 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES FOR ISSUANCE FROM
3,760,000 TO 4,960,000
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
1994 FISCAL YEAR
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
________________________________________
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
and upon such other matter of matters which may properly come before the meeting
or any adjournment or adjournments thereof.
(This proxy should be dated, signed by the stockholder(s) exactly as his or
her name appears hereon and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
Dated ______________________, 1994
__________________________________
Signature:
__________________________________
Signature:
