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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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
EXAR
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THOMAS R. MELENDREZ, ESQ.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4. Proposed maximum aggregate value of transaction:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
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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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EXAR CORPORATION
2222 QUME DRIVE
SAN JOSE, CALIFORNIA 95131
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 31, 1995
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TO THE STOCKHOLDERS OF EXAR CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Exar
Corporation, a Delaware corporation (the "Company"), will be held on Thursday,
August 31 at 3:00 p.m. local time at the Marriott Hotel, 2700 Mission College
Boulevard, Santa Clara, California, for the following purposes:
1. To elect one director to hold office until the 1998 Annual Meeting of
Stockholders.
2. To approve the Company's 1991 Stock Option Plan, as amended, to increase
the aggregate number of shares of Common Stock authorized for issuance
under such plan by 250,000 shares.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on July 5, 1995, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
RONALD W. GUIRE
SECRETARY
San Jose, California
July 31, 1995
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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EXAR CORPORATION
2222 QUME DRIVE
SAN JOSE, CALIFORNIA 95131
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 31, 1995
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Exar
Corporation, a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on August 31, 1995, at 3:00 p.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the Marriott Hotel, 2700 Mission College
Boulevard, Santa Clara, California. The Company intends to mail this proxy
statement and accompanying proxy card on or about July 31, 1995 to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request, Corporate Investor Communications, Inc. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but Corporate Investor Communications, Inc. will be
paid its customary fee, estimated to be approximately $3,000, if it renders
solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on July 5,
1995 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on July 5, 1995 the Company had outstanding and entitled to
vote 9,605,106 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2222 Qume
Drive, San Jose, California 95131, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1996 Annual Meeting of Stockholders must be received by the Company not later
than March 25, 1996 in order to be included in the proxy statement and proxy
relating to that Annual Meeting. In addition, any stockholder that desires to
make a proposal to be presented at the Company's Annual Meeting of Stockholders
must comply with the provisions relating to advance notice contained in the
Company's By-laws.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended Restated Certificate of Incorporation and By-laws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled by either (i) the affirmative vote of the holders of a majority of the
voting power of the then-outstanding shares of voting stock of the Company
voting together as a single class, or (ii) by a majority of the remaining
directors. A director elected to fill a vacancy shall serve for the remainder of
the full term of the class of directors in which the vacancy occurred and until
such director's successor is elected and qualified.
The Board of Directors is presently composed of five members. There is one
director in the class whose term of office expires in 1995. The nominee for
election to this class is currently a director of the Company who was previously
elected by the stockholders. If elected at the Annual Meeting, the nominee would
serve until the 1998 Annual Meeting and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominee named below. In the event that the nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. The person nominated for election has agreed to serve if elected, and
management has no reason to believe that the nominee will be unable to serve.
Set forth below is biographical information for the person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING
RONALD W. GUIRE
Mr. Guire, age 46, joined the Company in July 1984 and has been a director
of the Company since June 1985. Mr. Guire has served in a variety of officer
positions, and has been Chief Financial Officer of the Company since May 1985
and Senior Vice President since November 1989. Mr. Guire was a partner in the
certified public accounting firm of Graubart & Co. from 1979 until he joined the
Company in July 1984.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1996 ANNUAL MEETING
GEORGE D. WELLS
Mr. Wells, age 59, joined the Company as President in June 1992 and has
served as a director since September 1992. Mr. Wells has more than 30 years of
semiconductor experience, most recently with LSI Logic Corporation ("LSI"), a
manufacturer of HCMOS and BiCMOS application-specific integrated circuits. He
joined LSI in 1985 as President and Chief Operating Officer and was appointed
Vice Chairman in March 1992, a position he held until he joined the Company.
From 1983 to 1985, Mr. Wells was President of Intersil and General Manager of
Semiconductor, both divisions of General
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Electric Company. Mr. Wells is a director of Micronics Computers Inc., a
manufacturer of high-performance system boards, and of QLogic Corp., a supplier
of adaptor cards and disk control chips. Mr. Wells holds a B.S. in physics from
and completed two years of post-graduate work in nuclear physics at the
University of Glasgow, Scotland.
RAIMON L. CONLISK
Mr. Conlisk, age 73, has served as a director of the Company since August
1985, was appointed Vice Chairman of the Board in August 1990, and was appointed
Chairman of the Board in April 1994. From 1977 to date, Mr. Conlisk has been
President of Conlisk Associates, a management consulting firm serving
high-technology companies in the United States and foreign countries. Mr.
Conlisk has also been President, from 1984 to 1989, and more recently Chairman
from 1989 until retirement in June 1990, of Quantic Industries, Inc.
("Quantic"), a privately-held manufacturer of electronic systems and devices for
aerospace, defense and factory automation applications. He was a director of
Quantic from 1970 until retirement. From 1970 to 1973, and from 1987 to 1990,
Mr. Conlisk served as a director of the American Electronics Association. Mr.
Conlisk is also a director of SBE, Inc., a manufacturer of communication and
computer products.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
JAMES E. DYKES
Mr. Dykes, age 57, joined the Company's Board of Directors in May 1994. Mr.
Dykes served as President and Chief Executive Officer of Signetics division of
North American Philips Corporation, a manufacturer of industrial and consumer
electronics, from 1989 to 1993 and, from 1987 to 1988, as President and Chief
Executive Officer of Taiwan Semiconductor Manufacturing Company ("TSMC"), a
semiconductor foundry in Taiwan. Prior to joining TSMC, Mr. Dykes held various
management positions with other semiconductor and related companies including
General Electric Company, a diversified international manufacturer of defense,
electrical and other products, and Harris Semiconductor, Inc., a manufacturer of
semiconductors and integrated circuits. Mr. Dykes has served as President and
Chief Operating Officer of Intellon Corp., a wireless network communications
company, since August 1994. Mr. Dykes is also a director of Cree Research, Inc.,
a developer of blue light-emitting diodes, and Thomas Group Inc., a management
services company.
GEORGE E. GREGA
Mr. Grega, age 66, has served as a director of the Company since August
1985. From 1985 to date, Mr. Grega has been President of George E. Grega
Associates, an international business and management consulting firm. Mr. Grega
was an employee of General Electric Company, a diversified international
manufacturer of defense, electrical and other products, from 1950 through 1984,
including service from 1970 to 1973 as President and Chief Executive Officer of
General Electric Japan, Ltd. Mr. Grega is also a director of SBE, Inc., a
manufacturer of communication and computer products.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1995, the Board of Directors held
twelve meetings. The Board maintains an Audit Committee, a Compensation
Committee, an Employee Option Administration Committee, a Nominating Committee
and, for a portion of such fiscal year, maintained a Special Committee.
The Audit Committee reviews the results of the Company's annual audit,
recommends to the Board the independent auditors to be retained for the Company,
and receives and considers the accountants' comments as to controls, adequacy of
staff and management performance, and procedures in connection with audit and
financial controls. The Audit Committee, which during the fiscal year ended
March 31, 1995, was composed of Messrs. Conlisk, Grega, and Dykes, the latter of
whom served as Chairman of the Committee, held five meetings during such fiscal
year.
The Compensation Committee evaluates the performance of the Company's Chief
Executive Officer, reviews the performance of other members of management, and
reviews and approves or recommends to the Board compensation levels, policies
and programs. The Compensation Committee,
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which during the fiscal year ended March 31, 1995, was composed of Messrs.
Conlisk, Dykes and Grega, the latter of whom served as Chairman of the
Committee, held nine meetings during such fiscal year.
The Employee Option Administration Committee administers the Company's
employee stock option plans, including the granting of any options under those
plans. The Employee Option Administration Committee, which during the fiscal
year ended March 31, 1995, was composed of Messrs. Conlisk and Grega, the latter
of whom served as Chairman of the Committee, held six meetings during such
fiscal year.
The Special Committee reviewed and approved certain material transactions
between the Company and Rohm Co., Ltd. ("Rohm") and its affiliates. The Special
Committee, which during the fiscal year ended March 31, 1995, was composed of
Messrs. Conlisk, Grega and Wells, held three meetings during such fiscal year.
In view of Rohm's reduced percentage of stock ownership of the Company, the
Special Committee was disbanded in fiscal 1995.
In April 1994, the Board established a Nominating Committee, which during
the fiscal year ended March 31, 1995, consisted of Messrs. Conlisk, Dykes and
Grega, the latter of whom served as Chairman of the Committee. The Nominating
Committee held six meetings during such fiscal year. The Nominating Committee
interviews, evaluates, nominates and recommends individuals for membership on
the Company's Board of Directors and committees thereof and nominates specific
individuals to be elected as officers of the Company by the Board of Directors.
No formal procedure has been established for the consideration of nominees
recommended by stockholders, although the Board has in the past considered
nominees recommended by stockholders.
During the fiscal year ended March 31, 1995, each Board member attended 83%
or more of the aggregate of the meetings of the Board and of the committees on
which he served, held during the period for which he was a director or committee
member, respectively.
PROPOSAL 2
APPROVAL OF THE 1991 STOCK OPTION PLAN, AS AMENDED
In August 1991, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1991 Stock Option Plan (the "1991 Plan").
As a result of a series of amendments, at June 8, 1995, the aggregate number of
shares of the Company's Common Stock authorized for issuance under the 1991 Plan
was 1,776,056 shares. This number represents (i) 1,700,000 shares of Common
Stock plus (ii) one share of Common Stock for each share of stock subject to an
option that was outstanding under the Company's 1984 Incentive Stock Option Plan
on August 2, 1991 to the extent such option had expired or otherwise terminated
unexercised as of May 31, 1995, as provided under the terms of the 1991 Plan. As
of May 31, 1995, options (net of canceled or expired options) and stock bonus
awards covering an aggregate of 1,132,795 shares of the Company's Common Stock
were outstanding or had been exercised, and only 393,261 shares (plus any shares
that might in the future be returned to the 1991 Plan as a result of
cancellation or expiration of options) remained available for future grant under
the 1991 Plan. During the last fiscal year, no options or stock bonuses under
the 1991 Plan were granted to the Company's current executive officers. No
options or stock bonuses may be granted under the 1991 Plan to non-employee
directors. During the last fiscal year, under the 1991 Plan, the Company granted
to all employees as a group options to purchase 627,150 shares at exercise
prices of $16.09 to $22.50 per share.
On June 8, 1995, the Board approved an amendment to the 1991 Plan, subject
to stockholder approval, to enhance the flexibility of the Board and the
Employee Option Administration Committee in granting stock options to the
Company's employees. The amendment increases the number of shares authorized for
issuance under the 1991 Plan by 250,000 shares from a total of 1,526,056 shares
to 1,776,056 shares. The Board adopted this amendment to ensure that the Company
can continue to grant stock options to employees at levels determined
appropriate by the Board and the Employee Option Administration Committee.
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Stockholders are requested in this Proposal 2 to approve the 1991 Plan, as
amended. The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the 1991 Plan, as amended. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
The essential features of the 1991 Plan are outlined below:
GENERAL
The 1991 Plan provides for the grant of "Stock Awards" which may be either
(i) incentive stock options, (ii) nonqualified stock options, or (iii) stock
bonuses. Incentive stock options granted under the 1991 Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Nonqualified stock
options granted under the 1991 Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of incentive and nonqualified stock options.
PURPOSE
The 1991 Plan was adopted to provide a means by which selected employees and
directors of and consultants to the Company and its affiliates (defined in the
1991 Plan to mean any parent or subsidiary of the Company) may be given an
opportunity to benefit from increases in the value of the stock of the Company.
The Company, by means of the 1991 Plan, seeks to secure and retain the services
of persons capable of filling such positions and to provide incentives for such
persons to exert maximum efforts for the success of the Company. As of May 31,
1995, approximately 213 of the Company's approximately 458 employees and
consultants currently participate in the 1991 Plan.
ADMINISTRATION
The 1991 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1991 Plan and, subject to the
provisions of the 1991 Plan, to determine the persons to whom and the dates on
which Stock Awards will be granted, whether a Stock Award will be an incentive
stock option, a nonqualified stock option, a stock bonus, or a combination of
the foregoing, the number of shares to be subject to each Stock Award, the time
or times when a person shall be permitted to purchase or receive stock pursuant
to a Stock Award, the exercise or purchase price, the type of consideration, and
other terms of Stock Awards. Under the 1991 Plan, the Board of Directors is
authorized to delegate administration of the 1991 Plan to a committee composed
of not fewer than two members of the Board. The Board has delegated
administration of the 1991 Plan to the Employee Option Administration Committee
of the Board. As used herein with respect to the 1991 Plan, the "Board" refers
to the Employee Option Administration Committee as well as to the Board of
Directors itself. In addition, the 1991 Plan provides that, in the Board's
discretion, directors who grant options to employees covered under Section
162(m) of the Code generally will be "outside directors" as defined in Section
162(m). See "Federal Income Tax Information" below for a discussion of the
application of Section 162(m).
ELIGIBILITY
Employees (including officers) of the Company and its affiliates may be
granted Stock Awards under the 1991 Plan. Consultants are eligible to receive
Stock Awards other than incentive stock options under the 1991 Plan. Directors
who are not employees of or consultants to the Company or to any affiliate of
the Company are not eligible to participate in the 1991 Plan.
No incentive stock option may be granted under the 1991 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting
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power of the Company or any affiliate of the Company, unless the option exercise
price is at least 110% of the fair market value of the stock subject to the
option on the date of grant, and the term of the option does not exceed five
years from the date of grant. For incentive stock options, the aggregate fair
market value, determined at the time of grant, of the shares of Common Stock
with respect to which such options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
No person may be granted options under the 1991 Plan during any two calendar
year period to purchase in excess of 250,000 shares of Common Stock. This
limitation permits the Company, under Section 162(m) of the Code, to continue to
be able to deduct as a business expense certain compensation attributable to the
exercise of stock options granted under the 1986 Plan. Section 162(m) denies a
deduction to any publicly held corporation for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000 for any covered employee, unless certain conditions are
satisfied. See "Federal Income Tax Information" below for a discussion of the
application of Section 162(m).
STOCK SUBJECT TO THE 1991 PLAN
If Stock Awards granted under the 1991 Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such options
again becomes available for issuance under the 1991 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1991 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the 1991 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonqualified options under the 1991 Plan may not be less
than 50% of the fair market value of the Common Stock subject to the option on
the date of the option grant. However, if options were granted with exercise
prices below market value, deductions for compensation attributable to the
exercise of such options could be limited by Section 162(m) of the Code. See
"Federal Income Tax Information." At June 30, 1995 the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$29.50 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonqualified, with new
lower priced options. To the extent required by Section 162(m) of the Code, an
option repriced under the 1991 Plan is deemed to be cancelled and a new option
granted. Both the option deemed to be cancelled and the new option deemed to be
granted will be counted against the 250,000-share per-person per-two calendar
year limitation.
The exercise price of options granted under the 1991 Plan must be paid
either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (a) by delivery of other Common Stock of the Company,
(b) pursuant to a deferred payment arrangement or (c) in any other form of legal
consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the 1991 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the 1991 Plan typically vest at the rate of
25% per year during the optionee's employment or services as a consultant.
Shares covered by options granted in the future under the 1991 Plan may be
subject to different vesting terms. The Board has the power to accelerate the
time during which an option may be exercised. The 1991 Plan authorizes the grant
of options that may be exercised prior to full vesting subject to a right of
repurchase in favor of the Company; however, no currently outstanding options
permit such early exercise. To the extent provided by the terms of an option, an
optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option
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by a cash payment upon exercise, by authorizing the Company to withhold a
portion of the stock otherwise issuable to the optionee, by delivering
already-owned stock of the Company or by a combination of these means.
TERM. The maximum term of options under the 1991 Plan is ten years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1991 Plan terminate three months after the optionee ceases to
be employed by (or to serve as a consultant to) the Company or any affiliate of
the Company, unless (i) such termination is due to such person's permanent and
total disability (as defined in the Code), in which case the option may, but
need not, provide that it may be exercised at any time within one year of such
termination; (ii) the optionee dies while employed by or serving as a consultant
or director of the Company or any affiliate of the Company, or within three
months after termination of such relationship, in which case the option may, but
need not, provide that it may be exercised (to the extent the option was
exercisable at the time of the optionee's death) within eighteen months of the
optionee's death by the person or persons to whom the rights to such option pass
by will or by the laws of descent and distribution or, alternatively, it may be
exercised by a third party designated by the optionee as permitted under the
1991 Plan; or (iii) the option by its terms specifically provides otherwise.
Individual options by their terms may provide for exercise within a longer
period of time following termination of employment or the consulting
relationship. The option term may also be extended in the event that exercise of
the option within these periods is prohibited for specified reasons.
TERMS OF STOCK BONUSES
The Board has the authority to grant stock bonuses under the 1991 Plan. The
terms and conditions of the stock bonus agreements may change from time to time,
and the terms and conditions of separate agreements need not be identical;
however, each stock bonus agreement must include the substance of the following
provisions:
CONSIDERATION. The consideration, if any, to be paid for shares issued
under each stock bonus agreement is determined by the Board and designated in
such agreement. The method of payment of such consideration is also determined
by the Board and may consist of cash, promissory note, or any combination of
such methods of payment, or such other legal consideration and method of payment
acceptable to the Board, including past services actually rendered to or for the
benefit of the Company.
REPURCHASE OPTION BY THE COMPANY. Shares of stock sold or awarded under a
stock bonus agreement may, but need not, be subject to a repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board. In the event that a participant's employment or relationship with the
Company is interrupted or terminated by the Company or its affiliates, the
Company may repurchase or otherwise reacquire any or all of the shares of stock
held by that person that have not vested as of the date of termination under the
terms of the stock bonus agreement between the Company and such person.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1991 Plan or subject to
any Stock Award granted under the 1991 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1991 Plan and Stock
Awards outstanding thereunder will be appropriately adjusted as to the class and
the maximum number of shares subject to such plan, the maximum number of options
which may be granted to any person during any two-calendar year period, and as
to the class, number of shares, and price per share of stock subject to such
outstanding Stock Awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1991 Plan provides that, in the event of: (i) a dissolution or
liquidation of the Company, (ii) a merger or consolidation in which the Company
is not the surviving corporation, (iii) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's Common Stock
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outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iv) any other capital reorganizations in which more than 50% of
the shares of the Company entitled to vote are exchanged, then, at the
discretion of the Board or the Committee and to the extent permitted by
applicable law: (a) any surviving corporation shall assume any Stock Awards
outstanding under the 1991 Plan or shall substitute similar Stock Awards for
those outstanding under the 1991 Plan, (b) such Stock Awards shall continue in
full force and effect, or (c) the Stock Awards shall terminate if not exercised
prior to such event.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1991 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1991 Plan will terminate on August 1, 2001.
The Board may also amend the 1991 Plan at any time or from time to time. No
amendment will be effective unless approved by the stockholders of the Company
within twelve months before or after its adoption by the Board if the amendment
would: (i) modify the requirements as to eligibility for participation (to the
extent such modification requires stockholder approval in order for the Plan to
satisfy Section 422(b) of the Code, if applicable, or to comply with Rule 16b-3
("Rule 16b-3") of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")); (ii) increase the number of shares reserved for Stock Awards; or (iii)
change any other provision of the Plan in any other way if such modification
requires stockholder approval in order to comply with Rule 16b-3 or satisfy the
requirements of Section 422(b) of the Code. The Board may, in its sole
discretion, submit any other amendment to the 1991 Plan for stockholder
approval, including, but not limited to, amendments intended to satisfy the
requirements of Section 162(m) of the Code regarding the exclusion of
performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1991 Plan, an option may not be transferred by the optionee other
than by will or by the laws of descent and distribution and during the lifetime
of the optionee, may be exercised only by the optionee. In any case, the
optionee may designate in writing a third party who may exercise the option in
the event of the optionee's death. Under the 1991 Plan, no rights under a stock
bonus agreement shall be transferable except by will or by the laws of descent
and distribution so long as stock awarded under such agreement remains subject
to the terms of the agreement, unless such assignment is required by law or
expressly authorized by the terms of the applicable stock bonus agreement.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1991 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition will
be a capital gain or loss, which will be long-term or short-term depending on
whether
8
<PAGE>
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options granted under the
1991 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonqualified stock option. Upon exercise of a nonqualified stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Section 162(m) of the
Code, compensation attributable to stock options will qualify as
performance-based compensation, provided that the option is granted by a
compensation committee comprised solely of "outside directors" and either: (i)
the option plan contains a per-employee limitation on the number of shares for
which options may be granted during a specified period, the per-employee
limitation is approved by the stockholders, and the exercise price of the option
is no less than the fair market value of the stock on the date of grant; or (ii)
the option is granted (or exercisable) only upon the achievement (as certified
in writing by the compensation committee) of an objective performance goal
established in writing by the compensation committee while the outcome is
substantially uncertain, and the option is approved by stockholders. The 1991
Plan contains a per-employee limitation on the number of shares for which
options may be granted in any two calendar years which has been approved by the
stockholders.
STOCK BONUSES. Stock bonuses granted under the 1991 Plan generally have the
following federal income tax consequences:
Upon acquisition of stock under a stock bonus award, the recipient normally
will recognize taxable ordinary income equal to the excess of the stock's fair
market value over the purchase price, if any. However, to the extent the stock
is subject to certain types of vesting restrictions, the taxable
9
<PAGE>
event will be delayed until the vesting restrictions lapse unless the recipient
elects to be taxed on receipt of the stock. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, the application of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, the Company will
be entitled to a business expense deduction equal to the taxable ordinary income
recognized by the recipient. Upon disposition of the stock, the recipient will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock, if any, plus any amount
recognized as ordinary income upon acquisition (or vesting) of the stock. Such
gain or loss will be long-term or short-term depending on whether the stock was
held for at least one year from the date ordinary income is measured. Slightly
different rules apply to persons who acquire stock subject to forfeiture under
Section 16(b) of the Exchange Act.
10
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 31, 1995 by: (i) each director and
nominee for director; (ii) each Named Executive Officer (as defined below);
(iii) all executive officers and directors of the Company as a group; and (iv)
all those known by the Company to be beneficial owners of more than five percent
of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
(1)
---------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ---------------------------------------------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Putnam Investments, Inc. (2) ............................................................................. 1,120,870 11.8%
One Post Office Square
Boston, MA 02109
FMR Corp. (3) ............................................................................................ 1,072,350 11.3%
82 Devonshire Street
Boston, MA 02109
J. & W. Seligman & Co. Incorporated (4) .................................................................. 934,335 9.9%
100 Park Avenue
New York, NY 10017
Robert Fleming Inc. (5) .................................................................................. 556,925 5.9%
1285 Avenue of the Americas
16th Floor
New York, NY 10019
Nicholas-Applegate Capital Management (6) ................................................................ 482,325 5.1%
600 West Broadway, 29th Floor
San Diego, CA 92101
George D. Wells (7)....................................................................................... 106,195 1.1%
Ronald W. Guire (7)....................................................................................... 61,550 *
H. Ilhan Refioglu (7)..................................................................................... 40,600 *
Raimon L. Conlisk (7)..................................................................................... 40,312 *
George E. Grega (7)....................................................................................... 40,312 *
Robert M. Skinner (7)..................................................................................... 21,303 *
Thomas R. Melendrez (7)................................................................................... 16,301 *
James E. Dykes (7)........................................................................................ 5,625 *
All executive officers and directors as a group (12 persons) (7).......................................... 383,096 3.9%
<FN>
- ------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors, and
principal stockholders and Schedules 13G filed with the Securities and
Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table, and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 9,477,518 shares of the
Company's Common Stock outstanding on May 31, 1995, adjusted as required by
rules promulgated by the SEC.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
(2) Based on a Schedule 13G filed with the SEC in February 1995. Includes
343,160 shares over which Putnam Investments, Inc. has shared voting power
and 560,435 shares over which it has shared dispositive power; 141,150
shares over which Putnam Investment Management, Inc. has shared dispositive
power; and 343,160 shares over which The Putnam Advisory Company, Inc. has
shared voting power and 419,285 shares over which it has shared dispositive
power.
(3) Based on a Schedule 13G filed with the SEC on February 14, 1995. Includes
952,750 shares beneficially owned by Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR Corp., as a result of serving as
investment adviser to various companies registered under Section 8 of the
Investment Company Act of 1940, and 119,600 shares beneficially owned by
Fidelity Management Trust Company, also a wholly-owned subsidiary of FMR
Corp., as a result of its serving as trustee or managing agent for various
private investment accounts, primarily employee benefit plans. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 755,650 shares of the Company's Common Stock at December 31,
1994. FMR Corp. has sole voting power with respect to 114,500 shares and
sole dispositive power with respect to 1,072,350 shares.
(4) Based on a Schedule 13G filed with the SEC on April 10, 1995. Includes
934,335 shares over which J. & W. Seligman & Co. Incorporated has sole
voting power and 900,135 shares over which it has sole dispositive power.
(5) Based on a Schedule 13G filed with the SEC on February 14, 1995. Includes
556,925 shares over which Robert Fleming Inc. has shared voting and
dispositive power.
(6) Based on a Schedule 13G filed with the SEC on February 15, 1995. Includes
319,445 shares over which Nicholas-Applegate Capital Management has sole
voting power and 482,325 shares over which it has sole dispositive power.
(7) Includes shares which certain executive officers and directors have the
right to acquire within 60 days after May 31, 1995, pursuant to outstanding
options as follows: George D. Wells, 86,249 shares; Ronald W. Guire, 33,750
shares; H. Ilhan Refioglu, 40,123 shares; Raimon L. Conlisk, 40,312 shares;
George E. Grega, 40,312 shares; Robert M. Skinner, 19,500 shares; Thomas R.
Melendrez, 15,936 shares; James E. Dykes, 5,625 shares; and all executive
officers and directors as a group, 329,032 shares.
</TABLE>
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a 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 March 31, 1995, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
FEES. In fiscal 1995, the Company paid fees to each of its non-employee
directors for their services as directors. The Company paid James E. Dykes fees
totalling $19,800 for his services as a director. The Company paid Raimon L.
Conlisk fees totalling $63,200 for his services as a director, including service
as Chairman of the Board of Directors. The Company paid George E. Grega fees
totalling $31,600 for his services as a director. Such fees include $20,000 and
$10,000 paid to Messrs. Conlisk and Grega, respectively, for attendance at
additional meetings and other efforts as
12
<PAGE>
directors contributed in connection with, among other things, the restructuring
of the Company's relationship with Rohm. The Company reimburses all directors
for certain expenses incurred in connection with their services as directors in
accordance with Company policy.
NONQUALIFIED STOCK OPTIONS. Non-Employee Directors receive periodic
non-discretionary grants of nonqualified stock options to purchase shares of
Common Stock of the Company under the 1991 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan"). Upon initial election to the Board, each
Non-Employee Director is granted an option to purchase 22,500 shares of Common
Stock, and is automatically granted an option to purchase 7,500 additional
shares on each yearly anniversary date thereafter. Options granted under the
Directors' Plan are granted at fair market value and vest in four equal annual
installments with the first installment becoming exercisable on the first
anniversary of the date of the option grant. The maximum term of options granted
under the Directors' Plan is seven years. Prior to the adoption of the
Directors' Plan, non-employee directors received options under the 1986
Non-Employee Directors' Stock Option Plan (the "1986 Directors' Plan"), which
was terminated as to future grants in November 1991. At March 31, 1995, options
to purchase 13,124 shares of Common Stock were outstanding under the 1986
Directors' Plan and options to purchase 135,000 shares of Common Stock were
outstanding under the Directors' Plan.
During fiscal 1995, options covering 37,500 shares were granted under the
1991 Directors' Plan to the Company's Non-Employee Directors during such period
at an exercise price of $16.34 per share. The exercise price of such options was
equal to the fair market value of the Company's Common Stock on the date of
grant. No options were exercised by Non-Employee Directors during such period.
13
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended March 31, 1995, 1994
and 1993, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer, the President, and its other four most highly compensated
executive officers at March 31, 1995 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION (1) AWARDS
--------------------------------- --------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($)(2) BONUS ($) ($)(3) OPTIONS (#)(4) ($)(5)
- ---------------------- ---- ------- --------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
George D. Wells (6) 1995 328,140 137,000 -- 0 9,794
President 1994 300,186 195,000 -- 97,500 5,896
1993 200,228 111,328 -- 225,000 4,567
Ronald W. Guire 1995 197,615 70,000 -- 0 10,702
Senior Vice President, 1994 180,593 101,000 -- 74,999 5,252
Chief Financial 1993 176,017 73,340 -- 33,000 3,638
Officer
and Secretary
H. Ilhan Refioglu (7) 1995 181,385 0 -- 0 9,378
Vice President, 1994 175,410 60,000 -- 35,999 5,223
Strategic Product 1993 172,419 55,005 -- 14,999 3,632
Business Units
Thomas R. Melendrez 1995 156,563 39,450 -- 0 9,826
Corporate Vice 1994 123,940 57,000 -- 45,000 3,581
President of 1993 120,850 23,636 -- 4,500 3,858
Legal Affairs
Robert M. Skinner (8) 1995 153,161 35,000 -- 0 9,586
Vice President, 1994 139,508 55,000 -- 45,000 3,931
Worldwide Sales 1993 76,735 24,937 -- 18,000 962
<FN>
- ------------------------
(1) As permitted by rules promulgated by the SEC, no amounts are shown for
"perquisites," as such amounts for each Named Executive Officer do not
exceed the lesser of 10% of the sum of such executive's salary plus bonus
or $50,000.
(2) Includes amounts earned but deferred at the election of the Named Executive
Officer pursuant to the Company's tax-qualified Savings Plan (the "401(k)
Plan"). Also includes auto allowances.
(3) As permitted by rules promulgated by the SEC, no amounts are shown for
"perquisites," as such amounts for each Named Executive Officer do not
exceed the lesser of 10% of the sum of such executive's salary plus bonus
or $50,000.
(4) The Company has not granted any stock appreciation rights or made any
restricted stock bonus awards to any executive officer. All stock option
numbers reflect the 3:2 stock split declared in the form of a dividend and
paid on October 11, 1994.
(5) Consists of matching contributions made for fiscal 1993, fiscal 1994 and
fiscal 1995 by the Company for the benefit of each Named Executive Officer
under its 401(k) Plan in the stated amounts.
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
(6) Mr. Wells joined the Company as President in June 1992. The elements of Mr.
Wells' fiscal 1993 compensation were negotiated and set forth in an offer
letter from the Company which provided for, among other things, his fiscal
1993 base compensation rate, his initial grant of stock options to purchase
225,000 shares, his participation in the Company's executive incentive
program for fiscal 1993 at a level resulting in a bonus equal to at least
30% of his prorated fiscal 1993 base compensation, and an auto allowance of
$800 per month.
(7) Mr. Refioglu resigned as an executive officer of the Company effective June
1995.
(8) Mr. Skinner joined the Company in September 1992.
</TABLE>
STOCK OPTION GRANTS AND EXERCISES
The Company has granted both incentive and nonqualified stock options to its
executive officers under its 1991 Plan as well as under its 1984 Incentive Stock
Option Plan (which plan was suspended by the Board and terminated as to future
grants in August 1991). As of May 31, 1995, options to purchase a total of
1,132,795 shares of Common Stock were outstanding or had been exercised under
these plans and 393,261 shares remained available for future grant.
No option grants were made to the Named Executive Officers during the fiscal
year ended March 31, 1995.
The following table sets forth, for each of the Named Executive Officers,
the shares acquired and the value realized on each exercise of stock options
during fiscal 1995 and the fiscal year-end number and value of unexercised
shares subject to options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE (2)
- --------------------------------------------------------- --------------- --------------- -------------- -------------------
<S> <C> <C> <C> <C>
George D. Wells.......................................... 56,250 $581,625 24,375/185,625 $105,919/$1,676,756
Ronald W. Guire.......................................... -- -- 39,546/82,297 $ 317,546/$536,448
H. Ilhan Refioglu........................................ 3,750 $ 44,025 14,625/40,123 $ 87,308/$256,881
Thomas R. Melendrez...................................... 3,375 $ 34,069 12,000/37,687 $ 55,301/$189,099
Robert M. Skinner........................................ 4,500 $ 35,190 15,570/42,749 $ 82,583/$213,277
<FN>
- ------------------------
(1) Represents the fair market value of the Company's Common Stock on the date
of exercise (based on the closing sales price reported on the Nasdaq
National Market System or the actual sales price if the shares were sold by
the optionee simultaneously with the exercise) less the exercise price,
without taking into account any taxes that may be payable in connection
with the transaction.
(2) Fair market value of the Company's Common Stock at March 31, 1995 ($21.50)
minus the exercise price of the options.
</TABLE>
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND OF THE
EMPLOYEE OPTION ADMINISTRATION COMMITTEE
During fiscal 1995, the Compensation Committee of the Board of Directors
(the "Compensation Committee") consisted of Messrs. Conlisk, Dykes, and Grega,
the latter of whom served as Chairman of the Committee, none of whom is an
officer or an employee of the Company. The Compensation Committee evaluates the
performance of the Company's Chief Executive Officer, reviews the performance of
other members of management, and reviews and approves or recommends to the Board
compensation levels, policies and programs. The Employee Option Administration
Committee of the Board of Directors (the "Option Committee") consists of Messrs.
Conlisk and Grega, the latter of whom served as Chairman of the Committee. The
Option Committee administers the Company's employee stock option plans.
COMPENSATION PHILOSOPHY
Through the Compensation Committee and the Option Committee, the Company has
developed and implemented compensation policies, plans and programs which seek
to tie executive compensation to the attainment of specific individual,
operating group and Company-wide objectives, while providing compensation
sufficient to attract and retain talented executives who will contribute to the
Company's long-term success. In furtherance of these goals, annual base salaries
are generally set at levels which take into account both competitive and
performance factors. The Company also relies to a significant degree on annual
and longer-range incentive compensation to attract and motivate its executives.
Incentive compensation is variable and is closely tied to corporate performance
to encourage profitability growth and the enhancement of stockholder value.
During fiscal 1995, compensation for the Company's executive officers consisted
of base salary, annual cash incentive opportunities, longer-term equity
incentives, participation as eligible (with all other eligible employees of the
Company) in the Company's 401(k) Savings Plan, an auto allowance for most
executive officers, and certain benefits available generally to employees of the
Company.
CASH-BASED COMPENSATION
BASE SALARY. The Compensation Committee fixes the base salary of the Chief
Executive Officer and reviews and approves base salaries for each of the
Company's other executive officers annually in connection with annual
performance reviews. In adjusting these base salaries, the Compensation
Committee examines both qualitative and quantitative factors relating to
corporate and individual performance. In many instances, the qualitative factors
necessarily involve a subjective assessment by the Committee. The Committee does
not base its considerations on any single performance factor nor does it
specifically assign relative weights to factors but rather considers a mix of
factors and evaluates individual performance against that mix both in absolute
terms and in relation to the executive's peers within the Company. Generally, in
determining salary adjustments for executive officers (other than the Chief
Executive Officer), the Committee relies primarily on the evaluation and
recommendations of Mr. Wells.
In addition, in determining base salaries for fiscal 1995, the Committee
reviewed an independent survey of base salaries paid to executive officers of
other high technology companies of comparable size. The survey includes a
broader group of companies than those companies included in the Hambrecht &
Quist Technology Index used in the performance measurement comparison graph
included in this proxy statement. To assist in recruiting highly qualified
management, the Committee generally targets base salaries paid to executive
officers at competitive levels, depending on individual qualifications and
experience. Generally, base salaries paid to executive officers for fiscal 1995
were set at levels within the second and third quartiles of salaries paid to
executives under the independent survey.
For fiscal 1995, the Compensation Committee increased the salary of Mr.
Wells by approximately 7.7%, resulting in an adjusted salary in the 75th
percentile of salaries paid to chief executive officers of high technology
companies of comparable size in the independent survey described above. The
increase reflects, in addition to competitive considerations, the Committee's
evaluation of Mr. Wells' contribution to the performance of the Company in
fiscal 1994. In particular, the Committee took into
16
<PAGE>
account the Company's financial performance, including sales growth and
profitability, as well as contributions by Mr. Wells to achievements in
strategic planning, positioning and direction, recruitment of qualified
management and other employees, the introduction of "total quality management"
concepts, and enhanced emphasis on accountability procedures.
Similar corporate performance factors, in addition to individual
performance, accounted for increases in base salaries for other executive
officers for fiscal 1995. Based on the Committee's conclusions that the salaries
of the Company's other executive officers should be aligned with those paid to
executive officers who performed at above-average levels at comparable-sized
high technology companies, salary adjustments for other executive officers
ranged up to 7.2%. In addition to individual and corporate performance, the
factors considered include degree of penetration of the Company's salary range
structure, the Company's merit increase matrix, independent survey data, number
of years with the Company and anticipated future responsibilities of each
individual within the next year.
ANNUAL INCENTIVE OPPORTUNITIES. The Company maintains annual cash incentive
bonus programs to reward executive officers and other key employees for
attaining defined performance goals. For most executive officers, bonuses are
based primarily on Company-wide performance targets. For senior management
personnel, Company-wide performance is a factor, and significant weight also is
given to individual performance and the performance of particular operating
groups within the Company. Company-wide, operating group and individual targets
are established annually for these bonus programs.
In September 1994, the Committee approved an executive incentive program for
fiscal 1995 in which Messrs. Wells, Guire, Refioglu, Skinner, Michael and
Melendrez each participated. This program determined bonuses by application of a
formula which multiplies (i) Company-wide return (based on pre-tax profits) on
assets employed, (ii) Company-wide sales growth relative to the previous year,
and (iii) a position factor reflecting each participant's relative
responsibility within the organization. The first two elements of the formula
are adjusted by a range of numeric factors specified in the formula, which may
have the effect of increasing the impact of performance that is either
particularly favorable or unfavorable. The Committee does not otherwise assign
relative weights to any element. Individual performance factors may also be
taken into account to modify the potential bonus calculated under the formula by
up to 50%. Under the program approved for fiscal 1995, no bonuses may be awarded
unless a minimum level of profitability is achieved. The maximum amount for
which Mr. Wells was eligible under the fiscal 1995 program was 100% of base
salary. Other executive officers participating in the program were eligible to
receive maximum amounts ranging between 60% and 80% of base salary. Based on the
Company's pre-tax profit for fiscal 1995 of $16.7 million (excluding the charge
to earnings of in-process research and development resulting from certain
acquisitions completed during the course of the year), as well as individual
performance factors, Mr. Wells was awarded a bonus of 42% of his base salary,
while other executive officers participating in the program for fiscal 1995 were
awarded bonuses ranging from 0% to 36% of their respective base salaries.
During fiscal 1995, the other executive officers participated in an annual
key employee incentive compensation program, under which bonuses were premised
upon Company-wide proprietary products sales and profit performance targets
(which were different from those applicable to the executive incentive program),
the performance of particular operating groups, and individual performance.
Because the Company-wide sales and profit targets were not achieved, no bonuses
were paid under this program for fiscal 1995.
EQUITY INCENTIVES
The Company utilizes its 1991 Plan to further align the interests of
stockholders and management by creating common incentives related to the
possession by management of a substantial economic interest in the long-term
appreciation of the Company's stock. Generally, options under the 1991 Plan are
granted with exercise prices set at 100% of the fair market value of the
underlying stock on the date of grant, have a term of seven years, and are
subject to vesting over four years. In
17
<PAGE>
determining the size of an option to be granted to an executive officer, the
Option Committee takes into account the officer's position and level of
responsibility within the Company, the officer's existing stock and unvested
option holdings, the potential reward to the officer if the stock price
appreciates in the public market, and the competitiveness of the officer's
overall compensation arrangements, including stock options, although outstanding
performance by an individual may also be taken into consideration. Option grants
may also be made to new executives upon commencement of employment and, on
occasion, to executives in connection with a significant change in job
responsibility. Additional long-term incentives are provided through the
Company's Employee Stock Participation Plan in which all eligible employees,
including eligible executive officers of the Company, may purchase stock of the
Company, subject to specified limits, at 85% of fair market value. The Option
Committee generally grants options taking into account multiple year periods.
Therefore option grants are not necessarily made each year. In fiscal 1995, the
Option Committee made no stock option grants to executive officers.
The Compensation Committee has not adopted a general policy with respect to
the application of Section 162(m) of the Code, which generally imposes an annual
corporate deduction limitation of $1 million on the compensation of certain
executive officers. However, pursuant to Section 162(m), the Board has adopted,
and the stockholders have approved, amendments to the 1991 Plan intended to
permit compensation from options granted thereunder to be excluded from Section
162(m) limitations.
<TABLE>
<S> <C>
The Compensation Committee The Employee Option Administration Committee
George E. Grega George E. Grega
Raimon L. Conlisk Raimon L. Conlisk
James E. Dykes
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during the fiscal year ended March 31, 1995, the
Compensation Committee consisted of Messrs. Conlisk, Grega and Dykes, none of
whom is an officer or an employee of the Company.
18
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON (1)
The following graph shows a five-year comparison of cumulative stockholder
return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
Companies) (the "Nasdaq Composite Index"), the Hambrecht & Quist ("H&Q")
Technology Index, and the Company. The H&Q Technology Index is composed of
approximately 200 technology companies in the semiconductor, electronics,
medical, and related technology industries. Historic stock price performance is
not necessarily indicative of future stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN ON INVESTMENT (2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EXAR CORP H&Q TECHNOLOGY NASDAQ
<S> <C> <C> <C>
Mar-90 $100.00 $100.00 $100.00
Jun-90 $130.08 $108.55 $106.73
Sep-90 $79.31 $78.52 $80.33
Dec-90 $99.11 $88.57 $88.18
Mar-91 $203.05 $114.93 $114.65
Jun-91 $171.32 $109.20 $113.57
Sep-91 $260.15 $113.81 $126.75
Dec-91 $215.74 $130.93 $142.30
Mar-92 $237.94 $135.29 $147.27
Jun-92 $190.36 $124.08 $137.32
Sep-92 $295.05 $129.37 $142.93
Dec-92 $352.16 $150.61 $164.32
Mar-93 $298.22 $148.41 $167.89
Jun-93 $358.50 $151.60 $179.38
Sep-93 $415.61 $154.30 $187.26
Dec-93 $298.22 $164.35 $184.62
Mar-94 $298.22 $165.84 $170.32
Jun-94 $329.95 $159.63 $172.32
Sep-94 $428.30 $175.47 $186.57
Dec-94 $466.37 $190.77 $184.43
Mar-95 $409.26 $212.33 $200.91
<FN>
- ------------------------
(1) This section is not "soliciting material," is not deemed filed with the
SEC, and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Exchange Act,
whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
(2) The total return on investment (change in stock price plus reinvested
dividends) for the Company, the Nasdaq Composite Index and the H&Q
Technology Index, based on March 31, 1990 = 100.
</TABLE>
19
<PAGE>
OTHER MATTERS
The Company's financial statements have been audited by KPMG Peat Marwick as
independent auditors. Representatives of KPMG Peat Marwick are expected to be
present at the Annual Meeting of Stockholders. They do not expect to make any
statement, but will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, sign and return
the enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
Ronald W. Guire
SECRETARY
July 31, 1995
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1995 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, EXAR CORPORATION,
2222 QUME DRIVE, P.O. BOX 49007, SAN JOSE, CALIFORNIA 95161-9007.
20
<PAGE>
PROXY
EXAR CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 31, 1995
The undersigned hereby appoints George D. Wells and Ronald W. Guire, and
each of them, at attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Exar Corporation which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders
of Exar Corporation to be held at the Marriott Hotel, 2700 Mission College
Boulevard, Santa Clara, California on Thursday, August 31, 1995 at 3:00 p.m.
local time, and at any and all continuations and adjournments thereof, with
all powers that the undersigned would possess if personally present, upon and
in respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters
that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEE LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED,
THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE>
/ X / PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR
LISTED BELOW.
1. To elect one director to hold office until the
1998 Annual Meeting of Stockholders.
NOMINEE: Ronald W. Guire
FOR THE NOMINEE / / / / WITHHELD FROM THE NOMINEE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
2. To approve the Company's 1991 Stock FOR AGAINST ABSTAIN
Option Plan as amended. / / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears at left. Executors, administrators,
trustees, guardians, attorneys-in-fact, etc. should give their full titles.
If the signer is a corporation, please give full corporate name and have a
duly authorized officer sign, stating title. If signer is a partnership,
please sign in partnership name by authorized person. If stock is registered
in the names of two or more persons, each should sign.
Signature: _____________________________ Date ______________
Signature: _____________________________ Date ______________
