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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or Section 240.14a-12
EXAR CORPORATION
------------------
(Name of Registrant as Specified In Its Charter)
------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: (5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No. 14A:
(3) Filing Party:
(4) Date Filed:
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EXAR CORPORATION
48720 KATO ROAD
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
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, September 10, 1998 at 3:00 p.m. local time at the Company's
Corporate Headquarters, 48720 Kato Road, Fremont, California, for the
following purposes:
1. To elect two (2) directors to hold office until the 2001 Annual
Meeting of Stockholders and until their successors are elected.
2. To approve the Company's 1997 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 450,000 shares.
3. To approve the Company's 1996 Non-Employee Directors' Stock Option
Plan, as amended, to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by 100,000
shares.
4. 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 15, 1998,
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
Fremont, California
July 15, 1998
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
48720 KATO ROAD
FREMONT, CALIFORNIA 94538
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 10, 1998
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 September 10, 1998, 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 Company's Corporate
Headquarters, 48720 Kato Road, Fremont, California. The Company intends to
mail this proxy statement and accompanying proxy card on or about July 30,
1998 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 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, approximately $4,500,
for solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on July
15, 1998 will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on July 15, 1998 the Company had outstanding and
entitled to vote 9,603,183 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 Corporate Headquarters, 48720
Kato Road, Fremont, California 94538, 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 1999 Annual Meeting of Stockholders must be received by the Company
not later than March 31, 1999 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 and Restated Certificate of Incorporation, as
amended, 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 are
two directors in the class whose term of office expires in 1998, Donald L.
Ciffone, Jr. and Ronald W. Guire. Each of the nominees for election to this
class is currently a director of the Company. Mr. Ciffone was unanimously
elected by the voting members of the Board of Directors in October 1996 upon
assuming President and CEO responsibilities. Mr. Guire, the other nominee,
was previously elected by the stockholders. If elected at the Annual Meeting,
Messrs. Ciffone and Guire would serve until the 2001 Annual Meeting and until
their successors are elected and have 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 nominees 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 persons nominated for election have agreed to
serve if elected, and management has no reason to believe that the nominees
will be unable to serve.
Set forth below is biographical information for the persons nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
DONALD L. CIFFONE, JR.
Mr. Ciffone, age 43, joined the Company as President and CEO in October
1996 and was appointed a director at that time. Mr. Ciffone has more than 20
years of semiconductor experience. Prior to joining the Company, he was
Executive Vice President of Toshiba America from August 1996 to October 1996.
Between 1991 and 1996, Mr. Ciffone served in a variety of senior management
positions at VLSI Technology, Inc. ("VLSI"), the last being Senior Vice
President, VLSI Products. Prior to joining VLSI, Mr. Ciffone was employed at
National Semiconductor Corporation for 13 years where he held a variety of
marketing and operations positions.
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RONALD W. GUIRE
Mr. Guire, age 49, 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 Executive Vice President since July 1995. Mr. Guire is also
Chairman of the Board of XeTel Corporation, an electronics contract
manufacturer. Mr. Guire was a partner in the certified public accounting firm
of Graubart & Co. from 1979 prior to joining the Company in July 1984.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
GEORGE D. WELLS
Mr. Wells, age 62, joined the Company as President and CEO in June 1992
and has served as a director since September 1992. In October, 1996, Mr.
Wells retired as President and CEO of the Company. Mr. Wells has more than 35
years of semiconductor experience. He joined LSI Logic Corporation in 1985, a
manufacturer of HCMOS and BiCMOS application-specific integrated circuits, in
1985 as President and Chief Operating Officer and was appointed Vice Chairman
in March 1992, a position he held until three months before he joined the
Company. From 1983, Mr. Wells was President of Intersil, Inc., a wholly owned
subsidiary of General Electric, and later its General Manager of the
Semiconductor Operations. Mr. Wells is a director of QLogic Corporation, a
supplier of adaptor cards and SCSI chips, Align-Rite, a semiconductor
photoplate manufacturer and Johnson Matthey, a leader in advanced materials
technology.
RAIMON L. CONLISK
Mr. Conlisk, age 76, 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 1995. 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 Chairman, from 1989
until retirement in June 1990, of Quantic Industries, Inc. ("Quantic"), a
privately held manufacturer of electronic systems. 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 Chairman of the Board of SBE, Inc., a manufacturer of communication and
computer products, and a director of XeTel Corporation, an electronics contract
manufacturer.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
JAMES E. DYKES
Mr. Dykes, age 60, joined the Company's Board of Directors in May 1994.
Mr. Dykes served as President and CEO of the 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 CEO
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. From August 1994 to June 1997, Mr.
Dykes served as President and Chief Operating Officer of Intellon Corp., a
wireless network communications company. In July 1997, Mr. Dykes joined the
Thomas Group, Inc., a management services company, as Executive Vice
President, Corporate Development. Mr. Dykes is also a director of the Thomas
Group Inc. and Cree Research, Inc., a developer of blue light-emitting diodes.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1998, the Board of Directors held
seven meetings. The Board maintains an Audit Committee, a Compensation
Committee, an Employee Option Administration Committee and a Nominating
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, 1998, was composed of Messrs. Conlisk, Wells, and
Dykes, held five meetings during such fiscal year. Mr. Wells serves as
Chairman of the Audit Committee.
The Compensation Committee evaluates the performance of the Company's
President and CEO, 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, which, during the fiscal
year ended March 31, 1998, was composed of Messrs. Conlisk, Dykes and Wells,
held seven meetings during such fiscal year. Mr. Dykes serves as Chairman of
the Compensation Committee.
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, 1998, was composed of Messrs. Wells and Conlisk,
held eight meetings during such fiscal year. Mr. Conlisk serves as Chairman
of the Employee Option Administration Committee.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof. The Nominating Committee will consider nominees recommended by
stockholders. Such recommendations should be submitted to the attention of
the Chairman of the Nominating Committee. The Nominating Committee, which,
during the fiscal year ended March 31, 1998, was composed of Messrs. Conlisk,
Dykes and Wells, held three meetings during such fiscal year. Mr. Conlisk
serves as Chairman of the Nominating Committee.
During the fiscal year ended March 31, 1998, each Board member attended
at least 75% 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.
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PROPOSAL 2
APPROVAL OF 1997 EQUITY INCENTIVE PLAN, AS AMENDED
In June 1997, the Board adopted, and the stockholders subsequently
approved in September 1997, the Company's 1997 Equity Incentive Plan (the
"1997 Plan"). Under the 1997 Plan, 825,000 common shares were reserved for
issuance plus an additional number of shares that may become available upon
the cancellation of options outstanding under the Company's 1991 Stock Option
Plan, as amended (the "1991 Plan"). As of May 31, 1998, options (net of
canceled or expired options) and stock bonus awards covering an aggregate of
2,157,594 shares of the Company's Common Stock were outstanding or had been
exercised, and only 509,319 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 1997 Plan. No options
or stock bonuses may be granted under the 1997 Plan to non-employee
directors. During the last fiscal year, under the 1997 Plan, the Company
granted to all employees as a group options to purchase 796,169 shares at
exercise prices of $16.45 to $26.84 per share.
On June 25, 1998, the Board approved an amendment to the 1997 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 1997 Plan by 450,000 shares from a total of 825,000
shares to 1,275,000 shares plus an additional number of shares that may
become available upon the cancellation of options outstanding under the
Company's 1991 Plan. 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.
Stockholders are requested in this Proposal 2 to approve the 1997 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 1997 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 1997 Plan are outlined below:
GENERAL
The 1997 Plan provides for the grant or issuance of incentive stock
options, nonstatutory stock options and stock bonuses to employees, directors
and consultants. Incentive stock options granted under the 1997 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").
Nonstatutory stock options granted under the 1997 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 the various awards
included in the 1997 Plan.
PURPOSE
The 1997 Plan provides a means by which selected employees,
employee-directors and consultants to the Company, and its affiliates, may be
given an opportunity to acquire Common Stock of the Company. The Company, by
means of the 1997 Plan, seeks to retain the services of persons who are now
employees, employee-directors or consultants to the Company or its
affiliates, to secure and retain the services of new employees,
employee-directors and consultants, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.
Approximately 350 of the Company's employees, employee directors and
consultants are eligible to participate in the 1997 Plan.
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FORMS OF BENEFIT
The 1997 Plan provides for incentive stock options, nonstatutory stock
options and stock bonuses (collectively "Stock Awards").
ADMINISTRATION
The 1997 Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of two (2) or more Board
members, all of the members of which committee may be non-employee directors
(as defined under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) and may also be, in the discretion of the Board, outside
directors (as defined under the Code). If administration is delegated to a
committee, such committee will have, in connection with the administration of
the 1997 Plan, the powers possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the 1997 Plan, as may be
adopted from time to time by the Board. The Board or the committee may
delegate to a subcommittee of one or more members of the Board the authority
to grant Stock Awards to eligible persons who are not then subject to Section
16 of the Exchange Act and/or who are either (i) not then employees covered
by Section 162(m) of the Code and are not expected to be covered by Section
162(m) of the Code at the time of recognition of income resulting from such
Stock Award, or (ii) not persons with respect to whom the Company wishes to
qualify for an exemption from the application of Section 162(m) of the Code.
The Board may abolish a committee or subcommittee at any time and revest in
the Board the administration of the 1997 Plan. The Board has delegated the
administration of the 1997 Plan to the Employee Option Administration
Committee.
The Board has the power to determine from time to time which of the
persons eligible under the 1997 Plan shall be granted awards, the type of
awards to be granted, when and how each award shall be granted, to construe
and interpret the 1997 Plan and awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board may
correct any defect in the 1997 Plan or in any award agreement to make the
1997 Plan fully effective.
SHARES SUBJECT TO THE 1997 PLAN
The Common Stock that may be sold pursuant to awards under the 1997 Plan
shall not exceed in the aggregate 1,275,000 shares of the Company's Common
Stock plus any shares that remained available for issuance under the
Company's 1991 Stock Option Plan (the "1991 Plan") on the date the 1997 Plan
was adopted and any additional shares that would become available under the
1991 Plan due to the expiration or other termination of any stock award
thereunder. If any award expires or terminates, in whole or in part, without
having been exercised in full, the stock not purchased under such award will
revert to and again become available for issuance under the 1997 Plan. The
Common Stock subject to the 1997 Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
ELIGIBILITY
Incentive stock options may be granted only to employees. Nonstatutory
stock options and stock bonuses may be granted only to employees or
consultants.
No person is eligible for the grant of an incentive stock option if, at
the time of grant, such person owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company unless the exercise price of such option is at least one hundred ten
percent (110%) of the fair market value of such Common Stock subject to the
option at the date of grant and the option is not exercisable after the
expiration of five (5) years from the date of grant. No person shall be
eligible to be granted Stock Awards covering more than Three Hundred Thousand
(300,000) shares of the Company's Common Stock in any calendar year.
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TERM AND TERMINATION
No option is exercisable after the expiration of ten (10) years from the
date it was granted.
In the event an optionee's employment or relationship as a consultant is
terminated, the optionee may exercise his or her option (to the extent that
the optionee was entitled to exercise it at the time of termination) but only
within the earlier of (i) the date three (3) months after the termination of
the optionee's employment or relationship as a consultant, or (ii) the
expiration of the term of the option as set forth in the option agreement.
However, if the optionee's termination of employment or relationship as a
consultant is due to permanent and total disability, the three (3) month
period is extended to one (1) year. In addition, if the optionee dies while
an employee, consultant, or within three (3) months following the termination
of such relationship, the three (3) month period is extended to eighteen (18)
months,
In the event a stock bonus recipient's continuous status as an employee,
consultant terminates, the Company may repurchase or otherwise reacquire any
or all of the shares of stock held by that person which have not vested as of
the date of termination under the terms of the stock bonus agreement between
the Company and such person.
EXERCISE/PURCHASE PRICE
The exercise price of each incentive stock option will not be less than
one hundred percent (100%) of the fair market value of the Company's Common
Stock on the date of grant. The exercise price of each nonstatutory stock
option will not be less than fifty percent (50%) of the fair market value on
the date of grant except for options issued under a salary deferral election.
The Board of Directors has the authority, with the consent of affected
holders, to reprice outstanding options and to offer optionees the
opportunity to replace outstanding options with new options for the same or a
different number of shares. Such repricing shall be limited to: (i) no more
than 20% of the options reserved for issuance under the 1997 Plan; and (ii)
options held other than by directors and officers (corporate and Section 16
insiders).
CONSIDERATION
The purchase price of stock acquired pursuant to a Stock Award is paid
either in cash at the time of exercise or purchase, or (if determined by the
Board at the time of grant or exercise for an option) by deferred payment or
other arrangement or in any other form of legal consideration that may be
acceptable to the Board. Additionally, in the case of an option and in the
discretion of the Board at the time of the grant or exercise of an option, by
delivery to the Company of other Common Stock of the Company. In the case of
any deferred payment arrangement, interest will be payable at least annually
and will be charged at the minimum rate of interest necessary to avoid the
treatment as interest of amounts that are not stated to be interest.
TRANSFERABILITY
An incentive stock option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the incentive stock option is granted only by
such person. A stock bonus shall not be transferable except where required by
law or expressly authorized by the applicable stock bonus agreement. A
nonstatutory stock option shall be transferable only to the extent
specifically provided for in the option agreement. An award holder may
designate a beneficiary who may exercise his or her award after death.
VESTING
The total number of shares of stock subject to an option may, but need
not, be allotted in periodic installments. The option agreement may provide
that from time to time during each of such installment periods, the option
may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of
the shares allotted to such period and/or any prior period as to which the
option became vested but was not fully exercised. The option agreement may
also provide that an optionee may exercise an option prior to full vesting,
provided that the Company may have a repurchase right with respect to any
unvested shares.
Stock bonuses sold or awarded under the 1997 Plan may be granted
pursuant to a repurchase option in favor of the Company in accordance with a
vesting schedule determined by the Board.
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SALARY DEFERRAL ELECTIONS
The Committee may permit selected employees to elect to have a portion of
their compensation reduced each year in return for options to purchase Common
Stock at an aggregate discount from then current fair market value equal to the
salary reduction amount.
Elections to defer salary must be filed with the Company prior to the
commencement of the calendar year in which the salary to be deferred is
earned, and are irrevocable for that calendar year. The minimum amount of
salary that may be deferred for a year is $5,000; the maximum is $50,000.
Options granted pursuant to a salary deferral election will be granted
on or before the last trading day in January of the calendar year for which
the salary reduction election is to be in effect. The number of shares of
Common Stock subject to each option shall be equal to A / (B x 66-2/3%),
where A is the salary deferral amount and B is the fair market value per
share of Common Stock on the option grant date. The number of shares shall be
rounded down to the nearest whole number.
The exercise price of each option granted pursuant to a salary deferral
election shall be 33 1/3% of the fair market value of the Common Stock
subject to such option on the date such option is granted. Such options shall
become exercisable in twelve monthly installments at the end of each month of
the calendar year in which salary is deferred, and shall terminate on the
earlier of (i) ten years from the date the option was granted, (ii) three
years following termination of employment or relationship as a director or
consultant.
ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the 1997 Plan, or
subject to any Stock Award, without receipt of consideration by the Company
(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 class(es) and maximum number of shares subject
to the 1997 Plan, the maximum annual award applicable under the 1997 Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding Stock Awards will be appropriately adjusted.
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock 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 (4)
any other capital reorganization in which more than fifty percent (50%) of
the shares of the Company entitled to vote are exchanged, excluding in each
case a capital reorganization in which the sole purpose is to change the
state of incorporation of the Company, then all outstanding options shall
become exercisable in full for a period of at least ten (10) days, and all
stock bonuses shall be fully vested, prior to such event. Outstanding options
which have not been exercised prior to such event shall terminate on the date
of such event unless assumed by a successor corporation.
AMENDMENT OF THE 1997 PLAN
The Board at any time, and from time to time, may amend the 1997 Plan.
However, no amendment shall be effective unless approved by the stockholders
of the Company to the extent such amendment requires stockholder approval in
order for the 1997 Plan to satisfy the requirements of Section 422 of the
Code, to comply with the requirements of Rule 16b-3 of the Exchange Act or to
comply with any Nasdaq or securities exchange listing requirements. The Board
may in its sole discretion submit any other amendment to the 1997 Plan for
stockholder approval.
TERMINATION OR SUSPENSION OF THE 1997 PLAN
The Board may suspend or terminate the 1997 Plan at any time. Unless
sooner terminated, the 1997 Plan shall terminate September 1, 2007. No Stock
Awards may be granted under the 1997 Plan while the 1997 Plan is suspended or
after it is terminated.
10
<PAGE>
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1997 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 (2) years from the date on which the option is
granted and at least one (1) 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 or mid-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 (a) the excess of the stock's fair market value on the date
of exercise over the exercise price, or (b) 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, mid-term or short-term depending on how long the optionee holds
the stock. Capital gains are generally subject to lower tax rates than
ordinary income. Slightly different rules may apply to optionees who are
subject to Section 16 of the Exchange Act or acquire stock subject to certain
repurchase options.
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, 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.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
1997 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 nonstatutory stock option. Upon exercise of a nonstatutory
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
requirement of reasonableness, Section 162(m) of the Code and the
satisfaction of a reporting obligation, the Company will be generally
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, mid-term or short-term depending on how long the optionee holds
the stock. 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.
STOCK BONUSES. Stock bonuses granted under the 1997 Plan generally have
the following federal income tax consequences:
Upon acquisition of the stock, 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 event will be delayed
until the vesting restrictions lapse unless the recipient elects to be taxed
on receipt of the stock. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an
amount based on the ordinary income recognized. Generally, the Company will
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 acquisition (or vesting) of the stock.
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.
11
<PAGE>
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 million for a covered employee. It is possible that
compensation attributable to awards granted in the future under the 1997 Plan,
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 Treasury regulations issued under Section 162(m), 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 (such as that set forth in the 1997 Plan), 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.
12
<PAGE>
PROPOSAL 3
APPROVAL OF THE 1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN, AS AMENDED
In July 1996 (the "Effective Date"), the Board of Directors adopted and
the stockholders subsequently approved the Company's 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan") authorizing for issuance
150,000 shares of Common Stock under the Directors' Plan. On June 25, 1998,
the Board of Directors approved an amendment, subject to stockholder
approval, to the Directors' Plan in order to attract and retain the services
of persons capable of serving on the Board of the Company to provide
flexibility in the event of Board expansion, and to continue to make grants
in the manner previously made under the Company's 1991 Non-Employee
Directors' Stock Option Plan (the "1991 Directors' Plan), which terminated
May 31, 1996.
The amendment increases the number of shares authorized for issuance
under the Directors' Plan by 100,000 shares from a total of 150,000 shares to
250,000 shares. As of May 31, 1998, options (net of cancelled or expired
options) covering an aggregate of 67,500 shares of the Company's Common Stock
had been granted and only 82,500 shares (plus any shares that might in the
future be returned to the Directors' Plan as a result of cancellation or
expiration of options) remained available for future grant under the
Directors' Plan. During the last fiscal year, under the Directors' Plan, the
Company granted to all non-employee directors as a group options to purchase
31,940 shares at exercise prices of $16.69 to $26.94 per share.
Stockholders are requested in this Proposal 3 to approve the adoption of
the Directors' 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 adoption of the
Directors' 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 THIS PROPOSAL 3
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan provides for non-discretionary grants of
nonstatutory stock options. Options granted under the Directors' Plan are not
intended to qualify as incentive stock options as defined under Section 422
of the Code.
PURPOSE
The purpose of the Directors' Plan is to retain the services of persons
now serving as Non-Employee Directors of the Company (as defined below), to
secure and retain the services of persons capable of serving on the Board and
to provide incentives for such persons to exert maximum efforts to promote
the success of the Company.
ADMINISTRATION
The Directors' Plan is administered by the Board. The Board has the
final power to construe and interpret the Directors' Plan and options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to
Non-Employee Directors of the Company. A "Non-Employee Director" is defined
in the Directors' Plan as a director of the Company and its affiliates who is
not otherwise an employee of the Company or any affiliate. Three of the
Company's five current directors are eligible to participate in the
Directors' Plan.
13
<PAGE>
TERM OF OPTIONS
Each option under the Directors' Plan is subject to the following terms and
conditions:
NON-DISCRETIONARY GRANTS. Option grants under the Directors' Plan are
non-discretionary and made solely in accordance with the express provisions
of the Directors' Plan.
Each person who is first elected to the Board after the Effective Date
shall be granted, at the time of such election, an option to purchase 22,500
shares of Common stock (the "Initial Grant"). Thereafter, on each anniversary
date of an Initial grant or the Non-Employee Director's initial grant under
the Company's 1991 Directors' Plan, each Non-Employee Director who has
continuously served as a Non-Employee Director for the preceding 12 months
shall automatically be granted an option to purchase 7,500 shares.
OPTION EXERCISE. Options become exercisable in four equal annual
installments, on the first, second, third and fourth anniversaries of the
date of grant. Such vesting is conditioned upon continued service to the
Company.
EXERCISE PRICE; PAYMENT. The exercise price of options granted under the
Directors' Plan shall be equal to 100% of the fair market value of the Common
Stock on the date such option is granted. The exercise price of options
granted must be paid in cash at the time the option exercised.
TRANSFERABILITY; TERM. Under the Directors' Plan, an option may not be
transferred by the optionee, except by will, by the laws of descent and
distribution, to a beneficiary designation (in a form satisfactory to the
Company), or pursuant to a domestic relations order that meets the requirements
of Rule 16b-3 under the Securities Exchange Act of 1934. No option granted under
the Directors' Plan is exercisable by any person after the expiration of seven
years from the date the option is granted.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' 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
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to the plan
and the class, number of shares and price per share of stock subject to
outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of certain specified types of merger or other corporate
reorganizations, than all outstanding options shall be exercisable in full
for a period of at least 10 days prior to such event. The acceleration of an
option in the event of an acquisition or similar corporate event may be
viewed as an antitakeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
FEE DEFERRAL ELECTION
Each Board member may elect to have a portion of their annual fee
reduced each year in return for options to purchase Common Stock at an
aggregate discount from the current fair market value equal to the fee
reduction amount.
Election to defer fee must be filed with the Company prior to the
commencement of the calendar year in which the fee to be deferred is earned,
and are irrevocable for that calendar year. The percentage of fee that may be
deferred for a year is an amount equal to at least 25% but in no event more
than 50%.
14
<PAGE>
Options granted pursuant to a fee deferral election will be granted on
or before the last trading day in January of the calendar year for which the
fee reduction election is to be in effect. The number of shares of Common
stock subject to each option shall be equal to A / (B x 66-2/3%), where A is
the fee deferral amount and B is the fair market value per share of Common
Stock on the option grant date. The number of shares shall be rounded down to
the nearest whole number.
The exercise price of each option granted pursuant to a fee deferral
election shall be 33-1/3% of the fair market value of the Common Stock
subject to such option on the date such option is granted. Such options shall
become exercisable in installments on each date that fees would have been
payable in cash had no deferral election been in effect, and shall terminate
on the earlier of (I) seven years from the date the option was granted, (ii)
three years following termination for any reason of his or her service as a
non-employee director.
DURATION, AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Directors' Plan at any
time or from time to time. No amendment will be effective unless approved by
the stockholders of the Company if such amendment requires stockholder
approval in order for the Directors' Plan to meet the requirements of Rule
16b-3 or Nasdaq or exchange listing requirements.
CERTAIN FEDERAL INCOME TAX INFORMATION
Stock options granted under the Directors' Plan are subject to federal
income tax treatment pursuant to rules governing options that are not
incentive stock options.
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan, does not purport to be complete and does
not discuss the income tax laws of any state or foreign country in which an
optionee may reside.
Options granted under the Directors' Plan are nonstatutory stock
options. There are no tax consequences to the Optionee or the Company by
reason of the grant of a nonstatutory stock option. Upon exercise of a
nonstatutory 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.
15
<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, 1998 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>
Sanford C. Bernstein & Co.(2)....................................... 698,600 7.29%
One State Street Plaza
New York, NY 10004-1545
Wellington Management Company(3).................................... 558,000 5.82%
75 State Street
Boston, MA 02109
Dimensional Fund Advisors Inc. (4).................................. 548,300 5.72%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Thomson Horstmann & Bryant, Inc. (5)................................ 530,100 5.53%
Park 80 West, Plaza Two
Saddle Brook, NJ 07663
Mellon Bank Corporation (6)......................................... 353,910 3.69%
One Mellon Bank Center
Pittsburgh, PA 15258
The TCW Group, Inc. (7)............................................. 159,000 1.66%
865 South Figuerra Street
Los Angeles, CA 90017
Ronald W. Guire(8) ................................................. 115,325 1.20%
Stephen W. Michael(8) .............................................. 75,427 *
Donald L. Ciffone, Jr. (8).......................................... 59,715 *
George D. Wells (8)................................................. 51,566 *
Thomas R. Melendrez(8).............................................. 49,478 *
James E. Dykes(8) .................................................. 33,992 *
Raimon L. Conlisk(8) ............................................... 33,750 *
Roubik Gregorian (8) ............................................... 8,369 *
All executive officers and directors as a group
(14 persons)(8) .................................................. 532,339 5.56%
</TABLE>
* 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 9,585,003 shares of the
Company's Common Stock outstanding on May 31, 1998, adjusted as required
by rules promulgated by the SEC.
(2) Based on a Schedule 13G filed with the SEC on February 4, 1998 includes
13,100 shares over which Sanford C. Bernstein & Co. has shared voting
power.
16
<PAGE>
(3) Based on a Schedule 13G filed with the SEC on February 10, 1998. Includes
308,000 shares over which Wellington Management Company has shared voting
power and 558,000 shares over which Wellington Management Company has
shared dispositive power.
(4) Based on a Schedule 13G filed with the SEC on February 10, 1998. Includes
186,800 shares over which Dimensional Fund Advisors Inc. has shared voting
power and dispositive power.
(5) Based on a Schedule 13G filed with the SEC on March 13, 1998. Includes
11,500 shares over which Thomson Horstmann & Bryant, Inc. has shared
voting power.
(6) Based on a Schedule 13G filed with the SEC on January 27, 1998. Includes
55,400 shares over which Mellon Bank Corporation has shared dispositive
power.
(7) Based on a Schedule 13G filed with the SEC on February 12, 1998.
(8) Includes shares which certain executive officers and directors have the
right to acquire within 60 days after May 31, 1998, pursuant to outstanding
options as follows: Ronald W. Guire, 79,999 shares; Stephen W. Michael,
69,999 shares; Donald L. Ciffone, Jr., 56,250; George D. Wells, 5,867
shares; Thomas R. Melendrez, 45,876 shares; James E. Dykes, 33,992 shares;
Raimon L. Conlisk, 33,750 shares; Roubik Gregorian, 7,750 shares; and all
executive officers and directors as a group, 404,857 shares.
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, 1998, 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 1998, the Company paid fees to each of its non-employee
directors for their services as directors. The Company paid to each of James
E. Dykes and George D. Wells fees totalling $21,600 for their services as
directors. The Company paid George E. Grega fees totalling $10,800 for his
services as a director through September 18, 1997. The Company paid Raimon L.
Conlisk fees totalling $43,200 for his services as a director, including
service as Chairman of the Board of Directors. In addition, 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 received periodic
non-discretionary grants of nonqualified stock options to purchase shares of
Common Stock of the Company under the 1996 Non-Employee Directors' Stock
Option Plan, as amended (the "1996 Directors' Plan"). The 1996 Directors'
Plan provides that 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. In addition, the 1996 Directors'
Plan provides that Non-Employee Directors may defer the payment of fees for
their services as directors and apply such deferrals to options to purchase
shares of the Company's common stock with exercise prices set at a discount
to market with the aggregate amount of such discounts equal to the aggregate
amount of the fees so deferred. For calendar year 1998, Messrs. Wells and
Dykes elected to have 50% of their annual director's fee deferred. Options
granted under the 1996 Directors' Plan are granted at fair market value and
vest in
17
<PAGE>
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 1996 Directors' Plan is seven
years. Prior to the adoption of the 1996 Directors' Plan, Non-Employee
Directors received options under the 1991 Non-Employee Directors' Stock
Option Plan (the "1991 Directors' Plan") which was terminated as to future
grants on May 31, 1996, and the 1986 Non-Employee Directors' Stock Option
Plan (the "1986 Directors' Plan"), which was terminated as to future grants
on November 7, 1991. At March 31, 1998, options to purchase -0- shares of
Common Stock were outstanding under the 1986 Directors' Plan, options to
purchase 112,500 shares of Common Stock were outstanding under the 1991
Directors' Plan and options to purchase 52,500 shares of Common Stock were
outstanding under the 1996 Directors' Plan.
During fiscal 1998, options covering 31,940 shares were granted under
the 1996 Directors' Plan to the Company's Non-Employee Directors during such
period at an aggregate exercise price of $21.38 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. During the same period, Non-Employee Directors
exercised options covering 7,500 shares under the 1986 Directors' Plan for a
net value realized of $99,543 and options covering 45,000 shares under the
1991 Directors' Plan for a net value realized of $367,200.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal years ended March 31, 1998,
1997 and 1996, compensation awarded or paid to, or earned by, the Company's
President and CEO, and its other four most highly compensated executive
officers at March 31, 1998 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
----------------------- ------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY UNDERLYING COMPENSATION
POSITION YEAR ($)(2) BONUS($) OPTIONS (#)(3) ($)(4)
- ----------------------- ---- ------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Donald L. Ciffone, Jr. (5) 1998 424,785 507,000 50,000 3,000
President and CEO 1997 188,824 197,000(5) 225,000 843
1996 -- -- -- --
Ronald W. Guire 1998 239,204 222,000 30,000 3,000
Executive Vice President, 1997 219,308 21,700 65,000 1,052
Chief Financial Officer and 1996 204,234 0 15,000 3,750
Secretary
Roubik Gregorian (6) 1998 208,076 596,000(6) 28,000 3,000
Chief Technology Officer 1997 188,308 345,000(6) 23,000 912
Vice President, 1996 -- -- -- --
Communications Division
Thomas R. Melendrez 1998 186,750 116,000 14,000 3,000
Corporate Vice President, 1997 174,846 11,900 20,500 844
General Counsel 1996 152,309 39,000 10,000 3,750
Stephen W. Michael 1998 174,745 130,000 15,000 3,000
Vice President, Operations 1997 166,481 12,670 16,000 802
Division 1996 156,576 0 8,000 3,750
</TABLE>
18
<PAGE>
- ---------------------
(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 retirement plan,
the Exar Corporation Savings Plan (the "401(k) Plan"). Also includes auto
allowances.
(3) The Company has not granted any stock appreciation rights or made any
restricted stock bonus awards to any executive officer.
(4) Consists of matching contributions made for fiscal 1998, fiscal 1997 and
fiscal 1996 by the Company for the benefit of each Named Executive Officer
under its 401(k) Plan in the stated amounts.
(5) Mr. Ciffone joined the Company as President and CEO in October 1996. The
components of Mr. Ciffone's fiscal 1997 and 1998 compensation were
negotiated and set forth in an offer letter from the Company which
provided for, among other things, his fiscal 1997 base compensation rate,
his initial recommended grant of stock options to purchase 225,000 shares
and a calculated incentive payment under the Company's FY 1997 Executive
Incentive Compensation Program or $197,000, whichever is greater, and FY
1998 Executive Incentive Compensation Program or fifty percent (50%) of
his base salary as of March 31, 1998, which ever is greater. Mr. Ciffone
also received an auto allowance of $1,000 per month and a "sign-on" loan
of $100,000 which has been deemed paid in full.
(6) Reflects a retention payment per the March 19, 1995 Agreement and Plan of
Reorganization between the Company and Startech Semiconductor, Inc.
19
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company has granted both incentive and nonqualified stock options to
its executive officers under the 1997 Plan, as amended, and 1991 Plan, as
amended. The following tables show for the fiscal year ended March 31, 1998,
certain information regarding options granted to, exercised by, and held at
year end by, the Named Executive Officers:
<TABLE>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN EXERCISE PRICE APPRECIATION
GRANTED FISCAL PRICE EXPIRATION FOR OPTION TERM (4)
NAME (#)(1) YEAR(2) ($/SH)(3) DATE 5% ($) 10% ($)
- ---- ------ ------- --------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Ciffone, Jr. 50,000 6.54% $ 23.63 9/18/04 $ 480,989 $ 1,120,909
Ronald W. Guire 30,000 3.93% $ 23.63 9/18/04 $ 288,593 $ 672,546
Roubik Gregorian 28,000 3.66% $ 23.63 9/18/04 $ 269,354 $ 627,709
Stephen W. Michael 15,000 1.96% $ 23.63 9/18/04 $ 144,297 $ 336,273
Thomas R. Melendrez 14,000 1.83% $ 23.63 9/18/04 $ 134,677 $ 313,855
- --------------------
</TABLE>
(1) The options were granted under the terms of the 1991 Plan, as amended, and
the 1997 Plan, as amended. Options generally vest 25% per year on the
anniversary date of the grant. The options will become fully vested prior
to and the time during which the stock option may be exercised shall be
accelerated upon a change in control of the Company as defined in the 1991
Plan, as amended, and the 1997 Plan, as amended. Outstanding options which
have not been exercised prior to a change in control event shall terminate
on the date of such event unless assumed by the successor corporation.
(2) Based on options to purchase an aggregate of 764,229 shares of the
Company's Common Stock granted to employees of the Company in fiscal 1998,
including the Named Executive Officers.
(3) The exercise price of the options was equal to the fair market value of
the Company's Common Stock on the date of grant.
(4) The potential realizable value is based on the term of the option at the
time of grant (7 years). The potential realizable value is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated rate for the entire term of the option and that the option is
exercised and sold on the last day of its term at the appreciated price.
These amounts represent certain assumed rates of appreciation, in
accordance with rules of the SEC, and do not reflect the Company's
estimate or projection of future stock price performance. Actual gains, if
any, are dependent on the actual future performance of the Company's
Common Stock and no gain to the optionee is possible unless the stock
price increases over the option term, which will benefit all stockholders.
20
<PAGE>
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
SHARES FY-END (#) FY-END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------------- ------------------ ------------------ -------------------- ----------------
<S> <C> <C> <C> <C>
Donald L. Ciffone, Jr.... 0 0 56,250/218,750 $414,844/$1,244,531
Ronald W. Guire.......... 0 0 79,999/82,500 $506,558/$320,625
Stephen W. Michael....... 0 0 69,999/29,000 $348,595/$54,250
Thomas R. Melendrez...... 0 0 45,876/32,375 $221,049/$88,409
Roubik Gregorian......... 0 0 7,750/43,250 $42,719/$81,156
</TABLE>
(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 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, 1998
($21.625) minus the exercise price of the options.
21
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND OF THE
EMPLOYEE OPTION ADMINISTRATION COMMITTEE(1)
During fiscal 1998, the Compensation Committee of the Board of Directors
(the "Compensation Committee") consisted of Messrs. Conlisk, Wells and Dykes,
the latter of whom serves as Chairman of the Committee and none of whom is an
officer or an employee of the Company. The Compensation Committee evaluates
the performance of the Company's President and CEO, reviews the performance
of other executive officers 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. Wells and Conlisk, the latter of whom serves as Chairman
of the Committee. The Option Committee administers the Company's employee
stock option plans.
GENERAL COMPENSATION POLICY
COMPENSATION PHILOSOPHY. The Compensation Committee and the Option
Committee (the "Committees") believe that the Company's overall compensation
program should relate to creating stockholder value. Accordingly, the
compensation program is designed to attract and retain talented executives
and technical personnel, to reward achievement of the Company's short-term
and long-term performance goals, to link executive compensation to
stockholder interests through equity-based plans, and to recognize and reward
individual contributions to operating group and Company-wide performance
objectives.
COMPONENTS OF EXECUTIVE COMPENSATION. During fiscal 1998, compensation
for the Company's executive officers consisted of base salary, participation
in an annual incentive compensation program and longer-term equity
incentives. The Committee calibrated each component to a competitive market
position based on executive compensation surveys and reports, third party
compensation specialists and other relevant information. The Company also
offers to its executive officers participation (with all other eligible
employees of the Company) in its 401(k) Plan, an auto allowance for most
executive officers, and certain other benefits available generally to
employees of the Company.
CASH-BASED COMPENSATION
BASE SALARY. The Compensation Committee determines the base salary of
the President and CEO and reviews and approves base salaries for each of the
Company's other executive officers annually in connection with annual
performance reviews. In adjusting 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
neither bases 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 other Company executives. Generally, in
approving salary adjustments for executive officers (other than the President
and CEO), the Committee considers the evaluation and recommendations of the
Company's President and CEO.
The Compensation Committee reviews an independent survey of compensation
of executive officers of other high technology companies to enable it to set
base salaries based on each executive officer's level of responsibility and
within the parameters of companies of comparable size in the Company's
industry. The survey includes a broader group of technology companies than
those companies included in the Hambrecht & Quist Technology Index used in
the performance measurement comparison graph included in this proxy
statement. Generally, base salaries paid to executive officers for fiscal
1998 were set at levels within the top half of salaries paid to executives
under the independent survey. This is consistent with the Committee's
objective of attracting and retaining executives whose skills and potential
rank above the norm.
- --------
(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.
22
<PAGE>
During fiscal 1998, consistent with the principles discussed in the
prior paragraph, the Compensation Committee recommended an average salary
adjustment for non-CEO executive officers of 6.9%. In addition to individual
and corporate performance, the factors considered include relative salaries
and responsibilities in the Company, the Company's merit budget, which
considers factors such as inflation and the competitive environment relative
to other technology companies, independent survey data, number of years with
the Company and anticipated future responsibilities of each individual within
the next year.
ANNUAL INCENTIVE COMPENSATION OPPORTUNITIES. The Company maintains
annual incentive compensation programs to reward executive officers and other
selected senior management and technical personnel for attaining defined
performance goals. The programs are designed to attract and motivate
employees, and they are closely tied to corporate performance to enhance
stockholder value and encourage profit and revenue growth. For executive
officers, incentive compensation payments are based primarily on Company-wide
performance targets, as well as personal performance measured against
agreed-objectives. For selected senior management and technical 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. The programs are periodically reviewed with an executive
compensation firm to ensure they are competitive and designed to achieve the
performance intended.
EXECUTIVE INCENTIVE COMPENSATION.
In June 1997, the Committee approved an executive incentive compensation
program based on performance results for fiscal 1998 in which all executive
officers, including the President and CEO, participated. This program
determined incentive compensation payments by application of a formula which
takes into account (i) pretax profit and revenue goals against
pre-established threshold levels and (ii) 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 reflect the impact of particularly favorable or
unfavorable individual performance. The Committee does not otherwise assign
relative weights to any element. Individual performance factors may also be
taken into account to modify the potential incentive compensation payment
calculated under the formula. Under the program approved for fiscal 1998, no
incentive payments could have been awarded unless a minimum level of
profitability were achieved. In addition, no incentive payments could have
been awarded unless payments were first made under the key employee incentive
compensation program discussed below. The maximum amount for which Mr.
Ciffone was eligible under the fiscal 1998 program was 150% of base salary.
Other executive officers participating in the program were eligible to
receive maximum amounts ranging between 80% and 120% of base salary.
KEY EMPLOYEE INCENTIVE COMPENSATION.
During fiscal 1998, certain other senior management and technical
personnel participated in a key employee incentive compensation program,
which was adopted by the Committee in June 1997. Under the program incentive
compensation payments were based upon pre-tax profit targets (which were
consistent with those applicable to the executive incentive compensation
program), the performance of particular operating groups and individual
performance.
EQUITY INCENTIVES
The Company utilizes its 1997 Plan, as amended, to further align the
interests of stockholders and management by providing executive officers and
other employees with a significant economic interest in the long-term
appreciation of the Company's stock. Generally, options under the 1997 Plan,
as amended, are granted with exercise prices set at 100% of the fair market
value of the underlying stock on the date of grant and have a term of seven
years. Under the 1997 Plan, as amended, executive officers and selected
senior management and technical personnel may defer a portion of his or her
base salary and apply such deferred salary to options to purchase shares of
the Company's common stock with exercise prices set at a discount to market
with the aggregate of such discounts equal to the aggregate amount of the
base salary so deferred. Options, other than deferred compensation options,
are subject to vesting over four years which is designed to motivate option
holders to achieve stated objectives, thereby aiding the Company's efforts to
maximize revenue and profit together with shareholder value, and to remain
with the Company for the long-term. In determining the number of shares
subject to 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
23
<PAGE>
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. The Option Committee may grant options taking into
account multiple year periods. In fiscal 1998, based on the factors described
above, the Option Committee granted options to purchase 240,099 shares of
Common Stock to executive officers of the Company including 20,899 shares to
new officers.
Additional long-term equity 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.
CEO COMPENSATION
Mr. Ciffone's compensation package for fiscal 1998 consisted of an
annual base salary of $412,305, participation in the Company's FY 1998
Executive Incentive Compensation Program ("FY 1998 Program") and a stock
option grant. Under the terms of his employment package, Mr. Ciffone was
entitled to receive an incentive compensation payment equal to the greater of
fifty percent (50%) of his base salary as of March 31, 1998 or the amount of
the calculated payment under the FY 1998 Program. Mr. Ciffone received an
incentive compensation payment of $507,000 for fiscal 1998.
To provide Mr. Ciffone with longer-term equity incentives, the
Compensation Committee awarded Mr. Ciffone options to purchase 50,000 shares
of the Company's Common Stock pursuant to the 1997 Plan, as amended.
SECTION 162(m) POLICY
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, the 1997 Plan, as amended,
intended to permit compensation from options granted thereunder to be
excluded from Section 162(m) limitations.
The Compensation Committee The Employee Option Administration Committee
James E. Dykes Raimon L. Conlisk
George D. Wells George D. Wells
Raimon L. Conlisk
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during the fiscal year ended March 31, 1998, the
Compensation Committee consisted of Messrs. Conlisk, Wells and Dykes, none of
whom is an officer or an employee of the Company.
24
<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)
GRAPH
Research Data Group
Exar Corp (EXAR)
<TABLE>
<CAPTION> CUMULATIVE TOTAL RETURN
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3/31/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94
Exar Corp EXAR 100.00 120.21 139.36 100.00 100.00 110.64
NASDAQ STOCK MARKET (U.S.) 100.00 101.92 110.51 112.68 107.94 102.89
H&Q TECHNOLOGY 100.00 102.55 104.73 110.51 114.58 104.82
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
Exar Corp EXAR 143.62 156.38 137.23 188.30 228.19 94.15 94.15 82.98
NASDAQ STOCK MARKET (U.S.) 111.41 110.14 120.07 137.35 153.89 155.77 163.03 176.34
H&Q TECHNOLOGY 119.53 132.74 148.65 185.43 209.56 198.48 202.30 216.71
CUMULATIVE TOTAL RETURN
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
Exar Corp EXAR 91.76 98.94 103.72 137.23 169.15 105.32 138.03
NASDAQ STOCK MARKET (U.S.) 182.61 191.59 181.21 214.42 250.70 235.17 275.21
H&Q TECHNOLOGY 230.05 246.69 235.13 283.02 342.99 289.21 350.18
</TABLE>
- ---------------
(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, 1993 = 100.
25
<PAGE>
CERTAIN TRANSACTIONS
In October 1996, Mr. Ciffone received a noninterest-bearing loan of
$100,000, which was deemed paid in full as of April 1998.
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements
he/she may be required to pay in actions or proceedings which he/she is or
may be made a party by reason of his/her position as a director, officer or
other agent of the Company, and otherwise to the full extent permitted under
Delaware law and the Company's By-Laws.
In December 1996, the Company made a loan of $130,000 to Aurelio
Fernandez, Senior Vice President of Worldwide Sales. The loan bore interest
at 7% per annum and were secured by certain real property owned by Mr.
Fernandez. Interest payments under the loan was due monthly and commenced in
January 1997. On January 22, 1998 Mr. Fernandez resigned from the Company and
repaid the entire loan.
In connection with the implementation of its new enterprise resource
planning system, the Company retained the services of Answer Think Consulting
Group ("ACG"). Ted A. Fernandez, ACG's Chief Executive Officer, is the
brother of Aurelio Fernandez, who resigned as Senior Vice President of
Worldwide Sales on January 22, 1998. During the fiscal year ending March 31,
1998 the Company paid ACG $671,008.
ACCOUNTANTS
The Company's financial statements have been audited by Deloitte &
Touche LLP as independent auditors. Representatives of Deloitte & Touche LLP
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.
COMMUNICATING WITH THE COMPANY
We have from time-to-time received calls from stockholders inquiring about
the available means of communication with the Company. We thought that it
would be helpful to describe these arrangements which are available for your
use.
- - If you would like to RECEIVE INFORMATION about the Company, without
charge, you may use one of these convenient methods:
1. To have information such as the Company's latest Quarterly Earnings
Release, Form 10-K, Form 10-Q or Annual Report mailed to you,
stockholders residing in the U.S., please call the transfer agent,
Boston EquiServe at 781-575-3400.
2. To view the Company's website on the Internet, use the Company's
Internet address: www.exar.com. The Company's website includes
product, marketing, corporate and financial data, as well as also
recent earnings releases, current stock price, an electronic file of
this Proxy Statement and 10K/10Q, the Company's Annual Report to
Stockholders and job listings. Internet access to this information has
the advantage of providing you with up-to-date information about the
Company throughout the year.
3. To reach our Investor Relations representative, please call
510-668-7201.
- - If you would like to WRITE TO US, please send your correspondence to the
following address:
Exar Corporation
48720 Kato Road
Fremont, California 94538
Attn: Investor Relations, M/S 205
26
<PAGE>
OTHER MATTERS
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 15, 1998
27
<PAGE>
DETACH HERE
PROXY
EXAR CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
The undersigned hereby appoints Donald L. Ciffone, Jr. and Ronald W. Guire,
or each of them, as 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 Company's Corporate Headquarters, 48720
Kato Road, Fremont, California, on Thursday, September 10, 1998 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
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2, AND FOR PROPOSAL 3 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 SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE>
DETACH HERE
/X/ Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW AND FOR PROPOSALS 2 AND 3.
1. To elect directors to hold office until the 2001 Annual Meeting of
Stockholders.
NOMINEES: Donald L. Ciffone, Jr. and Ronald W. Guire
FOR WITHHELD
/ / BOTH / / FROM BOTH
NOMINEES NOMINEES
/ / ___________________________________________
For both nominees except as noted above
2. To approve the Company's 1997 Equity FOR AGAINST ABSTAIN
Incentive Plan, as amended, to increase
the aggregate number of shares of Common / / / / / /
Stock authorized for issuance under such
plan by 450,000 shares.
3. To approve the Company's 1996 Non-Employee FOR AGAINST ABSTAIN
Directors' Stock Option Plan, as amended,
to increase the aggregate number of shares / / / / / /
of Common Stock authorized for issuance
under such plan by 100,000 shares.
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: _____
