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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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[LOGO]
EXAR CORPORATION
48720 KATO ROAD
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 7, 2000
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 7, 2000 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 2003 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 800,000 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 12,
2000, 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
/s/ Ronald W. Guire
----------------------------------
RONALD W. GUIRE
Secretary
Fremont, California
July 26, 2000
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.
<PAGE>
EXAR CORPORATION
48720 KATO ROAD
FREMONT, CALIFORNIA 94538
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 7, 2000
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 7, 2000, 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 26, 2000 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, plus documented expenses, for solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
July 12, 2000 will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on July 12, 2000, the Company had outstanding and
entitled to vote 18,737,844 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.
Unless otherwise indicated, all information in this proxy statement
reflects a three-for-two stock split effected on February 15, 2000.
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 2001 Annual Meeting of Stockholders must be received by the Company
not later than March 31, 2001 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 six members. There
are two directors, James E. Dykes and Frank P. Carrubba, in the class whose
terms of office expire in 2000. Mr. Dykes, a nominee for election to this class,
is currently a Director of the Company. Mr. Dykes was previously elected by the
stockholders. Frank P. Carrubba, who is the other director in this class, is
currently a Director of the Company. Mr. Carrubba was unanimously elected by the
voting members of the Board of Directors in August 1998. If elected at the
Annual Meeting, Messrs. Dykes and Carrubba would serve until the 2003 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 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 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 2003 ANNUAL MEETING
JAMES E. DYKES
Mr. Dykes, age 62, joined us as a director 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 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. From July 1997 to July 1998, Mr. Dykes served as
Executive Vice President, Corporate Development, of the Thomas Group, Inc., a
management services company. Mr. Dykes also is a director of the Thomas Group,
Inc., Cree Research, Inc., a developer of blue light-emitting diodes, and Thesus
Logic, Inc., a privately held semiconductor company.
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FRANK P. CARRUBBA
Dr. Carrubba, age 62, joined the Company's Board of Directors in
August 1998. Dr. Carrubba served as Executive Vice President and Chief Technical
Officer of Royal Philips Electronics N.V., headquartered in Eindhoven, The
Netherlands, from 1991 to 1997. From 1982 to 1991, Dr. Carrubba was with the
Hewlett-Packard Company, where he was a member of the Group Management Committee
and was Director of H-P Laboratories. Prior to joining Hewlett-Packard, he spent
22 years as a member of the technical staff at IBM Corporation's Thomas J.
Watson Research Laboratory in Yorktown Heights, New York. Dr. Carrubba was one
of the original designers of the RISC Architecture, for which he was named
"Inventor of the Year" by the Intellectual Property Owners in Washington, D.C.
in 1992. Dr. Carrubba is also a director of Coherent, Inc., a global leader in
the design, manufacture and sale of lasers, and Gyration, Inc., creators of
in-air cordless mice and controllers for games, presentations and virtual
reality.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
DONALD L. CIFFONE, JR.
Mr. Ciffone, age 45, joined the Company as Chief Executive Officer
and President in October 1996 and was appointed a director at that time. From
August 1996 to October 1996, Mr. Ciffone was Executive Vice President of Toshiba
America, the U.S. semiconductor subsidiary of Toshiba Semiconductor. Prior to
joining Toshiba, he served from 1991 to 1996 in a variety of senior management
positions at VLSI Technology, Inc. From 1978 to 1991, Mr. Ciffone held a variety
of marketing and operations positions at National Semiconductor, Inc.
RONALD W. GUIRE
Mr. Guire, age 51, joined the Company in July 1984 and has been a
director since June 1985. He has served as Chief Financial Officer 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 until he joined Exar in July 1984.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING
RAIMON L. CONLISK
Mr. Conlisk, age 78, 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. Mr. Conlisk has also served as a
director since 1991, and was appointed Chairman of the Board in December 1997 of
SBE, Inc., a manufacturer of communications and computer products. From 1977 to
1999, Mr. Conlisk was President of Conlisk Associates, a management consulting
firm serving high-technology companies in the United States and foreign
countries. From 1991 to 1998, Mr. Conlisk served as a director of Xetel
Corporation, a contract manufacturer of electronic equipment. Mr. Conlisk was
also President from 1984 to 1989, a director from 1970, and Chairman from 1989
until retirement in June 1990, of Quantic Industries, Inc., a privately held
manufacturer of electronic systems. From 1970 to 1973, and from 1987 to 1990,
Mr. Conlisk served as a director of the American Electronics Association.
RICHARD PREVITE
Mr. Previte, age 65, joined the Company as a director in October
1999. Mr. Previte is Chief Executive Officer and Chairman of the Board of
Directors of MarketFusion, Inc., an internet-based provider of global strategic
sourcing. He was a director from 1990 to April 2000, and Vice Chairman of the
Board of Directors of Advanced Micro Devices, or AMD, from 1999 to April 2000.
Additionally, Mr. Previte served as Chairman of the Board from 1997 to June
1999, and acted as Chief Executive Officer from February 1999 to June 1999 of
Vantis Corporation, a subsidiary of AMD. Mr. Previte served as President of AMD
from 1990 to 1999, Executive Vice President and Chief Operating Officer from
1989 to 1990, and Chief Financial Officer and Treasurer from 1969 to 1989.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 2000, the Board of Directors
held ten 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, 2000, was composed of Messrs. Conlisk, Carrubba and Dykes, held
four meetings during such fiscal year. At the March 22, 2000 Board of Directors
meeting, Mr. Previte was appointed to the Audit Committee. Mr. Carrubba 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, 2000, was composed of Messrs. Conlisk, Dykes and
Carrubba, 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, 2000, was composed of Messrs. Dykes and Conlisk,
held fourteen meetings during such fiscal year. Mr. Conlisk serves as Chairman
of the Employee Option Administration Committee. The Employee Option
Administration Subcommittee, formed on March 22, 2000, and comprised of Messrs.
Ciffone, as Chairman, and Guire, did not hold any meetings during the fiscal
year.
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, 2000, was composed of Messrs. Conlisk,
Dykes and Ciffone (non-voting), held two meetings during such fiscal year. Mr.
Conlisk serves as Chairman of the Nominating Committee.
During the fiscal year ended March 31, 2000, 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, 1,237,500 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"). In June 1998, the Board adopted, and the
stockholders subsequently approved in September 1998, an increase in the number
of authorized shares for issuance under the 1997 Plan by 675,000 shares, from a
total of 1,237,500 shares to 1,912,500 (the "1997 Plan, as amended"). In June
1999, the Board adopted, and the stockholders subsequently approved in September
1999, an increase in the number of authorized shares for issuance under the 1997
Plan by 675,000 shares, from a total of 1,912,500 to 2,587,500 (the "1997 Plan,
as amended"). As of May 31, 2000, options (net of canceled or expired options)
and stock bonus awards covering an aggregate of 3,742,335 shares of the
Company's Common Stock were outstanding or had been exercised, and only 359,982
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, as amended. No options or stock bonuses may be
granted under the 1997 Plan, as amended, to non-employee directors. During the
last fiscal year, under the 1997 Plan, as amended, the Company granted to all
employees as a group, options to purchase 1,046,403 shares at exercise prices of
$13.00 to $95.31 per share.
On June 22, 2000, the Board approved an amendment to the 1997 Plan,
as amended, 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, as amended, by 800,000 shares from
a total of 2,587,500 shares to 3,387,500 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 proposed amendment to 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, as amended, are outlined
below:
GENERAL
The 1997 Plan, as amended, 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, as amended, 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, as
amended, 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, as amended.
PURPOSE
The 1997 Plan, as amended, 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, as amended, 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.
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Approximately 260 of the Company's employees, employee directors and consultants
are eligible to participate in the 1997 Plan, as amended.
FORMS OF BENEFIT
The 1997 Plan, as amended, provides for incentive stock options,
nonstatutory stock options and stock bonuses (collectively "Stock Awards").
ADMINISTRATION
The 1997 Plan, as amended, 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, as amended, the powers possessed by the Board, subject, however,
to such resolutions, not inconsistent with the provisions of the 1997 Plan, as
amended, 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, as amended. The Board has delegated
the administration of the 1997 Plan, as amended, to the Employee Option
Administration Committee. On March 22, 2000, the Employee Option Administration
Committee formed a subcommittee, the Employee Option Administration
Subcommittee, to best ensure that option grants be issued upon or as near as
practicable to the hire dates of eligible employees other than Section 16(b)
employees, thereby avoiding stock price fluctuations that might occur between
the date of hire and the next regularly scheduled meeting of 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, as amended, 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, as amended, 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, as amended, or in any award
agreement to make the 1997 Plan, as amended, fully effective.
SHARES SUBJECT TO THE 1997 PLAN, AS AMENDED
The Common Stock that may be sold pursuant to awards under the 1997
Plan, as amended, shall not exceed in the aggregate 3,387,500 shares of the
Company's Common Stock plus any shares that remained available for issuance
under the Company's 1991 Plan on the date the 1997 Plan, as amended, 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, as amended. The Common Stock subject
to the 1997 Plan, as amended, 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 Four Hundred Fifty Thousand (450,000) shares of
the Company's Common Stock in any calendar year. As a result of the
three-for-two stock split, effected in the form of a stock dividend, as of
February 15, 2000, the Company adjusted the number of shares of the Company's
Common
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Stock that may be granted to any individual in a calendar year from 300,000 to
450,000. This adjustment was made pursuant to Sections 4(c) and 11 of the 1997
Plan, as amended.
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, as amended; 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.
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Stock bonuses sold or awarded under the 1997 Plan, as amended, may
be granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule determined by the Board.
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.
ADJUSTMENT UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the 1997 Plan,
as amended, 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, as amended, the maximum annual award applicable under the 1997
Plan, as amended, 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, AS AMENDED
The Board at any time, and from time to time, may amend the 1997
Plan, as amended. 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, as amended, 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, as amended, for stockholder approval.
TERMINATION OR SUSPENSION OF THE 1997 PLAN, AS AMENDED
The Board may suspend or terminate the 1997 Plan, as amended, at any
time. Unless sooner terminated, the 1997 Plan, as amended, shall terminate
September 1, 2007. No Stock Awards may be granted under the 1997 Plan, as
amended, while the 1997 Plan, as amended, is suspended or after it is
terminated.
8
<PAGE>
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1997
Plan, as amended, 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, as amended, 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, as
amended, 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.
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
9
<PAGE>
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,
as amended, 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, as
amended), 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.
10
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of May 31, 2000:
- each stockholder who is known by us to own beneficially more
than 5% of our Common Stock;
- each of our named executive officers;
- each of our directors; and
- all of our non-employee directors and executive officers as a
group.
Unless otherwise indicated, to our knowledge, all persons listed
below have sole voting and investment power with respect to their shares of our
Common Stock, except to the extent authority is shared by spouses under
applicable law. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission. Applicable percentage ownership is
based on 18,679,716 shares of common stock outstanding as of May 31, 2000,
together with options for that stockholder that are currently exercisable or
exercisable within 60 days of May 31, 2000. In computing the number and
percentage of shares beneficially owned by a person, shares of common stock
subject to options currently exercisable, or exercisable within 60 days of May
31, 2000, are counted as outstanding, while these shares are not counted as
outstanding for computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------- --------- ----------
<S> <C> <C>
Morgan Stanley Dean Witter (2)................................................... 1,036,751 5.6%
1585 Broadway
New York, NY 10036
David L. Babson and Company Incorporated (3)..................................... 1,003,200 5.4%
One Memorial Drive
Cambridge, MA 02142-1300
Stephen W. Michael (4)........................................................... 105,772 *
Roubik Gregorian (4) ............................................................ 103,714 *
Raimon L. Conlisk (4) ........................................................... 64,375 *
James E. Dykes (4) .............................................................. 61,191 *
Michael Class (4)................................................................ 38,982 *
Frank P. Carrubba (4) ........................................................... 17,812 *
Ronald W. Guire(4) .............................................................. 14,133 *
Donald L. Ciffone, Jr............................................................ 12,585 *
Richard Previte (4).............................................................. 225 *
All executive officers and non-employee directors as a group
(13 persons) (4) .............................................................. 697,806 3.7%
</TABLE>
----------
* Represents beneficial ownership of less than one percent of the common stock.
(1) This table is based upon information supplied by executive officers,
directors, and principal stockholders and Schedules 13G filed with the
Securities and Exchange Commission (the "SEC").
11
<PAGE>
(2) Based on a Schedule 13G filed with the SEC on February 4, 2000. Includes
1,015,901 shares over which Morgan Stanley Dean Witter has shared voting
power, and 1,036,751 shares over which Morgan Stanley Dean Witter has
shared dispositive power.
(3) Based on a Schedule 13G filed with the SEC on January 27, 2000.
(4) Includes shares which certain executive officers and directors have the
right to acquire within 60 days after May 1, 2000, pursuant to outstanding
options as follows: Roubik Gregorian, 102,375 shares; Stephen W. Michael,
94,498 shares; Raimon L. Conlisk, 62,875 shares; James E. Dykes, 51,141
shares; Michael J. Class, 38,982 shares; Frank P. Carrubba, 17,812 shares;
Ronald W. Guire, 5,625 shares; Richard Previte, 225 shares; and all
executive officers and non-employee directors as a group, 563,496 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, 2000, 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 2000, the Company paid fees to each of its
non-employee directors for their services as directors. The Company paid to
James E. Dykes fees totaling $24,000 for his services as a director. The Company
paid to Frank P. Carrubba fees totaling $24,000 for his services as a director.
The Company paid to Richard Previte fees totaling $7,000 for his services as a
director. The Company paid Raimon L. Conlisk fees totaling $33,000 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 27,000 shares of Common Stock, and is automatically
granted an option to purchase 11,250 additional shares on each yearly
anniversary date thereafter. On April 13, 2000, the Board amended Section 5(b)
of the 1996 Directors' Plan to provide that the Annual Grant to the Chairman of
the Board be increased to twice the Annual Grant issued to each Non-Employee
Director. 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 equal to 33-1/3% of the fair market value of the stock on
the date the options are granted. For calendar year 2000, Mr. Conlisk elected to
have 25% of his annual director's fees deferred, and Mr. Previte elected to have
50% of his annual director's fees deferred. Options granted under the 1996
Directors' Plan are granted at fair market value. Initial option grants vest
annually over a period of three years. Annual options granted prior to September
11, 1998, vest in four equal annual installments with the first installment
becoming exercisable on the first anniversary of the date of the option grant.
Annual options granted on or after September 11, 1998 vest monthly over a period
of twelve months from the date of 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, 2000, options to purchase
-0- shares of Common Stock were outstanding under the 1986 Directors' Plan,
options to purchase 59,063 shares of Common Stock were outstanding under the
1991 Directors'
12
<PAGE>
Plan and options to purchase 156,696 shares of Common Stock were outstanding
under the 1996 Directors' Plan. On the date the Directors' Plan was amended as
described above, Mr. Conlisk was granted an option to purchase 11,250 shares of
Common Stock.
During fiscal 2000, options covering 61,652 shares were granted
under the 1996 Directors' Plan to the Company's Non-Employee Directors during
such period at an average exercise price of $24.17 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 45,000 shares under the 1991 Directors' Plan for a net value
realized of $1,474,463.
13
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal years ended March 31, 2000,
1999 and 1998, compensation awarded or paid to, or earned by, the Company's
President and CEO, and its other four most highly compensated executive officers
at March 31, 2000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) ------
-----------------------
NAME AND PRINCIPAL POSITION SECURITIES ALL OTHER
--------------------------- SALARY UNDERLYING COMPENSATION
YEAR ($) (2) BONUS (4) OPTIONS (#) (3) ($) (4)
---- ------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Donald L. Ciffone, Jr. (5) 2000 510,279 720,000 75,000 4,250
President and CEO 1999 460,304 70,000 75,000 100,800 (6)
1998 424,785 507,000 75,000 3,000
Ronald W. Guire (7) 2000 278,602 285,000 45,000 18,839 (7)
Executive Vice President, 1999 254,113 29,000 45,000 800
Chief Financial Officer 1998 239,204 222,000 45,000 3,000
and Secretary
Roubik Gregorian (8) 2000 267,620 300,000 60,000 6,750 (9)
Senior Vice President 1999 232,813 30,000 210,000 800
and Chief Technology Officer, 1998 208,076 596,000 (8) 42,000 3,000
Communications Division
Stephen W. Michael 2000 190,884 157,000 21,000 4,250
Vice President, 1999 184,509 16,000 21,000 800
Operations Division 1998 174,745 130,000 22,500 3,000
Michael J. Class 2000 180,295 165,000 45,000 4,250
Vice President 1999 153,800 26,984 30,000 655
Worldwide Sales 1998 115,776 49,171 52,348 3,000
</TABLE>
----------
(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) Adjusted for a three-for-two stock split effected on February 15, 2000.
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 2000, fiscal 1999 and
fiscal 1998 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
14
<PAGE>
provided for, among other things, his fiscal 1997 base compensation rate,
his initial recommended grant of stock options to purchase 337,500 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, whichever is greater. Mr. Ciffone
also received an auto allowance of $1,000 per month.
(6) Includes a "sign-on" loan of $100,000 to Mr. Ciffone, which has been
deemed paid in full.
(7) Includes $14,589 for a longevity award in the form of 300 shares of the
Company's stock (based on the fair market value of the Company's stock on
the date of the award).
(8) Reflects a retention payment per the March 19, 1995 Agreement and Plan of
Reorganization between the Company and Startech Semiconductor, Inc.
(9) Includes $2,500 in patent awards paid during the FY 2000.
15
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company has granted both incentive and nonqualified stock
options to its executive officers under the 1997 Plan, as amended, and 1991
Plan, as amended. The following tables show for the fiscal year ended March 31,
2000, certain information regarding options granted to, exercised by, and held
at year end by, the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF %OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES EXERCISE PRICE APPRECIATION FOR
GRANTED IN FISCAL PRICE EXPIRATION OPTION TERM (4)
(#) (1) YEAR (2) ($/SH) (3) DATE 5% ($) 10% ($)
------- -------- ---------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Ciffone, Jr. 75,000 7.17% $24.89 9/9/06 $760,363 $1,771,670
Ronald W. Guire 45,000 4.30% $24.89 9/9/06 $456,218 $1,063,002
Roubik Gregorian 60,000 5.73% $24.89 9/9/06 $608,290 $1,417,336
Stephen W. Michael 21,000 2.01% $24.89 9/9/06 $212,891 $496,044
Michael J. Class 45,000 4.30% $24.89 9/9/06 $456,218 $1,063,002
</TABLE>
(1) The options were granted under the terms of the 1997 Plan, as amended.
Options generally vest 25% per year on the anniversary date of the grant.
The options will become fully vested prior to and the time during which
the stock option may be exercised shall be accelerated upon a change in
control of the Company as defined in the 1997 Plan, as amended.
Outstanding options which have not been exercised prior to a change in
control event shall terminate on the date of such event unless assumed by
the successor corporation.
(2) Based on options to purchase an aggregate of 1,046,403 shares of the
Company's Common Stock granted to employees of the Company in fiscal 2000,
including the Named Executive Officers.
(3) The exercise price of the options was equal to the fair market value of
the Company's Common Stock on the date of grant.
(4) The potential realizable value is based on the term of the option at the
time of grant (7 years). The potential realizable value is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated rate for the entire term of the option and that the option is
exercised and sold on the last day of its term at the appreciated price.
These amounts represent certain assumed rates of appreciation, in
accordance with rules of the SEC, and do not reflect the Company's
estimate or projection of future stock price performance. Actual gains, if
any, are dependent on the actual future performance of the Company's
Common Stock and no gain to the optionee is possible unless the stock
price increases over the option term, which will benefit all stockholders.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
NUMBER OF SHARES VALUE UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED REALIZED FY-END (#) FY-END ($)
NAME ON EXERCISE ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE (2)
---- ----------- ------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Ciffone, Jr. 309,374 $8,693,709 -0- 253,124 $ -0- $14,297,172
Ronald W. Guire 208,123 $5,343,059 -0- 125,623 $ -0- $6,943,369
Stephen W. Michael 22,500 $310,028 113,998 53,998 $6,662,229 $2,943,579
Michael J. Class 12,241 $457,085 38,982 98,625 $2,337,525 $5,326,256
Roubik Gregorian -0- -0- 99,375 247,123 $5,959,585 $14,143,971
</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, 2000 ($71.56)
minus the exercise price of the options.
EXECUTIVE OFFICERS' CHANGE OF CONTROL SEVERANCE BENEFIT PLAN
On June 24, 1999, the Board of Directors of the Company adopted the Executive
Officers' Change of Control Severance Benefit Plan (the "Severance Plan"). The
following individuals are eligible to receive benefits under the Severance Plan:
Group I: Donald L. Ciffone, Jr., Michael J. Class, Roubik Gregorian, Ronald W.
Guire and John Sramek. Group II: Thomas W. Jones, Thomas R. Melendrez, Stephen
W. Michael and Susan Hardman. The Board of Directors or the Compensation
Committee may, in their sole discretion, designate additional employees as
eligible to receive benefits under the Severance Plan. The Severance Plan
provides that an eligible employee will receive benefits if the employee's
employment is involuntarily terminated without "cause" or if the employee
voluntarily terminates his or her employment for "good reason," in either case
within thirteen (13) months following the effective date of a change of control
of the Company. Employees in Group I will receive a lump sum payment equal to
two (2) times the employee's annual base salary. Employees in Group II will
receive a lump sum payment equal to the greater of (a) one year's base salary,
or (b) one month's base salary for each complete year of service the employee
has provided to the Company, up to a maximum of two (2) times the employee's
annual base salary. In order to receive benefits under the Severance Plan, an
employee must execute a release of all claims the employee may have against the
Company and its successors and assigns.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND OF THE
EMPLOYEE OPTION ADMINISTRATION COMMITTEE(1)
During fiscal 2000, the Compensation Committee of the Board of
Directors (the "Compensation Committee") consisted of Messrs. Conlisk, Carrubba
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. Dykes 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 2000,
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 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 Chase H&Q Technology Index used in
the performance measurement comparison graph included in this proxy statement.
Generally, base salaries paid to executive officers for fiscal 2000 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.
During fiscal 2000, consistent with the principles discussed in the
prior paragraph, the Compensation Committee approved an average salary
adjustment for non-CEO executive officers of 8.1%. In addition to individual and
corporate performance, the factors considered include relative salaries and
responsibilities in the Company, the Company's merit
----------
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.
18
<PAGE>
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. On April 20, 1999, the Committee
approved an Executive Incentive Compensation Program based on performance
results for fiscal 2000, in which all 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 2000, no
incentive payments could have been awarded unless a minimum level of
profitability was 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 2000 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. Based on the Company's
pre-tax profit for fiscal 2000 of $22.1 million, and revenue of $78.6 (both in
excess of program targets), as well as individual performance factors, Mr.
Ciffone was awarded an incentive payment of 138.5% of his fiscal year 2000 base
salary, while other executive officers participating in the program for fiscal
2000 were awarded incentive payments ranging from 66.19% to 119.6% of their
respective fiscal year 2000 base salaries.
KEY EMPLOYEE INCENTIVE COMPENSATION. During fiscal 2000, certain
other senior management and technical personnel participated in a Key Employee
Incentive Compensation Program, which was adopted by the Committee in June 1998.
Under the program, incentive compensation payments were based upon pre-tax
profit and revenue targets (which were consistent with those applicable to the
Executive Incentive Compensation Program), the performance of particular
operating groups and individual performance. Based on the Company's pre-tax
profit for fiscal 2000 of $22.1 million, and revenue of $78.6 million (both in
excess of program targets), $2,178,047 was distributed to participants in the
program in various amounts based on operating group 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 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,
19
<PAGE>
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 2000, based on the factors described above, the
Option Committee granted options to purchase 362,996 shares of Common Stock to
executive officers of the Company.
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 2000 consisted of an annual
base salary of $487,500, participation in the Company's FY 2000 Executive
Incentive Compensation Program and a stock option grant. Under the FY 2000
Executive Incentive Compensation Program, Mr. Ciffone received an incentive
payment of $663,540. In addition, Mr. Ciffone received a special one-time
performance award of $56,460.00.
To provide Mr. Ciffone with longer-term equity incentives, the
Compensation Committee awarded Mr. Ciffone options to purchase 75,000 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
Frank P. Carrubba James E. Dykes
Raimon L. Conlisk
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during the fiscal year ended March 31, 2000, the
Compensation Committee consisted of Messrs. Conlisk, Carrubba and Dykes, none of
whom is an officer or an employee of the Company.
20
<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 Chase H&Q Technology
Index, and the Company. The Chase 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)
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------------------------------------
3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAR CORPORATION 100.00 137.21 166.28 68.60 68.60 60.47 66.86 72.09 75.58 100.00 123.26
NASDAQ STOCK MARKET (U.S.) 100.00 114.38 128.16 129.72 135.79 146.86 152.11 159.61 150.95 178.61 208.82
CHASE H & Q TECHNOLOGY 100.00 124.74 140.98 133.53 136.10 145.79 154.76 165.95 158.18 190.40 230.74
<CAPTION>
Cumulative Total Return
-------------------------------------------------------------------------------------------
12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99 3/00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAR CORPORATION 76.74 100.58 97.67 70.35 75.00 75.00 115.12 174.13 273.84 499.25
NASDAQ STOCK MARKET (U.S.) 195.56 228.88 235.15 212.19 275.74 309.19 338.32 346.43 511.76 574.68
CHASE H & Q TECHNOLOGY 194.56 235.58 241.18 214.39 302.63 329.59 390.35 412.95 675.87 675.87
</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 Chase H&Q
Technology Index, based on March 31, 1995 = 100.
21
<PAGE>
CERTAIN TRANSACTIONS
On April 3, 2000, Messrs. Ciffone, Guire and Gregorian were granted
options to purchase 300,000, 100,000, and 50,000 shares of Common Stock,
respectively.
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.
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, corporate and financial data, as well as 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 210
OTHER MATTERS
The Board of Directors knows of no other matter that will be
presented for consideration at the Annual Meeting. If any other matter is
properly brought before the meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matter in accordance with their best
judgment.
22
<PAGE>
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
/s/ Ronald W. Guire
-------------------------------
Ronald W. Guire
Secretary
July 26, 2000
23
<PAGE>
DETACH HERE
PROXY
EXAR CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 7, 2000
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 7, 2000 at 3:00 p.m.
local time, and at any and all continuations, postponements 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 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 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 SEE REVERSE
SIDE SIDE
--------------- ---------------
<PAGE>
DETACH HERE
--- PLEASE MARK
X VOTES AS IN
--- THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW AND FOR PROPOSAL 2.
1. To elect two (2) directors to hold office until the 2003 Annual Meeting of
Stockholders and until their successors are elected.
NOMINEES: (01) James E. Dykes (02) Frank P. Carrubba
FOR WITHHELD
NOMINEES / / / / FROM
NOMINEES
/ / ______________________________________
For all nominees except as noted above
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 800,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To transact such other business as may properly come before the meeting or
any adjournment, continuation or postponement thereof.
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:_______
