SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |_|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
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*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
IMP, INC.
2830 North First Street
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 19, 1998
TO THE STOCKHOLDERS OF IMP, INC.:
The Annual Meeting of Stockholders of IMP, Inc. (the "Company") will be
held at the executive offices of IMP, Inc., 2830 North First Street, San Jose,
California on Wednesday, August 19, 1998, at 1:30 p.m. (the "Annual Meeting")
for the following purposes:
1. To elect the Board of Directors to serve until the next Annual
Meeting and until their successors are elected and qualified;
2. To approve an amendment to the Stock Option Plan (the "Option
Plan") to increase the number of shares of Common Stock reserved for
issuance by an additional 500,000 shares;
3. To ratify the appointment of Price Waterhouse as the Company's
independent auditors for the fiscal year ending March 28, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Any stockholders of record at the close of
business on June 25, 1998 will be entitled to vote at the Annual Meeting and at
any adjournment thereof. The transfer books will not be closed. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection at the offices of the Company. If you do not plan to attend the
Annual Meeting in person, please sign, date and return the enclosed proxy in the
envelope provided. If you attend the Annual Meeting and vote by ballot your
proxy will be revoked automatically and only your vote at the Annual Meeting
will be counted. The prompt return of your proxy will assist us in preparing for
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/S/GEORGE RASSAM
San Jose, California George Rassam
July 17, 1998 Secretary and Chief Financial Officer
<PAGE>
IMP, INC.
2830 North First Street
San Jose, California 95134
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 19, 1998
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of IMP,
Inc., a Delaware corporation (the "Company"), for use at the annual meeting of
stockholders to be held on August 19, 1998 (the "Annual Meeting"). The Annual
Meeting will be held at 1:30 p.m. at the executive offices of IMP, Inc., 2830
North First Street, San Jose, California 95134. Stockholders of record on June
25, 1998 will be entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and accompanying proxy (the "Proxy") and Notice of
Annual Meeting were first mailed to all stockholders entitled to vote on or
about July 17, 1998.
Voting
On June 25, 1998, the record date for determination of stockholders
entitled to vote at the Annual Meeting, there were approximately 29,465,299
shares of Common Stock outstanding. No shares of the Company's preferred stock
are outstanding. Each stockholder is entitled to one vote for each share of
Common Stock held by such stockholder. 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
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions will be counted
towards the tabulations of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes, whereas broker non-votes will
not be counted for purposes of determining whether a proposal has been approved
or not.
Revocability of Proxies
Any person giving a Proxy has the power to revoke it at any time before its
use. It may be revoked by filing with the Secretary of the Company at the
Company's principal executive offices, IMP, Inc., 2830 North First Street, San
Jose, California, 95134, a notice of revocation or another signed Proxy with a
later date or by attending the Annual Meeting and voting in person.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees or agents
of the Company. No compensation will be paid to these individuals for any such
services. Except as described above, the Company does not presently intend to
solicit proxies other than by mail.
<PAGE>
Share Ownership
The following table sets forth certain information known to the Company
regarding the ownership of the Company's Common Stock as of March 29, 1998 for
(i) each director and nominee, (ii) all persons who are beneficial owners of
five percent (5%) or more of the Company's Common Stock, (iii) the executive
officers named in the compensation tables, and (iv) all current directors and
executive officers of the Company as a group. Unless otherwise indicated, each
of the stockholders has sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Percent of Total
Name Shares Shares Outstanding(1)
---- ------ ---------------------
<S> <C> <C>
James Phillips Ferguson ............................... 10,000 *
Zvi Grinfas (2) ....................................... 356,227 1.2%
David A. Laws (3) ..................................... 101,094 *
Peter D. Olson (4) .................................... 11,667 *
Bernard V. Vonderschmitt (5) .......................... 22,000 *
Jerry DaBell (6) ...................................... 9,500 *
Moiz Khambaty ......................................... -- *
Ron Laugesen .......................................... 18,000 *
All directors and executive officers as a
group (11 persons) .................................... 531,488 1.8%
</TABLE>
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* Less than one percent (1%).
(1) Percentage of beneficial ownership is calculated assuming 29,427,899 shares
of Common Stock were outstanding on March 29, 1998. This percentage may
include Common Stock of which such individual or entity has the right to
acquire beneficial ownership within 60 days of March 29, 1998, including
but not limited to the exercise of an option; however, such Common Stock
shall not be deemed outstanding for the purpose of computing the percentage
owned by any other individual or entity. Such calculation is required by
General Rule 13d-3(d)(1)(i) under the Securities Exchange Act of 1934.
Options repriced on February 27, 1998 pursuant to the Company's option
repricing program are not exercisable within a one-year period from the
date of repricing and, therefore, the shares subject to such options are
not considered to be beneficially owned by their holders as of March 29,
1998. See "Ten-Year Option Repricing Table."
(2) Includes 20,000 shares issuable upon exercise of options within 60 days of
March 29, 1998.
(3) Shares beneficially owned by Mr. Laws are in the name of the Laws Family
Trust.
(4) Includes 11,667 shares issuable upon exercise of options within 60 days of
March 29, 1998.
(5) Includes 20,000 shares issuable upon exercise of options within 60 days of
March 29, 1998.
(6) Shares beneficially owned by Mr. DaBell are in the name of Jerry and
Christy DaBell.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
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The persons named below are nominees for director to serve until the next
annual meeting of stockholders and until their successors have been elected and
qualified. The Company's Bylaws provide that the authorized number of directors
shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of stockholders. The authorized number of
directors is currently five (5). The Board of Directors has selected five (5)
nominees, all of which are currently directors of the Company. Proxies cannot be
voted for a greater number of persons than five (5). Each person nominated for
election has agreed to serve if elected and management has no reason to believe
that any nominee will be unavailable to serve. Unless otherwise instructed, the
proxyholders will vote the proxies received by them for the nominees named
below. The five (5) candidates receiving the highest number of affirmative votes
of the shares entitled to vote at the Annual Meeting will be elected directors
of the Company.
Nominees
Set forth below is information regarding the nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of March 31, 1998.
First Year Elected
Name Age Director
---- --- --------
James Phillips Ferguson 67 1997
Zvi Grinfas 57 1981
David A. Laws 56 1996
Peter D. Olson 55 1989
Bernard V. Vonderschmitt 74 1991
Business Experience of Directors
Mr. Ferguson, 67, joined the Company in June 1997 as President, Chief
Executive Officer and a member of the Board of Directors. He served as a
consultant to the Company from December 1996 to June 1997. From 1967 to June
1997 he was a principal in Ferguson Associates, a firm providing domestic and
international consulting services. In recent consulting assignments, Mr.
Ferguson assumed chief executive officer or chief operating officer
responsibilities with QuickLogic Corporation, Plus Logic and Paradigm
Technologies. Mr. Ferguson's prior employment included positions at Texas
Instruments and Fairchild Semiconductor, and he was founder, President and Chief
Executive Officer of General Microelectronics.
Mr. Grinfas, 57, a co-founder of the Company, has been a director of the
Company since its organization in January 1981. He served as Senior Vice
President for the Company, managing the Business Development Group, until
December 1984. At that time he became Senior Vice President, Engineering, a
position he held until May 1986, when he became Vice President, Business
Development and Sales Director of Southern Europe of IMP Europe Limited. Mr.
Grinfas ceased working for IMP Europe Limited in December 1988, and has been
employed as a consultant since that time, including serving in the function of
General Manager, Microelectronic Operations for Elron Electronics Industries,
Ltd. from February 1989 through February 1990.
Mr. Laws, 56, joined the Company in February 1995 as its Senior Vice
President, Marketing and Business Development. From May 1996 until June 1997, he
served as President and Chief Executive Officer and also as a director of the
Company, and in June 1997 he was appointed to serve as Chairman of the Board of
Directors. Prior to joining the Company, Mr. Laws was self-employed as a
consultant from January 1994 to February 1995.
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<PAGE>
Mr. Laws was President and Chief Executive Officer of QuickLogic Corporation, a
company engaged in the development of field programmable gate arrays, from
September 1990 to January 1994. From January 1986 to September 1990, Mr. Laws
was Vice President of Marketing for Altera Corporation, a supplier of
programmable logic devices. Prior to working at Altera, he served in various
positions at Advanced Micro Devices from May 1975 to January 1986, including as
Managing Director of the PLD business unit and Vice President of Business
Development.
Mr. Olson, 55, has been a director of the Company since August 1989. Since
July 1997, Mr. Olson has been Executive Vice President of MachOne
Communications, Inc. From July 1994 through July 1997, Mr. Olson served as
President of H3D Entertainment, Inc. Mr. Olson was a co-founder of Octel
Communications Corporation ("Octel"), a telecommunications company, and served
as Executive Vice President and Chief Technical Officer of Octel from 1982 to
July 1994. Mr. Olson also serves on the board of directors of several private
companies.
Mr. Vonderschmitt, 74, was a co-founder of Xilinx, Inc. ("Xilinx"), a
supplier of field programmable gate arrays. He served as the President of Xilinx
from its inception in February 1984 to August 1994 and as its Chief Executive
Officer from August 1994 to January 1996 and is currently Chairman of the board
of directors of Xilinx. Mr. Vonderschmitt also serves as a director on the
boards of directors of Credence Systems Corporation and Sanmina Corporation, as
well as various private companies. He has been a director of the Company since
February 1991.
There are no family relationships among executive officers or directors of
the Company.
Board of Directors Committees and Meetings
During the fiscal year ended March 29, 1998, the Board of Directors held
seven (7) meetings. As of March 29, 1998, the Company had four standing
Committees: an Audit Committee, a Compensation Committee, a Nominating Committee
and a Stock Option Committee. On November 13, 1997, the Board of Directors
created the Special Litigation Committee for the limited purpose of reviewing
certain class-action lawsuits brought against the Company and certain current
and former directors and officers of the Company. Such lawsuits have been
dismissed and the Special Litigation Committee is no longer active.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing reports of the
Company's external auditors regarding the Company's accounting practices and
systems of internal accounting controls. This Committee currently consists of
Messrs. Grinfas, Olson and Vonderschmitt. This Committee held two (2) meetings
during the last fiscal year.
The Compensation Committee reviews and approves the Company's general
compensation policies and sets compensation levels for the Company's executive
officers. This Committee currently consists of Messrs. Grinfas, Olson and
Vonderschmitt. This Committee held five (5) meetings during the last fiscal year
and also acted by unanimous written consent one (1) time.
The Nominating Committee is responsible for recommending nominees for
members of the Company's Board of Directors. This Committee currently consists
of Messrs. Laws, Olson and Vonderschmitt. This Committee held no meetings during
the last fiscal year. The Nominating Committee has not instituted proceedings to
consider nominees recommended by security holders, but may do so in the future.
The Stock Option Committee has been granted separate but concurrent
jurisdiction to make option grants under the Company's Discretionary Option
Grant Program to individuals that are not subject to the short-swing trading
restrictions under the federal securities laws. This Committee currently
consists of Mr. Ferguson, but consisted of Mr. Laws until June 1997. This
Committee held no meetings during the last fiscal year but acted by unanimous
written consent fourteen (14) times.
No incumbent director serving for the full fiscal year attended fewer than
75% of the aggregate number of meetings of the Board of Directors and meetings
of Committees of the Board on which he serves.
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<PAGE>
Directors' Compensation
Each non-employee member of the Board of Directors receives $1,500 for each
full fiscal quarter that he serves as a member of the Board of Directors, and
$1,000 for each meeting he attends. Mr. Grinfas does not receive fees, but
instead receives reimbursement for his travel expenses incurred in attending
meetings of the Board of Directors, which totaled approximately $34,596 in
fiscal 1998. In addition, non-employee members of the Board are eligible to
receive options to purchase shares of the Company's Common Stock.
Each individual newly elected or appointed as a non-employee member of the
Board will be granted on such date of election or appointment an automatic
option grant for 20,000 shares of Common Stock under the Company's Stock Option
Plan (the "Option Plan"). Each individual who continues to serve as a
non-employee Board member will receive additional automatic option grants, each
for 20,000 shares of Common Stock, at successive four (4)-year intervals over
his or her period of continued Board service. The first such additional grant
will be made on the later of (A) the date of the 1994 Annual Stockholders
Meeting or (B) the date of the Annual Stockholders Meeting held in the calendar
year in which occurs the fourth anniversary of the grant date of the initial
automatic option grant made to such individual, provided he or she is re-elected
to the Board at that Annual Meeting. Additional automatic grants for 20,000
shares each will be made to such individual at every fourth Annual Stockholders
Meeting thereafter over such individual's period of continued service as a
non-employee Board member.
Each such grant becomes exercisable for all of the shares upon the
optionee's completion of six (6) months of service on the Board and becomes
immediately exercisable for all of the option shares if the Company is acquired
by merger, asset sale or hostile take-over. The option shares are subject to
repurchase at the original exercise price if the optionee ceases Board service
prior to vesting in the shares. The Board member will vest in twenty-five
percent (25%) of the option shares upon completion of one (1) year of Board
service, and the balance will vest in thirty-six (36) successive equal monthly
installments over the optionee's continued period of Board service, subject to
accelerated vesting upon the optionee's death or disability or if the Company is
acquired by merger, asset sale or hostile take-over. Such options have a maximum
term of ten (10) years, subject to earlier termination upon the optionee's
cessation of Board service. Upon the successful completion of a hostile tender
offer for more than fifty percent (50%) of the Company's outstanding Common
Stock, each automatic option grant will be canceled, and the non-employee Board
member will be entitled to a cash distribution from the Company based upon the
tender-offer price.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the nominees listed herein.
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<PAGE>
================================================================================
PROPOSAL NO. 2
APPROVAL AND RATIFICATION OF AMENDMENT TO THE STOCK OPTION PLAN
================================================================================
Introduction
The Company's stockholders are being asked to approve an amendment to the
Company's Stock Option Plan (the "Option Plan") which will increase the maximum
number of shares of Common Stock authorized for issuance over the term of the
Option Plan by an additional 500,000 shares The purpose of the new amendment is
to assure that the Company will continue to have a sufficient reserve of Common
Stock available under the Option Plan to attract and retain the services of key
individuals essential to the Company's long-term growth and success. The
amendment was adopted by the Board of Directors on May 13, 1998, subject to
stockholder approval at the 1998 Annual Meeting.
The following is a summary of the principal features of the Option Plan as
amended, together with the applicable tax and accounting implications for the
Company and the participants. However, the summary does not purport to be a
complete description of all the provisions of the Option Plan. Any stockholder
of the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the Secretary of the Company at the Company's principal
executive offices in San Jose, California.
The Option Plan was originally adopted by the Board in October 1981 and
subsequently approved by the stockholders. A restatement of the Option Plan was
adopted by the Board on December 16, 1986 and approved by the stockholders on
February 26, 1987. The Plan as so restated was subsequently amended on several
occasions, and those amendments were approved by the Company's stockholders on
August 3, 1988 and again on August 2, 1989, at which time an automatic grant
program for non-employee Board members was approved. On May 13, 1992, the Plan
was further restated by the Board, and the 1992 restatement was approved by the
Company's stockholders at the 1992 Annual Meeting of Stockholders. On August 18,
1994, the Plan was again restated to authorize additional automatic option
grants to non-employee Directors at successive four (4)-year intervals over such
person's period of continued Board service. Such restatement was approved by the
Company's stockholders at the 1995 Annual Meeting of Stockholders. The Option
Plan was subsequently amended by the Board on May 15, 1996 and that amendment
was subsequently approved by the stockholders at the 1996 Annual Meeting of
Stockholders. On May 14, 1997, the Plan was amended to increase the number of
shares authorized for issuance under the Plan by 750,000 shares, which amendment
was approved by the Company's stockholders at the 1997 Annual Meeting of
Stockholders.
Structure
The Option Plan is divided into two separate components: the Discretionary
Option Grant Program and the Automatic Option Grant Program. Under the
Discretionary Option Grant Program, options may be issued to key employees
(including officers and directors) and key consultants in the service of the
Company (or its parent or subsidiary companies) who contribute to the
management, growth and financial success of the Company. Under the Automatic
Option Grant Program, non-employee Board members will receive a series of option
grants over their period of continued service on the Board.
Administration
The Compensation Committee of the Board administers the provisions of
Discretionary Option Grant Program with respect to all officers and directors of
the Company subject to the short-swing trading restrictions of the federal
securities laws. With respect to all other participants, the Discretionary
Option Grant Program may be administered by either the Compensation Committee or
a committee of one or more Board members appointed by the Board or by the entire
Board itself. Currently, the Compensation Committee administers the
Discretionary Option Grant Program with respect to all participants. The Board
has also created a Stock Option Committee that has separate but concurrent
jurisdiction with the Compensation Committee to make option grants under the
Discretionary Option Grant Program to individuals who are not subject to the
short-swing trading restrictions of the federal securities laws. Each entity,
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<PAGE>
whether the Compensation Committee or the secondary committee or the Board, will
be referred to in this summary as Plan Administrator with respect to its
particular administrative functions under the Discretionary Option Grant
Program. Each Plan Administrator has complete discretion (subject to the
provisions of the Option Plan) to authorize grants under the Discretionary
Option Grant Program within the scope of its administrative jurisdiction.
Accordingly, the Plan Administrator will have full authority to determine
the eligible individuals who are to receive option grants, the time or times
when the option grants are to be made, the number of shares of Common Stock
subject to each such grant, the date or dates on which the option is to become
exercisable, and the maximum term for which the option is to be outstanding. The
Plan Administrator will also have the discretion to determine whether the
granted option is to be an incentive stock option under the Federal tax laws or
a nonstatutory option. In addition, the Plan Administrator will have full
authority to accelerate the exercisability of one or more outstanding options at
any time upon such terms and conditions as it deems appropriate.
Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program, and no Plan
Administrator will have any discretionary authority with respect to those option
grants.
Share Reserve
A total of 6,677,000 shares of Common Stock have been reserved for issuance
over the ten-year term of the Option Plan, including the 500,000-share increase
for which stockholder approval is sought under this Proposal. In no event may
any one participant in the Option Plan be granted stock options or separately
exercisable stock appreciation rights for more than 1,000,000 shares in the
aggregate under the Option Plan. For purposes of such limitation, stock options
and stock appreciation rights granted prior to July 31, 1994 will not be taken
into account.
As of March 29, 1998 approximately 3,547,000 shares of Common Stock had
been issued upon the exercise of options granted under the Option Plan,
2,340,000 shares of Common Stock were subject to outstanding options under the
Option Plan, and 790,000 shares of Common Stock were available for issuance
under future option grants, assuming approval of this Proposal No. 2.
Should an option expire or terminate for any reason prior to exercise in
full, the shares subject to the portion of the option not so exercised will be
available for subsequent issuance under the Option Plan. Shares subject to any
option surrendered in accordance with the stock appreciation right provisions of
the Option Plan will not be available for subsequent issuance.
Eligibility
Officers and other key employees of the Company and its parent or
subsidiary corporations (whether now existing or subsequently established), key
consultants in the service of the Company or such parent or subsidiary
corporations and non-employee Board members (other than those serving on the
Compensation Committee) will be eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Non-employee Board members (including
those serving on the Compensation Committee) will also participate in the
Automatic Option Grant Program.
As of March 29, 1998, approximately 235 employees (including eight
executive officers) were eligible to participate in the Discretionary Option
Grant Program, and three non-employee Board members were eligible to participate
in the Automatic Option Grant Program.
Price and Exercisability
The exercise price of shares issued under the Discretionary Option Grant
Program may not be less than 85% of the fair market value per share of Common
Stock on the grant date, and no option may be outstanding for more than a
10-year term. If the granted option is intended to be an incentive stock option
under the Federal tax laws, the option price must not be less than 100% of the
fair market value per share of Common Stock on the grant date. Options issued
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<PAGE>
under the Discretionary Option Grant Program generally become exercisable in a
series of installments over the optionee's period of service with the Company.
The option price is payable in cash or in shares of Common Stock.
Outstanding options may also be exercised through a cashless exercise procedure
pursuant to which a designated brokerage firm is to effect an immediate sale of
the shares purchased under the option and pay over to the Company, out of the
sales proceeds available on the settlement date, sufficient funds to cover the
option price for the purchased shares plus all applicable withholding taxes. The
Plan Administrator may also assist any optionee (including an officer) in the
exercise of outstanding options under the Discretionary Option Grant Program by
authorizing a loan from the Company or permitting the optionee to pay the option
price in installments over a period of years. The terms and conditions of any
such loan or installment payment will be established by the Plan Administrator
in its sole discretion, and may include provision for forgiveness of such
indebtedness in whole or in part, but in no event may the maximum credit
extended to the optionee exceed the aggregate option price payable for the
purchased shares (less the par value), plus any Federal and state income or
employment taxes incurred in connection with the purchase.
No optionee is to have any stockholder rights with respect to the option
shares until such optionee has exercised the option, paid the option price for
the purchased shares and been issued a stock certificate for those shares.
Options are not assignable or transferable other than by will or the laws of
inheritance following the optionee's death and, during the optionee's lifetime,
the option may be exercised only by the optionee.
Valuation
For purposes of establishing the option price and for all other valuation
purposes under the Option Plan, the fair market value per share of Common Stock
on any relevant date will be the closing selling price per share on such date on
the Nasdaq National Market. On March 27, 1998 the fair market value per share of
Common Stock was $1.343 on the basis of the closing selling price on that date.
Termination of Service
All options granted under the Discretionary Option Grant Program must be
exercised within twelve months (or such shorter period as the Plan Administrator
may establish at the time of grant) after the optionee ceases for any reason to
be in the employ or service of the Company or its parent or subsidiary
corporations. The Plan Administrator will, however, have complete discretion to
extend the period of time for which any option is to remain exercisable
following the optionee's cessation of employment or service, but under no
circumstances may an option be exercised after the specified expiration date of
the option term. If the optionee's employment is terminated for misconduct or
the optionee makes or attempts to make any unauthorized use of confidential
information of the Company or its parent or subsidiary corporations, then any
outstanding option held by the optionee will immediately terminate.
Each option under the Discretionary Option Grant Program will be
exercisable only to the extent of the number of shares for which that option is
exercisable at the time of the optionee's cessation of employment or service,
unless the Plan Administrator accelerates the exercisability of the option in
whole or in part. Such acceleration may be authorized at any time while the
option remains outstanding, whether before or after the optionee's actual
cessation of service.
Corporate Transaction
Each outstanding option under the Discretionary Option Grant Program will
become immediately exercisable for all of the shares of Common Stock subject to
such option in the event of a Corporate Transaction (as defined below), unless
(i) that option is assumed by the successor corporation (or its parent
corporation) or replaced with a comparable option to purchase shares of stock of
the successor corporation (or its parent corporation) or (ii) the acceleration
of such option is precluded by other limitations imposed by the Plan
Administrator at the time of grant. A Corporate Transaction includes one or more
of the following transactions:
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<PAGE>
a. a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation;
b. the sale, transfer or other disposition of all or substantially all
of the assets of the Company; or
c. any reverse merger in which the Company is the surviving entity,
but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held the
stock immediately prior to such merger.
Immediately following the consummation of the Corporate Transaction, all
outstanding options will terminate, except to the extent assumed by the
successor corporation (or its parent company).
Stock Appreciation Rights
At the discretion of the Plan Administrator, options may be granted with
stock appreciation rights. A stock appreciation right grants the holder the
right to surrender all or part of an unexercised option under the Discretionary
Option Grant Program in exchange for a distribution from the Company equal in
amount to the excess of (i) the fair market value (on the date of surrender) of
the shares of Common Stock in which the optionee is at the time vested under the
surrendered option over (ii) the aggregate option price payable for such shares.
The appreciation distribution may be made, at the discretion of the Plan
Administrator, either in shares of Common Stock valued at fair market value on
the date of surrender, in cash or in a combination of cash and Common Stock. No
surrender of an option will be effective unless it is approved by the Plan
Administrator.
One or more officers of the Company subject to the short-swing profit
restrictions of the Federal securities laws may, in the Plan Administrator's
discretion, be granted limited stock appreciation rights in tandem with their
outstanding options under the Discretionary Grant Program. Any option with such
a limited stock appreciation right in effect for at least six months will
automatically be canceled upon the occurrence of a Hostile Take-Over, and the
optionee will in return be entitled to a cash distribution from the Company in
an amount equal to the excess of (i) the Take-Over Price of the number of shares
of Common Stock in which the optionee is at the time vested under the canceled
option over (ii) the aggregate exercise price payable for such vested shares.
Neither the Plan Administrator's approval nor the Board's consent will be
required in connection with such cancellation and cash distribution.
For purposes of such option cancellation provisions, the following
definitions are in effect under the Option Plan:
1. Hostile Take-Over means the acquisition by any person or related
group of persons (other than the Company or its affiliates) of securities
possessing more than 50% of the combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer which the
Board does not recommend the Company's stockholders to accept, provided at
least 50% of the securities so acquired in such tender or exchange offer
are obtained from holders other than the officers and directors of the
Company.
2. Take-Over Price means the greater of (A) the fair market value of
the shares subject to the canceled option, measured on the cancellation
date in accordance with the valuation provisions of the Option Plan
described above or (B) the highest reported price per share paid in
effecting the Hostile Take-Over.
The acceleration of options in the event of a Corporate Transaction and the
cash-out of options upon a Hostile Take-Over may be seen as anti-takeover
provisions and may have the effect of discouraging a merger proposal, takeover
attempt or other effort to gain control of the Company.
Cancellation and New Grant of Options
The Plan Administrator has the authority to effect, at any time and from
time to time, with the consent of the affected optionees, the cancellation of
any or all options outstanding under the Discretionary Option Grant Program and
-9-
<PAGE>
to grant in substitution therefor new options covering the same or different
numbers of shares of Common Stock but having an exercise price per share not
less than 85% of the fair market value per share of Common Stock on the new
grant date (or 100% of fair market value if the new option is to be an incentive
stock option).
Automatic Option Grant Program
Under the Automatic Option Grant Program, option grants have been made to
the current non-employee Board members, and option grants will be made to
individuals who join the Board as non-employee Board members in the future.
These special grants are summarized as follows:
1. Each individual who was serving as a non-employee Board member at
the time of the 1989 Annual Meeting was automatically granted on such date
a nonstatutory stock option to purchase 20,000 shares of Common Stock at
the fair market value of the Common Stock on such date.
2. Each individual who first becomes a non-employee Board member at
any time after the 1989 Annual Meeting, whether through election by the
stockholders or appointment by the Board, will be automatically granted, at
the time of such initial election or appointment, a nonstatutory stock
option to purchase 20,000 shares of Common Stock.
3. Each individual who continues to serve as a non-employee Board
member will receive additional automatic option grants, each for 20,000
shares of Common Stock, at successive four (4)-year intervals over his or
her period of continued Board service. The first such additional grant will
be made upon the later of (A) the date of the 1994 Annual Stockholders
Meeting or (B) the date of the Annual Stockholders Meeting held in the
calendar year in which occurs the fourth anniversary of the grant date of
the initial automatic option grant made to such individual, provided he or
she is re-elected to the Board at that Annual Meeting. Additional automatic
grants for 20,000 shares each will be made to such individual at every
fourth Annual Stockholders Meeting thereafter over such individual's
continued period of service as a non-employee Board member.
Each option grant under the Automatic Option Grant Program is subject to
the following terms and conditions:
- The option price per share will be equal to 100% of the fair market
value per share of Common Stock on the automatic grant date, and each
option is to have a maximum term of ten years measured from the grant date.
- Each automatic option grant will become exercisable for the option
shares six months after the grant date, provided the optionee continues as
a member of the Board.
- Shares purchased under the automatic option grant will be subject to
repurchase by the Company, at the option price paid per share, in the event
the optionee should cease to be a Board member prior to vesting in those
shares. The option shares will vest in a series of installments over the
optionee's period of Board service as follows: 25% of the option shares
will vest upon optionee's completion of one year of Board service measured
from the automatic grant date, and the balance of the option shares will
vest in a series of 36 successive equal monthly installments upon the
optionee's completion of each additional month of Board service thereafter.
Full and immediate vesting of the option shares will occur upon the
optionee's death or permanent disability while a Board member.
- Each automatic option will remain exercisable for a six-month period
following the optionee's termination of service as a Board member for any
reason other than death. Should the optionee die while serving as a Board
member or during the six-month period following his or her cessation of
Board service, then such option will remain exercisable for a 12-month
period following such optionee's death and may be exercised by the personal
representatives of the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of inheritance. In no event,
however, may the option be exercised after the expiration date of the
option term. During the applicable exercise period, the option may not be
exercised for more than the number of shares (if any) in which the optionee
is vested at the time of his or her cessation of Board service.
-10-
<PAGE>
- The option will become immediately exercisable for all of the shares
of Common Stock at the time subject to such option in the event of a
Corporate Transaction (see "Corporate Transaction" above). Immediately
following the consummation of the Corporate Transaction, the option will
terminate, except to the extent assumed by the successor corporation (or
its parent company).
- The option will become immediately exercisable for all of the shares
of Common Stock at the time subject to such option in the event of a Change
in Control. A Change in Control will be deemed to occur under the Option
Plan in the event:
(A) any person or related group of persons (other than the
Company or any affiliate) acquires beneficial ownership of securities
possessing more than 50% of the combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer which
the Board does not recommend the Company's stockholders to accept; or
(B) there is a change in the composition of the Board over a
period of 24 consecutive months or less such that a majority of the
Board members cease, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who are
either (i) Board members who have served continuously during such
period (continuing Board members) or (ii) Board members who were
elected or nominated during such period by continuing Board members.
- Each automatic option in effect for at least six months will
automatically be canceled upon the occurrence of a Hostile Take-Over (see
"Stock Appreciation Rights" above), and the optionee will in return be
entitled to a cash distribution from the Company in an amount equal to the
excess of (A) the Take-Over Price of the shares of Common Stock at the time
subject to the canceled option (whether or not the option is otherwise at
the time exercisable for such shares) over (B) the aggregate exercise price
payable for such shares.
- The remaining terms and conditions of the option grants under the
Automatic Option Grant Program will in general conform to the terms
described above for option grants made under the Discretionary Option Grant
Program and will be incorporated into the option agreement evidencing the
automatic grant.
Excess Grants
The Option Plan permits the grant of options to purchase shares of the
Company's Common Stock in excess of the number of shares then available for
issuance under the Option Plan. Any option so granted cannot be exercised prior
to stockholder approval of an amendment increasing the number of shares
available for issuance under the Option Plan.
Changes in Capitalization
In the event any change is made to the Common Stock issuable under the
Option Plan by reason of (A) a Corporate Transaction or (B) any stock split,
stock dividend, combination of shares, recapitalization or other similar change
in the corporate structure of the Company effected without receipt of
consideration, then unless such change results in the termination of all
outstanding options pursuant to the Corporate Transaction provisions of the
Option Plan, appropriate adjustments will be made to (i) the maximum number
and/or class of securities available for issuance under the Option Plan, (ii)
the maximum number and class of securities for which any one participant may be
granted stock options and separately exercisable stock appreciation rights under
the Option Plan, (iii) the number and/or class of securities and price per share
in effect under each outstanding option under the Discretionary Option Grant
Program, (iv) the number and/or class of securities per non-employee Board
member for which automatic option grants are subsequently to be made under the
Automatic Option Grant Program, and (v) the number and/or class of securities
and price per share of the Common Stock in effect under each automatic grant
outstanding under the Automatic Option Grant Program. The purpose of such
adjustments to the outstanding options is to preclude the enlargement or
dilution of rights and benefits under such options.
-11-
<PAGE>
Stock Options
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted under
the Option Plan during the last fiscal year, including options granted pursuant
to option repricings in fiscal year 1998 (see "Ten-Year Option Repricing
Table"), together with the weighted average exercise price payable per share.
<TABLE>
<CAPTION>
=========================================================================================================
Number of Option Weighted Average
Name and Position Shares Exercise Price ($)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
James Phillips Ferguson, 250,000 1.16
President and Chief Executive Officer(1)
- ---------------------------------------------------------------------------------------------------------
David A. Laws, 100,000 1.16
Chairman of the Board(2)
- ---------------------------------------------------------------------------------------------------------
Jerry DaBell, 110,000 1.16
Senior Vice President Design Engineering
- ---------------------------------------------------------------------------------------------------------
Moiz Khambaty, 130,000 1.16
Vice President Technology
- ---------------------------------------------------------------------------------------------------------
Ron Laugesen, 104,900 1.16
Vice President Product and Test Engineering
- ---------------------------------------------------------------------------------------------------------
All current executive officers as a group (8 persons) 1,209,352 1.16
- ---------------------------------------------------------------------------------------------------------
Zvi Grinfas, Director 0 0
- ---------------------------------------------------------------------------------------------------------
Peter D. Olson, Director 0 0
- ---------------------------------------------------------------------------------------------------------
Bernard V. Vonderschmitt, Director 0 0
- ---------------------------------------------------------------------------------------------------------
All directors (other than executive officers) as a group 0 0
(3 persons)
- ---------------------------------------------------------------------------------------------------------
All employees, including current officers who are not executive 2,342,984 1.37
officers, as a group (235 persons)
=========================================================================================================
</TABLE>
- ----------
(1) Mr. Ferguson joined the Company as President, Chief Executive Officer and a
member of the Board of Directors on June 19, 1997.
(2) Mr. Laws served as President and Chief Executive Officer from May 15, 1996
until June 19, 1997.
Amendment and Termination of the Plan
The Board may amend or modify the Option Plan in any or all respects
whatsoever. However, the Board will not, without stockholder approval, increase
the maximum number of shares available for issuance under the Option Plan except
in the event of certain changes to the Company's capitalization, and certain
other amendments may require stockholder approval pursuant to applicable laws or
regulations.
The Board may terminate the Option Plan at any time, but in all events the
Option Plan will terminate upon the earlier of August 16, 2005 or the date all
shares available for issuance under the Option Plan are issued or canceled
pursuant to the exercise or surrender of options granted under the Option Plan.
Any options outstanding at the time of the termination of the Option Plan will
remain in force in accordance with the provisions of the instruments evidencing
such grants.
-12-
<PAGE>
Federal Income Tax Consequences
Option Grants
Options granted under the 1995 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two years after the option grant date and more
than one year after the exercise date. If either of these two holding periods is
not satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.
Deductibility of Executive Compensation
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
-13-
<PAGE>
Accounting Treatment
Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will result in a
compensation expense to the Company's earnings equal to the difference between
the exercise or issue price and the fair market value of the shares on the grant
or issue date. Such expense will be accruable by the Company over the period
that the option shares or issued shares are to vest. Option grants or stock
issuances at 100% of fair market value will not result in any charge to the
Company's earnings, but the Company must disclose, in pro-forma statements to
the Company's financial statements, the impact those options would have upon the
Company's reported earnings were the value of those options at the time of grant
treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
Recommendation of the Board of Directors
The affirmative vote of a majority of the shares present or represented at
the 1998 Meeting and entitled to vote on Proposal No. 2 is required for approval
of the amendment to the Option Plan. The Board of Directors believes that the
amendment to the Option Plan is necessary in order to continue to provide equity
incentives to attract and retain the services of key employees, consultants and
non-employee Board members. For this reason, the Board of Directors recommends
that the stockholders vote FOR this Proposal No. 2
Should such stockholder approval not be obtained, then the 500,000-share
increase to the share reserve will not be implemented, and the Option Plan will
terminate as to future issuances once the existing share reserve as last
approved by the stockholders has been issued.
New Plan Benefits
There have been no option grants made on the basis of the 500,000 shares
increase which forms part of the amendment to the Option Plan for which
stockholder approval is sought under this Proposal No. 2.
-14-
<PAGE>
================================================================================
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT AUDITORS
================================================================================
The Company is asking the stockholders to ratify the selection of Price
Waterhouse as the Company's independent auditors for the fiscal year ending
March 28, 1999. The affirmative vote of the holders of a majority of the Common
Stock present or represented at the Annual Meeting will be required to ratify
the selection of Price Waterhouse.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its stockholders.
Price Waterhouse has audited the Company's financial statements annually
beginning with the fiscal year ended March 27, 1994. Its representatives are
expected to be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
Recommendation of Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of Price Waterhouse to serve as the Company's
independent auditors for the fiscal year ending March 28, 1999.
================================================================================
ADDITIONAL INFORMATION
================================================================================
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file with the Commission
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 (10%) stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that all reporting requirements under Section 16(a) for the
fiscal year ended March 29, 1998 were met in a timely manner by its executive
officers, Board members and greater than ten percent (10%) stockholders, except
as follows: The Laws Family Trust, of whose shares David Laws is a beneficial
owner, acquired 1,000 shares of the Company's Common Stock in September 1997 and
1,000 shares of the Company's Common Stock in March 1998. Mr. Laws filed a Form
5 related to such transactions in June 1998. Ron Laugesen purchased 9,000 shares
of the Company's Common Stock in November 1997 and filed a Form 4 related to
such transaction in February 1998.
-15-
<PAGE>
================================================================================
EXECUTIVE COMPENSATION AND RELATED INFORMATION
================================================================================
Compensation Committee Report
It is the duty of the Compensation Committee of the Company's Board of
Directors to set the base salary of executive officers and to administer the
Option Plan and the Employee Stock Purchase Plan (the "Purchase Plan") under
which grants may be made to such officers and other key employees. In addition,
the Compensation Committee approves the individual bonus programs for executive
officers each fiscal year and the base salaries of the Company's executive
officers.
For the 1998 fiscal year, the Committee established the compensation
payable to Mr. Ferguson and Mr. Laws, each of whom served as President and Chief
Executive Officer. Mr. Laws resigned on June 19, 1997 and was succeeded by Mr.
Ferguson as President and Chief Executive Officer effective as of that date. The
Committee also established the compensation payable to the Company's other
executive officers.
GENERAL COMPENSATION POLICY. Each executive officer's compensation package
is comprised of three elements: (i) base salary which reflects individual
performance and Company performance and is designed generally to be competitive
with salary levels in the industry, (ii) annual bonus awards payable in cash and
tied to the Company's achievement of performance goals, and (iii) long-term
stock-based incentive awards which strengthen the mutuality of interests between
the executive officers and the Company's stockholders.
FACTORS. The primary factors which were considered in establishing the
components of each executive officer's compensation package for the 1998 fiscal
year are summarized below. The Committee may in its discretion apply entirely
different factors, particularly different measures of financial performance, in
setting executive compensation for future fiscal years.
* Base Salary. The base salary for each executive officer is set on the
basis of personal performance, the salary levels in effect for comparable
positions with the Company's principal competitors, and internal comparability
standards, however, the Committee does not take into account any specific salary
surveys in setting the base salary levels for the Company's executive officers.
The Committee believes that the Company's most direct competitors for executive
talent are not necessarily all of the companies that the Company would use in a
comparison for shareholder returns. Therefore, the compensation comparison group
is not necessarily the same as the industry group index in the Performance Graph
below.
* Annual Incentive Compensation. Targeted annual bonuses, set as a targeted
percentage of salary based on position, are earned by each executive officer on
the basis of the Company's achievement of certain sales and profitability goals
established by the Committee at the start of the fiscal year. Actual awards are
subject to decrease or increase on the basis of the Company's performance and at
the discretion of the Chief Executive Officer. For fiscal year 1998, the
Compensation Committee established the following performance goals: (i) sales
must exceed $50 million, (ii) sales and earnings must increase each fiscal
quarter and (iii) the Company must report a net profit in the fourth quarter.
Upon successful completion of each of these goals, the Company would pay each
executive officer a bonus equal to 25% of his or her base salary. These goals
were not met, and accordingly, the Company's executive officers were not paid
bonuses under the Company's annual incentive bonus program for fiscal year 1998.
See the "Summary Compensation Table" for a description of how certain executive
officers were paid additional compensation other than through the annual
incentive bonus program.
* Long-Term Incentive Compensation. The Committee periodically approves
grants of stock options under the Option Plan to the Company's executive
officers. The grants are designed to align the interests of each executive
officer with those of the stockholders and provide each individual with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. Each grant generally allows the officer to
acquire shares of Common Stock at a fixed price per share (the market price on
the grant date) over a specified period of time (up to 10 years), thus providing
a return to the executive officer only if the market price of the shares
appreciates over the option term. During the 1993 fiscal year, the Committee
approved an evergreen program under the Option Plan designed to provide for the
annual grant of options to ensure that top performing employees, including
-16-
<PAGE>
executive officers, have a significant equity stake in the Company. The program
takes into account the individual's option holdings, as well as direct stock
holdings, at the time annual awards are made. The size of the option grant to
each executive officer, generally is set to achieve a potential percentage
ownership stake in the Company that the Committee deems appropriate in order to
create a meaningful opportunity for stock ownership based upon the individual's
current position with the Company, but also takes into account the individual's
potential for future responsibility and promotion over the option term and the
individual's personal performance in recent periods. Each such factor is given
equal weight. Option grants to executive officers in fiscal year 1998 are set
forth in the subsection titled Stock Options under Proposal No. 2 and under
"Stock Option Grants in 1998."
CEO COMPENSATION. On June 19, 1997, the date on which the Board of
Directors appointed James Philips Ferguson to the position of President and
Chief Executive Officer, the Compensation Committee set Mr. Ferguson's base
salary at $190,000 per year with a potential bonus of 40% of such base salary if
certain sales and earnings goals of the Company were met. These goals were not
met, and accordingly, Mr. Ferguson was not paid an incentive bonus for fiscal
year 1998. In addition, Mr. Ferguson was granted options to purchase an
aggregate of 250,000 shares of the Company's Common Stock in fiscal year 1998 as
more fully described under "Stock Option Grants in 1998."
David Laws, who served as the Company's President Chief Executive Officer
from May 15, 1995 through June 19, 1997, earned a base salary of $185,000 per
year through the June 19, 1997. In addition, Mr. Laws was paid a retention bonus
of $250,000 in fiscal year 1998.
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries except as follows: Mr.
Grinfas was a co-founder of the Company and served as Senior Vice President for
the Company, managing the Business Development Group, until December 1984. At
that time he became Senior Vice President, Engineering, a position he held until
May 1986, when he became Vice President, Business Development and Sales Director
of Southern Europe of IMP Europe Limited, at the time a subsidiary of the
Company. Mr. Grinfas ceased working for IMP Europe Limited in December 1988.
* Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code disallows a tax deduction to publicly held companies
for compensation paid to certain of their executive officers to the extent that
compensation exceeds $1 million per covered officer in any fiscal year. The
limitation applies only to compensation which is not considered to be
performance-based. Non-performance based compensation paid to the Company's
executive officers for the 1998 fiscal year did not exceed the $1 million limit
per officer, and the Committee does not anticipate that the non-performance
based compensation to be paid to the Company's executive officers for fiscal
1998 will exceed that limit. The Company's Option Plan has been structured so
that any compensation deemed paid in connection with the exercise of option
grants made under that plan with an exercise price equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation which will not be subject to the $1 million limitation. Because it
is unlikely that the cash compensation payable to any of the Company's executive
officers in the foreseeable future will approach the $1 million limit, the
Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Committee will reconsider this decision should the individual cash
compensation of any executive officer ever approach the $1 million level.
Compensation Committee
Zvi Grinfas
Peter D. Olson
Bernard V. Vonderschmitt
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the foregoing report and the Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.
-17-
<PAGE>
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and the four other
most highly-compensated executive officers of the Company ("Named Executive
Officers"), for services rendered in all capacities to the Company and its
subsidiaries for each of the last three (3) fiscal years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
===========================================================================================================
Long Term
Securities
Underlying Other
Name and Position Year Salary($)(1) Bonus($) Options Compensation($)(2)
===========================================================================================================
<S> <C> <C> <C> <C> <C>
James Philips Ferguson 1998 148,439 -- 250,000 7,980
President and Chief Executive 1997 -- -- -- --
Officer(3) 1996 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
David A. Laws, 1998 181,808 250,000 -- 3,600
Chairman of the Board(4) 1997 185,985 40,000 245,835 3,600
1996 166,624 0 295,834 2,628
- -----------------------------------------------------------------------------------------------------------
Jerry DaBell 1998 155,855 0 65,000 2,804(5)
Senior Vice President, Design 1997 145,848 22,915 0 2,304
Engineering 1996 152,588 10,575 0 1,620
- -----------------------------------------------------------------------------------------------------------
Moiz Khambaty 1998 155,065 0 70,000 5,616
Vice President Technology 1997 138,386 21,000 0 5,616
1996 138,638 10,500 0 5,616
- -----------------------------------------------------------------------------------------------------------
Ron Laugesen 1998 125,102 28,750(6) 74,900 3,600
Vice President Product and Test 1997 -- -- -- --
Engineering 1996 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Salary includes amounts deferred pursuant to the Company's 401(k) plan. The
amounts shown under the Bonus column include cash bonuses earned for the
indicated fiscal years.
(2) Includes the premium paid on behalf of each executive officer for
supplemental life insurance plus any other amount as indicated for each
individual.
(3) Mr. Ferguson was appointed to the position of President and Chief Executive
Officer on June 19, 1997. Mr. Ferguson's annual base salary is $190,000 per
year and he is eligible to receive a performance bonus of up to 40% of this
amount.
(4) Mr. Laws served as President and Chief Executive Officer from May 15, 1996
until June 19, 1997 and was paid a retention bonus of $250,000 in 1998.
(5) Includes a $500 reimbursement for tax preparation.
-18-
<PAGE>
(6) Mr. Laugesen was promoted to Vice President, Product and Test Engineering
on August 20, 1998. The bonus paid to Mr. Laugesen represents a retention
incentive payment prior to his promotion to Vice President Product and Test
Engineering.
STOCK OPTION GRANTS IN 1998
The following table sets forth information for the executive officers named
in the Summary Compensation Table with respect to grants of options to purchase
Common Stock of the Company made in fiscal-year 1998 and the value of all
options held by such executive officers on March 29, 1998. The following table
does not include options repriced and reissued pursuant to the fiscal-year 1998
option repricing program. See "Ten-Year Option Repricing Table."
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------- Potential Realizable
Number of Value at Assumed
Securities Percent of Annual Rates of
Underlying Total Options Stock Price
Options Granted to Exercise Appreciation for
Granted Employees in Price Expiration Option Term (2)
------------------------
Name (Shares) Fiscal Year(1) (Per Share) Date 5% ($) 10% ($)
------------- --------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James Philips Ferguson........ 100,000 7% $1.94 6/19/07 $122,006 $309,186
150,000 10% $1.44 9/22/07 $135,841 $344,248
David A. Laws................. -- -- -- -- -- --
Jerry DaBell.................. 45,000 3% $1.44 9/22/07 $40,752 $103,275
20,000 1% $1.29 2/10/08 $16,225 $41,119
Moiz Khambaty................. 50,000 3% $1.44 9/22/07 $45,280 $114,749
20,000 1% $1.29 2/10/08 $16,225 $41,119
Ron Laugesen.................. 10,000 1% $1.94 6/19/07 $12,201 $30,919
44,900 3% $1.94 9/22/07 $54,780 $138,825
20,000 1% $1.29 2/10/08 $16,225 $41,119
</TABLE>
- ----------
(1) The Company granted options to employees to purchase an aggregate of
1,430,300 shares of Common Stock during fiscal year 1998, exclusive of
options granted pursuant to option repricings in fiscal year 1998. See
"Ten-Year Option Repricing Table."
(2) Potential realizable values are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual realized gains, if any, on stock
option exercises are dependent on future performance of the Company's
Common Stock, as well as the optionee's continued employment through the
vesting period.
-19-
<PAGE>
Option Exercises and Holdings
The table below sets forth information concerning the exercise of stock
options during the 1998 fiscal year by the Named Executive Officers and the
unexercised options held as of the end of the 1998 fiscal year by such
individuals. For purposes of the latter calculation, the fiscal year-end market
value of the shares is deemed to be $1.343, the closing sale price of the
Company's Common Stock as reported on the National Association of Securities
Dealers Automated Quotations System on Friday, March 27, 1998. No stock
appreciation rights were exercised by the Named Executive Officers during the
1998 fiscal year, and no stock appreciation rights were held by those
individuals at the end of such year.
<TABLE>
<CAPTION>
=====================================================================================================================
Number of Value of
Shares Number of Unexercised
Acquired Unexercised In-the-Money
on Value Options at Options at
Exercise Realized FY-End FY-End ($1.343)
- ---------------------------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
James Philips Ferguson (1) -- -- -- 250,000 -- $45,750
- ---------------------------------------------------------------------------------------------------------------------
David A. Laws (2) -- -- -- 100,000 -- 18,000
- ---------------------------------------------------------------------------------------------------------------------
Jerry DaBell -- -- -- 110,000 -- 19,800
- ---------------------------------------------------------------------------------------------------------------------
Moiz Khambaty -- -- -- 100,000 -- 18,000
- ---------------------------------------------------------------------------------------------------------------------
Ron Laugesen -- -- -- 104,900 -- 18,882
=====================================================================================================================
</TABLE>
- ----------
(1) Mr. Ferguson was appointed President and Chief Executive Officer on June
19, 1997.
(2) Mr. Laws served as President and Chief Executive Officer of the Company
from May 15, 1996 until June 19, 1997, at which time he was succeeded by
James Phillips Ferguson.
-20-
<PAGE>
TEN-YEAR OPTION REPRICING TABLE
The Company permitted certain holders of options to purchase the Company's
Common Stock to reprice their options on September 22, 1997 and again on
February 27, 1998. On September 22, 1997, the Company permitted employees,
excluding executive officers named in the Summary Compensation Table, to cancel
outstanding options that had been granted under the Company's Stock Option Plan
but that had not yet been exercised and that had an exercise price in excess of
the then-current fair market value of the Company's Common Stock and replace
them with new options for an equal number of shares with an exercise price equal
to $1.44 per share, the fair market value on September 22, 1997. These repriced
options were subsequently repriced on February 27, 1998.
On February 27, 1998, the Company permitted employees, including executive
officers named in the Summary Compensation Table, to cancel outstanding options
that had been granted under the Company's Stock Option Plan but that had not yet
been exercised and that had an exercise price in excess of the then-current fair
market value of the Company's Common Stock (including the options that were
repriced on September 22, 1997) and replace them with new options for an equal
number of shares with an exercise price equal to $1.16 per share, the fair
market value on February 27, 1998. Each repriced option granted is not
exercisable until February 27, 1999 at which time each option will become vested
and exercisable as to the number of shares subject to the canceled options that
were vested as of February 27, 1998; thereafter, the vesting schedules under the
original option agreement continues as to the unvested shares. In accordance
with the regulations promulgated by the Securities and Exchange Commission, such
repricing requires the Company to disclose all repricings of the Company's
options held by its executive officers that have occurred during the last ten
completed years (exclusive of years prior to the year in which the Company
became a reporting company under the Exchange Act), in the format set forth
below:
<TABLE>
<CAPTION>
Length of
Number Shares Market Original Option
of Common Price of Exercise Term Remaining at
Date of Stock Stock at Price at New Date
Name Pricing Underlying Time of Time of Exercise of Repricing
Options Repriced Repricing Repricing Price (in months)
- --------------------- ------------ ----------------- ------------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
James Philips 2/27/98 100,000 $1.16 $1.94 $1.16 40
Ferguson
2/27/98 150,000 1.16 1.44 1.16 43
David A. Laws 2/27/98 100,000 1.16 1.50 1.16 12
Jerry DaBell 2/27/98 20,000 1.16 1.29 1.16 47
2/27/98 45,000 1.16 1.44 1.16 43
9/22/97 45,000 1.44 2.57 1.44 40
2/13/91 60,000 .81 3.00 .81 27
Moiz Khambaty 2/27/98 20,000 1.16 1.29 1.16 47
2/27/98 30,000 1.16 1.38 1.16 35
2/27/98 50,000 1.16 1.44 1.16 31
9/22/97 30,000 1.44 2.57 1.44 40
2/13/91 17,500 .81 3.00 .81 --
2/13/91 18,400 .81 4.25 .81 --
Ron Laugesen 2/27/98 20,000 1.16 1.29 1.16 48
2/27/98 44,900 1.16 1.44 1.16 43
2/27/98 10,000 1.16 1.94 1.16 16
2/27/98 20,000 1.16 2.57 1.16 34
2/27/98 10,000 1.16 5.94 1.16 18
2/13/91 7,500 .81 1.625 .81 26
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
Length of
Number Shares Market Original Option
of Common Price of Exercise Term Remaining at
Date of Stock Stock at Price at New Date
Name Pricing Underlying Time of Time of Exercise of Repricing
Options Repriced Repricing Repricing Price (in months)
- --------------------- ------------ ----------------- ------------- ------------ ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
George Rassam 2/27/98 80,002 1.16 1.44 1.16 36
2/27/98 20,000 1.16 1.29 1.16 48
2/13/91 10,100 .81 4.25 .81 2
2/13/91 2,564 .81 2.625 .81 6
Taraim Batra 2/27/98 63,200 1.16 1.44 1.16 43
2/27/98 20,000 1.16 1.29 1.16 48
2/27/98 11,250 1.16 1.85 1.16 15
2/27/98 30,000 1.16 2.57 1.16 36
Barry Wiley 2/27/98 75,000 1.16 1.60 1.16 41
2/27/98 25,000 1.16 1.44 1.16 43
2/27/98 20,000 1.16 1.29 1.16 48
Barry Carrington (1) 2/13/91 902 .81 3.00 .81 --
2/13/91 53,798 .81 3.00 .81 --
2/13/91 94,000 .81 4.25 .81 --
2/13/91 146,202 .81 3.60 .81 --
2/13/91 141,300 .81 4.25 .81 --
Charles Isherwood (2) 2/15/91 100,000 .81 .4.25 .81 --
</TABLE>
- ----------
(1) Mr. Carrington served as the Company's Chief Executive Officer through
1996.
(2) Mr. Isherwood served as the Company's Chief Financial Officer through 1996.
Employment Contracts and Termination of Employment Agreements
Except as indicated below, none of the Company's executive officers have
employment contracts or severance agreements with the Company, and their
employment may be terminated at any time at the discretion of the Board of
Directors.
By letter agreement between the Company and David Laws dated December 10,
1996, the Company confirmed, among other things, a retention bonus of $250,000
payable to Mr. Laws in fiscal year 1998. See also "Certain Relationships and
Related Transactions" for a description of a terminated contract for services
between the Company and James Phillips Ferguson.
-22-
<PAGE>
Stock Performance Graph
The graph depicted below shows the Company's stock price as an index for
the last five-year period, assuming $100 invested on March 31, 1993 and the
reinvestment of dividends. Also depicted are the composite prices of companies
listed on the Nasdaq National Market Index and the Nasdaq Index of Electronic
Equipment Manufacturers--comprised of companies primarily engaged in the
manufacture of electronic components and accessories--also assuming $100
invested on March 31, 1993. This information has been provided to the Company by
Media General Financial Services.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL STOCKHOLDER RETURNS
3/31/93 3/31/94 3/31/95 3/31/96 3/29/97 3/31/98
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IMP, Inc. $100 $78 $78 $311 $92 $65
Nasdaq $100 $116 $123 $165 $185 $279
Nasdaq Electronic Equipment $100 $133 $157 $186 $266 $309
Manufacturers
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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 or the Securities Exchange Act of 1934.
-23-
<PAGE>
Certain Relationships and Related Transactions
On December 9, 1996, the Company entered into a contract for services with
James Phillips Ferguson pursuant to which Mr. Ferguson agreed to render services
to the Company as its Chief Operating Officer in exchange for the payment of
fees specified in the contract. The Company paid an aggregate of $130,000 to Mr.
Ferguson pursuant to such contract through its termination on June 19, 1997.
During fiscal 1998, the Company billed H3D Entertainment, Inc. $50,000 for
shipments of component parts for integrated circuits. Peter D. Olson, a member
of the Company's Board of Directors, is the principal stockholder, Chief
Executive Officer and a member of the Board of Directors of H3D Entertainment,
Inc.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Stockholder proposals that are intended to be presented at the Company's
annual meeting of stockholders to be held in 1999 must be received by the
Company no later than March 19, 1999 in order to be included in the proxy
statement and related proxy materials.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, IMP, INC., MS
200/JE, 2830 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95134.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
George Rassam
Secretary and Chief Financial Officer
Dated: July 17, 1998
