<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
RAINBOW TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
RAINBOW TECHNOLOGIES, INC.
50 TECHNOLOGY DRIVE
IRVINE, CALIFORNIA 92718
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 1996
------------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN THAT the 1996 Annual Meeting of Shareholders of
Rainbow Technologies, Inc. (the "Company"), will be held on June 6, 1996 at 2:00
PM, Pacific Daylight Time at the Company's Headquarters, 50 Technology Drive,
Irvine, California 92718, 714-450-7300, (the "Annual Meeting") for the purposes
described below.
1. To elect a Board of Directors who shall hold office until the next
Annual Meeting of Shareholders or until their successors are duly
elected and shall have qualified.
2. To ratify the appointment of Ernst & Young, LLP as the independent
auditors of the Company.
3. To transact such other business as may properly come before the
Annual Meeting.
Only Shareholders of record at the close of business on April 12, 1996 are
entitled to notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. However, if you are
not able to be present, please be sure that your shares are represented at the
Annual Meeting by indicating your voting instructions, dating and signing the
enclosed proxy card and returning it promptly in the enclosed, postage paid
envelope.
By Order of the Board of Directors
SIG
Walter W. Straub
April 25, 1996
<PAGE> 3
RAINBOW TECHNOLOGIES, INC.
50 TECHNOLOGY DRIVE
IRVINE, CALIFORNIA 92718
------------------------------
PROXY STATEMENT
------------------------------
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Rainbow Technologies, Inc. (the "Company") of proxies,
in the form enclosed, for use at the 1996 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at the time and place and for the
purpose set forth in the attached Notice of Annual Meeting of Shareholders.
Mailing of this proxy statement and the accompanying proxy card is to
commence on April 29, 1996.
GENERAL INFORMATION
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on April 12, 1996 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, the Company had issued and outstanding 7,422,724 shares of
Common Stock.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company before the Annual Meeting, or
(iii) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy).
VOTING
Each share of Common Stock outstanding on the Record Date is entitled to
one vote. No shareholder will be entitled to cumulative votes. The six nominees
for election as Directors at the Annual Meeting who receive the highest number
of affirmative votes will be elected. The other matter submitted for shareholder
approval at the Annual Meeting will require the affirmative vote of a majority
of shares of the Company's Common Stock present or represented and entitled to
vote at the meeting.
SOLICITATION OF PROXIES
The cost of solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares of Common Stock for their expenses in forwarding soliciting materials to
such beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers, and regular employees, without additional compensation,
personally or by telephone or telegram.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders of the Company intended to be presented by such
shareholder at the Company's 1997 Annual Meeting must be received by the Company
no later than February 15, 1997 in order that they may be included in the proxy
statement related to that meeting.
<PAGE> 4
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES
Six directors are to be elected to hold office until the next Annual
Meeting of Shareholders and until their successors are elected and qualified.
Unless otherwise directed, the proxy holders will vote the proxies received by
them for the six nominees named below. Management expects that each of the
nominees will be available for election, but if any of them is not a candidate
at the time the election occurs, it is intended that such proxy will be voted
for the election of another nominee to be designated by the Board to fill any
such vacancy.
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION
- ------------------------ ---- --------------------------------------
<S> <C> <C>
Walter W. Straub 52 Chairman, President, Chief Executive
Officer and Director
Peter M. Craig 51 Vice Chairman, Executive Vice
President, Secretary and Director
Richard P. Abraham 66 Director
Frederick M. Haney 55 Director
Marvin Hoffman 61 Director
Alan K. Jennings 66 Director
</TABLE>
All of the nominees of management are members of the Board of Directors at
the present time and have served continuously since the dates of their election
as described below.
Walter W. Straub, a co-founder of the Company, has been a director of the
Company since its inception in 1982, and President and Chief Executive Officer
of the Company since 1983. Since 1989, Mr. Straub has served as director of CAM
Data Systems, a manufacturer of computerized inventory control systems. Mr.
Straub received a B.S.E.E. in 1965 and an M.B.A. in Finance in 1970 from Drexel
University. In May 1993, Mr. Straub was elected to the Board of Trustees of
Drexel University.
Peter M. Craig has been a director of the Company since 1985, Vice Chairman
since December, 1995, Executive Vice President since 1992, and Secretary of the
Company since 1989. From 1989 to 1992, he was Vice President of the Company
responsible for North American Operations. From 1986 to 1989 he was President
and Chief Executive Officer of Promod, a software development firm specializing
in software management tools which automate the design and management of
large-scale software projects. Mr. Craig received a B.S.E.E. from Case Institute
of Technology in 1967 and a M.S.E.E. from the University of Minnesota in 1975.
Richard P. Abraham has been a director of the Company since 1988. He is
currently the President of Pacific Associates, a sole proprietorship engaged in
business consulting. Since 1987, Mr. Abraham has been a General Partner of
Weeden Capital Management and has also been a consultant to Weeden & Co. Mr.
Abraham received a B.S. and M.S. from Stanford University in 1954.
Dr. Frederick M. Haney has been a director of Rainbow since January, 1996.
He is Managing General Partner of the Cruttenden Roth Equity Fund, and he is
President of Venture Management Company, Palos Verdes Estates, California. From
1984 to 1991 he was founder and manager of 3i Ventures, California, a high
technology venture capital fund. From 1980 to 1983 he performed senior
management functions at TRW and from 1968 to 1980 he held management positions
at Xerox Corporation and Computer Science Corporation. Dr. Haney has extensive
experience in strategic planning, operations and finance in the information and
computer industry. Dr. Haney holds a Ph.D. in Computer Science from
Carnegie-Mellon University.
Marvin Hoffman has been a director of the Company since 1990. He is
currently, and has been since 1976, the Chief Executive Officer and Chairman of
the Board of XXCAL, Inc., a corporation engaged in the business of providing
high technology computer and computer-related temporary personnel. He is also
currently, and has been since 1988 and 1987, respectively, the President of the
Los Angeles City College Foundation and a director of RIMTECH, a not-for-profit
organization encouraging trade and joint ventures
2
<PAGE> 5
between United States and Japanese businesses. Mr. Hoffman received a B.A. in
Mathematics from California State University Northridge in 1962.
Dr. Alan K. Jennings, a co-founder of the Company, has been a director of
the Company since its inception in 1982. From 1982 to 1992 he served as an
officer of the Company in various capacities. Since 1980, Dr. Jennings has been
the President of Dartex, Inc. ("Dartex"), a California corporation which
provides technical and management services. He received a B.S.E.E. from Stanford
University in 1949, an M.S. in Mathematics from Oklahoma State University in
1951 and a Ph.D. in Mathematics from Kansas University in 1954.
EXECUTIVE OFFICERS
The names of the Company's executive officers who are not nominated for
election as members of the Board of Directors, and certain information about
them is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- --- --------------------------------------------
<S> <C> <C>
Theodore S. Bettwy 60 Senior Vice President
Paul A. Bock 48 Senior Vice President Business Development
Norman L. Denton, III 50 Senior Vice President Sales and Marketing
Patrick E. Fevery 40 Vice President Finance and Chief Financial
Officer
Richard L. Burris 51 Vice President Manufacturing
Laurie W. Casey 39 Vice President Product Management & Planning
Kenneth A. Konechy 51 Vice President Strategic Technology Programs
Dorinda Dorsey Rowden 43 Vice President Asia Pacific and Latin
America
</TABLE>
Theodore S. Bettwy was promoted to Senior Vice President of Rainbow in
January 1996. He joined Mykotronx as Executive Vice President and Director in
February 1993 and was promoted to his current position of President of Mykotronx
in August 1993. Dr. Bettwy retired from TRW after 31 years where he served as
both a Program Manager and Functional Manager. He started and managed the TRW
Colorado Springs Engineering organization which grew to a 320 person level
within three years. He has authored more than 10 technical papers on a variety
of aerospace and communications subjects and has lectured college level courses
on management and marketing. He holds PhD and MSEE from USC and a BSEE from
Villanova University. Dr. Bettwy also participated in the Stanford Executive
Development Program.
Paul A. Bock was promoted to Senior Vice President Business Development in
December 1995, and has served as Vice President of Business Development since
1992. From 1988 to 1992, Mr. Bock held the positions of Director of Business
Development for the Company and Manager of National Sales and Major Accounts for
the Company. Mr. Bock received his B.S. degree in Political Science from
California State University Northridge in 1969.
Norman L. Denton, III was promoted to Senior Vice President of Sales and
Marketing December 1995, and has served as Vice President of Sales and Marketing
since 1992. From 1990 to 1992, Mr. Denton held positions of Director of Sales
and Marketing North American, and Director of National Accounts Marketing at
Rainbow. Mr. Denton was Vice President Sales and Marketing of Promod, Inc. from
1987 to 1989. Mr. Denton attended University of California at Berkeley and San
Francisco State University.
Patrick E. Fevery has been Vice President of Finance and Chief Financial
Officer of the Company since January 1992. From 1990 to 1992, Mr. Fevery was
Controller of the Company. From 1988 to 1990, Mr. Fevery was the Company's
Manager of Finance and Administration. Mr. Fevery received a Bachelor's Degree
in Business Administration from European University in Belgium in 1980, and a
Masters Degree in Business Administration from Claremont Graduate School in
Claremont, California in 1982.
Richard L. Burris has been Vice President of Manufacturing since 1992. From
1988 to 1992, Mr. Burris held the positions as the Company's Manufacturing
Manager and Director of Manufacturing. Mr. Burris received an AA from Fullerton
College in 1973.
3
<PAGE> 6
Laurie W. Casey was promoted to Vice President Product Management &
Planning in December 1995. Ms. Casey joined Rainbow as Manager of Product
Management & Planning in 1992. From 1990 to 1992, she was a Product Manager for
Printronix Corporation. She was employed at IBM from 1979 through 1990, where
she held various sales and marketing positions for large systems. Ms. Casey
received her B.A. in Spanish in 1978 from the University of California at Santa
Barbara, and obtained her Master's degree in International Management from the
American Graduate School of International Management in 1989.
Kenneth A. Konechy became Vice President of Strategic Technology Program in
December, 1995. He served as Vice President of Engineering of the Company since
1990. From 1989 to 1990, Mr. Konechy held the position of Engineering Director
for the Company. From 1981 to 1989, Mr. Konechy was employed by Printronix in
Irvine, first as Engineering Development Manager and later as Product Manager.
Mr. Konechy received a B.S.E.E. in 1964 and a M.S.E.E. in 1967 from the
University of Pittsburgh.
Dorinda Dorsey Rowden has been Vice President of Asia Pacific and Latin
America since 1992. From 1989 to 1992, Ms. Rowden was the Company's Manager of
Sales and Distribution for Asia and Latin America. Ms. Rowden received a B.A.
from San Diego State University in 1974.
Except as stated, there are no arrangements or understandings by or between
any director or executive officer and any other person(s), pursuant to which he
or she was or is to be selected as a director or executive officer,
respectively.
There is no family relationship by or between any director or executive
officer of the Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during the Company's year ended
December 31, 1995. Each director attended all meetings of the Board of
Directors.
The Board of Directors of the Company has standing Audit, Compensation and
Stock Option Committees. The Board of Directors has no Nominating Committee nor
any committee performing the functions of a Nominating Committee.
The members of the Audit Committee are Mr. Jennings and Mr. Hoffman. The
Audit Committee held two meetings during fiscal 1995. The purpose of the Audit
Committee is to review with the management of the Company and with the Company's
independent auditors such matters as internal accounting controls and
procedures, the plan and results of the annual audit, and the recommendations of
the independent auditors with respect to their audit activities.
The members of the Compensation Committee are Mr. Abraham and Mr. Hoffman.
The Compensation Committee held two meetings during fiscal 1995. The
Compensation Committee is primarily responsible for establishing compensation
for the executive officers of the Company. Its activities are described in more
detail under "Report of the Compensation Committee on Executive Compensation"
below.
The Stock Option Committee is primarily responsible for establishing the
number of options granted to employees of the Company under the 1990 Restated
Stock Option Plan. The Stock Option Committee held five meetings during fiscal
1995. The members of the Stock Option Committee are Mr. Abraham and Mr. Hoffman.
Each member of each particular Committee attended all of the meetings of
each such Committee.
REPORT OF THE COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation and Stock Option Committees of the Board of Directors.
The Compensation Committee and the Stock Option Committee are each
comprised entirely of non-employee, independent members of the Board of
Directors. The Compensation Committee establishes the general compensation
policies of the Company and the compensation paid to the Chief Executive Officer
and
4
<PAGE> 7
other executive officers. The Stock Option Committee administers the 1990
Restated Incentive Stock Option Plan including review and approval of stock
option grants to all employees, including the Chief Executive Officer and other
executive officers.
GENERAL COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that cash compensation should be
related to the performance of the Company and any long term incentive should be
closely aligned with the interests of shareholders. This philosophy is designed
to attract, retain and motivate the high caliber of executives required for the
success of the business.
In determining executive compensation, the Compensation Committee compares
the compensation paid at companies in the computer hardware and software
industries, and places particular emphasis upon financial performance
comparisons including sales growth, net income growth, net income per share
growth, increase in cash flow and growth in shareholder value. The Committee
then structures cash compensation for the executive officers named in the
Summary Compensation Table to consist of (i) a base salary determined upon a
review of the Company's performance in the prior year, and (ii) bonus
compensation that is directly related to the Company's sales, quality and net
income performance in the current year.
In particular, the bonus compensation paid to executives is established by
the Compensation Committee each year following a review of Rainbow's performance
for the prior year. The bonus compensation is based directly on Rainbow's
current year operating performance goals, and is generally established to equal
30% to 60% of the executive's total cash compensation for the year.
Long term incentive compensation is realized through the granting of stock
options to key employees including the Chief Executive Officer and other
executive officers. The number of shares of Common Stock subject to a stock
option grant is based upon the employee's current and anticipated future
performance and ability to achieve strategic goals and objectives. Grants are
made annually and generally become exercisable during a four year vesting
period, thus providing an incentive to remain in the Company's employ. Stock
options have value for the employee only if the price of the Company's stock
increases above the fair market value on the grant date and the employee remains
in the Company's employ for the period required for the stock option to be
exercisable.
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation for the Chief Executive Officer was set according to the
established compensation philosophy described above.
The Compensation Committee reviewed competitive base compensation
information reflecting the most recent compensation data and the Company's
performance in 1994 and goals for 1995. The bonus portion of the Chief Executive
Officer's compensation represents approximately 56% of the Chief Executive
Officer's total cash compensation. This reflects the Company's commitment to its
stated compensation philosophy. The Chief Executive Officer received a grant of
stock options based upon an evaluation of the Company's performance in 1994.
CONCLUSION
The committee believes that these policies and programs are competitive and
effectively align executive compensation with the Company's goal of maximizing
the return to shareholders.
COMPENSATION COMMITTEE:
Richard P. Abraham
Marvin Hoffman
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following tables set forth the annual compensation for the Chief
Executive Officer and the four other most highly compensated executive officers
on Rainbow Technologies, Inc.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------ ALL OTHER
NAME YEAR SALARY($) BONUS($) OPTIONS# COMPENSATION(1)($)
---------------------- ----- ------- ------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Walter W. Straub 1995 163,604 208,000 20,000 1,000
1994 163,604 160,000 60,400 1,000
1993 153,689 150,000 37,600 1,000
Peter M. Craig 1995 152,420 115,500 12,000 1,000
1994 152,420 105,000 38,425 1,000
1993 142,436 100,000 23,800 1,000
Norman L. Denton III 1995 226,974 91,000 19,000 1,000
1994 182,358 70,000 23,025 1,000
1993 173,476 60,000 24,100 1,000
Theodore S. Bettwy 1995 124,800 201,100 27,000 6,756
1994 103,960 143,600 6,600 5,100
1993 93,400 61,200 79,200 1,800
Paul A. Bock 1995 91,580 91,000 14,500 1,000
1994 91,580 70,000 22,675 1,000
1993 91,580 60,000 14,100 1,000
</TABLE>
- ---------------
(1) Company contribution under the Company's 401(K) Plan.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE AT
------------------------------------------------ ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(1) IN 1995 ($/SH) DATE 5% 10%
--------------------- ---------- ---------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Straub 4,382 18.750 09/28/05 $ 51,672 $130,946
15,618 5.69% 18.750 09/28/05 184,164 466,708
Peter M. Craig 8,079 18.750 09/28/05 95,266 241,422
3,921 3.42% 18.750 09/28/05 130,181 329,904
Norman L Denton III 5,307 18.750 09/28/05 62,579 158,587
7,000 18.750 09/28/05 82,542 209,179
5,000 18.750 09/28/05 58,959 149,413
1,693 5.41% 18.750 09/28/05 19,963 50,591
Theodore S. Bettwy 6,192 18.625 05/31/05 72,528 183,800
13,808 18.625 05/31/05 161,735 409,869
7,000 7.69% 18.750 09/28/05 82,542 209,179
Paul A. Bock 2,016 18.625 05/31/05 23,614 59,842
5,484 18.625 05/31/05 64,235 162,784
7,000 4.13% 18.750 09/28/05 82,542 209,179
</TABLE>
- ---------------
(1) No Option may be exercised prior to one year from date of grant, at which
time 28% of the grant is vested with 2% per month vesting thereafter.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
NUMBER OF AT YEAR END 1995
UNEXERCISED OPTIONS (MARKET PRICE AT 12/29/95
SHARES AT YEAR END 1995 AT $21.625/SH)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
----------------------- ----------- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Straub 0 -- 66,589 76,411 619,095 553,580
Peter M. Craig 5,000 56,250 35,564 48,161 276,664 353,645
Norman L. Denton 0 -- 39,803 42,322 392,145 262,140
Theodore S. Bettwy 0 -- 63,360 49,440 1,229,844 509,488
Paul A. Bock 9,700 75,288 9,425 35,750 88,955 230,135
</TABLE>
DIRECTORS' COMPENSATION
For the year ended December 31, 1995, the Company had an Outside Directors'
Plan to compensate those directors of the Company who were not also employees of
the Company, for serving as directors. The Outside Directors' Plan provides for
outside directors to receive the sum of $2,500 per Board meeting. For the year
ended December 31, 1995, Richard P. Abraham, Marvin Hoffman and Alan Jennings
outside directors of the Company, each received $10,000.
7
<PAGE> 10
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative return among
Rainbow Technologies, the NASDAQ Index, and the NASDAQ Computer and Data
Processing Index.
COMPARISON OF 5 YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
NASDAQ
COMPUTER &
MEASUREMENT PERIOD DATAPROCES-
(FISCAL YEAR COVERED) RAINBOW NASDAQ INDEX SING INDEX
<S> <C> <C> <C>
DEC-90 100 100 100
DEC-91 358 161 202
DEC-92 277 187 217
DEC-93 292 215 230
DEC-94 215 210 279
DEC-95 333 296 425
</TABLE>
The graph assumes $100 was invested on December 31, 1990.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
In January 1996, the Company entered into employment agreements and change
of control agreements with Walter W. Straub, President and Chief Executive
Officer of the Company, Peter M. Craig, Vice Chairman and Executive Vice
President, Norman L. Denton III, Senior Vice President and Paul A. Bock, Senior
Vice President. The terms of the employment agreements provide for a term of one
year, and base salary and bonus compensation to be determined by the Board of
Directors. In the event of a change of control, the agreements provide for
severance payments equal to the salary and bonus paid in the prior year for Mr.
Craig, Mr. Denton and Mr. Bock, and three times the salary and bonus paid in the
prior year for Mr. Straub.
In May 1995, the Company entered into an employment agreement with Mr.
Theodore S. Bettwy, Senior Vice President. The terms of the employment agreement
provide for a term of two years and base salary and bonus compensation, pursuant
to a formula as set forth in the agreement.
8
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12, 1996
with respect to share ownership of the Company's Common Stock by (i) each person
who owns beneficially more than 5% of the outstanding shares of Common Stock of
the Company, (ii) each director of the Company and (iii) executive officers
listed in the Summary Compensation Table (iv)all officers and directors of the
Company as a group without naming them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNERS(1) OWNERSHIP(2) OF CLASS
---------------------------------------------- ----------------- ----------
<S> <C> <C>
Alan K. Jennings 681,164 9.18%
Walter W. Straub 403,772 5.44%
Theodore S. Bettwy 79,613 1.07%
Peter M. Craig 66,591 *
Richard P. Abraham 29,400 *
Marvin Hoffman 17,400 *
Norman L. Denton III 45,959 *
Paul A. Bock 16,084 *
All officers and directors
as a group (12 persons) 1,339,983 18.05%
</TABLE>
- ---------------
(1) c/o Rainbow Technologies, Inc., 50 Technology Drive, Irvine, CA 92718.
(2) For purposes of this table, "beneficial ownership" of any security as of a
given date includes the right to acquire such security within 60 days of
April 12, 1996. To the knowledge of the Company, each person named in the
table has the sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by such person or entity.
(*) Indicates less than one percent ownership.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At various times during 1995, the following individuals (none of whom was
or had been an officer or employee of the Company or any of its subsidiaries)
served on the Company's Compensation Committee: Richard P. Abraham, Marvin
Hoffman. There were no interlocks with other companies within the meaning of the
SEC's Proxy rules during 1995.
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
During 1995, the Company paid $112,000 to XXCAL, Inc. a corporation engaged
in providing high technology temporary computer and computer-related personnel.
Marvin Hoffman is the Chief Executive Officer and Chairman of the Board of
XXCAL, Inc.
401(K) PROFIT SHARING PLAN AND TRUST
In January 1990, the Board of Directors adopted and approved a 401(k)
Profit Sharing Plan and Trust effective January 1, 1990. Under the 401(k)
program, the Company is obligated to match each employee's contribution 50% per
dollar of salary contribution with a company matching maximum contribution of 6%
of salary deferral. The Company has the option to contribute an additional
discretionary amount based upon current or accumulated net profits. No such
discretionary contribution were made in 1995. Company contributions vest at the
date of the employee's commencement of service.
9
<PAGE> 12
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
It is proposed that the shareholders approve the selection of Ernst & Young
LLP as independent auditors for the Company for the 1996 fiscal year. Ernst &
Young LLP has been the independent auditors for the Company since 1987, and
their reappointment has been recommended by the Board of Directors.
Representatives of Ernst & Young LLP are expected to be available at the
Annual Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if they so desire. This proposal requires the
approval of at least a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting. In the event such approval is not
obtained, selection of independent auditors will be reconsidered by the Board of
Directors.
RIGHTS OF DISSENTING SHAREHOLDERS
There are no rights of appraisal or similar rights of dissenters with
respect to any matter proposed to be acted upon at the 1996 Annual Meeting of
Shareholders.
OTHER MATTERS
The Company knows of no matters other than those described herein which are
to be brought before the Annual Meeting. However, if any other proper matters
are brought before the Annual Meeting, the persons named in the enclosed proxy
will vote in accordance with their judgment on such matters.
FINANCIAL STATEMENTS
Financial Statements of the Company are contained in the 1995 Annual Report
to Shareholders.
THE COMPANY FILES AN ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K. SHAREHOLDERS MAY OBTAIN A COPY OF THIS REPORT WITHOUT
COST BY WRITTEN REQUEST TO THE COMPANY'S SHAREHOLDER RELATIONS DEPARTMENT.
NOTICE TO BANKS, BROKERS/DEALERS
AND VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company, at 50 Technology Drive, Irvine, California
92718, Attention: Secretary, whether other persons are the beneficial owners of
the shares for which proxies are being solicited and, if so, the number of
copies of the proxy statement, other soliciting material and Annual Report you
wish to receive in order to supply copies to the beneficial owners of shares of
Common Stock of the Company.
By Order of the Board of Directors:
SIG
Walter W. Straub
President
Dated: Irvine, California
April 25, 1995
10
<PAGE> 13
RAINBOW TECHNOLOGIES, INC.
ANNUAL MEETING OF SHAREHOLDERS -- JUNE 6, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Rainbow Technologies, Inc. (the "Company")
hereby appoints Walter W. Straub, the President of the Company, or failing him,
Peter M. Craig, Vice Chairman and Executive Vice President of the Company, or
instead of either of the foregoing ______________________, as the nominee of the
undersigned to attend and to act for and on behalf of the undersigned at the
annual meeting of shareholders of the Company to be held on June 6, 1996 at 2:00
P.M. Pacific Time, and at any adjournment or adjournments thereof, to the same
extent and with the same power as if the undersigned were personally present at
said meeting or such adjournment or adjournments thereof and, without limiting
the generality of the power hereby conferred, the nominees named above are
specifically directed to vote as indicated below.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS. / / FOR all nominees listed below (except / / WITHHOLD AUTHORITY to vote
as marked to the contrary below) for each nominee listed below
Walter W. Straub Alan K. Jennings Marvin Hoffman
Peter M. Craig Richard P. Abraham Frederick M. Haney
</TABLE>
(INSTRUCTION:) To withhold authority to vote for any individual nominee, strike
a line through or otherwise strike the nominee's name in the list
above.
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG, LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE> 14
If there are amendments or variations to the matters proposed at the meeting or
at any adjournment or adjournments thereof, or if any other business properly
comes before the meeting, this proxy confers discretionary authority on the
proxy nominees named herein to vote on such amendments, variations or other
business.
Dated: , 1996
-------------------------
Name
-------------------------
No. of Shares
-------------------------
Signature
-------------------------
Signature if held jointly
please sign exactly as
name appears herein. When
shares are held by joint
tenants, both should
sign. When signing as
attorney, as executor,
administrator, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.
NOTE: IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ON PROPOSALS 1
AND 2.
